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PROSPECTUS
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As
filed pursuant to Rule 424(b)(3)
Registration
No. 333-165958
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NEXMED,
Inc.
10,722,756
Shares of Common Stock
This
prospectus relates to the resale, from time to time, of up to 10,722,756 shares
of Common Stock of NexMed, Inc., a Nevada corporation, all of which are being
offered by the selling stockholders named in this prospectus. The
aggregate number of shares offered under this prospectus represents 130% of the
number of shares of Common Stock issuable upon the full conversion at maturity
of the 7% Convertible Notes due December 31, 2012 (the “Notes”) issued pursuant
to a Purchase Agreement dated March 15, 2010, to allow for the resale of shares
issuable in the event the conversion price is reduced or in the event shares are
issued in payment of principal accretions on the Notes. See “Selling
Stockholders” at page 12.
We are
not selling any common stock under this prospectus and will not receive any of
the proceeds from the sale of the common stock by the selling
stockholders. In connection with the original issuance of the Notes
in the aggregate principal amount of $4,000,000, however, the Company received
approximately $1.4 million in cash, and certain of the selling stockholders
cancelled approximately $2.6 million in indebtedness of the Company outstanding
under convertible promissory notes previously issued by the Company in June 2008
and November 2009. See “Use of Proceeds” at page 11.
The
selling stockholders may sell the shares of common stock described in this
prospectus in a number of different ways and at varying prices. See
“Plan of Distribution” below for additional information on how the selling
stockholders may conduct sales of our common stock. Other than underwriting
discounts and commissions, if any, we have agreed to bear all reasonable
expenses incurred in connection with the registration and sale of the common
stock offered by the selling stockholders and to indemnify the selling
stockholders against certain liabilities, including liabilities under the
Securities Act of 1933.
Our
common stock trades on the NASDAQ Capital Market under the symbol “NEXM.” On
April 16, 2010, the closing price for our common stock, as reported on the
NASDAQ Capital Market, was $.45 per share.
Investing in our securities involves
certain risks. See “Risk Factors” beginning on Page 3 of this prospectus and in
the applicable prospectus supplement for certain risks you should consider. You
should read the entire prospectus carefully before you make your investment
decision.
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.
The date
of this prospectus is April 16, 2010
TABLE
OF CONTENTS
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Page
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About
NexMed
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1
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Risk
Factors
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2
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Forward-Looking
Statements
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10
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Use
of Proceeds
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11
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Private
Placement Agreements
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11
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The
Selling Stockholders
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12
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Plan
of Distribution
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14
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Where
You Can Find More Information
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16
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Legal
Matters
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16
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Experts
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16
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Incorporation
by Reference
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16
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You
should rely only on the information contained or incorporated by reference in
this prospectus and any applicable prospectus supplements. We have not
authorized anyone to provide you with information different from that contained
in this prospectus. Offers to sell, and offers to buy, the shares of common
stock are valid only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as to the date of this
prospectus, regardless of the time of delivery of the prospectus or of any sale
of the common stock.
ABOUT
NEXMED, INC.
NexMed,
Inc. is life sciences company that operates in two segments: (i) designing and
developing pharmaceutical products based on our NexACT delivery technology, and
(ii) providing pre-clinical contract research services through our subsidiary,
Bio-Quant, Inc. Bio-Quant is the largest specialty contract research
organization, or CRO, based in San Diego, California, and is one of the
industry’s most experienced CROs for
in vitro
and
in vivo
pharmacology services
and research models. NexMed’s goal is to generate revenues from the growth of
its Discovery Pre-clinical CRO business, while aggressively seeking to monetize
its proprietary NexACT drug delivery technology through out-licensing agreements
with pharmaceutical and biotechnology companies worldwide. At the same time, we
are actively pursuing partnering opportunities for its NexACT-based treatments
for onychomycosis, psoriasis, sexual dysfunction and cancer. Below is a summary
of our product pipeline and the stage of development for each compound as of the
date of this prospectus:
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Name
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Indication
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Development Stage
**
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Vitaros
*
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Erectile
dysfunction
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Phase
III completed; seeking approval
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NM1000060
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Onychomycosis
(anti-fungal)
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Phase
II completed
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Femprox
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Female
sexual arousal disorder
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Phase
I completed
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PrevOnco
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Oncology
(HCC)
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IND
pending to commence Phase II trials
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Calcipotriene
/ betamethasone
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Psoriasis
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Pre-clinical
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Ketoprofen
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Pain
Relief
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Pre-clinical
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Alprostadil
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Wound
healing
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Pre-clinical
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Alprostadil
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Raynaud’s
Disease
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Pre-clinical
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Lidocaine
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Pain
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Pre-clinical
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___________
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*
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U.S.
rights sold to Warner Chilcott. As of the date of this
prospectus, under review in Canada for marketing approval and Warner
Chilcott expected to seek approval in U.S. in
2010.
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**
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At
present, the Company is sponsoring no ongoing clinical trials of these
drug candidates. Pre-clinical development work is being
performed by our Bio-Quant subsidiary while we are seeking
commercialization partners to defray part or all of the clinical
development costs in a licensing or partnering
arrangement.
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We are a
Nevada corporation and have been in existence since 1987. We have
operated in the pharmaceutical industry since 1995, focusing on research and
development in the area of drug delivery. Our proprietary drug
delivery technology is called NexACT® .
Our
principal executive offices are at 6330 Nancy Ridge Drive, Suite 103, San Diego,
California 92121 and our telephone number is (858) 222-8041.
RISK
FACTORS
Before making an investment
decision, you should carefully consider the risks described in this prospectus,
together with all of the other information incorporated by reference into this
prospectus, including from our most recent annual report on Form 10-K and
subsequent quarterly reports on Form 10-Q. The following risks are presented as
of the date of this prospectus and we expect that these will be updated from
time to time in our periodic and current reports filed with the SEC, which will
be incorporated herein by reference. Please refer to these subsequent reports
for additional information relating to the risks associated with investing in
our common stock.
RISKS
RELATED TO THE COMPANY
We
continue to require external financing to fund our operations, which may not be
available.
