<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 0-26872
GELTEX PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3136767
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
NINE FOURTH AVENUE
WALTHAM, MASSACHUSETTS 02451
(Address of principal executive offices) (Zip Code)
781-290-5888
(Registrant's telephone number, including area code)
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
--- ---
The number of shares outstanding of each of the issuer's classes of common stock
as of the latest practicable date:
CLASS OUTSTANDING AT MARCH 31, 1999
----- -----------------------------
Common Stock, $.01 par value 16,844,708
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GELTEX PHARMACEUTICALS, INC.
TABLE OF CONTENTS
<TABLE>
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PAGE NO.
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PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
Condensed Balance Sheets as of March 31, 1999 and December 31, 1998................................ 3
Condensed Statements of Operations for the three months ended March 31, 1999 and 1998.............. 4
Condensed Statements of Comprehensive Loss for the three months ended March 31, 1999 and
1998............................................................................................... 5
Condensed Statements of Cash Flows for the three months ended March 31, 1999 and 1998.............. 6
Notes to Condensed Financial Statements............................................................ 7
ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations............. 7
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk......................................... 9
PART II OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K................................................................... 10
SIGNATURES.......................................................................................................... 11
EXHIBIT INDEX....................................................................................................... 12
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GELTEX PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ..................................... $ 23,079,762 $ 30,874,900
Marketable securities ......................................... 70,236,794 74,077,436
Prepaid expenses and other current assets ..................... 2,383,997 2,708,487
Due from affiliates ........................................... 10,219,850 10,251,100
Due from Joint Venture ........................................ 1,210,687 1,128,124
Inventory ..................................................... 776,954 --
------------- -------------
Total current assets ............................................... 107,908,044 119,040,047
Long-term receivables, affiliates .................................. 470,000 470,000
Long-term receivables .............................................. 32,755 32,725
Property and equipment, net ........................................ 7,947,516 7,899,470
Intangible assets, net ............................................. 889,020 818,963
Investment in Joint Venture ........................................ 6,741,028 5,183,580
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$ 123,988,363 $ 133,444,785
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued expenses ......................... 5,185,413 4,848,728
Due to Joint Venture .......................................... -- 1,349,400
Current portion of long-term obligations ...................... 1,266,344 2,020,614
------------- -------------
Total current liabilities .......................................... 6,451,757 8,218,742
Long-term obligations, less current portion ........................ 5,206,180 5,206,180
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000
Shares authorized, none issued or outstanding ............. -- --
Common Stock, $.01 par value, 50,000,000 shares authorized;
16,844,708 and 16,792,444 shares issued and outstanding
at March 31, 1999 and December 31, 1998, respectively ......... 168,447 167,924
Additional paid-in capital .................................... 186,923,736 186,762,715
Deferred compensation ......................................... (624,080) (663,722)
Unrealized gain on available-for-sale securities .............. 110,824 264,388
Accumulated deficit ........................................... (74,248,501) (66,511,442)
------------- -------------
Total stockholders' equity ......................................... 112,330,426 120,019,863
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$ 123,988,363 $ 133,444,785
============= =============
</TABLE>
The accompanying notes are an integral part
of the financial statements.
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GELTEX PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-------------------------------
1999 1998
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<S> <C> <C>
Revenue:
Collaborative Joint Venture project reimbursement .............. $ 1,882,914 $ 1,538,650
Contract Revenue ............................................... 1,751,669 --
------------ ------------
Total revenue ..................................................... 3,634,583 1,538,650
Costs and expenses:
Research and development ....................................... 6,852,041 7,400,499
Collaborative Joint Venture project costs ...................... 1,882,914 1,538,650
------------ ------------
Total research and development .............................. 8,734,955 8,939,149
General and administrative ..................................... 1,514,126 1,167,692
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Total costs and expenses .......................................... 10,249,081 10,106,841
------------ ------------
Loss from operations .............................................. (6,614,498) (8,568,191)
Interest income, net .............................................. 1,148,100 567,407
Equity in net loss of Joint Venture ............................... (2,270,662) (895,672)
------------ ------------
Net loss .......................................................... $ (7,737,060) $ (8,896,456)
============ ============
Basic and diluted net loss per share .............................. $ (0.46) $ (.63)
============ ============
Shares used in computing basic and diluted net loss per share ..... 16,835,000 14,099,000
</TABLE>
The accompanying notes are an integral part
of the financial statements.
