UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
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 2-98260
PAINEWEBBER R&D PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3304143
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 713-2000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
<PAGE>
PAINEWEBBER R&D PARTNERS, L.P.
(a Delaware Limited Partnership)
FORM 10-Q
SEPTEMBER 30, 1995
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Statements of Financial Condition
(unaudited) at September 30, 1995 and
December 31, 1994 2
Statements of Operations
(unaudited) for the three months
ended September 30, 1995 and 1994 3
Statements of Operations
(unaudited) for the nine months
ended September 30, 1995 and 1994 3
Statement of Changes in Partners' Capital
(unaudited) for the nine months
ended September 30, 1995 4
Statements of Cash Flows
(unaudited) for the nine months
ended September 30, 1995 and 1994 5
Notes to Financial Statements
(unaudited) 6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
All schedules are omitted either because they are not applicable or the
information required to be submitted has been included in the financial
statements or notes thereto.
<PAGE>
Page 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PAINEWEBBER R&D PARTNERS, L.P.
(a Delaware Limited Partnership)
Statements of Financial Condition
(unaudited)
September 30, December 31,
1995 1994
- ------------------------------------------------------------------------------
Assets:
Cash $72,712 $25,667
Marketable securities, at market value 149,886 526,502
Interest receivable 827 1,566
Royalty income receivable 1,100 1,330,800
-------- ----------
Total assets $224,525 $1,884,535
======== ==========
Liabilities and partners' capital:
Accrued liabilities $70,330 $155,544
Partners' capital 154,195 1,728,991
-------- ----------
Total liabilities and partners' capital $224,525 $1,884,535
======== ==========
- ------------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
Page 3
PAINEWEBBER R&D PARTNERS, L.P.
(a Delaware Limited Partnership)
Statements of Operations
(unaudited)
For the three months ended September 30, 1995 1994
- -------------------------------------------------------------------------------
Revenues:
Interest income $5,183 $6,347
Income from product development projects 1,100 1,312,839
Unrealized depreciation of marketable
securities - (4,164)
------ ---------
6,283 1,315,022
------ ---------
Expenses:
General and administrative costs 81,485 46,426
------ ------
Net income (loss) $(75,202) $1,268,596
======== ==========
Net income (loss) per partnership unit:
Limited partners (based on 37,799 units) $(1.97) $33.23
General partner $(752.02) $12,685.96
- -------------------------------------------------------------------------------
For the nine months ended September 30, 1995 1994
- -------------------------------------------------------------------------------
Revenues:
Interest income $22,941 $29,695
Income from product development projects 1,073,416 3,674,699
Realized loss on sale of marketable
securities (10,456) -
Unrealized depreciation of marketable
securities - (19,788)
--------- ---------
1,085,901 3,684,606
--------- ---------
Expenses:
General and administrative costs 178,945 182,670
Write-down of investment - 750,000
------- -------
178,945 932,670
-------- ----------
Net income $906,956 $2,751,936
======== ==========
Net income per partnership unit:
Limited partners (based on 37,799 units) $23.75 $72.08
General partner $9,069.56 $27,519.36
- -------------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
Page 4
PAINEWEBBER R&D PARTNERS, L.P.
(a Delaware Limited Partnership)
Statement of Changes in Partners' Capital
(unaudited)
Limited General
For the nine months ended September 30, 1995 Partners Partner Total
- -------------------------------------------------------------------------------
Balance at December 31, 1994 $1,732,435 $(3,444) $1,728,991
Net income 897,886 9,070 906,956
Cash distributions to partners (2,456,934) (24,818) (2,481,752)
---------- ------- ----------
Balance at September 30, 1995 $173,387 $(19,192) $154,195
========== ======== ==========
- -------------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
Page 5
PAINEWEBBER R&D PARTNERS, L.P.
