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 QUARTERLY PERIOD ENDED MARCH 31, 1999
Commission File Number 0-15609
AGOURON PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0061928
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10350 North Torrey Pines Road, La Jolla, California 92037-1020
(Address of principal executive offices) (Zip Code)
(619) 622-3000
(Registrant's telephone number, including area code)
NONE
(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 ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of May 10, 1999, the
registrant had approximately 32,200,000 shares of Common Stock, no par value,
outstanding.
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AGOURON PHARMACEUTICALS, INC.
INDEX
<TABLE>
<S> <C>
PAGE NO.
--------
PART I. Financial Information
ITEM 1. Financial Statements
Consolidated Balance Sheet - 3
March 31, 1999 and June 30, 1998
Consolidated Statement of Income - 4
Three and Nine Months Ended
March 31, 1999 and 1998
Consolidated Statement of Cash Flows- 5
Nine Months Ended March 31, 1999 and 1998
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
PART II. Other Information
ITEM 1. Legal Proceedings 15
ITEM 2. Changes in Securities 15
ITEM 3. Defaults Upon Senior Securities 15
ITEM 4. Submission of Matters to a Vote of Security Holders 15
ITEM 5. Other Information 15
ITEM 6. Exhibits and Reports on Form 8-K 15
Signature 16
</TABLE>
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PART I. FINANCIAL INFORMATION
AGOURON PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, June 30,
1999 1998
-------------- --------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 42,775 $ 19,098
Short-term investments 41,692 68,025
Accounts receivable, net 58,334 51,341
Inventories 98,901 103,706
Current deferred tax assets 877 564
Other current assets 2,580 5,247
-------------- -------------
Total current assets 245,159 247,981
Property and equipment, net of accumulated
depreciation and amortization of $34,123 and $24,321 48,066 47,212
Deferred tax assets 71,262 64,644
Purchased intangibles 3,050 3,500
-------------- -------------
$ 367,537 $ 363,337
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,442 $ 44,393
Accrued liabilities 50,183 35,356
Deferred revenue and advances 8,101 23,563
Current deferred tax liabilities 2,589 1,139
Loan payable and current portion of long-term debt 857 15,802
-------------- -------------
Total current liabilities 85,172 120,253
-------------- -------------
Long-term liabilities:
Long-term debt, less current portion 6,170 5,892
Accrued rent 822 1,023
-------------- -------------
Total long-term liabilities 6,992 6,915
-------------- -------------
Stockholders' equity:
Common stock, no par value, 75,000,000 shares authorized,
32,070,124 and 31,053,380 shares issued and outstanding 373,377 348,482
Accumulated other comprehensive income (expense) (727) 384
Accumulated deficit (97,277) (112,697)
-------------- -------------
Total stockholders' equity 275,373 236,169
-------------- -------------
$ 367,537 $ 363,337
============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
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AGOURON PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- --------------------------
March 31, March 31,
--------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 145,993 $ 111,950 $ 438,056 $ 283,252
Contracts 5,877 8,608 17,310 31,073
Royalties and license fees 5,613 13,900 17,763 16,652
----------- ----------- ----------- ----------
157,483 134,458 473,129 330,977
----------- ----------- ----------- ----------
Operating expenses:
Cost of product sales 60,268 49,220 191,554 121,235
Research and development 44,725 31,859 121,434 89,113
Selling, general and administrative 23,411 14,168 61,254 40,759
Royalties 29,027 18,081 83,005 46,889
----------- ----------- ----------- ----------
157,431 113,328 457,247 297,996
----------- ----------- ----------- ----------
Operating income 52 21,130 15,882 32,981
----------- ----------- ----------- ----------
Other income (expenses):
Interest and other income 1,208 1,624 3,095 4,393
Interest expense (190) (212) (836) (579)
----------- ----------- ----------- ----------
1,018 1,412 2,259 3,814
------------ ----------- ----------- ----------
Income before income taxes 1,070 22,542 18,141 36,795
Income tax provision 160 9,017 2,721 14,718
----------- ----------- ----------- ----------
Net income $ 910 $ 13,525 $ 15,420 $ 22,077
=========== =========== =========== ==========
Earnings per share:
Basic $ .03 $ .44 $ .49 $ .73
=========== ========== =========== ==========
Diluted $ .03 $ .41 $ .45 $ .66
=========== ========== =========== ==========
Shares used in calculation of:
Basic 31,936 30,757 31,491 30,414
Diluted 35,291 32,956 34,236 33,251
</TABLE>
See accompanying notes to consolidated financial statements.
