<PAGE> 1
AMENDED
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q / A
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended September 30,
1998.
[ ] 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
0-23160
ANESTA CORP.
(Exact name of registrant as specified in its charter)
Delaware 87-0424798
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4745 Wiley Post Way
Plaza 6, Suite 650
Salt Lake City, UT 84116
(801) 595-1405
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
Securities registered pursuant to Section
12(g) of the Act:
Common Stock $.001 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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.
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 .
Common Stock $.001 par value 9,672,314
---------------------------- -------------------------------
Class Outstanding at November 9, 1998
<PAGE> 2
ANESTA CORP.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Balance Sheets -
September 30, 1998 (unaudited) and December 31, 1997 2
Statements of Operations and Comprehensive Loss -
for the three and nine months ended September 30, 1998 and 1997
(unaudited) and the period from inception (August 1, 1985) to
September 30, 1998 (unaudited) 3
Statements of Cash Flows -
for the nine months ended September 30, 1998 and 1997 (unaudited)
and the period from inception (August 1, 1985) to
September 30, 1998 (unaudited) 4
Notes to Financial Statements (unaudited) 6
Management's Discussion and Analysis ofFinancial Condition and Results
of Operations 9
PART II. OTHER INFORMATION 12
SIGNATURES 14
</TABLE>
1
<PAGE> 3
ANESTA CORP.
(A Development Stage Company)
BALANCE SHEETS
-----------
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,722,298 $ 9,760,765
Current portion of certificate of deposit 255,000 255,000
Marketable debt securities,
available-for-sale 13,541,445 17,875,711
Accounts receivable 212,137 82,863
Prepaid expenses and other current assets 323,698 428,490
------------ ------------
Total current assets 19,054,578 28,402,829
------------ ------------
Property and equipment, at cost:
Furniture and equipment 935,526 910,443
Leasehold improvements 2,327,372 2,278,941
Accumulated depreciation (1,079,336) (870,848)
------------ ------------
2,183,562 2,318,536
------------ ------------
Other assets:
Certificate of deposit 1,530,000 1,785,000
Other assets 212,015 205,269
------------ ------------
1,742,015 1,990,269
------------ ------------
Total assets $ 22,980,155 $ 32,711,634
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 354,984 $ 433,666
Accrued liabilities:
Accrued compensation 814,461 477,231
Accrued research and development costs 200,000
Other 119,992 52,746
Current portion of notes payable 250,000 250,000
------------ ------------
Total current liabilities 1,539,437 1,413,643
Unearned revenues 402,500 350,000
Notes payable 1,500,000 1,750,000
------------ ------------
Total liabilities 3,441,937 3,513,643
------------ ------------
Stockholders' equity:
Common stock, par value, $.001 per share; Authorized:
15,000,000 shares; Issued and outstanding: 9,648,687
in 1998 and 9,551,465 in 1997 9,648 9,551
Additional paid-in capital 62,638,334 62,142,239
Deficit accumulated during the development stage (43,174,342) (32,962,206)
Accumulated other comprehensive income 64,578 8,407
------------ ------------
Total stockholders' equity 19,538,218 29,197,991
------------ ------------
Total liabilities and stockholders' equity $ 22,980,155 $ 32,711,634
============ ============
</TABLE>
The accompanying notes are an integral
part of the financial statements
2
<PAGE> 4
ANESTA CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
----------
<TABLE>
<CAPTION>
Period from
Three months ended Nine months ended inception
------------------------------- -------------------------------- (August 1, 1985) to
September 30, September 30, September 30, September 30, September 30,
1998 1997 1998 1997 1998
------------- ------------- ------------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales $ 76,797 $ 50,225 $ 151,881 $ 109,425 $ 526,064
Royalty revenue 2,276 1,489 4,506 3,243 115,546
Revenues from contract research/
license agreements 175,000 10,153,931
----------- ----------- ------------ ------------ ------------
Total revenues 79,073 51,714 331,387 112,668 10,795,541
----------- ----------- ------------ ------------ ------------
Operating costs and expenses:
Cost of goods sold 21,977 14,251 42,686 31,396 162,457
Royalties 2,372 1,551 4,691 3,380 15,029
Research and development 2,175,320 2,003,995 5,768,521 5,353,295 36,503,304
Depreciation and amortization 70,737 58,801 224,272 177,988 1,321,423
Marketing, general and
administrative 2,060,412 1,882,164 5,367,371 4,723,272 21,093,036
