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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMYLIN PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 33-0266089
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
9373 TOWNE CENTRE DRIVE
SAN DIEGO, CALIFORNIA 92121
(619) 552-2200
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOSEPH C. COOK, JR.
CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
AMYLIN PHARMACEUTICALS, INC.
9373 TOWNE CENTRE DRIVE
SAN DIEGO, CALIFORNIA 92121
(619) 552-2200
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
------------------------
COPIES TO:
THOMAS A. COLL, ESQ.
ERIC J. LOUMEAU, ESQ.
COOLEY GODWARD LLP
4365 EXECUTIVE DRIVE, SUITE 1100
SAN DIEGO, CA 92121
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(2) FEE
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Common Stock, $.001 par value...... 3,000,000 shares $3.92 $11,760,000 $3,469.20
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(1) Estimated in accordance with Rule 457(c) solely for the purpose of computing
the amount of the registration fee based on the average of the high and low
prices of the Registrant's Common Stock as reported on The Nasdaq National
Market on July 7, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 10, 1998
PROSPECTUS
3,000,000 SHARES
AMYLIN LOGO
COMMON STOCK
------------------------
All of the 3,000,000 shares of Common Stock offered hereby (the "Offering")
are being sold by AMYLIN PHARMACEUTICALS, INC. ("AMYLIN" or the "Company"). The
Company's Common Stock is quoted on the Nasdaq National Market under the symbol
"AMLN." On July 8, 1998, the last reported sale price for the Company's Common
Stock on the Nasdaq National Market was $3.625 per share. See "Price Range of
Common Stock."
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS," BEGINNING ON PAGE 6.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE TO PROCEEDS TO
PUBLIC COMPANY(1)(2)(3)
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Per Share................................. $ $
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Total(3).................................. $ $
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(1) The Common Stock is being offered, on an all or none basis, by the Company
principally to selected institutional and individual investors. Though the
exact investors to whom shares will be offered have not been identified, the
Company expects the pool of such investors to include current holders of the
Company's Common Stock and other institutional investors who purchase
biotechnology stocks for longer-term investment purposes. The Company may
reject, in whole or in part, any offer to purchase shares of Common Stock
included in the Offering. See "Plan of Distribution."
(2) The termination date of the Offering is August 31, 1998, subject to earlier
termination if all the shares are sold or otherwise at the discretion of the
Company. There is no minimum required purchase of the shares. The closing of
the Offering is conditioned on the sale of all the shares offered hereby.
See "Plan of Distribution."
(3) Before deducting expenses payable by the Company, estimated at $350,000.
------------------------
, 1998
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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH
IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS AT ANY TIME NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
following Regional Offices: Chicago Regional Office, Suite 1400, Northwest
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661; and New York
Regional Office, Seven World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. The Commission also maintains a site on the World Wide
Web that contains reports, proxy and information statements and other
information regarding the Company. The address for such site is
http://www.sec.gov.
Additional information regarding the Company and the shares offered hereby
is contained in the Registration Statement on Form S-3 and the exhibits thereto
filed with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). For further information pertaining to the Company and the
shares, reference is made to the Registration Statement and the exhibits
thereto, which may be inspected without charge at, and copies thereof may be
obtained at prescribed rates from, the office of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
The AMYLIN logo is a trademark of the Company. All other brand names or
trademarks appearing in this Prospectus are the property of their respective
holders.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997, the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, and the Company's Registration Statement on Form 8-A dated
November 27, 1991 filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus except as superseded or modified
herein. All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the Offering of the shares offered
hereby shall be deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date of filing of such documents. Any statement
contained in any document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus. The Company will provide without charge to
each person, including any beneficial owner to whom this Prospectus is
delivered, upon written or oral request of such person, a copy of any and all of
the documents that have been or may be incorporated by reference herein (other
than exhibits to such documents which are not specifically incorporated by
reference into such documents). Such requests should be directed to the
Company's General Counsel at the Company's principal executive offices at 9373
Towne Centre Drive, San Diego, California 92121 (telephone (619) 552-2200).
2
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements including the notes thereto appearing
elsewhere in this Prospectus or incorporated hereby reference. This Prospectus
contains forward-looking statements which involve risks and uncertainties. The
Company's actual results may differ significantly from the results discussed in
the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed under "Risk Factors,"
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations" and "Business." As used in this Prospectus, references to "Johnson &
Johnson" include Johnson & Johnson, LifeScan, Inc. and Johnson & Johnson
Development Corporation.
THE COMPANY
AMYLIN PHARMACEUTICALS, INC. ("AMYLIN" or the "Company") is focused on
developing novel therapeutics for treating people with diabetes and other
metabolic disorders. The Company is conducting a series of Phase III clinical
trials of its lead drug candidate, pramlintide, a compound that was invented and
patented by AMYLIN and is being developed by the Company to safely improve
glucose control in people with Type I (juvenile-onset) and Type II
(maturity-onset) diabetes who use insulin. In addition, the Company is applying
its research and development expertise and is in-licensing new technologies to
identify and develop potential new treatments for diabetes, obesity and
dyslipidemia.
Diabetes is a major global health problem which is inadequately treated by
available drugs. The hallmark of diabetes is excessively high blood glucose, and
an estimated seven million people with diabetes in the major pharmaceutical
markets rely on insulin therapy to help control their blood glucose. However,
insulin is relatively difficult to use, and most people with diabetes cannot
maintain their blood glucose concentrations near the normal range. Even modest
improvements in glucose control can result in significant reductions in the risk
of degenerative complications such as blindness, kidney failure and nerve damage
and in the risk of heart disease. Consequently, the Company believes that a new
drug which could safely help people with diabetes improve their glucose control
would be of great therapeutic benefit.
Pramlintide is a synthetic analog of human amylin, a hormone which in
healthy individuals is believed to work in concert with insulin in controlling
glucose metabolism. Amylin secretion in many people with diabetes is missing or
deficient, an abnormality which may contribute to poor glucose control,
especially after eating. Like pramlintide, amylin is also the subject of U.S.
patents which have been issued to the Company. Based on 38 completed and ongoing
clinical studies involving approximately 5,000 subjects, the Company believes
that pramlintide should aid insulin-using patients in achieving better control
of their metabolic functions. The Company expects treatment outcomes to include
improved glucose control without increased hypoglycemia, improved weight
control, and healthier cholesterol profiles. In the Company's opinion,
pramlintide's excellent safety and tolerability profile appears to be consistent
with its mechanism of action, which replaces the desired effects of a
disease-induced hormone deficiency.
The Company has completed two of six planned Phase III efficacy studies on
pramlintide. AMYLIN announced results from the two completed Phase III clinical
trials in August 1997: the Company interpreted the outcomes as positive in Type
I diabetes and encouraging in Type II diabetes. Pramlintide improved glucose
control without increased hypoglycemia, and it improved weight control and
cholesterol profiles for many patients. These studies also extended
pramlintide's excellent safety and tolerability profile to dosing of up to 12
months.
Unfortunately, the effects of pramlintide on glucose control for all
patients in the initial Phase III clinical trials (i.e., the "intent to treat"
results) were less than expected. The Company believes that the results from
these initial Phase III clinical trials of pramlintide were confounded by a
tendency for patients receiving placebo to increase their insulin doses during
the course of the studies to a greater degree than did patients receiving
pramlintide. Because insulin exerts a strong glucose lowering effect, changes in
insulin dosing can be expected to obfuscate the pramlintide drug effect and
affect the difference in glucose endpoints between the placebo (insulin only)
and drug (insulin plus pramlintide) treatment groups. To isolate better the
pramlintide
3
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drug effect, protocol modifications were incorporated in the Company's remaining
four Phase III efficacy studies for pramlintide -- two six-month European Phase
III clinical trials for Type I and Type II diabetes and two one-year United
States Phase III clinical trials for Type I and Type II diabetes.
Enrollment in the Company's two European Phase III clinical trials was
completed in the first quarter of 1998, and AMYLIN plans to announce the results
of these two six-month clinical trials in the fourth quarter of this year.
Enrollment in the Company's two one-year United States Phase III clinical trials
for Type I and Type II diabetes was completed in July 1998. Results from the two
U.S. clinical trials are expected in the second half of 1999.
Since June 1995, AMYLIN has been collaborating with Johnson & Johnson in
developing pramlintide. However, in February 1998, AMYLIN was notified by
Johnson & Johnson of its intention to withdraw from the collaboration at the end
of August 1998. Until Johnson & Johnson's decision to withdraw from the
collaboration, the regulatory strategy for pramlintide was based on plans for
global filings in both Type I and Type II diabetes during the first half 2000.
However, as the Phase III clinical trials have proceeded, AMYLIN's scientists
and advisors have grown more confident that available data may support an
earlier European filing for use by Type I patients. Also, the European Phase III
clinical trials are scheduled for completion ahead of the ongoing U.S. Phase III
clinical trials. Thus, if the ongoing Phase III clinical trials meet the
Company's expectations, AMYLIN plans to file its first marketing application in
Europe for Type I diabetes during the first half of 1999.
The Company plans to file a marketing application in Europe for Type II
diabetes in the first half of 2000, subject to European approval of pramlintide
for Type I diabetes. The Company also plans to file a New Drug Application
("NDA") for pramlintide in the United States for Type I and Type II diabetes
during the first half of 2000.
The Company is also working on other potential new treatments for diabetes,
obesity and dyslipidemia, including exendin, a peptide which has effects like
those of the glucose-lowering hormone glucagon-like peptide-1 ("GLP-1") and
which may have important pharmaceutical advantages over GLP-1. Although certain
of the Company's other research programs have been slowed down in order to
conserve the Company's financial resources, clinical trials for exendin are
scheduled to begin in 1998, and the Company believes its other research programs
have the potential to provide the Company with additional product candidates.
The Company was incorporated in Delaware in September 1987. Unless the
context otherwise requires, "AMYLIN" and the "Company" refer to Amylin
Pharmaceuticals, Inc., a Delaware corporation, and its European subsidiary,
Amylin Europe Limited. The Company's executive offices are located at 9373 Towne
Centre Drive, San Diego, California 92121, and its telephone number is (619)
552-2200.
4
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THE OFFERING
Common Stock offered by the
Company............................. 3,000,000 shares
Common Stock outstanding after this
Offering............................ 35,492,478 shares(1)
Use of Proceeds..................... To fund Phase III development of
pramlintide, research and development,
and general and administrative
expenses.
Nasdaq National Market Symbol....... AMLN
Risk Factors........................ The Common Stock offered hereby
involves a high degree of risk. See
"Risk Factors."
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
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CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues under collaborative
agreements:
From related party................ $ -- $ -- $ 17,045 $ 35,803 $ 42,609 $12,358 $ 7,086
Other............................. 667 500 -- -- -- -- --
Expenses:
Research and development.......... 18,988 30,255 39,337 64,998 82,281 16,530 18,169
General and administrative........ 4,387 6,383 8,318 10,420 15,592 2,847 2,923
-------- -------- -------- -------- -------- ------- --------
23,375 36,638 47,655 75,418 97,873 19,377 21,092
Net interest income (expense)....... 2,195 1,637 1,341 1,828 637 370 (813)
-------- -------- -------- -------- -------- ------- --------
Net loss............................ $(20,513) $(34,501) $(29,269) $(37,787) $(54,627) $(6,649) $(14,819)
======== ======== ======== ======== ======== ======= ========
Net loss per share -- basic and
diluted........................... $ (1.15) $ (1.71) $ (1.23) $ (1.31) $ (1.70) $ (0.21) $ (0.46)
======== ======== ======== ======== ======== ======= ========
Shares used in computing net loss
per share -- basic and diluted.... 17,867 20,185 23,854 28,745 32,156 32,023 32,438
======== ======== ======== ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
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ACTUAL AS ADJUSTED(2)
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CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 34,991 $ 45,516
Working capital............................................. 18,239 28,764
Total assets................................................ 47,405 57,930
Long term notes payable and obligation under capital
lease..................................................... 3,308 3,308
Long term notes payable to related party.................... 35,358 35,358
Accumulated deficit......................................... (224,551) (224,551)
Total stockholders' equity (net capital deficiency)......... (9,404) 1,121
</TABLE>
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(1) Based on shares of Common Stock outstanding as of March 31, 1998. Excludes
an aggregate of 5,967,404 shares of Common Stock reserved for issuance upon
exercise of options outstanding as of March 31, 1998 at a weighted average
exercise price of $7.02 per share (reflecting the repricing of certain
options in April 1998) and 1,550,950 shares of Common Stock reserved for
issuance upon exercise of warrants outstanding as of March 31, 1998 at a
weighted average exercise price of $11.99 per share. See "Capitalization."
(2) Adjusted to give effect to the receipt of the net proceeds from the sale of
the 3,000,000 shares of Common Stock offered hereby (at an assumed public
offering price of $3.625 per share and after deducting the estimated
offering expenses payable by the Company).
5
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RISK FACTORS
Prospective investors in the shares of Common Stock offered hereby should
carefully consider the following risk factors, in addition to the other
information appearing in this Prospectus.
Except for the historical information contained herein, the discussion in
this registration statement contains forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially
from those discussed this section and in this Prospectus. Factors that could
cause or contribute to such differences include, without limitation, those
discussed in the sections entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business," as well as those
discussed elsewhere in this Prospectus or incorporated herein by reference.
Uncertainty Associated with Clinical Trials. Pramlintide is the only
product candidate that the Company currently has in human clinical trials. The
Company has completed two of six planned Phase III clinical trials on
pramlintide and is currently conducting the remaining four Phase III efficacy
studies for its patented product candidate. In the ongoing Phase III clinical
trials, the Company is testing whether treatment with its pramlintide invention
can improve metabolic control in patients with diabetes who use insulin.
Enrollment in the Company's two European Phase III clinical trials for Type
I and Type II diabetes was completed in the first quarter of 1998, and AMYLIN
plans to announce the results of these two six-month studies in the fourth
quarter of this year. Enrollment in the Company's two one-year United States
Phase III clinical trials for Type I and Type II diabetes was completed in July
1998. Results from the two U.S. clinical trials are expected in the second half
of 1999. Although the Company believes the initial Phase III clinical data about
pramlintide's clinical value warrants continuing with the Phase III development
program, there can be no assurance that the Company's four ongoing Phase III
clinical trials will confirm or improve upon the results of the initial Phase
III clinical trials to date or that the data will support regulatory approval of
pramlintide. Moreover, there can be no assurance that the Company will not
encounter problems in such clinical trials which will cause the Company or
regulatory authorities to delay or suspend those clinical trials or delay the
analysis of data therefrom. If the results of the Company's ongoing Phase III
clinical trials for pramlintide are not available when expected by the Company
or if those results do not improve upon the results of the initial Phase III
clinical trials to date, or if pramlintide does not successfully complete
clinical testing and meet applicable regulatory requirements or is not
successfully manufactured or marketed, the Company may not have the financial
resources to continue research and development of pramlintide or any of the
Company's other product candidates. See "-- Future Capital Needs; Uncertainty of
Additional Funding" and "Business -- Initial Phase III Clinical Results."
Technological Uncertainty; Reliance on Single Drug Candidate in Clinical
Development. All of the Company's products are in research or development, and
no revenues have been generated from product sales. To date, the Company's
resources have been dedicated primarily to the research and development of
potential pharmaceutical products relating to the amylin hormone to treat
metabolic disorders. The physiology of fuel metabolism is highly complex, and
the causes of metabolic disorders, such as diabetes, are not fully known.
Although the Company believes that preclinical and Phase II and initial Phase
III clinical data support the Company's belief that amylin plays an important
role in the regulation of metabolism, there can be no assurance that the
Company's theories are correct or that any of its product candidates will be
effective in the treatment of metabolic disorders.
The Company's research and development programs other than pramlintide are
at an early stage. Any additional product candidates will require significant
research, development, preclinical and clinical testing, regulatory approval and
commitments of resources prior to commercialization. There can be no assurance
that the Company's research will lead to the discovery of any additional product
candidates or that pramlintide or any such potential products will be
successfully developed, prove to be safe and efficacious in clinical trials,
meet applicable regulatory standards, be produced in commercial quantities at
acceptable costs or be marketed successfully. See "Business -- Initial Phase III
Clinical Results" and "-- Other Research and Development Activities."
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Future Capital Needs; Uncertainty of Additional Funding. The Company's
collaborative relationship with Johnson & Johnson will be terminated in August
1998. Accordingly, the Company must find alternate sources of capital in order
to complete the development and commercialization of pramlintide. The Company's
future capital requirements will depend on many factors, including the results
of its six-month European Phase III clinical trials for pramlintide (expected in
the fourth quarter of 1998), the ability of the Company to establish one or more
development and/or commercialization collaborations for its pramlintide program,
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 the costs of manufacturing scale-up. The Company anticipates that its
existing cash, including interest income from cash investments, financial
commitments from Johnson & Johnson during the termination notice period, and the
proceeds of this Offering, will be adequate to satisfy the Company's capital
requirements until late in the first quarter of 1999. If results of the
Company's two, six-month European clinical trials for pramlintide are available
when expected by the Company and if those results improve upon the results of
the Company's initial Phase III clinical trials, the Company believes that it
should be able to raise additional funds through other corporate partnerships,
equity offerings, debt offerings and/or investor partnerships. 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, if at all. In the
event 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.
Government Regulation. 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 United States Food and Drug
Administration ("FDA") and equivalent foreign authorities. Subject to compliance
with applicable regulations, the Company is undertaking extensive clinical
testing to demonstrate optimal dose, safety and efficacy for its product
candidates. 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 applicable regulatory authorities 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
such 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. See "Business -- Initial Phase III Clinical
Results."
The time required for completing such clinical testing and obtaining such
regulatory approvals is uncertain and approval itself may not be obtained. In
addition, delays or rejections may be encountered based upon FDA regulatory
review of each submitted New Drug Application ("NDA") and changes in FDA
policies during the period of product development. Similar delays may also be
encountered in other countries. There can be no assurance that, even after such
time and expenditures, regulatory approval will be obtained for any products
developed by the Company. Moreover, prior to receiving regulatory approval to
market its products, the Company may have to demonstrate that its products
represent improved forms of treatment over existing therapies. If regulatory
approval of a product is granted, such approval may be subject to limitations on
the indicated uses for which the product may be marketed. Further, even if such
regulatory approval is obtained, a marketed product, its manufacturers and its
manufacturing facilities are subject to continual review and periodic
inspections and later discovery of previously unknown problems with a product,
manufacturer or facility may result in restrictions on such product or
manufacturer, including withdrawal of the product from the market. See
"Business -- Initial Phase III Clinical Results" and "-- Government Regulation."
Termination of Johnson & Johnson Collaboration. In late February 1998,
Johnson & Johnson provided the Company with six months' notice of its intention
to terminate their collaboration for the development and
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commercialization of pramlintide. Johnson & Johnson's financial and other
obligations under the Collaboration Agreement will continue during the
termination notice period. Based upon Johnson & Johnson's decision, in early
March 1998 AMYLIN initiated the process of restructuring its operations by
reducing its workforce by approximately 25% and reducing other non-personnel
related expenses. The Company is continuing to evaluate its business operations
during this restructuring process.
As a result of Johnson & Johnson's notice of its intention to terminate the
collaboration, the Company will assume full responsibility for certain product
development, marketing and manufacturing functions that were being undertaken by
Johnson & Johnson. The transition of those functions to the Company will require
the cooperation of third-party service providers and manufacturers and Johnson &
Johnson. There can be no assurance that third-party service providers and
manufacturers will cooperate in the transition of such services or functions or
that such transitions will proceed in a timely or cost effective manner. The
Company believes that it will likely need to find another corporate partner who
can provide primary responsibility for commercialization of pramlintide. There
can be no assurance that the Company will be able to find such a corporate
partner, or that such a corporate partner will establish adequate sales and
distribution capabilities or be successful in gaining market acceptance for
products, if any.
History of Operating Losses. The Company has experienced significant
operating losses since its inception in 1987. As of March 31, 1998, the Company
had an accumulated deficit of approximately $225 million. The Company expects to
incur significant additional operating losses over the next several years.
Substantially all of the Company's revenues to date have been derived from
development funding, fees and milestone payments under collaborative agreements
and from interest income. To date, the Company has not received any revenues
from product sales. To achieve profitable operations, the Company, alone or with
others, must successfully develop, manufacture, obtain required regulatory
approvals and market its products.
Patents and Proprietary Rights. The Company's success will depend in part
on its ability to obtain patent protection for its products and technologies
both in the United States and other countries. The patent positions of
biotechnology and pharmaceutical companies can be highly uncertain and involve
complex legal and factual questions. As of March 31, 1998, the Company owned or
held exclusive rights to 25 issued U.S. patents. In addition, AMYLIN owns or has
exclusive rights to more than 25 patent applications pending with the U.S.
Patent and Trademark Office (the "U.S. PTO"). The Company intends to file
additional applications as appropriate for patents covering both its products
and processes. Generally, it is the Company's policy to file foreign
counterparts in countries with significant pharmaceutical markets. The Company
has filed foreign counterparts of certain of its issued and pending applications
in many countries. There can be no assurance that patents will issue from any of
these applications or, if patents do issue, that claims allowed on issued
patents will be sufficient to protect the Company's technology. In addition,
there can be no assurance that patents issued to the Company will not be
challenged or circumvented or that the rights granted thereunder will provide
proprietary protection or commercial advantage to the Company.
Since patent applications in the United States are maintained in secrecy
until patents issue and since publication of discoveries in the scientific or
patent literature often lag behind actual discoveries, the Company cannot be
certain that it was the first to make the inventions covered by each of its
pending patent applications or that it was the first to file patent applications
for such inventions. In the event that a third party has also filed a patent for
any of its inventions, the Company may have to participate in interference
proceedings declared by the U.S. PTO to determine priority of invention, which
could result in substantial cost to the Company, even if the eventual outcome is
favorable to the Company. There can be no assurance that the Company's patents,
if issued, would be held valid by a court of competent jurisdiction. There can
be no assurance that the Company will not be obliged to defend itself in court
against allegations of infringement of third-party patents. An adverse outcome
in such a suit could subject the Company to significant liabilities to third
parties, require disputed rights to be licensed from third parties or require
the Company to cease using such technology.
The Company has received letters from the University of Minnesota (the
"University") and Per Westermark ("Westermark") asserting that the Company's
patented pramlintide invention is covered by a patent (the "University Patent")
which was licensed to the Company before it issued, while it was still
8
<PAGE> 10
pending as an application, pursuant to a License Agreement dated November 11,
1991 among the Company, the University and Westermark (the "University License
Agreement"). The University Patent is directed to a different, tumor-derived
molecule called "Insulinoma Amyloid Polypeptide." In its letters, the University
and Westermark claim that they are entitled to 50% of any sublicense fees
received by the Company from sublicensing the University Patent to Johnson &
Johnson pursuant to the Collaboration Agreement, as well as future royalties as
specified in the University License Agreement. The Company has informed the
University and Westermark that no such sublicensing moneys have been received by
the Company from Johnson & Johnson, who is not a sublicensee under the
University Patent. On December 5, 1996, the Company filed a complaint against
the University and Westermark in the U.S. District Court for the Southern
District of California seeking a declaratory judgment that its patented
pramlintide invention is not covered by the University Patent and that no moneys
are owed to the University or Westermark. Although discussions were underway
with the University and Westermark, they did not result in any agreement
regarding the litigation. The Company's complaint was served on the University
and Westermark in April 1997. The Company believes that the University's and
Westermark's assertions are without merit and intends to defend vigorously
against the claims that have now been brought against the Company related to the
foregoing.
If patents are issued to other companies that contain competitive or
conflicting claims and such claims are ultimately determined to be valid, there
can be no assurance that the Company would be able to obtain licenses to these
patents at a reasonable cost or be able to develop or obtain alternative
technology.
In order to protect its proprietary technology and processes, AMYLIN also
relies in part on confidentiality agreements with its corporate partners,
employees, consultants, outside scientific collaborators and sponsored
researchers and other advisors. There can be no assurance that these agreements
will not be breached, that the Company will have adequate remedies for any such
breach or that the Company's trade secrets will not otherwise become known or be
independently discovered by competitors. See "Business -- Patents, Proprietary
Rights, and Licenses."
Competition; Technological Change. Other products are currently in
development or exist in the market that may compete directly with the products
that the Company is seeking to develop and market. Various products are
available to treat Type II diabetes, including sulfonylureas, metformin,
acarbose, repaglinide, troglitazone and other compounds. In addition, several
companies are developing various approaches to improve treatments for Type I and
Type II diabetes. There can be no assurance that the Company's products, even if
successfully tested and developed, will have sufficient advantages over existing
products to cause health care professionals to adopt them over such other
products or that the Company's products will offer an economically feasible
alternative to such existing products.
The Company is engaged in a rapidly developing field. A number of companies
are pursuing the development of novel pharmaceuticals which target the same
diseases that AMYLIN is targeting. These companies include biotechnology and
pharmaceutical companies. It is expected that the number of companies seeking to
develop products and therapies for the treatment of diabetes and other metabolic
disorders will increase. There can be no assurance that other products and
therapies will not be developed that will either render the Company's proposed
products obsolete or that will have advantages that will significantly outweigh
the advantages of the products and therapies that the Company is seeking to
develop.