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AGOURON PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
March 31,
--------------------------
1999 1998
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Cash received from product sales, contracts, license fees
and royalties $ 450,674 $ 311,174
Cash paid to suppliers, employees and service providers (445,549) (277,073)
Interest received 3,084 4,443
Interest paid (836) (579)
----------- ------------
Net cash provided (used) by operating activities 7,373 37,965
----------- -----------
Cash flows from investing activities:
Proceeds from maturities/sales of short-term investments 51,619 102,113
Purchases of short-term investments (26,397) (150,299)
Purchases of property and equipment (11,362) (23,200)
----------- -----------
Net cash provided (used) by investing activities 13,860 (71,386)
----------- -----------
Cash flows from financing activities:
Net proceeds from issuance of common stock 17,111 11,411
Proceeds from credit line 40,000 22,600
Principal payments on credit line, long-term debt,
and capital leases (54,667) (23,147)
----------- -----------
Net cash provided (used) by financing activities 2,444 10,864
----------- -----------
Net increase (decrease) in cash and cash equivalents 23,677 (22,557)
Cash and cash equivalents at beginning of period 19,098 52,484
----------- -----------
Cash and cash equivalents at end of period $ 42,775 $ 29,927
=========== ===========
Reconciliation of net income to net cash provided (used) by operating
activities:
Net income $ 15,420 $ 22,077
Depreciation and amortization 10,958 6,206
Provision for deferred income taxes 2,303 14,282
Net (increase) decrease in accounts receivable
and other current assets (4,326) (25,133)
Net (increase) decrease in inventories 4,805 (32,200)
Net increase (decrease) in accounts payable, accrued liabilities,
deferred revenue and advances, and other liabilities (21,787) 52,733
----------- -----------
Net cash provided (used) by operating activities $ 7,373 $ 37,965
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
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AGOURON PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(March 31, 1999)
NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Agouron Pharmaceuticals, Inc. (Agouron or the Company) was organized and
incorporated in California in June 1984. Agouron is an integrated pharmaceutical
company committed to the discovery, development, manufacturing and marketing of
innovative therapeutic products engineered to inactivate proteins which play key
roles in cancer, AIDS and other serious diseases. The Company, through its own
sales and marketing organization, is currently marketing in the United States
and Canada its first drug, VIRACEPT(R) (nelfinavir mesylate) for treatment of
HIV infection. The Company is also conducting pivotal phase II/III clinical
trials for AG3340 for treatment of lung and prostate cancer. In addition,
Agouron has initiated a phase II/III pivotal clinical trial of REMUNE(TM), an
immune-based therapeutic agent for treatment of HIV infection and AIDS being
co-developed by Agouron and The Immune Response Corporation (IRC). Further, the
Company has a number of programs in progress for discovery or development of
other new drugs in the fields of cancer, viral disease and other serious
diseases.
On January 26, 1999, the Company announced that it had signed a definitive
agreement to merge with Warner-Lambert Company, a worldwide company devoted to
discovering, developing, manufacturing, and marketing quality pharmaceuticals,
consumer healthcare, and confectionery products. Warner-Lambert employs more
than 40,000 people worldwide. The proposed merger, which is subject to approval
by Agouron's shareholders, will be treated as a "pooling of interests" for
accounting purposes. If approved, each share of Agouron common stock will be
converted into the right to receive .8934 share of Warner-Lambert common stock.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
FINANCIAL STATEMENTS AND ESTIMATES
The consolidated balance sheet as of March 31, 1999 and the consolidated
statements of income and cash flows for the three and nine-month periods ended
March 31, 1999 and 1998 have been prepared by the Company and have not been
audited. Such financial statements, in the opinion of management, include all
adjustments necessary for their fair presentation in conformity with generally
accepted accounting principles. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's June 30, 1998 Annual Report on Form 10-K. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally
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accepted accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission rules and regulations. Interim results are
not necessarily indicative of results for the full year.
The Company recorded approximately $3,300,000 in merger-related costs in the
quarter ended March 31, 1999. If the merger is approved by Agouron's
shareholders, the Company expects to incur an additional $11,300,000 in
merger-related costs in the quarter ended June 30, 1999.
