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 Quarterly Period Ended September 30, 1996
Commission file number 0-15681
WESTMED VENTURE PARTNERS, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 13-3443230
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(State of organization) (I.R.S. Employer Identification No.)
Oppenheimer Tower, World Financial Center
New York, New York 10281
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 667-7000
Not applicable
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Former name, former address and former fiscal year, if changed since last report
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>
WESTMED VENTURE PARTNERS, L.P.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets as of September 30, 1996 (Unaudited) and December 31, 1995
Schedule of Portfolio Investments at September 30, 1996 (Unaudited)
Statements of Operations for the Three and Nine Months Ended September 30, 1996
and 1995 (Unaudited)
Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
Statement of Changes in Partners' Capital for the Nine Months Ended
September 30, 1996 (Unaudited)
Notes to Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
WESTMED VENTURE PARTNERS, L.P.
BALANCE SHEETS
<TABLE>
September 30, 1996 December 31,
(Unaudited) 1995
ASSETS
Portfolio investments, at fair value
(cost $9,477,568 at September 30, 1996 and $11,690,534
<S> <C> <C> <C> <C> <C> <C>
at December 31, 1995) - Notes 2 and 4 $ 11,425,843 $ 13,668,256
Cash and cash equivalents - Note 2 6,197,955 2,310,697
Prepaid expenses 55,984 37,588
Accrued interest receivable 1,358 1,500
--------------- ----------------
TOTAL ASSETS $ 17,681,140 $ 16,018,041
=============== ================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 105,354 $ 64,979
Due to Managing General Partner - Note 4 87,841 82,705
Due to Independent General Partners - Note 4 7,500 15,000
--------------- ----------------
Total liabilities 200,695 162,684
--------------- ----------------
Partners' Capital:
Managing General Partner 174,808 158,557
Limited Partners (66,929 Units) 17,305,637 15,696,800
--------------- ----------------
Total Partners' capital 17,480,445 15,855,357
--------------- ----------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 17,681,140 $ 16,018,041
=============== ================
</TABLE>
See notes to financial statements.
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
September 30, 1996
Active Portfolio Investments:
<TABLE>
Initial Investment
Company / Position Date Cost Fair Value
Aprogenex, Inc.(A)
<C> <C> <C> <C>
476,739 shares of Common Stock Jan. 1989 $ 1,471,807 $ 329,450
10% convertible promissory note due 5/29/98 ` 212,120 212,120
Warrant to purchase 16,458 shares of Common Stock
at $7.39 per share, expiring 10/15/98 0 0
Warrant to purchase 13,000 shares of Common Stock
at $1.10 per share, expiring 5/29/99 0 0
--------------- ---------------
1,683,927 541,570
- -------------------------------------------------------------------------------------------------------------------------------
Bellara Medical Products Ltd.(A)
442,430 shares of Common Stock Sept. 1987 250,000 0
- -------------------------------------------------------------------------------------------------------------------------------
Cortex Pharmaceuticals, Inc.(A)
140,833 shares of Common Stock May 1988 504,038 422,499
75,000 shares of Preferred Stock 53,030 22,077
--------------- ---------------
557,068 444,576
- -------------------------------------------------------------------------------------------------------------------------------
Exocell, Inc.*
598,083 shares of Preferred Stock Feb. 1988 714,266 464,266
Convertible note due 3/31/97 53,030 53,030
--------------- ---------------
767,296 517,296
- -------------------------------------------------------------------------------------------------------------------------------
HBO & Co.(A)
3,926 shares of Common Stock Dec. 1987 165,934 262,059
- -------------------------------------------------------------------------------------------------------------------------------
MNI Group Inc.(A)
211,973 shares of Common Stock Sept. 1987 451,457 56,395
- -------------------------------------------------------------------------------------------------------------------------------
Nimbus Medical, Inc.
200,709 shares of Common Stock Apr. 1988 380,431 192,374
Nimbus Medical, L.P.
38,340 units of limited partnership interest 635 30,289
--------------- ---------------
381,066 222,663
- -------------------------------------------------------------------------------------------------------------------------------
Oclassen Pharmaceuticals, Inc.
