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Previous: PRONET INC /DE/, 8-K/A, 1995-05-12 |
Next: LABONE INC, S-8, 1995-05-12 |
<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- -----------
Commission file number 0-17254
-------
NOVEN PHARMACEUTICALS, INC.
--------------------------------------------------------
(Exact name of Registrant as specified in its character)
STATE OF DELAWARE 59-2767632
- - - - ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
11960 S.W. 144th Street, Miami, FL 33186
- - - - --------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 253-5099
--------------
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 last practicable date.
Class Outstanding at April 27, 1995
----- -----------------------------
Common stock $.0001 par value 18,975,849
Page 1 of 10
<PAGE> 2
NOVEN PHARMACEUTICALS, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page No.
- - - - ------ --------------------- --------
<S> <C>
Item 1 - Financial Statements
Statements of Operations and Accumulated Deficit
for the three months ended March 31, 1995 and 1994 3
Balance Sheets as of March 31, 1995 and December
31, 1994 4
Statements of Cash Flows for the three months ended
March 31, 1995 and 1994 5
Notes to Financial Statements 6 - 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7 - 9
PART II - OTHER INFORMATION
- - - - -------- -----------------
Item 6 - Exhibits and Reports on Form 8-K 9
SIGNATURES 10
- - - - ----------
</TABLE>
Page 2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NOVEN PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------
MARCH 31, MARCH 31,
1995 1994
------------- -------------
<S> <C> <C>
REVENUES:
Product Sales $ 151,242
License revenue 639,832 $ 723,166
Interest income 429,241 122,347
Other income 15,318 103,097
------------ ------------
Total revenues 1,235,633 948,610
------------ ------------
EXPENSES:
Cost of products sold 75,237
Research and development 2,205,654 1,313,058
General and administrative 722,669 677,007
------------ ------------
Total expenses 3,003,560 1,990,065
------------ ------------
NET LOSS FOR THE PERIOD (1,767,927) (1,041,455)
ACCUMULATED DEFICIT BEGINNING OF PERIOD (15,482,754) (10,538,529)
------------ ------------
ACCUMULATED DEFICIT END OF PERIOD $(17,250,681) $(11,579,984)
============ ============
NET LOSS PER SHARE $ (0.09) $ (0.06)
============ ============
WEIGHTED AVERAGE SHARES OF COMMON STOCK
AND COMMON STOCK EQUIVALENTS 18,877,683 16,179,857
============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
Page 3
<PAGE> 4
NOVEN PHARMACEUTICALS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 22,721,866 $ 12,070,272
Securities held to maturity 9,566,583 23,445,070
Inventory 1,990,166 1,264,553
Prepaid and other current assets 636,240 825,159
------------ ------------
Total current assets 34,914,855 37,605,054
------------ ------------
PROPERTY AND EQUIPMENT, at cost,
net of accumulated depreciation
and amortization of $1,291,704 at
March 31, 1995 and $1,076,379 at
December 31, 1994 15,352,734 15,022,523
------------ ------------
OTHER ASSETS:
Patent development costs, net 965,597 979,201
Deposits and other assets 45,394 45,394
------------ ------------
Total other assets 1,010,991 1,024,595
------------ ------------
TOTAL $ 51,278,580 $ 53,652,172
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 2,007,035 $ 2,558,202
------------ ------------
DEFERRED LICENSE REVENUE 6,491,508 6,548,007
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - authorized 100,000
shares of $.01 par value; no shares
issued or outstanding
Common stock - authorized 30,000,000
shares, par value $.0001 per share; issued
and outstanding - 18,975,849 shares at
March 31, 1995 and 18,839,068
shares at December 31, 1994 1,898 1,884
Additional paid-in capital 60,028,820 60,026,833
Accumulated deficit (17,250,681) (15,482,754)
------------ ------------
Total stockholders' equity 42,780,037 44,545,963
------------ ------------
TOTAL $ 51,278,580 $ 53,652,172
============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
Page 4
<PAGE> 5
NOVEN PHARMACEUTICALS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------
MARCH 31, MARCH 31,
1995 1994
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,767,927) $(1,041,455)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 237,945 162,336
Increase in inventory (725,613) (10,652)
Decrease in prepaid and other current
assets 188,919 190,689
