As filed with the Securities and Exchange Commission on February 4, 1999
Registration No. 333-68133
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NEOPHARM, INC.
(Exact name of registrant as specified in its charter)
Delaware 8731 51-0327886
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation or Classification Code Number)
organization) Number)
100 Corporate North
Suite 215
Bannockburn, Illinois 60015
(847) 295-8678
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
JAMES M. HUSSEY
President and Chief Executive Officer
NEOPHARM, INC.
100 Corporate North
Suite 215
Bannockburn, Illinois 60015
(847) 295-8678
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copy to:
LAWRENCE B. FISHER, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP
30 Rockefeller Plaza
New York, New York 10112
(212) 506-5000
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If any of these securities being registered on this Form are being offered
pursuant to a dividend or reinvestment plans, please check the following box.
|_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. |_|
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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SUBJECT TO COMPLETION, DATED FEBRUARY 4, 1999
NEOPHARM, INC.
This prospectus covers the offer and sale by certain selling
securityholders named herein of up to 2,079,134 shares of our common stock, upon
exercise of 1,039,567 warrants to purchase shares of our common stock, which
consist of:
(1) 1,674,134 shares of common stock that are issuable upon exercise of
837,067 redeemable common stock purchase warrants which are currently
traded on the American Stock Exchange;
(2) 270,000 shares of common stock that are issuable upon exercise of
warrants issued to the representative of the several underwriters of
our initial public offering.
(3) 135,000 shares of common stock that are issuable upon exercise of the
warrants underlying the representative's warrants.
Our common stock is traded on the AMEX under the symbol "NEO." The closing
sale price of the common stock as reported by AMEX on February 1, 1999 was
$17.00 per share.
Our redeemable warrants are traded on the AMEX under the Symbol "Neo_T".
The closing sale price of the redeemable warrants as reported by AMEX on
February 1, 1999 was $24.00.
All of the shares offered hereby will be offered and sold by selling
securityholders. We will not receive any proceeds from the sale of the shares of
common stock but we may receive proceeds upon exercise of the redeemable
warrants, and the warrants issued to the representative of the several
underwriters of our initial public offering.
The shares involve certain risks. See "Risk Factors" on page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is _________, 1999.
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NEOPHARM, INC.
We are a pharmaceutical company that researches and develops drugs used in
the fields of oncology therapeutics and diagnostics. We have developed expertise
in identifying, developing, preparing and the regulatory approval of cancer
drugs for both therapeutic and diagnostic purposes, although we don't currently
have any products that are approved for sale. Our goal is to be a leading
worldwide oncology drug company, and over the past eight years, we have
established a portfolio of compounds in various stages of clinical and
pre-clinical development.
Currently we are developing five compounds which all target various forms
of cancer. Although cancer is the second largest cause of death in the U.S. and
there are a large number of new cases of cancer each year, for some types of
cancer, there are no acceptable treatments, while for others, the currently
available treatments are limited due to severe side effects. Our products under
development offer either improvements to currently available technology or new
technology that improves the efficacy and reduces the side effects. Before new
drugs can be approved by the U.S. Food and Drug Administration (the "FDA"), they
must go through several test phases, from pre-clinical trials to Phase I to
Phase II and Phase III trials. The products which we currently have under
development are detailed in the following table:
<TABLE>
<CAPTION>
Compounds Use or Advantage Development Status Cancer Indication U.S. Patent
Position
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LED We believe LED allows Phase I completed, initiated Breast, Prostate, 2 Patents
cancer patients to tolerate Phase II in June 1998 Hematological
higher dosages of
chemotherapy providing
greater therapeutic value in
a number of types of cancer
tumors.
- -------------------------------------------------------------------------------------------------------------------------
LEP We believe LEP allows Phase I in September 1998 Ovarian, Breast, Lung 1 Patent
cancer patients to tolerate
higher dosages of
chemotherapy providing
greater therapeutic value in
a number of types of cancer
tumors.
- -------------------------------------------------------------------------------------------------------------------------
LE-AON LE-AON is an antisense Pre-clinical trials ongoing, Head & Neck, Lung, 1 Patent
drug useful in enhancing the initiate Phase I in the 2nd Brain
lethality and effectiveness of Quarter, 1999
radiation.
- -------------------------------------------------------------------------------------------------------------------------
IL-13 Chimeric IL-13 Chimeric Protein Pre-clinical trials ongoing, Renal Cell, Brain, 2 Patents
Protein Exotoxin Exotoxin is a genetically initiate Phase I in the 1st Kaposi's Sarcoma,
engineered compound Quarter, 1999 Breast
incorporating a highly toxic
material that destroys cells
once linked to the target
receptor on its surface.
- -------------------------------------------------------------------------------------------------------------------------
Broxine We believe Broxine New drug application Breast, Colon, Prostate, 0 Patents
(Registered) will prove useful in pending before the FDA Hematologic
characterizing tumor cell
growth in nearly all solid
tumors.
</TABLE>
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Our short term goal is to use our proprietary technology to significantly
enhance the efficiency and reduce the side effects of currently available
chemotherapy compounds.
Our long term goal is to be a leading worldwide oncology drug development
company. To reach our goal we have developed the following strategies:
Focus our resources exclusively on the expanding cancer
market;
Develop a balanced portfolio of anti-cancer drugs based on
enhancing proven compounds;
Develop novel therapeutic agents and leverage our expertise
to identify compounds we can license; and
Form strategic alliances with larger pharmaceutical and biotechnology
companies to obtain financial and marketing support for certain of our
product development activities.
We were founded in 1990 by scientists specializing in cancer therapy. We
have relationships with the FDA, National Cancer Institute, Georgetown
University, as well as with established pharmaceutical manufacturers. We
currently do not have any products which are approved for sale, and as a result
we have no marketing or sales staff and have conducted our activities through
consultants and at university research facilities.