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, liabilities, revenues and expenses and
related disclosures as of the date of the financial statements. Actual results
could differ from such estimates.
INVENTORIES
The inventories consist of the following components:
<TABLE>
<CAPTION>
March 31, June 30,
(Dollars in thousands) 1999 1998
------------- ------------
<S> <C> <C>
Raw materials and work in process $ 91,286 $ 95,517
Finished goods 7,615 8,189
------------- -------------
$ 98,901 $ 103,706
============= =============
</TABLE>
PRODUCT SALES
The Company has the exclusive right to market its anti-HIV drug VIRACEPT in the
United States and Canada. Accordingly, the Company ships VIRACEPT to wholesalers
throughout the United States and certain provinces of Canada, and recognizes
sales revenue upon shipment. Sales are reported net of discounts, rebates,
chargebacks and product returns.
Also included in product sales for the three and nine-month periods ended March
31, 1999 are approximately $31,488,000 and $103,764,000 of sales (at cost plus
contractually determined mark-ups) to F. Hoffmann-La Roche Ltd (Roche) of
clinical and commercial drug supplies to be used by Roche in its licensed
territory. For the three and nine-month periods ended March 31, 1998, sales to
Roche were approximately $18,942,000 and $30,362,000. The Company receives a
royalty on Roche's subsequent commercial sales of such drug supplies.
7
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ROYALTIES AND LICENSE FEES
Royalty revenues are recognized based on estimated and actual sales of licensed
products in licensed territories.
For the three and nine-month periods ended March 31, 1999, the Company has
accrued and/or received royalties of approximately $5,613,000 and $17,338,000
resulting from estimated and actual net sales of VIRACEPT by Roche within its
licensed territory. For the three and nine-month periods ended March 31, 1998,
Roche royalties were approximately $1,900,000 and $2,652,000.
License fees are recognized as revenue when earned as generally evidenced by
certain factors including: receipt of such fees, satisfaction of any performance
obligations and the non-refundable nature of such fees. In August 1998, the
Company and JT granted Roche certain exclusive rights to VIRACEPT in Mexico. For
such rights, the Company realized as revenue a license fee of $125,000 from
Roche. In December 1998, the Company granted to Zarix Limited, a
biopharmaceutical development company, certain exclusive rights to THYMITAQ, an
anti-cancer drug. For such rights, the Company realized as revenue a license fee
of $300,000.
INCOME TAX PROVISION
The Company records a provision for current and deferred income taxes using the
liability method.
EARNINGS PER SHARE
Basic earnings per share is based upon the weighted average number of the
Company's common shares outstanding during a period. Diluted earnings per share
is based upon the weighted average number of common shares outstanding and
dilutive common stock equivalents during a period. Common stock equivalents are
options under the Company's stock option plans which are included in the
earnings per share computation under the treasury stock method and common shares
expected to be issued under the Company's employee stock purchase plan.
Common stock equivalents of approximately 3,355,000 and 2,745,000 shares for the
three and nine-month periods ended March 31, 1999 were used to calculate diluted
earnings per share. For the three and nine-month periods ended March 31, 1998,
common stock equivalents of approximately 2,199,000 and 2,837,000 shares were
used to calculate diluted earnings per share. There are no reconciling items in
calculating the numerator for basic and diluted earnings per share for any of
the periods presented.
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NOTE 2 - COMPREHENSIVE INCOME
As of July 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (FAS 130), "Reporting Comprehensive Income," which establishes
new rules for the reporting and display of comprehensive income and its
components. FAS 130 requires unrealized gains and losses on the Company's
available-for-sale securities to be included in other comprehensive income. The
Company presents such information in its statement of stockholders' equity on an
annual basis and in a footnote in its quarterly reports. During the three and
nine-month periods ended March 31, 1999, total comprehensive income was $344,000
and $14,309,000, respectively. During the three and nine-month periods ended
March 31, 1998, total comprehensive income was $13,525,000 and $22,077,000.
