-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OTLQIZBaG3A5N/t6UygbQ3FB1J5N3u118hy9djxn340NygvbVxvNedW7cIGRxrC9 QRyVPRYrMZr0fkV03s+WoQ== 0000898432-01-500474.txt : 20020412 0000898432-01-500474.hdr.sgml : 20020412 ACCESSION NUMBER: 0000898432-01-500474 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20011205 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHARMACEUTICAL RESOURCES INC CENTRAL INDEX KEY: 0000878088 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 223122182 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-74606 FILM NUMBER: 1807327 BUSINESS ADDRESS: STREET 1: ONE RAM RIDGE RD CITY: SPRING VALLEY STATE: NY ZIP: 10977 BUSINESS PHONE: 9144257100 MAIL ADDRESS: STREET 1: ONE RAM RIDGE RD CITY: SPRING VALLEY STATE: NY ZIP: 10977 S-3 1 a176778.txt As filed with the Securities and Exchange Commission on December 5, 2001 Registration No. 333-_______ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________ FORM S-3 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ________________ PHARMACEUTICAL RESOURCES, INC. (Exact name of registrant as specified in its charter) New Jersey 22-3122182 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) One Ram Ridge Road Spring Valley, New York 10977 (845) 425-7100 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Kenneth I. Sawyer Chairman of the Board and Chief Executive Officer Pharmaceutical Resources, Inc. One Ram Ridge Road Spring Valley, New York 10977 (845) 425-7100 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Stephen R. Connoni, Esq. Kirkpatrick & Lockhart LLP 1251 Avenue of the Americas New York, NY 10020 (212) 536-3900 Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE ================================================================================ Title of Each Class Amount To Be Proposed Maximum Amount of of Securities To Be Registered Aggregate Offering Registration Registered (1) Price (2)(3) Fee (4) - -------------------------------------------------------------------------------- Common Stock, par (5) (5) (5) value $0.01 per share........ - -------------------------------------------------------------------------------- Preferred Stock, par (5) (5) (5) value $0.0001 per share........................ - -------------------------------------------------------------------------------- Warrants, exercisable (5) (5) (5) for shares of common stock or shares of preferred stock - -------------------------------------------------------------------------------- Total........................ $75,000,000 $75,000,000 $17,925 ================================================================================ (1) There are being registered hereunder such indeterminate number of shares of common stock and preferred stock and such indeterminate number of warrants to purchase common stock and preferred stock as shall have an aggregate initial offering price not to exceed $75,000,000. The securities registered hereunder may be sold separately, or together as units with other securities registered hereunder. The securities hereunder also include such indeterminate number of shares of common stock that may be issued upon conversion of any convertible preferred stock or upon exercise of any warrant, and such indeterminate number of shares of preferred stock that may be issued upon exercise of any warrants or pursuant to the anti-dilution provisions of any such securities. (2) In United States dollars or the equivalent thereof in any other currency, currency unit or units, or composite currency or currencies. (3) The proposed maximum per unit and aggregate offering prices per class of security will be determined from time to time by the registrant in connection with the issuance by the registrant of the securities registered hereunder. (4) Estimated solely for purposes of determining the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. (5) Not required to be included in accordance with General Instruction II.D. of Form S-3. _______________ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ The information in this prospectus is not complete and may be changed without notice. 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 it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Preliminary Prospectus - Subject to completion, dated December 5, 2001 PROSPECTUS $75,000,000 PHARMACEUTICAL RESOURCES, INC. Shares of Common Stock, Preferred Stock and/or Warrants _______________ This is a public offering of shares of common stock, shares of preferred stock and/or warrants of Pharmaceutical Resources, Inc. This means that from time to time: o we may offer and issue shares of common stock, shares of preferred stock and/or warrants, each in varying amounts and at prices and on terms to be determined at the time of sale; o we will provide a prospectus supplement each time we offer and sell a particular type of securities; and o the prospectus supplement will describe the offering and the terms of the securities. We will receive all of the net proceeds from any sales for cash of our securities. Where necessary, the applicable prospectus supplement will also contain information about certain United States federal income tax considerations relating to, and any listing on a securities exchange of, the securities covered by such prospectus supplement. We may offer the securities directly or through agents or to or through underwriters or dealers. If any agents or underwriters are involved in the sale of the securities, their names, and any applicable purchase price, fee, commission or discount arrangement between or among them will be set forth, or will be calculable from the information set forth, in an accompanying prospectus supplement. We may sell the securities through agents, underwriters or dealers only with delivery of a prospectus supplement describing the method and terms of the offering of such securities. See "Plan of Distribution" beginning on page 16 of this prospectus. Our common stock is traded on The New York Stock Exchange (the "NYSE") under the symbol "PRX." _______________ The securities offered involve a high degree of risk. See "Risk Factors" beginning on page 7 of this prospectus for a discussion of some important risks you should consider before buying any shares of common stock, shares of preferred stock and/or warrants. _______________ Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities, or has passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. _______________ This prospectus may not be used to consummate sales of securities unless it is accompanied by the applicable prospectus supplement. The date of this prospectus is December 5, 2001 WHERE YOU CAN FIND MORE INFORMATION We are a public company and file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission, or SEC. You may read and copy any document that we file at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can obtain copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference room. Our SEC filings are also available to the public at the SEC's web site at "http://www.sec.gov." In addition, our common stock is listed for trading on the NYSE. You can read and copy reports and other information concerning us at the offices of The New York Stock Exchange located at 20 Broad Street, New York, New York 10005. This prospectus is only part of a Registration Statement on Form S-3 that we have filed with the SEC under the Securities Act of 1933, as amended, and, therefore, omits certain information contained in such Registration Statement. We have also filed exhibits and schedules with the Registration Statement that are excluded from this prospectus, and you should refer to the applicable exhibit or schedule for a complete description of any statement referring to any contract or other document. You may: o inspect a copy of the Registration Statement, including the exhibits and schedules, without charge at the SEC's public reference room, o obtain a copy from the SEC upon payment of the fees prescribed by the SEC, or o obtain a copy from the SEC web site. INFORMATION INCORPORATED BY REFERENCE The SEC allows us to "incorporate by reference" information that we file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus, and the information that we file later with the SEC will automatically update, supplement and/or supersede this information. We incorporate by reference any future filings that we make with the SEC under Sections 13(a), 13(c) or 14 of the Securities Exchange Act of 1934 until we sell all of the securities covered hereby. We also incorporate by reference the documents listed below: 1. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2000; 2. Our Proxy Statement for the 2001 Annual Meeting of Stockholders; 3. Our Quarterly Report on Form 10-Q for the three months ended March 31, 2001; 4. Our Quarterly Report on Form 10-Q for the three months ended June 30, 2001; 5. Our Quarterly Report on Form 10-Q for the three months ended September 30, 2001; 6. Our Registration Statement on Form S-3 filed with the SEC on August 24, 2001, as amended on September 5, 2001; and 7. The description of our common stock contained in our registration statement under Section 12 of the Securities Exchange Act of 1934, including any amendments or reports filed for the purpose of updating such description. The reports and other documents that we file after the date of this prospectus will update, supplement and/or supersede the information in this prospectus. You may request and obtain a copy of these filings, at no cost to you, by writing or calling us at the following address or phone number: Pharmaceutical Resources, Inc. One Ram Ridge Road Spring Valley, New York 10977 Telephone: (845) 425-7100 Attn: Secretary You should rely only on the information incorporated by reference or provided in this prospectus and any prospectus supplement. We have not authorized anyone else to provide you with different information. We are not making an offer of these securities in any jurisdiction where the offer is not permitted. Do 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 such documents. 2 ABOUT THIS PROSPECTUS This prospectus is part of a registration statement that we filed with the SEC, using a "shelf" registration or continuous offering process. We may, from time to time, sell any combination of the securities offered in this prospectus in one or more offerings up to a total dollar amount of $75,000,000. This prospectus provides you with a general description of the securities we may offer. Each time we offer to sell securities, we will provide you with a prospectus supplement containing specific information about the terms of the securities being offered. The prospectus supplement also may include a discussion of certain United States federal income tax consequences and any risk factors or other special considerations applicable to those securities. The prospectus supplement also may add, update, supercede or change information in this prospectus. If there is any inconsistency between the information in this prospectus and the applicable prospectus supplement, you should rely on the information in such prospectus supplement. You should read both this prospectus and any applicable prospectus supplement, together with the additional information described under the heading "Where You Can Find More Information" on page 2 of this prospectus. 