292,955 shares of Preferred Stock Jan. 1989 1,351,405 2,705,842
- -------------------------------------------------------------------------------------------------------------------------------
Somatogen, Inc.(A)
125,404 shares of Common Stock Dec. 1988 657,194 1,426,469
- -------------------------------------------------------------------------------------------------------------------------------
Ultramed, Inc.
954,545 shares of Preferred Stock Oct. 1987 333,410 0
18% Convertible Promissory Notes 159,090 150,000
12% Promissory Note 7,500 7,500
Warrant to purchase 7,500 shares of Common Stock
at $.05 per share, expiring 2/1/97 0 0
-------------- ---------------
500,000 157,500
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) - continued
September 30, 1996
Active Portfolio Investments:
<TABLE>
Initial Investment
Company / Position Date Cost Fair Value
UroCor, Inc.(A)
<C> <C> <C> <C>
384,982 shares of Common Stock May 1991 $ 1,097,258 $ 3,645,298
Warrant to purchase 8,000 shares of Common Stock
at $1.25 per share, expiring 2/13/01 0 65,750
Warrant to purchase 8,995 shares of Common Stock
at $4.30 per share, expiring 10/18/98 0 46,493
Warrant to purchase 9,000 shares of Common Stock
at $5.00 per share, expiring 6/2/00 0 40,219
--------------- ---------------
1,097,258 3,797,760
- -------------------------------------------------------------------------------------------------------------------------------
Xenova Group plc(A)
304,403 Ordinary shares Aug. 1988 1,614,963 1,293,713
- -------------------------------------------------------------------------------------------------------------------------------
Totals From Active Portfolio Investments $ 9,477,568 $ 11,425,843
=================================
SUPPLEMENTAL INFORMATION: LIQUIDATED PORTFOLIO INVESTMENTS(B)
Cost Realized Loss Return
Totals From Liquidated Portfolio Investments $ 19,141,346 $ (7,758,452) $ 11,382,894
=====================================================
Combined Combined
Unrealized and Fair Value
Cost Realized Loss and Return
Totals From Active and Liquidated Portfolio Investments $ 28,618,914 $ (5,810,177) $ 22,808,737
=====================================================
</TABLE>
(A) Public company
(B)Amounts provided for "Supplemental Information: Liquidated Portfolio
Investments" are cumulative from inception through September 30, 1996.
* May be deemed an affiliated person of the Partnership as defined in the
Investment Company Act of 1940.
See notes to financial statements.
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
-------------- --------------- -------------- ----------
INVESTMENT INCOME AND EXPENSES
Income:
<S> <C> <C> <C> <C>
Interest from short-term investments $ 82,893 $ 31,118 $ 151,302 $ 99,639
Interest, dividend and other income from
portfolio investments 79 - 237 55,593
-------------- --------------- -------------- ---------------
Total 82,972 31,118 151,539 155,232
-------------- --------------- -------------- ---------------
Expenses:
Management fee - Note 4 87,841 81,989 251,773 188,300
Professional fees 27,125 23,325 85,358 44,886
Mailing and printing 3,773 7,998 20,287 27,910
Insurance expense 18,517 20,545 58,034 69,471
Custodial fees 1,118 907 3,824 4,283
Independent General Partners' fees - Note 4 2,500 3,750 9,877 11,250
Miscellaneous 158 10 3,372 1,263
-------------- --------------- -------------- ---------------
Total 141,032 138,524 432,525 347,363
-------------- --------------- -------------- ---------------
NET INVESTMENT LOSS (58,060) (107,406) (280,986) (192,131)
Net realized gain from portfolio investments - 65,470 1,935,521 65,470
-------------- --------------- -------------- ---------------
NET REALIZED GAIN (LOSS)
FROM OPERATIONS (58,060) (41,936) 1,654,535 (126,661)
Net change in unrealized appreciation or
depreciation of investments (648,976) 1,611,372 (29,447) 1,909,857
--------------- --------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS
(allocable to Partners) - Note 3 $ (707,036) $ 1,569,436 $ 1,625,088 $ 1,783,196
=============== =============== ============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30, 1996
<TABLE>
1996 1995
-------------- ---------
CASH FLOWS USED FOR OPERATING ACTIVITIES
<S> <C> <C>
Net investment loss $ (280,986) $ (192,131)
