<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For The Quarterly Period Ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
Commission File Number: 0-19700
AMYLIN PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0266089
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9373 Towne Centre Drive, San Diego, California 92121
(Address of principal executive offices) (Zip code)
(619) 552-2200
(Registrant's telephone number, including area code)
Not Applicable
(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.
Class Outstanding at June 30,1996
----- ---------------------------
Common Stock, $.001 par value 28,197,352
<PAGE> 2
AMYLIN PHARMACEUTICALS, INC.
TABLE OF CONTENTS
PAGE NO.
COVER PAGE................................................... 1
TABLE OF CONTENTS............................................ 2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1996 and December 31, 1995..................... 3
Condensed Consolidated Statements of Operations
for the three months and six months ended June 30,
1996 and 1995....................................... 4
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1996 and 1995......... 6
Notes to Condensed Consolidated Financial Statements.... 7
ITEM 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 8
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................................ 15
ITEM 5. Other Information............................... *
ITEM 6. Exhibits and Reports on Form 8-K................ 17
SIGNATURE.................................................... 18
* No information provided due to inapplicability of item.
<PAGE> 3
AMYLIN PHARMACEUTICALS, INC.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(unaudited) (Note)
------------- ------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $18,233,320 $16,708,757
Short-term investments 21,319,122 36,812,237
Other current assets 1,195,216 1,495,418
----------- -----------
Total current assets 40,747,658 55,016,412
Property and equipment, at cost
Equipment 9,947,203 8,369,702
Leasehold Improvements 3,276,172 3,180,819
----------- -----------
13,223,375 11,550,521
Less accumulated depreciation and amortization (6,854,383) (5,797,917)
----------- -----------
6,368,992 5,752,604
Patents and other assets, net 1,384,150 1,180,266
----------- -----------
$48,500,800 $61,949,282
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,012,250 $ 1,477,252
Accrued liabilities 4,111,623 2,886,152
Deferred revenue 6,761,404 4,618,100
Current portion of note payable 508,330 312,500
Current portion of obligation under capital leases 457,724 454,173
---------- -----------
Total current liabilities 12,851,331 9,748,177
Notes Payable 3,168,476 1,670,619
Obligation under capital lease 534,449 759,015
Deferred rent and other 4,182 16,743
Stockholders' equity:
Common stock, $.001 par value, 50,000,000 shares
authorized, 28,197,352 and 28,017,839 issued and
outstanding at June 30, 1996 and December 31, 1995
respectively 28,197 28,018
Additional paid-in capital 167,574,866 166,994,485
Accumulated deficit (135,654,643) (117,318,121)
Unrealized (losses) gains on short-term investments (6,058) 50,346
----------- -----------
Total stockholders' equity 31,942,362 49,754,728
----------- -----------
$48,500,800 $61,949,282
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from audited
consolidated statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
<PAGE> 4
AMYLIN PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended
June 30,
------------------
1996 1995
------ ------
<S> <C> <C>
Revenues under collaborative agreements $ 7,383,595 $ 9,066,000
Expenses:
Research and development 17,150,720 10,376,008
General and administrative 2,396,953 2,465,680
------------ ------------
19,547,673 12,841,688
Interest and other income 534,858 262,898
Interest and other expense (87,074) (76,377)
------------ ------------
Net loss ($11,716,294) ($ 3,589,167)
============ ============
Net loss per share ($0.42) ($0.16)
============ ============
Shares used in computing net loss per share 28,122,798 22,124,508
============ ============
</TABLE>
See accompanying notes
<PAGE> 5
AMYLIN PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
---------------------
1996 1995
------ ------
<S> <C> <C>
Revenues under collaborative agreements $ 10,730,143 $ 9,066,000
Expenses:
Research and development 25,790,863 20,022,972
General and administrative 4,274,615 4,133,202
------------ ------------
30,065,478 24,156,174
Interest and other income 1,169,975 473,933
Interest and other expense (171,162) (160,969)
------------ ------------
