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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 5, 1997;
REGISTRATION NO. 333-29477
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
Amendment No. 2 to
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________
NAPRO BIOTHERAPEUTICS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C> <C>
Delaware 2833 84-1187753
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
6304 Spine Road, Unit A
Boulder, Colorado 80301
Telephone: (303) 530-3891
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
Gordon H. Link, Jr. Copies to:
Chief Financial Officer Francis R. Wheeler, Esq.
6304 Spine Road, Unit A Holme Roberts & Owen LLP
Boulder, Colorado 80301 1700 Lincoln, Suite 4100
Telephone: (303) 530-3891 Denver, Colorado 80203
Telecopier: (303) 530-1296 Telephone: (303) 866-0477
(Name, Address, Including Zip Code, Telecopier: (303) 866-0200
and Telephone Number,
Including Area Code, of Agent for
Service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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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Title of each class Proposed maximum Proposed maximum
of securities to be Amount to be offering price aggregate offering Amount of
registered registered per share price registration fee
<S> <C> <C> <C> <C>
Common Stock(2)...... 1,500,000 $6.75(3) $10,125,000 $3,068.18
Common Stock(2) 100,000(1) $9.00(4) $ 900,000 $ 272.73
Total 1,600,000 $11,025,000 $3,340.91
</TABLE>
(1) Reflects additional amount being registered by Amendment. The filing fee
for the initial 1,500,000 was paid on the original filing, June 18, 1997.
(2) Includes (i) up to 1,178,446 shares of Common Stock to be issued upon
conversion of the Company's 5% Senior Convertible Notes due 2000 (the
"Notes"), (ii) 323,700 shares of Common Stock to be issued upon exercise
of Warrants, (iii) up to 97,854 shares of Common Stock to be issued and
paid in lieu of cash, at the Company's option, as interest on the Notes,
and (iv) an indeterminate number of additional shares of Common Stock as
may from time to time become issuable upon conversion of the Notes or
payment of interest on the Notes, which shares are registered hereunder
pursuant to Rule 416 under the Securities Act.
(3) Estimated solely for purposes of calculating the registration fee, based on
the average of the high and low trading prices for the Common Stock
<PAGE>
for June 11, 1997, as reported on the Nasdaq National Market.
(4) Estimated solely for purposes of calculating the registration fee, based
on the average of the high and low trading prices for the Common Stock
for September 3, 1997, as reported on the Nasdaq National Market.
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a) MAY DETERMINE.
================================================================================
<PAGE>
NAPRO BIOTHERAPEUTICS, INC.
1,600,000 SHARES OF COMMON STOCK
This Prospectus relates to the offer and sale by certain persons listed herein
under "Selling Stockholders and Plan of Distribution" (collectively, the
"Selling Stockholders") of a maximum of 1,600,000 shares (collectively, the
"Shares") of common stock, $.0075 par value ("Common Stock"), of NaPro
BioTherapeutics, Inc. (the "Company") consisting of: (i) up to 1,178,446 shares
of Common Stock to be issued from time to time to the Selling Stockholders upon
conversion of the Company's 5% Senior Convertible Notes due 2000 (the "Notes") ,
(ii) 323,700 shares of Common Stock issuable upon the exercise of warrants to
purchase shares of Common Stock (the "Warrants") and (iii) up to 97,854 shares
of Common Stock to be issued and paid in lieu of cash, from time to time and at
the Company's option, as interest on the Notes. This Prospectus covers the
resale by the Selling Stockholders of up to 1,600,000 Shares, plus, in
accordance with Rule 416 under the Securities Act of 1933, as amended (the
"Securities Act"), such presently indeterminate number of additional Shares as
may be issuable upon conversion of the Notes or payment of interest on the
Notes, based upon fluctuations in the conversion price of the Notes. The Notes,
Warrants, and the shares of Common Stock issuable upon conversion of the Notes
or exercise of the Warrants have been and will be issued in transactions exempt
from the registration requirements of the Securities Act. The Notes and
Warrants have been issued, and upon conversion of such Notes and exercise of
such Warrants, shares of Common Stock will be issued. See "Selling Stockholders
and Plan of Distribution." The Company will not receive any proceeds from the
sale of the Shares covered by this Prospectus.
The Selling Stockholders have not advised the Company of any specific plans
for the distribution of the Shares covered by this Prospectus, but it is
anticipated that the Shares will be sold from time to time primarily in
transactions (which may include block transactions) on the Nasdaq National
Market of The Nasdaq Stock Market ("Nasdaq") at the market price then
prevailing, although sales may also be made in negotiated transactions or
otherwise. The Selling Stockholders and the brokers and dealers through whom
sale of the Shares may be made may be deemed to be "underwriters" within the
meaning of the Securities Act, and their commissions or discounts and other
compensation may be regarded as underwriters' compensation. See "Selling
Stockholders and Plan of Distribution."
The Common Stock is quoted on Nasdaq National Market under the symbol "NPRO".
On September 3, 1997, the last reported sale price of the Common Stock was
$9.375 per share.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS
OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" STARTING ON PAGE 6.
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 September 5, 1997
<PAGE>
TABLE OF CONTENTS
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Page
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<S> <C>
Available Information.......................... 3
Information Incorporated by Reference.......... 3
Prospectus Summary............................. 4
Risk Factors................................... 6
Use of Proceeds................................ 15
Selling Stockholders and Plan of Distribution.. 16
Legal Matters.................................. 18
Experts........................................ 18
</TABLE>
NO DEALER, SALESPERSON, OR ANY INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION, OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR IN A PROSPECTUS SUPPLEMENT IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING STOCKHOLDERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THEREOF. THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SHARES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus constitute "forward-looking
statements" within the meaning of the federal securities laws. Such forward-
looking statements may include, among other things, statements concerning the
Company's plans, objectives or future economic prospects, such as matters
relative to availability of raw materials; plant completion and approval;
completion of clinical trials and regulatory filings; prospects for and timing
of regulatory approvals; need for and availability of additional capital; amount
and timing of capital expenditures; timing of product introductions and revenue;
prospects for breaking even and other statements of expectations, beliefs,
future plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts. Such forward-
looking statements involve known and unknown risks, uncertainties and other
factors that may cause actual results, performance or achievements of the
Company to be materially different from the results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, adverse economic and general business conditions;
competition from Bristol-Myers Squibb Company and other existing and new
producers of paclitaxel and other drugs; technological advances relating to
cancer treatment and drug development; ability to obtain rights to technology;
ability to obtain raw materials and commercialize manufacturing processes;
timing of regulatory filings relative to those of competitors; effectiveness of
NBT Paclitaxel (as defined below) and other pharmaceuticals developed by the
Company in treating disease; results of research and development activities;
business abilities and judgment of management and other personnel; availability
of qualified personnel; changes in and compliance with governmental regulations;
effect of financial market conditions and other factors on capital availability
for the Company and other biopharmaceutical companies; performance of the
Company's strategic partners of obligations under existing agreements; the
financial health of the Company's strategic partners; and other factors
discussed under "Risk Factors."
2
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AVAILABLE INFORMATION
The Company is subject to the information 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
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected without charge at, and copies
thereof may be obtained at prescribed rates from, the public reference
facilities of the Commission's principal office at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549 and at the Commission's regional offices at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, Suite 1300, New York, New York 10048. The Commission also maintains a
site on the World Wide Web, the address of which is http://www.sec.gov, that
contains reports, proxy and information statements and other information
regarding issuers, such as the Company, that file electronically with the
Commission.
The Company has filed with the Commission a Registration Statement under the
Securities Act, with respect to the securities offered hereby (the "Registration
Statement"). This Prospectus does not contain all of the information set forth
in the Registration Statement and the exhibits thereto. For further information
with respect to the Company and the securities offered hereby reference is made
to the Registration Statement, including the exhibits thereto, which may be
inspected at, and copies thereof may be obtained at prescribed rates from, the
public reference facilities of the Commission at the addresses set forth above.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed with the Commission (File No. 0-24320)
and are incorporated in this Prospectus by reference and made a part hereof:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996, as amended by Form 10-K/A filed on June 5, 1997,
and Form 10-K/A2 filed on August 18, 1997.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, as amended by Form 10-Q/A filed on August 18,
1997.
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997.
4. The description of the Company's Common Stock included in the
Registration Statement on Form 8-A filed June 17, 1994, as amended
on July 27, 1994;
5. The description of the Company's Rights to Purchase Class B Junior
Participating Preferred Stock filed on Form 8-A filed November 26,
1996; and
6. The Company's Definitive Proxy Statement for its 1997 Annual
Meeting of Stockholders filed May 15, 1997.
All documents filed by the Company following the filing of the Registration
Statement pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act,
after the date of this Prospectus and prior to the termination of the Offering,
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the dates 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 herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference in this Prospectus modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this Prospectus
is delivered, upon such person's written or oral request, a copy of any and all
of the information that has been incorporated by reference into this Prospectus
(not including exhibits to such information unless such exhibits are
specifically incorporated by reference into such information). Any such request
should be directed to NaPro BioTherapeutics, Inc., 6304 Spine Road, Unit A,
Boulder, Colorado 80301. Telephone: (303) 530-3891, Attention: Investor
Relations.
3
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus or incorporated by reference herein. Each
prospective investor is urged to read this Prospectus in its entirety. Special
Note: Certain statements set forth below constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). See "Special Note Regarding Forward-Looking Statements" on page 2
for additional factors relating to such statements.
