Filed pursuant to Rule 424(b)(3)
Registration No. 333-143246
PROSPECTUS
ELITE PHARMACEUTICALS INC.
COMMON STOCK
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This is an offering (the "OFFERING") of the following shares of common
stock, par value $.01 per share, of Elite Pharmaceuticals, Inc. (the "COMPANY",
"ELITE", "WE", "US" or "OUR"), by the selling stockholders named in this
prospectus or by pledgees, donees, transferees or other successors in interest
to the selling stockholders (the "SELLING STOCKHOLDERS"):
(i) 10,653,147 shares of common stock issuable upon conversion of outstanding
shares of our Series C PreferredH Stock, par value $.01 per share issued in
a private placement that closed on April 24, 2007 and shares of common
stock issuable in satisfaction of certain Series C Preferred Stock dividend
obligations;
(ii) 2,133,606 shares of common stock issuable upon exercise of warrants issued
in the private placement;
The common stock is listed on the American Stock Exchange under the symbol
"ELI." On May 21, 2007, the closing sales price of our common stock on the
American Stock Exchange was $2.30 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF FACTORS THAT YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF OUR 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 DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Other than receipt of the cash exercise price upon exercise of the warrants
issued in the private placement, we will receive no proceeds from the sale of
the shares of common stock sold by the Selling Stockholders.
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The date of this prospectus is July 11, 2007.
TABLE OF CONTENTS
Page
WHERE YOU CAN FIND MORE INFORMATION ABOUT US...................................1
PROSPECTUS SUMMARY.............................................................1
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION.....................2
RISK FACTORS...................................................................3
USE OF PROCEEDS...............................................................11
SELLING STOCKHOLDERS..........................................................11
PLAN OF DISTRIBUTION..........................................................16
LEGAL MATTERS.................................................................18
EXPERTS.......................................................................18
INCORPORATION BY REFERENCE....................................................18
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file reports, proxy statements, information statements and other
information with the Securities and Exchange Commission (the "SEC"). You may
read and copy this information, for a copying fee, at the SEC's Public Reference
Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for more information in its public reference rooms. Our SEC
filings are also available to the public from commercial document retrieval
services, from the American Stock Exchange and at the web site maintained by the
SEC at http://www.sec.gov.
We have not authorized anyone to give any information or make any
representation about the Offering that differs from, or adds to, the information
in this prospectus or in our documents that are publicly filed with the SEC and
that are incorporated in this prospectus. Therefore, if anyone does give you
different or additional information, you should not rely on it. The delivery of
this prospectus does not mean that there have not been any changes in our
condition since the date of this prospectus. If you are in a jurisdiction where
it is unlawful to offer the securities offered by this prospectus, or if you are
a person to whom it is unlawful to direct such activities, then the offer
presented by this prospectus does not extend to you. This prospectus speaks only
as of its date except where it indicates that another date applies. Documents
that are incorporated by reference in this prospectus speak only as of their
date, except where they specify that other dates apply.
THIS PROSPECTUS IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY NOR SHALL THERE BE ANY SALE OF SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM, OR INCORPORATED
BY REFERENCE INTO, THIS PROSPECTUS AND MAY NOT CONTAIN ALL THE INFORMATION THAT
IS IMPORTANT TO YOU. TO UNDERSTAND OUR BUSINESS AND THIS OFFERING FULLY, YOU
SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE CONSOLIDATED
FINANCIAL STATEMENTS AND THE RELATED NOTES AND THE DOCUMENTS INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS. REFERENCES IN THIS PROSPECTUS TO THE "COMPANY,"
"ELITE," "ELITE PHARMACEUTICALS," "WE," "OUR," AND "US" REFER TO ELITE
PHARMACEUTICALS, INC., A DELAWARE CORPORATION, TOGETHER WITH OUR SUBSIDIARIES.
PLEASE SEE "INCORPORATION BY REFERENCE" FOR A DESCRIPTION OF PUBLIC FILINGS
DEEMED INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
THE COMPANY
OVERVIEW
We are a specialty pharmaceutical company principally engaged in the
development and manufacture of oral, controlled release products. We develop
oral, controlled release products using proprietary technology and license these
products. Our strategy includes improving off-patent drug products for life
cycle management and developing generic versions of controlled release drug
products with high barriers to entry. Our technology is applicable to develop
delayed, sustained or targeted release pellets, capsules, tablets, granules and
powders.
We have two products, Lodrane 24(R) and Lodrane 24D(R), currently being
sold commercially, and a pipeline of seven drug candidates under development in
the therapeutic areas that include pain management, allergy and infection. Of
the products under development, ELI-216, an abuse deterrent oxycodone product
and ELI-154, a once daily oxycodone product are in clinical trials and we have
two generic product candidates that are undergoing pivotal studies. The
addressable market for our pipeline of products exceeds $6 billion. Our facility
in Northvale, New Jersey also is a Good Manufacturing Practice (GMP) and DEA
registered facility for research, development and manufacturing.
At the end of 2006, we formed, together with VGS Pharma, LLC, Novel
Laboratories, Inc. ("NOVEL"), a Delaware corporation as a separate specialty
pharmaceutical company for the research, development, manufacturing, licensing
and acquisition of specialty generic pharmaceuticals.
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We believe that our business strategy enables us to reduce our risk by
having a diverse product portfolio that includes both branded and generic
products in various therapeutic categories and build collaborations and
establish licensing agreements with companies with greater resources thereby
allowing us to share costs of development and to improve cash-flow.
CORPORATE INFORMATION
Elite Pharmaceuticals, Inc. was incorporated on October 1,1997 under the
laws of Delaware, and our wholly-owned subsidiaries, Elite Laboratories, Inc.
("ELITE LABS") and Elite Research, Inc. ("ELITE RESEARCH") were incorporated on
August 23, 1990 and December 20, 2002, respectively, under the laws of Delaware.
On October 24, 1997, Elite Pharmaceuticals merged with and into our
predecessor company, Prologica International, Inc. ("PROLOGICA"), an inactive
publicly held corporation formed under the laws of Pennsylvania. At the same
time, Elite Labs merged with a wholly-owned subsidiary of Prologica. Following
these mergers, Elite Pharmaceuticals survived as the parent of its wholly-owned
subsidiary, Elite Labs.
On September 30, 2002, we acquired from Elan Corporation, plc and Elan
International Services, Ltd. (together "ELAN") Elan's 19.9% interest in Elite
Research, Ltd., a Bermuda corporation ("ERL"), a joint venture formed between
Elite and Elan in which our initial interest was 100% of the outstanding common
stock which represented 80.1% of the outstanding capital stock. As a result of
the termination of the joint venture, we owned 100% of ERL's capital stock. On
December 31, 2002, ERL was merged into Elite Research, our wholly-owned
subsidiary.
Our common stock is traded on the American Stock Exchange under the symbol
"ELI". The market for our stock has historically been characterized generally by
low volume and broad range of prices and volume volatility. We cannot give any
assurance that a stable trading market will develop for our stock.