Net loss ($18,336,522) ($14,777,210)
============ ============
Net loss per share ($0.65) ($0.69)
============ ============
Shares used in computing net loss per share 28,083,524 21,490,429
============ ============
</TABLE>
See accompanying notes
<PAGE> 6
AMYLIN PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
-----------------
1996 1995
----------- -----------
<S> <C> <C>
Operating Activities:
Net Loss ($18,336,522) ($14,777,210)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization 1,091,475 1,002,496
Deferred rent and other expense (12,561) (12,561)
Amortization of deferred compensation -- 261,814
Changes in assets and liabilities:
Other current assets 300,202 (3,216,141)
Accounts payable (465,002) (788,124)
Accrued liabilities 1,225,471 282,550
Deferred collaborative revenue 2,143,304 3,803,000
------------ ------------
Net cash flows used for operating activities (14,053,633) (13,444,176)
Investing activities:
Decrease in short-term investments 15,436,711 4,531,747
Purchase of equipment and leasehold improvements (1,672,854) (652,020)
Increase in deposits, patents and other assets (238,893) (68,401)
------------ ------------
Net cash flows provided by investing activities 13,524,964 3,811,326
Financing activities:
Issuance of notes payable 1,898,785 --
Principal payments on notes payable (205,098) (130,208)
Principal payments on capital leases (221,015) (351,936)
Issuance of common stock, net 580,560 17,812,508
------------ ------------
Cash flows provided by financing activities 2,053,232 17,330,364
Increase in cash and cash equivalents 1,524,563 7,697,514
Cash and cash equivalents at beginning of period 16,708,757 7,360,681
------------ ------------
Cash and cash equivalents at end of period $ 18,233,320 $ 15,058,195
============ ============
Supplemental disclosure of cash flow information:
Interest paid $ 117,302 $ 160,169
</TABLE>
See accompanying notes.
<PAGE> 7
AMYLIN PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation
The information contained herein has been prepared in accordance with
instructions for Form 10-Q and Article 10 of Regulation S-X. The information at
June 30, 1996, and for the three months and six months ended June 30, 1996 and
1995, is unaudited. In the opinion of management, the information reflects all
adjustments necessary to make the results of operations for the interim periods
a fair statement of such operations. All such adjustments are of a normal
recurring nature. Interim results are not necessarily indicative of results for
a full year. For a presentation including all disclosures required by generally
accepted accounting principles, these financial statements should be read in
conjunction with the audited financial statements included in the Company's
Annual Report to Shareholders for the year ended December 31, 1995.
Per Share Data
Net loss per share is computed using the weighted average number of shares
outstanding during the periods.
Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Amylin Europe Limited. All significant intercompany
transactions and balances have been eliminated.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the discussion
in this report contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed in this report. Factors that could cause or contribute to such
differences include, without limitation, those discussed in the section entitled
"Liquidity and Capital Resources" herein as well as those discussed in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995 under
the heading "Risk Factors".
Since its inception in September 1987, Amylin Pharmaceuticals, Inc.
("Amylin Pharmaceuticals" or the "Company") has devoted substantially all of its
resources to its research and development programs. Substantially all of the
Company's revenues to date have been derived from fees and expense
reimbursements under collaborative agreements and from interest income. Amylin
Pharmaceuticals has not received any revenues from the sale of products. The
Company has been unprofitable since its inception and expects to incur
additional operating losses for the next several years. As of June 30, 1996, the
Company's accumulated deficit was approximately $135.7 million.
RESULTS OF OPERATIONS
Revenue
The Company had $7.4 million and $10.7 million of revenue for the three
month and six month periods ended June 30, 1996 as compared to $9.1 million for
the same periods in 1995. The revenues recognized in 1996 and 1995 were related
to the Company's Collaboration Agreement with LifeScan, a wholly owned
subsidiary of Johnson & Johnson, hereinafter referred to as Johnson & Johnson.