We expect
our current cash reserves to provide us with sufficient cash to fund our
operations into the second half of 2011. While our newly acquired
subsidiary, Bio-Quant, is projected to be cash flow positive in 2010,
we do not believe that Bio-Quant will generate sufficient cash to fund the
development of our current products under development and the annual costs to
remain a public company, including legal, audit and listing fees. We
intend to seek development partners to advance our products under development
because we will also need significant funding to pursue our overall product
development plans. In general, products we plan to develop will require
significant time-consuming and costly research and development, clinical
testing, regulatory approval and significant investment prior to their
commercialization. Even if we are successful in obtaining partners who can
assume the funding for further development of our products, we may still
encounter additional obstacles such as research and development activities may
not be successful, our products may not prove to be safe and effective, clinical
development work may not be completed in a timely manner or at all, and the
anticipated products may not be commercially viable or successfully
marketed. During 2010 we intend to focus on generating more positive
cash flow by expanding the CRO business through organic growth within
Bio-Quant’s current business operations and through acquiring small cash flow
positive entities who have complimentary capabilities to those of Bio-Quant but
are not operating at full capacity due to insufficient business development
efforts. There is no assurance that we can expand Bio-Quant’s current
business operations or successfully identify and acquire small cash flow
positive entities as described above. Should we not be able to find
development partners or successfully increase Bio-Quant’s positive cash flow, we
would require external financing to fund our operations.
Additionally,
we have substantial notes payable issued in connection with the acquisition of
Bio-Quant due within 12 months as discussed in Notes 3 and 9 of the Notes to the
Consolidated Financial Statements, which if not converted to common stock, would
significantly impact liquidity when due in December 2010.
Our
current cash reserves of approximately $3.25 million as of the date of this
report, should provide us with sufficient cash to fund our operations into the
second half of 2011 assuming we convert upon stockholder approval or extend the
maturity date of significant amounts due in 2010 and 2011 under notes
payable. This projection is based on the monthly operating expenses
of maintaining our public listing together with Bio-Quant’s business growing at
an assumed rate of 11% over 2009 levels with no additional acquisitions in
2010.
We
will continue to incur operating losses.
We may
encounter delays, uncertainties and complications typically encountered by
businesses with future revenues tied to products under development. We have not
marketed or generated sales revenues in the U.S. from our products under
development. We are not profitable and have incurred an accumulated deficit of
$171,731,862 since our inception through December 31, 2009. Our
ability to generate revenues and to achieve profitability and positive cash flow
will depend on the successful licensing or commercialization of our products
currently under development and the ability to grow Bio-Quant’s pre-clinical
service business to a level sufficient to generate sufficient operating income
to cover the costs of our operations, including maintaining our public
listing. Our ability to become profitable will depend, among other
things, on our (1) development of our proposed products, (2) obtaining of
regulatory approvals of our proposed products on a timely basis, (3) success in
licensing, manufacturing, distributing and marketing our proposed products and
(4) increasing the profitability of Bio-Quant through acquisitions and organic
growth of its current operations.
Our
independent registered public accounting firm has doubt as to our ability to
continue as a going concern.
As a
result of our losses to date, expected losses in the future, limited capital
resources and accumulated deficit, our independent registered public accounting
firm has concluded that there is substantial doubt as to our ability to continue
as a going concern, and accordingly, our independent registered public
accounting firm has modified their report on our December 31, 2009 consolidated
financial statements included in this annual report on Form 10-K in the form of
an explanatory paragraph describing the events that have given rise to this
uncertainty. These factors may make it more difficult for us to obtain
additional funding to meet our obligations. Our continuation is dependent upon
our ability to generate or obtain sufficient cash to meet our obligations on a
timely basis and ultimately to attain profitable operations. We anticipate that
we will continue to incur significant losses at least until successful
commercialization of one or more of our products, and we may never operate
profitably in the future.
If
we fail to attract and keep senior management and key scientific personnel, we
may be unable to successfully operate our business.
Our
success depends in part on our continued ability to attract, retain and motivate
highly qualified management and scientific personnel and on its ability to
develop and maintain important relationships with healthcare providers,
clinicians and scientists. We are highly dependent upon our senior
management and scientific staff, particularly Bassam Damaj, Ph.D., our Chief
Executive Officer. Although we have employment agreements with most
of our executives, these agreements are generally terminable at will at any
time, and, therefore, we may not be able to retain their services as expected.
The loss of services of one or more members of our senior management and
scientific staff could delay or prevent us from obtaining new clients and
successfully operating our business. Competition for qualified
personnel in the biotechnology and pharmaceuticals field is intense,
particularly in the San Diego, California area, where our offices are
located. We may need to hire additional personnel as we expand our
commercial activities. We may not be able to attract and retain
qualified personnel on acceptable terms.
Our
ability to maintain, expand or renew existing business with our clients and to
get business from new clients, particularly in the drug development sector, also
depends on our ability to subcontract and retain scientific staff with the
skills necessary to keep pace with continuing changes in drug development
technologies.
We
will need partnering agreements and significant funding to continue with our
research and development efforts, and they may not be available.
We expect
our current cash reserves to provide us with sufficient cash to fund our
operations into the second half of 2011. We will need additional
sources of cash to fund the development and eventual marketing and sales of our
products under development. We intend to seek development partners to
advance our products under development because we will also need significant
funding to pursue our overall product development plans. In general, products we
plan to develop will require significant time-consuming and costly research and
development, clinical testing, regulatory approval and significant investment
prior to their commercialization.
Our
research and development expenses for the years ended December 31, 2009, 2008
and 2007 were $1,883,458, $5,410,513 and $5,022,671,
respectively. Through December 31, 2009, we have spent $98,786,673 on
research and development. Given our current level of cash reserves
and current revenue level of our subsidiary, Bio-Quant, we will not be able to
fully advance our products under development unless we enter into additional
partnering agreements and /or significantly grow Bio-Quant’s CRO business. If we
are successful in entering into additional partnering agreements for our
products under development, we may receive milestone payments, which will offset
some of our research and development expenses.