Adjustments to reconcile net investment loss to cash used for operating
activities:
(Increase) in prepaid expenses (18,396) (5,151)
(Increase) decrease in accrued interest receivable 142 (400)
Increase (decrease) in payables 38,011 (10,493)
-------------- ---------------
Cash used for operating activities (261,229) (208,175)
--------------- ---------------
CASH FLOWS PROVIDED FROM INVESTING ACTIVITIES
Proceeds from the sale of portfolio investments 4,330,318 275,850
Cost of portfolio investments purchased (212,120) (238,635)
Cash distribution from Nimbus Medical L.P. 30,289 -
-------------- ---------------
Cash provided from investing activities 4,148,487 37,215
-------------- ---------------
Increase (decrease) in cash and cash equivalents 3,887,258 (170,960)
Cash and cash equivalents at beginning of period 2,310,697 2,609,028
-------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,197,955 $ 2,438,068
============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (UNAUDITED)
For the Nine Months Ended September 30, 1996
<TABLE>
Managing
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance at beginning of period $ 158,557 15,696,800 15,855,357
Net increase in net assets resulting
from operations - Note 3 16,251 1,608,837 1,625,088
------------- --------------- ----------------
Balance at end of period $ 174,808 $ 17,305,637(A) $ 17,480,445
============= =============== ================
</TABLE>
(A) The net asset value per unit of limited partnership interest, including
the allocation of net unrealized appreciation of investments, was $259 at
September 30, 1996. Such per unit amount is based on average allocations
to all limited partners and does not reflect specific limited partner
allocations, which are determined by the original closing date associated
with the units of limited partnership interest held by each limited
partner.
See notes to financial statements.
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Purpose
WestMed Venture Partners, L.P. (the "Partnership") was formed under Delaware law
on February 5, 1987. The Partnership operates as a business development company
under the Investment Company Act of 1940, as amended. The Partnership is a
closed-end investment fund and accordingly its units of limited partnership
interest ("Units") are not redeemable. A total of 66,929 Units were sold to
limited partners (the "Limited Partners" and together with the Managing General
Partner (as hereinafter defined), the "Partners") at $500 per Unit.
The general partners of the Partnership include two individuals (the
"Independent General Partners") and the managing general partner, WestMed
Venture Management, L.P., a Delaware limited partnership (the "Managing General
Partner" and collectively with the Independent General Partners, the
"General Partners"). The general partner of the Managing General Partner is
Medical Venture Holdings, Inc., a Delaware corporation affiliated with
Oppenheimer & Co., Inc. ("Opco"). The limited partners of the Managing General
Partner are Oppenheimer Holdings, Inc., MVP Holdings, Inc. and BSW, Inc., a
Delaware corporation owned by John A. Balkoski, Philippe L. Sommer and Howard
S. Wachtler. Alsacia Venture Management, Inc. (the "Sub-Manager"), a
corporation controlled by Philippe L. Sommer, is the sub-manager of the
Partnership pursuant to a sub-management agreement among the Partnership,
the Managing General Partner and the Sub-Manager. The Sub-Manager has been
retained by the Managing General Partner to assist the Managing General Partner
in the performance of its duties to the Partnership.
Opco, a member firm of the New York Stock Exchange, the National Association of
Securities Dealers, Inc., and all principal United States securities exchanges,
is a diversified investment banking and securities firm and registered
investment advisor, providing a broad range of services to individual,
corporate, and institutional clients. Opco operates in the capacity of broker
and dealer for its customers, as well as trader for its own account. The
services provided by Opco and its subsidiaries, and the activities in which it
is engaged, include securities brokerage, securities research, customer
financing, securities trading, corporate finance, mergers and acquisitions,
underwriting and investment advisory services.
