<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission File Number: 0-20063
THERATECH, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 87-0420511
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
417 WAKARA WAY, SALT LAKE CITY, UTAH 84108
(Address of principal executive offices) (Zip Code)
(801) 588-6200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. As of: JULY 31, 1996
Classes of Common Stock Number of shares outstanding
COMMON STOCK, $0.01 PAR VALUE 20,330,319
Page 1 of 12
<PAGE> 2
THERATECH, INC.
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INDEX TO FORM 10-Q
PART I -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements Page
-------------------- ----
<S> <C> <C>
Condensed Consolidated Statements of Operations
Three months ended June 30, 1996 and 1995, and six months ended June 30, 1996 and 1995...... 3
Condensed Consolidated Balance Sheets
June 30, 1996 and December 31, 1995......................................................... 4
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and 1995..................................................... 5
Notes to Condensed Consolidated Financial Statements........................................ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................................... 7
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders......................................... 11
Item 6. Exhibits and Reports on Form 8-K............................................................ 11
</TABLE>
Page 2 of 12
<PAGE> 3
THERATECH, INC.
----------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Research and development $5,916,508 $4,857,718 $8,768,853 $7,343,616
Product sales 2,438,276 -- 4,612,610 --
Licensing 135,000 65,000 985,000 615,000
Interest and other 332,740 410,613 808,389 827,004
---------- ----------- ---------- ----------
Total revenues 8,822,524 5,333,331 15,174,852 8,785,620
Costs and expenses:
Research and development 4,341,479 5,460,823 8,217,513 9,611,844
Cost of products sold 1,866,106 -- 4,101,174 --
General and administrative 1,253,101 2,011,449 2,473,671 3,159,471
Interest and other 292,741 230,437 588,922 451,431
---------- ----------- ---------- ----------
Total costs and expenses 7,753,427 7,702,709 15,381,280 13,222,746
---------- ----------- ---------- ----------
Net income (loss) $1,069,097 $(2,369,378) $(206,428) $(4,437,126)
========== =========== ========== ==========
Net income (loss) per share $0.05 $(0.12) $(0.01) $(0.23)
========== =========== ========== ==========
Shares used in calculation
of net income (loss) per share 20,233,658 19,733,230 20,160,597 19,681,948
========== =========== ========== ==========
</TABLE>
See accompanying notes.
Page 3 of 12
<PAGE> 4
THERATECH, INC.
---------
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995 (1)
----------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash, cash equivalents and short-term investments (2) $19,326,953 $18,718,985
Contracts and accounts receivable 3,643,618 2,157,559
Inventories 2,522,666 2,418,516
Prepaid expenses 379,717 147,860
----------- -----------
Total current assets 25,872,954 23,442,920
Investments in long-term securities (2) 2,083,718 6,379,122
Plant and equipment:
Plant 9,301,171 9,291,313
Equipment 10,169,283 9,253,425
Leasehold improvements 930,342 918,484
Construction in progress 4,604,886 2,366,678
----------- -----------
25,005,682 21,829,900
Less accumulated depreciation and amortization (4,679,399) (3,666,441)
----------- -----------
Net plant and equipment 20,326,283 18,163,459
Other assets 2,924,400 2,850,553
----------- -----------
Total assets $51,207,355 $50,836,054
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 3,000,034 $ 4,432,665
Current portion of notes payable and capital lease obligations 2,212,089 2,047,124
Unearned revenue 4,419,064 2,432,822
----------- -----------
Total current liabilities 9,631,187 8,912,611
Notes payable and capital lease obligations, less current portion 9,422,559 10,319,993
Unearned revenue 1,212,000 1,212,000
Commitments
Stockholders' equity:
Common stock 202,654 200,077
Additional paid-in capital 68,304,894 67,509,149
Unrealized gain on investments held as available-for-sale 105,263 79,941
Accumulated deficit (37,492,500) (37,286,072)
Cumulative translation adjustment (178,702) (111,645)
----------- -----------
Total stockholders' equity 30,941,609 30,391,450
----------- -----------
Total liabilities and stockholders' equity $51,207,355 $50,836,054
=========== ===========
</TABLE>
See accompanying notes.
(1) Derived from audited financial statements
(2) TheraTech's total cash position as of June 30, 1996 and December 31, 1995
was $21,410,671 and $25,098,107, respectively, which includes cash, cash
equivalents, and short- and long-term investments.