Our principal executive offices are located at 100 Corporate North, Suite
215, Bannockburn, Illinois 60015, and our telephone number is (847) 295-8678.
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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 NeoPharm and
our business.
Limited Operating History
We are a development stage company and our history of operations consists
primarily of the development of our products and the sponsorship of research and
clinical trials. Therefore, we have only a limited history upon which you may
judge our performance and prospects.
History of Losses and Uncertain Future Profitability
We have incurred significant losses since inception. At September 30, 1998
and December 31, 1997, we had accumulated losses since inception of
approximately $10,135,008 and $8,358,213, respectively. We probably will
continue to incur substantial additional operating losses for at least the next
several years and expect cumulative losses to increase as our research and
development efforts expand. We have only generated limited amounts of revenue
from our license fees and there can be no assurance as to when or whether we
will be able to develop other sources of revenue or when or if our operations
will become profitable, even if we are able to commercialize some of our
products.
Uncertainty of Product Development; Early Stage of Development of
Proprietary Products
Our research and development programs are at various states of
development, ranging from the pre-clinical stage, to Phase I and Phase II
clinical trials to a pending new drug application. Substantial additional
research and development will be necessary in order for us to develop products
based on our therapeutic and diagnostic agents, and there can be no assurance
that our research and development will lead to development of products that are
shown to be safe and effective in clinical trials and are commercially viable.
Our proposed products will also require clinical testing, regulatory approval
and substantial additional investment prior to commercialization. Our proposed
products are subject to the risks of failure inherent in the development of
pharmaceutical products. These risks include the following:
Some of our products may be found to be unsafe or ineffective, or may
fail to receive the necessary regulatory clearances in a timely fashion,
if at all;
Our products, if safe and effective, may be difficult to
manufacture on a large scale or may be uneconomical to market;
The proprietary rights of third parties may preclude us from
marketing such products; and
Third parties may market more effective or less costly products for
treatment of the same diseases.
As a result, we cannot be certain that any of our products will be
successfully developed, receive required governmental regulatory approvals on a
timely basis, become commercially viable or achieve market acceptance. Also, we
have only limited experience in conducting clinical trials and other aspects of
the regulatory process.
There have been delays in our testing and development schedules to date
and there can be no assurance that our expected testing and development
schedules will be met. Delays in our testing and
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development schedules could have a material adverse effect on our business,
financial condition and results of operations.
Collaborative Relationships - Development of our Products is Dependent Upon our
Ability to Develop Working Relationships with Others.
The successful development of our products is dependent upon our ability
to develop and maintain strategic and collaborative relationships with
government agencies, research institutions, public and private universities and
hospitals.
Our failure to develop and maintain any of the following strategic and
collaborative relationships could have a material adverse effect on our
business, financial condition and results of operations:
Our Broxine(R) product was the subject of a cooperative research and
development agreement with the National Cancer Institute which gave
us exclusive rights to data generated by the National Cancer
Institute for certain cancer indications. That agreement expired on
September 14, 1988 and is to be replaced by a clinical trials
agreement which is still being negotiated. Because our Broxine(R)
product is not covered by patents or patent applications, our
exclusive access to the data collected by the National Cancer
Institute is of significant importance for the conduct of clinical
trials and is a principal advantage over others.
Our IL-13 product is the subject of a cooperative research and
development agreement with the FDA that extends through October 2001
and provides us rights to the development of IL-13 with the FDA and
to the data generated during the term of this agreement. This
agreement may be terminated by either party upon sixty days advance
notice without cause. Termination of the this agreement with the FDA
would be materially adverse to our development program and could
require curtailment or termination of that program.
We have also entered into two license and sponsored research
agreements with Georgetown University relating to our liposomal
products. These licenses are generally not terminable by Georgetown
University except in the event of a default by us. Any such default
and resulting termination of the licenses would be materially adverse
to our liposome program and could require curtailment or termination
of that program.
We may Need Additional Financing
We require substantial funds to conduct research and development,
pre-clinical and clinical testing and to manufacture and market our proposed
products. Our fixed commitments, including consulting fees, rent, payments under
license agreements and other contractual commitments are substantial and are
likely to increase. Our cash requirements may vary materially from those now
planned. We may seek to satisfy our future funding requirements through
additional public or private offerings of securities, with collaborative
arrangements with corporate partners or from other sources.
Additional financing may not be available when we need it or be on terms
acceptable to us. If adequate financing is not available, we may be required to
delay, scale back or eliminate certain of our research and development programs,
to relinquish rights to certain of our technologies, therapeutic and diagnostic
agents, product candidates or products, or to license third parties to
commercialize products or technologies that we would otherwise seek to develop
ourself. If additional capital is raised through the sale of equity or debt
securities, the percentage ownership of
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our existing stockholders will be reduced and such securities may have rights,
preferences or privileges superior to those of our current stockholders.
We do not Have Manufacturing, Marketing, or Sales Resources
We currently do not have internal manufacturing, marking or sales
resources. Since we focus on research and development and have limited
resources, we do not anticipate spending a material amount of cash to acquire
resources and develop capabilities in these areas. Our manufacturing strategy
will be to develop manufacturing relationships with established pharmaceutical
manufacturers for production of products. We can give no assurance that we will
be able to enter into manufacturing agreements on commercially reasonable terms,
if at all.
We do not Have Clinical Testing or Regulatory Capability
We currently do not have internal clinical testing or regulatory
capability. If we develop compounds with commercial potential, it will be
necessary for us to hire additional personnel skilled in the clinical testing
and the regulatory compliance processes. We can not give any assurance that we
will successfully complete clinical testing of, obtain regulatory approval for,
or manufacture or market any product we may develop, either independently or
pursuant to manufacturing or marketing arrangements. Should we seek to enter
into third-party arrangements, there can be no assurance that such arrangements
can be successfully negotiated on commercially reasonable terms, if at all.
