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This filing is made pursuant
to Rule 424(b)(1)
under the Securities Act of
1933 in connection with
Registration No. 333-16371
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 January 3, 1997, the last sale
price of DepoTech Common Stock as reported on the Nasdaq National Market was
$16.125 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.
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COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" ON PAGES 6 TO 13.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is January 3, 1997.
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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
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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 drug delivery technology. The Company does not engage in the
discovery of new chemical entities. 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. The
breadth of the Company's technology is illustrated by its ability to encapsulate
and control the release of a wide spectrum of water-soluble and water-stable
drugs, including small molecules, proteins, peptides and various forms of
genetic material. The technology allows for injection of sustained release forms
of these pharmaceutical products via several routes including under the skin,
within muscle tissue, into cerebrospinal fluid, within joints and within the
abdominal cavity. These features allow DepoTech to develop new formulations of
products in a variety of therapeutic areas. The Company is currently developing
products in oncology, anti-infectives, pain management and rheumatology.
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 neoplastic meningitis ("NM"), the
spread of cancers to the soft tissue membrane of the brain and spinal cord
(known as the meninges) due to cancers arising from either solid tumors,
leukemia (a form of cancer involving white blood cells) or lymphoma (a form of
cancer involving tissues of the lymphatic system). The Company is currently
carrying out clinical trials of DepoCyt for the treatment of NM arising from
each of these types of cancer. In August 1995, DepoTech announced interim
results of the solid tumor portion of the pivotal clinical trial. In May 1996,
enrollment of solid tumor patients into the trial was completed and,
subsequently, the Company announced data from the solid tumor trial which
compared DepoCyt with the standard therapy (methotrexate). 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 commenced the filing of a new drug
application ("NDA") for the treatment of NM arising from solid tumors in the
fourth quarter of 1996. The Company plans to complete the filing of the NDA as
soon as practicable by submitting the remaining sections of the NDA as well as
safety and efficacy data on available lymphoma and leukemia patients. The
Company intends to continue the pivotal Phase III trial of DepoCyt for patients
with lymphoma and leukemia and to submit supplements to the NDA for the
treatment of these diseases.
The Company estimates, based on market survey data, that the current
treated market for NM is approximately 20,000 patients per year in the United
States. Based on data derived from autopsies, the Company estimates that
approximately 65,000 patients per year in the United States develop NM.
In addition to DepoCyt, the Company is: (i) developing DepoAmikacin, a
DepoFoam formulation of amikacin, a potent, broad-spectrum antibiotic for the
treatment and prevention of bacterial infections;
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(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 undisclosed indications. 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 scale-up of the
manufacturing process to a scale appropriate to provide clinical trial materials
of DepoMorphine. An investigational new drug application ("IND") was filed with
the United States Food and Drug Administration ("FDA") in December 1996 to begin
clinical studies to manage acute post-operative pain with this DepoMorphine
formulation. The Company and Chiron are performing various pre-clinical studies
on D0601 and conducting various feasibility studies on D0602. DepoTech is also
evaluating DepoFoam formulations of several additional compounds which may offer
significant medical benefits and substantial market potential, including
anti-infectives, 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 contractual arrangement provides for the future
development of additional DepoFoam formulations of other Chiron proprietary
products, including certain therapeutic proteins, vaccines, and gene therapy
products. The contractual arrangement (the "Agreement") between DepoTech and
Chiron grants Chiron rights to market and sell DepoCyt in the United States,
Canada and Europe. DepoTech will manufacture DepoCyt, Chiron will market, sell,
and distribute DepoCyt, and the parties will share profits equally. Chiron will
make payments to DepoTech upon filing of an NDA and upon achievement of certain
milestones in the European development of DepoCyt. Chiron also has a right of
first refusal to obtain a license to alternate DepoFoam formulations of
cytarabine under terms and conditions to be negotiated in the future. Following
an evaluation of the markets and certain other factors, the Company and Chiron
mutually agreed not to further develop any additional generic cancer compounds.
The Agreement also provides for the joint development of DepoFoam
formulations of certain compounds proprietary to Chiron ("Chiron Products").
