UNITED STATES
SECURITIES & 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, 2000
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 33-35938
PAINEWEBBER R&D PARTNERS III, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3588219
(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>
SPECIAL NOTE REGARDING
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Except for the historical information
contained herein, the matters discussed herein are forward-looking statements.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of PaineWebber R&D Partners III, L.P. or industry results to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: general economic and business conditions; fluctuations in the
value of securities for which only a limited, or no, public market exists;
dependence on the development of new technologies; dependence on timely
development and introduction of new and competitively priced products; the need
for regulatory approvals; the Sponsor Companies (hereinafter defined) having
insufficient funds to commercialize products to their maximum potential; the
restructuring of Sponsor Companies; the dependence of PaineWebber R&D Partners
III, L.P. on the skills of certain scientific personnel; and the dependence of
PaineWebber R&D Partners III, L.P. on the General Partner (hereinafter defined).
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
FORM 10-Q
JUNE 30, 2000
Table of Contents
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Statements of Financial Condition (unaudited) at
June 30, 2000 and December 31, 1999 2
Statements of Operations
(unaudited) for the three months and six months
ended June 30, 2000 and 1999 3
Statement of Changes in Partners' Capital (Deficit)
(unaudited) for the six months ended June 30, 2000 4
Statements of Cash Flows
(unaudited) for the six months ended
June 30, 2000 and 1999 5
Notes to Financial Statements
(unaudited) 6-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
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 III, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF FINANCIAL CONDITION
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Marketable securities, at market value $ 8,781,605 $ 6,846,730
Advances to product development projects 19,399 19,399
------------------ ----------------
Total assets $ 8,801,004 $ 6,866,129
================== ================
Liabilities and partners' capital:
Accrued liabilities 106,197 79,844
Partners' capital 8,694,807 6,786,285
------------------ ----------------
Total liabilities and partners' capital $ 8,801,004 $ 6,866,129
================== ================
--------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
2
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the three months ended June 30, 2000 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Interest income $ 161,987 $ 27,749
Unrealized depreciation of marketable securities (1,531,673) (35,358)
Realized loss on sale of marketable securities - (46,456)
------------------ ----------------
(1,369,686) (54,065)
------------------ ----------------
Expenses:
General and administrative costs 44,400 48,377
------------------ ----------------
Net loss $ (1,414,086) $ (102,442)
================== ================
Net loss per partnership unit:
Limited partners (based on 50,000 units) $ (28.00) $ (2.03)
General partner $ (14,140.86) $ (1,024.42)
========================================================================================================
For the six months ended June 30, 2000 1999
--------------------------------------------------------------------------------------------------------
Revenues:
Interest income $ 194,924 $ 45,413
Unrealized appreciation of marketable securities 4,001,548 434,144
Realized gain (loss) on sale of marketable securities 9,465,802 (414,865)
------------------ ----------------
13,662,274 64,692
------------------ ----------------
Expenses:
General and administrative costs 80,924 91,533
------------------ ----------------
Net income (loss) $ 13,581,350 $ (26,841)
================== ================
Net income (loss) per partnership unit:
Limited partners (based on 50,000 units) $ 268.91 $ (0.53)
General partner $ 135,813.50 $ (268.41)
--------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
3
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(unaudited)
<TABLE>
<CAPTION>
Limited General
For the six months ended June 30, 2000 Partners Partner Total
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at Janury 1, 2000 $ 6,716,887 $ 69,398 $ 6,786,285
Net income 13,445,537 135,813 13,581,350
Cash distribution to partners (10,000,000) (1,672,828) (11,672,828)
------------------ ---------------- -----------------
Balance at June 30, 2000 $ 10,162,424 $ (1,467,617) $ 8,694,807
================== ================ =================
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
4
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the six months ended June 30, 2000 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 13,581,350 $ (26,841)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Unrealized appreciation of marketable securities (4,001,548) (434,144)
Decrease in operating assets:
Marketable securities 2,066,673 468,413
Decrease (increase) in operating liabilities:
Accrued liabilities 26,353 (7,428)
------------------ ----------------
Cash provided by operating activities 11,672,828 -
------------------ ----------------
Cash flows from financing activities:
Distributions to partners (11,672,828) -
Cash at beginning of period - -
------------------ ----------------
Cash at end of period $ - $ -
================== ================
--------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
The Partnership paid no cash for interest or taxes during the six months ended
June 30, 2000 and 1999.
