<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 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 0-23272
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 June 30, 1996
----- ----------------------------
Common Stock $.001 par value 11,720,268
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
Statements of Operations 4
Statements 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 -- None
(b) Reports on Form 8-K -- None
SIGNATURES 11
<PAGE>
NPS PHARMACEUTICALS, INC.
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1996 1995
------------ --------------
(Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 62,306,478 $ 8,039,625
Marketable investment securities 8,920,078 300,000
Accounts receivable 413,410 23,000
------------ --------------
Total current assets 71,639,966 8,362,625
Plant and equipment:
Equipment 2,503,851 2,272,006
Leasehold improvements 1,846,850 1,635,189
------------ --------------
4,350,701 3,907,195
Less accumulated depreciation and amortization 2,081,551 1,711,551
------------ --------------
Net plant and equipment 2,269,150 2,195,644
Other assets 42,154 42,154
------------ --------------
$ 73,951,270 $ 10,600,423
------------ --------------
------------ --------------
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of obligations
under capital leases $ 157,952 $ 435,230
Current installments of long-term debt 354,377 331,746
Accounts payable 655,646 1,036,464
Accrued expenses 147,053 139,714
Deferred income 508,750 587,500
Income tax payable 200,000 --
------------ --------------
Total current liabilities 2,023,778 2,530,654
Obligations under capital leases, excluding
current installments 57,217 53,761
Long-term debt, excluding current installments 511,512 693,528
------------ --------------
Total liabilities 2,592,507 3,277,943
Stockholders' equity:
Common stock 11,720 7,073
Additional paid-in capital 84,082,418 28,067,130
Deferred compensation (106,708) (234,458)
Deficit accumulated during development stage (12,628,667) (20,517,265)
------------ --------------
Net stockholders' equity 71,358,763 7,322,480
------------ --------------
$ 73,951,270 $ 10,600,423
------------ --------------
------------ --------------
</TABLE>
See accompanying note to financial statements.
<PAGE>
NPS PHARMACEUTICALS, INC.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
October 22,
1986
(inception)
Three Months Ended June 30, Six Months Ended June 30, through
------------------------------ ----------------------------- June 30,
1996 1995 1996 1995 1996
------------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Revenues from research
and license agreements $ 1,410,625 $ 5,900,000 $ 15,865,937 $ 6,824,000 $ 38,181,786
Operating expenses:
Research and development 2,642,285 1,639,705 5,818,186 3,547,509 36,178,376
General and administrative 1,331,062 1,177,302 2,677,972 2,043,075 15,466,417
------------ ----------- ------------ ----------- -------------
Total operating expenses 3,973,347 2,817,007 8,496,158 5,590,584 51,644,793
------------ ----------- ------------ ----------- -------------
Operating income (loss) (2,562,722) 3,082,993 7,369,779 1,233,416 (13,463,007)
Other income (expense):
Interest income 654,910 107,930 797,251 236,073 2,054,095
Interest expense (32,421) (25,377) (78,432) (50,761) (554,145)
Other -- -- -- -- 34,390
------------ ----------- ------------ ----------- -------------
Total other income 622,489 82,553 718,819 185,312 1,534,340
------------ ----------- ------------ ----------- -------------
Income (loss) before taxes (1,940,233) 3,165,546 8,088,598 1,418,728 (11,928,667)
Income taxes -- 500,000 200,000 500,000 700,000
------------ ----------- ------------ ----------- -------------
Net income (loss) $ (1,940,233) $ 2,665,546 $ 7,888,598 $ 918,728 $ (12,628,667)
------------ ----------- ------------ ----------- -------------
------------ ----------- ------------ ----------- -------------
Net income (loss) per common
share -- primary $ (0.19) $ 0.39 $ 0.79 $ 0.13
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
Weighted average shares
outstanding -- primary 10,447,000 6,854,100 9,964,400 6,830,300
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
</TABLE>
See accompanying note to financial statements.