THE COMPANY
NaPro BioTherapeutics, Inc. (the "Company") is engaged in the development
and manufacture of paclitaxel (the Company's formulation of paclitaxel is
referred to herein as "NBT Paclitaxel"), a naturally-occurring cytotoxic agent
found in certain species of yew (Taxus) trees. Bristol-Myers Squibb Company
("BMS") has publicly announced sales of their formulation of paclitaxel, known
as TAXOL(R)/1/, of approximately $580 million in 1995 and $813 million in 1996.
The Company's objective is to develop its proprietary extraction, isolation and
purification ("EIP") technology in conjunction with proprietary sources of
renewable Taxus biomass to become an established manufacturer of NBT Paclitaxel
on a worldwide basis while assigning responsibility for the performance of
clinical trials and regulatory procedures and sales, marketing and distribution
of NBT Paclitaxel to large international pharmaceutical companies. To implement
this strategy, the Company has formed strategic alliances through long-term
exclusive agreements with each of F.H. Faulding & Co., Ltd., Australia's largest
domestic pharmaceutical company with 1996 sales of approximately $1.2 billion
("Faulding"), and Baker Norton Pharmaceuticals, a subsidiary of IVAX
Corporation, a diversified international healthcare company with 1996 sales of
approximately $1.2 billion ("IVAX" and together with Faulding, the "Strategic
Partners").
The Strategic Partners have agreed to fund and, with the Company's input,
oversee the clinical trials required to obtain regulatory approvals for the
commercialization of NBT Paclitaxel in their respective territories. The
Company is responsible for supplying the Strategic Partners with NBT Paclitaxel
for clinical and commercialization purposes. Upon commercialization, the
Company will receive royalty payments based on NBT Paclitaxel product sales by
the Strategic Partners.
Faulding obtained regulatory approval and began marketing NBT Paclitaxel as
a generic pharmaceutical in Australia in January 1995 for treating refractory
breast and ovarian cancers, and is seeking approvals to market NBT Paclitaxel in
other countries in its defined territory. IVAX filed an Investigational New
Drug application for NBT Paclitaxel with the United States Food and Drug
Administration (the "FDA") in June 1994. IVAX has completed the treatment phase
of the Phase II/III clinical trials with NBT Paclitaxel for three therapeutic
indications including refractory breast and ovarian cancers and Kaposi's Sarcoma
and submitted a new drug application (an "NDA") to the FDA for Kaposi's Sarcoma
on March 31, 1997. The Company has been advised that BMS submitted a
supplemental NDA for Kaposi's Sarcoma in February 1997. There can be no
assurance as to whether IVAX will be successful in obtaining any necessary
regulatory approvals or successfully market NBT Paclitaxel even if such
approvals are obtained. See "Risk Factors--Government Regulation; No Assurance
of Regulatory Approval".
The Company's EIP technology was designed to allow the extraction of
paclitaxel and other taxanes (compounds structurally similar to paclitaxel that
can be synthesized into paclitaxel) from renewable sources of biomass such as
needles and limbstock harvested from ornamental yew bushes. In order to have
access to a more stable and reliable source of Taxus biomass for use in the
production of NBT Paclitaxel, the Company has entered into agreements with
Pacific Biotechnologies, Inc. ("PBI"), a subsidiary of Pacific Regeneration
Technologies, Inc., one of Canada's largest reforestation companies, and Zelenka
Nursery, Inc. ("Zelenka"), the largest commercial grower of ornamental yew trees
for the horticulture industry in the United States, to grow cloned ornamental
yew trees and bushes on a large scale. The Company is currently constructing a
large-scale commercial EIP manufacturing facility with planned capacity to meet
- --------------------------
/1/TAXOL(R) is a registered trademark of Bristol-Myers Squibb Company
for an anti-cancer pharmaceutical preparation containing paclitaxel.
4
<PAGE>
the commercial needs of the Strategic Partners through 1999. In addition, in
order to increase production yields of NBT Paclitaxel and reduce manufacturing
cost, the Company is developing, and has applied for patent protection for, a
semi-synthesis process for manufacturing NBT Paclitaxel from certain other
taxanes contained in renewable biomass sources. The use of this semi-synthesis
process will require a supplemental NDA (an "SNDA").
The Company was incorporated as a Washington corporation in 1991, and was
reincorporated as a Delaware corporation in 1993. The Company has two
subsidiaries, NaPro BioTherapeutics (Canada) Inc., a British Columbia Company
("NaPro Canada"), and NaPro BioTherapeutics (Ireland) Ltd., a Company formed
under the laws of Ireland. All references herein to the "Company" include these
subsidiaries, unless the context requires otherwise.
The Company's principal executive offices are located at 6304 Spine Road,
Unit A, Boulder, Colorado 80301, and its telephone number is (303) 530-3891.
RECENT DEVELOPMENTS
The Company closed a private placement of approximately $10 million of
senior convertible notes on June 4, 1997. The convertible notes (the "Notes")
were sold at par, mature in June 2000 and bear interest at a rate of 5% per
annum, subject to adjustment in certain events. Interest on the Notes may be
paid in Common Stock or cash, at the option of the Company. Initially, 50% of
the Notes are convertible into Common Stock of the Company at a price of $10.00
per share. Starting October 2, 1997, the Notes are convertible into Common Stock
of the Company at a discount (ranging from 5% to 10%) from the trading price of
the Common Stock during specified periods prior to conversion. If not converted
into Common Stock, upon maturity in June 2000 the Notes will be exchanged for
13.75% five-year debentures of the Company. In connection with the private
placement of the Notes, the Company issued the Warrants to purchase up to
323,700 shares of Common Stock at $10.00 per share, including Warrants to
purchase up to 33,700 shares of Common Stock that were issued to the placement
agent. The placement agent for the private placement was Diaz & Altschul
Capital, LLC ("D&A Capital"). The last sale price of the Common Stock on June 4,
1997, as reported on the Nasdaq National Market, was $8.625. See "Selling
Stockholders and Plan of Distribution--Shares Offered Hereby."
5
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RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully by potential investors in evaluating an
investment in the shares of Common Stock offered hereby. Special Note: Certain
statements set forth below constitute "forward-looking statements" within the
meaning of the Reform Act. See "Special Note Regarding Forward-Looking
Statements" on page 2 for additional factors relating to such statements.
Early Stage of Product Development; Dependence on Paclitaxel. The Company
has a limited relevant operating history upon which an evaluation of its
prospects can be made. Such prospects must be considered in light of the risks,
expense and difficulties frequently encountered in establishing a business in
the evolving, heavily regulated pharmaceutical industry, which is characterized
by an increasing number of market entrants, intense competition and a high
failure rate. In addition, significant challenges are often encountered in
shifting from development to commercialization of new products. Since its
inception, the Company has devoted its efforts almost entirely to the
development and implementation of its EIP technology for producing NBT
Paclitaxel. The Company currently has no other drugs in clinical trials and has
conducted very limited investigation into additional product possibilities. The
Company cannot predict when, if ever, it will identify or successfully develop
any additional product candidates and any additional products. The Company is
exclusively dependent on the sales of NBT Paclitaxel for revenue for the
foreseeable future. The Company's production of NBT Paclitaxel continues to be
limited to small-scale production for use by the Strategic Partners for research
and development and in clinical trials and limited commercial sales. The
Company's future growth and profitability will depend upon, among other things,
the ability of the Company to complete development of its EIP technology,
develop large-scale commercial manufacturing capacity sufficient to meet
requirements of the Strategic Partners, operate without infringing on the patent
or proprietary rights of others, obtain regulatory approval for its
manufacturing processes, including using biomass sources other than the bark of
the wild Pacific yew for the production of NBT Paclitaxel, and develop and
obtain regulatory approval for its semi-synthetic formulation of paclitaxel, of
which there can be no assurance. The Company's growth and profitability is also
dependent on the success of the Strategic Partners in advancing NBT Paclitaxel
through regulatory processes in the United States and other countries around the
world, and in fostering commercial acceptance of NBT Paclitaxel in the
oncological market as a form of chemotherapy. This will require substantial
additional clinical testing and marketing efforts and the expenditure of
significant funds by the Strategic Partners. Although NBT Paclitaxel is
currently approved for commercial sale in Australia, the Company does not expect
NBT Paclitaxel to receive regulatory approvals in most other countries,
including the United States, for at least one year, if at all. Clinical testing
of the safety and efficacy of new drugs takes several years, and the time
required to commercialize new drugs cannot be predicted with accuracy. Product
development of pharmaceuticals is highly uncertain, and unanticipated
developments, clinical or regulatory delays, unexpected adverse side effects,
inadequate therapeutic efficacy or competitive and technological developments
could slow or prevent the product development efforts of the Company and the
Strategic Partners and have a material adverse effect on the Company. There can
be no assurance that NBT Paclitaxel will receive the necessary regulatory
approvals, prove safe and effective, be capable of being produced in commercial
quantities at acceptable cost or be successfully marketed by the Strategic
Partners in the oncological market. The failure of NBT Paclitaxel to achieve
any of the foregoing would have a material adverse effect on the Company and
could result in the Company being forced to discontinue operations. See "Risk
Factors--Government Regulation; No Assurance of Regulatory Approval."
