<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended March 31, 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 0-23272
NPS PHARMACEUTICALS, INC.
(Exact name of Registrant as Specified in Its Charter)
Delaware 87-0439579
- - -------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
420 Chipeta Way, Salt Lake City, Utah 84108-1256
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(801) 583-4939
- - -------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
N/A
- - -------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 31, 1996
Common Stock $.001 par value 8,187,232
Preferred Stock $.001 par value 0
<PAGE>
NPS PHARMACEUTICALS, INC.
TABLE OF CONTENTS
Page No.
--------
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets 3
Statement of Operations 4
Statement of Cash Flows 5
Note to Financial Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits 10
(b) Reports on Form 8-K 10
SIGNATURES 11
INDEX TO EXHIBITS 12
-2-
<PAGE>
NPS PHARMACEUTICALS, INC.
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
Assets 1996 1995
------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 25,950,513 $ 8,039,625
Marketable investment securities 300,000 300,000
Accounts receivable 13,037 23,000
Deferred offering costs 247,204 -
-------------- -------------
Total current assets 26,510,754 8,362,625
Plant and equipment:
Equipment 2,367,670 2,272,006
Leasehold improvements 1,804,499 1,635,189
-------------- -------------
4,172,169 3,907,195
Less accumulated depreciation and amortization 1,881,551 1,711,551
-------------- -------------
Net plant and equipment 2,290,618 2,195,644
Other assets 42,154 42,154
-------------- -------------
$ 28,843,526 $ 10,600,423
-------------- -------------
-------------- -------------
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of obligations under capital leases $ 332,785 $ 435,230
Current installments of long-term debt 342,867 331,746
Accounts payable 1,053,771 1,036,464
Accrued expenses 660,615 139,714
Deferred income 603,438 587,500
Income tax payable 200,000 -
-------------- -------------
Total current liabilities 3,193,476 2,530,654
Obligations under capital leases, excluding current installments 40,897 53,761
Long-term debt, excluding current installments 604,546 693,528
-------------- -------------
Total liabilities 3,838,919 3,277,943
Stockholders' equity:
Common stock 8,187 7,073
Additional paid-in capital 35,855,437 28,067,130
Deferred compensation (170,583) (234,458)
Deficit accumulated during development stage (10,688,434) (20,517,265)
-------------- -------------
Net stockholders' equity 25,004,607 7,322,480
-------------- -------------
$ 28,843,526 $ 10,600,423
-------------- -------------
-------------- -------------
</TABLE>
See accompanying note to financial statements.
<PAGE>
NPS PHARMACEUTICALS, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31, October 22, 1986,
---------------------------------- (inception) through
1996 1995 March 31, 1996
-------------- -------------- ------------------
<S> <C> <C> <C>
Revenues from research
and license agreements $ 14,455,312 $ 924,000 $ 36,771,161
Operating expenses:
Research and development 3,175,901 1,907,804 33,536,091
General and administrative 1,346,910 865,773 14,135,355
--------------- --------------- ---------------
Total operating expenses 4,522,811 2,773,577 47,671,446
--------------- --------------- ---------------
Operating income (loss) 9,932,501 (1,849,577) (10,900,285)
Other income (expense):
Interest income 142,341 128,143 1,399,185
Interest expense (46,011) (25,384) (521,724)
Other - - 34,390
--------------- --------------- ---------------
Total other income 96,330 102,759 911,851
--------------- --------------- ---------------
Income (loss) before taxes 10,028,831 (1,746,818) (9,988,434)
Income taxes 200,000 - 700,000
-------------- -------------- --------------
Net income (loss) $ 9,828,831 $ (1,746,818) $ (10,688,434)
-------------- -------------- --------------
-------------- -------------- --------------
Net income (loss) per common
share - primary $ 1.16 $ (0.26)
--------------- ---------------
--------------- ---------------
Weighted average shares
outstanding - primary 8,463,800 6,806,200
--------------- ---------------
--------------- ---------------
</TABLE>
See accompanying note to financial statements.