<PAGE>
NPS PHARMACEUTICALS, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30, October 22, 1986
--------------------------------- (inception) through
1996 1995 June 30, 1996
------------- ------------ -------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,888,598 $ 918,728 $ (12,628,667)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 370,000 340,000 2,783,028
Gain on sale of equipment -- -- (28,720)
Issuance of stock in lieu of cash for services 319,400 -- 533,939
Amortization of deferred compensation 127,750 127,750 659,792
Decrease (increase) in receivables (390,410) (4,356,498) (413,410)
Decrease (increase) in other assets -- (30,427) (45,754)
Increase (decrease) in accounts payable and
accrued expenses (373,479) (247,406) 802,699
Increase (decrease) in deferred income (78,750) -- 508,750
Increase (decrease) in taxes payable 200,000 -- 200,000
------------- ------------ --------------
Net cash provided by (used in) operating activities 8,063,109 (3,247,853) (7,628,343)
Cash flows from investing activities:
Net sale (purchase) of marketable investment securities (8,620,078) 3,392,135 (8,920,078)
Acquisition of equipment and leasehold improvements (411,006) (270,087) (4,470,132)
Proceeds from sale of equipment -- -- 1,048,484
------------- ------------ --------------
Net cash provided by (used in) investing activities (9,031,084) 3,122,048 (12,341,726)
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 55,700,535 126,046 65,512,283
Proceeds from long-term debt -- 1,062,696 1,166,434
Principal payments on note payable to bank -- -- (123,855)
Principal payments under capital lease obligations (306,322) (208,408) (1,185,737)
Principal payments on long-term debt (159,385) -- (497,849)
Repurchase of preferred stock -- -- (300,000)
------------- ------------ --------------
Net cash provided by financing activities 55,234,828 980,334 82,276,547
------------- ------------ --------------
Net increase in cash and cash equivalents 54,266,853 854,529 62,306,478
Cash and cash equivalents at beginning of period 8,039,625 5,931,082 --
------------- ------------ --------------
Cash and cash equivalents at end of period $ 62,306,478 $ 6,785,611 $ 62,306,478
------------- ------------ --------------
------------- ------------ --------------
</TABLE>
See accompanying note to financial statements.
<PAGE>
NPS PHARMACEUTICALS, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30, October 22, 1986
--------------------------------- (inception) through
1996 1995 June 30, 1996
------------- ------------ -------------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 78,432 $ 25,377 $ 554,145
Cash paid for taxes -- -- $ 500,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Acquisition of equipment through incurrence of
capital lease obligations 32,500 -- 1,400,906
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 and
six month periods ended June 30, 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 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
THIS QUARTERLY REPORT ON FROM 10-Q CONTAINS, IN ADDITION TO
HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM
THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD
CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED HEREIN.
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 completed development of any pharmaceutical products for sale and has
incurred substantial losses. NPS has incurred cumulative losses through June
30, 1996, of $12.6 million net of cumulative revenues from research and
license agreements of $38.2 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, that such fluctuations may be substantial,
and that results from prior quarters may not be indicative of future
operating results. 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 $1.4 million for the second quarter of 1996 compared to
$5.9 million for the second quarter of 1995 and $15.9 million for the
six-month period of 1996 compared to $6.8 million for the same six-month
period of 1995. The fluctuations were due to the timing of license fee and
milestone payments from licensees. Revenues were lower in the second quarter
of 1996 than the second quarter of 1995 because of a $5 million license fee
from the Pharmaceutical Division of Kirin Brewery Company, Limited ("Kirin")
in 1995. The increase in revenues in the six-month period of 1996 compared to
the same period in 1995 was primarily due to the receipt by NPS of a $10
million license fee from Amgen Inc. ("Amgen") and a $3 million milestone
payment from SmithKline Beecham Corporation ("SmithKline") in the first
quarter of 1996. These license fee and milestone payments are non-recurring.
Research and development expenses were $2.6 million compared to $1.6
million for the three months ended June 30, 1996 and 1995, respectively, and
$5.8 million compared to $3.5 million for the six-month periods ended June
30, 1996 and 1995, respectively. The increases were primarily due to ongoing
clinical trials for NPS R-568 (Norcalcin-TM-) in early 1996, increased
expenditures for the preclinical development of NPS 1506, and the hiring of
additional personnel. Although Amgen and Kirin have assumed responsibility
for conducting and funding all future development costs of NPS R-568 under
the Amgen Agreement and the Kirin Agreement in their respective territories,
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 June 30, 1996, from $1.2 million in the comparable period
of 1995, and to $2.7 million for the six months ended June 30, 1996, from
$2.0 million in the comparable period of 1995. The increases were primarily
due to costs incurred in finalizing the agreement with Amgen in March 1996
and costs associated with a follow-on offering of the Company' common stock
which was completed in May 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.