Dependence on Strategic Alliances. The Company has entered into long-term
agreements with the Strategic Partners pursuant to which the Strategic Partners
have assumed control of the clinical development and commercialization of NBT
Paclitaxel in their respective territories, including conducting clinical trials
and preparing and filing regulatory submissions. The Company is responsible for
the manufacture of NBT Paclitaxel as a pharmaceutical under current good
manufacturing practices ("cGMP") to satisfy the Strategic Partners' clinical and
commercial needs. The Company has limited independent clinical testing and
marketing capabilities and experience and it is unlikely that the Company could
achieve a sufficient independent level of such capabilities and experience in
the short or medium term. In the event that either of the agreements with the
Strategic Partners were to be terminated, there can be no assurance that the
Company would be able to enter into new, comparable agreements, or establish its
own marketing and sales force to market NBT Paclitaxel effectively on a global
basis and compete with BMS and others, any of which would have a material
adverse effect on the Company's business, financial condition and results of
operations. Sales of NBT Paclitaxel to the Strategic Partners constituted
virtually all of the Company's revenue during the year ended December 31, 1996,
and the Company expects that sales to the Strategic Partners will continue to
constitute substantially all of the Company's revenue for the
6
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foreseeable future.
There can be no assurance that the Strategic Partners will continue to
perform their respective obligations under these agreements, that they will be
successful in their clinical trials or in receiving the necessary regulatory
approvals for NBT Paclitaxel, or that they will be successful in marketing and
distributing NBT Paclitaxel if regulatory approvals are received. The failure
of the Strategic Partners to perform any such obligations or to be successful in
marketing NBT Paclitaxel would have a material adverse effect on the Company.
Furthermore, there can be no assurance that business conflicts will not arise
between the Strategic Partners or between the Company and the Strategic Partners
over paclitaxel or non-paclitaxel anti-cancer drugs that may be produced by the
Strategic Partners. In addition, the agreements with the Strategic Partners are
subject to termination under various circumstances. Faulding may terminate its
agreement with the Company upon the occurrence of certain events, including the
following: (i) if Faulding becomes controlled by a pharmaceutical company that
sells paclitaxel in the Faulding territory; (ii) if the Company becomes
controlled by IVAX or BMS; (iii) if the Company is purchased by a pharmaceutical
company which sells paclitaxel in the Faulding territory and that company
refuses to be bound by the terms of the Faulding agreement; or (iv) if the
Company is unable to meet the paclitaxel supply requirements of Faulding as
defined under the agreement. IVAX may terminate its agreement if the Company
materially breaches the agreement. Pursuant to the agreement, a material breach
includes the Company's failure to meet the supply requirements of IVAX for a
continuing three-year period. In addition, if the Company is unable to meet at
least 75% of its supply obligations to IVAX for a continuing period of 90 days,
IVAX may have the right to obtain certain confidential manufacturing information
and to have paclitaxel manufactured by a third party. Termination of the
agreements under certain of the circumstances set forth above could prevent the
Company from selling NBT Paclitaxel in the Faulding and IVAX territories for two
years and three years following termination, respectively. If either of the
Strategic Partners terminates or breaches its agreement, such termination or
breach would have a material adverse effect on the Company and could result in
the Company being forced to discontinue operations.
Limited Product Sales; History of Significant Operating Losses; Anticipated
Future Losses. Since its inception, substantially all of the Company's revenue
has come from sales of NBT Paclitaxel to the Strategic Partners for clinical
trials and with respect to Faulding in Australia, limited commercial sales. The
Company has generated only limited revenue and has incurred significant
operating losses, including operating losses of approximately $6.0 million, $4.3
million and $7.1 million for the years ended December 31, 1994, 1995 and 1996,
respectively, resulting in an accumulated deficit of $25.5 million as of
December 31, 1996. For the six months ended June 30, 1997, operating losses
were approximately $6.982 million (unaudited) and as of June 30, 1997, the
accumulated deficit was $32.593 million (unaudited). In addition, losses are
continuing and will continue until such time, if ever, that the Company is able
to generate sufficient revenue from sales of NBT Paclitaxel to cover its
expense. The Company expects to incur significant operating losses at least
through 1997, if not longer, as the Company scales up its manufacturing
capabilities and develops and secures new sources of biomass to produce NBT
Paclitaxel. Furthermore, the Company's ability to achieve profitability depends
on the ability of the Strategic Partners to obtain required regulatory approvals
in the United States, among other places, and successfully market NBT Paclitaxel
as well as to operate in a competitive environment. The Company's profitability
will also depend on its ability to establish and operate FDA-approved
manufacturing facilities that produce NBT Paclitaxel in sufficient quantities on
a timely basis to supply the Strategic Partners' requirements and to operate
without infringing on the patents and proprietary rights of others. There can
be no assurance that any of such events will occur, that the Company's revenue
will increase or that the Company will ever achieve profitable operations.
Potential Limitations on the Availability of Raw Materials. Through 1994,
the Company harvested bark of the wild Pacific yew tree as the primary raw
material used in the Company's production of NBT Paclitaxel. Harvesting the
bark from Pacific yew trees generally requires cutting down the trees. This
practice has been the subject of environmental controversy between
pharmaceutical companies, governmental agencies regulating public lands and
environmental activist groups due to the prevalence of some wild Pacific yew
trees located in old growth forests which are frequently the habitat of the
spotted owl and other endangered species. As such, there can be no assurance
that the bark of the wild Pacific yew tree will be available for the production
of NBT Paclitaxel in the future. The Company has developed its EIP technology
to extract paclitaxel and other taxanes from non-bark sources of ornamental yew
bushes. The use of non-bark sources for paclitaxel may require additional
regulatory approval, of which there can be no assurance. See "Risk Factors--
Government Regulation; No Assurance of Regulatory Approval."
To improve its access to raw materials for the production of NBT Paclitaxel
and to help avoid environmental issues, the Company is implementing a plantation
strategy pursuant to which it grows ornamental yew bushes which it believes
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may provide it with a renewable source of biomass. The Company has entered into
agreements with PBI and Zelenka pursuant to which PBI and Zelenka, respectively,
grow and harvest ornamental yew bushes for the Company. The Company also is
supplementing its supply of biomass obtained from PBI and Zelenka by entering
into additional agreements to purchase biomass and mature yew bushes from
commercial growers and, if economical, to develop its own plantations. There
can be no assurance that the Company will be able to enter into additional
agreements on acceptable terms or at all or that the Company will be successful
in developing its own plantations. In addition, there can be no assurance that
the arrangements with PBI and Zelenka will prove successful in supplying biomass
in adequate quantities or of sufficient quality to satisfy the Strategic
Partners' commercial requirements, or that alternate sources of biomass will be
available to the Company, if necessary for its operations, on commercially
reasonable terms, in sufficient quantities. The biomass used for NBT Paclitaxel
may also be difficult to obtain in the future due to many other factors,
including environmental regulation and litigation, geographic location, weather
patterns, scarcity, destruction by insects, vandalism, acts of God and fire.
Moreover, yew biomass is subject to a very long product cycle (between four and
five years) between the planting of the yew trees and bushes and harvesting, and
accordingly, mature yew trees and bushes, if destroyed or damaged, cannot be
replaced on a timely basis. The paclitaxel content of the biomass obtained by
the Company may also vary as a result of fluctuations in temperature, humidity,
soil content and age of the biomass source as well as geographical area.
Failure to obtain an adequate supply of quality biomass on a timely basis would
limit or preclude the Company's ability to manufacture NBT Paclitaxel and would
have a material adverse effect on the Company's business, financial condition
and results of operations.
Limited Manufacturing Experience; Dependence on a Commercial-Scale
Paclitaxel Manufacturing Facility; Technological Challenges. Although the
Company has constructed and currently operates small-scale manufacturing
facilities in the United States and Canada, the Company has limited experience
in producing NBT Paclitaxel in large-scale commercial quantities adequate to
support sales in a major market. Since its inception, the Company has produced
NBT Paclitaxel only in quantities necessary for research and clinical trials and
limited commercial sales by Faulding in Australia. The Company does not
currently have the trained staff or the facilities necessary to manufacture NBT
Paclitaxel in large-scale commercial quantities. The Company is currently in
the process of constructing a large-scale commercial EIP manufacturing facility
in Boulder, Colorado with the expected capacity to produce a sufficient volume
of NBT Paclitaxel to meet the Strategic Partners' needs through 1999. In order
to increase its capacity to manufacture NBT Paclitaxel, the Company is currently
developing a semi-synthetic process. If the Company successfully develops a
semi-synthetic process and receives the required regulatory approvals, the
Company intends to either expand its current facility under construction to
accommodate semi-synthetic manufacturing or construct a separate semi-synthetic
manufacturing facility. There can be no assurance, however, that the proposed
large-scale commercial EIP manufacturing facility or semi-synthetic
manufacturing facility will be completed within the time periods indicated, if
at all, or be adequate to supply the Strategic Partners' commercial long-term
needs. In addition, there can be no assurance that the Company will receive the
necessary regulatory approvals for its manufacturing facilities or processes.
The success of the Company's manufacturing facilities will depend upon its
ability to successfully adapt its EIP technology for large-scale commercial
production of NBT Paclitaxel. The adaptation of such technologies to
accommodate increased production volumes may result in significant expense and
is subject to numerous risks, including unanticipated problems and delays.
There can be no assurance that the Company will successfully adapt its EIP
technology to large-scale commercial production on a timely basis, if at all.
There also can be no assurance that the Company will be able to achieve at any
facility the product yields and operating efficiencies necessary to produce NBT
Paclitaxel at a competitive cost. The Company's failure to adapt its technology
for large-scale commercial production and to establish and successfully operate
large-scale commercial manufacturing facilities at a competitive cost would have
a material adverse effect on the Company. In addition, although the Company
performs its own procedures for isolation and purification of paclitaxel and
other taxanes, the Company currently has a contract with a third party for the
extraction of crude paclitaxel and other taxanes from yew biomass. This
contract provides for less capacity than the EIP facility currently under
construction. Accordingly, to meet the expected increase in demand and to
provide for an alternative source of supply for NBT Paclitaxel if regulatory
approvals are obtained, the Company must either contract out its large-scale
extraction requirements or build an extraction facility. There can be no
assurance that such a contract can be obtained on commercially reasonable terms,
if at all, or that an extraction facility can be constructed in a timely fashion
and receive the necessary regulatory approvals. The failure of the Company to
secure a large-scale extraction contract or to construct a regulatory-approved
extraction facility on a timely basis in order to meet its supply obligations to
the Strategic Partners would have a material adverse effect on the Company.
