PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(5)
(To prospectus dated January 26, 2001) Registration Statement No. 333-53108
UP TO 1,025,000 SHARES OF COMMON STOCK
AND
WARRANTS TO PURCHASE UP TO 256,250 SHARES OF COMMON STOCK
OF
NEOTHERAPEUTICS, INC.
This prospectus supplement relates to an offering by us on a "best efforts"
basis of up to 1,025,000 shares of our common stock at a purchase price of $2.00
per share and warrants to purchase up to 256,250 shares of our common stock at
an exercise price of $2.75 per share, to certain institutional and individual
investors for aggregate proceeds of approximately $2,050,000. In connection with
this offering, we will pay Ladenburg & Thalmann & Co. ("LTCO") a cash fee equal
to 5% of the aggregate proceeds received by us from investors introduced to us
by LTCO plus expenses for its services as placement agent. See "Plan of
Distribution" on page S-12 for more information regarding this arrangement.
You should read this prospectus supplement, the accompanying prospectus,
and the documents incorporated by reference herein and therein, carefully before
you invest. Such documents contain information you should consider when making
your investment decision. The information included in the registration statement
on Form S-3, as amended (No. 333-53108) filed with the Securities and Exchange
Commission on January 2, 2001, is hereby incorporated by reference into this
prospectus supplement.
Our common stock is traded on the Nasdaq National Market under the symbol
"NEOT." On March 14, 2002, the last sale price of our common stock on the Nasdaq
National Market was $2.06 per share. As of March 14, 2002, we had 26,351,951
shares of our common stock outstanding.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE S-3 OF THIS PROSPECTUS SUPPLEMENT AS WELL AS THE RISK
FACTORS IN THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN AND THEREIN TO READ ABOUT FACTORS YOU SHOULD CONSIDER BEFORE
BUYING SHARES OF THE COMMON STOCK.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus supplement or the accompanying
prospectus. Any representation to the contrary is a criminal offense.
-------------------------------------
The date of this prospectus supplement is March 15, 2002.
TABLE OF CONTENTS
Page
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ABOUT NEOTHERAPEUTICS .......................................... S-3
RECENT DEVELOPMENTS ............................................ S-3
RISK FACTORS ................................................... S-4
FORWARD-LOOKING STATEMENTS ..................................... S-11
USE OF PROCEEDS ................................................ S-11
DILUTION ....................................................... S-12
PLAN OF DISTRIBUTION ........................................... S-12
DESCRIPTION OF COMMON STOCK .................................... S-13
DESCRIPTION OF WARRANTS ........................................ S-15
WHERE YOU CAN FIND MORE INFORMATION ............................ S-16
You should rely only on the information contained or incorporated by reference
in this prospectus supplement and the accompanying prospectus that is also part
of this document. We have not authorized anyone to provide information different
from that contained or incorporated in this prospectus supplement and the
accompanying prospectus. We are offering to sell, and seeking to buy, shares of
common stock only in jurisdictions where offers and sales are permitted. The
information contained or incorporated in this prospectus supplement and the
accompanying prospectus is accurate only as of the date of such information,
regardless of the time of delivery of this prospectus supplement and the
accompanying prospectus or of any sale of our common stock.
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ABOUT NEOTHERAPEUTICS
NeoTherapeutics, Inc. is a development stage biopharmaceutical company
engaged in the discovery and development of novel therapeutic drugs intended to
treat neurological diseases and conditions, such as memory deficits associated
with Alzheimer's disease and aging, spinal cord injuries, Parkinson's disease,
other degenerative diseases that affect the nervous system and psychiatric
diseases. We are also engaged in research involving functional genomics, or the
study of how genes function in the body, and the development of drugs for the
treatment of cancer. Our lead product candidate, Neotrofin(TM) (also known as
AIT-082 or leteprinim potassium), and other compounds under development, are
based on our patented technology. This technology uses small synthetic molecules
to create non-toxic compounds, intended to be administered orally or by
injection, that are capable of passing through the blood-brain barrier, which is
a layer of cells that prevents some molecules that may be harmful from entering
the brain, to rapidly act upon specific target cells in specific locations in
the central nervous system, including the brain. Animal and laboratory tests
have shown that Neotrofin(TM) appears to selectively increase the production of
certain neurotrophic factors, a type of large protein involved in nerve cell
proliferation, differential and survival, in selected areas of the brain and in
the spinal cord. These neurotrophic factors regulate nerve cell growth and
function. Our technology has been developed to capitalize on the beneficial
effects of these proteins, which have been widely acknowledged to be closely
involved in the early formation and differentiation of the central nervous
system. We believe that Neotrofin(TM) could have therapeutic and regenerative
effects. We have observed no serious negative side effects in patients receiving
Neotrofin(TM) in our clinical trials; however, patients have reported
experiencing fatigue, headache, nausea, confusion and depression at rates
consistent with those normally seen in the elderly Alzheimer's disease test
population. NeoGene Technologies, Inc., a subsidiary of NeoTherapeutics, Inc.,
is engaged in functional genomics research. On November 16, 2000, we formed
another subsidiary, NeoOncoRx, Inc., for the purpose of in-licensing anti-cancer
compounds which are in the clinical trial stages of development. This oncology
division has recently begun clinical trials which include the study of
Neotrofin(TM) in patients with chemotherapy-induced neuropathy and the
anticancer compound Neoquin in the treatment of superficial bladder cancer.
Unless otherwise specified or required by context, references in this prospectus
supplement to "we," "us," "our" and "NeoTherapeutics" refer to NeoTherapeutics,
Inc. and its subsidiaries on a consolidated basis.
We currently have no marketable products, and do not expect to have any
products commercially available for at least two years, if at all. We have
incurred substantial losses since our inception, and expect our losses to
continue for at least the next several years. The pharmaceutical marketplace in
which we operate is highly competitive, and includes many large,
well-established companies pursuing treatments for Alzheimer's disease and some
of the other applications we are pursuing. See "Risk Factors" below.
This prospectus supplement relates to an offering by us on a "best efforts"
basis of up to 1,025,000 shares of our common stock at a purchase price of $2.00
per share and warrants to purchase up to 256,250 shares of our common stock at
an exercise price of $2.75 per share, to certain institutional and individual
investors for aggregate proceeds of approximately $2,050,000. In connection with
this offering, we will pay Ladenburg & Thalmann & Co. ("LTCO") a cash fee equal
to 5% of the aggregate proceeds received by us from investors introduced to us
by LTCO plus expenses for its services as placement agent. See "Plan of
Distribution" on page S-12 for more information regarding this arrangement.
We were incorporated in Colorado in December 1987 and reincorporated in
Delaware in June 1997. Our executive offices are located at 157 Technology
Drive, Irvine, California 92618. Our telephone number is (949) 788-6700. Our web
site address is www.neotherapeutics.com. Information contained in our web site
does not constitute part of this prospectus supplement.