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, patent and trade secret protection for new technologies, products
and processes is very important to us. We have obtained licenses to ten United
States patent applications and have sixteen other issued or allowed patent
applications outside the United States. With respect to these patents, however,
no assurance can be given that:
Any patents under any pending applications or on future
patent applications will be issued;
The scope of any patent protection will exclude
competitors or provide competitive advantages to us;
Any of our patents that may be issued will be held valid
if subsequently challenged;
Others will not claim rights in or ownership to the
patents and other proprietary rights held by us;
Others will not independently develop substantially equivalent
proprietary information or otherwise obtain access to our know-how;
or
Others may not be issued patents that require licensing and the
payment of significant fees or royalties by us.
Further, we could be forced to incur substantial costs in defending
ourselves in suits that may be brought against us claiming infringement of the
patent rights of others, in asserting our patent rights in a suit against
another party, or in participating in interference proceedings declared by the
United States Patent and Trademark Office for the purpose of determining the
priority of invention in connection with our patent applications or those of
others. Adverse determinations in litigation or interference proceedings could
require us to seek licenses, which may not be available on
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commercially reasonable terms, if at all, or subject us to significant
liabilities to third party and could, therefore, have a material adverse effect
on us.
Our Broxine(R) product is not currently the subject of patents or patent
applications and we do not expect to obtain patent protection for this product.
The lack of patent protection could have a material adverse effect on our
business, financial condition and results of operations.
Finally, we also rely on trade secrets, know-how and technological
advantage to protect the technology we develop. Although we use confidentiality
agreements and employee proprietary information and invention assignment
agreements to protect our 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.
Relationships with Other Entities; Conflicts of Interest
Messrs. John N. Kapoor and Kevin M. Harris, who each hold executive
positions with us, are also associated with EJ Financial Enterprises, Inc., a
healthcare investment firm which is wholly owned by John N. Kapoor. On July 1,
1994, we entered into a Consulting Agreement with EJ Financial. The Consulting
Agreement provides that we 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 ours without pay. EJ Financial is
involved in the management of healthcare companies in various fields, and
Messrs. Kapoor and Harris are involved in various capacities with the management
and operation of these companies. The John N. Kapoor Trust dated September 20,
1989, the beneficiary of which is Dr. John Kapoor, is a principal shareholder of
each of these companies as well as the Company. The John N. Kapoor Trust
beneficially owns shares of our common stock, which represents 24% of our
outstanding shares of common stock.
Further, as of September 30, 1998, the Trust entered into a Line of Credit
Agreement with us pursuant to which we may borrow up to $3,000,000 at a rate
equal to 2% (two hundred basis points) over the "prime rate" announced from time
to time by The Northern Trust Bank of Chicago. Loans under the Credit Agreement
are secured by a Continuing Security Agreement which provides the Trust with a
security interest in our assets.
Mr. Harris, who is currently our Chief Financial Officer, is also the
Director of Taxes and Planning of EJ Financial. Accordingly, Mr. Harris will not
devote all of his working hours to our 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 our
products less competitive or obsolete.
Members of our Scientific Advisory Board are employed on a full-time basis
by academic or research institutions. These individuals will to devote only a
portion of their time to our business and research activities. Except for work
performed specifically for and at our direction, the inventions or processes
discovered by our consultants and scientific advisors will not become our
property but will be the intellectual property of other institutions which they
may have an affiliation. In such event, it would be necessary for us 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 us may be subject to the
rights of their primary employers or other third parties with whom such
individuals have consulting relationships.
We have recently been advised by Georgetown University of an internal
policy of Georgetown's that provides for splitting license fees which it
receives from the license of technology, such as the Liposomal technology which
we license from Georgetown, with those persons at Georgetown whose work
Georgetown considers instrumental in the development of such licensed
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technology. Dr. Aquilur Rahman, our Chief Scientific Officer and one of our
Directors, and Dr. Anatoly Dritschilo, also one of our Directors, have been, or
are currently, associated with Georgetown University and were crucial to the
development of the Liposomal technology which we license from Georgetown. As a
result, a portion of the license fees which the Company pays to Georgetown may,
at Georgetown's option, be remitted by Georgetown to these two individuals. The
amount of such payments cannot be determined at this time as that will depend on
the amount paid by us to Georgetown and on whether, and to what extent,
Georgetown splits such license fees with these named individuals.
Need to Comply with Governmental Regulations and to Obtain Product
Approvals
Our research, testing, manufacturing, labeling, distribution, marketing
and advertising activities are regulated extensively by governmental authorities
in the United States and other countries. The FDA and comparable agencies in
foreign countries impose substantial requirements on our ability to introduce
pharmaceutical products through lengthy and detailed laboratory and clinical
testing procedures, sampling procedures, sampling activities and other costly
and time consuming procedures. Our proprietary products may require substantial
clinical trials and FDA review as new drugs.
We cannot predict with certainty if or when we might submit for regulatory
review those products currently under development. Once we submit our potential
products for review, we cannot be certain that the FDA or other regulatory
agencies will grant approvals for any of our other pharmaceutical products on a
timely basis or at all. A delay in obtaining or failure to obtain such approvals
may adversely affect our business financial conditions and results of
operations. If we fail to comply with regulatory requirements, we could be
subjected to regulatory or judicial enforcement actions, including product
recalls or seizures, injunctions, civil penalties, criminal prosecution,
refusals to approve new products, withdrawal of arresting approvals, and
potentially enhanced product liability exposure. Sales of our products outside
the United States will be subject to regulatory requirements governing clinical
trials and marketing approval. These requirements vary widely from country to
country and could delay the introduction of our products in those countries.