Page 4 of 12
<PAGE> 5
THERATECH, INC.
-------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------------
1996 1995
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (206,428) $(4,437,126)
Adjustments to reconcile net loss to net cash and cash
equivalents provided by (used in) operating activities:
Depreciation and amortization 1,147,713 477,788
Compensation expense related to the grant of stock options 955 20,437
Changes in operating assets and liabilities:
Contracts and accounts receivable (1,486,059) (1,603,680)
Inventories (104,150) (800,626)
Prepaid expenses 65,625 77,178
Accounts payable and accrued liabilities (1,432,631) 1,114
Unearned revenue 1,986,242 168,281
----------- -----------
Net cash used in operating activities (28,733) (6,096,634)
INVESTING ACTIVITIES:
Decrease (increase) in investments, net 586,839 (1,201,129)
Purchase of plant and equipment (3,336,864) (1,983,534)
Other assets (90,309) (278,841)
----------- -----------
Net cash used in investing activities (2,840,334) (3,463,504)
FINANCING ACTIVITIES:
Proceeds from issuance of notes payable and capital lease
obligations 300,000 768,724
Proceeds from issuance of common stock 797,367 387,892
Payments of notes payable and capital lease obligations (1,287,162) (671,371)
----------- -----------
Net cash provided by (used in) financing activities (189,795) 485,245
Effect of exchange-rate changes on cash and cash equivalents (67,057) 36,545
----------- -----------
Net decrease in cash and cash equivalents (3,125,919) (9,038,348)
Cash and cash equivalents at beginning of period 14,554,352 17,690,459
----------- -----------
Cash and cash equivalents at end of period 11,428,433 8,652,111
Short-term investments 7,898,520 5,415,196
----------- -----------
Cash, cash equivalents and short-term investments at end of period $19,326,953 $14,067,307
=========== ===========
</TABLE>
See accompanying notes.
Page 5 of 12
<PAGE> 6
THERATECH, INC.
-------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1996
FINANCIAL STATEMENTS
In the opinion of management, the accompanying condensed consolidated financial
statements contain all normal recurring adjustments necessary to present fairly
the financial position of TheraTech, Inc. ("Company") as of June 30, 1996 and
the results of its operations and cash flows for the interim periods ended June
30, 1996 and 1995. The operating results for the interim periods are not
necessarily indicative of the results for a full year. For further discussion
of the Company's accounting policies, refer to the Company's audited financial
statements for the year ended December 31, 1995.
PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries Nippon TTI K.K. ("TheraTech Japan")
and Natrapac, Inc. ("Natrapac"). All significant intercompany accounts and
transactions have been eliminated.
INVENTORY
At June 30, 1996, inventory is stated at the lower of cost or market and
consists of the following:
<TABLE>
<S> <C>
Raw materials $1,801,000
Work in process 219,000
Finished goods 503,000
----------
$2,523,000
==========
</TABLE>
REVENUES
The Company has entered into various collaborative research and development,
product licensing and marketing agreements with certain pharmaceutical
companies ("Collaborative Partners"). These agreements provide for TheraTech
to receive payments in various forms, including licensing fees upon execution
of an agreement, periodic payments in support of TheraTech research and product
development activities and milestone payments upon achievement of certain
technical and regulatory goals. Research and development revenues and
licensing fees are recognized as earned based on terms in the specific
contracts. Milestone payments are included in revenues in the period in which
the applicable milestone is achieved.
TheraTech has also entered into various product supply agreements to
manufacture products for certain Collaborative Partners. These agreements
include provisions for TheraTech to recognize product sales and unearned
revenue at the time TheraTech ships product to the Collaborative Partner and/or
at the time the Collaborative Partner ships product to its customers. Unearned
revenue relates to advances on future revenues.
COMMITMENTS
TheraTech has entered into a purchase commitment with a sole source supplier
for material used in its manufacturing process. Under this agreement,
TheraTech has agreed to purchase, at a predetermined price, fixed quantities
over three years as follows:
<TABLE>
<S> <C>
1996 $2,725,000
1997 2,885,000
1998 3,060,000
----------
$8,670,000
==========
</TABLE>
In November 1995, TheraTech initiated a capital project to finish and equip
expansion space within its commercial manufacturing facility. TheraTech has
substantially satisfied the commitments related to this capital project.
Page 6 of 12
<PAGE> 7
THERATECH, INC.