----------- ----------- ------------ ------------ ------------
Total costs and expenses 4,330,818 3,960,762 11,407,541 10,289,331 59,095,249
----------- ----------- ------------ ------------ ------------
Loss from operations (4,251,745) (3,909,048) (11,076,154) (10,176,663) (48,299,708)
Non operating income (expense):
Interest income 231,297 479,025 978,019 1,540,489 7,315,115
Interest expense (35,342) (38,451) (105,642) (94,440) (598,033)
Other (557) (3,733) 3,150 (51,309)
----------- ----------- ------------ ------------ ------------
Loss before provision for income
taxes, extraordinary item and
cumulative effect of change
in accounting (4,055,790) (3,469,031) (10,207,510) (8,727,464) (41,633,935)
Provision for income taxes (485) (729) (4,626) (1,539) (29,772)
----------- ----------- ------------ ------------ ------------
Loss before extraordinary item
and cumulative effect of
change in accounting (4,056,275) (3,469,760) (10,212,136) (8,729,003) (41,663,707)
Extraordinary item - reduction of
income taxes arising from
carryforward of prior
years' operating losses 22,296
Cumulative effect of change in
accounting (1,041,047)
----------- ----------- ------------ ------------ ------------
Net loss (4,056,275) (3,469,760) (10,212,136) (8,729,003) $(42,682,458)
============
Other comprehensive income:
Foreign currency translation
adjustment 17,650 19,460
Unrealized gain on marketable
debt securities,
available-for-sale 47,221 7,112 36,711 17,708
----------- ----------- ------------ ------------
Total other comprehensive income 64,871 7,112 56,171 17,708
----------- ----------- ------------ ------------
Comprehensive loss $(3,991,404) $(3,462,648) $(10,155,965) $ (8,711,295)
=========== =========== ============ ============
Basic and diluted loss per
common share--
Net loss per common share $ (0.42) $ (0.36) $ (1.06) $ (0.92)
=========== =========== ============ ============
Weighted average shares outstanding 9,631,302 9,509,539 9,595,081 9,485,720
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral
part of the financial statements
3
<PAGE> 5
ANESTA CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
----------
<TABLE>
<CAPTION>
Nine months ended
------------------------------------ Period from inception
September 30, September 30, (August 1, 1985) to
1998 1997 September 30, 1998
------------ ------------ ---------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(10,212,136) $ (8,729,003) $(42,682,458)
Adjustments to reconcile net loss to net cash
used in operating activities:
Cumulative effect of accounting change 1,041,047
Depreciation and amortization 224,272 177,988 1,321,423
Debt conversion expense 101,330
Interest converted to equity 94,104
Compensatory stock options and stock 3,539
Loss on retirement of assets 3,778 859 78,401
Increase (decrease) due to changes in:
Accounts receivable (129,274) (19,781) (212,137)
Prepaid expenses and other current assets 104,792 (336,105) (323,698)
Other assets (6,746) (680,811) (214,593)
Accounts payable (78,682) 40,217 354,984
Accrued liabilities 204,476 350,079 934,453
Unearned revenues 52,500 402,500
------------ ------------ ------------
Net cash used in operating activities (9,837,020) (9,196,557) (39,101,105)
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures (93,126) (98,871) (3,308,505)
Proceeds from sale of assets 50 25 11,896
Costs associated with license agreements (1,109,533)
Advances to employees (1,650)
Purchase of marketable debt securities,
available-for-sale (14,404,574) (6,191,468) (66,786,358)
Maturities of marketable debt securities,
available-for-sale 18,775,551 4,979,783 53,271,627
Purchase of treasury bills (1,174,419)
Proceeds from maturity of treasury bills 1,174,419
Purchase of certificate of deposit (816,000) (2,346,000)
Proceeds from maturity of certificate of deposit 255,000 153,000 561,000
------------ ------------ ------------
Net cash provided by (used in) investing activities 4,532,901 (1,973,531) (19,707,523)
------------ ------------ ------------
Cash flows from financing activities:
Principal payments on notes payable (250,000) (150,000) (587,500)
Proceeds from issuance of notes payable 800,000 3,337,700
Principal payments on obligations under capital leases (194,488)
Proceeds from issuance of common stock 496,192 455,838 60,903,519
Collections on notes receivable from
issuance of common stock 65,000
Proceeds from issuance of preferred stock 756,222
Deferred offering costs (277,103)
Dividends paid on preferred stock (491,884)
------------ ------------ ------------
Net cash provided by financing activities 246,192 1,105,838 63,511,466
------------ ------------ ------------
Effect of exchange rate changes on cash 19,460 19,460