Our executive offices are located at 165 Ludlow Avenue, Northvale, New
Jersey 07647. Phone No.: (201) 750-2646; Facsimile No.: (201) 750-2755.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
Certain information contained in or incorporated by reference into this
prospectus includes forward-looking statements (as defined in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934)
that reflect our current views with respect to future events and financial
performance. Certain factors, such as unanticipated technological difficulties,
the volatile and competitive environment for drug delivery products and the
development of generic drug products, changes in domestic and foreign economic,
market and regulatory conditions, the inherent uncertainty of financial
estimates and projections, the degree of success, if any, in concluding business
partnerships or licenses with viable pharmaceutical companies, instabilities
arising from terrorist actions and responses thereto, and other considerations
described as "RISK FACTORS" in this prospectus could cause actual results to
differ materially from those in the forward-looking statements. When used in
this registration statement, statements that are not statements of current or
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "plan", "intend", "may," "will," "expect," "believe",
"could," "anticipate," "estimate," or "continue" or similar expressions or other
variations or comparable terminology are intended to identify such
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. Except
as required by law, we undertake no obligation to update any forward-looking
statements, whether as a result of new information, future events or otherwise.
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS,
INCLUDING THE OTHER DOCUMENTS INCORPORATED HEREIN BY REFERENCE AND REFERRED
BELOW, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING
AN INVESTMENT IN US AND IN ANALYZING OUR FORWARD-LOOKING STATEMENTS.
RISKS RELATED TO OUR BUSINESS
WE HAVE A RELATIVELY LIMITED OPERATING HISTORY, WHICH MAKES IT DIFFICULT TO
EVALUATE OUR FUTURE PROSPECTS.
Although we have been in operation since 1990, we have a relatively short
operating history and limited financial data upon which you may evaluate our
business and prospects. In addition, our business model is likely to continue to
evolve as we attempt to expand our product offerings and our presence in the
generic pharmaceutical market. As a result, our potential for future
profitability must be considered in light of the risks, uncertainties, expenses
and difficulties frequently encountered by companies that are attempting to move
into new markets and continuing to innovate with new and unproven technologies.
Some of these risks relate to our potential inability to:
o develop new products;
o obtain regulatory approval of our products;
o manage our growth, control expenditures and align costs with revenues;
o attract, retain and motivate qualified personnel; and
o respond to competitive developments.
If we do not effectively address the risks we face, our business model may
become unworkable and we may not achieve or sustain profitability or
successfully develop any products.
WE HAVE NOT BEEN PROFITABLE AND EXPECT FUTURE LOSSES.
To date, we have not been profitable, and since our inception in 1990, we
have not generated any significant revenues. We may never be profitable or, if
we become profitable, we may be unable to sustain profitability. We have
sustained losses in each year since our incorporation in 1990. We incurred net
losses of $7,750,174, $6,883,914, $5,906,890, $6,514,217 and $4,061,422, for the
nine months ended December 31, 2006 and the years ended March 31, 2006, 2005,
2004 and 2003, respectively. We expect to realize significant losses for the
current year of operation and to continue to incur losses until we are able to
generate sufficient revenues to support our operations and offset operating
costs.
IF WE ARE UNABLE TO OBTAIN ADDITIONAL FINANCING NEEDED FOR THE EXPENDITURES FOR
THE DEVELOPMENT AND COMMERCIALIZATION OF OUR DRUG PRODUCTS, IT WOULD IMPAIR OUR
ABILITY TO CONTINUE TO MEET OUR BUSINESS OBJECTIVES.
We continue to require additional financing to ensure that we will be able
to meet our expenditures to develop and commercialize our products. In
particular, we have committed to make a substantial investment in our joint
venture, Novel, of up to $25,000,000 upon Novel meeting certain milestones and
if we fail to meet this obligation, VGS Pharma, LLC, our co-venturer in Novel,
may exercise a purchase right that would result in either the elimination or
significant dilution of our interest in Novel.
We do not have committed external sources of funding and may not be able to
obtain any additional funding, especially if volatile market conditions persist
for biotechnology companies. We believe our existing cash resources, including
the $15 million raised in the private placement that closed on April 24, 2007,
is sufficient to meet our cash requirements for the next 14 months.
Other possible sources of the required financing are income from product
sales or sales of market rights, distributions from Novel, income from
co-development or partnering arrangements and the cash exercise of warrants and
options that are currently outstanding. No representation can be made that we
will be able to obtain such revenue or additional
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financing or if obtained it will be on favorable terms, or at all. No assurance
can be given that any offering if undertaken will be successfully concluded or
that if concluded the proceeds will be material. Our inability to obtain
additional financing when needed would impair our ability to continue our
business.
If any future financing involves the further sale of our securities, our
then-existing stockholders' equity could be substantially diluted. On the other
hand, if we incurred debt, we would be subject to risks associated with
indebtedness, including the risk that interest rates might fluctuate and cash
flow would be insufficient to pay principal and interest on such indebtedness.
SUBSTANTIALLY ALL OF OUR PRODUCT CANDIDATES ARE AT AN EARLY STAGE OF DEVELOPMENT
AND ONLY A PORTION OF THESE ARE IN CLINICAL DEVELOPMENT.
Other than ELI-216 and ELI-254, which are in clinical trial development,
our five other product candidates are still at an early stage of development. We
do not have any products that are commercially available other than Lodrane
24(R) and Lodrane 24D(R). We will need to perform additional development work
for all of our product candidates in our pipeline before we can seek the
regulatory approvals necessary to begin commercial sales.
IF WE ARE UNABLE TO SATISFY REGULATORY REQUIREMENTS, WE MAY NOT BE ABLE TO
COMMERCIALIZE OUR PRODUCT CANDIDATES.
We need FDA approval prior to marketing our product candidates in the
United States of America. If we fail to obtain FDA approval to market our
product candidates, we will be unable to sell our product candidates in the
United States of America and we will not generate revenue from the sale of such
products.
This regulatory review and approval process, which includes evaluation of
preclinical studies and clinical trials of our product candidates is lengthy,
expensive and uncertain. To receive approval, we must, among other things,
demonstrate with substantial evidence from well-controlled clinical trials that
our product candidates are both safe and effective for each indication where
approval is sought. Satisfaction of these requirements typically takes several
years and the time needed to satisfy them may vary substantially, based on the
type, complexity and novelty of the pharmaceutical product. We cannot predict if
or when we might submit for regulatory approval any of our product candidates
currently under development. Any approvals we may obtain may not cover all of
the clinical indications for which we are seeking approval. Also, an approval
might contain significant limitations in the form of narrow indications,
warnings, precautions, or contra-indications with respect to conditions of use.
The FDA has substantial discretion in the approval process and may either
refuse to file our application for substantive review or may form the opinion
after review of our data that our application is insufficient to allow approval
of our product candidates. If the FDA does not file or approve our application,
it may require that we conduct additional clinical, preclinical or manufacturing
validation studies and submit that data before it will reconsider our
application. Depending on the extent of these or any other studies, approval of
any applications that we submit may be delayed by several years, or may require
us to expend more resources than we have available. It is also possible that
additional studies, if performed and completed, may not be considered sufficient
by the FDA to make our applications approvable. If any of these outcomes occur,
we may be forced to abandon our applications for approval, which might cause us
to cease operations.