Many of the Company's competitors have substantially greater financial,
technical and human resources than the Company. In addition, many of these
competitors have significantly greater experience than the Company in
undertaking preclinical testing and human clinical trials of new pharmaceutical
products and in obtaining regulatory approvals of human therapeutic products.
Accordingly, the Company's competitors may succeed in obtaining FDA approval for
products more rapidly than the Company. Furthermore, if the Company is permitted
to commence commercial sales of products, it may also be competing with respect
to manufacturing efficiency and marketing capabilities, areas in which it has
limited or no experience. See "Business -- Competition."
Reliance on Third-Party Manufacturers; Manufacture of Pramlintide in
Commercial Quantities. The manufacturing of sufficient quantities of new drugs
is a time consuming and complex process. The Company currently has no facilities
for the manufacture of clinical trial or commercial supplies of pramlintide. The
9
<PAGE> 11
Company currently relies on third-parties to manufacture pramlintide for
preclinical testing and clinical trials. Pramlintide has not yet been
manufactured on a commercial scale. In light of Johnson & Johnson's decision to
terminate its Collaboration with the Company, Amylin will likely need to find
another corporate partner or work with contract suppliers who have the
capabilities for the commercial manufacture of pramlintide. All manufacturing
facilities must comply with applicable regulations of the FDA. No assurance can
be given that the Company, alone or together with a new corporate partner, will
be able to make the transition to commercial production. The Company has
established a quality control and quality assurance program, including a set of
standard operating procedures and specifications, designed to ensure that the
Company's products are manufactured in accordance with current Good
Manufacturing Practice ("GMP") and other applicable domestic and foreign
regulatory standards. However, the Company is dependent upon contract
manufacturers to comply reliably with such procedures and regulations. There can
be no assurance that these manufacturers will meet the Company's requirements
for quality, quantity or timeliness. See "Business -- Manufacturing."
Attraction and Retention of Key Employees and Consultants. The Company is
highly dependent on the principal members of its scientific and management
staff, the loss of whose services might impede the achievement of research and
development objectives. Recruiting and retaining qualified scientific personnel
to perform research and development work in the future will also be critical to
the Company's success. Although the Company believes it will be successful in
attracting and retaining skilled and experienced scientific personnel, there can
be no assurance that the Company will be able to attract and retain such
personnel on acceptable terms given the competition between numerous
pharmaceutical and biotechnology companies, universities and other research
institutions for experienced scientists and management personnel. The Company
does not maintain "key person" insurance on any of its employees. In addition,
the Company relies on consultants and advisors, including its scientific and
clinical advisors, to assist the Company in formulating its research and
development strategy. All of the Company's consultants and advisors are employed
by employers other than the Company and have commitments to or consulting or
advisory contracts with other entities that may limit their availability to the
Company.
Absence of Sales and Marketing Organization. The Company has limited
experience in market development and no experience in sales, marketing or
distribution. To market any of its products directly, the Company must obtain
access to marketing and sales forces with technical expertise and with
supporting distribution capability. To this end, the Company believes that it
will likely need to find a corporate partner who can provide primary
responsibility for commercialization of pramlintide. There can be no assurance
that the Company will be able to find such a corporate partner, or that such a
corporate partner will establish adequate sales and distribution capabilities or
be successful in gaining market acceptance for products.
Uncertainty of Pharmaceutical Pricing and Reimbursement. AMYLIN's ability
to commercialize its products successfully will depend in part on the extent to
which reimbursement for the cost of such products and related treatments will be
available from government health administration authorities, private health
insurers and other organizations. The levels of revenues and profitability of
pharmaceutical companies may be affected by the continuing efforts of
governmental and third-party payors to contain or reduce the costs of health
care through various means. For example, in certain foreign markets pricing or
profitability of prescription pharmaceuticals is subject to government control.
In the United States, there have been, and the Company expects that there will
continue to be, a number of federal and state proposals to implement similar
government control. In addition, both in the United States and elsewhere, sales
of prescription pharmaceuticals are dependent in part on the availability of
reimbursement from third-party payors, such as government and private insurance
plans. Third-party payors are increasingly challenging the prices charged for
medical products and services. If the Company succeeds in bringing pramlintide
to the market, there can be no assurance that it will be considered cost
effective and that reimbursement will be available or will be sufficient to
allow the Company to sell pramlintide on a competitive basis. This could have a
material adverse effect on the Company's business.
Product Liability and Insurance. The Company's business exposes it to
potential product liability risks which are inherent in the testing,
manufacturing and marketing of human therapeutic products. Although the Company
currently has product liability insurance, there can be no assurance that it
will be able to maintain
10
<PAGE> 12
such insurance on acceptable terms or that insurance will provide adequate
coverage against potential liabilities.
Hazardous Materials. The Company's research and development involves the
controlled use of hazardous materials, chemicals and various radioactive
compounds. Although the Company believes that its safety procedures for handling
and disposing of such materials comply with the standards prescribed by state
and federal regulations, the risk of accidental contamination or injury from
these materials cannot be eliminated. In the event of such an accident, others
may seek to hold the Company liable for any damages that result and any such
liability could exceed the resources of the Company.
Volatility of Stock Price. The market prices for securities of
biopharmaceutical and biotechnology companies, including AMYLIN, have
historically been highly volatile, and the market from time to time has
experienced significant price and volume fluctuations that are unrelated to the
operating performance of such companies. Given the uncertainty of the Company's
future funding and the pending announcement of results of the Company's two
six-month European Phase III clinical trials (expected during the fourth quarter
of 1998), the Company expects that there may be increased volatility of its
stock price, above that which it has historically experienced, during the next
twelve months. In addition, factors such as fluctuation in the Company's
operating results, announcements of additional clinical trial results,
technological innovations or new commercial therapeutic products by the Company
or its competitors, governmental policy or regulation, developments in patent or
other proprietary rights, developments in the Company's relationships with
collaborative partners, public concern as to the safety of drugs developed by
the Company and general market conditions may have a significant effect on the
market price of the Common Stock.
The Company's Common Stock is listed for trading on the Nasdaq National
Market System ("Nasdaq"), which requires certain minimum market prices for
equity securities listed on Nasdaq. In the event the Company's stock price does
not meet the minimum requirements for listing on Nasdaq, the Company's
securities may be delisted from Nasdaq. There can be no assurance that the
Company will be able to maintain the listing of its Common Stock on Nasdaq or
any other exchange.
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered by the Company hereby are estimated to be $10.5 million,
assuming a public offering price of $3.625 per share and after deducting the
estimated offering expenses payable by the Company.
The Company intends to use the proceeds of this Offering for the ongoing
development of pramlintide, including the Phase III efficacy studies, and for
the support of its other research, discovery and development programs and other
general corporate purposes. To the extent that clinical trials of pramlintide
progress as planned, the Company's research and development expenses will
include costs of supplying materials for and conducting pramlintide clinical
trials, expanding the potential patient use and indications for pramlintide,
further exploring amylin biology and continuing to broaden its research base to
investigate new drug targets for the treatment of metabolic disorders, including
diabetes, obesity and dyslipidemia. The amounts actually expended for each
purpose may vary significantly depending on numerous factors, including the
progress of the Company's research and development programs, the results of
preclinical studies and clinical trials, 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 availability of additional sources of funds,
the establishment of collaborative arrangements with other companies, and other
factors. The Company anticipates that its existing available cash, interest
income from cash investments, financial payments through August 1998 by Johnson
& Johnson under its collaboration agreement with the Company, and the proceeds
of this Offering will be adequate to fund the Company's activities until late in
the first quarter of 1999.
In addition, the Company from time to time considers acquisitions of
complementary businesses, assets or technologies and, although there are no
current agreements or understandings with respect to any such acquisition, the
Company desires to be able to respond to opportunities as they arise.
Pending such uses, the Company will invest the net proceeds in
investment-grade, interest-bearing marketable securities.
12
<PAGE> 14
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "AMLN." The following table sets forth, for the periods indicated,
the high and low sales prices per share of Common Stock on the Nasdaq National
Market:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1998
Third Quarter (through July 8, 1998)...................... $ 4.13 $ 3.63
Second Quarter............................................ 6.88 2.69
First Quarter............................................. 6.38 2.50
1997
Fourth Quarter............................................ $ 9.75 $ 4.75
Third Quarter............................................. 15.50 6.88
Second Quarter............................................ 14.00 10.00
First Quarter............................................. 16.63 11.88
1996
Fourth Quarter............................................ $13.50 $10.75
Third Quarter............................................. 13.63 8.13
Second Quarter............................................ 12.25 9.00
First Quarter............................................. 13.50 9.25
</TABLE>
The last reported sale price of the Common Stock on the Nasdaq National
Market on July 8, 1998 was $3.625. As of July 8, 1998, there were approximately
1,100 stockholders of record of the Company's Common Stock.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain any future earnings for funding
growth and, therefore, does not anticipate paying any cash dividends in the
foreseeable future.
13
<PAGE> 15
CAPITALIZATION
The following table sets forth at March 31, 1998 the actual capitalization
of the Company, and the capitalization as adjusted to reflect the receipt of the
estimated net proceeds from the sale of the 3,000,000 shares of Common Stock
being offered by the Company hereby at an assumed public offering price of
$3.625 per share and after deducting the estimated offering expenses payable by
the Company.
<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term notes payable and obligation under capital
leases.................................................... $ 3,308 $ 3,308
Long-term notes payable to related party, net of discount... 35,358 35,358
Stockholder's equity:
Preferred stock, $.001 par value; 7,500,000 shares
authorized; no shares issued or outstanding............ -- --
Common stock, $.001 par value; 50,000,000 shares
authorized; 32,492,478 shares issued and outstanding;
and 35,492,498 shares to be outstanding as
adjusted(1)(2)......................................... 32 35
Additional paid-in capital................................ 215,973 226,495
Accumulated deficit....................................... (224,551) (224,551)
Deferred compensation..................................... (857) (857)
Unrealized (gains) losses on short-term investments....... (1) (1)
--------- ---------
Total stockholders' equity (net capital deficiency).... (9,404) 1,121
--------- ---------
Total capitalization.............................. $ 29,262 $ 39,787
========= =========
</TABLE>
- ---------------
(1) Excludes 8,220,000 shares reserved for issuance under the Company's stock
option plans, of which 5,967,404 shares were subject to outstanding options
as of March 31, 1998 at a weighted average exercise price of $7.02 per share
(reflecting the repricing of certain options in April 1998), and 1,550,950
shares reserved for issuance under outstanding warrants to purchase shares
of the Company's Common Stock having a weighted average exercise price of
$11.99 per share.
(2) On May 20, 1998, the Company's stockholders approved an amendment to the
Company's Amended and Restated Certificate of Incorporation increasing the
number of shares of Common Stock authorized to 100,000,000 shares. A
Certificate of Amendment reflecting this amendment was filed with the
Delaware Secretary of State on May 29, 1998.
14
<PAGE> 16
DILUTION
The net tangible book value (deficit) of the Company's Common Stock at
March 31, 1998 was $(11,171,000), or $(0.34) per share of Common Stock. Net
tangible book value (deficit) per share represents the amount of the Company's
total tangible assets less total liabilities divided by the number of shares of
Common Stock outstanding. Net tangible book value dilution per share represents
the difference between the amount per share paid by purchasers of shares of
Common Stock in the Offering made hereby and the net tangible book value
(deficit) per share of Common Stock. After giving effect to the sale of the
Company of the 3,000,000 shares of Common Stock offered hereby (based upon an
offering price of $3.625 per share and after deducting estimated offering
expenses), the pro forma net tangible book value (deficit) of the Company at
March 31, 1998 would have been $(646,000) or $(0.02) per share, representing an
immediate increase of $0.32 per share to existing stockholders and an immediate
dilution of $3.645 per share to new investors. The following table illustrates
this dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed public offering price per share(1).................. $ 3.625
Net tangible book value (deficit) per share at March 31,
1998................................................... $(0.34)
Increase in pro forma net tangible book value per share
attributable to new investors.......................... 0.32
------
Pro forma net tangible book value (deficit) per share
after Offering......................................... (0.020)
Dilution per share to new investors....................... $ 3.645
=======
</TABLE>
- ---------------
(1) Before deduction of estimated offering expenses to be paid by the Company.
The preceding table assumes no exercise of any outstanding options or
warrants to purchase Common Stock. At March 31, 1998, there were 5,967,404
shares of Common Stock issuable upon exercise of outstanding options with a
weighted average exercise price of $7.02 per share (reflecting the repricing of
certain options in April 1998) and 1,550,950 shares of Common Stock issuable
upon exercise of outstanding warrants with a weighted average exercise price of
$11.99 per share. To the extent outstanding options are exercised, there will be
further dilution in net tangible book value per share of Common Stock to new
investors.
15
<PAGE> 17
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial data set forth below with respect to the Company's
consolidated statements of operations for each of the years in the three-year
period ended December 31, 1997 and with respect to the consolidated balance
sheets at December 31, 1996 and 1997, are derived from the consolidated
financial statements that have been audited by Ernst & Young LLP, independent
auditors, which are included in this Prospectus and are qualified by reference
to such financial statements and the notes related thereto. The consolidated
statement of operations for the three months ended March 31, 1997 and 1998 are
derived from unaudited financial statements included in this Prospectus. The
consolidated balance sheet data at December 31, 1993, 1994 and 1995, and the
consolidated statement of operations data for the years ended December 31, 1993
and 1994, are derived from audited financial statements not incorporated by
reference or included in this Prospectus. The unaudited financial statements
include all adjustments, consisting only of normal recurring adjustments, which
the Company considers necessary for a fair presentation of the financial
position and the results of operations for these periods. Operating results for
the three months ended March 31, 1998 are not necessarily indicative of the
results that may be expected for the entire year ending December 31, 1998. The
data should be read in conjunction with the consolidated financial statements,
related notes and other financial information included in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues under collaborative
agreements:
Related party........................ $ -- $ -- $ 17,045 $ 35,803 $ 42,609 $12,358 $ 7,086
Other................................ 667 500 -- -- -- -- --
Expenses:
Research and development............. 18,988 30,255 39,377 64,998 82,281 16,530 18,169
General and administrative........... 4,387 6,383 8,318 10,420 15,592 2,847 2,923
-------- -------- -------- -------- -------- ------- --------
23,375 36,638 47,655 75,418 97,873 19,377 21,092
Net interest income (expense)........ 2,195 1,637 1,341 1,828 637 370 (813)
-------- -------- -------- -------- -------- ------- --------
Net loss............................. $(20,513) $(34,501) $(29,269) $(37,787) $(54,627) $(6,649) $(14,819)
======== ======== ======== ======== ======== ======= ========
Net loss per share................... $ (1.15) $ (1.71) $ (1.23) $ (1.31) $ (1.70) $ (0.21) $ (0.46)
======== ======== ======== ======== ======== ======= ========
Shares used in computing net loss per
share.............................. 17,867 20,185 23,854 28,745 32,156 32,023 32,438
======== ======== ======== ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------- MARCH 31,
1993 1994 1995 1996 1997 1998
-------- -------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments................................ $ 56,250 $ 29,149 $ 53,521 $ 62,123 $ 52,748 $ 34,991
Working capital.............................. 54,435 26,209 45,268 46,691 31,303 18,239
Total assets................................. 62,029 37,306 61,949 73,533 65,338 47,405
Long-term notes payable and obligation under
capital lease.............................. 819 2,177 1,410 1,990 3,047 3,308
Long-term notes payable to related party..... -- -- 1,020 4,345 33,933 35,358
Accumulated deficit.......................... (53,548) (88,049) (117,318) (155,105) (209,732) (224,551)
Total stockholders' equity (net capital
deficiency)................................ 58,162 30,869 49,754 48,534 4,649 (9,404)
</TABLE>
16
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the financial
statements and the related notes thereto incorporated by reference herein. The
discussion in this Prospectus contains forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially
from those discussed in this Prospectus. Factors that could cause or contribute
to such differences include, without limitation, those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth under "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," as well as those discussed
elsewhere in this Prospectus or incorporated herein by reference.
OVERVIEW
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 March 31,
1998, the Company's accumulated deficit was approximately $225 million.
Since June 1995, the Company and Johnson & Johnson have been collaborating
on the development and commercialization of pramlintide, a diabetes drug
candidate that was invented and patented by the Company and which is now in
Phase III clinical trials. Through March 31, 1998, Johnson & Johnson entities
made various financial payments to the Company totaling $170 million. In late
February 1998, Johnson & Johnson provided the Company with six months' notice of
its intention to terminate their collaboration with the Company. Johnson &
Johnson's financial and other obligations under the Collaboration Agreement will
continue during the termination notice period. Based upon Johnson & Johnson's
decision, in early March 1998 AMYLIN initiated the process of restructuring its
operations by reducing its workforce by approximately 25% and reducing other
non-personnel related expenses. The Company anticipates that its ongoing
restructuring, its existing available cash, interest income from cash
investments, financial payments through August 1998 from Johnson & Johnson under
the Collaboration Agreement and the proceeds of this Offering will permit the
Company to finance its current operations until late in the first quarter of
1999.
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 1998
Revenue
The Company had $7.1 million of revenue for the three months ended March
31, 1998 as compared to $12.4 million for the same period 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 Johnson
& Johnson. Revenues in 1998 were comprised of Johnson & Johnson's reimbursement
of its one-half share of pramlintide development expenses incurred by AMYLIN
during the first quarter. Revenues in the first quarter of 1997 were comprised
of Johnson & Johnson's reimbursement of its one-half share of pramlintide
development expenses incurred by AMYLIN and a $6.0 million option fee payment
made by Johnson & Johnson.
Operating Expenses
The Company's total operating expenses for the quarter ended March 31, 1998
increased to $21.1 million from $19.4 million for the same period in 1997.
Research and development expenses increased to $18.2 million for the three
months ended March 31, 1998 as compared to $16.5 million for the same period in
1997. The increase in these expenditures was primarily due to the costs of the
Company's ongoing pramlintide clinical development efforts. In addition to
17
<PAGE> 19
increased clinical trial expenses, the Company also incurred increased personnel
expenses and facilities related expenses in support of the pramlintide program.
General and administrative expenses increased slightly to $2.9 million for
the three months ended March 31, 1998 as compared to $2.8 million for the same
period in 1997. The increase was primarily due to increased personnel expenses.
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 March 31, 1998 as compared to $0.7 million for the
same period in 1997. The decrease in interest and other income was primarily due
to lower average cash reserves available for investment for the three months
ended March 31, 1998 as compared to the same period 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 has advanced AMYLIN's share of pramlintide
pre-launch marketing expenses incurred since the date of the collaboration.
Separately, in September 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 the second through
fourth quarters of 1997. 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. The estimated value of the
warrants will be 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") and will be repaid with
interest over time out of the Company's share of future pramlintide profits, if
any, subject to certain exceptions set forth in the Loan Agreement. Interest and
other expense increased to $1.3 million for the three months ended March 31,
1998 from $0.3 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.
Net Loss
The net loss for the quarter ended March 31, 1998 was $14.8 million
compared to a net loss for the same quarter in 1997 of $6.6 million. The
increase in the net loss was due to decreased collaborative revenues, increased
operating expenses 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, 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.
In June 1995, the Company entered into the Collaboration Agreement for the
development and commercialization of pramlintide, a diabetes drug candidate
which was invented and patented by the Company and is currently in Phase III
clinical trials. In conjunction with the Collaboration Agreement, the
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Company simultaneously entered into the Loan Agreement and a Stock Purchase
Agreement with Johnson & Johnson.
In September 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 applied against the Company's one-half share of
development expenses for pramlintide incurred during the second through fourth
quarters of 1997. The loan carries an interest rate of 9.0%. In conjunction with
the borrowing, 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 loan is repayable 12 months
after approval of a new drug application for pramlintide out of 50% of the
Company's pramlintide profits, subject to certain exceptions set forth in the
Loan Agreement. The loan is secured by the Company's issued patents and pending
patent applications relating to amylin.
In late February 1998, Johnson & Johnson provided the Company six months'
notice of its intention to terminate their collaboration. All product rights
held by the collaboration will be returning to AMYLIN following the termination
of the collaboration. Johnson & Johnson's financial and other obligations under
the Collaboration Agreement will continue during the termination notice period.
Based upon Johnson & Johnson's decision, in early March 1998 AMYLIN initiated
the process of restructuring its operations by reducing its workforce by
approximately 25% and reducing other non-personnel related expenses. The Company
anticipates that its ongoing restructuring, its existing available cash,
interest income from cash investments, financial payments through August 1998
from Johnson & Johnson under the Collaboration Agreement and the proceeds of
this Offering will permit the Company to finance its current operations until
late in the first quarter of 1999.
Prior to Johnson & Johnson's notification of its intent to terminate the
collaboration, the regulatory strategy for pramlintide was based on plans for
global filings in both Type I and Type II diabetes during the first half of
2000. However, as the Phase III trials have proceeded, AMYLIN scientists and
advisors have concluded that available data should support an earlier filing for
use by Type I patients. In the major pharmaceutical markets, there are about
two-million Type I patients for whom the only important glucose-control drug is
insulin. The Company believes that Europe offers the earliest market
opportunity. Thus, AMYLIN aims to file its first marketing application for
pramlintide in Europe for Type I diabetes during the first half of 1999 and,
subject to the approval of this indication and the results of its ongoing
clinical trials, plans to submit regulatory filings for pramlintide in Europe
for Type II diabetes in the first half of 2000.
The Company plans to file a New Drug Application for pramlintide in the
United States during the first half of 2000 for Type I and Type II diabetes. The
acceleration of the regulatory filing in Europe for Type I diabetes will require
a significant dedication of resources, including financial resources, to that
program.
At March 31, 1998, the Company had $35.0 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 III clinical
trials, for its exendin research program and for other general corporate
purposes. To the extent that clinical trials of the Company's compounds progress
as planned, research and development expenses will include costs of supplying
materials for and conducting pramlintide clinical trials, research activities to
further explore amylin biology and research and development of other compounds
targeted at metabolic diseases. 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.
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As of March 31, 1998, the Company leased or sub-leased approximately
141,000 square feet of space. In association with the Company's process of
restructuring its operations, the Company intends on reducing its ongoing
facilities lease expense during 1998. The Company did not renew a sub-lease
which expired at the end of June 1998 for 14,000 square feet. The Company also
has sub-leased an additional 42,000 square feet of space to a third party for a
period of two years commencing June 1, 1998. At this time, the Company expects
to incur less than $1.0 million of capital expenditures in the remainder of
1998. These expenditures will primarily be directed toward the purchase of new
equipment to support its research and development efforts and for tenant
improvements.
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. The Company's cash resources will be directed toward the
funding of the Phase III clinical trials and other ancillary studies in its
pramlintide clinical program, for its exendin research program and for other
general corporate purposes. The Company plans to continue advancing its expanded
research and development pipeline when resources permit. The Company anticipates
that its corporate restructuring, its existing cash, including interest income
from cash investments, financial payments through August 1998 from Johnson &
Johnson under the Collaboration Agreement and the proceeds of this Offering,
will be adequate to satisfy the Company's capital requirements until late in the
first quarter of 1999. The Company believes that if the results of its two
six-month European Phase III clinical trials for pramlintide are available when
expected by the Company and if those results improve upon the results of the
Company's initial Phase III clinical trials, it should be able to raise
additional funds through other corporate partnerships, equity offerings, debt
offerings and/or investor partnerships. 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, if at all. In the event that 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.
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,
and 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 six-month European Phase III clinical trials (expected in the
fourth quarter of 1998), the ability of the Company to establish one or more
development and/or commercialization collaborations for its pramlintide program,
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 the 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 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 plans 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 the initial Phase III clinical data about pramlintide's clinical value
warrants continuing with the Phase III development program, there can be no
assurance that these studies will confirm or improve the results of the initial
Phase III clinical trials to date or that the data will support regulatory
approval of pramlintide. 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 regulatory authorities 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 regulatory authorities to delay or suspend clinical trials or
delay the analysis of data therefrom. 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.
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BUSINESS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results in the future could differ
significantly from the results discussed in such forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in the sections entitled "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," as well as those discussed elsewhere in this
Prospectus.
GENERAL
Amylin Pharmaceuticals, Inc. ("AMYLIN" or the "Company") is focused on
identifying and developing novel therapeutics for treating people with diabetes
and other metabolic disorders. The Company is conducting Phase III clinical
trials of its lead drug candidate, pramlintide, to establish its safety and
efficacy for improving metabolic control in people with Type I (juvenile-onset)
and with Type II (maturity-onset) diabetes requiring insulin therapy. This
combined patient population comprises about seven million people in the major
pharmaceutical markets. Pramlintide, a molecule that was invented and patented
by the Company, is a synthetic analog of the human hormone amylin. Amylin was
discovered by the Company's co-founder Dr. Garth Cooper and Mr. Tony Willis
while working together at Oxford University.
