<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
-----
Exchange Act of 1934. For the quarterly period ended June 30, 1999.
____ 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 13,252,703
Class Outstanding at August 6, 1999
<PAGE>
ANESTA CORP.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
--------
<S> <C>
Balance Sheets -
June 30, 1999 (unaudited) and December 31, 1998 2
Statements of Operations and Comprehensive Loss -
for the three and six months ended June 30, 1999 and
1998 (unaudited) and the period from inception (August 1, 1985)
to June 30, 1999 (unaudited) 3
Statements of Cash Flows -
for the six months ended June 30, 1999 and 1998 (unaudited)
and the period from inception (August 1, 1985) to
June 30, 1999 (unaudited) 4
Notes to Financial Statements (unaudited) 6
Management's Discussion and Analysis of
Financial Condition and Results
of Operations 10
PART II. OTHER INFORMATION 14
SIGNATURES 15
</TABLE>
1
<PAGE>
ANESTA CORP.
(A Development Stage Company)
BALANCE SHEETS
-----------
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1999 1998
------------ -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 26,501,951 $55,889,226
Current portion of certificate of deposit 255,000 255,000
Marketable debt securities,
available-for-sale 46,713,581 24,661,040
Accounts receivable 1,063,765 276,476
Prepaid expenses and other current assets 1,349,469 194,802
------------ -----------
Total current assets 75,883,766 81,276,544
------------ -----------
Property and equipment, at cost:
Furniture and equipment 970,834 947,598
Leasehold improvements 2,390,730 2,330,136
Accumulated depreciation (1,285,764) (1,151,126)
------------ -----------
2,075,800 2,126,608
------------ -----------
Other assets:
Certificate of deposit 1,530,000 1,530,000
Other assets 223,189 196,202
------------ -----------
1,753,189 1,726,202
------------ -----------
Total assets $ 79,712,755 $85,129,354
------------ -----------
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
----------- -------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 195,643 $ 1,478,521
Accrued liabilities:
Accrued compensation 527,453 1,117,909
Other 184,318 236,783
Current portion of notes payable 250,000 250,000
----------- -------------
Total current liabilities 1,157,414 3,083,213
Unearned revenues 1,061,898 526,796
Notes payable 1,500,000 1,500,000
----------- -------------
Total liabilities 3,719,312 5,110,009
----------- -------------
Stockholders' equity:
Common stock, par value, $.001 per
share; Authorized:
35,000,000 shares; Issued: 13,248,891
in 1999 and 13,054,934 in 1998 13,249 13,055
Additional paid-in capital 130,284,222 128,634,691
Deficit accumulated during the development stage (54,133,193) (48,679,075)
Accumulated other comprehensive income (loss) (170,835) 50,674
----------- -------------
Total stockholders' equity 75,993,443 80,019,345
----------- -------------
Total liabilities and stockholders' equity $79,712,755 $ 85,129,354
----------- -------------
</TABLE>
The accompanying notes are an integral
part of the financial statements
2
<PAGE>
ANESTA CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
---------
<TABLE>
<CAPTION>
Three months ended Six months ended Period from inception
---------------------------- ---------------------------
June 30, June 30, June 30, June 30, (August 1, 1985) to
1999 1998 1999 1998 June 30, 1999
------------ ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales $ 1,094,955 $ 36,299 $ 1,128,063 $ 75,085 $ 1,695,777
Royalty revenue 28,828 1,079 29,809 2,229 146,593
Revenues from contract research/license
agreements 450,000 175,000 621,148 175,000 11,075,783
------------ ------------ ------------ ------------ ----------------
Total revenues 1,573,783 212,378 1,779,020 252,314 12,918,153
------------ ------------ ------------ ------------ ----------------
Operating costs and expenses:
Cost of goods sold 361,813 9,812 371,007 20,709 544,582
Royalties 30,885 1,121 31,908 2,319 45,235
Research and development 2,506,145 1,677,150 4,712,785 3,593,201 44,075,174
Depreciation and amortization 74,468 76,487 147,517 153,535 1,540,909
Marketing, general and administrative 2,210,044 1,901,837 4,004,323 3,306,958 28,315,667
------------ ------------ ------------ ------------ ----------------
Total costs and expenses 5,183,355 3,666,407 9,267,540 7,076,722 74,521,567