(a Delaware Limited Partnership)
Statements of Cash Flows
(unaudited)
For the nine months ended September 30, 1995 1994
- ------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $906,956 $2,751,936
Adjustments to reconcile net income to cash
provided by operating activities:
Unrealized depreciation of marketable securities - 19,788
Write-down of investment - 750,000
Decrease (increase) in operating assets:
Marketable securities 376,616 951,386
Interest receivable 739 3,329
Royalty income receivable 1,329,700 (107,304)
Decrease in operating liabilities:
Accrued liabilities (85,214) (8,105)
--------- ---------
Cash provided by operating activities 2,528,797 4,361,030
--------- ---------
Cash flows from financing activities:
Distributions to partners (2,481,752) (4,581,696)
----------- -----------
Cash used for financing activities (2,481,752) (4,581,696)
----------- -----------
Increase (decrease) in cash 47,045 (220,666)
Cash at beginning of period 25,667 243,842
---------- ----------
Cash at end of period $72,712 $23,176
========== ==========
- -------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
The Partnership paid no cash for interest during the nine months ended
September 30, 1995 and 1994.
- -------------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
Page 6
PAINEWEBBER R&D PARTNERS, L.P.
(a Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BUSINESS
The financial information as of and for the periods ended September 30, 1995
and 1994 is unaudited. However, in the opinion of management of PaineWebber
R&D Partners, L.P. (the "Partnership"), such information includes all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation. The results of operations reported for the interim periods ended
September 30, 1995, are not necessarily indicative of results to be expected
for the year ended December 31, 1995. These financial statements should be read
in conjunction with the most recent annual report of the Partnership on Form
10-K for the year ended December 31, 1994, and the previously issued quarterly
reports for the quarters ended June 30 and March 31, 1995.
The Partnership is a Delaware limited partnership that commenced operations
on March 6, 1986 with a total of $62.1 million available for investment. PWDC
Holding Company (the "Manager") is the general partner of PaineWebber
Technologies, L.P. (the "General Partner"), which is the general partner of the
Partnership. PWDC Holding Company is a wholly owned subsidiary of PaineWebber
Development Corporation ("PWDC"), an indirect, wholly owned subsidiary of Paine
Webber Group Inc. The Partnership will terminate on December 31, 1998, unless
its term is extended or reduced by the General Partner. The principal
objective of the Partnership was to provide long-term capital appreciation to
investors through investing in the development and commercialization of new
products with technology companies ("Sponsor Companies"), which were expected
to address significant market opportunities.
On November 14, 1994, the General Partner commenced with the dissolution of
the Partnership's assets but does not intend to terminate the Partnership until
the contingent payment rights ("CPR") due from Amgen, Inc. ("Amgen") from the
sale of Neupogen<reg-trade-mark> have been fully realized and a lawsuit with
Centocor, Inc. ("Centocor") has been fully resolved. On April 21, 1995, the
Partnership distributed the CPR to its General Partner and limited partners
(the "Limited Partners"; together with the General Partner, the "Partners").
Amgen is required to make CPR payments through the year 2005. The Partnership
received its final CPR payment in June 1995. On July 12, 1995, the Partnership
commenced an action against Centocor in the Supreme Court of New York arising
from certain agreements entered into by Centocor and Eli Lilly & Company in
July 1992. The Partnership's complaint seeks damages, interest and expenses.
There is no assurance that the Partnership's claim will be successful.
<PAGE>
Page 7
PAINEWEBBER R&D PARTNERS, L.P.
(a Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(NOTE 1 CONTINUED)
All distributions to the Partners from the Partnership will be made pro rata
in accordance with their respective net capital contributions. The following
table sets forth the proportion of each distribution to be received by the
Limited Partners and the General Partner, respectively:
Limited General
Partners Partner
-------- -------
I. Until the value of the aggregate
distributions for each limited
partnership unit ("Unit")
equals $1,850 plus interest
on such amount accrued at
5% per annum, compounded
annually ("Contribution Payout") 99% 1%
II. After Contribution Payout and
until the value of the
aggregate distributions for
each Unit equals $9,250
("Final Payout") 80% 20%
III. After Final Payout 75% 25%
At September 30, 1995, the Partnership has made cash and securities
distributions since inception of $889 and $593 per Unit, respectively. The
securities distributions of $593 does not include the distribution of the CPR
in April 1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Marketable securities consist of readily marketable securities that are
valued at market value. Marketable securities are not considered cash
equivalents for the Statements of Cash Flows.
