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As filed with the Securities and Exchange Commission on August 8, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_______________
SUNPHARM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE F593097048
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4651 SALISBURY ROAD, SUITE 205
JACKSONVILLE, FLORIDA 32256
(904) 296-3320
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
STEFAN BORG
PRESIDENT AND CHIEF EXECUTIVE OFFICER
4651 SALISBURY ROAD, SUITE 205
JACKSONVILLE, FLORIDA 32256
(904) 296-3320
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_______________
Copies to:
ANDREWS & KURTH L.L.P.
2170 BUCKTHORNE PLACE, SUITE 150
THE WOODLANDS, TEXAS 77380
(713) 220-4801
ATTN: JEFFREY L. WADE
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of the Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend 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. / /
_______________
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM
CLASS OF OFFERING AGGREGATE AMOUNT OF
SECURITIES TO SHARES TO PRICE PER OFFERING REGISTRATION
BE REGISTERED BE REGISTERED(1) SHARE(2) PRICE(2) FEE(2)
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Common Stock, par
value $.001 per
share . . . . . . 1,478,246 $2.71875 $4,018,982 $1,218
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(1) Consists of (i) 854,260 shares that are outstanding as of the date
hereof, (ii) 612,301 shares that are issuable upon exercise of certain
warrants, and (iii) 11,685 shares that are issuable upon exercise of
certain options.
(2) Pursuant to Rule 457(c), the registration fee is calculated based upon
the average of the high and low sale prices for the Common Stock
reported by the Nasdaq Small Cap Market on August 7, 1997.
_______________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
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
UNLAWFULL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
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SUBJECT TO COMPLETION, DATED AUGUST 8, 1997
PROSPECTUS
SUNPHARM CORPORATION
1,478,246 SHARES OF
COMMON STOCK
This Prospectus relates to the offering of up to 1,478,146 shares (the
"Shares") of common stock, par value $.001 per share ("Common Stock") of
SunPharm Corporation ("SunPharm or the Company") by the selling stockholders
named herein (the "Selling Stockholders"). The Shares covered by this
Prospectus consist of (i) 854,260 shares of Common Stock that are issued and
outstanding as of the date of this Prospectus, (ii) 612,301 shares of Common
Stock issuable upon the exercise of certain outstanding warrants, and (iii)
11,685 shares of Common Stock issuable upon the exercise of certain
outstanding options. The Company will not receive any of the proceeds from
the sale of Common Stock by the Selling Stockholders other than the
applicable exercise price per share of the such warrants and options. The
Company's Common Stock is traded on The Nasdaq Small Cap Market under the
symbol "SUNP". On August 7, 1997, the last reported sales price of the Common
Stock was $2.72 per share.
All or part of the Shares may be offered by the Selling Stockholders
from time to time for their own account in transactions on The Nasdaq Small
Cap Market, in negotiated transactions or otherwise, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers and such
broker-dealers may receive compensation in the form of discounts, concessions
or commission from the Selling Stockholders or the purchasers of the Shares
for whom such broker-dealers may act as agent or to whom they sell as
principal or both (which compensation to a particular broker-dealer might be
in excess of customary commissions).
None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company. The Company has agreed to bear
certain expenses in connection with the registration and sale of the Shares
being offered by the Selling Stockholders, and has agreed to indemnify the
Selling Stockholders against certain liabilities under the Securities Act of
1933, as amended (the "Securities Act"). The Selling Stockholders and any
broker-dealers participating in the distribution of the Shares may be deemed
to be "underwriters" within the meaning of the Securities Act, and any profit
on the sale of Shares by the Selling Stockholders and any commissions
received by any such broker-dealer may be deemed to be underwriting
commissions under the Securities Act. See "Plan of Distribution."
The Shares have not been registered for sale by the Selling Stockholders
under the securities laws of any state as of the date of this Prospectus.
Brokers or dealers effecting transactions in the Shares should confirm
registration thereof under the securities laws of the states in which such
transactions occur, or the existence of any exemption from registration.
_______________
THESE ARE SPECULATIVE SECURITIES.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 5.
_______________
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 , 1997
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
accordingly, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission are available for
inspection and copying at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
DC 20549, and at the Commission's Regional Offices located at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at
Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such documents may also be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549,
at prescribed rates. The Commission maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy statements and other
information regarding registrants that file electronically with the
Commission. In addition, such materials and other information concerning the
Company can be inspected at the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, DC 20006.
The Company has filed with the Commission a registration statement (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), on Form S-3 with respect to the securities offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved. The Registration Statement
and any amendments thereto, including exhibits filed or incorporated by
reference as a part thereof, are available for inspection and copying at the
Commission's offices as described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission pursuant to
the Exchange Act (File No. 0-27578) are hereby incorporated by reference into
this Prospectus:
1. The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996;
2. The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1997;
3. The Company's Current Report on Form 8-K dated April 14, 1997; and
4. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on
January 18, 1996.
All reports and documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered hereby
have been sold or which deregisters all securities then remaining unsold,
shall be deemed to be incorporated by reference herein and to be a part
hereof from the respective date of filing of such documents. Any statement
contained herein or in a document all or a portion of which is incorporated
or deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THE COMPANY HEREBY UNDERTAKES TO
PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO
WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN OR ORAL
REQUEST OF ANY SUCH PERSON, A COPY OF ANY AND ALL OF THE DOCUMENTS REFERRED
TO ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED IN THIS PROSPECTUS BY
REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). SUCH REQUESTS
FOR DOCUMENTS SHOULD BE DIRECTED TO SUNPHARM CORPORATION, 4651 SALISBURY
ROAD, SUITE 205, JACKSONVILLE, FLORIDA 32256, ATTENTION: STEFAN BORG,
TELEPHONE NUMBER (904) 296-3320.
No person is authorized to give any information or to make any
representation not contained in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having been
authorized. This
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Prospectus does not constitute an offer to sell, or a solicitation of an
offer to purchase, any of the securities offered by this Prospectus, or the
solicitation of a proxy, in any jurisdiction in which, or to any person to
whom, it is unlawful to make such offer or solicitation of an offer or proxy
solicitation. Neither the delivery of this Prospectus nor any distribution
of the securities offered hereby shall, under any circumstances, create any
implication that the information contained herein is correct as of any time
subsequent to the date hereof or that there has been no change in the affairs
of the Company since the date hereof.
