<PAGE>
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 period ended MARCH 31, 1994
--------------
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
- - ----- Exchange Act of 1934
For the Transition period from to
---------- ----------
Commission File Number 1-6247
------
ALZA CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 77-0142070
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
950 Page Mill Road, P.O. Box 10950, Palo Alto, California 94303-0802
- - --------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 494-5000
-------------
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
----- ---
Number of shares outstanding of each of the registrant's classes of common stock
as of April 29, 1994:
Common Stock, $.01 par value - 81,685,400 shares
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
ALZA CORPORATION
Condensed Consolidated Statement of Income (unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1994 1993
-------- --------
<S> <C> <C>
REVENUES:
Royalties and fees $ 32,849 $ 32,628
Net sales 17,893 16,532
Research revenue 14,183 10,005
Other revenue 3,240 10,771
-------- --------
Total revenues 68,165 69,936
COSTS AND EXPENSES:
Costs of products shipped 13,842 14,532
Research and product development 16,899 13,704
General, administrative and marketing 8,110 4,718
Interest 3,712 5,031
-------- --------
Total costs and expenses 42,563 37,985
-------- --------
Income before income taxes and cumulative
effect of accounting change 25,602 31,951
Income taxes 9,985 11,182
-------- --------
Income before cumulative effect of 15,617 20,769
accounting change
Cumulative effect of accounting
change - 6,573
-------- --------
Net income $ 15,617 $ 27,342
-------- --------
-------- --------
PER COMMON AND COMMON EQUIVALENT
SHARE:
Income before cumulative effect of
accounting change $ .19 $ .26
Cumulative effect of accounting
change - .08
-------- --------
Net income $ .19 $ .34
-------- --------
-------- --------
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES 82,304 79,965
-------- --------
-------- --------
<FN>
See accompanying notes.
</TABLE>
<PAGE>
ALZA CORPORATION
Condensed Consolidated Balance Sheet (unaudited)
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1994 1993
- - ------ ---------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 62,435 $ 53,683
Short-term investments 182,144 40,399
Receivables, net 70,420 56,563
Inventories, at cost:
Raw materials 15,667 14,635
Work in process 11,835 9,241
Finished goods 1,822 1,287
---------- ----------
Total inventories 29,324 25,163
Prepaid expenses and other
current assets 21,761 22,603
---------- ----------
Total current assets 366,084 198,411
Investments in long-term government
and corporate notes and bonds -* 163,391
Property, plant and equipment 283,310 278,483
Less accumulated depreciation
and amortization (59,585) (56,886)
---------- ----------
Net property, plant and
equipment 223,725 221,597
Other assets 52,575 38,425
---------- ----------
$ 642,384 $ 621,824
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Current liabilities:
Short-term debt $ 249,370 $ 249,520
Accounts payable 10,153 11,678
Accrued income taxes 5,400 375
Accrued compensation 6,758 8,212
Other current liabilities 17,444 16,393
---------- ----------
Total current liabilities 289,125 286,178
Deferred income taxes 12,140 9,906
Other long-term liabilities 20,297 19,063
Stockholders' equity:
Common stock 296,635 295,814
Unrealized losses on available
for sale securities (unrealized
loss of $3,891 less $1,598 tax
effect) (2,293) -
Retained earnings 26,480 10,863
---------- ----------
Total stockholders' equity 320,822 306,677
---------- ----------
$ 642,384 $ 621,824
---------- ----------
---------- ----------
<FN>
* Investments in long-term government and corporate notes and bonds have
been reclassified to short-term investments and other assets.
See accompanying notes.