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (5,038,467) (10,064,250) 4,722,298
Cash and cash equivalents at beginning of period 9,760,765 22,807,608
------------ ------------ ------------
Cash and cash equivalents at end of period $ 4,722,298 $ 12,743,358 $ 4,722,298
============ ============ ============
</TABLE>
- Continued -
The accompanying notes are an integral
part of the financial statements
4
<PAGE> 6
ANESTA CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS, Continued
(Unaudited)
----------
<TABLE>
<CAPTION>
Nine months ended
------------------------------------ Period from inception
September 30, September 30, (August 1, 1985) to
1998 1997 September 30, 1998
------------- ------------- ---------------------
<S> <C> <C> <C>
Supplemental schedule of noncash activities:
The Company issued stock and stock options for:
Purchase of additional license agreement $ 5,400
Notes receivable 71,000
The Company purchased leasehold improvements
using accounts payable 251,507
The Company entered into various capital lease
arrangements 204,610
The Company received stock as payment of a
note receivable 4,226
The Company converted senior promissory notes,
demand notes and interest to voting preferred stock 1,000,200
</TABLE>
The accompanying notes are an integral
part of the financial statements
5
<PAGE> 7
ANESTA CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
----------
1. Significant Accounting Policies:
In the opinion of management, the accompanying financial statements
contain all adjustments (consisting only of normal recurring items)
necessary to present fairly the financial position of Anesta Corp. (a
development stage company) (the Company) as of September 30, 1998, the
results of its operations for the three and nine months ended September
30, 1998 and 1997 and for the period from inception (August 1, 1985) to
September 30, 1998, and its cash flows for the nine months ended
September 30, 1998 and 1997 and for the period from inception (August
1, 1985) to September 30, 1998. The results of operations for the
periods presented are not necessarily indicative of the results to be
expected for the full year period.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the
Company's Annual Report on Form 10-K for the period ended December 31,
1997 and quarterly reports on Form 10-Q for the periods ended June 30,
1998 and March 31, 1998.
Net Loss Per Share
Basic and diluted earnings per share are computed in accordance with
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings
per Share (EPS). Basic EPS excludes dilution and is computed by
dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution from securities or
contracts to issue common stock. Common equivalent shares are excluded
from the computation of diluted EPS when their effect is antidilutive.
As of September 30, 1998, options to purchase 1,640,610 shares of
common stock at prices between $5.00 and $19.25 per share were
outstanding. As of September 30, 1997, options to purchase 1,018,550
shares of common stock at prices between $0.80 and $19.25 were
outstanding. None of these options were included in the computation of
diluted loss per share because the effect would have been antidilutive.
2. Cash and Cash Equivalents and Marketable Debt Securities:
At September 30, 1998, the Company maintained a majority of its cash
and cash equivalents and marketable debt securities in two banks in San
Francisco, California.
3. Income Taxes:
The provision for income taxes for the three and nine months ended
September 30, 1998 and 1997 is related solely to state income taxes.
4. Revolving/Term Promissory Note Agreements:
On January 11, 1995, the Company entered into a revolving/term
promissory note in the amount of $1.5 million. On May 15, 1995, the
term of the revolving promissory note ended and the Company entered
into a 10 year term note in the amount of $1.5 million. Additionally,
on March 20, 1997, the
6
<PAGE> 8
ANESTA CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS, Continued
(Unaudited)
----------
4. Revolving/Term Promissory Note Agreements, Continued
Company entered into an 8 year term note for an additional $800,000,
for a total of $2.3 million. The agreements provide for a constant
interest rate of "160 basis points" above the financial institution's
certificate of deposit rate (5.60% at September 30, 1998). As of
September 30, 1998 three payments totaling $550,000 had been made
leaving a balance of $1,750,000. Annual payments in the amount of
$250,000 will be made on approximately July 15 for the next 7 years
beginning on July 15, 1999. Borrowings under the agreement are
collateralized by a certificate of deposit in the amount of $1,785,000,
which is maintained in a bank in Salt Lake City, Utah.