-------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1996
STOCK SPLIT
On May 30, 1996, TheraTech announced that its Board of Directors had approved a
3-for-2 split of the Company's common stock. On June 28, 1996, TheraTech
effected the split in the form of a stock dividend. The accompanying financial
statements have been adjusted retroactively for all periods presented to
reflect the split.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform with the current
period presentation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Since its inception in January 1985, TheraTech has devoted substantially all of
its resources to drug delivery research and development programs. In late
September 1995, TheraTech received marketing clearance from the U.S. Food and
Drug Administration ("FDA") for the Androderm(R) Testosterone Transdermal System
for men, the Company's first commercial product. TheraTech currently receives
its revenues primarily from research and development fees, licensing fees,
milestone payments, and product sales.
The Company has entered into various product development, marketing and
manufacturing agreements with major pharmaceutical companies. These agreements
provide for TheraTech to receive payments in various forms, including periodic
payments for research and product development activities, milestone payments
upon achievement of certain technical and regulatory goals, licensing fees and
revenues from product sales. TheraTech may also recognize revenue based on its
Collaborative Partners' product sales. In addition, TheraTech is independently
developing products involving a variety of drug delivery methods.
The Company's results of operations may vary significantly from quarter to
quarter and depend, among other factors, on the signing of new product
development agreements, the timing of fees and milestone payments made by
Collaborative Partners, the progress of clinical trials, product sales levels
and costs associated with the manufacturing processes. The timing of the
Company's research and development revenues may not match the timing of the
associated expenses. The amount of revenues in any given period is not
necessarily indicative of future revenues. Although expenses in prior years
have exceeded revenues in any particular period, TheraTech's management
anticipates that with the commencement of product sales, revenues in future
years should equal or exceed expenses in the related years.
TheraTech has negotiated marketing agreements for its Testosterone Transdermal
System with several partners covering various countries. These partners and
countries include SmithKline Beecham in the U.S., Canada, Australia, New
Zealand and East and West Europe excluding France, Spain, Portugal and
Scandinavia; Laboratories Fournier S.C.A. ("Fournier") in France and
French-speaking Africa; Compania Espanola de la Penicilina y Antibioticos, S.L.
("CEPA") in Spain; Produtos Farmaceuticos Bioty, Lda. ("Bioty") in Portugal;
Astra AB ("Astra") in Scandinavia; Wyeth-Ayerst International, Inc.
("Wyeth-Ayerst") in Mexico, Central and South America, non-French-speaking
Africa and the Middle East; Grelan Pharmaceutical Co., Ltd. ("Grelan") in Japan
and Sam Yang Co., Ltd. ("Sam Yang") in South Korea. This product will be
marketed under the trade name Androderm in the U.S. and Canada.
Page 7 of 12
<PAGE> 8
THERATECH, INC.
-------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TheraTech was responsible for filing with the FDA the Androderm New Drug
Application ("NDA") in the United States. In all other countries, TheraTech's
partners are responsible for filing and obtaining regulatory approvals to market
the testosterone product. The ability to market and the timing of the
testosterone product launch in the various countries is dependent upon obtaining
the necessary regulatory approvals. In April 1996, TheraTech and Astra
announced that their testosterone transdermal patch had been granted marketing
authorization in Sweden by the Swedish Medical Products Agency under the trade
name ATMOS(R). In July 1996, TheraTech and SmithKline Beecham announced that
their testosterone transdermal patch had been granted a marketing license in the
United Kingdom by the Medicines Control Administration under the trade name
Andropatch(TM).
In April 1996, TheraTech established a wholly owned subsidiary Natrapac, Inc.
("Natrapac") to conduct third party non-pharmaceutical packaging operations.
Also in April 1996, Natrapac entered into a contract to package a client
company's product using certain technology developed by TheraTech. As of June
30, 1996, Natrapac had commenced its initial shipments of product to the client
company resulting in sales of less than $4,000.
On May 30, 1996, TheraTech announced that its Board of Directors had approved a
3-for-2 split of the Company's common stock. On June 28, 1996, TheraTech
effected the split in the form of a stock dividend. The accompanying financial
statements have been adjusted retroactively for all periods presented to
reflect the split.
RESULTS OF OPERATIONS
For the three months ended June 30, 1996, TheraTech had net income of
$1,069,000, equal to $0.05 per share. This compares to a net loss of
$2,369,000 or $0.12 per share for the same period in 1995. Total revenues for
the quarter were $8,823,000, compared to $5,333,000 in the second quarter 1995.
