Filed pursuant to
Rule 424(b)(3)
File No. 333-08179
PROSPECTUS
ICN PHARMACEUTICALS, INC.
1,198,107 SHARES OF COMMON STOCK
This Prospectus relates to 1,198,107 shares (the "Shares")
of Common Stock, $ .01 par value, including associated
Preferred Stock Purchase Rights (the "Common Stock), of ICN
Pharmaceuticals, Inc., a Delaware corporation (the "Company" or
"ICN"), that may from time to time be sold by the Stockholders
identified herein (the "Selling Stockholders"). The Company
will not receive any of the proceeds from the sale of the
Shares. However, under certain circumstances, certain of the
Selling Stockholders will be required to pay to the Company the
amount, if any, by which the proceeds from the sale of their
Shares exceeds certain agreed upon price thresholds.
Conversely, under certain circumstances, the Company will be
required to pay each Selling Stockholder the amount, if any, by
which the proceeds from the sale of such Selling Stockholders
Shares is less than certain agreed upon price thresholds. The
Company has agreed to bear all expenses (other than selling
commissions and fees and expenses of counsel and other advisors
to the Selling Stockholders) in connection with the
registration and sale of the Shares being offered by the
Selling Stockholders. See "Selling Stockholders" and "Plan of
Distribution."
The Shares may be sold from time to time by the Selling
Stockholders or, in certain cases, by transferees or assignees.
Such sales may be made in the over - the - counter market, on
the New York Stock Exchange or other exchanges (if the Common
Stock is listed for trading thereon), or otherwise at prices
and at terms then prevailing, at prices related to the then
current market price or at negotiated prices. The Shares may
be sold by any one or more of the following methods: (a) a
block trade in which the broker or dealer so engaged will
attempt to sell the securities as agent but may position and
resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account; (c)
ordinary brokerage transactions and transactions in which the
broker solicits purchasers; and (d) privately negotiated
transactions. In addition, any Shares that qualify for sale
pursuant to Rule 144 may be sold under Rule 144 rather than
pursuant to this Prospectus.
The Shares covered by this Prospectus were originally
issued in private placements made by the Company under Rule
4(2) of the Securities Act of 1933, as amended (the "Securities
Act"), in connection with the acquisitions by the Company of
(i) 40% of the outstanding common stock of SeaLite Sciences,
Inc. ("SeaLite"), the owner of patented diagnostic technology
which can be used to produce extremely sensitive test kits, in
December 1995, (ii) all the outstanding common stock of
Gly-Derm, Inc. ("Gly-Derm"), a Michigan based skin care
company, in February 1996 and (iii) the Dosimetry Service
Division ("Dosimetry") of Siemens Medical Systems, Inc.
("Siemens Medical"), in July 1996. The acquisition of Gly-Derm
and Dosimetry, together with the consummated and proposed
acquisitions discussed under "Recent Developments," do not,
individually or in the aggregate, constitute the acquisition of
significant businesses as defined by Regulation S-X promulgated
by the Securities and Exchange Commission (the "Commission").
The Selling Stockholders and any broker-dealers, agents or
underwriters that participate with the Selling Stockholders in
the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act and any
commissions received by such broker-dealers, agents or
underwriters and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act.
The Common Stock is traded on the New York Stock Exchange
("NYSE") under the symbol "ICN." On July 19, 1996, the closing
sale price per share, as reported by the NYSE, was $24.75.
AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. 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.
The Date of this Prospectus is July 22, 1996.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and
other information filed by the Company may be inspected and copies
obtained (at prescribed rates) at the public reference facilities
maintained by the Commission in Washington, D.C. at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549 and at the Commission's
Regional Offices in New York, at 7 World Trade Center 13th Floor, New
York, New York 10048 and in Chicago, at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained (at prescribed rates), by writing to the
Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material can also be inspected at the
NYSE, 20 Broad Street, New York, New York 10005, on which the Common
Stock is listed.
This Prospectus is part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the
Securities Act with respect to the Shares. This Prospectus does not
contain all the information set forth or incorporated by reference in
the Registration Statement and the exhibits and schedules relating
thereto, certain portions of which have been omitted as permitted by
the Commission's rules and regulations. For further information with
respect to the Company and the Shares offered hereby, reference is
made to the Registration Statement and the exhibits thereto which are
on file at the offices of the Commission and may be obtained upon
payment of the fee prescribed by the Commission as described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following reports and documents filed by the Company with
the Commission pursuant to the Exchange Act are incorporated into
this Prospectus by reference as of their respective dates:
1. Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 as amended by Form 10-K/A-1, dated
April 29, 1996.
2. Quarterly Report on Form 10-Q for the three months
ended March 31, 1996.
3. The description of the Common Stock and associated
Preferred Stock Purchase Rights contained in the
Registration Statement on Form 8-A, dated November 10,
1994.
All reports and other documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the
offering of the Shares pursuant to this Prospectus (this "Offering")
shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the date of filing of such reports and
documents. Any statement contained herein or in a report or document
incorporated or deemed to be incorporated herein by reference shall
be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed report or document that is or is deemed to be
incorporated by reference herein 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 making of a modifying or superseding statement shall not be
deemed an admission for any purpose that the modified or superseded
statement, when made, constituted a misrepresentation, an untrue
statement of a material fact or an omission to state a material fact
that is required to be stated or that is necessary to make a
statement not misleading in light of the circumstances in which it
was made.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON TO WHOM
A COPY OF THIS PROSPECTUS IS DELIVERED, ON THE REQUEST OF SUCH
PERSON, A COPY OF ANY OR ALL OF THE REPORTS AND DOCUMENTS
INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS THERETO, UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH
REPORTS OR DOCUMENTS). WRITTEN REQUESTS FOR SUCH COPIES SHOULD BE
DIRECTED TO DAVID C. WATT, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY, ICN PHARMACEUTICALS, INC., 3300 HYLAND
AVENUE, COSTA MESA, CALIFORNIA 92626. TELEPHONE INQUIRIES MAY BE
DIRECTED TO DAVID C. WATT AT (714) 545-0100.