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GELTEX PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------------------
1999 1998
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<S> <C> <C>
Net loss ........................................................... $(7,737,060) $(8,896,456)
Other Comprehensive Income (Loss):
Unrealized gain (loss) on securities held during the period .... (153,564) 19,571
----------- -----------
Comprehensive loss ................................................. $(7,890,624) $(8,876,885)
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
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GELTEX PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------------------
1999 1998
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OPERATING ACTIVITIES
Net loss ........................................................... $(7,737,060) $(8,896,456)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ................................... 491,070 504,200
Equity in net loss of Joint Venture ............................. 2,283,952 895,672
Compensation from issuance of stock options ..................... 164,367 239,771
Due from affiliates ............................................. 31,250 --
Changes in operating assets and liabilities:
Prepaid expenses and other current assets ................... 324,490 (655,528)
Due from Joint Venture ...................................... (82,563) 1,310,167
Long-term receivables ....................................... (30) 1,020
Accounts payable and accrued expenses ....................... 336,685 (2,162,140)
Amount due to Joint Venture ................................. (1,349,400) --
Inventory ................................................... (776,954) --
----------- -----------
Net cash used in operating activities .............................. (6,314,193) (8,763,294)
INVESTING ACTIVITIES
Purchase of marketable securities .................................. (12,430,118) (56,255,844)
Proceeds from sale and maturities of marketable securities ......... 16,098,566 17,123,835
Investment in Joint Venture ........................................ (3,841,400) (1,806,776)
Purchase of intangible assets ...................................... (147,056) (167,110)
Purchase of property and equipment, net ............................ (462,116) (395,432)
----------- -----------
Net cash used in investing activities .............................. (782,124) (41,501,327)
FINANCING ACTIVITIES
Sale of Common Stock and warrants, net of issuance costs ........... 55,449 77,459,470
Payments on notes payable .......................................... (754,270) (343,664)
----------- -----------
Net cash provided by financing activities .......................... (698,821) 77,115,806
----------- -----------
Increase (decrease) in cash and cash equivalents ................... (7,795,138) 26,851,185
Cash and cash equivalents at beginning of period ................... 30,874,900 26,689,190
----------- -----------
Cash and cash equivalents at end of period ......................... $23,079,762 $53,540,375
=========== ===========
Interest paid ...................................................... $ 134,404 $ 147,350
</TABLE>
The accompanying notes are an integral part
of the financial statements.
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GELTEX PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements for the three
months ended March 31, 1999 and 1998 have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, the accompanying condensed financial statements
include all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of the financial condition, results of operations and
cash flows for the periods presented. The results of operations for the interim
period ended March 31, 1999 are not necessarily indicative of the results to be
expected for the year ended December 31, 1999.
These financial statements should be read in conjunction with the
audited financial statements and notes thereto for the fiscal year ended
December 31, 1998 included in the Company's Annual Report on Form 10-K (File
Number 0-26872) as filed with the Securities and Exchange Commission.
2. RECLASSIFICATION
Certain amounts from the prior year have been reclassified to conform to
the current year presentation.
3. JOINT VENTURE AGREEMENT
In June 1997, the Company entered into a joint venture with Genzyme
Corporation for the final development and commercialization of Renagel(R)
Capsules (the "Joint Venture"). The Company accounts for its investment in
the Joint Venture using the equity method.