1996 revenues were comprised of Johnson & Johnson's one-half share of
collaboration development expenses incurred by Amylin Pharmaceuticals in the
first half of the year. 1995 revenues were comprised of Johnson & Johnson's
one-half share of collaboration development expenses incurred by Amylin
Pharmaceuticals in the second quarter of 1995 along with a license fee which was
paid at the signing of the agreements. (Please see the "Liquidity and Capital
Resources" section for further discussion of payments expected to be received by
the Company in the future.)
Operating Expenses
The Company's total operating expenses for the quarter ended June 30,
1996 increased to $19.6 million from $12.8 million for the second quarter in
1995. For the six months ended June 30, 1996, operating expenses increased to
$30.1 million from $24.2 million for the same period in 1995.
<PAGE> 9
Research and development expenses increased to $17.2 million for the
three months ended June 30, 1996 as compared to $10.4 million for the same
period in 1995. Research and development expenses for the six months ended June
30, 1996 increased to $25.8 million from $20.0 million for the same period in
1995. The increase in these expenditures was primarily due to the costs of
expanding pramlintide clinical development efforts. Several other factors also
contributed to this increase, including increased staffing, expanded product
development efforts and increased facilities expenditures.
General and administrative expenses decreased slightly to $2.4 million
for the three months ended June 30, 1996 as compared to $2.5 million for the
same period in 1995. General and administrative expenses for the six months
ended June 30, 1996 increased to $4.3 million from $4.1 million for the same
period in 1995. The increase for the six month period was primarily related to
expanded pramlintide market development efforts in conjunction with the
Company's collaboration with Johnson & Johnson.
Other Income and Expense
Interest and other income is principally comprised of interest income
from investment of the Company's cash reserves. Interest and other income
increased to $0.5 million for the quarter ended June 30, 1996 from $0.3 million
for the same period in 1995. Interest and other income increased to $1.2 million
for the six months ended June 30, 1996 from $0.5 million for the same period in
1995. The increase in interest and other income was primarily due to higher
average cash reserves available for investment for the three months and six
months ended June 30, 1996 as compared to the same period in 1995.
Interest and other expense is principally comprised of interest expense
resulting from long-term debt obligations. Debt financing has been utilized by
the Company to acquire laboratory and other equipment and to fund tenant
improvements to the Company's facilities. In addition, in accordance with the
terms of the Company's Collaborative Agreement with Johnson & Johnson, Johnson &
Johnson has advanced Amylin's share of pramlintide pre-launch marketing expenses
incurred since the date of the collaboration, to be repaid with interest over
time out of Amylin's share of future pramlintide profits if any. Interest and
other expense increased to $87,000 for the three months ended June 30, 1996 from
$76,000 for the same period in 1995. Interest and other expense increased to
$171,000 for the six months ended June 30, 1996 from $161,000 for the same
period in 1995. The increase in interest and other expense is reflective of an
overall higher long-term debt balance during the first half of 1996 as compared
to 1995.
<PAGE> 10
Net Loss
The net loss for the quarter ended June 30, 1996 was $11.7 million
compared to a net loss for the second quarter of 1995 of $3.6 million. The
increase in the net loss for the quarter was primarily the result of decreased
collaborative revenues along with increased pramlintide clinical development
efforts. The decrease in revenues was due to a non-recurring license fee paid at
the initiation of the collaboration with Johnson & Johnson in June 1995. The
Company incurred a net loss of $18.3 million for the six months ended June 30,
1996 as compared to $14.8 million for the six months ended June 30, 1995. For
the year the increase in the net loss was primarily related to increased
pramlintide clinical development efforts.