THE COMPANY
On November 1, 1994, the stockholders of ICN Pharmaceuticals,
Inc. ("Old ICN"), SPI Pharmaceuticals, Inc. ("SPI"), Viratek, Inc.
("Viratek"), and ICN Biomedicals, Inc. ("Biomedicals") (collectively,
the "Predecessor Companies") approved the combination of the
Predecessor Companies ("the Merger"). On November 10, 1994, SPI, Old
ICN and Viratek merged into ICN Merger Corp., and Biomedicals merged
into ICN Subsidiary Corp., a wholly-owned subsidiary of ICN Merger
Corp. In conjunction with the Merger, ICN Merger Corp. was renamed
ICN Pharmaceuticals, Inc. For accounting purposes, SPI is the
acquiring company and as a result, the Company reports the historical
financial data of SPI in its financial results. Subsequent to the
Merger, the results of the Company include the combined operations of
all Predecessor Companies.
ICN is a multinational research-based pharmaceutical company
that develops, manufactures, distributes and sells pharmaceutical,
nutrition, research and diagnostic products. The Company pursues a
strategy of international expansion which includes (i) research and
development of proprietary products with the potential to be
significant contributors to the Company's global operations; (ii)
penetration of major pharmaceutical markets by means of targeted
acquisitions; and (iii) expansion in these major markets through the
development or acquisition of pharmaceutical products that meet the
particular needs of each market.
The Company distributes and sells a broad range of prescription
and over-the-counter pharmaceutical and nutritional products in over
60 countries worldwide, primarily in North America, Latin America,
Western Europe and Eastern Europe. These pharmaceutical products
treat viral and bacterial infections, diseases of the skin,
myasthenia gravis, cancer, cardiovascular disease, diabetes and
psychiatric disorders. The Company's leading product is the broad
spectrum antiviral agent ribavirin, which is marketed in the United
States, Canada and most of Europe under the trade name
Virazole(registered trademark). Virazole(registered trademark) is
currently approved for commercial sale in over 40 countries for one
or more of a variety of viral infections, including respiratory
syncytial virus ("RSV"), herpes simplex, influenza, chicken pox,
hepatitis and HIV. In the United States, Virazole(registered
trademark) is approved only for use in hospitalized infants and young
children with severe lower respiratory infections due to RSV.
The Company believes it has substantial opportunities to realize
growth from its internally developed compounds. These compounds are
the result of significant investments in its research and development
activities related to nucleic acids conducted over three decades.
The Company believes that the approval of Virazole(registered
trademark) for the treatment of chronic hepatitis C would be
important to the Company because of the potential size of the chronic
hepatitis C market both in the United States and abroad. On June 1,
1994, a New Drug Application ("NDA") was filed with the United States
Food and Drug Administration (the "FDA") for the use of
Virazole(registered trademark) for the treatment of chronic hepatitis
C in the United States. Similar applications for approval to market
Virazole(registered trademark) for chronic hepatitis C were filed in
the European Union, Canada, Sweden, Norway, Finland, Australia and
New Zealand. Following the submission of the NDA, the FDA raised
serious questions regarding the safety and efficacy of
Virazole(registered trademark). Similar questions were raised by
foreign reviewers. Subsequently, the Company withdrew its NDA for
Virazole(registered trademark) and the applications for
Virazole(registered trademark) submitted in other world markets. On
July 28, 1995, the Company entered into an agreement (described
below) with a subsidiary of Schering-Plough Corporation (collectively
with such subsidiary, "Schering") to license ribavirin
(Virazole(registered trademark)) as a treatment for chronic hepatitis
C in combination with Schering's alpha interferon (the "Combination
Therapy"). The FDA subsequently approved a protocol for the testing
of the Combination Therapy, and Schering is currently conducting
Phase III clinical trials of the Combination Therapy. To obtain FDA
approval of Virazole(registered trademark) for use in Combination
Therapy, the Company and Schering must demonstrate that Combination
Therapy is safer and more effective in treating chronic hepatitis C
than alpha interferon alone. Schering is also testing the
Combination Therapy pursuant to protocols approved by the European
Union. The Company continues to believe that Virazole(registered
trademark) has potential in the treatment of hepatitis C in
Combination Therapy and is taking all steps necessary to capitalize
on its full potential.
Pursuant to an Exclusive License and Supply Agreement (the
"License Agreement") with Schering, the Company licensed ribavirin to
Schering for use in Combination Therapy. The License Agreement
provided the Company an initial non-refundable payment by Schering of
$23,000,000, and future royalty payments to the Company for marketing
of ribavirin, including certain minimum royalty rates. Schering will
have exclusive marketing rights for ribavirin for hepatitis C
worldwide, except that the Company will retain the right to co-market
the drug in the countries of the European Union. In addition,
Schering will purchase up to $42,000,000 in Common Stock upon the
achievement of certain regulatory milestones. Under the License
Agreement, Schering will be responsible for all clinical developments
worldwide.