--------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
5
<PAGE>
PAINEWEBBER R&D PARTNERS III, 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, 2000 and
1999 is unaudited. However, in the opinion of management of PaineWebber R&D
Partners III, 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, 2000, are not necessarily indicative of results to be expected for the
year ended December 31, 2000. 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, 1999 and the previously issued quarterly report
on Form 10-Q for the quarter ended March 31, 2000.
The Partnership is a Delaware limited partnership that commenced operations
on June 3, 1991. Paine Webber Development Corporation ("PWDC" or the "General
Partner"), an indirect, wholly-owned subsidiary of Paine Webber Group Inc.,
("PWG") is the general partner and manager of the Partnership. The Partnership
will terminate on December 15, 2015, unless its term is extended or reduced by
the General Partner.
The principal objective of the Partnership has been to provide long-term
capital appreciation to investors through investing in the development and
commercialization of new products with technology and biotechnology companies
("Sponsor Companies"), which have been expected to address significant market
opportunities. The Partnership has been engaged in diverse product development
projects (the "Projects") including product development contracts, participation
in other partnerships and investments in securities of Sponsor Companies. Once
the product development phase has been completed, the Sponsor Companies have had
the option to license and commercialize the products resulting from the product
development project, and the Partnership has had the right to receive payments
based upon the sale of such products. The Partnership obtained warrants to
purchase the common stock of Sponsor Companies to provide additional capital
appreciation to the Partnership which was not directly dependent upon the
outcome of the Projects (see Note 5).
6
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(NOTE 1 CONTINUED)
All distributions from the Partnership to the General Partner and the
limited partners of the Partnership (the "Limited Partners"; collectively, the
"Partners") have been made pro rata in accordance with their respective capital
contributions. The table below sets forth the proportion of each distribution to
be received by the Limited Partners and the General Partner, respectively:
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNER
-------- -------
<S> <C> <C>
I. Until the value of the aggregate distributions for each limited
partnership unit ("Unit") equals $1,000 plus simple interest on such
amount accrued at 5% per annum ("Contribution Payout"); At June 30,
2000, Contribution Payout was $1,450 per Unit ........................ 99% 1%
II. After Contribution Payout and until the value of the aggregate
distributions for each Unit equals $5,000 ("Final Payout") ........... 80% 20%
III. After Final Payout ................................................... 75% 25%
</TABLE>
During the quarter ended June 30, 2000, the Partnership made a cash
distribution which resulted in aggregate distributions per Unit to reach
Contribution Payout as of this date. As a result the General Partner was
allocated 20% of the total cash distribution over Contribution Payout. The total
distribution amounted to $11,672,828 ($200 per Unit; $1,672,828 to the General
Partner). At June 30, 2000, the Partnership has made cash and security
distributions, as valued on the dates of distribution, since inception of $1,483
and $98 per Unit, respectively.
Profits and losses of the Partnership are allocated as follows: (i) until
cumulative profits and losses for each Unit equals Contribution Payout, 99% to
Limited Partners and 1% to the General Partner, (ii) after Contribution Payout
and until cumulative profits and losses for each unit equals Final Payout, 80%
to Limited Partners and 20% to the General Partner, and (iii) after Final
Payout, 75% to Limited Partners and 25% to the General Partner. As of June 30,
2000, the cumulative profits of the Partnership were $922 per Unit.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements are prepared in conformity with accounting
principles generally accepted in the United States 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.
Marketable securities consist of a money market fund and common stock which
are recorded at market value. Marketable securities are not considered cash
equivalents for the Statements of Cash Flows.
Realized and unrealized gains or losses are generally determined on a
specific identification method and are reflected in the Statements of Operations
during the period in which the change in value occurs.
7
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(NOTE 2 CONTINUED)
The Partnership invests in product development contracts with Sponsor
Companies either directly or through product development limited partnerships.
The Partnership expenses product development costs when incurred by the Sponsor
Companies and such costs are reflected as expenditures under product development
projects in the accompanying Statements of Operations. Income received and/or
accrued from investments in Projects is reflected in the Statements of
Operations for the period in which the income is earned.