Amylin Pharmaceuticals expects to incur substantial operating losses
over the next several years due to continuing and increasing expenses associated
with its research and development programs, including preclinical and clinical
testing of multiple product candidates, and related general and administrative
support. Operating losses may fluctuate from quarter to quarter as a result of
differences in the timing of expenses incurred and revenues recognized.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, Amylin Pharmaceuticals has financed its operations
primarily through private placements of preferred stock, sales of common stock,
its collaboration with Johnson & Johnson, and operating and capital lease
obligations.
In June 1995, the Company entered into a worldwide Collaboration
Agreement with LifeScan, Inc. for the development and commercialization of
pramlintide, a diabetes drug candidate currently in Phase III clinical trials.
In conjunction with the Collaboration Agreement, the Company also entered into a
Stock Purchase Agreement with Johnson & Johnson Development Corporation ("JJDC")
and a Loan Agreement with Johnson & Johnson. LifeScan, Inc. and JJDC are
hereinafter referred to as Johnson & Johnson.
As of June 30, 1996, Johnson & Johnson entities have made various
financial payments to the Company totaling $50.5 million. These payments
primarily include a license fee, the purchase of $15 million of the Company's
common stock, and payment of one half of the pramlintide development costs.
In August, 1996, the Company achieved the first milestone in its
collaboration with Johnson & Johnson. Based on achieving this milestone Johnson
& Johnson has decided to continue the collaboration on pramlintide. Johnson &
Johnson based its decision on a comprehensive review of all clinical data to
date, including an administrative interim review of the first two one-year Phase
III clinical trials. As a result, Johnson & Johnson will be making additional
payments associated with the milestone to Amylin
<PAGE> 11
totaling $22 million, in addition to Johnson & Johnson's significant ongoing
development support.
The additional payments associated with the milestone include $7
million in milestone and option fee payments to be paid by Johnson & Johnson in
the third quarter of 1996 and a commitment to purchase up to $15 million of
Amylin common stock before the completion of Phase III trials of pramlintide.
The option fee payment represents a nonrefundable prepayment of a portion of the
license fee required for expansion of the field of the collaboration beyond
pramlintide to include other amylin agonists. In exchange for this prepayment,
the companies have agreed to extend to March 1997 the time during which Johnson
& Johnson may exercise its option to expand the field of the collaboration. In
the ensuing months while the pramlintide development program moves ahead,
Johnson & Johnson plans to evaluate the opportunity that amylin agonists
represent for other uses.
In addition to the above mentioned milestone-related payments and
investment, Johnson & Johnson's financial commitment now includes the funding of
50% of development costs and 100% of pre-launch marketing costs (Amylin
Pharmaceuticals' one-half share to be repaid over time from future profits), as
well as milestone payments, license fees, equity investments; and a loan
facility for use in certain circumstances. The Company will apply all of the
license fees and any cash milestone payments and 50% of the proceeds from
Johnson & Johnson's equity investments towards its share of development
expenses. Although Johnson & Johnson's various payments to Amylin
Pharmaceuticals should be sufficient to fund the substantial portion of the
Company's 50% share of pramlintide's development, the Company may elect to raise
additional funds to pay for its share of such development and for other
corporate purposes.
The Company is dependent on the future payments from Johnson & Johnson
to continue development and commercialization of pramlintide. Johnson & Johnson
may terminate the Collaboration Agreement with the Company subject to a notice
period of six months. Johnson & Johnson's financial and other obligations under
the Collaboration Agreement would continue during any such termination notice
period. In addition, Johnson & Johnson has the right to terminate the
Collaboration Agreement at any time based on material safety or tolerability
issues. Without Johnson & Johnson's continued collaborative support, the Company
might not be able to continue the pramlintide development program, and the
Company's financial condition would be materially adversely affected.
At June 30, 1996, the Company had $39.6 million in cash, cash
equivalents and short-term investments as compared to $53.5 million at December
31, 1995. The Company invests its cash in U.S. government and other highly rated
liquid debt instruments.
