<PAGE> 1
As filed with the Securities and Exchange Commission on November 19, 1996
Registration No. 333-______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
DEPOTECH CORPORATION
(Exact name of Registrant as specified in its charter)
CALIFORNIA 33-0387911
(State or other juris- (I.R.S. Employer
diction of incorpo- Identification No.)
ration or organization)
10450 Science Center Drive, San Diego, California 92121
(619) 625-2424
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Edward L. Erickson
President and Chief Executive Officer
DEPOTECH CORPORATION
10450 Science Center Drive, San Diego, California 92121
(619) 625-2424
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Craig S. Andrews, Esq.
Faye H. Russell, Esq.
BROBECK, PHLEGER & HARRISON LLP
550 West C Street, Suite 1300
San Diego, California 92101
Approximate date of commencement of proposed
sale to the public: From time to time after the
effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /
The securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================================
Title of Each Class Proposed Maximum Proposed Maximum
of Securities to Amount to be Offering Price Per Aggregate Offering Amount of
be Registered Registered Share(1) Price(1) Registration Fee
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 1,500,000 $13.50 $20,250,000 $6,137.00
===================================================================================================================================
</TABLE>
(l) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933, as amended.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
1,500,000 Shares
DEPOTECH CORPORATION
Common Stock
This Prospectus relates to the public offering, which is not being
underwritten, of 1,500,000 shares of Common Stock, no par value per share (the
"Shares"), of DepoTech Corporation ("DepoTech" or the "Company"). All of these
Shares are held and may be offered by certain shareholders of the Company (the
"Selling Shareholders") who received such Shares pursuant to an exemption from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") provided by Section 4(2) thereof. The Shares are being
registered by the Company pursuant to a purchase agreement with the Selling
Shareholders. See "The Company" and "Selling Shareholders."
The sale of the Shares may be effected by the Selling Shareholders from
time to time in transactions in the over-the-counter market, in negotiated
transactions or a combination of such methods of sale, at fixed prices which may
be changed, at market prices prevailing at the time of sale, at prices related
to prevailing market prices or at negotiated prices. The Selling Shareholders
may effect such transactions by selling the Shares to or through broker-dealers,
and such broker-dealers may receive compensation in the form of discounts,
concession or commission from the Selling Shareholders and/or the purchasers of
the Shares for whom such broker-dealers may act as agents or to whom they may
sell as principals or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions). See "Plan of Distribution."
None of the proceeds from the sale of the Shares by the Selling
Shareholders will be received by the Company. The Company has agreed, among
other things, to bear certain expenses (other than fees and expenses of counsel
and underwriting discounts and commission and brokerage commissions and fees) in
connection with the registration and sale of the Shares being offered by the
Selling Shareholders. See "Selling Shareholders."
DepoTech Common Stock is traded on the Nasdaq National Market ("Nasdaq
National Market") under the symbol "DEPO." On November 18, 1996, the last sale
price of DepoTech Common Stock as reported on the Nasdaq National Market was
$13.50 per share.
The Selling Shareholders and any broker-dealers, agents or underwriters
that participate with the Selling Shareholders in the distribution of Shares may
be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any commissions received by them 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. See "Plan of Distribution"
for a description of indemnification arrangements.
---------------
THE COMMON STOCK 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 November __, 1996.
<PAGE> 3
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SELLING SHAREHOLDER OR BY ANY OTHER PERSON. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES TO ANY PERSON OR BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE
MADE.
AVAILABLE INFORMATION
DepoTech is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information may be inspected at the
Commission's Public Reference Section , Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Commission's regional offices at 7
World Trade Center, 13th Floor, New York, New York 10048; and at Northwest
Atrium Center, 500 West Madison Street, Room 1400, Chicago, Illinois 60661-2511.
Copies of such material can also be obtained at prescribed rates at the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The Common Stock of the Company is traded on the Nasdaq National
Market.
Additional information regarding the Company and the shares offered
hereby is contained in the Registration Statement on Form S-3 and the exhibits
thereto (the "Registration Statement") filed with the Commission under the
Securities Act. For further information pertaining to the Company and the
shares, reference is made to the Registration Statement and the exhibits
thereto, which may be inspected without charge at, and copies thereof may be
obtained at prescribed rates from, the office of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission
(Commission File No. 0-20720) are hereby incorporated by reference in this
Prospectus:
(1) The Annual Report of the Company on Form 10-K for the fiscal
year ended December 31, 1995;
(2) The Quarterly Report of the Company on Form 10-Q for the
fiscal quarter ended March 31, 1996;
(3) The Quarterly Report of the Company on Form 10-Q for the
fiscal quarter ended June 30, 1996;
(4) The Quarterly Report of the Company on Form 10-Q for the
fiscal quarter ended September 30, 1996; and
(5) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed with the Commission
on September 26, 1995.
All reports and other documents subsequently filed by the Company
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 this Offering shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such reports and documents. Any statement incorporated herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also 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 Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such document). Requests for such documents
should be submitted in writing to the Secretary, at DepoTech Corporation, 10450
Science Center Drive, San Diego, California 92121 or by telephone at (619)
625-2424.
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THE COMPANY
This Prospectus contains, in addition to historical information, forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from the results discussed in the forward-looking
statements. Factors that could cause or contribute to such differences include
those discussed under "Risk Factors," as well as those discussed elsewhere in
this Prospectus.
DepoTech is a drug delivery company engaged in the development and
manufacture of sustained-release therapeutic products based on DepoFoam, an
injectable, depot drug delivery technology. DepoFoam consists of microscopic,
spherical particles composed of hundreds to thousands of nonconcentric chambers
each separated from adjacent chambers by a bilayer lipid membrane. The Company
has developed DepoFoam formulations which release drugs over an extended period
of time, such as several weeks, or over a shorter period, such as a few days.
DepoTech has demonstrated that its proprietary DepoFoam technology can be used
to encapsulate a wide spectrum of generic and proprietary water-stable drugs,
including small molecules, proteins, peptides, antisense oligonucleotides and
DNA, for a range of therapeutic indications. DepoTech believes that its
technology enables the development of highly-differentiated, proprietary
products with enhanced safety and efficacy, improved profit margins, broadened
labeling, extended or renewed patent life and significantly reduced
administration schedules.
The Company's lead product, DepoCyt, is a proprietary DepoFoam
formulation of cytarabine, a generic anti-cancer drug also known as ara-C.
DepoCyt is being developed in collaboration with Chiron Corporation ("Chiron")
in the United States, Canada and Europe for the treatment of three subtypes of
neoplastic meningitis ("NM") arising from solid tumors, leukemia and lymphoma.
