<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 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 0-24274
LA JOLLA PHARMACEUTICAL COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 33-0361285
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
6455 NANCY RIDGE DRIVE, SAN DIEGO, CA 92121
(Address of principal executive offices)
Registrant's telephone number, including area code: (858) 452-6600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $0.01
Warrants
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 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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, computed by reference to the closing price of such stock on the
Nasdaq Stock Market on January 31, 2000, was $78,542,398. The number of shares
of the Registrant's common stock, $.01 par value, outstanding at January 31,
2000 was 20,269,006.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates certain information by reference from the
Registrant's definitive proxy statement for its annual meeting of stockholders
held on May 11, 2000, which was filed on April 10, 2000.
The Registrant hereby amends the footnotes to the financial statements
included in Item 14 of its Annual Report on Form 10-K filed on February 25, 2000
as follows:
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
1. Financial Statements.
The following financial statements of La Jolla Pharmaceutical
Company are included in Item 8:
<TABLE>
<S> <C>
Report of Independent Auditors ........................................ F-1
Balance Sheets at December 31, 1999 and 1998........................... F-2
Statements of Operations for each of the three years in the periods
ended December 31, 1999, 1998 and 1997................................. F-3
Statements of Stockholders' Equity for each of the three years
in the periods ended December 31, 1999, 1998 and 1997.................. F-4
Statements of Cash Flows for each of the three years in the periods
ended December 31, 1999, 1998 and 1997................................. F-5
Notes to Financial Statements.......................................... F-6
</TABLE>
2. Financial Statement Schedules.
No financial statement schedules are required.
2
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3. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
3.1 Intentionally omitted
3.2 Amended and Restated Bylaws of the Company(14)
3.3 Amended and Restated Certificate of Incorporation of the
Company(14)
4.0 Rights Agreement dated as of December 3, 1998 between the Company
and American Stock Transfer & Trust Company(11)
4.1 Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock of the Company(13)
10.1 Intentionally omitted
10.2 Stock Option Agreement dated February 4, 1993 entitling Joseph
Stemler to purchase 35,000 shares of Common Stock(1) *
10.3 Intentionally omitted
10.4 Intentionally omitted
10.5 Intentionally omitted
10.6 Steven B. Engle Employment Agreement(1), Amendment No. 1(9) and
Amendment No. 2(15)*
10.7 Form of Directors and Officers Indemnification Agreement(1)
10.8 Intentionally omitted
10.9 Intentionally omitted
10.10 Option and Collaborative Research Agreement dated June 10, 1991
regarding certain compounds for potential treatment of muscular
dystrophies or myasthenia gravis between the Company and CepTor
Corporation(1)
10.11 Intentionally omitted
10.12 Intentionally omitted
10.13 Form of Employee Invention and Confidential Information
Agreement(1)
10.14 Industrial Real Estate Lease(1)
10.15 Intentionally omitted
10.16 Master Lease Agreement dated June 22, 1993 with Aberlyn Capital
Management Limited Partnership ("ACM") and related Agreements to
Issue Warrant with Warrants issued to ACM and Aberlyn Holding
Company, Inc.(1)
10.17 La Jolla Pharmaceutical Company 1989 Incentive Stock Option Plan
and 1989 Nonstatutory Stock Option Plan(1)*
10.18 Form of Stock Option Agreement under the 1989 Nonstatutory Stock
Option Plan(1)
10.19 Amended La Jolla Pharmaceutical Company 1994 Incentive Stock
Option Plan(13)*
10.20 Intentionally omitted
10.21 Letter of Agreement dated June 7, 1993 between the Company and
Vector Securities International regarding Vector's engagement as
financial advisor to the Company with respect to potential
corporate strategic alliances(1)
10.22 Intentionally omitted
</TABLE>
3
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<TABLE>
<S> <C>
10.23 Intentionally omitted
10.24 Intentionally omitted
10.25 Second Amendment to Lease dated June 30, 1994 by and between the
Company and BRE Properties, Inc.(2)
10.26 Intentionally omitted
10.27 Third Amendment to Lease dated January 26, 1995 by and between the
Company and BRE Properties, Inc.(3)
10.28 Intentionally omitted
10.29 Master Lease Agreement dated September 13, 1995 by and between the
Company and Comdisco Electronics Group(4)
10.30 Intentionally omitted
10.31 Agreement dated September 22, 1995 between the Company and Joseph
Stemler regarding option vesting(5)*
10.32 Intentionally omitted
10.33 Building Lease Agreement effective November 1, 1996 by and between
the Company and WCB II-S BRD Limited Partnership(6)
10.34 Master Lease Agreement dated December 20, 1996 by and between the
Company and Transamerica Business Credit Corporation(8)
10.35 License and Supply Agreement dated December 23, 1996 by and
between the Company and Abbott Laboratories(7),(8)
10.36 Stock Purchase Agreement dated December 23, 1996 by and between
the Company and Abbott Laboratories(8)
10.37 Intentionally omitted
10.38 Master Lease Agreement No. 2 dated June 23, 1998 by and between
the Company and Transamerica Business Credit Corporation(10)
10.39 William J. Welch Employment Agreement and Attachment A(12)*
10.40 Supplement to employment offer letter for Matthew Linnik,
Ph.D.(15)*
23.1 Consent of Independent Auditors(16)
27 Financial Data Schedule(15)
</TABLE>
---------------
* This exhibit is a management contract or compensatory plan or arrangement.