Recent Developments
Issuance of Common Stock and Warrants
On March 12, 2002, we issued 2,575,000 shares of our common stock at a
negotiated purchase price per share of $2.00 and warrants to purchase up to
643,750 shares of our common stock at a purchase price per share of $2.75 to 14
investors for aggregate consideration of $5,150,000. The shares and warrants
were issued pursuant to an effective Registration Statement on Form S-3. Please
see our Form 8-K filed with Securities and Exchange
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Commission on March 14, 2002 and incorporated by reference into this prospectus
supplement for more information.
Interim and Annual Financial Results
For the quarter ended December 31, 2001, we reported a net loss of $9.7
million compared to a net loss of $11.5 million for the quarter ended December
31, 2000. Our basic and diluted net loss per share for the same periods were
$(0.48) versus $(0.88) for the prior year. We reduced our net loss for the year
2001 by $18.6 million, or 40 percent, over the prior year period. Our loss for
the year of 2001 was $27.8 million, compared to $46.4 million during the same
period during 2000. Our basic and diluted net loss per share for the same
periods were $(1.46), after giving effect to the payment of dividends ($0.04 per
common share) on preferred stock, versus $(4.37) for the prior year.
During the fourth quarter, our research and development expenses decreased
from $9.6 million in 2000 to $7.3 million in 2001. For the year, our research
and development expenses decreased from $38.8 million in 2000 to $20.6 million
in 2001. General and administrative expenses increased from $1.7 million during
the fourth quarter of 2000 to $2.3 million during the fourth quarter of 2001.
For the year, our general and administrative expenses increased from $5.1
million in 2000 to $7.6 million in 2001.
During the fourth quarter, we raised approximately $7.2 million in cash
through the sale of common equity, and ended the quarter with $7.2 million in
cash and short-term investments on hand, compared to $8.2 million at the end of
September 2001 and $11.5 million at the end of December 2000. So far during the
first quarter of 2002, the Company has raised an additional $5.15 million
through the sale of common stock as is mentioned above.
RISK FACTORS
Your investment in our common stock involves a high degree of risk. You
should consider the risks and other matters described below and the other
information contained in this prospectus supplement, the accompanying prospectus
and the documents incorporated by reference herein and therein, carefully before
deciding to invest in our common stock. If any of the following risks and other
matters discussed actually occurs, our business, prospects, financial condition
and operating results would be significantly harmed. As a result, the trading
price of our common stock could decline, and you could lose a part or all of
your investment.
Our losses will continue to increase as we expand our development efforts, and
our efforts may never result in profitability.
Our cumulative losses during the period from our inception in 1987 through
September 30, 2001 were approximately $114.3 million, almost all of which
consisted of research and development and general and administrative expenses.
We lost approximately $11.6 million in 1998, $26.0 million in 1999,
approximately $46.4 million in 2000 and approximately $18.1 million in the nine
months ended September 30, 2001. We expect our losses to decrease in the year
2001 as compared to the year 2000 due in part to anticipated savings of
approximately $10.0 million from our transition to managing our clinical trials
ourselves rather than contracting with third parties for this function. However,
we expect our losses to increase in the future as we expand our clinical trials
and increase our research and development activities. Moreover, we may not
realize the anticipated savings from the changes in our clinical trial program.
We currently do not sell any products and we may never achieve significant
revenues or become profitable. Even if we eventually generate revenues from
sales, we nevertheless expect to incur significant operating losses over the
next several years.
Our potential drug products are in an early stage of clinical and preclinical
development and may not prove safe or effective enough to obtain regulatory
approval to sell any of them.
We currently are testing our first potential drug product, Neotrofin(TM),
in human clinical trials. We are currently conducting three clinical trials of
Neotrofin(TM) for Alzheimer's disease, spinal cord injury and Parkinson's
disease, and we expect to complete these trials before the end of the first
quarter of 2002 with full data analysis to be completed within approximately
sixty days thereafter. In conjunction with our subsidiary, NeoOncoRx, Inc., we
have acquired rights to three anti-cancer drugs that are in clinical trials, and
we have commenced a clinical trial of Neotrofin(TM) for chemo-induced
neuropathy. We expect that we will need to complete additional trials before we
will be able to apply for regulatory approval to sell Neotrofin(TM) or any of
our other potential drug products. Our
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other proposed products are in preclinical development. We cannot be certain
that any of our potential or proposed products will prove to be safe or
effective in treating disorders of the central nervous system or any other
diseases. All of our potential drugs will require additional research and
development, testing and regulatory clearance before we can sell them. We cannot
be certain that we will receive regulatory approval to sell any of our potential
drugs. We do not expect to have any products commercially available for at least
two years, if at all.
If we are unable to obtain substantial additional funding on acceptable terms,
we may have to delay or eliminate one or more of our development programs.
We currently are spending cash at a rate in excess of approximately $2.3
million per month, and we expect this rate of spending to continue for at least
the next twelve months assuming continued progress of clinical testing of
Neotrofin(TM). If there is a change in the progress of clinical testing of
Neotrofin(TM), our spending rate might decrease. We currently expect that we
will need to raise additional cash within approximately four months to avoid
making substantial reductions to our operations. While we will continue to look
to sales of our common stock pursuant to our existing sales agreements and our
Class B Warrants as financing sources, we believe that we will need to obtain
additional financing from other sources or enter into strategic alliances with
major pharmaceutical companies to satisfy our current funding requirements for
at least the next twelve months assuming continued progress of clinical testing
of Neotrofin(TM) and our other drug candidates. Also, if the market price of our
common stock is less than $2.00 per share, we may not be able to use our Class B
Warrants as a financing source. As of March 11, 2002, Class B Warrants have been
exercised for 586,400 shares and gross proceeds of approximately $5.1 million.
We have not issued any call notices under our Class B Warrants since November
2000, and the Class B Warrants expire in June 2002.
We intend to continue to seek alternative sources of funding for the
foreseeable future. We may not be able to obtain additional funds on acceptable
terms or at all. Should we not be able to continue to make sales under our
existing sales agreements, utilize our Class B Warrants or obtain additional
funding we will have to delay or eliminate one or more of our development
programs.
We will need substantial additional funds to complete the research and
development and clinical trials of Neotrofin(TM), our lead drug candidate,
before we will be able to submit it to the FDA for approval for commercial sale.
We will also need substantial additional funds to support the continued research
and development and clinical trials of our other potential products. Since we
currently have no products available for commercial sale and minimal revenues
from licensing in our genomics division, we must use capital to fund our
operating expenses. Our operating expenses, and consequently our capital
requirements, will depend on many factors, including:
.. continued scientific progress in research and development to identify and
develop or obtain additional product candidates;
.. the costs and progress of preclinical and clinical testing of
Neotrofin(TM), our anti-cancer drugs and additional drug candidates;
.. the cost involved in filing, prosecuting and enforcing patent claims; and
.. the time and cost involved in obtaining regulatory approvals for our
potential products.
