PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 27, 2003)
1,954,416 SHARES
NORTHFIELD LABORATORIES INC.
COMMON STOCK
We are offering up to 1,954,416 shares of our common stock. In connection
with this offering, we will pay fees and issue an unregistered warrant to
purchase up to 58,632 shares of our common stock to SG Cowen & Co., LLC, as
exclusive placement agent. See "Plan of Distribution" beginning on page S-7 of
this prospectus supplement for more information regarding these arrangements.
Our common stock is quoted on the Nasdaq National Market under the symbol
"NFLD." On May 12, 2004, the closing price of our common stock as quoted on the
Nasdaq National Market was $13.18 per share.
OUR BUSINESS AND AN INVESTMENT IN OUR COMMON STOCK
INVOLVES SIGNIFICANT RISKS. THESE RISKS ARE DESCRIBED UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE S-1.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR ACCOMPANYING PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PER MAXIMUM
SHARE OFFERING
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Public offering price....................................... $12.00 $23,452,992
Placement agent fee......................................... $ 0.84 $ 1,641,709
Proceeds, before expenses, to us............................ $11.16 $21,811,283
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We estimate the total expenses of this offering, excluding the placement
agent fee, will be approximately $100,000. The placement agent is not required
to sell any specific number or dollar amount of the shares of common stock
offered by this offering, but will use its commercially reasonable efforts to
sell the shares of common stock offered. Pursuant to an escrow agreement between
us, the placement agent and an escrow agent, certain funds received in payment
for the shares sold in this offering will be wired to an interest bearing escrow
account and held until we and the placement agent notify the escrow agent that
the offering has closed, indicating the date on which the shares are to be
delivered to the purchasers and the proceeds are to be delivered to us. Because
there is no minimum offering amount required as a condition to closing in this
offering, the actual public offering amount, placement agent fee and net
proceeds to us, if any, in this offering are not presently determinable and may
be substantially less than the maximum offering amounts set forth above.
SG COWEN & CO.
May 13, 2004
TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
Risk Factors................................................ S-1
Use of Proceeds............................................. S-6
Dilution.................................................... S-6
Plan of Distribution........................................ S-7
Legal Matters............................................... S-8
PROSPECTUS
About this Prospectus....................................... 1
Where You Can Find More Information......................... 1
Forward-Looking Information................................. 2
Our Business................................................ 3
Risk Factors................................................ 4
Use of Proceeds............................................. 9
Ratio of Earnings to Fixed Charges and Preference
Dividends................................................. 9
Dilution.................................................... 9
Description of the Securities We May Offer.................. 10
Plan of Distribution........................................ 12
Legal Matters............................................... 13
Experts..................................................... 13
THE PURPOSE OF THIS PROSPECTUS SUPPLEMENT IS TO PROVIDE SUPPLEMENTAL
INFORMATION REGARDING NORTHFIELD LABORATORIES INC. IN CONNECTION WITH THE
OFFERING. YOU SHOULD READ THIS PROSPECTUS SUPPLEMENT, ALONG WITH THE
ACCOMPANYING PROSPECTUS, CAREFULLY BEFORE YOU INVEST. BOTH DOCUMENTS CONTAIN
IMPORTANT INFORMATION YOU SHOULD CONSIDER WHEN MAKING YOUR INVESTMENT DECISION.
THIS PROSPECTUS SUPPLEMENT MAY ADD, UPDATE OR CHANGE INFORMATION CONTAINED IN
THE ACCOMPANYING PROSPECTUS.
YOU SHOULD RELY ONLY ON INFORMATION CONTAINED IN THIS PROSPECTUS
SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS WE INCORPORATE BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. WE ARE
OFFERING THE COMMON STOCK ONLY IN JURISDICTIONS WHERE SUCH OFFERS ARE PERMITTED.
THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IS ACCURATE ONLY AS OF THEIR RESPECTIVE DATES, REGARDLESS OF THE TIME
OF DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
RISK FACTORS
The securities offered by this prospectus supplement involve a high degree
of risk. You should consider the following risk factors when reviewing the
information contained in this prospectus supplement. These risk factors replace
and supercede in their entirety the "Risk Factors" beginning on page 4 of the
accompanying prospectus. You also should consider the other information
incorporated by reference in this prospectus supplement. These risk factors may
be supplemented and amended by any risk factors set forth in a later filed
prospectus supplement.
RISKS RELATED TO OUR BUSINESS
WE ARE REQUIRED TO CONDUCT ADDITIONAL CLINICAL TRIALS IN THE FUTURE.
The results of our clinical trials conducted to date are not sufficient to
demonstrate adequately the safety and effectiveness of PolyHeme in order to
obtain approval from FDA for the commercial sale of PolyHeme. We have begun
enrollment in a pivotal Phase III trial in which PolyHeme is being used for the
first time in civilian trauma applications to treat severely injured patients
before they reach the hospital. Under this protocol, treatment with PolyHeme
begins at the scene of the injury and continues during transport to the hospital
by ambulance. This trial is likely to be expensive and time-consuming and the
timing of FDA review process is uncertain. We cannot ensure that we will be able
to complete our clinical trials successfully or obtain FDA approval of PolyHeme,
or that FDA approval, if obtained, will not include limitations on the indicated
uses for which PolyHeme may be marketed. Our business, financial condition and
results of operations are critically dependent on receiving FDA approval of
PolyHeme. A significant delay in our planned clinical trials or a failure to
achieve FDA approval of commercial sales of PolyHeme would have a material
adverse effect on us and could result in the cessation of our business. We or
FDA may in the future suspend clinical trials at any time if it is believed that
the subjects participating in such trials are being exposed to unacceptable
health risks.
OUR ACTIVITIES ARE AND WILL CONTINUE TO BE SUBJECT TO EXTENSIVE GOVERNMENT
REGULATION.
Our research, development, testing, manufacturing, marketing and
distribution of PolyHeme are, and will continue to be, subject to extensive
regulation, monitoring and approval by FDA. The regulatory approval process to
establish the safety and effectiveness of PolyHeme and the safety and
reliability of our manufacturing process has already consumed several years and
considerable expenditures. The data obtained from clinical trials are
susceptible to varying interpretations, which could delay, limit or prevent FDA
regulatory approval. The lack of established criteria for evaluating the
effectiveness of blood substitute products could also delay or prevent FDA
regulatory approval. In addition, delay or rejection could be caused by changes
in FDA policies and regulations. We cannot ensure that, even after extensive
clinical trials, regulatory approval will ever be obtained for PolyHeme. We will
be required to file a Biologics License Application, or BLA, with FDA in order
to obtain regulatory approval for the commercial sale of PolyHeme in the United
States. Under FDA guidelines, FDA may comment upon the acceptability of a BLA
following its submission. After a BLA is submitted there is an initial review by
FDA to be sure that all of the required elements are included in the submission.
There can be no assurance that the submission will be accepted for filing or
that FDA may not issue a refusal to file, or RTF. If an RTF is issued, there is
opportunity for dialogue between the sponsor and FDA in an effort to resolve all
concerns. There can be no assurance that such a dialogue will be successful in
leading to the filing of the BLA. If the submission is filed, there can be no
assurance that the full review will result in product approval. Moreover, if
regulatory approval of PolyHeme is granted, the approval may include limitations
on the indicated uses for which PolyHeme may be marketed. Further, even if such
regulatory approval is obtained, we do not presently have manufacturing
facilities sufficient to produce commercial quantities of PolyHeme. In order to
seek FDA approval of the sale of PolyHeme produced at its first commercial
manufacturing facility, we may be required to conduct a portion of our clinical
trials with product manufactured at that facility. Discovery of previously
unknown problems with PolyHeme or unanticipated problems with our manufacturing
facilities, even after FDA approval of PolyHeme for commercial sale, may result
in the imposition of significant restrictions, including withdrawal of
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PolyHeme from the market. Additional laws and regulations may also be enacted
which could prevent or delay regulatory approval of PolyHeme, including laws or
regulations relating to the price or cost-effectiveness of medical products. Any
delay or failure to achieve regulatory approval of commercial sales of PolyHeme
is likely to have a material adverse effect on our financial condition. FDA
continues to review products even after they receive agency approval. If and
when FDA approves PolyHeme, its manufacture and marketing will be subject to
ongoing regulation, including compliance with current good manufacturing
practices, adverse event reporting requirements and FDA's general prohibitions
against promoting products for unapproved or "off-label" uses. We are also
subject to inspection and market surveillance by FDA for compliance with these
and other requirements. Any enforcement action resulting from failure, even by
inadvertence, to comply with these requirements could affect the manufacture and
marketing of PolyHeme. In addition, FDA could withdraw a previously approved
product from the market upon receipt of newly discovered information. FDA could
also require us to conduct additional, and potentially expensive, studies in
areas outside our approved indicated uses.
