<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, 1997 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, 1997
----- -----------------------------
Common Stock $.001 par value 11,881,265
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
Notes 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
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<PAGE>
NPS PHARMACEUTICALS, INC.
(A Development Stage Company)
Balance Sheets
March 31, December 31,
Assets 1997 1996
------------- -------------
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 66,378,881 $ 68,961,764
Accounts receivable 104,456 415,208
------------- -------------
Total current assets 66,483,337 69,376,972
Plant and equipment:
Equipment 3,615,408 3,259,376
Leasehold improvements 2,174,118 1,997,994
------------- -------------
5,789,526 5,257,370
Less accumulated depreciation and amortization 2,702,665 2,477,665
------------- -------------
Net plant and equipment 3,086,861 2,779,705
Other assets 5,461 3,267
------------- -------------
$ 69,575,659 $ 72,159,944
------------- -------------
------------- -------------
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of obligations under
capital leases $ 57,371 $ 53,339
Current installments of long-term debt 381,997 369,467
Accounts payable 559,053 619,120
Accrued expenses 381,952 271,677
Deferred income 500,000 500,000
Income tax payable 20,000 150,000
------------- -------------
Total current liabilities 1,900,373 1,963,603
Obligations under capital leases, excluding
current installments 39,228 27,295
Long-term debt, excluding current installments 199,200 299,534
------------- -------------
Total liabilities 2,138,801 2,290,432
Stockholders' equity:
Common stock 11,881 11,807
Additional paid-in capital 84,549,910 84,270,283
Deficit accumulated during development stage (17,124,933) (14,412,578)
------------- -------------
Net stockholders' equity 67,436,858 69,869,512
------------- -------------
$ 69,575,659 $ 72,159,944
------------- -------------
------------- -------------
See accompanying notes to financial statements.
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<PAGE>
NPS PHARMACEUTICALS, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31, October 22, 1986,
----------------------------- (inception) through
1997 1996 March 31, 1997
------------ ------------ -------------------
<S> <C> <C> <C>
Revenues from research
and license agreements $ 1,075,000 $14,455,312 $ 43,733,179
Operating expenses:
Research and development 3,400,912 3,210,901 44,754,986
General and administrative 1,218,858 1,311,910 19,451,114
------------ ------------ -------------
Total operating expenses 4,619,770 4,522,811 64,206,100
------------ ------------ -------------
Operating income (loss) (3,544,770) 9,932,501 (20,472,921)
Other income (expense):
Interest income 854,285 142,341 4,801,697
Interest expense (21,870) (46,011) (639,288)
Other - - 35,579
------------ ------------ -------------
Total other income 832,415 96,330 4,197,988
------------ ------------ -------------
Income (loss) before tax expense (2,712,355) 10,028,831 (16,274,933)
Income tax expense 200,000 850,000
------------ ------------ -------------
Net income (loss) $(2,712,355) $ 9,828,831 $(17,124,933)
------------ ------------ -------------
------------ ------------ -------------
Net income (loss) per common share $ (0.23) $ 1.16
------------ ------------
------------ ------------
Weighted average shares outstanding 11,866,000 8,463,800
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
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<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
1997 1996 March 31, 1997
------------ ------------ -------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(2,712,355) $ 9,828,831 $(17,124,933)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 225,000 170,000 3,411,241
Gain on sale of equipment - - (29,909)
Issuance of stock in lieu of cash for services 119,600 175,150 798,054
Amortization of deferred compensation - 63,875 766,500
Decrease (increase) in receivables 310,752 9,963 (104,456)
Decrease (increase) in other assets (2,194) (247,204) (9,061)
Increase (decrease) in accounts payable and
accrued expenses 50,208 538,208 941,005
Increase (decrease) in taxes payable (130,000) 200,000 20,000
Increase (decrease) in deferred income - 15,938 500,000
------------ ------------ -------------
Net cash provided by (used in) operating activities (2,138,989) 10,754,761 (10,831,559)
Cash flows from investing activities:
Acquisition of equipment and leasehold improvements (498,121) (264,974) (5,908,221)
Proceeds from sale of equipment - - 1,075,621
------------ ------------ -------------
Net cash used in investing activities (498,121) (264,974) (4,832,600)
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 160,101 7,614,271 65,715,821
Proceeds from long-term debt - - 1,166,434
Principal payments on note payable to bank - - (123,855)
Principal payments under capital lease obligations (18,070) (115,309) (1,338,090)
Principal payments on long-term debt (87,804) (77,861) (782,541)
Repurchase of preferred stock - - (300,000)
------------ ------------ -------------
Net cash provided by financing activities 54,227 7,421,101 82,043,040
------------ ------------ -------------
Net increase (decrease) in cash and cash equivalents (2,582,883) 17,910,888 66,378,881
Cash and cash equivalents at beginning of period 68,961,764 8,039,625 -
------------ ------------ -------------
Cash and cash equivalents at end of period $66,378,881 $25,950,513 $ 66,378,881
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
See accompanying notes to financial statements.