The Company believes it is positioned to expand its presence in
the pharmaceutical markets in Eastern Europe. In 1991, a 75%
interest was acquired in Galenika Pharmaceuticals, a large drug
manufacturer and distributor in Yugoslavia. Galenika Pharmaceuticals
was subsequently renamed ICN Galenika ("Galenika"). This acquisition
added new products and significantly expanded the sales volume of the
Company. With the investment in Galenika Pharmaceuticals, the
Company became one of the first Western pharmaceutical companies to
establish a direct investment in Eastern Europe. Galenika continues
to be a significant part of the Company's operations although its
sales and profitability have, at times, been substantially diminished
owing principally to the imposition of sanctions on Yugoslavia by the
United Nations. However, in December 1995, the United Nations
Security Council adopted a resolution that suspended economic
sanctions imposed on the Federal Republic of Yugoslavia since May of
1992. The suspension of economic sanctions has enabled Galenika to
resume exporting certain of its product lines to Russia, other
Eastern Europe Markets, Africa, the Middle East and the Far East.
Additionally, during 1995, in pursuing its Eastern Europe expansion
strategy, the Company acquired a 75% interest in Oktyabr, a
pharmaceutical company in the Russian Republic. The Company
subsequently acquired an additional 15% interest in Oktyabr,
increasing its interest in Oktyabr to 90%.
In addition to its pharmaceutical operations, the Company also
develops, manufacturers and sells a broad range of research chemical
products, diagnostic reagents and radiation monitoring services. The
Company markets these products internationally to major scientific,
academic, health care and governmental institutions through catalog
and direct mail marketing programs.
The principal executive offices of the Company are located at
3300 Hyland Avenue, Costa Mesa, California 92626. The telephone
number at such address is (714) 545-0100.
RISK FACTORS
An investment in the Shares involves a high degree of risk and
may not be appropriate for investors who cannot afford to lose their
entire investment. Prospective Purchasers of the Shares should be
fully aware of the risk factors set forth herein. This Prospectus
contains or incorporates statements that constitute forward looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Those statements appear in a number of places in
this Prospectus and in the documents incorporated by reference and
may include statements regarding, among other matters, the Company's
growth opportunities, the Company's acquisition strategy, regulatory
matters pertaining to governmental approval of the marketing or
manufacturing of certain of the Company's products and other factors
affecting the Company's financial condition or results of operations.
Prospective investors are cautioned that any such forward looking
statements are not guarantees of future performance and involve
risks, uncertainties and other factors which may cause actual
results, performance or achievements to differ materially from the
future results, performance or achievements expressed or implied in
such forward looking known and unknown statements. Such factors
include the various risk factors described below.
DEPENDENCE ON FOREIGN OPERATIONS
Approximately 75% and 75% of the Company's net sales for 1995
and the three months ended March 31, 1996, respectively, were
generated from operations outside the United States. The Company
operates directly and through distributors in North America, Latin
America (principally Mexico), Western Europe and Eastern Europe and
through distributors elsewhere in the world. Foreign operations are
subject to certain risks inherent in conducting business abroad,
including possible nationalization or expropriation, price and
exchange controls, limitations on foreign participation in local
enterprises, health-care regulation and other restrictive
governmental actions. Changes in the relative values of currencies
take place from time to time and may materially affect the Company's
results of operations. Their effects on the Company's future
operations are not predictable.
RISK OF OPERATIONS IN YUGOSLAVIA
Galenika represents a material part of the Company's business.
Approximately 46% and 45% of the Company's net sales for 1995 and the
three months ended March 31, 1996, respectively, were from Galenika.
In addition, approximately 49% and 36% of the Company's operating
income for 1995 and the three months ended March 31, 1996,
respectively, were from Galenika. The current political and economic
circumstances in Yugoslavia create certain business risks particular
to that country. Between May 1992 and December 1995, Yugoslavia had
been operating under sanctions imposed by the United Nations which
had severely limited the ability to import raw materials for
manufacturing and had prohibited all exports. While the sanctions
were suspended in December 1995, certain risks such as
hyperinflation, currency devaluations, wage and price controls and
potential government action could continue to have a material adverse
effect on the Company's results of operations.
Galenika is subject to price controls in Yugoslavia. The size
and frequency of government-approved price increases are influenced
by local inflation, devaluations, cost of imported raw materials and
demand for Galenika products. During 1995, Galenika received fewer
price increases than in the past due to lower relative levels of
inflation. As inflation increases, the size and frequency of price
increases are expected to increase. Price increases obtained by
Galenika are based on economic events preceding such an increase and
not on expectations of ongoing inflation. A lag in approved price
increases could reduce the gross margins that Galenika receives on
its products. Although the Company expects that Galenika will limit
sales of products that have poor margins until an acceptable price
increase is received, the impact of an inability to obtain adequate
price increases in the future could have an adverse impact on the
Company as a result of declining gross profit margins or declining
sales in an effort to maintain existing gross margin levels.
RISK OF OPERATIONS IN EASTERN EUROPE AND RUSSIA
The Company has an investment in Russia through its 90% interest
in the Russian pharmaceutical company Oktyabr. The Company has
purchased a 40% investment in a U.S. Company which formed a joint
venture with a joint stock company in Kazakhstan to convert a former
Soviet scientific production complex in Kazakhstan into a
pharmaceutical manufacturing and distribution plant and also acquired
approximately an 88% interest in Lekstredstva, a Russian
pharmaceutical company. In addition, the Company recently won a
competitive bid to purchase up to a 59% interest in Alkaloida
Chemical Co., a Hungarian state-owned pharmaceutical company. The
Company is also considering several other strategic acquisitions and
investments in Eastern Europe. Although the Company believes that
investment in Russia and Eastern Europe offers access to growing
world markets, the economic and political conditions in such
countries are unstable. See "Recent Developments."