WE ARE A DEVELOPMENT STAGE COMPANY WITHOUT REVENUES OR PROFITS.
Northfield was founded in 1985 and is a development stage company. Since
1985, we have been engaged primarily in the development and clinical testing of
PolyHeme. No revenues have been generated to date from commercial sales of
PolyHeme. Our revenues to date have consisted solely of license fees. We cannot
ensure that our clinical testing will be successful, that regulatory approval of
PolyHeme will be obtained, that we will be able to manufacture PolyHeme at an
acceptable cost and in appropriate quantities or that we will be able to
successfully market and sell PolyHeme. We also cannot ensure that we will not
encounter unexpected difficulties which will have a material adverse effect on
us, our operations or our properties.
WE HAVE A HISTORY OF LOSSES, OUR FUTURE PROFITABILITY IS UNCERTAIN AND OUR
FINANCIAL STATEMENTS ARE SUBJECT TO A GOING CONCERN EXPLANATORY PARAGRAPH BY OUR
INDEPENDENT ACCOUNTANTS.
From Northfield's inception through February 29, 2004, we have incurred net
operating losses totaling $120,438,163. We will require substantial additional
expenditures to complete clinical trials, to pursue regulatory approval for
PolyHeme, to establish commercial scale manufacturing processes and facilities,
and to establish marketing, sales and administrative capabilities. These
expenditures are expected to result in substantial losses for a least the next
several years and are expected to substantially exceed our available capital
resources. The expense and the time required to realize any product revenues or
profitability are highly uncertain. We cannot ensure that we will be able to
achieve product revenues or profitability on a sustained basis or at all. As a
result of these factors, our independent accountants have included an
explanatory paragraph in their audit opinion based on uncertainty regarding our
ability to continue as a going concern.
WE WILL NEED TO RAISE ADDITIONAL CAPITAL TO CONTINUE OUR BUSINESS.
We intend to use the proceeds of this offering to fund certain
post-enrollment activities in connection with our current clinical trials, the
preparation and filing of a Biologics License Application with FDA, the
preparation for the commercialization of our product and for other general
corporate purposes. We expect that we will be required to raise capital, in
addition to the proceeds of this offering, to achieve commercial production of
PolyHeme. Our future capital requirements will depend on many factors, including
the scope and results of our clinical trials, the timing and outcome of
regulatory reviews, administrative and legal expenses, the status of competitive
products, the establishment of manufacturing capacity and the establishment of
collaborative relationships. We cannot ensure that this additional funding will
be available or, if it is available, that it can be obtained on terms and
conditions we will deem acceptable. Our independent accountants have included an
explanatory paragraph in their audit opinion based on uncertainty regarding our
ability to continue as a going concern. A statement of this type may interfere
with our ability to issue our securities to the public or in private
transactions. Any additional funding derived from the sale of equity securities
may result in significant dilution to our existing stockholders.
S-2
WE ARE DEVELOPING A SINGLE PRODUCT THAT IS SUBJECT TO A HIGH LEVEL OF
TECHNOLOGICAL RISK.
Our operations have to date consisted primarily of the development and
clinical testing of PolyHeme. We do not expect to realize product revenues
unless we successfully develop and achieve commercial introduction of PolyHeme.
We expect that such revenues, if any, will be derived solely from sales of
PolyHeme. We also expect the use of PolyHeme to be limited primarily to the
acute blood loss segment of the transfusion market. The biomedical field has
undergone rapid and significant technological changes. Technological
developments may result in PolyHeme becoming obsolete or non-competitive before
we are able to recover any portion of the research and development and other
expenses we have incurred to develop and clinically test PolyHeme. Any such
occurrence would have a material adverse effect on us and our operations.
WE ARE NOT CERTAIN THAT WE WILL BE ABLE TO MANUFACTURE POLYHEME COMMERCIALLY.
Commercial-scale manufacturing of PolyHeme will require the construction of
a manufacturing facility significantly larger than that currently being used to
produce PolyHeme for our clinical trials. We have no experience in
commercial-scale manufacturing, and there can be no assurance that we can
achieve commercial-scale manufacturing capacity. It is also possible that we may
incur substantial cost overruns and delays compared to existing estimates in
building and equipping a commercial-scale manufacturing facility. Moreover, in
order to seek FDA approval of the sale of PolyHeme produced at our first
commercial manufacturing facility, we may be required to conduct a portion of
our clinical trials with product manufactured at that facility. Accordingly, a
delay in achieving scale-up of commercial manufacturing capabilities will have a
material adverse effect on sales of PolyHeme. Additionally, the manufacture of
PolyHeme will be subject to extensive government regulation. Among the
conditions for marketing approval is that our quality control and manufacturing
procedures conform to FDA's good manufacturing practice regulations. We cannot
ensure that we will be able to obtain the necessary regulatory clearances or
approvals to manufacture PolyHeme on a timely basis or at all.
THERE MAY BE LIMITATIONS IN THE SUPPLY OF THE STARTING MATERIAL FOR POLYHEME.
We currently purchase donated blood from The American Red Cross and Blood
Centers of America for use as the starting material for PolyHeme. We have also
entered into an agreement with hemerica, Inc., a subsidiary of Blood Centers of
America, under which hemerica would supply us with up to 160,000 units per year
of packed red cells, the source material for PolyHeme. We have not purchased any
blood supplies under this agreement to date. We have plans to enter long-term
supply arrangements with other blood collectors. We cannot ensure that we will
be able to enter into satisfactory long-term arrangements with blood bank
operators, that the price we may be required to pay for starting material will
permit us to price PolyHeme competitively or that we will be able to obtain an
adequate supply of starting material. Additional demand for blood may arise from
competing blood substitute products, some of which are derived from human blood,
thereby limiting our available supply of starting material.
THERE ARE SIGNIFICANT COMPETITORS DEVELOPING SIMILAR PRODUCTS.
If approved for commercial sale, PolyHeme will compete directly with
established therapies for acute blood loss and may compete with other
technologies currently under development. We cannot ensure that PolyHeme will
have advantages which will be significant enough to cause medical professionals
to adopt it rather than continue to use established therapies or to adopt other
new technologies or products. We also cannot ensure that the cost of PolyHeme
will be competitive with the cost of established therapies or other new
technologies or products. The development of blood substitute products is a
rapidly evolving field. Competition is intense and expected to increase. Several
companies have developed or are in the process of developing technologies which
are, or in the future may be, the basis for products which will compete with
PolyHeme. Certain of these companies are pursuing different approaches or means
of accomplishing the therapeutic effects sought to be achieved through the use
of PolyHeme. Some of these companies have substantially greater financial
resources, larger research and development staffs, more extensive facilities and
more experience than Northfield in testing, manufacturing, marketing and
distributing medical products. We cannot ensure that one or more other companies
will not succeed in developing technologies or products which
S-3
will become available for commercial use prior to PolyHeme, which will be more
effective or less costly than PolyHeme or which would otherwise render PolyHeme
obsolete or non-competitive. A bovine-source hemoglobin-based oxygen-carrier has
been approved for human use in South Africa and a BLA is under review by FDA for
its use in the United States.
WE DO NOT HAVE EXPERIENCE IN THE SALE AND MARKETING OF MEDICAL PRODUCTS.
If approved for commercial sale, we intend to market PolyHeme in the United
States using our own sales force. We have no experience in the sale or marketing
of medical products. Our ability to implement our sales and marketing strategy
for the United States will depend on our ability to recruit, train and retain a
marketing staff and sales force with sufficient technical expertise. We cannot
ensure that we will be able to establish an effective marketing staff and sales
force, that the cost of establishing such a marketing staff and sales force will
not exceed revenues from the sale of PolyHeme or that our marketing and sales
efforts will be successful.
THE MARKET MAY NOT ACCEPT OUR PRODUCT.
We anticipate that the market price for PolyHeme, if FDA approval is
received, will exceed the cost of transfused blood. Competitors may also develop
new technologies or products which are more effective or less costly than
PolyHeme. We cannot ensure that the price of PolyHeme, considered in relation to
PolyHeme's expected benefits, will be perceived by health care providers and
third party payors as cost-effective, or that the price of PolyHeme will be
competitive with transfused blood or with other new technologies or products.
Our results of operations may be adversely affected if the price of PolyHeme is
not considered cost-effective or if PolyHeme does not otherwise receive market
acceptance.