In addition, if we are successful in obtaining regulatory approval of one or
more of our potential products, we will require additional capital to cover
costs associated with commercializing our products.
We expect to seek additional funding through public or private financings
or collaborative or other arrangements with third parties. We may not obtain
additional funds on acceptable terms, if at all. If adequate funds are not
available, we will have to delay or eliminate one or more of our development
programs.
Competition for patients in conducting clinical trials and extensive regulations
governing the conduct of clinical trials may prevent or delay approval of a drug
candidate and strain our limited financial resources.
Many pharmaceutical companies are conducting clinical trials in patients
with Alzheimer's disease, Parkinson's disease, spinal cord injuries and the
forms of cancer our product candidates address. As a result, we must compete
with them for clinical sites, physicians and the limited number of patients with
these diseases or injuries who fulfill the stringent requirements for
participation in clinical trials. In addition, due to a lack of
S-5
available information about the condition of Alzheimer's disease sufferers in
the United States, we cannot be certain how many of the over 4 million patients
with Alzheimer's disease in the United States would meet the requirements for
participating in our clinical trials. Also, due to the confidential nature of
clinical trials, we cannot be certain how many of the eligible Alzheimer's
disease, Parkinson's disease, spinal cord injury and cancer patients may be
enrolled in competing studies and consequently not available to us. This
competition may increase costs of our clinical trials and delay the introduction
of our potential products.
Any failure to comply with extensive governmental regulation could prevent or
delay product approval or cause governmental authorities to disallow our
products after approval and subject us to criminal or civil liabilities.
The U.S. Food and Drug Administration, or FDA, and comparable agencies in
foreign countries impose many requirements on the introduction of new drugs
through lengthy and detailed clinical testing procedures, and other costly and
time-consuming compliance procedures. These requirements apply to every stage of
the clinical trial process and make it difficult to estimate when Neotrofin(TM)
or any other of our potential products will be available commercially, if at
all.
Our proprietary compounds will require substantial clinical trials and FDA
review as new drugs. Even if we successfully enroll patients in our clinical
trials, patients may not respond to our potential drug products. We think it is
prudent to expect setbacks. While we believe that we are currently in compliance
with applicable FDA regulations, if we fail to comply with the regulations
applicable to our clinical testing, the FDA may delay, suspend or cancel our
clinical trials, or the FDA might not accept the test results. The FDA, or any
comparable regulatory agency in another country, may suspend clinical trials at
any time if it concludes that the trials expose patients participating in such
trials to unacceptable health risks. Further, human clinical testing may not
show any current or future product candidate to be safe and effective to the
satisfaction of the FDA or comparable regulatory agencies or the data derived
therefrom may be unsuitable for submission to the FDA or other regulatory
agencies.
We cannot predict with certainty when we might submit any of our proposed
products currently under development for the regulatory approval required in
order to commercially sell the products. Once we submit a proposed product for
commercial sale approval, the FDA or other regulatory agencies may not issue
their approvals on a timely basis, if at all. If we are delayed or fail to
obtain these approvals, our business and prospects may be significantly damaged.
If we fail to comply with regulatory requirements, either prior to seeking
approval or in marketing our products after approval, we could be subject to
regulatory or judicial enforcement actions. These actions could result in:
.. product recalls or seizures;
.. injunctions;
.. civil penalties;
.. criminal prosecution;
.. refusals to approve new products and withdrawal of existing approvals; and
.. enhanced exposure to product liabilities.
The loss of key researchers or managers could hinder our drug development
process significantly and might cause our business to fail.
Our success depends upon the contributions of our key management and
scientific personnel, especially Dr. Alvin Glasky, our Chief Executive Officer
and Chief Scientific Officer. Dr. Glasky has led our research and business
developments since founding our business in 1987 and is the inventor on several
of our patents. Our loss of the services of Dr. Glasky or any other key
personnel could delay or preclude us from achieving our business objectives.
Although we currently have key-man life insurance on Dr. Glasky in the face
amount of $2 million, we believe that the loss of Dr. Glasky's services would
damage our research and development efforts substantially. Dr. Glasky has an
employment agreement with us that provides for a three year term expiring
December 31, 2003, with automatic one-year renewals thereafter unless we or Dr.
Glasky gives notice of intent not to renew at least 90 days in advance of the
renewal date.
S-6
In addition to Dr. Glasky, the loss of Dr. Luigi Lenaz, our Vice
President, Oncology Division and President of our subsidiary NeoOncoRx, Inc.,
would damage the development of our anti-cancer business substantially, and the
loss of the services of Dr. Olivier Civelli, consultant to our subsidiary
NeoGene, Inc., would harm the development of our functional genomics business
substantially. Dr. Lenaz has an employment agreement with us that will expire on
July 1, 2003, with automatic one year renewals thereafter unless we or Dr. Lenaz
gives notice of intent not to renew at least 90 days in advance of the renewal
date. We also will need substantial additional expertise in finance and
marketing and other areas in order to achieve our business objectives.
Competition for qualified personnel among pharmaceutical companies is intense,
and the loss of key personnel, or the inability to attract and retain the
additional skilled personnel required for the expansion of our business, could
significantly damage our business.
If we cannot protect or enforce our intellectual property rights adequately, the
value of our research could decline as our competitors appropriate portions of
our research.
We actively pursue patent protection for our proprietary products and
technologies. We hold rights to nine U.S. patents and currently have seventeen
U.S. patent applications pending, including one which has been allowed. Our
issued patents expire between 2009 and 2019. In addition, we have numerous
foreign patents issued and patent applications pending corresponding to our U.S.
patents. However, our patents may not protect us against our competitors. We may
have to file suit to protect our patents or to defend our use of our patents
against infringement claims brought by others. Because we have limited cash
resources, we may not be able to afford to pursue or defend against litigation
in order to protect our patent rights.
We also rely on trade secret protection for our unpatented proprietary
technology. However, trade secrets are difficult to protect. While we enter into
confidential information agreements with our employees and consultants, these
agreements may not successfully protect our trade secrets or other proprietary
information.
We are a small company relative to our principal competitors and our limited
financial and research resources may limit our ability to develop and market new
products.