-5-
<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
1997 1996 March 31, 1997
------------ ------------ -------------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 21,870 $ 46,011 $ 639,288
Cash paid for taxes 130,000 200,000 $ 830,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Acquisition of equipment through incurrence of
capital lease obligations 34,035 - 1,434,689
Acquisition of leasehold improvements through
incurrence of debt - - 197,304
Issuance of preferred stock for stock subscription
receivable - - 4,000,000
Accrual of deferred offering costs - - 150,000
</TABLE>
See accompanying notes to financial statements.
-6-
<PAGE>
NPS Pharmaceuticals, Inc.
(A Development Stage Company)
Notes 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, 1997, 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 1996 which includes the
audited financial statements and the notes thereto for the year ended
December 31, 1996.
(2) RECLASSIFICATIONS
Certain amounts in 1996 have been reclassified to conform with 1997
presentation.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.
THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS DISCUSSED
IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO
SUCH DIFFERENCES INCLUDE THOSE DISCUSSED HEREIN AS WELL AS THOSE DISCUSSED IN
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996
UNDER THE HEADING "RISK FACTORS".
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 March
31, 1997, of $17.1 million net of cumulative revenues from research and license
agreements of $43.7 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 and development support payments from its
licensees and these revenues fluctuate from quarter to quarter. Accordingly, the
Company expects that income or loss 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 and the
efforts of its licensees, to complete development of its 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 $1.1 million for the first quarter of 1997 compared to $14.5
million for the first quarter of 1996. The decrease in revenues was primarily
due to the receipt by NPS in the first quarter of 1996 of a one time $10 million
license fee from Amgen Inc. ("Amgen"), following execution and closing of a
definitive license and development agreement for NPS compounds in the filed of
hyperparathyroidism and a $3 million milestone payment from SmithKline Beecham
Corporation ("SmithKline Beecham"), each of these payments are non-recurring.
See "Liquidity and Capital Resources" below for further discussion of payments
that may be received by the Company in the future under the separate agreements
with these parties.
Research and development expenses were $3.4 million compared to $3.2
million for the three months ended March 31, 1997 and 1996, respectively.
Research and development expenses are expected to increase significantly in the
future as NPS conducts discovery, preclinical development and clinical trials
for non-licensed product candidates, sponsors research or and/or acquires
licenses for technology from academia or research institutions and hires more
research and development personnel.
General and administrative expenses were $1.2 million for the three months
ended March 31,1997, compared to $1.3 million for same period in 1996. The
Company expects that general and administrative expenses will increase in the
future as more personnel and facilities are needed to support research and
development activities.
Interest income increased to $854,000 for the first quarter of 1997 from
$142,000 for the first quarter of 1996 primarily due to a higher average cash
balance during the first quarter of 1997 resulting from the net proceeds of the
follow-on offering of stock in May 1996. The Company anticipates that interest
income will decrease in the future as the Company's cash is utilized for
operations.