OUR PATENTS AND OTHER PROPRIETARY RIGHTS MAY NOT PROTECT OUR TECHNOLOGY.
Our ability to compete effectively with other companies will depend, in
part, on our ability to protect and maintain the proprietary nature of our
technology. We cannot be certain as to the degree of protection offered by our
patents or as to the likelihood that additional patents in the United States and
certain other countries will be issued based upon pending patent applications.
Patent applications in the United States are maintained in secrecy until patents
are issued. We cannot be certain that we were the first creator of the
inventions covered by our patents or pending patent applications or that we were
the first to file patent applications for our inventions. The high costs of
enforcing patent and other proprietary rights may also limit the degree of
protection afforded to us. We also rely on unpatented proprietary technology,
and we cannot ensure that others may not independently develop the same or
similar technology or otherwise obtain access to our proprietary technology. We
cannot ensure that our patents or other proprietary rights will be determined to
be valid or enforceable if challenged in court or administrative proceedings or
that we will not become involved in disputes with respect to the patents or
proprietary rights of third parties. An adverse outcome from these proceedings
could subject us to significant liabilities to third parties, require disputed
rights to be licensed from third parties or require us to stop using this
technology, any of which would result in a material adverse effect on our
results of operations.
OUR PROFITABILITY WILL BE AFFECTED IF WE INCUR PRODUCT LIABILITY CLAIMS IN
EXCESS OF OUR INSURANCE COVERAGE.
The testing and marketing of medical products, even after FDA approval,
have an inherent risk of product liability. We maintain limited product
liability insurance coverage for our clinical trials in the total amount of $10
million. However, our profitability will be adversely affected by a successful
product liability claim in excess of our insurance coverage. We cannot guarantee
that product liability insurance will be available in the future or be available
on reasonable terms.
WE DEPEND ON THE SERVICES OF A LIMITED NUMBER OF KEY PERSONNEL.
Our success is highly dependent on the continued services of a limited
number of skilled managers and scientists. The loss of any of these individuals
could have a material adverse effect on us. In addition, our
S-4
success will depend, among other factors, on the recruitment and retention of
additional highly skilled and experienced management and technical personnel. We
cannot ensure that we will be able to retain existing employees or to attract
and retain additional skilled personnel on acceptable terms given the
competition for such personnel among numerous large and well-funded
pharmaceutical and health care companies, universities and non-profit research
institutions.
HEALTH CARE REFORM AND CONTROLS ON HEALTH CARE SPENDING MAY LIMIT THE PRICE WE
CAN CHARGE FOR POLYHEME AND THE AMOUNT WE CAN SELL.
The federal government and private insurers have considered ways to change,
and have changed, the manner in which health care services are provided in the
United States. Potential approaches and changes in recent years include controls
on health care spending and the creation of large purchasing groups. In the
future, it is possible that the government may institute price controls and
limits on Medicare and Medicaid spending. These controls and limits might affect
the payments we collect from sales of our product. Assuming we succeed in
bringing PolyHeme to market, uncertainties regarding future health care reform
and private market practices could affect our ability to sell PolyHeme in large
quantities at profitable pricing.
UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT COULD AFFECT OUR PROFITABILITY.
Sales of medical products largely depend on the reimbursement of patients'
medical expenses by governmental health care programs and private health
insurers. There is no guarantee that governmental health care programs or
private health insurers will reimburse our sales of PolyHeme, or permit us to
sell our product at high enough prices to generate a profit.
RISKS RELATED TO THE OFFERING
OUR STOCK PRICE COULD BE VOLATILE AND YOUR INVESTMENT COULD SUFFER A DECLINE IN
VALUE.
The market price of our common stock has fluctuated significantly in
response to a number of factors, many are which are beyond our control,
including:
- regulatory developments relating to our PolyHeme blood substitute
product;
- announcements by us relating to the results of our clinical trials of
PolyHeme;
- developments relating to our efforts to obtain additional financing to
fund our operations;
- announcements by us regarding transactions with potential strategic
partners;
- announcements relating to blood substitute products being developed by
our competitors;
- changes in industry trends or conditions;
- our issuance of additional debt or equity securities; and
- sales of significant amounts of our common stock or other securities in
the market.
In addition, the stock market in general, and the Nasdaq National Market
and the biotechnology industry market in particular, have experienced
significant price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of listed companies. These broad
market and industry factors may seriously harm the market price of our common
stock, regardless of our operating performance. In the past, securities class
action litigation has often been instituted following periods of volatility in
the market price of a company's securities. A securities class action suit
against us could result in substantial costs, potential liabilities and the
diversion of our management's attention and resources.
S-5
ANTI-TAKEOVER PROVISIONS CONTAINED IN OUR CHARTER AND BYLAWS COULD DISCOURAGE
POTENTIAL TAKEOVER ATTEMPTS.
Our certificate of incorporation contains a "fair price" provision which
requires approval of the holders of at least 80% of our voting stock, excluding
shares held by certain interested stockholders and their affiliates, as a
condition to mergers or certain other business combinations with, or proposed
by, any holder of 15% or more of our voting stock, except in cases where
approval of our disinterested directors is obtained or certain minimum price
criteria and other procedural requirements are satisfied. In addition, our board
of directors has the authority, without further action by our stockholders, to
fix the rights and preferences and issue shares of preferred stock. These
provisions, and other provisions of our certificate of incorporation and bylaws
and Delaware law, may have the effect of deterring hostile takeovers or delaying
or preventing changes in our control or management, including transactions in
which stockholders might otherwise receive a premium for their shares over the
then prevailing market prices.
THERE IS A LARGE NUMBER OF SHARES THAT MAY BE SOLD IN THE MARKET FOLLOWING THIS
OFFERING, WHICH MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.
Sales of a substantial number of shares of our common stock or securities
convertible into or exercisable for our common stock in the public market
following this offering could cause the market price of our common stock to
decline. If there are more shares of common stock offered for sale than buyers
are willing to purchase, then the market price of our common stock may decline
to a market price at which buyers are willing to purchase the offered shares of
common stock and sellers remain willing to sell the shares. All of the shares
sold in the offering will be freely tradeable without restriction or further
registration under the Securities Act, except for any shares purchased by our
"affiliates" as defined in Rule 144 of the Securities Act and the shares
underlying the warrant issued to the placement agent.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
The public offering price of the securities offered hereby is likely to be
substantially higher than the book value per share of our common stock.
Investors purchasing common stock in this offering may, therefore, incur
immediate dilution in net tangible book value per share of common stock.
Investors will also incur additional dilution upon the exercise of outstanding
stock options and warrants. See "Dilution" for a more detailed discussion of the
dilution you will incur in this offering.
USE OF PROCEEDS
Unless we inform you otherwise, we intend to use the proceeds of this
offering to fund certain post-enrollment activities in connection with our
current clinical trials, the preparation and filing of a Biologics License
Application with FDA, the preparation for the commercialization of our product
and for other general corporate purposes. Pending any specific application, we
may initially invest funds in short-term marketable securities.
DILUTION
Our net tangible book value at February 29, 2004 was $22,116,021, or $1.16
per share of common stock. Net tangible book value per share represents total
tangible assets less total liabilities divided by the number of outstanding
shares of our common stock on February 29, 2004. Assuming that we issue an
aggregate of 1,954,416 shares of our common stock at a public offering price of
$12.00 per share, with estimated net proceeds to us (after assumed commissions
and expenses) of $21,711,283, our pro forma net tangible book value at February
29, 2004 would have been $43,827,304, or $2.09 per share. This represents an
immediate
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increase in the tangible book value of $0.93 per share to our existing
stockholders and an immediate dilution of $9.91 per share to new investors
purchasing common stock in this offering, as illustrated in the following table:
Public offering price per share............................. $12.00
Net tangible book value per share as of February 29,
2004................................................... $1.16
Increase per share attributable to new investors.......... $0.93
Pro forma net tangible book value per share after
offering............................................... $ 2.09
Dilution per share to new investors......................... $ 9.91
The computations in the table above assume (i) no exercise of any
outstanding stock options or warrants after February 29, 2004 and (ii) no
exercise of the unregistered warrant to be issued to the placement agent for
this offering. At February 29, 2004, there were options and warrant outstanding
to purchase a total of 1,368,259 shares of our common stock at a weighted
average exercise price of $8.44 per share. If any of these options or warrants
are exercised, there will be further dilution to new investors.
PLAN OF DISTRIBUTION
We are offering the shares of our common stock through a placement agent.