We
currently have no sales force or marketing organization and will need, but may
not be able, to attract marketing partners or afford qualified or experienced
marketing and sales personnel for our products under development.
In order
to market our proprietary products under development, we will need to attract
additional marketing partner(s) that will need to spend significant funds to
inform potential customers, including third-party distributors, of the
distinctive characteristics and benefits of our products. Our operating results
and long term success will depend, among other things, on our ability to
establish (1) successful arrangements with domestic and additional international
distributors and marketing partners and (2) an effective internal marketing
organization. Consummation of partnering arrangements is subject to
the negotiation of complex contractual relationships, and we may not be able to
negotiate such agreements on a timely basis, if at all, or on terms acceptable
to us.
Pre-clinical
and clinical trials are inherently unpredictable. If we or our
partners do not successfully conduct these trials, we or our partners may be
unable to market our products.
Through
pre-clinical studies and clinical trials, our products must be demonstrated to
be safe and effective for their indicated uses. Results from pre-clinical
studies and early clinical trials may not be indicative of, or allow for
prediction of results in later-stage testing. Future clinical trials
may not demonstrate the safety and effectiveness of our products or may not
result in regulatory approval to market our products. Commercial
sales in the United States of our products cannot begin until final FDA approval
is received. The failure of the FDA to approve our products for
commercial sales will have a material adverse effect on our
prospects.
Patents
and intellectual property rights are important to us but could be
challenged.
Proprietary
protection for our pharmaceutical products and products under development is of
material importance to our business in the U.S. and most other countries. We
have sought and will continue to seek proprietary protection for our products to
attempt to prevent others from commercializing equivalent products in
substantially less time and at substantially lower expense. Our success may
depend on our ability to (1) obtain effective patent protection within the U.S.
and internationally for our proprietary technologies and products, (2) defend
patents we own, (3) preserve our trade secrets, and (4) operate without
infringing upon the proprietary rights of others. In addition, we
have agreed to indemnify our partners for certain liabilities with respect to
the defense, protection and/or validity of our patents and would also be
required to incur costs or forego revenue if it is necessary for our partners to
acquire third party patent licenses in order for them to exercise the licenses
acquired from us.
We
currently hold ten U.S. patents out of a series of patent applications that we
have filed in connection with our NexACT® technology and our NexACT®-based
products under development. To further strengthen our global patent position on
our proprietary products under development, and to expand the patent protection
to other markets, we have filed under the Patent Cooperation Treaty
corresponding international applications for our issued U.S. patents and pending
U.S. patent applications. We previously held two patents covering the
first generation of the NexACT® technology enhancer, which expired in 2008 and
2009. While we believe there are significant disadvantages to using
the permeation enhancers covered by these expired patents, third parties may
nevertheless develop competitive products using the enhancer technology now that
it is no longer patent protected..
While we
have obtained patents and have several patent applications pending, the extent
of effective patent protection in the U.S. and other countries is highly
uncertain and involves complex legal and factual questions. No
consistent policy addresses the breadth of claims allowed in or the degree of
protection afforded under patents of medical and pharmaceutical
companies. Patents we currently own or may obtain might not be
sufficiently broad enough to protect us against competitors with similar
technology. Any of our patents could be invalidated or
circumvented.
While we
believe that our patents would prevail in any potential litigation, the holders
of competing patents could determine to commence a lawsuit against us and even
prevail in any such lawsuit. Litigation could result in substantial
cost to and diversion of effort by us, which may harm our business. In addition,
our efforts to protect or defend our proprietary rights may not be successful
or, even if successful, may result in substantial cost to us.
Additionally,
in February 2009, we sold two patents to Warner and are obligated to indemnify
Warner against challenges to those patents, which could result in additional
costs to us.
We
and our licensees depend upon third party manufacturers for chemical
manufacturing supplies.
We and
our licensees are dependent on third party chemical manufacturers for the active
drugs in our NexACT®-based products under development, and for the supply of our
NexACT® enhancers that are essential in the formulation and production of our
topical products on a timely basis and at satisfactory quality
levels. If our validated third party chemical manufacturers fail to
produce quality products on time and in sufficient quantities, our results would
suffer, as we or our licensees would encounter costs and delays in revalidating
new third party suppliers.
We
face severe competition.
We are
engaged in a highly competitive industry. We and our licensees can expect
competition from numerous companies, including large international enterprises,
and others entering the market for products similar to ours. Most of these
companies have greater research and development, manufacturing, marketing,
financial, technological, personnel and managerial resources. Acquisitions of
competing companies by large pharmaceutical or healthcare companies could
further enhance such competitors' financial, marketing and other resources.
Competitors may complete clinical trials, obtain regulatory approvals and
commence commercial sales of their products before we could enjoy a significant
competitive advantage. Products developed by our competitors may be more
effective than our products.
The
Bio-Quant CRO business primarily competes against in-house departments of
pharmaceutical, biotechnology and medical device companies, academic
institutions and other contract research organizations. Competitors in
Bio-Quant’s industry range from small, limited-service providers to full
service, global contract research organizations. Many of Bio-Quant’s
competitors have an established global presence, including Quintiles
Transnational Corp., Covance, Inc., Parexel International Corporation,
Pharmaceutical Product Development, Inc., Icon Clinical Research, and Kendle
International, Inc. In addition, many of Bio-Quant’s competitors have
substantially greater financial and other resources than Bio-Quant does and
offer a broader range of services in more geographical areas than Bio-Quant
does. Significant factors in determining whether Bio-Quant will be
able to compete successfully include: its consultative capabilities; its
reputation for on-time quality performance; its expertise and experience in
specific drug discovery, research and development areas; the scope of its
service offerings; its strength in various geographic markets; the price of its
services; and its size.
If
Bio-Quant’s services are not competitive based on these or other factors and
Bio-Quant is unable to develop an adequate level of new business, its business,
backlog position, financial condition and results of operations will be
materially and adversely affected. In addition, Bio-Quant may compete
for fewer clients arising out of consolidation within the pharmaceutical
industry and the growing tendency of drug companies to outsource to a smaller
number of preferred contract research organizations that have far greater
resources and capabilities.