(1) Previously filed with the Company's Registration Statement on Form S-1 (No.
33-76480) as declared effective by the Securities and Exchange Commission
on June 3, 1994.
(2) Previously filed with the Company's quarterly report on Form 10-Q for the
quarter ended June 30, 1994 and incorporated by reference herein.
(3) Previously filed with the Company's quarterly report on Form 10-Q for the
quarter ended March 31, 1995 and incorporated by reference herein.
(4) Previously filed with the Company's quarterly report on Form 10-Q for the
quarter ended September 30, 1995 and incorporated by reference herein.
(5) Previously filed with the Company's annual report on Form 10-K for the
fiscal year ended December 31, 1995 and incorporated by reference herein.
(6) Previously filed with the Company's quarterly report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated by reference herein.
(7) Portions of the Exhibit 10.35 have been omitted and filed separately with
the Securities and Exchange Commission pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities Exchange Act of
1934.
4
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(8) Previously filed with the Company's annual report on Form 10-K for the
fiscal year ended December 31, 1996 and incorporated by reference herein.
(9) Previously filed with the Company's quarterly report on Form 10-Q for the
quarter ended June 30, 1997 and incorporated by reference herein.
(10) Previously filed with the Company's quarterly report on Form 10-Q for the
quarter ended June 30, 1998 and incorporated by reference herein.
(11) Previously filed with the Company's Registration Statement on Form 8-A (No.
000-24274) as filed with the Securities and Exchange Commission on December
4, 1998.
(12) Previously filed with the Company's annual report on Form 10-K for the
fiscal year ended December 31, 1998 and incorporated by reference herein
(13) Previously filed with the Company's quarterly report on Form 10-Q for the
quarter ended June 30, 1999 and incorporated by reference herein.
(14) Previously filed with the Company's quarterly report on Form 10-Q for the
quarter ended September 30, 1999 and incorporated by reference herein.
(15) Previously filed.
(16) Filed herein.
(b) Reports on Form 8-K:
None.
5
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Report of Independent Auditors
The Board of Directors and Stockholders
La Jolla Pharmaceutical Company
We have audited the accompanying balance sheets of La Jolla Pharmaceutical
Company as of December 31, 1999 and 1998, and the related statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of La Jolla Pharmaceutical Company
at December 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
San Diego, California
February 11, 2000
F-1
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La Jolla Pharmaceutical Company
Balance Sheets
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,409 $ 11,176
Short-term investments 6,994 12,174
Other current assets 464 517
-------- --------
Total current assets 11,867 23,867
Property and equipment, net 658 659
Patent costs and other assets, net 1,518 1,289
-------- --------
$ 14,043 $ 25,815
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 225 $ 1,254
Accrued expenses 520 575
Accrued payroll and related expenses 262 355
Current portion of obligations under capital leases 199 3
Deferred revenue - related party -- 1,769
-------- --------
Total current liabilities 1,206 3,956
Noncurrent portion of obligations under capital leases 44 --
Commitments
Stockholders' equity:
Preferred stock, $.01 par value; 8,000,000 shares authorized,
no shares issued or outstanding -- --
Common stock, $.01 par value; 100,000,000 shares authorized,
20,204,424 and 20,106,303 shares issued and outstanding at
December 31, 1999 and 1998, respectively 202 201
Additional paid-in capital 84,358 84,276
Accumulated deficit (71,767) (62,618)
-------- --------
Total stockholders' equity 12,793 21,859
-------- --------
$ 14,043 $ 25,815
======== ========
</TABLE>
See accompanying notes.