Since June 1995, AMYLIN has been collaborating with Johnson & Johnson in
developing pramlintide; however, in February 1998, AMYLIN was notified by
Johnson & Johnson of its intention to withdraw from the collaboration at the end
of August 1998. The Company was surprised by Johnson & Johnson's decision to
withdraw since there had been no new clinical results since August 1997, and the
Company's four ongoing Phase III clinical trials were continuing as planned.
AMYLIN believes that Johnson & Johnson made a portfolio decision to invest its
resources elsewhere.
As structured, the Johnson & Johnson collaboration provided for, among
other things, a fifty-fifty sharing arrangement whereby each party would be
responsible for one-half of all development and commercialization costs and
would share one-half of all profits derived from pramlintide. As a result of
Johnson & Johnson's withdrawal, Johnson & Johnson has relinquished all rights to
share in any pramlintide profits. Both companies are obligated to continue to
perform their obligations under the current agreement through the termination of
the collaboration in late August 1998.
AMYLIN is continuing to develop pramlintide and plans to complete its four
ongoing pivotal Phase III clinical trials as planned. Enrollment in the
Company's two European Phase III clinical trials for Type I and Type II diabetes
was completed in the first quarter of 1998, and AMYLIN plans to announce the
results of these two six-month studies in the fourth quarter of this year.
Enrollment in the Company's two one-year United States Phase III clinical trials
for Type I and Type II diabetes was completed in July 1998. Results from the two
U.S. clinical trials are expected in the second half of 1999.
The Company believes that Europe offers the earliest market opportunity for
pramlintide. Thus, AMYLIN plans to file its first marketing application for
pramlintide in Europe for Type I diabetes during the first half of 1999. The
Company then plans to file a marketing application for pramlintide in Europe for
Type II diabetes in the first half of 2000, subject to European approval for
Type I diabetes. The Company also plans on filing a New Drug Application for
pramlintide in the United States for Type I and Type II diabetes during the
first half of 2000.
Based on 38 completed and ongoing clinical trials involving approximately
5,000 subjects, the Company believes that pramlintide should aid insulin-using
patients in achieving better control of their metabolic functions. The Company
expects treatment outcomes to include improved glucose control without increased
hypoglycemia, improved weight control and healthier cholesterol profiles. In the
Company's view, pramlintide's excellent safety and tolerability profile appears
to be consistent with its mechanism of action, which replaces the desired
effects of a disease-induced hormone deficiency.
Since its inception, the Company has spent over $300 million building its
integrated drug discovery and development expertise. With its lead drug
candidate now well advanced in clinical development, AMYLIN has broadened its
research pipeline and is developing other potential drug candidates for treating
metabolic
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disorders, including diabetes, obesity and dyslipidemia, and for treating
cardiovascular risk-factors associated with the development of atherosclerosis.
Although certain of these research programs have been slowed down in order to
conserve the Company's financial resources, the Company believes these programs
have the potential to provide the Company with additional product candidates.
BACKGROUND
Diabetes is a major global health problem which is inadequately treated by
available drugs. The International Diabetes Federation estimates that over 100
million people worldwide are afflicted with this disease. Diabetes costs the
American economy over $100 billion annually, according to a study reported in
the Journal of Clinical Endocrinology and Metabolism, which went on to say that
". . . health care expenditures for people with diabetes constituted about one
in seven health care dollars spent in 1992." Moreover, the American Medical
Association reports that the incidence of diagnosed diabetes as a percentage of
the American population has tripled since 1958, and that the total number of
diagnosed and undiagnosed cases has grown to about 16 million.
Diabetes occurs when the pancreas no longer produces enough insulin, a
hormone that regulates the metabolism of blood-glucose. In Type I
(juvenile-onset) diabetes, which afflicts about 10% of all people with diagnosed
diabetes in developed countries, the pancreatic beta-cells that make insulin
have been destroyed. In the more prevalent form of diabetes, Type II
(maturity-onset), the beta-cells are unable to produce enough insulin to
compensate for patients' poor sensitivity to insulin in glucose-using tissues (a
condition called insulin resistance). In both Type I and Type II diabetes, the
insulin deficiency results in abnormally high blood-glucose concentrations, a
condition called hyperglycemia which is an important cause of the degenerative
complications associated with diabetes, including blindness, kidney failure and
nerve damage. In addition, many authorities believe hyperglycemia plays a role
in the development of heart disease.
Since its discovery in 1921, insulin replacement therapy has played a
central role in treating diabetes. For people with Type I diabetes, insulin
injections are essential, since these patients would otherwise die. For people
with Type II diabetes, oral medications that either stimulate greater insulin
production or enhance insulin sensitivity may improve metabolic control.
However, as many as 20% of people with newly diagnosed Type II diabetes do not
respond to oral therapy. Moreover, Type II patients who do respond to oral
therapy become progressively resistant over time, with as many as 10% each year
ceasing to derive a therapeutic benefit. Thus, an estimated 40% of people
diagnosed with Type II diabetes are using insulin injections to manage their
disease. The Company estimates that in the major pharmaceutical markets as many
as two million people with Type I diabetes and five million people with Type II
diabetes use insulin to help control their blood-glucose concentrations.
Despite over 75 years of efforts to improve insulin therapy, most people
with diabetes have great difficulty achieving optimal glucose control with
insulin alone. For superior glucose control, each insulin injection must be
adjusted to reflect the person's pre-meal blood-glucose concentration and the
carbohydrate content of the meal. These adjustments require multiple
finger-pricks each day for glucose monitoring. Aggressive efforts to bring
blood-glucose concentration down into the normal range using intensive insulin
therapy increase the risk of blood-glucose concentration falling too low, a
condition called hypoglycemia which can cause unpleasant and dangerous effects
that include sweating, disorientation, personality changes, coma, convulsions,
and even death. To avoid hypoglycemia, many people with diabetes maintain above
normal blood-glucose concentrations, but thereby increase their risk of
degenerative complications from the disease.
In June 1993, the National Institutes of Health announced the results of
the Diabetes Control and Complications Trial ("DCCT"). This decade-long,
prospective study of over 1,400 people with Type I diabetes established the
importance of glucose control as a determinant of long-term risk of degenerative
complications. The quality of glucose control for each DCCT participant was
determined by measuring the proportion of blood-hemoglobin which had chemically
combined with blood-glucose to form glycated hemoglobin(%HbA1c). This
measurement is a recognized indicator of average blood-glucose concentration
over the three- to four-month period prior to testing, and lower %HbA1c values
are indicative of better glucose control. In healthy, non-diabetic individuals,
%HbA1c is usually below about 6.0, which therefore is an
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outcome goal for diabetes therapy. However, very few patients with diabetes are
able to maintain normal %HbA1c values, and the American Diabetes Association
("ADA") has recommended that steps be taken to improve glucose control when
patients' %HbA1c values exceed 8.0.
This ADA intervention guideline is based on data from the DCCT which showed
definitively that the risk of degenerative complications is greatly reduced if
blood-glucose concentrations in people with Type I diabetes can be brought
closer to normal. However, the intensive insulin therapy used to achieve this
benefit had several side effects and disadvantages, including (1) a three-fold
increase in severe hypoglycemia compared with the control group, (2) an average
weight gain of 10 to 15 pounds per patient, (3) a highly burdensome treatment
regimen requiring strict patient compliance, and (4) intensive and costly
support from diabetes care-givers. As a result of these side effects and
disadvantages, most people using insulin currently are unable to achieve normal
blood-glucose concentrations. In view of the health problems and economic costs
associated with this failure to achieve optimal glucose control, the Company
believes that significant value would result from a new medicine that could
safely improve glucose control without imposing unacceptable treatment and cost
burdens.
Although the DCCT study involved people with Type I diabetes only, many
experts believe that the conclusions of that study concerning the benefits of
glucose control are also applicable to people with Type II diabetes.
Amylin: The Partner Hormone in Glucose Control
In 1987, researchers at the University of Oxford announced their discovery
that the pancreatic beta-cells which make insulin also produce a second peptide,
amylin. In the years since amylin's discovery, extensive research in animals and
humans has generated data consistent with the idea that amylin is a partner
hormone to insulin:
- Rising blood-glucose concentrations stimulate increases in blood
concentrations of amylin, so that both amylin and insulin concentrations
normally increase after meals.
- Amylin exerts biological effects relevant to maintaining normal glucose
metabolism, including initiation of satiety, regulation of nutrient
transit through the gastrointestinal tract, pancreatic secretion of
digestive enzymes, and suppression of post-meal glucagon (a pancreatic
hormone which stimulates liver production of glucose).
- In people with diabetes who need insulin therapy, both the endogenous
insulin and amylin responses are deficient.
The Company was founded to undertake research and development aimed at the
potential therapeutic implications of the amylin discovery. To this end, the
Company began preclinical research with the hormone amylin and its analogs in
late 1987. Since 1992, the Company has been conducting clinical studies to
determine whether replacing the desired actions of amylin -- using pramlintide,
the Company's patented synthetic chemical analog of human amylin -- can safely
improve metabolic control in people with diabetes.
INITIAL PHASE III CLINICAL RESULTS
The Company is performing extensive clinical trials aimed at understanding
the effects of amylin replacement therapy with pramlintide in patients with
diabetes. Almost 1,700 subjects have been enrolled in 28 completed and ongoing
Phase I and II clinical trials designed to measure safety parameters, mechanisms
of action, interactions with insulin and oral drugs, and effects on post-meal
glucose metabolism. The completed and ongoing Phase III clinical trials are
scheduled to enroll over 3,300 subjects in order to establish safety and
efficacy in chronic dosing of pramlintide for 6- to 12-month periods. This Phase
III program comprises six double-blind, placebo-controlled studies (two for each
type of diabetes in the U.S., and one for each type in Europe) and two
open-label, long-term safety studies.
In August 1997, AMYLIN announced results from the two initial Phase III
clinical trials: the Company interpreted the outcomes as positive in Type I
diabetes and encouraging in Type II diabetes. Pramlintide
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improved glucose control without increased hypoglycemia, and it improved weight
control and cholesterol profiles for many patients. These studies also extended
pramlintide's excellent safety and tolerability profile to dosing of up to 12
months. The most common drug-related side effect in the studies was initial
transient nausea, which in most patients was relatively mild and usually
dissipated during the initial 14 days of treatment; only at the highest drug
dose in the Type II study was the patient dropout rate different from the
dropout rate in the placebo group.
The Company believes that the results from these initial Phase III clinical
trials of pramlintide effects on %HbA1c were confounded by a tendancy for
patients receiving a placebo to increase their insulin doses during the course
of the studies to a greater degree than did patients receiving pramlintide.
Because insulin exerts a strong glucose lowering effect, changes in insulin
dosing can be expected to obfuscate the pramlintide drug effect and affect the
difference in glucose endpoints between the placebo (insulin only) and drug
(insulin plus pramlintide) treatment groups. To isolate better the pramlintide
drug effect, protocol modifications were incorporated in the Company's four
ongoing Phase III clinical trials. See "Remaining Phase III Clinical Program."
Results in Type I Diabetes
In August 1997, the Company released the results from its first Phase III
clinical trial involving Type I diabetics. The study was a double-blind, placebo
controlled study and involved 477 patients for a 12-month treatment period. The
pramlintide dosing regimen was 30 micrograms four-times daily, with certain
patients escalating to 60 micrograms at 20 weeks.
Unfortunately, the effects of pramlintide on glucose control for all
patients in the study (i.e., the "intent to treat" results) were less than
expected. Type I patients who self-administered pramlintide together with
insulin for 12 months experienced a statistically significant, average reduction
in %HbA1c of about 0.3 compared to patients in the placebo group who received
only insulin. Pramlintide patients achieved this improvement without any
increase in the frequency or severity of hypoglycemia. In fact, the incidence of
severe hypoglycemia (requiring assistance and/or medical intervention) was lower
in the drug group, an important potential benefit if this finding is replicated
in the ongoing Phase III clinical trials. In contrast, intensification of
insulin therapy to lower average blood glucose increases the risk of
hypoglycemia.
The 0.3 reduction in %HbA1c represents a useful improvement for many
patients with Type I diabetes. However, AMYLIN believes that this result did not
properly isolate pramlintide's effect on %HbA1c from the glucose-lowering
effects of insulin, and that pramlintide's effect on %HbA1c should be higher in
patients with relatively poor glucose control. In addition, the Company believes
that these initial Phase III results were confounded by a tendency for patients
receiving placebo to increase their insulin doses during the course of the study
to a greater degree than did patients receiving pramlintide. Consequently, the
Company has revised several design parameters of the ongoing Type I studies. See
"Remaining Phase III Clinical Program." The Company believes that the outcome of
these design changes may be better in light of the glucose-lowering results for
relevant patient subgroups in the initial Type I study.
In addition to improved glucose control, Type I patients who received
pramlintide also experienced other metabolic benefits that were statistically
significant. Patients receiving pramlintide lost weight, while the insulin-only
group gained weight. In contrast, weight gain is a usual side effect of
intensifying insulin therapy to improve glucose control. Also, patients in the
treatment group improved their cholesterol profiles over the course of the
52-week study as compared to the patients in the control group receiving only
insulin. Both obesity and inappropriate cholesterol levels are risk factors for
cardiovascular disease, the leading cause of mortality among patients with
diabetes.
Results in Type II Diabetes
In August 1997, the Company also released the results from its first Phase
III clinical trial involving Type II diabetics. The study was a double-blind,
placebo controlled study and involved 539 patients for a 12-month treatment
period. The pramlintide dosing regimen was 30 micrograms, 75 micrograms, and 150
micrograms three-times daily.
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Insulin-using patients with Type II diabetes who added pramlintide to their
therapeutic regimen appeared to improve their glucose control; however, as in
the Type I diabetes study, unfortunately, the effects of pramlintide based on
the intent to treat results were less than expected. %HbA1c reductions at 12
months were about 0.2 at 75 mg and about 0.3 at 150 mg doses of drug compared to
placebo, but these results did not achieve statistical significance. The Company
believes these results would have been statistically significant if the number
of patients enrolled in the study had been larger. For the same reasons as in
the Type I diabetes study, the Company believes that revisions incorporated in
the ongoing Type II studies may result in more robust effects on %HbA1c. See
"Remaining Phase III Clinical Program."
Type II patients who received pramlintide for 12 months benefited from a
statistically significant reduction in body weight ranging from 3.7 pounds to
7.0 pounds, depending on dose, compared to patients receiving insulin alone.
Weight loss is particularly important in Type II diabetes, because most patients
with this disorder are obese, and obesity exacerbates insulin resistance.
Intensification of insulin therapy to overcome this resistance and the use of
certain popular oral hypoglycemic agents typically lead to weight gain.
Therefore, breaking this obesity cycle would be particularly important in
managing Type II diabetes. Due to the limited amount of fasting cholesterol data
available at baseline, conclusions regarding cholesterol profiles could not be
drawn for Type II patients.
REMAINING PHASE III CLINICAL PROGRAM
In order to create study designs that will better isolate the pramlintide
drug effect in patients with poor glucose control, and thus enhance regulatory
filings, the Company has incorporated important design changes in the four
ongoing blinded trials (two six-month studies in Europe and Canada, and two
one-year studies in the United States):
- The Company raised the %HbA1c patient entry threshold to $8.0. This
criterion conforms the studies with the ADA guideline for therapeutic
intervention. Analysis of the initial Phase III results indicated that
excluding patients who have achieved good control with insulin alone may
result in more robust %HbA1c responses to pramlintide administration.
- The Company instituted a number of protocol changes aimed at stabilizing
insulin dosing so that the relevant effects of pramlintide on %HbA1c can
be better measured. These changes include:
-- three-month lead-in periods during which patients who vary their
insulin dosing by more than 610% can be identified and excluded;
-- blinding of %HbA1c data, with values to be reported to caregivers only
when %HbA1c trends require treatment intervention for safety reasons;
-- and persistent attention by caregivers and patients to stabilizing
insulin dosing over the course of the studies.
- The Company decided to define in a prospective manner relevant patient
subgroups which isolate the beneficial therapeutic effects of pramlintide
from those of insulin. For example, one important subgroup excludes
patients who increased their insulin dosing during the studies. These
patient subgroup analyses can be relevant to the global assessment of
pramlintide by both regulatory authorities and medical experts, if they
are defined before the clinical studies are unblinded.
Data from the initial Phase III clinical trials and previous studies
suggest that different pramlintide dosing regimens may further enhance patient
convenience. Therefore, two- and three-times-per-day dosing regimens are being
studied in the ongoing Phase III clinical trials. To support the regulatory
filing package, in the future the Company may conduct clinical-practice trials
in Type I and Type II diabetes to evaluate the interrelationship of insulin and
pramlintide dosing for optimizing patients' metabolic control when the two drugs
are used in concert.
Until Johnson & Johnson's decision to withdraw from the collaboration, the
regulatory strategy for pramlintide was based on plans for global filings in
both Type I and Type II diabetes during the first half 2000. However, as the
Phase III trials have proceeded, AMYLIN scientists and its advisors have grown
more
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confident that available data may support an earlier European filing for use by
Type I patients. Also, the European Phase III clinical trials are scheduled for
completion ahead of the ongoing U.S. Phase III clinical trials. Thus, AMYLIN
plans to file its first marketing application for pramlintide in Europe for Type
I diabetes during the first half of 1999.
The Company plans to file a marketing application for pramlintide in Europe
for Type II diabetes in the first half of 2000, subject to European approval for
Type I diabetes. The Company also plans to file a New Drug Application ("NDA")
for pramlintide in the United States for Type I and Type II diabetes during the
first half of 2000.
AMYLIN believes that, when used in conjunction with insulin, pramlintide
should help many patients with diabetes to achieve better control of metabolic
functions, including lower %HbA1c concentrations without increased hypoglycemia,
improved weight control, and healthier cholesterol profiles. Pramlintide's
excellent safety and tolerability profile appears to be consistent with the
concept of replacing the desired actions of a naturally occurring human hormone.
OTHER RESEARCH AND DEVELOPMENT ACTIVITIES
AMYLIN has developed a business strategy of in-licensing potential drug
candidates for metabolic disease as well as developing product candidates from
internal research programs. The metabolic components of diabetes, obesity and
dyslipidemia are linked in many ways that may allow the Company to leverage its
decade of expertise to move new metabolic drugs into the clinic. The Company is
working on the following research and development programs not related to
pramlintide. Although certain of these research programs have been slowed down
in order to conserve the Company's financial resources, the Company believes
these programs have the potential to provide the Company with additional product
candidates.
Diabetes/Exendin
The Company's second drug candidate is a natural peptide, exendin, which
has effects similar to those of the glucose-lowering hormone, glucagon-like
peptide-1 (GLP-1), and which may have important pharmaceutical advantages over
natural GLP-1. Exendin stimulates insulin secretion primarily in the presence of
high blood glucose levels. Clinical trials for exendin are scheduled to begin in
1998.
Atherosclerosis/LLAs
AMYLIN is in preclinical development with a new class of small molecules
that are lipid-lowering anti-oxidants (LLAs). These compounds have demonstrated
in animal models prevention of atherosclerosis (arterial plaque) and may also be
useful for prevention of restenosis.
Obesity/UCP3
The Company's scientists have discovered a molecule expressed only in
skeletal muscle, uncoupling protein 3 (UCP3), which diverts nutrient calories
into heat formation. The screening program has yielded a number of
small-molecule hits that are potential candidates for causing weight loss
without effecting appetite.
Obesity/NAS
Using animal models developed for amylin research, the Company has been
searching for new adipocyte signals (NASs) that are selectively activated in fat
cells when metabolic stress occurs. This work has yielded a number of potential
molecular targets that may lead to new drugs for treating obesity.
STRATEGIC ALLIANCES
AMYLIN's commercial strategy is to develop products both independently and
in collaboration with established pharmaceutical and biotechnology companies.
Where appropriate, the Company seeks to complement its internal efforts with
collaborative arrangements. These commercial partners may provide financial
resources, research and manufacturing capabilities, and marketing infrastructure
to aid in the commercializa-
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<PAGE> 28
tion of AMYLIN's potential drug discoveries. The Company evaluates, on an
ongoing basis, potential collaborative relationships with established
pharmaceutical and biotechnology companies.
Johnson & Johnson
In June 1995, AMYLIN and Johnson & Johnson entered into a worldwide
collaboration agreement (the "Collaboration Agreement") to develop and
commercialize the Company's patented pramlintide invention. As of March 31,
1998, Johnson & Johnson has made payments to AMYLIN totaling approximately $170
million. These payments included funding of one half of the pramlintide
development costs, draw downs from the development loan facility under a loan
and security agreement (the "Loan Agreement"), the purchase of $30 million of
the Company's Common Stock, milestone, license and option fee payments, and the
funding of pramlintide pre-marketing costs.
In February 1998, the Company was given six months' notice by Johnson &
Johnson of its intention to withdraw from the collaboration. AMYLIN was
surprised by Johnson & Johnson's decision to withdraw, as there had been no new
clinical results since August 1997, and the Company's four ongoing Phase III
clinical trials of pramlintide were continuing as planned. AMYLIN believes that
Johnson & Johnson made a portfolio decision to invest resources elsewhere.
As structured, the Johnson & Johnson collaboration provided for, among
other things, a fifty-fifty sharing arrangement whereby each party would be
responsible for one-half of all development and commercialization costs and
would share one-half of all profits derived from pramlintide. As a result of
Johnson & Johnson's withdrawal, Johnson & Johnson has relinquished all rights to
share in any pramlintide profits. During the remaining term of the
collaboration, both companies are obligated to continue to perform their
obligations under the Collaboration Agreement. When the collaboration terminates
in late August 1998, all product and other rights associated with pramlintide
and related compounds will revert to AMYLIN.
In conjunction with the collaboration, the Company received proceeds of
approximately $30.6 million from a draw down under the development loan facility
with Johnson & Johnson. The loan carries an interest rate of 9.0%. In
conjunction with the borrowing, 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 loan is repayable 12
months after approval of a new drug application for pramlintide out of 50% of
the Company's pramlintide profits, if any, subject to certain exceptions set
forth in the Loan Agreement. The loan is secured by the Company's issued patents
and patent applications relating to amylin.
At March 31, 1998, Johnson & Johnson's Common Stock ownership represented
approximately 10.6% of the Company's outstanding Common Stock. See "Risk
Factors -- Future Capital Needs."
Hoechst Marion Roussel
In March 1997, the Company entered into a Technology License Agreement (the
"License Agreement") with Hoechst Marion Roussel pursuant to which the Company
was granted exclusive worldwide rights to a series of orally active
lipid-lowering antioxidant compounds which are being evaluated for their ability
to improve cardiovascular risk factors associated with the development of
atherosclerosis and restenosis.
Under the terms of the License Agreement, the Company is responsible for
conducting the preclinical evaluation and clinical development of candidate
compounds. Upon completion of Phase II clinical trials, Hoechst Marion Roussel
will have a one-time right to elect to collaborate with the Company in the
continuing development and commercialization of these compounds in a 50:50
cost-and-profit sharing arrangement. If Hoechst Marion Roussel exercises this
option, the Company will continue to be responsible for developing and
registering the product candidates, and Hoechst Marion Roussel will be
responsible for manufacturing and marketing. The Company and Hoechst Marion
Roussel will assume equal responsibility for all past and future research and
development, manufacturing and commercialization expenses and will share equally
in any operating profits from commercialization. If Hoechst Marion Roussel does
not exercise its option, the Company will retain all development and
commercialization rights, and Hoechst Marion Roussel will be
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<PAGE> 29
entitled to a royalty based on any future net sales. In such case, the Company
will be free to collaborate with other companies on the development,
manufacture, and commercialization of these compounds.
PATENTS, PROPRIETARY RIGHTS, AND LICENSES
The Company believes that patents and other proprietary rights are
important to its business. The Company's policy is to file patent applications
to protect technology, inventions and improvements that may be important to the
development of its business. AMYLIN also relies upon trade secrets, know-how,
continuing technological innovations and licensing opportunities to develop and
maintain its competitive position. The Company plans to enforce its issued
patents and its rights to proprietary information and technology. The Company
reviews third-party patents and patent applications in its fields of endeavor,
both to shape its own patent strategy and to identify useful licensing
opportunities.
Much of the research into the role of the hormone amylin in healthy and
diseased states has been undertaken by the Company and its collaborators.
Consequently, the Company has been able to create a comprehensive intellectual
property estate which the Company believes covers relevant commercial aspects of
amylin physiology, including methods of treatment, compositions of matter,
discovery methodologies and manufacturing techniques. In recognition of
inventions made by the Company, the U.S. PTO recently issued a patent which
covers the Company's lead clinical compound, pramlintide, as well as other
synthetic amylin agonist molecules. U.S. Patent No. 5,686,411, entitled "Amylin
Agonist Peptides and Uses Therefor," was issued to the Company on November 11,
1997, and has a seventeen-year term expiring November 11, 2014. Counterpart
applications to this patent are pending in various other territories in the
world, including Europe, Canada and Japan.
