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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
NEOPHARM, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 51-0327886
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
225 East Deerpath, Suite 250, Lake Forest, Illinois 60045
(Address of Principal Executive Offices)
NeoPharm, Inc. 1995 Stock Plan
NeoPharm, Inc. 1995 Director Option Plan
(Full Title of the Plan)
William C. Grovier, President
NEOPHARM, INC.
225 East Deerpath, Suite 250
Lake Forest, Illinois 60045
(847) 295-8678
(Name, address, including zip code, and telephone
number, including area code, of Agent For Service)
with copies to:
Stephen E. Goodman
Schwartz & Freeman
401 North Michigan Avenue, Suite 1900
Chicago, Illinois 60611
(312) 222-6657
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED SHARE PRICE FEE
---------------------- ------------ ------------------ ------------------ ------------
<S> <C> <C> <C> <C>
Stock Options 500,000 (1) -- -- (2)
Common Stock, par 500,000 (3) $ 12.00 (4) $ 6,000,000 $ 2,068.97
value $.000429 per
share
Total 500,000(3) $ 12.00 (4) $ 6,000,000 $ 2,068.97
</TABLE>
See footnotes on next page.
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(1) Represents 450,000 options to be granted pursuant to the NeoPharm, Inc.
1995 Stock Plan (the "Plan") and 50,000 options to be granted pursuant
to the NeoPharm, Inc. 1995 Director Option Plan (the "Director Plan")
(The "Plan" and the "Director Plan" are collectively referred to as the
"Plans").
(2) No registration fee is required pursuant to Rule 457(h)(2).
(3) Includes an indeterminate number of shares of Common Stock which may
become issuable pursuant to the antidilution provisions of the Plans.
(4) Calculated solely for the purpose of determining the registration fee.
Pursuant to Rule 457(c) the registration fee based upon the average of the
high and low prices for the Common Stock on the National Association of
Securities Dealers, Inc. Automated Quotation System on May 10, 1996.
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PROSPECTUS
NEOPHARM, INC.
500,000 Shares Common Stock
$0.000429 par value
This Prospectus has been prepared by NeoPharm, Inc. (the "Company")
for use in connection with the resale of shares of Common Stock, $0.000429 par
value, of the Company, which shares may be acquired by "affiliates" of the
Company (as defined in Rule 405 under the Securities Act of 1933, as amended)
upon the exercise of incentive stock options and nonqualified stock options
under the NeoPharm, Inc. 1995 Stock Plan (the "Plan") and the NeoPharm, Inc.
1995 Director Option Plan (the "Director Plan"). The Plan and the Director
Plan are collectively referred to herein as the "Plans". See "DESCRIPTION OF
SECURITIES" and "SELLING STOCKHOLDERS.'" The maximum number of shares which may
be offered or sold hereunder is subject to adjustment in the event of stock
splits, or dividends, recapitalization and other similar changes affecting the
Common Stock.
The Company will not receive any of the proceeds from the sale of the
Common Stock offered hereby.
______________________________
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 May 14, 1996
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NO DEALER, SALESPERSON OR OTHER 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 CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, files reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information can
be inspected and copied at the public reference facility maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices located at 75 Park Place, New York, New York
10007 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60621-25114. Copies of such materials can be obtained in
person from the Public Reference Section of the Commission at its principal
office located at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated
herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
(b) All other reports filed pursuant to Section 13 or 15(d) of the
Exchange Act, since May 10, 1996.
(c) The description of the Common Stock which is contained in the
Company's Registration Statement on Form 10 filed under the
Exchange Act, including any amendments or reports filed for
the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15 (d) of the Exchange Act, prior to termination of the
offering, shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of the filing of such documents.
Any statement contained in a document, all or a portion of which is
incorporated by reference herein, shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained or
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, including any
beneficial owner, to whom this Prospectus is delivered a copy of any or all of
such documents which are incorporated herein by reference (other than exhibits
to such documents unless such exhibits are specifically incorporated by
reference into the documents that this Prospectus incorporates). Written or
oral requests for copies should be directed to NeoPharm, Inc., 225 East
Deerpath, Suite 250, Lake Forest, Illinois 60045, Attention: Vice President -
Finance.
THE COMPANY
NeoPharm, Inc. is a pharmaceutical company engaged in the research and
development of drugs for the diagnosis and treatment of various forms of
cancer. Phase II clinical trails have been completed by various parties under
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the sponsorship of the National Cancer Institute (the "NCI"), a unit of the
national Institutes of Health, with respect to the Company's two primary drugs,
BUdR (Broxuridine) and IUdR (Idoxuridine). In clinical trials involving brain
cancer patients, patients receiving BUdR together with radiation therapy
exhibited increased survival times as compared to patients receiving radiation
therapy alone. Preliminary results of additional studies indicate that BUdR
and IUdR may enhance the effectiveness of radiation therapy for other cancers,
including cervical and gynecological cancers, soft tissue sarcomas, and head
and neck cancers. BUdR and IUdR are also being used for diagnostic
applications as indicators of cancer cell proliferation activity. The Company
anticipates filing new drug applications ("NDA") with the United States Food
and Drug Administration ("FDA") for BUdR in a diagnostic application, for IUdR
in a diagnostic application and for BUdR in the treatment of brain cancer
during 1996. The Company is located at 225 East Deerpath, Suite 250, Lake
Forest, Illinois, 60045, telephone number (847) 295-8678.