Health Care Reform and Potential Limitations on Third-Party
Reimbursement
Revenues and profitability of pharmaceutical companies may be affected by
the continuing effort of governmental and third-party payors to contain or
reduce the costs of health care. We cannot predict the effect that health care
reforms may have on our business, and it is possible that any such reforms will
adversely affect our business. In addition, in both the United States and
elsewhere, sales of prescription pharmaceuticals are dependent in part on the
availability of reimbursement to the consumer from third-party payors, such as
government and private insurance plans. Third-party payors are increasingly
challenging the prices charged for medical products and services. We cannot be
certain that our current and proposed products will be considered cost-effective
and that reimbursement to the consumer will be available or will be sufficient
to allow us to sell products on a competitive basis.
Hazardous Materials; Environmental Matters
We are subject to federal, state and local laws and regulations governing
the use, manufacture, storage, handling and disposal of hazardous materials and
certain waste products. We currently maintain a supply of several hazardous
materials at our facilities. While we currently outsource our research and
development programs involving the controlled use of biohazardous materials, if
in the future we conduct such programs, we might be required to incur
significant cost to comply with environmental laws and regulations. In the event
of an accident, we could be held liable for any damages that result, and such
liability could exceed our resources.
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We don't have Product Liability Insurance
We do not have any product liability insurance and our business exposes us
to potential product liability risks which are inherent in the testing,
manufacturing and marketing of human therapeutic products. Although we plan to
obtain product liability insurance when and if our products become commercially
available, there can be no assurance that we 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 we obtain could have a material adverse effect
on our business and prospects.
Litigation Involving Our Chairman
John N. Kapoor, our Chairman and principal stockholder, was previously the
Chairman and President of Lyphomed Inc. Fujisawa Pharmaceutical Co. Ltd. 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. Fujisawa filed suit in federal district
court in Illinois against Dr. Kapoor alleging that between 1980 and 1986,
Lyphomed filed a large number of allegedly fraudulent new drug applications with
the FDA, in violation of FDA rules, and that Dr. Kapoor's failure to disclose
these violations to Fujisawa constituted a violation of federal securities laws
and the Racketeer Influenced and Corrupt Organizations Act. Fujisawa also
alleged state common-law claims of constructive trust, fraud, breach of
fiduciary duties and breach of warranty against Dr. Kapoor. In addition to
substantial monetary relief in excess of $100,000,000 (which amount could be
trebled under RICO), 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 our
common stock or rights to acquire shares of our common stock.
Dr. Kapoor has vigorously defended himself against all these allegations.
In the federal lawsuit, Dr. Kapoor's motion for summary judgement was granted by
the trial court. However, the Seventh Circuit Court of Appeals subsequently
reversed, in part, the trial court's decision, reinstating the RICO claims
against Dr. Kapoor. Dr. Kapoor's subsequent motion for summary judgment was
denied and the matter has been referred to a special master for mediation
discussions. It is anticipated that in the absence of resolution of the matter,
a trial would be held in late 1999 or early in 2000. Fujisawa's claims under
state law against Dr. Kapoor are also pending. A related suit filed by Dr.
Kapoor in Delaware Chancery Court seeking to require Lyphomed to advance to Dr.
Kapoor the cost of his defense to all of Fujisawa's lawsuits was decided in Dr.
Kapoor's favor and that decision was subsequently affirmed by the Delaware
Supreme Court. Finally, a countersuit filed by Dr. Kapoor against Fujisawa in
the Circuit Court of Cook County for breach of contract was dismissed without
prejudice with the court determining that the proper forum for such an action
was as part of the pending federal lawsuit. The decision of the lower court was
affirmed on appeal and Dr. Kapoor has now filed a counterclaim for breach of
contract as part of the federal court action.
If a decision is made in favor of Fujisawa, Fujisawa may acquire the right
to control Dr. Kapoor's shares of common stock, which comprise 26% of our common
stock. Such a decision could have a material adverse effect on us.
Potential Adverse Effect of Shares Eligible for Future Sale
If our stockholders sell substantial amounts of our common stock,
including shares issued upon the exercise of outstanding options and warrants,
in the public market following this offering, the market price of our common
stock could fall. Such sales also might make it more difficult to sell equity or
equity related securities in the future at a time and price that we deem
appropriate. Of the 8,343,779 shares of common stock outstanding as of January
31, 1999, 3,681,904 shares are freely transferable without restriction or
further registration under the Securities Act. The remaining
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4,661,875 shares are "restricted securities," and may only be sold pursuant to a
registration statement under the Securities Act or an applicable exemption from
registration thereunder.
Control by Officers and Directors
As of January 31, 1999, our directors and officers beneficially owned in
the aggregate 58.15% of the outstanding shares of our common stock. Accordingly,
our officers and directors, if acting together, have the ability to elect a
majority of our directors and otherwise control our operations.
Potential Volatility of Common Stock Price
The trading prices of our common stock are subject to significant
fluctuations in response to such factors as, among others, variations in
anticipated or actual results of operations, announcements of new products or
technological innovations or competitors, FDA approval or rejection of pending
applications and changes in earnings estimates by analysts. Moreover, the stock
market from time to time has experienced extreme price and volume fluctuations,
which have particularly affected the market prices for emerging growth companies
and which have often been unrelated to the operating performance of such
companies. These broad market fluctuations may adversely affect the market price
of our common stock.
In the past, following periods of volatility in the market price of a
company's common stock, securities class actions have been brought against the
issuing company. Such litigation could be brought against us in the future. Such
litigation could be expensive and divert management's attention and resources,
which adversely affect our business and results of operations. If such
litigation is determined against us, we could also be subject to significant
liabilities.