Summarized financial information regarding the Joint Venture for the
three months ended March 31, 1999 is as follows:
Net sales................................................ $ 3,545,965
Cost of products sold.................................... 1,515,440
Loss from operations..................................... (5,737,412)
Net loss................................................. (4,541,324)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
The Company earned revenues of $3.6 million during the three months ended
March 31, 1999 compared with $1.5 million earned during the three months ended
March 31, 1998. Under the terms of the Collaboration Agreement the Company has
entered into with Genzyme Corporation for the commercialization of Renagel(R)
(the "Joint Venture"), the Company and Genzyme Corporation are each expected to
fund the Joint Venture in an amount equal to 50% of the budgeted costs and
expenses of the project for the relevant period. Each party that incurs project
expenses, either as internal operating costs or as third party obligations, will
be reimbursed by the Joint Venture for 100% of the costs incurred. In the period
ended March 31, 1999, $1.9 million of the total revenue earned by the Company
represents reimbursement from the Joint Venture for certain Renagel(R)
development costs incurred by the
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<PAGE> 8
Company. In the period ended March 31, 1998, all $1.5 million in revenue earned
by the Company represents reimbursement from the Joint Venture for certain
Renagel development costs incurred by the Company. The amount of reimbursement
revenue earned by the Company will vary according to the obligations of, and
related expenses incurred by the Company, and is expected to decrease in the
future as the Company completes the development activities for the Joint
Venture. The remaining $1.7 million in revenue earned in the three months ended
March 31, 1999, represents non-recurring reimbursement by the Company's Japanese
partner for certain Renagel process development and manufacturing costs incurred
by the Company.
The Company's total operating expenses for the three months ended March 31,
1999 were $10.2 million, as compared to $10.1 million during the three months
ended March 31, 1998. Research and development expenses decreased to $8.7
million for the three months ended March 31, 1999 from $8.9 million for the
three months ended March 31, 1998 due primarily to decreased manufacturing costs
associated with the development of Renagel(R). General and administrative
expenses increased to $1.5 million for the three months ended March 31, 1999
from $1.2 million for the three months ended March 31, 1998 due primarily to
increased administrative costs, including personnel and business development
expenses.
The Company's equity in the loss of the Joint Venture with Genzyme
Corporation was $2.3 million for the three months ended March 31, 1999, as
compared to $0.9 million for the three months ended March 31, 1998. These
amounts represent the Company's portion of the Joint Venture's loss for the
relevant period, and reflect the increase costs associated with the commercial
launch of Renagel.
Net interest income increased to $1.1 million for the three months ended
March 31, 1999 from $0.6 million for the three months ended March 31, 1998, due
primarily to increases in cash balances available for investment due to the
Company's public offering of common stock in March 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, the Company had $93 million in cash, cash equivalents
and marketable securities as compared to $105 million at December 31, 1998. The
Company believes that its existing cash balances and marketable securities will
be sufficient to fund its operations through at least 2001.
On October 21, 1998, the Company entered into a synthetic lease transaction
under which the lessor has committed to fund up to an aggregate of $25.0 million
for the purchase of a new building to serve as the Company's new headquarters
and for the costs associated with the build-out of this facility. The synthetic
lease is asset-based financing structured to be treated as an operating lease
for accounting purposes. The Company will serve as construction agent for the
lessor. At March 31, 1999, the lessor's total accumulated cost for the land and
the partial build-out of the facility was approximately $12.5 million. Under the
terms of the synthetic lease, the Company is required to comply with certain
financial covenants which, among other things, require the maintenance of
minimum levels of cash, tangible net worth, liquidity and debt service coverage
and prohibits the payment of dividends. The Company was in compliance with these
terms at March 31, 1999.
YEAR 2000
The Year 2000 problem is a result of software programs being written using
two digits rather than four to define the applicable year. The Company
recognizes the risk that its information technology ("IT") systems and other
systems such as telephones, building access control systems and heating and
ventilation equipment ("embedded systems") may have date-sensitive software or
embedded chips that may recognize a date using "00" as the year 1900 rather than
the year 2000. This error could result in system failure or miscalculations
causing disruptions to the Company's research and development, financial,
administration and communication operations. The Company also has business
relationships with third parties that are themselves reliant on IT and embedded
systems to conduct their businesses. The Company recognizes the need to ensure
its operations will not be adversely impacted by Year 2000 software and hardware
failure both internally and from third parties with which the Company has an
important relationship.