RISK FACTORS
An investment in the Securities offered hereby involves a high degree
of risk. In addition to the other information contained in this Prospectus,
the following risk factors should be considered carefully in evaluating the
Company and its business before purchasing the Securities offered hereby.
Prospective investors should be in a position to risk the loss of their entire
investment.
EARLY STAGES OF DEVELOPMENT; NO OPERATING HISTORY, REVENUES OR ASSURANCE OF
PROFITABILITY; WORKING CAPITAL DEFICIT
The Company is at an early stage of development and is subject to all
business risks associated with a new enterprise. At September 30, 1995, the
Company had an accumulated deficit since inception of approximately $4.1
million and a working capital deficit of $4.0 million. The Company anticipates
that it will continue to incur substantial additional operating losses for at
least the next several years and expects cumulative losses to increase as the
Company's research and development efforts expand. The Company has had no
revenues to date, whether from product sales, license fees or research funding,
and there can be no assurance as to when or whether it will be able to develop
sources of revenue or that its operations will become profitable, even if it is
able to commercialize any products. The Company has only a limited history of
operations consisting primarily of development of its products and sponsorship
of research and clinical trials.
NO ASSURANCE OF SUCCESSFUL PRODUCT DEVELOPMENT
The Company's research and development programs are at various stages
of development, ranging from the preclinical stage to Phase I, Phase II and
Phase III clinical trials. Substantial additional research and development
will be necessary in order for the company to develop products based on the
Company's therapeutic and diagnostic agents, and there can be no assurance that
the Company's research and development will lead to development of products
that are shown to be safe and effective in clinical trials and are commercially
viable. In addition to further research and development, the Company's
proposed products will require clinical testing, regulatory approval and
substantial additional investment prior to commercialization. There can be no
assurance that any such products will be successfully developed, prove to be
safe and efficacious in clinical trials, meet applicable regulatory standards,
be capable of being produced in commercial quantities at acceptable costs, be
eligible for third party reimbursement from governmental or private insurers,
be successfully marketed or achieve market acceptance. Further, the Company's
products may prove to have undesirable or unintended side effects that may
prevent or limit their commercial use. The Company may find at any stage of
this complex process, that products that appeared promising in preclinical
studies or Phase I and Phase II clinical trials do not demonstrate efficacy in
larger-scale, Phase III clinical trials and do not receive regulatory
approvals. Accordingly, any product development program undertaken by the
Company may be curtailed, redirected or eliminated at any time. In addition,
there have been delays in the Company's testing and development schedules to
date and there can be no assurances that the Company's expected testing and
development schedules will be met which could have a material adverse effect on
the Company's financial condition and results of operation.
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DEPENDENCE ON COLLABORATIVE RELATIONSHIPS
The Company's BUdR and IUdR products are the subject of a Cooperative
Research and Development Agreement ("CRADA") with the NCI. Under the terms of
the CRADA, NeoPharm has exclusive rights to the development of these compounds
with the NCI and the data generated with them in collaboration with the NCI
during the term of the CRADA. The CRADA provides that the Company may sponsor
clinical studies, pay for the cost of producing BUdR and IUdR used in clinical
trials and, to the extent supported by clinical results, file appropriate NDAs
with the FDA. The term of the CRADA extends through May 1, 1997, although the
agreement may be terminated by either party upon 60 days' advance notice
without cause; provided that in the event of such termination all clinical
trials and protocols that have been schedules, initiated, or otherwise included
under the CRADA prior to the notification of termination shall be completed
unless otherwise mutually agreed. All provisions of the CRADA shall continue
in effect for such clinical trials and protocols. Because BUdR and IUdR are
not covered by patents or patent applications, the Company's exclusive access
to the clinical data collected by NCI and its investigators and its other
rights under the CRADA represent the principal competitive advantage for the
Company in the development and eventual commercialization of BUdR and IUdR.
Furthermore, the collaborative nature of the Company's relationship with the
NCI is of significant importance for the conduct of clinical trials.
Accordingly, termination of the CRADA would be materially adverse to the
Company's BUdR and IUdR program, could require curtailment or termination of
such program and could therefore have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company has entered into license and sponsored research agreements
with Georgetown University ("Georgetown") relating to liposome encapsulated
doxorubicin ("LED"), liposome encapsulated vincristine ("LEVCR"), liposome
encapsulated taxol ("LET"), and liposome encapsulated antisense
oligodeoxynucleotides ("LEAON"). Under these agreements, the Company is
obligated to sponsor certain research activities at Georgetown relating to
liposome encapsulating chemotherapeutic agents. The Company will also be
obligated to pay Georgetown royalties on commercial sales of the liposome
products. In addition, upon completion of this Offering, the Company will be
obliged to make certain advance royalty payments to Georgetown, which payments
will be credited against future royalties payable under the Company's
agreements with Georgetown. In the event the Company were unable to
successfully commercialize its liposome products, it would be unable to recoup
these advance royalty payments. The licenses are generally not terminable by
Georgetown, except in the event of a default by the Company. Any such default
and resulting termination of the licenses would be materially adverse to the
Company's liposome program, could require curtailment or termination of such
program and could therefore have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company may seek additional collaborative relationships in certain
areas, particularly in situations where the Company believes that the clinical
testing, marketing, manufacturing and other resources of pharmaceutical
collaborators will enable it to access more effectively particular product or
geographic markets. The Company's inability to contract, on acceptable terms
and with qualified suppliers, for the manufacture of any products which it
develops, or delays or difficulties in its relationships with collaborators,
suppliers or manufacturers, would have a material adverse effect on the
Company.