Feasibility studies, including formulation development and in vivo animal
studies on IGF-1 and IL-2 have been completed. In addition, Chiron and the
Company have initiated another feasibility study on a second formulation of
IGF-1 for undisclosed indications in the second half of 1996. In 1997 and
thereafter, Chiron must fund one feasibility program for a Chiron Product per
year or lose its option to develop DepoFoam formulations of additional Chiron
proprietary compounds. The Agreement provides that Chiron will pay DepoTech for
the Company's feasibility efforts, and that Chiron will be responsible for all
development costs thereafter. The Agreement also provides for payments by Chiron
to DepoTech upon achievement of certain development milestones with regard to
Chiron Products. Chiron will have exclusive, worldwide distribution rights to
all Chiron Products and will manufacture the bulk unencapsulated drug. DepoTech
will then encapsulate the bulk drug in DepoFoam creating the Chiron Product, and
Chiron will market, sell and distribute the Chiron Products. Chiron will
compensate DepoTech based on both manufacturing costs, including a manufacturing
profit, and a percent of Chiron's sales of the Chiron Products.
Both DepoTech 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 Chiron Product with a
limited amount of advance notice.
In connection with the Agreement, Chiron made a $2.5 million equity
investment in the Company.
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
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, including risks associated with determining the efficacy and safety
of the underlying drug.
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Since 1995, the Company has manufactured clinical material in a 10,000
square foot manufacturing plant built for this purpose. This manufacturing plant
has completed validation to comply with current Good Manufacturing Practices
("cGMP") regulations for the manufacture of pharmaceuticals and was inspected by
the California Department of Health Services Food and Drug Branch and received a
license from the State of California to manufacture drugs. In August 1995, the
Company completed construction of a 4,400 square foot addition to the plant
which allows for the manufacture of product at 10 times the scale used for
clinical trial production. This addition is intended to provide the capacity
currently anticipated for production of commercial shipments of DepoCyt. This
manufacturing plant is in the final phases of validation in preparation for a
pre-approval inspection from the FDA for the manufacture of DepoCyt. The Company
also completed construction and occupied an 82,000 square foot facility to house
its administrative, research and development and future manufacturing activities
in September 1995.
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. 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 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.
As with all drugs subject to accelerated approval, the FDA requested that
the Company conduct a Phase IV clinical trial. The trial is in process. There
can be no assurance that the data from the solid tumor arm of the DepoCyt Phase
III clinical trial 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
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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. 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. 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
The Company has no experience manufacturing products for commercial
purposes. The Company has scaled up its manufacturing operations to meet
commercial requirements for DepoCyt but these operations have not yet been
inspected by the FDA, a necessary step in the regulatory approval process to
market this product. For all other products, the Company will need to
significantly scale-up its current manufacturing operations and comply with
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
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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 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. To date the Company has retained the rights to
formulate and manufacture its products and intends in the future 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.
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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 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
9
<PAGE> 10
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 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
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<PAGE> 11
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.
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. There can be no assurance that the Company will be
successful in retaining required personnel 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
11
<PAGE> 12
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. The risk of
accidental contamination or injury from 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.
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<PAGE> 13
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.
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<PAGE> 14
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 had a material relationship with the
Company within the past three years except 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 notification
to the Company of the Securities and Exchange Commission's willingness to
declare the Registration Statement of which this Prospectus forms a part
effective. 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
Purchase Agreement contained representations and warranties as to each Selling
Shareholder's status as an "accredited investor" as such term is defined in Rule
501 promulgated under the Securities Act. Vector Securities International, Inc.,
the placement agent, will be paid a fee of $1,012,500 in connection with the
sale of Common Stock pursuant to the Purchase Agreement. 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.
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<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
OWNED PRIOR TO
OFFERING(1)(2) MAXIMUM NUMBER OF
------------------- 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. The address for the above named entity is: 50
California Street, Suite 2700, San Francisco, California 94111.
(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.
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<PAGE> 16
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.
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<PAGE> 17
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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DEPOTECH CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................................................................. 2
Information Incorporated by Reference................................................. 2
The Company........................................................................... 4
Risk Factors.......................................................................... 6
Selling Shareholders.................................................................. 14
Plan of Distribution.................................................................. 16
Legal Matters......................................................................... 16
Experts............................................................................... 17
</TABLE>