Government Regulation; No Assurance of Regulatory Approval. The research
and development, manufacture,
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preclinical and clinical testing, distribution and marketing of pharmaceutical
products, including NBT Paclitaxel, are subject to extensive regulation by
numerous governmental authorities in the United States and other countries. The
process of obtaining regulatory approval by the FDA and other required
regulatory approvals is lengthy, expensive and uncertain. Prior to marketing in
the United States, product candidates, including NBT Paclitaxel, must undergo
extensive preclinical and clinical testing to satisfy the FDA that they are safe
and efficacious in each clinical indication (the specific condition intended to
be treated), dosage, dose schedule and route of administration for which
approval for use is sought. In addition, approval by analogous regulatory
authorities in other countries must be obtained prior to commencing marketing of
pharmaceutical products in those countries. The approval process varies from
country to country and approval for sale in one country may facilitate, but does
not ensure, approval in other countries. Delays in obtaining regulatory
approvals would adversely affect the development, testing and marketing of NBT
Paclitaxel and the ability of the Company to generate revenue from the sale of
NBT Paclitaxel. While certain of the Company's employees have some experience
in conducting and managing the preclinical and clinical testing necessary to
obtain regulatory approval, the Company is relying almost exclusively on the
Strategic Partners to manage the process of taking NBT Paclitaxel through the
numerous clinical tests and regulatory processes necessary to gain approval for
use in those countries that Faulding or IVAX are targeting for commercial sales
of NBT Paclitaxel. There can be no assurance that NBT Paclitaxel, or any other
product candidate developed by the Company, will prove to be safe and effective
in clinical trials or that the Strategic Partners will obtain regulatory
approvals for NBT Paclitaxel in a timely manner, or at all. Even if regulatory
clearance is obtained, NBT Paclitaxel is subject to continual review, and later
discovery of previously unknown defects or failure to comply with the applicable
regulatory requirements may result in restrictions on marketing or withdrawal
from the market as well as possible civil or criminal sanctions.
Before receiving FDA approval to market NBT Paclitaxel, the Company and the
Strategic Partners will have to demonstrate that NBT Paclitaxel represents a
safe and effective therapy. Data obtained from preclinical and clinical
activities are susceptible to varying interpretations which could delay, limit
or prevent regulatory approvals. In addition, delays or rejections may be
encountered based upon additional government regulation from future legislation
or administrative action or changes in FDA policy during the period of product
development, preclinical and clinical trials, and FDA regulatory review. If
regulatory approval of NBT Paclitaxel is granted, such approval will be limited
to those disease states and conditions for which the product is, as demonstrated
through clinical studies, safe and effective. Furthermore, approval may entail
ongoing requirements for post-marketing studies. In order for regulatory
approval to be obtained, manufacturers of therapeutic products sold in the
United States are required to satisfy the FDA that their manufacturing
facilities and processes adhere to applicable standards, including cGMP, and to
engage in extensive record-keeping and reporting. Failure to comply with cGMP
regulations may result in restrictions on NBT Paclitaxel's marketing or
manufacture and may result in product seizures, product recalls, or withdrawal
of the product from the market. Compliance with such regulations is costly and
requires substantial time and attention. Following an inspection of the
Company's manufacturing facilities in Canada and the United States by an auditor
of the Australian Therapeutic Goods Administration ("TGA"), Australia's
equivalent of the FDA, the TGA issued approvals to the Company as an Australian
cGMP compliant paclitaxel manufacturer. None of the Company's manufacturing
facilities, however, have been inspected by the FDA.
The majority of clinical trials performed with NBT Paclitaxel utilized
product manufactured from the Company's inventory of bark from the wild Pacific
yew tree. The Company has, however, included product manufactured from needles
and limbstock harvested from ornamental yew trees and bushes in its Drug Master
File ("DMF") which the Company filed in support of IVAX's NDA. United States
regulatory approvals by the FDA are required to make these changes in biomass
sources. It has been necessary to demonstrate that paclitaxel extracted from a
different species, or a different part of the tree, is chemically and
biologically equivalent to a reference material which has been previously
characterized and tested. Similarly, the same type of demonstration must be
made for paclitaxel produced using the Company's planned semi-synthesis
manufacturing process. The production of paclitaxel semi-synthetically was not
referenced in the initial NDA filing. The Company anticipates that such semi-
synthetic production will be included in an SNDA to be filed after the initial
approval of NBT Paclitaxel, if ever. This change potentially introduces
additional uncertainty in the FDA review process which could delay or inhibit
the marketing approval for NBT Paclitaxel. There can be no assurance that
regulatory approval will be received on a timely basis, if at all. Failure to
receive such approval would have a material adverse effect on the Company's
business, financial condition and result of operations.
The Company is subject to United States laws and regulations applicable to
exporting drugs. On April 26, 1996,
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the export provisions in the Food, Drug and Cosmetic Act (the "FDC Act") were
amended in Chapter 1A of Title II, Supplemental Appropriations For The Fiscal
Year Ending September 30, 1996, in the "FDA Export Reform and Enhancement Act of
1996" to authorize the export of a drug before marketing approval is obtained in
the United States, to any country, if the drug (i) complies with the laws of the
importing country and (ii) has valid marketing authorization by the appropriate
authority in a country listed by the statute, one of which is Australia. The
Company has received valid marketing authorization from Australia. Thus, if the
other statutory conditions are met, the Company believes that future exports
from the United States of NBT Paclitaxel labeled in accordance with the laws of
Australia and, for countries other than Australia, the laws of the importing
country, should be permissible without an FDA permit or other FDA approval,
although no such assurance can be given.
The Company is also subject to, among others, the regulations of Canada,
the Province of British Columbia, the United States Environmental Protection
Agency, the Department of Interior (United States Fish and Wildlife Services and
the Bureau of Land Management), the Department of Agriculture (United States
Forest Service) and other countries and regulatory agencies. Pursuant to the
National Environmental Policy Act, certain United States agencies have prepared
an Environmental Impact Statement that addresses the impact of harvesting wild
Pacific yew trees, including cutting down wild Pacific yew trees on federally
managed land. The Company ceased harvesting bark in August 1994. The Company
is also subject to federal, state and local laws and regulations governing the
use and disposal of hazardous materials as well as regulations imposed by the
Occupational Safety and Health Administration governing worker safety. There
can be no assurance that the Company is at all times in complete compliance with
all such requirements. The Company has made and will continue to make
expenditures to comply with environmental requirements. Compliance with these
regulations is time-consuming and expensive. The failure to comply with these
regulations, however, could have a material adverse effect on the Company's
business, financial condition and results of operations.
The adoption by federal, state, local or foreign governments of significant
new laws or regulations or a change in the interpretation or implementation of
existing laws or regulations relating to environmental or other regulatory
matters, including FDA requirements, could increase the cost of producing NBT
Paclitaxel, delay regulatory approval, preclude continued marketing, or
otherwise adversely affect the Company's ability to produce or sell NBT
Paclitaxel. Adverse governmental regulations which might arise from future
legislative or administrative regulations or other actions cannot be predicted.
In addition, the Company's activities have been opposed by the Oregon Natural
Resources Council ("ONRC") because of its concern over wild Pacific yew in old
growth forests. Even though the Company no longer harvests biomass from the
bark of the wild Pacific yew and does not intend to do so, there can be no
assurance that the ONRC and other environmental activist groups will not oppose
other activities of the Company, which may have the effect of delaying or
halting production of NBT Paclitaxel, each of which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Uncertain Efficacy of Paclitaxel; Adverse Side Effects Associated With Use
of Paclitaxel. Paclitaxel is not considered to be a long-term cure for cancer.
Safety and efficacy trials completed by BMS, however, have demonstrated to the
satisfaction of the FDA that paclitaxel is efficacious in treating refractory
ovarian and breast cancers in accordance with their guidelines. The Company
understands that other clinical trials have indicated that paclitaxel,
individually and in combination with other chemotherapeutic agents, may be
effective in treating other forms of cancer. Such trials are ongoing, however,
and, accordingly, there is no conclusive evidence of paclitaxel's effectiveness
in treating other forms of cancer. It may take several years to obtain the
final results of such trials, and there can be no assurance that paclitaxel will
demonstrate efficacy as a broad-spectrum anti-cancer agent or that it will prove
to be more efficacious than other chemotherapeutic agents as single agent
therapy in treating any form of cancer. Like chemotherapy agents in general,
the present formulation for administering paclitaxel is believed to cause
adverse side effects, which, in some patients, are extensive. These side
effects include hypersensitivity (allergic) reactions, which require the use of
various premedications to minimize the side effects. In addition, paclitaxel
has been shown to produce peripheral neuropathy (loss of sensation or pain and
tingling in the extremities) and neutropenia (low white blood cell counts)
which, as a result, may limit its use in certain cases. There can be no
assurance that such side effects or other unintended and/or toxic side effects
will not adversely affect the ability of the Strategic Partners to obtain
regulatory approval for or to market NBT Paclitaxel.
Rapid Technological Change; Intense Competition. The biopharmaceutical
industry is subject to rapid and significant technological change. The Company
competes with all entities developing and producing therapeutic agents for
cancer treatment or other diseases which may be the subject of future product
development efforts of the Company.