Subject to the terms and conditions contained in the placement agent agreement
dated May 12, 2004, SG Cowen & Co., LLC has agreed to act as the placement agent
for the sale of up to 1,954,416 shares of our common stock. The placement agent
is not purchasing or selling any shares by this prospectus supplement or
accompanying prospectus, nor is it required to arrange the purchase or sale of
any specific number or dollar amount of the shares, but has agreed to use
commercially reasonable efforts to arrange for the sale of all 1,954,416 shares.
The placement agent agreement provides that the obligations of the
placement agent are subject to certain conditions precedent, including the
absence of any material adverse change in our business and the receipt of
certain opinions, letters and certificates from our counsel, our independent
auditors and us.
Confirmations and definitive prospectuses will be distributed to all
investors who agree to purchase shares of the common stock, informing investors
of the closing date as to such shares. We currently anticipate that closing of
the sale of 1,954,416 shares of common stock will take place on or about May 18,
2004. Investors will also be informed of the date on which they must transmit
the purchase price into our account.
On the scheduled closing date, the following will occur:
- each investor will transfer to us funds in the amount of the purchase
price, and
- the placement agent will be paid its fee.
We will pay the placement agent a commission equal to 7% of the gross
proceeds of the sale of shares of common stock in the offering. In addition, on
the closing date of this offering, we will issue to the placement agent a
warrant to purchase up to 3% of the aggregate number of shares of our common
stock sold in this offering. The placement agent's warrant will become
exercisable beginning one year after the closing date of this offering at a per
share exercise price equal to $13.73 subject to adjustments, and will expire
five years from the closing date of this offering. The placement agent's warrant
and underlying shares of common stock will be restricted from sale, transfer,
assignment or hypothecation for a period of one year from the closing date of
this offering, in compliance with Rule 2710 of the Conduct Rules of the National
Association of Securities Dealers, Inc. The total amount of compensation paid to
the placement agent upon completion of this offering will not exceed 8% of the
maximum gross proceeds of the offering.
We have agreed to indemnify the placement agent against certain
liabilities, including liabilities under the Securities Act of 1933 and
liabilities arising from breaches of representations and warranties contained in
the placement agent agreement. We have also agreed to contribute to payments the
placement agent may be required to make in respect of such liabilities.
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We, along with our executive officers and directors, have agreed to certain
lock-up provisions with regard to future sales of our common stock for a period
of 60 days, in the case of Northfield, and 90 days, in the case of our directors
and executive officers, after the offering as set forth in the placement agent
agreement.
The placement agent agreement with SG Cowen & Co., LLC and the placement
agent's warrant are included as exhibits to our Current Report on Form 8-K filed
with the Securities and Exchange Commission on May 13, 2004, which are
incorporated by reference into this prospectus supplement and the accompanying
prospectus.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered hereby
will be passed upon by our counsel, Baker & McKenzie in Chicago, Illinois. Brown
Raysman Millstein Felder & Steiner LLP in New York, New York is acting as
counsel for the placement agent in connection with various legal matters
relating to the shares of common stock offered hereby.
S-8
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
$50,000,000
NORTHFIELD LABORATORIES INC.
COMMON STOCK
PREFERRED STOCK
DEPOSITARY SHARES
STOCK PURCHASE CONTRACTS
WARRANTS
DEBT SECURITIES
THE SECURITIES OFFERED BY THE PROSPECTUS INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.
We will provide you with the specific terms of the particular securities
being offered in supplements to this prospectus. You should read this prospectus
and each related supplement carefully before you invest. This prospectus may not
be used to sell securities unless accompanied by a prospectus supplement.
Our common stock is quoted on the Nasdaq Stock Market's National Market
System under the symbol "NFLD." The last reported sale price of our common stock
on June 24, 2003 was $8.39 per share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is June 27, 2003.
TABLE OF CONTENTS
About this Prospectus....................................... 1
Where You Can Find More Information......................... 1
Forward-Looking Information................................. 2
Our Business................................................ 3
Risk Factors................................................ 4
Use of Proceeds............................................. 9
Ratio of Earnings to Fixed Charges and Preference
Dividends................................................. 9
Dilution.................................................... 9
Description of the Securities We May Offer.................. 10
Plan of Distribution........................................ 12
Legal Matters............................................... 13
Experts..................................................... 13
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission, or SEC, using a "shelf" registration
process. Using this process, we may offer the securities described in this
prospectus in one or more offerings with a total initial offering price of up to
$50,000,000 or an equivalent amount in one or more foreign currencies. We may
sell these securities separately or in units. This prospectus provides you with
a general description of the securities we may offer. Each time we offer
securities, we will provide you a prospectus supplement that will contain
information about the specific terms of that particular offering. The prospectus
supplement may also add, update or change information contained in this
prospectus. To obtain additional information that may be important to you, you
should read the exhibits filed by us with the registration statement of which
this prospectus is a part or our other filings with the SEC. You also should
read this prospectus and any prospectus supplement together with the additional
information described below under "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You can read and copy any materials we file with the
SEC at its Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. You can obtain information about the operations of the SEC Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a
web site that contains information we file electronically with the SEC, which
you can access over the Internet at www.sec.gov. You may also access the
information we file electronically with the SEC through our website at
www.northfieldlabs.com.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information we incorporate by reference is
an important part of this prospectus, and later information that we file with
the SEC will automatically update and supersede some of this information. We
incorporate by reference the documents listed below and any future filings we
make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until we sell all of the securities covered by this
prospectus. The documents we incorporate by reference are:
- our Annual Report on Form 10-K for the year ended May 31, 2002;
- our Quarterly Reports on Form 10-Q for the quarters ended August 31,
2002, November 30, 2002 and February 28, 2003; and
- the description of our common stock contained in our Registration
Statement on Form 8-A, Registration No. 33-76856, filed with the SEC on
March 24, 1994, including any amendments or reports filed for the purpose
of updating this description.
You may request a copy of these filings (other than an exhibit to the
filings unless we have specifically incorporated that exhibit by reference into
the filing), at no cost, by writing or telephoning us at the following address:
Northfield Laboratories Inc. 1560 Sherman Avenue Suite 1000 Evanston,
Illinois 60201-4800
(847)864-3500
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We may only use this
prospectus to sell securities if it is accompanied by a prospectus supplement.
We are only offering the securities in states where the offer is permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
1
FORWARD-LOOKING INFORMATION
This prospectus and the documents we incorporate by reference contain
forward-looking statements concerning, among other things, our prospects,
clinical and regulatory developments affecting our potential product and our
business strategies. These forward-looking statements are identified by the use
of such terms as "intends," "expects," "plans," "estimates," "anticipates,"
"should" and "believes" and are in certain cases followed by a cross reference
to "Risk Factors."
These forward-looking statements involve risks and uncertainties. Actual
results may differ materially from those predicted by the forward-looking
statements because of various factors and possible events, including those
discussed under "Risk Factors." Because these forward-looking statements involve
risks and uncertainties, actual results may differ significantly from those
predicted in these forward-looking statements. You should not place undue weight
on these statements. These statements speak only as of the date of this
prospectus or, in the case of any document incorporated by reference, the date
of that document.
All subsequent written and oral forward-looking statements attributable to
Northfield or any person acting on our behalf are qualified by the cautionary
statements in this section. We will have no obligation to revise these
forward-looking statements.
2
OUR BUSINESS
Northfield Laboratories Inc. is a leader in the development of a safe and
effective alternative to transfused blood for use in the treatment of acute
blood loss. Our PolyHeme(R) blood substitute product is a solution of chemically
modified hemoglobin derived from human blood. PolyHeme simultaneously restores
lost blood volume and hemoglobin levels and is designed for rapid, massive
infusion. PolyHeme requires no cross- matching, and is therefore immediately
available and compatible with all blood types. PolyHeme has an extended shelf
life compared to blood. We believe PolyHeme is the only blood substitute in
development that has been safely infused in clinical trials in sufficient
quantities to be useful in the treatment of urgent, large volume blood loss in
trauma and surgical settings, with a particular focus on situations where
donated blood is not immediately available.
We have conducted Phase II and Phase III clinical trials of PolyHeme at
multiple locations in the United States in trauma and emergency surgical
applications, in elective surgical procedures, and as life-saving therapy in
situations of compassionate use. The observations in these trials have
demonstrated the potential clinical utility of PolyHeme in the treatment of
urgent blood loss and life-threatening hemoglobin levels. In these trials in
hospitalized trauma patients, PolyHeme significantly improved survival compared
to historical control patients who did not receive blood. Our trials have
involved high dosage and rapid infusion of PolyHeme in situations that are
life-threatening and where massive blood loss routinely occurs. We believe that
this application addresses the largest world-wide clinical need and has the
greatest market opportunity. We believe we are the only company in our field
with an oxygen-carrying blood substitute that has been rapidly infused at such
high doses -- as much as 20 units (1,000 grams) or twice the blood volume of the
average adult.