The Company is currently in litigation with the University of Minnesota and
Dr. Per Westermark who claim that the Company's patented pramlintide invention
falls within a United States patent allegedly owned by them that is directed to
a different, tumor-derived molecule called "Insulinoma Amyloid Polypeptide." The
Company believes that the claims since made by the University and Westermark in
this litigation are without merit. The Company intends to defend vigorously
against the claims made by the University and Westermark in this litigation. See
"-- Legal Proceedings."
At March 31, 1998, the Company owned or held exclusive rights to 25 issued
U.S. patents and a number of other still-pending U.S. applications, two of which
have been allowed but are not yet issued. The Company has a total of 10 pending
and nine issued U.S. patents relevant to the development and commercialization
of pramlintide. AMYLIN also has filed foreign counterparts of certain of these
issued patents and applications in many countries. Included within the Company's
patent portfolio are issued patents for (1) pramlintide and other amylin agonist
analogues invented by Company researchers; (2) the amylin molecule, which was
discovered by University of Oxford researchers Tony Willis and Garth Cooper, a
co-founder of the Company; (3) amylin agonist pharmaceutical compositions,
including (a) compositions containing pramlintide, (b) compositions containing
pramlintide and insulin, (c) compositions containing amylin, and (d)
compositions containing amylin and insulin; (4) methods for treating diabetes
using any amylin agonist; (5) methods for synthesis of amylin and amylin
analogues; and (6) methods for preparing products that include an amylin agonist
in composition for parenteral administration. Generally, it is the Company's
policy to file foreign counterparts in countries with significant pharmaceutical
markets. All commercial rights to these patents and patent applications are held
by the Company or, in some cases, with Johnson & Johnson until late August 1998
when all such Johnson & Johnson rights revert to AMYLIN. There can be no
assurance that patents will issue from any of the still-pending applications.
MANUFACTURING
The Company has internally developed and also has contracted for the
development of processes for manufacturing pramlintide bulk drug and dosage
form. Progress has been made in improving the purity of active drug substance,
in scaling up drug synthesis and dosage form manufacturing processes, and in
developing new approaches for drug synthesis. The Company plans to launch
pramlintide based upon chemical synthesis of the bulk substance.
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<PAGE> 30
The Company currently has no facilities to manufacture clinical trial or
commercial supplies of pramlintide and currently relies on third parties to do
so. The Company has selected manufacturers which it believes comply with Good
Manufacturing Practice ("GMP") and other regulatory standards. Under the terms
of the collaboration with Johnson & Johnson, AMYLIN has been responsible for
arranging for the manufacture of pramlintide during the development phase, while
Johnson & Johnson was to be responsible for manufacturing during the commercial
phase. The Company currently uses three external suppliers for synthetic
chemical manufacture of pramlintide bulk drug, and one supplier and Johnson &
Johnson for fill-finish activities. All manufacturing activities undertaken by
Johnson & Johnson as part of the collaboration will be transitioned to AMYLIN in
connection with the termination of the agreement. In light of Johnson &
Johnson's decision to terminate the collaboration, the Company will seek another
corporate partner or work with third party contract suppliers with capabilities
for the commercial manufacture of pramlintide. The Company has established a
quality control and quality assurance program, including a set of standard
operating procedures and specifications, designed to ensure that the Company's
products are manufactured in accordance with GMP and other applicable domestic
and foreign regulations. However, the Company is dependent upon third party
manufacturers to comply reliably with such procedures and regulations. There can
be no assurance that these manufacturers will meet the Company's requirements
for quality, quantity or timeliness.
GOVERNMENT REGULATION
Regulation by governmental authorities in the United States and foreign
countries is a significant factor in the manufacture and marketing of
pramlintide and in the Company's ongoing research and development activities.
All of the Company's potential products, including its patented pramlintide
invention, will require regulatory approval by governmental agencies prior to
commercialization. In particular, human therapeutic products are subject to
rigorous preclinical testing and clinical trials and other pre-market approval
requirements by the FDA and regulatory authorities in foreign countries. Various
federal, and in some cases state, statutes and regulations also govern or
influence the manufacturing, safety, labeling, storage, record keeping and
marketing of such products. The lengthy process of seeking these approvals and
the subsequent compliance with applicable federal and state statutes and
regulations require the expenditure of substantial resources. Any failure by the
Company or its collaborators or licensees to obtain, or any delay in obtaining,
regulatory approvals could adversely affect the marketing of any products
developed by the Company and its ability to receive product revenue, royalty
revenue or profit sharing payments.
The activities required before a pharmaceutical agent may be marketed in
the United States begin with preclinical testing. Preclinical tests include
laboratory evaluation of product chemistry and animal studies to assess the
potential safety and efficacy of the product and its formulations. The results
of these studies must be submitted to the FDA as part of an IND application,
which must be reviewed by the FDA before proposed clinical trials can begin.
Typically, clinical trials involve a three-phase process. In Phase I, clinical
trials are conducted with a small number of subjects to determine the early
safety and tolerability profile and the pattern of drug distribution and
metabolism. In Phase II, clinical trials are conducted with groups of patients
afflicted with a specified disease in order to determine preliminary efficacy,
dosing regimens and expanded evidence of safety. In Phase III, large-scale,
multicenter, adequate and well-controlled, comparative clinical trials are
conducted with patients afflicted with a target disease in order to provide
enough data for the statistical proof of efficacy and safety required by the FDA
and others. In the case of pramlintide, the results of the preclinical testing
and clinical trials are then submitted to the FDA for a pharmaceutical product
in the form of a New Drug Application ("NDA") for approval to commence
commercial sales. In responding to an NDA, the FDA may grant marketing approval,
request additional information, or deny the application if it determines that
the application does not satisfy its regulatory approval criteria. There can be
no assurance that approvals will be granted on a timely basis, or at all.
Among the conditions for NDA approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures conform
with GMP guidelines. In complying with GMP, manufacturers must continue to
expend time, money and effort in the area of production and quality control and
quality
29
<PAGE> 31
assurance to ensure full technical compliance. Manufacturing facilities are
subject to periodic inspections by the FDA to ensure compliance. See
"-- Manufacturing."
The Company is also subject to various federal, state and local laws,
regulations and recommendations relating to safe working conditions, laboratory
and manufacturing practices, the experimental use of animals and the use and
disposal of hazardous or potentially hazardous substances, including radioactive
compounds and infectious disease agents, used in connection with the Company's
research. The extent of government regulation which might result from any
legislation or administrative action cannot be accurately predicted.
Clinical testing, manufacture and sale of the Company's products outside of
the United States will be subject to regulatory approval by other jurisdictions
which may be more or less rigorous than in the United States.
MARKETING AND SALES
As a result of Johnson & Johnson's decision to withdraw from the
collaboration, the Company is now in the process of redefining its strategy for
bringing pramlintide to market on a global basis.
One outcome of this redefinition has been the decision to file first a
European registration dossier for the Type I indication. See "Remaining Phase
III Clinical Program." Because European patients with diabetes are usually under
the care of specialized diabetes clinics, the Company believes that this market
may be accessible to a relatively small marketing and sales group.
The Company believes that a marketing collaboration with one or more
commercial partners may be necessary to promote the patient acceptance of amylin
replacement therapy using pramlintide in the leading pharmaceutical markets.
There can be no assurance that the Company will be able to find such a
commercial partner or that such a commercial partner will establish adequate
sales and distribution capabilities or be successful in gaining market
acceptance of pramlintide
COMPETITION
Although competitive activity in the diabetes market is intense, the
Company believes that pramlintide will occupy a special niche within the
available drug armamentarium. Pramlintide is aimed at restoring the desired
actions of a human hormone that is missing or deficient in people with diabetes
who use insulin, and hormone replacement therapy is a well established treatment
concept. In the case of Type I diabetes, the Company believes that pramlintide
is the only drug candidate in late stage clinical development for improving
metabolic control. In the case of Type II diabetes, many patients are unable to
achieve satisfactory glucose and weight control with available oral drugs or
insulin, and the Company believes that pramlintide's initial Phase III data
point to a unique profile of metabolic benefits for these patients. Since
diabetes is a heterogeneous disease with many degenerative complications, it is
believed that polytherapy will increasingly be used to arrest its relentless
progression, and the Company believes that pramlintide's mechanisms of action
are unique and complementary to those of other hypoglycemic agents.
Subcutaneous injections of pramlintide are relatively straightforward for
patients who are already self-injecting insulin. About 75% of subjects
completing pramlintide's Phase III clinical trials have opted to continue
open-label dosing. Moreover, assuming clinical utility is established,
alternative delivery routes and mechanisms may be feasible based on the current
dosing requirements and chemical characteristics of pramlintide.
Nevertheless, pramlintide may compete with several established therapies
for market share. In addition, many companies are pursuing the development of
novel pharmaceuticals which target the same diseases to which pramlintide is
targeted, and several product candidates are in Phase III clinical trials or in
registration. These companies may develop and introduce products competitive
with or superior to pramlintide. Such competitive or potentially competitive
products include troglitazone, and if indications for pramlintide's use are
expanded to people with diabetes who do not use insulin, may also include
metformin, acarbose, bromocriptine and other oral hypoglycemic agents such as
sulfonylureas.
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<PAGE> 32
The Company's competition will be determined in part by the indications for
which the Company's products are developed and ultimately approved by regulatory
authorities. An important factor in competition may be the timing of market
introduction of the Company's or competitors' products. Accordingly, the
relative speed with which AMYLIN or any future corporate partners can develop
products, complete the clinical trials and approval processes and supply
commercial quantities of the products to the market are expected to be important
competitive factors. The Company expects that competition among products
approved for sale will be based, among other things, on product efficacy,
safety, convenience, reliability, availability, price and patent position.
EMPLOYEES
As of May 31, 1998, AMYLIN had 205 full-time equivalent employees. A
significant number of the Company's management and professional employees have
had prior experience with pharmaceutical, biotechnology or medical product
companies. AMYLIN believes that it has been highly successful in attracting
skilled and experienced scientific personnel. None of the Company's employees is
covered by collective bargaining agreements and management considers relations
with its employees to be good.
LEGAL PROCEEDINGS
The Company has received letters from the University of Minnesota (the
"University") and Per Westermark ("Westermark") asserting that the Company's
patented pramlintide invention is covered by a patent (the "University Patent")
which was licensed to the Company before it issued, while it was still pending
as an application, pursuant to a License Agreement dated November 11, 1991 among
the Company, the University and Westermark (the "University License Agreement").
The University Patent is directed to a different, tumor-derived molecule called
"Insulinoma Amyloid Polypeptide." In its letters, the University and Westermark
claim that they are entitled to 50% of any sublicense fees received by the
Company from sublicensing the University Patent to Johnson & Johnson pursuant to
the Collaboration Agreement, as well as future royalties as specified in the
University License Agreement. The Company has informed the University and
Westermark that no such sublicensing moneys have been received by the Company
from Johnson & Johnson, who is not a sublicensee under the University Patent. On
December 5, 1996, the Company filed a complaint against the University and
Westermark in the U.S. District Court for the Southern District of California
seeking a declaratory judgment that its patented pramlintide invention is not
covered by the University Patent and that no moneys are owed to the University
or Westermark. Although discussions were underway with the University and
Westermark, they did not result in any agreement regarding the litigation. The
Company's complaint was served on the University and Westermark in April 1997.
The Company believes that the University's and Westermark's assertions are
without merit and intends to defend vigorously against the claims that have now
been brought against the Company related to the foregoing. In addition, should
any of the Company's competitors have prepared and filed patent applications in
the United States which claim technology also invented by the Company, AMYLIN
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. To date, no such interferences have
been declared. It is uncertain whether any third-party patents will require the
Company to alter 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.
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<PAGE> 33
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth certain information with respect to the
executive officers, directors and key employees of the Company as of May 31,
1998:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD WITH THE COMPANY
---- --- ------------------------------
<S> <C> <C>
Joseph C. Cook, Jr. .............. 56 Chairman of the Board and
Chief Executive Officer
Maurizio Denaro, M.D. ............ 46 Executive Vice President and
Chief Technical Officer
Daniel M. Bradbury................ 37 Senior Vice President of Corporate
Development
Bradford J. Duft.................. 43 Senior Vice President and General
Counsel
Richard A. Kenley, Ph.D. ......... 51 Senior Vice President of Product
Development
Orville G. Kolterman, M.D. ....... 50 Senior Vice President of Clinical
Affairs
Gareth W. Beynon, M.D., Ph.D. .... 47 Vice President of Amylin Europe
Limited
Suzanne S. Burgess................ 40 Vice President of Administration
James J. L'Italien, Ph.D. ........ 45 Vice President of Pharmaceutical
Development
Andrew A. Young, M.D., Ph.D. ..... 45 Vice President of Physiology
James C. Blair, Ph.D.(1).......... 59 Member, Board of Directors
James C. Gaither(1)............... 60 Member, Board of Directors
Ginger L. Graham(2)............... 42 Member, Board of Directors
Howard E. Greene, Jr. ............ 55 Member, Board of Directors and
Co-Founder
Vaughn M. Kailian(2).............. 53 Member, Board of Directors
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
MR. COOK has served as Chairman of the Board of Directors and Chief
Executive Officer since March 1998 and a director since November 1994. Mr. Cook
is a founding partner of Life Science Advisors, LLC. and President of Cambrian
Associates, Inc. Mr. Cook retired as Group Vice President, Global Manufacturing,
Engineering, and Corporate Quality at Eli Lilly in 1993. During his 28 years
with Eli Lilly, Mr. Cook was a Vice-President of Sales and Marketing and Chief
Financial Officer for Elanco Products Company and General Manager of a worldwide
business unit of Eli Lilly. He is also a director of Dura Pharmaceuticals, Inc.,
NABI, Inc., and Personnel Management, Inc.. He is a founder of Mountain
Ventures, Inc., a real estate development firm.
DR. DENARO, an executive officer of the Company, has served as Executive
Vice President and Chief Technical Officer since February 1997. From February
1996 to February 1997, Dr. Denaro served as Senior Vice President of Research.
Prior to joining the Company, from 1992 to 1996, he was a Vice President of
Research at Hoechst Marion Roussel, Inc., and he was Center Director of the
Marion Merrell Dow Research Institute in Cincinnati from 1994 to 1996. From 1985
to 1994, Dr. Denaro held various positions at Marion Merrell Dow Research
Institute's Lepetit Research Center, Gerenzano, Italy, including Vice President
and Director from 1992 to 1994. Prior to 1985, Dr. Denaro held various senior
research and post-doctoral fellowship positions at Centro di Riferimento
Oncologico in Italy, Uppsala University in Sweden and Stanford Medical School.
Dr. Denaro earned an M.D. from Bologna University Medical School.
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<PAGE> 34
MR. BRADBURY has served as Senior Vice President of Corporate Development
since March 1998. Mr. Bradbury previously served as Vice President of Marketing
from June 1995 to March 1998. From July 1994 to May 1995, Mr. Bradbury held the
position of Director of Marketing, Amylin Europe Limited. Prior to joining the
Company, Mr. Bradbury was employed by SmithKline Beecham Pharmaceuticals from
September 1984 to July 1994, where he held a number of positions, most recently
as Associate Director, anti-Infectives in the Worldwide Strategic Product
Development Division. Prior to 1984, Mr. Bradbury worked as a Pre-registration
Pharmacist with Glaxo Group Research. Mr. Bradbury holds a B.Pharm. from
Nottingham University and a Diploma in Management Studies from Harrow and Ealing
Colleges of Higher Education.
MR. DUFT, an executive officer of the Company, has served as Senior Vice
President and General Counsel since June 1997. Mr. Duft previously served as
Vice President and General Counsel from July 1990 to June 1997. Prior to joining
the Company, from 1983 to July 1990, he was an attorney in private practice with
the patent law firm of Lyon & Lyon, most recently as managing partner of its San
Diego office. From 1980 to 1983, he served as law clerk and technical advisor to
Judge Giles S. Rich of the U.S. Court of Appeals for the Federal Circuit and the
U.S. Court of Customs and Patent Appeals. Mr. Duft received a J.D. from
California Western School of Law and an LL.M. in Patent and Trade Regulation
from George Washington University.
DR. KENLEY, an executive officer of the Company, has served as Senior Vice
President of Product Development since February 1997. From January 1994 to
February 1997, Dr. Kenley served as Vice President of Product Development. Prior
to joining the Company, from 1990 to 1994, he was Director of Pharmaceutical
Sciences at Genetics Institute, Inc. From 1986 to 1990, Dr. Kenley was Associate
Director of Analytical Chemistry at Baxter Healthcare Corporation, and from 1982
to 1986 he was Department Head of Analytical Chemistry Development at Syntex
Corporation. Dr. Kenley earned a Ph.D. in chemistry from the University of
California at San Diego.
DR. KOLTERMAN, an executive officer of the Company, has served as Senior
Vice President of Clinical Affairs since February 1997. Dr. Kolterman previously
served as Vice President, Medical Affairs from July 1993 to February 1997 and
Director, Medical Affairs from May 1992 to July 1993. From 1983 to May 1992, he
was Program Director of the General Clinical Research Center and Medical
Director of the Diabetes Center, both at the University of California, San Diego
Medical Center. Since 1989 he has been Adjunct Professor of Medicine at U.C.S.D.
From 1978 to 1983, he was Assistant Professor of Medicine in the Endocrinology
and Metabolism Division at the University of Colorado School of Medicine,
Denver. He is a member of the Diabetes Control and Complications Trial Study
Group and past-President of the California Affiliate of the American Diabetes
Association. Dr. Kolterman earned an M.D. from Stanford University School of
Medicine.
DR. BEYNON, an executive officer of the Company, has served as Vice
President of Amylin Europe Limited, the Company's wholly owned European
subsidiary, since February 1992. Prior to joining the Company, Dr. Beynon had
been employed at G.D. Searle & Co. since 1984, where he held a number of
positions in Europe, including Director of Clinical Research, Director of
Strategic Planning and Regulatory Affairs and Marketing Director for France.
From 1979 to 1984, he practiced internal medicine with a particular interest in
endocrinology and diabetes. He held a number of clinical appointments at London
Teaching Hospitals, including Guys Hospital and the Postgraduate Medical School
at Hammersmith Hospital. Dr. Beynon has a Ph.D. in endocrine physiology from the
University of Cambridge and completed his training for his M.B.B.Chir. (M.D.) at
Guys Hospital, London. Dr. Beynon also earned an M.B.A. at Cranfield Management
Institute.
MS. BURGESS has served as Vice President of Administration since May 1994.
Ms. Burgess joined the Company in March 1992 as Director of Human Resources and
most recently held the position of Senior Director of Human Resources and
Facilities Administration. Prior to joining the Company, Ms. Burgess worked for
seven years with Dole Food Company/Castle & Cooke, Inc. where she held a number
of positions including Director of Human Resources. Prior to that time, she
worked in Human Resources with Industrial Indemnity, a division of Crum &
Forster. Ms. Burgess holds a B.A. from the University of California, Santa Cruz.
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<PAGE> 35
DR. L'ITALIEN has served as Vice President of Pharmaceutical Development
since March 1998. From May 1994 to March 1998, he served as Senior Director of
Pharmaceutical Development. Prior to joining the Company, from 1991 to May 1994,
he was Director of Quality and Technical Affairs at Ortho Biotech, a Johnson and
Johnson Company. From 1987 to 1991, Dr. L'Italien was Associate Director of
Analytical Development at SmithKline Beecham Pharmaceuticals, and from 1982 to
1987, he held several positions, from Senior Staff Scientist to the position of
Head of Protein Chemistry, at Molecular Genetics, Inc. He served a fellowship at
the Yale University School of Medicine. Dr. L'Italien earned his Ph.D. in
chemistry from Boston University.
DR. YOUNG has served as Vice President of Physiology since January 1994.
From 1989 to 1993 he held a number of positions in the Company's Physiology
department, most recently as Principal Scientist and Senior Director of
Physiology. Prior to joining the Company in 1989, Dr. Young was a lecturer in
the Department of Physiology at the University of Auckland, New Zealand and a
part-time general medical practitioner. From 1984 to 1987, Dr. Young was a
Clinical Research Scientist at the National Institutes of Health in Phoenix,
Arizona, where he studied insulin resistance and diabetes. He received his M.B.,
Ch.B. (M.D.) and his Ph.D. in Physiology from the University of Auckland, New
Zealand.
DR. BLAIR has served as a director since December 1988 and serves on the
Compensation Committee. He has been a general partner of Domain Associates, a
venture capital investment firm, since 1985. Domain Associates manages Domain
Partners, L.P., Domain Partners II, L.P. and Domain Partners III, L.P. and is
the U.S. venture capital advisor to Biotechnology Investments, Ltd. From 1969 to
1985, Dr. Blair was an officer of three investment banking and venture capital
firms. Dr. Blair is a director of Aurora Biosciences, Inc., CoCensys, Inc., Dura
Pharmaceuticals, Inc., Trega Biosciences, Inc. and Vista Medical Technologies,
Inc. Dr. Blair received a B.S.E. from Princeton University and the M.S.E. and
Ph.D. degrees from the University of Pennsylvania in electrical engineering.
MR. GAITHER has served as a director since November 1995 and serves on the
Compensation Committee. He has been a partner of the law firm Cooley Godward LLP
("Cooley Godward") since 1971 where he also served as managing partner from 1984
to 1990. Prior to joining Cooley Godward in 1969, Mr. Gaither served as Staff
Assistant to the President of the United States from July 1966 to January 1969.
He is a director of Basic American, Inc., Levi Strauss & Co., Siebel Systems,
Inc. and the Stanford Management Company and serves on the executive committee
of the Board of Visitors at Stanford Law School. He previously served as
President of the Board of Trustees of Stanford University and as Chairman of its
Investment Committee. He is a trustee of the Carnegie Endowment for
International Peace, The James Irvine Foundation, RAND, and The William and
Flora Hewlett Foundation. Mr. Gaither received his J.D. from Stanford
University.
MS. GRAHAM has served as a director since November 1995 and serves on the
Audit Committee. Ms. Graham has served as Vice President of Guidant Corporation,
a medical device company, since July 1994. She also holds the position of
president of the Vascular Intervention Group, which includes Advanced
Cardiovascular Systems ("ACS") and Devices for Vascular Intervention. She has
served as President and Chief Executive Officer of ACS since January 1993. Prior
to joining ACS, she held various positions with Eli Lilly from 1979 to 1992,
including sales and strategic planning positions. She serves on the Board of
Directors and the Executive Committee for the California Healthcare Institute
and on the Advisory Board of the California Institute for Federal Policy
Research. Ms. Graham received an M.B.A. from Harvard University.
MR. GREENE has served as a director of the Company and, until March 1998,
had served as Chairman of the Board of Directors since he co-founded the Company
in 1987. He was a full-time employee from September 1989 until September 1996
and a half-time employee from September 1996 until March 1998, at which time his
employment with the Company ceased. Mr. Greene served as Chief Executive Officer
of the Company from Company inception until July 1996 and as Chairman of the
Executive Committee from July 1996 until March 1998. From October 1986 until
September 1993, Mr. Greene was a general partner of Biovest Partners, a venture
capital firm, and in this capacity he was Chairman of the Board of Pyxis
Corporation from 1989 to 1993. He was Chief Executive Officer of Hybritech
Incorporated ("Hybritech") from 1979 to its acquisition by Eli Lilly & Company
("Eli Lilly") in 1986, and he was co-inventor of Hybritech's monoclonal antibody
diagnostic technology. Prior to joining Hybritech, he was an executive with
34
<PAGE> 36
Baxter Healthcare Corporation from 1974 to 1979 and a consultant with McKinsey &
Company from 1967 to 1974. He is Chairman of the Board of Cytel Corporation and
a director of Biosite Diagnostics, Inc., Neurex Corporation, and The
International Biotechnology Trust Plc. Mr. Greene received an M.B.A. from
Harvard University.
MR. KAILIAN has served as a director since November 1995 and serves on the
Audit Committee. Mr. Kailian has served as President, Chief Executive Officer
and board member of COR Therapeutics, Inc. since March 1990. From 1967 to 1990,
Mr. Kailian was employed by Marion Merrell Dow, Inc., a pharmaceutical company,
and its predecessor companies, in various general management, marketing and
sales positions. Among the positions held by Mr. Kailian were President and
General Manager, Merrell Dow USA and Corporate Vice President of Global
Commercial Development, Marion Merrell Dow, Inc. Mr. Kailian is also a director
of the Biotechnology Industry Organization and the California Health Care
Institute and is a director and serves on the compensation committee of Axys
Pharmaceutical Corporation. Mr. Kailian holds a B.A. from Tufts University.