<PAGE>
NPS PHARMACEUTICALS, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31, October 22, 1986
---------------------------------- (inception) through
1996 1995 March 31, 1996
-------------- -------------- ------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 9,828,831 $ (1,746,818) $ (10,688,434)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 170,000 165,000 2,583,028
Gain on sale of equipment - - (28,720)
Issuance of stock in lieu of cash for services 175,150 - 389,689
Amortization of deferred compensation 63,875 63,875 595,917
Decrease (increase) in receivables 9,963 145,055 (13,037)
Decrease (increase) in other assets (247,204) 4,874 (292,958)
Increase (decrease) in accounts payable and
accrued expenses 538,208 (67,872) 1,714,386
Increase (decrease) in deferred income 15,938 900,000 603,438
Increase (decrease) in taxes payable 200,000 - 200,000
-------------- -------------- ---------------
Net cash provided by (used in) operating activities 10,754,761 (535,886) (4,936,691)
Cash flows from investing activities:
Net purchase of marketable investment securities - (46,298) (300,000)
Acquisition of equipment and leasehold improvements (264,974) (220,727) (4,324,100)
Proceeds from sale of equipment - - 1,048,484
-------------- -------------- ---------------
Net cash provided by (used in) investing activities (264,974) (267,025) (3,575,616)
Cash flows from financing activities:
Proceeds from note payable to bank - - 123,855
Proceeds from issuance of preferred stock - - 17,581,416
Proceeds from issuance of common stock 7,614,271 69,409 17,426,019
Proceeds from long-term debt - - 1,166,434
Principal payments on note payable to bank - - (123,855)
Principal payments under capital lease obligations (115,309) (102,885) (994,724)
Principal payments on long-term debt (77,861) - (416,325)
Repurchase of preferred stock - - (300,000)
-------------- -------------- ---------------
Net cash provided by financing activities 7,421,101 (33,476) 34,462,820
-------------- -------------- ---------------
Net increase in cash and cash equivalents 17,910,888 (836,387) 25,950,513
Cash and cash equivalents at beginning of period 8,039,625 5,931,082 -
-------------- -------------- ---------------
Cash and cash equivalents at end of period $ 25,950,513 $ 5,094,695 $ 25,950,513
-------------- -------------- ---------------
-------------- -------------- ---------------
</TABLE>
See accompanying note to financial statements.
<PAGE>
NPS PHARMACEUTICALS, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31, October 22, 1986
---------------------------------- (inception) through
1996 1995 March 31, 1996
-------------- ------------- ------------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 46,011 $ 39,392 $ 521,724
Cash paid for taxes - - $ 500,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Acquisition of equipment through incurrence of
capital lease obligations - - 1,368,406
Acquisition of leasehold improvements through
incurrence of debt - - 197,304
</TABLE>
See accompanying note to financial statements.
<PAGE>
NPS Pharmaceuticals, Inc.
(A Development Stage Company)
Note to Financial Statements
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying financial statements of NPS Pharmaceuticals, Inc. ("NPS"
or the "Company") are unaudited, except as specifically noted. The financial
statements reflect all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary to present
fairly the financial position and results of operations for the interim
periods presented. The results of operations for the three month period ended
March 31,1996, are not necessarily indicative of the results to be expected
for the full year. The financial information included herein should be read
in conjunction with the Company's Annual Report on Form 10-K for 1995 which
includes the audited financial statements and the notes thereto for the year
ended December 31, 1995.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Since its inception in 1986, NPS has devoted substantially all of its
resources to its research and development programs. To date, the Company has
not developed any pharmaceutical products for sale and has incurred substantial
losses. NPS has incurred cumulative losses through March 31, 1996, of $10.7
million net of cumulative revenues from research and license agreements of $36.8
million. The Company expects to incur significant operating losses over at least
the next several years as the Company continues and expands its research and
development and preclinical and clinical testing activities. Substantially all
of the Company's revenues are derived from license fees, milestone payments and
research support payments from its licensees and collaborators, and these
revenues fluctuate from quarter to quarter. Accordingly, the Company expects
that losses will fluctuate from quarter to quarter and that such fluctuations
may be substantial. The Company's ability to achieve profitability depends in
part on its ability, alone and/or with others, to complete development of its
proposed products, to obtain required regulatory approvals and to manufacture
and market such products, as to which matters there can be no assurance.