5. Collaborative Relationships:
Effective October 12, 1995, the Company entered into an amendment to a
prior agreement between Abbott International (A.I.) and the Company to
provide the Company the right to terminate or cause to become
nonexclusive A.I.'s license rights to OT-fentanyl products in one or
more countries in the world except the U.S. The amendment also
eliminated $100,000 of the $450,000 unearned advance royalty
obligation, which amount was recognized as royalty revenue during the
year ended December 31, 1995. In January 1998, the Company exercised
its right to terminate A.I.'s license rights to OT-fentanyl products in
all countries in the world except the U.S. As the Company receives
payments related to international partnering for OT-fentanyl products,
the Company is obligated to make certain payments to A.I. until the
remaining $350,000 has been fully repaid, at which time such payments
to A.I. will cease. As of September 30, 1998, the Company had made
payments of $122,500, leaving a balance of $227,500 owed to A.I.
On January 28, 1998, the Company announced the signing of an exclusive
agreement with Grupo Ferrer (Ferrer) for the marketing, sales and
distribution of Anesta's OT-fentanyl product line, including Actiq(R),
in Spain and Portugal. Under terms of the agreement, Ferrer made a
payment to the Company and will have exclusive rights in Spain and
Portugal to market and distribute Actiq and certain other product
applications of OT-fentanyl which will be manufactured for Ferrer by
Anesta. The Company does not believe commercial manufacturing will
begin before December 31, 1999. Grupo Ferrer is a leading private
Spanish pharmaceutical company.
On June 4, 1998, the Company announced the signing of an exclusive
agreement with Laboratoire L. Lafon (Lafon) for the marketing, sales
and distribution of Anesta's OT-fentanyl product line, including Actiq,
in France. Under terms of the agreement, Lafon made a payment to the
Company and will have exclusive rights in France to market and
distribute Actiq and certain other product applications of OT-fentanyl
which will be manufactured for Lafon by Anesta. The Company does not
believe commercial manufacturing will begin before December 31, 1999.
Lafon is a leading private French pharmaceutical company.
6. Actiq Approval:
On November 5, 1998 the Company announced that the U.S. Food and Drug
Administration (FDA) had cleared Actiq (oral transmucosal fentanyl
citrate) for the management of breakthrough cancer pain in patients
with malignancies who are already receiving and who are tolerant to
opioid therapy. Actiq is expected to be available during March 1999.
7
<PAGE> 9
ANESTA CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS, Continued
(Unaudited)
---------
7. Stockholders' Equity:
The table below presents the activity in stockholders' equity from
January 1, 1998 to September 30, 1998:
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated Accumulated
------------------------------------- During the Other
Paid-in Development Comprehensive
Shares Amount Capital Stage Income (Loss) Total
--------- ------ ------------ ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 9,551,465 $9,551 $ 62,142,239 $ (32,962,206) $ 8,407 $ 29,197,991
Exercise of stock options in
Jan. 1998 for cash and stock
(at $0.80 to $13.50 per share) 8,916 9 (19,580) (19,571)
Exercise of stock options in
Feb. 1998 for cash
(at $1.00 to $16.50 per share) 5,577 6 54,751 54,757
Exercise of stock options in
Mar. 1998 for cash
(at $5.00 to $14.125 per share) 3,857 4 30,726 30,730
Exercise of stock options in
Apr. 1998 for cash
(at $1.00 to $11.00 per share) 10,178 10 49,928 49,938
Exercise of stock options in
May 1998 for cash
(at $1.00 to $12.75 per share) 8,376 8 58,831 58,839
Exercise of stock options in
June 1998 for cash
(at $1.00 to $14.125 per share) 8,943 9 73,966 73,975
Exercise of stock options in
July 1998 for cash
(at $1.00 to $14.125 per share) 4,698 5 33,139 33,144
Exercise of stock options in
August 1998 for cash
(at $1.00 to $14.125 per share) 41,199 41 154,958 154,999
Exercise of stock options in
September 1998 for cash
(at $1.00 to $14.125 per share) 5,478 5 59,376 59,382
Net loss (10,212,136) (10,212,136)
Other comprehensive income 56,171 56,171
--------- ------ ------------ ------------- --------- ------------
Balance at September 30, 1998 9,648,687 $9,648 $ 62,638,334 $ (43,174,342) $ 64,578 $ 19,538,218
========= ====== ============ ============= ========= ============
</TABLE>
8
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements which involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors discussed in this section. Additional risks and uncertainties are
described in the Company's most recently filed Annual Report on Form 10-K for
the fiscal year ended December 31, 1997.