On March 5, 2003, we received clearance from the U.S. Food and Drug
Administration, or FDA, to proceed with a pivotal Phase III trial in which
PolyHeme will be used for the first time in civilian, urban trauma settings to
treat severely injured patients in hemorrhagic shock before they reach the
hospital. Under this protocol, treatment with PolyHeme will begin at the scene
of the injury or in the ambulance and continue during transport and the initial
12 hour post-injury period in the hospital. Since blood is not presently carried
in ambulances, the use of PolyHeme in this setting has the potential to improve
survival and thereby address a critical, unmet medical need.
On June 11, 2003, we received a response from FDA on our request for
Special Protocol Assessment, or SPA, for our urban ambulance trial, confirming
that agreement had been reached on the primary endpoints for the protocol and
the concepts for clinical indications those endpoints would support. An SPA
represents acknowledgement and confirmation of a mutual agreement between a
clinical trial sponsor and FDA that successful completion of the proposed trial
will form the primary basis for an efficacy claim in a marketing application for
product approval. Such agreements become part of the administrative record and
may only be changed by mutual agreement of the parties, or if FDA identifies a
substantial scientific issue relevant to safety or efficacy after the trial has
begun.
We are currently in contact with over 30 potential clinical sites in an
effort to complete the trial at the earliest possible date. We anticipate that
approximately 20 Level I trauma centers throughout the United States will
eventually participate in the PolyHeme trial, which has an expected enrollment
of 720 patients. The process of public disclosure and community consultation
required under the regulations is underway at a number of potential trial sites
across the country.
Our principal executive offices are located at 1560 Sherman Avenue, Suite
1000, Evanston, Illinois 60201-4800, and our telephone number is (847) 864-3500.
We maintain an Internet web site at www.northfieldlabs.com. The information
contained on our web site, or on other web sites linked to our web site, is not
a part of this prospectus.
3
RISK FACTORS
The securities offered by this prospectus involve a high degree of risk.
You should consider the following risk factors when reviewing the information
contained in this prospectus. You also should consider the other information
incorporated by reference in this prospectus. These risk factors may be
supplemented and amended by any risk factors set forth in a prospectus
supplement.
RISKS RELATED TO OUR BUSINESS
WE ARE REQUIRED TO CONDUCT ADDITIONAL CLINICAL TRIALS IN THE FUTURE.
The results of our clinical trials conducted to date are not sufficient to
demonstrate adequately the safety and effectiveness of PolyHeme in order to
obtain approval from FDA for the commercial sale of PolyHeme. We are preparing
to commence enrollment a pivotal Phase III trial in which PolyHeme will be used
for the first time in civilian trauma applications to treat severely injured
patients before they reach the hospital. Under this protocol, treatment with
PolyHeme will begin at the scene of the injury and continue during transport to
the hospital by ambulance. This trial is likely to be expensive and
time-consuming and the timing of FDA review process is uncertain. We cannot
ensure that we will be able to complete our clinical trials successfully or
obtain FDA approval of PolyHeme, or that FDA approval, if obtained, will not
include limitations on the indicated uses for which PolyHeme may be marketed.
Our business, financial condition and results of operations are critically
dependent on receiving FDA approval of PolyHeme. A significant delay in our
planned clinical trials or a failure to achieve FDA approval of commercial sales
of PolyHeme would have a material adverse effect on us and could result in the
cessation of our business. We or FDA may in the future suspend clinical trials
at any time if it is believed that the subjects participating in such trials are
being exposed to unacceptable health risks.
OUR ACTIVITIES ARE AND WILL CONTINUE TO BE SUBJECT TO EXTENSIVE GOVERNMENT
REGULATION.
Our research, development, testing, manufacturing, marketing and
distribution of PolyHeme are, and will continue to be, subject to extensive
regulation, monitoring and approval by FDA. The regulatory approval process to
establish the safety and effectiveness of PolyHeme and the safety and
reliability of our manufacturing process has already consumed several years and
considerable expenditures. The data obtained from clinical trials are
susceptible to varying interpretations, which could delay, limit or prevent FDA
regulatory approval. The lack of established criteria for evaluating the
effectiveness of blood substitute products could also delay or prevent FDA
regulatory approval. In addition, delay or rejection could be caused by changes
in FDA policies and regulations. We cannot ensure that, even after extensive
clinical trials, regulatory approval will ever be obtained for PolyHeme. We will
be required to file a Biologics License Application, or BLA, with FDA in order
to obtain regulatory approval for the commercial sale of PolyHeme in the United
States. Under FDA guidelines, FDA may comment upon the acceptability of a BLA
following its submission. After a BLA is submitted there is an initial review by
FDA to be sure that all of the required elements are included in the submission.
There can be no assurance that the submission will be accepted for filing or
that FDA may not issue a refusal to file, or RTF. If an RTF is issued, there is
opportunity for dialogue between the sponsor and FDA in an effort to resolve all
concerns. There can be no assurance that such a dialogue will be successful in
leading to the filing of the BLA. If the submission is filed, there can be no
assurance that the full review will result in product approval. Moreover, if
regulatory approval of PolyHeme is granted, the approval may include limitations
on the indicated uses for which PolyHeme may be marketed. Further, even if such
regulatory approval is obtained, we do not presently have manufacturing
facilities sufficient to produce commercial quantities of PolyHeme. In order to
seek FDA approval of the sale of PolyHeme produced at its first commercial
manufacturing facility, we may be required to conduct a portion of our clinical
trials with product manufactured at that facility. Discovery of previously
unknown problems with PolyHeme or unanticipated problems with our manufacturing
facilities, even after FDA approval of PolyHeme for commercial sale, may result
in the imposition of significant restrictions, including withdrawal of PolyHeme
from the market. Additional laws and regulations may also be enacted which could
prevent or delay regulatory approval of PolyHeme, including laws or regulations
relating to the price or cost-effectiveness
4
of medical products. Any delay or failure to achieve regulatory approval of
commercial sales of PolyHeme is likely to have a material adverse effect on our
financial condition. FDA continues to review products even after they receive
agency approval. If and when FDA approves PolyHeme, its manufacture and
marketing will be subject to ongoing regulation, including compliance with
current good manufacturing practices, adverse event reporting requirements and
FDA's general prohibitions against promoting products for unapproved or "off-
label" uses. We are also subject to inspection and market surveillance by FDA
for compliance with these and other requirements. Any enforcement action
resulting from failure, even by inadvertence, to comply with these requirements
could affect the manufacture and marketing of PolyHeme. In addition, FDA could
withdraw a previously approved product from the market upon receipt of newly
discovered information. FDA could also require us to conduct additional, and
potentially expensive, studies in areas outside our approved indicated uses.
WE ARE A DEVELOPMENT STAGE COMPANY WITHOUT REVENUES OR PROFITS.
Northfield was founded in 1985 and is a development stage company. Since
1985, we have been engaged primarily in the development and clinical testing of
PolyHeme. No revenues have been generated to date from commercial sales of
PolyHeme. Our revenues to date have consisted solely of license fees. We cannot
ensure that our clinical testing will be successful, that regulatory approval of
PolyHeme will be obtained, that we will be able to manufacture PolyHeme at an
acceptable cost and in appropriate quantities or that we will be able to
successfully market and sell PolyHeme. We also cannot ensure that we will not
encounter unexpected difficulties which will have a material adverse effect on
us, our operations or our properties.
WE WILL NEED TO RAISE ADDITIONAL CAPITAL TO CONTINUE OUR BUSINESS.
We intend to use the proceeds of this offering to fund our planned clinical
trials and ongoing business operations and for other general corporate purposes.
We will be required to raise capital, in addition to the proceeds of this
offering, to achieve commercial production of PolyHeme. Our future capital
requirements will depend on many factors, including the scope and results of our
clinical trials, the timing and outcome of regulatory reviews, administrative
and legal expenses, the status of competitive products, the establishment of
manufacturing capacity and the establishment of collaborative relationships. We
cannot ensure that this additional funding will be available or, if it is
available, that it can be obtained on terms and conditions we will deem
acceptable. If we are unable to raise additional capital, our independent
accountants may qualify their audit opinions based on uncertainty regarding our
ability to continue as a going concern. A qualification of this type may
interfere with our ability to issue our securities to the public or in private
transactions. Any additional funding derived from the sale of equity securities
may result in significant dilution to our existing stockholders.
WE ARE DEVELOPING A SINGLE PRODUCT THAT IS SUBJECT TO A HIGH LEVEL OF
TECHNOLOGICAL RISK.