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THE COMPANY
THE FOLLOWING IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION INCLUDING "RISK FACTORS" APPEARING ELSEWHERE IN THIS PROSPECTUS
AND THE FINANCIAL STATEMENTS AND NOTES THERETO CONTAINED IN THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996, INCORPORATED
BY REFERENCE HEREIN (THE "ANNUAL REPORT"). EXCEPT FOR THE HISTORICAL
INFORMATION CONTAINED HEREIN, THE DISCUSSION IN THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE
NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS" BEGINNING AT PAGE 4 OF THIS
PROSPECTUS AND THOSE DISCUSSED IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" CONTAINED IN
THE ANNUAL REPORT, AS WELL THOSE DISCUSSED ELSEWHERE IN THE PROSPECTUS, THE
ANNUAL REPORT OR ANY OTHER DOCUMENT INCORPORATED BY REFERENCE HEREIN PRIOR TO
THE TERMINATION OF THE OFFERING.
SunPharm Corporation ("SunPharm" or the "Company") is a development
stage company engaged in the development of small molecule pharmaceutical
products, consisting of novel polyamine analogues and other proprietary
compounds invented at the University of Florida and licensed exclusively
worldwide to the Company. The Company's drug development efforts are centered
around three main areas: (i) cancer, (ii) acquired immunodeficiency syndrome
("AIDS") and (iii) gastrointestinal disorders. The Company currently has 13
potential products in various stages of research or development.
Three of the Company's polyamine analogue products are in Phase I or II
human clinical trials. Diethylhomospermine ("DEHOP") is currently in Phase II
human clinical trials for the treatment of AIDS-related chronic diarrhea.
DEHOP is also in a Phase I clinical trial for cancer, commenced in September
1996 under the supervision of the University of Wisconsin through a federal
grant from the National Cancer Institute. Another of the Company's products,
diethylnorspermine ("DENSPM"), recently reached the maximum tolerated dose in
a Phase I human clinical trial for the treatment of refractory solid cancer.
The Investigational New Drug ("IND") application relating to DENSPM was
transferred to the Company's strategic alliance partner, Warner-Lambert
Company ("Warner-Lambert"). Warner-Lambert is expected to commence Phase II
clinical trials of DENSPM in the second half of 1997.
The Company's strategy is to develop products both independently and
through strategic alliances, pursuant to which the Company will seek
financial, preclinical and clinical trial and marketing assistance from
larger pharmaceutical companies for drugs with broad market potential, while
retaining parallel manufacturing and/or marketing rights for all or part of
those markets. Consistent with this strategy, the Company sublicensed
worldwide rights (excluding Japan) to manufacture and market DENSPM for all
cancer applications to Warner-Lambert in May 1993 and sublicensed such rights
in Japan to Nippon Kayaku Co., Ltd. ("Nippon Kayaku") in February 1994.
Warner-Lambert and Nippon Kayaku have agreed to make staged payments to
SunPharm for license fees and research and development milestones, of which
an aggregate of $2.85 million has been paid to date, and to pay royalties for
sales of products incorporating DENSPM. In addition, Warner-Lambert and
Nippon Kayaku have agreed to fund and administer all further human clinical
trials which may be conducted for DENSPM.
The Company was incorporated in Delaware in 1990 as Lexigen, Incorporated
and in 1991 changed its name to SunPharm Corporation. The Company's principal
executive offices are located at 4651 Salisbury Road, Suite 205, Jacksonville,
Florida 32256 (telephone number (904) 296-3320). SunPharm supports a principal
research facility at the University of Florida in Gainesville, Florida.
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RISK FACTORS
IN EVALUATING THE COMPANY AND ITS BUSINESS, PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, TOGETHER WITH THE INFORMATION AND
FINANCIAL DATA SET FORTH IN THE REPORTS AND DOCUMENTS INCORPORATED BY REFERENCED
HEREIN, PRIOR TO PURCHASING ANY SHARES OF COMMON STOCK OFFERED HEREBY.
DEVELOPMENT STAGE COMPANY
The Company is in the development stage and has realized only limited
revenues, all of which have been derived from payments from Warner-Lambert and
Nippon Kayaku in connection with license fees and achieving identified research
milestones with respect to DENSPM. The Company has generated no revenues from
product sales, and it does not expect to generate revenue from product sales for
at least several years. The Company has incurred net losses since commencement
of its operations and it expects to continue to incur losses for the foreseeable
future. As of June 30, 1997, the Company had an accumulated deficit of $13.5
million. Moreover, there can be no assurance that the Company will
successfully complete the transition from a development company to successful
operations and/or profitability.
NO ASSURANCE OF SUCCESSFUL PRODUCT DEVELOPMENT OR COMMERCIALIZATION
Since its inception, the Company has devoted its efforts exclusively to the
research and development of potential pharmaceutical products based primarily
upon its licensed polyamine analogue and metal chelator technologies. While one
of the Company's polyamine analogues, DEHOP, is presently in Phase II human
clinical trials, and another analogue, DENSPM, has competed Phase I human
clinical trials, such trials will not be sufficient to demonstrate their safety
or efficacy, and substantial further human clinical trials must be successfully
completed before such products may be approved for commercialization. There can
be no assurance that DEHOP or DENSPM, or any other potential product currently
in development or developed in the future, will prove to be safe or effective in
clinical trials, meet applicable regulatory standards, be capable of being
produced in commercial quantities at acceptable cost or be successfully
marketed.
NEED FOR ADDITIONAL FINANCING
The Company has experienced negative cash flows from operations since its
inception and has funded its activities to date primarily from equity
financings. The Company has expended and will continue to expend substantial
funds to continue the research and development of its products, conduct
preclinical and clinical trials, establish clinical and commercial scale
manufacturing in its own facilities or in the facilities of others and market
its products. The amount and timing of such expenditures are subject to a
number of factors. Based on its current operating plan, the Company anticipates
that its existing capital resources will be adequate to satisfy its capital
needs through the first quarter of 1999, but will not be sufficient to fund the
Company's operations to the point of introduction of a commercially successful
product. The Company's rights to receive payments from Warner-Lambert and
Nippon Kayaku are dependent upon the achievement of certain development and
commercialization milestones by Warner-Lambert and Nippon Kayaku, respectively,
and are not within the control of the Company. Further, the capability of
Warner-Lambert and Nippon Kayaku to achieve such milestones depends upon the
availability and/or prioritization of sufficient funding to support necessary
testing of DENSPM, the availability of trained and experienced staff for testing
and the results of such testing, among other factors. As a result, no assurance
can be made that such milestones will be achieved or that such payments will be
received by the Company.
The Company will require significant levels of additional capital, which it
intends to raise through additional equity or debt financing, additional
arrangements with corporate partners or from other sources. No assurance can be
given that the necessary funds will be available for the Company to finance its
development on acceptable terms or at all. If adequate funds are not available,
the Company may be required to curtail significantly one or more of its research
or development programs, or it may be required to obtain funds through
arrangements with future collaborative partners or others that may require the
Company to relinquish rights to some or all of its technologies or products.