RESULTS OF OPERATIONS
Revenues were $14.5 million for the first quarter of 1996 compared to
$924,000 for the first quarter of 1995. The increase in revenues was primarily
due to the receipt by NPS of a $10.0 million non-refundable license fee from
Amgen Inc. ("Amgen") following the execution and closing of a definitive
agreement for Amgen to develop and commercialize NPS's Norcalcin-TM- and other
compounds for the treatment of hyperparathyroidism ("HPT") worldwide except in
parts of Asia (the "Amgen Agreement"). Revenues also increased in the first
quarter due to receipt by the Company of a $3.0 million milestone payment under
the terms of an agreement with SmithKline Beecham Corporation ("SmithKline
Beecham") in the field of osteoporosis. The license fee and milestone payments
are non-recurring.
Research and development expenses were $3.2 million compared to $1.9
million for the three months ended March 31, 1996 and 1995, respectively. The
increase was primarily due to the ongoing clinical trials for Norcalcin in
early 1996 and increased activity in each of the Company's principal research
and development projects. Although Amgen has assumed responsibility for
conducting and funding all future development costs of Norcalcin under the Amgen
Agreement, the Company's research and development expenses are expected to
increase significantly in the future as NPS conducts clinical trials for other
product candidates and as more research and development personnel are hired.
General and administrative expenses increased to $1.3 million for the three
months ended March 31,1996, from $866,000 in the comparable period of 1995. The
increase was primarily due to costs incurred in finalizing the agreement with
Amgen and costs incurred in preparing for a secondary offering of the Company'
common stock for which a registration statement on Form S-1 was filed with the
SEC in March 1996. The Company expects that general and administrative expenses
will continue to increase in the future as a result of increased activity by the
Company in business development, investor relations, and legal affairs, and as
more personnel and facilities are needed to support research and development
activities.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily through
collaborative research and license agreements and the private and public
placement of equity securities. As of March 31,1996, the Company had
recognized approximately $36.8 million of cumulative revenues from research
and license agreements and approximately $35.9 million as consideration for
the placement of equity securities. The Company's principal sources of
liquidity are its cash, cash equivalents, and marketable investment
securities which totaled $26.3 million at March 31, 1996. Subsequent to the
end of the quarter the Company completed an offering of 3.45 million shares
of its common stock with net proceeds to the Company of approximately $48.4
million (includes proceeds from the exercise of the underwriters'
over-allotment).
The Company receives quarterly payments under its agreements with the
pharmaceutical division of Kirin Brewery Company, Limited, ("Kirin") and
SmithKline Beecham to support the Company's research efforts in HPT and
osteoporosis, respectively. The Kirin payments are $500,000 per quarter through
June 1996 and a total of $5.0 million
<PAGE>
over the remaining four years of the research term of the agreement. The
SmithKline Beecham payments are estimated to be an aggregate of $3.9 million
through the scheduled expiration of the agreement in October 1996, of which $2.3
million had been received by March 31, 1996. Amgen will reimburse the Company up
to $400,000 per year for a period not to exceed five years for certain costs
which may be incurred by the Company in the development of Norcalcin in the
Amgen territory, with such participation occuring under the direction of Amgen.
The Company could receive additional payments of up to $56.0 million in the
aggregate from Amgen, Kirin, and SmithKline Beecham upon the accomplishment of
specified research and/or development milestones under the respective
agreements. Each of these agreements may be terminated before the scheduled
expiration date by the respective licensee and, therefore, no assurance can be
given that any future milestone or research or development support payments will
be received thereunder.
Under its agreements with The Brigham and Women's Hospital, Inc.
("Brigham and Women's"), the Company is obligated to pay an aggregate of
$810,000 to Brigham and Women's from February 1996 through February 1998, of
which $100,000 had been paid by March 31, 1996. Additional payments may be
required upon the accomplishment of certain research milestones by Brigham
and Women's.
As of March 31, 1996, the Company's net investment in leasehold
improvements, equipment and furnishings was approximately $2.3 million. The
Company has financed a portion of such expenditures through capital leases and
long-term debt with a total principal obligation of approximately $1.3 million
as of March 31, 1996. Additional equipment and facilities will be needed as the
Company increases its research and development activities, a portion of which
may be financed with debt. Equipment and leasehold improvements subject to the
capital leases and the long-term debt have been pledged in support of the
leasehold obligations.