------------ ------------ ------------ ------------ ----------------
Loss from operations (3,609,572) (3,454,029) (7,488,520) (6,824,408) (61,603,414)
Non operating income (expense):
Interest income 1,085,098 336,694 2,106,915 746,722 9,777,608
Interest expense (32,200) (38,844) (58,275) (70,300) (693,582)
Other 591 (3,192) 562 (3,733) (46,813)
------------ ------------ ------------ ------------ ----------------
Loss before provision for income
taxes, extraordinary item and
cumulative effect of change in
accounting (2,556,083) (3,159,371) (5,439,318) (6,151,719) (52,566,201)
Provision for income taxes (8,400) (3,275) (14,800) (4,141) (56,357)
------------ ------------ ------------ ------------ -----------------
Loss before extraordinary item and
cumulative effect of change in
accounting (2,564,483) (3,162,646) (5,454,118) (6,155,860) (52,622,558)
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 (2,564,483) (3,162,646) (5,454,118) (6,155,860) (53,641,309)
Other comprehensive income (loss):
Foreign currency translation adjustment (10,236) 1,810 (18,001) 1,810 (2,397)
Unrealized gain (loss) on marketable
debt securities, available-for-sale (142,401) 2,680 (203,508) (10,510) (168,438)
------------ ------------ ------------ ------------ -----------------
Total other comprehensive income
(loss) (152,637) 4,490 (221,509) (8,700) (170,835)
------------ ------------ ------------ ------------ -----------------
Comprehensive loss $ (2,717,120) $ (3,158,156) $ (5,675,627) $ (6,164,560) $ (53,812,144)
============ ============ ============ ============ =================
Basic and diluted loss per common share--
Net loss per common share $ (0.19) $ (0.33) $ (0.41) $ (0.64)
============ ============ ============ ============
Weighted average shares outstanding 13,220,051 9,588,558 13,170,944 9,581,348
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral
part of the financial statements
3
<PAGE>
ANESTA CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
--------
<TABLE>
<CAPTION>
Six months ended Period from inception
-----------------------------
June 30, June 30, (August 1, 1985) to
1999 1998 June 30, 1999
------------ ------------ ---------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(5,454,118) $ (6,155,860) $ (53,641,309)
Adjustments to reconcile net loss to net cash
used in operating activities:
Cumulative effect of change in accounting 1,041,047
Depreciation and amortization 147,517 153,535 1,540,909
Debt conversion expense 101,330
Interest converted to equity 94,104
Compensatory stock options and stock 3,539
(Gain) loss on retirement of assets (435) 3,778 78,011
Increase (decrease) due to changes in:
Accounts receivable (787,289) (84,777) (1,063,765)
Prepaid expenses and other current assets (1,154,667) (201,811) (1,349,469)
Other assets (26,987) (7,137) (225,767)
Accounts payable (966,459) (203,590) 195,643
Accrued liabilities (642,921) 25,450 711,771
Unearned revenues 535,102 140,000 1,061,898
----------- ------------ ---------------
Net cash used in operating activities (8,350,257) (6,330,412) (51,452,058)
----------- ------------ ---------------
Cash flows from investing activities:
Capital expenditures (96,762) (85,608) (3,420,327)
Proceeds from sales of assets 488 50 12,384
Costs associated with license agreements (1,109,533)
Advances to employees (1,650)
Purchase of treasury bills (1,174,419)
Proceeds from maturity of treasury bills 1,174,419
Purchase of marketable debt securities,
available-for-sale (45,078,675) (9,952,176) (126,386,341)
Maturities of marketable debt securities,
available-for-sale 22,822,626 16,768,658 79,485,918
Purchase of certificate of deposit (2,346,000)
Proceeds from maturity of certificate of deposit 561,000
----------- ------------ ---------------
Net cash provided by (used in) investing activities (22,352,323) 6,730,924 (53,204,549)
----------- ------------ ---------------
Cash flows from financing activities:
Proceeds from issuance of notes payable 3,337,700
Principal payments on notes payable (587,500)
Principal payments on obligations under capital (194,488)
Net proceeds from issuance of common stock 1,333,306 248,668 128,275,905
Collections on notes receivable from
issuance of common stock 65,000
Proceeds from issuance of preferred stock 756,222
Dividends paid on preferred stock (491,884)
----------- ------------ ---------------
Net cash provided by financing activities 1,333,306 248,668 131,160,955