Interest income increased to $655,000 and $797,000 for the
three-month and six-month periods ended June 30, 1996, respectively, from
$108,000 and $236,000 for the same periods in 1995 primarily due to higher
average cash balances resulting from the net proceeds of the stock offering
in May 1996 in which the Company sold 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).
<PAGE>
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 June 30, 1996, the Company had
recognized approximately $38.2 million of cumulative revenues from research
and license agreements and approximately $84.1 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 $71.2 million at June 30, 1996.
The Company receives quarterly payments under its agreements with
Kirin and SmithKline to support the Company's research efforts in HPT and
osteoporosis, respectively. The Kirin payments are currently $500,000 per
quarter with total payments of up to $7 million over the five years of the
research term of the Kirin Agreement. The SmithKline payments are estimated
to be an aggregate of $3.9 million through the scheduled expiration of the
agreement on October 31, 1996, of which $3.1 million had been earned as of
June 30, 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 occurring 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 upon the accomplishment of specified research
and/or development milestones under the respective agreements. NPS does not
control the subject matter, timing or resources applied by its licensees
(SmithKline, Kirin and Amgen) under their respective development contracts.
Thus, the Company's potential receipt of milestone payments from these
licensees is largely beyond the control of NPS. Progress under these
agreements is subject to risk and each of these support agreements may be
terminated before the scheduled expiration date by the respective licensee.
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., the
Company is obligated to pay an aggregate of $810,000 to Brigham and Women's
from February 1996 through February 1998, of which $265,000 had been paid by
June 30, 1996. Additional payments may be required upon the accomplishment of
certain research milestones by Brigham and Women's.
As of June 30, 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 $1.1
million as of June 30, 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 1998. 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 any proprietary products of NPS which may be derived
from NPS's current research and development efforts and to perform research
and development activities in additional areas. In addition, if Amgen
terminates its agreement to develop and commercialize NPS R-568 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
<PAGE>
rights to certain of its technologies, product candidates or products that
the Company may otherwise seek to develop or commercialize on its own.
CERTAIN BUSINESS RISKS
The Company is currently in the early stage of product development.
NPS R-568 is the only product candidate currently under development by the
Company or its licensees that is in human clinical trials. All of the
Company's remaining technologies are new and will require significant
additional research and development efforts prior to any commercial use,
including extensive preclinical and clinical testing as well as lengthy
regulatory approval. In addition, because the Company has granted exclusive
development, commercialization and marketing rights to its licensees in the
fields of hyperparathyroidism and osteoporosis, the success of its existing
hyperparathyroidism and osteoporosis programs is entirely dependent upon the
efforts of its licensees. All public releases of project status, updates and
other information generated under the license agreements are entirely in the
control of the licensees.
Other risks include the Company's lack of product sales, a history of
operating losses, the uncertainty of regulatory approvals, rapid
technological change and competition, the uncertainty of protection of the
Company's patents and proprietary technology, the Company's dependence on
third parties for manufacturing, the Company's future capital needs and the
uncertainty of additional funding, the Company's lack of marketing
capabilities, the uncertainty of third-party reimbursement, the Company's
dependence on key personnel and the Company's ability to manage growth. A
more detailed discussion of factors that could cause actual results to differ
materially from those in the forward-looking statements is contained in the
Company's SEC filings, including the Company's report on Form 10-K for the
year ended December 31, 1995.
<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: August 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)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 62,306,478
<SECURITIES> 8,920,078
<RECEIVABLES> 413,410
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 71,639,966
<PP&E> 4,350,701
<DEPRECIATION> 2,081,551
<TOTAL-ASSETS> 73,951,270
<CURRENT-LIABILITIES> 2,023,778
<BONDS> 0
0
0
<COMMON> 11,720
<OTHER-SE> 71,347,043
<TOTAL-LIABILITY-AND-EQUITY> 73,951,270
<SALES> 0
<TOTAL-REVENUES> 15,865,937
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,496,158
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78,432
<INCOME-PRETAX> 8,088,598
<INCOME-TAX> 200,000
<INCOME-CONTINUING> 7,888,598
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,888,598
<EPS-PRIMARY> 0.79
<EPS-DILUTED> 0
</TABLE>