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These entities include numerous academic and research organizations and
pharmaceutical and biotechnology companies pursuing production of, among other
things, genetically engineered drugs, drugs manufactured through chemical
synthesis and cell-tissue growth, as well as companies specifically pursuing the
production of paclitaxel for commercial sale from natural product extraction
techniques. The Company's competitors may succeed in developing technologies,
products and processes that render the Company's processes and/or products
obsolete or non-competitive and which may have a material adverse effect on the
Company's business, financial condition and results of operations. Many
companies and research institutions are seeking means to obtain paclitaxel and
other taxanes from renewable biomass components of yew trees and other sources
in order to increase potential paclitaxel yields, avoid environmental concerns
and reduce the cost of biomass. Although the Company has engineered a technology
for the extraction, isolation and purification of NBT Paclitaxel from bark and
renewable parts of yew trees and bushes, the development by others of
manufacturing methods for paclitaxel-containing biomass sources that are
significantly less costly than the Company's could have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, the Company is aware of several potential competitors that
have developed and patented or are developing various processes for producing
paclitaxel and paclitaxel-related substances semi-synthetically and through
other processes and which have resulted or may result in products that are as
effective or more effective than paclitaxel extracted from the bark of yew
trees. Although the Company is currently conducting research to increase
product yield through a semi-synthesis process incorporating its proprietary and
licensed technology, no assurance can be given that technical problems will not
be encountered in developing such technology for clinical or commercial use or
that any semi-synthesis process that may be developed by the Company will not be
deemed to infringe on the proprietary rights of others or will itself be
protectable by patents. In addition, although the Company believes the
production of fully synthetic paclitaxel is not currently commercially viable,
the discovery by a third party of a cost-effective means to fully synthesize
paclitaxel in commercial quantities or the manufacture of taxane derivatives or
analogs that are more efficacious than NBT Paclitaxel in treating cancer would
have a material adverse effect on the Company's business, financial condition
and results of operations. Moreover, many of these competitors, including BMS
who currently dominates the paclitaxel market, have substantially greater
capital resources, research and development capabilities, manufacturing and
marketing resources, and experience than the Company. The Company expects BMS
to compete intensely to maintain its dominance of the paclitaxel market,
including through pursuit of an aggressive patent strategy. The Company's
competitors may succeed in obtaining patents which limit or preclude the Company
from producing NBT Paclitaxel or in developing products that are more effective
or less costly than any that may be developed by the Company, including NBT
Paclitaxel, that gain regulatory approval prior to or that are marketed more
successfully than the Company's products, any of which would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "--Uncertainty of Protection of Patents and Proprietary
Technology; Reliance on Trade Secrets" and "--Uncertainty Related to Australian
Patent Proceedings."
BMS is already marketing paclitaxel commercially in the United States,
Australia, Canada, Europe and certain other territories, and Rhone-Poulenc Rorer
("RPR"), a large multinational pharmaceutical company, has developed a
proprietary analog of paclitaxel called docetaxel, which has a microtubule
binding mechanism of action similar to that of paclitaxel. In May 1996,
docetaxel, which is marketed by RPR under the trademark Taxotere(R), was
approved by the FDA for treatment of anthracycline-resistant breast cancer in
patients without impaired liver function. In addition, upon expiration in
December 1997 of the marketing protection from generic competition currently
afforded to BMS' paclitaxel compound under the 1984 Waxman-Hatch Amendment to
the FDC Act, NBT Paclitaxel, if approved, will be subject to competition from
generic paclitaxel pharmaceuticals in the United States. In Europe, a similar
exclusivity period extends for ten years from approval. The Company is aware
that Mylan Pharmaceuticals, Inc. has entered into an exclusive licensing
agreement with Phytogen International LLC to develop, manufacture and market
generic paclitaxel in the United States, Canada and Mexico. The success of
competitors, including generic manufacturers, in entering the paclitaxel market
may limit or foreclose the Company's market opportunity.
Uncertainty of Protection of Patents and Proprietary Technology; Reliance
on Trade Secrets. The Company's success depends, in part, on its ability to
obtain patents, maintain trade secret protection and operate without infringing
on the proprietary rights of third parties. Where appropriate, the Company
seeks protection of its proprietary technology by applying for patents in the
United States and abroad. The Company owns three issued United States patents
and has several United States patent applications pending. The Company has
filed patent applications in certain other areas of the world and expects to
make additional filings as it believes appropriate. In addition, the Company
has obtained licenses from third parties to use their proprietary technology,
for which patent applications have been filed in the United
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States and in certain other areas of the world. There can be no assurance that
either the Company's or its licensors' existing patent applications will become
issued patents or, if issued, that the coverage claimed in the applications will
not be significantly reduced prior to issuance, or that the Company will be able
to obtain any necessary or desired additional licenses to patents or
technologies of others or that the Company will be able to develop its own
additional patentable technologies. There can be no assurance that any future
patents issued to the Company, if any, will provide it with competitive
advantages or that products or processes covered by any such patents will not be
challenged as infringing upon the patents or proprietary rights of others, or
that any such patents will not be invalidated, or that the patents or
proprietary rights of others will not have a material adverse effect on the
ability of the Company to do business. Patent applications in the United States
are maintained in secrecy until patents are issued, and patent applications in
certain other countries generally are not published until more than 18 months
after they are filed. In addition, publication of scientific or patent
literature often lags behind actual discoveries. As a result, the Company cannot
be certain it or any of its licensors was the first creator of inventions
covered by the Company's or its licensors' pending patent applications or that
the Company or its licensors were the first to file such applications.
Furthermore, there can be no assurance that others will not independently
develop similar technology or, if patents are issued to the Company, that others
will not design technology to circumvent the Company's patents or proprietary
rights.
A substantial majority of the Company's proprietary technology is not
protected by patents and is held by the Company as trade secrets, including much
of its EIP technology. The Company's success will depend in part on its ability
to protect trade secrets for extracting, isolating and purifying paclitaxel and
other technology. The Company relies on proprietary know-how and confidential
information and employs various methods, such as entering into confidentiality
and non-compete agreements with its current employees and with third parties to
whom it divulges proprietary information, to protect the processes, concepts,
ideas and documentation associated with its technologies, including its
paclitaxel production process. Such methods may afford incomplete protection,
and there can be no assurance that the Company will be able to adequately
protect its trade secrets or that other companies will not acquire or
independently develop information which the Company considers to be proprietary.
In addition, if the Company is unable to fulfill its contractual obligations to
IVAX relating to its supply of NBT Paclitaxel, the Company may, under certain
circumstances, be contractually obligated to disclose proprietary manufacturing
information to IVAX. The inability to maintain its trade secrets for its
exclusive use could have a material adverse effect on the Company.
The patent position of pharmaceutical companies generally is highly
uncertain and involves complex legal and factual questions. Paclitaxel is an
unpatentable, naturally occurring compound. A large number of compositions
containing paclitaxel, as well as processes and other technologies, including
those relating to processing paclitaxel and other taxanes and preparing the drug
for finished formulation and administration, are or may be patented. Certain of
these patents are owned by BMS and RPR, two of the Company's primary
competitors. The Company is aware of competitors and potential competitors who
are pursuing patent protection for various aspects of the extraction,
preparation and production of natural and semi-synthetic paclitaxel. In the
event that the Company's technology, products or activities are deemed to
infringe upon the rights of others, including but not limited to BMS and RPR,
the Company could be subject to damages or enjoined from using such technology,
or the Company could be required to obtain licenses to utilize such technology.
No assurance can be given that any such licenses would be made available on
terms acceptable to the Company, or at all. If the Company was unable to obtain
such licenses, it could encounter significant delays in product market
introductions while it attempted to design around the patents or rights
infringed upon, or could find the development, manufacture or sale of products
requiring such licenses to be foreclosed. In addition, the Company could
experience a loss of revenue and may incur substantial cost in defending itself
and indemnifying the Strategic Partners in patent infringement or proprietary
rights violation actions brought against it or either of the Strategic Partners.
The Company could also incur substantial cost in the event it finds it necessary
to assert claims against third parties to prevent the infringement of its
patents and proprietary rights by others. Participation in such infringement
proceedings could have a material adverse effect on the Company, even if the
eventual outcome were favorable.
Uncertainty Related to Australian Patent Proceedings. In September 1993
and August 1994, BMS received two Australian petty patents claiming certain
methods of administering paclitaxel. Australian petty patents have a maximum
term of six years, are allowed to contain only three claims (one independent and
two dependent) and are granted on the basis of a prior art search which is
significantly more limited in scope than the searches done prior to issuance of
standard patents. Following publication of these patents, Faulding instituted
legal action to revoke these patents on the grounds that the patent claims are
invalid and that the subject matter claimed in the patents was already known
prior to the
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claimed date of invention. In February 1995, BMS brought legal action against
Faulding seeking an injunction to prevent Faulding from marketing NBT Paclitaxel
pursuant to Faulding's generic approval. In March 1995, the Australian court
denied BMS's request to enjoin Faulding from marketing NBT Paclitaxel. The
Company has been advised by Faulding that the legal actions brought by Faulding
and BMS have been joined. Thus, BMS's claims will likely be resolved in
conjunction with Faulding's revocation action. No assurance can be given,
however, that the BMS matter will be resolved within this time frame or that BMS
will not obtain an injunction against Faulding which could prevent Faulding from
marketing NBT Paclitaxel in Australia. If Faulding were prevented from marketing
NBT Paclitaxel in Australia pursuant to its generic approval, Faulding would be
unable to market NBT Paclitaxel for commercial sale in Australia until such time
as Faulding obtains its own non-generic approval which would require substantial
clinical trials and a lengthy regulatory approval process. There can be no
assurance that Faulding would be able to obtain its own non-generic approval in
such circumstances. If BMS is successful in enforcing its patent claims against
Faulding such that Faulding is unable to sell NBT Paclitaxel in Australia, such
a result could have a material adverse effect on the Company's business,
financial condition and results of operations.