Realized and unrealized gains or losses are determined on a specific
identification method and are reflected in the Statements of Operations during
the period in which the change in value occurs.
The Partnership carried warrants at a zero value in cases where the Sponsor
Company's stock was not publicly traded or the exercise period had not been
attained. To the extent that the Partnership's warrant was currently
exercisable and the Sponsor Company's stock was publicly traded, the warrant
was carried at intrinsic value (the excess of market price per share over the
exercise price per share), which approximated fair value.
3. MARKETABLE SECURITIES AND INVESTMENTS
MARKETABLE SECURITIES:
The money market fund consists of obligations with maturities of one year or
less that are subject to fluctuations in value.
<PAGE>
Page 8
PAINEWEBBER R&D PARTNERS, L.P.
(a Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(NOTE 3 CONTINUED)
At September 30, 1995, the Partnership held the following marketable
security:
Market Cost
--------- --------
Money market fund $149,886 $149,886
======== ========
At December 31, 1994, the Partnership held the following marketable
securities:
Market Cost
-------- --------
Money market fund $469,211 $469,211
41,666 shares of AgriDyne Technologies
Inc. common stock 57,291 0
-------- --------
$526,502 $469,211
======== ========
At December 31, 1994, the market value of AgriDyne Technologies, Inc. common
stock per share was $1.375. In June 1995 the Partnership sold its investment of
41,666 shares at $1.125 per share resulting in a loss of $10,456 for the nine
months ended September 30, 1995.
INVESTMENTS:
At December 31, 1994, the Partnership had an investment of 9,000,000 shares
of Applied Diagnostics, Inc. (a subsidiary of Teknowledge Corporation
("Teknowledge") (formerly Cimflex Teknowledge Corporation)) Series A
Convertible Preferred Stock with a carrying value of zero. As of September 30,
1995, the Partnership has been advised of the dissolution of Applied
Diagnostics, Inc. The Partnership received no distributions as a result of the
dissolution. In addition, the Partnership had one warrant to purchase
1,050,000 shares of Teknowledge common stock with an exercise price of $3.83
which expired in September 1995. The warrant was carried at a cost basis of
zero.
4. RELATED PARTY TRANSACTIONS
The Partnership's portfolio of a money market fund is managed by Mitchell
Hutchins Institutional Investors ("MHII"), an affiliate of PWDC. PWDC pays
MHII a fee with respect to such money management services.
PWDC and PaineWebber Incorporated, and its affiliates, have acted in an
investment banking capacity for several of the Sponsor Companies. In addition,
PWDC and its affiliates have had direct limited partnership interests in the
same product development limited partnerships as the Partnership.
The Partnership is involved in certain legal actions. The General Partner
believes these actions will be resolved without material adverse effect on the
Partnership's financial statements taken as a whole.
<PAGE>
Page 9
PAINEWEBBER R&D PARTNERS, L.P.
(a Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
5. INCOME TAXES
The Partnership is not subject to federal, state or local income taxes.
Accordingly, the individual Partners are required to report their distributive
shares of realized income or loss on their individual federal and state income
tax returns.
<PAGE>
Page 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Partners' capital was $0.1 million at September 30, 1995, compared to $1.7
million at December 31, 1994, a decrease of $1.6 million resulting from cash
distributions to the Partners of $2.5 million offset by net income of $0.9
million (as discussed in Results of Operations below).
The Partnership's working capital is invested in a money market fund.
Liquid assets at September 30, 1995, totaled $0.2 million, a decrease of $0.4
million from the balance of $0.6 million at December 31, 1994. The decrease is
primarily due to the excess of distributions paid to Partners over the income
from product development projects received by the Partnership. The balance of
the liquid assets will be used for the payment of administrative costs related
to the dissolution of the Partnership.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1994:
The net loss for the quarter ended September 30, 1995, was $0.1 million
compared to net income of $1.3 million for the quarter ended September 30,
1994, an unfavorable variance of $1.4 million which is due primarily to a
decrease in revenues.
