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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 1997;
REGISTRATION NO. 33-78016
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
Post-Effective Amendment No. 5
to
Form S-1
on
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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DELAWARE 2833 84-1187753
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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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: [_]
__________________________
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.
360,000 SHARES OF COMMON STOCK AND 180,000 WARRANTS BY THE COMPANY
1,005,000 OTHER SHARES OF COMMON STOCK BY SELLING STOCKHOLDERS
NaPro BioTherapeutics, Inc. (the "Company") is offering hereby a total of (i)
360,000 shares of Common Stock ("Shares") issuable upon exercise of 360,000
warrants (the "Underwriter's Warrants") with a $7.50 exercise price per share of
Common Stock issued or issuable to Whale Securities Co., L.P. ("Whale"), the
underwriter in the Company's initial public offering in 1994, and (ii) 180,000
warrants (the "Other Warrants") to purchase Underwriter's Warrants, with an
exercise price of $0.15, also issued to Whale. The Underwriter's Warrants and
the Other Warrants are collectively referred to as the "Warrants."
This Prospectus also relates to the offer and sale by certain persons (the
"Selling Stockholders"), of a maximum of 1,005,000 shares of Common Stock (the
"Selling Stockholder Shares") consisting of (i) 395,000 shares of Common Stock
into which 395,000 shares of the Company's Nonvoting Common Stock (the
"Nonvoting Common") will be convertible upon disposition; (ii) 200,000 shares of
Common Stock issuable upon exercise of 200,000 redeemable warrants (the
"Faulding Warrants") with a $5.00 exercise price to purchase Nonvoting Common
Stock and converted into Common Stock upon disposition, issued to F.H. Faulding
& Co., Ltd., (iii) 180,000 shares of Common Stock into which the Underwriter's
Warrants are exercisable, (iv) 180,000 shares of Common Stock into which the
Other Warrants are exercisable, and (v) 50,000 shares of Common Stock to be sold
by other Selling Stockholders in addition to those shares identified in clauses
(i) through (iv).
The Common Stock is quoted on the Nasdaq National Market ("Nasdaq") under the
symbol "NPRO". The last sale price of the Common Stock on September 5, 1997, as
reported on Nasdaq, was $8.8125.
The Company will not receive any of the proceeds from the sale of the Shares
or the Selling Stockholder Shares, although the Company will receive $5.00 per
share upon exercise of the Faulding Warrants, $7.50 per share upon exercise of
the Underwriter's Warrants for Common Stock, $.15 per warrant upon exercise of
the Underwriter's Warrants for Other Warrant's and $7.50 per share upon exercise
of the Other Warrants. See "Selling Stockholders and Plan of Distribution."
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"
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.
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============================================================================
Underwriting Discounts Proceeds to
Price to Public(1) and Commissions Company(5)(6)
- ----------------------------------------------------------------------------
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Per Share.... $ 5.00(2) $0 $1,000,000
- ----------------------------------------------------------------------------
Per Share.... $ 7.50(3) $0 $2,700,000
- ----------------------------------------------------------------------------
Per Warrant.. $ .15(4) $0 $ 27,000
- ----------------------------------------------------------------------------
Total........ $3,727,000 $0 $3,727,000
============================================================================
</TABLE>
(1) The information contained in this table applies only to the Faulding
Warrants, the Underwriters Warrants and the Other Warrants. The Company will
not receive any proceeds from the sale of the Selling Stockholders'
Shares.
(2) To be received upon exercise of Faulding Warrants.
(3) To be received upon exercise of Underwriter's Warrants.
(4) To be received upon exercise of the Other Warrants.
(5) Before deducting offering expenses estimated at $20,000.
(6) Assumes all of the Warrants are exercised.
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The date of this Prospectus is September 8, 1997
2
<PAGE>
TABLE OF CONTENTS
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Page
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Available Information.......................... 3
Information Incorporated by Reference.......... 3
Prospectus Summary............................. 5
Recent Developments............................ 6
Risk Factors................................... 8
Use of Proceeds................................ 18
Selling Stockholders and Plan of Distribution.. 18
Legal Matters.................................. 20
Experts........................................ 20
</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 OR 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
3
<PAGE>
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."