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GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL
Research, preclinical development, clinical trials and the manufacturing
and marketing of therapeutic products under development by the Company are
subject to extensive regulation by government authorities in the United States
and other countries, including, but not limited to, the United States Food and
Drug Administration ("FDA"). In order to obtain approval to commercialize a
product, the Company must demonstrate to the satisfaction of the FDA and
comparable authorities in other countries that such product is safe and
effective for its intended uses and that the Company is capable of manufacturing
the product to the applicable standards. In the United States, this requires
that the product undergo extensive preclinical testing, that the Company file an
IND with the FDA prior to commencing human clinical trials and that the Company
file a New Drug Application requesting FDA approval for commercial marketing of
the product.
The approval process for the Company's product candidates is likely to take
at least several years and will involve significant expenditures for which
additional financing will be required. The cost to the Company of conducting
human clinical trials for any potential product can vary dramatically based on a
number of factors, including the order and timing of clinical indications
pursued and the extent of development and financial support, if any, from
corporate partners. Although Phase I and Phase II clinical trials of DENSPM and
DEHOP, respectively, are presently being conducted, further clinical trials,
including large, time-consuming and more costly Phase II and Phase III clinical
trials, will be required to demonstrate the safety and efficacy of DENSPM and
DEHOP. There can be no assurance that the Company will have sufficient
resources to complete the required regulatory review process or that the Company
could survive the inability to obtain, or delays in obtaining, such approvals.
Moreover, even if regulatory approval of a drug is granted, such approval may
entail limitations on the indicated uses for which it may be marketed.
Furthermore, a marketed drug, its manufacturer and its manufacturing facilities
are subject to continual review and periodic inspections, and later discovery of
previously unknown problems with a product, manufacturer or facility may result
in restrictions on the product or manufacturers, including a withdrawal of the
product from the market. Failure to comply with the applicable regulatory
requirements can, among other things, result in fines, suspensions of regulatory
approvals, product recalls, operating restrictions and criminal prosecution.
Further, additional government regulation may be established that could prevent
or delay regulatory approval of the Company's products.
DEPENDENCE ON EXCLUSIVE LICENSE
All of the Company's development and commercialization rights for its
products are derived from its license agreement with the University of Florida
Research Foundation, Inc. (the "Foundation"). The Company's rights under the
license agreement are subject to early termination under certain circumstances,
including failure to pay royalties or other material breach by the Company,
bankruptcy of the Company or failure by the Company to carry on its business,
failure to commence marketing of a licensed product within six months of
approval in any specific market, and failure to comply with the terms of the
Company's sponsored research agreement with the University of Florida, among
others. In the event that the license agreement terminates for any reason, the
Company's rights to manufacture and market DEHOP and DENSPM and its other
products would terminate.
LIMITED PERSONNEL; RELIANCE ON STRATEGIC ALLIANCES; RELIANCE ON COLLABORATIVE
ARRANGEMENTS FOR RESEARCH AND DEVELOPMENT
SunPharm has only five full-time employees and one part-time employee and
is substantially dependent on third parties, with all of the risks attendant
thereto, to conduct research and development, to conduct clinical trials of the
Company's potential products and to manufacture DEHOP, DENSPM and other
compounds for such research and development.
The Company is dependent upon the University of Florida and Dr. Raymond
Bergeron, the inventor of the Company's technology, with respect to all research
and most early preclinical development of its potential products. The Company
does not have, and has no immediate plans to construct, a laboratory facility.
The Company has no control over the facilities where the research and
development work is being performed or over the personnel performing such work.
If the University of Florida breaches its obligations under its agreement with
the Company, the Company's remedies may be limited by applicable law affecting
actions against state agencies.
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The Company benefits significantly from and is dependent upon
collaborative arrangements with the University of Florida and Dr. Bergeron.
Although the Company believes that its relationships with its collaborators
are good, there can be no assurance that the Company's relationships with
such institutions and individuals will continue. The loss of these
relationships would significantly increase the Company's expenses and could
have a substantial negative effect on the Company's ability to attain its
long-range objectives.
The Company is dependent upon strategic alliances with Warner-Lambert
and Nippon Kayaku with respect to the development and commercialization of
DENSPM, and expects to rely upon future strategic alliances with other
pharmaceutical companies with respect to other potential products. Although
the Company believes that Warner-Lambert, Nippon Kayaku and any future
strategic alliance partners have or will have an economic motivation to
develop and commercialize such products, the amount and timing of resources
to be devoted to these activities are not within the control of the Company
and will be subject to the priorities of such strategic alliance partners in
allocating these resources, which may not be consistent with the best
interests of the Company. In addition, the Company's strategic alliance
partners or their affiliates may be pursuing alternative products or
technologies which may compete with the Company's products and technologies.
No assurances can be given that the Company's agreements with Warner-Lambert
and Nippon Kayaku, or with any other strategic alliances the Company may
enter in the future, will result in the successful development or
commercialization of DENSPM or other potential products, or that any such
agreements will result in any significant revenues, profits or cost savings
to the Company. Furthermore, no assurances can be given that the Company will
be able to enter into future strategic alliance agreements on favorable terms
or at all. In addition, the Company's strategic alliance partners or their
affiliates may be pursuing alternative products or technologies which may
compete with the Company's products and technologies.
UNCERTAINTIES AS TO PATENTS AND PROPRIETARY TECHNOLOGIES
Subject to a nonexclusive statutory license to the United States
government, the Company is the exclusive licensee of more than 25 issued
United States and foreign patents and numerous pending patent applications.
The Company is required to meet specified milestone and diligence
requirements in order to retain its license to the patents and other
proprietary rights licensed from the Foundation. No assurance can be given
that the Company will satisfy any of these requirements.
The patent position of pharmaceutical companies generally is highly
uncertain and involves complex legal and factual questions. There can be no
assurance that the patents licensed from the Foundation will provide
substantial protection or commercial benefit to the Company, afford the
Company adequate protection from competing products, or not be challenged or
declared invalid or that additional related United States or foreign patents
will be issued, the occurrence of any of which could have a material adverse
effect on the Company's operations. The United States government could use
its rights as licensee of the Foundation's patents to increase the supply of
products based on such patents or to reduce the cost of treatment with such
products.
Certain proprietary trade secrets and unpatented know-how are important
to the Company. There can be no assurance that others may not independently
develop the same or similar technologies. Although the Company has taken
steps to protect its trade secrets and unpatented know-how, third parties
nonetheless may gain access to such information.
There has been significant litigation in the biotechnology and
pharmaceutical industry regarding patents and other proprietary rights. If
the Company became involved in similar litigation regarding its intellectual
property rights, the cost of such litigation could be substantial.