3 OUR BUSINESS We are a holding company that, through our subsidiaries, is in the business of developing, manufacturing and distributing a broad line of generic drugs, primarily in the United States. We operate principally through our wholly-owned subsidiary, Par Pharmaceutical, Inc. ("Par"), a manufacturer and distributor of generic drugs. We have strategic alliances with several pharmaceutical and chemical companies. These alliances provide us with products to sell through the several distribution, development or licensing agreements that we have entered into. In 1998, we entered into our most significant strategic alliance when Merck KGaA ("Merck"), a pharmaceutical and chemical company located in Germany, through its subsidiary, EMD, Inc. (formerly known as Lipha Americas, Inc.) ("EMD"), purchased a substantial number of shares of our common stock and became our then largest stockholder. As part of the alliance, we obtained, pursuant to certain agreements, exclusive distribution rights from a related party of EMD to approximately 45 generic pharmaceutical products. Generic drugs are the pharmaceutical and therapeutical equivalents of brand name drugs and are usually marketed under their generic (chemical) names rather than by brand names. Generally, a generic drug may not be marketed until the applicable patents on the brand name drug expire. Generic drugs must meet the same governmental standards as brand name drugs, but generally are sold at prices below those of brand name drugs. Generic drugs provide a cost-effective alternative for consumers while maintaining the level of safety and effectiveness of the brand name pharmaceutical product. Our product line consists of both prescription and over-the-counter generic drugs. We currently market 112 products representing various dosage strengths for 50 separate drugs. We market our products primarily to wholesalers, retail drug chains, drug distributors and repackagers through our sales staff. RECENT DEVELOPMENTS In April 2001, Dr. Reddy's Laboratories Ltd. ("Reddy"), a vertically integrated producer of bulk active ingredients for the pharmaceutical industry and a developer and manufacturer of finished dosage forms located in India, entered into a broad-based co-marketing and development agreement with us covering 19 generic pharmaceutical products, four of which have been filed with the Food and Drug Administration (the "FDA") and are awaiting approval, to be marketed exclusively by Par in the United States and certain other United States territories upon FDA approval. On August 2, 2001, Reddy became the first company to receive 180-day marketing exclusivity in the U.S. generics market when it received FDA approval to market its fluoxetine 40 mg capsules (a generic form of the drug Prozac) and we started shipping the product immediately thereafter. We have agreed to pay Reddy a percentage of the gross profits on sales of the products sold by Par in accordance with a development and supply agreement. On August 2, 2001, we also received 180-day marketing exclusivity for fluoxetine 10 mg and 20 mg tablets. Additionally, on July 31, 2001, the FDA granted to Merck's affiliate, Alphapharm Pty., final approval to market flecainide acetate, the generic form of Tambocor, thereby allowing Par to market exclusively such product for up to 180 days thereafter through a distribution agreement with Genpharm, Inc., a Merck affiliate, pursuant to which Par immediately thereafter began shipping such product. Flecainide acetate is indicated for the prevention of paroxysmal supraventricular tochycardias. We expect to market the product during 2002. On July 25, 2001, the FDA granted Par final approval to market megestrol oral suspension, thereby allowing Par to market the product with marketing exclusivity until mid-January 2002, and we started shipping the product promptly thereafter. Megestrol oral suspension is indicated for the treatment of anorexia, cachexia or an unexplained significant weight loss in patients with a diagnosis of AIDS. On September 5, 2001, EMD and its affiliates sold 13,634,012 shares of our common stock in private placements to approximately 63 other entities, which shares were immediately thereafter registered with the SEC pursuant to a registration statement on Form S-3 (Registration No. 333-68308) under the Securities Act of 1933, as amended, and resold to the public. 4 On September 5, 2001, following the private placement of all of the securities of EMD and its affiliates, each of the four designees of EMD to our Board of Directors resigned. We have since filled one of the vacancies, increased the number of directors from seven to eight and we expect to fill the four remaining vacancies within the next few months. We are incorporated in New Jersey. Our principal executive offices are located at One Ram Ridge Road, Spring Valley, New York 10977, and our telephone number is (845)425-7100. 5 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This prospectus, including the documents that we incorporate herein by reference, contains forward-looking statements within the meaning of Section27A of the Securities Act of 1933, as amended, and Section21E of the Securities Exchange Act of 1934. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as "anticipate," "estimate," "plans," "projects," "continuing," "ongoing," "expects," "management believes," "we believe," "we intend" and similar words or phrases. Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this prospectus. Among the key factors that could cause actual results to differ materially from the forward-looking statements: o competitive factors; o general economic and financial conditions; o relationships with pharmaceutical and biotechnology companies; o the ability to develop safe and efficacious drugs; o variability and amounts of royalty, license and other revenue; o ability to enter into future collaborative agreements; o governmental regulation; o changes in industry practices; and o one-time or non-recurring events. Because the factors referred to above, as well as the risk factors beginning on page7 of this prospectus, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise and/or their effects. In addition, we cannot assess the impact of each factor on our business or financial condition or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. 6 RISK FACTORS You should carefully consider the following risk factors and all other information contained in this prospectus, any prospectus supplement and the documents that we incorporate by reference herein before purchasing our securities. Investing in our securities involves a high degree of risk. Any of the following risks could materially adversely affect our business, operating results and financial condition and could result in a complete loss of your investment. Additional risks and uncertainties not presently known to us that we currently deem immaterial may also impair our business operations and condition. RISKS RELATED TO OUR INDUSTRY WE FACE INTENSE COMPETITION IN THE PHARMACEUTICAL INDUSTRY FROM BRAND NAME AND GENERIC MANUFACTURERS, WHOLESALERS AND DISTRIBUTORS, WHICH COULD SIGNIFICANTLY LIMIT OUR GROWTH. The pharmaceutical industry is highly competitive. Many of our competitors have longer operating histories and greater financial, research and development, marketing and other resources than us. Consequently, many of our competitors may be able to develop products and/or processes competitive with, or superior to, our own. Furthermore, we may not be able to differentiate our products from those of our competitors, successfully develop or introduce new products that are less costly or offer better performance than those of our competitors or offer purchasers of our products payment and other commercial terms as favorable as those offered by our competitors. We are subject to competition from numerous other entities that currently operate or intend to operate in the pharmaceutical industry. In our pharmaceutical distribution business, we compete with a number of large wholesalers and other distributors of pharmaceuticals. Additionally, consolidation among wholesalers and retailers, the formation of large buying groups and competition between distributors have resulted in additional pricing pressures. We cannot assure you that we will be able to compete successfully with these companies. Certain manufacturers of brand name drugs and/or their affiliates have been introducing generic pharmaceutical products equivalent to such brand name drugs at relatively low prices. Such pricing, with its attendant diminished profit margins, could have the effect of inhibiting us and other manufacturers of generic pharmaceutical products from developing and introducing generic pharmaceutical products comparable to certain brand name drugs. This, in turn, may discourage our development of new products and reduce our sales and limit or preclude our profitability. In addition, increased price competition among manufacturers of generic pharmaceutical products, resulting from new generic pharmaceutical products being introduced into the market and other generic pharmaceutical products being reintroduced into the market, has led to an increase in demands by customers for downward price adjustments by the manufacturers of generic pharmaceutical products, including our business, for certain products that have already been delivered. No assurance can be given that such price adjustments, which reduce our gross profit margin, will not continue, or even increase, with a consequent adverse effect on our earnings. OUR REVENUES AND GROSS PROFIT FROM INDIVIDUAL GENERIC PHARMACEUTICAL PRODUCTS ARE LIKELY TO DECLINE AS OUR COMPETITORS INTRODUCE THEIR OWN GENERIC EQUIVALENTS. Revenues and gross profit derived from generic pharmaceutical products tend to follow a pattern based on regulatory and competitive factors believed to be unique to the generic pharmaceutical industry. As the patents for a brand name product and the related exclusivity periods expire, the first generic manufacturer to receive regulatory approval for a generic equivalent of the product often is able to capture a substantial share of the market. However, as other generic manufacturers receive regulatory approvals for competing products, that market share and the price of that product will typically decline. For example, the 180-day marketing exclusivity that we were granted by the FDA in respect of fluoxetine 10 mg and 20 mg tablets expires at the end of January 2002, and Reddy's 180-day marketing exclusivity in respect of fluoxetine 40 mg capsules, which our operating subsidiary Par currently sells pursuant to a development and supply agreement, expires at the end of January 2002. The expiration of these exclusivity periods will likely result in a decrease in the revenues and gross profit of such products as competition increases. 