In 1998, the Company developed a plan to ensure that its systems would be
Year 2000 compliant. The plan consists of four phases: (1)
assessment--identifying all IT systems that use date functions and assessing
Year 2000 functionality and compliance, (2) remediation--reprogramming or
replacing inventoried items to ensure Year 2000 compliance, (3) testing--testing
the code modifications or new inventory with other associated systems, including
date testing and quality assurance to ensure successful operation in the
post-1999 environment, and (4) implementation--returning all remediated and
successfully tested items back into normal operation. This plan encompasses IT
and embedded systems, as well as third party exposure.
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<PAGE> 9
The Company's State of Readiness
As of December 31, 1998, the Company had completed all four phases of the
plan for its IT systems and has concluded that its IT systems are Year 2000
compliant. The assessment phase for the embedded systems is complete. The
assessment indicated that certain systems are not Year 2000 compliant. The
Company will complete the remaining three phases of testing for these
non-compliant systems by December 1999. The cost of remediating these
non-compliant systems will be approximately $100,000 and will be funded from
available cash.
Third Parties and Their Exposure to Year 2000
The Company has continued formal communications with all significant third
parties, primarily, clinical trial sites, contract research organizations and
contract manufacturers. The Company has requested and has received from a
majority of these third parties, written statements regarding their knowledge of
and plans for being Year 2000 compliant. The Company has one direct system
interface with a third party and has received verification that the system
interface is Year 2000 compliant.
Contingency Plans
The Company has not yet developed a comprehensive contingency plan to
address situations that may result if the Company or any of the third parties
upon which the Company is dependent are unable to achieve Year 2000 readiness.
However, the Company's Year 2000 compliance program is ongoing and its scope,
including the development of contingency plans for the most reasonably likely
worst case scenario, will continue to be evaluated.
Risks
The Company's management believes it has an effective plan in place to
mitigate the risks of the Year 2000 issue in a timely manner. However, as noted
above, the Company has not yet completed all necessary phases of its Year 2000
plan. In the event that the Company is not able to complete the necessary
phases, the Company could experience business interruptions. In addition, the
inability of a third party upon which the Company is dependent to complete its
Year 2000 compliance program in a timely manner, as well as disruptions in the
general economy resulting from the Year 2000 issue could have a material adverse
impact on the Company's results of operations, liquidity or financial position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks were reported in the Notes to the Financial Statements for the
Company's Annual Report on Form 10-K for the year ended December 31, 1998. There
have been no material changes in these risks since the end of the year.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
See the Exhibit Index on page 12 hereto.
(b) Reports on Form 8-K.
None.
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GELTEX PHARMACEUTICALS, INC.
FORM 10-Q
MARCH 31, 1999
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
GELTEX PHARMACEUTICALS, INC.
DATE: May 13, 1999 BY: /s/ Paul J. Mellett, Jr.
------------ ------------------------
Paul J. Mellett, Jr.
Duly Authorized Officer and
Principal Financial Officer
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
10.1(#) Letter Agreement between the Company and Dr. Douglas Reed
entered into as of September 4, 1998
10.2(#) Promissory Note in favor of the Company executed by Dr.
Douglas Reed on December 1, 1998
10.3(#) Promissory Note in favor of the Company executed by Dr.
Douglas Reed on December 31, 1998
10.4(#) Promissory Note in favor of the Company executed by Dr.
Douglas Reed and Linda Reed on December 31, 1998
27.1 Financial Data Schedule
----------------------
#Identifies a management contract or compensatory plan or arrangement
in which an executive officer or director of the Company participates.
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EXHIBIT 10.1
September 4, 1998
Douglas Reed, M.D.
