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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2000
COMMISSION FILE NUMBER 0-13789
NASTECH PHARMACEUTICAL COMPANY INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 11-2658569
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
45 DAVIDS DRIVE, HAUPPAUGE, NEW YORK 11788
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (631) 273-0101
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Name of each exchange
Title of each class on which registered
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Common Stock, $.006 par value Nasdaq National Market
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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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
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<CAPTION>
<S> <C> <C> <C>
DATE CLASS SHARES OUTSTANDING
03/31/00 Common stock - $.006 par value 6,190,485
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NASTECH PHARMACEUTICAL COMPANY INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
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<CAPTION>
ITEM 1 - FINANCIAL STATEMENTS Page
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Balance Sheets as of March 31, 2000 (unaudited) and December 31, 1999....................................1
Statements of Operations for the three months ended March 31, 2000 (unaudited) and 1999 (unaudited)......2
Statements of Stockholders' Equity for the three months ended March 31, 2000 (unaudited) and the
year ended December 31,1999..............................................................................3
Statements of Cash Flows for the three months ended March 31, 2000 (unaudited) and 1999
(unaudited)..............................................................................................4
Notes to Financial Statements............................................................................5
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................6
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..............................................6
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS........................................................................................7
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS................................................................7
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES..........................................................................7
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................................................7
ITEM 5 - OTHER INFORMATION........................................................................................7
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.........................................................................7
SIGNATURES.......................................................................................8
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NASTECH PHARMACEUTICAL COMPANY INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
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<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
-------------- -------------
(UNAUDITED)
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ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 10,720 $ 10,652
Short-term investments........................................... --- 3,986
Account receivable................................................. 40 25
Royalties and fees receivable...................................... 865 1,011
Inventories........................................................ 262 279
Prepaid expenses and sundry assets................................. 550 533
---------------- ------------
Total current assets........................................ 12,437 16,486
---------------- ------------
Property and equipment................................................ 5,019 4,666
Less: Accumulated depreciation and amortization.................... 1,163 986
---------------- ------------
Property and equipment, net................................. 3,856 3,680
---------------- ------------
Other assets.......................................................... 51 33
---------------- ------------
Total assets................................................ $ 16,344 $ 20,199
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 759 $ 2,059
Royalties payable.................................................. 345 664
Accrued expenses and sundry liabilities............................ 789 851
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Total current liabilities................................... 1,893 3,574
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Commitments and Contingencies
Stockholders' equity:
Preferred stock, $.01 par value; authorized: 100,000 shares;
issued and outstanding: none
Common stock, $0.006 par value; authorized: 25,000,000
shares; issued: 6,267,485 shares .......................... 38 38
Additional paid-in capital......................................... 37,050 37,050
Accumulated deficit................................................ (22,486) (20,312)
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14,602 16,776
Less: Treasury stock, at cost, 77,000 shares................... 151 151
---------------- ------------
Total stockholders' equity................................ 14,451 16,625
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Total liabilities and stockholders' equity................ $ 16,344 $ 20,199
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NASTECH PHARMACEUTICAL COMPANY INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
2000 1999
----------------- -------------
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Revenues:
Product sales.................................... $ 84 $ 33
License fee and royalty income ................... 798 1,352
Interest income................................... 201 298
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Total revenues................................ 1,083 1,683
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Costs and expenses:
Cost of product sales............................. 69 27
Research and development.......................... 2,128 3,018
Royalties......................................... 345 330
Sales and marketing............................... 260 108
General and administrative........................ 455 435
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Total costs and expenses...................... 3,257 3,918
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Net loss................................................ $ (2,174) $ (2,235)
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Net loss per common share-basic and diluted............. $ (.35) $ (.35)
================= =============
Average shares outstanding-basic and diluted............ 6,190 6,380
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See accompanying notes to financial statements.
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NASTECH PHARMACEUTICAL COMPANY INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000 (UNAUDITED) AND
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
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<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------------ PAID-IN ACCUMULATED TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT STOCK EQUITY
------------- ------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998............... 6,376,915 $ 38 $37,426 $ (11,962) --- $ 25,502
Redemption of shares in connection with
reverse/forward stock split.............. (110,736) --- (395) --- --- (395)
Shares issued in connection with exercise
of stock options.................... 5,000 --- 19 --- --- 19
Acquisition of treasury stock............ (151) (151)
Fractional shares redeemed in connection
with reverse stock split............ (3,694) --- --- --- --- ---
Net loss year ended December 31, 1999 --- --- --- (8,350) --- (8,350)
------------- ------- ----------- ---------- ---------- -------------
BALANCE, DECEMBER 31, 1999 .............. 6,267,485 $ 38 $37,050 $ (20,312) $ (151) $ 16,625
Net loss three months ended March 31,
2000 (unaudited).................... --- --- --- $ (2,174) --- $ (2,174)
------------- ------- ----------- ---------- ---------- -------------
BALANCE, MARCH 31, 2000 (UNAUDITED) 6,267,485 $ 38 $37,050 $ (22,486) $ (151) $ 14,451
============= ======= =========== ========== ========== =============
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See accompanying notes to financial statements.