7 IF WE FAIL TO OBTAIN EXCLUSIVE MARKETING RIGHTS FOR GENERIC PHARMACEUTICAL PRODUCTS THAT WE MANUFACTURE AND/OR MARKET IN THE UNITED STATES, OUR BUSINESS MAY BE ADVERSELY AFFECTED. As a result of the 180-day market exclusivity granted to generic pharmaceutical companies that are first to file abbreviated new drug application, or ANDA, products with the FDA, generic pharmaceutical products at their initial introduction generally are priced to yield relatively high gross profit margins. As additional manufacturers introduce comparable generic pharmaceutical products into this highly competitive market, price competition and access to market have historically intensified and sales prices and product gross profit margins have typically declined, often significantly. Accordingly, our future profitability is significantly dependent upon our ability to timely and effectively file ANDA products with the FDA or partner with other parties that have obtained the market exclusivity. No assurances can be given that we will be able to develop and introduce successful products in the future within the time constraints necessary to be successful. If we are unable to continue timely and effectively to file ANDA products with the FDA or partner with other parties that have obtained the market exclusivity, our gross profit margin and operating results may decline significantly and our prospects may be adversely affected. BRAND NAME COMPANIES FREQUENTLY TAKE ACTIONS TO PREVENT OR DISCOURAGE THE USE OF GENERIC DRUG PRODUCTS SUCH AS OURS. Brand name companies frequently take actions to prevent or discourage the use of generic equivalents to their products, including generic products that we manufacture or market. These actions may include: o filing new patents on drugs whose original patent protection is about to expire, o developing patented controlled-release products or other product improvements, o developing and marketing, as over-the-counter products, branded products that will soon face generic competition, and o increasing marketing initiatives, regulatory activities and litigation. These actions, if successful, could have an adverse impact on products that we are developing and our business, financial condition and results of operation could be harmed. PROPOSED FDA REGULATIONS AND GUIDELINES MAY RESULT IN OUR GENERIC PRODUCTS NOT BEING ABLE TO FULLY UTILIZE THE 180-DAY MARKETING EXCLUSIVITY PERIOD, WHICH WILL AFFECT OUR RESULTS OF OPERATIONS. Any inability to fully use the 180-day marketing exclusivity period for any of our products will affect our results of operations. In August 1999, the FDA proposed to amend its regulations relating to 180-day marketing exclusivity for which certain generic drugs may qualify. We cannot predict whether or to what extent the FDA will make changes to those regulations. In March 2000, the FDA issued new guidelines regarding the timing of approval of ANDAs following patent infringement court decisions and regarding the start of the 180-day marketing exclusivity period set forth in recent Federal legislation. These guidelines could result in us not being able to utilize all or any portion of the 180-day marketing exclusivity period on ANDA products that we were first to file on, depending on the timing and results of court decisions in patent litigation, which could adversely affect our sales and future profitability. We are unable to predict what impact, if any, the FDA's new guidelines may have on our business or financial condition. NEW DEVELOPMENTS BY OTHER MANUFACTURERS COULD MAKE OUR PRODUCTS NON-COMPETITIVE OR OBSOLETE. The markets in which we compete and intend to compete are undergoing, and are expected to continue to undergo, rapid and significant change. We expect competition to intensify as technological advances are made. New developments by other manufacturers may render our products uncompetitive or obsolete. 8 OUR ABILITY TO MARKET SUCCESSFULLY ANY PRODUCT DEPENDS, IN LARGE PART, UPON THE ACCEPTANCE OF THE PRODUCT BY INDEPENDENT THIRD PARTIES. Our ability to market successfully any generic or proprietary pharmaceutical product depends, in large part, on the acceptance of the product by independent third parties (including physicians, pharmacies, government formularies and other retailers) as well as patients. Unanticipated side effects or unfavorable publicity concerning any of our products would have an adverse effect on our ability to achieve acceptance by prescribing physicians, managed care providers, pharmacies and other retailers, customers and patients. OUR OVERALL PROFITABILITY DEPENDS UPON OUR ABILITY TO INTRODUCE NEW GENERIC PRODUCTS ON A TIMELY BASIS. Our overall future profitability will depend, to a significant extent, upon our ability to introduce, on a timely basis, new generic products for which we are either the first to market (or among the first to market) or otherwise can gain significant market share. The timing of the introduction of our products is dependent upon, among other things, the regulatory approval of these products and the timing of regulatory approvals of competing products. Inasmuch as this timing is not within our control, we may not be able to develop and introduce new generic products on a timely basis, if at all. IN SOME CIRCUMSTANCES, WE MAY RETROACTIVELY REDUCE THE PRICE OF PRODUCTS THAT WE ALREADY HAVE SOLD. THESE PRICE REDUCTIONS RESULT IN REDUCED REVENUES. In some circumstances, we may issue to our customers credits and rebates for products that we previously sold to them. These credits and rebates effectively constitute a retroactive reduction of the price of products already sold and a reduction in our revenues. Although we establish a reserve with respect to these potential credits and rebates at the time of sale, we have no assurance that our reserves will be adequate. WE ARE SUBJECT TO STRINGENT GOVERNMENTAL REGULATION. Pharmaceutical manufacturers and distributors are subject to extensive regulation by the Federal government, principally the FDA and the Drug Enforcement Administration, and, to a lesser extent, by state governments. The Federal Food, Drug and Cosmetic Act, the Controlled Substances Act, the Generic Drug Enforcement Act of 1992 and other Federal statutes and regulations govern or influence the testing, manufacture, safety, labeling, storage, recordkeeping, approval, advertising and promotion of our products. Non-compliance with applicable requirements can result in fines, perhaps significant in amount, and other sanctions imposed by courts and/or regulatory bodies, including the initiation of product seizures, product recalls, injunctive actions and criminal prosecutions. In addition, administrative remedies can involve the recall of products, as well as the refusal of the government to enter into supply contracts with, and/or to approve new drug applications of, a noncomplying entity. The FDA also has the authority to withdraw approval of drugs in accordance with statutory procedures. WE ARE SUSCEPTIBLE TO PRODUCT LIABILITY CLAIMS THAT MAY NOT BE COVERED BY INSURANCE AND COULD REQUIRE US TO PAY SUBSTANTIAL SUMS. Like all pharmaceutical companies, we face the risk of loss resulting from, and adverse publicity associated with, product liability lawsuits, whether or not such claims are valid. We likely cannot avoid such claims. In addition, we cannot be certain that our product liability insurance will be adequate to cover such claims or that we will be able to get adequate insurance coverage in the future at acceptable costs. A successful product liability claim that exceeds our policy limits could require us to pay substantial sums. THE MANUFACTURE AND STORAGE OF PHARMACEUTICAL AND CHEMICAL PRODUCTS ARE SUBJECT TO ENVIRONMENTAL REGULATION AND RISK. Because of the chemical ingredients of pharmaceutical products and the nature of their manufacturing process, the pharmaceutical industry is subject to extensive environmental regulation and the risk of incurring liability for damages or the costs of remedying environmental problems. Although we have not incurred any such liability in any material amount, we have no assurance that we will not be subject to liability, perhaps material, in the future. We may be required to increase expenditures to remedy environmental problems and comply with applicable regulations. 9 If we fail to comply with environmental regulations to use, discharge or dispose of hazardous materials appropriately or otherwise to comply with the conditions attached to our operating licenses, the licenses could be revoked and we could be subject to criminal sanctions and/or substantial civil liability or could be required to suspend or modify our manufacturing operations. TESTING REQUIRED FOR THE REGULATORY APPROVAL OF OUR PRODUCTS IS SOMETIMES CONDUCTED BY INDEPENDENT THIRD PARTIES. ANY FAILURE BY ANY OF THESE THIRD PARTIES TO PERFORM THIS TESTING PROPERLY MAY HAVE AN ADVERSE EFFECT UPON OUR ABILITY TO OBTAIN REGULATORY APPROVALS. Our applications for the regulatory approval of our products incorporate the results of testing and other information that is sometimes provided by independent third parties (including, for example, manufacturers of raw materials, testing laboratories, contract research organizations or independent research facilities). The ability of the products being tested to receive regulatory approval is, to some extent, dependent upon the quality of the work performed by these third parties, the quality of the third parties' facilities and the accuracy of the information provided by third parties. We have little or no control over any of these factors. If this testing is not performed properly, our ability to obtain regulatory approval could be restricted or delayed. LITIGATION IS COMMON IN OUR INDUSTRY, CAN BE EXPENSIVE AND MAY DELAY AND/OR PREVENT ENTRY OF OUR PRODUCTS INTO THE MARKET. Litigation concerning patents and proprietary rights can be protracted and expensive. Pharmaceutical companies with patented brand products are increasingly suing companies that produce off-patent generic forms of their patented brand name products for alleged patent infringement or other violations of intellectual property rights, which may delay or prevent the entry of such a generic product into the market. Generally, a generic drug may not be marketed until the applicable patents on the brand name drug expire. When an ANDA is filed with the FDA for approval of a generic drug, the filing person may either certify as to the expiration of the patent listed by the FDA as covering the generic product, in which case the ANDA will not become effective until the expiration of such patent, or certify that any patent listed as covering the generic drug is invalid or will not be infringed by the manufacture, sale or use of the new drug for which the ANDA is filed. In either case, there is a risk that a branded pharmaceutical company may sue such filing person for alleged patent infringement or other violations of intellectual property rights. Because a large part of our business involves the marketing and development of off-patent products, the threat of litigation, the outcome of which is inherently uncertain, is always present. Such litigation may be costly and time consuming, and could result in a substantial delay in or prevention of the introduction and/or marketing of our products, which could have a material adverse effect on our business, financial condition, prospects and results of operations. RISKS RELATED TO OUR COMPANY WE MAY FAIL TO INTRODUCE PROFITABLE NEW PRODUCTS IN A TIMELY MANNER. The research and development of oral solid and suspension products, including preformulation research, process and formulation development, required studies and FDA review and approval, has historically taken approximately two to three years. We typically select products for development that we intend to market several years in the future. The length of time necessary to bring a product to market, however, can vary significantly and can depend on, among other things, availability of funding, problems relating to formulation, safety or efficacy or patent issues associated with the product. We currently have 23 ANDAs pending with the FDA, five of which have received tentative approval. We cannot provide assurance that we will successfully complete the development of products either under development or proposed for development, that we will obtain