RESULTS OF OPERATIONS
Revenues.
Total revenues increased by $27,400 or 53.0% for the three months ended
September 30, 1998 as compared to the corresponding period in 1997 and by
$218,700 or 194.1% for the nine months ended September 30, 1998 as compared to
the corresponding period in 1997. The increase for the three months ended
September 30, 1998 is a result of the growth in the number of new orders and
reorders of the Company's first oral transmucosal product, Fentanyl Oralet(R).
The increase for the nine months ended September 30, 1998 is primarily a result
of new collaborative relationships for Spain, Portugal and France (See Note 5 to
Financial Statements).
On November 4, 1998 the FDA cleared Actiq for marketing. It is indicated only
for the management of breakthrough cancer pain in patients with malignancies who
are already receiving and who are tolerant to opioid therapy. Actiq is expected
to be available during March 1999. Under the Company's agreements with Abbott
Laboratories (Abbott), Abbott manufactures Anesta's OT-fentanyl product line
(Fentanyl Oralet and Actiq) and sells these products to the Company at a price
which reflects Abbott's cost of manufacturing. The Company then sells the
products to Abbott at a price related to Abbott's selling price which results in
a gross profit to the Company ranging from approximately 40-70%. In addition,
the Company is entitled to receive a royalty on OT-fentanyl product sales by
Abbott.
Operating Expenses.
Research and development expenses increased by $171,300 or 8.5% for the three
months ended September 30, 1998 as compared to the corresponding period in 1997
and by $415,200 or 7.8% for the nine months ended September 30, 1998 as compared
to the corresponding period in 1997. The increase is due to higher expenditures
in 1998 related to clinical research programs and for the preparation, filing
and support of the amendment for the Actiq New Drug Application (NDA). The
Company expects that its research and development expenses will increase in the
future as a result of increased expenses related to the hiring of additional
personnel, preclinical studies, clinical trials, product development and
manufacturing process development activities.
Depreciation and amortization expense increased by $11,900 or 20.2% for the
three months ended September 30, 1998 as compared to the corresponding period in
1997 and by $46,300 or 26.0% for the nine months ended September 30, 1998 as
compared to the corresponding period in 1997. The increase in 1998 is due to the
Company's remodeling of additional facilities near the end of 1997.
Marketing, general and administrative expenses increased by $178,200 or 9.5% for
the three months ended September 30, 1998 as compared to the corresponding
period in 1997 and by $644,000 or 13.6% for the nine months ended September 30,
1998 as compared to the corresponding period in 1997. The increase in marketing,
general and administrative expenses is due primarily to higher expenditures for
personnel, corporate development activities, European operations, marketing
research, and Actiq pre-launch marketing activities. The Company expects that
its marketing and general and administrative expenses will increase in the
future as a result of the increased support required for marketing research,
Actiq pre-launch market development and market launch activities, European
operations including international clinical research studies and corporate
development activities.
9
<PAGE> 11
Non Operating Income (Expense).
Interest income decreased by $247,700 or 51.7% for the three months ended
September 30, 1998 as compared to the corresponding period in 1997 and by
$562,500 or 36.5% for the nine months ended September 30, 1998 as compared to
the corresponding period in 1997. The decrease is primarily due to a reduction
in the amount of invested funds.
Interest expense decreased by $3,100 or 8.1% for the three months ended
September 30, 1998 as compared to the corresponding period in 1997 and increased
by $11,200 or 11.8% for the nine months ended September 30, 1998 as compared to
the corresponding period in 1997. The decrease and the increase are primarily
due to borrowings under the term note and related payments thereon (See Note 4
to Financial Statements).
Income Taxes.
The provision for income taxes in 1998 and 1997 relates solely to state income
taxes. The Company recognized no tax benefit from its losses in those years.
Net Loss.