NEED FOR SUBSTANTIAL ADDITIONAL FUNDS; FIXED COMMITMENTS
The Company will require substantial funds to conduct research and
development, preclinical and clinical testing and to manufacture and market its
proposed products. The Company's cash requirements may vary materially from
those now planned because of results of research and development, results of
clinical testing, relationships with possible strategic partners, changes in
the focus and direction of the Company's research and development programs,
competitive and technological advances, the FDA regulatory process and other
factors. The net proceeds of this Offering may not be sufficient to fund the
Company's operations through the commercialization of its first product;
therefore, The Company is likely to need to raise additional funds in order to
fund the Company's operations through the commercialization of its first
product.
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The Company may seek to satisfy its future funding requirements
through public or private offerings of securities, with collaborative or other
arrangements with corporate partners or from other sources. Additional
financing may not be available when needed or on terms acceptable to the
Company. If adequate financing is not available, the Company may be required
to delay, scale back or eliminate certain of its research and development
programs, to relinquish rights to certain of its technologies, therapeutic and
diagnostic agents, product candidates or products, or to license third parties
to commercialize products or technologies that the Company would otherwise seek
to develop itself. To the extent the Company raises additional capital by
issuing equity securities, ownership dilution to the investors in this Offering
will result.
The Company's fixed commitments, including consulting fees for
consultants, rent, payments under license agreements and other contractual
commitments are substantial and are likely to increase as additional agreements
are entered into and additional personnel are retained.
NO MANUFACTURING, MARKETING OR SALES
The Company does not have internal manufacturing, marketing or sales
resources. In view of its early stage of development and limited resources,
the Company does not anticipate spending a material portion of the net proceeds
of this Offering to acquire resources and develop capabilities in these areas.
NO CLINICAL TESTING OR REGULATORY CAPABILITY
If the Company should succeed in developing compounds with commercial
potential, it will be necessary for the Company to hire additional personnel
skilled in the clinical testing and the regulatory compliance processes. There
can be no assurance that the Company will successfully complete clinical
testing of, obtain regulatory approval for, manufacture or market any product
it may develop, either independently or pursuant to manufacturing or marketing
arrangements, if any, with third parties. Should the Company seek to enter
into third- party arrangements, there can be no assurance that such
arrangements can be successfully negotiated on commercially reasonable terms or
that any such arrangements, if entered into, will be successful.
UNCERTAIN ABILITY TO PROTECT PATENTS AND PROPRIETARY INFORMATION
Because of the substantial length of time and expense associated with
bringing new products through development and regulatory approval to the
marketplace, the pharmaceutical industry places considerable importance on
patent and trade secret protection for new technologies, products and
processes. BUdR and IUdR are, however, not currently the subject of patents or
patent applications, and the Company does not expect to obtain patent
protection for its BUdR and IUdR products. The lack of patent protection could
hare a material adverse effect on the Company's operations. The Company has
obtained licenses to three United States patents and two United States patent
applications. These patents and patent applications relate primarily to the
Company's proposed liposome products. No assurance can be given that any
patents under pending patent applications or any future patent applications
will be issued. Furthermore, there can be no assurance that the scope of any
patent protection will exclude competitors or provide competitive advantages to
the Company, that any of the Company's patents that may be issued will be held
valid if subsequently challenged or that others, including competitors or
current or former employers of the Company's employees, advisors and
consultants, will not claim rights in or ownership to the patents and other
proprietary rights held by the Company. In addition, there can be no assurance
that others will not independently develop substantially equivalent proprietary
information or otherwise obtain access to the Company's know-how or that others
may not be issued patents that may require licensing and the payment of
significant fees or royalties by the Company for the pursuit of its proposed
business.
The pharmaceutical industry has experienced extensive litigation
regarding patent and other intellectual property rights. Accordingly, the
company could incur substantial costs in defending itself in suits that may be
brought against the company claiming infringement of the patent rights of
others or in asserting the Company's patent rights in a suit against another
party. The Company may also be required to participate in interference
proceedings declared by
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the United States Patent and Trademark Office ("USPTO") for the purpose of
determining the priority of inventions in connection with the patent
applications of the Company or other parties. Adverse determinations in
litigation or interference proceedings could require the Company to seek
licenses (which may not be available on commercially reasonable terms) or
subject the Company to significant liabilities to third parties, and could
therefore have a material adverse effect on the Company.