The limited capital resources of the Company could significantly
adversely affect its ability to enforce or defend its intellectual property
rights, especially against companies which have substantially more resources.
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UNCERTAINTY OF HEALTH CARE REFORM MEASURES; THIRD-PARTY REIMBURSEMENT
The Company's ability to successfully commercialize its products may
depend in part on the extent to which reimbursement for the costs of such
products and related treatments will be available from government health
administration authorities, private health coverage insurers and other
organizations. While the legislative and regulatory proposals of President
Clinton to reform the health care system have been tabled temporarily and
while the Company cannot predict whether any such future legislative or
regulatory proposals will be adopted, the pendency of such proposals could
have a material adverse effect on the Company's ability to raise capital. Any
such reform measures, if adopted, could adversely affect the pricing of
therapeutic products in the United States or the amount of reimbursement
available from United States governmental agencies or third party insurers
and could materially adversely affect the Company in general. Furthermore,
the Company's ability to commercialize its potential product portfolio 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 collaborators for certain of the Company's
proposed products.
In both domestic and foreign markets, sales of the Company's proposed
products will depend in part on the availability of reimbursement from
third-party payors such as government health administration authorities,
private health insurers and other organizations. Third-party payors are
increasingly challenging the price and cost effectiveness of medical products
and services. Significant uncertainty exists as to the reimbursement status
of newly approved health care products. There can be no assurance that the
Company's proposed products will be considered cost effective or that
adequate third-party reimbursement will be available to enable the Company to
maintain price levels sufficient to realize an appropriate return on its
investment in product development. Legislation and regulations affecting the
pricing of pharmaceuticals may change before any of the Company's proposed
products are approved for marketing. Adoption of such legislation or
regulations could further limit reimbursement for medical products and services.
COMPETITION; RAPID TECHNOLOGICAL CHANGE
The Company is engaged in pharmaceutical product development
characterized by extensive research efforts and rapid technological progress.
There are many pharmaceutical companies, biotechnology companies, public
and private universities, and research organizations actively engaged in
research and development of products that may be similar to, or seek to
attack the same targets as, SunPharm's products. Many of the Company's
existing or potential competitors have substantially greater financial,
technical, and human resources than the Company and may be better equipped to
develop, manufacture, and market products. These companies may develop and
introduce products and processes competitive with or superior to those of the
Company. In addition, other technologies or products may be developed that
have an entirely different approach or means of accomplishing the intended
purposes of the Company's products, which might render the Company's
technology and products uncompetitive or obsolete. There can be no assurance
that the Company will be able to compete successfully.
RELIANCE ON FOUNDER
The Company is highly dependent upon Stefan Borg, its founder, President
and Chief Executive Officer. The loss of Mr. Borg's services could have a
material adverse effect on the Company.
PRODUCT LIABILITY EXPOSURE; LIMITED INSURANCE COVERAGE
The testing, marketing and sale of pharmaceutical products entails a
risk of product liability claims by consumers and others and such claims may
be asserted against the Company. The Company does not maintain product
liability insurance coverage other than $1,000,000 of primary and $1,000,000
of excess product liability coverage applicable only for DENSPM and DEHOP for
the Phase I human clinical trials of DENSPM Phase I and Phase II human
clinical trials of DEHOP, and, prior to marketing any product, there can be
no assurance it will be able to obtain such insurance at a reasonable cost or
in an amount sufficient to cover all possible liabilities. In the event of a
successful product liability suit against the Company, lack or insufficiency
of insurance coverage could have a material adverse effect on the Company.
Further, SunPharm is required to indemnify the University of Florida and its
trustees, officers, employees and affiliates against claims resulting from
the manufacture or sale of products derived from its polyamine
-8-
<PAGE>
compounds and to have product liability coverage naming the University of
Florida as an additional insured for such risks.
LACK OF MANUFACTURING EXPERIENCE OR FACILITIES
The Company currently contracts with third parties for the production of
compounds in limited quantities for its preclinical and clinical trials and
currently does not possess the staff or facilities necessary to manufacture
products in commercial quantities. The Company has entered into an agreement,
however, for the production of clinical-scale quantities of its products by
third party contractors which it believes capable of supplying its short-term
requirements. There can be no assurance that the polyamine compounds or iron
chelators can be manufactured by the Company or its suppliers at a cost or in
quantities necessary to make such compounds commercially viable products. The
Company also may encounter significant delays in obtaining supplies from
third-party manufacturers or experience interruptions in its supplies. If the
Company is unable to obtain adequate supplies, its business would be
materially adversely affected.
VOLATILITY OF STOCK PRICE; LIQUIDATION PREFERENCE; LACK OF DIVIDENDS
The market prices for securities of biopharmaceutical companies
historically have been highly volatile. Announcements concerning the Company
or its competitors, including the results of testing and clinical trials,
technological innovations, or commercial products, government regulations,
developments concerning proprietary rights, including patents and litigation
matters, a change in status of a collaborative partner, public concern
relating to the commercial value or safety of the Company's products, and
stock market conditions in general may have a significant impact on the price
of the Common Stock.
The Company has not paid dividends on its Common Stock since its
inception and does not intend to pay any such dividends in the foreseeable
future. For the years ended December 31, 1994, 1995 and 1996, and the six
months ended June 30, 1997, the Company incurred net losses of $2,159,001,
$4,369,653, $2,836,609 and $1,867,119, respectively.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public
market could adversely affect the market price of the Common Stock. Of the
5,667,471 shares of Common Stock outstanding as of July 31, 1997, (i)
3,839,185 shares (including the Shares offered hereby that are presently
outstanding) are eligible for sale without restriction under the Securities
Act (except for shares of Common Stock held by affiliates of the Company
whose shares may be sold subject to the volume limitations and certain other
requirements of Rule 144 under the Securities Act) or have been registered
for resale under the Securities Act and (ii) 1,828,286 shares are restricted
securities that may not be resold unless the resale is registered under the
Securities Act or it is made subject to the volume limitations and other
restrictions of Rule 144 or another exemption from registration under the
Securities Act. As of July 31, 1997, 5,203,376 shares of Common Stock (or
47.9% of the total number of shares outstanding on a fully diluted basis)
were issuable upon the exercise of outstanding options and warrants, of which
the issuance or resale of 1,564,045 shares (including the Shares offered
hereby that are issuable upon the exercise of warrants or options) has been
registered under the Securities Act. Additional shares may be issued upon the
conversion of preferred stock in the event that the Company issues any shares
of preferred stock. The existence of such warrants, options and convertible
securities, as well as certain registration rights, may adversely affect the
terms on which the Company may obtain additional equity financing.