NO ASSURANCE OF SUCCESSFUL DEVELOPMENT AND COMMERCIALIZATION OF
FUTURE PRODUCTS
The Company's future growth will depend, in large part, upon its
ability to develop or obtain and commercialize new products and new
formulations of or indications for current products. The Company is
engaged in an active research and development program involving
compounds owned by the Company or licensed from others which the
Company may, in the future, desire to develop commercially. There
can be no assurance that the Company will be able to develop or
acquire new products, obtain regulatory approvals to use such
products for proposed or new clinical indications in a timely manner,
manufacture its potential products in commercial volumes or gain
market acceptance for such products. In addition, the Company may
require financing over the next several years to fund costs of
development and acquisitions of new products and, if
Virazole(registered trademark) is approved for treatment of chronic
hepatitis C in Combination Therapy (for which there can be no
assurance), to expand the production and marketing of
Virazole(registered trademark) in the countries of the European Union
where the Company has retained marketing rights under the License
Agreement. It may be desirable that the Company enter into licensing
arrangements with other pharmaceutical companies in order to market
effectively any new products or new indications for existing products
such as the License Agreement with Schering for the marketing of
Virazole(registered trademark) for Combination Therapy (if approved).
There can be no assurance that the Company will be successful in
raising such additional capital or entering into such marketing
arrangements, if required, or that such capital will be, raised, or
such marketing arrangements will be, on terms favorable to the
Company.
LIMITED PATENT PROTECTION
The Company may be dependent on the protection afforded by its
patents relating to Virazole(registered trademark) and no assurance
can be given as to the breadth or degree of protection which these
patents will afford the Company. The Company has patent rights in
the United States expiring in 1999 relating to the use of
Virazole(registered trademark) to treat specified human viral
diseases. If future development of Virazole(registered trademark) in
Combination Therapy is successful and approval is granted in the
United States, an additional award of exclusivity will be granted of
up to three years from date of approval (Waxman-Hatch Act); however,
there can be no assurance that such development will be successful or
that such approval will be obtained. While the Company has patents
in certain foreign countries covering use of Virazole(registered
trademark) in the treatment of certain diseases, which coverage and
expiration varies and which patents expire at various times through
2006, the Company has no, or limited, patent rights with respect to
Virazole(registered trademark) and/or its use in certain foreign
countries where Virazole(registered trademark) is currently, or in
the future may be, approved for commercial sale, including France,
Germany and Great Britain. However, the Company and Schering intend
to file applications for approval of Combination Therapy through a
centralized procedure in the European Union (which includes France,
Germany and Great Britain). If such approval is granted, the Company
and Shering would be afforded either six or ten years (depending upon
the particular country) of protection for the Combination Therapy
against competition . There can be no assurance that the loss of the
Company's patent rights with respect to Virazole(registered
trademark) upon expiration of the Company's patent rights in the
United States, Europe and elsewhere will not result in competition
from other drug manufacturers or will not otherwise have a
significant adverse effect upon the business and operations of the
Company.
As a general policy, the Company expects to seek patents,
where available, on inventions concerning novel drugs, techniques,
processes or other products which it may develop or acquire in the
future. However, there can be no assurance that any patents applied
for will be granted, or that, if granted, they will have commercial
value or as to the breadth or the degree of protection which these
patents, if issued, will afford the Company. The Company intends to
rely substantially on its unpatented proprietary know-how, but there
can be no assurance that others will not develop substantially
equivalent proprietary information or otherwise obtain access to the
Company's know-how. Patents for pharmaceutical compounds are not
available in certain countries in which the Company markets its
products.
Marketing approvals in certain foreign countries provide an
additional level of protection for products approved for sale in such
countries.
UNCERTAIN IMPACT OF ACQUISITION PLANS
The Company intends aggressively to continue its strategy of
targeted expansion through the acquisition of compatible businesses
and product lines and the formation of strategic alliances, joint
ventures and other business combinations. Should the Company
complete any material acquisition, the Company's success or failure
in integrating the operations of the acquired company may have a
material impact on the future growth or success of the Company. See
"Recent Developments."
POTENTIAL LITIGATION EXPOSURE
ICN is a defendant in various lawsuits including certain
consolidated class action lawsuits alleging, among other things,
violations of federal securities laws. The plaintiffs in these
lawsuits allege that ICN made, or aided and abetted other defendants
in making, misrepresentations of material facts and omitted to state
material facts concerning the business, financial condition and
future prospects of the Company, primarily concerning developments
regarding Virazole(registered trademark), including statements made
in the 1980's concerning the efficacy and safety of the drug and the
market for the drug in the treatment of AIDS and AIDS related
diseases, and statements made in 1994 and 1995 concerning the
Company's NDA for the use of Virazole(registered trademark) for the
treatment of chronic hepatitis C (the "Hepatitis C NDA").
The Commission is conducting a private investigation (the
"Commission Investigation") with respect to certain matters
pertaining to the status and disposition of the Hepatitis C NDA,
including whether, during the period June 1994 through February 1995,
the Company, persons or entities associated with it and others
(including Mr. Milan Panic, Chairman, President and Chief Executive
Officer of the Company), in the offer and sale or in connection with
the purchase and sale of Common Stock, engaged in possible violations
of federal securities laws, by having possibly: (i) made false or
misleading statements or omitted material facts with respect to the
status and disposition of the Hepatitis C NDA; (ii) purchased or
sold Common Stock while in possession of material, non-public
information concerning the status and disposition of the Hepatitis C
NDA; or (iii) conveyed material, non-public information concerning
the status and disposition of the Hepatitis C NDA, to other persons
who may have purchased or sold Common Stock. The Company is
cooperating with the Commission in its investigation.