The Partnership's objective is to achieve long-term capital appreciation from
its portfolio of venture capital investments, consisting of companies engaged in
the health care industry. The Partnership is scheduled to terminate on December
31, 1997, subject to the right of the General Partners to extend the term for up
to two additional two-year periods, if they determine that such extensions are
in the best interest of the Partnership.
2. Summary of Significant Accounting Policies
Valuation of Investments - Portfolio investments are carried at fair value as
determined quarterly by the Managing General Partner under the supervision of
the Independent General Partners. The fair value of publicly-held portfolio
securities is adjusted to the closing public market price for the last trading
day of the
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
accounting period discounted for sales restrictions. Factors considered in the
determination of an appropriate discount include underwriter lock-up or Rule 144
trading restrictions, insider status where the Partnership either has a
representative serving on the board of directors of the portfolio company under
consideration or is greater than a 5% shareholder thereof, and other liquidity
factors such as the size of the Partnership's position in a given company
compared to the trading history of the public security. Privately-held portfolio
securities are carried at cost until significant developments affecting the
portfolio company provide a basis for change in valuation. The fair value of
private securities is adjusted (i) to reflect meaningful third-party
transactions in the private market and (ii) to reflect significant progress or
slippage in the development of the company's business such that cost no longer
reflects fair value. As a venture capital investment fund, the Partnership's
portfolio investments involve a high degree of business and financial risk that
can result in substantial losses. The Managing General Partner considers such
risks in determining the fair value of the Partnership's portfolio investments.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investment Transactions - Investment transactions are recorded on the accrual
method. For portfolio investments, transactions are recorded on the date which
the Partnership obtains an enforceable right to demand the securities or payment
thereof. Realized gains and losses on investments sold are computed on a
specific identification basis.
Statements of Cash Flows - Cash and cash equivalents include short-term
interest-bearing investments in commercial paper and other money market
investments. The Partnership considers its interest-bearing cash account to be
cash equivalents.
Income Taxes - No provision for income taxes has been made since all income and
losses are allocable to the partners for inclusion in their respective tax
returns. The Partnership's net assets for financial reporting purposes differ
from its net assets for tax purposes. Net unrealized appreciation of $1.9
million at September 30, 1996, which was recorded for financial statement
purposes, was not recognized for tax purposes. Additionally, from inception to
September 30, 1996, other timing differences totaling $7.9 million, relating to
net realized losses, original sales commissions paid and other costs of selling
the Units, have been recorded on the Partnership's financial statements but have
not yet been deducted for tax purposes.
3. Allocations of Partnership Profits and Losses
Pursuant to the Partnership's agreement of limited partnership, as amended (the
"Partnership Agreement"), the Partnership's net income and net realized gains
from all sources are allocated to all Partners, in proportion to
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
their capital contributions, until all Partners have been allocated an amount
equal to 6% per annum, simple interest, on their total Adjusted Invested
Capital; i.e., original capital contributions reduced by previous distributions
(the "Priority Return"). Thereafter, net income and net realized gains from
venture capital investments in excess of the amount used to cover the Priority
Return are allocated 20% to the Managing General Partner and 80% to all Partners
in proportion to their capital contributions. Any net income from non-venture
capital investments in excess of the amount used to cover the Priority Return is
allocated to all Partners in proportion to their capital contributions. Realized
losses are allocated to all Partners in proportion to their capital
contributions. However, if realized gains had been previously allocated in the
80-20 ratio, then losses are allocated in the reverse order in which profits
were allocated. From its inception to September 30, 1996, the Partnership had a
$7.3 million net loss from its venture capital investments including interest
and other income from portfolio investments totaling $493,000.
4. Related Party Transactions
Pursuant to the Partnership Agreement, the Managing General Partner is entitled
to receive a one-time venture capital fee equal to 5% of the gross proceeds from
the sale of Units. Such fee is incurred as portfolio investments are made in the
proportion of the cost of each portfolio investment to the net proceeds from the
sale of Units. Venture capital fees incurred are recorded as a cost of acquiring
the portfolio investments. There were no venture capital fees for the three
months ended September 30, 1996. Cumulative venture capital fees incurred from
inception to September 30, 1996 totaled $1.6 million.