Future Capital Needs; Uncertainty of Additional Funding. The Company has
incurred negative earnings and cash flow from operations since its inception.
Substantial expenditures will be required to enable the Company to scale-up its
manufacturing capabilities, acquire biomass and continue its research and
development activities. The Company anticipates a significant increase in
capital expenditures and operations in 1997 in anticipation of possible approval
of the NDA filed with the FDA. The Company's actual future capital needs,
however, will also depend upon many factors, including the cost and progress of
its process and technology development activities, the cost and success of the
Company's plantation strategy, the progress of the Strategic Partners' clinical
development of NBT Paclitaxel, the timing and receipt of regulatory approvals,
the cost involved in preparing, filing, prosecuting, maintaining, enforcing and
defending patent claims and other intellectual property rights, developments
related to regulatory and reimbursement matters, competing technological and
market developments, changes in or terminations of existing strategic alliances
and the cost, timing and success of manufacturing scale-up, including
construction of a large-scale commercial EIP manufacturing facility.
Depending on the factors described above, the Company may need to raise
substantial additional funds. If additional funds are raised by issuing equity
securities, further dilution to stockholders will result. Debt financing, if
available, may involve restrictive covenants. If adequate funds are not
available, the Company may obtain funds through arrangements with strategic
partners or others that may require the Company to relinquish rights to certain
of its technologies, any one of which could have a material adverse effect on
the Company's operations. The failure of the Company to raise capital when
needed would have a material adverse effect on the Company's business, financial
condition and results of operations, and could result in the Company being
forced to reduce or discontinue its operations.
Reliance on Foreign Sales. For the year ended December 31, 1996, sales of
NBT Paclitaxel into foreign markets accounted for approximately 72% of the
Company's revenue. The Company anticipates that a significant portion of its
revenue will continue to be derived from sales of its products in foreign
markets until such time, if ever, as approval for commercial sale of NBT
Paclitaxel in the United States has been received. A substantial portion of the
Company's revenue and operations will thus continue to be subject to the risks
associated with foreign business, including economic or political instability,
shipping delays, changes in foreign regulatory laws governing sales of drugs,
fluctuations in foreign currency exchange rates and various trade restrictions,
all of which could have a significant impact on the Company's ability to deliver
products on a competitive and timely basis. Future imposition of, or
significant increases in, the level of customs duties, export quotas, drug
regulatory restrictions or other regulatory or trade restrictions could have a
material adverse effect on the Company.
Uncertainty of Third-party Reimbursement. There is significant national
concern today about the availability and rising cost of health care in the
United States. It is anticipated that new federal and/or state legislation will
be proposed to attempt to provide broader and better health care and to manage
and contain its cost. While the Company cannot predict whether any such
legislative or regulatory proposals will be adopted or the effect such proposals
may have on its business, the pendency or adoption of such proposals could have
a material adverse effect on the Company, including its ability to raise
capital, or on the market value of the Common Stock.
In both domestic and foreign markets, sales of the Company's product
candidates will depend in part on the availability of reimbursement from third-
party payors, such as government health administration authorities, private
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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 NBT Paclitaxel 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. Failure to
achieve sufficient price levels for NBT Paclitaxel would have a material adverse
effect on the Company's business, results of operations and financial condition.
Legislation and regulations affecting the pricing of pharmaceuticals may change
before NBT Paclitaxel is approved for marketing. Adoption of such legislation or
regulations could further limit reimbursement for medical products and services.
Risk of Product Liability; Limited Insurance. The Company's business
exposes it to potential product liability risks which are inherent in the
testing, manufacturing, marketing and sale of therapeutic products. While the
Company will continue to take precautions it deems appropriate, there can be no
assurance that it will be able to avoid significant product liability exposure.
Pursuant to the agreements with the Strategic Partners, the Company is required
to indemnify the Strategic Partners for any defect in the NBT Paclitaxel that is
shipped to Faulding or IVAX. Under such agreements, the Company will be
indemnified by the Strategic Partners against certain product liability claims
brought against the Company to the extent such liability is a result of actions
by the Strategic Partners once they receive NBT Paclitaxel from the Company.
The Company currently maintains product liability insurance in the amount of
$5.0 million per policy year. Product liability insurance for the
pharmaceutical industry, however, generally is expensive, to the extent it is
available at all. There can be no assurance that the Company will be able to
maintain such insurance on acceptable terms, that it will be able to secure
increased coverage as the commercial approval process for NBT Paclitaxel
progresses or that its insurance policy will provide adequate protection against
potential claims. A successful claim brought against the Company in excess of
the Company's insurance coverage or a product recall could have a material
adverse effect on the Company's business, results of operations and financial
condition.
Dependence on Management and Key Personnel; Ability to Manage Growth. The
Company is highly dependent upon the services of its senior executives and
certain key scientific personnel, particularly its Chairman, Leonard P. Shaykin,
and its President and Chief Executive Officer, Sterling K. Ainsworth. The
Company maintains a key-man life insurance policy on the life of Dr. Ainsworth
in the amount of $3.0 million. Although the Company has entered into employment
contracts with Mr. Shaykin, Dr. Ainsworth and Dr. Patricia A. Pilia, the
Company's Vice President, BioResearch and Toxicology (collectively, the "Senior
Executives"), which expire in June 1998 (collectively, the "Executive
Agreements"), the loss of the services of any of the Senior Executives or other
of the Company's key employees could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
Mr. Shaykin serves the Company on a part-time basis and has obligations which
could divert his attention from the Company's affairs to the Company's
detriment. The Company's move to large-scale commercial operations will depend
upon, among other things, the successful recruiting of highly skilled managerial
and technical personnel with experience in business activities such as those
contemplated by the Company. Although the Company has hired a number of
individuals which the Company believes have the requisite skills and experience
to allow the Company to expand its operations to a commercial scale, competition
for the type of highly skilled individuals required by the Company is intense
among pharmaceutical companies, health care companies, government agencies,
academic institutions and other organizations. There can be no assurance that
the Company will be able to retain existing employees or that it will be able to
find, attract and retain other skilled personnel on acceptable terms to help the
Company manage its growth.
Continuing Control by Existing Stockholders; Conflict of Interest. The
Company's executive officers and directors beneficially own approximately 20.7%
of the Common Stock. In addition, IVAX, one of the Strategic Partners,
beneficially owns approximately 9.4% of the Common Stock. In the event that
such stockholders were to act in concert with respect to the Company's
operations, they would be in a position generally to substantially influence the
affairs of the Company. In addition, Richard C. Pfenniger, Jr., a director of
the Company, formerly served as President of the IVAX Health Care Group. There
can be no assurance that conflicts of interest will not arise with respect to
the foregoing or that such conflicts will be resolved in a manner favorable to
the Company. See "Risk Factors--Dependence on Strategic Alliances."
Anti-takeover Considerations; Authorization of Preferred Stock. Certain
provisions of the Company's Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation"), Bylaws (the "Bylaws") and Section 203 of
the Delaware General Corporation Law (the "DGCL") could discourage potential
acquisition proposals and could
14
<PAGE>
delay or prevent a change in control of the Company. The Company's board of
directors, without further stockholder approval, may issue blank check preferred
stock that could have the effect of delaying or preventing a rapid change in
control of the Company as well as adversely affecting the voting power of the
holders of Common Stock, including the loss of voting control to others. In
addition, the Certificate of Incorporation and Bylaws provide for a classified
board of directors consisting of three classes of directors serving staggered
terms. The Company's directors may be removed only for cause by stockholders
holding not less than 80% of the shares entitled to elect the director or
directors whose removal is sought.
The Company has adopted a stockholder rights plan having both "flip-in" and
"flip-over" provisions. Existing stockholders as of a selected record date
received the right (a "Right") to purchase a fractional share of preferred stock
at a purchase price of $60 for each share of Common Stock held. For the "flip-
in provision," the Rights would become exercisable only if a person or group
acquires beneficial ownership of 20% (the "Threshold Percentage") or more of the
outstanding Common Stock. In that event, all holders of Rights other than the
person or group who acquired the Threshold Percentage would be entitled to
purchase shares of Common Stock at a substantial discount to the then current
market price. This right to purchase Common Stock at a discount would be
triggered as of specified number of days following the passing of the Threshold
Percentage. For the "flip-over" provision, if the Company was acquired in a
merger or other business combination or transaction, the holders of such Rights
would be entitled to purchase shares of the acquiror's common stock at a
substantial discount.
In addition, the Executive Agreements provide for continuation of salary
and other benefits in the event employment is terminated under certain
circumstances, including a change of control of the Company. Furthermore, in
connection with its equity investment in the Company, IVAX agreed that for a
period ending on the earlier of June 7, 2000 or three years after the date IVAX
receives FDA approval to market NBT Paclitaxel commercially in the United
States, neither it nor any affiliate will, without the approval of a majority of
disinterested directors, among other things, (i) acquire, in the aggregate, more
than 20.0% of the Common Stock, (ii) seek control of the board of directors, or
(iii) propose an acquisition of all or substantially all of the Company's
assets, a merger or other business combination, or a tender offer for the Common
Stock.