The Company has received a Subpoena (the "Subpoena") from a
Grand Jury in the United States District Court, Central District of
California requesting the production of documents covering a broad
range of matters over various time periods. The Company and Milan
Panic are subjects of the investigation. The Company is cooperating
with the production of documents pursuant to the Subpoena.
DEPENDENCE ON KEY PERSONNEL
The Company believes that its continued success will depend to a
significant extent upon the efforts and abilities of its management,
including Milan Panic, its Chairman, President and Chief Executive
Officer. The loss of their services could have a material adverse
effect on the Company. The Company cannot predict what effect, if
any, the Commission's Investigation and the Subpoena may have on
Mr. Panic's ability to continue to devote services on a full time
basis to the Company. See " - Potential Litigation Exposure," above.
POTENTIAL PRODUCT LIABILITY EXPOSURE AND LACK OF INSURANCE
The Company could be exposed to possible claims for personal
injury resulting from allegedly defective products. Even if a drug
were approved for commercial use by an appropriate governmental
agency, there can be no assurance that users will not claim that
effects other than those intended may result from the Company's
products. The Company generally self-insures against potential
product liability exposure with respect to its marketed products,
including Virazole(registered trademark). While to date no material
adverse claim for personal injury resulting from allegedly defective
products, including Virazole(registered trademark), has been
successfully maintained against the Company or any of its
predecessors, a substantial claim, if successful, could have a
material adverse effect on the Company.
GOVERNMENT REGULATION
FDA approval must be obtained in the United States and approval
must be obtained from comparable agencies in other countries prior to
marketing or manufacturing new pharmaceutical products for use by
humans in such respective jurisdictions. Obtaining FDA approval for
new products and manufacturing processes can take a number of years
and involves the expenditure of substantial resources. Numerous
requirements must be satisfied, including preliminary testing
programs on animals and subsequent clinical testing programs on
humans, to establish product safety and efficacy. No assurance can
be given that authorization of the commercial sale of any new drugs
or compounds by the Company for any application will be secured in
the United States or any other country, or that, if such
authorization is secured, those drugs or compounds will be
commercially successful.
The FDA in the United States and other regulatory agencies in
other countries also periodically inspect manufacturing facilities.
Failure to comply with applicable regulatory requirements can result
in, among other things, sanctions, fines, delays or suspensions of
approvals, seizures or recalls of products, operating restrictions
and criminal prosecutions. Furthermore, changes in existing
regulations or adoption of new regulations could prevent or delay the
Company from obtaining future regulatory approvals.
The Company is subject to price control restrictions on its
pharmaceutical products in the majority of countries in which it
operates. To date, the Company has been affected by pricing
adjustments in Spain and by the lag in allowed price increases in
Yugoslavia and Mexico, which have created lower sales in U.S. dollars
and reductions in gross profit. Future sales and gross profit could
be materially affected if the Company is unable to obtain price
increases commensurate with the levels of inflation.
COMPETITION
The Company operates in a highly competitive environment. The
Company's competitors, many of whom have substantially greater
capital resources and marketing capabilities and larger research and
development staffs and facilities than the Company, are actively
engaged in marketing products similar to those of the Company and in
developing new products similar to those proposed to be developed and
sold by the Company. Others may succeed in developing products that
are more effective than those marketed or proposed for development by
the Company. Progress by other researchers in areas similar to those
being explored by the Company may result in further competitive
challenges. In early 1996, MedImmune, Inc. began marketing in the
United States RespiGam(registered trademark), a prophylactic drug for
the treatment of RSV. The Company is aware of several other ongoing
research and development programs which are attempting to develop new
prophylactic and therapeutic products for treatment of RSV. Although
the Company will follow publicly disclosed developments in this
field, on the basis of currently available data, it is unable to
evaluate whether RespiGam(registered trademark) or the other
technology being developed in these programs poses a threat to the
Company's current market position in the treatment of RSV or its
revenue streams. The Company may also face increased competition
from manufacturers of generic pharmaceutical products when certain of
the patents covering certain of its currently marketed products
expire.
RECENT DEVELOPMENTS
In June 1996, the Company acquired a 72.4% interest in
Lekstredstva, a Russian pharmaceutical company, for approximately
$5.7 million in cash, subject to approval from Russia's Anti-Monopoly
Committee. The Company has subsequently acquired an additional
approximately 16% interest in Lekstredstva from existing stockholders
and intends to make additional purchases to increase its interest in
Lekstredstva to 95%. It is estimated that these purchases will cost
approximately $600,000 in the aggregate.
In July 1996, the Company acquired the Dosimetry Service
division of Siemens Medical for 964,833 Shares, subject to certain
post-closing cash adjustments. Dosimetry is a leading provider of
worldwide commercial services used to measure occupational exposure
to radiation. Siemens Medical has the right, exercisable on or
before September 16, 1996, to require the Company to repurchase on
September 27, 1996, all of the Shares then owned by it for
approximately $23.51 per Share, in cash.
In June 1996, the Company won a competitive bid to purchase up
to a 59% interest in Alkaloida Chemical Co., a Hungarian state-owned
pharmaceutical company, for approximately $21.9 million in cash. The
Company anticipates that this transaction will close in September
1996, subject to the negotiation of a definitive agreement.