Bio-Quant’s
services may from time to time experience periods of increased price competition
that could have a material adverse effect on its profitability and
revenues. Additionally, the CRO industry is not highly
capital-intensive, and the financial costs of entry into the industry are
relatively low. Therefore, as a general matter, the industry has few
barriers to entry. Newer, smaller entities with specialty focuses,
such as those aligned to a specific disease or therapeutic area, may compete
aggressively against Bio-Quant for clients.
We
may be subject to potential product liability and other claims, creating risks
and expense.
We
are also exposed to potential product liability risks inherent in the
development, testing, manufacturing, marketing and sale of human therapeutic
products. Product liability insurance for the pharmaceutical industry
is extremely expensive, difficult to obtain and may not be available on
acceptable terms, if at all. We currently have liability insurance to cover
claims related to our products that may arise from clinical trials, with
coverage of $1 million for any one claim and coverage of $3 million in total,
but we do not maintain product liability insurance for marketed products as our
products have yet to be approved for commercialization. We may need
to acquire such insurance coverage prior to the commercial introduction of our
products. If we obtain such coverage, we have no guarantee that the coverage
limits of such insurance policies will be adequate. A successful claim against
us if we are uninsured, or which is in excess of our insurance coverage, if any,
could have a material adverse effect upon us and on our financial
condition.
INDUSTRY
RISKS
We
are vulnerable to volatile market conditions.
The
market prices for securities of biopharmaceutical and biotechnology companies,
including ours, have been highly volatile. The market has from time to time
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. In addition, future
announcements, such as the results of testing and clinical trials, the status of
our relationships with third-party collaborators, technological innovations or
new therapeutic products, governmental regulation, developments in patent or
other proprietary rights, litigation or public concern as to the safety of
products developed by us or others and general market conditions, concerning us,
our competitors or other biopharmaceutical companies, may have a significant
effect on the market price of our Common Stock.
Instability
and volatility in the financial markets and the global economic recession are
likely to have a negative impact on our ability to raise necessary funds and on
our business, financial condition, results of operations and cash
flows.
During
recent months, there has been substantial volatility and a decline in financial
markets due at least in part to the deteriorating global economic environment.
In addition, there has been substantial uncertainty in the capital markets and
access to financing is uncertain. These conditions are likely to have
an adverse effect on our industry, licensing partners, and business, including
our financial condition, results of operations and cash flows.
To the
extent that we do not generate sufficient cash from operations, we may need to
incur indebtedness, if available, to finance plans for growth or to continue our
current operations. However, recent turmoil in the credit markets and the
potential impact on the liquidity of major financial institutions may have an
adverse effect on our ability to fund our business strategy through borrowings,
under either existing or newly created instruments in the public or private
markets on terms that we believe to be reasonable, if at all.
Changes
in trends in the pharmaceutical and biotechnology industries, including
difficult market conditions, could adversely affect our operating
results.
Industry
trends and economic and political factors that affect pharmaceutical,
biotechnology and medical device companies also affect our
business. For example, the practice of many companies in these
industries has been to hire companies like us to conduct discovery, research and
development activities. If these companies suspend these activities
or otherwise reduce their expenditures on outsourced discovery, research and
development in light of current difficult conditions in credit markets and the
economy in general, or for any other reason, our operations, financial condition
and growth rate could be materially and adversely affected. In the
past, mergers, product withdrawal and liability lawsuits, and other factors in
the pharmaceutical industry have also slowed decision-making by pharmaceutical
companies and delayed drug development projects. Continuation or
increases in these trends could have an adverse effect on our
business. In addition, numerous governments have undertaken efforts
to control growing healthcare costs through legislation, regulation and
voluntary agreements with medical care providers and pharmaceutical
companies. If future cost-containment efforts limit the profits that
can be derived on new drugs, our clients might reduce their drug discovery and
development spending, which could reduce our revenue and have a material adverse
effect on our results of operations.
The
biotechnology, pharmaceutical and medical device industries generally and drug
discovery and development more specifically are subject to increasingly rapid
technological changes. Our competitors, clients and others might
develop technologies, services or products that are more effective or
commercially attractive than our current or future technologies, services or
products, or that render our technologies, services or products less competitive
or obsolete. If competitors introduce superior technologies, services
or products and we cannot make enhancements to our technologies, services or
products to remain competitive, our competitive position, and in turn our
business, revenue and financial condition, would be materially and adversely
affected.
We
and our licensees are subject to numerous and complex government regulations
which could result in delay and expense.
Governmental
authorities in the U.S. and other countries heavily regulate the testing,
manufacture, labeling, distribution, advertising and marketing of our proposed
products. None of our proprietary products under development has been approved
for marketing in the U.S. Before any products we develop are marketed, FDA and
comparable foreign agency approval must be obtained through an extensive
clinical study and approval process.
The
studies involved in the approval process are conducted in three
phases. In Phase 1 studies, researchers assess safety or the most
common acute adverse effects of a drug and examine the size of doses that
patients can take safely without a high incidence of side effects. Generally, 20
to 100 healthy volunteers or patients are studied in the Phase 1 study for a
period of several months. In Phase 2 studies, researchers determine the drug's
efficacy with short-term safety by administering the drug to subjects who have
the condition the drug is intended to treat, assess whether the drug favorably
affects the condition, and begin to identify the correct dosage level. Up to
several hundred subjects may be studied in the Phase 2 study for approximately 6
to 12 months, depending on the type of product tested. In Phase 3 studies,
researchers further assess efficacy and safety of the drug. Several hundred to
thousands of patients may be studied during the Phase 3 studies for a period
from 12 months to several years. Upon completion of Phase 3 studies, a New Drug
Application is submitted to the FDA or foreign governmental regulatory authority
for review and approval.
The
failure to obtain requisite governmental approvals for our products under
development in a timely manner or at all would delay or preclude us and our
licensees from marketing our products or limit the commercial use of our
products, which could adversely affect our business, financial condition and
results of operations.