regulatory approval for any such product, that any approved product will be produced in commercial quantities or that any approved product can be sold at a profit. Our failure to introduce profitable new products in a timely manner could have a material adverse effect on our operating results, prospects and financial condition. OUR PROFITABILITY MAY BE ADVERSELY AFFECTED BY OUR CONTINUING DEPENDENCE ON OUR MAJOR CUSTOMERS AND OUR LIMITED DISTRIBUTION CHAIN. We have approximately 150 customers, some of which are part of larger buying groups. For the first nine (9) months of fiscal year 2001, our three largest customers in sales volume, McKesson Drug Co., Bergen Brunswig Corporation and 10 Walgreen accounted for approximately 13%, 11% and 11%, respectively, of our net sales. Sales to McKesson Drug Co. included a significant amount related to one of our non-warehousing drug store chain customers. We do not have written agreements with any of these customers. The loss of any of these customers or the substantial reduction in orders from any of such customers could have a material adverse effect upon our operating results and financial condition. We also have broadened our product line by entering into distribution agreements, pursuant to which we distribute generic pharmaceutical products manufactured by others. We are dependent, in large part, on the efforts of the corporations that are party to such distribution agreements to develop and promote such generic pharmaceutical products and there can be no assurance that such efforts will be successful. If these relationships do not continue as expected, our business, financial condition and results of operation could suffer. FUTURE INABILITY TO OBTAIN RAW MATERIALS OR PRODUCTS FROM CONTRACT MANUFACTURERS COULD SERIOUSLY AFFECT OUR OPERATIONS. The raw materials essential to our manufacturing business are purchased primarily from United States distributors of bulk pharmaceutical chemicals manufactured by foreign companies. Although to date we have not experienced difficulty in obtaining these raw materials and products, we cannot assure you that supply interruptions or delays will not occur in the future or that we will not have to obtain substitute materials or products, which would require additional regulatory approvals. In addition, necessary changes in our raw material suppliers could result in delays in production, higher raw material costs and loss of sales and customers because regulatory authorities must generally approve raw material sources for pharmaceutical products. Any significant supply interruption could have a material adverse effect on our operations. WE ARE INCREASING OUR EFFORTS TO DEVELOP NEW PROPRIETARY PHARMACEUTICAL PRODUCTS, BUT WE CAN GIVE NO ASSURANCE THAT ANY OF THESE EFFORTS WILL BE COMMERCIALLY SUCCESSFUL. Our principal business has traditionally been the development, manufacture and marketing of generic equivalents of pharmaceutical products first introduced by third parties. However, we have recently increased our efforts to obtain patents on new products. Expanding from our focus on generic products and broadening our pipeline to include patents on products may require additional internal expertise or external collaboration in areas in which we currently do not have substantial resources and personnel. We may have to enter into collaborative arrangements with others that may require us to relinquish rights to certain of our technologies or product candidates that we would otherwise pursue independently. We cannot assure you that we will be able to acquire the necessary expertise or enter into collaborative agreements on acceptable terms, if at all, to develop and market proprietary product candidates. In addition, only a small minority of all new proprietary research and development programs ultimately results in commercially successful drugs. It is not possible to predict whether or when any program (including any program of ours) will succeed unless and until it actually produces a drug that is commercially marketed for a significant period of time. In order to obtain regulatory approvals for the commercial sale of our proprietary product candidates, we will be required to complete extensive clinical trials in humans to demonstrate the safety and efficacy of the products. We have limited experience in conducting clinical trials in these new product areas. A clinical trial may fail for a number of reasons, including: o failure to enroll a sufficient number of patients meeting eligibility criteria; o failure of the product candidate to demonstrate safety and efficacy; o the development of serious (including life threatening) adverse events (including, for example, side effects caused by or connected with exposure to the product candidate); and o the failure of clinical investigators, trial monitors and other consultants or trial subjects to comply with the trial plan or protocol. 11 WE MAY NEED ADDITIONAL FINANCING, WHICH MAY NOT BE AVAILABLE, AND ANY FINANCINGS MAY DILUTE THE PERCENTAGE OWNERSHIP OF OUR EXISTING STOCKHOLDERS. Our existing capital resources may not be sufficient to fund the expansion of our operations and research and development programs, and we may, therefore, need to raise significant additional capital through public or private equity offerings, debt financings or additional commercial partnerships and licensing arrangements. We may not be able to find additional financing when we need it or on terms favorable to us. If we raise additional capital by issuing equity securities, such an issuance will reduce the percentage ownership of existing stockholders. Furthermore, we may need to issue securities that have rights, preferences and privileges senior to our common stock. WE MAY BE SUBJECT TO RISKS ASSOCIATED WITH FUTURE ACQUISITIONS. We are evaluating and may pursue acquisitions of, or investments in, complementary companies, product lines and businesses as part of our business strategy. We cannot assure you that we will be able to identify suitable acquisition or investment candidates, or if we do identify suitable candidates, that we will be able to make such acquisitions or investments on commercially acceptable terms or at all. If we do make any acquisitions or investments, we may finance such acquisitions or investments by issuing additional equity securities, which could dilute the holdings of our then existing stockholders, using our cash resources and/or incurring additional debt. Any such acquisitions or investments could also result in an increase in goodwill, intangible assets and amortization expenses that could negatively impact our profitability. In addition, acquisitions involve numerous risks, including difficulties in the assimilation of the personnel, operations and products of the acquired companies, the diversion of management's attention from other business concerns, risks of entering markets in which we have no, or limited, prior experience and the potential loss of key employees of the acquired company. Also, any acquisition could result in our assumption of unknown and/or unexpected, perhaps significant, liabilities. WE DEPEND ON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS. WE CANNOT BE CERTAIN OF THEIR CONFIDENTIALITY AND PROTECTION. Our success depends, in large part, on our ability to protect our current and future products and to defend our intellectual property rights. If we fail to protect our intellectual property adequately, competitors may manufacture and market products similar to ours. Numerous patents covering our products have been issued to us, and we have filed, and expect to continue to file, patent applications seeking to protect newly developed products in various countries, including the United States. Some patent applications in the United States are maintained in secrecy until the patent is issued. Because the publication of discoveries tends to follow their actual discovery by several months, we cannot be certain that we were the first to invent or file patent applications on any of our discoveries. We also cannot be certain that patents will be issued with respect to any of our patent applications or that any existing or future patents issued to or licensed by us will provide competitive advantages for our products or will not be challenged, invalidated or circumvented by our competitors. Furthermore, our patent rights may not prevent our competitors from developing, using or commercializing products that are similar or functionally equivalent to our products. We also rely on trade secrets, unpatented proprietary expertise and continuing innovation that we seek to protect, in part, by entering into confidentiality agreements with licensees, suppliers, employees and consultants. We cannot assure you that these agreements will not be breached. We also cannot be certain that there will be adequate remedies in the event of a breach. Disputes may arise concerning the ownership of intellectual property or the applicability of confidentiality agreements. We cannot be sure that our trade secrets and proprietary technology will not otherwise become known or be independently developed by our competitors or, if patents are not issued with respect to products arising from research, that we will be able to maintain the confidentiality of information relating to these products. In addition, efforts to ensure our intellectual property rights can be costly, time-consuming and ultimately unsuccessful. 12 VOLATILITY OF THE MARKET PRICE OF OUR COMMON STOCK COULD ADVERSELY AFFECT OUR STOCKHOLDERS. The market price of our common stock may be volatile, and could be subject to wide fluctuations, for the following reasons, among others: o actual or anticipated variations in our quarterly operating results or those of our competitors; o announcements by us or our competitors of new and enhanced products or acquisition of new businesses; o market conditions or trends in the pharmaceutical industry; o developments or disputes concerning proprietary rights; o introduction of technologies or product enhancements by others that reduce the need for our products; o changes in financial estimates by securities analysts; o general economic and political conditions; o departures of key personnel; o changes in the market valuations of our competitors; o regulatory considerations; o the recent sale of a large amount of our common stock by our then largest stockholder could limit future demand for our stock; o the sale of a large amount of our common stock could cause volatility of our share price and may have a significant impact on the market price of our common stock; o preferred stock that we may issue could have other rights, including economic rights, senior to our common stock, so that the issuance of such preferred stock could adversely affect the market value of our common stock and could also have the effect of delaying, deferring or preventing a change of control of us without any action by the common stockholders; and o the other risk factors listed in this section. IF WE DO NOT MANAGE OUR ANTICIPATED GROWTH, WE MAY NOT BE ABLE TO OPERATE OUR BUSINESS EFFECTIVELY. We anticipate a significant expansion of our operations. Our anticipated growth could place a strain on our management systems and financial and other resources. Our ability to successfully implement our business plan in a rapidly evolving market will require an effective planning and management process, close coordination with and support of our suppliers and insuring the availability of adequate working capital