We will also be subject to a wide variety of foreign regulations governing
the development, manufacture and marketing of our products. Whether or not FDA
approval has been obtained, approval of a product by the comparable regulatory
authorities of foreign countries must still be obtained prior to manufacturing
or marketing the product in those countries. The approval process varies from
country to country and the time needed to secure approval may be longer or
shorter than that required for FDA approval. We cannot assure you that clinical
trials conducted in one country will be accepted by other countries or that
approval in one country will result in approval in any other country.
BEFORE WE CAN OBTAIN REGULATORY APPROVAL, WE NEED TO SUCCESSFULLY COMPLETE
CLINICAL TRIALS, OUTCOMES OF WHICH ARE UNCERTAIN.
In order to obtain FDA approval to market a new drug product, we must
demonstrate proof of safety and effectiveness in humans. To meet these
requirements, we must conduct extensive preclinical testing and "adequate and
well-controlled" clinical trials. Conducting clinical trials is a lengthy, time
consuming, and expensive process. Completion of necessary clinical trials may
take several years or more. Delays associated with products for which we
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are directly conducting preclinical or clinical trials may cause us to incur
additional operating expenses. The commencement and rate of completion of
clinical trials may be delayed by many factors, including, for example:
o ineffectiveness of our product candidate or perceptions by physicians
that the product candidate is not safe or effective for a particular
indication;
o inability to manufacture sufficient quantities of the product
candidate for use in clinical trials;
o delay or failure in obtaining approval of our clinical trial protocols
from the FDA or institutional review boards;
o slower than expected rate of patient recruitment and enrollment;
o inability to adequately follow and monitor patients after treatment;
o difficulty in managing multiple clinical sites;
o unforeseen safety issues;
o government or regulatory delays; and
o clinical trial costs that are greater than we currently anticipate.
Even if we achieve positive interim results in clinical trials, these
results do not necessarily predict final results, and positive results in early
trials may not be indicative of success in later trials. A number of companies
in the pharmaceutical industry have suffered significant setbacks in advanced
clinical trials, even after promising results in earlier trials. Negative or
inconclusive results or adverse medical events during a clinical trial could
cause us to repeat or terminate a clinical trial or require us to conduct
additional trials. We do not know whether our existing or any future clinical
trials will demonstrate safety and efficacy sufficiently to result in marketable
products. Our clinical trials may be suspended at any time for a variety of
reasons, including if the FDA or we believe the patients participating in our
trials are exposed to unacceptable health risks or if the FDA finds deficiencies
in the conduct of these trials.
Failures or perceived failures in our clinical trials will directly delay
our product development and regulatory approval process, damage our business
prospects, make it difficult for us to establish collaboration and partnership
relationships, and negatively affect our reputation and competitive position in
the pharmaceutical community.
Because of these risks, our research and development efforts may not result
in any commercially viable products. Any delay in, or termination of, our
preclinical or clinical trials will delay the filing of our NDAs with the FDA
and, ultimately, our ability to commercialize our product candidates and
generate product revenues. If a significant portion of these development efforts
are not successfully completed, required regulatory approvals are not obtained
or any approved products are not commercially successfully, our business,
financial condition, and results of operations may be materially harmed.
IF OUR COLLABORATION OR LICENSE ARRANGEMENTS ARE UNSUCCESSFUL, OUR REVENUES AND
PRODUCT DEVELOPMENT MAY BE LIMITED.
We have entered into several collaboration and licensing arrangements for
the development of generic products. However, there can be no assurance that any
of these agreements will result in FDA approvals, or that we will be able to
market any such finished products at a profit. Collaboration and licensing
arrangements pose the following risks:
o collaborations and licensee arrangements may be terminated, in which
case we will experience increased operating expenses and capital
requirements if we elect to pursue further development of the product
candidate;
o collaborators and licensees may delay clinical trials and prolong
clinical development, under-fund a clinical trial program, stop a
clinical trial or abandon a product candidate;
o expected revenue might not be generated because milestones may not be
achieved and product candidates may not be developed;
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o collaborators and licensees could independently develop, or develop
with third parties, products that could compete with our future
products;
o the terms of our contracts with current or future collaborators and
licensees may not be favorable to us in the future;
o a collaborator or licensee with marketing and distribution rights to
one or more of our products may not commit enough resources to the
marketing and distribution of our products, limiting our potential
revenues from the commercialization of a product; and
o disputes may arise delaying or terminating the research, development
or commercialization of our product candidates, or result in
significant and costly litigation or arbitration.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND AVOID CLAIMS
THAT WE INFRINGED ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, OUR ABILITY TO
CONDUCT BUSINESS MAY BE IMPAIRED.
Our success depends on our ability to protect our current and future
products and to defend our intellectual property rights. If we fail to protect
our intellectual property adequately, competitors may manufacture and market
products similar to ours.
We currently hold five patents, have two patents pending and we intend to
file further patent applications in the future. With respect to our pending
patents, we cannot be certain that these applications will result in the
issuance of patents. If patents are issued, third parties may sue us to
challenge such patent protection, and although we know of no reason why they
should prevail, it is possible that they could. It is likewise possible that our
patent rights may not prevent or limit our present and future competitors from
developing, using or commercializing products that are similar or functionally
equivalent to our products.
In addition, we may be required to obtain licenses to patents, or other
proprietary rights of third parties, in connection with the development and use
of our products and technologies as they relate to other persons' technologies.
At such time as we discover a need to obtain any such license, we will need to
establish whether we will be able to obtain such a license on favorable terms.
The failure to obtain the necessary licenses or other rights could preclude the
sale, manufacture or distribution of our products.
We rely particularly on trade secrets, unpatented proprietary expertise and
continuing innovation that we seek to protect, in part, by entering into
confidentiality agreements with licensees, suppliers, employees and consultants.
We cannot provide assurance that these agreements will not be breached or
circumvented. We also cannot be certain that there will be adequate remedies in
the event of a breach. Disputes may arise concerning the ownership of
intellectual property or the applicability of confidentiality agreements. We
cannot be sure that our trade secrets and proprietary technology will not
otherwise become known or be independently developed by our competitors or, if
patents are not issued with respect to products arising from research, that we
will be able to maintain the confidentiality of information relating to these
products. In addition, efforts to ensure our intellectual property rights can be
costly, time-consuming and/or ultimately unsuccessful.
LITIGATION IS COMMON IN OUR INDUSTRY, PARTICULARLY THE GENERIC PHARMACEUTICAL
INDUSTRY, AND CAN BE PROTRACTED AND EXPENSIVE AND COULD DELAY AND/OR PREVENT
ENTRY OF OUR PRODUCTS INTO THE MARKET, WHICH, IN TURN, COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS.
Litigation concerning patents and proprietary rights can be protracted and
expensive. With our expansion into the generic pharmaceutical market through our
joint venture, Novel, our risk of litigation has increased. Companies that
produce brand pharmaceutical products routinely bring litigation against
applicants that seek FDA approval to manufacture and market generic forms of
their branded products. These companies allege patent infringement or other
violations of intellectual property rights as the basis for filing suit against
an applicant. Likewise, patent holders may bring patent infringement suits
against us alleging that our products, product candidates and technologies
infringe upon intellectual property rights. Litigation often involves
significant expense and can delay or prevent introduction or sale of our
products.