Dilution. The current market price for the Common Stock is substantially
higher than the current adjusted net tangible book value per share of Common
Stock, assuming conversion of all Notes and exercise of all Warrants.
Therefore, investors purchasing Shares (at the current tangible net book value
and at current market prices) will incur immediate and substantial dilution.
Absence of Dividends. The Company has never paid cash dividends on its
Common Stock. It is the Company's intention to retain earnings, if any, to
finance the operation and expansion of its business and, therefore, it does not
expect to pay cash dividends in the foreseeable future. In addition, future
credit facilities may restrict dividend payments.
Volatility of Stock Price. The market price of the Common Stock has been,
and will likely continue to be, volatile. Factors such as the Company's
financial results, introduction of new products by the Company or its
competitors, results of clinical trials, government regulations, changes in
reimbursement policies, developments in patent and other proprietary rights,
developments in the Company's relationships with the Strategic Partners, public
concern as to the safety and efficacy of paclitaxel and various factors
affecting the biotechnology or pharmaceutical industries generally, may have a
significant impact on the market price of the Common Stock. Additionally, in
recent years, the stock market has experienced a high level of price and volume
volatility and market prices for the stock of many companies (particularly of
small and emerging growth companies, the common stock of which trade in the
over-the-counter market) have experienced wide price fluctuations which have not
necessarily been related to the operating performance of such companies. An
increase in the number of shares of Common Stock that may become available for
sale in the public market may adversely affect the market price prevailing from
time to time of the Common Stock in the public market and could impair the
Company's ability to raise additional capital through the sale of its equity
securities.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
15
<PAGE>
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of each Selling Stockholder and as adjusted to
give effect to the sale of the Shares offered hereby. The Shares are being
registered to permit public secondary trading of the Shares, and the Selling
Stockholders may offer the Shares for resale from time to time.
SHARES OFFERED HEREBY
The Shares being offered hereby by the Selling Stockholders may be
acquired, from time to time, upon (i) the conversion of $10,300,000 aggregate
principal amount of the Notes, which were acquired by them from the Company in a
private placement transaction pursuant to those certain Note Purchase
Agreements, dated as of May 30, 1997 (the "Note Purchase Agreements"), and
pursuant to an Engagement Agreement, dated as of May 28, 1997 (the "Engagement
Agreement"), between the Company and D&A Capital, as placement agent, (ii)
exercise of the Warrants, as described below, and (iii) the payment by the
Company of interest on the Notes in the form of Common Stock in lieu of cash, at
the Company's option. This Prospectus covers the resale by the Selling
Stockholders of up to 1,600,000 Shares, plus, in accordance with Rule 416 under
the Securities Act, such presently indeterminate number of additional Shares as
may be issuable upon conversion of the Notes or payment of interest on the
Notes, based upon fluctuations in the conversion price of the Notes.
The Notes were sold at par, mature in June 2000 and bear interest at a rate
of 5% per annum, subject to adjustment in certain events. Interest on the Notes
may be paid in Common Stock or cash, at the option of the Company. Initially,
50% of the Notes are convertible into Common Stock of the Company at a price of
$10.00 per share. Beginning October 2, 1997, the Notes are convertible into
Common Stock of the Company at a conversion price equal to a specified percent
(the "Conversion Percent") of the low trading price of the Common Stock on the
Nasdaq National Market during a period of a specified number of trading days
immediately preceding the conversion date (the "Pricing Period"). For
conversions from October 2 through November 1, 1997, the Conversion Percent is
95% and the Pricing Period is seven days; for conversions from November 2
through December 1, 1997, the Conversion Percent is 92.5% and the Pricing Period
is eight days; and for conversions after December 2, 1997, the Conversion
Percent is 90% and the Pricing Period is nine days. Beginning March 4, 1998, the
conversion price cannot exceed 110% of the average closing bid price of the
Common Stock for the 30 trading days immediately preceding March 4, 1998.
Pursuant to the terms of the Notes, no holder can convert such holder's Notes if
such conversion would cause such holder's beneficial ownership of Common Stock
(other than shares so owned through ownership of the Notes) to exceed 4.9%. If
not converted into Common Stock, upon maturity in June 2000 the Notes will be
exchanged for 13.75% five-year debentures of the Company.
The Note Purchase Agreement also provided for the issuance of 2.9 Warrants
for each $100 principal amount of Notes. Accordingly, 290,000 Warrants were
issued to the purchasers of the Notes. An additional 33,700 Warrants were
issued to D&A Capital, as placement agent, in connection with the private
placement transaction. Upon exercise, the Warrants may be exchanged for one
share of Common Stock. The exercise price, per Warrant, is $10.00, and the
Warrants expire June 3, 2001.
In recognition of the fact that Selling Stockholders may wish to be legally
permitted to sell their Shares when they deem appropriate, the Company has filed
with the Commission, under the Securities Act, a Registration Statement on Form
S-3, of which this Prospectus forms a part, with respect to the resale of the
Shares from time to time on Nasdaq or in privately negotiated transactions and
has agreed to prepare and file such amendments and supplements to the
Registration Statement as may be necessary to keep the Registration Statement
effective until the Shares are no longer required to be registered for the sale
thereof by the Selling Stockholders.
The Company has agreed to register a specified number of Shares for resale
by the Selling Stockholders. The number of Shares shown in the following table
as being offered by the Selling Stockholders does not include such presently
indeterminate number of shares of Common Stock as may be issuable upon
conversion of the Notes or payment of interest on the Notes pursuant to the
provisions thereof regarding determination of the applicable conversion price
but which shares are, in accordance with Rule 416 under the Securities Act,
included in the Registration Statement of which this Prospectus forms a part.
16
<PAGE>
<TABLE>
<CAPTION>
SELLING STOCKHOLDERS
NUMBER
OF
NUMBER OF SHARES
NUMBER OF SHARES SHARES BENEFICIALLY
NAME OF BENEFICIALLY OWNED BEING OWNED AFTER
SELLING STOCKHOLDER PRIOR TO OFFERING(1) OFFERED OFFERING*
- ------------------------------------ -------------------- -------- ------------
<S> <C> <C> <C>
Delta Opportunity Fund, Ltd. (2)(4) ... 555,722 555,722 0
Diaz & Altschul Group, LLC (2)(4)...... 68,024 68,024 0
Nelson Partners (3).................... 277,933 277,933 0
Olympus Securities, Ltd. (3)........... 277,790 277,790 0
Omicron Partners, LP................... 286,824 286,824 0
OTATO L.P. (4)......................... 35,853 35,853 0
</TABLE>
- --------------------------------------
* Less than 1%.
(1) Represents the number of shares of Common Stock issuable upon (a) conversion
of the Notes calculated using an assumed conversion price of $10.00 with
respect to one-half of the face value of the Notes and an assumed conversion
price of $7.7625 (the lowest reported sale price of the Common Stock on
September 3, 1997 minus the maximum conversion discount applicable to
conversion of the Notes) with respect to one-half of the face value of the
Notes, based upon certain conversion provisions of the Notes (which
conversion price could fluctuate from time to time on and after October 2,
1997, based on changes in the market price of the Common Stock) and (b)
exercise of the Warrants. Does not include shares of Common Stock that may
be issued and paid in lieu of cash, at the Company's option, as interest on
the Notes. This Prospectus also covers the resale of such presently
indeterminate number of additional Shares as may be issuable upon conversion
of the Notes or payment of interest on the Notes, based upon fluctuations in
the conversion price of the Notes.
(2) Diaz & Altschul Advisors, LLC, a New York limited liability company ("D&A
Advisors"), serves as advisor to Delta Opportunity Fund, Ltd. ("DO Fund"),
and may be deemed to share beneficial ownership of the securities
beneficially owned by DO Fund by reason of shared power to dispose of the
shares shown as beneficially owned by DO Fund. D&A Advisors is controlled
by Diaz & Altschul Group, LLC ("D&A Group"). The amounts shown for D&A
Group exclude the amounts shown for DO Fund. D&A Advisors and D&A Group
disclaim beneficial ownership of the shares of Common Stock beneficially
owned by DO Fund.
(3) Citadel Limited Partnership is the managing general partner of Nelson
Partners ("Nelson") and the trading manager of Olympus Securities, Ltd.
("Olympus") and consequently has voting control and investment discretion
over securities held by both Nelson and Olympus. The ownership information
for Nelson does not include the Shares owned by Olympus and the ownership
information for Olympus does not include the Shares owned by Nelson.
(4) OTA Limited Partnership ("OTA") serves as a trading consultant to DO Fund
and D&A Group with respect to the shares of Common Stock beneficially owned
by such Selling Stockholder and may be deemed to share beneficial ownership
of the shares of Common Stock beneficially owned by such Selling
Stockholders by reason of shared power to dispose of such shares. OTA
disclaims beneficial ownership of such shares of Common Stock. OTATO L.P.
is under common control with OTA.
PLAN OF DISTRIBUTION
The Selling Stockholders' Shares may be offered and sold from time to time
in the discretion of the Selling Stockholders in the over-the-counter market, or
otherwise, at prices and terms then prevailing or at prices related to the then-
current market price, or in negotiated transactions. The Selling Stockholders
will act independently of the Company
17
<PAGE>
in making decisions with respect to the timing, manner and size of each sale
hereunder. The Selling Stockholders' Shares may be sold by one or more of the
following methods including, without limitation: (a) a block trade in which a
broker or dealer so engaged will attempt to sell the Shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchases;
and (d) face-to-face transactions between sellers and purchasers without a
broker/dealer. In effecting sales, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from Selling
Stockholders in amounts to be negotiated. Such brokers and dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act, in connection with such sales. From time to time,
one or more of the Selling Stockholders may pledge, hypothecate or grant a
security interest in some or all of the Shares owned by them, and the pledgees,
secured parties or persons to whom such securities have been hypothecated shall,
upon foreclosure in the event of default, be deemed to be Selling Stockholders
hereunder. In addition, a Selling Stockholder may, from time to time, sell short
the Common Stock of the Company, and in such instances, this Prospectus may be
delivered in connection with such short sales and the Shares offered hereby may
be used to cover such short sales.
