<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 September 30, 1998
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
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(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.
<TABLE>
<CAPTION>
Class Outstanding at September 30, 1998
----- ---------------------------------
<S> <C>
Common Stock, $.001 par value 36,724,758
</TABLE>
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AMYLIN PHARMACEUTICALS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
COVER PAGE..................................................1
TABLE OF CONTENTS...........................................2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1998 and December 31, 1997...............3
Condensed Consolidated Statements of Operations
for the three months and nine months ended
September 30, 1998 and 1997............................4,5
Condensed Consolidated Statements of Cash Flows for
the nine months ended September 30, 1998 and 1997......6
Notes to Condensed Consolidated Financial Statements...7
ITEM 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations..........8-16
ITEM 3.
Quantitative and Qualitative Disclosures
about Market Risk......................................*
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings..............................17
ITEM 2. Changes in Securities and Use of Proceeds......*
ITEM 3. Defaults upon Senior Securities................*
ITEM 4. Submission of Matters to a Vote of
Security Holders...............................*
ITEM 5. Other Information..............................*
ITEM 6. Exhibits and Reports on Form 8-K...............*
SIGNATURE...................................................17
</TABLE>
* No information provided due to inapplicability of item.
<PAGE> 3
AMYLIN PHARMACEUTICALS, INC.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- -------------
(unaudited) (Note)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 23,090,000 $ 46,903,000
Short-term investments 2,003,000 5,845,000
Receivable from related party 210,000 966,000
Other current assets 717,000 1,298,000
------------- -------------
Total current assets 26,020,000 55,012,000
Property and equipment, at cost:
Equipment 15,304,000 14,707,000
Leasehold improvements 4,507,000 4,763,000
------------- -------------
19,811,000 19,470,000
Less accumulated depreciation and amortization (13,220,000) (10,860,000)
------------- -------------
6,591,000 8,610,000
Patents and other assets, net 1,972,000 1,716,000
------------- -------------
$ 34,583,000 $ 65,338,000
============= =============
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable $ 2,914,000 $ 5,278,000
Accrued liabilities 10,262,000 10,606,000
Deferred revenue from related party 423,000 6,357,000
Current portion of obligation under capital
leases and equipment notes payable 1,659,000 1,468,000
------------- -------------
Total current liabilities 15,258,000 23,709,000
Obligation under capital leases and
equipment notes payable 4,719,000 3,047,000
Notes payable to related party, net of discount 38,632,000 33,933,000
Stockholders' equity (deficit):
Common stock, $.001 par value, 100,000,000 shares authorized,
36,724,758 and 32,394,433 issued and outstanding at
September 30, 1998 and December 31, 1997, respectively 37,000 32,000
Additional paid-in capital 229,756,000 215,246,000
Accumulated deficit (253,265,000) (209,732,000)
Deferred compensation (557,000) (893,000)
Unrealized gains/(losses) on short-term investments 3,000 (4,000)
------------- -------------
Total stockholders' equity (deficit) (24,026,000) 4,649,000
------------- -------------
$ 34,583,000 $ 65,338,000
============= =============
</TABLE>
Note: The condensed consolidated balance sheet at December 31, 1997 has been
derived from audited condensed consolidated financial 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
September 30,
---------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenues under collaborative agreements
from related party $ 2,678,000 $ 9,091,000
Operating Expenses:
Research and development 15,414,000 21,836,000
General and administrative 2,310,000 3,484,000
------------ ------------
17,724,000 25,320,000
------------ ------------
Loss from operations (15,046,000) (16,229,000)
Interest and other income 462,000 526,000
Interest and other expense (1,382,000) (233,000)
------------ ------------
Net loss $(15,966,000) $(15,936,000)
============ ============
Net loss per share - basic and diluted $ (0.45) $ (0.50)
============ ============
Shares used in computing net loss per share -
basic and diluted 35,506,000 32,187,000
============ ============
</TABLE>
See accompanying notes.