Redeemable Warrants May Be Redeemed
Since July 25, 1997, the redeemable warrants have been subject to
redemption at $0.01 per redeemable warrant on thirty (30) days' prior written
notice to the warrantholders. We can only redeem the warrants if the average
closing sale price of our common stock as reported on AMEX equals or exceeds
$5.60 per share for twenty (20) trading days within a period of thirty (30)
consecutive trading days ending on the fifth trading day prior to the date of
the notice of redemption. If we redeem the redeemable warrants, holders of the
redeemable warrants will lose their rights to purchase shares of common stock
issuable upon the exercise of the redeemable warrants. Upon receipt of a notice
of redemption, holders would be required to:
Exercise the redeemable warrants and pay the exercise
price at a time when it may be disadvantageous for them to
do so;
Sell the redeemable warrants at the current market price, if any,
when they might otherwise wish to hold the warrants; or
Accept the redemption price which is likely to be substantially less
than the market value of the redeemable warrants at the time of
redemption.
Since November 4, 1998, our common stock has traded above $5.60 with the
result that we may redeem the redeemable warrants, if we wish. We are currently
evaluating the merits of calling the redeemable warrants.
Restrictions on Sales of Shares Underlying the Redeemable Warrants
The redeemable warrants are not exercisable unless, at the time of the
exercise, we have a current prospectus covering the shares of common stock
issuable upon exercise of the redeemable
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warrants, and such shares have been registered, qualified or deemed to be
exempt under the securities laws of the state of residence of the exercising
holder of the redeemable warrants. We do not intend to qualify the redeemable
warrants for exercise in the states in which the holders reside. Holders of the
redeemable warrants may be deprived of value. Although we have agreed to use our
best efforts to keep a registration statement covering the shares of common
stock issuable upon exercise of the redeemable warrants effective for the term
of the redeemable warrants, if we fail to do so for any reason, your ability to
resell the shares underlying the redeemable warrants will be materially
adversely effected.
Purchasers may buy redeemable warrants in the aftermarket or may move to
jurisdictions in which the shares underlying the redeemable warrants are not so
registered or qualified during the period that the redeemable warrants are
exercisable. In this event, we would be unable to issue shares to those persons
desiring to exercise their redeemable warrants, and holders of redeemable
warrants would have no choice but to attempt to sell the redeemable warrants in
a jurisdiction where such sale is permissible or allow them to expire
unexercised.
Limitation of Liability and Indemnification
Our Certificate of Incorporation limits, to the maximum extent permitted
by the Delaware General Corporation Law, the personal liability of directors for
monetary damages for breach of their fiduciary duties as a director. Our By-laws
provide that we must indemnify our officers and directors and may indemnify our
employees and other agents to the fullest extent permitted by law. We have
entered into indemnification agreements with our officers and directors
containing provisions which are in some respects broader than the specific
indemnification provisions contained in Delaware Law. We may be required
pursuant to Delaware Law, our By-laws or the indemnification agreements to
indemnify our officers and directors against certain liabilities that may arise
by reason of the 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.
Year 2000 Risk
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. As a result, software
that records only the last two digits of the calendar year may not be able to
distinguish whether "00" means 1900 or 2000. This may result in software
failures or the creation of erroneous results. We believe that our products and
internal systems are currently year 2000 compliant. We have confirmed our year
2000 compliance by obtaining representations by third party vendors of their
products' year 2000 compliance, as well as specific testing of our products. The
failure of products or systems maintained by third parties or our products and
systems to be year 2000 complaint could cause us to incur significant expenses
to remedy any problems, or seriously damage our business. We have not incurred
significant costs to date complying with year 2000 requirements, and we do not
believe that we will incur significant costs for such purposes in the
foreseeable future.
Prospectus Contains Forward-Looking Information
This prospectus contains various forward looking statements. These
statements are based upon management's current beliefs as well as assumptions
made by management based upon information currently available to it. These
statements are subject to various risks and uncertainties, including those
described above, as well as potential changes in economic or regulatory
conditions generally which are beyond our control. Should one or more of those
risks materialize or changes occur, or should management's assumptions prove
incorrect, our actual results may vary materially from those anticipated or
projected.
11
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain information contained in, or incorporated by reference into, this
prospectus, includes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, as indicated by the use of
such terms as "may," "will," "expect," "believe," "estimate," "anticipate,"
"intend" or other similar terms or the negative of such terms. Such
forward-looking statements include, without limitation, our expectations with
respect to future financial results, capital requirements, market growth, new
product introductions, potential acquisitions and the like. These statements are
based upon information currently available to us and are subject to a number of
risks and uncertainties that could cause actual results to differ materially
from those anticipated. The principal risks and uncertainties are set forth
under the heading "Risk Factors" beginning on page 5 of this prospectus and are
described elsewhere herein and in the documents incorporated herein by
reference.
12
<PAGE>
USE OF PROCEEDS
The net proceeds to Neopharm upon the exercise of all of the redeemable
warrants, representative's warrants and warrants underlying the representative's
warrants, after deduction of certain expenses we have agreed to bear, is
approximately $10,455,307. We intend to use the net proceeds for working capital
and general corporate purposes.
Since July 25, 1997, the redeemable warrants have been subject to
redemption at $0.01 per redeemable warrant on thirty (30) days prior written
notice to the warrantholders if the average closing sale price of our common
stock as reported by AMEX equals or exceeds $5.60 for any twenty (20) trading
days within a period of thirty (30) consecutive trading days ending on the fifth
trading day prior to the date and notice of redemption. Since November 4, 1998,
our common stock has traded above $5.60 with the result that we may redeem the
redeemable warrants, if we wish. We are currently evaluating the merits of
calling the redeemable warrants. The representative's warrants may be exercised
on a cashless basis and if the holders of representative's warrants choose to do
so, net proceeds will be reduced by approximately $1.3 million.
13
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth certain information provided to us, as of
January 31, 1999, with respect to the number of shares of common stock,
redeemable warrants and the warrants originally issued to the representative of
the several underwriters of our initial public offering, beneficially owned by
each of the selling securityholders both before and after the sale of the shares
offered hereby.