----------- ------------ ---------------
Effect of exchange rate changes on cash (18,001) 1,810 (2,397)
----------- ------------ ---------------
Net increase (decrease) in cash and cash equivalents (29,387,275) 650,990 26,501,951
Cash and cash equivalents at beginning of period 55,889,226 9,760,765
----------- ------------ ---------------
Cash and cash equivalents at end of period $26,501,951 $ 10,411,755 $ 26,501,951
----------- ------------ ---------------
</TABLE>
-Continued-
The accompanying notes are an integral
part of the financial statements
4
<PAGE>
ANESTA CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS, Continued
(Unaudited)
--------
<TABLE>
<CAPTION>
Six months ended Period from inception
------------------------------
June 30, June 30, (August 1, 1985) to
1999 1998 June 30, 1999
------------ ------------- ---------------------
<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
</TABLE>
5
<PAGE>
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 June 30, 1999, the results of its operations
for the three and six months ended June 30, 1999 and 1998 and for the period
from inception (August 1, 1985) to June 30, 1999, and its cash flows for the
six months ended June 30, 1999 and 1998 and for the period from inception
(August 1, 1985) to June 30, 1999. 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, 1998 and the Company's
quarterly report on Form 10-Q for the quarter ended March 31, 1999.
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 June 30, 1999, options to purchase
1,322,487 shares of common stock at prices between $5.25 and $25.1875 per
share were outstanding. As of June 30, 1998, options to purchase 1,387,003
shares of common stock at prices between $1.00 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.
Capital Stock
-------------
On June 29, 1999, stockholders approved an Amendment to the Company's
Certificate of Incorporation increasing the Company's authorized shares from
15,000,000 to 35,000,000.
2. Cash, Cash Equivalents and Marketable Debt Securities:
-----------------------------------------------------
At June 30, 1999, the Company maintained a majority of its cash, 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 six months ended June 30,
1999 and 1998 is related solely to state income taxes.
6
<PAGE>
ANESTA CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS, Continued
(Unaudited)
_____________
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
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 June 30, 1999). As of June 30, 1999, 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. As of June 30, 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 August 31, 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 June 30, 1999, the Company had made
payments of $166,250, leaving a balance of $183,750 owed to A.I.
On January 28, 1998, the Company announced the signing of an exclusive
agreement with Grupo 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, Grupo Ferrer made a payment to the
Company in 1998, a portion of which will be recognized as revenue in future
years over the term of the agreement. The OT-fentanyl product line will be
manufactured for Grupo Ferrer by Anesta, however, 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 payments to the Company in 1998, a
portion of which will be recognized as revenue in future years over the term
of the agreement. The OT-fentanyl product line will be manufactured for
Lafon by Anesta, however, the Company does not believe commercial
manufacturing will begin before December 31, 1999. Lafon is a leading
private French pharmaceutical company.
On February 23, 1999, the Company announced the signing of an option
agreement with Novartis involving the Company's proprietary Oral
Transmucosal System (OTS) for drug delivery. Under terms of the agreement,
Novartis made a payment to the Company in 1999, which will be recognized
7
<PAGE>
ANESTA CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS, Continued
(Unaudited)
_________________
5. Collaborative Relationships, Continued
---------------------------
as revenue in over the term of the agreement. Novartis and the Company will
assess the world wide commercial opportunity of potential products which
combine the OTS with undisclosed compounds, with the goal of entering into
an exclusive licensing agreement.