</TABLE>
<PAGE>
ALZA CORPORATION
Condensed Consolidated Statement of Cash Flows (unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1994 1993
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,617 $ 27,342
Adjustments to reconcile net
income to net cash provided by
operating activities:
Cumulative effect of accounting change - (6,573)
Depreciation and amortization 2,699 2,863
Accrued interest on 7.5% zero coupon
convertible subordinated debentures - 4,278
Deferred income taxes 2,234 1,232
(Increase) decrease in assets:
Receivables (13,857) (3,873)
Inventories (4,161) (2,434)
Prepaid expenses and other
current assets 842 1,191
Increase (decrease) in liabilities:
Accounts payable (1,525) (1,074)
Accrued income taxes 5,025 4,071
Accrued compensation (1,454) (1,225)
Accrued and other liabilities 2,292 1,319
---------- ----------
Total adjustments (7,905) (225)
---------- ----------
Net cash provided by
operating activities 7,712 27,117
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,827) (9,377)
Purchases of available for sale
securities (74,153) -
Sales of available for sale securities 41,714 -
Maturities of available for sale securities 36,194 -
Decrease in short-term investments - 623
Decrease in long-term investments - 5,034
Decrease (increase) in cash surrender
value-life insurance (241) 9,991
Cash and cash equivalents reserved for contri-
bution to Therapeutic Discovery Corporation - (22,000)
Decrease in other assets 1,689 8,859
---------- ----------
Net cash provided by (used in)
investing activities 376 (6,870)
CASH FLOWS FROM FINANCING ACTIVITIES:
Maturities of short-term debt (150) -
Principal payments on long-term debt (7) (9)
Issuances of common stock 821 3,426
---------- ----------
Net cash provided by
financing activities 664 3,417
---------- ----------
Net increase in cash and
cash equivalents 8,752 23,664
Cash and cash equivalents at
beginning of period 53,683 26,656
---------- ----------
Cash and cash equivalents at end
of period $ 62,435 $ 50,320
---------- ----------
---------- ----------
<FN>
See accompanying notes.
</TABLE>
<PAGE>
ALZA CORPORATION
March 31, 1994
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The information at March 31, 1994 and for the three months
ended March 31, 1994 and 1993 is unaudited, but includes all
adjustments (consisting only of normal recurring adjustments)
which the management of ALZA Corporation ("ALZA") believes
necessary for fair presentation of the results for the periods
presented. Interim results are not necessarily indicative of
results for a full year. The condensed consolidated financial
statements should be read in conjunction with the audited
consolidated financial statements for the year ended December 31,
1993 included in ALZA's 1993 Annual Report to Stockholders.
2. INCOME PER SHARE
As shown in the table included in Exhibit 11 of the Form
10-Q, the computation of weighted average shares includes common
and common equivalent shares. Common equivalent shares include
warrants and options for the period each was outstanding (using
the Treasury Stock Method).
3. ACCOUNTING CHANGE
In May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" ("SFAS
115"). ALZA adopted the provisions of the new standard for
investments held as of or acquired after January 1, 1994. In
accordance with SFAS 115, prior period financial statements have
<PAGE>
ALZA CORPORATION
March 31, 1994
not been restated to reflect the change in accounting principle.
ALZA has classified its entire investment portfolio as
available-for-sale.
In accordance with SFAS 115, investments are carried at fair
value, with the unrealized gains and losses reported as a
separate component of stockholders' equity. The amortized cost
of debt securities classified as available-for-sale is adjusted
for amortization of premiums and accretion of discounts to
maturity. Such amortization is included in investment income
along with interest earned. Realized gains or losses, and
declines in value judged to be other than temporary are also
included in investment income. The cost of securities sold is
based on the specific identification method. With the exception
of securities issued by the United States government, ALZA limits
the amount of credit exposure to any one issuer by its investment
policy. ALZA has not experienced any losses related to its
investments due to institutional failure.
As a result of ALZA adopting SFAS 115, stockholders' equity
at January 1, 1994 was increased by $1.2 million (net of income
taxes) to reflect the net unrealized holding gains on securities
previously carried at amortized cost. During the three months
ended March 31, 1994, net unrealized losses of $3.5 million (net
of income taxes) were charged to stockholders' equity leaving a
balance at March 31, 1994 of $2.3 million of unrealized losses
(net of income taxes). There was no impact on ALZA's results of
operations.
