<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
/ / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transaction period from __________ to __________
Commission file number 0-26758
ALKERMES CLINICAL PARTNERS, L.P.
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 043-145043
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
64 Sidney Street, Cambridge, MA 02139-4136
------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (617) 494-0171
------------------------------
Not Applicable
- --------------------------------------------------------------------------------
Former name, former address, and former fiscal year, if changed since last
report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
<PAGE> 2
ALKERMES CLINICAL PARTNERS, L.P.
INDEX
-----
Page No.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets 3
-September 30, 1996 and December 31, 1995
Statements of Operations 4
-Three months ended September 30, 1996 and 1995
-Nine months ended September 30, 1996 and 1995
Statements of Cash Flows 5
-Nine months ended September 30, 1996 and 1995
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits, Financial Statement Schedules and 9
Reports on Form 8-K
SIGNATURES 10
EXHIBIT INDEX 11
(2)
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS:
ALKERMES CLINICAL PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
<TABLE>
BALANCE SHEETS
(Unaudited)
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
A S S E T S
<S> <C> <C>
Current Assets:
Cash and cash equivalents $40,518 $2,365,478
Prepaid expenses to Alkermes, Inc. -- 500,000
Interest receivable -- 1,375
------- ----------
Total current assets 40,518 2,866,853
Other Assets:
Organization costs, less amortization of $221,112 and $205,726 -- 15,386
------- ----------
Total Assets $40,518 $2,882,239
======= ==========
L I A B I L I T I E S A N D P A R T N E R S' C A P I T A L
Current Liabilities:
Accrued expenses $14,998 $ 26,464
------- ----------
Total current liabilities 14,998 26,464
------- ----------
Partners' capital 25,520 2,859,147
Less: Notes receivable from limited partners -- (3,372)
------- ----------
25,520 2,855,775
------- ----------
Total Liabilities and Partners' Capital $40,518 $2,882,239
======= ==========
</TABLE>
See notes to financial statements.
(3)
<PAGE> 4
ALKERMES CLINICAL PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
<TABLE>
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Interest income $ 329 $ 90,832 $ 11,287 $ 236,564
------- ----------- ----------- -----------
Expenses:
Research and development -- 2,698,000 4,850,000 8,284,000
General and administrative 8,136 41,369 49,815 102,153
Interest expense -- -- -- 98,666
------- ----------- ----------- -----------
8,136 2,739,369 4,899,815 8,484,819
------- ----------- ----------- -----------
Net loss $(7,807) $(2,648,537) $(4,888,528) $(8,248,255)
======= =========== =========== ===========
Net Loss Per Class A and B
Limited Partnership Interest $ (8) $ (2,847) $ (5,255) $ (8,866)
======= =========== =========== ===========
Average Limited Partnership
Interests Outstanding 921 921 921 921
======= =========== =========== ===========
</TABLE>
See notes to financial statements.
(4)
<PAGE> 5
ALKERMES CLINICAL PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
<TABLE>
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(4,888,528) $(8,248,255)
Adjustment to reconcile net loss to net cash used for
operating activities:
Amortization 15,386 41,459
Changes in assets and liabilities:
Prepaid expenses to Alkermes, Inc. 500,000 1,884,000
Interest receivable 1,375 24,320
Accrued expenses (11,466) 26,423
Accrued interest payable -- (256,459)
----------- -----------
Net cash used by operating activities (4,383,233) (6,528,512)
----------- -----------
Cash flows from investing activities:
Purchases of short-term investments -- (2,698,191)
----------- -----------
Cash flows from financing activities:
Payment of note payable to Alkermes, Inc. -- (4,735,000)
Partners' cash capital contributions 2,058,273 10,755,238
----------- -----------
Net cash provided by financing activities 2,058,273 6,020,238
----------- -----------
Net decrease in cash and cash equivalents (2,324,960) (3,206,465)
Cash and cash equivalents, beginning of period 2,365,478 3,308,800
----------- -----------
Cash and cash equivalents, end of period $ 40,518 $ 102,335
=========== ===========
Noncash Supplemental Disclosure -
Write-off of notes receivable from limited partners $ -- $ 184,788
=========== ===========
</TABLE>
See notes to financial statements.
(5)
<PAGE> 6
ALKERMES CLINICAL PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. BASIS OF PRESENTATION
--------------------
The financial statements for Alkermes Clinical Partners, L.P. (the
"Partnership") for the three and nine month periods ended September 30, 1996 and
1995, are unaudited and include all adjustments which, in the opinion of
management, are necessary to present fairly the results of operations for the
periods then ended. All such adjustments are of a normal recurring nature. These
financial statements should be read in conjunction with the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1995, which includes
financial statements and notes thereto for the years ended December 31, 1995,
1994 and 1993.