Decrease in accounts payable and
accrued liabilities (551,167) (58,041)
Decrease in deferred license revenue (56,499) (56,499)
----------- -----------
Cash flows used in operating
activities (2,674,342) (813,622)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) maturity of securities 13,878,487 (71,455)
Purchase of fixed assets (545,536) (412,488)
Payments for patent development costs (9,016) (127,819)
----------- -----------
Cash flows used in investing
activities 13,323,935 (611,762)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 2,001 16,123
----------- -----------
Cash flows provided by financing
activities 2,001 16,123
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 10,651,594 (1,409,261)
CASH AND CASH EQUIVALENTS - BEGINNING OF
PERIOD 12,070,272 2,658,187
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $22,721,866 $ 1,248,926
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
Page 5
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The financial statements of Noven Pharmaceuticals, Inc. (the "Company"),
included herein, do not include all footnote disclosures normally
included in annual financial statements and, therefore, should be read in
conjunction with the Company's financial statements and notes thereto for
each of the three years in the period ended December 31, 1994 included in
the Company's annual report on Form 10-K.
The interim financial statements for the three months ended March 31,
1995 and 1994 are unaudited and, in the opinion of management, reflect
all adjustments (consisting only of normal recurring accruals) necessary
for fair presentation of the balance sheets, statements of operations and
cash flows of the Company. The statements of operations for the three
months ended March 31, 1995 and 1994 are not necessarily indicative of
the results to be expected for the year ending December 31, 1995. Certain
amounts in the 1995 and 1994 financial statements have been reclassified
for comparative purposes.
2. SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
"PROPERTY AND EQUIPMENT"
Property and equipment is recorded at cost. Depreciation is provided
over the estimated useful lives of the assets. Leasehold improvements
are amortized over the life of the lease or the service life of the
improvements, whichever is shorter. The straight-line method of
depreciation is followed for financial purposes.
"PATENT DEVELOPMENT COSTS"
Costs, principally legal fees related to the development of patents are
capitalized and amortized over the lesser of their estimated economic
useful lives or their remaining legal lives.
"LOSS PER SHARE"
Loss per share is based on the weighted average number of shares
outstanding during the period.
Page 6
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED) - (CONTINUED)
3. STOCKHOLDERS' EQUITY
A schedule of the transactions in the common stock and the additional
paid in capital accounts is as follows:
<TABLE>
<CAPTION>
Common Stock Additional
-------------- Paid-In
Shares Amount Capital
--------- -------- ---------
<S> <C> <C> <C>
Balance, January 1, 1995 18,839,068 $1,884 $60,026,833
Issuance of 28,052 shares of
stock pursuant to stock
option plans, net 28,052 3 1,998
Issuance of 108,729 shares of
stock pursuant to price protection
provisions of 1993 contract for
land purchase 108,729 11 (11)
---------- ------ -----------
Balance, March 31, 1995 18,975,849 $1,898 $60,028,820
========== ====== ===========
</TABLE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Since it commenced operations in 1987, the Company has been engaged
primarily in the research and development of transdermal drug delivery
systems. The Company's revenues have been generated principally by
license fees, milestone payments pursuant to various license agreements
and interest. The Company anticipates that a significant portion of its
revenues in 1995 will be attributable to the launch of its first
commercial product, a transdermal estrogen delivery system.
To date, the Company's product development efforts have been undertaken
independently and pursuant to license agreements with Rhone-Poulenc
Rorer, Inc. and/or its affiliates ("RPR") and Ciba-Geigy Corporation
("Ciba-Geigy"). Under these agreements a license fee was paid upon
execution. All of the agreements provide for the payments of monthly
development fees or cost reimbursements for product development and/or
milestone payments upon achieving certain technical and regulatory goals.