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, NY 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
4
<PAGE>
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.
5
<PAGE>
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 hereto. 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 Reform Act. See "Special Note Regarding
Forward-Looking Statements" on page 3 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.
6
<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 certain adjustments. 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.
THE OFFERING
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SECURITIES OFFERED BY THE COMPANY 180,000 Other Warrants and 360,000 shares of Common Stock to be
issued upon exercise of the Underwriter's Warrants and the Other
Warrants.
- --------------------------------------------------------------------------------------------------------------
SECURITIES OFFERED BY THE SELLING In addition to resale of the 360,000 shares of Common Stock to be
STOCKHOLDERS acquired upon from the Company upon exercise of the Underwriter's
Warrants and the Other Warrants, a total of 1,005,000 shares of
Common Stock are being offered hereby on behalf of the Selling
Stockholders.
- --------------------------------------------------------------------------------------------------------------
COMMON STOCK TO BE OUTSTANDING AFTER
THE OFFERING (ASSUMING EXERCISE OF
ALL WARRANTS)....................... 12,962,319 shares.
- --------------------------------------------------------------------------------------------------------------
USE OF PROCEEDS; PLAN OF DISTRIBUTION The Company will not receive any proceeds from the sale of the
securities. However, the company will receive approximately
$3,700,000 upon the exercise of the Warrants and the Faulding
Warrants, assuming all such warrants are exercised. No underwriting
discounts or commissions will be paid in connection with this
offering. See "Use of Proceeds."
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RISK FACTORS The securities offered hereby are speculative and involve a high
degree of risk and immediate substantial dilution and should not be
purchased by investors who cannot afford the loss of their entire
investment. See "Risk Factors."
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NASDAQ SYMBOL Common Stock -- "NPRO"
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The Common Stock is quoted on the Nasdaq National Market ("Nasdaq") under the
symbol "NPRO". The Other Warrants are not traded on any exchange or Nasdaq.
The Company will not receive any of the proceeds from the sale of the
Securities, however, the Company will receive $5.00 per share upon exercise of
the Faulding Warrants, $7.50 per share upon exercise of the Underwriter's
Warrants, and $.15 per warrant upon the exercise of the Other Warrants. See
"Selling Stockholders and Plan of Distribution."
8
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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
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expects that sales to the Strategic Partners will continue to constitute
substantially all of the Company's revenue for the 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.
Under the agreement with Faulding, the Company is paid a fixed sum for
paclitaxel supplied for noncommercial uses, and a fixed percentage of Faulding's
sales price for paclitaxel supplied for commercial use. Title to the paclitaxel
and risk of loss pass to Faulding upon shipment by the Company; the sales are
unconditional other than for the failure of product to meet specifications. The
Company recognizes the corresponding revenue at the time of shipment of
paclitaxel to Faulding, based upon the forecast allocations of sales and
estimated prices submitted by Faulding. Consideration is given to amounts
intended for commercial and non-commercial use. The Company is paid a fixed sum
for non-commercial uses, and a percentage of Faulding's sales price for
commercial use. For commercial use sales calculations, further consideration is
given to sales quantities and price by respective country in the Faulding
territory. However, Faulding may or may not use the paclitaxel in accordance
with the original intent indicated on its purchase orders. Additionally,
Faulding's actual selling price may differ from the amounts originally budgeted
and indicated to NaPro. For each year ended March 31, Faulding reports to the
Company the final amount of sales, the actual end use of product supplied by the
Company and the actual sales price per gram for commercial use sales. The
Company calculates an adjustment, which may either increase or decrease the
Company's revenue from sales of products to Faulding during the prior twelve
months. The adjustment is invoiced or remitted to Faulding. In that both
Faulding and the Company share the risks and benefits of price changes, both
Faulding and the Company bear the risk of loss in the event of a decline in the
market value of the goods. Although price adjustments are outside the control of
the Company, management does not expect the adjustments to be material to the
financial statements because the Company uses a projection prepared by Faulding
to price the invoice, the customer has an absolute contractual obligation to pay
the invoice, and historical data have shown that the esimates have been
materially accurate when compared to the final pricing.
