**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

** **

** **

**FORM 10-Q**

 

 

**ý****                         QUARTERLYREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**ForQuarter Ended March 31, 2002**

** **

**or**

 

**o**                         TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

** **

**For the transition period from                        to                     **

 

**Commissionfile number 33-90516**

** **

 

**NEOPHARM, INC.**

(Exact name of Registrant as specified in its charter)

 

| **Delaware**                                                    |   | **51-0327886**                           |
|-----------------------------------------------------------------|--------|------------------------------------------|
| (State or other jurisdiction of

incorporation or organization) |   | (I.R.S. Employer

Identification Number) |

** **

**150Field Drive**

**Suite195**

**LakeForest, Illinois   60045**

(Address of principal executive offices)  (Zip Code)

 

 

**(847)295-8678**

(Registrant’s telephone number, including area code)

 

 

Indicate by check markwhether the registrant (1)  has filedall reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  Yes ý   No o

 

As a result of theCompany's recent dismissal of Arthur Andersen, LLP as its independent publicaccountants, the financial statements included in this Form 10-Q have not beenreviewed by independent public accountants in accordance with Rule 10-01(d) ofRegulation S-X.  See Part I-FinancialInformation.

 

As of April 19, 2002 thenumber of shares outstanding of each of the issuer’s classes of common stockwas as follows:

 
| **Title of  each class**           |   | **Number of  shares outstanding** |
|------------------------------------|--------|-----------------------------------|
| Common Stock ($.0002145 par value) |   | 16,263,529                        |

 

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NEOPHARM, INC.

(A DELAWARE CORPORATION)

 
| PART I.  FINANCIAL INFORMATION |     |                                                                                        |
|--------------------------------|----------|---------------------------------------------------------------------------------------------|
|                           | Item 1.  | Financial Statements                                                                        |   |   |
|                           |     | Balance Sheets as  of March 31, 2002 and December 31, 2001                                  |   |   |
|                           |     | Statements  of Operations for the three months ended March 31, 2002 and March 31, 2001      |   |   |
|                           |     | Statements  of Cash Flows for the three months ended March 31, 2002 and March 31, 2001      |   |   |
|                           |     | Notes to Financial  Statements                                                              |   |   |
|                           | Item  2. | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |   |   |
|                           | Item  3. | Quantitative  and Qualitative Disclosures About Market Risk                                 |   |   |
| PART II. OTHER INFORMATION     |     |                                                                                        |
|                           | Item 1.  | Legal  Proceedings                                                                          |   |   |
|                           | Item 2.  | Changes in  Securities and Use of Proceeds                                                  |   |   |
|                           | Item 3.  | Defaults Upon Senior  Securities                                                            |   |   |
|                           | Item  4. | Submission  of Matters to a Vote of Security-Holders                                        |   |   |
|                           | Item 5.  | Other  Information                                                                          |   |   |
|                           | Item 6.  | Exhibits and Reports  on Form 8-K                                                           |   |   |
| SIGNATURE PAGE                 |     |                                                                                        |

 

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**PARTI - FINANCIAL INFORMATION**

 

As aresult of the Company having recently dismissed Arthur Andersen, LLP as itsindependent public accountants, the financial statements that are included inthis Form 10-Q have not been reviewed by independent public accountants inaccordance with Rule 10-01(d) of Regulation S-X and this filing of theCompany's Form 10-Q is being made in accordance with the Securities andExchange Commission's Temporary Final Rules and Final Rules GoverningRequirements for Arthur Andersen Auditing Clients dated March 18, 2002 (the"'34 Act Order").  The Companyis currently in the process of interviewing new accountants and anticipateshaving such new independent public accountants engaged by June 15, 2002.  Upon being engaged, such new independentpublic accountants will promptly review the financial statements included inthis Form 10-Q.  If, as a result of suchreview, any changes are required in the financial statements, the Company, inaccordance with the '34 Act Order, will promptly file an amended Form 10-Q andprovide a discussion of any material changes from the unreviewed financialstatements.  If, however, upon review nochanges are required, a statement to that effect will be included in theCompany's next Form 10-Q report. 