For the six months ended June 30, 1996, TheraTech had a net loss of $206,000,
or $0.01 per share. This compares to a net loss of $4,437,000, or $0.23 per
share for the corresponding period in 1995. Total revenues year to date were
$15,175,000, compared to $8,786,000 for the corresponding period in 1995.
RESEARCH AND DEVELOPMENT REVENUES were $5,917,000 and $4,858,000 for the three
months ended June 30, 1996 and 1995, respectively. During the 1996 quarter,
TheraTech earned revenues from Proctor & Gamble Pharmaceuticals, Inc. ("P&G")
for estradiol commercialization activities which included a preapproval
inspection ("PAI") conducted by the FDA, and for estradiol/progestin combination
product development activities including Phase II studies. Also during the 1996
quarter, TheraTech earned revenues for product development activities from
SmithKline Beecham, Solvay Pharmaceuticals, Inc. ("Solvay") and Meiji Milk
Products Co. ("Meiji"). During the 1995 quarter, TheraTech achieved a milestone
and earned cost reimbursements of research and development expenses from P&G.
Also during the quarter, milestone and cost reimbursement payments were received
from Grelan, SmithKline Beecham, Sam Yang and Pfizer Inc.
For the six months ended June 30, 1996 and 1995, research and development
revenues were $8,769,000 and $7,344,000, respectively. The revenue increase in
the 1996 period over the 1995 period was primarily from the following: 1)
development activities on the testosterone one patch per day ("unipatch")
product for SmithKline Beecham and Wyeth-Ayerst; 2) Androderm clinical trial
supplies; 3) Phase I clinical costs and development milestones for the female
testosterone product for Solvay; and 4) the estradiol product commercialization
activities and estradiol/progestin combination product development activities
for P&G.
PRODUCT SALES for the three months and six months ended June 30, 1996 were
$2,438,000 and $4,613,000, respectively. Product sales during the second
quarter consisted primarily of Androderm marketed in the U.S. Also during the
second quarter, TheraTech began shipping prelaunch quantities of ATMOS and
Andropatch. Product sales for the year to date period were primarily
Androderm. No product sales were reported during the corresponding 1995
periods as no products had yet been approved for marketing.
Page 8 of 12
<PAGE> 9
THERATECH, INC.
-------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LICENSING REVENUES were $135,000 and $65,000 for the three months ended June
30, 1996 and 1995, respectively. During the 1996 quarter, TheraTech received
payments for the achievement of milestones from Astra under the testosterone
product licensing agreement and from Sam Yang under the estradiol/progestin
combination product licensing agreement. During the 1995 quarter, TheraTech
earned licensing fees from Sam Yang by achieving a milestone under a product
licensing agreement.
For the six months ended June 30, 1996 and 1995, licensing revenues were
$985,000 and $615,000, respectively. During the 1996 period, TheraTech earned
licensing revenues from Wyeth-Ayerst and Astra for achieving milestones under
their testosterone product licensing agreements and from Sam Yang for a
milestone under an estradiol/progestin combination product licensing agreement.
During the 1995 period, TheraTech earned licensing fees by signing agreements
with P&G for marketing rights covering new female hormone replacement products,
Astra for distribution of the testosterone transdermal product in Scandinavia
and from Sam Yang.
INTEREST AND OTHER REVENUES were $333,000 and $411,000 for the three months
ended June 30, 1996 and 1995, respectively, and primarily consisted of interest
income totaling $303,000 and $384,000, respectively. Interest income during
the 1996 quarter decreased from the 1995 quarter due to lower average balances
in cash, cash equivalents and investments.
Interest and other revenues for the six months ended June 30, 1996 and 1995
were $808,000 and $827,000, respectively, and primarily consisted of interest
income totaling $637,000 and $795,000, respectively. Interest income during
the 1996 period decreased from the 1995 period due to lower average balances in
cash, cash equivalents and investments. Other revenues in the 1996 period
consisted primarily of intermediate materials sold to a collaborative partner
and a foreign currency transaction gain on a collaborative partner payment.
RESEARCH AND DEVELOPMENT EXPENSES for the three months ended June 30, 1996 and
1995 were $4,341,000 and $5,461,000, respectively. This decrease was the
result of Phase III clinical trials for the estradiol transdermal product and
Androderm commercialization activities conducted during 1995 and not repeated
in 1996. This decrease was partially offset by additional spending on the
following: 1) commercialization and PAI activities for the estradiol
transdermal product; 2) estradiol/progestin combination product development
activities including Phase II studies; 3) testosterone unipatch product
development activities; 4) female testosterone product Phase I clinical
activities; and 5) other projects funded both internally and by Collaborative
Partners.