Pursuant to a management agreement between the Partnership and the Managing
General Partner, the Managing General Partner is responsible for the management,
administrative and certain investment advisory services necessary for the
operation of the Partnership. For such services, the Managing General Partner
receives a management fee at the annual rate of 2% of the lesser of the net
assets of the Partnership or the net contributed capital of the Partnership;
i.e., gross capital contributions to the Partnership (net of selling commissions
and organizational expenses) reduced by capital distributed. Such fee is
determined and payable quarterly. The compensation of the Sub-Manager is paid
directly by the Managing General Partner.
For services rendered to the Partnership, each of the two Independent General
Partners receives a $5,000 annual fee and reimbursement for all out-of-pocket
expenses relating to attendance at meetings of the General Partners.
5. Cash Distributions
No cash distributions were paid to Partners during the three months ended
September 30, 1996. Cumulative cash distributions paid to Partners from
inception through September 30, 1996 total $5.71 million; $5.65 million, or
approximately $85 per $500 Unit, to the Limited Partners, and $57,000 to the
Managing General Partner.
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
6. Subsequent Event - Cash Distribution
Subsequent to the end of the quarter, on November 12, 1996, the General Partners
approved a cash distribution to Partners totaling $4,529,538. Limited Partners
will receive $4,484,243, or $67 per Unit, and the General Partners will receive
$45,295. The distribution will be paid in January 1997 to Limited Partners of
record on December 31, 1996.
7. Classification of Investments
As of September 30, 1996, the Partnership's portfolio investments were
categorized by type and geographic region as follows:
All of the Partnership's portfolio companies are in the health care industry.
<TABLE>
Type of Investments Cost Fair Value % of Net Assets*
- ------------------- --------------- --------------- ----------------
<S> <C> <C> <C>
Common Stock $ 6,805,202 $ 7,992,843 45.73%
Preferred Stock 2,452,111 3,192,185 18.26%
Debt Securities 219,620 210,530 1.20%
Limited Partnerships 635 30,289 .17%
--------------- --------------- --------
$ 9,477,568 $ 11,425,847 65.36%
=============== =============== ========
Country/Geographic Region
United States $ 7,612,605 $ 10,132,134 57.97%
United Kingdom 1,614,963 1,293,713 7.39%
Australia 250,000 0 .00%
--------------- --------------- --------
$ 9,477,568 $ 11,425,847 65.36%
=============== =============== ========
</TABLE>
* Percentage of net assets is based on fair value.
8. Interim Financial Statements
In the opinion of the Managing General Partner, the unaudited financial
statements as of September 30, 1996, and for the three and nine month periods
then ended, reflect all adjustments necessary for the fair presentation of the
results of the interim periods.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
At September 30, 1996, the Partnership had invested an aggregate of $28.6
million in 23 portfolio companies (including acquisition costs and venture
capital fees totaling $2 million) representing approximately 95% of the original
$30 million of net proceeds to the Partnership.
At September 30, 1996, the Partnership held $6.2 million in cash and short-term
investments: $6.0 million in short-term securities with maturities of less than
one year and $191,000 in an interest-bearing cash account. For the three and
nine months ended September 30, 1996, the Partnership earned interest from such
investments totaling $83,000 and $151,000, respectively. Interest earned from
short-term investments in future periods is subject to fluctuations in
short-term interest rates and changes in funds available for investment.
Subsequent to the end of the quarter, on November 12, 1996, the General Partners
approved a cash distribution to Partners totaling $4,529,538. Limited Partners
will receive $4,484,243, or $67 per Unit, and the General Partners will receive
$45,295. The distribution will be paid in January 1997 to Limited Partners of
record on December 31, 1996.
The Partnership does not expect to make additional investments in new portfolio
companies. It is anticipated that funds needed to cover future operating
expenses and follow-on investments in existing portfolio companies will be
obtained from existing cash reserves, interest and other investment income
received, and proceeds from the sale of portfolio investments.
