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 JUNE 30, 1997
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
JUNE 30, 1997
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Statements of Financial Condition (unaudited) 2
at June 30, 1997 and December 31, 1996
Statements of Operations
(unaudited) for the three months and six months
ended June 30, 1997 and 1996 3
Statement of Changes in Partners' Deficit
(unaudited) for the six months ended
June 30, 1997 4
Statements of Cash Flows
(unaudited) for the six months ended
June 30, 1997 and 1996 5
Notes to Financial Statements
(unaudited) 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
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>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PAINEWEBBER R&D PARTNERS, L.P.
(a Delaware Limited Partnership)
Statements of Financial Condition
(unaudited)
June 30, December 31,
1997 1996
-------- -----------
Assets:
Cash $ 14,320 $ 22,634
Royalty income receivable 1,000 2,200
-------- --------
Total assets $ 15,320 $ 24,834
======== ========
Liabilities and partners' deficit:
Accrued liabilities $ 47,926 $ 38,761
Partners' deficit (32,606) (13,927)
-------- --------
Total liabilities and partners' deficit $ 15,320 $ 24,834
======== ========
See notes to financial statements.
2
<PAGE>
PAINEWEBBER R&D PARTNERS, L.P.
(a Delaware Limited Partnership)
Statements of Operations
(unaudited)
For the three months ended June 30, 1997 1996
-------- --------
Revenues:
Interest income $ 383 $ 1,268
Income from product development project 575 2,242
-------- --------
958 3,510
-------- --------
Expenses:
General and administrative costs 31,139 29,514
-------- --------
Net loss $(30,181) $(26,004)
======== ========
Net loss per partnership unit:
Limited partners (based on 37,799 units) $ 0.00 $ (0.68)
General partner $(30,181.00) $(260.04)
- --------------------------------------------------------------------------------
For the six months ended June 30, 1997 1996
Revenues:
Interest income $ 678 $ 3,201
Income from product development project 1,538 3,028
-------- --------
2,216 6,229
-------- --------
Expenses:
General and administrative costs 67,743 63,339
-------- --------
Net loss $(65,527) $(57,110)
======== ========
Net loss per partnership unit:
Limited partners (based on 37,799 units) $ 0.00 $ (1.50)
General partner $(65,527.00) $(571.10)
See notes to financial statements.
3
<PAGE>
PAINEWEBBER R&D PARTNERS, L.P.
(a Delaware Limited Partnership)
Statement of Changes in Partners' Deficit
(unaudited)
<TABLE>
<CAPTION>
Limited General
For the six months ended June 30, 1997 Partners Partner Total
<S> <C> <C> <C>
Balance at January 1, 1997 $ 0 $ (13,927) $ (13,927)
Net loss 0 (65,527) (65,527)
General Partner contribution 0 46,848 46,848
-------- --------- ---------
Balance at June 30, 1997 $ 0 $ (32,606) $ (32,606)
======== ========= =========
</TABLE>
See notes to financial statements.
4
<PAGE>
PAINEWEBBER R&D PARTNERS, L.P.
(a Delaware Limited Partnership)
Statements of Cash Flows
(unaudited)
For the six months ended June 30, 1997 1996
-------- --------
Cash flows from operating activities:
Net loss $(65,527) $(57,110)
Adjustments to reconcile net loss to cash
used for operating activities:
Decrease in operating assets:
Marketable securities 0 28,761
Interest receivable 0 581
Royalty income receivable 1,200 0
Increase (decrease) in operating liabilities:
Accrued liabilities 9,165 (42,272)
-------- --------
Cash used for operating activities (55,162) (70,040)
-------- --------
Cash flows from financing activities:
Contribution by General Partner 46,848 20,713
-------- --------
Cash provided by financing activities 46,848 20,713
-------- --------
Decrease in cash (8,314) (49,327)
Cash at beginning of period 22,634 74,542
-------- --------
Cash at end of period $ 14,320 $ 25,215
======== ========
Supplemental disclosure of cash flow information:
The Partnership paid no cash for interest or taxes during the six months ended
June 30, 1997 and 1996.
See notes to financial statements.
5
<PAGE>
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 June 30, 1997
and 1996 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 June 30, 1997,
are not necessarily indicative of results to be expected for the year ended
December 31, 1997. 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, 1996 and the previously issued quarterly report on Form 10-Q for
the quarter ended March 31, 1997.
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 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 Paine Webber
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.