<PAGE> 5
AMYLIN PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
---------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenues under collaborative agreements
from related party $ 15,653,000 $ 31,462,000
Operating Expenses:
Research and development 47,817,000 56,019,000
General and administrative 8,598,000 9,693,000
------------ ------------
56,415,000 65,712,000
------------ ------------
Loss from operations (40,762,000) (34,250,000)
Interest and other income 1,294,000 1,866,000
Interest and other expense (4,065,000) (706,000)
------------ ------------
Net loss $(43,533,000) $(33,090,000)
============ ============
Net loss per share - basic and diluted $ (1.30) $ (1.03)
============ ============
Shares used in computing net loss per share -
basic and diluted 33,516,000 32,095,000
============ ============
</TABLE>
See accompanying notes.
<PAGE> 6
AMYLIN PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
---------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Operating Activities:
Net loss $(43,533,000) $(33,090,000)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization 2,444,000 2,013,000
Deferred revenue from related party (5,934,000) 1,404,000
Deferred rent and other expense -- (17,000)
Amortization of deferred compensation 698,000 420,000
Amortization of warrants issued with debt 898,000 --
Changes in assets and liabilities:
Receivable from related party 756,000 1,404,000
Other current assets 581,000 27,000
Accounts payable (2,364,000) (1,269,000)
Accrued liabilities (343,000) 275,000
------------ ------------
Net cash flows used for operating activities (46,797,000) (28,833,000)
Investing activities:
Decrease in short-term investments 3,849,000 9,486,000
Purchase of equipment and leasehold improvements (342,000) (4,311,000)
Increase in deposits, patents and other assets (339,000) (298,000)
------------ ------------
Net cash flows provided by (used for) investing activities 3,168,000 4,877,000
Financing activities:
Issuance of notes payable 6,850,000 35,993,000
Principal payments on capital leases and
equipment notes payable (1,187,000) (1,413,000)
Issuance of common stock, net 14,154,000 1,469,000
------------ ------------
Net cash flows provided by financing activities 19,817,000 36,049,000
------------ ------------
Decrease in cash and cash equivalents (23,813,000) 12,093,000
Cash and cash equivalents at beginning of period 46,903,000 42,654,000
------------ ------------
Cash and cash equivalents at end of period $ 23,090,000 $ 54,747,000
============ ============
Supplemental disclosure of cash flow information:
Interest paid $ 411,000 $ 295,000
</TABLE>
See accompanying notes.
<PAGE> 7
AMYLIN PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(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
September 30, 1998, and for the three months and nine months ended September 30,
1998 and 1997, 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 Registration Statement on Form S-3 (Registration No. 333-58831), as
amended.
Per Share Data
Basic and diluted net loss per share is computed using the weighted average
number of common shares outstanding during the periods.
Consolidation
The consolidated financial statements include the accounts of Amylin
Pharmaceuticals Inc. ("Amylin" or the "Company") and its wholly owned
subsidiary, Amylin Europe Limited. All significant intercompany transactions and
balances have been eliminated.
2. Stockholders' Equity
In July 1998, the Company completed a public stock offering of 4.0 million
shares of its common stock which raised net proceeds of approximately $12.7
million.
<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 due to risks and uncertainties regarding, among other
things, the drug discovery and development process, the results and timing of
the results of the Company's ongoing and planned clinical trials of pramlintide
and AC2993 (exendin-4), the Company's ability to raise additional capital to
finance its business operations through and following the second quarter of
1999, and the timing of filings for regulatory approval of pramlintide or
exendin-4, if any such filings are made at all, and if such approval(s) are
received, the time to market thereafter. Additional 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 Registration Statement on Form S-3 (Registration No.
333-58831), as amended, under the heading "Risk Factors."
Since its inception in September 1987, Amylin 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
has no product sales and 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 September
30, 1998, the Company's accumulated deficit was approximately $253 million.
From June 1995 until late August 1998, the Company and Johnson &
Johnson collaborated on the development and commercialization of pramlintide, a
diabetes drug candidate which is now in Phase 3 clinical trials. Through
September 30, 1998 Johnson & Johnson entities made various financial payments to
the Company totaling $175 million. In late February 1998, Johnson & Johnson
provided the Company with six months' notice of its intention to terminate their
collaboration with the Company, and the collaboration was terminated in late
August 1998. Johnson & Johnson's financial and other obligations under the
Collaboration Agreement (defined below) continued during the termination notice
period.