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."
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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 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
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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, 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
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<PAGE>
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, 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
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<PAGE>
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. 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.
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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 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
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<PAGE>
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 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
16
<PAGE>
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
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.
17
<PAGE>
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 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
18
<PAGE>
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 this offering, though it will
receive approximately $3,727,000 if all of the Faulding Warrants and the
Underwriter's Warrants are exercised. No underwriting discounts or commissions
will be paid in connection with this Offering.
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
A total of 1,005,000 shares of Common Stock consisting of: (i) 395,000 shares
of Common Stock into which 395,000 shares of the Company's Nonvoting Common will
be convertible upon disposition; (ii) 200,000 shares of Common Stock issuable
upon exercise of the Faulding Warrants into which 200,000 shares of the
Company's Nonvoting Common will be convertible upon disposition, (iii) 180,000
shares of Common Stock into which 180,000 Underwriter Warrants are exercisable,
(iv) 180,000 shares of Common Stock into which the Other Warrants are
exercisable, and (v) 50,000 shares of Common Stock to be sold by other Selling
Stockholders in addition to those shares identified in clauses (i) through (iv),
may be offered and sold pursuant to this Prospectus. The Company has agreed to
pay all expenses in connection with the registration of the Selling Stockholders
Shares hereby. Other than Leonard P. Shaykin, the Chairman of the Board and a
principal stockholder of the Company, and IVAX (a principal stockholder of the
Company) and Faulding, the Company's two primary strategic business partners and
principal customers, and Whale Securities, the underwriter of the Company's
initial public offering in August of 1994, none of the Selling Stockholders has
ever held any position or office with the Company or had any other material
relationship with the Company. The Company will not receive any of the proceeds
from the sale of the Shares or the Selling Stockholder Shares, although the
Company will receive $5.00 per share upon exercise of the Faulding Warrants,
$7.50 per share upon exercise of the Underwriter's Warrants for Common Stock,
$.15 per warrant upon exercise of the Underwriter's Warrants for Other Warrants
and $7.50 per share upon exercise of the Other Warrants. See "Use of Proceeds."
The following table sets forth certain information with respect to the Selling
Stockholders as of May 27, 1997 as supplied to the Company by the Selling
Stockholders or their representatives:
<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIAL BENEFICIAL
OWNERSHIP SHARES OF OWNERSHIP OF
BENEFICIAL COMMON STOCK COMMON STOCK
OWNERSHIP OF SHARES AMOUNT OF SELLING AFTER SALE OF SELLING AFTER SALE OF SELLING
OF COMMON STOCK STOCKHOLDERS' STOCKHOLDERS' STOCKHOLDERS'
SELLING STOCKHOLDER PRIOR TO SALE SHARES OFFERED SHARES(9) SHARES
- ----------------------------- ----------------------- -------------------- ------------------------ ----------------------
<S> <C> <C> <C> <C>
F.H. Faulding & Co. Limited 395,000 395,000 0 0%
IVAX Corporation 1,126,398(2)(3) 20,000 1,106,398 8.60%
Oracle Partners, LP 200,000(1) 200,000(4) 0 0%
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MLC Management Company 10,000 10,000 0 0%
Leonard P. Shaykin 908,809(2) 20,000 888,809 7.05%
William G. Walters 120,591(2)(5)(6) 80,224 40,367 *
Elliot J. Smith 45,780(7) 45,780 0 0%
Estate of Howard D. Harlow 16,992(7) 16,992 0 0%
Nicholas Anari 1,810(7) 1,810 0 0%
James D. Whitten 1,716(7) 1,716 0 0%
Cynthia Buckwalter 504(7) 504 0 0%
Whale Securities Co., L.P. 212,974(7)(8) 212,974 0 0%
</TABLE>
__________
* Less than 1%.