 

**Item1****- Financial Statements**

** **

**NEOPHARM,INC.**

**(ADelaware Corporation)**

**Balance Sheets**

 
|                                                                                                                                     |   | **March 31, 2002** |        | **December 31,****2001** |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-------------|--------------------------|--------|
|                                                                                                                                     |   | **(Unaudited)**    |        |                     |   |
| **ASSETS**                                                                                                                               |   |               |        |                     |   |
| Current assets:                                                                                                                          |   |               |        |                     |   |
| Cash and cash equivalents                                                                                                                |   | $                  | 98,644,932  |                     | $      | 106,525,864 |   |
| Short-term investment in marketable securities                                                                                           |   | 17,275,899         |        | 15,030,045               |   |
| Other receivables                                                                                                                        |   | 92,537             |        | 131,718                  |   |
| Prepaid expenses                                                                                                                         |   | 1,242,778          |        | 469,862                  |   |
| Total current assets                                                                                                                     |   |               | 117,256,146 |                     |   | 122,157,489 |   |
| Equipment and furniture:                                                                                                                 |   |               |        |                     |   |
| Equipment                                                                                                                                |   | 2,494,858          |        | 2,260,949                |   |
| Furniture                                                                                                                                |   | 731,871            |        | 486,658                  |   |
| Leasehold improvements                                                                                                                   |   | 394,282            |        | 254,096                  |   |
| Less accumulated depreciation                                                                                                            |   | (959,901           | )           | (686,061                 | )      |
| Total equipment and furniture, net                                                                                                       |   | 2,661,110          |        | 2,315,642                |   |
| Long-term investments in marketable securities                                                                                           |   | 2,236,505          |        | 2,738,563                |   |
| Related party note receivable, net (Note 3)                                                                                              |   | 2,032,966          |        | 1,983,381                |   |
| Total assets                                                                                                                             |   | $                  | 124,186,727 |                     | $      | 129,195,075 |   |
|                                                                                                                                     |   |               |        |                     |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                            |   |               |        |                     |   |
| Current liabilities:                                                                                                                     |   |               |        |                     |   |
| Accrued clinical trial expense                                                                                                           |   | $                  | 830,033     |                     | $      | 632,365 |   |
| Accounts payable                                                                                                                         |   | 718,602            |        | 537,465                  |   |
| Accrued compensation                                                                                                                     |   | 624,091            |        | 221,862                  |   |
| Other accrued expenses                                                                                                                   |   | 363,931            |        | 459,833                  |   |
| Total current liabilities                                                                                                                |   | $                  | 2,536,657   |                     | $      | 1,851,525 |   |
|                                                                                                                                     |   |               |        |                     |   |
| Stockholders’ equity:                                                                                                               |   |               |        |                     |   |
| Common stock, $.0002145 par value; 25,000,000 shares  authorized: 16,263,529 and 16,237,779 shares issued and outstanding,  respectively |   | 3,492              |        | 3,484                    |   |
| Additional paid-in capital                                                                                                               |   | 169,859,022        |        | 169,748,547              |   |
| Accumulated deficit                                                                                                                      |   | (48,212,444        | )           | (42,408,481              | )      |
| Total stockholders’ equity                                                                                                          |   | $                  | 121,650,070 |                     | $      | 127,343,550 |   |
| Total liabilities and stockholders’ equity                                                                                          |   | $                  | 124,186,727 |                     | $      | 129,195,075 |   |

 

The accompanyingnotes are an integral part of these balance sheets.

 

 

2

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**NEOPHARM,INC.**

**(ADelaware Corporation)**

**Statements of Operations**

**ThreeMonths Ended March 31, 2002 and 2001**

(Unaudited)

 
|                                  |   | **Three Months Ended** |       |
|---------------------------------------|--------|------------------------|------------|
|                                  |   | **March 31, 2002**     |       | **March 31, 2001** |   |
| Revenues                              |   | $                      | —     |   | $ | — |   |
| Expenses:                             |   |                   |       |   |   |
| Research and development              |   | 5,073,608              |       | 1,583,397 |   |
| General and administrative            |   | 1,291,652              |       | 944,470 |   |
| Related party expenses (Note 3)       |   | 32,172                 |       | 32,573 |   |
| Total Expenses                        |   | 6,397,432              |       | 2,560,440 |   |
| Income (loss) from operations         |   | (6,397,432             | )          | (2,560,440 | ) |
| Other income                          |   | —                 |       | 8,049 |   |
| Interest income (Note 3)              |   | 593,469                |       | 1,968,564 |   |
| Net income (loss) before income taxes |   |                   | (5,803,963 | ) |   | (583,827 | ) |
| Income taxes                          |   | —                 |       | — |   |
| Net income (loss)                     |   | $                      | (5,803,963 | ) | $ | (583,827 | ) |
| Net income (loss) per share           |   |                   |       |   |   |
| Basic                                 |   | $                      | (0.36      | ) | $ | (0.04 | ) |
| Diluted                               |   | $                      | (0.36      | ) | $ | (0.04 | ) |
| Weighted average shares outstanding   |   |                   |       |   |   |
| Basic                                 |   | 16,249,132             |       | 16,123,560 |   |
| Diluted                               |   | 17,031,684             |       | 16,938,152 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