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 31,1997, the Company had recognized
$43.7 million of cumulative revenues from research and license agreements and
$84.6 million in consideration for the sale of equity securities for cash and
services. The Company's principal sources of liquidity are its cash, cash
equivalents, and marketable investment securities which totaled $66.4 million at
March 31, 1997.
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<PAGE>
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
hyperparathyroidism ("HPT") and osteoporosis, respectively. The Kirin payments
are $500,000 per quarter through June 30, 1997 and $250,000 per quarter
thereafter through the remaining three years of the research term of the Kirin
agreement. The scheduled expiration date of the SmithKline Beecham agreement is
October 31, 1997 and NPS expects to receive $475,000 per quarter through that
date from SmithKline Beecham. Amgen will reimburse the Company up to $400,000
per year for a period not to exceed five years for costs incurred by the Company
for designation of NPS personnel to be able to participate in the development of
a compound for primary HPT in the Amgen territory, with such participation
occurring under the direction of Amgen. The Company could receive future
payments of up to $51.0 million in the aggregate from Amgen, Kirin, and
SmithKline Beecham upon the accomplishment of specified research and/or
development milestones under the respective agreements. NPS does not control the
subject matter, timing or resources applied by its licensees under their
respective development programs. 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 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.
The Company has entered into certain sponsored research and license
agreements which obligate the Company to make research support payments to
academic or research institutions. Additional payments may be required upon the
accomplishment of research milestones by the institutions or as license fees or
royalties to maintain the licenses. As of March 31, 1997, the Company had a
total commitment of approximately $945,000 for future research support payments.
The Company expects to enter into additional sponsored research and license
agreements in the future.
As of March 31, 1997, the Company's net investment in leasehold
improvements, equipment and furnishings was $3.1 million. The Company has
financed a portion of such expenditures through capital leases and long-term
debt with a total principal obligation of $678,000 as of March 31, 1997.
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 such 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 1999. 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 current research and development efforts and perform research and
development activities in additional areas. In addition, if Amgen terminates its
agreement, the Company may not have sufficient capital to complete the
development and commercialization of a drug for HPT in the Amgen territory.
NPS may need to raise additional funds to support its long-term product
development and commercialization programs. The Company intends to seek
additional funding through corporate collaborations and licensing agreements.
The Company may also seek additional funding through public or private
financing. There can be no assurance that additional funding 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.
-9-
<PAGE>
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 and its licensees that is in human clinical trials. There is no
guarantee that NPS R-568 will prove to be safe or efficacious, that back-up
or later generation compounds will be identified, or that the Company's
licensees will pursue development of NPS R-568 or back-up or later generation
compounds. All of the Company's remaining technologies are new and will
require significant additional research and development efforts prior to any
commercial use. Because the Company has granted exclusive development,
commercialization and marketing rights in the fields of HPT and osteoporosis,
the success of its existing HPT and osteoporosis programs is entirely
dependent upon the efforts of Amgen, Kirin and SmithKline Beecham.
Other risks that may cause actual results to differ from those projected
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'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 forward-looking statements is contained in the Company's SEC
filings, including the Risk Factors in the Company's Annual Report on Form 10-K.
-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 5, 1997 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-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 66,378,881
<SECURITIES> 0
<RECEIVABLES> 104,456
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 66,483,337
<PP&E> 5,789,526
<DEPRECIATION> (2,702,665)
<TOTAL-ASSETS> 69,575,659
<CURRENT-LIABILITIES> 1,900,373
<BONDS> 0
0
0
<COMMON> 11,881
<OTHER-SE> 67,424,977
<TOTAL-LIABILITY-AND-EQUITY> 69,575,659
<SALES> 0
<TOTAL-REVENUES> 1,929,285
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (4,619,770)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (21,870)
<INCOME-PRETAX> (2,712,355)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,712,355)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,712,355)
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> 0
</TABLE>