In October 1996, the Company announced data from a pivotal Phase III clinical
trial which compared DepoCyt to the standard therapy (methotrexate) in patients
with NM arising from solid tumors. Of 24 evaluable patients treated with
DepoCyt, the median survival was 168 days compared to 87 days for 29 evaluable
patients receiving methotrexate. Of the patients evaluable for survival, 33% of
the patients treated with DepoCyt showed a response versus 17% of the patients
treated with methotrexate. Response, the key primary endpoint of the study, was
defined as the absence of malignant cells in two consecutive samples of
patients' cerebrospinal fluid and lack of disease progression as assessed
through neurological evaluation. For all solid tumor patients, mean time to NM
disease progression as measured by neurological examination or death from any
cause was 108 days for those receiving DepoCyt compared to 48 days for those
receiving methotrexate. Based on these data and other data still being analyzed,
the Company plans to file a new drug application ("NDA") for the treatment of NM
arising from solid tumors in the fourth quarter of 1996.
In addition to DepoCyt, DepoTech has a diversified development pipeline
that demonstrates the breadth of the Company's technology. The Company is: (i)
developing DepoAmikacin, a DepoFoam formulation of amikacin, a potent,
broad-spectrum antibiotic for the treatment and prophylaxis of bacterial
infections; (ii) developing DepoMorphine, a DepoFoam formulation of morphine
sulfate, for post-surgical acute pain management; and (iii) developing D0601, a
DepoFoam formulation of insulin-like growth factor 1 ("IGF-1"), a Chiron
proprietary protein, for a rheumatologic indication and is assessing the
feasibility of developing D0602, a second formulation of IGF-1 for an
undisclosed indication. The Company completed a Phase I clinical trial for
DepoAmikacin in April 1996 in which the drug was found to be well-tolerated for
all dosage levels studied. DepoTech has also completed formulation, preclinical
studies and initial manufacturing scale-up of DepoMorphine and is preparing to
file an investigational new drug application ("IND") in 1996. DepoTech is also
evaluating DepoFoam formulations of several additional compounds which may offer
significant medical benefits and substantial market potential, including
antisense oligonucleotides, local anesthetics and anti-thrombotics.
Since March 1994, DepoTech and Chiron have collaborated in the
development of DepoCyt and DepoFoam formulations of certain of Chiron's
proprietary products, including IGF-1. The collaborative agreement provides for
the future development of additional DepoFoam formulations of other Chiron
proprietary products, including certain cytokines, vaccines, growth factors and
gene therapy products. Under the terms of the agreement, DepoTech retains
manufacturing rights to DepoCyt and the DepoFoam formulations of Chiron's
proprietary products. Chiron will market and distribute DepoCyt in the United
States, Canada and Europe and will have worldwide marketing rights to DepoFoam
formulations of its own proprietary products.
The Company's strategy is focused on the development and
commercialization of proprietary DepoFoam formulations of generic drugs or, in
collaboration with corporate partners, the development of DepoFoam formulations
of compounds proprietary to the corporate partners. The Company is implementing
this strategy by: (i) developing high value-added DepoFoam formulations of
approved or late-stage drugs; (ii) expanding the product pipeline by identifying
new product opportunities according to stringent criteria and by conducting
feasibility studies; (iii) establishing collaborative and funding arrangements
for
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development and commercialization of new DepoFoam products; and (iv) retaining
certain manufacturing rights to DepoFoam formulations. The Company believes this
strategy minimizes certain risks associated with pharmaceutical discovery and
development.
The Company was incorporated in the State of California in October
1989. Unless the context indicates otherwise, the "Company" or "DepoTech" refers
to DepoTech Corporation. The Company's principal executive offices are located
at 10450 Science Center Drive, San Diego, California 92121, and its telephone
number is (619) 625-2424.
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
Company. Prospective investors are cautioned that the statements in this
Prospectus that are not descriptions of historical facts may be forward looking
statements that are subject to risks and uncertainties. Actual results could
differ materially from those currently anticipated due to a number of factors,
including those identified under "Risk Factors" and elsewhere in this
Prospectus.
EARLY STAGE COMPANY
DepoTech's products are at an early stage of development, and, to date,
only two of the Company's DepoFoam formulations, DepoCyt and DepoAmikacin, have
been subject to any human clinical testing. Although many of the drug compounds
which the Company has encapsulated in DepoFoam have been tested in humans by
others using alternate delivery routes, the Company's potential products will
require extensive research, formulation, development, preclinical and clinical
testing, and may involve a lengthy regulatory approval process prior to
commercialization. There can be no assurance that DepoCyt, DepoAmikacin or any
of the Company's other products or potential products will prove safe and
effective in clinical trials, meet applicable regulatory standards, be capable
of being produced in commercial quantities at acceptable cost or be successfully
commercialized. In addition, there can be no assurance that preclinical or
clinical testing will accurately predict safety or efficacy in broader human
use, or that delays in the regulatory approval process will not arise, delaying
approval longer than currently expected by the Company. Even if all of the
Company's products prove to be safe and effective and are approved for marketing
by the United States Food and Drug Administration ("FDA") and other regulatory
authorities, there can be no assurance that health care providers, payors and
patients will accept the Company's products. Any failure of the Company to
achieve technical feasibility, demonstrate safety, achieve clinical efficacy,
obtain regulatory approval or, together with its partners, successfully market
products would have a material adverse effect on the Company.
DepoCyt is the Company's only product currently in pivotal Phase III
trials. Data from the solid tumor arm of the trial was reported in June and
October 1996 and the other two arms of the trial, for NM arising from leukemia
and lymphoma, are expected to be completed by the end of 1997. The Company
expects to file an NDA under the FDA's expedited approval process for the
treatment of NM arising from solid tumors in the fourth quarter of 1996. In the
case of DepoCyt, as with all drugs subject to accelerated approval, the FDA
requested that the Company submit a Phase IV protocol prior to the submission of
an NDA. This protocol was submitted, has been cleared by the FDA and the study
is in process. There can be no assurance that the data reported to date
regarding DepoCyt will be sufficient to gain FDA approval, that additional
results from the pivotal Phase III trial will confirm earlier results or that
the Phase IV and other clinical trials of DepoCyt will generate positive
results. Any of these occurrences could have a material adverse effect on the
Company and its ability to fund the further development and commercialization of
DepoCyt and its other products.
GOVERNMENT REGULATION; UNCERTAINTY OF OBTAINING REGULATORY APPROVAL
DepoTech's research and development activities are, and its future
business will be, subject to significant regulation by governmental authorities
in the United States, primarily by the FDA. Pharmaceutical products intended for
therapeutic use in humans are governed principally by the Federal Food, Drug,
and Cosmetic Act, as amended, and by the FDA regulations in the United States
and by comparable laws and regulations in foreign countries. DepoTech is also
subject to regulation under the food and drug statutes and regulations of the
State of California.