3

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**NEOPHARM,INC.**

**(ADelaware Corporation)**

**Statements of Cash Flows**

**Threemonths Ended March 31, 2002 and 2001**

(Unaudited)

 
|                                                                               |   | **Three Months Ended** |       |
|------------------------------------------------------------------------------------|--------|------------------------|------------|
|                                                                               |   | **March 31, 2002**     |       | **March 31, 2001** |   |
| Cash flows used in operating activities:                                           |   |                   |       |   |   |
| Net income/(loss)                                                                  |   | $                      | (5,803,963 | ) | $ | (583,827 | ) |
| Adjustments to reconcile net income to net cash provided  by operating activities: |   |                   |       |   |   |
| Depreciation and amortization                                                      |   | 273,840                |       | 49,596 |   |
| (Increase)/decrease in other assets                                                |   | (783,320               | )          | 37,473 |   |
| Increase/(decrease) in accounts payable and accrued  liabilities                   |   | 685,132                |       | 568,811 |   |
| Net cash and cash equivalents provided by operating  activities                    |   | (5,628,311             | )          | 72,053 |   |
|                                                                               |   |                   |       |   |   |
| Cash flows used in investing activities:                                           |   |                   |       |   |   |
| Purchase of marketable securities                                                  |   | (1,743,796             | )          | — |   |
| Purchase of equipment and furniture                                                |   | (619,308               | )          | (669,213 | ) |
| Net cash and cash equivalents used in investing  activities                        |   | (2,363,104             | )          | (669,213 | ) |
|                                                                               |   |                   |       |   |   |
| Cash flows from financing activities:                                              |   |                   |       |   |   |
| Proceeds from issuance of common stock                                             |   | 110,483                |       | 70,619 |   |
| Net cash and cash equivalents provided by financing  activities                    |   | 110,483                |       | 70,619 |   |
|                                                                               |   |                   |       |   |   |
| Net increase/(decrease) in cash and cash equivalents                               |   | (7,880,932             | )          | (526,541 | ) |
| Cash and cash equivalents, beginning of period                                     |   | 106,525,864            |       | 139,777,330 |   |
| Cash and cash equivalents, end of period                                           |   | $                      | 98,644,932 |   | $ | 139,250,789 |   |
|                                                                               |   |                   |       |   |   |
| Supplemental disclosure of cash paid for:                                          |   |                   |       |   |   |
| Interest                                                                           |   | $                      | —     |   | $ | — |   |
| Income taxes                                                                       |   | $                      | —     |   | $ | — |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

4

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**NEOPHARM, INC.**

**(A Delaware Corporation)**

**NOTESTO FINANCIAL STATEMENTS**

**March 31, 2002**

 

**Note 1**  **Basis ofPresentation**

 

The financial informationherein is unaudited, other than the Balance Sheet at December 31, 2002, whichis derived from the audited financial statements.

 

The accompanying unauditedfinancial statements of NeoPharm, Inc. (the “Company”) have been prepared inaccordance with generally accepted accounting principles for interim financialinformation and with the instructions to Form 10-Q and Rule 10-01 of RegulationS-X other than the requirement that such unaudited financial statements bereviewed by independent public accountants. Accordingly, they do not containall of the information and footnotes required by generally accepted accountingprinciples for complete financial statements. In the opinion of the Company,the accompanying unaudited interim financial statements contain all adjustments(consisting of normal recurring adjustments) necessary to present fairly theCompany’s financial position as of March 31, 2002, the results of operationsfor the three months ended March 31, 2002 and 2001, and the changes in cashflows for the three month periods ended March 31, 2002 and 2001.

 

While the Companybelieves that the disclosures presented are adequate to make the information notmisleading, it is suggested that these financial statements be read inconjunction with the financial statements and notes included in the Company’s2001 Annual Report on Form 10-K filed with the Securities and ExchangeCommission.