The Company also relies on trade secrets, know-how and technological
advancement to maintain its competitive position. Although the Company uses
confidentiality agreements and employee proprietary information and invention
assignment agreements to protect its trade secrets and other unpatented
know-how, these agreements may be breached by the other party thereto or may
otherwise be of limited effectiveness or enforceability.
DEPENDENCE ON QUALIFIED PERSONNEL
Because of the specialized scientific nature of the Company's
business, the Company is highly dependent upon its ability to attract and
retain qualified scientific, technical and managerial personnel. The Company
does not have employment agreements with its key personnel. The loss of the
Company's Chief Executive Office, Dr. William C. Grovier, or its Chief
Scientific Officer, Dr. Aquilur Rahman, would be detrimental to the Company.
The Company maintains insurance for $1 million on the lives of each of these
individuals. The proceeds of such insurance may not be sufficient to
compensate the Company for the loss of the services of such individuals. There
is intense competition for qualified personnel in the pharmaceutical field, and
there can be no assurance that the Company will be able to continue to attract
and retain qualified personnel necessary for the development of its business.
The loss of the services of existing personnel as well as the failure to
recruit additional key scientific and technical personnel in a timely manner
would be detrimental to the Company's research and development programs and to
its business.
RELATIONSHIPS WITH OTHER ENTITIES; CONFLICTS OF INTEREST
Messrs. John N. Kapoor and Mahendra G. Shah, who hold executive
positions with the Company, are associated with EJ Financial Enterprises, Inc.,
a healthcare investment firm ("EJ Financial"). On July 1, 1994, the Company
entered into a Consulting Agreement with EJ Financial. The Consulting
Agreement provides that the Company will pay EJ Financial $125,000 per year
(paid quarterly) for certain business and financial services, including having
certain officers of EJ Financial serve as officers of the Company. EJ
Financial is involved in the management of healthcare companies in various
fields, and Messrs. Kapoor and Shah are involved in various capacities with the
management and operation of these companies. The John N. Kapoor Trust, the
beneficiary of which is Dr. John Kapoor, is a principal shareholder of each of
these companies. Accordingly, although such individuals will devote such
amount of their working hours as they reasonably deem necessary to the business
of the Company, such individuals do not devote all of their working hours to
the Company's affairs. In addition, certain companies with which EJ Financial
is involved are in the oncology field. Although these companies are pursuing
different therapeutic approaches for the treatment of cancer, discoveries made
by one or more of these companies could render the Company's products less
competitive or obsolete.
David E. Riggs, the Chief Financial Officer of the Company, is the
Senior Vice President, Chief Financial Officer, Secretary and Treasurer of
Unimed Pharmaceuticals, Inc. ("Unimed"), a developer and marketer of
pharmaceuticals for cancer, endocrine disorders and infectious diseases. Mr.
Riggs will continue to be employed by Unimed while serving as Chief Financial
Officer of the Company. John Kapoor, the Company's Chairman, owns nonqualified
options to purchase 200,000 shares of Unimed Common Stock; the Dr. John N.
Kapoor Trust owns 1,667,429 shares of Unimed Common Stock and a limited
partnership created for the benefit of Dr. Kapoor's family members of which Dr.
Kapoor is the general partner, owns 505,000 shares of Unimed Common Stock.
These persons and entities together own approximately 28.2% of Unimed Common
Stock if such options and warrants were fully exercised. The Dr. John N.
Kapoor Trust has the right to nominate persons to the Board of Directors of
Unimed in certain circumstances. Currently, Dr. Kapoor is the Trusts's
representative on Unimed's Board of Directors. Unimed is involved in the
oncology field, and although Unimed and the Company are pursuing different
therapeutic approaches
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for the treatment of cancer, discoveries made by Unimed could render the
Company's products less competitive or obsolete.
Dr. Aquilur Rahman, as well as the members of the Company's Scientific
Advisory Board, are employed on a full-time basis by academic or research
institutions. These individuals serve as consultants to the Company, and
certain Scientific Advisory Board Members have consulting relationships with
other companies. Accordingly, these individuals will be able to devote only a
portion of their time to the Company's business and research activities. In
addition, except for work performed specifically for and at the direction of
the Company, the inventions or processes discovered by the Company's
consultants and scientific advisors will not become the property of the Company
but will be the intellectual property of their institutions. In such event, it
would be necessary for the Company to obtain licenses to such technology from
such institutions. In addition, invention assignment agreements executed by
Scientific Advisory Board members and consultants in connection with their
relationships with the Company may be subject to the rights of their primary
employers or other third parties with whom such individuals have consulting
relationships.