Since the Partnership's warrants were currently exercisable and the Sponsor
Company's stock was publicly traded, the warrants were carried at intrinsic
value (the excess of market price per share over the exercise price per share),
which approximated fair value.
3. MARKETABLE SECURITIES
The Partnership held the following marketable securities at:
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
---------------------------------- ------------------------------
CARRYING CARRYING
VALUE COST VALUE COST
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Money market fund $ 589,414 $ 589,414 $ 1,450,164 $ 1,450,164
Genzyme Molecular Oncology
(461,091 and 713,091 common
shares at June 30, 2000 and
December 31, 1999, respectively 6,397,638 646,609 4,991,638 1,000,000
Alkermes, Inc.
(Warrant to purchase 7,293 shares) ---- ---- 321,804 ----
Repligen Corporation
(285,700 common shares at June
30, 2000 and a warrant to purchase
133,000 common shares at
December 31, 1999) 1,794,553 901,433 83,124 ----
------------- ------------ ------------ -----------
$ 8,781,605 $ 2,137,456 $ 6,846,730 $ 2,450,164
============= ============ ============ ===========
</TABLE>
During the six months ended June 30, 2000 the Partnership sold 252,000
shares of Genzyme Molecular Oncology ("GMO") for proceeds of $8,968,599 (average
price per share of $35.59). The shares had a carrying value as of December 31,
1999 of $1,764,000 ($7.00 per share) and, accordingly, the Partnership
recognized a gain from the sale of $7,204,599. As of June 30, 2000 the
Partnership recorded its remaining investment of 461,091 shares at the market
value of $13.875 as compared to $15.125 per share at March 31, 2000 and $7.00
per share at December 31, 1999. Accordingly, the Partnership recognized
unrealized appreciation (depreciation) of $(576,364) and $3,170,000 for the
three months and six months then ended. At March 31, 1999 and December 31, 1998
the Partnership recorded its investment of 713,091 shares at market values of
$2,674,092 ($3.75 per share) and $2,317,546 ($3.25 per share), respectively. At
June 30, 1999, the market value was $2.75 per share resulting in unrealized
depreciation of $713,091 and $356,545 for the three months and six months then
ended.
8
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(NOTE 3 CONTINUED)
At December 31, 1999 the Partnership owned warrants to purchase 133,000 and
252,700 shares of Repligen Corporation ("Repligen") at exercise prices of $2.50
per share and $3.50 per share, respectively. The market value of Repligen as of
this date was $3.125 per share. The Partnership recorded its warrant to purchase
133,000 shares at the intrinsic value of $83,124. During the six months ended
June 30, 2000, the Partnership exercised the warrants at an aggregate exercise
price of $1,216,950. The Partnership sold 100,000 shares for aggregate proceeds
of $1,584,026 (average price per share of $15.84). The Partnership recognized a
gain from the sale for the six months ended June 30, 2000 of $1,246,957. The
value of the remaining 285,700 shares were carried at market value of $9.625 per
share as of March 31, 2000. The market value as of June 30, 2000 was $6.28125,
resulting in recognition of appreciation (depreciation) of $(955,309) and
$831,548 for the three months and six months then ended.
During the six months ended June 30, 2000 the Partnership exercised its
warrant for 7,293 shares of Alkermes, Inc. ("Alkermes") at an aggregate exercise
price of $36,465 ($5.00 per share). At December 31, 1999 the market value of
Alkermes was $49.125 per share and the Partnership recorded the warrant at its
intrinsic value of $321,804. The Partnership sold the Alkermes shares for
aggregate net proceeds of $1,372,515 ($188.20 per share) and recognized a gain
from the sale of $1,014,246 for the six months ended June 30, 2000.
During the quarter ended June 30, 1999, the Partnership sold its
investments in Biocompatibles International plc ("Biocompatibles"), Gensia
Sicor, Inc. ("Gensia") and Pharming Group N.V. ("Pharming"). Upon the sale of
Biocompatibles the Partnership received aggregate proceeds of $1,302,967
(average price of $1.60 per share) and recognized a gain (loss) for the three
months and six months ended June 30, 1999 of $(110,036) and $140,010,
respectively. Aggregate proceeds from the sale of Gensia were $558,564 (average
price of $4.05 per share) resulting in a gain (loss) for the three months and
six months ended June 30, 1999 of $171,080 and $(65,716), respectively. The sale
of Pharming generated proceeds of $796,804 ($6.15 per share) which resulted in a
loss of $107,501 and $489,159 for these same periods ended June 30, 1999.