In October 1998, the Company announced results from two, six-month
Phase 3 European/Canadian studies of pramlintide, the
<PAGE> 9
Company's lead drug candidate. In both type 1 and insulin-using type 2 diabetes,
a clear drug effect of pramlintide was demonstrated. Unexpectedly in both
pramlintide studies, however, this effect was not observed in the dosing arms
with the highest dose which had been designated in advance as the primary arms
for regulatory purposes. As a consequence, under the procedure specified in the
statistical analysis plan, the results from the primary pramlintide dosing arms
by themselves did not complete the requirements for a new drug application.
Exendin-4, the Company's second product in clinical development, is planned to
enter Phase 2 testing in the first quarter of 1999.
As a result, the Company is adjusting its regulatory filing timelines
for pramlintide. It is presently anticipated that the Company will likely
experience a delay of approximately one year in its plan to file a regulatory
application in Europe for the use of pramlintide to treat people with type 1
diabetes, but that its other timelines for the filing in Europe for the
treatment of type 2 diabetes in 2000 and for filing in the U.S. for treatment of
both type 1 and type 2 diabetes in 2000 will remain essentially unchanged. The
Company's current regulatory timelines are subject to successful results from
the Company's current ongoing phase 3 trials of pramlintide.
Results from the recently announced type 1 study showed that two of the
three active treatment arms showed a statistically significant reduction in
average blood-glucose, while in the type 2 study, one of the three active
treatment arms achieved statistical significance for this end point.
Nevertheless, because these results were not as expected and will delay any
future attempts by the Company to gain regulatory approval for pramlintide, the
Company has taken measures to reduce its expenditures, including reducing its
workforce by 75%, and concentrating its remaining resources on those critical
steps necessary to support clinical trials of pramlintide and exendin-4.
The Company is conducting further analyses of the data from the two
recently completed European studies, is engaged in appropriate consultation with
regulatory authorities and consultants in the U.S. and Europe, and is continuing
its two remaining ongoing Phase 3 trials in the U.S. The company is currently
considering various options for financing its ongoing operations, including
corporate partnering and equity financing. However, there can be no assurance
that the Company will have or be able to obtain the financial resources
necessary to complete its U.S. trials, or, if so, that the results of its
remaining two one-year U.S. clinical trials for pramlintide will be favorable or
sufficient to support filing for market approval in any jurisdiction or, if they
are, that additional financial resources will be raised in the necessary time
frame or on terms favorable to the Company, if at
<PAGE> 10
all. If for any reason Amylin is unable to obtain additional financing on
acceptable terms, the Company will not have the financial resources to continue
research and development of pramlintide or any of the Company's other product
candidates through and following the second quarter of 1999. The Company
believes that its existing available cash, interest income from cash investments
and the proceeds from the recently completed public stock offering will permit
the Company to finance its current operations until through at least the first
quarter of 1999.
The Company has received notification from The Nasdaq Stock Market,
Inc., that the Company is not presently in compliance with certain Nasdaq
National Market maintenance standards needed to remain listed on the Nasdaq
National Market. On November 12, 1998, the Company participated in a hearing by
Nasdaq on this matter in which it sought to demonstrate that the Company's
common stock should continue to be listed on the Nasdaq National Market. During
the hearing, the Company requested that Nasdaq consider many factors affecting
the Company's operations, and requested that Nasdaq grant an extension of time
for the Company to comply with Nasdaq National Market maintenance standards. The
Company's common stock will continue to be listed on the Nasdaq National Market
pending the outcome of the hearing, which is expected shortly. No assurance can
be given that the outcome of the hearing will be favorable to the Company. An
unfavorable hearing outcome could have a material adverse effect on the Company
and its ability to raise additional capital on favorable terms as well as on
stockholder liquidity.