COMPETITION
There are many companies, both publicly and privately held, including
well-known pharmaceutical companies, as well as academia and other research
institutions, engaged in developing pharmaceutical and biologically-derived
products for the treatment of cancer. The Company, however, does not have and
does not expect to obtain patent protection for its proposed BUdR and IUdR
products. In addition, many of the Company's potential competitors have
substantially greater capital, research and development capabilities and human
resources than the Company and represent significant competition for the
Company. Furthermore, many of these competitors have significantly greater
experience than the Company in undertaking preclinical testing and clinical
trials of new pharmaceutical products and obtaining FDA and other regulatory
approvals. If the Company is permitted to commence commercial sales of any
product, it will also be competing with companies that have greater resources
and experience in manufacturing, marketing and sales. The Company's
competitors may succeed in developing products that are more effective, less
costly, or have a better side effect profile than any that may be developed by
the Company, and such competitors may also prove to be more successful than the
Company in manufacturing, marketing and sales. Competitive developments could
render the Company's proposed products noncompetitive or obsolete.
TECHNOLOGICAL CHANGES AND UNCERTAINTY
The Company is engaged in the pharmaceutical field which is
characterized by extensive research efforts and rapid technological progress.
New developments in oncology, cancer therapy, medicinal pharmacology and other
fields arc expected to continue at a rapid pace in both industry and academia.
There can be no assurance that research and discoveries by others will not
render some or all of the Company's proposed programs or products
noncompetitive or obsolete.
The Company's business strategy is subject to the risks inherent in
the development of new products using new technologies and approaches. There
can be no assurance that unforeseen problems will not develop with these
technologies or applications, that the Company will be able to address
successfully technological challenges it encounters in its research and
development programs, or that commercially feasible products will ultimately be
developed by The Company.
NO ASSURANCE OF FDA APPROVAL; GOVERNMENT REGULATION
The FDA and comparable agencies in foreign countries impose
substantial requirements on the introduction of diagnostic and therapeutic
pharmaceutical products through lengthy and detailed laboratory and clinical
testing procedures and other costly and time consuming procedures.
Satisfaction of these requirements typically takes a number of years and varies
substantially based upon the type, complexity and novelty of the
pharmaceutical. In general, the FDA approval process for pharmaceuticals
involves the submission of an IND application following preclinical studies,
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clinical trials in humans to demonstrate the safety and efficacy of the product
under the protocols set forth in the IND, and submission of preclinical and
clinical data as well as other information to the FDA in an NDA. The conduct
of clinical trials will require substantial time and expense, and there can be
no assurance that the results of such tests will be sufficient to support the
submissions or the approval of an NDA. Accordingly, there can be no assurance
that FDA or other regulatory approval for any products developed by the Company
will be granted on a timely basis or at all. There can be no assurance that
the Company will have sufficient resources to complete the required regulatory
review process or that the Company could overcome the inability to obtain or
delays in obtaining such approvals. The failure of the Company to receive FDA
approval for its products under development would preclude the Company from
marketing and selling its products in the United States. Therefore failure to
receive such FDA approval would have a material adverse effect on the business,
financial condition and results of operations of the Company, and would likely
require the Company to cease operations.
The production and marketing of the Company's proposed products, as
well as its ongoing research and development activities, are also subject to
regulation by governmental agencies of the United States and other countries.
The effect of government regulation may be to delay marketing of the Company's
products for a considerable period of time, to impose costly procedures upon
the Company's activities and to furnish a competitive advantage to larger
companies that compete with the Company. Any delay in obtaining, or failure to
obtain, FDA or other necessary regulatory approvals would adversely affect the
marketing of the Company's products and the ability to generate product
revenue. In addition, the marketing and manufacturing of pharmaceuticals are
subject to continuing FDA review and surveillance and failure to comply with
regulations or discovery of previously unknown problems can result in FDA
action against the product or the manufacturer, including fines, recalls,
product seizures, and suspension or withdrawal of previously granted regulatory
approvals. Furthermore, government regulation may increase at any time,
creating additional hurdles for the Company. The extent of potential adverse
government regulation which might arise from future legislation or
administrative action cannot be predicted.
UNCERTAIN AVAILABILITY OF HEALTH CARE REIMBURSEMENT, HEALTH CARE REFORM
The Company's ability to commercialize human therapeutic products may
depend in part on the extent to which reimbursement for the costs of such
products and related treatments will be available from government health
administration authorities, private health insurers and others. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products. There can be no assurance of the availability of adequate
third-party insurance reimbursement coverage that enables the Company to
establish and maintain price levels sufficient for realization of an
appropriate return on its investment in developing new therapies. Government
and other third-party payers are increasingly attempting to contain health care
costs by limiting both coverage and the level of reimbursement for new
therapeutic products approved for marketing by the FDA and by refusing in some
cases to provide any coverage for uses of approved products for disease
indications for which the FDA has not granted marketing approval. If adequate
coverage and reimbursement levels are not provided by government and third-
party payers for uses of the Company's therapeutic products, the market
acceptance of these products would be adversely affected.
Healthcare reform proposals have been introduced in Congress and in
various state legislatures. It is currently uncertain whether any health care
reform legislation will be enacted at the federal level or what actions
governmental and private payers may take in response to the suggested reforms.
The Company cannot predict when any suggested reforms will be implemented, if
ever, or the effect of any implemented reforms on the Company's business.