As of June 30 1999, the Partnership owned 722,915 shares of Medarex, Inc.
("Medarex") with a market value of $4.125 per share. The market values as of
March 31, 1999 and December 31, 1998 were $3.1875 per share and $3.03125 per
share, respectively. The Partnership recognized unrealized appreciation of
$677,733 and $790,688 for the three months and six months then ended.
4. RELATED PARTY TRANSACTIONS
The General Partner is entitled to receive an annual management fee for
management and administrative services provided to the Partnership. As of
January 1, 1997, the General Partner elected to discontinue the management fee
charged to the Partnership.
The money market fund invested in by the Partnership is managed by an
affiliate of PaineWebber Incorporated ("PWI").
PWDC and PWI, and its affiliates, have acted in an investment banking
capacity for several of the Sponsor Companies. In addition, PWDC and its
affiliates have direct limited partnership interests in some of the same product
development limited partnerships as the Partnership.
9
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
5. PRODUCT DEVELOPMENT PROJECTS
Of the Partnership's seven original Projects, the following two Projects
are currently active: a $6.0 million investment in Alkermes Clinical Partners,
L.P., a $46.0 million limited partnership formed to fund the development,
clinical testing, manufacturing and marketing of Receptor-Mediated
Permeabilizers for use in the treatment of diseases of the brain and central
nervous system by enabling the delivery of drugs across the blood brain barrier;
and a $6.0 million investment in Cephalon Clinical Partners, L.P., a $45.0
million limited partnership formed to fund the development, clinical testing,
manufacturing and marketing of Myotrophin(TM) for use in the treatment of
amyotrophic lateral sclerosis and certain other peripheral neuropathies.
If the Projects produce any product for commercial sale, the Sponsor
Companies have the option to license the Partnership's technology to manufacture
and market the products developed. In addition, the Sponsor Companies have the
option to purchase the Partnership's interest in the technology. In
consideration for granting such purchase options, the Partnership has received
warrants to purchase shares of common stock of certain of the Sponsor Companies.
As of June 30, 2000, the Partnership holds no warrants.
6. INCOME TAXES
The Partnership is not subject to federal, state or local income taxes.
Accordingly, the individual partners are required to report their distributive
share of realized income or loss on their individual federal and state income
tax returns.
7. SUBSEQUENT EVENT
On July 12, 2000, PWG entered into an agreement and plan of merger with UBS
AG ("UBS") and a subsidiary of UBS pursuant to which PWG will merge with and
into that subsidiary. The transaction, which is expected to be completed in the
fourth quarter of 2000, has been approved by PWG's Board of Directors and is
subject to customary closing conditions, including certain regulatory approvals
and the approval of PWG's shareholders.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
Partners' capital increased from $6.8 million at December 31, 1999 to $8.7
million at June 30, 2000. The change of $1.9 million was due to the recognition
of net income of $13.6 million for the six months ended June 30, 2000 (as
discussed in the Results of Operations below) offset by a cash distribution to
the Partners of $11.7 million.
The Partnership's funds are invested in a money market fund and marketable
securities until cash is needed for the payment of ongoing management and
administrative expenses incurred or remittance of cash distributions to
Partners. Liquid assets increased from $6.8 million at December 31, 1999 to $8.8
million at June 30, 2000. The change of $2.0 million resulted primarily from (i)
increases in the market values of marketable securities held as of these dates
of $4.0 million, (ii) the sale of marketable securities during the six months
ended June 30, 2000 for cash proceeds in excess of their carrying values at
December 31, 1999 of $9.5 million offset by (iii) cash distributions to the
Partners of $11.7 million.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE
THREE MONTHS ENDED JUNE 30, 1999:
Net loss for the three months ended June 30, 2000 and 1999 was $1.4 million
and $0.1 million, respectively. The increase in net loss resulted primarily from
an unfavorable change in revenues of $1.3 million.