On May 6, 1999, the Company announced the signing of an exclusive agreement
with Swedish Orphan AB for the marketing, sales and distribution of Anesta's
OT-fentanyl product line, including Actiq, for Scandinavia (Denmark,
Finland, Iceland, Norway, and Sweden). Under terms of the agreement, Swedish
Orphan made a payment to the Company which was recognized as revenue. The
OT-fentanyl product line will be manufactured for Swedish Orphan by Anesta,
however, the Company does not believe commercial manufacturing will begin
before December 31, 1999.
8
<PAGE>
ANESTA CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS, Continued
(Unaudited)
----------
6. Stockholders' Equity:
--------------------
The table below presents the activity in stockholders' equity from
January 1, 1999 to June 30, 1999:
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated Accumulated
-------------------------------------------
Additional 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, 1999 13,054,934 $ 13,055 $ 128,634,691 $ (48,679,075) $ 50,674 $ 80,019,345
Exercise of stock options in
Jan. 1999 for cash
(at $8.00 to $16.50 per share) 41,991 42 511,610 511,652
Exercise of stock options in
Feb. 1999 for cash
(at $5.25 to $14.125 per share) 11,629 12 80,940 80,952
Exercise of stock options in
Mar. 1999 for cash and stock
(at $5.25 to $14.125 per share) 51,479 51 293,430 293,481
Exercise of stock options in
Apr. 1999 for cash
(at $6.75 to $14.125 per share) 38,097 38 308,290 308,328
Exercise of stock options in
May 1999 for cash and stock
(at $5.25 to $14.125 per share) 15,004 15 177,897 177,912
Exercise of stock options in
June 1999 for cash and stock
(at $5.25 to $14.125 per share) 35,757 36 277,364 277,400
Net loss (5,454,118) (5,454,118)
Other comprehensive loss (221,509) (221,509)
---------- -------- ------------- ------------- --------- ------------
Balance at June 30, 1999 3,248,891 $ 13,249 $ 130,248,222 $ (54,133,193) $(170,835) $ 75,993,443
---------- -------- ------------- ------------- --------- ------------
</TABLE>
9
<PAGE>
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, 1998.
Results of Operations
Revenues.
Total revenues increased by $1,361,400 or 640.6% for the three months ended June
30, 1999 as compared to the corresponding period in 1998 and by $1,526,700 or
605.1% for the six months ended June 30, 1999 as compared to the corresponding
period in 1998. The increase is primarily a result of the U.S. launch of Actiq,
a new option agreement with Novartis involving the Company's proprietary OTS for
drug delivery, and a new agreement with Swedish Orphan AB involving the
Company's OT-fentanyl product line (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 was launched
by Abbott Laboratories (Abbott) on March 31, 1999. Under the Company's
agreements with 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 $829,000 or 49.4% for the three
months ended June 30, 1999 as compared to the corresponding period in 1998 and
by $1,119,600 or 31.2% for the six months ended June 30, 1999 as compared to the
corresponding period in 1998. The increase is due to higher expenditures in 1999
related to additional research and development programs, increased number of
personnel, manufacturing activities and continuing support for Actiq. 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,
manufacturing process development and clinical manufacturing activities.
Depreciation and amortization expense decreased by $2,000 or 2.6% for the three
months ended June 30, 1999 as compared to the corresponding period in 1998 and
by $6,000 or 3.9% for the six months ended June 30, 1999 as compared to the
corresponding period in 1998. The decrease is due to a larger number of fully
depreciated assets for the three and six months ended June 30, 1999 as compared
to the corresponding period in 1998.