Any
failure on our part to comply with applicable regulations could result in the
termination of on-going research, discovery and development activities or the
disqualification of data for submission to regulatory
authorities. As a result of any such failure, we could be
contractually required to perform repeat services at no further cost to our
clients, but at a substantial cost to us. The issuance of a notice
from regulatory authorities based upon a finding of a material violation by us
of applicable requirements could result in contractual liability to our clients
and/or the termination of ongoing studies which could materially and adversely
affect our results of operations. Furthermore, our reputation and
prospects for future work could be materially and adversely
diminished.
Because
we intend that our products will be sold and marketed outside the U.S., we
and/or our licensees will be subject to foreign regulatory requirements
governing the conduct of clinical trials, product licensing, pricing and
reimbursements. These requirements vary widely from country to country. The
failure to meet each foreign country’s requirements could delay the introduction
of our proposed products in the respective foreign country and limit our
revenues from sales of our proposed products in foreign markets.
Successful
commercialization of our products may depend on the availability of
reimbursement to the consumer from third-party healthcare payers, such as
government and private insurance plans. Even if one or more products is
successfully brought to market, reimbursement to consumers may not be available
or sufficient to allow the realization of an appropriate return on our
investment in product development or to sell our products on a competitive
basis. In addition, in certain foreign markets, pricing or profitability of
prescription pharmaceuticals is subject to governmental controls. In the U.S.,
federal and state agencies have proposed similar governmental control and the
U.S. Congress has recently considered legislative and regulatory reforms that
may affect companies engaged in the healthcare industry. Pricing constraints on
our products in foreign markets and possibly in the U.S. could adversely affect
our business and limit our revenues.
RISKS
RELATED TO OWNING OUR COMMON STOCK
Our
stock may be delisted from Nasdaq, which may make it more difficult for you to
sell your shares.
Currently,
our Common Stock trades on the Nasdaq Capital Market. On January 26,
2010, we received an expected notice of non-compliance (the “Notice”) from The
NASDAQ Stock Market LLC based upon the bid price of the Company’s common stock
closing at less than $1.00 per share in violation of NASDAQ Listing Rule
5550(a)(2), which could serve as an additional basis for the delisting of the
Company’s securities from The NASDAQ Capital Market.
We
responded to the Notice on January 27, 2010, requesting additional time to
regain compliance with the bid price listing requirement. Our January
27, 2010 response also sought an exemption, through May 24, 2010, from
compliance with another existing deficiency (failure to comply with the annual
stockholder meeting and proxy solicitation requirements) to allow the Company to
execute its plans to regain compliance.
At an
appeals hearing held in November 2009 at our request, following a series of
communications between us and NASDAQ regarding various deficiencies, including
those described above and our failure to satisfy the minimum $2.5 million in
stockholders’ equity requirement for continued listing as of August 2009, we
presented to NASDAQ our plan to regain compliance with the applicable listing
requirements. On February 1, 2010, we received the Hearing Panel’s
determination (the “Determination Letter”). The Determination
Letter confirmed that NASDAQ would continue the listing of the Company’s
securities on The NASDAQ Stock Market provided that the Company shall have (1)
solicited proxies and held its annual meeting on or before May 24, 2010 and (2)
evidenced compliance with the minimum bid price requirement and all other
requirements for The NASDAQ Stock Market on or before July 15,
2010. If the Company is not able to demonstrate compliance with all
requirements for continued listing on or before July 15, 2010, its securities
may be delisted. During this exemption period, the Company must
provide prompt notice to NASDAQ of any significant events that occur, including,
but not limited to, any event that may call into question the Company’s
historical financial information or that may impact the Company’s ability to
maintain compliance with any NASDAQ listing requirement or exemption
deadline.
If we
fail to achieve the minimum bid price requirement of the Nasdaq Capital Market
by July 15, 2010 or fail to maintain compliance with any other listing
requirements during this period (including a failure to comply with the annual
stockholder meeting and proxy solicitation requirements on or before May 24,
2010), we may be delisted and our stock would be considered a penny stock under
regulations of the Securities and Exchange Commission and would therefore be
subject to rules that impose additional sales practice requirements on
broker-dealers who sell our securities. The additional burdens imposed upon
broker-dealers by these requirements could discourage broker-dealers from
effecting transactions in our Common Stock, which could severely limit the
market liquidity of the Common Stock and your ability to sell our securities in
the secondary market. In addition, if we fail to maintain our listing on Nasdaq
or any other United States securities exchange, quotation system, market or
over-the-counter bulletin board, we will be subject to cash penalties under
investor rights agreements to which we are a party until a listing is
obtained.
We
do not expect to pay dividends on our Common Stock in the foreseeable
future.
Although
our stockholders may receive dividends if, as and when declared by our board of
directors, we do not intend to declare dividends on our Common Stock in the
foreseeable future. Therefore, you should not purchase our Common Stock if you
need immediate or future income by way of dividends from your
investment.
We
may issue additional shares of our capital stock that could dilute the value of
your shares of Common Stock.
We are
authorized to issue 280,000,000 shares of our capital stock, consisting of
270,000,000 shares of our Common Stock and 10,000,000 shares of our preferred
stock of which 1,000,000 are designated as Series A Junior Participating
Preferred Stock, 800 are designated as Series B 8% Cumulative Convertible
Preferred Stock and 600 are designated as Series C 6% Cumulative Convertible
Preferred Stock. As of March 26, 2010, 126,902,281 shares of our Common Stock
were issued and outstanding and 6,364,102 shares of our Common Stock were
issuable upon the exercise or conversion of outstanding options and
warrants. As of March 26, 2010, there were no shares of Series A,
Series B or Series C Preferred Stock outstanding. In light of our
possible future need for additional financing, we may issue authorized and
unissued shares of Common Stock at below current market prices or additional
convertible securities that could dilute the earnings per share and book value
of your shares of our Common Stock.
Additionally,
we have substantial notes payable issued in connection with the acquisition of
Bio-Quant due within 12 months as discussed in Notes 3 and 9 of the Notes to the
Consolidated Financial Statements. These notes can, with approval of
our stockholders, be repaid with the issuance of Common Stock. As of
the date of this report, we would need to issue approximately 60 million shares,
at a predetermined price of $0.168 per share to repay such notes payable in
full.