There may also be situations where we use our business judgment and decide
to market and sell products, notwithstanding the fact that allegations of patent
infringement(s) have not been finally resolved by the courts. The risk involved
in doing so can be substantial
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because the remedies available to the owner of a patent for infringement
include, among other things, damages measured by the profits lost by the patent
owner and not by the profits earned by the infringer. In the case of a willful
infringement, the definition of which is subjective, such damages may be
trebled. Moreover, because of the discount pricing typically involved with
bioequivalent products, patented brand products generally realize a
substantially higher profit margin than bioequivalent products. An adverse
decision in a case such as this or in other similar litigation could have a
material adverse effect on our business, financial position and results of
operations and could cause the market value of our common stock to decline.
THE PHARMACEUTICAL INDUSTRY IS HIGHLY COMPETITIVE AND SUBJECT TO RAPID AND
SIGNIFICANT TECHNOLOGICAL CHANGE, WHICH COULD IMPAIR OUR ABILITY TO IMPLEMENT
OUR BUSINESS MODEL.
The pharmaceutical industry is highly competitive, and we may be unable to
compete effectively. In addition, it is undergoing rapid and significant
technological change, and we expect competition to intensify as technical
advances in each field are made and become more widely known. An increasing
number of pharmaceutical companies have been or are becoming interested in the
development and commercialization of products incorporating advanced or novel
drug delivery systems. We expect that competition in the field of drug delivery
will increase in the future as other specialized research and development
companies begin to concentrate on this aspect of the business. Some of the major
pharmaceutical companies have invested and are continuing to invest significant
resources in the development of their own drug delivery systems and technologies
and some have invested funds in such specialized drug delivery companies. Many
of our competitors have longer operating histories and greater financial,
research and development, marketing and other resources than we do. Such
companies may develop new formulations and products, or may improve existing
ones, more efficiently than we can. Our success, if any, will depend in part on
our ability to keep pace with the changing technology in the fields in which we
operate.
As we expand our presence in the generic pharmaceuticals market through our
joint venture, Novel, its product candidates may face intense competition from
brand-name companies that have taken aggressive steps to thwart competition from
generic companies. In particular, brand-name companies continue to sell or
license their products directly or through licensing arrangements or strategic
alliances with generic pharmaceutical companies (so-called "authorized
generics"). No significant regulatory approvals are required for a brand-name
company to sell directly or through a third party to the generic market, and
brand-name companies do not face any other significant barriers to entry into
such market. In addition, such companies continually seek to delay generic
introductions and to decrease the impact of generic competition, using tactics
which include:
o obtaining new patents on drugs whose original patent protection is
about to expire;
o filing patent applications that are more complex and costly to
challenge;
o filing suits for patent infringement that automatically delay approval
of the FDA;
o filing citizens' petitions with the FDA contesting approval of the
generic versions of products due to alleged health and safety issues;
o developing controlled-release or other "next-generation" products,
which often reduce demand for the generic version of the existing
product for which we are seeking approval;
o changing product claims and product labeling;
o developing and marketing as over-the-counter products those branded
products which are about to face generic competition; and
o making arrangements with managed care companies and insurers to reduce
the economic incentives to purchase generic pharmaceuticals.
These strategies may increase the costs and risks associated with our
efforts to introduce our generic products under development and may delay or
prevent such introduction altogether.
IF OUR PRODUCT CANDIDATES DO NOT ACHIEVE MARKET ACCEPTANCE AMONG PHYSICIANS,
PATIENTS, HEALTH CARE PAYORS AND THE MEDICAL COMMUNITY, THEY WILL NOT BE
COMMERCIALLY SUCCESSFUL AND OUR BUSINESS WILL BE ADVERSELY AFFECTED.
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The degree of market acceptance of any of our approved product candidates
among physicians, patients, health care payors and the medical community will
depend on a number of factors, including:
o acceptable evidence of safety and efficacy;
o relative convenience and ease of administration;
o the prevalence and severity of any adverse side effects;
o availability of alternative treatments;
o pricing and cost effectiveness;
o effectiveness of sales and marketing strategies; and
o ability to obtain sufficient third-party coverage or reimbursement.
If we are unable to achieve market acceptance for our product candidates,
then such product candidates will not be commercially successful and our
business will be adversely affected.
WE ARE DEPENDENT ON A SMALL NUMBER OF SUPPLIERS FOR OUR RAW MATERIALS, AND ANY
DELAY OR UNAVAILABILITY OF RAW MATERIALS CAN MATERIALLY ADVERSELY AFFECT OUR
ABILITY TO PRODUCE PRODUCTS.
The FDA requires identification of raw material suppliers in applications
for approval of drug products. If raw materials were unavailable from a
specified supplier, FDA approval of a new supplier could delay the manufacture
of the drug involved. In addition, some materials used in our products are
currently available from only one supplier or a limited number of suppliers.
Further, a significant portion of our raw materials may be available only
from foreign sources. Foreign sources can be subject to the special risks of
doing business abroad, including:
o greater possibility for disruption due to transportation or
communication problems;
o the relative instability of some foreign governments and economies;
o interim price volatility based on labor unrest, materials or equipment
shortages, export duties, restrictions on the transfer of funds, or
fluctuations in currency exchange rates; and
o uncertainty regarding recourse to a dependable legal system for the
enforcement of contracts and other rights.
In addition, recent changes in patent laws in certain foreign jurisdictions
(primarily in Europe) may make it increasingly difficult to obtain raw materials
for research and development prior to expiration of applicable United States or
foreign patents. Any inability to obtain raw materials on a timely basis, or any
significant price increases that cannot be passed on to customers, could have a
material adverse effect on us.
The delay or unavailability of raw materials can materially adversely
affect our ability to produce products. This can materially adversely affect our
business and operations.
EVEN AFTER REGULATORY APPROVAL, WE WILL BE SUBJECT TO ONGOING SIGNIFICANT
REGULATORY OBLIGATIONS AND OVERSIGHT.
Even if regulatory approval is obtained for a particular product candidate,
the FDA and foreign regulatory authorities may, nevertheless, impose significant
restrictions on the indicated uses or marketing of such products, or impose
ongoing requirements for post-approval studies. Following any regulatory
approval of our product candidates, we will be subject to continuing regulatory
obligations, such as safety reporting requirements, and additional
post-marketing obligations, including regulatory oversight of the promotion and
marketing of our products. If we become aware of previously unknown problems
with any of our product candidates here or overseas or our contract
manufacturers' facilities, a regulatory
8
agency may impose restrictions on our products, our contract manufacturers or on
us, including requiring us to reformulate our products, conduct additional
clinical trials, make changes in the labeling of our products, implement changes
to or obtain re-approvals of our contract manufacturers' facilities or withdraw
the product from the market. In addition, we may experience a significant drop
in the sales of the affected products, our reputation in the marketplace may
suffer and we may become the target of lawsuits, including class action suits.
Moreover, if we fail to comply with applicable regulatory requirements, we may
be subject to fines, suspension or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions and criminal prosecution.
Any of these events could harm or prevent sales of the affected products or
could substantially increase the costs and expenses of commercializing and
marketing these products.
IF KEY PERSONNEL WERE TO LEAVE US OR IF WE ARE UNSUCCESSFUL IN ATTRACTING
QUALIFIED PERSONNEL, OUR ABILITY TO DEVELOP PRODUCTS COULD BE MATERIALLY HARMED.