Many companies, both public and private, including well-known
pharmaceutical companies such as Amgen, Inc., Bayer AG, Eli Lilly and Co.,
Novartis AG, Bristol-Meyers Squibb Company, Pfizer, Inc., Janssen Pharmaceutica,
Inc. and Shire Pharmaceuticals Group plc, are developing products to treat
Alzheimer's disease and certain of the other applications we are pursuing. Most
of these companies have substantially greater financial, research and
development, manufacturing, marketing and sales experience and resources than
us. As a result, our competitors may be more successful than us in developing
their products, obtaining regulatory approvals and marketing their products to
consumers. While we believe, based on recent industry publications, that
Neotrofin(TM) is more advanced in the drug development process than most other
drugs seeking to use neurotrophic factors to treat Alzheimer's disease, we
cannot be certain that Neotrofin(TM) will be the first of these drugs to receive
FDA approval, if it receives approval at all. In addition, there are four drugs
currently approved for the treatment of Alzheimer's disease in the United
States, all of which use a different approach to the disease than Neotrofin(TM).
If these treatments are successful, or if other drugs using the neurotrophic
factor approach are approved before Neotrofin(TM), or if any of these drugs
prove to be more effective than Neotrofin(TM), the market for Neotrofin(TM)
could be reduced or eliminated.
Our lack of experience at conducting clinical trials ourselves may delay the
trials and increase our costs.
We have begun to conduct, and intend to conduct in the future, some
clinical trials ourselves rather than hiring outside contractors. We believe
this conversion may reduce the costs associated with the trials and give us more
control over the trials. However, while some of our management has had
experience at conducting clinical trials, we have never done so as a company.
While we have not experienced significant delays or increased costs to date due
to this conversion, as we move forward with our first self-conducted clinical
trials, our lack of experience may delay the trials and increase our costs. We
think it is prudent to expect setbacks as we make this transition.
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Holders of our warrants could engage in short selling to increase the number of
shares of common stock issuable upon conversion or exercise of the securities
and decrease the exercise price of the warrants. If this occurs, the market
price of our common stock may decline.
Short selling is a practice in which an investor borrows shares from a
stockholder to sell in the trading market, with an obligation to deliver the
same number of shares back to the lending stockholder at a future date. Short
sellers make a profit if the price of our common stock declines, allowing the
short sellers to sell the borrowed shares at a higher price than they have to
pay for shares delivered to the lending stockholder. Short selling increases the
number of shares of our common stock available for sale in the trading market,
putting downward pressure on the market price of our common stock.
Our Class B Warrants may be exercised for shares of our common stock based
in some cases on a floating exercise price related to the market price of our
common stock. The holders of these securities may benefit from the downward
price pressures caused by short selling due to the reduced exercise price that
must be paid to obtain shares of common stock upon exercise. In particular, the
exercise price of our outstanding Class B Warrants, if we deliver a redemption
notice, is equal to the lesser of $33.75 per share (subject to adjustment for
stock splits, reverse splits and combinations) and 97% (or 95% if the market
price of our common stock is less than $5.00 per share) of the closing bid price
of our common stock on the trading day after the redemption notice is delivered.
This fact could give the holders of our Class B Warrants incentive to sell short
our common stock after receipt of a redemption notice, which could cause the
market price to decline. The holders of the Class B Warrants could then exercise
their Class B Warrants and use the shares of common stock received upon exercise
to replace the shares sold short and thereby profit by the decline in the market
price of the common stock caused by their short selling. There are currently
outstanding Class B Warrants exercisable for 3,413,600 shares of common stock.
The Class B Warrants expire on June 12, 2002.
Montrose Investments Ltd. and Strong River Investments, Inc. each hold
Class B Warrants to purchase 1,706,800 shares of our common stock, or
approximately 6.5% of the total number of shares of our common stock
outstanding, which Class B Warrants have an exercise price of $33.75 per share
if we do not deliver a redemption notice. No other investors hold Class B
Warrants. These facts give these two investors greater influence over the market
price of our stock if we deliver a redemption notice, however, each of these
investors make independent investment decisions, and each has agreed to vote any
and all shares of our common stock that they own as recommended by our board of
directors in any meeting of our stockholders.
The trading price of our common stock must comply with the listing requirements
of the Nasdaq National Market or we could be delisted and the liquidity of our
common stock would decline.
Our common stock is listed on the Nasdaq National Market. To remain listed
on this market, we must meet Nasdaq's listing maintenance standards and abide by
Nasdaq's rules governing listed companies. If the price of our common stock
falls below $1.00 per share for an extended period, or if we fail to meet other
Nasdaq standards, including minimum market capitalization and minimum total
assets, or violate Nasdaq rules, our common stock could be delisted from the
Nasdaq National Market.
Nasdaq has established rules regarding the issuance of "future priced
securities" or securities convertible into common stock based on a floating
conversion price, so that the number of shares of common stock issuable upon
conversion of the securities is not known when the securities are sold. These
rules may apply to a number of securities we have issued in the past, because
the number of shares of our common stock issuable upon conversion of those
securities were based upon a future price of our common stock. Nasdaq's concerns
regarding these securities include the potential dilution to our existing
stockholders if the price of our common stock goes down causing a large number
of shares to be issued upon conversion of the securities, and the corresponding
potential for excessive return on investment for the purchaser of the
convertible securities. In addition, since the holders of future priced
securities may benefit from a decrease in the market price of our common stock,
those holders may have greater incentive to engage in manipulative practices. In
light of these concerns, Nasdaq has indicated that the following rules may be
implicated by future priced securities:
Stockholders must approve significant issuances of listed securities at a
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discount to market or book value. Nasdaq rules prohibit an issuer of listed
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securities from issuing 20% or more of its outstanding capital stock in one
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transaction or a series of related transactions at less than the greater of book
value or the then current market value without obtaining prior stockholder
consent.
Public interest concerns. Nasdaq may terminate the listing of a security if
------------------------
necessary to prevent fraudulent and manipulative acts and practices or to
protect investors and the public interest. With respect to future priced
securities, Nasdaq has indicated that it may delist a security if the returns
with respect to the future priced security become excessive compared to the
returns being earned by public investors in the issuer's securities.
Furthermore, some requirements for continued listing, such as the $1.00
minimum bid price requirement, are outside of our control. Accordingly, there is
a risk that Nasdaq may delist our common stock.
If our common stock is delisted, we would likely seek to list our common
stock on the Nasdaq SmallCap Market or for quotation on the American Stock
Exchange or a regional stock exchange, if available. However, listing or
quotation on such market or exchange could reduce the market liquidity for our
common stock. If our common stock were not listed or quoted on another market or
exchange, trading of our common stock would be conducted in the over-the-counter
market on an electronic bulletin board established for unlisted securities or in
what are commonly referred to as the "pink sheets." As a result, an investor
would find it more difficult to dispose of, or to obtain accurate quotations for
the price of, our common stock. In addition, delisting from the Nasdaq National
Market and failure to obtain listing or quotation on such other market or
exchange would subject our common stock to so-called "penny stock" rules. These
rules impose additional sales practice and market-making requirements on
broker-dealers who sell and/or make a market in such securities. Consequently,
if our common stock is delisted from the Nasdaq National Market and we fail to
obtain listing or quotation on another market or exchange, broker-dealers may be
less willing or able to sell and/or make a market in our common stock and
purchasers of our common stock may have more difficulty selling such common
stock in the secondary market. In either case, the market liquidity of our
common stock would decline.