There can be no assurance that any implemented reforms will not have a material
adverse effect on the Company's future results of operations. Such reforms, if
enacted, may affect the availability of third-party reimbursement for products
developed by the Company as well as the price levels at which the Company is
able to sell such products. In addition, if, and to the extent that, the
Company is able to commercialize products in overseas' markets, the Company's
ability to achieve success in such markets will depend d in part on the health
care financing and reimbursement policies of such countries.
NO PRODUCT LIABILITY INSURANCE
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<PAGE> 11
The Company's business exposes it to potential product liability risks
which are inherent in the testing, manufacturing and marketing of human
therapeutic products. The Company does not currently have any product
liability insurance. Although the Company plans to obtain product liability
insurance, there can be no assurance that it will be able to obtain or maintain
such insurance on acceptable terms or that any insurance obtained will provide
adequate coverage against potential liabilities. Claims or losses in excess of
any liability insurance coverage obtained by the Company could have a material
adverse affect on the business, financial condition or results of operations of
the Company.
LITIGATION INVOLVING COMPANY'S CHAIRMAN
John N. Kapoor, the Company's Chairman and principal stockholder, was
previously the Chairman and President of Lyphomed, Inc. ("Lyphomed").
Fujisawa Pharmaceutical Co. Ltd. ("Fujisawa") was a major stockholder of
Lyphomed from the mid-1980s until 1990, at which time Fujisawa completed a
tender offer for the remaining shares of Lyphomed, including the shares held by
Dr. Kapoor. Prior to and following the tender offer by Fujisawa, Lyphomed
experienced regulatory difficulties with the FDA relating to the sale of
certain generic drug products. Lyphomed also experienced, following the tender
offer, declining results of operations. Fujisawa filed suit in federal
district court in Illinois against Dr. Kapoor alleging securities fraud,
racketeering, and related claims relating to the purchase of Lyphomed. In
addition to substantial monetary relief, among the relief sought by Fujisawa is
a constructive trust on the assets of Dr. Kapoor, which assets may involve Dr.
Kapoor's shares of the Company's Common Stock or rights to acquire shares of
the Company's Common Stock. The suit, which is currently in the discovery
phase, seeks substantial damages against Dr. Kapoor. Dr. Kapoor has denied
Fujisawa's allegations and is defending the suit. Dr. Kapoor has also filed a
suit against Fujisawa in Delaware state court seeking reimbursement for defense
costs incurred as a result of Fujisawa's suit against him. Although the
Company is not a party to these suits, a significant monetary or other judgment
settlement, or the imposition of the constructive trust against Dr. Kapoor
could have a material adverse effect on the Company.
POTENTIAL ADVERSE EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE
Future sales of Common Stock by existing stockholders under Rule 144
of the Securities Act of 1933, as amended (the "Securities Act"), or through
the exercise of outstanding registration rights or otherwise could have an
adverse effect on the market price of the Securities. 18,651 shares of Common
Stock will be eligible for sale in the public market in reliance on Rule 701,
and 15,542 shares of Common Stock will be eligible for sale in the public
market, subject to the volume limitations of Rule 144. Additionally,
approximately 699,405 shares of Common Stock will be eligible for sale in the
public market in February, 1997, upon expiration of certain lock-up agreements
in reliance on Rule 701. At such time, 1,883,296 additional shares will become
eligible for sale, subject to the volume limitations of Rule 144. In addition,
beginning in February, 1997, upon expiration of lock-up agreements, holders of
outstanding options to purchase approximately 259,433 shares will be entitled
to sell shares upon exercise of such options under Rule 701, subject to certain
contractual restrictions on exercise of such options.
CONCENTRATION OF OWNERSHIP
Directors, officers and other current stockholders of the Company who
in the aggregate currently own beneficially 2,350,000 shares of Common Stock
(excluding outstanding options to purchase shares of Common Stock) will own
beneficially in the aggregate 2,601,352 shares of Common Stock representing
approximately 65.83% of the outstanding shares of Common Stock assuming no
warrants or options are exercised. Accordingly, the Company's officers,
directors and other current stockholders will have the ability to elect a
majority of the Company's directors and otherwise control the Company.
ABSENCE OF DIVIDENDS
The Company has never declared or paid dividends on its Common Stock
and does not intend to pay any dividends in the foreseeable future.
9
<PAGE> 12
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Certificate of Incorporation limits, to the maximum
extent permitted by the Delaware General Corporation Law ("Delaware Law"), the
personal liability of directors for monetary damages for breach of their
fiduciary duties as a director. The Company's Bylaws provide that the Company
shall indemnify its officers and directors and may indemnify its employees and
other agents to the fullest extent permitted by law. The Company has entered
into indemnification agreements with its officers and directors containing
provisions which are in some respects broader than the specific indemnification
provisions contained in Delaware Law. The indemnification agreements may
require the Company, among other things, to indemnify such officers an
directors against certain liabilities that may arise by reason of their status
or service as directors or officers (other than liabilities arising from
willful misconduct of a culpable nature), to advance their expenses incurred as
a result of any proceeding against them as to which they could be indemnified,
and to obtain directors' and officers' insurance, if available on reasonable
terms. Section 145 of the Delaware Law provides that a corporation may
indemnify a director, officer, employee or agent made or threatened to be made
a party to an action by reason of the fact that he was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation against expenses actually and reasonably incurred in connection
with such action if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Delaware Law does not permit a corporation
to eliminate a director's duty of care, and the provisions of the Company's
Certificate of Incorporation have no effect on the availability of equitable
remedies, such as injunction or rescission, for a director's breach of the duty
of care.