In May 1996, the Company purchased a 40% investment in KAMED
Financial, Inc. ("KF"), a Delaware company, for an anticipated
investment of $3,000,000. KF formed a joint venture with
Biomedpreparat ("BP"), a Kazak joint stock company which is owned by
the State Property Committee and by the employees of BP, to convert
BP from a Soviet scientific production complex located in Kazakhstan
into a pharmaceutical manufacturing and distribution plant. KF has a
51% interest in the joint venture.
Neither the acquisitions of Gly-Derm nor Dosimetry (which were
consummated in 1996), nor the completed or proposed acquisitions
discussed above, individually or in the aggregate, constitute the
acquisition of significant businesses as defined by Regulation S-X
promulgated by the Commission.
As previously discussed, in January 1995, an action was
commenced by a former employee against the Company and the Company's
Chairman. The complaint asserted causes of action for sex
discrimination and harassment and for violations of the California
Department of Fair Employment and Housing statute and a provision of
the California Government Code. On June 30, 1996, the Company
settled the case without admitting any wrongdoing. Terms of the
settlement are sealed under court order.
USE OF PROCEEDS
Since this Prospectus relates to the offering of Shares by the
Selling Stockholders, the Company will not receive any of the
proceeds from the sale of the Shares offered hereby. However, under
certain circumstances, the Selling Stockholders (other than Siemens
Medical) will be required to pay to the Company the amount, if any,
by which the proceeds from the sale of their Shares exceeds certain
agreed upon price thresholds. Conversely, under certain
circumstances the Company will be required to pay each Selling
Stockholder the amount, if any, by which the proceeds from the sale
of such Selling Stockholder's Shares is less than certain agreed upon
price thresholds. See "Selling Stockholder -- Price Protection"
SELLING STOCKHOLDERS
An aggregate of 1,198,107 Shares are being offered for the
account of the Selling Stockholders identified in the table below.
The following table provides certain information, as of the date of
this Prospectus, with respect to the Shares owned by the Selling
Stockholders (which information has been furnished to the Company by
the Selling Stockholders). Because the Selling Stockholders may
sell all or part of the Shares which they hold pursuant to this
Prospectus and because this Offering is not being underwritten on a
firm commitment basis, no estimate can be given as to the amount of
Shares that will be held by the Selling Stockholder upon termination
of this Offering. See "Plan of Distribution."
As of June 30, 1996, (as adjusted to give effect to the issuance
of 964,833 Shares to Siemens Medical as described under "Recent
Developments"), the Company had outstanding approximately 32,799,833
shares of Common Stock.
SELLING STOCKHOLDER INFORMATION
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Shares of Shares of
NAME Common Stock Common Stock
---- ------------ ------------
<S> <C> <C>
Marvin E. Klein,
Trustee Marvin E.
Klein Revocable
Trust 7/74 29,683 *
Dr. Maurice Belkin,
Trustee
Maurice Belkin
Revocable Trust 42,830 *
Irving F. Keene and
Diane F. Keene,
Trustees of the Diane
F. Keene Insurance
Trust dated December
29, 1989 24,735 *
Helene Davidson and
Diane F. Keene,
Trustees of the Diane
F. Keene Grantor
Trust 4,946 *
Sidney H. Weber 3,385 *
Steven J. Cohen 1,236 *
Sylvia Glover 1,236 *
Patricia Ann Wendel 13,208 *
Phyllis F. Fine 2,139 *
Jennifer L. Markusic 1,236 *
Noel H. Upfall 12,394 *
Jeffrey M. Weber 1,938 *
Robert T. Goldman 961 *
Daisy P. Ramos 961 *
Daniel B. Seff 961 *
Judith C. Redmond
Trustee 387 *
Richard S. Schwartz 387 *
Marvin D. Siegel 387 *
SeaLite Sciences,
Inc. 89,264 *
Siemens Medical
Systems, Inc. 964,833 3%
-------------
Total 1,198,107
=============
</TABLE>
*Less than 1% of the outstanding shares of Common Stock.
All of the Selling Stockholders (other than SeaLite and Siemens
Medical) (the "Gly-Derm Selling Stockholders") acquired their Shares
as partial consideration for the Company's acquisition of Gly-Derm.
SeaLite acquired its Shares as consideration for the Company's
acquisition of its equity interest in SeaLite. Siemens Medical
acquired its Shares in consideration for the Company's acquisition of
Dosimetry. The registration effected hereby is being effected
pursuant to certain registration rights granted by the Company at the
time of the issuance of the Shares. In the case of the Shares held
by the Gly-Derm Selling Stockholders, the registration rights extend
to transferees and assigns. If applicable, this Offering would
include sales of Shares by such transferees and assigns.
PRICE PROTECTION/ PUT OPTION
Gly Derm
- --------
Pursuant to a Common Stock Undertaking Agreement (the "Gly-Derm
Undertaking Agreement") between Gly-Derm, the Gly-Derm Selling
Stockholders and the Company, if, during the Guaranty Period (as
defined below), Shares are sold by any Gly-Derm Selling Stockholder
pursuant to the Registration Statement at a price (after deducting
customary sales commissions) greater than approximately $20.83,
subject to adjustment under certain circumstances (the "Gly-Derm
Guaranty Price"), such Gly-Derm Selling Stockholder has agreed to pay
to the Company such excess. Conversely, if, during the Guaranty
Period, Shares are sold by any Gly-Derm Selling Stockholder pursuant
to the Registration Statement at a price (after deducting customary
sales commissions) less than the Guaranty Price, the Company has
agreed to pay such deficit to such Gly-Derm Selling Stockholder. The
obligations of the Company pursuant to these provisions are required
to be paid in Common Stock (valued based upon market prices of the
Common Stock for a specified period prior to such sale) and the
obligations of the Gly-Derm Selling Stockholder pursuant to the
provisions are required to be paid, at the election of the applicable
Gly-Derm Selling Stockholder, in cash, Common Stock (valued at the
prices received by the Gly-Derm Selling Stockholder upon disposition)
or a combination thereof.