The Company intends to use its financial resources for research, drug
discovery and development programs, initial strategic marketing activities, and
other general corporate purposes. To the extent that clinical trials of the
Company's
<PAGE> 12
compounds progress as planned, research and development expenses will include
costs of supplying materials for and conducting pramlintide clinical trials, and
research activities to further explore amylin biology and other peptide
metabolic regulators. The amounts actually expended for each purpose may vary
significantly depending upon numerous factors, including the progress of the
Company's research and development programs, the results of preclinical and
clinical studies, the timing of regulatory submissions and approvals, if any,
technological advances, determinations as to commercial potential of the
Company's compounds, and the status of competitive products. Expenditures will
also depend upon the availability of additional sources of funds, the
establishment of collaborative arrangements with other companies, and other
factors.
The Company currently leases or sub-leases approximately 72,000 square
feet of space. The Company is presently considering options to sub-lease an
additional 12,500 square feet of space for its product development efforts.
Should the Company lease this additional space in the second half of the year,
the terms of the lease will be at competitive market rates. At this time, the
Company expects to incur approximately $2.0 million of capital expenditures in
the second half of 1996. These expenditures will primarily be directed toward
the purchase of new equipment to support research and development efforts. In
addition, some capital expenditures will be directed toward the purchase of
equipment coming off of lease lines which will expire during the year and to
complete tenant improvements to the Company's product development facility. The
Company has entered into a $3.0 million loan agreement for the financing of the
majority of its equipment needs and intends to use this financing source during
1996. As of June 30, 1996 approximately $1.0 million of this loan facility had
been utilized. The terms of the loan agreement call for amounts drawn down under
the loan to be repaid monthly over a four year period.
The Company does not expect to generate a positive internal cash flow
for several years due to substantial additional research and development costs,
including costs related to drug discovery, preclinical testing, clinical trials,
manufacturing costs, and general and administrative expenses necessary to
support such activities. Amylin Pharmaceuticals anticipates that its existing
cash, interest income from cash investments, and future funding from Johnson &
Johnson, assuming continuation of the Johnson & Johnson collaboration, will be
adequate to satisfy the Company's capital requirements through mid-1998.
Assuming continued participation by Johnson & Johnson, the Company believes it
has reasonable alternatives to meet the financial needs of its programs.
However, there can be no assurance that additional financial resources will be
raised in the necessary time frame or on terms favorable to the Company.
The Company cannot assure that any of its drug candidates will
successfully meet all of their development goals. Important technical milestones
remain to be achieved before Amylin Pharmaceuticals can commercialize any of its
products, and
<PAGE> 13
failure to achieve these milestones could seriously jeopardize the Company's
chances of success and its financial condition would be adversely affected. The
Company's future capital requirements will depend on many factors, including
continued scientific progress in its research and development programs, the
magnitude of these programs, progress with preclinical and clinical trials, the
time and costs involved in preparing regulatory submissions and seeking
regulatory approvals, the costs involved in preparing, filing, prosecuting,
maintaining, and enforcing patents, competing technological and market
developments, changes in the Johnson & Johnson collaboration, the ability of the
Company to establish collaborative arrangements for its other research and
development programs, and the cost of manufacturing scale-up.
Prior to marketing, any drug developed by the Company must undergo
rigorous preclinical and clinical testing and an extensive regulatory approval
process mandated by the Food and Drug Administration (FDA) and equivalent
foreign authorities. Human clinical testing is now underway on the Company's
first product candidate, pramlintide. Subject to compliance with FDA
regulations, the Company plans to undertake extensive clinical testing to
demonstrate optimal dose, safety, and efficacy for its product candidates in
humans. Although preliminary clinical data about pramlintide's possible clinical
value warrants continuing Phase III trials, there can be no assurance that these
larger and longer studies will confirm the results of the Phase I and Phase II
studies to date. Further testing of pramlintide and the Company's other product
candidates in research or development may reveal undesirable and unintended side
effects or other characteristics that may prevent or limit their commercial use.