<PAGE>
ALZA CORPORATION
March 31, 1994
The following is a summary of available-for-sale securities at
March 31, 1994:
<TABLE>
<CAPTION>
Available-for-Sale Securities
---------------------------------------
Net Estimated
Unrealized Fair
(In thousands) Cost Losses Value
-------- ---------- ---------
<S> <C> <C> <C>
U.S. Treasury notes and
other U.S. government
securities $115,184 $ (2,720) $112,464
Corporate debt
securities 134,539 (1,171) 133,368
-------- ---------- ---------
$249,723 $ (3,891) $245,832(1)
-------- ---------- ---------
-------- ---------- ---------
</TABLE>
The amortized cost and estimated fair value of debt and
marketable equity securities at March 31, 1994, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because the issuers of the securities may
have the right to prepay certain of the obligations without
prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Fair
(In thousands) Cost Value
-------- ---------
<S> <C> <C>
Due in one year or less $ 89,853 $ 89,937
Due after one year through three years 47,099 46,517
Due after three years 112,771 109,378
-------- --------
$249,723 $245,832
-------- --------
-------- --------
<FN>
(1) Includes $63,688 of investments classified as cash equivalents
</TABLE>
<PAGE>
ALZA CORPORATION
March 31, 1994
4. Statement of Cash Flows
-----------------------
Supplemental schedule of noncash investing activities:
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 1994 March 31, 1993
-------------- --------------
(In thousands)
<S> <C> <C>
Cumulative unrealized $ 2,293 $ -
losses on available for
sale securities
Short-term investments $ - $103,343
for contribution to
Therapeutic Discovery
Corporation
Long-term investments $ - $124,657
for contribution to
Therapeutic Discovery
Corporation
</TABLE>
<PAGE>
ALZA CORPORATION
March 31, 1994
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
ALZA Corporation ("ALZA") develops, primarily under joint development and
commercialization agreements with pharmaceutical company clients, a broad range
of pharmaceutical products based on ALZA's proprietary therapeutic systems
technologies. ALZA's therapeutic systems can often improve the medical value as
well as the cost-effectiveness of drug compounds by increasing efficacy,
minimizing unpleasant or harmful side effects and/or providing greater patient
compliance. ALZA manufactures some or all of the various clients' requirements
for such products. ALZA markets certain products developed by ALZA in earlier
years and recently launched the Testoderm (registered trademark) Testosterone
Transdermal System. ALZA is also expanding its marketing activities under co-
promotion arrangements with client companies.
In recent years ALZA has expended substantial amounts in property, plant
and equipment to support its expanding research and development and
manufacturing activities. A significant portion of these expenditures has
involved the establishment of the Mountain View research and development campus
and the Vacaville manufacturing facility.
<PAGE>
ALZA CORPORATION
March 31, 1994
While ALZA believes its current and planned facilities and equipment are
sufficient to meet its current operating requirements, ALZA expects to continue
to expand its Mountain View facilities significantly over the next several
years, to construct additional facilities on its properties and to continue to
purchase available facilities or properties to support its long-term
requirements. Expenditures with respect to additions to property, plant and
equipment during the first three months of 1994 totaled approximately $4.8
million, and are expected to increase significantly for the remainder of 1994.
ALZA believes that its existing cash balances and investments are adequate
to fund its current cash needs. ALZA does consider raising capital from time to
time if market conditions are favorable. In addition, should the need arise,
ALZA believes it would be able to borrow additional funds or raise additional
capital. In connection with the expansion of ALZA's sales and marketing
activities, ALZA may consider using its capital to make strategic investments or
to acquire or license technology or products. ALZA may also enter into
strategic alliances with third parties, which may provide additional funding for
product development and support for product marketing and sales.
RESULTS OF OPERATIONS
ALZA's net income was $15.6 million or $.19 per common share for the
quarter ended March 31, 1994, compared to net income of $27.3 million or $.34
per common share for the quarter ended March 31, 1993. Included in the results
for first quarter of 1993 was approximately $6.6 million ($.08 per share) of
benefits related to the cumulative effect of adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
Without this one-time benefit, ALZA would have reported net income of
approximately $20.8 million or $.26 per share for the first quarter of 1993.
<PAGE>
ALZA CORPORATION
March 31, 1994
ALZA's net income currently results primarily from royalties and fees
received from client companies. Royalties and fees are derived from sales by
client companies of products developed jointly with ALZA, and vary from quarter
to quarter as a result of changing levels of sales of the products by client
companies and, infrequently, the receipt by ALZA of certain one-time fees.