Similar provisions apply to sales by the Gly-Derm Selling
Stockholders of Shares pursuant to Rule 144 or as otherwise approved
in advance by the Company (the Company being obligated under certain
circumstances to repurchase Shares based upon then market price if it
does not approve certain requested dispositions of Shares by Gly-Derm
Selling Stockholders).
The Guaranty Period is defined in the Gly-Derm Undertaking
Agreement as the period ending the earlier of (i) 120 days after the
effective date of the Registration Statement (provided that the
Registration Statement remains effective for 120 days), or (ii) May
28, 1998.
In the event that a Gly-Derm Selling Stockholder is permitted to
sell Shares pursuant to the Registration Statement, or Rule 144 is
available, at the time the Guaranty Period expires and the then
market price of the Common Stock (as defined) is greater than the
Guaranty Price, the Gly-Derm Selling Stockholder is required to pay
the Company the excess in cash, Common Stock (valued based upon
market prices of the Common Stock for a specified period prior to
such sale) or a combination thereof. If Rule 144 is not available,
or the Registration Statement is not effective, within 30 days after
the expiration of the Guaranty Period, each Gly-Derm Selling
Stockholder has a right to require the Company to repurchase all of
his or her Shares at the Guaranty Price.
The Shares owned by the Gly-Derm Selling Stockholders are
presently held by First Trust of California National Association, as
escrow agent. Of these Shares held in escrow, 1/6 are being held in
escrow in the event the Company has indemnification claims against
the Gly-Derm Selling Stockholders under the agreement pursuant to
which the Company acquired Gly-Derm (the "Gly-Derm Acquisition
Agreement"). The remaining Shares are being held in escrow in the
event the Gly-Derm Selling Stockholders are required to make payments
to the Company pursuant to the Gly-Derm Undertaking Agreement as
described above.
The Shares do not include any shares of Common Stock which the
Gly-Derm Selling Stockholders may be entitled to receive pursuant an
earn-out provision contained in the Gly-Derm Acquisition Agreement.
The maximum earn-out payable by the Company is $2.6 million, of which
the first $1 million is payable in cash and the balance is payable
50% in cash and 50% in shares of Common Stock (based upon the market
price of the Common Stock at the time of payment).
SeaLite
- -------
Under the terms of the agreement pursuant to which the Company
issued Shares to SeaLite (the "SeaLite Agreement"), if the aggregate
proceeds (net of broker or dealer fees, discounts and expenses, and
all transfer and other taxes) from sales of Shares by SeaLite to
unaffiliated persons during the Protected Period (as defined below)
is greater than approximately $20.72 times the number of Shares sold,
SeaLite is required to pay to the Company an amount in cash equal to
such excess. Conversely, if the aggregate proceeds (net of broker or
dealer fees, discounts and expenses, and all transfer and other
taxes) from sale of Shares to unaffiliated persons during the
Protected Period is less than approximately $20.72 times the number
of Shares sold, the Company is required to pay to SeaLite an amount
in cash equal to such deficit.
Protected Period means the period from the consummation of the
SeaLite Agreement until ninety (90) days after the earlier of (i) the
effective date of the Registration Statement or (ii) the date on
which the Shares issued to SeaLite are eligible to be sold under Rule
144.
Siemens Medical Systems, Inc.
- -----------------------------
Pursuant to a Common Stock Undertaking Agreement (the "Siemens
Undertaking Agreement") between Siemens and the Company, Siemens
Medical has the right, exercisable on or before September 16, 1996,
to require the Company to repurchase on September 27, 1996, all of
the Shares then owned by it for approximately $23.51 per Share in
cash.
The descriptions set forth above of the Gly-Derm Undertaking
Agreement, the SeaLite Agreement and the Siemens Undertaking
Agreement are summaries and as such are subject to and qualified in
their entirety by reference to the text of the Gly-Derm Undertaking
Agreement, the SeaLite Agreement and the Siemens Undertaking
Agreement, respectively, copies of which are attached as exhibits to
the Registration Statement.
PLAN OF DISTRIBUTION
The Selling Stockholders are offering the Shares for their own
account, and not for the account of the Company. The Company will
not receive any proceeds from the sale of the Shares by the Selling
Stockholders. However, under certain circumstances, the Selling
Stockholders (other than Siemens Medical) will be required to pay to
the Company the amount, if any, by which the proceeds from the sale
of their Shares exceed certain agreed upon price thresholds.
Conversely, under certain circumstances the Company will be required
to pay each Selling Stockholder (other than Siemens Medical) the
amount, if any, by which the proceeds from the sale of such Selling
Stockholder's Shares is less than certain agreed upon price
thresholds. See "Selling Stockholder -- Price Protection."
The Shares may be sold from time to time by the Selling
Stockholders or, in certain cases, by their transferees or assigns.