DepoTech recently announced certain results of the solid tumor arm of
the Phase III clinical trial for DepoCyt which showed higher median survival, an
increased response rate and longer time to NM disease progression for DepoCyt
versus
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standard therapy. There can be no assurance that these results will meet the
requirements for regulatory approvals necessary to commercialize DepoCyt in the
United States or otherwise.
The clinical testing and FDA review process for new drugs or biologics
requires substantial time, effort and expense. There can be no assurance that
any approval will be granted to the Company on a timely basis, if at all. The
FDA may refuse to approve a product for commercial sale or shipment if
applicable statutory and/or regulatory criteria are not satisfied, or may
require additional testing or information. There can be no assurance that such
additional testing or the provision of such information, if required, will not
have a material adverse effect on the Company. Also, the regulatory process can
be modified by Congress or the FDA in a manner that could materially affect the
Company.
In 1988, the FDA issued regulations intended to expedite the
development, evaluation and marketing of new therapeutic products to treat
life-threatening and severely debilitating illnesses for which no satisfactory
alternative therapies exist. These regulations provide for early consultation
between the sponsor and the FDA in the design of both preclinical studies and
clinical trials. At the present time, DepoCyt is being developed under such an
accelerated program. There can be no assurance, however, that any future
products the Company may develop will be eligible for evaluation by the FDA
under the 1988 regulations. In addition, there can be no assurance that DepoCyt
or any future products (if eligible) will be approved for marketing at all or,
if approved for marketing, will be approved for marketing sooner than would be
traditionally expected. Regulatory approval granted under these regulations may
be restricted by the FDA as necessary to ensure the safe use of the drug. In
addition, post-marketing clinical studies, sometimes called Phase IV studies,
will be required for products approved under this provision.
Under the Orphan Drug Act, the FDA may grant orphan drug designation to
drugs intended to treat a "rare disease or condition," which generally is a
disease or condition that affects populations of fewer than 200,000 individuals
in the United States. Under current law, orphan drug designation confers United
States marketing exclusivity upon the first company to receive FDA approval to
market such designated drug for the designated indication for a period of seven
years following approval of the NDA, subject to certain limitations. Orphan drug
designation does not convey any advantage in, or shorten the duration of, the
regulatory approval process. In June 1993, the Company obtained an orphan drug
designation for DepoCyt from the FDA to treat NM. There can be no assurance that
the Company will receive the first FDA approval to market sustained-release
cytarabine to treat NM and thus receive market exclusivity for DepoCyt to treat
NM arising from leukemia, lymphoma or solid tumor metastases. Although obtaining
FDA approval to market a product with an orphan drug designation can be
advantageous, there can be no assurance that the scope of protection or the
level of marketing exclusivity that is currently afforded by orphan drug
designation and marketing approval will remain in effect in the future.
For marketing outside the United States, the Company will be subject to
foreign regulatory requirements governing human clinical trials and marketing
approval for drugs and biologics in such foreign jurisdictions. The requirements
relating to the conduct of clinical trials, product licensing, pricing and
reimbursement vary widely from country to country and there can be no assurance
that the Company or any of its partners will meet and sustain any such
requirements.
LIMITED MANUFACTURING EXPERIENCE; RISK OF SCALE-UP
Although DepoTech is currently manufacturing materials for human
clinical trials, the Company has no experience manufacturing products for
commercial purposes. The Company will need to significantly scale-up its current
manufacturing operations and comply with current Good Manufacturing Practices
("CGMPS") and other regulations prescribed by various regulatory agencies in the
United States and other countries to achieve the prescribed quality and required
levels of production of such products and to obtain marketing approval. Failure
by the Company to successfully scale-up its manufacturing operations or to
comply with CGMPS and other regulations would have a material adverse impact on
the Company, including the loss of manufacturing rights under the Chiron
agreement.
HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY
The Company has incurred an accumulated deficit of $36.9 million
through September 30, 1996. The Company expects to continue to incur substantial
losses over at least the next two years as the Company's research and
development efforts, preclinical and clinical testing activities and
manufacturing scale-up and sales and marketing arrangement efforts expand. All
of the Company's revenues to date have consisted of contract revenues, milestone
payments and interest income. No revenues have
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been generated from product sales. There can be no assurance that the Company
can generate sufficient product or contract revenue to become profitable or
sustain profitability.
DEPENDENCE UPON PARTNERS FOR DEVELOPMENT AND COMMERCIALIZATION
The Company does not currently possess all the resources necessary to
develop, complete the FDA approval process for and commercialize any of its
potential therapeutic products. The Company intends to enter into collaborative
arrangements with other companies to fund research, development and clinical
trials, to assist in obtaining regulatory approvals in the United States and
internationally and to commercialize its products. In addition, the Company's
ability to apply its drug delivery technology to a broad range of
pharmaceuticals will depend upon its ability to establish and maintain
collaborative arrangements because the rights to many of the pharmaceuticals
most suited to the Company's drug delivery technology are currently owned by
third parties. While the Company has entered into preliminary collaborations to
test feasibility of its delivery technology with certain compounds and has
entered into a collaboration with Chiron, there can be no assurance that the
Company will be able to enter into additional collaborations to develop
commercial applications of its drug delivery technology. In addition, there can
be no assurance that the Company will be able to enter into or maintain existing
or future collaborations or that such collaborations will be successful. The
failure of the Company to enter into a collaboration with the owner of rights to
a particular formulation or pharmaceutical would preclude the Company from
developing its drug delivery technology with respect to such formulation or
pharmaceutical. The failure to enter into or maintain existing or future
collaborations would have a material adverse effect on the Company.
The Company's partners may pursue parallel development of other drug
delivery technologies that may compete with the Company's drug delivery
technology. In addition, definitive agreements negotiated with such partners may
provide that these partners may terminate the collaboration at any time without
significant penalty. Both the Company and Chiron have the ability to terminate a
portion or all of the collaboration at certain intervals and with advance
notice. In addition, Chiron has the ability to terminate the development of a
proprietary Chiron compound with a limited amount of advance notice. Termination
of a portion or all of the collaboration with Chiron would have a material
adverse effect on the Company. Although the Company intends generally to
formulate and manufacture pharmaceuticals for partners, certain partners may
choose to formulate or manufacture their own formulations, thereby limiting one
or more potential sources of revenue for DepoTech. In addition, the Company
believes that it may be precluded from entering into arrangements with companies
whose products compete with products sold by its partners. The Company also will
have limited or no control over the resources that any partner may devote to the
Company's products, over partners' development efforts, including the design and
conduct of clinical trials, or over the pricing of products. There can be no
assurance that any of the Company's present or future collaborative partners
will perform their obligations as expected or will devote sufficient resources
to the development, clinical testing or marketing of the Company's potential
products. Any parallel development by a partner of alternate drug delivery
technologies, preclusion from entering into competitive arrangements, failure to
obtain timely regulatory approvals, premature termination of a collaborative
agreement or failure by a partner to devote sufficient resources to the
development and commercialization of the Company's products would have a
material adverse effect on the Company.