35
<PAGE> 37
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of May 31, 1998 by: (i) each director; (ii)
each executive officer; (iii) all executive officers and directors of the
Company as a group; and (iv) all those known by the Company to be beneficial
owners of more than five percent of its Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-----------------------------
PERCENT OF
BENEFICIAL OWNER(1) NUMBER OF SHARES TOTAL
------------------- ---------------- ----------
<S> <C> <C>
Gareth W. Beynon(2)......................................... 197,153 *
James C. Blair(2)(3)........................................ 708,689 2.17%
Joseph C. Cook, Jr.(2)...................................... 361,497 1.10%
Maurizio Denaro(2).......................................... 89,911 *
Bradford J. Duft(2)......................................... 208,290 *
James C. Gaither(2)......................................... 33,796 *
Ginger L. Graham(2)......................................... 31,272 *
Howard E. Greene, Jr.(2).................................... 1,841,272 5.59%
Vaughn M. Kailian(2)........................................ 31,272 *
Richard A. Kenley(2)........................................ 141,094 *
Orville G. Kolterman(2)..................................... 172,894 *
Johnson & Johnson Development Corporation(4)................ 4,986,357 14.60%
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Wellington Management Company(5)............................ 3,500,180 10.73%
75 State Street
Boston, MA 02109
State of Wisconsin Investment Board......................... 1,810,000 5.55%
Lake Terrace
121 E. Wilson Street
P.O. Box 7842
Madison, WI 53707
All executive officers and directors as a group
(11 persons)(2)........................................... 3,817,140 11.63%
</TABLE>
- ---------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "Commission"). Unless otherwise indicated in
the footnotes to this table and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting and
investment power with respect to the shares indicated as beneficially owned.
Applicable percentages are based on 32,615,403 shares outstanding on May 31,
1998, adjusted as required by rules promulgated by the Securities and
Exchange Commission ("SEC"). Except as shown otherwise in the table, the
address of each stockholder listed is in care of the Company at 9373 Towne
Centre Drive, San Diego, California 92121.
(2) Includes shares which certain executive officers and directors of the
Company have the right to acquire within 60 days after the date of this
table pursuant to outstanding options and warrants, as follows: Dr. Beynon,
194,653 shares; Dr. Blair, 10,971 shares; Mr. Cook, 271,497 shares; Dr.
Denaro, 87,740 shares; Mr. Duft, 133,655 shares; Mr. Gaither, 31,272 shares;
Ms. Graham, 31,272 shares; Mr. Greene, 295,605 shares; Mr. Kailian, 31,272
shares; Dr. Kenley, 139,598 shares; Dr. Kolterman, 165,736 shares; and all
executive officers and directors as a group, 1,393,271 shares.
(3) Dr. Blair may be deemed to be the beneficial owner of 653,847 shares held of
record by Domain Partners II, L.P. Dr. Blair is a general partner of One
Palmer Square Associates, L.P., the general partner
36
<PAGE> 38
of Domain Partners, and One Palmer Square Associates II, L.P., the general
partner of Domain Partners II, and shares voting and investment power with
respect to such shares.
(4) Includes 3,455,407 shares as to which Johnson & Johnson and Johnson &
Johnson Development Corporation have shared voting and dispositive power and
1,530,950 shares Johnson & Johnson has the right to acquire pursuant to an
outstanding warrant.
(5) Includes 3,500,180 shares as to which Wellington Management Company ("WMC")
has shared dispositive power, of which WMC has shared voting power as to
1,313,100 shares.
PLAN OF DISTRIBUTION
The Common Stock is being offered, on an all or none basis, for sale by the
Company principally to selected institutional and individual investors. Though
the exact investors to whom shares will be offered have not been identified, the
Company expects the pool of such investors to include current holders of the
Company's Common Stock, other institutional investors who purchase biotechnology
stocks for longer-term investment purposes and certain officers and directors of
the Company.
It is anticipated that the Company will obtain indications of interest from
potential investors for the amount of the Offering and that effectiveness of the
Registration Statement will not be requested and no investor funds will be
accepted until indications of interest have been received for the amount of the
Offering. Confirmations and definitive prospectuses will be distributed to all
investors at the time of pricing, informing investors of the closing date, which
will be scheduled to occur as soon as practicable but not more than four
business days after pricing. No investor funds will be accepted prior to
effectiveness of the Registration Statement. Prior to the closing date, all
investor funds will promptly be placed in escrow with Chase Manhattan Bank and
Trust Company National Association, as escrow agent (the "Escrow Agent"), in an
escrow account established for the benefit of investors. Investors will be
instructed to make checks payable to the Escrow Agent. Prior to the closing
date, the investors from time to time will cause to be wired to or deposited
with the Escrow Agent funds or checks delivered in payment for the Common Stock.
Any checks delivered to the Escrow Agent shall be made payable to or endorsed to
the order of the Escrow Agent. The Escrow Agent, upon receipt of such checks,
will present such checks for payment to the drawee-bank under such checks. Any
checks not honored by the drawee-bank after the first presentment for payment
will be returned to the Company. Upon receipt of funds or checks the Escrow
Agent will credit such funds and the amount of such checks to the escrow
account. The Escrow Agent will invest such funds in accordance with Rule 15c2-4
promulgated under the Exchange Act. Prior to the closing date, the Escrow Agent
will advise the Company that payment for the purchase of the Common Stock has
been affirmed by investors and that investors have deposited the requisite funds
in the respective escrow accounts at the Escrow Agent. Upon receipt of such
notice, the Company will deposit with the Depository Trust Corporation the
shares of the Common Stock to be credited to the respective accounts of
investors. Investor funds, together with interest thereon, if any, will be
collected by the Company through the facilities of the Escrow Agent, as
appropriate, on the scheduled closing date. The Offering will not continue after
the closing date. In the event that investor funds are not received in the full
amount necessary to satisfy the requirements of the Offering, all funds
deposited in escrow accounts will promptly be returned.
The Company has retained Hambrecht & Quest LLC to serve as a financial
advisor with respect to this Offering.
There is no minimum required purchase of the shares. The closing of the
Offering is conditioned upon the sale of all of the 3,000,000 shares offered
hereby.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Cooley Godward LLP, San Diego, California.
37
<PAGE> 39
EXPERTS
The consolidated financial statements of AMYLIN PHARMACEUTICALS, INC. for
the years ended December 31, 1995, 1996 and 1997 appearing in this Prospectus
and the Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein and are included in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
38
<PAGE> 40
AMYLIN PHARMACEUTICALS, INC.
INDEX TO FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Audited Consolidated Financial Statements
Consolidated Balance Sheets at December 31, 1996 and 1997... F-3
Consolidated Statements of Operations for the years ended
December 31, 1995, 1996 and 1997.......................... F-4
Consolidated Statement of Stockholders' Equity for the three
years in the period ended December 31, 1997............... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at March 31, 1998
(unaudited) and December 31, 1997......................... F-15
Condensed Consolidated Statements of Operations at March 31,
1997 (unaudited) and March 31, 1998 (unaudited)........... F-16
Condensed Consolidated Statements of Cash Flows at March 31,
1997 (unaudited) and March 31, 1998 (unaudited)........... F-17
Notes to Condensed Consolidated Financial Statements........ F-18
</TABLE>
F-1
<PAGE> 41
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Amylin Pharmaceuticals, Inc.
We have audited the accompanying consolidated balance sheets of Amylin
Pharmaceuticals, Inc. as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Since the date of completion of our audit of the accompanying financial
statements and initial issuance of our report thereon dated January 23, 1998,
except for the last paragraph of Note 5, as to which the date is March 2, 1998,
as discussed in Note 1, the Company's estimated available cash and short-term
investments are expected to last only into the first quarter of 1999. Note 1
describes management's plans to address these issues.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Amylin
Pharmaceuticals, Inc. at December 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
January 23, 1998,
except for the last paragraph of Note 5, as to which the date is
March 2, 1998,
and the last paragraph of Note 1, as to which the date is
July 8, 1998
F-2
<PAGE> 42
AMYLIN PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 46,903,000 $ 42,654,000
Short-term investments.................................... 5,845,000 19,469,000
Receivable from related party............................. 966,000 2,089,000
Other current assets...................................... 1,298,000 1,142,000
------------- -------------
Total current assets.............................. 55,012,000 65,354,000
Property and equipment, at cost:
Equipment................................................. 14,707,000 11,480,000
Leasehold improvements.................................... 4,763,000 3,349,000
------------- -------------
19,470,000 14,829,000
Less accumulated depreciation and amortization............ (10,860,000) (8,075,000)
------------- -------------
8,610,000 6,754,000
Patents and other assets at cost, net....................... 1,716,000 1,425,000
------------- -------------
$ 65,338,000 $ 73,533,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 5,278,000 $ 4,829,000
Accrued liabilities, including other deferred revenue..... 10,606,000 4,628,000
Deferred collaborative revenue from related party......... 6,357,000 7,954,000
Current portion of notes payable to unrelated parties..... 1,240,000 722,000
Current portion of obligations under capital leases....... 228,000 531,000
------------- -------------
Total current liabilities......................... 23,709,000 18,664,000
Note payable and capital lease obligations.................. 3,047,000 1,990,000
Note payable to related party............................... 33,933,000 4,345,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 7,500,000 shares
authorized, none issued and outstanding................ -- --
Common stock, $.001 par value, 50,000,000 shares
authorized, 32,394,433 and 31,977,186 issued and
outstanding at December 31, 1997 and 1996,
respectively........................................... 33,000 32,000
Additional paid-in capital................................ 215,245,000 204,800,000
Accumulated deficit....................................... (209,732,000) (155,105,000)
Deferred compensation..................................... (893,000) (1,177,000)
Unrealized losses on short-term investments............... (4,000) (16,000)
------------- -------------
Total stockholders' equity........................ 4,649,000 48,534,000
------------- -------------
$ 65,338,000 $ 73,533,000
============= =============
</TABLE>
See accompanying notes.
F-3
<PAGE> 43
AMYLIN PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenues under collaborative agreements
from related party............................. $ 42,609,000 $ 35,803,000 $ 17,045,000
Expenses:
Research and development....................... 82,281,000 64,998,000 39,337,000
General and administrative..................... 15,592,000 10,420,000 8,318,000
------------ ------------ ------------
97,873,000 75,418,000 47,655,000
------------ ------------ ------------
Loss from operations............................. (55,264,000) (39,615,000) (30,610,000)
Interest and other income........................ 2,613,000 2,274,000 1,640,000
Interest and other expense....................... (1,976,000) (446,000) (299,000)
------------ ------------ ------------
Net loss......................................... $(54,627,000) $(37,787,000) $(29,269,000)
============ ============ ============
Basic net loss per share......................... $ (1.70) $ (1.31) $ (1.23)
============ ============ ============
Shares used in computing net loss per share --
basic and diluted............................. 32,155,761 28,744,822 23,853,606
============ ============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE> 44
AMYLIN PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
NOTES UNREALIZED
COMMON STOCK ADDITIONAL RECEIVABLE GAINS(LOSSES)
-------------------- PAID-IN ACCUMULATED DEFERRED FROM ON SHORT-TERM
SHARES AMOUNT CAPITAL DEFICIT COMPENSATION STOCKHOLDERS INVESTMENTS
---------- ------- ------------ ------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994................. 20,828,328 $21,000 $120,222,000 $ (88,049,000) $ (616,000) $(21,000) $(687,000)
Issuance of common
stock in private
placement............ 1,086,957 1,000 7,477,000 -- -- -- --
Issuance of common
stock in public
offerings............ 6,010,769 6,000 38,969,000 -- -- -- --
Issuance of common
stock upon exercise
of options........... 91,785 -- 409,000 -- -- -- --
Repayment of notes
receivable for
issuance of common
stock................ -- -- -- -- -- 21,000 --
Deferred compensation
related to stock
options.............. -- -- (83,000) -- 83,000 -- --
Amortization of
deferred
compensation......... -- -- -- -- 533,000 -- --
Unrealized gain on
available-for-sale
securities........... -- -- -- -- -- -- 737,000
Net loss............... -- -- -- (29,269,000) -- -- --
---------- ------- ------------ ------------- ----------- -------- ---------
Balance at December 31,
1995................. 28,017,839 28,000 166,994,000 (117,318,000) -- -- 50,000
Issuance of common
stock in public
offering............. 2,012,500 2,000 18,767,000 -- -- -- --
Issuance of common
stock in private
placement............ 1,500,000 1,000 14,999,000 -- -- -- --
Issuance of common
stock upon exercise
of options........... 446,847 1,000 1,967,000 -- -- -- --
Deferred compensation
related to stock
options.............. -- -- 2,073,000 -- (2,073,000) -- --
Amortization of
deferred
compensation......... -- -- -- -- 896,000 -- --
Unrealized loss on
available-for-sale
securities........... -- -- -- -- -- -- (66,000)
Net loss............... -- -- -- (37,787,000) -- -- --
---------- ------- ------------ ------------- ----------- -------- ---------
Balance at December 31,
1996................. 31,977,186 32,000 204,800,000 (155,105,000) (1,177,000) -- (16,000)
Issuance of common
stock upon exercise
of options........... 417,247 1,000 2,100,000 -- -- -- --
Deferred compensation
related to stock
options.............. -- -- 261,000 -- (261,000) -- --
Amortization of
deferred
compensation......... -- -- -- -- 545,000 -- --
Discount on Note
Payable related to
grant of common stock
warrants............. -- -- 8,084,000 -- -- -- --
Unrealized gain on
available-for-sale
securities........... -- -- -- -- -- -- 12,000
Net loss............... -- -- -- (54,627,000) -- -- --
---------- ------- ------------ ------------- ----------- -------- ---------
Balance at December 31,
1997................. 32,394,433 $33,000 $215,245,000 $(209,732,000) $ (893,000) $ -- $ (4,000)
========== ======= ============ ============= =========== ======== =========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance at December 31,
1994................. $ 30,870,000
Issuance of common
stock in private
placement............ 7,478,000
Issuance of common
stock in public
offerings............ 38,975,000
Issuance of common
stock upon exercise
of options........... 409,000
Repayment of notes
receivable for
issuance of common
stock................ 21,000
Deferred compensation
related to stock
options.............. --
Amortization of
deferred
compensation......... 533,000
Unrealized gain on
available-for-sale
securities........... 737,000
Net loss............... (29,269,000)
------------
Balance at December 31,
1995................. 49,754,000
Issuance of common
stock in public
offering............. 18,769,000
Issuance of common
stock in private
placement............ 15,000,000
Issuance of common
stock upon exercise
of options........... 1,968,000
Deferred compensation
related to stock
options.............. --
Amortization of
deferred
compensation......... 896,000
Unrealized loss on
available-for-sale
securities........... (66,000)
Net loss............... (37,787,000)
------------
Balance at December 31,
1996................. 48,534,000
Issuance of common
stock upon exercise
of options........... 2,101,000
Deferred compensation
related to stock
options.............. --
Amortization of
deferred
compensation......... 545,000
Discount on Note
Payable related to
grant of common stock
warrants............. 8,084,000
Unrealized gain on
available-for-sale
securities........... 12,000
Net loss............... (54,627,000)
------------
Balance at December 31,
1997................. $ 4,649,000
============
</TABLE>
See accompanying notes.
F-5
<PAGE> 45
AMYLIN PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss......................................... $(54,627,000) $(37,787,000) $(29,269,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................. 2,865,000 2,345,000 2,069,000
Deferred revenue from related party............ (1,597,000) 3,336,000 4,618,000
Deferred rent and other expense................ (17,000) (25,000) (25,000)
Amortization of deferred compensation.......... 545,000 896,000 533,000
Amortization of warrants issued with debt...... 299,000 -- --
Changes in operating assets and liabilities:
Receivable from related party............... 1,123,000 (1,866,000) (223,000)
Other current assets........................ (156,000) 130,000 6,000
Accounts payable............................ 449,000 3,352,000 302,000
Accrued liabilities......................... 5,995,000 1,750,000 765,000
------------ ------------ ------------
Net cash flows used in operating activities...... (45,121,000) (27,869,000) (21,224,000)
INVESTING ACTIVITIES:
Purchases of short-term investments.............. (15,541,000) (38,972,000) (38,208,000)
Maturities of short-term investments............. 19,005,000 29,642,000 11,326,000
Sales of short-term investments.................. 10,172,000 26,607,000 12,595,000
Purchase of equipment and leasehold
improvements................................... (4,641,000) (3,278,000) (1,999,000)
Increase in deposits, patents and other assets... (371,000) (313,000) (124,000)
------------ ------------ ------------
Net cash flows provided by (used in) investing
activities 8,624,000 13,686,000 (16,410,000)
FINANCING ACTIVITIES:
Issuance of notes payable........................ 40,467,000 5,379,000 1,020,000
Principal payments on capital leases and
equipment notes payable........................ (1,822,000) (988,000) (921,000)
Issuance of common stock, net.................... 2,101,000 35,737,000 46,883,000
------------ ------------ ------------
Net cash flows provided by financing
activities..................................... 40,746,000 40,128,000 46,982,000
------------ ------------ ------------
Increase in cash and cash equivalents............ 4,249,000 25,945,000 9,348,000
Cash and cash equivalents at beginning of
period......................................... 42,654,000 16,709,000 7,361,000
------------ ------------ ------------
Cash and cash equivalents at end of period....... $ 46,903,000 $ 42,654,000 $ 16,709,000
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid.................................... $ 411,000 $ 281,000 $ 290,000
============ ============ ============
</TABLE>
See accompanying notes.
F-6
<PAGE> 46
AMYLIN PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and business activity
Amylin Pharmaceuticals, Inc. ("Amylin" or the "Company") was incorporated
in Delaware on September 29, 1987. The Company is focused on developing novel
therapeutics for people with metabolic disorders. The Company is conducting a
series of Phase III clinical trials of its leading drug candidate, Pramlintide,
which is being developed to improve glucose control in people with Type I
(juvenile-onset) and Type II (maturity-onset) diabetes who use insulin.
Principles of 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 in consolidation.
Research revenues under collaborative agreements and research and development
expenses
Research revenues under collaborative agreements are recorded when earned
as research activities are performed. Payments in excess of amounts earned are
deferred. Research and development costs are expensed as incurred.
Cash, cash equivalents and short-term investments
Cash, cash equivalents and short-term investments consist principally of
U.S. government securities and other highly liquid debt instruments. The Company
considers instruments with remaining maturities of less than 90 days when
purchased to be cash equivalents.
Concentration of credit risk
The Company invests its excess cash in U.S. government securities and debt
instruments of financial institutions and corporations with strong credit
ratings. The Company has established guidelines relative to diversification and
maturities that maintain safety and liquidity. These guidelines are periodically
reviewed.
Investments
The Company has classified its debt securities as available-for-sale, and
accordingly, carries its short-term investments at fair value, and unrealized
holding gains or losses on these securities are carried as a separate component
of stockholders' equity. The amortized cost of debt securities in this category
is adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in interest income. Realized gains and losses and
declines in value judged to be other-than-temporary (of which there have been
none to date) on available-for-sale securities are included in interest income.
The cost of securities sold is based on the specific identification method.
Depreciation and amortization
Depreciation of equipment is computed using the straight-line method over
two to five years. Leasehold improvements are amortized over the shorter of the
estimated useful lives of the assets or the remaining term of the lease.
Amortization of equipment under capital leases is reported with depreciation of
property and equipment. Patents consist of patent filing costs which are
amortized over the estimated economic life of the patents when issued.
F-7
<PAGE> 47
AMYLIN PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
Net loss per share
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, Earnings per Share ("Statement No. 128").
Statement No. 128 replaced the calculation of primary and fully diluted earnings
per share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is very similar
to the previously reported fully diluted earnings per share. The adoption of
Statement No. 128 had no effect on the Company's financial statements.
Options
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees and related Interpretations ("APB
25"), in accounting for its employee stock options. Under APB 25, when the
exercise price of the Company's employee stock options is not less than the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
New accounting standards
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income, and SFAS No. 131, Segment Information. Both of
these standards are effective for fiscal years beginning after December 15,
1997. SFAS No. 130 requires that all components of comprehensive income,
including net income, be reported in the financial statements in the period in
which they are recognized. Comprehensive income is defined as the change in
equity during a period from transactions and other events and circumstances from
non-owner sources. Net income and other comprehensive income, including foreign
currency translation adjustments, and unrealized gains and losses on
investments, shall be reported, net of their related tax effect, to arrive at
comprehensive income. The Company does not believe that comprehensive income or
loss will be materially different than net income or loss. SFAS No. 131 amends
the requirements for public enterprises to report financial and descriptive
information about its reportable operating segments. Operating segments, as
defined by SFAS No. 131, are components of an enterprise for which financial
information is available and evaluated regularly by the Company in deciding how
to allocate resources and in assessing performance. The financial information is
required to be reported on the basis that it is used internally for evaluating
the segment performance. The Company believes it operates in one business and
operating segment and does not believe adoption of SFAS No. 131 will have a
material impact on the Company's financial statements.
Liquidity
The Company's collaborative relationship with Johnson & Johnson will be
terminated in August 1998. Accordingly, the Company must find alternate sources
of capital in order to complete the development and commercialization of
pramlintide. The Company's future capital requirements will depend on many
factors, including the results of its six-month European Phase III clinical
trials for pramlintide (expected in the fourth quarter of 1998), the ability of
the Company to establish one or more development and/or commercialization
collaborations for its pramlintide program, progress with its other ongoing and
new preclinical studies and
F-8
<PAGE> 48
AMYLIN PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
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 the costs of manufacturing scale-up. The Company anticipates
that its existing cash, including interest income from cash investments,
financial commitments from Johnson & Johnson during the termination notice
period, and the proceeds of this Offering, will be adequate to satisfy the
Company's capital requirements until late in the first quarter of 1999. If
results of the Company's two, six-month European clinical trials for pramlintide
are available when expected by the Company and if those results improve upon the
results of the Company's initial Phase III clinical trials, the Company believes
that it should be able to raise additional funds through other corporate
partnerships, equity offerings, debt offerings and/or investor partnerships.
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, if at
all. In the event the Company 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.
2. INVESTMENTS
The following is a summary of investments as of December 31, 1997 and 1996,
including $37,211,000 and $31,543,000 classified as cash equivalents in the
accompanying balance sheets as of December 31, 1997 and 1996, respectively. All
respective investments mature in less than one year.
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
U.S. Treasury securities and obligations of
U.S. government agencies................. $21,832,000 $ -- $ (3,000) $21,829,000
Other debt securities...................... 21,228,000 -- (1,000) 21,227,000
----------- -------- ---------- -----------
Total...................................... $43,060,000 $ -- $ (4,000) $43,056,000
=========== ======== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
U.S. Treasury securities and obligations of
U.S. government agencies................. $21,955,000 $ -- $ (13,000) $21,942,000
Other debt securities...................... 29,073,000 -- (3,000) 29,070,000
----------- -------- ---------- -----------
Total...................................... $51,028,000 $ -- $ (16,000) $51,012,000
=========== ======== ========== ===========
</TABLE>
The gross realized gains on sales of available-for-sale securities totaled
$1,000 and $29,000 and the gross realized losses totaled $3,000 and $5,000 for
the years ended December 31, 1997 and 1996, respectively.
3. COMMITMENTS
Leases
The Company leases its facilities and certain machinery and equipment under
operating and capital leases. The minimum annual rent on the Company's
facilities is subject to increases based on stated rental adjustment terms of
certain leases, taxes, insurance and operating costs. Certain equipment leases
require the
F-9
<PAGE> 49
AMYLIN PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
Company to provide the lessor with a guaranteed residual at the end of the lease
term at which time title to the equipment passes to the Company.
Minimum future annual obligations for operating leases for years ending
after December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998............................................ $ 2,339,000
1999............................................ 2,682,000
2000............................................ 2,632,000
2001............................................ 2,601,000
Thereafter...................................... 7,460,000
-----------
Total minimum lease payments.......... $17,714,000
===========
</TABLE>
Rent expense for 1997, 1996, and 1995 was $2,697,000, $2,315,000, and
$2,283,000, respectively.
Debt
As of December 31, 1997, the Company had an outstanding loan of $190,000
for financing of equipment and tenant improvements. The loan is payable over
forty-eight months which commenced on February 1, 1995. Payments include
principal and monthly interest of prime plus 1.75% (10.25% at December 31, 1997)
of the outstanding principal balance. Principal payments due for 1998 and 1999
are $175,000 and $15,000, respectively. The loan agreement contains provisions
for the complete repayment of any outstanding principal balance should the
Company's cash balances fall below certain minimum levels.
In 1996, the Company entered into a master line of credit agreement (as
amended) to provide up to $5,000,000 of net financing for standard equipment
through December 31, 1997. As of December 31, 1997, the Company had an
outstanding loan balance of $4,097,000. Borrowings under each loan schedule are
payable over forty-eight months to include principal and monthly interest based
on the average of three and five-year U.S. Treasury maturities (approximately
10.20% at December 31, 1997). Principal payments due in 1998 through 2001 are
$1,065,000, $1,184,000, $1,211,000, and $637,000, respectively. The credit
agreement provides the lender with a security interest in all equipment financed
under the line.
In November 1997, the Company entered into a commitment agreement to enter
into a financing agreement which will provide up to $2,700,000 of financing for
equipment purchases. Borrowings under this agreement will be payable over a
sixty month period with principal payments commencing on January 1, 1999.
Monthly interest payments will be calculated based on prime plus 0.5% of the
outstanding principal balance and will commence with any outstanding balance in
1998. The credit agreement provides the lender with a security interest in all
equipment financed under the agreement and requires payment of a security
deposit should the Company's cash balances fall below certain minimum levels.