(1) Includes 200,000 shares of Common Stock into which the Faulding Warrants
will convert upon Oracle's exercise and disposition thereof.
(2) Includes shares of Common Stock and warrants to purchase Common Stock held
by such Selling Stockholder other than the Selling Stockholders' Shares
offered hereunder.
(3) Shares beneficially owned by IVAX are beneficially owned directly by D&N
Holding Company, a wholly owned subsidiary of IVAX.
(4) Includes 200,000 shares of Common Stock to be received upon exercise
and conversion of the Faulding Warrants. The resale by Oracle of such
shares of Common Stock is included in the Registration Statement of which
this Prospectus forms a part.
(5) Includes shares of Common Stock held by Mr. Walter's individual retirement
account.
(6) Includes shares of Common Stock issuable upon exercise of the Underwriter's
Warrants and the Other Warrants. Does not include any shares of Common
Stock held by Whale, a limited partnership of which Whale Securities Corp.
is general partner. Mr. Walters, Chairman and principal stockholder of
Whale Securities Corp., disclaims beneficial ownership of such shares.
(7) Represents shares of Common Stock issuable upon exercise of the
Underwriter's Warrants and the Other Warrants.
(8) Includes securities held in the name of Whale for the account of certain
equity owners and employees of Whale. Excludes shares of Common Stock held
in any customer account by, and any trading account of, Whale.
(9) Assumes all of the Selling Stockholders' Shares offered under this
Prospectus are sold by the Selling Stockholders.
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 Sthckholders
will act independently of the Company 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, 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.
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.
20
<PAGE>
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 or
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 Shareholder"
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 deemed to be Selling Stockholders
hereunder.
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.
21
<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 Post-Effective Amendment are
estimated to be as follows:
Legal fees and expenses....... $14,000.00
Accounting fees and expenses.. 4,000.00
Printing and engraving........ 1,500.00
Miscellaneous................. 1,000.00
----------
Total..................... $20,500.00
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the DGCL permits a Delaware corporation to limit the
personal liability of its directors in accordance with the provisions set forth
therein. The Certificate of Incorporation of the Registrant provides that the
personal liability of its directors shall be limited to the fullest extent
permitted by applicable law.
Section 145 of the DGCL contains provisions permitting corporations
organized thereunder to indemnify directors, officers, employees or agents
against expenses, judgments and fines reasonably incurred and against certain
other liabilities in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person was or is a director,
officer, employee or agent of the corporation.
The Certificate of Incorporation and the By-Laws of the Registrant provide
for indemnification of its directors and officers to the fullest extent
permitted by applicable law. In addition, the Registrant maintains an officers
and directors liability insurance policy. The Certificate of Incorporation
limits the liability of directors of the Company for monetary damages for
breaches of directors' fiduciary duty of care. In addition, the Certificate of
Incorporation requires the Company to indemnify directors, officers, employees
and agents of the Company serving at the request of the Company against
expenses, judgments (including derivative actions), fines and amounts paid in
settlement. This indemnification is limited to actions taken in good faith in
the reasonable belief that the conduct was lawful and in or not opposed to the
best interests of the Company. The By-laws provide for the indemnification of
directors and officers in connection with civil, criminal, administrative or
investigative proceedings when acting in their capacities as agents for the
Company. The Company has entered into indemnification agreements with each
director and executive officer of the Company pursuant to which the Company will
agree to indemnify and hold harmless each director and executive officer to the
full extent permitted or authorized by the DGCL. The foregoing may reduce the
likelihood of derivative litigation against directors and executive officers and
may discourage or deter stockholders or management from suing directors or
executive officers for breaches of their duty of care, even though such an
action, if successful, might otherwise benefit the Company and its stockholders.
ITEM 16. EXHIBITS
The following exhibits are filed pursuant to Item 601 of Regulation S-K.