LIMITED SALES AND MARKETING CAPABILITY
Commercialization of the Company's products is expected to be expensive
and time-consuming. In the event that the Company elects to participate directly
in sales and marketing efforts for the Company's products, the Company will need
to build such capability in the targeted markets. The Company currently has a
limited marketing staff. There can be no assurance that the Company will be able
to establish an adequate sales and marketing capability in any or all targeted
markets or that it will be successful in gaining market acceptance for its
products. To the extent the Company enters into co-promotion or other licensing
arrangements, any revenues received by the Company will be dependent on the
efforts of third parties and there can be no assurance that such efforts will be
successful. To the extent the Company relies on its collaborators, there can be
no assurance that any of these collaborators or their sublicensees will
successfully market or distribute the Company's products or that the Company
will be able to establish a successful direct sales organization, co-promotion
or distribution arrangements.
DEPENDENCE ON SUPPLIERS
The Company currently relies on a limited number of suppliers to
provide the materials used to manufacture its DepoFoam formulations. Certain of
these materials are purchased only from one supplier. In the event the Company
could not
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obtain adequate quantities of necessary materials from its existing suppliers,
there can be no assurance that the Company would be able to access alternative
sources of supply within a reasonable period of time or at commercially
reasonable rates. Regulatory requirements applicable to pharmaceutical products
tend to make the substitution of suppliers costly and time-consuming. The
unavailability of adequate commercial quantities, the inability to develop
alternative sources, a reduction or interruption in supply or a significant
increase in the price of materials could have a material adverse effect on the
Company's ability to manufacture and market its products.
RELIANCE ON MANUFACTURING PROCESS
To date, the Company has relied on a particular proprietary method of
manufacture. There can be no assurance that this method will be applicable to
all pharmaceuticals or biologics the Company desires to commercialize. Further,
the yield of product incorporated into the delivery system may be highly
variable for different therapeutic agents. Finally, the Company will need to
successfully meet any manufacturing challenges associated with the
characteristics of the drug to be encapsulated. The physical and chemical
stability of the DepoFoam formulation may vary with each therapeutic agent over
time and under various storage conditions. There can be no assurance that the
manufacturing process will result in economically viable yields of product or
that it will produce formulations of therapeutic products sufficiently stable
under suitable storage conditions to be commercially useful. In the event that
the Company decides to pursue alternative manufacturing methods for some or all
of its drugs, there can be no assurance that these methods will prove to be
commercially practical or that the Company will have or be able to acquire
rights to use such alternative methods.
RELIANCE ON TECHNOLOGY RIGHTS FROM RESEARCH DEVELOPMENT FOUNDATION
In February 1994, the Company entered into an Assignment Agreement with
Research Development Foundation ("RDF"), pursuant to which RDF assigned to
DepoTech exclusive rights to certain intellectual property relating to the
DepoFoam technology, including the corresponding patents and patent applications
for such property (the "RDF Technology"). As consideration for the assignment of
the RDF Technology, DepoTech will pay RDF an earned royalty on gross revenues
from the sale by DepoTech or its collaborators of products incorporating the RDF
Technology. The Company's products, including DepoCyt, incorporate the RDF
Technology. In certain other circumstances, DepoTech will pay RDF a percentage
of the royalties or other consideration received by DepoTech from licensees (or,
if greater, the amount of royalty DepoTech would have owed had it engaged in the
same conduct as the licensees). In addition, RDF retains the right to terminate
the agreement or to convert the exclusive nature of the rights granted under the
agreement into a nonexclusive license in the event that the Company does not
satisfy its contractual obligations, including making certain minimum annual
payments. Additional termination events include bankruptcy, a material uncured
breach of the agreement by DepoTech or a contest by DepoTech of the patents
included in the RDF Technology. The termination of the Assignment Agreement or
the conversion of its exclusive nature to a nonexclusive agreement would have a
material adverse effect on the Company.
PATENTS AND PROPRIETARY TECHNOLOGY
DepoTech relies on a combination of technical leadership, patent, trade
secret, copyright and trademark protection and nondisclosure agreements to
protect its proprietary rights. As of November 1, 1996, the Company has
exclusive rights under its agreement with RDF discussed below to two issued
United States patents, five pending United States patent applications, 41 issued
foreign patents and 16 pending foreign applications. As of the same date and in
its own name, the Company has one issued United States patent, one allowed
United States patent application, five pending United States patent
applications, one issued foreign patent and 19 pending foreign patent
applications on file covering various aspects of its drug delivery technology.
The Company intends to file additional patent applications in the future. There
can be no assurance that the Company will be issued any additional patents or
that, if any patents are issued, they will provide the Company with significant
protection or will not be challenged. Even if such patents are enforceable, the
Company anticipates that any attempt to enforce its patents would be time
consuming and costly. Moreover, the laws of some foreign countries do not
protect the Company's proprietary rights in the products to the same extent as
do the laws of the United States.
The patent positions of pharmaceutical, biotechnology and drug delivery
companies, including DepoTech, are uncertain and involve complex legal and
factual issues. Additionally, the coverage claimed in a patent application can
be significantly reduced before the patent is issued. As a consequence, there
can be no assurance that any of the Company's patent applications will result in
the issuance of patents or, if any patents issue, that they will provide
significant proprietary protection or will not
-7-
<PAGE> 9
be circumvented or invalidated. Because patent applications in the United States
are maintained in secrecy until patents issue and publication of discoveries in
the scientific or patent literature often lag behind actual discoveries, the
Company cannot be certain that it was the first inventor of inventions covered
by its pending patent applications or that it was the first to file patent
applications for such inventions. Moreover, the Company may have to participate
in interference proceedings declared by the United States Patent and Trademark
Office to determine priority of invention that could result in substantial cost
to the Company, even if the eventual outcome is favorable to the Company. There
can be no assurance that the Company's patents, if issued, would be held valid
by a court of competent jurisdiction. An adverse outcome of any patent
litigation could subject the Company to significant liabilities to third
parties, require disputed rights to be licensed from or to third parties or
require the Company to cease using the technology in dispute.