F-2
<PAGE> 8
La Jolla Pharmaceutical Company
Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Revenue from collaborative agreement -
related party $ 4,690 $ 8,600 $ 9,860
Expenses:
Research and development 11,686 14,627 14,676
General and administrative 2,944 3,076 2,937
-------- -------- --------
Total expenses 14,630 17,703 17,613
-------- -------- --------
Loss from operations (9,940) (9,103) (7,753)
Interest expense (20) (6) (56)
Interest income 811 1,232 1,441
-------- -------- --------
Net loss $ (9,149) $ (7,877) $ (6,368)
======== ======== ========
Basic and diluted net loss per share $ (0.45) $ (0.42) $ (0.36)
======== ======== ========
Shares used in computing basic and diluted
net loss per share 20,135 18,649 17,547
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 9
La Jolla Pharmaceutical Company
Statements of Stockholders' Equity
For the Years Ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
(In thousands) COMMON STOCK ADDITIONAL TOTAL
------------------ PAID-IN DEFERRED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT EQUITY
------ ------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 17,279 $173 $ 76,307 $(169) $(48,373) $ 27,938
Issuance of common stock 831 8 3,852 -- -- 3,860
Issuance of common stock under Employee
Stock Purchase Plan 41 1 150 -- -- 151
Exercise of stock options 9 -- 11 -- -- 11
Amortization of deferred compensation -- -- -- 123 -- 123
Adjustment to deferred compensation
for terminations -- -- (16) 16 -- --
Net loss -- -- -- -- (6,368) (6,368)
------ ---- -------- ----- -------- --------
Balance at December 31, 1997 18,160 182 80,304 (30) (54,741) 25,715
Issuance of common stock 1,538 15 3,767 -- -- 3,782
Issuance of common stock under Employee
Stock Purchase Plan 43 -- 128 -- -- 128
Exercise of stock options 365 4 85 -- -- 89
Amortization of deferred compensation -- -- -- 22 -- 22
Adjustment to deferred compensation
for terminations -- -- (8) 8 -- --
Net loss -- -- -- -- (7,877) (7,877)
------ ---- -------- ----- -------- --------
Balance at December 31, 1998 20,106 201 84,276 -- (62,618) 21,859
Issuance of common stock under
Employee Stock Purchase Plan 78 1 53 -- -- 54
Exercise of stock options 20 -- 29 -- -- 29
Net loss -- -- -- -- (9,149) (9,149)
------ ---- -------- ----- -------- --------
Balance at December 31, 1999 20,204 $202 $ 84,358 $ -- $(71,767) $ 12,793
====== ==== ======== ===== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 10
La Jolla Pharmaceutical Company
Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (9,149) $ (7,877) $ (6,368)
Adjustments to reconcile net loss to net cash used
for operating activities:
Depreciation and amortization 357 367 642
Write-off of patent costs -- -- 7
Write-off of property and equipment -- 8 76
Deferred compensation amortization -- 22 123
Changes in operating assets and liabilities:
Receivable - related party -- -- 4,000
Other current assets 53 141 434
Accounts payable and accrued expenses (1,084) (307) (509)
Accrued payroll and related expenses (93) (22) 83
Deferred revenue - related party (1,769) 492 1,277
-------- -------- --------
Net cash used for operating activities (11,685) (7,176) (235)
INVESTING ACTIVITIES
Purchases of short-term investments (12,289) (20,576) (21,842)
Sales of short-term investments 6,667 2,500 5,493
Maturities of short-term investments 10,802 20,881 18,991
Additions to property and equipment (180) (55) (124)
Deletions to property and equipment 275 -- --
Increase in patent costs and other assets (275) (258) (250)
-------- -------- --------
Net cash provided by investing activities 5,000 2,492 2,268
FINANCING ACTIVITIES
Net proceeds from issuance of common stock 83 217 162
Net proceeds from issuance of common stock to related party -- 3,782 3,860
Payments on obligations under capital leases (165) (138) (669)
-------- -------- --------
Net cash (used for) provided by financing activities (82) 3,861 3,353
-------- -------- --------
(Decrease) increase in cash and cash equivalents (6,767) (823) 5,386
Cash and cash equivalents at beginning of period 11,176 11,999 6,613
-------- -------- --------
Cash and cash equivalents at end of period $ 4,409 $ 11,176 $ 11,999
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 20 $ 6 $ 56
======== ======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Capital lease obligations incurred for property and equipment $ 405 $ -- $ --
======== ======== ========
Adjustment to deferred compensation for terminations $ -- $ 8 $ 16
======== ======== ========
See accompanying notes.
</TABLE>
F-5
<PAGE> 11
La Jolla Pharmaceutical Company
Notes to Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS ACTIVITY
La Jolla Pharmaceutical Company (the "Company") is a biopharmaceutical company
focused on the research and development of highly specific therapeutics for the
treatment of certain life-threatening antibody-mediated diseases. These
diseases, including autoimmune conditions such as systemic lupus erythematosus
("lupus") and antibody-mediated stroke, are caused by abnormal B cell production
of antibodies that attack healthy tissues. Current therapies for these
autoimmune disorders target the symptoms of the disease or nonspecifically
suppress the normal operation of the immune system, frequently resulting in
severe, adverse side effects and hospitalization. The Company's drug candidates,
called Toleragens(R), are designed to treat the underlying cause of many
antibody-mediated diseases without these severe, adverse side effects. The
Company's clinical drug candidate is known as LJP 394, a lupus treatment drug.
All of the Company's revenues to date have been primarily derived from its
former collaborative agreement with Abbott Laboratories ("Abbott"), a related
party (See Note 2). As part of its planned business operations, the Company
seeks to pursue collaborations with pharmaceutical companies in an effort to
access their research, drug development, manufacturing and financial resources.
Prior to generating product revenues, the Company must complete the development
of its products, including several years of clinical testing, and receive
regulatory approvals prior to selling these products commercially. There can be
no assurance that the Company's product development efforts with respect to LJP
394 or any other drug candidate will be successfully completed, that required
regulatory approvals will be obtained, or that any product, if introduced, will
be successfully marketed or achieve commercial acceptance. In addition, there
can be no assurance that the Company can successfully manufacture and market any
such products at prices that would permit the Company to operate profitably. In
May 1999, Abbott and the Company elected to stop enrollment and treatment of the
more than 200 patients enrolled in the jointly conducted Phase II/III clinical
trial of LJP 394. In September 1999, Abbott and the Company terminated their
agreement and all rights to LJP 394 were returned to the Company.
The Company actively seeks additional financing to fund its research and
development efforts and commercialize its technologies. There is no assurance
such financing will be available to the Company when required or that such
financing would be available under favorable terms.