Net revenues for the three months ended June 30, 2000 and 1999 were $(1.4)
million and $(0.1) million, respectively. The variance was due to an unfavorable
change in unrealized depreciation of $1.5 million offset by an increase in
interest income of $0.2 million. Unrealized depreciation of marketable
securities for the three months ended June 30, 2000 was $1.5 million. At June
30, 2000 the market value of GMO was $13.875 per share as compared to a carrying
value of $15.125 per share at March 31, 2000. The Partnership recognized
unrealized depreciation of $0.6 million on its investment of 0.461 million
shares for the quarter ended June 30, 2000. Also, as of this date, the market
value of Repligen was $6.28125 per share as compared to March 31, 2000 carrying
value of $9.625 per share, thus the Partnership recognized unrealized
depreciation of $0.9 million on its investment of 0.285 million shares. Interest
income increased resulting from increased cash balances maintained by the
Partnership. Net revenues for the quarter ended June 30, 1999 consisted of
unrealized depreciation of marketable securities and realized loss on the sale
of marketable securities aggregating $0.1 million.
There were no material variances in expenses for the three months ended
June 30, 2000 as compared to the same period in 1999.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 1999:
Net income for the six months ended June 30, 2000 was $13.6 million
resulting from the recognition of revenues of $13.7 million offset by the
recognition of expenses of $0.1 million. Net income (loss) for the six months
ended June 30, 1999 was minimal.
During the six months ended June 30, 2000 the Partnership recognized
unrealized appreciation of marketable securities of $4.0 million, realized gain
on sale of marketable securities of $9.5 million and interest income $0.2
million. At June 30, 2000, the market value of GMO was $13.875 per share as
compared to a carrying value of $7.00 per share at December 31, 1999. The
Partnership recognized unrealized appreciation of $3.2 million on its investment
of 0.461 million shares for the six months ended
11
<PAGE>
(ITEM 2 CONTINUED)
June 30, 2000. Also, as of this date, the market value of Repligen was $6.28125
per share as compared to a weighted average carrying value of $3.37069 per share
at December 31, 1999. Thus, the Partnership recognized unrealized appreciation
of $0.8 million on its investment of 0.285 million shares. During the six months
ended June 30, 2000, the Partnership sold 0.252 million shares of GMO for
proceeds of $9.0 million (average price per share of $35.59) with a carrying
value of $1.8 million ($7.00 per share) at December 31, 1999 and recognized a
gain of $7.2 million. Also, the Partnership sold 0.1 million shares of Repligen
for proceeds of $1.6 million (average price per share of $15.84) and recognized
a gain of $1.3 million. The Partnership exercised its warrant for 7,293 shares
of Alkermes at $5.00 per share bringing the carrying value to $49.124 per share
and sold the shares for $188.20 per share recognizing a gain of $1.0 million.
For the six months ended June 30, 1999 the Partnership recognized net unrealized
appreciation of $0.4 million offset by a net realized loss on sale of marketable
securities of this amount. The market value of GMO decreased from $3.25 per
share at December 31, 1998 to $2.75 per share at June 30, 1999, resulting in
unrealized depreciation on its investment of 0.713 million shares for the six
months ended June 30, 1999 of $0.4 million. This was offset by the increase in
market value of Medarex from $3.03125 per share at December 31, 1998 to $4.125
at June 30, 1999, resulting in unrealized appreciation on its investment of
0.723 shares for the six months ended June 30, 1999 of $0.8 million. During the
six months ended June 30, 1999, the Partnership sold its investment in
Biocompatibles with a carrying value as of December 31, 1998 of $1.2 million for
proceeds of $1.3 million and realized a gain of $0.1 million. The sale of
Pharming shares (with a carrying value of $1.3 million) for proceeds of $0.8
million resulted in a loss of $0.5 million for the six months ended June 30,
1999.
There were no material variances in expenses for the six months ended June
30, 2000 as compared to the same period in 1999.
12
<PAGE>
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) EXHIBITS:
None
b) REPORTS ON FORM 8-K:
None
13
<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
2000.
PAINEWEBBER R&D PARTNERS III, L.P.
By: PaineWebber Development Corporation
(General Partner)
By: /s/ Dhananjay M. Pai
-----------------------------------
Dhananjay M. Pai
President
By: /s/ Robert J. Chersi
-----------------------------------
Robert J. Chersi
Principal Financial and Accounting Officer
14