NOTE 3 - LITIGATION
In January 1999, an action was filed on behalf of the Company's shareholders
against the Company, members of its board of directors, and Warner-Lambert
Company alleging that the board breached fiduciary duties in connection with the
decision to enter into an agreement to merge with Warner-Lambert Company. The
complaint purports to seek various forms of relief, including a preliminary and
permanent injunction against consummation of the transaction with Warner-Lambert
Company and/or money damages. The Company believes the allegations are without
merit.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
When used in this discussion, the words "believes," "anticipates" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties (including those associated with
continued growth of VIRACEPT sales, the impact of competitive products and
regulatory approvals) which could cause actual results to differ materially from
those projected. See "Important Factors Regarding Forward-Looking Statements"
attached as Exhibit 99 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1998 and incorporated herein by reference. Readers are cautioned
not to place undue reliance on these forward-looking statements which speak only
as of the date hereof. The Company undertakes no obligation to publicly release
the result of any revisions to these forward-looking statements which may be
made to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
OVERVIEW
The Company is committed to the discovery, development, manufacturing and
marketing of human pharmaceuticals targeting cancer, AIDS, and other serious
diseases. Operations to date have been principally funded from the Company's
equity-derived working capital, various collaborative arrangements and, most
recently, from the gross margin contribution of VIRACEPT. The net income
reported in the three and nine-month periods ended March 31, 1999 and 1998 is
principally due to the commercialization of VIRACEPT while the Company's prior
net operating losses reflect primarily the result of its independent research
and substantial investment in the clinical and commercial development of
VIRACEPT and certain anti-cancer compounds.
In March 1997, VIRACEPT was approved for marketing in the United States. In
January 1998, March 1998 and August 1998, VIRACEPT was approved for marketing in
Europe, Japan and Canada, respectively. For the three and nine-month periods
ended March 31, 1999, due principally to the increasing product contribution
from VIRACEPT sales, license fees and royalties, the Company realized a net
income of $910,000 and $15,420,000, respectively. Third quarter results were
diluted by a $5,000,000 milestone fee paid to IRC in conjunction with
development of REMUNE and approximately $3,300,000 of costs related to the
proposed merger with Warner-Lambert.
RESULTS OF OPERATIONS
PRODUCT SALES
Product sales for the three and nine-month periods ended March 31, 1999 were
approximately $145,993,000 and $438,056,000, which included sales in North
America of $114,505,000 and $334,292,000, respectively. The Company anticipates
that VIRACEPT sales in North America will meet or exceed $440,000,000 in fiscal
1999.
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CONTRACT REVENUES
Collaborative research and development agreements with Japan Tobacco Inc. (JT),
Hoffmann-La Roche Inc. and F. Hoffmann-La Roche Ltd (collectively, HLR)
accounted for substantially all of the Company's contract revenues for the three
and nine-month periods ended March 31, 1999 and 1998. Total contract revenues
for the three and nine-month periods decreased approximately 32% and 44% due
principally to termination of the HLR collaboration in fiscal 1998.
ROYALTIES AND LICENSE FEES
Royalty revenues of approximately $5,613,000 and $17,338,000 have been
recognized in the three and nine-month periods ended March 31, 1999 based on
estimated and actual Roche sales of VIRACEPT in its licensed territory.
Royalties for the three and nine-month periods increased from the prior year due
to growth in European market share and sales volume
License fee revenues of $12,000,000 were recognized in the prior year's three
month period when VIRACEPT was approved for marketing in Europe (January 1998)
and Japan (March 1998).
COST OF PRODUCT SALES
The aggregate cost of product sales as a percentage of product sales was
approximately 41% and 44% for the three and nine-month periods ended March 31,
1999. The aggregate cost of product sales as a percentage of product sales was
approximately 44% and 43% for the three and nine-month periods ended March 31,
1998. Gross margins on North America commercial sales were approximately 73% and
72% for the three and nine-month periods ended March 31, 1999. The Company
anticipates that gross margins on North America sales will approximate 73% for
fiscal 1999.
RESEARCH AND DEVELOPMENT
Research and development spending for the current three and nine-month periods
increased 40% and 36% from the prior year periods due to costs associated with
increasing average staff levels and staff related spending, a milestone fee paid
to IRC in conjunction with development of REMUNE, and increasing expenses
associated with the clinical development of certain of the Company's anti-viral
and anti-cancer compounds.