RESULTS OF OPERATIONS
Revenue
The Company had $2.7 million and $15.7 million of revenue for the three
month and nine month periods ended September 30, 1998 as compared to $9.1
million and $31.5 million for the same periods in 1997. The revenues recognized
in 1998 and 1997 were related to the Company's Collaboration Agreement dated as
of June 20, 1995 (the "Collaboration Agreement") with LifeScan, Inc., a wholly
owned subsidiary of Johnson & Johnson (hereinafter referred to as Johnson &
Johnson). Revenues in 1998 were comprised of Johnson & Johnson's reimbursement
of its one-half share of pramlintide development expenses incurred by Amylin
through the Collaboration termination date in August 1998. Revenues in the nine
months of 1997 were comprised of Johnson & Johnson's reimbursement of its
one-half share of pramlintide development expenses incurred by Amylin, as well
as a $6.0 million non-refundable option fee payment made by Johnson & Johnson in
the first quarter and a $3.0 million non-refundable option fee payment made by
Johnson & Johnson in the second quarter.
<PAGE> 11
Operating Expenses
The Company's total operating expenses for the quarter ended September
30, 1998 decreased to $17.7 million from $25.3 million for the same period in
1997. For the nine months ended September 30, 1998, operating expenses decreased
to $56.4 million from $65.7 million for the same period in 1997. The decreases
in operating expenses were primarily attributable to restructuring and
reductions in force initiated in February 1998 after the Company received notice
from Johnson & Johnson of its intention to terminate the Collaboration
Agreement. The Company expects operating expenses for the fourth quarter of 1998
to be substantially reduced as a result of restructuring and reductions in force
initiated in October 1998.
Research and development expenses decreased to $15.4 million for the
three months ended September 30, 1998 as compared to $21.8 million for the same
period in 1997. Research and development expenses for the nine months ended
September 30, 1998 decreased to $47.8 million from $56.0 million for the same
period in 1997. The decrease in these expenditures was primarily due to reduced
clinical costs, lower product development expenditures, and reduced spending on
the Company's non-pramlintide research programs.
General and administrative expenses were $2.3 million for the three
months ended September 30, 1998 as compared to $3.5 million for the same period
in 1997. General and administrative expenses for the nine months ended September
30, 1998 decreased to $8.6 million from $9.7 million for the same period in
1997. The decrease to general and administrative expenses for the year were
related to decreased pre-marketing expenses and decreased travel expenditures.
The decrease in these and certain other general and administrative expenses were
partially offset by increased litigation expenses during the first nine months
of the year attributable to litigation with the University of Minnesota and Per
Westermark which was settled in October 1998.
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 was
$0.5 million for the quarter ended September 30, 1998 as compared to $0.5
million for the same period in 1997. Interest and other income decreased to $1.3
million for the nine months ended September 30, 1998 from $1.9 million for the
same period in 1997. The decrease in interest and other income was primarily due
to lower average cash reserves available for
<PAGE> 12
investment for the three months and nine months ended September 30, 1998 as
compared to the same periods in 1997.
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, to fund tenant
improvements to the Company's facilities, and for other working capital
purposes. In addition, in accordance with the terms of the Collaboration
Agreement, Johnson & Johnson advanced Amylin's share of pramlintide pre-launch
marketing expenses incurred since the date of the collaboration.
Separately, in 1997, the Company received proceeds of approximately
$30.6 million from a draw down under its Development Loan Facility with Johnson
& Johnson. The proceeds were used to fund the Company's one-half share of
development expenses for its pramlintide invention during 1997. The loan carries
an interest rate of 9.0%. The loan is secured by the Company's issued patents
relating to amylin agonists and amylin antagonists.
The Company is required to repay the pre-marketing loan in full by no
later than June 20, 2010 and the Company is required to repay the development
loan in full by no later than June 20, 2005. Under certain circumstances the
Company may be required to begin to repay both loans prior to their respective
final repayment dates. For instance, in the event that pramlintide is approved
for commercial sale, then following the earlier of (i) 12 months after the date
of such approval and (ii) the date when sales of pramlintide reach $50 million,
the Company would be required to begin to repay the loans out of 25% of the
Company's net proceeds from certain future debt or equity financings by the
Company. In addition, in the event that the Company were to cease commercial
development of pramlintide, the Company would be required to begin to repay the
loans out of 25% of its net income from the Company's future products, if any,
and 25% of the Company's net proceeds from certain future debt or equity
financings by the Company. Other instances, such as a change in control of the
Company, may also require that the Company repay all or a portion of the loans
prior to their respective final repayment dates.