There are a substantial number of shares of our common stock eligible for future
sale in the public market. The sale of these shares could cause the market price
of our common stock to fall. Any future equity issuances by us may have dilutive
and other effects on our existing stockholders.
There were 26,351,951 shares of our common stock outstanding as of March
14, 2002. In addition, security holders held options, warrants and other rights
as of March 14, 2002 which, if exercised, would obligate us to issue up to an
additional 11,072,292 shares of common stock at a weighted average exercise
price of $15.42 per share, of which 3,664,663 shares are subject to options or
warrants which are currently exercisable at the sole election of the holder at a
weighted average exercise price of $7.56 per share. Many of these shares, if
issued, would likely be issued at a discount to the prevailing market price. A
substantial number of those shares, when we issue them upon exercise, will be
available for immediate resale in the public market. In addition, we have the
ability to sell up to approximately $11.5 million of our common stock pursuant
to a shelf registration that will be eligible for immediate resale in the
market, less the dollar amount of our common stock sold under this prospectus
supplement. The market price of our common stock could fall as a result of such
resales due to the increased number of shares available for sale in the market.
If all 11,072,292 shares were issued without any increase in our market
capitalization, the market price per share of our common stock may be reduced by
approximately 30%, excluding any effects of any other developments or market
factors.
We have financed our operations, and we expect to continue to finance our
operations, by issuing and selling our common stock or securities convertible
into or exercisable for shares of our common stock. Any issuances by us of
equity securities may be at or below the prevailing market price of our common
stock and may have a dilutive impact on our other stockholders. These issuances
would also cause our net income, if any, or loss per share to decrease in future
periods. As a result, the market price of our common stock could drop.
We may be subject to product liability claims, and may not have sufficient
product liability insurance to cover any claims, which may expose us to
substantial liabilities.
We may be exposed to product liability claims from patients who participate
in our clinical trials, or, if we are able to obtain FDA approval for one or
more of our potential products, from consumers of our products. Although we
currently carry product liability insurance in the amount of $5 million per
occurrence, it is possible that the amounts of this coverage will be
insufficient to protect us from future claims. Further, we cannot be certain
that we will be able to maintain our existing insurance or obtain or maintain
additional insurance on acceptable terms for
S-9
our clinical and commercial activities or that such additional insurance would
be sufficient to cover any potential product liability claim or recall. Failure
to maintain sufficient insurance coverage could have a material adverse effect
on our business, prospects and results of operations if claims are made that
exceed our coverage.
The use of hazardous materials in our research and development efforts imposes
certain compliance costs on us and may subject us to liability for claims
arising from the use or misuse of these materials.
Our research and development efforts involve the use of hazardous
materials, including biological materials, chemicals and radioactive materials.
We are subject to federal, state and local laws and regulations governing the
storage, use and disposal of these materials and some waste products. We believe
that our safety procedures for the storage, use and disposal of these materials
comply with the standards prescribed by federal, state and local regulations.
However, we cannot completely eliminate the risk of accidental contamination or
injury from these materials. If there were to be an accident, we could be held
liable for any damages that result, which could exceed our financial resources.
We currently maintain insurance coverage of up to $1,000,000 per occurrence for
injuries resulting from the hazardous materials we use, and up to $25,000 per
occurrence for pollution clean up and removal, however, future claims may exceed
these amounts. Currently the costs of complying with federal, state and local
regulations are not significant, and consist primarily of waste disposal
expenses. We may incur substantially increased costs to comply with regulations,
particularly environmental regulations, if we develop our own commercial
manufacturing facility.
The market price and volume of our common stock fluctuate significantly and
could result in substantial losses for individual investors.
The stock market from time to time experiences significant price and volume
fluctuations that are unrelated to the operating performance of particular
companies. These broad market fluctuations may cause the market price and volume
of our common stock to decrease. In addition, the market price and volume of our
common stock is highly volatile. Factors that may cause the market price and
volume of our common stock to decrease include fluctuations in our results of
operations, timing and announcements of our technological innovations or new
products or those of our competitors, FDA and foreign regulatory actions,
developments with respect to patents and proprietary rights, public concern as
to the safety of products developed by us or others, changes in health care
policy in the United States and in foreign countries, changes in stock market
analyst recommendations regarding our common stock, the pharmaceutical industry
generally and general market conditions. In addition, the market price and
volume of our common stock may decrease if our results of operations fail to
meet the expectations of stock market analysts and investors. While a decrease
in market price could result in direct economic loss for an individual investor,
low trading volume could limit an individual investor's ability to sell our
common stock, which could result in substantial economic loss as well. During
the last year, the price of our common stock has ranged between $6.60 and $2.06,
and the daily trading volume has been as high as 1,140,800 shares and as low as
10,222 shares, with a recent average of approximately 115,924 shares.
Our directors and executive officers own a substantial percentage of our common
stock. Their ownership could allow them to exercise significant control over
corporate decisions and to implement corporate acts that are not in the best
interests of our stockholders as a group.
Our directors and executive officers beneficially own approximately 12.1%
of our outstanding common stock as of February 12, 2002. In addition, several of
our stockholders, including Montrose Investments Ltd. and Strong River
Investments, Inc. have agreed that they will vote any and all shares of our
common stock that they own as recommended by our board of directors in any
meeting of our stockholders. As of March 14, 2002, we believe these stockholders
collectively held less than 750,000 shares of our common stock, or approximately
2.8% of the number of shares outstanding, and held warrants which could result
in the issuance of up to 4,713,145 additional shares, for a total of 5,463,145
shares or 17.2% of the total number outstanding if all of those securities were
converted or exercised. However, none of the additional shares can be issued at
the option of the holder within 60 days of March 14, 2002. As a result of these
holdings, our directors and executive officers, if they acted together, could
exert substantial influence over matters requiring approval by our stockholders.
These matters would include the election of directors and the approval of
mergers or other business combination transactions. This concentration of
ownership and voting power may discourage or prevent someone from acquiring our
business.
S-10
Certain Charter and Bylaws provisions and our Stockholder Rights Plan may make
it more difficult for someone to acquire control of us or replace current
management.
Certain provisions of our Certificate of Incorporation and Bylaws may make
it more difficult for someone to acquire control of us or replace our current
management. These provisions may make it more difficult for stockholders to take
certain corporate actions and could delay, discourage or prevent someone from
acquiring our business or replacing our current management, even if doing so
would benefit our stockholders. These provisions could limit the price that
certain investors might be willing to pay for shares of our common stock.