As a result of the increase in total revenues, the increase in research and
development activities, the increase in marketing, general and administrative
expenses and other factors discussed above, the net loss for the three months
ended September 30, 1998 was $4,056,300 or $0.42 per share as compared to
$3,469,800 or $0.36 per share for the same period in 1997. The net loss for the
nine months ended September 30, 1998 was $10,212,136 or $1.06 per share as
compared to $8,729,003 or $0.92 per share for the same period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company had cash and cash equivalents totaling
$4,722,300, $1,785,000 in a certificate of deposit used as collateral for a
revolving/term loan (See Note 4 to Financial Statements) and $13,541,400 in
marketable debt securities which are available for sale. Thus cash, cash
equivalents, certificate of deposit and marketable debt securities totaled
$20,048,743 as of September 30, 1998. Cash in excess of immediate requirements
is invested according to the Company's investment policy, which provides
guidelines with regard to liquidity and return, and, wherever possible, seeks to
minimize the potential effects of concentration of credit risk.
The Company used cash in operating activities of $9,837,000 for the nine months
ended September 30, 1998 compared to $9,196,600 for the corresponding period in
1997. The increase in cash used in the period is a direct result of the increase
in net loss, offset by lower working capital requirements in 1998.
During the nine months ended September 30, 1998, the Company made capital
expenditures of approximately $93,100 as compared to capital expenditures of
$98,900 during the corresponding period in 1997. During the nine months ended
September 30, 1998, the Company received net proceeds from the maturity of
marketable debt securities of $4,371,000. This compares to a net increase in
marketable debt securities of $1,211,700 during the corresponding period in
1997. During the nine months ended September 30, 1997 the Company purchased a
certificate of deposit in the amount of $816,000, of which, $255,000 matured in
1998 and $153,000 in 1997.
10
<PAGE> 12
During the nine months ended September 30, 1998, the Company realized cash
proceeds of $496,200 relating to the exercise of stock options. During the nine
months ended September 30, 1997 the Company realized cash proceeds of $455,800
relating to the exercise of stock options and $800,000 from issuance of notes
payable (See Note 4 to Financial Statements). During the nine months ended
September 30, 1998 and 1997, the Company made principal payments on notes
payable of $250,000 and $150,000 respectively.
The Company's future capital requirements could be substantial and will depend
on, and could increase as a result of, many factors, including progress of the
Company's research and development programs; the results and costs of
preclinical and clinical testing of the Company's products, if developed; the
time and costs involved in obtaining regulatory approvals; the costs involved in
filing patents; the time and costs involved in developing and maintaining
collaborative research relationships; the costs associated with potential
commercialization of its products; and administrative and legal costs.
The Company believes that it is prudent to monitor existing cash balances in
order to fund the activities which the Company believes are necessary to
continue its growth. Therefore, the Company periodically evaluates market
conditions and various financing alternatives for obtaining funds to augment
existing cash balances.
Year 2000 Compliance.
Many currently installed computer systems are unable to distinguish between the
year 1900 and the year 2000. This is commonly known as the Year 2000 ("Y2K")
issue. As a result, business entities are at risk for possible miscalculations
or systems failures causing disruptions in their business operations.
The Company utilizes management information systems and software technology that
may be affected by Y2K issues throughout its business. During fiscal 1998, the
Company began to implement plans to ensure those systems continue to meet
internal and external requirements. The Company currently uses vendor supplied
finance and accounting software and as of September 30, 1998 the Company had
received written confirmation that all finance and accounting software is Y2K
compliant. The Company's information systems group continues to review
additional information technology systems and non-information technology systems
to determine the extent of any changes that may be necessary and believes that
there will be minimal changes needed for Company Y2K compliance by June 30,
1999.
The Company has contacted key suppliers and customers regarding their Y2K
compliance to determine any impact on operations. In general, the suppliers and
customers have developed or are in the process of developing plans to address
Y2K issues. The Company will continue to monitor and evaluate the progress of
its suppliers and customers on this critical matter.
Based on the progress the Company has made in addressing its Y2K issues and the
Company's plan and timeline to complete its compliance program, the Company does
not foresee significant risks associated with its Y2K compliance at this time.
However, the Company will continue to contact its key suppliers and customers in
an effort to minimize any potential Y2K compliance impact as it is not possible
to guarantee their compliance. As the Company's plan is to address its
significant Y2K issues prior to being affected by them, it has not developed a
comprehensive contingency plan. However, if the Company identifies significant
risks related to its Y2K compliance or its progress deviates from the
anticipated timeline, the Company will develop contingency plans as deemed
necessary at that time.