The number of shares shown in the following table as being offered by the
selling securityholders does not include such presently indeterminate number of
additional shares of common stock as may be issuable as a result of stock
splits, stock dividends and similar transactions, but which shares are, in
accordance with Rule 416 under the Securities Act, included in the registration
statement of which this prospectus forms as part.
Any or all of the shares of common stock listed below may be offered for
sale pursuant to this prospectus by the selling securityholders from time to
time. Accordingly, no estimate can be given as to the amount of shares of common
stock that will be held by the selling securityholders upon consummation of any
such sales. In addition, the selling securityholders identified below may have
sold, transferred or otherwise disposed of all or a portion of their shares of
common stock since the date on which the information regarding their common
stock was provided, in transactions exempt from the registration requirements of
the Securities Act.
Beneficial ownership of the securities held by the selling securityholders
after this offering will depend on the number of securities sold by each selling
securityholder in this offering. Except as indicated in this prospectus, none of
the selling securityholders has had a material relationship with Neopharm within
the past three years other than as a result of the ownership of the shares or
other securities of Neopharm. See "Plan of Distribution."
The shares covered by this prospectus may be offered from time to time by
the selling securityholders named below:
The following table only includes 143,502 of the 837,067 redeemable
warrants that are traded on the AMEX.
<TABLE>
<CAPTION>
Percent of
Securities Owned
After Offering
Amount of Amount of Amount of (Assuming the
Securities Securities Securities sale of all of the
Owned Prior Being Owned After securities offered
Name of Selling Securityholder To Offering Registered Offering hereby)
- --------------------------------- ----------- ----------- ------------ ------------------
<S> <C> <C> <C> <C>
National Securities Corporation
common stock.................. 48,600 48,600 0 *
redeemable warrants........... 0 0
warrants...................... 12,150 12,150 0 *
Steven A. Rothstein
common stock.................. 5,400 5,400 0 *
redeemable warrants........... 0 0 0 *
warrants...................... 1,350 1,350 0 *
14
<PAGE>
Michael M. LeConey
common stock.................. 44,000 44,000 0 *
redeemable warrants........... 0 0 0 *
warrants...................... 10,800 10,800 0 *
Madeline Littman
common stock.................. 3,870 3,870 0 *
redeemable warrants........... 0 0 0 *
warrants...................... 1,080 1,080 0 *
Daniel L. Hamilton
common stock.................. 8,600 8,600 0 *
redeemable warrants........... 0 0 0 *
Warrants...................... 2,160 2,160 0 *
Michael K. Hsu
common stock.................. 73,530 73,530 0 *
redeemable warrants........... 0 0 0 *
warrants...................... 18,360 18,360 0 *
Jessy Dirks
common stock.................. 43,000 43,000 0 *
redeemable warrants........... 0 0 0 *
warrants...................... 10,800 10,800 0 *
Raymond L. Dirks
common stock.................. 43,000 43,000 0 *
redeemable warrants........... 0 0 0 *
warrants...................... 10,800 10,800 0 *
John N. Kapoor
common stock.................. 287,004 287,004 2,125,409(1) 24%
redeemable warrants........... 143,502 143,502 0 *
warrants...................... 0 0 0 *
</TABLE>
*less than 1%
(1) Includes 1,511,624 shares of common stock held by the John N. Kapoor
Trust, dated September 20, 1989, of which Dr. Kapoor is the sole trustee
and sole beneficiary. The address of the Trust is 225 East Deerpath, Suite
250, Lake Forest, Illinois 60045. The Trust also owns warrants to purchase
287,004 shares of common stock, which are assumed to have been exercised
for purposes of disclosing the ownership indicated. The amount shown also
includes 300,000 shares which are held by the John N. Kapoor Charitable
Trust of which Dr. Kapoor disclaims beneficial ownership of the shares
held by the Charitable Trust. The amount shown does not include 1,550,453
shares of common stock which are owned by the John N. Kapoor 1994-A
Annuity Trust of which the sole trustee is Editha Kapoor, Dr. Kapoor's
spouse. In addition, the amount shown does not include 310,848 shares of
common stock which are owned by four trusts which have been established
for Dr. Kapoor's children of which the sole trustee is Dr. Kapoor's
spouse, Editha Kapoor. Dr. Kapoor does not have or share voting,
investment or dispositive power with regards to such shares and Dr. Kapoor
disclaims beneficial ownership of the shares held by the Annuity Trust and
the Childrens' Trusts.
15
<PAGE>
PLAN OF DISTRIBUTION
The offering of the shares of common stock is not being underwritten, and
we will receive no proceeds from this offering but will receive proceeds from
the exercise of the redeemable warrants and possibly from the exercise of the
representative's warrants. The selling securityholders (or, subject to
applicable law, their pledgees, distributees, transferees or other successors in
interest) may offer their shares at various times in one or more of the
following transactions:
on the AMEX or any other exchange where our common stock
is listed;
in the over-the-counter market;
in negotiated transactions not on an exchange or
over-the-counter;
in connection with short sales of our common stock;
by pledge to secure debts or other obligations;
in connection with the writing of call options, in hedge transactions
and in settlement of other transactions in standardized or
over-the-counter options; or
in a combination of any of the above transactions.
The selling securityholders also may sell shares that qualify under Rule
144 of the Securities Act, where applicable.
The selling securityholders may sell the shares through public or private
transactions at prevailing market prices, or at prices related to such
prevailing market prices or at privately negotiated prices. Sales of the shares
by the selling securityholders, or even the potential for such sales, would
likely have an adverse effect on the market price of our outstanding securities.
The selling securityholders may use broker-dealers to sell the shares. In
order to comply with the securities laws of certain states, if applicable, the
shares will 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 they have been registered or qualified for sale in the applicable state
or an exemption from the registration or qualification requirement is available
and is complied with.