On December 13, 2000, we adopted a Stockholder Rights Plan pursuant to
which we have distributed rights to purchase units of our capital Series B
Junior Participating Preferred Stock. The rights become exercisable upon the
earlier of ten days after a person or group of affiliated or associated persons
has acquired 20% or more of the outstanding shares of our common stock or ten
business days after a tender offer has commenced that would result in a person
or group beneficially owning 20% or more of our outstanding common stock. These
rights could delay or discourage someone from acquiring our business, even if
doing so would benefit our stockholders.
FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and the documents
incorporated by reference herein and therein, contain forward-looking statements
that are based on current expectations, estimates and projections about our
industry, management's beliefs, and assumptions made by management. Words such
as "anticipates," "expects," "intends," "plans," "believes," "seeks,"
"estimates," and variations of such words and similar expressions are intended
to identify such forward-looking statements. These statements are not guarantees
of future performance and are subject to certain risks, uncertainties and
assumptions that are difficult to predict; therefore, actual results may differ
materially from those expressed or forecasted in any forward-looking statements.
The risks and uncertainties include those noted in "Risk Factors" above, those
in the accompanying prospectus and those in the documents incorporated by
reference herein and therein.
We undertake no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise,
except to the extent that we are required to do so by law or regulations. We
also may make additional disclosures in our Annual Report on Form 10-K, our
definitive proxy statement filed in connection with our 2001 Annual Meeting of
Stockholders, our Quarterly Reports on Form 10-Q and our Current Reports on Form
8-K that we may file from time to time with the Securities and Exchange
Commission, or SEC. Please also note that we provide a cautionary discussion of
risks and uncertainties under the section entitled "Risk Factors" in our Annual
Report on Form 10-K. These are factors that we think could cause our actual
results to differ materially from expected or forecasted results. Other factors
besides those listed here could also adversely affect us. This discussion is
provided as permitted by the Private Securities Litigation Reform Act of 1995.
USE OF PROCEEDS
If we were to sell 1,025,000 shares of our common stock pursuant to this
offering, the net proceeds to us, before deducting the estimated placement agent
and/or finder fees and our estimated offering expenses, will be approximately
$2,050,000 based upon the public offering price of $2.00 per share. Any
placement agent or finder associated with this offering is working solely on a
best efforts basis and therefore, we may not sell the entire amount of shares of
our common stock offered pursuant to this prospectus. We plan to use the net
proceeds we raise for general corporate purposes, including:
. Working capital
. Capital expenditures
. Research and development
. General and administrative expenses
We may also use a portion of the net proceeds for the acquisition of, or
investment in, companies, technologies or assets. Net proceeds from the sale of
the offered securities initially may be temporarily invested in short-term
interest-bearing securities.
S-11
DILUTION
The net tangible book value of our common stock on September 30, 2001 was
$9,101,411 million, or approximately $0.42 per share. Net tangible book value
per share represents the amount of our total tangible assets, less our total
liabilities, divided by the total number of shares of our common stock
outstanding. Dilution in net tangible book value per share to new investors
represents the difference between the amount per share paid by purchasers of
shares of our common stock in this offering and the net tangible book value per
share of our common stock immediately afterwards. Without taking into account
any other changes in net tangible book value after September 30, 2001, other
than to give effect to the sale of 1,025,000 shares of common stock offered by
us at a price of $2.00 per share and after deducting the estimated placement
agent fees and estimated offering expenses payable by us, our net tangible book
value would have been $11,028,411 million, or approximately $0.48 per share.
This represents an immediate increase in net tangible book value of $0.06 per
share to existing stockholders and an immediate dilution in net tangible book
value of $1.52 per share to new investors.
Offering price per share ............................................ $2.00
Net tangible book value per share as of September 30, 2001 .......... $0.42
Increase per share attributable to new investors .................... 0.06
-----
As adjusted net tangible book value per share after the offering .... 0.48
-----
Dilution in net tangible book value per share to new investors ...... $1.52
=====
This table excludes shares of common stock issuable upon exercise of
options, warrants and other rights, and the effect of shares of common stock
issued since September 30, 2001.
PLAN OF DISTRIBUTION
Our common stock is traded on the Nasdaq National Market under the symbol
"NEOT."
This prospectus supplement relates to an offering by us on a "best efforts"
basis of up to 1,025,000 shares of our common stock at a purchase price of $2.00
per share and warrants to purchase up to 256,250 shares of our common stock at
an exercise price of $2.75 per share, to certain institutional and individual
investors for aggregate proceeds of approximately $2,050,000. In connection with
this offering, we will pay Ladenburg & Thalmann & Co. ("LTCO") a fee for its
services as a placement agent. Any placement agent or finder associated with
this offering is working solely on a best efforts basis and therefore, we may
not sell the entire amount of shares of our common stock offered pursuant to
this prospectus. The Ladenburg placement agent arrangement is described below.
Any placement agent, finder, broker or dealer that participates in the
distribution (collectively, "Distribution Participants"), may be deemed to be an
underwriter within the meaning of Section 2(a)(11) of the Securities Act, and
any commissions received by these brokers or dealers and any profit realized on
the resale of the securities sold by them while acting as principal might be
deemed to be underwriting discounts or commissions under the Securities Act. As
underwriters they would be required to comply with the requirements of the
Securities Act and the Securities Exchange Act of 1934, as amended, or the
Exchange Act, including, without limitation, Rule 415(a)(4) under the Securities
Act and Rule 10b-5 and Regulation M under the Exchange Act. These rules and
regulations may limit the timing of purchases and sales of shares of common
stock by "Distribution Participants." Under these rules and regulations,
Distribution Participants:
. may not engage in any stabilization activity in connection with our
securities; and
. may not bid for or purchase any of our securities or attempt to induce
any person to purchase any of our securities, other than as permitted
under the Exchange Act, until such Distribution Participant has
completed its participation in the distribution.
On November 19, 2001, we entered into a letter agreement with LTCO pursuant
to which LTCO shall act as a non-exclusive placement agent in connection with
proposed public offerings of up to $20 million of our common stock and/or
warrants to purchase our common stock on the Nasdaq National Market pursuant to
our existing effective shelf Registration Statement on Form S-3, file number
333-53108. The terms of any offering shall be agreed to between the purchasers
and us from time to time. LTCO's obligations under the agreement are on a
reasonable best efforts basis only and the execution of the agreement does not
constitute a commitment by LTCO to
S-12
purchase any of our securities or ensure the successful placement of any of our
securities. The agreement shall remain in effect until August 1, 2002, unless
terminated earlier by either party with 30 days written notice.