In
addition to provisions providing for proportionate adjustments in the event of
stock splits, stock dividends, reverse stock splits and similar events, certain
outstanding warrants and convertible instruments provide (with certain
exceptions) for an adjustment of the exercise or conversion price if we issue
shares of Common Stock at prices lower than the then exercise or conversion
price or the then prevailing market price. This means that if we need to raise
equity financing at a time when the market price for our Common Stock is lower
than the exercise or conversion price, or if we need to provide a new equity
investor with a discount from the then prevailing market price, then the
exercise price will be reduced and the dilution to stockholders
increased.
FORWARD-LOOKING
STATEMENTS
This
prospectus and the other documents incorporated by reference into this
prospectus contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Statements in this prospectus and the
other documents incorporated into this prospectus by reference that are not
historical facts are identified as “forward-looking statements” for the purpose
of the safe harbor provided by Section 21E of the Securities Exchange Act of
1934, as amended, or the Exchange Act, and Section 27A of the Securities Act of
1933, as amended, or the Securities Act. Forward-looking statements include
projections, assumptions or information concerning possible or assumed future
actions, events or our results of operations. These statements involve estimates
and assumptions based on the judgment of the company’s management. A number of
risks and uncertainties may cause actual results to differ materially from those
suggested by the forward-looking statements.
Forward-looking
statements include the information in this prospectus and the other documents
incorporated by reference into this prospectus. These statements may be made
regarding the business, operations, financial performance and condition,
earnings, our prospects and products, as well as regarding our industry
generally. These statements may be preceded by, followed by or include the words
“believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “should”
or similar expressions. We claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995 for all forward-looking statements. We do not undertake any
obligation to publicly update any forward-looking statements to reflect
subsequent events or circumstances.
Forward-looking
statements are not guarantees of performance. You should understand that these
factors, in addition to those discussed in “Risk Factors” above and elsewhere in
this document, and in the documents that are incorporated by reference into this
prospectus, could affect our future results and could cause those results or
other outcomes to differ materially from those expressed or implied in any
forward-looking statement.
USE
OF PROCEEDS
We will not receive any of the proceeds
from the sale of the shares of Common Stock offered by this
prospectus. All proceeds from the sale of the shares covered by
this prospectus will be for the account of the selling stockholders named
herein. See “Selling Stockholders” and “Plan of Distribution.” In
connection with the original issuance of the Notes in the aggregate principal
amount of $4,000,000, however, we received approximately $1.4 million in cash
from the selling stockholders, and certain of the selling stockholders cancelled
approximately $2.6 million in indebtedness outstanding under convertible
promissory notes previously issued by us in June 2008 and November
2009.
PRIVATE
PLACEMENT AGREEMENTS
This
prospectus relates to the resale, from time to time, of up to 10,722,756
shares of Common Stock of
NexMed, Inc., a Nevada corporation, all of which are being offered by the
selling stockholders named in this prospectus. The 10,722,756 shares
represent 130% of the number of shares of Common Stock issuable upon full
conversion of 7% Convertible Notes due December 31, 2012 (the “Notes”) issued
pursuant to a Purchase Agreement dated March 15, 2010, which is described below,
to allow for the resale of shares issuable in the event the conversion price is
reduced or in the event shares are issued in payment of principal accretions on
the Notes.
On March
15, 2010, we entered into a Purchase Agreement with The Tail Wind Fund Ltd.,
Tail Wind Advisory and Management Ltd. and Solomon Strategic Holdings, Inc. (the
“Purchasers”). Pursuant to the Purchase Agreement, we issued to the
Purchasers 7% convertible notes in the aggregate principal amount of $4 million.
The notes are convertible into shares of the Common Stock. The Notes
are initially convertible into shares of the Company’s Common Stock at $0.58 per
share, which conversion price is subject to adjustment upon stock dividends,
splits, combinations and certain issuances of our common stock at a price below
the then-applicable conversion price. The Notes have a coupon rate of
7% per annum, which is payable at the Company’s option in cash or in shares of
Common Stock, except that the Company will be prohibited from paying the Notes
in shares of Common Stock if (1) at any time within 10 Trading Days (as defined
in the Notes) prior to the Accretion Payment Date (as defined in the Notes)
there fails to exist Effective Registration (as defined in the Notes) or an
event of default exists or occurs under the Notes, (2) if the Company’s net cash
on hand (including cash equivalents) as of such Accretion Payment Date is
greater than $3 million, and (3) to the extent, and only to the extent, that
such conversion into shares of Common Stock would result in the holder of a Note
exceeding 9.9% beneficial ownership of the Company’s Common
Stock. Our obligations under the Notes are secured with a first
priority lien on the real property owned by NexMed (U.S.A.), Inc., a
wholly-owned subsidiary of the Company (“NexMed USA”), and are further secured
by guarantees provided by NexMed USA and Bio-Quant, Inc., also a wholly-owned
subsidiary of the Company.
THE
SELLING STOCKHOLDERS
This
prospectus covers only the resale of shares of our Common Stock by the selling
stockholders. The number of shares of Common Stock that may be actually sold by
the selling stockholders will be determined by such selling
stockholders.
The
following table sets forth: (1) the name of the selling stockholders, (2) the
number (as reported by the selling stockholders to the Company) and percentage
of shares of our Common Stock beneficially owned by the selling stockholders,
including shares purchasable upon conversion of convertible securities
(including the Notes), (3) the maximum number of shares of Common Stock which
the selling stockholders can sell pursuant to this prospectus and (4) the number
(as reported by the selling stockholders to the Company) and percentage of
shares of Common Stock that the selling stockholders would own if they sold all
their shares registered by this prospectus. The selling stockholders will
receive all of the net proceeds from the sale of its shares of Common Stock
offered by this prospectus.