Research and development expenses for the six months ended June 30, 1996 and
1995 were $8,218,000 and $9,612,000, respectively. The reduction in research
and development spending was also the result of Phase III clinical trials for
the estradiol transdermal product and Androderm commercialization activities
conducted during 1995 and not repeated in 1996.
COST OF PRODUCTS SOLD for the three months and six months ended June 30, 1996
were $1,866,000 and $4,101,000, respectively, which included direct and
indirect manufacturing costs attributable to the production of Androderm, ATMOS
and Andropatch. No cost of products were reported during the corresponding
1995 periods as no products had yet been approved for marketing.
GENERAL AND ADMINISTRATIVE EXPENSES for the three months ended June 30, 1996
and 1995 were $1,253,000 and $2,011,000, respectively. For the six months
ended June 30, 1996 and 1995, general and administrative expenses were
$2,474,000 and $3,159,000, respectively. The reduction of expenses in both the
three and six month periods was primarily the result of 1995 outside services
associated with the negotiation of several major contracts being greater than
those costs in 1996.
INTEREST AND OTHER EXPENSES for the three months ended June 30, 1996 and 1995
were $293,000 and $230,000, respectively, which consisted primarily of interest
expense totaling $273,000 and $221,000, respectively. The increase in interest
expense reflects an increase in notes payable and capital lease obligations
from June 1995 to June 1996.
Page 9 of 12
<PAGE> 10
THERATECH, INC.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interest and other expenses for the six months ended June 30, 1996 and 1995
were $589,000 and $451,000, respectively, which consisted primarily of interest
expense totaling $555,000 and $439,000, respectively. The increase in interest
expense reflects an increase in notes payable and capital lease obligations
from June 1995 to June 1996.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, TheraTech has funded its operations primarily through
equity and debt financing, collaborative research and development agreements,
licensing fees, interest income, other revenues and, beginning in October 1995,
product sales. As of June 30, 1996 and December 31, 1995, TheraTech had cash,
cash equivalents and investments totaling $21,411,000 and $25,098,000,
respectively. This decrease was primarily the result of cash used in investing
and financing activities as reflected in the Condensed Consolidated Statements
of Cash Flows.
Net cash used in operating activities for the six months ended June 30, 1996
was $29,000 compared to $6,097,000 for the same period in 1995. Cash used in
the 1996 period was primarily due to an increase in contracts and accounts
receivable, a decrease in accounts payable and accrued liabilities and also
from the net loss. This use of cash was largely offset from cash provided by
an increase in unearned revenue received from Collaborative Partners and from
the effect of depreciation and amortization. In comparison, cash used in
operating activities during the 1995 period was primarily due to the net loss
along with increases in contracts and accounts receivable and inventory.
The net use of cash in operating activities in the current period is not
necessarily indicative of future levels. Net income or loss and accordingly
the levels of net cash provided by or used in operations will vary from year to
year, as a result of changing levels of product sales and production costs, the
timing of milestone payments and licensing fees, and the timing of expenditures
for new and existing product development programs.
The Company's investing activities during the six months ended June 30, 1996,
used $2,840,000 compared to $3,464,000 for the 1995 period. Cash used in
investing activities during the 1996 period was primarily for plant expansion
costs and the purchase of equipment for manufacturing, research and
development, partially offset from cash provided by the net maturity of
investments. In comparison, cash used in the 1995 period was primarily for the
purchase of manufacturing, research and development equipment and for the net
purchase of investments.
The Company's future capital expenditure requirements will depend upon numerous
factors, including the progress of research and development activities, the
resources that the Company devotes to the independent development of products
and technologies, and the need for additional manufacturing plant and equipment
due to the demand for its other products if and when approved.
Net cash used in financing activities for the six months ended June 30, 1996
was $190,000 compared to net cash provided by financing activities of $485,000
for the six months ended June 30, 1995. Cash used in the 1996 period consisted
primarily of payments on notes payable and capital lease obligations, largely
offset by proceeds from the issuance of stock in both the employee stock
purchase plan and the employee stock option plan and from a short-term note
with a client company. In comparison, cash provided in the 1995 period was
primarily proceeds from notes payable and capital lease obligations and
proceeds from the issuance of stock in both the employee stock purchase plan
and the employee stock option plan, partially offset by payments on notes
payable and capital lease obligations.