SELLING STOCKHOLDERS
The Shares being offered hereby may be acquired upon the exercise of
incentive stock options and nonqualified stock options granted to the Selling
Stockholders. To the extent known on the date hereof, the following table set
forth (i) the name and relationship with the Company in the past three years of
each Selling Stockholder (ii) the number of shares of common stock that each
Selling Stockholder beneficially owns directly or indirectly on the date
hereof, including shares underlying nonqualified and incentive stock options
(iii) the number of shares of Common Stock that are being registered on behalf
of each, (iv) and the amount and percentage of Common Stock which would be
owned by each Selling Stockholder after completion of the offering assuming the
exercise by them of all nonqualified and incentive stock options and sale of
all of the Common Stock which may be sold hereunder. The inclusion of the
Common Stock for sale by a Selling Stockholder does not necessarily mean that
the Common Stock will be acquired upon the exercise of incentive stock options
or nonqualified options or sold.
<TABLE>
<CAPTION>
Name of Registered
Stockholder and Number of Shares Beneficial Ownership After
Relationship with the Beneficially Owned Number of Shares Being the Offering(2)
Company Directly or Indirectly Registered(1) Number Percentage
--------------------- ---------------------- ---------------------- --------------------------
<S> <C> <C> <C> <C>
Mahendra G. Shah, 67,741 25,000 42,741 1.1%
Ph.D., Vice President,
Corporate and Business
Development
David E. Riggs, Chief 50,000 50,000 -0- 0%
Financial Officer
</TABLE>
____________________
10
<PAGE> 13
(1) Does not constitute a commitment to sell any or all of the stated
number of shares of Common Stock. The number of shares offered shall
be determined from time to time by each Selling Stockholder at his
sole discretion.
(2) Dr. Shah disclaims beneficial ownership held by Nrupal Shah, 7,771
shares held by Shaily Shah and 23,312 shares held by Indira Shah.
PLAN OF DISTRIBUTION
The Company has been advised that the Shares may be sold from time to
time by the Selling Stockholders. Such sales may be made in the
over-the-counter market or otherwise at prices and on terms then prevailing or
in negotiated transactions. The Selling Stockholders may sell some or all of
the Shares in transactions involving broker-dealers, who may act as agent or
acquire the Shares as principal. Any broker-dealer participating in such
transactions as agent may receive commissions from the Selling Stockholders
(and, if they act as agent for the purchaser of such Shares, from such
purchaser). Broker-dealers may agree with the Selling Stockholders to sell a
specified number of Shares at stipulated price per Share and, to the extent
such a broker-dealer is unable to do so acting as agent for a Selling
Stockholder, to purchase as principals any unsold Shares at the price required
to fulfill the respective broker-dealer's commitment to the Selling
Stockholder. Broker-dealers who acquire Shares as principals may thereafter
resell such Shares from time to time in transactions (which may involve cross
and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above) in the
over-the-counter market, in negotiated transactions or otherwise, at market
prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive commissions from the
purchasers of such Shares.
The number of shares of Common Stock sold pursuant to this Prospectus
by a Selling Stockholder during any three month period may not exceed the
greater of (i) one percent of the shares outstanding as shown by the most
recent report or statement published by the Company or (ii) the average weekly
reported volume of trading in such securities on all national securities
exchanges and/or reported through the automated quotation system of a
registered securities association during the four calendar weeks preceding the
filing of the notice of such sale on Form 144, or if no such notice is
required, the date of receipt of the order to execute the transaction by the
broker or the date of execution of the transaction directly with a market
maker, or (iii) the average weekly volume of trading in such securities
reported through the consolidated transaction reporting system under the
Securities Exchange Act of 1934 during the four-week period specified in
subdivision (ii).
The Company is bearing all costs relating to the registration of the
Shares. Any commissions or other fees payable to broker-dealers in connection
with any sale of the Shares will be borne by the Selling Stockholders.
EXPERTS
The financial statements included in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said report.
11
<PAGE> 14
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain
Information by Reference . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
NEOPHARM, INC.
500,000 Shares of Common Stock
Par Value $0.000429 per share
____________________
PROSPECTUS
May 14, 1996
<PAGE> 15
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents By Reference
The following documents filed with the Securities and Exchange
Commission (the "Commission") by the registrant, NeoPharm, Inc., a Delaware
corporation (the "Company"), pursuant to the Securities Act of 1933, as amended
(the "Securities Act") and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), are incorporated by reference in this registration statement:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.
(b) The description of the common stock, par value $.000429 per share, of
the Company (the "Common Stock") contained in the Company's Registration
Statement on Form 10 filed pursuant to Section 12(g) of the Exchange Act,
including any amendment or report filed for the purpose of updating such
information.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this registration statement to the extent that a
statement contained herein or in any other subsequently filed document which
also is incorporated or deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this registration statement.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
The sections entitled "RISK FACTORS - Limitation of Liability and
Indemnification" in the Prospectus dated January 25, 1996, included as a part
of Registration Statement No. 33-90516 is incorporated herein by reference.