The Company believes that patents and other proprietary rights are important to
its business. The Company's policy is to file patent applications to protect
technology, inventions and improvements to its inventions that are considered
important to the development of its business. The patent positions of
biotechnology firms, including the Company, are uncertain and involve complex
legal and factual questions for which important legal principles are largely
unresolved. There can be no assurance that any additional patents will be
issued, or that the scope of any patent protection will be sufficient, or that
any current or future issued patent will be held valid if subsequently
challenged.
F-6
<PAGE> 12
La Jolla Pharmaceutical Company
Notes to Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and disclosures made in
the accompanying notes to the financial statements. Actual results could differ
from those estimates.
RECLASSIFICATION
Certain amounts in the 1998 and 1997 financial statements have been reclassified
to conform with the 1999 presentation.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash and cash equivalents consist of cash and highly liquid investments which
include debt securities with remaining maturities when acquired of three months
or less and are stated at market. Short-term investments mainly consist of debt
securities with maturities greater than three months. Management has classified
the Company's cash equivalents and short-term investments as available-for-sale
securities in the accompanying financial statements. Available-for-sale
securities are stated at fair value, with unrealized gains and losses reported
as a separate component of stockholders' equity. Realized gains and losses and
declines in value judged to be other-than-temporary on available-for-sale
securities are included in interest income. The cost of securities sold is based
on the specific identification method. Interest and dividends on securities
classified as available-for-sale are included in interest income.
CONCENTRATION OF RISK
Cash, cash equivalents and short-term investments are financial instruments
which potentially subject the Company to concentrations of credit risk. The
Company deposits its cash in financial institutions. At times, such deposits may
be in excess of insured limits. The Company invests its excess cash in United
States Government securities and debt instruments of financial institutions and
corporations with strong credit ratings. The Company has established guidelines
relative to diversification of its cash investments and their maturities in an
effort to maintain safety and liquidity. These guidelines are periodically
reviewed and modified to take advantage of trends in yields and interest rates.
To date, the Company has not experienced any impairment losses on its cash, cash
equivalents and short-term investments.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. SFAS 133 is effective January 1, 2001. The adoption of this
statement is not expected to have a significant effect on the financial position
or results of operations of the Company.
F-7
<PAGE> 13
La Jolla Pharmaceutical Company
Notes to Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and depreciated using the straight-line
method over the estimated useful lives of the assets (primarily five years).
Leasehold improvements and equipment under capital leases are stated at cost and
amortized on a straignt-line basis over the shorter of the estimated useful life
or the lease term.
Property and equipment is comprised of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
------- -------
<S> <C> <C>
Laboratory equipment $ 3,279 $ 2,972
Computer equipment 297 291
Furniture and fixtures 108 134
Leasehold improvements 702 718
------- -------
4,386 4,115
Less: Accumulated depreciation and amortization (3,728) (3,456)
------- -------
$ 658 $ 659
======= =======
</TABLE>
IMPAIRMENT OF LONG-LIVED ASSETS
The Company records impairment losses on long-lived assets used in operations
when events and circumstances indicate that assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amount of those assets. The Company also records the assets to be
disposed of at the lower of their carrying amount or fair value less cost to
sell. To date, the Company has not experienced any impairment losses on its
long-lived assets used in operations. While the Company's current and historical
operating and cash flow losses are indicators of impairment, the Company
believes the future cash flows to be received support the carrying value of its
long-lived assets and accordingly, the Company has not recognized any impairment
losses as of December 31, 1999.
PATENTS
The Company has filed several patent applications with the United States Patent
and Trademark Office and in foreign countries. Legal costs and expenses incurred
in connection with pending patent applications have been deferred. Costs related
to successful patent applications are amortized using the straight-line method
over the lesser of the remaining useful life of the related technology or the
remaining patent life, commencing on the date the patent is issued. Accumulated
amortization at December 31, 1999 and 1998 was $166,000 and $120,000,
respectively. Deferred costs related to patent applications are charged to
operations at the time a determination is made not to pursue such applications.
F-8
<PAGE> 14
La Jolla Pharmaceutical Company
Notes to Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
As allowed under Statement of Financial Accounting Standard No. 123, "Accounting
and Disclosure of Stock-Based Compensation" ("SFAS 123"), the Company has
elected to continue to account for stock option grants in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations. Pursuant to APB 25,
compensation expense for employee or director stock options represents the
difference between the exercise price and the fair value of the common stock on
the date of grant. This compensation expense is amortized to expense in
accordance with FASB Interpretation No. 28 over the vesting period of the
options. The Company generally grants stock options for a fixed number of shares
to employees and directors with an exercise price equal to the fair value of the
shares at the date of grant and therefore, under APB 25, recognized no
compensation expense for such stock option grants.
Options or stock awards issued to non-employees have been determined in
accordance with SFAS 123 and EITF 96-18. Deferred charges for options granted to
non-employees are periodically remeasured as the options vest. There were no
options granted to non-employees or charges related to non-employee stock
options in the current period.
REVENUE RECOGNITION
Revenue from collaborative agreements typically consists of ongoing research and
development funding and milestone, royalty and other payments which are
nonrefundable. Revenue from ongoing research and development funding is recorded
as the expenses are incurred. Revenue from milestone, royalty and other payments
will be recognized when the achievement of the milestone criteria, royalty
generating events or other criteria according to the collaborative agreement
have occurred. Payments received in advance under these agreements are recorded
as deferred revenue until earned.