In conjunction with the borrowing under the Development Loan Facility,
the Company issued warrants to Johnson & Johnson to purchase 1,530,950 shares of
the Company's common stock with a fixed exercise price of $12 per share and a
10-year exercise period. The estimated value of the warrants is being amortized
to interest expense over the life of the Development Loan Facility. Both the
development loan and the pre-marketing loan were provided under the terms and
conditions of the Company's Loan and Security Agreement with Johnson & Johnson
(the "Loan Agreement").
<PAGE> 13
Interest and other expense increased to $1.4 million for the three
months ended September 30, 1998 from $0.2 million for the same period in 1997.
Interest and other expense increased to $4.1 million for the nine months ended
September 30, 1998 from $0.7 million for the same period in 1997. The increase
in interest and other expense was primarily due to the interest associated with
the development loan debt, amortization of the valuation placed on the warrants,
and interest expense related to the pre-marketing loan. Of the $4.1 million of
interest and other expense incurred in 1998, the Company had to expend cash
payments for only $0.4 million. The large majority of the interest expense
incurred, $3.7 million, was related to loans with Johnson & Johnson for which
payment is deferred until the occurrence of certain future events, which are
referenced above.
Net Loss
The net loss for the quarter ended September 30, 1998 was $16.0 million
compared to a net loss for the same quarter in 1997 of $15.9 million. The
Company incurred a net loss of $43.5 million for the nine months ended September
30, 1998 as compared to $33.1 million for the nine months ended September 30,
1997. The increase in the net loss was due to decreased collaborative revenues
and increased interest expense.
Amylin expects to incur substantial operating losses over the next
several years due to continuing expenses associated with its research and
development programs, including clinical development of pramlintide, preclinical
and potential clinical testing of additional product candidates, including
exendin-4, 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, the Company has financed its operations primarily
through private placements of preferred stock, sales of common stock,
reimbursement of pramlintide development expenses through its collaboration with
Johnson & Johnson, and debt financings.
At September 30, 1998, the Company had $25.1 million in cash, cash
equivalents and short-term investments as compared to $52.7 million at December
31, 1997. 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 the ongoing
development of its pramlintide invention, including the Phase 3 clinical trials,
for its exendin-4 development program,
<PAGE> 14
and for other general corporate purposes. As a result of the termination of the
Collaboration Agreement between the Company and Johnson and Johnson, and
following the announcement in October 1998 of unexpected results from the
Company's six month Phase 3 European/Canadian clinical studies of pramlintide,
resources dedicated toward the Company's other research programs have been
sharply reduced or eliminated in 1998. The Company plans to continue advancing
its research and development pipeline only as future resources permit. To the
extent that clinical trials of the Company's pramlintide and exendin-4 compounds
progress as planned, research and development expenses will include costs of
supplying materials for and/or conducting pramlintide and exendin-4 clinical
trials. 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.
As of September 30, 1998, the Company leased approximately 127,000
square feet of space. In association with the Company's process of restructuring
its operations, the Company intends to reduce its ongoing facilities lease
expense during 1999. In June 1998, the Company sub-leased 42,000 square feet of
its space to a third-party tenant under a two-year sub-lease agreement. The
space is being leased to the tenant at competitive market prices, proceeds from
which will offset Amylin's expense on this space. At this time, the Company
expects to incur minimal additional capital expenditures in the remainder of
1998 and during the first part of 1999.
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 research, preclinical testing, clinical trials,
manufacturing costs, and general and administrative expenses necessary to
support such activities. Operating losses may fluctuate from quarter to quarter
as a result of differences in the timing of expenses incurred and revenues
recognized.