 

**Note 2**  **IncomePer Share**

 

The following table setsforth the computation of the basic and diluted earnings per share fromcontinuing operations:

 
|                                                                                                   |   | **For the three months ended:** |       |
|--------------------------------------------------------------------------------------------------------|--------|---------------------------------|------------|
|                                                                                                   |   | **March 31 2002**               |       | **March 31 2001** |   |
| Numerator:                                                                                             |   |                            |       |   |   |
| Net income/(loss) from  continuing operations                                                          |   | $                               | (5,803,963 | ) | $ | (583,827 | ) |
|                                                                                                   |   |                            |       |   |   |
| Denominator:                                                                                           |   |                            |       |   |   |
| Denominator for basic  income per share-weighted average shares                                        |   | 16,249,132                      |       | 16,123,560 |   |
|                                                                                                   |   |                            |       |   |   |
| Effect of dilutive  securities:                                                                        |   |                            |       |   |   |
| Stock options                                                                                          |   | 782,552                         |       | 814,592 |   |
| Dilutive potential  common shares                                                                      |   | 782,552                         |       | 814,592 |   |
| Denominator for diluted  income/(loss) per share-weighted average shares and assumed  conversions |   | 17,031,684                      |       | 16,938,152 |   |
| Basic income/(loss) per  share                                                                         |   | $                               | (0.36      | ) | $ | (0.04 | ) |
| Diluted income/(loss)  per share                                                                       |   | $                               | (0.36      | ) | $ | (0.04 | ) |

 

5

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**Note 3**  **Transactionswith Related Parties**

 

             The following table provides further detail of therelated party expenses reflected in the statement of operations.  Management believes that the terms of therelated party transactions listed below were at fair market rates.

 
|                          |                                       |             |   | **For the three months ended:** |   |
|-------------------------------|--------------------------------------------|------------------|--------|---------------------------------|--------|
| **Related Party**             |                                       | **Expense Type** |   | **March 31 2002**               |   | **March 31 2001** |   |
| E.J. Financial Enterprises    |                                       | Consulting       |   | $                               | 31,250 |   | $ | 31,250 |   |
| E.J. Financial  Enterprises   |                                       | Direct Expenses  |   | 922                             |   | 1,323 |   |
|                          | Total general and  administrative expenses |             | 32,172 |                            | 32,573 |   |
| Total related party  expenses |                                       |             |   | $                               | 32,172 |   | $ | 32,573 |   |
|                               |                                            |                  |        |                                 |        |  |  |  |  |  |

 

In December 2001, following approval by the Company’s Board ofDirectors, the Company loaned $3,250,000 to Akorn, Inc., an independentpublicly traded company, to assist Akorn in the completion of itslyophilization manufacturing facility in Decatur, Illinois.  The note receivable issued to Akorn is duein December 2006, and accrues interest at a rate equal to that received on theCompany’s investments in marketable securities, which is lower than theinterest rate paid by Akorn on its other outstanding debt.  In exchange, the Company has entered into amanufacturing processing agreement that grants the Company access to at least15% of the annual lyophilization manufacturing capacity at Akorn at adiscounted price, upon completion of the facility.  The Company has recorded the note receivable net of a valuationallowance reflecting the difference between the actual loan amount and thepresent value of the loan using an estimated market interest rate of 10%.  The valuation allowance is being amortizedover the life of the loan.   During thefirst quarter of 2002, the Company included a total of $64,904 in interestincome from this transaction, which included $15,319 of accrued interest on thenote receivable and $49,585 of valuation allowance amortization.

 

**Note 4**  **Investments**

 

             The Company considers all highlyliquid investments purchased with an original maturity of three months or lessto be cash equivalents.  The carryingvalue of these investments approximate the fair market value.  Short-term investment in marketablesecurities includes liquid investments purchased with an original maturity ofbetween three months and one year while long-term investment in marketablesecurities includes liquid investments purchased with an original maturity ofgreater than one year but less than two years. As provided by SFAS No. 115, the Company has elected to treat all of itsinvestments in marketable securities as "available-for-sale", whichrequires these investments to be recorded at fair market value.  At December 31, 2001, the Company recordedits investments in marketable securities using cost plus accrued interest asthis approximated the fair market value of the securities held.  No investments were sold during the period.