CONCENTRATION OF STOCK OWNERSHIP; FACTORS INHIBITING TAKEOVER
As of July 31, 1997, the Company's executive officers and directors
beneficially owned approximately 40.7% of the outstanding Common Stock. As a
result, such persons will have a substantial influence on the Company's
affairs and business. In addition, the Company's Board of Directors can,
without obtaining stockholder approval, issue shares of preferred stock
having rights that could adversely effect the voting power of holders of the
Common Stock. Also, Section 203 of the Delaware General Corporation Law
restricts certain business combinations with any interested stockholder as
defined by such statute. Any of the foregoing factors may delay, defer or
prevent a change in control of the Company. See "Description of Securities."
-9-
<PAGE>
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Prospectus contains forward-looking statements. The words anticipate,
believe, expect, estimate, project and similar expressions are intended to
identify forward-looking statements. Such statements reflect the Company's
current views with respect to future events and financial performance and are
subject to certain risks, uncertainties and assumptions, including the risk
factors set forth above. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, believed, expected, estimated or
projected.
USE OF PROCEEDS
The Company intends to use the proceeds from the exercise of warrants
and options, if any are exercised, for human clinical trials of DEHOP and
DENSPM, research and development of other potential products and general
corporate purposes. The Company will not receive any proceeds from sales, if
any, of shares of Common Stock by the Selling Stockholders to the public.
-10-
<PAGE>
SELLING STOCKHOLDERS
The Shares covered by this Prospectus consist of (i) 854,260 shares of
Common Stock that are issued and outstanding as of the date of this
Prospectus, (ii) 612,301 shares of Common Stock issuable upon the exercise of
certain outstanding warrants, and (iii) 11,685 shares of Common Stock
issuable upon the exercise of certain outstanding options.
During the year ended December 31, 1996, the Company completed the private
placement of 537,623 units pursuant to Section 4(2) of the Securities Act of
1933 for $5.50 per unit. Each unit consisted of one share of the Company's
Common Stock and one redeemable Common Stock Purchase Warrant. The warrants
included in the units had an original expiration date of four years from the
date of issuance and original exercise prices of $5.50 per share until the
first anniversary date, $6.50 per share until the second anniversary date,
and $7.50 per share thereafter. The warrants are subject to redemption by the
Company at $0.01 per warrant, provided the Company's Common Stock closes at a
price (under the terms of such warrants as originally issued) of $8.50, $9.50
or $10.50 per share for 20 consecutive days during the second, third or
fourth years, respectively, of the term of the warrant. Proceeds from the
private placement were approximately $2,636,000 net of placement agent and
other costs of approximately $321,000.
Also during 1996, the Company offered certain of its existing warrant
holders a 30% reduction in their applicable exercise price if they exercised
their warrants prior to December 31, 1996. Additionally, for each four
warrants exercised, participants were issued a warrant identical to the
warrants issued in the private placement. As a result of this warrant
exchange offer, 236,721 outstanding warrants were exercised in exchange for
236,721 shares of Company Stock and 59,178 new warrants. Proceeds from the
warrant exchange were approximately $459,000, net offering costs of
approximately $34,000.
In April 1997, the Company offered to reduce the exercise price of the
warrants issued in the 1996 private placement and warrant exchange offer to
$3.00 per share, to extend the expiration date of the warrants to March 31,
2001, and to increase the price per share at which the Common Stock must
trade to permit the Company to redeem the warrants to $16.00, $20.00 and
$24.00 for 20 consecutive days during the years ending March 31, 1999, 2000
or 2001, respectively. The holders of warrants exercisable for an aggregate
561,679 shares agreed to such modifications, in consideration for their
consent and waiver with respect to the Company's sale of Common Stock and
warrants to certain institutional investors in March 1997.
The Shares offered hereby include shares of Common Stock sold to the
Selling Stockholders in the Company's 1996 private placement and warrant
exchange offer, as well as shares issuable upon the exercise of warrants
issued in such transactions, pursuant to the Company's agreement to file a
registration statement covering the resale of such shares by such Selling
Stockholders. In addition, the Shares include certain shares of Common Stock
issuable upon the exercise of warrants and options issued prior to the
Company's 1995 initial public offering, pursuant to certain "piggyback"
registration rights of the holders of such options and warrants.
The following table sets forth the names of the Selling Stockholders, the
number of shares of Common Stock (including the shares issuable upon the
exercise of the warrants and options) beneficially owned by each of them as
of the date of this Prospectus, the number of shares covered by this
Prospectus and the amount of shares to be held by each of them after the
offering covered by this Prospectus (assuming that all shares subject to this
Prospectus are sold).
<TABLE>
COMMON STOCK
SHARES OF COMMON STOCK BENEFICIALLY OWNED
SHARES OF COVERED BY THIS PROSPECTUS AFTER THE OFFERING(1)
COMMON STOCK ------------------------------------- --------------------------
BENEFICIALLY OWNED ISSUABLE UPON
PRIOR TO EXERCISE OF NUMBER
NAME OF SELLING STOCKHOLDER THE OFFERING(1) OUTSTANDING WARRANTS TOTAL OF SHARES PERCENTAGE
- --------------------------- ------------------ ----------- -------------- ----- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Fred M. Cone, Jr. 5,000 2,500 2,500 5,000 -- *