If broker-dealers are used, they will either receive discounts or
commissions from the selling securityholders, or they will receive commissions
from the purchasers of shares from whom they acted as agents. The selling
securityholders and any broker-dealers or agents that participate with the
selling securityholders in the distribution of the shares may be deemed to be
"underwriters" within the meaning 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.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the shares may not bid for or purchase shares of
common stock during a period which commences one business day (five business
days, if our public float is less than $25 million or our average daily trading
volume is less than $100,000) prior to such person's participation in the
distribution, subject to exceptions for certain passive market making
activities. In addition and without limiting the foregoing, each selling
securityholder will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M, which provisions may limit the timing of purchases and sales of shares of our
common stock by such selling securityholder.
At the time a particular offer of shares is made by or on behalf of the
selling securityholders, or by us upon exercise of the redeemable warrants, a
prospectus will be delivered to the extent required by the Securities Act.
16
<PAGE>
Under applicable rules and regulations under the Securities Exchange Act
of 1934, any person engaged in the distribution of the selling securityholder
securities may not simultaneously engage in market-making activities with
respect to any of our securities during the applicable "cooling off" period
(currently a period of up to five business days) prior to the commencement of
such distribution. In addition, each selling securityholder desiring to sell
redeemable warrants will be subject to the applicable provisions of the Exchange
Act and the rules and regulations thereunder, which provisions may limit the
securities by such selling securityholders.
We have agreed to pay substantially all of the expenses incident to the
registration of all of the securities covered under this prospectus, other than
transfer taxes, if any, and commissions and discounts of dealers and agents.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will be
passed upon for us by Orrick, Herrington & Sutcliffe LLP, New York, New York.
EXPERTS
The financial statements at December 31, 1997 appearing in our Annual
Report on Form 10-K, as amended, for the year ended December 31, 1997 have been
audited by Arthur Andersen 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.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the Securities
and Exchange Commission. You may read and copy any document we file at the SEC's
Public Reference Room at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C., 20549, and at the following regional offices of the SEC: Seven
World Trade Center, 13th Floor, New York, New York, 10048 and at Citicorp
Center, Suite 1400, 500 West Madison Street, Chicago, Illinois, 60661. Copies
can also be obtained from the Public Reference Room of the SEC at 450 Fifth
Street, N.W., Washington, D.C., 20549, upon payment of prescribed rates. You may
obtain information on the operation of the SEC's Public Reference Room by
calling the SEC at (800) SEC-0300. Our SEC filings are available to you on the
SEC's Internet site at http://www.sec.gov. Our common stock and redeemable
warrants are quoted on the AMEX.
This prospectus is only part of a registration statement on Form S-3 that
we have filed with the SEC under the Securities Act, and therefore omits certain
information contained in the registration statement. We have also filed exhibits
and schedules with the registration statement that are not included in this
prospectus, and you should refer to the applicable exhibit or schedule for a
complete description of any statement referring to any contract or other
document. A copy of the registration statement, including the exhibits and
schedules thereto, may be inspected without charge at the Public Reference Room
of the SEC described above, and copies of such material may be obtained from
such office upon payment of the fees prescribed by the SEC.
MATERIAL CHANGES
Mr. James M. Hussey joined us in March 1998 as our President, Chief
Executive Officer and a member of our Board of Directors. We entered into an
employment agreement with Mr. Hussey which is terminable by either us or Mr.
Hussey upon ninety (90) days written notice. Under the terms of the employment
agreement, Mr. Hussey is paid an annual salary of $250,000 and is eligible for a
17
<PAGE>
bonus payment of up to 80% of that salary based on the achievement of strategic
performance goals established by our Board.
Under the terms of his employment contract, we granted Mr. Hussey options
to purchase 400,000 shares of our common stock at an exercise price of $4.75 per
share. The options become exercisable for 25% of the covered shares on January
12, 1999 and will become exercisable with respect to an additional 25% on each
annual anniversary thereafter until exercisable in full unless terminated in
accordance with our 1995 Stock Option Plan.
In April, 1998, Dr. Lewis Strauss joined us as Vice President-Chief
Medical Officer. Under the terms of his employment, Dr. Strauss is paid an
annual salary of $140,000 and is eligible for a bonus payment of up to 50% of
that salary based on the achievement of strategic performance goals established
by our Board. In addition, under the terms of his employment, we granted Dr.
Strauss options to purchase 20,000 shares of our common stock at an exercise
price of $3.75 per share. The options become exercisable for 25% of the covered
shares on April 6, 1999 and will become exercisable with respect to an
additional 25% on each annual anniversary thereof until exercisable in full
unless terminated in accordance with the terms of the 1995 Stock Option Plan.
In June 1998, Mr. Kevin M. Harris joined the Company as Secretary and
Chief Financial Officer. Mr. Harris, who is also currently the Director of Taxes
and Planning for EJ Financial, an entity controlled by our principal
shareholder, Dr. John N. Kapoor, does not receive a salary for his services.
Upon joining us, however, Mr. Harris was granted a stock option for 12,000
shares, at an exercise price of $3.875 per share, which will become exercisable
with respect to 25% of the covered shares beginning July 23, 1999 and will
become exercisable with respect to an additional 25% on each annual anniversary
thereof until exercisable in full unless terminated.
In July 1998, Mr. Sander A. Flaum joined us as a Director. Mr. Flaum is
President and CEO of Robert A. Becker EURO/RSCG. Prior to becoming President of
Becker in 1991, Mr. Flaum was Marketing Director of Lederle Pharmaceuticals, a
division of American Cyanamid Corporation.
On July 23, 1998, our Board of Directors adopted the 1998 Equity Incentive
Plan (the "Equity Incentive Plan"), which will be submitted to our stockholders
for their approval at or before the 1999 Annual Meeting of Stockholders.
Under the Equity Incentive Plan, the Board as a whole or a committee of
outside directors (the "Administrator") is authorized to award stock options,
restricted stock, performance shares, performance units and bonus stock. The
Equity Incentive Plan has a 10-year term and, subject to anti-dilution
adjustments, a maximum of 2,000,000 shares of common stock may be delivered
pursuant to awards of options, restricted stock or bonus stock. All full-time
employees, as well as consultants and directors of Neopharm, are eligible to
receive awards.