Our operations have to date consisted primarily of the development and
clinical testing of PolyHeme. We do not expect to realize product revenues
unless we successfully develop and achieve commercial introduction of PolyHeme.
We expect that such revenues, if any, will be derived solely from sales of
PolyHeme. We also expect the use of PolyHeme to be limited primarily to the
acute blood loss segment of the transfusion market. The biomedical field has
undergone rapid and significant technological changes. Technological
developments may result in PolyHeme becoming obsolete or non-competitive before
we are able to recover any portion of the research and development and other
expenses we have incurred to develop and clinically test PolyHeme. Any such
occurrence would have a material adverse effect on us and our operations.
WE ARE NOT CERTAIN THAT WE WILL BE ABLE TO MANUFACTURE POLYHEME COMMERCIALLY.
Commercial-scale manufacturing of PolyHeme will require the construction of
a manufacturing facility significantly larger than that currently being used to
produce PolyHeme for our clinical trials. We have no experience in commercial
scale manufacturing, and there can be no assurance that we can achieve
commercial-scale manufacturing capacity. It is also possible that we may incur
substantial cost overruns and delays compared to existing estimates in building
and equipping a commercial-scale manufacturing facility.
5
Moreover, in order to seek FDA approval of the sale of PolyHeme produced at our
first commercial manufacturing facility, we may be required to conduct a portion
of our clinical trials with product manufactured at that facility. Accordingly,
a delay in achieving scale-up of commercial manufacturing capabilities will have
a material adverse effect on sales of PolyHeme. Additionally, the manufacture of
PolyHeme will be subject to extensive government regulation. Among the
conditions for marketing approval is that our quality control and manufacturing
procedures conform to FDA's good manufacturing practice regulations. We cannot
ensure that we will be able to obtain the necessary regulatory clearances or
approvals to manufacture PolyHeme on a timely basis or at all.
THERE MAY BE LIMITATIONS IN THE SUPPLY OF THE STARTING MATERIAL FOR POLYHEME.
We currently purchase donated blood from The American Red Cross and Blood
Centers of America for use as the starting material for PolyHeme. We have also
entered into an agreement with hemerica, Inc., a subsidiary of Blood Centers of
America, under which hemerica would supply us with up to 160,000 units per year
of packed red cells, the source material for PolyHeme. We have not purchased any
blood supplies under this agreement to date. We have plans to enter long-term
supply arrangements with other blood collectors. We cannot ensure that we will
be able to enter into satisfactory long-term arrangements with blood bank
operators, that the price we may be required to pay for starting material will
permit us to price PolyHeme competitively or that we will be able to obtain an
adequate supply of starting material. Additional demand for blood may arise from
competing blood substitute products, some of which are derived from human blood,
thereby limiting our available supply of starting material.
THERE ARE SIGNIFICANT COMPETITORS DEVELOPING SIMILAR PRODUCTS.
If approved for commercial sale, PolyHeme will compete directly with
established therapies for acute blood loss and may compete with other
technologies currently under development. We cannot ensure that PolyHeme will
have advantages which will be significant enough to cause medical professionals
to adopt it rather than continue to use established therapies or to adopt other
new technologies or products. We also cannot ensure that the cost of PolyHeme
will be competitive with the cost of established therapies or other new
technologies or products. The development of blood substitute products is a
rapidly evolving field. Competition is intense and expected to increase. Several
companies have developed or are in the process of developing technologies which
are, or in the future may be, the basis for products which will compete with
PolyHeme. Certain of these companies are pursuing different approaches or means
of accomplishing the therapeutic effects sought to be achieved through the use
of PolyHeme. Some of these companies have substantially greater financial
resources, larger research and development staffs, more extensive facilities and
more experience than Northfield in testing, manufacturing, marketing and
distributing medical products. We cannot ensure that one or more other companies
will not succeed in developing technologies or products which will become
available for commercial use prior to PolyHeme, which will be more effective or
less costly than PolyHeme or which would otherwise render PolyHeme obsolete or
non-competitive. A bovine-source hemoglobin-based oxygen-carrier has been
approved for human use in South Africa and a BLA is under review by FDA for its
use in the United States.
WE DO NOT HAVE EXPERIENCE IN THE SALE AND MARKETING OF MEDICAL PRODUCTS.
If approved for commercial sale, we intend to market PolyHeme in the United
States using our own sales force. We have no experience in the sale or marketing
of medical products. Our ability to implement our sales and marketing strategy
for the United States will depend on our ability to recruit, train and retain a
marketing staff and sales force with sufficient technical expertise. We cannot
ensure that we will be able to establish an effective marketing staff and sales
force, that the cost of establishing such a marketing staff and sales force will
not exceed revenues from the sale of PolyHeme or that our marketing and sales
efforts will be successful.
WE HAVE A HISTORY OF LOSSES AND OUR FUTURE PROFITABILITY IS UNCERTAIN.
From Northfield's inception through February 28, 2003, we have incurred net
operating losses totaling $107,142,000. We will require substantial additional
expenditures to complete clinical trials, to pursue
6
regulatory approval for PolyHeme, to establish commercial scale manufacturing
processes and facilities, and to establish marketing, sales and administrative
capabilities. These expenditures are expected to result in substantial losses
for at least the next several years. The expense and the time required to
realize any product revenues or profitability are highly uncertain. We cannot
ensure that we will be able to achieve product revenues or profitability on a
sustained basis or at all.
THE MARKET MAY NOT ACCEPT OUR PRODUCT.
We anticipate that the market price for PolyHeme, if FDA approval is
received, will exceed the cost of transfused blood. Competitors may also develop
new technologies or products which are more effective or less costly than
PolyHeme. We cannot ensure that the price of PolyHeme, considered in relation to
PolyHeme's expected benefits, will be perceived by health care providers and
third party payors as cost-effective, or that the price of PolyHeme will be
competitive with transfused blood or with other new technologies or products.
Our results of operations may be adversely affected if the price of PolyHeme is
not considered cost-effective or if PolyHeme does not otherwise receive market
acceptance.
OUR PATENTS AND OTHER PROPRIETARY RIGHTS MAY NOT PROTECT OUR TECHNOLOGY.
Our ability to compete effectively with other companies will depend, in
part, on our ability to protect and maintain the proprietary nature of our
technology. We cannot be certain as to the degree of protection offered by our
patents or as to the likelihood that additional patents in the United States and
certain other countries will be issued based upon pending patent applications.
Patent applications in the United States are maintained in secrecy until patents
are issued. We cannot be certain that we were the first creator of the
inventions covered by our patents or pending patent applications or that we were
the first to file patent applications for our inventions. The high costs of
enforcing patent and other proprietary rights may also limit the degree of
protection afforded to us. We also rely on unpatented proprietary technology,
and we cannot ensure that others may not independently develop the same or
similar technology or otherwise obtain access to our proprietary technology. We
cannot ensure that our patents or other proprietary rights will be determined to
be valid or enforceable if challenged in court or administrative proceedings or
that we will not become involved in disputes with respect to the patents or
proprietary rights of third parties. An adverse outcome from these proceedings
could subject us to significant liabilities to third parties, require disputed
rights to be licensed from third parties or require us to stop using this
technology, any of which would result in a material adverse effect on our
results of operations.
OUR PROFITABILITY WILL BE AFFECTED IF WE INCUR PRODUCT LIABILITY CLAIMS IN
EXCESS OF OUR INSURANCE COVERAGE.
The testing and marketing of medical products, even after FDA approval,
have an inherent risk of product liability. We maintain limited product
liability insurance coverage for our clinical trials in the total amount of $10
million. However, our profitability will be adversely affected by a successful
product liability claim in excess of our insurance coverage. We cannot guarantee
that product liability insurance will be available in the future or be available
on reasonable terms.
WE DEPEND ON THE SERVICES OF A LIMITED NUMBER OF KEY PERSONNEL.
Our success is highly dependent on the continued services of a limited
number of skilled managers and scientists. The loss of any of these individuals
could have a material adverse effect on us. In addition, our success will
depend, among other factors, on the recruitment and retention of additional
highly skilled and experienced management and technical personnel. We cannot
ensure that we will be able to retain existing employees or to attract and
retain additional skilled personnel on acceptable terms given the competition
for such personnel among numerous large and well-funded pharmaceutical and
health care companies, universities and non-profit research institutions.
7
HEALTH CARE REFORM AND CONTROLS ON HEALTH CARE SPENDING MAY LIMIT THE PRICE WE
CAN CHARGE FOR POLYHEME AND THE AMOUNT WE CAN SELL.