3021 E. Thackeray Place
Salt Lake City, UT 84108
Dear Dr. Reed:
It is my pleasure to extend to you an offer of employment with GelTex
Pharmaceuticals, Inc. We would like you to join us in October 1998, as Vice
President, Business Development. Your bi-weekly rate of pay will be $7,403.85,
which is the equivalent of an annual rate of $192,500, based on a 40-hour
workweek. After you have been employed for one year, and annually thereafter,
you will be eligible for a performance and salary review on or near your
anniversary date. GelTex will pay you a $10,000 sign on bonus upon commencement.
GelTex will provide you with a loan in the principal amount of $100,000. This
loan will be interest free assuming the equity you have in your current home is
greater than $100,000. The amount of the loan will be forgiven on the fourth
anniversary of the commencement of your employment with GelTex, provided that
you continue to be a full-time employee of GelTex on such date. Should your
employment with GelTex terminate prior to the fourth anniversary of the
commencement of your employment, the principal and interest will immediately
become due and payable.
You will be eligible for a bonus opportunity equal to 25% or more of your base
salary on an annual basis subject to the approval of the Board of Directors of
GelTex. In the event that GelTex terminates your employment without cause, you
will be eligible to receive six months of severance pay, which will be equal to
six months of your base salary.
In addition, we will grant you an option to purchase 50,000 shares of GelTex
common stock at the closing price on the day your employment begins. The option
grant will be an Incentive Stock Option to the maximum extent permitted by law.
This option vests over a four-year period at the rate of 1/48 per month of
service from the date of the option grant. GelTex believes that ownership of
common stock is the best way to significantly motivate and reward long term
contributions to the company.
<PAGE> 2
Dr. Reed
Page 2
GelTex will pay the usual and customary closing costs of your existing home in
Salt Lake City, UT and on a new home in the Boston area. These costs will be
grossed up to cover the federal and state income tax obligations at statutory
rates. GelTex will also pay the costs associated with moving your household
goods to this area and up to six months temporary living expenses.
In addition, you will be eligible for the company benefits described below:
- Three weeks paid vacation per year, increasing to four weeks after five
years of employment.
- Eleven paid holidays, including a floating holiday that may be taken at
your discretion.
- Company paid term life insurance equal to two times your annual salary.
- Long-term disability insurance which provides up to 60% of your monthly
salary.
- Group health insurance through The Guardian. The company pays 75% of
the premium for family or individual coverage.
- Group dental insurance through the Delta Dental Plan. The company pays
75% of the premium for family or individual coverage.
- Participation in the GelTex Pharmaceuticals 401(k) Plan. Each employee
may contribute up to 15% of gross pay (subject to an IRS maximum) which
will then be excluded from the employee's taxable income.
- Participation in the GelTex Pharmaceuticals Employee Stock Purchase
Plan. The purpose of the plan is to provide employees an opportunity to
purchase shares of common stock of the company.
- Tuition assistance of up to $3,000 per year for relevant academic
courses.
- Participation in the GelTex Pharmaceuticals Flexible Benefits Plan which
allows you to fund for eligible dependent care expenses on a pre-tax
basis.
While the foregoing represents the current benefits, they are continuously being
reviewed and are subject to modification. Also, the above is a summary of the
<PAGE> 3
Dr. Reed
Page 3
benefits. Complete descriptions are contained in the appropriate plan documents
or other company documents, and will be discussed in detail with you during your
first few days of employment. This letter constitutes the entire understanding
of the terms of your employment and supersedes any prior written or oral
statements. In addition, nothing herein shall be construed as, or interpreted to
constitute, the terms of a contract of employment for either a definite or
indefinite time.
Your employment with GelTex Pharmaceuticals will be conditional upon documents
establishing that you are authorized to work for GelTex Pharmaceuticals pursuant
to the Immigration Reform and Control Act of 1986. These documents must be
provided to the company within your first three days of employment. You will
also have to complete certain other standard company forms and documents.
If accepted and agreed upon, please sign both copies of the offer letter,
retaining one copy for your files and returning the other to GelTex
Pharmaceuticals.