 

**Item 2****- Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

 

             The following should be read in conjunction with thefinancial statements and related footnotes and Management’s Discussion andAnalysis of Results of Operations and Financial Conditions included in theCompany’s Annual Report on Form 10-K. The results discussed below are not necessarily indicative of theresults to be expected in any future periods. The following discussion contains forward-looking statements that aresubject to risks and uncertainties which could cause actual results to differfrom the statements made.

 

**Overview**

 

             We are a biopharmaceutical company engaged in theresearch, development and commercialization of drugs for the treatment ofvarious cancers. We currently have a portfolio of eight anti-cancer drugs, sixof which are in clinical trials. We have built our drug portfolio based on ourtwo novel proprietary technology platforms: the NeoLipidTM electrostaticliposome drug delivery platform and a tumor-targeting platform. Our corporatestrategy is to become a leader in the research, development andcommercialization of new and innovative anti-cancer treatments.

 

**Results of Operations — Three MonthsEnded March 31, 2002 vs. Three Months Ended March 31, 2001.**

 

             The Company recorded no revenue for the three monthsended March 31, 2002 or for the three months ended March 31, 2001.

 

             Research and development expense for the three-monthperiod ended March 31, 2002 was $5,073,608 compared to $1,583,397 for the sameperiod in 2001. During the first quarter of 2002, we continued to advanceseveral of our compounds in Phase I/II clinical trials towards Phase II/IIIclinical trials and we also continued to make progress on the pre-clinicalresearch being

 

6

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conducted to prepare forthe initiation of clinical trials for certain other compounds in development.  As a result, the overall increase inresearch and development costs was the result of increased research expenses ofapproximately $1,770,000 related to the clinical and pre-clinical developmentof our products, increased payroll and consulting expense of approximately$1,353,000 related to increases in our R&D staff, and an increase ofapproximately $367,000 in expenses incurred for the operation of the researchand development facility the Company opened in Waukegan, Illinois during February2001.

 

             General and administrative expenses for the three-monthperiod ended March 31, 2002 were $1,323,824 compared to $977,043 for the sameperiod in 2001. The overall increase in general and administrative expenses wasthe result of an increase of approximately $251,000 for payroll and consultingexpenses related to increases in our administrative staff, an increase inmiscellaneous general office expenses of approximately $53,000, and increasedrent expense of approximately $43,000 from a recent expansion of the Company’sheadquarters in Lake Forest, Illinois.

 

             The Company generated interest income on excess cashbalances of $593,469 and $1,968,564 for the three-month periods ended March 31,2002 and March 31, 2001, respectively. The decrease in interest income for the first quarter of 2002 wasprimarily due to the dramatic decrease in short-term interest rates earned onthe Company’s investment portfolio between the fourth quarter of 2000 and thefirst quarter of 2002.

 

             Net loss for the three months ended March 31, 2002 was$5,803,963 compared to net loss of $583,827 for the three-month period endedMarch 31, 2001. Net loss per share for the three-month period ended March 31,2002 was $0.36 basic and diluted, compared to net loss of $0.04 basic and dilutedfor the three months ended March 31, 2001.

** **

**Liquidity And Capital Resources**

 

             At March 31, 2002, we had $98,644,932 in cash and cashequivalents and net working capital of $114,719,489. We believe that our cashand equivalents should be adequate to fund our immediate needs. However, we canoffer no assurances that additional funding will not be required in theforeseeable future. All excess cash has been invested in short-term investmentsand marketable securities which mature in less than two years.

 

             Our assets at March 31, 2002 were $124,186,727 comparedto $129,195,075 at December 31, 2001. Our liabilities at March 31, 2002increased to approximately $2,537,000 from approximately $1,852,000 at December31, 2001. This increase was attributable to an increase in accrued compensationof approximately $402,000 relating to accrued vacation time and sick leave asof March 31, 2002 and potential bonuses payable at the end of the year, anincrease in accrued clinical trial expenses of approximately $198,000 incurredin conducting our Phase I/II clinical trials, an increase in trade payables ofapproximately $181,000, and a decrease in other accrued expenses ofapproximately $96,000.

 

             We may seek to satisfy our future funding requirementsthrough public or private offerings of securities, with collaborative or otherarrangements with corporate partners or from other sources. Additionalfinancing may not be available when needed or on terms acceptable to us. Ifadequate financing is not available, we may be required to delay, scale back oreliminate certain of our research and development programs, relinquish rightsto certain of our technologies, cancer drugs or products, or license thirdparties to commercialize products or technologies that we would otherwise seekto develop ourselves.