In fiscal 1997, the Company acquired Alanex Corporation ("Alanex," a research
company) and recorded a write-off of $57,500,000 (or 92% of the purchase price,
including transaction costs), representing the values determined by management
to be attributable to the in-process technology purchased. Of the amount written
off, approximately 95% was attributed to and supported by a discounted cash flow
analysis of three drug discovery programs which anticipated revenues beginning
in 2003. Approximately 40% of the value was attributed to a compound with
obesity and cardiovascular indications, 30% for compounds with depression and
anxiety indications and 25% for a program to treat endometriosis and sex-hormone
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dependent tumors. The Company believes that the allocations and aggregate values
attributable to these programs were reasonable and appropriate based on the
commercial potential, beginning in 2003, of these three drug discovery programs,
which remain the subject of research or development activities at March 31,
1999.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative costs for the current three and nine-month
periods increased by 65% and 50% from the prior year periods due principally to
increasing sales and marketing activities, the support of VIRACEPT phase IV
marketing studies and costs related to the proposed merger with Warner-Lambert.
ROYALTIES
The Company's obligation to share VIRACEPT profits with JT is reflected in
royalty expense for the three and nine-month periods ended March 31, 1999 and
represents approximately 25% of North America product sales. Royalty expense in
the prior year periods was approximately 20% of North America product sales.
INCOME TAX PROVISION
The income tax provision has been computed using an effective, combined federal
and state rate of 15%. This rate is expected to increase if the proposed merger
with Warner-Lambert becomes effective during the fourth fiscal quarter. The cash
obligation of such provision has been mostly offset by the utilization of
deductions generated by the exercise of stock options and/or the utilization of
deferred tax benefits (comprised mostly of net operating loss carryforwards and
research tax credits).
YEAR 2000
The Year 2000 issue results from computer programs and systems that were created
to accept only two digit dates. Such systems may not be able to distinguish 20th
century dates from 21st century dates. This could result in miscalculations and
system failures that could inhibit the Company's ability to engage in normal
business activities.
The Company has established a Year 2000 project team and is utilizing a
multi-phased approach to address this issue. The phases included in the
Company's plan are the awareness, assessment, remediation, testing,
implementation, and contingency planning phases. The Company has completed the
awareness and assessment phases and has begun to correct and replace those
systems that are not Year 2000 compliant. The Company expects to complete
internal remediation efforts and the validation and contingency phases by the
end of calendar 1999.
The Company has initiated communications with all of its significant external
business partners to determine the extent to which the Company is vulnerable to
their failures and to ascertain Year 2000 compliance and risk. The Company
intends to monitor the progress of these significant business partners and will
develop contingency plans in the event that a
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significant exposure is identified. While the Company is not presently aware of
any such significant exposure, there can be no guarantee that the systems of the
third-parties on which the Company relies will be Year 2000 compliant, or that a
failure to remediate by another company would not have a material adverse effect
on the Company.
The Company estimates that the total cost of its Year 2000 project will not
exceed $1,000,000, including costs already incurred. The anticipated cost of the
project and the dates on which the Company expects to complete major milestones
are based on management's best estimates using information that is currently
available. Based on its current estimates, the Company does not anticipate that
the costs associated with the Year 2000 project will have a material adverse
effect on the Company's business, financial position, or results of operation.
LIQUIDITY AND CAPITAL RESOURCES
Prior to fiscal 1998, the Company relied principally on equity financings and
corporate collaborations to fund its operations and capital expenditures.
Beginning in fiscal 1998, the gross margin from commercial sales of VIRACEPT
contributed significantly to the Company's overall working capital requirements.
Commercial sales of VIRACEPT for the three and nine-month periods ended March
31, 1999 resulted in gross margins of approximately $85,725,000 and
$246,502,000.
At March 31, 1999, the Company had net working capital of approximately
$159,987,000, an increase of $32,259,000 over June 30, 1998 levels due
principally to the Company's pre-tax profit of $18,141,000 and $17,111,000 of
proceeds from the exercise of stock options. Individual working capital
components significantly impacted by the commercialization of VIRACEPT include
trade accounts receivable (an increase of $4,660,000), inventories (a decrease
of $4,805,000), accounts payable (a decrease of $20,951,000) and accrued
liabilities (an increase of $14,827,000, primarily due to accrued royalties
payable to JT). It is anticipated that these working capital components and cash
and short-term investments will continue to be significantly impacted by
VIRACEPT sales. At March 31, 1999, the Company had cash, cash equivalents and
short-term investments of approximately $84,467,000. The Company believes that
its current capital resources, existing contractual commitments and anticipated
VIRACEPT product sales are sufficient to maintain its current operations through
fiscal 1999. This belief is based on current research and clinical development
plans, anticipated working capital requirements associated with the expanding
commercialization of VIRACEPT, the current regulatory environment, historical
industry experience in the development of therapeutic drugs and general economic
conditions.