4. STOCKHOLDERS' EQUITY
Stock Purchase Plan
In November 1991, the Company adopted the Employee Stock Purchase Plan (the
"Purchase Plan"), under which 500,000 shares of common stock may be issued to
eligible employees, including officers. The price of common stock under the
Purchase Plan is equal to the lessor of 85% of the market price on the effective
date of an employee's participation in the plan or 85% of the fair market value
of the common stock at the purchase date. At December 31, 1997, 302,391 shares
of common stock had been issued under the plan.
F-10
<PAGE> 50
AMYLIN PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
Stock Options
Under the Company's 1991 Stock Option Plan (the "Plan"), 7,000,000 shares
of common stock are reserved for issuance upon exercise of options granted to
employees and consultants of the Company. The Plan provides for the grant of
incentive and nonstatutory stock options. The exercise price of incentive stock
options must equal at least the fair market value on the date of grant, and the
exercise price of nonstatutory stock options may be no less than 85% of the fair
market value on the date of grant. Additionally, the Company is authorized to
issue supplemental stock options for up to 70,000 options outside of the Plan.
The maximum term of all options granted is ten years.
Under the company's Non-Employee Directors' Stock Option Plan (the
"Directors' Plan") 350,000 shares of common stock are reserved for issuance upon
exercise of nonqualified stock options granted to Non-Employee Directors of the
Company.
The following table summarizes option activity:
<TABLE>
<CAPTION>
SHARES
UNDER WEIGHTED AVERAGE
OPTION EXERCISE PRICE
---------- ----------------
<S> <C> <C>
Outstanding at December 31, 1994................ 3,523,636 $ 8.08
Granted....................................... 3,152,238 $ 5.14
Exercised..................................... (21,331) $ 3.29
Cancelled..................................... (2,346,310) $ 8.48
---------- ------
Outstanding at December 31, 1995................ 4,308,233 $ 5.74
Granted....................................... 1,927,796 $10.58
Exercised..................................... (404,671) $ 4.46
Cancelled..................................... (331,576) $ 9.43
---------- ------
Outstanding at December 31, 1996................ 5,499,782 $ 7.31
Granted....................................... 566,914 $11.94
Exercised..................................... (376,826) $ 4.71
Cancelled..................................... (327,231) $ 8.48
---------- ------
Outstanding at December 31, 1997................ 5,362,639 $ 7.91
========== ======
</TABLE>
At December 31, 1997, 1,150,054 shares remained available for grant or
sale.
Following is a further breakdown of the options outstanding as of December
31, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED WEIGHTED EXERCISE
AVERAGE AVERAGE PRICE OF
RANGE OF OPTIONS REMAINING EXERCISE OPTIONS OPTIONS
EXERCISE PRICES OUTSTANDING LIFE IN YEARS PRICE EXERCISABLE EXERCISABLE
- ---------------- ----------- ------------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 2.00 286,702 3.88 $ 2.00 286,702 $ 2.00
$ 4.50 - $ 6.75 1,899,605 6.28 $ 4.84 1,676,398 $ 4.79
$ 6.875 - $10.00 1,380,874 8.13 $ 7.96 577,585 $ 7.85
$10.25 - $14.875 1,795,458 8.24 $12.06 758,489 $11.61
--------- ---- ------ --------- ------
5,362,639 7.28 $ 7.91 3,299,174 $ 6.65
========= ==== ====== ========= ======
</TABLE>
Adjusted pro forma information regarding net loss and loss per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options and stock purchase plan under the fair
value method of SFAS No. 123. The fair value for these options was estimated at
the date of
F-11
<PAGE> 51
AMYLIN PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
grant using the "Black-Scholes" method for option pricing with the following
weighted average assumptions for 1997, 1996 and 1995, respectively: risk-free
interest of 5.71%, 6.39%, and 6.39%; dividend yield of 0%; volatility factors of
the expected market price of the Company's common stock of 65.4%, 64.7% and
64.7%; and a weighted-average expected life of the option of five years.
For purposes of adjusted pro forma disclosures, the estimated fair value of
the option is amortized to expense over the option's vesting period.
The Company's adjusted pro forma information is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Adjusted pro forma net loss...... $(59,850,000) $(41,969,000) $(31,576,000)
Adjusted pro forma net loss per
share.......................... $ (1.86) $ (1.46) $ (1.32)
</TABLE>
The weighted-average fair value of options granted during 1997, 1996, and
1995 was $7.14, $6.67, and $3.17, respectively.
Stock Warrants
In May 1997, in conjunction with an amendment to a License Agreement, the
Company issued warrants to the licensor to purchase 20,000 shares of the
Company's common stock with a fixed exercise price of $11.375 per share and a
10-year exercise period.
On September 30, 1997, in conjunction with the draw down under the
Development Loan Facility with Johnson & Johnson, the Company issued a warrant
to Johnson & Johnson to purchase 1,530,950 shares of the Company's common stock
at an exercise price of $12.00 per share which expires on September 29, 2007
(see "Collaborative Agreements").
Shares Reserved for Future Issuance
The following shares of common stock are reserved for future issuance at
December 31, 1997:
<TABLE>
<S> <C>
1991 Stock Option Plan................................... 7,000,000
Employee Stock Purchase Plan............................. 500,000
Directors Plan........................................... 350,000
Warrants................................................. 1,550,950
---------
9,400,950
=========
</TABLE>
5. COLLABORATIVE AGREEMENTS
Johnson & Johnson
In June 1995, the Company entered into a worldwide Collaboration Agreement
(the "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, each of which are wholly-owned subsidiaries of Johnson
& Johnson, are referred to herein as Johnson & Johnson.
Johnson & Johnson paid the Company a license fee, which was recognized as
revenue upon the signing of the Collaboration Agreement in 1995. Approximately
$33.6 million, $27.4 million and $12.0 million of development payments were made
to the Company and recognized as revenues during 1997, 1996 and 1995,
F-12
<PAGE> 52
AMYLIN PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
respectively. Also included in receivables from related party was $1.0 million
and $0.7 million of pre-marketing expenses due to the Company from Johnson &
Johnson as of December 31, 1997 and 1996, respectively. Additionally, the
Company's December 31, 1997 balance sheet includes approximately $6.4 million in
short-term deferred revenues reflecting amounts advanced from Johnson & Johnson
representing an equalization payment for its share of projected development
expenses for the first quarter of 1998. Payments from Johnson & Johnson to
Amylin Pharmaceuticals for development expenses are recognized as revenue in the
period in which they are earned.
In accordance with the terms of the Stock Purchase Agreement, Johnson &
Johnson purchased 3,455,407 shares of the Company's common stock through
December 31, 1997, approximately 10.7% of the Company's common shares
outstanding. Therefore, Johnson & Johnson is considered a related party.
In September 1997, the Company received proceeds of approximately $30.6
million from the loan facility (the "Development Loan Facility"). The proceeds
were applied against the Company's one-half share of development expenses for
Pramlintide during the second through fourth quarters of 1997. The loan carries
an interest rate of 9.0%. In conjunction with the borrowing, the Company issued
warrants to Johnson & Johnson to purchase 1,530,950 shares of the Company's
common stock over a 10-year exercise period. The estimated fair value of the
warrants has been accounted for as a discount from the face value of the note.
The loan is repayable 12 months after approval of a new drug application for
Pramlintide out of 50% of the Company's Pramlintide profits, if any, subject to
certain exceptions set forth in the Development Loan facility. The loan is
secured by the Company's issued patents and patent applications relating to
amylin.
As of December 31, 1997, Johnson & Johnson entities have made various
financial payments to the Company totaling approximately $163 million. As
discussed above, these payments primarily include funding of one-half of the
Pramlintide development costs, a draw down from a development loan facility, the
purchase of $30 million of the Company's common stock, milestone and option fee
payments, funding of Pramlintide pre-marketing costs and license fees. As of
December 31, 1997, the Company owed Johnson & Johnson approximately $10.4
million for its share of pre-launch marketing expenses.
In late February 1998, Johnson & Johnson provided the Company with
six-months notice of its intention to terminate their collaboration. Johnson &
Johnson's financial and other obligations under the Collaboration Agreement will
continue during the termination notice period. Based upon Johnson & Johnson's
decision, in early March 1998 Amylin initiated the process of restructuring its
operations, which will include reducing its workforce by approximately 25% to
ensure that cash is available into the first quarter of 1999. The impact of this
restructuring will slow down other (non-Pramlintide) research programs. The
Company intends on raising additional funds from capital markets and corporate
partners during the course of 1998. There can be no assurance that the Company
will be able to raise such additional funds.
6. INCOME TAXES
Significant components of the Company's deferred tax assets as of December
31, 1997 and 1996 are shown below. A valuation allowance of $91,950,000, of
which $24,360,000 is related to 1997 changes, has been recognized as of December
31, 1997 to offset the deferred tax assets as realization of such assets is
uncertain.
F-13
<PAGE> 53
AMYLIN PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Deferred tax assets:
Capitalized research expenses................. $ 9,653,000 $ 6,760,000
Net operating loss carryforwards.............. 68,892,000 48,560,000
Research and development credits.............. 9,615,000 7,355,000
Other......................................... 3,790,000 4,915,000
------------ ------------
Total deferred tax assets....................... 91,950,000 67,590,000
Valuation allowance for deferred tax assets..... (91,950,000) (67,590,000)
------------ ------------
Net deferred tax assets......................... $ -- $ --
============ ============
</TABLE>
Approximately $382,000 of the valuation allowance for deferred tax assets
relates to stock option deductions which when recognized will be allocated
directly to additional paid-in capital.
At December 31, 1997, the Company has federal, California and foreign tax
net operating loss carryforwards of approximately $192,651,000, $24,394,000 and
$2,979,000, respectively. The difference between the federal and California tax
loss carryforwards is attributable to the capitalization of research and
development expenses for California tax purposes and the fifty percent
limitation on California loss carryforwards. The federal and California tax loss
carryforwards will begin expiring in 2002 and 1998 respectively unless
previously utilized. The Company also has federal and California research and
development tax credit carryforwards of $7,990,000 and $2,358,000, respectively,
which will begin expiring in 2002 unless previously utilized.
Under the Tax Reform Act of 1986, the use of the Company's net operating
loss and credit carryforwards may be limited if a cumulative change in ownership
of more than 50% occurs within a three-year period. However, the Company does
not believe that such a limitation would have a material impact upon the future
utilization of these carryforwards
7. CONTINGENCIES
The Company has received letters from the University of Minnesota (the
"University") and Per Westermark ("Westermark") asserting that Pramlintide is
covered by a patent (the "University Patent") which was licensed to the Company
pursuant to a License Agreement dated November 11, 1991 among the Company, the
University and Westermark (the "University License Agreement"). In its letters,
the University and Westermark claim that they are entitled to 50% of any
sublicense fees received by the Company from sublicensing the University Patent
to Johnson & Johnson pursuant to the Collaboration Agreement, as well as future
royalties as specified in the University License Agreement. The Company has
informed the University and Westermark that no such sublicensing moneys have
been received by the Company from Johnson & Johnson, who is not a sublicensee
under the University Patent. On December 5, 1996, the Company filed a complaint
against the University and Westermark in the U.S. District Court for the
Southern District of California seeking a declaratory judgment that Pramlintide
is not covered by the University Patent and that no moneys are owed to the
University or Westermark. Although discussions were underway with the University
and Westermark, they did not result in any agreement regarding the litigation.
The Company's complaint was served on the University and Westermark in April
1997. The Company believes that the University's and Westermark's assertions are
without merit and intends to defend vigorously against the claims brought
against the Company related to the foregoing.
F-14
<PAGE> 54
AMYLIN PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------- -------------
(UNAUDITED) (NOTE)
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................. $ 34,991,000 $ 46,903,000
Short-term investments.................................... -- 5,845,000
Receivable from related party............................. 528,000 966,000
Other current assets...................................... 863,000 1,298,000
------------- -------------
Total current assets.............................. 36,382,000 55,012,000
Property and equipment, at cost:
Equipment................................................. 15,395,000 14,707,000
Leasehold improvements.................................... 5,570,000 4,763,000
------------- -------------
20,965,000 19,470,000
Less accumulated depreciation and amortization............ (11,760,000) (10,860,000)
------------- -------------
9,205,000 8,610,000
Patents and other assets, net............................... 1,818,000 1,716,000
------------- -------------
$ 47,405,000 $ 65,338,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable.......................................... $ 2,067,000 $ 5,278,000
Accrued liabilities....................................... 9,436,000 10,606,000
Deferred revenue from related party....................... 5,233,000 6,357,000
Current portion of obligation under capital leases and
equipment notes payable................................ 1,407,000 1,468,000
------------- -------------
Total current liabilities......................... 18,143,000 23,709,000
Obligation under capital leases and equipment notes
payable................................................... 3,308,000 3,047,000
Notes payable to related party, net of discount............. 35,358,000 33,933,000
Stockholders' equity (deficit):
Common stock, $.001 par value, 50,000,000 shares
authorized, 32,492,478 and 32,394,433 issued and
outstanding at March 31, 1998 and December 31, 1997,
respectively........................................... 32,000 32,000
Additional paid-in capital................................ 215,973,000 215,246,000
Accumulated deficit....................................... (224,551,000) (209,732,000)
Deferred compensation..................................... (857,000) (893,000)
Unrealized gains/(losses)on short-term investments........ (1,000) (4,000)
------------- -------------
Total stockholders' equity (deficit).............. (9,404,000) 4,649,000
------------- -------------
$ 47,405,000 $ 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.
F-15
<PAGE> 55
AMYLIN PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1998 1997
------------ -----------
<S> <C> <C>
Revenues under collaborative agreements from related
party..................................................... $ 7,086,000 $12,358,000
Operating Expenses:
Research and development.................................. 18,169,000 16,530,000
General and administrative................................ 2,923,000 2,847,000
------------ -----------
21,092,000 19,377,000
------------ -----------
Loss from operations........................................ (14,006,000) (7,019,000)
Interest and other income................................... 512,000 686,000
Interest and other expense.................................. (1,325,000) (316,000)
------------ -----------
Net loss.................................................... $(14,819,000) $(6,649,000)
============ ===========
Net loss per share -- basic and diluted..................... $ (0.46) $ (0.21)
============ ===========
Shares used in computing net loss per share basic and
diluted................................................... 32,438,000 32,023,000
============ ===========
</TABLE>
See accompanying notes.
F-16
<PAGE> 56
AMYLIN PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1998 1997
------------ -----------
<S> <C> <C>
Operating Activities:
Net loss.................................................. $(14,819,000) $(6,649,000)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization............................. 931,000 713,000
Deferred revenue from related party....................... (1,124,000) 4,906,000
Deferred rent and other expense........................... 0 (6,000)
Amortization of deferred compensation..................... 202,000 130,000
Amortization of warrants issued with debt................. 299,000 --
Changes in assets and liabilities:
Receivable from related party............................. 438,000 1,534,000
Other current assets...................................... 435,000 (99,000)
Accounts payable.......................................... (3,211,000) (2,839,000)
Accrued liabilities....................................... (1,170,000) 158,000
------------ -----------
Net cash flows used for operating activities.............. (18,019,000) (2,152,000)
Investing activities:
Decrease in short-term investments........................ 5,847,000 11,000
Purchase of equipment and leasehold improvements.......... (1,495,000) (2,074,000)
Increase in deposits, patents and other assets............ (132,000) (89,000)
------------ -----------
Net cash flows provided by (used for) investing
activities............................................. 4,220,000 (2,152,000)
Financing activities:
Issuance of notes payable................................. 1,771,000 1,625,000
Principal payments on capital leases and equipment notes
payable................................................ (445,000) (330,000)
Issuance of common stock, net............................. 561,000 489,000
------------ -----------
Net cash flows provided by financing activities............. 1,887,000 1,784,000
------------ -----------
Decrease in cash and cash equivalents....................... (11,911,000) (2,520,000)
Cash and cash equivalents at beginning of period............ 46,903,000 42,654,000
------------ -----------
Cash and cash equivalents at end of period.................. $ 34,991,000 $40,134,000
============ ===========
Supplemental disclosure of cash flow information:
Interest paid............................................. $ 122,000 $ 89,000
</TABLE>
See accompanying notes.
F-17
<PAGE> 57
AMYLIN PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(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
March 31, 1998, and for the three months ended March 31, 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
Annual Report to Shareholders on Form 10-K for the year ended December 31, 1997.
Per Share Data
Basic and diluted 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.
2. STOCKHOLDERS' EQUITY
In early May 1998, the Company distributed a supplement to its Notice of
Annual Meeting and Proxy Statement requesting that stockholders approve a
partial option-exchange program which was further restricted to non-executive
officer employees of the Company. Under the program, which was approved by the
Company's Board of Directors in late April 1998, only options held by qualifying
employees are eligible to be exchanged for new options to purchase the same
number of shares at an option price equal to the closing price of the Company's
Common Stock on the date the offers of employees to exchange such options are
accepted by the Company. Subject only to certain limited exceptions, no
exchanged options will be exercisable until June 30, 1999, at which time they
will continue to vest according to the same schedule as the old options
surrendered therefor.
F-18
<PAGE> 58
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Registrant in
connection with the sale of the Common Stock being registered. All the amounts
shown are estimates except for the SEC registration fee.
<TABLE>
<S> <C>
SEC Registration fee........................................ $ 3,470
NASD filing fee............................................. $ 1,680
Nasdaq National Market Listing Application Fee.............. $ 17,500
Printing and engraving expenses............................. $ 30,000
Legal fees and expenses..................................... $ 50,000
Accounting fees and expenses................................ $ 25,000
Financial advisory fees and expenses........................ $200,000
Miscellaneous............................................... $ 22,350
--------
Total............................................. $350,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act").
The Registrant's Certificate of Incorporation and By-laws include
provisions to (i) eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by Section 102(b)(7) of the General Corporation Law of Delaware (the "Delaware
Law") and (ii) require the Registrant to indemnify its Directors and officers to
the fullest extent permitted by Section 145 of the Delaware Law, including
circumstances in which indemnification is otherwise discretionary. Pursuant to
Section 145 of the Delaware Law, a corporation generally has the power to
indemnify its present and former directors, officers, employees and agents
against expenses incurred by them in connection with any suit to which they are
or are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in or not opposed to, the best interests of the corporation and
with respect to any criminal action, they had no reasonable cause to believe
their conduct was unlawful. The Registrant believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
These provisions do not eliminate the directors' duty of care, and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware Law. In addition,
each director will continue to be subject to liability for breach of the
director's duty of loyalty to the Registrant, for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
acts or omissions that the director believes to be contrary to the best
interests of the Registrant or its stockholders, for any transaction from which
the director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the director's duty to the Registrant or its
stockholders when the director was aware or should have been aware of a risk of
serious injury to the Registrant or its stockholders, for acts or omission that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the Registrant or its stockholders, for improper
transactions between the director and the Registrant and for improper
distributions to stockholders and loans to directors and officers. The provision
also does not affect a director's responsibilities under any other law, such as
the federal securities law or state or federal environmental laws.
The Registrant has entered into indemnity agreements with each of its
directors and executive officers that require the Registrant to indemnify such
persons against expenses, judgments, fines, settlements and other amounts
incurred (including expenses of a derivative action) in connection with any
proceeding, whether actual or threatened, to which any such person may be made a
party by reason of the fact that such person is or was a director or an
executive officer of the Registrant or any of its affiliated enterprises,
provided
II-1
<PAGE> 59
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Registrant and, with
respect to any criminal proceeding, had no reasonable cause to believe his
conduct was unlawful. The indemnification agreements also set forth certain
procedures that will apply in the event of a claim for indemnification
thereunder.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
The Registrant has an insurance policy covering the officers and directors
of the Registrant with respect to certain liabilities, including liabilities
arising under the Securities Act or otherwise.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
FOOTNOTE NUMBER DESCRIPTION OF DOCUMENT
-------- ------- -----------------------
<C> <C> <S>
(1) 3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 Certificate of Amendment of Amended and Restated Certificate
of Incorporation of the Registrant.
(1) 3.3 Amended and Restated Bylaws of the Registrant.
4.1 Reference is made to Exhibits 3.1 and 3.2.
5.1 Opinion of Cooley Godward LLP.
(1) 10.1 Form of Indemnity Agreement entered into between the
Registrant and its directors and officers.
10.2 Registrant's 1991 Stock Option Plan, as amended (the "Option
Plan").
(8) 10.3 Form of Incentive Stock Option Agreement under the Option
Plan with related schedule.
(1) 10.4 Form of Supplemental Stock Option Agreement under the Option
Plan.
(1) 10.5 Form of Supplemental Stock Option Agreement not granted
under the Option Plan with related schedule.
(14) 10.6 Registrant's Employee Stock Purchase Plan and related
offering document.
(1) 10.7 Stock Purchase Agreement, dated as of October 28, 1991,
between the Registrant and the parties named therein, as
amended.
(1)(2) 10.8 License Agreement, dated as of November 22, 1991, among the
Registrant, the Regents of the University of Minnesota, and
Per Westermark.
(1) 10.9 Lease, dated as of January 2, 1989, between the Registrant
and Nippon Landic (USA), Inc., the assignee of
NEXUS/GADCO-UTC, as amended.
(3) 10.10 Lease Agreement, dated as of January 22, 1993, between the
Registrant and Loma Palisades, Ltd., a California Limited
Partnership, and related Sublease Agreements, each dated
January 21, 1993, between the Registrant and Lam Research
Corporation.
(3) 10.11 Master Equipment Lease Agreement Number 10453, Equipment
Financing Agreement Number 10753, Negative Covenant Pledge
Agreements and Collateral Security Agreement, each dated as
of March 19, 1993, between the Registrant and Lease
Management Services, Inc.
10.12 Registrant's Non-Employee Directors Stock Option Plan, as
amended (the "Directors' Plan").
(4) 10.13 Form of Nonstatutory Stock Option Agreement under the
Directors' Plan.
</TABLE>
II-2
<PAGE> 60
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
FOOTNOTE NUMBER DESCRIPTION OF DOCUMENT
-------- ------- -----------------------
<C> <C> <S>
(5) 10.14 Sublease Agreement, dated September 1, 1994, between the
Registrant and ORINCON Corporation.
(5) 10.15 Loan Agreement, dated July 5, 1994, and related Note and
Credit Terms and Conditions Agreement between the Registrant
and Imperial Bank.
(5) 10.16 Phantom Stock Unit Agreement, dated January 4, 1995, between
the Registrant and Farview Management Co., L.P.
(6)(7) 10.17 Collaboration Agreement, dated June 20, 1995, between the
Registrant and LifeScan, Inc.
(6)(7) 10.18 Stock Purchase Agreement, dated June 20, 1995, between the
Registrant and Johnson & Johnson Development Corporation.
(6)(7) 10.19 Loan and Security Agreement, dated June 20, 1995, between
the Registrant and Johnson & Johnson.
(6)(7) 10.20 Agreement to Discontinue Collaboration, dated June 20, 1995,
between the Registrant and Glaxo Wellcome, Inc.
(8) 10.21 Consulting Agreement, dated June 15, 1995, between the
Registrant and Joseph C. Cook, Jr., as amended on March 25,
1996, and related Nonstatutory Stock Option grant dated June
15, 1995.
(8) 10.22 Addendums No. 10453 and 10753 to Master Lease Agreement
dated January 19, 1996, between the Registrant and Lease
Management Services with Related Negative Covenant Pledge
Agreement and Collateral Security Agreement.
(9)(10) 10.23 Patent and Technology License Agreement, Consulting
Agreement and Nonstatutory Stock Option Agreement dated
October 1, 1996, between the Registrant and Dr. John Eng.
(9)(10) 10.24 Collaborative Research and Assignment Agreement dated
October 15, 1996, among the Registrant, London Health
Sciences Centre and Dr. John Dupre.
(11) 10.25 Employment agreement dated August 1, 1996, between the
Registrant and Howard E. Greene, Jr.
(11) 10.26 Amendment dated November 5, 1996, to the Lease Agreement,
dated January 22, 1993, between the Registrant and Loma
Palisades, Ltd., a California Limited Partnership.
(11) 10.27 Amendment dated January 15, 1997, to the Consulting
Agreement, dated June 15, 1995, between the Registrant and
Joseph C. Cook, Jr.
(11) 10.28 Addendum to the Master Financing Agreement No, 10753 dated
January 19, 1996, between the Registrant and Lease
Management Services with amendments to the Related Negative
Covenant Pledge Agreement and Collateral Security Agreement,
each dated as of January 30, 1997.
(11) 10.29 Fourth Amendment dated February 26, 1997, to the Lease
Agreement, dated January 2, 1989, between the Registrant and
Nippon Landic (U.S.A.), Inc., as amended.
(12)(13) 10.30 Collaboration Agreement between the Registrant and Hoechst
Marion Roussel Dated March 31, 1997.
(12)(13) 10.31 License and Option Agreement between the Registrant and
Hoechst Marion Roussel Dated March 31, 1997.
(14) 10.32 Registrant's Directors' Deferred Compensation Plan.
</TABLE>
II-3
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
FOOTNOTE NUMBER DESCRIPTION OF DOCUMENT
-------- ------- -----------------------
<C> <C> <S>
(15) 10.33 Warrant Agreement between the Registrant and the Medical
Research Council dated May 9, 1997.