Marketing, general and administrative expenses increased by $308,200 or 16.2%
for the three months ended June 30, 1999 as compared to the corresponding period
in 1998 and by $697,400 or 21.1% for the six months ended June 30, 1999 as
compared to the corresponding period in 1998. 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 market launch activities. The Company expects that its
marketing, general and administrative expenses will increase in the future as a
result of the increased support required for marketing research, Actiq market
launch activities, European operations and corporate development activities.
10
<PAGE>
Non Operating Income (Expense).
Interest income increased by $748,400 or 222.3% for the three months ended June
30, 1999 as compared to the corresponding period in 1998 and by $1,360,200 or
182.2% for the six months ended June 30, 1999 as compared to the corresponding
period in 1998. The increase is primarily due to invested net proceeds of
$64,478,400 from the Company's public offering in December 1998.
Interest expense decreased by $6,600 or 17.0% for the three months ended June
30, 1999 as compared to the corresponding period in 1998 and by $12,000 or 17.1%
for the six months ended June 30, 1999 as compared to the corresponding period
in 1998. The decrease is primarily due to lower borrowings under the term note
as a result of the related payments thereon (See Note 4 to Financial
Statements).
Income Taxes.
The provision for income taxes in 1999 and 1998 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, the increase in interest income and other factors discussed above, the
net loss for the three months ended June 30, 1999 was $2,564,483 or $0.19 per
share as compared to $3,162,646 or $0.33 per share for the same period in 1998.
The net loss for the six months ended June 30, 1999 was $5,454,118 or $0.41 per
share as compared to $6,155,860 or $0.64 per share for the same period in 1998.
Liquidity and Capital Resources
As of June 30, 1999, the Company had cash and cash equivalents totaling
$26,502,000, $1,785,000 in a certificate of deposit used as collateral for a
revolving/term loan (See Note 4 to Financial Statements) and $46,713,600 in
marketable debt securities which are available for sale. Thus cash, cash
equivalents, certificate of deposit and marketable debt securities totaled
$75,000,600 as of June 30, 1999. 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 $8,350,300 for the six months
ended June 30, 1999 compared to $6,330,400 for the corresponding period in 1998.
The increase in cash used in the period is a direct result of higher working
capital requirements in 1999.
During the six months ended June 30, 1999, the Company made capital expenditures
of approximately $96,800 as compared to capital expenditures of $85,600 during
the corresponding period in 1998. During the six months ended June 30, 1999, the
Company made net purchases of marketable debt securities of $22,256,000. This
compares to a net decrease in marketable debt securities of $6,816,500 during
the corresponding period in 1998.
During the six months ended June 30, 1999, the Company realized cash proceeds of
$1,333,300 relating to the exercise of stock options. During the six months
ended June 30, 1998 the Company realized cash proceeds of $248,700 relating to
the exercise of stock options.
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
11
<PAGE>
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
existing capital resources will be sufficient to meet the Company's capital
needs through at least the end of 2000.
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. The Company considers
its finance and accounting, clinical database, and laboratory data acquisition
and analysis software mission critical. The Company's information systems group
is finishing the assessment phase and beginning the remediation and testing
phases to ensure those systems, along with additional internal and external
systems, continue to meet its requirements. To date, one software system has
been identified which is not Y2K compliant and needs to be upgraded. The
Company believes that the cost of this upgrade will be less than $10,000. The
Company continually upgrades its software in the ordinary course of business,
thereby helping meet its Y2K requirements. The Company believes that the costs
associated with purchasing or upgrading other specific software systems to meet
the requirements of Y2K will be minimal. The Company's information systems
group continues to review non-information technology systems to determine the
extent of any changes that may be necessary and believes that there will be
minimal changes needed. As a result of the Company's growth, its phone system
has been replaced in order to provide adequate access for the Company's
requirements as well as being Y2K compliant. The Company believes all remaining
Y2K testing, internal reviews and updates, can be completed by October 31, 1999.