Doug, all of us at GelTex are most impressed by you. We are convinced that you
could make key contributions to the success and growth of our company. We think
that GelTex will be a very exciting place to work over the next few years and we
would like you to join us in that excitement.
Sincerely,
/s/ Mark Skaletsky
- ---------------------
Mark Skaletsky
President and CEO
Accepted by:
/s/ Douglas Reed
- ---------------------
Douglas Reed, M.D.
Date: Sept. 8, 1998
<PAGE> 1
EXHIBIT 10.2
PROMISSORY NOTE
Waltham, Massachusetts
December 1, 1998
$100,000
FOR VALUE RECEIVED, the undersigned, Dr. Douglas Reed (the "Borrower"),
hereby promises to pay to the order of GelTex Pharmaceuticals, Inc., a Delaware
corporation (the "Lender") the principal amount of One Hundred Thousand and
00/100 Dollars ($100,000) (the "Principal") on or before the Maturity Date, as
hereinafter defined. This Note is given as evidence of a loan in an amount equal
to the principal amount of this Note. The purpose of the loan is to assist the
Borrower in financing the purchase of his new principal residence located at 90
Ruddock Road, Sudbury, Massachusetts.
Interest shall not accrue on the outstanding Principal during the term of
this Note, unless Dr. Reed's employment with the Lender is terminated for
whatever reason prior to the Maturity Date. Upon Dr. Reed's termination,
interest shall accrue as of the date of such termination in an amount equal to
the Prime Rate of interest, as in effect from time to time (but in no event in
excess of the maximum rate permitted by then applicable law) as announced by
Fleet National Bank. Any accrued interest shall be due and payable on the
Maturity Date.
The Maturity Date of this Note shall be the earlier of (i) fifteen days
following the closing date of the Borrower's sale of the property located at
3021 E. Thackeray Place, Salt Lake City, Utah or (ii) June 30, 1999.
The Borrower hereby agrees to pay, to the extent permitted by law, all
reasonable costs and expenses, including, without limitation, reasonable
attorneys' fees, incurred or paid by the Lender in enforcing this note, whether
or not litigation is commenced. This note shall be governed by the laws of the
Commonwealth of Massachusetts.
If any provisions hereof or the application thereof to any person or
circumstance shall, to any extent, be invalid or unenforceable, the remainder
hereof, or the application of such provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each provision hereof shall be valid and in force to the
fullest extent permitted by law.
<PAGE> 2
This Note shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts, and shall take effect as a sealed instrument.
Executed as of the day and year first written above.
/s/ Douglas Reed
- ----------------------------------
Douglas Reed
WITNESS:
/s/ Elizabeth Grammer
- ----------------------------------
Elizabeth Grammer
- ----------------------------------
Print Name
<PAGE> 1
EXHIBIT 10.3
PROMISSORY NOTE
Waltham, Massachusetts
December 31, 1998
$150,000
FOR VALUE RECEIVED, the undersigned, Dr. Douglas Reed (the "Borrower"),
hereby promises to pay to the order of GelTex Pharmaceuticals, Inc., a Delaware
corporation (the "Lender") the principal amount of One Hundred Fifty Thousand
and 00/100 Dollars ($150,000) (the "Principal") on or before the Maturity Date,
as hereinafter defined. This Note is given as evidence of a loan in an amount
equal to the principal amount of this Note. The purpose of the loan is to assist
the Borrower in financing the purchase of his new principal residence located at
90 Ruddock Road, Sudbury, Massachusetts.
Interest shall not accrue on the outstanding Principal during the term of
this Note, unless Dr. Reed's employment with the Lender is terminated for
whatever reason prior to the Maturity Date. Upon Dr. Reed's termination,
interest shall accrue as of the date of such termination in an amount equal to
the Prime Rate of interest, as in effect from time to time (but in no event in
excess of the maximum rate permitted by then applicable law) as announced by
Fleet National Bank. Any accrued interest shall be due and payable on the
Maturity Date.