Section 102 of the Delaware Law allows a corporation, in its
Certificate of Incorporation, to eliminate the personal liability of its
directors to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, other than liability for (1) any breach
of the director's duty of loyalty to the corporation or its stockholders, (2)
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (3) any transaction from which the director derived
an improper personal benefit and (4) payment of dividends or stock purchases or
redemptions in violation of the provisions of Delaware Law.
Item 7. Exemption From Registration Claimed.
Not applicable
<PAGE> 16
Exhibit 8. Exhibits.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
4.1 NeoPharm, Inc 1995 Stock Plan (filed as Exhibit 10.1 to
Registration Statement No. 33-90516 and incorporated herein by reference).
4.2 NeoPharm, Inc. 1995 Director Option Plan, with form of
Director Stock Option Agreement (filed as Exhibit 10.2 to Registration
Statement No. 33-90516, and incorporated herein by reference).
*5.1 Opinion of Schwartz & Freeman.
23.1 Consent of Schwartz & Freeman (including in Exhibit 5.1
hereto).
*23.2 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney (included on the signature page of this
Registration Statement). * filed herewith
Item 9. Required Undertakings.
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which its
offers or sells securities, 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 which, individually or together, represent a fundamental change
in the information set forth in the registration statement;
(iii) To include any additional or changed
material information with respect to the plan of distribution.
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8 and the information required
to be included in a post-effective amendment by those paragraphs is contained
in periodic reports filed by the Registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
(1) 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.
(2) 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.
(b) The undersigned Registrant hereby undertakes that,
for purposes of determining any liability under the Securities Act of 1933,
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
<PAGE> 17
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.
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to any arrangement, provision 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 Securities Act of 1933 and is, therefore,
unenforceable. In the event that 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, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
<PAGE> 18
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Lake Forest, State of Illinois, on
May 13, 1996.
NEOPHARM, INC.
By: /S/ WILLAIM C. GROVIER
William C. Govier
President and Chief Executive
Officer (principal executive
officer)
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints David
E. Riggs and Aquilur Rahman, and each of them, his or her true and lawful
attorneys-in-fact and agents, with power of substitution and resubstitution,
for him or her and in his or her 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 exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying all that said attorneys-in-fact and
agents or his or her substitute or substitutes, or any of them, 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 by the following persons on behalf of the Registrant,
on May 13, 1996 in the capacities indicated.
SIGNATURE TITLE
/S/JOHN N. KAPOOR, PH.D Director, Chairman of the Board
John N. Kapoor, Ph.D.
/S/AQUILUR RAHMAN, PH.D. Director
Aquilur Rahman, Ph.D.
/S/DAVID E. RIGGS Chief Financial Officer (Principal
David E. Riggs Financial and Accounting Officer)
/S/WILLIAM C. GOVIER, M.D., PH.D President, Chief Executive Officer
William C. Govier, M.D., Ph.D. (principal executive officer) and
Director
/S/ANATOLY DRITSCHILO, M.D. Director
Anatoly , Dritschilo M.D.
<PAGE> 1
SCHWARTZ & FREEMAN EXHIBIT 5.1
LAW OFFICES
401 N. Michigan Ave.
Suite 1900
Chicago, Illinois 60611-4206
(312) 222-0800
May 14, 1996
NeoPharm, Inc.
225 East Deerpath
Lake Forest IL 60045
Gentlemen:
We have been engaged as your counsel in connection with the registration
statement on Form S-8 (the "Registration Statement"), of shares of common
stock, $0.000429 par value (the "Common Stock"), of NeoPharm, Inc. (the
"Company"), which may be issued upon the exercise of options granted and to be
granted under the NeoPharm 1995 Stock Option Plan and the NeoPharm 1995
Director Option Plan (the "Plans").
We have examined the Certificate of Incorporation of the Company and all
amendments thereto to date; the By-Laws of the Company as presently in effect;
the Registration Statement including the Exhibits thereto; copies of the Plans;
the minutes of a meeting of directors of the Company relating to the issuance
of the shares; and such other corporate records and documents as we have deemed
necessary in order to enable us to express the opinion set forth below.
Based on the foregoing examination and assumptions, it is our opinion that the
500,000 shares of Common Stock covered by the Registration Statement which may
be issued upon exercise of options issued and to be issued under the Plans, will
be, when issued in accordance with the Plans, including payment in full of the
exercise price as provided therein, duly and validly issued, fully paid and
non-assessable.
We understand that you may file this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement. We consent to that
filing and to the use of our firm name in the Registration Statement.
Very truly yours,
SCHWARTZ & FREEMAN
/s/ STEPHEN E. GOODMAN
Stephen E. Goodman
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated April 12, 1996
included in NeoPharm, Inc.'s Form 10-K for the year ended December 31, 1995 and
to all references of our Firm included in this registration statement.
Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
May 7, 1996