Jerome Goldberg 10,000 5,000 5,000 10,000 -- *
Stanley and Lesley Berkovitz 7,000 3,500 3,500 7,000 -- *
Richard M. Lilly TTEE
Richard M. Lilly Revocable Trust 20,000 10,000 10,000 20,000 -- *
</TABLE>
-11-
<PAGE>
<TABLE>
COMMON STOCK
SHARES OF COMMON STOCK BENEFICIALLY OWNED
SHARES OF COVERED BY THIS PROSPECTUS AFTER THE OFFERING(1)
COMMON STOCK ------------------------------------- --------------------------
BENEFICIALLY OWNED ISSUABLE UPON
PRIOR TO EXERCISE OF NUMBER
NAME OF SELLING STOCKHOLDER THE OFFERING(1) OUTSTANDING WARRANTS TOTAL OF SHARES PERCENTAGE
- --------------------------- ------------------ ----------- -------------- ----- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael Lilly 10,000 5,000 5,000 10,000 -- *
Nicholas Lilly 2,000 1,000 1,000 2,000 -- *
James Lilly 2,000 1,000 1,000 2,000 -- *
David Zarchan 27,272 13,636 13,636 27,272 -- *
Adolf Bohn 72,720 36,360 36,360 72,720 -- *
KG Associates 13,500 6,750 6,750 13,500 -- *
Henri Zimmerli 30,000 15,000 15,000 30,000 -- *
Tini D. Lilly IRA 6,000 3,000 3,000 6,000 -- *
Mary E. Stuart 18,180 9,090 9,090 18,180 -- *
JWM Partners 9,092 4,546 4,546 9,092 -- *
Universal Partners, L.P. 14,286 11,429 2,857 14,286 -- *
George F. Bowles, Trustee
Bowles Trust 28,571 22,857 5,714 28,571 -- *
Elliot S. Schlissel and Lois Schlissel 14,286 11,429 2,857 14,286 -- *
Jacqueline Lesley Towell 14,286 11,429 2,857 14,286 -- *
Thomas Brazier and Paulette Butler 7,142 5,714 1,428 7,142 -- *
SunPharm Investors, L.P. 199,802 159,842 39,960 199,802 -- *
Julian J. D'Agostine 18,180 9,090 9,090 18,180 -- *
Hans Bergman 10,000 5,000 5,000 10,000 -- *
Dr. Ben-Ami Feit and Ora Feit JTWROS 4,000 2,000 2,000 4,000 -- *
Ran Feit 6,508 3,254 3,254 6,508 -- *
Moshe Malki 6,000 3,000 3,000 6,000 -- *
Guy Perkins 20,000 10,000 10,000 20,000 -- *
Dr. Thierry Waelli 40,000 20,000 20,000 40,000 -- *
Isabelle Fischer 40,000 20,000 20,000 40,000 -- *
Menachem Benbassat 4,000 2,000 2,000 4,000 -- *
Gottfried Hofmann 80,000 40,000 40,000 80,000 -- *
Lewinger Family L.P. 100,000 50,000 50,000 100,000 -- *
Peter Bollmann 10,000 5,000 5,000 10,000 -- *
Earlsward Limited 80,000 40,000 40,000 80,000 -- *
Veldan Olten Inc. 80,000 40,000 40,000 80,000 -- *
Peter Waelli 60,000 30,000 30,000 60,000 -- *
Henri Chalhoub 20,000 10,000 10,000 20,000 -- *
Donald E. Kaplan 6,000 3,000 3,000 6,000 -- *
Carl J. Domino 20,000 10,000 10,000 20,000 -- *
W. Richard and Lori J. Lueck 25,600 12,800 12,800 25,600 -- *
Miller Advisory Corp. Pension Plan
& Trust, Ronald L. Miller, Trustee 10,000 5,000 5,000 10,000 -- *
Margret M. Jordan 2,000 1,000 1,000 2,000 -- *
</TABLE>
-12-
<PAGE>
<TABLE>
COMMON STOCK
SHARES OF COMMON STOCK BENEFICIALLY OWNED
SHARES OF COVERED BY THIS PROSPECTUS AFTER THE OFFERING(1)
COMMON STOCK ------------------------------------- --------------------------
BENEFICIALLY OWNED ISSUABLE UPON
PRIOR TO EXERCISE OF NUMBER
NAME OF SELLING STOCKHOLDER THE OFFERING(1) OUTSTANDING WARRANTS TOTAL OF SHARES PERCENTAGE
- --------------------------- ------------------ ----------- -------------- ----- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Maurice and Stacy Gozlan
Tenants by the Entirety 20,000 10,000 10,000 20,000 -- *
Deborah Christian 5,454 2,727 2,727 5,454 -- *
Josef Paradis and Shelley Paradis 36,360 18,180 18,180 36,360 -- *
Jeffrey H. Lerer 5,000 2,500 2,500 5,000 -- *
Alan Gainsford 15,000 7,500 7,500 15,000 -- *
Haim Shaked and Ruth Shaked 4,000 2,000 2,000 4,000 -- *
Richard N. Bernstein, as Trustee 20,000 10,000 10,000 20,000 -- *
Milton Susman Trustee
Milton Susman Trust
UAD-5-8-89 FOB Milton Susman 10,000 5,000 5,000 10,000 -- *
Michael Futerman 36,000 18,000 18,000 36,000 -- *
Sanford B. Miot 9,090 4,545 4,545 9,090 -- *
Rush & Co. 37,200 18,600 18,600 37,200 -- *
Martin Greenberg 17,526 14,021 3,505 17,526 -- *
Moty Hermon 3,000 1,500 1,500 3,000 -- *
Forsyth Realty, Inc. P/S 9,090 4,545 4,545 9,090 -- *
Tioga Capital Corporation 11,685 -- 11,685(2) 11,685 -- *
Michael M. Rothkopf 15,500 5,000 10,500 15,500 -- *
Harry Z. Rosengart 91,500 51,220 -- 51,220 40,280 *
Carmine C. Mascoli 28,106(3) 18,696 -- 18,696 9,410 *
TOTAL 1,527,936 854,260 623,986 1,478,246 49,690 *
</TABLE>
- -----------------------------
* Represents less than 1%
(1) The table reflects the shares of Common Stock beneficially owned by each
Selling Stockholder and includes the number of Shares being registered
hereunder that each Selling Shareholder would receive upon exercise of all
warrants and options, as well as the shares of Common Stock otherwise owned
by such Selling Stockholder. While the Selling Stockholders have not
expressed a specific intention as to the number of Shares to be sold, the
table shows the beneficial ownership that would result if all Shares
issuable upon exercise of the warrants and options were sold.
(2) Shares of Common Stock that are issuable upon exercise of certain options.
(3) Includes 7010 shares of common stock in which Mr. Mascoli holds beneficial
interest through SunPharm Investors, L.P.
Certain shares of Common Stock owned by or issuable upon the exercise of
warrants and options held by Tioga Capital Corporation ("Tioga") and SunPharm
Investor, L.P. ("SunPharm Investors"), a limited partnership of which Tioga
is the general partner, are covered by this Prospectus. George B.
Schwartz, a director of the Company, is the founder and President of Tioga.
On July 19, 1996, the Company issued 159,842 shares of Common Stock and
warrants to purchase 39,960 shares of Common Stock to SunPharm Investors in
consideration for the exercise by SunPharm Investors of warrants to purchase
159,842 shares of Common Stock and the payment of the $304,262 exercise price
of such warrants. In April 1997, in connection with the amendments to the
terms of warrants issued in the Company's 1996 private placement and exchange
offer, the Company agreed to reduce the exercise price of the warrants issued
in July 1996 to $3.00 per share, and extended the expiration date of such
warrants to March 31, 2001, on the same terms offered to other holders of
such warrants.