Sales of a particular product, and therefore ALZA's royalties from such product,
generally can be expected to decrease later in the product's life cycle or if
new competing products are introduced into the marketplace. Because ALZA's
clients generally take responsibility for obtaining necessary regulatory
approvals and make all marketing and commercialization decisions regarding such
products, most of the variables that affect ALZA's royalties and fees are not
directly within ALZA's control. For example, ALZA's clients determine the
extent of selling and marketing effort to be devoted to an ALZA-developed
product as compared with other products they market. Within the
next several years, ALZA intends to become less dependent on royalties and fees
as ALZA's manufacturing, sales and marketing activities expand and as ALZA
markets more products (including any developed with Therapeutic Discovery
Corporation); however, there can be no assurance that these expanded activities
will be successful.
Royalties and fees in the first quarter of 1994 increased slightly from the
first quarter of 1993 due to increased royalties from Duragesic (registered
trademark), marketed by Janssen
<PAGE>
ALZA CORPORATION
March 31, 1994
Pharmaceutica, Inc., and certain other products, largely offset by a decrease in
royalties received on sales of Nicoderm (registered trademark) by Marion Merrell
Dow, Inc. During the quarter ended March 31, 1994, Procardia XL (registered
trademark) accounted for more than 60% of ALZA's royalties. In April 1994
Glucotrol XL (registered trademark), a once-a-day oral product for the treatment
of diabetes developed jointly by ALZA and Pfizer, Inc. ("Pfizer"), was cleared
for marketing by the U.S. Food and Drug Administration ("FDA"). Pfizer has
stated that it will begin marketing this product shortly under a royalty-bearing
license from ALZA. ALZA expects that, in the near term, net income will
continue to result primarily from royalty income on sales of both currently
marketed products and additional products recently approved or now awaiting
approval by the FDA and other regulatory agencies. With increasing pressures
for cost containment in the United States health care system, it can be expected
that pharmaceutical product prices, including those of ALZA's royalty-bearing
products, will not increase as quickly as they have in the past, and could
decrease.
Net sales of $17.9 million for the quarter ended March 31, 1994 increased
8% from the same period in 1993, due primarily to initial shipments of the
Testoderm product and increased product shipments to certain client companies,
offset in part by decreased shipments of Nicoderm. Costs of products shipped
decreased 5% for the quarter compared to the same period in 1993 due to changes
in product mix. In late March 1994, the Actisite (registered trademark)
(tetracycline HCl) Periodontal Fiber, developed jointly by ALZA and On-Site
Therapeutics, Inc., was cleared for marketing by the FDA, and is expected to be
launched by a partnership between ALZA and
<PAGE>
ALZA CORPORATION
March 31, 1994
Procter & Gamble within the next several months. The product will be
manufactured by ALZA. ALZA will also manufacture a portion of Pfizer's
requirements of Glucotrol XL, which Pfizer has stated will be launched shortly.
ALZA's commercial manufacturing is predominantly centralized in its large-
scale commercial manufacturing facility in Vacaville,
where ALZA manufactures products for client companies and on its own behalf.
The Vacaville manufacturing facility was expanded in 1993, and additional
equipment will continue to be added to the facility to meet anticipated
increases in manufacturing needs. The utilization of the facility in any
quarter depends on many factors, including client orders, product approvals and
launches and sales of products, many of which are outside ALZA's control. The
quantity of any particular product manufactured in the facility in any quarter,
and the mix of products manufactured in the facility, is dependent on orders by
client companies and demand for products marketed by ALZA. Utilization of the
facility in the quarter ended March 31, 1994 was high; as utilization
fluctuates, there could be unused capacity in certain quarters.
Research revenue of $14.2 million for the quarter ended March 31, 1994
increased 42% from the same period in 1993 due largely to increased activities
on behalf of Therapeutic Discovery Corporation ("TDC"). TDC was formed by ALZA
for the purpose of selecting and developing new human pharmaceutical products
combining ALZA's proprietary drug delivery technology with various drug
compounds, and commercializing such products, most likely through licensing to
ALZA. ALZA and TDC have entered into a development agreement pursuant to which
ALZA conducts research and development activities
<PAGE>
ALZA CORPORATION
March 31, 1994
on behalf of TDC, and ALZA has granted to TDC a royalty-free, nonexclusive,
perpetual license to use ALZA's proprietary drug delivery technology to develop
and commercialize specified TDC products. Research expenses for the quarter
ended March 31, 1994 increased approximately 23% from the 1993 level due to
increased development activities primarily on behalf of TDC. As additional
products are accepted by TDC for development, and as development activities
increase, ALZA's research expenses related to TDC activities (and,
correspondingly, ALZA's research revenues related to those activities) are
expected to increase substantially. Because products in early stages of
development generally require lower levels of expenditures, the research
expenses for TDC activities for any product (and ALZA's corresponding research
revenue) can be expected to be lower during the early stages of product
development, but can be expected to increase substantially as the product enters
later stages of development.