There can be no assurance that third parties will not assert
infringement claims against the Company in the future or that any such
assertions will not result in costly litigation or require the Company to obtain
a license to intellectual property rights of such parties. There can be no
assurance that any such licenses would be available on terms acceptable to the
Company, if at all. Furthermore, parties making such claims may be able to
obtain injunctive or other equitable relief that could effectively block the
Company's ability to further develop or commercialize its products in the United
States and abroad and could result in the award of substantial damages. Defense
of any lawsuit or failure to obtain any such license could have a material
adverse affect on the Company. Finally, litigation, regardless of outcome, could
result in substantial cost to and a diversion of efforts by the Company.
ACCESS TO DRUGS
The Company's ability to develop and commercialize its technology will
be affected by the Company's or its partners' access to the drugs that are to be
formulated. The Company intends in certain circumstances to rely on the ability
of its partners to provide access to the drugs that are to be formulated for use
with DepoFoam. There can be no assurance that the Company's partners will be
able to provide access to drug candidates for formulation in DepoFoam, or that,
if such access is provided, the Company or its partner will not be alleged or
determined to be infringing on third parties' rights and will not be prohibited
from using the drug or be found liable for damages that may not be subject to
indemnification. Any restriction on access or liability for damages would have a
material adverse effect on the Company. See "--Dependence Upon Partners for
Development and Commercialization."
FUTURE CAPITAL NEEDS
The development and commercialization of the Company's products will
require substantial funds to conduct research and development and preclinical
and clinical testing of products and to manufacture and commercialize any
products that are approved for commercial sale. The Company has a contractual
commitment arising from the Chiron collaboration to fund 50% of the sales and
marketing expenses incurred for DepoCyt in the United States, Canada and Europe.
In addition, in December 1994, the Company entered into an agreement to lease an
82,000 square foot facility for a 20-year term with a future minimum rental
commitment ranging from approximately $2.1 million to $4.3 million per year,
based upon pre-established annual rent increases. Further, the Company plans to
install a manufacturing line in this facility to support clinical and commercial
production of products under development. The cost of equipment and tenant
improvement expenses are estimated to total approximately $8.1 million through
1997. This cost is expected to be financed through new and existing bank credit
facilities. Finally, the Company has a right of first refusal and right of
first offer to purchase land located adjacent to its headquarters which must
be exercised on or before October 15, 1997. At present, the Company has not
made a decision concerning the exercise of such option in 1997. The Company's
future capital requirements will depend on many factors, including continued
scientific progress in its products and process development programs, progress
with preclinical testing and clinical trials, the time and costs involved in
obtaining regulatory approvals, the costs involved in filing patents,
competing technological and market developments, changes in existing
collaborative relationships, the ability of the Company to establish
development arrangements, the cost of establishing effective sales and
marketing arrangements. To date, the Company has not received any revenues
from product sales. The Company anticipates that its existing available cash,
cash equivalents and short-term investments, committed future contract revenue,
projected funding from equipment and other financings and interest income will
be adequate to satisfy its capital requirements and fund operations at least
through 1998.
-8-
<PAGE> 10
UNCERTAINTY OF ADDITIONAL FUNDING
The Company intends to seek additional funding through collaborative
arrangements, contract research or through public or private financings. There
can be no assurance that additional financing will be available on acceptable
terms or at all. If additional funds are raised by issuing equity securities,
further dilution to then existing shareholders may result. If adequate funds are
not available, the Company may be required to delay, scale back or eliminate one
or more of its research and development programs or seek to obtain funds through
arrangements with collaborative partners or others even if the arrangements
would require the Company to relinquish certain rights to certain of its
technologies, product candidates or products that the Company would not
otherwise relinquish.
DEPENDENCE ON KEY PERSONNEL
The success of the Company is highly dependent, in part, on its ability
to retain highly qualified personnel, including senior management and scientific
personnel. Competition for such personnel is intense and the inability to retain
additional key employees or the loss of one or more current key employees could
adversely affect the Company. Although the Company has been successful in
retaining required personnel to date, there can be no assurance that the Company
will be successful in the future. The Company has not entered into employment
agreements with any executive officers.
HIGHLY COMPETITIVE INDUSTRY
The drug delivery, pharmaceutical and biotechnology industries are
highly competitive and rapidly evolving, with significant developments expected
to continue at a rapid pace. The Company's success will depend upon maintaining
a competitive position and developing products and technologies for efficient
and cost-effective drug delivery. The Company's products will compete with other
formulations of drugs and with other drug delivery systems. There can be no
assurance that any of the Company's products will have advantages that will be
significant enough to cause medical professionals to use them. DepoTech believes
that its products will compete on the basis of quality, efficacy, cost,
convenience, safety and patient compliance. New drugs or further development in
alternative drug delivery methods may provide greater therapeutic benefits for a
specific drug or indication, or may offer comparable performance at lower cost
than those offered by the Company's DepoFoam drug delivery system. The Company
is aware of many other competitors in the field of drug delivery, including
competitors developing injectable or implantable drug delivery systems, oral
drug delivery technologies, passive transdermal systems, electrotransport
systems, oral transmucosal systems and inhalation systems. There can be no
assurance that developments by others will not render the Company's products or
technologies uncompetitive or obsolete. Many of the Company's existing or
potential competitors have substantially greater research and development
capabilities, experience, manufacturing, marketing, financial and managerial
resources than the Company. Furthermore, acquisitions of competing drug delivery
companies by large pharmaceutical companies could enhance competitors'
financial, marketing and other resources. Accordingly, the Company's competitors
may succeed in developing competing technologies, obtaining FDA approval or
gaining market share for products more rapidly than the Company.
PRODUCT LIABILITY; AVAILABILITY OF INSURANCE
The design, development and manufacture of the Company's products
involve an inherent risk of product liability claims and associated adverse
publicity. The Company obtained clinical trial product liability insurance for
its human clinical trials and intends to obtain insurance for future clinical
trials of other products under development and for potential product liability
associated with the commercial sale of the Company's products. There can be no
assurance, however, that the Company will be able to obtain or maintain
insurance for any of its clinical trials or commercial products. Although the
Company currently maintains general liability insurance, there can be no
assurance that the coverage limits of the Company's insurance policies will be
adequate. Product liability insurance is expensive, difficult to obtain and may
not be available in the future on acceptable terms or at all. A successful claim
brought against the Company in excess of the Company's insurance coverage would
have a material adverse effect upon the Company.