The Company or the FDA may suspend clinical trials at any time if the subjects
or patients participating in such trials are being exposed to unacceptable
health risks. There can be no assurance that the Company will not encounter
problems in clinical trials which will cause the Company or the FDA to delay or
suspend clinical trials. In addition, there can be no assurance that any of the
Company's products will obtain FDA approval for any indication. Products, if
any, resulting from Amylin Pharmaceuticals' research and development programs
are not expected to be commercially available for a number of years.
In addition, the Company believes that patent and other proprietary
rights are important to its business, and in this regard intends to file
applications as appropriate for patents covering both its products and
processes. Litigation, which could result in substantial cost to the Company,
may also be necessary to enforce any patents issued to the Company or to
determine the scope and validity of third-party proprietary rights. Should any
of its competitors have prepared and filed patent applications in the United
States which claim technology also invented by the Company, Amylin
Pharmaceuticals may have to participate in interference proceedings declared by
the U.S. Patent and Trademark Office in order to determine priority of invention
and, thus, the right to a patent for the technology, all of which could result
in substantial cost to the Company to determine its rights. It is uncertain
whether any third-party patents will require the Company to alter
<PAGE> 14
its products or processes, obtain licenses, or cease certain activities. If any
licenses are required, there can be no assurances that the Company will be able
to obtain any such license on commercially favorable terms, if at all. Failure
by the Company to obtain a license to any technology that it may require to
commercialize its products may have a material adverse impact on the Company.
<PAGE> 15
ITEM 4.
Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders (the "Annual Meeting") was
held on May 30, 1996. At the Annual Meeting, the stockholders of the Company (i)
elected each of the persons listed below to serve as a director of the Company
until the next annual meeting and until their successor is elected, (ii)
approved the Company's 1991 Stock Option Plan, as amended, (iii) approved the
Company's Non-Employee Director's Stock Option Plan, as amended, (iv) ratified
the selection of Ernst & Young LLP as the Company's independent auditors for the
fiscal year ending December 31, 1996.
The Company had 28,056,172 shares of Common Stock outstanding as of April
1, 1996, the record date for the Annual Meeting. At the Annual Meeting, holders
of a total of 25,135,233 shares of Common Stock were present in person or
represented by proxy. The following sets forth information regarding the results
of the voting at the Annual Meeting:
<TABLE>
<CAPTION>
Proposal 1: Election of Directors
---------------------------------
Shares
Voting Shares
Director in Favor Withheld
-------- ---------- --------
<S> <C> <C>
Howard E. Greene, Jr. 24,870,743 264,490
James C. Blair 24,870,343 264,890
Joseph C. Cook, Jr. 24,870,343 264,890
James C. Gaither 24,861,793 273,440
Ginger L. Howard 24,863,143 272,090
Vaughn M. Kailian 24,863,043 272,190
Donald H. Rumsfeld 24,867,643 267,590
Timothy J. Wollaeger 24,870,343 264,890
</TABLE>
<TABLE>
<CAPTION>
Proposal 2: Approval of the 1991 Stock Option Plan, as amended
--------------------------------------------------------------
<S> <C>
Votes in Favor: 15,682,646
Votes Against: 4,900,702
Abstentions: 94,155
Broker/No Votes: 4,457,730
</TABLE>
<TABLE>
<CAPTION>
Proposal 3: Approval of the Non-Employee Director Stock Option
Plan, as amended
--------------------------------------------------------------
<S> <C>
Votes in Favor: 16,518,425
Votes Against: 4,223,538
Abstentions: 114,662
Broker/No Votes: 4,278,608
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
Proposal 4: Ratification of Selection of Independent Auditors
- - -------------------------------------------------------------
<S> <C>
Votes in Favor: 24,892,654
Votes Against: 49,705
Abstentions: 192,874
</TABLE>
<PAGE> 17
ITEM 6
Exhibits and Reports Submitted on Form 8-K
(a) EXHIBITS. The exhibits listed below are filed with this report.