ALZA's research revenue and the corresponding expenses will fluctuate from
quarter to quarter depending upon the number of products in development, their
stages of development, and the clients' desired pace of development. Research
expenses and research revenues are expected to increase during the remainder
of 1994, as compared with the prior year.
General, administrative and marketing expenses of $8.1 million for the
quarter ended March 31, 1994 increased 72% from the same period in 1993, due in
large part to the formation of ALZA's sales force and pre-launch expenses for
Testoderm. ALZA expects its sales and marketing activities and expenses to
increase during the
<PAGE>
ALZA CORPORATION
March 31, 1994
remainder of 1994 and in the future as more sales and marketing activities are
undertaken by ALZA.
Other revenue, which consists primarily of interest income, decreased from
$10.8 million for the quarter ended March 31, 1993 to $3.2 million for the
quarter ended March 31, 1994, due to lower rates earned on investments and
lower invested cash balances resulting from ALZA's $250 million contribution to
TDC in June 1993. In addition, during the first quarter of 1993, ALZA realized
approximately $5.0 million in gains related to long-term investments liquidated
to fund TDC. In future quarters, other revenue will include a share of income
or losses due to activities undertaken by a partnership of ALZA and Procter &
Gamble relating to the development, manufacture and marketing of certain
periodontal products, including the marketing of the Actsite product. The
Actisite product will be marketed in the United States by the ALZA/Procter &
Gamble Partnership, and is expected to be introduced within the next several
months. A joint venture between ALZA and On-Site Therapeutics, Inc. will
receive payments on United States sales of the product, and ALZA's share of the
profits of this joint venture will be included in other revenue. For 1994, the
effect on other revenues of these payments and activities is not expected to be
material.
Interest expense for the quarter ended March 31, 1994 decreased 26% from
the same period in 1993. During the first quarter of 1993 interest expense
consisted primarily of interest accrued on ALZA's 7.5% zero coupon convertible
subordinated debentures. The
<PAGE>
ALZA CORPORATION
March 31, 1994
replacement of the 7.5% debentures with a commercial paper program has reduced
interest expense. While interest expense is expected to be lower during 1994
than in 1993, it is expected that interest expense will increase for the second
quarter of 1994 due to the recent increase in short-term interest rates.
In May 1993, the Financial Accounting Standards Board issued SFAS 115 (see
note 3). ALZA adopted the provisions of SFAS 115 for investments held as of or
acquired after January 1, 1994. In accordance with SFAS 115, prior period
financial statements have not been restated to reflect the change in accounting
principle. In accordance with SFAS 115, investments are carried at fair value,
with the unrealized gains and losses reported as a separate component of
stockholders' equity. The amortized cost of debt securities classified as
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization is included in investment income along
with interest earned. Realized gains or losses and declines in value judged to
be other-than-temporary are also included in investment income. The cost of
securities sold is based on the specific identification method. With the
exception of securities issued by the U.S. government, ALZA limits the amount of
credit exposure to any one issuer by its investment policy. ALZA has not
experienced any losses due to institutional failure.
ALZA's effective combined federal and state tax rate for the quarter ended
March 31, 1994 was 39%, compared to 35% for 1993.
<PAGE>
ALZA CORPORATION
March 31, 1994
This increase is primarily due to changes in income before taxes without
proportionate changes in tax credits.
The health care industry has continued to change rapidly as the public,
government, medical practitioners and the pharmaceutical industry focus on ways
to expand medical coverage while controlling the growth in health care costs.
Congress and the Clinton Administration are working on comprehensive legislative
changes which, if enacted, could put significant pressures on the prices charged
for pharmaceutical products. Similarly, prescription drug reimbursement
practices and the growth of large managed care organizations, as well as generic
and therapeutic substitution (substitution of a different product for the same
indication), could significantly affect ALZA's business. While ALZA believes
the changing health care environment may increase the value of ALZA's drug
delivery products over the long term, it is impossible to predict the impact
such changes will have on ALZA in the near term.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In the ordinary course of business, various suits and claims are filed
against ALZA. In the past, ALZA's liability claims (including product
liability) have not been significant.