HAZARDOUS MATERIALS
The Company's research and development involves the controlled use of
hazardous materials, chemicals and various radioactive compounds. Although the
Company believes that its safety procedures for handling and disposing of such
materials comply with the standards prescribed by local, state and federal
regulations, the risk of accidental contamination or injury from
-9-
<PAGE> 11
these materials cannot be completely eliminated. In the event of such an
accident, the Company could be held liable for any damages that result and any
such liability could exceed the resources of the Company. The Company may incur
substantial cost to comply with environmental regulations.
POSSIBLE VOLATILITY OF STOCK PRICE
Factors such as the announcements of technological innovations or new
products by the Company, its competitors and other third parties, as well as
variations in the Company's results of operations, market conditions, analysts'
estimates and the stock market generally (and stock market perceptions of the
pharmaceutical, biotechnology and/or drug delivery industries specifically) may
cause the market price of the Company's Common Stock to fluctuate significantly.
Companies such as DepoTech have, in recent years, experienced dramatic stock
price volatility. Also, future sales of shares by existing shareholders pursuant
to Rule 144 of the Securities Act, or through the exercise of outstanding
registration rights, could have an adverse effect on the price of the Company's
Common Stock.
NO DIVIDENDS
The Company currently intends to retain any future earnings for use in
its business and does not anticipate paying any cash dividends in the future.
UNCERTAINTY OF HEALTH CARE REFORM MEASURES AND THIRD-PARTY REIMBURSEMENT
The uncertainty created by a series of legislative and regulatory
proposals announced in recent years could have a materially adverse effect on
the Company's ability to raise capital and to identify and reach agreements with
potential partners. In the event such proposals are eventually adopted, they
could have a material adverse effect on the Company. Furthermore, the Company's
ability to commercialize its potential product portfolio may be adversely
affected to the extent that such proposals have a material adverse effect on the
business, financial condition and profitability of other companies that are
current or prospective collaborators for certain of the Company's proposed
products.
In both domestic and foreign markets, sales of the Company's potential
products, if any, will depend in part on the availability of reimbursement of
third-party payors such as government health administration authorities, private
health insurers and other organizations. Third-party payors are increasingly
challenging the price and cost-effectiveness of medical products and services.
Significant uncertainty exists as to the reimbursement status of newly approved
health care products. There can be no assurance that the Company's proposed
products will be considered cost effective or that adequate third-party
reimbursement will be available to enable the Company to maintain price levels
sufficient to realize an appropriate return on its investment in product
development. Legislation and regulations affecting the pricing of
pharmaceuticals may change before the Company's proposed products are approved
for marketing and any such changes could further limit reimbursement for medical
products and services.
POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS
The Company's Articles of Incorporation include, among other things, a
provision (the "Fair Price Provision") that requires the approval of the holders
of two-thirds of the Company's voting stock as a condition to a merger or
certain other business transactions with, or proposed by, a holder of 15% or
more of the Company's voting stock, except in cases where certain directors
approve the transaction or certain minimum price criteria and other procedural
requirements are met. The Fair Price Provision and other charter provisions may
discourage certain types of transactions involving an actual or potential change
in control of the Company, including transactions in which the shareholders
might otherwise receive a premium for their shares over then current market
prices, and may limit the ability of the shareholders to approve transactions
that they may deem to be in their best interests. The Board of Directors also
has the authority to issue up to 5,000,000 shares of Preferred Stock in one or
more series and to fix the rights, priorities, preferences, qualifications,
limitations and restrictions, including the dividend rates, conversion rights,
voting rights, terms of redemption, terms of sinking funds, liquidation
preferences and the number of shares constituting any series, without any
further vote or action by the shareholders, which could decrease the amount of
earnings and assets available for distribution to holders of Common Stock or
adversely affect the rights and powers, including voting rights, of the holders
of the Common Stock. The issuance of Preferred Stock may have the effect of
delaying or preventing a change in control of the Company and may adversely
affect the rights of the holders of Common Stock.
-10-
<PAGE> 12
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
Selling Shareholders, including (i) the names and addresses of the Selling
Shareholders, (ii) the number of shares of Common Stock owned by, and
percentage ownership of, the Selling Shareholders prior to the offering and
(iii) the maximum number of shares of such Common Stock to be offered hereby.
Because the Selling Shareholders may offer all or a portion or none of the
Common Stock offered pursuant to this Prospectus, no estimate can be given as
to the amount of Common Stock that will be held by the Selling Shareholders
upon termination of the offering. There are currently no agreements,
arrangements or understandings with respect to the sale of any of the Shares.
The Shares are being registered to permit public secondary trading of the
Shares, and the Selling Shareholders may offer the Shares for resale from time
to time. See "Plan of Distribution."
None of the Selling Shareholders has not had a material relationship
with the Company within the past three years other than as a result of the
ownership of the Shares or other securities of the Company.
The Shares covered by this Prospectus are being acquired from the
Company by the Selling Shareholders pursuant to a Purchase Agreement dated as of
November 18, 1996 (the "Purchase Agreement") for an aggregate purchase price of
$20,250,000 ($13.50 per share), the only condition to which is the effectiveness
of the Registration Statement of which this Prospectus forms a part. The offer
and sale by the Company of the Common Stock pursuant to the Purchase Agreement
were made pursuant to an exemption from the registration requirements of the
Securities Act provided by Section 4(2) thereof. The placement agent, in
connection with the sale of Common Stock pursuant to the Purchase Agreement,
will be paid a fee of $1,012,500. In addition, the Company has agreed to
reimburse such placement agent for its travel and out-of-pocket expenses
incurred in connection with the sale of Common Stock pursuant to the Purchase
Agreement up to a maximum of $100,000.
In connection with the purchase of such Shares, each Selling
Shareholder entered into a purchase agreement pursuant to which such Selling
Shareholder represented that he, she or it was acquiring the Shares for
investment and with no present intention of distributing the Shares. The
Company agreed, in such purchase agreements, to prepare and file a registration
statement as soon as practicable and to bear all expenses other than fees and
expenses of counsel for a Selling Shareholder and underwriting discounts and
commissions and brokerage commissions and fees. In addition, and in recognition
of the fact that the Selling Shareholders, even though purchasing the Shares
without a view to distribution, may wish to be legally permitted to sell the
Shares when each deems appropriate, the Company filed with the Commission a
Registration Statement on Form S-3, of which this Prospectus forms a part,
with respect to, among other things, the resale of the Shares from time to time
at prevailing prices in the over-the-counter market or in privately-negotiated
transactions and has agreed to prepare and file such amendments and supplements
to the Registration Statement as may be necessary to keep the Registration
Statement effective until all Shares offered hereby have been sold pursuant
thereto or until such Shares are no longer, by reason of Rule 144 under the
Securities Act or any other rule of similar effect, required to be registered
for the sale thereof by the Selling Shareholders.