The Company continues to contact 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 actively monitor and evaluate the
progress of its suppliers and customers on this critical matter. Because of the
availability of alternative suppliers and the diversity of the Company's
customer base, the Company believes that any failure of any management
information systems or software technology at any supplier or customer which has
not responded to the Company's inquiries regarding Y2K compliance will not have
a material adverse effect on the Company.
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.
As of June 30, 1999, the Company has spent less than $10,000 on assessment and
remediation associated with the Y2K issue. However, the Company will continue
to discuss Y2K compliance issues with its key suppliers and customers in an
effort to minimize any potential Y2K compliance impact.
Although unlikely, the Company might be adversely affected by Y2K disruptions at
its customers and suppliers. To address this possibility, the Company plans to
accumulate sufficient supplies to conduct normal business operations for a
reasonable period of time. If the Company's preparations are insufficient, the
Company's business and financial condition would be materially and adversely
affected.
12
<PAGE>
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.
13
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on June 29, 1999, at which the
stockholders elected seven directors to each serve until the next annual meeting
of stockholders and until his successor is elected and has qualified or until
such director's death, resignation or removal. Stockholders also approved
amendments to the Company's Certificate of Incorporation, the 1993 Stock Option
Plan and the 1993 Non-Employee Directors' Stock Option Plan and stockholders
ratified the selection of PricewaterhouseCoopers LLP as independent accountants
of the Company for its fiscal year ending December 31, 1999. Votes were cast as
follows:
<TABLE>
<CAPTION>
Votes Against
Votes For Or Withheld Votes Abstained Broker Non-Votes
---------- ----------- --------------- ----------------
<S> <C> <C> <C> <C>
Election of Directors:
Thomas B. King 11,313,084 444,045 Not Applicable Not Applicable
Richard H. Leazer 11,325,546 431,583 Not Applicable Not Applicable
William C. Moeller 11,322,729 434,400 Not Applicable Not Applicable
Emanuel M. Papper 11,324,917 432,212 Not Applicable Not Applicable
Daniel L. Kisner 11,317,846 439,283 Not Applicable Not Applicable
Theodore H. Stanley 11,323,729 433,400 Not Applicable Not Applicable
Richard P. Urfer 11,325,629 431,500 Not Applicable Not Applicable
Approval of an amendment
to the Company's Certificate
of Incorporation 9,950,201 1,799,958 6,970 None
Approval of an amendment
to the Company's 1993
Stock Option Plan 5,847,485 4,244,185 14,203 1,651,256
Approval of an amendment
to the Company's 1993
Non-Employee Directors'
Stock Option Plan 8,918,761 1,172,409 14,703 1,651,256
Ratification of PricewaterhouseCoopers LLP
as independent accountants
for the fiscal year
ending December 31, 1999 11,750,658 3,901 2,570 None
</TABLE>
Item 5. Other Information
Notice of Deadlines for Stockholder Proposals for 2000 Proxy Statement
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2000 annual
meeting of stockholders pursuant to Rule 14a-8, "Shareholder Proposals," of the
Securities and Exchange Commission's Regulation 14A and the date after which
notice of a stockholder proposal submitted outside the procedures of Rule 14a-8
is considered untimely is February 28, 2000.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
(27) Financial Data Schedule
b) Reports on Form 8-K.
None.
14
<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 16, 1999 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)
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 26,502
<SECURITIES> 46,714
<RECEIVABLES> 1,064
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 75,884
<PP&E> 3,362
<DEPRECIATION> 1,286
<TOTAL-ASSETS> 79,713
<CURRENT-LIABILITIES> 1,157
<BONDS> 1,500
0
0
<COMMON> 13
<OTHER-SE> 75,993
<TOTAL-LIABILITY-AND-EQUITY> 79,713
<SALES> 1,128
<TOTAL-REVENUES> 1,779
<CGS> 371
<TOTAL-COSTS> 9,268
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58
<INCOME-PRETAX> (5,439)
<INCOME-TAX> 15
<INCOME-CONTINUING> (5,454)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,454)
<EPS-BASIC> (0.41)
<EPS-DILUTED> (0.41)
</TABLE>