financing. We must continue to improve and effectively utilize our existing operational, management, marketing and financial systems and successfully recruit, hire, train, retain and manage personnel, which we may be unable to do. Further, we must maintain close coordination among our technical, finance, marketing, sales and production staffs. We cannot assure you that we will be able to successfully manage our expansion. If we fail to manage our anticipated growth, our operations may be disrupted and our business may be adversely affected. WE DEPEND UPON MANAGEMENT AND KEY PERSONNEL AND WE DO NOT HAVE LONG-TERM EMPLOYMENT AGREEMENTS WITH THEM. Our future success depends, to a substantial degree, upon the continued service of Kenneth I. Sawyer, our President and Chief Executive Officer, and other key members of our management team. Although we have severance agreements that provide incentives for management to continue working for us, we do not have long-term employment agreements with any of our senior officers and there can be 13 no assurance than any individual will continue in his present capacity with us for any specified period. The loss of the services of Mr. Sawyer, or of certain key members of our management team, or their inability to perform services on our behalf could materially and adversely affect our operations. Our future success and plans for growth also depend upon our ability to attract, train and retain skilled personnel in all areas of our business. THE ANTI-TAKEOVER PROVISIONS OF OUR CERTIFICATE OF INCORPORATION COULD AFFECT STOCKHOLDERS. Under our certificate of incorporation, the Board of Directors has staggered terms, which may have the effect of making us a less attractive target for unfriendly acquisition by a person or company that does not have the support of the Board of Directors by making it more difficult for such person or company to obtain control over us. One impact of this provision may be to have an inhibitive impact on the ability of the holders of our common stock to obtain a premium on the sale of their shares in a change of control situation and may limit somewhat the trading price of our common stock. THE PROVISIONS OF OUR CREDIT AGREEMENT MAY AFFECT OUR ABILITY TO ENTER INTO CERTAIN TRANSACTIONS. The Loan and Security Agreement, dated as of December 15, 1996, as amended from time to time, that we entered into with General Electric Capital Corporation ("GE"), may restrict our ability to enter into certain corporate transactions, unless we obtain GE's prior written consent. Although we believe that we will be able to obtain any such consent, we cannot guarantee that GE will, in all circumstances, provide consent for the specific purposes for which we intend, which may restrict our ability to enter into, or delay the consummation of, certain corporate transactions. THE SALE OF SECURITIES HELD BY MERCK COULD POTENTIALLY DISRUPT CERTAIN EXISTING AGREEMENTS BETWEEN US AND AFFILIATES OF MERCK. In connection with, and following, the acquisition of a substantial portion of our shares in 1998 by EMD, Merck and Genpharm, Inc. and Generics (UK) Ltd., each subsidiaries of Merck, entered into various commercial agreements, including services agreements, pursuant to which Merck and its subsidiaries provide us with research and development, regulatory compliance and manufacturing support, and distribution agreements, pursuant to which Genpharm, Inc. granted exclusive distribution rights to us within the United States and certain other United States territories with respect to approximately 45 generic pharmaceutical products. We cannot assure you that the recent sale of our common stock by EMD will not result, directly or indirectly, in the modification, eventual expiration and/or early termination of our commercial contracts with Merck and/or its subsidiaries. If such agreements lapse, we cannot be certain that we will be able to enter into necessary replacement agreements on acceptable terms to meet our service and distribution requirements. 14 USE OF PROCEEDS We will receive all of the net proceeds from any sales for cash of our securities registered under the registration statement of which this prospectus is a part. Unless otherwise set forth in the applicable prospectus supplement, we currently intend to use the net proceeds from the sale of securities: o to fund our research and development programs; o for general corporate purposes; o to meet working capital needs; and o to fund possible acquisitions of companies, products, assets and/or technologies. We have not determined the amount of net proceeds to be used for each of the specific purposes indicated or the timing of any expenditures. As a result, our management will have broad discretion to allocate the net proceeds from any sales of our securities registered under the registration statement of which this prospectus is a part. Pending application of the net proceeds as described above, we intend to invest the net proceeds of the offering in short-term, investment-grade, interest-bearing securities. We may set forth additional information on the use of net proceeds from the sale of securities we offer under this prospectus in a prospectus supplement relating to any specific offering(s). 15 PLAN OF DISTRIBUTION We may offer our securities for sale in one or more transactions, including block transactions, at a fixed price or prices, which may be changed, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at prices determined on a negotiated or competitive bid basis. We may sell securities directly, through agents designated by us, from time to time, or by such other means as we may specify in any applicable prospectus supplement. Participating agents or broker-dealers in the distribution of any of the securities may be deemed to be "underwriters" within the meaning of the Securities Act of 1933, as amended. Any discount or commission received by any underwriter and any participating agents or broker-dealers, and any profit on the resale of shares of the securities purchased by any of them may be deemed to be underwriting discounts or commissions under the Securities Act of 1933, as amended. We may sell our securities through a broker-dealer acting as agent or broker or to a broker-dealer acting as principal. In the latter case, the broker-dealer may then resell such securities to the public at varying prices to be determined by the broker-dealer at the time of resale. Underwriters, dealers and agents may engage in transactions with or perform services for us or our subsidiaries in the ordinary course of their businesses. To the extent required, the number and amount of the securities to be sold, information relating to the underwriters, the purchase price, the public offering price, if applicable, the name of any underwriter, agent or broker-dealer, and any applicable commissions, discounts or other items constituting compensation to such underwriters, agents or broker-dealers with respect to a particular offering will be set forth in an appropriate supplement to this prospectus. If underwriters are used in a sale, securities will be acquired by the underwriters for their own account and may be resold 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. The securities may be offered to the public either through underwriting syndicates represented by one or more managing underwriters or directly by one or more firms acting as underwriters. The underwriter or underwriters with respect to a particular underwritten offering of the securities will be named in the prospectus supplement relating to that offering and, if an underwriting syndicate is used, the managing underwriter or underwriters will be stated on the cover of the prospectus supplement. Underwriters, dealers and agents may be entitled, under agreements to be entered into with us, to indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act of 1933, as amended. If any material change is made with respect to this plan of distribution, we will file a post-effective amendment to the registration statement of which this prospectus forms a part. Under the securities laws of some states, the securities registered by this registration statement may be sold in those states only through registered or licensed brokers or dealers. Certain persons that participate in the distribution of the securities may engage in transactions that stabilize, maintain or otherwise affect the price of the securities, including over-allotment, stabilizing and short-covering transactions in such securities, and the imposition of penalty bids, in connection with an offering. Any person participating in the distribution of the securities registered under the registration statement that includes this prospectus and any supplement will be subject to applicable provisions of the Securities Exchange Act of 1934 and the applicable SEC rules and regulations, including, among others, Regulation M, which may limit the timing of purchases and sales of any of our securities by any such person. Furthermore, Regulation M may restrict the ability of any person engaged in the distribution of our securities to engage in market-making activities with respect to our securities. These restrictions may affect the marketability of our securities and the ability of any person or entity to engage in market-making activities with respect to our securities. Upon sale under the registration statement that includes this prospectus and any supplement, the securities registered by the registration statement will be freely tradable in the hands of persons other than our affiliates. 16 THE SECURITIES WE MAY OFFER The descriptions of the securities contained in this prospectus, together with any applicable prospectus supplement, summarize the material terms and provisions of the various types of securities that we may offer. We will describe in the applicable prospectus supplement relating to any securities, the particular terms of the securities offered by that prospectus supplement. If we so indicate in the applicable prospectus supplement, the terms of the securities may differ from the terms that we have summarized below. We will also include in the applicable prospectus supplement information, where applicable, about material United States federal income tax considerations relating to the securities, and the securities exchange, if any, on which the securities will be listed. We may, from time to time, sell in one or more offerings, common stock, preferred stock and/or warrants to purchase any of such securities. This prospectus may not be used to consummate a sale of securities unless it is accompanied by a prospectus supplement. DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK The following description of our capital stock and certain provisions of our amended certificate of incorporation and our bylaws is only a summary and is qualified in its entirety by the provisions of our amended certificate of incorporation and our bylaws. Our authorized capital stock consists of 90,000,000 shares of common stock, par value $.01 per share, and 6,000,000 shares of preferred stock, par value $.0001 per share, of which 2,000,000 shares were designated as SeriesA Convertible Preferred Stock ("Series A Preferred Stock"), 960,568 shares of which Series A Preferred Stock were issued and subsequently converted to 1,055,815 shares of our common stock. As of December 4, 2001, there are 32,029,937 shares of our common stock issued and outstanding and no shares of our preferred stock issued or outstanding. COMMON STOCK Holders of our common stock are entitled to one vote for each share held of record on all matters properly submitted to a vote of our stockholders. Subject to the rights of holders of the preferred stock, if any, holders of our common stock have ratable rights to dividends from funds legally available therefor, when, as and if declared by our Board of Directors, and are entitled to share ratably in all of our assets available for distribution to holders of common stock upon our liquidation, dissolution or winding up of our affairs remaining after the payment of all of our debts and other liabilities. Holders of our common stock have neither preemptive rights nor rights to convert their common stock into any other securities and are not subject to future calls or assessments. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of our shares of preferred stock that we may designate and issue in the future. There are no redemption or sinking-fund provisions in our amended certificate of incorporation. LISTING Our common stock is listed on the NYSE under the symbol "PRX." TRANSFER AGENT AND REGISTRAR First City Transfer Company is the transfer agent and registrar for our common stock. PREFERRED STOCK Our amended certificate of incorporation authorizes our Board of Directors to issue preferred stock in one or more series and to determine the voting rights, dividend rights, liquidation preferences, conversion rights, redemption rights, including sinking-fund provisions and redemption prices, and other terms and rights of each series of preferred stock. We currently have no shares of preferred stock outstanding. If we determine to issue any preferred stock, we 17 will fix the rights, preferences, privileges and restrictions of the preferred stock of each series in the certificate of designation relating to that series. We will incorporate by reference as an exhibit to the registration statement that includes this prospectus the form of any certificate of designation that describes the terms of the series of preferred stock we are offering before any issuance of the related series of preferred stock. This description may include: 1. the title and stated value; 2. the number of shares we are offering; 3. the liquidation preference per share; 4. the purchase price per share; 5. any dividend rate, period and payment date, and the method of calculation for dividends; 6. whether dividends will be cumulative or non-cumulative and, if cumulative, the date from which dividends will accumulate; 7. the procedures for any auction and remarketing; 8. the provisions for a sinking fund; 9. the provisions for redemption or repurchase, if applicable, and any restrictions on our ability to exercise those redemption and repurchase rights; 10. any listing of the preferred stock on any securities exchange or market; 11. whether the preferred stock will be convertible into our common stock and, if applicable, the conversion price, or how it will be calculated, and the conversion period; 12. whether the preferred stock will be exchangeable into debt securities and, if applicable, the exchange price, or how it will be calculated, and the exchange period; 13. any voting rights of the preferred stock; 14. preemptive rights; 15. any restrictions on the transfer, sale or other assignment of the preferred stock; 16. whether interests in the preferred stock will be represented by depositary shares; 17. a discussion of any material or special United States federal income tax considerations applicable to the preferred stock; 18. the relative ranking and preferences of the preferred stock as to dividend rights and rights if we liquidate, dissolve or wind up our affairs or engage in an extraordinary corporate transaction; 19. any limitations on issuance of any class or series of preferred stock ranking senior to or on a parity with the series of preferred stock as to dividend rights and rights if we liquidate, dissolve or wind up our affairs; and 20. any other specific terms, preferences, rights or limitations of, or restrictions on, the preferred stock. 18 If and when we issue shares of preferred stock under this prospectus, the shares will be fully paid and non-assessable and will not have, or be subject to, any preemptive or similar rights. The New Jersey Business Corporation Act provides that the holders of preferred stock will have the right to vote separately as a class on any proposal involving fundamental changes in the rights of holders of that preferred stock. This right is in addition to any voting rights that may be provided for in the applicable certificate of designation for such series of preferred stock. Any preferred stock that we may issue could have other rights, including economic rights, senior to our common stock, so that such issuance of preferred stock could adversely affect the market value of our common stock. Any issuance of preferred stock may also have the effect of delaying, deferring or preventing a change in control of us without any action by the common stockholders. NOMINATION AND ELECTION OF DIRECTORS Our amended certificate of incorporation contains provisions that affect the nomination and election of directors to our Board of Directors. Our Board of Directors consists currently of four directors, and each director serves until his successor has been duly elected and qualified. Our Board of Directors is divided into three classes of directors. Each class serves a staggered three-year term. As a result, approximately one-third of the Board of Directors is elected each year. Generally, a director will stand for reelection only once every three years. Additionally, our bylaws provide that the directors in office will fill any vacancy or newly-created directorship on the Board of Directors. These provisions could have the effect of discouraging a third party from making a tender offer or otherwise attempting to obtain control of us, even though the attempt might be beneficial to us and our stockholders. DESCRIPTION OF WARRANTS GENERAL We may issue, together with other securities or separately, warrants to purchase our common stock or preferred stock. We will issue any warrants under warrant agreements to be entered into between us and a warrant agent, or as shall be set forth in the applicable prospectus supplement. The warrant agent will act solely as our agent in connection with the warrants of the series being offered and will not assume any obligation or relationship of agency or trust for or with any holders or beneficial owners of warrants. The applicable prospectus supplement will describe the following terms, where applicable, of any warrants in respect of which this prospectus is being delivered: 1. the title of the warrants; 2. the designation, amount and terms of the securities for which the warrants are exercisable and the procedures and conditions relating to the exercise of such warrants; 3. the designation and terms of the other securities, if any, with which the warrants are to be issued and the number of warrants issued with such security; 4. the price or prices at which the warrants will be issued; 5. the aggregate number of warrants; 6. any provisions for adjustment of the number or amount of securities receivable upon exercise of the warrants or the exercise price of the warrants; 7. the price or prices at which, and other terms of, the securities purchasable upon exercise of the warrants may be purchased; 19 8. if applicable, the date on and after which the warrants and the securities purchasable upon exercise of the warrants will be separately transferable; 9. if applicable, a discussion of the material United States federal income tax considerations applicable to the exercise of the warrants; 10. any other terms of the warrants, including terms, procedures and limitations relating to the exchange and exercise of the warrants; 11. the date on which the right to exercise the warrants will commence and the date on which the right will expire; 12. the maximum or minimum number of warrants which may be exercised at any time; and 13. information with respect to book-entry procedures, if any. EXERCISE OF WARRANTS Each warrant will entitle the holder thereof to purchase for cash the number of shares of preferred stock or common stock at the exercise price as will in each case be set forth in, or be determinable as set forth in, any applicable prospectus supplement. Holders of warrants will not be entitled, by virtue of being such holders, to vote, consent, receive dividends or exercise any rights whatsoever as our stockholders. Warrants may be exercised at any time up to the close of business on the expiration date set forth in the applicable prospectus supplement. After the close of business on the expiration date, unexercised warrants will become void. Warrants may be exercised when and as set forth in any applicable prospectus supplement relating to those warrants. Upon receipt of payment and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant agent or any other office indicated in the applicable prospectus supplement, we will, as soon as practicable, forward the purchased securities. If less than all of the warrants represented by the warrant certificate are exercised, a new warrant certificate will be issued for the remaining warrants. LEGAL MATTERS Kirkpatrick & Lockhart LLP, New York, New York, will pass upon the legality of the securities being offered by this prospectus for us. EXPERTS The consolidated financial statements of Pharmaceutical Resources, Inc. at December 31, 2000 and 1999, and for the years ended December 31, 2000 and 1999, the three-month transition period ended December 31, 1998 and the year ended September 30, 1998, incorporated by reference in this registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. 20 No dealer, salesperson or other person Prospectus has been authorized to give any information or to make any representation not contained in this $75,000,000 Prospectus in connection with the offer made by this Prospectus and, if given or made, such information or PHARMACEUTICAL RESOURCES, INC. representation must not be relied upon as having been authorized by the Common Stock, Preferred Stock Pharmaceutical Resources, Inc. This and/or Warrants Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the securities to which it relates, or an offer in any jurisdiction to any person to whom it is unlawful to make such an offer in such jurisdiction. Neither the delivery of this Prospectus nor any sale hereunder shall, under any circumstances, create an implication that the information contained herein is correct at any time after the date hereof. TABLE OF CONTENTS Page WHERE YOU CAN FIND MORE INFORMATION..........................2 INFORMATION INCORPORATED BY December 5, 2001 REFERENCE............................2 ABOUT THIS PROSPECTUS................3 OUR BUSINESS.........................4 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS...........................6 RISK FACTORS.........................7 USE OF PROCEEDS.....................15 PLAN OF DISTRIBUTION................16 THE SECURITIES WE MAY OFFER.........17 DESCRIPTION OF COMMON STOCK.........17 DESCRIPTION OF PREFERRED STOCK......17 NOMINATION AND ELECTION OF DIRECTORS19 DESCRIPTION OF WARRANTS.............19 LEGAL MATTERS.......................20 EXPERTS.............................20 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth all expenses payable by the registrant in connection with the issuance and distribution of our securities being registered hereby, other than underwriting discounts and commissions, all of which will be borne by the registrant. All amounts are estimated except the SEC registration fee: Expenses Amount -------- ------ SEC Registration Fee.............. $ 17,925 NYSE Listing Fees................. 15,000 Legal Fees and Expenses........... 