In December 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB
101"). SAB 101 formalizes the basic revenue recognition criteria that must be
met in order to record revenue. SAB 101 is required to be adopted in the second
quarter of 2000. The Company believes that the adoption of SAB 101 would not
have a material impact on the Company's financial statements.
NET LOSS PER SHARE
Basic and diluted net loss per share is computed using the weighted-average
number of common shares outstanding during the periods in accordance with
Statement of Financial Accounting Standard No. 128, "Earnings per Share". As the
Company has incurred a net loss for all three years presented, stock options and
warrants are not included in the computation of net loss per share since their
effect is anti-dilutive.
F-9
<PAGE> 15
La Jolla Pharmaceutical Company
Notes to Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMPREHENSIVE LOSS
Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive
Income (Loss)" ("SFAS 130"), requires that all components of comprehensive
income (loss), including net income (loss), be reported in the financial
statements in the period in which they are recognized. Comprehensive income
(loss) is defined as the change in equity during the period from transactions
and other events and circumstances from non-owner sources. Net income (loss) and
other comprehensive income (loss), including unrealized gains and losses on
investments, shall be reported, net of their related tax effect, to arrive at
comprehensive income (loss). The Company's comprehensive net loss and net loss
are the same and therefore the adoption of SFAS 130 did not have an impact on
the financial statements.
SEGMENT INFORMATION
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standard No. 131, "Segment Information" ("SFAS 131"). SFAS 131 redefines
segments and requires companies to report financial and descriptive information
about their operating segments. The Company has determined that it operates in
one business segment.
2. COLLABORATIVE AGREEMENTS
In December 1996, the Company entered into a collaborative agreement with
Abbott, a diversified health-care company. Under this agreement, in exchange for
an exclusive, worldwide license to market and sell LJP 394, Abbott agreed to pay
an initial nonrefundable license fee of $4,000,000 upon signing, and agreed to
fund the development of the Company's lupus drug candidate, LJP 394, in
accordance with a mutually agreed upon budget, and to make certain payments to
the Company upon the attainment of specific milestones, as well as royalty and
sales incentive payments to the Company on sales of LJP 394. The Company
retained worldwide manufacturing rights and ownership rights of all of its
patents relating to the drug. Under a separate stock purchase agreement, Abbott
also purchased common stock of the Company in December 1996, September 1997 and
October 1998 for an aggregate purchase price of $4,000,000 on each date at
values based on the reported last sale price of the common stock on each of the
20 trading days immediately preceding each purchase date. The stock purchase
agreement allows Abbott certain registration rights, allows the Company certain
rights of first refusal and contains no future performance obligations. Both
Abbott and the Company had the right to terminate the collaborative agreement
under certain circumstances. In September 1999, Abbott and the Company
terminated this collaborative agreement and all rights to LJP 394 were returned
to the Company following the May 1999 suspension of the jointly conducted Phase
II/III clinical trial of LJP 394.
Under the collaborative agreement with Abbott, the Company incurred research and
development costs of approximately $4,690,000, $8,600,000 and $9,860,000 during
the years ended December 31, 1999, 1998 and 1997, respectively, for the
development of LJP 394. In 1999, the Company recorded revenue of $4,690,000 from
Abbott for the development of LJP 394, of which $2,921,000 was received in cash
in 1999 and $1,769,000 was revenue recognized from previously deferred revenue.
In 1998, the Company received $9,077,000 from Abbott for the development of LJP
394, of which $8,600,000 was recorded as
F-10
<PAGE> 16
La Jolla Pharmaceutical Company
Notes to Financial Statements
2. COLLABORATIVE AGREEMENTS (CONTINUED)
revenue. In 1997, the Company received $11,137,000 from Abbott for the
development of LJP 394, of which $9,860,000 was recorded as revenue.
3. RESTRUCTURING CHARGES
As a result of the termination of the Company's collaborative agreement with
Abbott in September 1999, the Company restructured its operations in order to
reduce expenses and to focus its resources on its remaining potential drug
candidates. In September 1999, the Company recorded estimated restructuring
charges of approximately $742,000. When the restructuring was completed in
December 1999, actual total restructuring expenses paid and charged against the
restructuring liability were approximately $640,000 and approximately $108,000
of the estimated liability was reversed in November and December 1999. Total
restructuring expenses paid consisted of termination benefits paid to 38
employees terminated from various company departments, and are included in both
research and development and general and administrative expense. There were no
material changes to the restructuring liability subsequent to December 31, 1999.
4. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The following is a summary of the estimated fair value of available-for-sale
securities (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
------- -------
<S> <C> <C>
Money market accounts $ 570 $ 1,117
United States corporate debt securities 4,899 16,181
Government-asset-backed securities 4,500 5,000
------- -------
$ 9,969 $22,298
======= =======
</TABLE>
As of December 31, 1999 and 1998, the difference between cost and estimated fair
value of available-for-sale securities was not significant. Included in cash and
cash equivalents at December 31, 1999 and 1998 were $2,975,000 and $10,124,000,
respectively, of securities classified as available-for-sale. As of December 31,
1999, available-for-sale securities of $9,969,000 mature in one year or less.