The Company cannot assure that any of its drug candidates will
successfully meet any or all of their development goals. Important technical
milestones remain to be achieved before the Company can commercialize any of its
products. 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 the results of its remaining one-year
<PAGE> 15
U.S. Phase 3 clinical trials of pramlintide (expected by the third quarter of
1999), the continued evaluation of results from its two European/Canadian Phase
3 clinical trials of pramlintide, the ability of the Company to establish one or
more development and/or commercialization collaborations for its pramlintide and
exendin programs, progress with its other ongoing and new preclinical studies
and clinical trials, the time and costs involved in obtaining regulatory
approvals, scientific progress in its non-pramlintide research and development
programs, the magnitude of these programs, the costs involved in preparing,
filing, prosecuting, maintaining, enforcing or defending itself against patents,
competing technological and market developments, changes in collaborative
relationships, and any costs 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 and foreign
authorities regulations, the Company continues to undertake extensive clinical
testing in an effort to demonstrate optimal dose, safety, and efficacy for its
product candidates in humans. Although the Company believes Phase 3 clinical
data from its initial four pramlintide trials warrant continuing with the Phase
3 development program at this time, there can be no assurance that the remaining
studies will confirm or improve the results of the four previously completed
Phase 3 studies or that any of the data, past or future, will support regulatory
approval of pramlintide.
Further testing of pramlintide and the Company's other product
candidates in research or development, including exendin-4, may reveal
undesirable and unintended side effects or other characteristics that may
prevent or limit their commercial use. As is the case for any drug in clinical
testing, the Company or regulatory authorities may suspend clinical trials at
any time if the 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
regulatory authorities to delay or suspend clinical trials. In addition, there
can be no assurance that any of the Company's products will obtain regulatory
approval for any indication. Products, if any, resulting from Amylin's research
and development programs are not expected to be commercially available for a
number of years.
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
<PAGE> 16
to the Company, may also be necessary to enforce patents issued to the Company.
Litigation, whether or not there is any basis for it, may also be required to
determine the scope and validity of third-party proprietary rights.
YEAR 2000 ISSUE
The Company is in the process of assessing the impact of the year
2000 on its operations and systems. Management has developed a plan to address
identified issues within the Company. The Company does not yet know the full
extent, if any, of the impact of the year 2000 on its systems and equipment, but
at this point expects the costs associated with its becoming year 2000 compliant
to be approximately $100,000. The Company is also in the process of
communicating with third parties with which it conducts business to assess
whether they are or will be year 2000 compliant. There can be no assurance,
however, that such third parties, including suppliers, clinical research
organizations, and collaborative parties, are using systems that are year 2000
compliant or will address any year 2000 issues in a timely fashion. Any year
2000 compliance problems of the Company, its suppliers, its clinical research
organizations, its collaborative partners, or others could have a material
adverse effect on the Company's business, results of operations and financial
condition.
<PAGE> 17
LEGAL PROCEEDINGS
On December 5, 1996, the Company filed a complaint against the
University of Minnesota and Per Westermark in the U.S. District Court for the
Southern District of California seeking a declaratory judgment that the
Company's patented pramlintide invention is not covered by the University's
patent directed to a tumor-derived molecule called "Insulinoma Amyloid
Polypeptide" and that no moneys are owed to the University or Westermark. In
October 1998 all claims between the parties were settled on undisclosed terms.
AMYLIN PHARMACEUTICALS, INC.
September 30, 1998
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.
Amylin Pharmaceuticals, Inc.
Date: November 16, 1998 By: /s/ Joseph C. Cook, Jr.
----------------------------------
Joseph C. Cook, Jr.
Chairman of the Board and
Chief Executive Officer
(on behalf of the registrant
and as the registrant's
principal financial officer)
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS AS FILED AS PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 25,093,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,020,000
<PP&E> 19,811,000
<DEPRECIATION> 13,220,000
<TOTAL-ASSETS> 34,583,000
<CURRENT-LIABILITIES> 15,258,000
<BONDS> 0
0
0
<COMMON> 37,000
<OTHER-SE> (24,063,000)
<TOTAL-LIABILITY-AND-EQUITY> 34,583,000
<SALES> 0
<TOTAL-REVENUES> 16,947,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 56,415,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,064,000
<INCOME-PRETAX> (43,533,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (43,533,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (43,533,000)
<EPS-PRIMARY> (1.30)
<EPS-DILUTED> (1.30)
</TABLE>