<TABLE>
<CAPTION>
Number of Shares Beneficially Maximum Number of
Owned Prior to Offering (1)(2) Shares Being
Name and Address Number Percent Offered
- ---------------- ------ ------- -----------------
<S> <C> <C> <C>
Abydos & Co. (3) ................................................... 885,000 6.8% 670,000
Franklin Select Series - Small Capital Growth Fund (4) ............. 394,100 3.0% 269,100
SE Banken Fonder AB ................................................ 200,000 1.5% 200,000
The Aries Trust (5) ................................................ 105,000 * 105,000
Franklin Valuemark Annuity Funds - Small Cap
Growth Fund (4) .................................................... 70,900 * 70,900
Aries Domestic Fund, L.P. (5) ...................................... 45,000 * 45,000
Lawrence F. DeGeorge ............................................... 30,000 * 30,000
WPG Life Sciences Funds, L.P. (6) .................................. 30,000 * 30,000
WPG Institutional Life Sciences Fund, L.P. (6) ..................... 20,000 * 20,000
Clarion Partners, LP ................................................ 16,000 * 16,000
1801 E. 9th Street, Suite 510
Cleveland, Ohio 44114
Essex Special Growth Opportunities Fund LP (7) ...................... 12,000 * 12,000
Essex High Technology Fund, L.P. (7) ............................... 8,000 * 8,000
Bear Stearns Securities Corporation f.b.o. EAG
Enterprises LTD (8) ................................................ 5,000 * 5,000
Bear Stearns Securities Corporation f.b.o. Pogue
Capital International Ltd. (8) ..................................... 5,000 * 5,000
Clarion Offshore Fund, Ltd. ........................................ 4,000 * 4,000
c/o Citco Fund Services
Corporate Center
West Bay Road
Leeward One - 2nd Floor
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
British West Indies
Bear Stearns Securities Corporation f.b.o. Closefire Ltd. (8) ...... 2,000 * 2,000
Bear Stearns Securities Corporation f.b.o. Hapna
Foundation (8) ..................................................... 2,000 * 2,000
Bear Stearns Securities Corporation f.b.o. Charles
Kleinow (8) ........................................................ 2,000 * 2,000
Bear Stearns Securities Corporation f.b.o. Niloufar
Pahlavi (8) ........................................................ 2,000 * 2,000
Bear Stearns Securities Corporation f.b.o. Barbara
Tiffany (8) ........................................................ 2,000 * 2,000
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, the persons named in the table have sole voting
and sole investment power with respect to all shares beneficially owned.
(2) Applicable percentage of ownership is calculated pursuant to SEC Rule
13d-3(d)(1).
(3) Certain entities affiliated with Abydos & Co. beneficially own additional
shares of the Company's Common Stock. Such shares are not included in the
share numbers set forth above.
(4) The address for the above named entities is: 777 Mariners Island Blvd.,
San Mateo, California 94404.
(5) The address for the above named entities is: 787 7th Avenue, New York,
New York 10019.
(6) The address for the above named entities is: c/o Weiss, Peck and Greer,
LLC, 1 New York Plaza, New York, New York 10004.
(7) The address for the above named entities is: 125 High Street, 29th Floor,
Boston, Massachusetts 02110.
(8) The address for the above named individuals is Bear Stearns Securities
Corporation, One Metrotech Center North, Brooklyn, New York 11201, Attn:
Mr. Anthony Dejohn, Specialist - Clearing 5th Floor.
-11-
<PAGE> 13
PLAN OF DISTRIBUTION
The Shares offered hereunder may be sold from time to time by the
Selling Shareholders, or by pledgees, donees, transferees or other successors in
interest. Such sales may be made on the Nasdaq National Market or in the
over-the-counter market or otherwise, at prices and on terms then prevailing or
related to the then-current market price, or in negotiated transactions. The
Shares may be sold to or through one or more broker-dealers, acting as agent or
principal, in underwritten offerings, block trades, agency placements, exchange
distributions, brokerage transactions or otherwise, or in any combination of
transactions.
At the time a particular offer of Shares is made, to the extent
required, a supplemental Prospectus will be distributed which will set forth the
number of shares being offered and the terms of the offering including the name
or names of any underwriters, dealers or agents, the purchase price paid by any
underwriter for the Shares purchased from the Selling Shareholders, any
discounts, commissions and other items constituting compensation from the
Selling Shareholders and any discounts, concessions or commissions allowed or
reallowed or paid to dealers.
In connection with any transaction involving the Shares, broker-dealers
or others may receive from the Selling Shareholders, and may in turn pay to
other broker-dealers or others, compensation in the form of commissions,
discounts or concessions in amounts to be negotiated at the time (which
compensation may be in excess of customary commissions). Broker-dealers and any
other persons participating in a distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Act in connection with such
distribution, and any such commissions, discounts or concessions may be deemed
to be underwriting discounts or commissions under the Act.
Any or all of the sales or other transactions involving the Shares
described above, whether effected by the Selling Shareholders, any broker-dealer
or others, may be made pursuant to this prospectus. In addition, any Shares that
qualify for sale pursuant to Rule 144 under the Act may be sold under Rule 144
rather than pursuant to this prospectus.
In order to comply with the securities laws of certain states, if
applicable, the Shares may be sold in such jurisdictions only through registered
or licensed brokers or dealers. In addition, in certain states the Shares may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Shares may not simultaneously engage
in market making activities with respect to DepoTech Common Stock for a period
of two business days prior to the commencement of such distribution. In addition
and without limiting the foregoing, the Selling Shareholders 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 shares of the Shares
by the Selling Shareholders.
All costs associated with this offering, other than fees and expenses
of counsel for a Selling Shareholder and underwriting discounts and commissions
and brokerage commissions and fees, will be paid by DepoTech.
DepoTech and the Selling Shareholders may agree to indemnify certain
persons, including broker-dealers or others, against certain liabilities in
connection with any offering of the Shares, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, San Diego, California.
EXPERTS
The financial statements of DepoTech Corporation appearing in DepoTech
Corporation's Annual Report (Form 10-K) for the year ended December 31, 1995,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
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<PAGE> 14
DEPOTECH CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information............................................... 2
Information Incorporated by Reference............................... 2
The Company......................................................... 3
Risk Factors........................................................ 4
Selling Shareholders................................................ 11
Plan of Distribution................................................ 12
Legal Matters....................................................... 12
Experts............................................................. 12
</TABLE>
<PAGE> 15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various costs and expenses to be paid by
the Company with respect to the sale and distribution of the securities being
registered. All of the amounts shown are estimates except the Securities and
Exchange Commission registration.