The Administrator has the discretion to determine the persons to whom
awards shall be made and, subject to the terms of the Equity Incentive Plan, the
terms and conditions of each award. The Administrator may, among other things,
cancel outstanding awards and grant substitute awards with an exercise price
determined by reference to the value of the common stock on the date of the
substitute awards, accelerate vesting and waive terms and conditions of
outstanding awards and permit eligible employees or consultants to elect, prior
to earning compensation, to acquire options in lieu of receiving such
compensation. All awards will be fully vested upon a change of control (as
defined in the Equity Incentive Plan) of Neopharm.
On January 25, 1999, we announced that we entered into a letter of intent
providing for an exclusive 30 day negotiating period involving our liposomal
products with an international pharmaceutical company. In consideration for this
period of exclusivity, we received a non-refundable payment under the terms of
the letter of intent.
18
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference the information we file with
it, which means that we can disclose important information to you by referring
you to these documents. This information incorporated by reference is considered
to be part of this prospectus and later information we file with the SEC will
automatically update and supercede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. Our 1934 Act File Number
is 1-12493. The documents we are incorporating by reference are:
(a) our Annual Report on Form 10-K for the year ended December 31,
1997, filed with the SEC on March 31, 1998 and amended on April 30, 1998;
(b) our Definitive Proxy Statement dated May 11, 1998, filed with the
SEC on May 28, 1998 in connection with our 1998 Annual Meeting of
Stockholders;
(c) our Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998, filed with the SEC on May 15;
(d) our Quarterly Report on Form 10-Q for the quarter ended June 30,
1998, filed with the SEC on August 14, 1998;
(e) our Quarterly Report on Form 10-Q for the quarter ended September
30, 1998, filed with the SEC on November 16, 1998; and
(f) the description of our common stock contained in our Registration
Statement on Form 8-A, as amended, filed with the SEC, including any
amendments or reports filed for the purpose of updating such description.
You may request a copy of any of these filings at no cost by writing or
telephoning us at the following address: 100 Corporate North, Suite 215,
Bannockburn, Illinois, 60015, Attn: Investor Relations, (847) 295-8678.
19
<PAGE>
You should rely on the information contained in this document or that to which
we have referred you. We have not authorized anyone to provide you with
information that is different. You should not assume that the information in
this document is accurate as of any date other than the date on the front of
this document. This prospectus is not an offer to sell nor is it seeking an
offer to buy any securities in any state where the offer or sale is not
permitted.
TABLE OF CONTENTS
Page
NEOPHARM.............................................................2
RISK FACTORS.........................................................4
FORWARD-LOOKING STATEMENTS..........................................12
USE OF PROCEEDS.....................................................13
SELLING SECURITYHOLDERS.............................................14
PLAN OF DISTRIBUTION................................................16
LEGAL MATTERS.......................................................17
EXPERTS.............................................................17
WHERE YOU CAN FIND MORE INFORMATION.................................17
MATERIAL CHANGES....................................................17
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.....................19
<PAGE>
2,079,134 Shares
NEOPHARM, INC.
Common Stock
PROSPECTUS
______________, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth an itemized statement of all estimated
expenses, all of which will be paid by the Company, in connection with the
issuance and the distribution of the securities being registered.
SEC Registration Fee...................... $2,909
Accounting Fees and Expenses.............. $9,000
Legal Fees and Expenses................... $25,000
Printing Fees and Expenses................ $5,000
Miscellaneous............................. $5,091
Total..................................... $47,000
============================================
Item 15. Indemnification of Directors and Officers.
The Company's Certificate of Incorporation limits, to the maximum extent
permitted by 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 and 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. The Company believes that these agreements are
necessary to attract and retain qualified persons as directors and officers.
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
II-1
<PAGE>
remedies, such as injunction or rescission, for a director's breach of the duty
of care. Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act") may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing provisions
and agreements, the Company has been informed that in the opinion of the staff
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
3.1 Certificate of Incorporation, as amended filed with the Commission as
Exhibit 3.1 to the Company's Registration Statement on Form S-1 (File No.
33-90516), is incorporated by reference.
3.2 Bylaws of the Registrant, as amended filed with the Commission as Exhibit
3.2 to the Company's Registration Statement on Form S-1 (File No.
33-90516), is incorporated by reference.
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP*
23.1 Consent of Arthur Andersen LLP*
23.2 Consent of Orrick, Herrington & Sutcliffe LLP (See Exhibit
5.1)*
24.1 Power of Attorney (See page II-4)*
*Previously filed
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change to such information
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offered range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) under
the Securities Act if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii)to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change in the information
II-2
<PAGE>
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.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against 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 act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
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-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bannockburn, on the 3rd day of February, 1999.
NEOPHARM, INC.
/s/James M. Hussey
-----------------------------
By: James M. Hussey
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
Signature Title Date
/s/John N. Kapoor Director, Chairman of the February 3, 1999
- ------------------------ Board
Dr. John N. Kapoor
* Director, President, and February 3, 1999
- ------------------------ Chief Executive Officer
Mr. James M. Hussey (Principal Executive Officer)
* Director February 3, 1999
- ------------------------
Dr.Anatoly Dritschilo
* Director, Chief Scientific February 3, 1999
- ------------------------ Officer
Dr. Aquilur Rahman
* Director February 3, 1999
- ------------------------
Mr. Sander A. Flaum
* Director February 3, 1999
- ------------------------
Mr. Erick E. Hanson
* Chief Financial Officer February 3, 1999
- ------------------------ (Principal Financial
Mr. Kevin M. Harris Officer and Principal
Accounting Officer)
*John N. Kapoor
as power of attorney
II-4