Results of Operations
For the three and nine months ended September 30, 1996, the Partnership had a
$58,000 net realized loss from operations and a $1.7 million net realized gain
from operations, respectively. For the three and nine months ended September 30,
1995, the Partnership had a net realized loss from operations of $42,000 and
$127,000, respectively. Net realized gain or loss from operations is comprised
of (i) net realized gain or loss from portfolio investments and (ii) net
investment income or loss (interest, dividends, and other income, less operating
expenses).
Realized Gains and Losses from Portfolio Investments - The Partnership had no
realized gains or losses from its portfolio investments for the three months
ended September 30, 1996. For the nine months ended September 30, 1996, the
Partnership had a net realized gain from its portfolio investments of $1.9
million. In May 1996, in connection with the merger of Corvita Corporation and a
wholly-owned subsidiary of Pfizer Inc., the Partnership sold its investment in
Corvita for $4.3 million, realizing a gain of $1.9 million.
For the three and nine months ended September 30, 1995, the Partnership had a
net realized gain from its portfolio investments of $65,000. During July and
August 1995, the Partnership sold 51,000 shares of Aprogenex, Inc. common stock
in the public market for $276,000, realizing a gain of $65,000.
Investment Income and Expenses - Net investment loss for the three months ended
September 30, 1996 and 1995 was $58,000 and $107,000, respectively. The decrease
in net investment loss for the 1996 period compared to the 1995 period primarily
resulted from a $52,000 increase in interest earned from short-term investments.
The increase in interest earned from short-term investments resulted from an
increase in funds available for investment in such securities during the 1996
period compared to the 1995 period due to the receipt of $4.3 million in May
1996 from the sale of the Partnership's investment in Corvita, as discussed
above.
Net investment loss for the nine months ended September 30, 1996 and 1995 was
$281,000 and $192,000, respectively. The increase in net investment loss
primarily resulted from an $85,000 increase in operating expenses for the 1996
period compared to the same period in 1995. The increase in operating expenses
includes a $63,000 increase in the management fee, as discussed below, and a
$40,000 increase in professional fees, primarily due to legal fees relating to
the preparation of a proxy statement in connection with the Special Meeting of
Limited Partners held on June 21, 1996. Partially offsetting the increase in
management and professional fees was a $19,000 decrease in other expenses for
the 1996 period compared to the same period in 1995 mainly resulting from lower
insurance costs and mailing and printing expenses.
Pursuant to a management agreement between the Partnership and the Managing
General Partner, the Managing General Partner is responsible for the management,
administrative and certain investment advisory services necessary for the
operation of the Partnership. For such services, the Managing General Partner
receives a management fee at the annual rate of 2% of the lesser of the net
assets of the Partnership or the net contributed capital of the Partnership;
i.e., gross capital contributions (net of selling commissions and organizational
expenses) reduced by capital distributed. Such fee is determined and payable
quarterly. The compensation of the Sub-Manager is paid directly by the Managing
General Partner. Additionally, the Managing General Partner has agreed to reduce
the management fee payable by the Partnership for any director's fees earned by
the Managing General Partner from any of the Partnership's portfolio companies.
For the three months ended September 30, 1996 and 1995, the management fee was
$88,000 and $82,000, respectively. For the nine months ended September 30, 1996
and 1995, the management fee was $252,000 and $188,000, respectively. The
increase in the management fee for the three month period in 1996 compared to
the 1995 period primarily resulted from the increased net asset value of the
Partnership. The increased management fee for the nine month period in 1996
compared to the same period in 1995, reflects the increased net asset value of
the Partnership and a $38,000 reduction to the management fee during the 1995
period reflecting director's fees received by the Managing General Partner.
To the extent possible, the management fee and other operating expenses are paid
with funds provided from operations. Funds provided from operations are obtained
from interest received from short-term investments, interest and other
investment income and from proceeds received from the sale of portfolio
investments.