The General Partner has commenced with the dissolution of the
Partnership's assets but does not intend to terminate the Partnership until a
lawsuit with Centocor, Inc. ("Centocor") has been fully resolved (see Note 5).
On April 1, 1995, the Partnership distributed its contingent payment rights
("CPR") due from Amgen Inc. ("Amgen") through the year 2005 from the sale of
Neupogen(R) to its General Partner and limited partners (the "Limited Partners",
collectively, the "Partners"), but continued to receive CPR payments on account
of, and for payment to, the Partners. Such continuing CPR payments are no longer
available to pay any expenses of the Partnership. In December 1996, the
Partnership and Amgen entered into a Consent Agreement permitting PWDC to assume
the ongoing responsibility for receiving the CPR payments and making the
corresponding payments to the Partners. Currently, the Partnership does not have
available sufficient cash flow to meet working capital requirements (consisting
primarily of expenses relating to the dissolution of the Partnership). The
General Partner is making, and will continue to make, capital contributions to
the Partnership to fund working capital deficits until such time as the
Partnership is terminated.
6
<PAGE>
(NOTE 1 CONTINUED)
All distributions to the Partners from the Partnership have been 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:
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNERS
-------- --------
<S> <C> <C> <C>
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%
</TABLE>
For the six months ended June 30, 1997, the Partnership made no cash or
security distributions. As of June 30, 1997, the Partnership has made cash and
security distributions, as valued on the dates of distribution, since inception
of $889 and $593 per Unit, respectively. The cash and security distributions do
not include distributions made in connection with the CPR through June 30, 1997,
totaling $280 per Unit.
Effective February 1997, the General Partner removed the previously
imposed restrictions on the transferability of Units to permit, subject to the
approval of the General Partner, transfers in addition to those that occur as a
result of the laws of descent and distribution or by operation of law.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements are prepared in conformity with generally
accepted accounting principles which require management to make certain
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
3. RELATED PARTY TRANSACTIONS
PWDC and PaineWebber Incorporated and it 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.
4. 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.
7
<PAGE>
PAINEWEBBER R&D PARTNERS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
5. LEGAL PROCEEDING
In July 1995, the Partnership commenced an action in the Supreme Court of
the State of New York (the "Court") against Centocor arising out of Centocor's
July 1992 transactions with Eli Lilly & Company ("Lilly"). In April 1996, the
Court granted Centocor's motion to dismiss the action on the grounds that New
York was an inconvenient forum. Accordingly, the Partnership refiled its claims
in Delaware Superior Court.
In 1986, the Partnership and others purchased limited partnership
interests in Centocor Partners II, L.P. ("CP II"), a limited partnership formed
to develop and sell Centoxin, a Centocor drug. On February 21, 1992, Centocor
exercised its option to purchase all of the limited partnership interests in CP
II, including those held by the Partnership. The purchase agreement provided
that Centocor would thereafter pay to the former limited partners 50% of
Centocor's revenues from the licensing or sublicensing of Centoxin and 8% of
Centocor's revenues from Centoxin sales, with such payments to be made on the
last business day of the calendar quarter in which they were earned.
In July 1992, Centocor entered into a set of agreements with Lilly for the
stated purposes of Lilly making an equity investment in Centocor and furthering
the testing and eventual distribution of Centoxin. Pursuant to those agreements,
Lilly paid Centocor a total of $100 million, and Centocor conveyed to Lilly,
among other things, two million shares of Centocor common stock, exclusive
marketing rights to Centoxin and an option to acquire exclusive marketing rights
to CentoRx (now ReoPro), another Centocor drug.
The Partnership's complaint alleges, among other things, that part of the
$100 million paid by Lilly constitutes revenues to Centocor from the licensing,
sublicensing and/or sale of Centoxin, and that Centocor is obligated to pay a
percentage of that part to the former limited partners of CP II, including the
Partnership. The Partnership is seeking to proceed on behalf of itself and all
other former limited partners of CP II whose interests were acquired by Centocor
in February 1992 (the "Class"). The complaint seeks damages, interest and
expenses. Centocor has taken the positions that: it is not obligated to make any
further payments to former limited partners of CP II and the Partnership is not
a proper Class representative. This action is presently scheduled for trial in
January 1998.
In February 1996, Jerome Petrisko, another former limited partner of CP
II, commenced a purported class action in the Court of Common Pleas of the State
of Pennsylvania against Centocor and Lilly. The claims in that action are
similar to those asserted in the Partnership's complaint. In March 1997, Mr.