Pursuant to the agreement, we shall pay LTCO: (i) a non-accountable expense
allowance equal to 3% of the gross offering proceeds received by us from
investors introduced to us by LTCO with an overall limit of $150,000, (ii) an
advance of $50,000 which will be returned to us to the extent not earned through
placements of securities or incurred through expenses and (iii) a cash fee
payable upon each closing of the sale of securities to investors introduced to
us by LTCO equal to 5% of the gross offering proceeds received by us from the
investors at each closing. We have already paid LTCO approximately $80,000 for
expenses related to offerings on December 10, 2001 and March 13, 2002.
A complete copy of our agreement with LTCO was filed with the Securities
and Exchange Commission on December 11, 2001, as Exhibit 1.1 to our Form 8-K.
We may use one or more additional placement agents or finders in connection
with this offering.
In addition, we estimate that our share of the total expenses of this
offering, excluding the placement agent fees and expense reimbursements, will be
approximately $10,000.
We have also agreed to indemnify LTCO against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
LTCO may be required to make in respect of such liabilities.
DESCRIPTION OF COMMON STOCK
The following summary of the terms of our common stock does not purport to
be complete and is subject to and qualified in its entirety by reference to our
Charter and Bylaws, copies of which are on file with the Commission. See "Where
You Can Find More Information."
We have authority to issue 50,000,000 shares of common stock, $.001 par
value per share. As of March 14, 2002, we had 26,351,951 shares of common stock
outstanding, held of record by approximately 400 stockholders.
Terms
Holders of our common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. The holders of common stock are
not entitled to cumulative voting rights with respect to election of directors,
and as a consequence, minority stockholders will not be able to elect directors
on the basis of their shares alone. Our board of directors is divided into three
classes, with the term of each class expiring every third year at the annual
meeting of stockholders. The number of directors is distributed equally between
the three classes. Subject to the preferences that may be applicable to the
holders of outstanding shares of preferred stock, if any, the holders of our
common stock are entitled to receive ratably such lawful dividends as may be
declared by the Board of Directors. In the event of liquidation, dissolution or
winding up of NeoTherapeutics, and subject to the rights of the holders of
outstanding shares of preferred stock, if any, the holders of shares of our
common stock shall be entitled to receive pro rata all of our remaining assets
available for distribution to our stockholders. Our common stock has no
preemptive or conversion rights, other subscription rights, or redemption or
sinking fund provisions. All outstanding shares of our common stock are fully
paid and nonassessable. The rights, powers, preferences and privileges of
holders of our common stock are subject to, and may be adversely affected by,
the rights of the holders of shares of any series of preferred stock, if any.
Stockholder Rights Plan
On December 13, 2000, we adopted a Stockholder Rights Plan pursuant to
which we have distributed rights to purchase units of our capital Series B
Junior Participating Preferred Stock. The rights become exercisable upon the
earlier of ten days after a person or group of affiliated or associated persons
has acquired 20% or more of the outstanding shares of our common stock or ten
business days after a tender offer has commenced that would result in a person
or group beneficially owning 20% or more of our outstanding common stock. The
description and terms
S-13
of the rights are set forth in a Rights Agreement between us and U.S. Stock
Transfer Corporation, as rights agent, filed with the Securities and Exchange
Commission on December 26, 2000, as Exhibit 4.1 to our Form 8-A.
Certain Provisions of Delaware Law and of the Company's Charter and Bylaws
The following paragraphs summarize certain provisions of the Delaware
General Corporation Law and the Company's Charter and Bylaws. The summary does
not purport to be complete and is subject to and qualified in its entirety by
reference to the DGCL and to the Company's Charter and Bylaws, copies of which
are on file with the Commission. See "Where You Can Find More Information."
Our Certificate of Incorporation and Bylaws contain provisions that,
together with the ownership position of the officers, directors and their
affiliates, could discourage potential takeover attempts and make it more
difficult for stockholders to change management, which could adversely affect
the market place of our common stock.
Our Certificate of Incorporation limits the personal liability of our
directors to NeoTherapeutics and our stockholders to the fullest extent
permitted by the Delaware General Corporation Law, or DGCL. The inclusion of
this provision in our Certificate of Incorporation may reduce the likelihood of
derivative litigation against directors and may discourage or deter stockholders
or management from bringing a lawsuit against directors for breach of their duty
of care.
Our Bylaws provide that special meetings of stockholders can be called only
by the Board of Directors, the Chairman of the Board of Directors or the Chief
Executive Officer. Stockholders are not permitted to call a special meeting and
cannot require the Board of Directors to call a special meeting. There is no
right of stockholders to act by written consent without a meeting, unless the
consent is unanimous. Any vacancy on the Board of Directors resulting from
death, resignation, removal or otherwise or newly created directorships may be
filled only by vote of the majority of directors then in office, or by a sole
remaining director. Our Bylaws establish advance notice procedures with respect
to stockholder proposals and the nomination of candidates for election as
directors, except for nominations made by or at the direction of the board of
directors or a committee of the board. Our Bylaws also provide for a classified
board. See "Terms" above.
We are subject to the "business combination" statute of the DGCL, an
anti-takeover law enacted in 1988. In general, Section 203 of the DGCL prohibits
a publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder," for a period of three years after the date of
the transaction in which a person became an "interested stockholder," unless:
. prior to such date the board of directors of the corporation approved
either the "business combination" or the transaction which resulted in
the stockholder becoming an "interested stockholder,"
. upon consummation of the transaction which resulted in the stockholder
becoming an "interested stockholder," the "interested stockholder"
owned at least 85% of the voting stock of the corporation outstanding
at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (1) by
persons who are directors and also officers and (2) employee stock
plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer, or
. at or subsequent to such time the "business combination" is approved
by the board of directors and authorized at an annual or special
meeting of stockholders, and not be written consent, by the
affirmative vote of a least 66 2/3% of the outstanding voting stock
which is not owned by the "interested stockholder."
A "business combination" includes mergers, stock or asset sales and other
transactions resulting in a financial benefit to the "interested stockholders."
An "interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of the
corporation's voting stock. Although Section 203 permits us to elect not to be
governed by its provisions, we have not made this election. As a result of the
application of Section 203, potential acquirers of NeoTherapeutics may be
discouraged from attempting to effect an acquisition transaction with us,
thereby possibly depriving holders of our securities of certain opportunities to
sell or otherwise dispose of such securities at above-market prices pursuant to
such transactions.
S-14
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is U.S. Stock
Transfer Corporation.
DESCRIPTION OF WARRANTS
As of March 14, 2002, we had warrants to purchase 6,689,317 shares of our
common stock outstanding at a weighted average exercise price of $21.91 per
share (other than options issued under our stock option plans and non-qualified
options issued to our employees and consultants outside of our stock option
plans).