-13-
<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders may offer the shares of Common Stock subject to
this Prospectus from time to time for their own account in transactions on
The Nasdaq Small Cap Market, in negotiated transactions or otherwise, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling Stockholders
may effect such transactions by selling the shares to or through broker-dealers
and such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders or the purchasers of
the shares for whom such broker-dealers may act as agent or to whom they sell
as principal or both (which compensation to a particular broker-dealer might
be in excess of customary commissions). The methods by which the shares may
be sold include (i) a block trade (which may involve crosses) in which the
broker or dealer so engaged will attempt to sell the securities as agent but
may position and resell a portion of the block as principal to facilitate the
transaction; (ii) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; (iii)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers; and (iv) privately negotiated transactions.
None of the proceeds from the sale of the shares of Common Stock subject
to this Prospectus by the Selling Stockholders will be received by the
Company. The Company has agreed to bear certain expenses in connection with
the registration and sale of the shares being offered by the Selling
Stockholders, and has agreed to indemnify the Selling Stockholders against
certain liabilities under the Securities Act. The Selling Stockholders and
any broker-dealers participating in the distribution of the shares of Common
Stock subject to this Prospectus may be deemed to be "underwriters" within
the meaning of the Securities Act, and any profit on the sale of Shares by
the Selling Stockholders and any commissions received by any such
broker-dealers may be deemed to be underwriting commission under the
Securities Act.
The shares of Common Stock subject to this Prospectus have not been
registered for sale by the Selling Stockholders under the securities laws of
any state as of the date of this Prospectus. Brokers or dealers effecting
transactions in the shares should confirm registration thereof under the
securities laws of the states in which such transactions occur, or the
existence of any exemption from registration.
If underwriters are used in any offering of shares of Common Stock, the
underwriter or underwriters with respect to such offering will be named in a
Prospectus Supplement. Only underwriters named in a Prospectus Supplement
will be deemed to be underwriters in connection with the shares of Common
Stock offered thereby. Firms not so named will have no direct or indirect
participation in the underwriting of such Common Stock, although such a firm
may participate in the distribution of such Common Stock under circumstances
entitling it to a dealer's commission. Unless otherwise set forth in the
Prospectus Supplement relating to such offering, any underwriting agreement
pertaining to any offering of shares of Common Stock will (i) entitle the
underwriters to indemnification by the Company and the Selling Stockholders
against certain civil liabilities under the Securities Act; (ii) provide that
the obligations of the underwriters will be subject to certain conditions
precedent; and (iii) provide that the underwriters will be obligated to
purchase all shares of such Common Stock so offered if any shares are
purchased. If underwriters are used in any offering of Common Stock, the
names of such underwriters, the anticipated date of delivery and other
material terms of the transaction will be set forth in the Prospectus
Supplement relating to such offering.
Underwriters, brokers and dealers may engage in transactions with or
perform services for the Company in the ordinary course of business.
Offers to purchase Common Stock may be solicited, and sales thereof may
be made, by the Selling Stockholders directly to one or more purchasers in
fixed price offerings, in negotiated transactions, at market prices
prevailing at the time of sale or at prices related to such market prices.
Certain of such purchasers may be deemed to be underwriters with respect to
any resale by them of Common Stock so acquired. This Prospectus may be
delivered by any such purchaser in connection with any such resales. Such
resales may be through underwriters, brokers or dealers, or directly to one
or more purchasers, all in the manner described above.
NEW JERSEY INVESTORS: The Securities offered by the Selling Stockholders
may be sold in New Jersey only through a registered broker-dealer or in reliance
upon an exemption from registration under the Securities Act.
-14-
<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company has authorized 25,000,000 shares of Common Stock, par value
$.0001 per share. As of July 31, 1997, 5,667,471 shares of Common Stock were
issued and outstanding and held by 131 holders of record.
The holders of Common Stock are entitled to one vote for each share held
of record on all matters to which stockholders may vote, including the
election of directors. The holders of Common Stock are entitled to share
ratably on a share for share basis with respect to any dividends when, as and
if declared by the Board of Directors out of funds legally available
therefor. In the event of a liquidation, dissolution or winding up of the
Company, holders of the Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preference
of any then outstanding Preferred Stock. Holders of Common Stock have no
preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to
the Common Stock. All outstanding shares of Common Stock are, and all shares
of Common Stock included in the Units offered hereby will be, fully paid and
nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 2,500,000 shares of Preferred Stock, par value
$.001 per share, in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the
designation of such series. The issuance of Preferred Stock could adversely
affect the voting power of the holders of Common Stock and the likelihood
that such holders will receive dividend payments and payments upon liquidation
and could have the effect of delaying, deferring or preventing a change in
control of the Company. The Company has no present plan to issue any shares of
Preferred Stock.
OUTSTANDING OPTIONS AND WARRANTS
At July 31, 1997, the Company had an aggregate of 3,093,618 shares of
Common Stock reserved for issuance pursuant to outstanding options and
warrants and options issued and available under the Company's 1994 Stock
Option Plan and 1995 Nonemployee Directors' Stock Option Plan. The Company
had outstanding options and warrants to purchase an aggregate of 5,203,376
shares of Common Stock, expiring at various period through April 2004.
TRANSFER AGENT AND REGISTRAR
Continental Stock Transfer & Trust Company in New York, New York, is the
transfer agent for the Common Stock.
REGISTRATION RIGHTS
Pursuant to agreements between the Company and the holders of 634,100
outstanding shares of Common Stock and of warrants exercisable for an
additional 524,618 shares of Common Stock, such holders have the right to
require the Company to register the sale of such shares of Common Stock (the
"Registrable Securities") under the Securities Act under certain
circumstances. See "Risk Factors--Shares Eligible for Future Sale." Subject
to certain exceptions, the holders of 50% of the Registrable Securities may
require the Company to register the Registrable Securities held by them for
public resale at the Company's expense, less underwriters commissions. This
right may be exercised twice, so long as at least 90% of the Registrable
Securities requested to be registered were in fact registered and sold. In
addition, if at any time following this offering the Company proposes to
register any of its securities under the Securities Act, holders of
Registrable Securities and holders of an additional 1,698,171 shares of
Common Stock (including 712,736 shares which may be acquired upon exercise of
outstanding options and warrants) are entitled, subject to certain restrictions,
to include their Registrable Securities in such registration. The Company is
required to bear all registration and selling
-15-
<PAGE>
expenses other than underwriters' commissions in connection with the
registration of Registrable Securities for the two required registrations and
for all Company-initiated registrations.
DELAWARE BUSINESS COMBINATION STATUTE
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, the statute
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years
after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed
manner. For purposes of Section 203, a "business combination" includes a
merger, asset sale or other transaction resulting in a financial benefit to
the interested stockholder, and an "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years prior,
did own) 15% or more of the corporation s voting stock.
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities
offered hereby have been passed upon for the Company by Andrews & Kurth
L.L.P., Houston, Texas.