50,000 Accounting Fees and Expenses...... 10,000 Miscellaneous Expenses............ 30,000 TOTAL...................... $ 122,925 Item 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Articles VIII and IX of the registrant's amended Certificate of Incorporation provide for the indemnification of officers and directors and limitations on liability of officers and directors in the manner and to the fullest extent permitted by New Jersey law. Under Article VII of the registrant's By-Laws, the registrant shall indemnify each director and officer of the registrant to the fullest extent permitted by law. Section 14A:3-5 of the New Jersey Business Corporation Act generally provides that a corporation has the power to indemnify a current or former officer or director of the corporation against expenses and liabilities in connection with any proceeding involving the officer or director by reason of his being or having been an officer or director of the corporation, other than a proceeding by or in the right of the corporation, if such officer or director acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal proceeding, such officer or director had no reasonable cause to believe his conduct was unlawful. Section 14A:3-5 additionally provides that a corporation has the power to indemnify a current or former officer or director of the corporation against his expenses in connection with any proceeding by or in the right of the corporation to procure a judgment in its favor which involves the officer or director by reason of his being or having been an officer or director of the corporation, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation. However, in such proceeding no indemnification shall be provided in respect of any claim, issue or matter as to which such officer or director shall have been adjudged to be liable to the corporation, unless and only to the extent that a court of competent jurisdiction shall determine upon application that despite the adjudication of liability, but in view of all circumstances of the case, such officer or director is fairly and reasonably entitled to indemnity for such expenses as such court shall deem proper. Section 14A:3-5 further provides that an indemnification, unless ordered pursuant to a court determination, may be made by the corporation only as authorized in a specific case upon a determination that indemnification is proper in the circumstances because the officer or director met the applicable standards of conduct as described above. Such determination may be made by the corporation's Board of Directors or a committee thereof, by independent legal counsel or by the stockholders of the corporation. Section 14A:2-7 of the New Jersey Business Corporation Act provides that a corporation's certificate of incorporation may provide that a director or officer shall have limited liability to the corporation and its shareholders, with certain exceptions. II-1 The registrant maintains a directors' and officers' liability insurance policy that, subject to the limitations and exclusions provides therein, covers the officers and directors of the registrant for certain actions that they may take or omit to take in their capacities as officers and directors of the registrant. Insofar as indemnification liabilities arising under the Securities Act of 1933, as amended, may be permitted to officers and directors under any of the foregoing provisions, the registrant has been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. ITEM 16. EXHIBITS. (a) Exhibits. Exhibit No. Description ----------- ----------- 1.1* The form of any underwriting agreement for common stock will be filed as an exhibit to a Current Report of the registrant on Form 8-K and incorporated herein by reference. 1.2* The form of any underwriting agreement for preferred stock will be filed as an exhibit to a Current Report of the registrant on Form 8-K and incorporated herein by reference. 4.1* The form of any warrant exercisable for common stock will be filed as an exhibit to a Current Report of the registrant on Form 8-K and incorporated herein by reference. 4.2* The form of any warrant exercisable for preferred stock will be filed as an exhibit to a Current Report of the registrant on Form 8-K and incorporated herein by reference. 4.4 The form of preferred stock certificate(1). 5.1 Opinion of Kirkpatrick & Lockhart LLP. 23.1 Consent of Arthur Andersen LLP, Independent Accountants. 23.2 Consent of Kirkpatrick & Lockhart llp. Reference is made to Exhibit 5.1. 24.1 Power of Attorney. Reference is made to page II-4. __________________ * To be filed by amendment or as an exhibit to a report pursuant to Section 13(a) or 13(c) of the Securities Exchange Act of 1934. (1) To be incorporated by reference in connection with any offering of preferred stock. ITEM 17. UNDERTAKINGS. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers, and controlling persons of the registrant pursuant to the provisions described in Item15 or otherwise, the registrant has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the II-2 Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that subparagraphs (i) and (ii) above do not apply if the information required to be included in a post-effective amendment by these subparagraphs is contained in periodic reports filed by the Registrant pursuant to Section13 or Section15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, as amended, each such post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for the purpose of determining any liability under the Securities Act of 1933, as amended, each filing of the registrant's annual report pursuant to Section 13(a) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Spring Valley, State of New York, on the 5th day of December 2001. PHARMACEUTICAL RESOURCES, INC. By:/s/ Kenneth I. Sawyer -------------------------------- Kenneth I. Sawyer Chairman of the Board and Chief Executive Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kenneth I. Sawyer and Dennis J. O'Connor, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to the registration statement and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, the following persons in the capacities and on the dates indicated have signed this registration statement below. /s/ Kenneth I. Sawyer Chairman of the Board and December 5, 2001 - ------------------------------ Chief Executive Officer Kenneth I. Sawyer (Principal Executive Officer) /s/ Dennis J. O'Connor Vice President, Chief December 5, 2001 - ------------------------------ Financial Officer and Dennis J. O'Connor Secretary (Principal Accounting and Financial Officer) /s/ Mark Auerbach - ------------------------------ Director December 5, 2001 Mark Auerbach /s/ John D. Abernathy - ------------------------------ Director December 5, 2001 John D. Abernathy /s/ Peter S. Knight - ------------------------------ Director December 5, 2001 Peter S. Knight II-4 INDEX TO EXHIBITS Exhibit No. Description ----------- ----------- 1.1* The form of any underwriting agreement for common stock will be filed as an exhibit to a Current Report of the registrant on Form 8-K and incorporated herein by reference. 1.2* The form of any underwriting agreement for preferred stock will be filed as an exhibit to a Current Report of the registrant on Form 8-K and incorporated herein by reference. 4.1* The form of any warrant exercisable for common stock will be filed as an exhibit to a Current Report of the registrant on Form 8-K and incorporated herein by reference. 4.2* The form of any warrant exercisable for preferred stock will be filed as an exhibit to a Current Report of the registrant on Form 8-K and incorporated herein by reference. 4.4 The form of preferred stock certificate(1). 5.1 Opinion of Kirkpatrick & Lockhart LLP. 23.1 Consent of Arthur Andersen LLP, Independent Accountants. 23.2 Consent of Kirkpatrick & Lockhart LLP. Reference is made to Exhibit 5.1. 24.1 Power of Attorney. Reference is made to page II-4. __________________ * To be filed by amendment or as an exhibit to a report pursuant to Section 13(a) or 13(c) of the Securities Exchange Act of 1934. (1) To be incorporated by reference in connection with any offering of preferred stock. II-5 EX-5 3 ex5-1.txt EXHIBIT 5.1 Exhibit 5.1 Opinion of Kirkpatrick & Lockhart LLP December 5, 2001 Pharmaceutical Resources, Inc. One Ram Ridge Road Spring Valley, New York 10977 Re: Sale of Common Stock, Preferred Stock and/or Warrants of Pharmaceutical Resources, Inc. Ladies and Gentlemen: We have acted as counsel to Pharmaceutical Resources, Inc., a New Jersey corporation (the "Corporation"), in connection with the preparation of a Registration Statement on Form S-3 (the "Registration Statement") filed by the Corporation with the Securities and Exchange Commission (the "Commission") on or about December 5, 2001. The Registration Statement relates to the issuance and sale from time to time, pursuant to Rule 415 of the General Rules and Regulations promulgated under the Securities Act of 1933, as amended (the "Securities Act"), of the following securities of the Corporation with an aggregate initial offering price of up to $75,000,000: (i) common stock, par value $0.01 per share, of the Corporation (the "Common Stock"), (ii) one or more series of preferred stock, par value $0.0001 per share, of the Corporation (the "Preferred Stock"), and/or (iii) warrants that are exercisable for shares of Common Stock or shares of Preferred Stock (the "Warrants" and together with the Common Stock and/or the Preferred Stock, the "Securities"). In connection with this opinion, we have examined copies of the Registration Statement, the Corporation's certificate of incorporation, as amended (the "Certificate of Incorporation"), and by-laws (the "By-Laws"), and the resolutions of the Board of Directors of the Corporation (the "Board") authorizing the issuance of the Securities. We also have examined such other documents, papers, statutes and authorities as we deemed necessary or appropriate to enable us to render the opinion hereinafter expressed. As to certain factual matters, we have relied upon certificates of officers of the Corporation and public officials and have not independently verified such matters. In rendering this opinion, we have assumed: the genuineness of all signatures on original documents; the authenticity of all documents submitted to us as originals; the conformity to originals of all documents submitted to us as copies; the accuracy, completeness and authenticity of certificates of officers and representatives of the Corporation and others; and the due authorization, execution and delivery of all documents, where authorization, execution and delivery are prerequisites to the effectiveness of such documents. In our capacity as counsel to the Corporation in connection with such registration, we are familiar with the proceedings taken and proposed to be taken by the Corporation in connection with the authorization and issuance of the Securities. For purposes of this opinion, we have assumed that such proceedings will be timely and properly completed, in accordance with all requirements of applicable federal and New Jersey laws, in the manner presently proposed. We are not opining on, and we assume no responsibility for, the