This prospectus supplement relates to the issuance of warrants to purchase
up to 256,250 shares of our common stock and the issuance of the shares of
common stock upon exercise of the warrants. The warrants will have an exercise
price of $2.75 per share and are immediately exercisable. The warrants will
expire if not exercised within five years of their date of issuance. The shares
of our common stock underlying the warrants, when issued upon exercise of the
warrants, will be fully paid and nonassessable, and we will pay any transfer tax
incurred as a result of the issuance of the underlying common stock except for
any tax payable in respect of any transfer in a name other than the holders.
The warrants contains provisions that protect the holders against dilution
by adjustment of the exercise price and the number of shares issuable. Such
adjustments will occur in the event, among others, of a:
. merger,
. stock split or reverse stock split,
. stock dividend,
. sale or transfer of all or substantially all of assets,
. reclassification, or
. distribution of assets (other than a liquidation).
We are not required to issue fractional shares upon the exercise of the
warrants. The holders of the warrants will not possess any rights as
shareholders of NeoTherapeutics until such holders exercise the warrants.
Each warrant may be exercised upon surrender of the warrant on or before
the expiration date of the warrant at our offices with the Form of Election to
Purchase attached to the warrant completed and signed as indicated, accompanied
by payment of the exercise price in immediately available funds, by certified
check or bank draft or by wire transfer to an account designated by us, for the
number of shares with respect to which the warrant is being exercised. We will
promptly deliver certificates representing the purchased shares to the
registered holder of the warrant, registered in the name specified in the Form
of Election to Purchase. The warrants do not contain provisions for cashless
exercise and there is no minimum or maximum amount which may be exercised at any
one time.
The warrants may not be transferred or assigned without our prior written
consent except in certain limited circumstances. We shall register the transfer
or assignment of any portion of a warrant in the warrant register upon surrender
of the warrant at our offices with the Form of Assignment attached to the
warrant completed and signed as indicated. Upon any such transfer or assignment,
a new warrant evidencing the portion transferred shall be issued to the
transferee, and a new warrant evidencing the remaining portion not transferred
shall be issued to the transferor. Each warrant is exchangeable, upon surrender
of the warrant at our offices, for one or more new warrants, evidencing in the
aggregate the right to purchase the number of shares of our common stock which
may then be purchased pursuant to the warrant.
For the life of the warrants, the holders of the warrants have the
opportunity to profit from a rise in the market price of our common stock
without assuming the risk of ownership of the shares of the underlying common
stock. The warrant holders may be expected to exercise the warrants at a time
when we would, in all likelihood, be
S-15
able to obtain any needed capital by an offering of our common stock on terms
more favorable than those provided for by the warrants. Furthermore, the terms
on which we obtain additional capital during the life of the warrants may be
adversely affected.
The warrants will not be listed on any exchange or quotation system. We
will act as warrant agent under the warrants.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C., 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. Our SEC filings are also available to the public at the SEC's
web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them which means that we can disclose important information to you by
referring you to those documents instead of having to repeat the information in
this prospectus supplement. The information incorporated by reference is
considered to be part of this prospectus supplement, and later information that
we file with the SEC will automatically update and supersede 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 Securities
Exchange Act of 1934 until the offering is terminated:
. Our annual report on Form 10-K for the fiscal year ended December 31,
2000, as amended by Form 10-K/A filed on April 25, 2001;
. Our quarterly reports on Form 10-Q for the quarters ended March 31,
2001, June 30, 2001 and September 30, 2001, filed on May 14, 2001,
August 14, 2001 and November 14, 2001, respectively;
. Our current reports on Form 8-K filed on February 16, 2001, March 14,
2001, May 21, 2001, August 15, 2001, August 27, 2001, September 24,
2001, October 24, 2001, October 30, 2001, December 11, 2001, December
20, 2001 and March 14, 2002;
. Our definitive proxy statement filed on April 30, 2001, pursuant to
Section 14 of the Exchange Act in connection with our 2001 Annual
Meeting of Stockholders; and
. The description of our common stock contained in the Registration of
Securities of Certain Successor Issuers filed pursuant to Section
12(g) of the Exchange Act on Form 8-B on June 27, 1997, including any
amendment or reports filed for the purpose of updating such
description.
. The description of our Rights to Purchase Series B Junior
Participating Preferred Stock contained in the Registration of Certain
Classes of Securities filed pursuant to Section 12(g) of the Exchange
Act on Form 8-A on December 26, 2000, including any amendment or
reports filed for the purpose of updating such description.
You can request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
NeoTherapeutics, Inc.
Attn: Investor Relations
157 Technology Drive
Irvine, California 92618
(949) 788-6700
You should rely only on the information contained in this prospectus
supplement, the accompanying prospectus, and the documents incorporated by
reference herein and therein. We have not authorized anyone else to provide you
with different information. We will not make an offer of these shares in any
state where the offer is not permitted. You should not assume that the
information in this prospectus supplement, the accompanying prospectus or any
other supplement or in the documents incorporated by reference herein and
therein is accurate on any date other than the date on the front of those
documents.
S-16
This prospectus supplement, the accompanying prospectus and any documents
incorporated by reference herein and therein, are part of a registration
statement we filed with the SEC (Registration No. 333-53108). The registration
statement and the documents incorporated by reference into it and this
prospectus supplement and the accompanying prospectus contain more information
about the shares sold by us pursuant to this prospectus supplement. Because
information about contracts referred to in this prospectus supplement and the
accompanying prospectus is not always complete, you should read the full
contracts which are incorporated by reference in the registration statement,
this prospectus supplement and the accompanying prospectus. You may read and
copy the full registration statement and the documents incorporated by reference
into it at the SEC's public reference rooms or their web site.
S-17
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus that is
also part of this document. We have not authorized anyone to provide information
different from that contained or incorporated in this prospectus supplement and
the accompanying prospectus. We are offering to sell, and seeking to buy, shares
of common stock only in jurisdictions where offers and sales are permitted. The
information contained or incorporated in this prospectus supplement and the
accompanying prospectus is accurate only as of the date of such information,
regardless of the time of delivery of this prospectus supplement and the
accompanying prospectus or of any sale of our common stock.
TABLE OF CONTENTS
Page
----
ABOUT NEOTHERAPEUTICS ................................................. S-3
RECENT DEVELOPMENTS ................................................... S-3
RISK FACTORS .......................................................... S-4
FORWARD-LOOKING STATEMENTS ............................................ S-11
USE OF PROCEEDS ....................................................... S-11
DILUTION .............................................................. S-12
PLAN OF DISTRIBUTION .................................................. S-12
DESCRIPTION OF COMMON STOCK ........................................... S-13
DESCRIPTION OF WARRANTS ............................................... S-15
WHERE YOU CAN FIND MORE INFORMATION ................................... S-16
NEOTHERAPEUTICS, INC.
UP TO 1,025,000 SHARES OF COMMON
STOCK
AND
WARRANTS TO PURCHASE UP TO 256,250
SHARES
OF COMMON STOCK
PROSPECTUS SUPPLEMENT
March 15, 2002