5. COMMITMENTS
LEASES
In July 1992, the Company entered into a non-cancellable operating lease for the
rental of its office and research and development facilities, which expires in
July 2004. The lease is subject to an escalation clause that provides for annual
increases based on the Consumer Price Index. The lease also contains an option
to extend the lease term for an additional five years and a one-time
cancellation option effective any time after August 1, 1998 with the payment of
certain penalties. The lease also contains a construction allowance in the
amount of $1,434,000 for approved tenant improvements to the facility.
F-11
<PAGE> 17
La Jolla Pharmaceutical Company
Notes to Financial Statements
5. COMMITMENTS (CONTINUED)
In October 1996, the Company entered into a non-cancellable operating lease for
the rental of office and research and development facilities, which expires in
October 2001. The lease contains a provision for scheduled annual rent increases
and an option to extend the lease term for an additional five years. The lease
also contains a construction allowance in the amount of $168,000 for approved
tenant improvements to the facility.
The Company leases certain equipment under capital leases. The total amount of
equipment financed under these capital leases as of December 31, 1999 was
$564,000.
The Company leases certain other equipment and leasehold improvements under
operating leases. As of December 31, 1999, the total amount of equipment and
leasehold improvements financed under these operating leases was $5,908,000.
Annual future minimum lease payments as of December 31, 1999, which excludes
$885,000 for the effect of exercising the facility operating lease cancellation
option as management does not intend to exercise this cancellation option, are
as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEARS ENDED DECEMBER 31, LEASES LEASES
------------------------ --------- -------
<S> <C> <C>
2000 $2,260 $205
2001 1,475 44
2002 434 --
2003 18 --
2004 -- --
------ ----
Total $4,187 249
======
Less amount representing interest (6)
-----
Present value of net minimum lease payments 243
Less current portion (199)
-----
Noncurrent portion of capital lease obligations $ 44
=====
</TABLE>
Rent expense under all operating leases totaled $2,360,000, $2,179,000, and
$1,853,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
Equipment acquired under capital leases included in property and equipment
totaled $233,000 and $44,000 (net of accumulated amortization of $331,000 and
$152,000) at December 31, 1999 and 1998, respectively.
6. STOCKHOLDERS' EQUITY
PREFERRED STOCK
As of December 31, 1999, the Company is authorized to issue 8,000,000 shares of
preferred stock with a par value of $0.01 per share, in one or more series.
F-12
<PAGE> 18
La Jolla Pharmaceutical Company
Notes to Financial Statements
6. STOCKHOLDERS' EQUITY (CONTINUED)
The Board of Directors has designated 75,000 of preferred stock as nonredeemable
Series A Junior Participating Preferred Stock ("Series A Preferred Stock"). In
the event of liquidation, each share of Series A Preferred Stock is entitled to
receive a preferential liquidation payment of $1,000 per share plus the amount
of accrued unpaid dividends. The Series A Preferred Stock is subject to certain
anti-dilution adjustments, and the holder of each share is entitled to 1,000
votes, subject to adjustments. Cumulative quarterly dividends of the greater of
$0.25 or, subject to certain adjustments, 1,000 times any dividend declared on
shares of common stock, are payable when, as and if declared by the Board of
Directors, from funds legally available for this purpose.
COMMON STOCK
In May 1999, the Company increased the number of shares of common stock the
Company is authorized to issue to 100,000,000 shares with a par value of $0.01
per share.
WARRANTS
In connection with the Company's initial public offering ("IPO") in June 1994,
including the conversion of the principal and accrued interest on stockholder
bridge notes, the Company issued 3,823,517 redeemable warrants. The redeemable
warrant holders are entitled to purchase one-half of one share of common stock
for each warrant at an exercise price of $3.00 per one-half share. In May 1999,
the Company extended the expiration date of these warrants to June 3, 2000. The
warrants are redeemable only at the option of the Company. The Company is
entitled to redeem the warrants on not less than 30 days written notice at $0.05
per warrant if the average closing bid price of the common stock exceeds 150% of
the then-effective warrant exercise price for one share of common stock, over a
period of 20 consecutive trading days, ending within 15 days of the date of
notice of redemption. At December 31, 1999, 3,822,617 redeemable warrants were
outstanding to purchase 1,911,309 shares of common stock.
The terms of the stockholder bridge notes also provided for the granting of
additional warrants to the holders. Those additional warrants permit the holders
to purchase 166,697 shares of common stock at $5.00 per share. In May 1999, the
Company extended the expiration date of these warrants to June 3, 2000. At
December 31, 1999, warrants to purchase 154,460 shares of common stock were
outstanding.
Also in connection with the IPO, the Underwriter was granted the option to
purchase up to 260,000 additional shares of common stock and 260,000 redeemable
warrants to purchase one-half of one share of common stock at an exercise price
of $3.60 per one-half share. In May 1999, the Company extended the expiration
date of the purchase option to June 3, 2000. At December 31, 1999, warrants to
purchase 130,000 shares of common stock were outstanding.
There are no future performance obligations, or any stated or unstated rights or
privileges associated with the issuance of the above warrants.
As of December 31, 1999, 4,237,077 warrants were outstanding and 2,195,769
shares of common stock are reserved for issuance upon exercise of warrants.