<TABLE>
<S> <C>
SEC Registration Fee........................... $ 6,137
Legal Fees and Expenses*....................... 25,000
Accounting Fees and Expenses*.................. 7,000
Miscellaneous*................................. 1,863
-------
Total.................................. $40,000
</TABLE>
- -----------------
*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) Section 317 of the California General Corporation Law provides for the
indemnification of officers and directors of the Company against expenses,
judgments, fines and amounts paid in settlement under certain conditions and
subject to certain limitations.
(b) Article VI of the Bylaws of the Company provides that the Company shall
have power to indemnify any person who is or was an agent of the Company as
provided in Section 317 of the California General Corporation Law. The rights to
indemnity thereunder continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of the person. In addition, expenses incurred by a
director or officer in defending a civil or criminal action, suit or proceeding
by reason of the fact that he or she is or was a director or officer of the
Company (or was serving at the Company's request as a director or officer of
another corporation) shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
Company as authorized by the relevant section of the California General
Corporation Law.
(c) Article IV of the Company's Articles of Incorporation provides that the
liability of the directors of the Company for monetary damages shall be
eliminated to the fullest extent permissible under California law. Accordingly,
a director will not be liable for monetary damages for breach of duty to the
Company or its shareholders in any action brought by or in the right of the
Company. However, a director remains liable to the extent required by law (i)
for acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law, (ii) for acts or omissions that a director believes
to be contrary to the best interests of the Company or its shareholders or that
involve the absence of good faith on the part of the director, (iii) for any
transaction from which a director derived an improper personal benefit, (iv) for
acts or omissions that show a reckless disregard for the director's duty to the
Company or its shareholders in circumstances in which the director was aware, or
should have been aware, in the ordinary course of performing a director's
duties, of a risk of serious injury to the Company or its shareholders, (v) for
acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the Company or its
shareholders, (vi) for any act or omission occurring prior to the date when the
exculpation provision became effective and (vii) for any act or omission as an
officer, notwithstanding that the officer is also a director or that his or her
actions, if negligent or improper, have been ratified by the directors. The
effect of the provisions in the Articles of Incorporation is to eliminate the
rights of the Company and its shareholders (through shareholders' derivative
II-1
<PAGE> 16
suits on behalf of the Company) to recover monetary damages against a director
for breach of duty as a director, including breaches resulting from negligent
behavior in the context of transactions involving a change of control of the
Company or otherwise, except in the situations described in clauses (i) through
(vii) above. These provisions will not alter the liability of directors under
federal securities laws.
(d) Pursuant to authorization provided under the Articles of Incorporation,
the Company has entered into indemnification agreements with each of its
directors and officers. Generally, the indemnification agreements attempt to
provide the maximum protection permitted by California law as it may be amended
from time to time. Moreover, the indemnification agreements provide for certain
additional indemnification. Under such additional indemnification provisions,
however, an individual will not receive indemnification for judgments,
settlements or expenses if he or she is found liable to the Company (except to
the extent the court determines he or she is fairly and reasonably entitled to
indemnity for expenses), for settlements not approved by the Company or for
settlements and expenses if the settlement is not approved by the court. The
indemnification agreements provide for the Company to advance to the individual
any and all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding. In order to
receive an advance of expenses, the individual must submit to the Company copies
of invoices presented to him or her for such expenses. Also, the individual must
repay such advances upon a final judicial decision that he or she is not
entitled to indemnification. The Company's Bylaws contain a provision of similar
effect relating to advancement of expenses to a director or officer, subject to
an undertaking to repay if it is ultimately determined that indemnification is
unavailable.
(e) There is directors and officers liability insurance now in effect which
insures directors and officers of the Company.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER
<S> <C>
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit
5.1).
24.1 Power of Attorney (see pages II-4 and II-5).
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
II-2
<PAGE> 17
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefor, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the question has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus 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.
II-3
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on the 19th day of
November, 1996.
DEPOTECH CORPORATION
By /s/ Edward L. Erickson
---------------------------------
Edward L. Erickson, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Edward L. Erickson and Dana S. McGowan and each
of them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Edward L. Erickson President, Chief Executive Officer and November 19, 1996
- -----------------------------------
(Edward L. Erickson) Director
(Chief Executive Officer)
/s/ Dana S. McGowan Director of Finance and Administration, November 19, 1996
- -----------------------------------
(Dana S. McGowan) Chief Financial Officer and Treasurer
(Principal Financial Officer and Accounting
Officer)
/s/ Roger C. Davisson Director November 19, 1996
- -----------------------------------
(Roger C. Davisson)
/s/ Jean Deleage Director November 19, 1996
- -----------------------------------
(Jean Deleage)
/s/ George W. Dunbar, Jr. Director November 19, 1996
- -----------------------------------
(George W. Dunbar, Jr.)
/s/ Stephen B. Howell Director November 19, 1996
- -----------------------------------
(Stephen B. Howell)
/s/ Fred A. Middleton Chairman of the Board, Director November 19, 1996
- -----------------------------------
(Fred A. Middleton)
/s/ Peter Preuss Director November 19, 1996
- -----------------------------------
(Peter Preuss)
/s/ Pieter Strijkert Director November 19, 1996
- -----------------------------------
(Pieter Strijkert)
</TABLE>
II-4
<PAGE> 19
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-3
UNDER
SECURITIES ACT OF 1933
DEPOTECH CORPORATION
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
</TABLE>
<PAGE> 1
EXHIBIT 5.1
OPINION OF BROBECK, PHLEGER & HARRISON LLP
November 18, 1996
DepoTech Corporation
10450 Science Center Drive
San Diego, California 92121
Ladies and Gentlemen:
We have acted as counsel to DepoTech Corporation, a California
corporation (the "Company"), in connection with the registration of 1,500,000
shares of Common Stock (the "Common Stock"), as described in the Company's
Registration Statement on Form S-3 ("Registration Statement"), filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
We are familiar with the corporate proceedings taken by the Company in
connection with the proposed issuance and sale of the Common Stock. It is our
opinion that the Common Stock, when, as and if issued in accordance with the
terms and conditions of those certain Purchase Agreements between the Company
and the purchasers thereunder, will be duly authorized, validly issued, fully
paid and nonassessable.
We consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus which is part of the Registration Statement.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
EXHIBIT 5.1
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of DepoTech
Corporation for the registration of 1,500,000 shares of its common stock and to
the incorporation by reference therein of our report dated February 16 1996,
with respect to the financial statements of DepoTech Corporation included in
its Annual Report (Form 10-K) for the year ended December 31, 1995, filed with
the Securities and Exchange Commission.
ERNST & YOUNG LLP
San Diego, California
November 15, 1996