Our success depends in large part on our ability to attract and retain
highly qualified scientific, technical and business personnel experienced in the
development, manufacture and marketing of oral, controlled release drug delivery
systems and generic products. Our business and financial results could be
materially harmed by the inability to attract or retain qualified personnel.
IF WE WERE SUED ON A PRODUCT LIABILITY CLAIM, AN AWARD COULD EXCEED OUR
INSURANCE COVERAGE AND COST US SIGNIFICANTLY.
The design, development and manufacture of our products involve an inherent
risk of product liability claims. We have procured product liability insurance;
however, a successful claim against us in excess of the policy limits could be
very expensive to us, damaging our financial position. The amount of our
insurance coverage, which has been limited due to our limited financial
resources, may be materially below the coverage maintained by many of the other
companies engaged in similar activities. To the best of our knowledge, no
product liability claim has been made against us as of March 31, 2007.
RISKS RELATED TO OUR COMMON STOCK
FUTURE SALES OF OUR COMMON STOCK COULD LOWER THE MARKET PRICE OF OUR COMMON
STOCK.
Sales of substantial amounts of our shares in the public market could harm
the market price of our common stock, even if our business is doing well. A
significant number of shares of our common stock are eligible for sale in the
public market under SEC Rule 144 subject in some cases to volume and other
limitations. In addition, pursuant hereto, we are registering the resale of:
o 10,653,147 shares of common stock issuable upon conversion of
outstanding shares of our Series C Preferred Stock issued in the
private placement that closed on April 24, 2007 and shares of common
stock issuable in satisfaction of certain Series C Preferred Stock
dividend obligations;
o 2,133,606 shares of common stock issuable upon exercise of warrants
issued in the private placement.
Due to the foregoing factors,sales of a substantial number of shares of our
common stock in the public market could occur at any time. These sales, or the
perception in the market that the holders of a large number of shares intend to
sell shares, could reduce the market price of our common stock.
OUR STOCK PRICE HAS BEEN VOLATILE AND MAY FLUCTUATE IN THE FUTURE.
There has been significant volatility in the market prices for publicly
traded shares of pharmaceutical companies, including ours. For the twelve months
ended May 21, 2007, the closing sale price on the American Stock Exchange of our
common stock fluctuated from a high of $2.60 per share to a low of $1.75 per
share. The per share price of our common stock may not remain at or exceed
current levels. The market price for our common stock, and for the stock of
pharmaceutical companies generally, has been highly volatile. The market price
of our common stock may be affected by:
o Results of our clinical trials;
o Approval or disapproval of abbreviated new drug applications or new
drug applications;
9
o Announcements of innovations, new products or new patents by us or by
our competitors;
o Governmental regulation;
o Patent or proprietary rights developments;
o Proxy contests or litigation;
o News regarding the efficacy of, safety of or demand for drugs or drug
technologies;
o Economic and market conditions, generally and related to the
pharmaceutical industry;
o Healthcare legislation;
o Changes in third-party reimbursement policies for drugs; and
o Fluctuations in our operating results.
THE FAILURE TO MAINTAIN THE AMERICAN STOCK EXCHANGE LISTING OF THE COMMON STOCK
WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE MARKET FOR OUR COMMON STOCK AND OUR
MARKET PRICE.
On January 4, 2006, we received a letter from the American Stock Exchange
("AMEX") notifying us that, based on our unaudited financial statements as of
September 30, 2005, we were not in compliance with the continued listing
standards set forth in the AMEX Company Guide in that under one listing standard
our shareholders' equity is less than $4,000,000 and we had losses from
continuing operations and/or net losses in three of our four most recent fiscal
years and under another listing standard our shareholders' equity is less than
$6,000,000 and we had losses from continuing operations and/or net losses in our
five most recent fiscal years. At the request of AMEX, we submitted a plan on
February 3, 2006 advising AMEX of action, we had taken, and will take, to bring
ourselves in compliance with the continued listing standards within a maximum of
18 months from January 4, 2006. On March 15, 2006, we completed a private
placement of our Series B Preferred Stock and warrants to purchase common stock.
We received $10,000,000 in gross proceeds from the private placement. On March
21, 2006, we submitted an update to the plan we had previously submitted on
February 6, 2006. Upon notice of the March 2006 private placement and the
acceptance of the updated plan. AMEX allowed us to maintain our AMEX listing,
subject to periodic review of the our progress by the AMEX staff. If we are not
in compliance with the continued listing standards, AMEX may then initiate
delisting proceedings. The failure to maintain listing of our common stock on
AMEX will have an adverse effect on the market and the market price for our
common stock.
THE ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON STOCK OR OUR PREFERRED STOCK
COULD MAKE A CHANGE OF CONTROL MORE DIFFICULT TO ACHIEVE.
The issuance of additional shares of our common stock or the issuance of
shares of an additional series of preferred stock could be used to make a change
of control of us more difficult and expensive. Under certain circumstances, such
shares could be used to create impediments to or frustrate persons seeking to
cause a takeover or to gain control of us. Such shares could be sold to
purchasers who might side with the Board in opposing a takeover bid that the
Board determines not to be in the best interests of our stockholders. It might
also have the effect of discouraging an attempt by another person or entity
through the acquisition of a substantial number of shares of our common stock to
acquire control of us with a view to consummating a merger, sale of all or part
of our assets, or a similar transaction, since the issuance of new shares could
be used to dilute the stock ownership of such person or entity.
IF PENNY STOCK REGULATIONS BECOME APPLICABLE TO OUR COMMON STOCK THEY WILL
IMPOSE RESTRICTIONS ON THE MARKETABILITY OF OUR COMMON STOCK AND THE ABILITY OF
OUR STOCKHOLDERS TO SELL SHARES OF OUR STOCK COULD BE IMPAIRED.
The SEC has adopted regulations that generally define a "penny stock" to be
an equity security that has a market price of less than $5.00 per share or an
exercise price of less than $5.00 per share subject to certain exceptions.
Exceptions include equity securities issued by an issuer that has (i) net
tangible assets of at least $2,000,000, if such issuer has been in continuous
operation for more than three years, or (ii) net tangible assets of at least
$5,000,000, if such issuer has been in continuous operation for less than three
years, or (iii) average revenue of at least $6,000,000 for the preceding three
years. Unless an
10
exception is available, the regulations require that prior to any transaction
involving a penny stock, a risk of disclosure schedule must be delivered to the
buyer explaining the penny stock market and its risks. Our common stock is
currently trading at under $5.00 per share. Although we currently fall under one
of the exceptions, if at a later time we fail to meet one of the exceptions, our
common stock will be considered a penny stock. As such the market liquidity for
our common stock will be limited to the ability of broker-dealers to sell it in
compliance with the above-mentioned disclosure requirements.
You should be aware that, according to the SEC, the market for penny stocks
has suffered in recent years from patterns of fraud and abuse. Such patterns
include:
o Control of the market for the security by one or a few broker-dealers;
o "Boiler room" practices involving high-pressure sales tactics;
o Manipulation of prices through prearranged matching of purchases and
sales;
o The release of misleading information;
o Excessive and undisclosed bid-ask differentials and markups by selling
broker- dealers; and
o Dumping of securities by broker-dealers after prices have been
manipulated to a desired level, which hurts the price of the stock and
causes investors to suffer loss.