The Maturity Date of this Note shall be the earlier of (i) fifteen days
following the closing date of the Borrower's sale of the property located at
3021 E. Thackeray Place, Salt Lake City, Utah or (ii) June 30, 1999.
The Borrower hereby agrees to pay, to the extent permitted by law, all
reasonable costs and expenses, including, without limitation, reasonable
attorneys' fees, incurred or paid by the Lender in enforcing this note, whether
or not litigation is commenced.
If any provisions hereof or the application thereof to any person or
circumstance shall, to any extent, be invalid or unenforceable, the remainder
hereof, or the application of such provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each provision hereof shall be valid and in force to the
fullest extent permitted by law.
<PAGE> 2
This Note shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts, and shall take effect as a sealed instrument.
Executed as of the day and year first written above.
/s/ Douglas Reed
- ----------------------------------
Douglas Reed
WITNESS:
/s/ Elizabeth Grammer
- ----------------------------------
Elizabeth Grammer
- ----------------------------------
Print Name
<PAGE> 1
EXHIBIT 10.4
PROMISSORY NOTE
$100,000.00 December 31, 1998
FOR VALUE RECEIVED, the undersigned, DOUGLAS REED and LINDA REED of 90
Ruddock Road, Sudbury, Massachusetts (the "Borrower"), jointly and severally,
promise to pay to the order of GelTex Pharmaceuticals, Inc., a Delaware
corporation, with a principal place of business at Nine Fourth Avenue, Waltham,
Massachusetts (the "Lender"), the principal sum of One Hundred Thousand Dollars
($100, 000.00) on or before December 30, 2002 (the "Maturity Date") and pursuant
to the terms and in the manner hereinafter provided. Notwithstanding the above,
if Dr. Reed remains a full-time employee of the Lender on the Maturity Date, the
full principal amount outstanding under this Note will be forgiven, and the
Borrower shall have no obligation to repay such amount. In addition, if Dr.
Reed's employment is terminated by the Lender or its successor as a result of,
or in connection with a "change of control" of the Lender, the full principal
amount outstanding under this Note will be forgiven, and the Borrower shall have
no obligation to repay such amount. For purposes of this Note, a "change of
control" shall have occurred in the event that (i) any third party or group of
related third parties shall directly or indirectly become the beneficial owner
of capital stock representing fifty percent or more of the total voting rights
of all of the capital stock of the Lender, or (ii) the Lender shall consolidate
or merge with any other person and the stockholders of record of the Lender
immediately prior to the consummation of such transaction do not beneficially
own capital stock representing fifty percent or more of the total voting rights
of the surviving corporation after the consummation of the transaction.
No interest shall accrue or be due and payable during the term of this
Note, unless Dr. Reed's employment with the Lender is terminated for whatever
reason prior to the Maturity Date. Upon Dr. Reed's termination, interest shall
accrue as of the date of such termination at a rate equal to the lowest
applicable federal rate of interest as set forth in Section 1274 of the Internal
Revenue Code of 1986, as amended, on the outstanding principal balance. The
payment of the accrued interest shall be due and payable on the Maturity Date in
full.
The privilege is granted of prepaying the outstanding principal balance,
together with any unpaid interest, if any, and all other amounts payable to the
Lender, in full or in part from time to time without penalty.
If there occurs a default in the performance of any of the terms,
agreements, covenants or conditions contained in this Note or the Mortgage (as
hereinafter defined) or any other documents now or hereafter executed as
security for this Note or in furtherance of Lender's protections under the
Mortgage (collectively, the "Loan Documents") continuing beyond, in each case,
any applicable grace period as may be provided therein for the payment of such
amount or the performance of such term, agreement, covenant or condition, then
at the option of the holder of this Note the entire indebtedness evidenced
hereby, with interest accrued thereon, if any, shall become forthwith due and
payable, and no omission on the part of the holder hereof to exercise such
option when entitled to do so shall be construed as a waiver of such right so
long as such delinquency or default shall remain uncured.