On December 2, 1991, Ciba-Geigy Corporation ("Ciba") filed a patent
infringement suit in the United States District Court for the District of New
Jersey, against ALZA and Marion Merrell Dow, Inc. in connection with the
Nicoderm product. The action seeks injunctive
<PAGE>
ALZA CORPORATION
March 31, 1994
relief and damages, and claims that the Nicoderm product infringes a patent
exclusively licensed to Ciba by the University of California. Ciba's motion for
a preliminary injunction against the marketing of the Nicoderm product was
denied in December 1991. The suit is in the discovery phase.
On April 26, 1993 and April 30, 1993, securities class action lawsuits were
filed against ALZA and certain of its officers and directors in the United
States District Court for the Northern District of California. The lawsuits
claim that ALZA issued and allowed to be issued various public statements that
were materially false and misleading, primarily with respect to the financial
prospects of the Nicoderm product. On July 9, 1993, a derivative suit was filed
against certain officers and all of the directors of ALZA. The lawsuit claims
that some or all of the named persons mismanaged the company and improperly
obtained profits from the sale of ALZA securities. The lawsuits were
consolidated into one suit and, under a court order, ALZA's outside directors
were removed as defendants in the suit. On April 18, 1994, ALZA announced that
it had reached a preliminary agreement, subject to court approval, to settle the
above securities class action and derivative lawsuits. The settlement amount is
$3.7 million. After taking into account the coverage by the Company's directors
and officers liability insurance, this settlement will have no material impact
on ALZA's financial statements.
<PAGE>
ALZA CORPORATION
March 31, 1994
On January 18, 1994, a suit was filed against ALZA by Cygnus Therapeutics
Corporation in the United States District Court for the Northern District of
California, seeking a declaration of unenforceability and invalidity of an ALZA
patent relating to transdermal administration of fentanyl and alleging
violation of antitrust laws. ALZA filed a motion to dismiss the suit. The
court granted this motion on April 22, 1994, and granted the plaintiff
permission to amend the complaint.
ALZA is not involved in any legal proceedings which, in the opinion of the
management, either alone or in the aggregate, will have a material adverse
effect on ALZA's financial position or results of operations.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11. Computation of weighted average common and common equivalent
shares outstanding
<PAGE>
ALZA CORPORATION
March 31, 1994
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.
ALZA CORPORATION
Date: May 13, 1994 By: /s/ Dr. Jane E. Shaw
----------------------------
Dr. Jane E. Shaw
President and
Chief Operating Officer
Date: May 13, 1994 By: /s/ Bruce C. Cozadd
---------------------------
Bruce C. Cozadd
Vice President and Chief
Financial Officer
<PAGE>
ALZA CORPORATION
March 31, 1994
EXHIBIT INDEX
Page Number in
Sequential
Numbering System
----------------
Exhibit
- - -------
11. Statement regarding weighted average 22
common and common equivalent shares
used in computation of per share
earnings
<PAGE>
ALZA CORPORATION
March 31, 1994
EXHIBIT 11
Statement Regarding Weighted Average Common and Common
Equivalent Shares Used in Computation of Per Share Earnings
(in thousands)
<TABLE>
<CAPTION>
Primary Fully Diluted
----------------------- -----------------------
Quarter Ended March 31, Quarter Ended March 31,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Common stock 81,651 74,964 81,651 74,964
$15 warrants - 3,759 - 3,759
$25 warrants - 318 - 318
7.5% zero coupon
convertible
subordinated
debentures - - - -
Other, principally
stock options 653 924 653 923
-------- -------- -------- --------
Average shares 82,304 79,965 82,304 79,964
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The 7.5% zero coupon convertible subordinated debentures (redeemed in
November 1993) are not included in the calculation for the quarter ended March
31, 1993, because they were not considered to be common stock equivalents and
these debentures were antidilutive for purposes of the fully diluted
computation. The $15 warrants, to the extent not exercised by December 14,
1993, expired on that date.
Fully diluted earnings per share are not presented on the face of the
condensed consolidated statement of income (unaudited) since dilution is less
than 3%.