EXPERTS
The financial statements incorporated in this prospectus by reference
from the Company's Annual Report on Form 10-KSB for the year ended December 31,
1996 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference (which
report expresses an unqualified opinion and includes an explanatory paragraph
referring to recurring losses incurred by the Company from inception and to
an uncertainty surrounding the Company's ability to obtain sufficient
financing in 1997 which raises substantial doubt about the Company's ability
to continue as a going concern), and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
-16-
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THESE SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVER
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL AT ANY TIME IMPLY THAT
THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
Page
----
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents
by Reference. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Selling Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Description of Securities . . . . . . . . . . . . . . . . . . . . . . . . 15
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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SUNPHARM CORPORATION
1,478,246 SHARES OF COMMON STOCK
------------
PROSPECTUS
------------
, 1997
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the
sale of the Common Stock being registered. All the amounts shown are
estimates except for the registration fee.
SEC registration fee . . . . . . . . . . . . . . . . . . . . . . . . $ 1,635
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . . . . . --
Legal fees and expenses. . . . . . . . . . . . . . . . . . . . . . . 15,000
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . 5,000
Miscellaneous fees and expenses. . . . . . . . . . . . . . . . . . . 3,365
--------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,000
--------
--------
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Reference is made to Article VII of the By-Laws of the Company (filed as
Exhibit 3.2) to the Company's Annual Report on Form 10-KSB for the fiscal
ended December 31, 1996 and to Section 145 of the Delaware General
Corporation Law, which, among other things and subject to certain conditions,
authorize the Company to indemnify each of its officers and directors against
certain liabilities and expenses incurred by such persons in connection with
claims made by reason of their being such officers or directors. Reference is
further made to the Company's 1995 underwriting agreement (filed as Exhibit
1.1) to the Registration Statement on Form SB-2 (No. 33-85416-A) as filed on
January 10, 1995, which contains provisions for the indemnification of
directors, officers and controlling persons of the Company under certain
circumstances.
ITEM 16. EXHIBITS
Exhibit No. Description
----------- -----------
*5.1 Opinion of Andrews & Kurth L.L.P.
*23.1 Consent of Deloitte & Touche LLP
*23.2 Consent of Andrews & Kurth L.L.P. (included in opinion
filed as Exhibit 5.1).
*24.1 Power of Attorney (included on signature page).
- ----------------
* Filed Herewith
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
II-1
<PAGE>
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in the
Registration Statement.
Provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities and Exchange Act
of 1934, as amended (the "Exchange Act") that are incorporated by reference
in the Registration Statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit a
court of appropriate jurisdiction the question 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.
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<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 Jacksonville, State of Florida on
August 7, 1997.
SUNPHARM CORPORATION
DATE: AUGUST 7, 1997 By: /s/ STEFAN BORG
-----------------------------------
Stefan Borg
President and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Stefan Borg his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution for him and in his name, place, and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute, may
lawfully 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.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Stefan Borg President, Director and Chief August 7, 1997
- ----------------------------- Executive Officer (PRINCIPAL
(Stefan Borg) EXECUTIVE AND ACCOUNTING OFFICER)
/s/ Philip R. Tracy Chairman of the Board August 7, 1997
- ----------------------------- of Directors
(Philip R. Tracy)
/s/ Charles Dimmler, III Director August 7, 1997
- -----------------------------
(Charles Dimmler, III)
/s/ Jerry T. Jackson Director August 7, 1997
- -----------------------------
(Jerry T. Jackson)
/s/ Robert S. Janicki Director August 7, 1997
- -----------------------------
(Robert S. Janicki)
/s/ Norman H. Lipoff Director August 7, 1997
- -----------------------------
(Norman H. Lipoff)
/s/ Robert A. Schoellhorn Director August 7, 1997
- -----------------------------
(Robert A. Schoellhorn)
/s/ George B. Schwartz Director August 7, 1997
- -----------------------------
(George B. Schwartz)
II-3
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
*5.1 Opinion of Andrews & Kurth L.L.P.
*23.1 Consent of Deloitte & Touche LLP
*23.2 Consent of Andrews & Kurth L.L.P. (included in opinion filed
as Exhibit 5.1).
*24.1 Power of Attorney (included on signature page).
- --------------------
* Filed herewith.
<PAGE>
Exhibit 5.1
Form of Opinion
August 7, 1997
Board of Directors
SunPharm Corporation
4651 Salisbury Road, Suite 205
Jacksonville, Florida 32256
Gentlemen:
We have acted as counsel to SunPharm Corporation (the "Company") in
connection with the Company's Registration Statement on Form S-3 (the
"Registration Statement") relating to the registration under the Securities
Act of 1993, as amended (the "Securities Act"), of the offer and sale by the
Selling Stockholders identified in the Registration Statement of up to
1,478,246 shares of the Common Stock, par value $.001 per share ("Common
Stock"), of the Company, of which (i) 854,260 shares of Common Stock are
issued and outstanding as of the date of this Prospectus (the "Outstanding
Shares"), (ii) 612,301 shares of Common Stock are issuable upon the exercise
of certain outstanding warrants (the "Warrant Shares"), and (iii) 11,685
shares of Common Stock are issuable upon the exercise of certain outstanding
options (the "Option Shares").
As the basis for the opinions hereinafter expressed, we have
examined such statutes, regulations, corporate records and documents,
certificates of corporate and public officials, and other instruments as we
have deemed necessary or advisable. In such examination we have assumed the
authenticity of all documents submitted to us as originals and the conformity
with the original documents of all documents submitted to us as copies.
Based on the foregoing and on such legal considerations as we deem
relevant, we are of the opinion that:
1. The Outstanding Shares have been duly and validly authorized, and
are validly issued, fully paid and nonassessable.
2. The Warrant Shares have been duly and validly authorized, and
when issued upon the exercise of such warrants in accordance with the terms
thereof, will be validly issued, fully paid and nonassessable.
3. The Option Shares have been duly and validly authorized, and when
issued upon the exercise of such options in accordance with the terms
thereof, will be validly issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and reference to our firm under the caption "Legal
Matters" in the Prospectus included therein.
Very truly yours,
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of SunPharm Corporation (the "Company") on Form S-3 of our report dated March
14, 1997 (which report expresses an unqualified opinion and includes an
explanatory paragraph referring to recurring losses incurred by the Company from
inception and to an uncertainty surrounding the Company's ability to obtain
sufficient financing in 1997 which raises substantial doubt about the Company's
ability to continue as a going concern), appearing in the Annual Report on Form
10-KSB of SunPharm Corporation for the year ended December 31, 1996, and to the
reference to us under the heading "Experts" in the Prospectus, which is a part
of this Registration Statement.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
August 7, 1997