The federal government and private insurers have considered ways to change,
and have changed, the manner in which health care services are provided in the
United States. Potential approaches and changes in recent years include controls
on health care spending and the creation of large purchasing groups. In the
future, it is possible that the government may institute price controls and
limits on Medicare and Medicaid spending. These controls and limits might affect
the payments we collect from sales of our product. Assuming we succeed in
bringing PolyHeme to market, uncertainties regarding future health care reform
and private market practices could affect our ability to sell PolyHeme in large
quantities at profitable pricing.
UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT COULD AFFECT OUR PROFITABILITY.
Sales of medical products largely depend on the reimbursement of patients'
medical expenses by governmental health care programs and private health
insurers. There is no guarantee that governmental health care programs or
private health insurers will reimburse our sales of PolyHeme, or permit us to
sell our product at high enough prices to generate a profit.
RISKS RELATED TO THE OFFERING
OUR STOCK PRICE COULD BE VOLATILE AND YOUR INVESTMENT COULD SUFFER A DECLINE IN
VALUE.
The market price of our common stock has fluctuated significantly in
response to a number of factors, many are which are beyond our control,
including:
- regulatory developments relating to our PolyHeme blood substitute
product;
- announcements by us relating to the results of our clinical trials of
PolyHeme;
- developments relating to our efforts to obtain additional financing to
fund our operations;
- announcements by us regarding transactions with potential strategic
partners;
- announcements relating to blood substitute products being developed by
our competitors;
- changes in industry trends or conditions;
- our issuance of additional debt or equity securities; and
- sales of significant amounts of our common stock or other securities in
the market.
In addition, the stock market in general, and the Nasdaq National Market
and the biotechnology industry market in particular, have experienced
significant price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of listed companies. These broad
market and industry factors may seriously harm the market price of our common
stock, regardless of our operating performance. In the past, securities class
action litigation has often been instituted following periods of volatility in
the market price of company's securities. A securities class action suit against
us could result in substantial costs, potential liabilities and the diversion of
our management's attention and resources.
ANTI-TAKEOVER PROVISIONS CONTAINED IN OUR CHARTER AND BYLAWS COULD DISCOURAGE
POTENTIAL TAKEOVER ATTEMPTS.
Our certificate of incorporation contains a "fair price" provision which
requires approval of the holders of at least 80% of our voting stock, excluding
shares held by certain interested stockholders and their affiliates, as a
condition to mergers or certain other business combinations with, or proposed
by, any holder of 15% or more of our voting stock, except in cases where
approval of our disinterested directors is obtained or certain minimum price
criteria and other procedural requirements are satisfied. In addition, our board
of directors has the authority, without further action by our stockholders, to
fix the rights and preferences and issue shares of preferred stock. These
provisions, and other provisions of the our certificate of incorporation and
bylaws and
8
Delaware law, may have the effect of deterring hostile takeovers or delaying or
preventing changes in our control or management, including transactions in which
stockholders might otherwise receive a premium for their shares over the then
prevailing market prices.
THERE IS A LARGE NUMBER OF SHARES THAT MAY BE SOLD IN THE MARKET FOLLOWING THIS
OFFERING, WHICH MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.
Sales of a substantial number of shares of our common stock or securities
convertible into or exercisable for our common stock in the public market
following this offering could cause the market price of our common stock to
decline. If there are more shares of common stock offered for sale than buyers
are willing to purchase, then the market price of our common stock may decline
to a market price at which buyers are willing to purchase the offered shares of
common stock and sellers remain willing to sell the shares. All of the shares
sold in the offering will be freely tradeable without restriction or further
registration under the Securities Act, except for any shares purchased by our
"affiliates" as defined in Rule 144 of the Securities Act.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
The public offering price of the securities offered hereby is likely to be
substantially higher than the book value per share of our common stock.
Investors purchasing common stock in this offering may, therefore, incur
immediate dilution in net tangible book value per share of common stock.
Investors will also incur additional dilution upon the exercise of outstanding
stock options and warrants. See "Dilution" for a more detailed discussion of the
dilution you will incur in this offering.
USE OF PROCEEDS
Unless we inform you otherwise in the prospectus supplement, we intend to
use the proceeds of this offering to fund our planned clinical trials and
ongoing business operations and for other general corporate purposes. Pending
any specific application, we may initially invest funds in short-term marketable
securities.
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERENCE DIVIDENDS
We reported no revenues or earnings during our last five fiscal years.
During this period, we did not have any debt or related interest expense and
were not a party to any capital lease arrangements. No preference securities
were outstanding during this period.
DILUTION
Our net tangible book value at February 28, 2003 was $10,504,000, or $.74
per share of common stock. Net tangible book value per share represents total
tangible assets less total liabilities divided by the number of outstanding
shares of our common stock on February 28, 2003. Assuming that we issue an
aggregate of $50 million of common stock at an assumed public offering price of
$8.39 per share (the last reported sale price of our common stock on the Nasdaq
National Market on June 24, 2003), with estimated net proceeds to us (after
assumed commissions and expenses) of $46,375,000, our pro forma net tangible
book value at February 28, 2003 would have been $56,879,000 or $2.81 per share.
This represents an immediate increase in the tangible book value of $2.07 per
share to our existing stockholders and an immediate dilution of $5.58 per share
to new investors purchasing common stock in this offering, as illustrated in the
following table:
Assumed public offering price per share(1).................. $8.39
Net tangible book value per share as of February 28,
2003................................................... $0.74
Increase per share attributable to new investors.......... $2.07
Pro forma net tangible book value per share after
offering............................................... $2.81
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Dilution per share to new investors......................... $5.58
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(1) We assumed an offering price of $8.39 per share based on the last reported
sale price of the common stock on the Nasdaq National Market on June 24,
2003. The assumed offering price of the common stock at the time any common
stock is offered hereby may differ significantly from the offering price
assumed for purposes of this prospectus.
The computations in the table above assume no exercise of any outstanding
stock options after February 28, 2003. At February 28, 2003, there were options
outstanding to purchase a total of 958,000 shares of our common stock at a
weighted average exercise price of $9.62 per share. If any of these options are
exercised, there will be further dilution to new investors.
If the securities offered hereby are common stock, the prospectus
supplement will include a revised dilution table setting forth any increase in
net tangible book value to existing stockholders and any dilution to new
investors based on the proposed number of shares of common stock to be offered
and the public offering price at the time of such offering.
DESCRIPTION OF THE SECURITIES WE MAY OFFER
We may offer up to $50,000,000 of common stock, preferred stock, depositary
shares, stock purchase contracts, warrants and debt securities, in one or more
offerings and in any combination. A prospectus supplement, which we will provide
each time we offer securities, will describe the specific amounts, prices and
terms of these securities.
We may sell the securities to or through underwriters, dealers or agents or
directly to purchasers. We, as well as any persons acting on our behalf, reserve
the sole right to accept and to reject in whole or in part any proposed purchase
of securities. Each prospectus supplement will set forth the names of any
underwriters, dealers or agents involved in the sale of securities described in
that prospectus supplement and any applicable fee, commission or discount
arrangements with them.
COMMON STOCK
We may issue shares of our common stock either alone or underlying other
registered securities convertible into or exercisable or exchangeable for shares
of our common stock. Holders of our common stock are entitled to receive
dividends declared by our board of directors out of funds legally available for
the payment of dividends, subject to rights, if any, of preferred stock holders.
Currently, we do not pay a dividend. The holders of our common stock are
entitled to one vote per share and are not entitled to cumulative voting rights
for the election of our directors. The holders of our common stock have no
preemptive rights.
PREFERRED STOCK AND DEPOSITARY SHARES
We may issue preferred stock, in one or more series, alone or underlying
other registered securities convertible into or exercisable or exchangeable for
shares of our preferred stock. Our board of directors or a committee designated
by the board will determine the dividend, voting and conversion rights and other
provisions of the preferred stock at the time of sale. Each series of preferred
stock will be more fully described in the particular prospectus supplement that
will accompany this prospectus, including redemption provisions, rights in the
event of liquidation, dissolution or the winding up of Northfield, voting rights
and conversion rights. We may also issue fractional shares of preferred stock
that will be represented by depositary shares and depositary receipts. Each
particular series of depositary shares will be more fully described in the
prospectus supplement that will accompany this prospectus.
WARRANTS
We may issue warrants for the purchase of common stock, preferred stock,
depositary shares or debt securities. We may issue warrants independently or
together with other securities. The specific terms of any warrants will be
described in the prospectus supplement that will accompany this prospectus.