Based upon current expectations of operations and capital expenditures for
1996, the Company anticipates that its available cash, cash equivalents and
investments plus anticipated revenues from collaborative agreements, product
licensing and sales, interest income and bank financing should be sufficient to
fund its capital requirements and operating activities for the foreseeable
future.
Page 10 of 12
<PAGE> 11
THERATECH, INC.
-------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RISK FACTORS THAT MAY AFFECT EARNINGS AND STOCK PRICE
The statements contained in this report on SEC Form 10-Q that are not purely
historical are forward looking statements, including statements regarding the
Company's future product developments, commercial opportunities, expectations,
goals, strategies, mission or intentions regarding the future. Forward looking
statements include statements regarding; future regulatory approvals by U.S. or
foreign regulatory authorities, future financial performance, and continued
performance by various distributors of TheraTech's products under, but not
limited to, the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations." All forward looking statements included
in this document are made as of the date hereof, based on information available
to TheraTech as of the date hereof, and TheraTech assumes no obligation to
update any forward looking statement. It is important to note that the
Company's actual results could differ materially from those in such forward
looking statements. Among the factors that could cause actual results to
differ materially are the following: the need to continually develop and
commercialize new products; the expensive, time consuming and uncertain FDA and
foreign government approval processes; dependence on third-party marketing
efforts; competitive factors such as new product or feature introductions by
rival manufacturers and price pressures; dependence on sole source suppliers;
limited history of large-scale manufacturing of newly approved products; and
exposure to product liability suits. You should consult the risk factors
listed from time to time in the Company's reports on SEC forms 10-K and 10-Q.
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on May 30, 1996 the
stockholders elected as directors the following:
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
Dinesh C. Patel, Ph.D. 10,693,469 299,750
William I. Higuchi, Ph.D. 10,693,869 299,350
Gary L. Crocker 10,693,869 299,350
Jay J. Pisik 10,693,869 299,350
James T. O'Brien 10,693,869 299,350
Boyd J. Poulsen, Ph.D. 10,693,869 299,350
</TABLE>
In addition, the stockholders approved an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 25,000,000 to 50,000,000 (with 9,443,122
votes For, 621,372 votes Against, 611,450 votes Abstained and 317,275
non-votes).
The stockholders also approved the amendment to the TheraTech, Inc. 1992
Employees' Stock Option Plan (with 8,949,844 votes For, 1,652,028 votes
Against, 17,875 votes Abstained and 373,472 non-votes).
At the same meeting, the stockholders ratified the appointment of Ernst & Young
LLP as the Corporation's independent auditors for 1996 (with 10,979,158 votes
For, 5,650 votes Against, 8,411 votes Abstained and 0 non-votes).
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None
(b) No reports were filed on Form 8-K during the quarter.
Page 11 or 12
<PAGE> 12
THERATECH, INC.
-------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THERATECH, INC.
-------------------------------
(Registrant)
Date: August 12, 1996 By: DINESH C. PATEL
-------------------------------
Dinesh C. Patel, Ph.D.
President and
Chief Executive Officer
Date: August 12, 1996 By: ALEXANDER L. SEARL
-------------------------------
Alexander L. Searl
Senior Vice President and
Chief Financial Officer
Page 12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
THERATECH, INC. CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 11,428,433
<SECURITIES> 7,898,520
<RECEIVABLES> 3,643,618
<ALLOWANCES> 0
<INVENTORY> 2,522,666
<CURRENT-ASSETS> 25,872,954
<PP&E> 25,005,682
<DEPRECIATION> 4,679,399
<TOTAL-ASSETS> 51,207,355
<CURRENT-LIABILITIES> 9,631,187
<BONDS> 9,422,559
0
0
<COMMON> 202,654
<OTHER-SE> 30,738,955
<TOTAL-LIABILITY-AND-EQUITY> 51,207,355
<SALES> 4,612,610
<TOTAL-REVENUES> 15,174,852
<CGS> 4,101,174
<TOTAL-COSTS> 14,792,358
<OTHER-EXPENSES> 34,084
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 554,838
<INCOME-PRETAX> (206,428)
<INCOME-TAX> 0
<INCOME-CONTINUING> (206,428)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (206,428)
<EPS-PRIMARY> (0.01)
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