10.27 Employment agreement dated July 11, 1996, between the registrant
and Richard M. Haugen.
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the quarter
for which this report is filed.
<PAGE> 18
AMYLIN PHARMACEUTICALS, INC.
June 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
Amylin Pharmaceuticals, Inc.
Date: August 12, 1996 By:/s/Marjorie T. Sennett
-----------------------
Marjorie T. Sennett
Vice President and Chief
Financial Officer
(on behalf of the registrant
and as the registrant's
principal financial officer)
<PAGE> 1
EXHIBIT 10.27
July 11, 1996
Mr. Rick Haugen
8 Bluff View
Irvine, CA 92715
Dear Rick:
We are very pleased to offer you the position of PRESIDENT AND CHIEF EXECUTIVE
OFFICER with Amylin Pharmaceuticals, Inc. We believe you have the talent and
experience to make a great contribution to Amylin, and that in turn we can offer
you a stimulating innovative pharmaceutical environment with top class
colleagues.
POSITION AND BASE SALARY: In your position as President, Chief Executive Officer
and Director of the Company, you will be accountable to the Board of Directors,
of which I will continue to serve as Chairman. Your salary will be $350,000 per
annum, - the 1996 portion will be prorated from your start date less unpaid
leave taken during 1996. You will be eligible for a merit salary review
annually, consistent with the Company's compensation policy for executive
officers.
PERFORMANCE BONUS: It is expected that during 1996, you and our head of Human
Resources will make a recommendation to the Board regarding an incentive
compensation program, which may include a performance bonus component. If a
performance bonus plan is adopted, the expected target bonus of the President
and CEO position would be 15% of base salary.
STOCK OPTIONS: Upon employment you will be granted an option to purchase 500,000
shares of Amylin stock (incentive stock options will be allowed subject to the
maximum amount under IRS regulations). Of this total, 400,000 shares will be
granted and priced on your start date and will be under the terms and conditions
of Amylin's standard stock option program. Twenty-five percent of this 400,000
share grant will become exercisable one year from your start date, with the
remaining seventy-five percent becoming exercisable daily in equal installments
over the three-year period following your one-year anniversary. Notwithstanding
the foregoing paragraph, in the event of the occurrence of a "Change in Control"
(defined below) of the Company, then immediately prior to the effective date of
such Change in Control, the foregoing vesting schedule shall be accelerated and
the 400,000 shares shall become fully vested.
The remaining 100,000 shares will be granted and priced on your start date. This
portion will be subject to longer term vesting which will be accelerated in full
on the earliest date that the U.S. Food and Drug Administration or an
appropriate European
<PAGE> 2
regulatory authority formally accepts the Company's first new drug application
for regulatory review. This option will not be covered by the standard Change in
Control provision. Instead, vesting credit will be given for the time from the
start date to the effective date of a Change in Control based on the Company's
standard four year vesting schedule described above. The unvested balance of the
100,000 shares would be assumable by the acquiring company.
For purposes of the preceding paragraph, "Change in Control" is defined as any
of the following: (i) any merger, acquisition, consolidation, reorganization, or
other similar transaction pursuant to which the shareholders of the Company
prior to such merger, acquisition, consolidation, reorganization or other
similar transaction do not, immediately thereafter, own more than 50% of the
outstanding voting securities of the resulting entity or (ii) any liquidation or
dissolution of the Company or any sale of all or substantially all of the assets
of the Company.
In the future, you will be eligible for additional stock option grants on an
annual basis based on your performance and based on the Company's merit stock
option policy for executive officers.
RELOCATION: As you will be moving from Irvine to San Diego, Amylin will pay for
real estate commissions of up to 6% of the sale price of your former home and
reasonable closing costs on the same home (excluding loan prepayment penalties
and new loan points).