F-13
<PAGE> 19
La Jolla Pharmaceutical Company
Notes to Financial Statements
6. STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTION PLANS
In May 1989, the Company adopted the 1989 Stock Option Plan and the 1989
Nonstatutory Stock Option Plan (the "1989 Plan"), under which 904,000 shares of
common stock have been authorized for issuance upon exercise of options granted
by the Company. The 1989 Plan expired in 1999.
In June 1994, the Company adopted the 1994 Stock Incentive Plan (the "1994
Plan"), under which 2,500,000 shares of common stock have been authorized for
issuance upon exercise of options granted by the Company. The 1994 Plan provides
for the grant of incentive and non-qualified stock options, as well as other
stock-based awards, to employees, consultants and advisors of the Company with
various vesting periods as determined by the compensation committee, as well as
automatic fixed grants to non-employee directors of the Company.
A summary of the Company's stock option activity and related data follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
-----------------------------
OPTIONS
AVAILABLE NUMBER OF PRICE PER
FOR GRANT SHARES SHARE
--------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31, 1996 327,542 1,715,084 $1.00-$8.31
Additional shares authorized 500,000 -- --
Granted (312,700) 312,700 $4.00-$5.38
Exercised -- (8,620) $1.00-$4.31
Cancelled 56,101 (56,101) $1.00-$7.88
--------- -----------
Balance at December 31, 1997 570,943 1,963,063 $1.00-$8.31
Granted (723,800) 723,800 $2.41-$4.38
Exercised -- (364,903) $1.00-$3.75
Cancelled 388,192 (388,192) $1.00-$7.88
--------- -----------
Balance at December 31, 1998 235,335 1,933,768 $1.00-$8.31
Additional shares authorized 750,000 -- --
Expired (225,743) -- --
Granted (905,206) 905,206 $0.34-$4.81
Exercised -- (19,919) $1.00-$4.75
Cancelled 559,204 (559,204) $1.00-$7.88
--------- -----------
Balance at December 31, 1999 413,590 2,259,851 $0.34-$8.31
========= ===========
</TABLE>
F-14
<PAGE> 20
La Jolla Pharmaceutical Company
Notes to Financial Statements
6. STOCKHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
1999 1998 1997
----------------------------- ----------------------------- -----------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
---------- ---------------- ---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding - beginning
of year 1,933,768 $3.75 1,963,063 $3.25 1,715,084 $3.00
Granted 905,206 $0.64 723,800 $3.54 312,700 $4.82
Exercised (19,919) $1.49 (364,903) $1.06 (8,620) $1.38
Forfeited (559,204) $3.89 (388,192) $3.37 (56,101) $4.55
--------- --------- ----------
Outstanding - end of year 2,259,851 $2.49 1,933,768 $3.75 1,963,063 $3.25
========= ========== ==========
Exercisable at end of year 1,660,777 $2.43 879,502 $3.55 1,171,376 $2.43
Expired 225,743 $1.00 -- -- -- --
Weighted-average fair value
of options granted during
the year $0.52 $1.62 $2.72
</TABLE>
Exercise prices and weighted-average remaining contractual lives for the options
outstanding as of December 31, 1999 follow:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
OPTIONS RANGE OF EXERCISE REMAINING WEIGHTED-AVERAGE OPTIONS WEIGHTED-AVERAGE
OUTSTANDING PRICES CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
----------- ----------------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
119,786 $0.34 9.84 $0.34 83,621 $0.34
732,020 $0.48 9.74 $0.48 561,056 $0.48
666,745 $1.00 - $3.63 7.07 $2.65 419,188 $2.20
469,400 $3.75 - $4.75 6.67 $4.22 350,212 $4.18
271,900 $4.88 - $8.31 6.70 $5.49 246,700 $5.47
--------- ---------
2,259,851 $0.34 - $8.31 7.95 $2.49 1,660,777 $2.43
========= =========
</TABLE>
At December 31, 1999, the Company has reserved 2,666,635 shares of common stock
for future issuance under the 1989 and 1994 Plans.
F-15
<PAGE> 21
La Jolla Pharmaceutical Company
Notes to Financial Statements
6. STOCKHOLDERS' EQUITY (CONTINUED)
EMPLOYEE STOCK PURCHASE PLAN
Effective August 1, 1995, the Company adopted the 1995 Employee Stock Purchase
Plan (the "Purchase Plan") which was amended in July 1996. Under the amended
Purchase Plan, a total of 300,000 shares of common stock are reserved for sale
to full-time employees with six months of service. Employees may purchase common
stock under the Purchase Plan every six months (up to but not exceeding 10% of
each employee's earnings) over the offering period at 85% of the fair market
value of the common stock at certain specified dates. The offering period may
not exceed 24 months. For the year ended December 31, 1999, 78,202 shares of
common stock had been issued under the Purchase Plan (43,191 shares for the year
ended December 31, 1998). To date, 189,893 shares of common stock have been
issued under the Purchase Plan and 110,107 shares of common stock are available
for issuance.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Weighted-average fair value of employee
stock purchase plan purchases $0.91 $1.54 $1.87
</TABLE>
STOCK-BASED COMPENSATION
Pro forma information regarding net loss and net loss per share is required by
SFAS 123, which also requires that the information be determined as if the
Company has accounted for its employee stock plans granted after December 31,
1994 under the fair value method of that statement. The fair value was estimated
at the date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for 1999, 1998 and 1997, respectively:
risk-free interest rate of 6.8%, 4.8% and 5.5%; volatility factor of the
expected market price of the Company's common stock of 1.09, 0.60 and 0.60; and
a dividend yield of 0% and a weighted-average expected life of five years for
all three years presented.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion the existing models do not necessarily provide a reliable single measure
of the fair value of its employee stock options.