Page 7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The Company's results of operations vary significantly from quarter to
quarter and depend, among other factors, on the execution of new product
development agreements, the timing of fees and milestone payments made by its
licensees, the progress of clinical trials conducted by the Company and/or its
licensees and costs associated with the development of the Company's products.
The timing of the Company's license revenue may not match the timing of the
Company's associated product development expenses for any particular period.
RESULTS OF OPERATIONS
The Company's revenues increased approximately $287,000 or 30% for the three
month period ended March 31, 1995 from the same period in the prior year. The
increase in revenue during the first quarter of 1995 was primarily a result of
increased interest income from the investment of the proceeds of the June 1994
offering of common stock.
Research and development expenses increased approximately $893,000 or 68% for
the three month period ended March 31, 1995 from the same period in the prior
year. The increase in research and development expenses were attributable to
the Company's move into the early stages of manufacturing its first product, a
transdermal estrogen delivery system. These expenses included the costs of
production at its existing manufacturing facility as well as the preproduction
costs of training personnel and validating equipment and the new manufacturing
facility. The increase in research and development expenses was also
attributable to research activities related to new products such as the
transoral dental anesthetic system and the transdermal estrogen/progestogen
combination delivery system. The increase in general and administrative
expenses of approximately $46,000 or 7% was primarily due to increases in
staffing and recruitment expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations through public offerings of common
stock, including the exercise of warrants issued in connection with the first
such offering, private placements of its equity securities, license and
Contract revenues and interest income. From its inception through March 31,
1995, the Company received net proceeds of approximately $56,000,000 from the
sale of equity securities, approximately $12,500,000 from license agreements and
approximately $3,500,000 from interest income. At the end of March 31, 1995 the
Company had approximately $32,000,000 in cash and securities held to maturity.
During the first quarter of 1995, the Company utilized approximately $2,700,000
of its cash resources to fund research and operating activities and $600,000 to
fund investing activities, primarily the purchase of property and equipment.
As of March 31, 1995 the Company had commitments for capital expenditures of
approximately $200,000.
Page 8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The Company's future capital requirements depend upon numerous factors,
including (i) the progress of its product development programs, (ii) the time
required to obtain government regulatory approvals of products in development,
(iii) the resources that the Company devotes to the development of self-funded
products, proprietary manufacturing methods, advanced technologies and a
marketing and sales administration infrastructure, (iv) the ability of the
Company to obtain additional license agreements and to manufacture products
pursuant to those agreements and (v) the demand for its products, if and when
approved by regulatory authorities.
The Company expects to incur additional costs related to product development
activities, increased general and administrative expenses and the completion of
its manufacturing facilities. Although the Company believes that existing
cash, securities held to maturity, anticipated contract and manufacturing
revenues will be adequate for the foreseeable future, circumstances could arise
which may result in a need to raise additional capital. There can be no
assurance that such capital will be available on acceptable terms, or at all.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule (for SEC use only)
Page 9
<PAGE> 10
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.
NOVEN PHARMACEUTICALS, INC.
(Registrant)
Date: May 12, 1995 By: /s/ Steven Sablotsky
----------------- --------------------
Steven Sablotsky, Chairman of the
Board and President
By: /s/ William A. Pecora
---------------------
William A. Pecora
Chief Financial Officer
Page 10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF NOVEN PHARMACEUTICALS FOR THE THREE MONTHS ENDED MARCH
31, 1995, AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 22,721,866
<SECURITIES> 9,566,583
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,990,166
<CURRENT-ASSETS> 34,914,855
<PP&E> 16,644,438
<DEPRECIATION> 1,291,704
<TOTAL-ASSETS> 51,278,580
<CURRENT-LIABILITIES> 2,007,035
<BONDS> 0
<COMMON> 1,898
0
0
<OTHER-SE> 42,778,139
<TOTAL-LIABILITY-AND-EQUITY> 51,278,580
<SALES> 151,242
<TOTAL-REVENUES> 1,235,633
<CGS> 75,237
<TOTAL-COSTS> 75,237
<OTHER-EXPENSES> 2,205,654
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,767,927)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,767,927)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,767,927)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
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