(15) 10.34 Promissory Note dated September 30, 1997, issued by the
Registrant to Johnson & Johnson.
(15) 10.35 Warrant Agreement between the Registrant and Johnson &
Johnson dated September 30, 1997.
(16) 10.36 Amendment dated September 1, 1996, to Option Agreements
between the Registrant and Howard E. Greene, Jr.
10.37 Amendment dated March 25, 1998, to Option Agreements between
the Registrant and Howard E. Greene, Jr.
(16) 10.38 Margin Account Loan Agreement between the Registrant and
Bradford and Kimberly Duft dated December 19, 1997.
(16) 10.39 Credit Agreement and related Note between the Registrant and
Imperial Bank dated January 15, 1998.
(16) 10.40 Amendment dated February 1, 1998, to Option Agreements
between the Registrant and Marjorie T. Sennett.
(17) 10.41 Registrant's Employee Stock Purchase Plan, as amended on
November 20, 1997.
(17) 10.42 Special Form of Incentive Stock Option Agreement under the
Option Plan of the Registrant.
(18) 10.43 Employee Phantom Stock Salary Deferral Plan (the "Deferral
Plan").
(18) 10.44 Form of Deferred Compensation Agreement under the Deferral
Plan.
10.45 Employment Agreement dated March 25, 1998, between the
Registrant and Richard M. Haugen.
10.46 Letter agreement dated June 12, 1998, between the Registrant
and Richard M. Haugen regarding Mr. Haugen's participation
in the Deferral Plan.
10.47 Employment Agreement dated March 25, 1998, between the
Registrant and Joseph C. Cook, Jr.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1 Power of Attorney. Reference is made to page .
</TABLE>
- ---------------
(1) Filed as an exhibit to the Registrant's Registration Statement on Form S-1
(No. 33-44195) or amendments thereto and incorporated herein by reference.
(2) Certain confidential portions deleted pursuant to Order Granting
Application Under the Securities Act of 1933 and Rule 406 Thereunder
Respecting Confidential Treatment dated January 17, 1992.
(3) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.
(4) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.
(5) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.
(6) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995.
II-4
<PAGE> 62
(7) Certain confidential portions deleted pursuant to Order Granting
Application Under the Securities Exchange Act of 1934 and Rule 24b-2
Thereunder Respecting Confidential Treatment dated March 7, 1997.
(8) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.
(9) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996.
(10) Certain confidential portions deleted pursuant to Order Granting
Application Under the Securities Exchange Act of 1934 and Rule 24b-2
Thereunder Respecting Confidential Treatment dated December 20, 1996.
(11) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.
(12) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997.
(13) Certain confidential portions deleted pursuant to Order Granting
Application Under the Securities Exchange Act of 1934 and Rule 24b-2
Thereunder Respecting Confidential Treatment dated June 24, 1997.
(14) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997.
(15) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997.
(16) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997.
(17) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998.
(18) Filed as an exhibit to the Registrant's Registration Statement on Form S-8
(No. 333-51577) or amendments thereto and incorporated herein by reference.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 15 or otherwise, the registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Act,
each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(2) That, for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained
II-5
<PAGE> 63
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 64
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on July 9, 1998.
AMYLIN PHARMACEUTICALS, INC.
By: /s/ JOSEPH C. COOK, JR.
------------------------------------
Joseph C. Cook, Jr.
Chief Executive Officer and
Chairman of the Board of Directors
(Principal Executive Officer and
Principal Financial Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Joseph C. Cook, Jr. and Bradford J. Duft
and each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments, exhibits thereto and other documents in connection
therewith) to this Registration Statement and any subsequent registration
statement filed by the registrant pursuant to Rule 462(b) of the Securities Act
of 1933, as amended, which relates to this Registration Statement, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOSEPH C. COOK, JR. Chief Executive Officer and July 9, 1998
- ----------------------------------------------------- Chairman of the Board of
Joseph C. Cook, Jr. Directors (Principal Executive
Officer and Principal Financial
Officer)
/s/ KARL H. OLSEN Treasurer and Controller July 9, 1998
- ----------------------------------------------------- (Principal Accounting Officer)
Karl H. Olsen
/s/ JAMES C. BLAIR Director July 9, 1998
- -----------------------------------------------------
James C. Blair
/s/ JAMES C. GAITHER Director July 9, 1998
- -----------------------------------------------------
James C. Gaither
/s/ GINGER L. GRAHAM Director July 9, 1998
- -----------------------------------------------------
Ginger L. Graham
/s/ HOWARD E. GREENE, JR. Director July 9, 1998
- -----------------------------------------------------
Howard E. Greene, Jr.
/s/ VAUGHN M. KAILIAN Director July 9, 1998
- -----------------------------------------------------
Vaughn M. Kailian
</TABLE>
II-7
<PAGE> 65
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
FOOTNOTE NUMBER DESCRIPTION OF DOCUMENT
- -------- ------- -----------------------
<C> <C> <S>
(1) 3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 Certificate of Amendment of Amended and Restated Certificate
of Incorporation of the Registrant.
(1) 3.3 Amended and Restated Bylaws of the Registrant.
4.1 Reference is made to Exhibits 3.1 and 3.2.
5.1 Opinion of Cooley Godward LLP.
(1) 10.1 Form of Indemnity Agreement entered into between the
Registrant and its directors and officers.
10.2 Registrant's 1991 Stock Option Plan, as amended (the "Option
Plan").
(8) 10.3 Form of Incentive Stock Option Agreement under the Option
Plan with related schedule.
(1) 10.4 Form of Supplemental Stock Option Agreement under the Option
Plan.
(1) 10.5 Form of Supplemental Stock Option Agreement not granted
under the Option Plan with related schedule.
(14) 10.6 Registrant's Employee Stock Purchase Plan and related
offering document.
(1) 10.7 Stock Purchase Agreement, dated as of October 28, 1991,
between the Registrant and the parties named therein, as
amended.
(1)(2) 10.8 License Agreement, dated as of November 22, 1991, among the
Registrant, the Regents of the University of Minnesota, and
Per Westermark.
(1) 10.9 Lease, dated as of January 2, 1989, between the Registrant
and Nippon Landic (USA), Inc., the assignee of
NEXUS/GADCO-UTC, as amended.
(3) 10.10 Lease Agreement, dated as of January 22, 1993, between the
Registrant and Loma Palisades, Ltd., a California Limited
Partnership, and related Sublease Agreements, each dated
January 21, 1993, between the Registrant and Lam Research
Corporation.
(3) 10.11 Master Equipment Lease Agreement Number 10453, Equipment
Financing Agreement Number 10753, Negative Covenant Pledge
Agreements and Collateral Security Agreement, each dated as
of March 19, 1993, between the Registrant and Lease
Management Services, Inc.
10.12 Registrant's Non-Employee Directors Stock Option Plan, as
amended (the "Directors' Plan").
(4) 10.13 Form of Nonstatutory Stock Option Agreement under the
Directors' Plan.
(5) 10.14 Sublease Agreement, dated September 1, 1994, between the
Registrant and ORINCON Corporation.
(5) 10.15 Loan Agreement, dated July 5, 1994, and related Note and
Credit Terms and Conditions Agreement between the Registrant
and Imperial Bank.
(5) 10.16 Phantom Stock Unit Agreement, dated January 4, 1995, between
the Registrant and Farview Management Co., L.P.
(6)(7) 10.17 Collaboration Agreement, dated June 20, 1995, between the
Registrant and LifeScan, Inc.
(6)(7) 10.18 Stock Purchase Agreement, dated June 20, 1995, between the
Registrant and Johnson & Johnson Development Corporation.
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
FOOTNOTE NUMBER DESCRIPTION OF DOCUMENT
- -------- ------- -----------------------
<C> <C> <S>
(6)(7) 10.19 Loan and Security Agreement, dated June 20, 1995, between
the Registrant and Johnson & Johnson.
(6)(7) 10.20 Agreement to Discontinue Collaboration, dated June 20, 1995,
between the Registrant and Glaxo Wellcome, Inc.
(8) 10.21 Consulting Agreement, dated June 15, 1995, between the
Registrant and Joseph C. Cook, Jr., as amended on March 25,
1996, and related Nonstatutory Stock Option grant dated June
15, 1995.
(8) 10.22 Addendums No. 10453 and 10753 to Master Lease Agreement
dated January 19, 1996, between the Registrant and Lease
Management Services with Related Negative Covenant Pledge
Agreement and Collateral Security Agreement.
(9)(10) 10.23 Patent and Technology License Agreement, Consulting
Agreement and Nonstatutory Stock Option Agreement dated
October 1, 1996, between the Registrant and Dr. John Eng.
(9)(10) 10.24 Collaborative Research and Assignment Agreement dated
October 15, 1996, among the Registrant, London Health
Sciences Centre and Dr. John Dupre.
(11) 10.25 Employment agreement dated August 1, 1996, between the
Registrant and Howard E. Greene, Jr.
(11) 10.26 Amendment dated November 5, 1996, to the Lease Agreement,
dated January 22, 1993, between the Registrant and Loma
Palisades, Ltd., a California Limited Partnership.
(11) 10.27 Amendment dated January 15, 1997, to the Consulting
Agreement, dated June 15, 1995, between the Registrant and
Joseph C. Cook, Jr.
(11) 10.28 Addendum to the Master Financing Agreement No, 10753 dated
January 19, 1996, between the Registrant and Lease
Management Services with amendments to the Related Negative
Covenant Pledge Agreement and Collateral Security Agreement,
each dated as of January 30, 1997.
(11) 10.29 Fourth Amendment dated February 26, 1997, to the Lease
Agreement, dated January 2, 1989, between the Registrant and
Nippon Landic (U.S.A.), Inc., as amended.
(12)(13) 10.30 Collaboration Agreement between the Registrant and Hoechst
Marion Roussel Dated March 31, 1997.
(12)(13) 10.31 License and Option Agreement between the Registrant and
Hoechst Marion Roussel Dated March 31, 1997.
(14) 10.32 Registrant's Directors' Deferred Compensation Plan.
(15) 10.33 Warrant Agreement between the Registrant and the Medical
Research Council dated May 9, 1997.
(15) 10.34 Promissory Note dated September 30, 1997, issued by the
Registrant to Johnson & Johnson.
(15) 10.35 Warrant Agreement between the Registrant and Johnson &
Johnson dated September 30, 1997.
(16) 10.36 Amendment dated September 1, 1996, to Option Agreements
between the Registrant and Howard E. Greene, Jr.
10.37 Amendment dated March 25, 1998, to Option Agreements between
the Registrant and Howard E. Greene, Jr.
(16) 10.38 Margin Account Loan Agreement between the Registrant and
Bradford and Kimberly Duft dated December 19, 1997.
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
FOOTNOTE NUMBER DESCRIPTION OF DOCUMENT
- -------- ------- -----------------------
<C> <C> <S>
(16) 10.39 Credit Agreement and related Note between the Registrant and
Imperial Bank dated January 15, 1998.
(16) 10.40 Amendment dated February 1, 1998, to Option Agreements
between the Registrant and Marjorie T. Sennett.
(17) 10.41 Registrant's Employee Stock Purchase Plan, as amended on
November 20, 1997.
(17) 10.42 Special Form of Incentive Stock Option Agreement under the
Option Plan of the Registrant.
(18) 10.43 Employee Phantom Stock Salary Deferral Plan (the "Deferral
Plan").
(18) 10.44 Form of Deferred Compensation Agreement under the Deferral
Plan.
10.45 Employment Agreement dated March 25, 1998, between the
Registrant and Richard M. Haugen.
10.46 Letter agreement dated June 12, 1998, between the Registrant
and Richard M. Haugen regarding Mr. Haugen's participation
in the Deferral Plan.
10.47 Employment Agreement dated March 25, 1998, between the
Registrant and Joseph C. Cook, Jr.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1 Power of Attorney. Reference is made to page .
</TABLE>
- ---------------
(1) Filed as an exhibit to the Registrant's Registration Statement on Form S-1
(No. 33-44195) or amendments thereto and incorporated herein by reference.
(2) Certain confidential portions deleted pursuant to Order Granting
Application Under the Securities Act of 1933 and Rule 406 Thereunder
Respecting Confidential Treatment dated January 17, 1992.
(3) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.
(4) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.
(5) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.
(6) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995.
(7) Certain confidential portions deleted pursuant to Order Granting
Application Under the Securities Exchange Act of 1934 and Rule 24b-2
Thereunder Respecting Confidential Treatment dated March 7, 1997.
(8) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.
(9) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996.
(10) Certain confidential portions deleted pursuant to Order Granting
Application Under the Securities Exchange Act of 1934 and Rule 24b-2
Thereunder Respecting Confidential Treatment dated December 20, 1996.
(11) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.
(12) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997.
<PAGE> 68
(13) Certain confidential portions deleted pursuant to Order Granting
Application Under the Securities Exchange Act of 1934 and Rule 24b-2
Thereunder Respecting Confidential Treatment dated June 24, 1997.
(14) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997.
(15) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997.
(16) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997.
(17) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998.
(18) Filed as an exhibit to the Registrant's Registration Statement on Form S-8
(No. 333-51577) or amendments thereto and incorporated herein by reference.
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
AMYLIN PHARMACEUTICALS, INC.
AMYLIN PHARMACEUTICALS, INC., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: The name of the Corporation is Amylin Pharmaceuticals, Inc.
SECOND: The date on which the Certificate of Incorporation of the
Corporation was originally filed with the Secretary of State of the State of
Delaware is September 29, 1987.
THIRD: The Board of Directors of the Corporation, acting in accordance
with the provisions of Sections 141 and 242 of the General Corporation Law of
the State of Delaware, adopted resolutions amending its Amended and Restated
Certificate of Incorporation as follows:
Paragraph A of Article V shall be amended and restated to read in
its entirety as follows:
"A. The Corporation is authorized to issue two classes of stock
to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the Corporation is authorized to issue
is one hundred and seven million five hundred thousand (107,500,000)
shares. One hundred million (100,000,000) shares shall be Common Stock,
each having a par value of one-tenth of one cent ($.001). Seven million
five hundred thousand (7,500,000) shares shall be Preferred Stock, each
having a par value of one-tenth of one cent ($.001)."
FOURTH: Thereafter pursuant to a resolution of the Board of Directors
this Certificate of Amendment was submitted to the stockholders of the
Corporation for their approval, and was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Amylin Pharmaceuticals, Inc. has caused this
Certificate of Amendment to be signed by its President and attested to by its
Secretary this 27th day of May, 1998.
AMYLIN PHARMACEUTICALS, INC.
By: /s/ JOSEPH C. COOK, JR.
-----------------------------------
Joseph C. Cook, Jr.
Chief Executive Officer and
Chairman of the Board of Directors
<PAGE> 1
EXHIBIT 5.1
[COOLEY GODWARD LLP LETTERHEAD]
July 8, 1998
AMYLIN PHARMACEUTICALS, INC.
9373 Towne Centre Drive
San Diego, CA 92121
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by AMYLIN PHARMACEUTICALS, INC. (the "Company") of a
Registration Statement on Form S-3 (the "Registration Statement"), with the
Securities and Exchange Commission (the "Commission"), including a related
prospectus to be filed with the Commission pursuant to Rule 424(b) of Regulation
C (the "Prospectus") promulgated under the Securities Act of 1933, as amended,
and the offering of up to 3,000,000 shares of common stock (the "Common Stock")
pursuant to such Prospectus.
In connection with this opinion, we have examined and relied upon the
Registration Statement, the Company's Certificate of Incorporation and Bylaws,
as amended, and the originals or copies certified to our satisfaction of such
records, documents, certificates, memoranda and other instruments as in our
judgment are necessary or appropriate to enable us to render the opinion
expressed below. We have assumed the genuineness and authenticity of all
documents submitted to us as originals, the conformity to originals of all
documents submitted to us as copies thereof and the due execution and delivery
of all documents where due execution and delivery are a prerequisite to the
effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Common Stock, when sold and issued in accordance with the Registration
Statement and related Prospectus, will be validly issued, fully paid and
nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
Cooley Godward LLP
By: /s/ THOMAS A. COLL
--------------------------
Thomas A. Coll
<PAGE> 1
EXHIBIT 10.2
AMYLIN PHARMACEUTICALS, INC.
1991 STOCK OPTION PLAN
ADOPTED OCTOBER 25, 1991
AS AMENDED ON FEBRUARY 9, 1994, FEBRUARY 14, 1995,
FEBRUARY 8, 1996, APRIL 15, 1997, MAY 29, 1997,
FEBRUARY 18, 1998 AND MAY 20, 1998
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees of and Consultants to the Company, and its Affiliates, may be given an
opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees of or Consultants to the Company, to secure and
retain the services of new Employees and Consultants, and to provide incentives
for such persons to exert maximum efforts for the success of the Company.
(c) The Company intends that the Options issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonqualified Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonqualified Stock Options
at the time of grant, and in such form as issued pursuant to section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
(d) In order to achieve the above purposes, the Plan has been amended
from time to time.
2. DEFINITIONS.
(a) "AFFILIATE" means any "parent corporation" or "subsidiary
corporation," whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan
(e) "COMPANY" means Amylin Pharmaceuticals, Inc., a Delaware
corporation.
1.
<PAGE> 2
(f) "CONSULTANT" means any person, including an advisor, engaged by
the Company or an Affiliate to render services and who is compensated for such
services, provided that the term "Consultant" shall not include Directors who
are paid only a director's fee by the Company or who are not compensated by the
Company for their services as Directors.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the
employment or consulting relationship is not interrupted or terminated by the
Company or any Affiliate. The Board, in its sole discretion, may determine
whether Continuous Status as an Employee or Consultant shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board,
including sick leave, military leave, or any other personal leave; provided,
however, that for purposes of Incentive Stock Options, any such leave may not
exceed ninety (90) days, unless reemployment upon the expiration of such leave
is guaranteed by contract (including certain Company policies) or statute; or
(ii) transfers between locations of the Company or between the Company,
Affiliates or their successors.
(h) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(i) "DIRECTOR" means a member of the Board.
(j) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate. Neither service as a Director nor
payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:
(i) If the common stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reporting in the Wall Street Journal or such
other source as the Board deems reliable;
(ii) If the common stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the high bid and high asked
prices for the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
2.
<PAGE> 3
(iii) In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by the Board.
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(n) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(o) "NONQUALIFIED STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "OPTION" means a stock option granted pursuant to the Plan.
(r) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
(s) "OPTIONED STOCK" means the common stock of the Company subject to
an Option.
(t) "OPTIONEE" means an Employee or Consultant who holds an
outstanding Option.
(u) "OUTSIDE DIRECTOR" means a Director who either (i) is not a
current employee of the Company or an affiliated corporation, is not a former
employee of the Company or an affiliated corporation receiving compensation for
prior services (other than benefits under a tax qualified pension plan), was not
an officer of the Company or an affiliated corporation at any time, and is not
currently receiving compensation for personal services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(v) "PLAN" means this 1991 Stock Option Plan.
(w) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
3.
<PAGE> 4
(x) "SECURITIES ACT" means the Securities Act of 1933, as amended.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; whether the Option will be an Incentive Stock Option or a Nonqualified
Stock Option; the provisions of each Option granted (which need not be
identical), including the time or times such Option may be exercised in whole or
in part; and the number of shares for which an Option shall be granted to each
such person.
(ii) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(iii) To amend the Plan as provided in Section 11.
(c) The Board may delegate administration of the Plan to a committee
of the Board composed of not fewer than two (2) members (the "Committee"), all
of the members of which Committee may be, in the discretion of the Board,
Non-Employee Directors and/or Outside Directors. If administration is delegated
to a Committee, the Committee shall have, in connection with the administration
of the Plan, the powers theretofore possessed by the Board, including the power
to delegate to a subcommittee of two (2) or more Outside Directors any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such a
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Notwithstanding anything in this Section 3 to the
contrary, the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant Options to eligible persons who (1)
are not then subject to Section 16 of the Exchange Act and/or (2) are either (i)
not then Covered Employees and are not expected to be Covered Employees at the
time of recognition of income resulting from such Option, or (ii) not persons
with respect to whom the Company wishes to comply with Section 162(m) of the
Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate seven million eight hundred thousand (7,800,000) shares
of the Company's common stock. If any Option shall for any reason expire or
otherwise terminate without having been exercised in
4.
<PAGE> 5
full, the stock not purchased under such Option shall revert to and again become
available for issuance pursuant to exercises of options granted under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Nonqualified Stock Options may be granted only to Employees or Consultants.
(b) No person shall be eligible for the grant of an Option if, at the
time of grant, such person owns (or is deemed to own pursuant to Section 424(d)
of the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any of its Affiliates
unless the exercise price of such Option is at least one hundred ten percent
(110%) of the Fair Market Value of such stock at the date of grant and the
Option is not exercisable after the expiration of five (5) years from the date
of grant.
(c) No employee shall be eligible to be granted in any calendar year
Options covering more than 5% of the total number of shares of the Company's
common stock outstanding on the record date for the Company's 1995 Annual
Meeting of Stockholders.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonqualified Stock Option shall be not less than fifty percent (50%) of the
Fair Market Value of the stock subject to the Option on the date the Option is
granted.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the option is exercised, or (ii) at
the discretion of the Board or the Committee, either at the time of the grant or
exercise of the Option, (A) by delivery to the Company of other common stock of
the Company, (B) according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or to
whom the Option is transferred pursuant to subsection 6(d), or (C) in any other
form of legal consideration that may be acceptable to the Board.
5.
<PAGE> 6
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonqualified Stock Option shall
only be transferable by the Optionee upon such terms and conditions as are set
forth in the Option Agreement for such Nonstatutory Stock Option, as the Board
or the Committee shall determine in its discretion. The person to whom the
Option is granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionee, shall thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. During the remainder of the term of the Option (if its term extends
beyond the end of the installment periods), the option may be exercised from
time to time with respect to any shares then remaining subject to the Option.
The provisions of this subsection 6(e) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee,
or any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. These requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act, or (ii) as
to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws.
(g) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. In the event
an Optionee's Continuous Status as an Employee or Consultant terminates (other
than upon the Optionee's death or Disability), the Optionee may exercise his or
her Option, but only within such period of time as is determined by the Board,
and only to the extent that the Optionee was
6.
<PAGE> 7
entitled to exercise it at the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement).
In the case of an Incentive Stock Option, the Board shall determine such period
of time (in no event to exceed ninety (90) days from the date of termination)
when the Option is granted. If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance pursuant to Options granted under the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance pursuant to
Options granted under the Plan.
(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee or Consultant terminates as a result of the Optionee's
Disability, the Optionee may exercise his or her Option, but only within twelve
(12) months from the date of such termination (or such shorter period specified
in the Option Agreement), and only to the extent that the Optionee was entitled
to exercise it at the date of such termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement). If,
at the date of termination, the Optionee is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance pursuant to Options
granted under the Plan. If, after termination, the Optionee does not exercise
his or her Option within the time specified herein, the Option shall terminate,
and the shares covered by such Option shall revert to and again become available
for issuance pursuant to Options granted under the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee, the
Option may be exercised, at any time within twelve (12) months following the
date of death (or such shorter period specified in the Option Agreement) (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
the Optionee was entitled to exercise the Option at the date of death. If, at
the time of death, the Optionee was not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to and again become available for issuance pursuant to Options granted
under the Plan. If, after death, the Optionee's estate or a person who acquired
the right to exercise the Option by bequest or inheritance does not exercise the
Option within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance pursuant to Options granted under the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee or Consultant to
exercise the Option as to any part or all of the shares subject to the Option
prior to the full vesting of the Option. Any unvested shares so purchased may be
subject to a repurchase right in favor of the Company or to any other
restriction the Board determines to be appropriate.
(k) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of
7.
<PAGE> 8
such means: (1) tendering a cash payment; (2) authorizing the Company to
withhold shares from the shares of the common stock otherwise issuable to the
participant as a result of the exercise of the Option; or (3) delivering to the
Company owned and unencumbered shares of the common stock of the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available
at all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.
(c) Effective as of June 1, 1998, the Company shall not implement
without prior stockholder approval any stock option exchange program or
repricing program intended to reduce the exercise price applicable to Options
granted pursuant to the Plan. This subsection 7(c) may not be amended or
modified by the Company without prior stockholder approval.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e) only for purposes of allowing
early exercise, notwithstanding the provisions in the Option stating the time at
which it may first be exercised or the time during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is
transferred under subsection 6(d) shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares subject to such
Option unless and until such person has satisfied all requirements for exercise
of the Option pursuant to its terms.
(c) Throughout the term of any Option, the Company shall deliver to
the holder of such Option, not later than one hundred twenty (120) days after
the close of each of the Company's fiscal years during the Option term, such
financial and other information regarding the Company as comprises the annual
report to the stockholders of the Company provided for in
8.
<PAGE> 9
the bylaws of the Company. This subsection shall not apply after the first
registration of an equity security of the Company under the Securities Act.