F-16
<PAGE> 22
La Jolla Pharmaceutical Company
Notes to Financial Statements
6. STOCKHOLDERS' EQUITY (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (in thousands except for net loss per share
information):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Pro forma net loss $(9,985) $(8,500) $(6,873)
======= ======= =======
Pro forma basic and diluted net loss
per share $ (0.50) $ (0.46) $ (0.39)
======= ======= =======
</TABLE>
The effects of applying SFAS 123 for either recognizing compensation expense or
providing pro forma disclosures are not likely to be representative of the
effects on reported net loss for future years.
STOCKHOLDER RIGHTS PLAN
The Company has adopted a Stockholder Rights Plan (the "Rights Plan"). The
Rights Plan provides for a dividend of one right (a "Right") to purchase
fractions of shares of the Company's Series A Preferred Stock for each share of
the Company's common stock. Under certain conditions involving an acquisition by
any person or group of 15% or more of the common stock, the Rights permit the
holders (other than the 15% holder) to purchase the Company's common stock at a
50% discount upon payment of an exercise price of $30 per Right. In addition, in
the event of certain business combinations, the Rights permit the purchase of
the common stock of an acquirer at a 50% discount. Under certain conditions, the
Rights may be redeemed by the Board of Directors in whole, but not in part, at a
price of $.001 per Right. The Rights have no voting privileges and are attached
to and automatically trade with the Company's common stock. The Rights expire on
December 2, 2008.
7. 401(k) PLAN
The Company has established a 401(k) defined contribution retirement plan (the
"401(k) Plan"), which was amended in July 1997, to cover all employees with six
months of service. The 401(k) Plan provides for voluntary employee contributions
up to 20% of annual compensation (as defined). The Company does not match
employee contributions or otherwise contribute to the 401(k) Plan.
8. INCOME TAXES
At December 31, 1999, the Company had federal and California income tax net
operating loss carryforwards of approximately $68,789,000 and $8,297,000,
respectively. The difference between the federal and California tax loss
carryforwards is primarily attributable to the capitalization of research and
development expenses for California income tax purposes and the 50% percent
limitation on California loss carryforwards. The Company also had federal and
California research tax credit carryforwards of $3,067,000 and $1,462,000,
respectively. The federal net operating loss and tax credit carryforwards will
begin to expire in 2005 unless previously utilized. A portion of the California
net operating loss carryforwards totaling $1,272,000 expired in 1999, and will
continue to expire in 2000.
F-17
<PAGE> 23
La Jolla Pharmaceutical Company
Notes to Financial Statements
7. INCOME TAXES (CONTINUED)
8.
Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of the
Company's net operating loss and credit carryforwards may be limited if a
cumulative change in ownership of more than 50% occurs within a three-year
period.
Significant components of the Company's deferred tax assets are shown below (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 24,553 $ 21,100
Research and development credits 4,017 3,300
Capitalized research and development 416 2,800
-------- --------
Total deferred tax assets 28,986 27,200
Valuation allowance for deferred tax assets (28,986) (27,200)
-------- --------
Net deferred tax assets $ -- $ --
======== ========
</TABLE>
A valuation allowance of $28,986,000 has been recognized to offset the deferred
tax assets as realization of such assets is uncertain.
9. SUBSEQUENT EVENT
In February 2000, the Company issued 4,040,000 shares of common stock in a
private placement to selected institutional investors and other accredited
investors for gross proceeds of approximately $13,635,000 at a discounted per
share value based on the reported last sale price of the common stock on the
purchase date. The Company is required to register these shares within 10
business days from the date of closing. There are no other stated or unstated
rights or privileges associated with the sale of these shares.
F-18
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
LA JOLLA PHARMACEUTICAL COMPANY
By: /s/ Steven B. Engle
---------------------------------
July 18, 2000 Name: Steven B. Engle
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Steven B. Engle Chairman of the Board and Chief July 18, 2000
------------------------------ Executive Officer
Steven B. Engle (PRINCIPAL EXECUTIVE OFFICER AND
DIRECTOR)
/s/ Gail A. Sloan Controller and Secretary July 18, 2000
------------------------------ (PRINCIPAL FINANCIAL AND ACCOUNTING
Gail A. Sloan OFFICER)
/s/ Thomas H. Adams Director July 18, 2000
------------------------------
Thomas H. Adams, Ph.D.
/s/ William E. Engbers Director July 18, 2000
------------------------------
William E. Engbers
/s/ Robert A. Fildes Director July 18, 2000
------------------------------
Robert A Fildes, Ph.D.
/s/ Stephen M. Martin Director July 18, 2000
------------------------------
Stephen M. Martin
/s/ W. Leigh Thompson Director July 18, 2000
------------------------------
W. Leigh Thompson, M.D., Ph.D.
</TABLE>
6