10
STOCK PURCHASE CONTRACTS
We may issue stock purchase contracts, including contracts obligating
holders to purchase from us, and us to sell to the holders, a specified number
of securities, at a future date or dates, or similar contracts issued on a
"prepaid" basis, which in each case are referred to herein as "stock purchase
contracts." The price per share of securities and the number of shares of
securities may be fixed at the time the stock purchase contracts are issued or
may be determined by reference to a specific formula set forth in the stock
purchase contracts. The stock purchase contracts will require either the stock
purchase price be paid at the time the stock purchase contracts are issued or
that payment be made at a specified future date. The stock purchase contracts
also may require us to make periodic payments to the holders of the stock
purchase contracts or vice versa, and such payments may be unsecured or refunded
on some basis. The specific terms of any stock purchase contracts will be
described in the prospectus supplement that will accompany this prospectus.
DEBT SECURITIES
GENERAL
We may issue secured or unsecured obligations in the form of either senior
or subordinated debt. The senior debt securities and the subordinated debt
securities are together referred to in this prospectus as "debt securities." The
senior unsecured debt securities will have the same rank as all of our other
unsecured unsubordinated debt. The subordinated debt securities generally will
be entitled to payment only after payment of our senior debt. Senior debt
generally includes all debt for money borrowed by us, except debt that is stated
in the instrument governing the terms of that debt to be not senior to, or to
have the same rank in right of payment as, or to be expressly junior to, the
senior debt securities. We may issue debt securities that are convertible into
or exchangeable for shares of common stock or other securities or property.
The senior and subordinated debt securities will be issued under separate
indentures between a trustee and us. We have summarized the general features of
the debt securities to be governed by the indentures. These indentures have been
filed as exhibits or will be incorporated by reference into the registration
statement that we have filed with the SEC of which this prospectus is a part. We
encourage you to read these indentures. Instructions on how you can get copies
of these documents are provided above in "Where You Can Find More Information."
GENERAL INDENTURE PROVISIONS THAT APPLY TO SENIOR AND SUBORDINATED DEBT
The following general indenture provisions will apply to any senior and
subordinated debt securities:
- each indenture allows debt to be issued in series with terms particular
to each series;
- neither indenture limits the amount of debt that we may issue or
generally provides holders any protection should we engage in a highly
leveraged transaction;
- the indentures allow us to merge or to consolidate with another U.S.
entity or convey, transfer or lease our properties and assets
substantially as an entirety to another U.S. entity, as long as certain
conditions are met. If these events occur, the other company will be
required to assume our responsibilities on the debt securities, and we
will be released from all liabilities and obligations, except in the case
of a lease;
- the indentures provide that the trustee and we may generally amend the
indenture with the consent of holders of a majority of the total
principal amount of the debt outstanding in any series to change certain
of our obligations or your rights concerning the debt. However, to change
the payment of principal, interest or adversely affect the right to
convert or certain matters, every holder in that series must consent; and
- we may discharge the indentures and defease restrictive covenants by
depositing sufficient funds with the trustee to pay the obligations when
due, as long as certain conditions are met. The trustee would pay all
amounts due to you on the debt from the deposited funds.
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EVENTS OF DEFAULT
Each of the following is an event of default under the indentures:
- principal not paid when due;
- any sinking fund payment not made when due;
- failure to pay interest for 30 days;
- covenants not performed for 90 days after notice; and
- certain events of bankruptcy, insolvency or reorganization of Northfield.
A prospectus supplement may describe deletions of, or changes or additions
to, the events of default.
REMEDIES
Upon an event of default, other than a bankruptcy, insolvency or
reorganization, the trustee or holders of 25 percent of the principal amount
outstanding in a series may declare the outstanding principal, plus accrued
interest, if any, immediately payable. However, the holders of a majority in
principal amount may, under certain circumstances, rescind this action.
INDENTURE PROVISIONS THAT APPLY ONLY TO THE SUBORDINATED DEBT SECURITIES
The subordinated indenture provides that the subordinated debt securities
will be subordinated to all senior debt as defined in the subordinated
indenture.
PLAN OF DISTRIBUTION
We may sell the offered securities in and outside the United States through
underwriters, dealers or agents or directly to purchasers. The prospectus
supplement will set forth the following information:
- the terms of the offering;
- the names of any underwriters, dealers or agents;
- the purchase price;
- the net proceeds to us;
- any delayed delivery arrangements;
- any underwriting discounts and other items constituting underwriters'
compensation;
- the initial public offering price;
- any discounts or concessions allowed, reallowed or paid to dealers; and
- any commissions paid to agents.
If we use underwriters in the sale of the offered securities, the
underwriters will acquire the securities for their own account. The underwriters
may resell the securities from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. Underwriters may offer the
securities to the public either through underwriting syndicates represented by
one or more managing underwriters or directly by one or more firms acting as
underwriters. Unless we inform you otherwise in the prospectus supplement, the
obligations of the underwriters to purchase the securities will be subject to
conditions, and the underwriters will be obligated to purchase all the
securities if they purchase any of them. The underwriters may change from time
to time any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers.
During and after an offering through underwriters, the underwriters may
purchase and sell the securities in the open market. These transactions may
include overallotment and stabilizing transactions and purchases
12
to cover syndicate short positions created in connection with the offering. The
underwriters may also impose a penalty bid, in which selling concessions allowed
to syndicate members or other broker-dealers for the offered securities sold for
their account may be reclaimed by the syndicate if the offered securities are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
offered securities, which may be higher than the price that might otherwise
prevail in the open market. If commenced, these activities may be discontinued
at any time. If we use dealers in the sale of securities, we will sell the
securities to them as principals. They may then resell those securities to the
public at varying prices determined by the dealers at the time of resale. The
dealers participating in any sale of our securities may be deemed to be
underwriters within the meaning of the Securities Act with respect to any sale
of those securities. We will include in the prospectus supplement the names of
the dealers and the terms of the transaction.
We may sell the securities directly. In that event, no underwriters,
dealers or agents would be involved. We may also sell the securities through
agents we designate from time to time. In the prospectus supplement, we will
name any agent involved in the offer or sale of the offered securities, and we
will describe any commissions payable by us to the agent. Unless we inform you
otherwise in the prospectus supplement, any agent will agree to use its
reasonable best efforts to solicit purchases for the period of its appointment.
We may sell the securities directly to institutional investors or others who may
be deemed to be underwriters within the meaning of the Securities Act with
respect to any sale of those securities. We will describe the terms of any of
these sales in the prospectus supplement.
The total amount of compensation paid to the underwriters or placement
agents upon completion of this offering will not exceed 8% of the maximum gross
proceeds of the offering.
We may have agreements with the underwriter, dealers and agents to
indemnify them against civil liabilities, including liabilities under the
Securities Act, or to contribute with respect to payments that the underwriter,
dealers or agents may be required to make. Underwriters, dealers and agents may
engage in transactions with us or may perform services for us in the ordinary
course of their businesses.
Underwriters, dealers and agents participating in a sale of securities may
be deemed to be underwriters as defined in the Securities Act, and any discounts
and commissions received by them and any profit realized by them on resale of
the securities may be deemed to be underwriting discounts and commissions under
the Securities Act.
LEGAL MATTERS
The validity of the securities offered herein will be passed upon for us by
Baker & McKenzie, Chicago, Illinois. If the securities are distributed in an
underwritten offering, the underwriters will be advised by their own legal
counsel with respect to any offering.
EXPERTS
The financial statements of Northfield Laboratories Inc. as of May 31,
2002, and for each of the years in the three-year period ended May 31, 2002 and
for the cumulative period from June 19, 1985 (inception) have been incorporated
by reference herein and in the registration statement in reliance upon the
report of KPMG LLP, independent certified public, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
With respect to the unaudited interim financial information of the periods
ended August 31, 2002, November 30, 2002 and February 28, 2003, incorporated by
reference herein, the independent certified public accountants have reported
that they applied limited procedures in accordance with professional standards
for a review of such information. However, their separate reports included in
Northfield Laboratories Inc.'s quarterly reports on Form 10-Q for the quarters
ended August 31, 2002, November 30, 2002 and February 28, 2003, incorporated by
reference herein, state that they did not audit and they do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their reports on such information should
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be restricted in light of the limited nature of the review procedures applied.
The accountants are not subject to the liability provisions of Section 11 of the
Securities Act of 1933 for their report on the unaudited interim financial
information because that report is not a "report" or a "part" of the
registration statement prepared or certified by the accountants within the
meaning of Sections 7 and 11 of the Act.
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1,954,416 SHARES
NORTHFIELD LABORATORIES INC.
COMMON STOCK
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PROSPECTUS SUPPLEMENT
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SG COWEN & CO.
May 13, 2004
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