We are aware of the abuses that have occurred in the penny stock market.
Although we do not expect to be in a position to dictate the behavior of the
market or of broker-dealers who participate in the market, we will strive within
the confines of practical limitations to prevent such abuses with respect to our
common stock.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW MAY DETER A THIRD PARTY FROM
ACQUIRING US.
Section 203 of the Delaware General Corporation Law prohibits a merger with
a 15% shareholder within three years of the date such shareholder acquired 15%,
unless the merger meets one of several exceptions. The exceptions include, for
example, approval by the holders of two-thirds of the outstanding shares (not
counting the 15% shareholder), or approval by the Board prior to the 15%
shareholder acquiring its 15% ownership. This provision makes it difficult for a
potential acquirer to force a merger with or takeover of us, and could thus
limit the price that certain investors might be willing to pay in the future for
shares of our common stock.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares by the
Selling Stockholders pursuant to this prospectus.
A portion of the shares covered by this prospectus are issuable upon
exercise of warrants to purchase our common stock. Upon any exercise of the
warrants for cash, the Selling Stockholders would pay us the exercise price of
the warrants, as applicable. Under certain conditions set forth in the warrants,
the warrants are exercisable on a cashless basis. If the warrants are exercised
on a cashless basis, we would not receive any cash payment from the Selling
Stockholder upon any exercise of the warrants. Any proceeds from the exercise of
the warrants will be used for working capital.
SELLING STOCKHOLDERS
On April 24, 2007 we issued 15,000 shares of Series C Preferred Stock
convertible into 6,465,504 shares of our common stock and warrants to purchase
2,133,606 shares of our common stock in a private placement. Pursuant to the
registration rights agreement related to such private placement, we agreed to
file, at our expense, a registration statement, of which this prospectus is a
part, with the SEC to register for resale, from time to time, the 6,465,504
shares of our common stock issuable upon conversion of the shares of Series C
Preferred Stock, 4,187,643 shares of our common stock issuable in satisfaction
of certain Series C Preferred Stock dividend obligations, and 2,133,606 shares
of our common stock issuable upon exercise of the warrants issued in the private
placement.
11
We are registering the shares to permit the Selling Stockholders to offer
these shares for resale from time to time. The Selling Stockholders may sell
all, some or none of the shares covered by this prospectus. For more
information, see the section of this prospectus entitled "PLAN OF DISTRIBUTION."
The table below presents information as of April 24, 2007, regarding the
Selling Stockholders and the shares of our common stock that they may offer and
sell from time to time under this prospectus. The information is based on
information provided by or on behalf of the Selling Stockholders. Except as
noted in the footnotes, no Selling Stockholder has had, within the past three
years, any position, office, or material relationship with us or any of our
predecessors or affiliates. The table has been prepared on the assumption that
all shares offered under this prospectus will be sold to parties unaffiliated
with the Selling Stockholders. Except as indicated below the Selling
Stockholders have sole voting and investment power with their respective shares.
SHARES BENEFICIALLY OWNED
AFTER OFFERING
NUMBER OF
SHARES NUMBER OF NUMBER OF PERCENTAGE
NAME OF SELLING STOCKHOLDER(1) BENEFICIALLY SHARES OFFERED SHARES(2) OF CLASS(3)
OWNED PRIOR TO
OFFERING
M.H. Davidson & Co.**
27,404(4) 27,404 0 0
Davidson Kempner
Healthcare Fund
LP** 1,729,413(5) 1,729,413 0 0
0
Davidson Kempner Healthcare
International Ltd.** 2,547,106(6) 2,547,106 0 0
Serena Limited** 16,790(7) 16,790
0 0
Davidson Kempner International,
Ltd.** 677,492(8) 677,492 0 0
Davidson Kempner Institutional0
Partners, L.P.** 386,178(9) 386,178 0 0
Davidson Kempner Partners** 212,398(10) 212,398 0 0
CAMOFI Master LDC 839,520(11) 839,520 0 0
The Gabelli Convertible and 83,951(12) 83,951 0 0
Securities Fund Inc. +
Sphera Global Healthcare Master Fund 293,832(13) 293,832 0 0
Cotswold Foundation 251,856(14) 251,856 0 0
Martha H. Morris+ 209,879(15) 209,879 0 0
I. Wistar Morris III IRA+ 335,806(16) 335,806 0 0
12
Eleventh Generation LP 209,879(17) 209,879 0 0
Trellus Partners, LP 2,195,257(18) 629,639 1,565,618 7%
Trellus Partners II, LP 33,975(19) 25,185 8,790 *
Trellus Offshore Fund Limited 1,373,215(20) 1,024,215 349,000 1.7%
Otago Partners, LLC+ 209,879(21) 209,879 0 0
Capital Ventures International+ 839,520(22) 839,520 0 0
Iroquois Master Fund Ltd. 419,760(23) 419,760 0 0
Rockmore Investment Master Fund Ltd. 839,520(24) 839,520 0 0
BridgePointe Master Fund Ltd. 503,712(25) 503,712 0 0
Benyamin Mandel 125,927(26) 125,927 0 0
Reitler Brown & Rosenblatt LLC 10,912(27) 10,912 0 0
Rose Millennium Investments Ltd. 41,975(28) 41,975 0 0
Eurocom Capital Finance Ltd. 92,356(29) 92,356 0 0
Barry H. Dash 33,790(30) 16,790 17,000 *
Oppenheimer & Co., Inc. 184,238(31) 133,998 50,240 *
Ledgemont Capital Group, LLC+ 270,637(32) 36,045 234,592 1.1%
Boenning & Scattergood, Inc. 15,517(34) 15,517 0 0
* Less than 1%
** Messrs Thomas L. Kempner, Jr., Marvin H. Davidson, Stephen M. Dowicz, Scott
E. Davidson, Michael J. Leffell, Timothy I. Levart, Robert H. Brivio, Jr.,
Anthony A. Yoseloff, Eric P. Epstein and Avram Z Friedman (collectively,
the "PRINCIPALS"), are
13
the general partners of M. H. Davidson & Co. and MHD Management Co.
("MHD"), the general partner of Davidson Kempner Partners, the sole
managing members of Davidson Kempner International Advisors, L.L.C.
("DKIA"), the investment manager of each of Davidson Kempner International,
Ltd. and Serena Limited, the sole stockholders of Davidson Kempner Advisers
Inc. ("DKAI"), the general partner of Davidson Kempner Institutional
Partners, L.P., the managing members of DK Group LLC ("DKG"), the general
partner of Davidson Kempner Healthcare Fund LP, and the limited partners of
DK Management Partners LP ("DKMP"), the investment manager of Davidson
Kempner Healthcare International Ltd. Each of the Principals, MHD, DKIA,
DKAI, DKG and DKMP disclaim all beneficial ownership as affiliates of a
registered investment adviser, and, in any case disclaim all beneficial
ownership except as to the extent of their pecuniary interest in the
shares.
+ The Selling Stockholder has identified itself as an affiliate of a
registered broker-dealer. The Selling Stockholder has represented to us
that it purchased the shares in the ordinary course of its business and, at
the time of purchase, had no agreements or understandings, directly or
indirectly, with any person to distribute the shares.