Petrisko filed a second action in Delaware Superior Court, which action has been
consolidated with the Partnership's action. Motions by the Partnership and Mr.
Petrisko for class certification are pending. Mr. Petrisko has stated that he
intends to discontinue his Pennsylvania action.
8
<PAGE>
PAINEWEBBER R&D PARTNERS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(NOTE 5 CONTINUED)
PWDC has been advancing, and may continue to advance, the funds necessary
to pay the Partnership's legal fees and expenses relating to this action. In the
event of a recovery on behalf of the Class, the Court may award legal fees and
expenses to the Partnership's counsel, to be paid out of the recovery. The
amounts of any recovery and award of legal fees and expenses cannot be estimated
at this time. It is anticipated that: the net proceeds of any recovery will be
distributed to the members of the Class, including the Partnership, on a pro
rata basis; the Partnership and/or its counsel will reimburse PWDC; and any
remaining Partnership proceeds will be distributed to the Partners of the
Partnership on a pro rata basis.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Partners' deficit was $14,000 at December 31, 1996, as compared to $32,600
at June 30, 1997, resulting from a net loss of $65,500 offset by a contribution
from the General Partner of $46,900. The Partnership does not have available
sufficient cash flow to meet working capital requirements consisting primarily
of expenses relating to the dissolution of the Partnership. Therefore, the
General Partner is making, and will continue to make, capital contributions to
the Partnership to fund working capital deficits.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE THREE MONTHS
ENDED JUNE 30, 1996:
The net loss for the quarter ended June 30, 1997, approximated $30,200
compared to a net loss of $26,000 for the quarter ended June 30, 1996. Revenues
for the Partnership consisted of minimal amounts received from a product
development project and interest income earned on cash balances. Expenses
consisted of general and administrative costs incurred in connection with the
dissolution of the Partnership.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO THE SIX MONTHS
ENDED JUNE 30, 1996:
The net loss for the six months ended June 30, 1997 and 1996 was $65,500
and $57,100, respectively. Revenues for the Partnership consisted of minimal
amounts received from a product development project and interest income earned
on cash balances. Expenses consisted of general and administrative costs
incurred in connection with the dissolution of the Partnership.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
ACTION AGAINST CENTOCOR, INC.
Information regarding this action was disclosed on the
Partnership's Form 10-K for the year ended December 31, 1996 and the
Partnership's Form 10-Q for the quarter ended March 31, 1997.
Motions by the Partnership and another former limited partner of
Centocor Partners II, L.P. for class certification are pending.
IN RE: PAINEWEBBER LIMITED PARTNERSHIP LITIGATION
Information regarding this action was disclosed on the
Partnership's Form 10-K for the year ended December 31, 1996 and the
Partnership's Form 10-Q for the quarter ended March 31, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A) EXHIBITS:
None
B) REPORTS ON FORM 8-K:
None.
11
<PAGE>
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 14th day of August
1997.
PAINEWEBBER R&D PARTNERS, L.P.
By: PaineWebber Technologies, L.P.
(General Partner)
By: PWDC Holding Company
(general partner of the General Partner)
By: Dhananjay M. Pai /s/
--------------------
Dhananjay M. Pai
President*
By: Anthony M. DiIorio /s/
---------------------
Anthony M. DiIorio
Principal Financial and Accounting Officer*
* The capacities listed are with respect to PWDC Holding Company
as well as PWDC, the parent company of PWDC Holding Company.
12
<PAGE>
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 14th day of August
1997.
PAINEWEBBER R&D PARTNERS, L.P.
By: PaineWebber Technologies, L.P.
(General Partner)
By: PWDC Holding Company
(general partner of the General Partner)
By: Dhananjay M. Pai/s/
------------------
Dhananjay M. Pai
President*
By: Anthony M. DiIorio/s/
--------------------
Anthony M. DiIorio
Principal Financial and Accounting Officer*
* The capacities listed are with respect to PWDC Holding Company,
as well as PWDC, the parent company of the PWDC Holding Company.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000770470
<NAME> PAINEWEBBER R&D PARTNERS, L.P.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 14,320
<SECURITIES> 0
<RECEIVABLES> 1,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,320
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,320
<CURRENT-LIABILITIES> 47,926
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (32,606)
<TOTAL-LIABILITY-AND-EQUITY> 15,320
<SALES> 0
<TOTAL-REVENUES> 2,216
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 67,743
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (65,527)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (65,527)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