Sales of Selling Stockholders' Shares may also be made pursuant to Rule 144
under the Securities Act, where applicable. The Selling Stockholders' Shares
may also be offered in one or more underwritten offerings, on a firm commitment
or best efforts basis. The Company will receive no proceeds from the sale of
the Selling Stockholders' Shares by the Selling Stockholders. The Shares may be
sold from time to time in one or more transactions at a fixed offering price,
which may be changed, or at varying prices determined at the time of sale or at
negotiated prices. Such prices will be determined by the Selling Stockholders
or by agreement between a Selling Stockholder and its underwriters, dealers,
brokers or agents.
To the extent required under the Securities Act, the aggregate amount of
Selling Stockholders' Shares being offered and the terms of the offering, the
names of any such agents, brokers, dealers or underwriters and any applicable
commission with respect to a particular offer will be set forth in an
accompanying Prospectus supplement. Any underwriters, dealers, brokers or
agents participating in the distribution of the Shares may receive compensation
in the form of underwriting discounts, concessions, commissions or fees from a
Selling Stockholder and/or purchasers of Selling Stockholders' Shares, for whom
they may act. In addition, sellers of Selling Stockholders' Shares may be
deemed to be underwriters under the Securities Act and any profits on the sale
of Selling Stockholders' Shares by them may be deemed to be discount commissions
under the Securities Act. Selling Stockholders may have other business
relationships with the Company and its subsidiaries or affiliates in the
ordinary course of business.
From time to time one or more of the Selling Stockholders may transfer,
pledge, donate or assign Selling Stockholders' Shares to lenders, family members
and others and each of such persons will be deemed to be a "Selling Stockholder"
for purposes of this Prospectus. The number of Selling Stockholders' Shares
beneficially owned by those Selling Stockholders who so transfer, pledge, donate
or assign Selling Stockholders' Shares will decrease as and when they take such
actions. The plan of distribution for Selling Stockholders' Shares sold
hereunder will otherwise remain unchanged, except that the transferees,
pledgees, donees or other successors will be Selling Stockholders hereunder.
Including and without limiting the foregoing, in connection with
distributions of the Common Stock, a Selling Stockholder may enter into hedging
transactions with broker-dealers and the broker-dealers may engage in short
sales of the Common Stock in the course of hedging the positions they assume
with such Selling Stockholder. A Selling Stockholder may also enter into option
or other transactions with broker-dealers that involve the delivery of the
Common Stock to the broker-dealers, who may then resell or otherwise transfer
such Common Stock. A Selling Stockholder may also loan or pledge the Common
Stock to a broker-dealer and the broker-dealer may sell the Common Stock so
loaned or upon a default may sell or otherwise transfer the pledged Common
Stock.
The Company is bearing all costs relating to the registration of the Shares
(other than fees and expenses, if any, of counsel or other advisors to the
Selling Stockholders). Any commissions, discounts or other fees payable to
broker-dealers in connection with any sale of the Shares will be borne by the
Selling Stockholder selling such Shares.
The Company has agreed to indemnify the Selling Stockholders in certain
circumstances, against certain liabilities, including liabilities arising under
the Securities Act.
18
<PAGE>
LEGAL MATTERS
The validity of the Common Stock being registered has been passed upon by
Holme Roberts & Owen LLP, Denver, Colorado, as counsel for the Company.
EXPERTS
The consolidated financial statements of NaPro BioTherapeutics, Inc.
appearing in NaPro BioTherapeutics, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1996 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses of the Registrant in connection with the issuance and distribution
of the securities being registered under this Registration Statement are
estimated to be as follows:
<TABLE>
<CAPTION>
<S> <C>
Legal fees and expenses....... $12,500
Accounting fees and expenses.. 2,000
Printing and engraving........ 2,000
Miscellaneous................. 2,000
Total.......... $18,500
</TABLE>
ITEM 16. EXHIBITS
The following exhibits are filed pursuant to Item 601 of Regulation S-K.
Exhibit
Number Description of Exhibit
- ------ ----------------------
4.1 Amended and Restated Certificate of Incorporation of the
Registrant, as amended August 2, 1996 (1)
4.2 Certificate of Designation for the Series B Junior Participating
Preferred Stock of the Registrant (2)
4.3 Bylaws of the Registrant (3)
4.4 Form of Common Stock Certificate (3)
4.5 Rights Agreement dated as of November 8, 1996 between the
Registrant and American Stock Transfer and Trust Company, as
Rights Agent (2)
4.6 Form of Note Purchase Agreement dated as of June 4, 1997 between
the Registrant and each of the Selling Stockholders (4)
4.7 Form of 5% Senior Convertible Note (4)
4.8 Form of Common Stock Purchase Warrant (4)
4.9 Pledge and Security Agreement dated as of June 4, 1997 between
the Registrant and First Trust of New York, National Association,
as Collateral Agent (4)
5.1 Opinion of Holme Roberts & Owen LLP (5)
23.1 Consent of Ernst & Young LLP
23.2 Consent of Holme Roberts & Owen LLP (included in Exhibit 5.1)
24.1 Power of Attorney (5)
______________________
(1) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996 (File No. 0-24320).
(2) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 8, 1996 (File No. 0-24320).
(3) Incorporated by reference to the Registrant's Registration Statement on
Form S-1, filed on July 24, 1994 (File No. 33-78016).
(4) Incorporated by reference to the Registrant's Annual Report on Form 10-Q
for the quarter ended June 30, 1997 (File No. 0-24320).
(5) Previously filed.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) 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;
(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 the registration statement or any
material change to such information in the registration statement.
(2) 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.
(3) 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.
(4) 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 that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, 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 provisions described under Item 15, or otherwise, the
registrant has been advised that in the opinion of the 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 that the payment by the registrant of expenses
incurred or paid by a director, officers or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boulder, State of Colorado, as of September 5, 1997.
NaPro BioTherapeutics, Inc.
By: /s/ Gordon H. Link, Jr.
------------------------
Gordon H. Link, Jr.
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and as of the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
* President and Chief Executive Officer; September 5, 1997
- ------------------------------ Director (Principal Executive Officer)
Sterling K. Ainsworth, Ph.D.
* Chairman of the Board of Directors September 5, 1997
- ------------------------------
Leonard P. Shaykin
/s/ Gordon H. Link, Jr. Vice President, Chief Financial Officer September 5, 1997
- ------------------------------ (Principal Financial Officer)
Gordon H. Link, Jr.
/s/ Robert L. Poley Controller (Principal Accounting Officer) September 5, 1997
- ------------------------------
Robert L. Poley
* Director September 5, 1997
- ------------------------------
Patricia A. Pilia, Ph.D.
* Director September 5, 1997
- ------------------------------
E. Garrett Bewkes, Jr.
Director
- ------------------------------
Richard C. Pfenniger, Jr.
Director
- ------------------------------
Arthur H. Hayes, Jr. M.D.
* Director September 5, 1997
- ------------------------------
Mark B. Hacken
* Director September 5, 1997
- ------------------------------
Vaughn D. Bryson
</TABLE>
* By: /s/ Gordon H. Link, Jr.
------------------------
Gordon H. Link, Jr., Attorney-in-Fact
II-3
<PAGE>
EXHIBIT INDEX
Exhibit
- -------
Number Description of Exhibit
- ------ ----------------------
4.1 Amended and Restated Certificate of Incorporation of the Registrant,
as amended August 2, 1996 (1)
4.2 Certificate of Designation for the Series B Junior Participating
Preferred Stock of the Registrant (2)
4.3 Bylaws of the Registrant (3)
4.4 Form of Common Stock Certificate (3)
4.5 Rights Agreement dated as of November 8, 1996 between the Registrant
and American Stock Transfer and Trust Company, as Rights Agent (2)
4.6 Form of Note Purchase Agreement dated as of June 4, 1997 between the
Registrant and each of the Selling Stockholders (4)
4.7 Form of 5% Senior Convertible Note (4)
4.8 Form of Common Stock Purchase Warrant (4)
4.9 Pledge and Security Agreement dated as of June 4, 1997 between the
Registrant and First Trust of New York, National Association, as
Collateral Agent (4)
5.1 Opinion of Holme Roberts & Owen LLP (5)
23.1 Consent of Ernst & Young LLP
23.2 Consent of Holme Roberts & Owen LLP (included in Exhibit 5.1)
24.1 Power of Attorney (5)
______________________
(1) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996 (File No. 0-24320).
(2) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 8, 1996 (File No. 0-24320).
(3) Incorporated by reference to the Registrant's Registration Statement on
Form S-1, filed on July 24, 1994 (File No. 33-78016).
(4) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997 (File No. 0-24320).
(4) Previously filed.
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 2 to the Registration Statement on Form S-3 (Number 333-29477)
and related Prospectus of NaPro BioTherapeutics, Inc. for the registration of
1,600,000 shares of common stock and to the incorporation by reference therein
of our report dated January 26, 1997, with respect to the consolidated financial
statements of NaPro BioTherapeutics, Inc. included in its Annual Report on Form
10-K for the year ended December 31, 1996, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
Denver, Colorado
September 5, 1997