** **

**Forward Looking Statements**

 

             Any statements made by NeoPharm, Inc. (“we”, “us”,“our”, or the “Company”) in this quarterly report that are forward looking aremade pursuant to the safe harbor provisions of the Private SecuritiesLitigation Reform Act of 1995.  TheCompany cautions readers that important factors may affect the Company’s actualresults and could cause such results to differ materially from forward-lookingstatements made by or on behalf of the Company.  Such factors include, but are not limited to, changing marketconditions, the impact of competitive products and pricing, the timelydevelopment, approval by the Food and Drug Administration (“FDA”) and foreignhealth authorities, and market acceptance of the Company’s products indevelopment, the Company’s ability to further raise capital, the Company’sdependence on key personnel, and other factors referenced under “Risk Factors”in the Company’s Annual Report on Form 10-K for the fiscal year ended December31, 2001.

 

7

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**Item 3****— Quantitative andQualitative Disclosures About Market Risk**

 

             Not applicable.

 

8

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**PART II - OTHER INFORMATION**

 

Item 1.                    LegalProceedings

 

On April 19, 2002, the Company filed a Demand forArbitration with the American Arbitration Association in accordance with theterms of its License Agreement dated February 19, 1999 (the “LicenseAgreement”) with Pharmacia Corporation (“Pharmacia”), for the purpose ofresolving a dispute with Pharmacia concerning delays in the developmentprograms for LEP (Liposome Encapsulated Paclitaxal) and LED (LiposomeEncapsulated Doxorubicin) which are being conducted by Pharmacia.  The Company contends that Pharmacia failedin its duty under the License Agreement to use reasonable efforts to developLEP and LED and that such failure constitutes a breach of the LicenseAgreement.  The Company further contendsthat Pharmacia breached its duty to consult with NeoPharm on the progress ofthe drug development program and thereby impaired NeoPharm’s ability to monitorthe development of these compounds.  TheCompany is seeking all damages to which it is entitled, which include, but arenot limited to, loss of co-promotion and royalty revenues that would have beenreceived if LEP and LED had not been delayed, and milestone payments that wouldhave been received if the programs had been properly conducted byPharmacia.  NeoPharm believes that thesedamages are substantial.  NeoPharm isnot currently seeking a termination of the License Agreement as part of thearbitration.  Pharmacia has indicatedinformally that it will assert counterclaims to the Company’s Demand.

 

The Company has also been named in several putativeclass action lawsuits (the “Class Action Suits”) each of which alleges variousviolations of the federal securities laws in connection with the Company’spublic statements during the period from September 25, 2000 through April 19,2002 as they relate to the Company’s LEP drug. Also named as individual defendants in each of the lawsuits are John N.Kapoor, Chairman of the Company, and James M. Hussey, the Company’s Presidentand CEO, and Dr. Aquilur Rahman, a former director and executive officer of theCompany.  The first of these ClassAction Suits was filed on April 26, 2002 and all of the Class Action Suits havebeen filed in the United States District Court for the Northern District ofIllinois, Eastern Division.  While theCompany has not yet filed answers to the Class Action Suits, it is theCompany’s intention to vigorously defend each and every claim contained inthese Class Action Suits.

 

Item 2.                    Changes in Securities and Use ofProceeds

                                None

 

Item 3.                    Defaults Upon Senior Securities

                                None

 

Item 4.                    Submission of Matters to a Vote ofSecurity-Holders

                                None

 

Item 5.                    OtherInformation

                                None

 

Item 6.                    Exhibits and Reports on Form 8-K

                                No reports on Form 8-K were filedduring the quarter ended March 31, 2002.

 

9

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**SIGNATURE PAGE**

** **

**Pursuant to the requirements of theSecurities Exchange Act of 1934, the Registrant has duly caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized.**

 
|               |   | NEOPHARM, INC. |
|--------------------|--------|----------------|
| Date: May 15, 2002 |   | By:            |   | /s/  Lawrence A. Kenyon |
|               |   |           |   | Lawrence A. Kenyon, |
|               |   |           |   | *Chief Financial Officer* |
|               |   |           |   | *(Principal Accounting Officer and* |
|               |   |           |   | *Principal Financial Officer)* |

 

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