The Company anticipates that its existing capital resources, including
interest earned thereon and expected research and development support payments
from its licensees will be sufficient to enable it to maintain its current and
planned operations through at least 1997. However, actual needs are dependent on
numerous factors, including the progress of the Company's research and
development programs, the magnitude and scope of these activities, progress with
preclinical and clinical trials, the cost of preparing, filing, prosecuting,
maintaining and enforcing patent claims and other intellectual property rights,
competing technological and market developments, changes in or terminations of
existing research and license arrangements, the establishment of additional
license arrangements and the cost of manufacturing scale-up and development of
marketing activities, if undertaken by the Company. Substantial expenditures
will be required to conduct preclinical studies and clinical trials, manufacture
or have manufactured and market products other than Norcalcin from current
research and development efforts and perform research and development activities
in additional areas. In addition, if Amgen terminates its agreement to develop
and commercialize Norcalcin in its territory, the Company may not have
sufficient capital to complete the development and commercialization of
Norcalcin in Amgen's territory.
NPS may need to raise additional funds to support its long-term product
development and commercialization programs. The Company also intends to seek
additional funding through corporate collaborations and licensing agreements and
the Company may seek additional funding through public or private financing.
There can be no assurance that additional financing will be available on
acceptable terms, if at all. If adequate funds are not available, the Company
may be required to delay, reduce the scope of or eliminate one or more of its
research and development programs or to obtain funds through arrangements with
licensees or others that may require the Company to relinquish rights to certain
of its technologies, product candidates or products that the Company may
otherwise seek to develop or commercialize on its own.
<PAGE>
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO.
10.16*+ Development and License Agreement between the Company and
Amgen Inc. effective as of December 27, 1995
10.17*+ Stock Purchase Agreement between the Company and Amgen Inc.
10.23*+ Amendment effective February 7, 1996 to Research Agreement
between the Company and The Brigham and Women's Hospital, Inc.,
dated February 19, 1993
10.24*+ Amendment effective June 29, 1996 to the Patent Agreement
between the Company and The Brigham and Women's Hospital, Inc.,
dated February 19, 1993
--------------------
* Incorporated by reference to the Company's Form 10-K for the
fiscal year ended December 31, 1995.
+ Confidential Treatment has been granted with respect to
these Exhibits.
(b) Reports on Form 8-K
For the quarter ending March 31, 1996, the Company filed one
report on Form 8-K, dated February 29, 1996, reporting the
execution of a Binding Letter of Intent between Amgen Inc. and
the Company dated December 27, 1995.
-10-
<PAGE>
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.
Date: May 6, 1996 NPS PHARMACEUTICALS, INC.
By: /s/ James U. Jensen
-----------------------------------------
James U. Jensen
Vice President, Corporate Development
and Legal Affairs
(Executive Officer)
By: /s/ Robert K. Merrell
-----------------------------------------
Robert K. Merrell
Vice President, Finance, Chief Financial
Officer and Treasurer
(Principal Financial and Accounting
Officer)
-11-
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- - -------------- -----------------------
10.16*+ Development and License Agreement between the Company and
Amgen Inc. effective as of December 27, 1995
10.17*+ Stock Purchase Agreement between the Company and Amgen Inc.
10.23*+ Amendment effective February 7, 1996 to Research Agreement
between the Company and The Brigham and Women's Hospital,
Inc., dated February 19, 1993
10.24*+ Amendment effective June 29, 1996 to the Patent Agreement
between the Company and The Brigham and Women's Hospital,
Inc., dated February 19, 1993
- - --------------------
* Incorporated by reference to the Company's Form 10-K for the fiscal
year ended December 31, 1995.
+ Confidential Treatment has been granted with respect to these
Exhibits.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 25,950,513
<SECURITIES> 300,000
<RECEIVABLES> 13,037
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,510,754
<PP&E> 4,172,169
<DEPRECIATION> (1,881,551)
<TOTAL-ASSETS> 28,843,526
<CURRENT-LIABILITIES> 3,193,476
<BONDS> 0
0
0
<COMMON> 8,187
<OTHER-SE> 24,996,420
<TOTAL-LIABILITY-AND-EQUITY> 28,843,526
<SALES> 0
<TOTAL-REVENUES> 14,455,312
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (4,522,811)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (46,011)
<INCOME-PRETAX> 10,028,831
<INCOME-TAX> 200,000
<INCOME-CONTINUING> 9,828,831
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,828,831
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 0
</TABLE>