13
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The Company believes that additional financing may be required to meet the
planned operating needs after fiscal 1999 if significant and increasing positive
cash flows are not generated from commercial activities. Such needs would
include the expenditure of substantial funds to continue and expand research and
development activities, conduct existing and planned preclinical studies and
human clinical trials and to support the increasing working capital requirements
of a growing commercial infrastructure including manufacturing, sales and
marketing capabilities. As a result, the Company anticipates pursuing various
financing alternatives such as collaborative arrangements and additional public
offerings or private placements of securities. If such alternatives are not
available, the Company may be required to defer or restrict certain commercial
activities, delay or eliminate expenditures for certain of its potential
products under development, cancel licenses from third parties or to license
third parties to commercialize products or technologies that the Company would
otherwise seek to develop or commercialize itself.
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PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings:
On January 27, 1999, an action entitled Rubin v. Agouron
Pharmaceuticals, Inc., et al. was filed in San Diego Superior
Court against the Company, members of its board of directors,
and Warner-Lambert Company. The complaint, which purports to
be a class action filed on behalf of the Company's
shareholders, alleges that the board breached fiduciary duties
in connection with the decision to enter into the Agreement
and Plan of Merger among the Company, WLC Acquisition
Corporation and Warner-Lambert Company, dated as of January
26, 1999. The complaint purports to seek various forms of
relief, including a preliminary and permanent injunction
against consummation of the transaction with Warner-Lambert
Company and/or money damages. The parties have agreed, with
approval of the court, that defendants' time to respond to the
complaint will be indefinitely extended and that such response
will not be due until 10 days after plaintiffs request such a
response. Agouron believes that the allegations asserted are
without merit because, among other things, they do not have a
basis in fact or in law.
The Company is involved in certain other legal or
administrative proceedings generally incidental to its normal
business activities. While the outcome of any such proceedings
cannot be accurately predicted, the Company does not believe
the ultimate resolution of any such existing matters should
have a material adverse effect on its financial position or
results of operations.
ITEM 2. Changes in Securities: None
ITEM 3. Defaults Upon Senior Securities: None
ITEM 4. Submission of Matters to a Vote of Security Holders: None
ITEM 5. Other Information: None
ITEM 6. Exhibits and Reports on Form 8-K:
a. Exhibits:
27. Financial Data Schedule for the quarter ended
March 31, 1999.
b. Reports on Form 8-K:
A report on Form 8-K was filed on January 19, 1999,
reporting the amendment to the Company's stockholder
rights plan. A report on Form 8-K was also filed on
January 28, 1999, reporting the execution of a
definitive agreement to merge with Warner-Lambert
Company.
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SIGNATURE
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.
AGOURON PHARMACEUTICALS, INC.
Date: May 13, 1999 /s/ Steven S. Cowell
-------------------------------------------------
Steven S. Cowell
Corporate Vice President, Finance
Chief Financial Officer
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet and the statement of income and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Jun-30-1999
<PERIOD-END> Mar-31-1999
<CASH> 42,775
<SECURITIES> 41,692
<RECEIVABLES> 59,090
<ALLOWANCES> 756
<INVENTORY> 98,901
<CURRENT-ASSETS> 245,159
<PP&E> 82,189
<DEPRECIATION> 34,123
<TOTAL-ASSETS> 367,537
<CURRENT-LIABILITIES> 85,172
<BONDS> 0
0
0
<COMMON> 373,377
<OTHER-SE> (98,004)
<TOTAL-LIABILITY-AND-EQUITY> 367,537
<SALES> 438,056
<TOTAL-REVENUES> 473,129
<CGS> 191,554
<TOTAL-COSTS> 224,310
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 836
<INCOME-PRETAX> 18,141
<INCOME-TAX> 2,721
<INCOME-CONTINUING> 15,420
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,420
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.45
</TABLE>