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NASTECH PHARMACEUTICAL COMPANY INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
2000 1999
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OPERATING ACTIVITIES:
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Net loss...................................................................... $ (2,174) $ (2,235)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization............................................... 177 93
Changes in assets and liabilities:
Accounts and other receivables.............................................. 131 879
Inventories................................................................. 17 69
Prepaid expenses and sundry assets.......................................... (35) (64)
Accounts payable............................................................ (1,300) 678
Royalties payable........................................................... (319) (267)
Accrued expenses and sundry liabilities..................................... (62) (120)
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Net cash used in operating activities............................................. (3,565) (967)
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INVESTING ACTIVITIES:
Property and equipment......................................................... (353) (267)
Short-term investments-redemptions............................................. 3,986 ---
------------- ------------
Net cash provided by (used in) investing activities............................... 3,633 (267)
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FINANCING ACTIVITIES:
Exercise of stock options..................................................... 19
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Net cash provided by financing activities......................................... --- 19
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Net increase (decrease) in cash and cash equivalents.............................. 68 (1,215)
Cash and cash equivalents--beginning.............................................. 10,652 23,515
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Cash and cash equivalents--ending................................................. $ 10,720 $ 22,300
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See accompanying notes to financial statements.
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NASTECH PHARMACEUTICAL COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- GENERAL
The accompanying financial information should be read in conjunction
with the audited financial statements, including the notes thereto, as of and
for the year ended December 31, 1999, included in the Company's 1999 annual
report filed on Form 10-K.
The information furnished in this report reflects all adjustments
(consisting of only normal recurring accruals) which are, in the opinion of
management, necessary for a fair statement of the results for the interim
periods.
NOTE 2 -- NET LOSS PER COMMON SHARE
Basic and diluted net loss per common share is computed by dividing
the net loss by the weighted average number of common shares outstanding during
the periods. The diluted loss per common share presented excludes the common
stock equivalents (stock options and warrants), since such inclusion in the
computation would be antidilutive.
Employee stock options totaling 316,650 at March 31, 2000 were not
included in the net loss per share calculation because their effect would have
been anti-dilutive.
NOTE 3 -- INCOME TAXES
At March 31, 2000, the Company has available net operating loss
carryforwards for federal and state income tax reporting purposes of
approximately $21.3 million and has available research and development credit
carryforwards for federal income tax reporting purposes of approximately $1
million which are available to offset future taxable income, if any. These
carryforwards expire beginning in 2000 through 2019. A valuation allowance has
been applied to offset the respective deferred tax assets in recognition of the
uncertainty that such tax benefits will be realized. In addition, Company's
ability to use such net operating loss and research and development credit
carryforwards is limited by change of control provisions under Section 382 of
the Internal Revenue Code.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Except for historical information contained herein, the statements in
this Item are forward-looking statements that are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties
that reflect the Company's intentions, expectations or beliefs concerning future
events. The accompanying information should be read in conjunction with the
Company's 1999 annual report filed on Form 10K.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 Compared to Three Months Ended
March 31, 1999
Revenues decreased by $600,000, or 36%, to $1.1 million primarily
as a result of a decline in milestone payments on intranasal scopolamine. Total
revenues from Schwarz Pharma on Nascobal(R) were $183,000 compared to $124,000
in 1999. No milestone payments on scopolamine were received in the current three
months as compared to $500,000 in 1999. Royalty income received from BMS on
sales of Stadol NS increased $13,000, or 2%, to $691,000.
Total costs and expenses decreased by $661,000 or 17%, to $3.3 million
in 2000. The details of the decrease follow:
Research and development expense decreased by $890,000, or 29%, to $2.1
million primarily as a result of a reduction in the Company's clinical program
for intranasal scopolamine.
Royalties expense increased by $15,000, or 5%, to $345,000 as a result
of the increase in sales of Stadol NS by BMS and the related royalty payable to
the University of Kentucky Research Foundation (UKRF) under a separate agreement
between the Company and UKRF. Royalties expense increases or decreases
approximately in proportion to royalty income associated with Stadol NS.
As a percentage of total revenues, sales and marketing and general and
administrative expenses increased to 66% in 2000 as compared to 32% in 1999 as a
result of the decline in revenues.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company's liquidity included cash and cash
equivalents of $10.7 million compared to $14.6 million of cash and cash
equivalents and short-term investments at December 31, 1999. Account, royalties
and fee receivables at March 31, 2000 consist principally of receivables
pursuant to the BMS and Schwarz Pharma agreements.
At March 31, 2000, the Company had working capital of $10.5 million.
Management anticipates that it may require an additional infusion of capital in
year 2000 in order to provide adequate funds for the Company's anticipated
needs, including working capital.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company knows of no material litigation or proceedings, pending
or threatened, to which the Company is or may become a party.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
On May 1, 2000 the Company's President and Chief Executive Officer,
Vincent D. Romeo, Ph.D., died. The responsibilities associated with
his position have been assumed by the Company's Executive Committee
in accordance with the Company's succession plan.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
None
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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, duly authorized, in Hauppauge, State of New York, on May 10, 2000.
NASTECH PHARMACEUTICAL COMPANY INC.
By: /s/ Bruce R. Thaw
-------------------------------
Bruce R. Thaw
Director
Member of Executive Committee
By: /s/ Andrew Zinzi
-------------------------------
Andrew Zinzi
Chief Financial Officer
(Principal Financial and Accounting Officer)
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 10,720
<SECURITIES> 0
<RECEIVABLES> 905
<ALLOWANCES> 0
<INVENTORY> 262
<CURRENT-ASSETS> 12,437
<PP&E> 5,019
<DEPRECIATION> 1,163
<TOTAL-ASSETS> 16,344
<CURRENT-LIABILITIES> 1,893
<BONDS> 0
0
0
<COMMON> 38
<OTHER-SE> 14,413
<TOTAL-LIABILITY-AND-EQUITY> 16,344
<SALES> 84
<TOTAL-REVENUES> 1,083
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<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,157
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,174)
<EPS-BASIC> (.35)
<EPS-DILUTED> (.35)
</TABLE>