<PAGE> 2
The Borrower agrees to pay all costs of suit and other expenses of
collection, including reasonable fees of attorneys, in the event that this Note
is placed in the hands of any attorney for collection or suit is brought
thereon.
The Borrower waives presentment, demand, protest and notice of every kind
and assents to any extension or postponement of the time of payment or any other
indulgence to any substitution, exchange or release of collateral and to the
addition or release of any other party or person primarily or secondarily
liable.
This Note is given as evidence of a loan in an amount equal to the
principal amount of this Note (the "Loan"), which Loan is secured by a certain
second Mortgage (the "Mortgage") of even date herewith from the Borrower to the
Lender, which Mortgage grants a lien on certain real estate known and numbered
as 90 Ruddock Road, Sudbury, Massachusetts (the "Real Estate"), all as more
particularly described in the Mortgage.
The purpose of the Loan is to provide the Borrower with the proceeds to
finance the purchase of the Real Estate, which will be Borrower's principal
residence. The Borrower certifies to the Lender that the Borrower reasonably
expects to be entitled to and will itemize deductions for each tax year in which
the Loan is outstanding.
All of the terms, conditions and agreements contained in the Mortgage and
the other Loan Documents, as the same may be amended from time to time, are
hereby made a part of this Note to the same extent as if fully set forth herein.
If the Borrower conveys, transfers, assigns, encumbers, pledges or
otherwise disposes of any legal or beneficial interest in the Real Estate or in
the equity of redemption in the Real Estate or any part thereof without the
Lender's prior written consent, Lender may, at its option, require immediate
payment of the entire indebtedness evidenced hereby, with accrued interest
thereon, as provided herein.
Wherever notice, demand or a request may be given to the Borrower under
this Note, the same shall always be sufficient if in writing and deposited in
the United States mail by registered or certified mail, addressed to the
Borrower at the address given in this Note as the Borrower's address, or the
business address of the Borrower last known to the holder hereof, and any such
notice, demand or request shall be treated as having been given upon deposit in
the United States mail.
If any provisions hereof or the application thereof to any person or
circumstance shall, to any extent, be invalid or unenforceable, the remainder
hereof, or the application of such provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each provision hereof shall be valid and in force to the
fullest extent permitted by law.
As used herein, the word "holder" shall mean the Lender and its successors
and assigns, including, but not limited to, (i) any endorsee of this Note in
possession hereof, (ii) the bearer hereof if this Note is at the time payable to
the bearer, or (iii) any successor or
-2-
<PAGE> 3
assign of the Lender as of a result of a change of control (as defined above) of
the Lender.
This Note shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts, and shall take effect as a sealed instrument.
IN WITNESS WHEREOF, the Borrower has executed this Note, under seal, as of
the date first above written.
WITNESS:
/s/ Elizabeth Grammer /s/ Douglas Reed
- ----------------------------------- ------------------------------------
Douglas Reed, M.D.
Elizabeth Grammer /s/ Linda Reed
- ----------------------------------- ------------------------------------
Linda Reed by: Douglas Reed, M.D. as
Attorney-in-fact
-3-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE GELTEX
PHARMACEUTICALS, INC. FORM 10-Q AND THE NOTES THERETO FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 1999 AND IS QUALIFITED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 23,079,762
<SECURITIES> 70,236,794
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 776,954
<CURRENT-ASSETS> 107,908,044
<PP&E> 11,782,000
<DEPRECIATION> 3,834,484
<TOTAL-ASSETS> 123,988,363
<CURRENT-LIABILITIES> 6,451,757
<BONDS> 0
0
0
<COMMON> 168,447
<OTHER-SE> 112,161,979
<TOTAL-LIABILITY-AND-EQUITY> 123,988,363
<SALES> 0
<TOTAL-REVENUES> 3,634,583
<CGS> 0
<TOTAL-COSTS> 12,519,743
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 134,404
<INCOME-PRETAX> (7,737,060)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,737,060)
<EPS-PRIMARY> (.46)
<EPS-DILUTED> (.46)
</TABLE>