The results of the Partnership's operations for any interim period are not
necessarily indicative of the results of the Partnership's operations for any
other interim period or for a full year.
2. PRODUCT DEVELOPMENT AGREEMENT
-----------------------------
Alkermes, Inc. has been issued U.S. Patent No. 5,506,206 in April 1996. The
patent covers the specific chemical composition of RMP-7[Trademark] and the
rights to the patent have been licensed to the Partnership pursuant to a
product development agreement.
3. ACCRUED EXPENSES
----------------
Included in accrued expenses at September 30, 1996 are amounts totaling
approximately $3,500 which are due to Alkermes, Inc.
(6)
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
Alkermes Clinical Partners, L.P. (the "Partnership") was formed on February 7,
1992, and is managed by Alkermes Development Corporation, II (the "General
Partner"), a wholly owned subsidiary of Alkermes, Inc. ("Alkermes"). The
Partnership was organized to fund the further development and clinical testing
of a family of molecules, designated by Alkermes as Receptor-Mediated
Permeabilizers[Trademark] ("RMPs[Trademark]"), for human pharmaceutical use in
the United States and Canada.
RESULTS OF OPERATIONS
Revenues
The Partnership's sole source of revenue for the three and nine months ended
September 30, 1996 and 1995 was the interest earned on the investments made with
the capital contributions received from the General Partner and the limited
partners of the Partnership (the "Limited Partners") prior to their disbursement
to Alkermes for research and development as well as other Partnership expenses.
Interest income for the three and nine months ended September 30, 1996 was $329
and $11,287 compared to $90,832 and $236,564 for the corresponding periods of
the prior year. Interest income for the three and nine months ended September
30, 1996 as compared to 1995 decreased as a result of the decrease in cash and
cash equivalents and short-term investments. The decrease in the cash and cash
equivalents and short-term investments of the Partnership are a result of the
substantial completion of the annual capital contributions by the Limited
Partners and the General Partner in 1995 and the completion of the development
funding to Alkermes during the quarter ended June 30, 1996.
Expenses
Research and development expenses for the three and nine months ended September
30, 1996 were zero and $4,850,000 as compared to $2,698,000 and $8,284,000 for
the three and nine months ended September 30, 1995. The decrease in research and
development expenses was a result of the completion of the development funding
to Alkermes pursuant to the product development agreement between Alkermes and
the Partnership (the "Product Development Agreement").
General and administrative expenses for the three and nine months ended
September 30, 1996 were $8,136 and $49,815 as compared to $41,369 and $102,153
for the three and nine months ended September 30, 1995. The decrease was mainly
a result of a decrease in amortization of organization costs and legal fees.
There was no interest expense for the three and nine months ended September 30,
1996 as compared to zero and $98,666 for the three and nine months ended
September 30, 1995. The decrease was a result of the repayment in April 1995 of
the $4,735,000 note payable to Alkermes.
(7)
<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Partnership had current assets totaling $40,518,
consisting solely of cash; and current liabilities of $14,998.
The Partnership's primary source of funding and capital resources has been the
annual capital contributions by the Limited Partners and the General Partner.
The Limited Partners' capital contributions have been remitted to the
Partnership in four annual installment payments, the fourth and final payment of
which was due on April 15, 1995. During the six months ended June 30, 1996, the
Partnership received approximately $2,058,000 in cash as a result of the
purchase by Alkermes of previously defaulted Class A limited partnership units.
There will be no additional capital contributions received by the Partnership
after the quarter ended June 30, 1996.
The Partnership has used its capital resources primarily to fund the further
development and clinical testing of RMPs. Such development is being conducted
for the Partnership by Alkermes pursuant to the Product Development Agreement.
During the six months ended June 30, 1996, the Partnership completed its
development funding to Alkermes and incurred expenses totaling $4,850,000 for
reimbursable costs incurred by Alkermes. Alkermes anticipates that its clinical
testing of RMPs will continue beyond such date. Since none of the Partners of
the Partnership are obligated to make any further capital contributions to the
Partnership, Alkermes intends to fund the further development of RMPs.
The Partnership's remaining cash and equivalents will be used to pay for
administrative services for the Partnership. Alkermes is obligated, through the
General Partner, to perform administrative services for the Partnership, such as
preparing financial statements, tax returns and reports to the Limited Partners.
Alkermes intends to continue to cause the General Partner to perform such
services at its expense after the Partnership's current assets are depleted,
unless it exercises its Purchase Option and thereby acquires all limited
partnership interests in the Partnership. The activities performed by Alkermes
and the General Partner constitute all of the activities undertaken by or on
behalf of the Partnership.