applicability to or effect on any of the matters covered herein of any laws other than the federal laws of the United States of America and the New Jersey Business Corporation Act. No opinion is expressed herein with respect to the qualification of the Securities under the securities or blue sky laws of any state or any foreign jurisdiction. The Securities may be issued from time to time on a delayed or continuous basis, but this opinion is limited to the laws, including the rules and regulations thereunder, as in effect on the date hereof. On the basis of the foregoing and in reliance thereon, and subject to the qualifications contained herein, we are of the opinion that: 1. The Common Stock has been duly authorized by all necessary corporate action of the Corporation and when (i) the Registration Statement, as finally amended (including all post-effective amendments), has become effective; (ii) an appropriate prospectus supplement with respect to the applicable shares of Common Stock has been prepared, delivered and filed in compliance with the Securities Act and the applicable rules and regulations thereunder; (iii) if the applicable shares of Common Stock are to be sold pursuant to an underwriting agreement, such underwriting agreement with respect to the applicable shares of Common Stock has been duly authorized, executed and delivered by the Corporation and the other parties thereto; (iv) the Board, including any appropriate committee appointed thereby, and appropriate officers of the Corporation have taken all necessary corporate action to approve the issuance of the applicable shares of Common Stock and all matters related thereto; (v) the terms of the issuance and sale of the applicable shares of Common Stock have been duly established in conformity with the Certificate of Incorporation and By-Laws so as not to violate any applicable law, the Certificate of Incorporation or By- Laws of the Corporation or result in a default under or breach of any agreement or instrument binding upon the Corporation and so as to comply with any restriction imposed by any court or governmental body having jurisdiction over the Corporation; (vi) the applicable shares of Common Stock have been offered, issued and sold in accordance with the terms of the Registration Statement, or any post-effective amendment thereto, and any prospectus and prospectus supplement relating thereto; and (vii) certificates representing the applicable shares of Common Stock have been duly executed, signed, registered and delivered upon payment of the agreed upon consideration therefor in accordance with the underwriting agreement with respect to the Common Stock, or as otherwise contemplated by the Registration Statement, or any post-effective amendment thereto, and any prospectus and prospectus supplement relating thereto, the applicable shares of Common Stock will be validly issued, fully paid and nonassessable. 2. The Preferred Stock has been duly authorized by all necessary corporate action of the Corporation and when (i) the Registration Statement, as finally amended (including all post-effective amendments), has become effective; (ii) an appropriate prospectus supplement with respect to the applicable Preferred Stock has been prepared, delivered and filed in compliance with the Securities Act and the applicable rules and regulations thereunder; (iii) if the applicable Preferred Stock is to be sold pursuant to an underwriting agreement, such underwriting agreement with respect to the applicable Preferred Stock in the form filed as an exhibit to the Registration Statement, or any post-effective amendment thereto, has been duly authorized, executed and delivered by the Corporation and the other parties thereto; (iv) the Board, including any appropriate committee appointed thereby, and appropriate officers of the Corporation have taken all necessary corporate action to approve the issuance and terms of the applicable Preferred Stock and all matters related thereto, including the adoption of a certificate of designation relating to the applicable Preferred Stock in accordance with the applicable provisions of the New Jersey Business Corporation Act (the "Certificate of Designation"); (v) the filing of the Certificate of Designation with the Secretary of State of the State of New Jersey has duly occurred; (vi) the terms of the applicable Preferred Stock and of its issuance and sale have been duly established in conformity with the Certificate of Incorporation, including the Certificate of Designation, relating to the applicable Preferred Stock and the By-Laws so as not to violate any applicable law, the Certificate of Incorporation or By-Laws or result in default under or breach of any agreement or instrument binding upon the Corporation and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Corporation; (vii) the applicable Preferred Stock has been offered, issued and sold in accordance with the terms of the Registration Statement, or any post-effective amendment thereto, and any prospectus and prospectus supplement relating thereto; and (viii) certificates representing the shares of the applicable Preferred Stock have been duly executed, signed, registered and delivered upon payment of the agreed upon consideration therefor in accordance with the underwriting agreement with respect to the Preferred Stock, or as otherwise contemplated by the Registration Statement, or any post-effective amendment thereto, and any prospectus and prospectus supplement relating thereto, (A) the shares of the applicable Preferred Stock will be duly authorized, validly issued, fully paid and nonassessable, and (B) if the applicable Preferred Stock is convertible or exchangeable into Common Stock, the Common Stock issuable upon conversion or exchange of the applicable Preferred Stock will be validly issued, fully paid and nonassessable, assuming the execution, authentication, issuance and delivery of the applicable Preferred Stock and the conversion or exchange thereof in accordance with the terms of the Certificate of Designation. 3. The Warrants have been duly authorized by all necessary corporate action of the Corporation and when (i) the Registration Statement, as finally amended (including all post-effective amendments), has become effective; (ii) an appropriate prospectus supplement with respect to the applicable Warrants has been prepared, delivered and filed in compliance with the Securities Act and the applicable rules and regulations thereunder; (iii) if the applicable Warrants are to be sold pursuant to an underwriting agreement, such underwriting agreement with respect to the Warrants, as will be filed as an exhibit to a Current Report of the Corporation on Form 8-K and incorporated by reference to the Registration Statement, or any post-effective amendment thereto, has been duly authorized, executed and delivered by the Corporation and the other parties thereto; (iv) the Board, including any appropriate committee appointed thereby, and the appropriate officers of the Corporation have taken all necessary corporate action to approve the issuance and terms of the applicable Warrants and any warrant agreement associated therewith (the "Warrant Agreement") and all matters related thereto; (v) the terms of the applicable Warrants and of their issuance and sale have been duly established in conformity with the Warrant Agreement so as not to violate any applicable law, the Certificate of Incorporation or By-Laws of the Corporation or result in a default under or breach of any agreement or instrument binding upon the Corporation and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Corporation; (vi) a Warrant Agreement conforming to the description thereof in any post-effective amendment to the Registration Statement, and any prospectus and prospectus supplement relating thereto, has been duly authorized, executed and delivered by the Corporation and any warrant agent named therein (the "Warrant Agent"); and (vii) the applicable Warrants have been duly authenticated by the Warrant Agent and duly executed and delivered on behalf of the Corporation in accordance with the provisions of the Warrant Agreement, have been offered, issued and sold in accordance with the terms of the Registration Statement, or any post-effective amendment thereto, and any prospectus and prospectus supplement relating thereto, have been issued and sold in accordance with the Warrant Agreement, and have been delivered to the purchasers thereof upon payment of the agreed upon consideration therefor in accordance with the underwriting agreement with respect to the applicable Warrants, or as otherwise contemplated in any post-effective amendment to the Registration Statement and any prospectus and prospectus supplement relating thereto, the applicable Warrants will be valid and binding obligations of the Corporation, enforceable against the Corporation in accordance with their respective terms. The opinions set forth above are subject to the following exceptions, limitations and qualifications: (i) the effect of bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights and remedies of creditors; (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law, and the discretion of the court before which any proceeding therefor may be brought; and (iii) the unenforceability under certain circumstances under law or court decisions of provisions providing for the indemnification of, or contribution to, a party with respect to a liability where such indemnification or contribution is contrary to public policy. For purposes of the opinions rendered above, we have assumed that the Corporation will at all times in the future be duly incorporated and validly existing as a corporation under the laws of the State of New Jersey and have the corporate power and authority to issue and sell the Securities. To the extent that the obligations of the Corporation under any applicable Warrant Agreement and any applicable underwriting agreement, as the case may be, may be dependent upon such matters, we assume for purposes of the foregoing opinions the following facts at the time of the execution and delivery of such agreements: that the other party thereto is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that such party is duly qualified to engage in the activities contemplated by the agreement; that the agreement has been duly authorized, executed and delivered by the other party and constitutes a legally valid, binding and enforceable obligation of the other party, enforceable against it in accordance with its terms; that the other party is in compliance, generally and with respect to acting in its designated capacity under such agreement, with all applicable laws and regulations; and that the other party has the requisite organizational and legal power and authority to perform its obligations under such agreement. We hereby consent to the filing of this opinion with the Commission as Exhibit 5.1 to the Registration Statement. We also consent to the reference to our firm under the heading "Legal Matters" in the Registration Statement. Very truly yours, /s/ Kirkpatrick & Lockhart LLP Kirkpatrick & Lockhart LLP EX-23 4 ex23-1.txt EXHIBIT 23.1 Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated March 9, 2001 included in Pharmaceutical Resources, Inc. Form10-K for the year ended December 31, 2000 and to all references to our Firm included in this registration statement. /s/ Arthur Andersen LLP Arthur Andersen LLP Roseland, New Jersey December 5, 2001 -----END PRIVACY-ENHANCED MESSAGE-----