Unrealized Gains and Losses and Changes in Unrealized Appreciation or
Depreciation of Portfolio Investments - For the nine months ended September 30,
1996, the Partnership had a $288,000 net unrealized gain, primarily resulting
from the net upward revaluation of its investment in UroCor, Inc. due to the
completion of that company's initial public offering in May 1996. Additionally,
during the nine month period, $317,000 of unrealized gain was transferred to
realized gain relating to the sale of the Partnership's investment in Corvita,
as discussed above. The $317,000 transfer of unrealized gain to realized gain,
partially offset by the $288,000 additional unrealized gain, resulted in a
$29,000 decrease to net unrealized appreciation of investments for the nine
month period.
For the nine months ended September 30, 1995, the Partnership had a $1,918,000
net unrealized gain, resulting from the net upward revaluation of its
publicly-traded securities. Additionally, during the nine month period, $8,000
of unrealized gain was transferred to realized gain relating to the sale of
Aprogenex common stock during the period, as discussed above. The $1,918,000 net
unrealized gain partially offset by the $8,000 transfer of unrealized gain to
realized gain resulted in a $1,910,000 increase to net unrealized appreciation
of investments for the nine month period.
Net Assets - Changes to net assets resulting from operations are comprised of
(i) net realized gain or loss from operations and (ii) changes to net unrealized
appreciation or depreciation of portfolio investments.
At September 30, 1996, the Partnership's net assets were $17.5 million,
reflecting an increase of $1.6 million from $15.9 million at December 31, 1995.
The $1.6 million increase was comprised of the $1.7 million net realized gain
from operations partially offset by the $29,000 decrease to net unrealized
appreciation of investments for the nine month period.
At September 30, 1995, the Partnership's net assets were $16.3 million,
reflecting an increase of $1.8 million from $14.5 million at December 31, 1994.
The $1.8 million increase was comprised of the $1.9 million increase to net
unrealized appreciation of investments partially offset by the $127,000 net
realized loss from operations for the nine month period.
The net asset value per $500 Unit, including an allocation of net unrealized
appreciation or depreciation of portfolio investments, at September 30, 1996 and
December 31, 1995 was $259 and $235, respectively. Such per Unit amounts are
based on average allocations to all Limited Partners and do not reflect specific
Limited Partner allocations, which are determined by the original closing date
associated with the Units held by each Limited Partner.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Partnership is not a party to any material pending legal proceedings.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule.
(b) No reports on Form 8-K have been filed during the quarter for which
this report is filed.
<PAGE>
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.
WESTMED VENTURE PARTNERS, L.P.
By: WestMed Venture Management, L.P.
The Managing General Partner
By: MEDICAL VENTURE HOLDINGS, INC.
General Partner
By: /s/ Stephen McGrath
Stephen McGrath
Executive Vice President
By: /s/ Ann Oliveri Fusco
Ann Oliveri Fusco
Vice President and Principal Financial
and Accounting Officer
Date: November 14, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WESTMED
VENTURE PARTNERS, L.P.'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 9,477,568
<INVESTMENTS-AT-VALUE> 11,425,843
<RECEIVABLES> 1,358
<ASSETS-OTHER> 55,964
<OTHER-ITEMS-ASSETS> 6,197,955
<TOTAL-ASSETS> 17,681,140
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 200,695
<TOTAL-LIABILITIES> 200,695
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 66,929
<SHARES-COMMON-PRIOR> 66,929
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,948,275
<NET-ASSETS> 17,480,445
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 151,539
<OTHER-INCOME> 0
<EXPENSES-NET> 432,525
<NET-INVESTMENT-INCOME> (280,986)
<REALIZED-GAINS-CURRENT> 1,935,521
<APPREC-INCREASE-CURRENT> (29,447)
<NET-CHANGE-FROM-OPS> 1,625,088
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,663,099
<ACCUMULATED-NII-PRIOR> 0
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<AVERAGE-NET-ASSETS> 16,667,901
<PER-SHARE-NAV-BEGIN> 235
<PER-SHARE-NII> (4)
<PER-SHARE-GAIN-APPREC> 28
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 259
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