Amylin will pay for the cost of moving your household goods and two vehicles,
and for storage charges for up to 30 days, if necessary. The Company will also
pay for you and your spouse for home finding visits and to relocate your family.
You will be eligible for these relocation benefits for a period of 24 months
from your start date. While residing in San Diego prior to the relocation of
your Irvine household, the use of a corporate apartment will be available to
you.
Your year end W-2 will be grossed up to cover non-deductible moving and
relocation expenses in accordance with the Company's relocation guidelines.
Please note that the Company's relocation policy states that if an employee
voluntarily terminates his or her employment with the Company within six months
of hire, such employee may be required to reimburse the Company for all
relocation expenses.
ADDITIONAL RELOCATION ALLOWANCE AND SINGING BONUS: The Company is also pleased
to offer you a lump sum additional relocation allowance and signing bonus of
$50,000 gross, payable in your first paycheck less applicable deductions. This
payment is intended to ease the transition from Irvine to San Diego and could be
used to cover relocation expenses not specifically covered in Amylin's
relocation policy including, but not limited to: broker's commission above 6% on
the sale of your home,
<PAGE> 3
closing costs on the purchase of a home in San Diego, or an interest rate
differential.
EMPLOYEE BENEFITS: You will be entitled to the full range of the Company's
employee benefits. At present these include medical, dental, life and disability
insurances with coverage starting from the first of the month following your
start date. In the next calendar quarter following your employment, you will be
eligible to participate in the 401(k) savings plan. In addition, you will be
eligible to participate in the Company's Employee Stock Purchase Plan at the
first enrollment date following your hire. You will be entitled to 17 days of
paid personal leave per calendar year, prorated from your date of hire. This
leave is accrued on a monthly basis; the monthly accrual rate increases as your
term of service increases, according to the Company's policy.
Acceptance of this offer will not be construed as creating a contract, express
or implied, of continued employment or of employment for a particular period of
time. Employment is at-will, that is, either you or Amylin Pharmaceuticals, Inc.
may terminate the employment relationship at any time, with or without cause.
The at-will relationship shall remain in full force and effect notwithstanding
any statements to the contrary made by any Company personnel or set forth in any
documents.
Should the Company terminate your employment, other than for cause, at any time
during your first twelve months of employment, you will receive either the
remainder of your first twelve months base salary or six months salary,
whichever is greater, less applicable deductions.
We ask that you sign the Company's standard employee proprietary information and
inventions agreement, which is a condition of your employment with Amylin
Pharmaceuticals, Inc.
If you accept this offer, please return one signed Offer Letter, two signed
Proprietary Information & Inventions Agreements, and one signed At-Will
Agreement in the envelope provided. Due to certain ongoing programs, time is of
the essence and should you accept this offer, we are anticipating a start date
no later than July 11, 1996, therefore, this offer will expire if it is not
accepted by midnight, Pacific Daylight Time, July 12, 1996.
Rick, we are very excited about the prospect of your joining Amylin. We have
come a long way in our first eight years - from an interesting little peptide
all the way to a new disease paradigm for diabetes. Personally, I feel
privileged to have helped pioneer an important new area of science and to have
laid the foundation for a medicine that could truly help millions of patients
with diabetes. But the challenge now is to introduce that medicine to the
medical community, to continue to play an equal role in the commercial process
with our friends at Johnson & Johnson, and to build a very large, very
profitable company where all of the best people in our industry want to be
employed. I am absolutely convinced you are the man to lead Amylin to this
<PAGE> 4
greatness - as are the rest of the Amylin Board of Directors and management
team. In my opinion, this is an opportunity for you to make medical and business
history, and I sincerely hope you will accept the challenge.
Cordially,
/s/ Howard E. Greene, Jr.
---------------------
Howard E. Greene, Jr.
Chairman and Chief Executive Officer
Enclosures
cc: Joe Cook
Accepted and Agreed:
/s/ Richard M. Haugen July 12, 1996
----------------- -------------
Richard M. Haugen Date
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