Exhibit
Number Description of Exhibit
- ------ ----------------------
II-1
<PAGE>
4.1 Form of Amended and Restated Certificate of Incorporation of
the Registrant (1)
4.2 Form of Certificate of Designation for the Convertible Preferred
Stock, Series A, of the Registrant (2)
4.3 Form of Certificate of Designation for the Convertible Preferred
Stock, Series B, of the Registrant (3)
4.4 Bylaws of the Registrant (1)
4.5 Form of Common Stock Certificate (1)
5.1 Opinion of Holme Roberts & Owen LLP(1)
23.1 Consent of Ernst & Young LLP
23.2 Consent of Holme Roberts & Owen LLP
(included in Exhibit 5.1)
24.1 Powers of Attorney(1)
______________________
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (No. 33-78016).
(2) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995 (File No. 0-24320)
(3) Incorporated by reference to the Company's Report on Form 8-A dated
November 26, 1996.
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 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; and
(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
15(d) of the Exchange Act that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at the 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 above, 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 Post-Effective Amendment No. 5 to the
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 9,
1997.
NaPro BioTherapeutics, Inc.
By: \s\ Gordon H. Link, Jr.
-----------------------------------------------
Gordon H. Link, Jr.
Vice President, Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 5 to the 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 September 9, 1997
- ------------------------------------------ Officer; Director (Principal
Sterling K. Ainsworth, Ph.D. Executive Officer)
* Chairman of the Board of Directors September 9, 1997
- ------------------------------------------
Leonard P. Shaykin
\s\ Gordon H. Link, Jr. Vice President, Chief Financial September 9, 1997
- ------------------------------------------ Officer (Principal Financial Officer)
Gordon H. Link, Jr.
\s\ Robert L. Poley Controller (Principal Accounting September 9, 1997
- ------------------------------------------ Officer)
Robert L. Poley
* Director September 9, 1997
- ------------------------------------------
Patricia A. Pilia, Ph.D.
* Director September 9, 1997
- ------------------------------------------
E. Garrett Bewkes, Jr.
* Director September 9, 1997
- ------------------------------------------
Richard C. Pfenniger, Jr.
* Director September 9, 1997
- ------------------------------------------
Phillip Frost, M.D.
Director September __, 1997
- ------------------------------------------
Arthur H. Hayes, Jr. M.D.
- ------------------------------------------ Director September __, 1997
Mark B. Hacken
- ------------------------------------------ Director September __, 1997
Vaughn D. Bryson
* By: \s\ Gordon H. Link, Jr.
-----------------------------------
Gordon H. Link, Jr., Attorney-in-Fact
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
4.1 Amended and Restated Certificate of Incorporation of
the Registrant (1)
4.2 Form of Certificate of Designation for the Convertible
Preferred Stock,
Series A, of the Registrant (2)
4.3 Form of Certificate of Designation for the Convertible
Preferred Stock,
Series B, of the Registrant (3)
4.4 Bylaws of the Registrant (1)
4.5 Form of Common Stock Certificate (1)
4.6 Rights Agreement dated as of November 8, 1996, between
NaPro BioTherapeutics, Inc. and American Stock Transfer
and Trust Company, as Rights Agent (3)
5.1 Opinion of Holme Roberts & Owen LLP(1)
23.1 Consent of Ernst & Young LLP
23.2 Consent of Holme Roberts & Owen LLP
(included in Exhibit 5.1)
24.1 Powers of Attorney(1)
______________________
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (No. 33-78016).
(2) Incorporated by reference to the Company's Annual Report on Form 10-Q for
the quarter ended June 30, 1995 (File No. 0-24320).
(3) Incorporated by reference to the Company's Report on Form 8-A dated
November 26, 1996.
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in Post-
Effective Amendment No. 5 to Form S-1 on Form S-3 (No. 33-78016) and related
Prospectus of NaPro BioTherapeutics, Inc. 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.
ERNST & YOUNG LLP
Denver, Colorado
September 5, 1997