After September 30, 1996, the Partnership is expected to have no material
assets, liabilities or partners' capital and will have no future liquidity or
capital resources requirements other than those funded by Alkermes.
(8)
<PAGE> 9
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits:
Number Exhibit
------ -------
3.1 Alkermes Clinical Partners, L.P. Agreement of
Limited Partnership, dated as of February 7,
1992.*
3.1(a) Amendment No. 1 to Alkermes Clinical Partners,
L.P. Agreement of Limited Partnership, dated as
of September 29, 1992.*
3.1(b) Amendment No. 2 to Alkermes Clinical Partners,
L.P. Agreement of Limited Partnership, dated as
of March 30, 1993.*
4.1 Alkermes Clinical Partners, L.P. Agreement of
Limited Partnership, dated as of February 7,
1992.*
4.1(a) Amendment No. 1 to Alkermes Clinical Partners,
L.P. Agreement of Limited Partnership, dated as
of September 29, 1992.*
4.1(b) Amendment No. 2 to Alkermes Clinical Partners,
L.P. Agreement of Limited Partnership, dated as
of March 30, 1993.*
10.1 Product Development Agreement, dated as of
March 6, 1992, between the Partnership and
Alkermes.*
10.2 Purchase Agreement, dated as of March 6, 1992,
by and among Alkermes and each of the Limited
Partners, from time to time, of the
Partnership.*
11 Statement Regarding Computation of Per Share
Loss.
27 Financial Data Schedule.
*Incorporated by reference to Exhibits to the Registrant's Registration
Statement on Form 10 filed September 13, 1995.
(b) The Registrant has not filed any reports on Form 8-K during the
quarter ended September 30, 1996.
(9)
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALKERMES CLINICAL PARTNERS, L.P.
(Registrant)
By its General Partner
ALKERMES DEVELOPMENT CORPORATION II
Date: November 6, 1996 By: /s/ Richard F. Pops
------------------------------------------
Richard F. Pops
Director, President and Chief Executive
Officer (Principal Executive Officer)
Date: November 6, 1996 By: /s/ Michael J. Landine
------------------------------------------
Michael J. Landine
Director, Vice President, Chief
Financial Officer, Treasurer and
Assistant Secretary (Principal
Financial and Accounting Officer)
(10)
<PAGE> 11
EXHIBIT INDEX
-------------
Exhibit
Number Description
------- -----------
3.1 Alkermes Clinical Partners, L.P. Agreement of
Limited Partnership, dated as of February 7,
1992.*
3.1(a) Amendment No. 1 to Alkermes Clinical Partners,
L.P. Agreement of Limited Partnership, dated as
of September 29, 1992.*
3.1(b) Amendment No. 2 to Alkermes Clinical Partners,
L.P. Agreement of Limited Partnership, dated as
of March 30, 1993.*
4.1 Alkermes Clinical Partners, L.P. Agreement of
Limited Partnership, dated as of February 7,
1992.*
4.1(a) Amendment No. 1 to Alkermes Clinical Partners,
L.P. Agreement of Limited Partnership, dated as
of September 29, 1992.*
4.1(b) Amendment No. 2 to Alkermes Clinical Partners,
L.P. Agreement of Limited Partnership, dated as
of March 30, 1993.*
10.1 Product Development Agreement, dated as of
March 6, 1992, between the Partnership and
Alkermes.*
10.2 Purchase Agreement, dated as of March 6, 1992,
by and among Alkermes and each of the Limited
Partners, from time to time, of the
Partnership.*
11 Statement Regarding Computation of Per Share
Loss.
27 Financial Data Schedule.
*Incorporated by reference to Exhibits to the Registrant's Registration
Statement on Form 10 filed September 13, 1995.
(11)
<PAGE> 1
EXHIBIT 11
<TABLE>
STATEMENT REGARDING COMPUTATION OF NET LOSS PER PARTNERSHIP INTEREST
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, 1996 September 30, 1995 September 30, 1996 September 30, 1995
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net loss-Limited Partners $(7,729) $(2,622,052) $(4,839,643) $(8,165,772)
======= =========== =========== ===========
Average Class A and B limited partnership
interests outstanding 921 921 921 921
======= =========== =========== ===========
Net loss per Class A and B limited partnership
interest $ (8) $ (2,847) $ (5,255) $ (8,866)
======= =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10-Q FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 41
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 41
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 41
<CURRENT-LIABILITIES> 15
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 26
<TOTAL-LIABILITY-AND-EQUITY> 41
<SALES> 0
<TOTAL-REVENUES> 11
<CGS> 0
<TOTAL-COSTS> 4,850
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,889)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,889)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,889)
<EPS-PRIMARY> (5,255)
<EPS-DILUTED> (5,255)
</TABLE>