(d) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee or Consultant or Optionee any
right to continue in the employ of the Company or any Affiliate (or to continue
acting as a Consultant) or shall affect the right of the Company or any
Affiliate to terminate the employment or consulting relationship of any Employee
or Consultant or Optionee with or without cause.
(e) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options
granted after 1986 are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonqualified Stock Options.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan and outstanding Options will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Plan and
the class(es) and number of shares and price per share of stock subject to
outstanding Options.
(b) In the event of: (1) a merger or consolidation in which the
Company is not the surviving corporation or (2) a reverse merger in which the
Company is the surviving corporation but the shares of the Company's common
stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise then to the extent permitted by applicable law: (i) any surviving
corporation shall assume any Options outstanding under the Plan or shall
substitute similar Options for those outstanding under the Plan, or (ii) such
Options shall continue in full force and effect. In the event any surviving
corporation refuses to assume or continue such Options, or to substitute similar
options for those outstanding under the Plan, then, with respect to options held
by persons then performing services as Employees or Consultants for the Company,
the time at which such Options may first be exercised shall be accelerated and
the Options terminated if not exercised prior to such event. In the event of a
dissolution or liquidation of the Company, any Options outstanding under the
Plan shall terminate if not exercised prior to such event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for Options under the
Plan;
9.
<PAGE> 10
(ii) Modify the requirements as to eligibility for participation
in the Plan (to the extent such modification requires stockholder approval in
order for the Plan to satisfy the requirements of Section 422 of the Code); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code or to comply with applicable stock exchange listing
requirements.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith
(d) Rights and obligations under any Option granted before amendment
of the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Option was
granted and (ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on October 24, 2001, which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. No Options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Options granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company, and, if required, an
appropriate permit has been issued by the Commissioner of Corporations of the
State of California.
PROVISIONS APPLICABLE TO PERSONS SUBJECT TO THE LAWS OF FRANCE
The Company has adopted the following provisions in order that an
Option granted to an Employee who is subject to the laws of France will provide
the maximum benefits
10.
<PAGE> 11
under the provisions of French law (the "French Option"), and in order to
provide incentives for such Employee to exert maximum efforts for the success of
the Company. Except as set forth below, the terms of the Option Agreement for a
French Option shall otherwise comply with the other terms of the Plan.
14. ELIGIBILITY FOR FRENCH OPTION.
(a) No person shall be granted a French Option unless such person is
an Employee.
(b) Throughout the term of the Plan, no French Option shall be
granted, if by making such grant, the aggregate number of shares subject to
outstanding French Options could at any time exceed one-third of the aggregate
number of all shares of all classes of stock of the Company authorized for
issuance.
(c) No person shall be eligible for the grant of a French Option if,
at the time of grant, such person owns (or is deemed to own pursuant to the
applicable laws of France) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates.
15. FRENCH OPTION PROVISIONS.
(a) PRICE. The exercise price of a French Option shall be no less than
the higher of: (i) ninety-five percent (95%) of the average closing sales price
for such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Company's common stock) for the twenty (20) market trading days
immediately preceding the day of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable; or (ii) fifty percent
(50%) of the Fair Market Value of the stock.
(b) TRANSFERABILITY. The terms of a French Option shall not permit
transfer of the French Option, except on death and then only to the extent
permitted by French law. Further, the terms of a French Option shall provide
that during the lifetime of the Optionee the French Option may be exercised only
by the Optionee. In the event of the death of the Optionee during the Optionee's
Continuous Status as an Employee or Consultant, such French Option may be
transferred to the extent permitted by French law. A French Option so
transferred may be exercised (to the extent the Optionee was entitled to
exercise such French Option as of the date of death) by the transferee only
within the period ending on the earlier of (i) the date six (6) months following
the date of death, or (ii) the expiration of the term of such French Option as
set forth in the Option Agreement.
16. ADJUSTMENTS UPON CHANGES IN STOCK.
Any adjustment pursuant to Section 10 of the Plan, of stock subject to
a French Option, shall be made (a) in accordance with the applicable law of the
state in which the Company is incorporated at the time the adjustment is made,
and (b) in accordance with any applicable rules of the stock exchange (including
for this purpose the NASDAQ National Market System) which the Company uses to
determine Fair Market Value.
11.
<PAGE> 1
EXHIBIT 10.12
AMYLIN PHARMACEUTICALS, INC.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED ON FEBRUARY 9, 1994
AS AMENDED BY THE BOARD OF DIRECTORS ON NOVEMBER 14, 1995, FEBRUARY 8, 1996,
MAY 29, 1997 AND MAY 20, 1998
1. PURPOSE.
(a) The purpose of this Non-Employee Directors' Stock Option Plan (the
"Plan") is to provide a means by which each director of Amylin Pharmaceuticals,
Inc., a Delaware corporation (the "Company"), who is not otherwise an employee
of the Company or any Affiliate of the Company (each such person being hereafter
referred to as a "Non-Employee Director") will be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(d) The Company intends that the options issued under the Plan not be
incentive stock options as that term is used in Section 422 of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the Company
(the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To construe and interpret the Plan and options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any option agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.
(ii) To amend the Plan as provided in paragraph 11.
(iii) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
1.
<PAGE> 2
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate 350,000 shares of the Company's
common stock. If any option granted under the Plan shall for any reason expire
or otherwise terminate without having been exercised in full, the stock not
purchased under such option shall revert to and again become available for
issuance pursuant to exercises of options granted under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company.
5. NON-DISCRETIONARY GRANTS.
(a) Each person who is, immediately following the Company's 1994 Annual
Meeting of Stockholders (the "1994 Annual Meeting") at which the Plan is
approved by the stockholders of the Company, a Non-Employee Director of the
Company shall be granted, effective as of the date of such Annual Meeting, an
option to purchase ten thousand (10,000) shares of common stock of the Company
on the terms and conditions set forth herein.
(b) Each person who is, subsequent to November 1, 1995, and on or prior to
May 29, 1997, elected for the first time by the Board or shareholders of the
Company to serve as a Non-Employee Director of the Company and who has not
previously served as a member of the Board shall be granted, effective as of the
date of such election, an option to purchase thirty thousand (30,000) shares of
common stock of the Company on the terms and conditions set forth herein. Each
person who is, subsequent to May 29, 1997, elected for the first time by the
Board or shareholders of the Company to serve as a Non-Employee Director of the
Company and who has not previously served as a member of the Board shall be
granted, effective as of the date of such election, an option to purchase twenty
thousand (20,000) shares of common stock of the Company on the terms and
conditions set forth herein.
(c) Commencing with the 1996 Annual Meeting of Stockholders, each person
who is, immediately following each Annual Meeting of Stockholders of the Company
that occurs in an even year (i.e. 1996, 1998, 2000, 2002, etc.) (hereinafter, an
"Even Year Annual Meeting"), a Non-Employee Director of the Company shall be
granted, effective as of the date of such Even Year Annual Meeting (and in
addition to any option granted pursuant to Section 5(b)), an option
2.
<PAGE> 3
to purchase ten thousand (10,000) shares of common stock of the Company on the
terms and conditions set forth herein.
6. OPTION PROVISIONS.
Each option shall contain the following terms and conditions:
(a) No option shall be exercisable after the expiration of ten (10) years
from the date it was granted.
(b) The exercise price of each option shall be equal to the Fair Market
Value (defined below) of the stock subject to such option on the date such
option is granted. For purposes of this Plan, "Fair Market Value" means, as of
any date, the value of the common stock of the Company determined as follows:
(i) If the common stock is listed on any established stock exchange or
a national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the fair market value of a share of common stock
shall be the average of the highest and lowest price at which the common stock
was sold on such exchange or national market system on the trading day
immediately preceding the date as of which the determination is to be made;
(ii) If the common stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the fair market value of
a share of common stock shall be the mean between the high bid and high asked
prices for the common stock on the trading day immediately preceding the date as
of which the determination is to be made, as reported in the Wall Street Journal
or such other source as the Board deems reliable;
(iii) In the absence of an established market for the common stock,
the fair market value shall be determined in good faith by the Board.
(c) The purchase price of stock acquired pursuant to an option shall be
paid, to the extent permitted by applicable statutes and regulations, either (1)
in cash at the time the option is exercised, or (2) by delivery to the Company
of shares of common stock of the Company that have been held for the requisite
period necessary to avoid a charge to the Company's reported earnings and valued
at the Fair Market Value on the date of exercise, or (3) by a combination of
such methods of payment.
(d) An option shall not be transferable except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person or by his guardian or
legal representative.
(e) Options granted pursuant to the Plan shall vest as follows:
(i) An option granted pursuant to Section 5(a) or 5(c) shall vest with
respect to each optionee over a period of two (2) years with 0.1369863% of the
total number of shares subject to such option vesting on each day following the
date of grant of such option (provided
3.
<PAGE> 4
that the grantee has, during the entire period prior to any such vesting date,
continuously served as a Non-Employee Director), whereupon such option shall
become fully exercisable in accordance with its terms with respect to the shares
vesting as of such date.
(ii) An option granted pursuant to Section 5(b) shall vest according
to the following schedule:
If the optionee continues as a Non-Employee Director of the
Company or any Affiliate of the Company through the date that is one (1) year
from the date of grant thereof ("Anniversary Date"), such option shall become
exercisable as of the Anniversary Date with respect to one-fourth (1/4th) of the
total number of shares subject to such option.
Thereafter, for so long as such optionee continues as a
Non-Employee Director of the Company or an Affiliate of the Company, such option
will become exercisable with respect to an additional .0684932% of the total
number of shares subject to such option for each day subsequent to the
Anniversary Date until such option has become fully exercisable.
Notwithstanding the foregoing, in no event shall fractional shares be
issuable upon any such exercise, and in lieu of any such fractional share, the
Company shall pay cash to the holder of such option equal to the Fair Market
Value thereof.
(f) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 6(d), as a condition of exercising any such
option: (1) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters; and (2)
to give written assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the option for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
These requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (i) the issuance of the shares upon the exercise of the
option has been registered under a then-currently-effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or (ii), as to any particular requirement, a determination is made by counsel
for the Company that such requirement need not be met in the circumstances under
the then-applicable securities laws.
(g) Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan,
4.
<PAGE> 5
any option granted under the Plan, or any stock issued or issuable pursuant to
any such option. If the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options.
(c) Effective as of June 1, 1998, the Company shall not implement without
prior stockholder approval any stock option exchange program or repricing
program intended to reduce the exercise price applicable to Options granted
pursuant to the Plan. This subsection 7(c) may not be amended or modified by the
Company without prior stockholder approval.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(b) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to terminate the service of any
Non-Employee Director with or without cause.
(c) No Non-Employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(d) In connection with each option made pursuant to the Plan, it shall be a
condition precedent to the Company's obligation to issue or transfer shares to a
Non-Employee Director, or an affiliate of such Non-Employee Director, or to
evidence the removal of any restrictions on transfer, that such Non-Employee
Director make arrangements satisfactory to the Company to insure that the amount
of any federal or other withholding tax required to be withheld with respect to
such sale or transfer, or such removal or lapse, is made available to the
Company for timely payment of such tax.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
5.
<PAGE> 6
options will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding options.
(b) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's common stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) any other capital reorganization
in which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, then to the extent permitted by applicable law, the time
during which such options may be exercised shall be accelerated and the options
terminated if not exercised prior to such event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
Except as provided in paragraph 10 relating to adjustments upon changes in
stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for options under the Plan;
or
(ii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to comply with the requirements of
Rule 16b-3 promulgated under the Exchange Act or Section 162(m) of the Code.
(b) Rights and obligations under any option granted before any amendment of
the Plan shall not be altered or impaired by such amendment of the Plan unless
(i) the Company requests the consent of the person to whom the option was
granted and (ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on February 8, 2004. No options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(a) The Plan shall become effective upon adoption by the Board of
Directors, subject to the condition subsequent that the Plan is approved by the
stockholders of the Company in accordance with Rule 16-b(3)(1) of the
Regulations under the Securities Exchange Act prior to June 30, 1994.
6.
<PAGE> 7
(b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
7.
<PAGE> 1
EXHIBIT 10.37
AMENDMENT TO
INCENTIVE STOCK OPTION AGREEMENTS DATED
NOVEMBER 20, 1991, MARCH 15, 1993, APRIL 11, 1994,
AND FEBRUARY 8, 1996
This Amendment (the "Agreement") to Incentive Stock Option Agreements
dated November 20, 1991, March 15, 1993, April 11, 1994, and February 8, 1996
between Amylin Pharmaceuticals, Inc. (the "Company") and Howard E. Greene, Jr.
("Optionee") (the "Option Agreements") is effective as of March 25, 1998 (the
"Effective Date").
RECITALS
WHEREAS, the Option Agreements provide to Optionee options to purchase
up to the following numbers of shares of the Company's Common Stock (the
"Options"), subject to the conditions set forth in the Option Agreements,
including but not limited to continued employment of the Optionee by the
Company:
November 20, 1991 Option 150,000 shares
March 15, 1993 Option 50,000 shares
April 11, 1994 Option 100,000 shares
February 8, 1996 Option 40,000 shares
WHEREAS, the Option Agreements dated March 15, 1993 (50,000 shares),
April 11, 1994 (100,000 shares) and February 8, 1996 (40,000 shares) were each
previously amended as of September 1, 1996;
WHEREAS, the Optionee's employment with the Company ceased effective as
of the Effective Date and therefore the vesting of Options under such Option
Agreements also ceased as of the Effective Date;
WHEREAS, the Optionee has agreed to continue to serve as a member of the
Company's Board of Directors following the Effective Date; and
WHEREAS, the Company and the Optionee desire to amend the Option
Agreements to provide that the Options granted to Optionee pursuant to such
Option Agreements that were vested as of March 25, 1998 shall remain exercisable
through January 31, 1999.
<PAGE> 2
Amendment to Incentive Stock Option Agreements
March 25, 1998
Page 2
NOW, THEREFORE, in consideration of the mutual covenants and premises
herein contained, the Optionee and the Company hereby agree as follows:
AGREEMENT
Subject to the approval of this Agreement by the Board of Directors of
the Company, as of the Effective Date, the parties hereby agree that, subject to
the terms and conditions set forth in the Option Agreements, as amended to date,
and the additional terms and conditions of this Agreement, the Options vested
under each of the aforementioned Option Agreements as of March 25, 1998 are as
set forth on the attached Exhibit A (the "Vested Options"). The parties further
agree that such Vested Options shall remain exercisable until January 31, 1999
and that no further Options shall vest under such Option Agreements following
the Effective Date.
Except as specifically provided herein, this Agreement is not intended
and shall not be construed to amend or in any way alter the terms and conditions
of the Option Agreements or any prior amendments thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth below for each party.
AMYLIN PHARMACEUTICALS, INC. OPTIONEE:
By: /s/ BRADFORD J. DUFT By: /s/ HOWARD E. GREENE, JR.
-------------------------- ---------------------------
Bradford J. Duft Howard E. Greene, Jr.
Senior Vice President
and General Counsel
Date: June 4, 1998 Date: June 8, 1998
------------------------- ------------------------
<PAGE> 3
Amendment to Incentive Stock Option Agreements
March 25, 1998
Page 3
Exhibit A
VESTED OPTIONS
<TABLE>
<CAPTION>
Date of Option Original Option Vested Options as
Agreement Grant of March 25, 1998 Exercise Price
-------------- --------------- ----------------- --------------
<S> <C> <C> <C>
November 20, 1991 150,000 shares 150,000 shares $ 2.00 per share
March 15, 1993 50,000 shares 50,000 shares $ 9.00 per share
April 11, 1994 100,000 shares 81,198 shares $11.00 per share
February 8, 1996 40,000 shares 13,436 shares $12.375 per share
</TABLE>
<PAGE> 1
EXHIBIT 10.45
Mr. Richard M. Haugen
8 Bluff View
Irvine, California 92715
RE: AMYLIN PHARMACEUTICALS, INC.
Dear Rick:
This letter will confirm our discussions regarding your employment with
Amylin Pharmaceuticals, Inc. ("Amylin").
The Board of Directors has decided with great reluctance and regret to
accept, effective as of March 25, 1998, your resignation as Chief Executive
Officer, President and a director of Amylin. Following that date, you will
continue as a full-time employee of Amylin at your current base salary through
June 30, 1998 assisting the new Chief Executive Officer to effect an orderly
transition. You will continue to be eligible to participate in Amylin's employee
benefit plans during that period.
From July 1, 1998 through June 30, 1999, you will serve as a consultant
to Amylin. Amylin will compensate you for such services at the rate of $20,000
per month, payable on Amylin's regular paydays for employees. You will
participate in a phantom stock salary deferral program with respect to 15% of
such compensation. Your monthly time commitment as a consultant and the services
to be performed will be as agreed by you and Amylin's new Chief Executive
Officer.
Your currently outstanding 500,000 share option to purchase Amylin
Common Stock will continue to vest in accordance with its terms through June 30,
1998. To the extent such option is vested as of June 30, 1998, it shall remain
outstanding and exercisable in accordance with its terms through June 30, 1999.
Your option to purchase 35,000 shares of Amylin Common Stock granted March 13,
1998 will be accelerated and vested in full effective as of March 25, 1998 and
shall remain outstanding and exercisable in accordance with its terms through
June 30, 1999.
The provisions of this letter supersede any other agreements or promises
made to you relating to the subject matter of this letter.
On behalf of the Board of Directors, I would like to thank you for your
extraordinary service and devotion to the employees of Amylin and to those
people throughout the world who will ultimately benefit from the scientific
advances being made at Amylin. We are very grateful for your willingness to
assist the Company through June of 1999.
<PAGE> 2
Mr. Richard M. Haugen
March 25, 1998
Page Two
With appreciation and the highest regard of your colleagues on the Board
of Directors.
Sincerely,
/s/ JAMES C. GAITHER
James C. Gaither
On behalf of the Board of Directors of
Amylin Pharmaceuticals, Inc.
cc: Thomas A. Coll, Esq.
Accepted and agreed to this __ day of March, 1998:
/s/ RICHARD M. HAUGEN
- --------------------------
Richard M. Haugen
March 25, 1998
- --------------------------
Date
<PAGE> 1
EXHIBIT 10.46
June 12, 1998
Mr. Richard M. Haugen
8 Bluff View
Irvine, California 92715
Re: Phantom Stock Salary Deferral Plan
Dear Rick:
This letter is intended to set forth our understanding with
respect to your agreement to defer fifteen percent (15%) of the compensation you
receive from the Company from May 1, 1998 to May 15, 1999 into a salary deferral
program.
As you may know, earlier this year the Company implemented an
Employee Phantom Stock Salary Deferral Plan (the "Plan") for certain of its
employees. As an employee of the Company you were eligible to participate in the
Plan, but because your employment with the Company is scheduled to end on June
30, 1998, if you would have elected to participate in the Plan you would not
have been eligible to receive any Benefits under the terms of the Plan.
In order to allow you to participate in a salary deferral program
during your term both as an employee of and a consultant to the Company, we
hereby offer you the opportunity to defer fifteen percent (15%) of the
compensation you receive from the Company under the same terms and conditions
described in the Plan, except as those terms and conditions are modified as
follows:
1. References in the Plan to "employee" and "employment" shall be
interpreted to include "consultant" and "consultancy," as the case may be;
2. You will be eligible to defer compensation you receive from
the Company from May 1, 1998 through May 15, 1999, whether during your term as
an employee of or as a consultant to the Company;
3. You will not be required to complete and sign a Deferred
Compensation Agreement; and
<PAGE> 2
Mr. Richard M. Haugen
June 12, 1998
Page 2
4. Section 5.3 of the Plan is not applicable to you, and in the
event your employment or consultancy with the Company ceases prior to May 31,
1999 for any reason prior to receiving all of your Benefits, the value of your
Account will be paid to you or your beneficiary, as the case may be, by the
Company in the form of cash or shares of the Company's Common Stock (the form of
which shall be at the Company's sole and absolute discretion) within forty-five
(45) days of May 31, 1999. The value of your Account for purposes of this
payment shall be equal to the number of Shares allocated to your Account
multiplied by the Fair Market Value of one share of Common Stock of the Company
as of May 31, 1999.
If the terms and conditions of this arrangement for your
participation in the Plan are agreeable to you, please indicate your acceptance
by signing both copies of this letter and returning one fully-signed original to
my attention at your earliest convenience.
We sincerely appreciate your willingness to continue to assist
the Company. If you have any questions concerning this arrangement please do not
hesitate to call me.
Sincerely yours,
AMYLIN PHARMACEUTICALS, INC.
/s/ BRADFORD J. DUFT
---------------------------
Bradford J. Duft
Senior Vice President
and General Counsel
AGREED AND ACCEPTED:
/s/ RICHARD M. HAUGEN
- ---------------------------
Richard M. Haugen
<PAGE> 3
Mr. Richard M. Haugen
June 12, 1998
Page 3
cc: Ms. Sue Burgess (w/out enclosures)
Mr. Joe Cook (w/out enclosures)
Mr. Tom Coll (w/out enclosures)
Mr. Jim Gaither (w/out enclosures)
<PAGE> 1
EXHIBIT 10.47
March 25, 1998
Mr. Joseph C. Cook, Jr.
26 Timber Park Drive
Black Mountain, North Carolina 28711
RE: AMYLIN PHARMACEUTICALS, INC.
Dear Joe:
This letter will confirm our discussions regarding your
employment with Amylin Pharmaceuticals, Inc. ("Amylin").
Effective as of the time of the Board of Directors meeting on March 25,
1998, you will become Chairman of the Board of Directors and Chief Executive
Officer of Amylin. As such, your base salary will be $375,000 per year. You will
also be eligible to receive an annual bonus of up to $250,000, payable upon the
achievement of goals and milestones to be set by the Compensation Committee.
Your compensation will, of course, be subject to standard payroll deductions and
withholdings. You will also be eligible to participate in Amylin's employee
benefit plans to the same extent as Amylin's other executive officers and will
be entitled to reimbursement of business expenses in accordance with Amylin's
policies and practices.
You will be granted an option to purchase 500,000 shares of Common Stock
under Amylin's 1991 Stock Option Plan ("Plan"). The exercise price of your
option will be equal to the market trading price of Amylin's Common Stock at the
close of trading on March 25, 1998. Your option will be an incentive stock
option to the extent permissible under applicable tax regulations. 200,000
shares will vest in equal monthly installments over the first twelve months and
300,000 shares will vest in equal monthly installments over the following
thirty-six months. Your option will remain exercisable for as long as you
continue to provide services to Amylin (whether as an employee, member of the
Board of Directors or a consultant) and for three months thereafter. To the
extent permitted by the Plan, you will be permitted to exercise your options
prior to vesting, subject to a repurchase option in favor of the Company at the
option price.
Vesting of your option will be accelerated in full upon a change in
control of Amylin in accordance with Amylin's standard vesting acceleration
provisions. However, to the extent necessary in light of the shares currently
available in Amylin's employee option pool and Amylin's current plans for
employee option grants, the total number of shares covered by your option will
be subject to stockholder approval of a proposed increase in that pool. If such
stockholder approval is not obtained and the number of shares covered by your
option is thereby reduced, Amylin will provide you with a compensation
arrangement of substantially equivalent value on terms mutually agreed upon by
you and Amylin.
Your consulting agreement with Amylin dated June 15, 1995, as amended to
date, will terminate as of the close of business on March 25, 1998. The portion
of your outstanding options to purchase Amylin Common Stock which are vested on
that date shall remain outstanding and
<PAGE> 2
Mr. Joseph C. Cook, Jr.
March 25, 1998
Page 2
exercisable in accordance with their terms for so long as your employment
continues and for twelve months thereafter, or such longer period as is provided
under the terms of those options.
Your employment relationship with Amylin is at-will, which means that
either you or Amylin may elect to terminate the employment relationship at any
time for any reason or for no reason, with or without cause or advance notice.
This at-will employment relationship cannot be changed except in a writing
signed by a duly authorized director of Amylin. This letter supersedes any other
agreements or promises made to you by anyone, whether oral or written, relating
to the subject matter of this letter.
The Board of Directors is extremely pleased that you will be leading the
Amylin team. We look forward to working with you to help fulfill the promise of
Amylin's scientific efforts and to bring the medical benefits of those efforts
to people throughout the world.
Sincerely,
/s/ JAMES C. GAITHER
James C. Gaither
On behalf of the Board of Directors of
Amylin Pharmaceuticals, Inc.
Accepted and agreed to this __ day of March, 1998:
/s/ JOSEPH C. COOK, JR.
- -----------------------------
Joseph C. Cook, Jr.
March 25, 1998
- -----------------------------
Date
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" in the Registration Statement (Form
S-3) and related Prospectus of Amylin Pharmaceuticals, Inc. for the registration
of shares of its common stock and to the incorporation by reference therein of
our report dated January 23, 1998, except for the last paragraph of Note 5, as
to which the date is March 2, 1998, and the last paragraph of Note 1, as to
which the date is July 8, 1998, with respect to the consolidated financial
statements of Amylin Pharmaceuticals, Inc. included in its Annual Report (Form
10-K) for the year ended December 31, 1997, filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
San Diego, California
July 8, 1998