Because
the selling stockholders may sell all or part of their shares of Common Stock
pursuant to this prospectus and this offering is not being underwritten on a
firm commitment basis, we cannot accurately estimate the number and percentage
of shares of Common Stock that the selling stockholders will hold in the
aggregate at the end of the offering covered by this prospectus.
Beneficial
ownership is determined in accordance with Rule 13d-3(d) under the Exchange Act
as of March 16, 2010, on which date 126,902,281 shares of our common stock
were outstanding.
Name of Selling Stockholders (1)
|
|
Number of Shares
of Common Stock
Beneficially
Owned
Prior to the
Offering (2)
|
|
|
Number of Shares
of Common Stock
Being Offered
Pursuant to this
Prospectus (3)
|
|
|
Number of Shares
of Common Stock
to be Beneficially
Owned after the
Offering (4)
|
|
|
Percentage of All
Common Stock to
be Owned after the
Offering
|
|
|
The
Tail Wind Fund Ltd. (5)
|
|
|
5,862,069
|
|
|
|
9,114,344
|
|
|
|
0
|
|
|
|
0
|
|
|
Tail
Wind Advisory and Management Ltd. (5)
|
|
|
6,379,310
|
|
|
|
804,206
|
|
|
|
0
|
|
|
|
0
|
|
|
Solomon
Strategic Holdings, Inc. (6)
|
|
|
517,241
|
|
|
|
804,206
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(1)
|
Neither
the selling stockholders, nor any of their officers, directors or
principal equity holders, have held any position or office or have had any
material relationship with us within the past three
years.
|
|
|
(2)
|
As
determined in accordance with Rule 13d-3(d) under the Exchange Act,
includes shares of Common Stock and shares of Common Stock issuable upon
the conversion of the Notes held by the selling stockholders as of March
16, 2010 but does not include additional shares issuable upon conversion
of interest to be accrued on the Notes through their maturity date or the
additional shares representing 30% of the total shares issuable upon full
conversion of the Notes as described in footnote
(3).
|
|
|
(3)
|
Consists
of an aggregate of 8,248,274 shares of Common Stock issuable upon
conversion of the Notes assuming accrual of interest at 7% per annum
through their maturity date of December 31, 2012, and an additional
2,474,482 shares of Common Stock, representing 30% of the foregoing
number. Pursuant to the terms of a Registration Rights
Agreement dated as of March 15, 2010 between the Company and the holders
of the Notes, we agreed to register for resale an additional number of
shares representing 30% of the total shares issuable upon full conversion
of the Notes, to allow for the resale of shares issuable in the event the
conversion price is reduced or in the event shares are issued in payment
of principal accretions on the
Notes.
|
|
|
(4)
|
Represents
the number of shares of Common Stock beneficially owned by the selling
stockholders and the number of shares of Common Stock issuable upon the
conversion of convertible securities held prior to the issuance of the
Notes, and assumes the sale of all of the shares of Common Stock being
registered by this prospectus.
|
|
|
(5)
|
Shares
beneficially owned by The Tail Wind Fund Ltd. consist of 5,862,069 shares
of Common Stock issuable upon conversion of the Note issued to The Tail
Wind Fund Ltd. on March 16, 2010, assuming a conversion price of $0.58 per
share and no accrued interest. Shares beneficially owned by
Tail Wind Advisory and Management Ltd. (“TWAM”) consist of the foregoing
5,862,069 shares of Common Stock issuable upon conversion of the Note
issued to the Tail Wind Fund Ltd. and 517,241 shares of Common Stock
issuable upon conversion of the Note issued to TWAM on March 16, 2010,
assuming a conversion price of $0.58 per share and no accrued
interest. TWAM, a UK corporation authorized and regulated by
the Financial Services Authority of Great Britain, is the investment
manager for The Tail Wind Fund Ltd., and David Crook is the CEO and
controlling stockholder of TWAM. Each of TWAM and David Crook
expressly disclaims any equitable or beneficial ownership of the shares
being registered hereunder and held by The Tail Wind Fund
Ltd.
|
|
|
(6)
|
Shares
beneficially owned by Solomon Strategic Holdings, Inc. (“SSH”) consist of
517,241 shares of Common Stock issuable upon conversion of the Note issued
to SSH on March 16, 2010, assuming a conversion price of $0.58 per share
and no accrued interest. Andrew P. Mackellar has been
authorized by the Board of Directors of SSH to make voting and disposition
decisions with respect to the securities on behalf of SSH. By reason
of such delegated authority, Mr. Mackellar may be deemed to share
dispositive power over the shares of common stock beneficially owned by
SSH. Mr. Mackellar expressly disclaims any equitable or beneficial
ownership of the shares being registered hereunder and held by SSH, and he
does not have any legal right to maintain such delegated
authority.
|
PLAN
OF DISTRIBUTION
We are
registering the shares of Common Stock on behalf of the selling stockholders.
Sales of shares may be made by the selling stockholders, including their
respective donees, transferees, pledgees or other successors-in-interest
directly to purchasers or to or through underwriters, broker-dealers or through
agents. Sales may be made from time to time on the Nasdaq Capital Market, any
other exchange upon which our shares may trade in the future, in the
over-the-counter market or otherwise, at market prices prevailing at the time of
sale, at prices related to market prices, or at negotiated or fixed prices. The
shares may be sold by one or more of, or a combination of, the
following:
|
|
·
|
a
block trade in which the broker-dealer so engaged will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction (including crosses in which the
same broker acts as agent for both sides of the
transaction);
|
|
|
·
|
purchases
by a broker-dealer as principal and resale by such broker-dealer,
including resales for its account, pursuant to this
prospectus;
|
|
|
·
|
ordinary
brokerage transactions and transactions in which the broker solicits
purchases;
|
|
|
·
|
through
options, swaps or derivatives;
|
|
|
·
|
in
privately negotiated transactions;
|
|
|
·
|
in
making short sales or in transactions to cover such short sales;
and
|
|
|
·
|
put
or call option transactions relating to the
shares.
|
The
selling stockholders may effect these transactions by selling shares directly to
purchasers or to or through broker-dealers, which may act as agents or
principals. These broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The selling
stockholders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their securities.