Revenues for the quarter ended September 30, 1994 were $1.3 million
consisting primarily of the product development income received from Amgen
relating to sales of Neupogen<reg-trade-mark>. Effective April 1, 1995, the
Partnership distributed its rights to future payments from Amgen to its
Partners. The Partnership recognized minimal revenue attributable to interest
income for the quarter ended September 30, 1995.
Expenses, consisting of general and administrative costs, were $81,000 for
the quarter ended September 30, 1995, as compared to $46,000 for the same
period in 1994. The increase in expenses in the third quarter of 1995 is
attributable to the under-accrual of expenses by the Partnership for the first
six months of 1995.
<PAGE>
Page 11
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1994:
Net income for the nine months ended September 30, 1995, was $0.9 million
compared to net income of $2.7 million for the nine months ended September 30,
1994, a decrease of $1.8 million resulting from a decline in revenues of $2.6
million offset by a decrease in expenses of $0.8 million.
Revenues, which consisted primarily of income from product development
projects, were $1.1 million for the nine months ended September 30, 1995,
compared to $3.7 million for the same period in 1994. Income from product
development projects for this period in 1994 was primarily attributable to
royalty income accrued or received from Amgen as a result of the product sales
of Neupogen. Effective April 1, 1995, the Partnership distributed its rights
to future income from Amgen from the sales of Neupogen to its Partners.
Accordingly, the Partnership recognized income from Amgen solely attributable
to the first quarter of 1995 in the amount of $1.1.
Expenses were $0.1 million for the nine months ended September 30, 1995
compared to $0.9 million for the same period in 1994, a decrease of $0.8
million attributable to the write-down of the Partnership's investment in DSI
from $0.8 million to zero in March 1994.
<PAGE>
Page 12
PART II. OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS.
ACTION AGAINST CENTOCOR, INC.
Information regarding this action was disclosed on the Partnership's
Form 10-Q for the quarter ended June 30, 1995. Centocor, Inc. has moved
to dismiss the complaint on the ground that New York is allegedly an
inconvenient forum.
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS:
None
b) REPORTS ON FORM 8-K:
None
<PAGE>
Page 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on this 10th day of
November 1995.
PAINEWEBBER R&D PARTNERS, L.P.
By: PaineWebber Technologies, L.P.
(General Partner)
By: PWDC Holding Company
(General partner of the General Partner)
By:
-----------------------------------------
Eugene M. Matalene, Jr.
President and Principal Executive Officer
By:
------------------------------------------
Pierce R. Smith
Principal Financial and Accounting Officer
* The capacities listed are with respect to PWDC Holding Company, the Manager,
as well as the general partner of the General Partner of the Registrant.
<PAGE>
Page 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on this 10th of November
1995.
PAINEWEBBER R&D PARTNERS, L.P.
By: PaineWebber Technologies, L.P.
(General Partner)
By: PWDC Holding Company
(General partner of the General Partner)
By: EUGENE M. MATALENE, JR. /S/
---------------------------
Eugene M. Matalene, Jr.
President and Principal Executive Officer
By: PIERCE R. SMITH/S/
---------------------------
Pierce R. Smith
Principal Financial and Accounting Officer
* The capacities listed are with respect to PWDC Holding Company, the Manager,
as well as the general partner of the General Partner of the Registrant.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000770470
<NAME> PaineWebber R&D Partners, L.P.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 72,712
<SECURITIES> 149,886
<RECEIVABLES> 1,927
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 224,525
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 224,525
<CURRENT-LIABILITIES> 70,330
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 154,195
<TOTAL-LIABILITY-AND-EQUITY> 224,525
<SALES> 0
<TOTAL-REVENUES> 1,085,901
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 178,945
<LOSS-PROVISION> 0
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<INCOME-TAX> 0
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