Other Matters.
The Company has reviewed all other recently issued, but not yet adopted,
accounting standards in order to determine their effects, if any, on the results
of operations or financial position of the Company. Based on that review, the
Company believes that none of these pronouncements will have a significant
effect on current or future earnings or operations.
11
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
On November 5, 1998 the Company released the following press release:
U.S. FDA Clears Actiq for Breakthrough Cancer Pain
First Product Approved
For Treating Breakthrough Cancer Pain
Salt Lake City, UT -- November 5, 1998 -- Anesta Corp. (Nasdaq: NSTA) announced
today that the U.S. Food and Drug Administration (FDA) has cleared Actiq(R)
(oral transmucosal fentanyl citrate) for marketing. Actiq is the first product
specifically designed and studied for breakthrough cancer pain. It is indicated
only for the management of breakthrough cancer pain in patients with
malignancies who are already receiving and who are tolerant to opioid therapy.
Breakthrough cancer pain is a flare of severe cancer pain, which "breaks
through" the medication that is being administered at regular intervals for
persistent cancer pain.
Breakthrough cancer pain is a component of chronic cancer pain that is
particularly difficult to treat due to its severity, rapid onset and frequent
unpredictability. Approximately 50 percent of all cancer pain patients, more
than 800,000 patients in the United States, experience breakthrough cancer pain.
Actiq is contraindicated in the management of acute or postoperative pain and
must not be used in opioid non-tolerant patients. It is intended to be used only
in the care of cancer patients by oncologists and pain specialists who are
skilled in the use of Schedule II opioids to treat cancer pain. The most common
adverse events observed with product use in breakthrough cancer pain patients
are somnolence, nausea, vomiting and dizziness, which are generally associated
with opioid therapy.
"We believe that Actiq will provide a valuable new tool for clinicians to help
cancer patients control their breakthrough cancer pain," said Thomas B. King,
Anesta's president and chief executive officer. "We have worked diligently with
the FDA to address their questions related to Actiq's careful use in the home
setting, clinical results, data analysis, and manufacturing information. Actiq
is expected to be available during March 1999."
The introduction and marketing of Actiq will be accompanied by a comprehensive
risk management program of educational and safe use messages which inform health
care professionals, patients and their families of proper use, storage, handling
and disposal of the product. This program is designed to address potential risk
situations; accidental ingestion by children, improper patient selection and
diversion or abuse. The most clinically meaningful adverse event concern is the
potential for respiratory depression. As with all strong pain medicines, steps
must be taken to prevent access to Actiq by anyone other than the person for
whom the product was prescribed.
12
<PAGE> 14
Abbott Laboratories (NYSE: ABT) will market Actiq, which will be available only
by prescription for cancer patients who are already receiving opioid analgesic
therapy. "We have partnered with Anesta Corp. since 1989, for their OT-fentanyl
product line," said Richard A. Gonzalez, senior vice president, hospital
products at Abbott. "We are extremely pleased to move forward with this exciting
new product for breakthrough cancer pain, expanding Abbott's offering of pain
management and oncology products."
Anesta is a leader in oral transmucosal drug delivery. The company's first oral
transmucosal product, Fentanyl Oralet(R), is cleared for marketing by the FDA
for use in surgical premedication and for sedation/analgesia prior to diagnostic
or therapeutic procedures in hospital settings. Other products in clinical
development using Anesta's OT-system for drug delivery include OT-nicotine for
smoking cessation and OT-etomidate for short-acting sedation.
Further information is available on the Anesta homepage at
http://www.anesta.com.
This news release contains forward looking statements regarding the anticipated
date of product availability that involve risk and uncertainties. Future events
may differ materially from those discussed herein, due to a number of factors,
including uncertainties related to manufacturing, timing of product
introduction, and regulatory action, as well as other factors which are more
fully discussed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
b) REPORTS ON FORM 8-K.
None.
13
<PAGE> 15
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: November 20, 1998 ANESTA CORP.
By: /s/ Thomas B. King
------------------------------------
Thomas B. King, President and
Chief Executive Officer
(Authorized Signatory)
By: /s/ Roger P. Evans
------------------------------------
Roger P. Evans, Vice President-
Finance and Administration
(Principal Accounting Officer)
14
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<FISCAL-YEAR-END> DEC-31-1998
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0
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