The
selling stockholders may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with those transactions, the
broker-dealers or other financial institutions may engage in short sales of the
shares or of securities convertible into or exchangeable for the shares in the
course of hedging positions they assume with the selling stockholders. The
selling stockholders may also enter into options or other transactions with
broker-dealers or other financial institutions which require the delivery of
shares offered by this prospectus to those broker-dealers or other financial
institutions. The broker-dealer or other financial institution may then resell
the shares pursuant to this prospectus (as amended or supplemented, if required
by applicable law, to reflect those transactions).
The
selling stockholders and any broker-dealers that act in connection with the sale
of shares may be deemed to be “underwriters” within the meaning of Section 2(11)
of the Securities Act of 1933, and any commissions received by broker-dealers or
any profit on the resale of the shares sold by them while acting as principals
may be deemed to be underwriting discounts or commissions under the Securities
Act. The selling stockholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the shares
against liabilities, including liabilities arising under the Securities Act. We
have agreed to indemnify the selling stockholders and the selling stockholders
have agreed to indemnify us against some liabilities in connection with the
offering of the shares, including liabilities arising under the Securities
Act.
The
selling stockholders will be subject to the prospectus delivery requirements of
the Securities Act. We have informed the selling stockholders that the
anti-manipulative provisions of Regulation M promulgated under the Securities
Exchange Act of 1934 may apply to their sales in the market.
The
selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of Rule 144.
Upon
being notified by the selling stockholders that a material arrangement has been
entered into with a broker-dealer for the sale of shares through a block trade,
special offering, exchange distribution or secondary distribution or a purchase
by a broker or dealer, we will file a supplement to this prospectus, if required
pursuant to Rule 424(b) under the Securities Act, disclosing:
|
|
·
|
the
name of the selling stockholders and of the participating
broker-dealer(s);
|
|
|
·
|
the
number of shares involved;
|
|
|
·
|
the
initial price at which the shares were
sold;
|
|
|
·
|
the
commissions paid or discounts or concessions allowed to the
broker-dealer(s), where applicable;
|
|
|
·
|
that
such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus;
and
|
|
|
·
|
other
facts material to the transactions.
|
In
addition, if required under applicable law or the rules or regulations of the
Commission, we will file a supplement to this prospectus when the selling
stockholders notify us that a donee or pledgee intends to sell more than 500
shares of Common Stock.
We are
paying all expenses and fees in connection with the registration of the shares.
The selling stockholders will bear all brokerage or underwriting discounts or
commissions paid to broker-dealers in connection with the sale of the
shares.
Wells
Fargo Bank, N.A., located at P.O. Box 64854, South St. Paul, MN 55164-0854, is
the transfer agent and registrar for our Common Stock.
WHERE
YOU CAN FIND MORE INFORMATION
We are
subject to the informational requirements of the Exchange Act, and we are
required to file reports and proxy statements and other information with the
Securities and Exchange Commission. You may read and copy these reports, proxy
statements and information at the Securities and Exchange Commission’s Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Room by calling
the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission maintains a web site that contains reports, proxy and
information statements and other information regarding registrants, including
NexMed, Inc., that file electronically with the Securities and Exchange
Commission. You may access the Securities and Exchange Commission’s web site at
http://www.sec.gov.
LEGAL
MATTERS
The validity of the issuance of the
shares of Common Stock offered by the selling stockholders will be passed upon
for us by Brownstein Hyatt Farber Schreck, LLP, Las Vegas, Nevada.
EXPERTS
The
financial statements for the years ended December 31, 2009 and 2008,
incorporated in this Prospectus by reference to the Annual Report on Form 10-K
for the year ended December 31, 2009, have been so incorporated in reliance on
the report (which contains an explanatory paragraph relating to the Company’s
ability to continue as a going concern as described in Note 1 to the financial
statements) of Amper, Politziner & Mattia, LLP, an independent registered
public accounting firm, given on the authority of said firm as experts in
auditing and accounting.
INCORPORATION
OF DOCUMENTS BY REFERENCE
The
Securities and Exchange Commission allows us to “incorporate by reference”
information in documents we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information we incorporate by reference is considered to be part of this
prospectus and information that we file later with the Securities and Exchange
Commission automatically will update and supersede such information. We hereby
incorporate by reference the documents listed below and any future filings we
make with the Securities and Exchange Commission under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, prior to the termination of the
offering of the securities covered by this prospectus, as amended:
|
(1)
|
Our
Annual Report on Form 10-K for the fiscal year ended December 31, 2009
filed on March 31, 2010;
|
|
|
|
|
(2)
|
Our
Current Report on Form 8-K filed on January 8, 2010;
|
|
|
|
|
(3)
|
Our
Current Report on Form 8-K filed on January 28, 2010;
|
|
|
|
|
(4)
|
Our
Current Report on Form 8-K filed on February 1, 2010;
|
|
|
|
|
(5)
|
Our
Current Report on Form 8-K filed on March 3, 2010;
|
|
|
|
|
(6)
|
Our
Current Report on Form 8-K filed on March 17, 2010; and
|
|
|
|
|
(7)
|
The
description of our securities contained in our Registration Statement on
Form S-3 (File No. 333-152591), filed July 29, 2008, including any
amendment or report filed for the purpose of updating such
information.
|
You
may request a copy of these filings (including exhibits to such filings that we
have specifically incorporated by reference in such filings), at no cost, by
writing or telephoning our executive offices at the following
address:
NexMed,
Inc.
6330
Nancy Ridge Drive, Suite 103
San
Diego, California 92121
Attn:
Secretary
(858)
222-8041
You
should rely only on the information provided or incorporated by reference in
this prospectus or any related supplement. We have not authorized anyone else to
provide you with different information. The selling stockholders have agreed not
to make an offer of these shares in any state that prohibits such an offer. You
should not assume that the information in this prospectus or any supplement is
accurate as of any date other than the date on the cover page of such
documents.
NEXMED,
INC.
10,722,756
SHARES
COMMON
STOCK
PROSPECTUS
April
16, 2010
Nexmed (MM) (NASDAQ:NEXM)
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