(1) Selling Stockholders means the persons listed in the table above, as well
as the pledgees, assignees or other successors in interest to the selling
stockholders.
(2) Assumes that the Selling Stockholders dispose of all the shares of common
stock covered by this prospectus and do not acquire or dispose of any
additional shares of common stock. The Selling Stockholders are not
representing, however, that any of the shares covered by this prospectus
will be offered for sale, and the Selling Stockholders reserve the right to
accept or reject, in whole or in part, any proposed sale of shares.
(3) The percentage of common stock beneficially owned is based on 20,904,592
shares of common stock outstanding on April 24, 2007.
(4) Includes 14,224 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 9,213 dividend shares and 4,267 shares of common
stock issuable upon exercise of warrants.
(5) Includes 887,931 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 575,103 dividend shares and 266,379 shares of
common stock issuable upon exercise of warrants.
(6) Includes 1,307,758 shares of common stock issuable upon conversion shares
of Series C Preferred Stock, 847,021 dividend shares and 392,327 shares of
common stock issuable upon exercise of warrants.
(7) Includes 8,620 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 5,584 dividend shares and 2,586 shares of common
stock issuable upon exercise of warrants.
(8) Includes 347,844 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 225,295 dividend shares and 104,353 shares of
common stock issuable upon exercise of warrants.
(9) Includes 198,275 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 128,421 dividend shares and 59,482 shares of
common stock issuable upon exercise of warrants.
(10) Includes 109,051 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 70,632 dividend shares and 32,715 shares of
common stock issuable upon exercise of warrants.
(11) Includes 431,034 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 279,176 dividend shares and 129,310 shares of
common stock issuable upon exercise of warrants. Mr. Richard Smithine has
the power to vote or dispose of the shares.
(12) Includes 43,103 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 27,918 dividend shares and 12,930 shares of
common stock issuable upon exercise of warrants. Mr. Bruce Alpert has the
power to vote or dispose of the shares.
14
(13) Includes 150,862 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 97,712 dividend shares and 45,258 shares of
common stock issuable upon exercise of warrants. Doron Breen has the power
to vote or dispose of the shares.
(14) Includes 129,310 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 83,753 dividend shares and 38,793 shares of
common stock issuable upon exercise of warrants. I Wistar Morris and Martha
H. Morris, Co-Trustees have the power to vote or dispose of the shares.
(15) Includes 107,758 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 69,794 dividend shares and 32,327 shares of
common stock issuable upon exercise of warrants.
(16) Includes 172,413 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 111,670 dividend shares and 51,723 shares of
common stock issuable upon exercise of warrants. I. Wistar Morris III has
the power to vote or dispose of the shares.
(17) Includes 107,758 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 69,794 dividend shares and 32,327 shares of
common stock issuable upon exercise of warrants. Martha H. Morris, Agent
has the power to vote or dispose of the shares.
(18) Includes 323,275 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 888,889 shares of common stock issuable upon
conversion of shares of Series B Preferred Stock, 209,382 dividend shares
and 541,426 shares of common stock issuable upon exercise of warrants. Adam
Usdan has the power to vote or dispose of the shares.
(19) Includes 12,931 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 8,375 dividend shares and 3,879 shares of common
stock issuable upon exercise of warrants. Adam Usdan has the power to vote
or dispose of the shares.
(20) Includes 525,862 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 340,595 dividend shares and 157,758 shares of
common stock issuable upon exercise of warrants. Adam Usdan has the power
to vote or dispose of the shares.
(21) Includes 107,758 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 69,794 dividend shares and 32,327 shares of
common stock issuable upon exercise of warrants. Lindsay A. Rosenwald, M.D.
is the managing member of Otago Partners, LLC. Dr. Rosenwald is also the
sole shareholder and Chairman of Paramount BioCapital, Inc., an NASD member
broker-dealer, and Paramount BioCapital Asset Management, Inc., an
investment adviser registered with the SEC.
(22) Includes 431,034 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 279,176 dividend shares and 129,310 shares of
common stock issuable upon exercise of warrants. Heights Capital
Management, Inc., the authorized agent of Capital Ventures International
("CVI"), has discretionary authority to vote and dispose of the shares held
by CVI and may be deemed to be the beneficial owner of these shares. Martin
Kobinger, Investment Manager of Heights Capital Management, Inc. may also
be deemed to have investment discretion and voting power over the shares
held by CVI. Mr. Kobinger disclaims any beneficial ownership of such shares
and warrants, except to the extent of any pecuniary interest therein.
(23) Includes 215,517 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 139,588 dividend shares and 64,655 shares of
common stock issuable upon exercise of warrants. Joshua Silverman has
voting and investment control over the shares held by Iroquois Master Fund
Ltd. Mr. Silverman disclaims beneficial ownership of these shares.
(24) Includes 431,034 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 279,176 dividend shares and 129,310 shares of
common stock issuable upon exercise of warrants. Rockmore Capital, LLC
("Rockmore Capital") and Rockmore Partners, LLC ("Rockmore Partners"), each
a limited liability company formed under the laws of the State of Delaware,
serve as the investment manager and general partner, resectively, to
Rockmore Investments (US) LP, a Delaware limited partnership, which invests
all of its assets through Rockmore Investment Master Fund Ltd., an exempted
company formed under the laws of Bermuda ("Rockmore Master Fund"). By
reason of such relationships, Rockmore Capital and Rockmore Partners may be
deemed to share dispositive power over the shares of common stock owned by
Rockmore Master Fund.
15
Rockmore Capital and Rockmore Partners disclaim beneficial ownership of
such shares of common stock. Rockmore Partners has delegated authority to
Rockmore Capital regarding the portfolio management decisions with respect
to the shares of common stock owned by Rockmore Master Fund and, as of May
22, 2007 Mr. Bruce T. Bernstein and Mr. Brian Daly, as officers of Rockmore
Capital are responsible for the portfolio and management decisions of the
shares of common stock owned by Rockmore Master Fund. By reason of such
authority, Messrs. Bernstein and Daly may be deemed to share dispositive
power over the shares of common stock owned by Rockmore Master Fund.
Messrs. Bernstein and Daly disclaim beneficial ownership of such shares of
common stock and neither of such persons has any legal right to maintain
such authority. No other person has sole or shared voting or dispositive
power with respect to the shares of common stock as those terms are used
for purposes under Regulation 13D-G of the Securities Exchange Act of 1934,
as amended. No person or "group" (as that term is used in Section 13(d) of
the Securities Exchange Act of 1934, as amended, or the SEC's Regulation
13D-G) controls Rockmore Master Fund.
(25) Includes 258,620 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 167,506 dividend shares and 77,586 shares of
common stock issuable upon exercise of warrants. Eric S. Swartz has the
power to vote or dispose of the shares.
(26) Includes 64,655 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 41,876 dividend shares and 19,396 shares of
common stock issuable upon exercise of warrants.
(27) Includes 5,603 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 3,629 dividend shares and 1,680 shares of common
stock issuable upon exercise of warrants. Reitler Brown & Rosenblatt LLC
are counsel to us. Mr. Scott Rosenblatt, John Watkins, Robert Brown and
Edward Reitler have the power to vote or dispose of the shares.