Such sales may be made in the over-the-counter market, on the New
York Stock Exchange or other exchanges (if the Common Stock is listed
for trading thereon), or otherwise at prices and at terms then
prevailing, at prices related to the then current market price or at
negotiated prices. The Shares may be sold by any one or more of the
following methods: (a) a block trade in which the broker or dealer
so engaged will attempt to sell the securities as agent but may
position and resell a portion of the block as principal to facilitate
the transaction; (b) purchases by a broker as principal and resale by
such broker or dealer for its account; (c) ordinary brokerage
transactions and transactions in which the broker solicits
purchasers; and (d) privately negotiated transactions. In addition,
any Shares that qualify for sale pursuant to Rule 144 may be sold
under Rule 144 rather than pursuant to this Prospectus.
The Selling Stockholders and any broker-dealers, agents or
underwriters that participate with the Selling Stockholders in the
distribution of the Shares may be deemed to be "underwriters" within
the meaning of the Securities Act and any commissions received by
such broker-dealer, agent or underwriter and any profit on the resale
of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
Under the Exchange Act and the regulations thereunder, any
person engaged in a distribution of the Shares offered by this
Prospectus may not simultaneously engage in market making activities
with respect to the Common Stock during any applicable "cooling off"
periods prior to the commencement of such distribution. In addition,
and without limiting the foregoing, such Selling Stockholder will be
subject to applicable provisions of the Exchange Act and the rules
and regulations thereunder including, without limitation, Rules 10b-6
and 10b-7, which provisions may limit the timing of purchases and
sales of Common Stock by such Selling Stockholder.
In the Gly-Derm Undertaking Agreement, the Company has agreed to
indemnify the Gly-Derm Selling Stockholders and each person
controlling a Gly-Derm Selling Stockholder against all claims,
losses, damages and liabilities (or actions in respect thereof),
including any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss,
damage, liability or action, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained
in the Registration Statement, or based on any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
or any violation by the Company of the Securities Act or any rule or
regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with the
Registration Statement; provided that the Company will not be liable
in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue
statement or omission based upon written information furnished to the
Company by the Gly-Derm Stockholders and stated to be specifically
for use in the Registration Statement. The Gly-Derm Selling
Stockholders have each agreed to indemnify the Company, each of its
directors and officers and each person who controls the Company
within the meaning of the Securities Act and the rules and
regulations thereunder, against all claims, losses, damages and
liabilities (or actions in respect thereof), including any legal or
any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action, arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in the Registration
Statement or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in the
Registration Statement in reliance upon and in conformity with
written information furnished to the Company by the Gly-Derm Selling
Stockholders and stated to be specifically for use in the
Registration Statement; provided, however, that the obligations of
the Gly-Derm Selling Stockholders are limited to an amount equal to
the proceeds to the Gly-Derm Selling Stockholders of Shares sold
pursuant to the Registration Statement or otherwise as contemplated
by the Gly-Derm Undertaking Agreement.
In the Siemens Undertaking Agreement, the Company and Siemens
Medical agreed to mutual indemnification arrangements substantially
the same as the indemnification arrangements described above.
There can be no assurance that the Selling Stockholders will
sell any or all of the Shares offered by them hereunder. To the
extent required, the Company will use its best efforts to file,
during any period in which offers or sales are being made, one or
more supplements to this Prospectus to describe any material
information with respect to the plan of distribution not previously
disclosed in this Prospectus or any material change to such
information in this Prospectus.
The registration effected hereby is being effected pursuant to
certain registration rights previously granted by the Company to the
Gly-Derm Selling Stockholders in the Gly-Derm Undertaking Agreement,
to SeaLite in the SeaLite Agreement and to Siemens Medical in the
Siemens Undertaking Agreement. The Company will bear the expense of
such registration, other than selling commissions and fees and
expenses of counsel and other advisors to the Selling Stockholders.
LEGAL MATTERS
The legality of the Shares offered hereby will be passed upon
for the Company by David C. Watt, Executive Vice President, General
Counsel and Corporate Secretary of the Company. As of July 15, 1996,
Mr. Watt beneficially owned 100,332 shares of Common Stock, including
98,337 shares which he has the right to acquire upon the exercise of
currently exercisable stock options.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheets as of December 31, 1995 and
1994, and the consolidated statements of income, retained earnings
and cash flows for each of the three years in the period ended
December 31, 1995, incorporated by reference in this Prospectus, have
been included herein in reliance on the report, which includes, as it
relates to 1994 and 1993, an emphasis of matter paragraph related to
certain transactions between affiliates, of Coopers & Lybrand L.L.P.,
independent public accountants, given on the authority of that firm
as experts in auditing and accounting. With respect to the unaudited
interim financial information for the periods ended March 31, 1996
and 1995, incorporated by reference in this Prospectus, the
independent accountants have reported that they have applied limited
procedures in accordance with professional standards for a review of
such information. However, their separate report included in the
Company's quarterly report on Form 10-Q for the quarter ended March
31, 1996, and incorporated by reference herein, states that they did
not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their
report on such information should be restricted in light of the
limited nature of the review procedures applied. The accountants are
not subject to the liability provisions of Section 11 of the
Securities Act for their report on the unaudited interim financial
information because that report is not a "report" or a "part" of the
Registration Statement prepared or certified by the accountants
within the meaning of Sections 7 and 11 of the Securities Act.
Any financial statements and schedules hereafter incorporated by
reference in the Registration Statement of which this Prospectus is a
part, that have been audited and are the subject of a report by
independent accountants will be so incorporated by reference in
reliance upon such reports and upon the authority of such firms as
experts in accounting and auditing to the extent covered by consents
filed with the Commission.
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THIS OFFERING,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS
PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