(28) Includes 21,551 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 13,959 dividend shares and 6,465 shares of common
stock issuable upon exercise of warrants. Mr. Ohad Rozen has the power to
vote or dispose of the shares.
(29) Includes 43,103 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 27,918 dividend shares and 21,335 shares of
common stock issuable upon exercise of warrants. Mr. Shaul Elovitch and Mr.
Rabinovitch Alex have the power to vote or dispose of the shares.
(30) Includes 8,620 shares of common stock issuable upon conversion shares of
Series C Preferred Stock, 5,584 dividend shares and 2,586 shares of common
stock issuable upon exercise of warrants and 10,000 options to purchase our
shares of common stock. Mr. Dash is a member of our Board of Directors.
(31) Consists of shares of common stock issuable upon exercise of warrants.
Oppenheimer & Co. Inc. is a broker-dealer who acquired 133,998 warrants to
purchase our common stock as compensation for serving as our placement
agent in the private placement.
(32) Includes 270,637 shares of common stock issuable upon exercise of warrants.
Ledgemont Capital Group, LLC ("Ledgemont") was assigned these shares by
Indigo Securities LLC ("Indigo"). Indigo acquired 36,045 warrants to
purchase our common stock for serving as a selected dealer to our placement
agent in the private placement. Mr. Edward Neugeboren, a member of our
Board of Directors, was a consultant of Indigo and is currently managing
director of Ledgemont.
(33) Consists of shares of common stock issuable upon exercise of warrants.
Boenning & Scattergood, Inc. is a broker-dealer who acquired its warrants
as compensation for serving as a selected dealer to our placement agent in
the private placement.
PLAN OF DISTRIBUTION
OFFER AND SALE OF SHARES
Each Selling Stockholder has or its pledgees, assignees and
successors-in-interest
16
may, from time to time, sell any or all of their shares of common stock on the
American Stock Exchange or any other stock exchange, market or trading facility
on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. A Selling Stockholder may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
o a combination of any such methods of sale; or
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), if available, rather
than under this prospectus.
In connection with sales of the shares of common stock or otherwise, the
Selling Stockholders may enter into hedging transactions with broker-dealers,
which may in turn engage in short sales of the shares of common stock in the
course of hedging in positions they assume. The selling stockholders may also
sell shares of common stock short and deliver shares of common stock covered by
this prospectus to close out short positions and to return borrowed shares in
connection with such short sales. The Selling Stockholders may also loan or
pledge shares of common stock to broker-dealers that in turn may sell such
shares.
The Selling Stockholders may pledge or grant a security interest in some or
all of the warrants or shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933, as amended, amending, if
necessary, the list of selling stockholders to include the pledgee, transferee
or other successors in interest as selling stockholders under this prospectus.
The selling stockholders also may transfer and donate the shares of common stock
in other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.
The Selling Stockholders and any broker-dealers or agents involved in
selling the shares may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents 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. Each Selling Stockholder has informed us
that it does not have any written or oral agreement or understanding, directly
or indirectly, with any person to distribute the common stock. In no event shall
any broker-dealer receive fees, commissions and markups which, in the aggregate,
would exceed eight percent (8%).
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We are required to pay certain fees and expenses incurred by us incident to
the registration of the shares. We have agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
Because Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act including Rule 172 thereunder. In addition,
any securities covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than under
this prospectus. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the Selling
Stockholders.
We agreed to keep this prospectus effective until the earlier of (i) the
date on which the shares may be sold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule
144(k) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The shares will be sold only
through registered or licensed brokers or dealers if required under applicable
state securities laws. 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.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the shares may not simultaneously engage in
market making activities with respect to the common stock for the applicable
restricted period, as defined in Regulation M, prior to the commencement of the
distribution. In addition, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases and
sales of shares of the common stock by the Selling Stockholders or any other
person. We will make copies of this prospectus available to the Selling
Stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale (including by
compliance with Rule 172 under the Securities Act).
LEGAL MATTERS
Reitler Brown & Rosenblatt LLC, New York, New York, as our counsel will
pass upon whether the shares of common stock which are being registered under
the Securities Act of 1933, as amended, by the registration statement of which
this prospectus is a part are fully paid, nonassessable and validly issued.
Reitler Brown & Rosenblatt LLC is also a Selling Stockholder of 10,912 shares of
common stock.
EXPERTS
Miller, Ellin & Company, LLP, independent certified public accountants, has
audited our consolidated financial statements included in our Annual Report on
Form 10-K for the year ended March 31, 2006 as set forth in their reports, which
are incorporated by reference in this prospectus and elsewhere in the
registration statement. Our financial statements are incorporated by reference
in reliance on Miller Ellin's report, given on their authority as experts in
accounting and auditing.
INCORPORATION BY REFERENCE
The Securities and Exchange Commission (the "COMMISSION") allows us to
incorporate by reference the information that we file with it, which means that
we can disclose important information to you by referring you to those
documents. The information incorporated by reference into this registration
statement is considered to be part of this registration statement, and
information that we file later with the Commission will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings (including those filed by us prior to the
termination of the offering) we make with the Commission under Sections 13(a),
13(c), 14, or 15(d) of the Exchange Act:
a. our annual report on Form 10-K for the year ended March 31, 2007,
filed with the Commission on June 28, 2007;
b. our quarterly report on Form 10-Q for the quarter ended June 30, 2006,
filed with the Commission on August 11, 2006;
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c. our quarterly report on Form 10-Q for the quarter ended September 30,
2006, filed with the Commission on November 14, 2006;
d. our quarterly report on Form 10-Q for the quarter ended December 31,
2006, filed with the Commission on February 14, 2007;
e. our current report on Form 8-K filed on July 18, 2006;
f. our current report on Form 8-K filed on August 21, 2006;
g. our current report on Form 8-K filed on September 8, 2006;
h. our current report on Form 8-K filed on September 12, 2006;
i. our current report on Form 8-K filed on October 30, 2006;
j. our current report on Form 8-K filed on November 15, 2006;
k. our current report on Form 8-K filed on December 12, 2006;
l. our current report on Form 8-K filed on February 14, 2007; and
m. our current report on Form 8-K filed on April 25, 2007;
n. the description of our capital stock which is contained in our
registration statement on Form 8-A filed with on February 16, 2000
including any subsequent amendments and reports filed for the purpose
of updating that description.
You may request a copy of these filings, at no cost, by written or oral
request to us at the following address:
Mark I. Gittelman
Corporate Secretary
Elite Pharmaceuticals, Inc.
165 Ludlow Avenue
Northvale, New Jersey 07647
(201) 750-2646
No person has been authorized to give any information or to make any
representation other than those contained in this prospectus in connection with
the offering of the shares of our common stock by the Selling Stockholders. If
information or representations other than those contained in this prospectus are
given or made, you must not rely on it as if we authorized it. Neither the
delivery of this prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that the information contained or
incorporated by reference herein is correct as of any time subsequent to its
date or that there has been no change in our affairs since such date. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any securities offered hereby in any jurisdiction in which such offer or
solicitation is not permitted, or to anyone whom it is unlawful to make such
offer or solicitation. The information in this prospectus is not complete and
may be changed.
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