0000950144-95-002170.txt : 19950810 0000950144-95-002170.hdr.sgml : 19950810 ACCESSION NUMBER: 0000950144-95-002170 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950809 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOVEN PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000815838 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 592767632 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17254 FILM NUMBER: 95560046 BUSINESS ADDRESS: STREET 1: 11960 SW 144TH ST CITY: MIAMI STATE: FL ZIP: 33186 BUSINESS PHONE: 3052535099 MAIL ADDRESS: STREET 2: 11960 SW 144TH STREET CITY: MIAMI STATE: FL ZIP: 33185 10-Q 1 NOVEN PHARMACEUTICALS, INC. FORM 10-Q 06/30/95 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) --- OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 ------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OF THE --- SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------ ------------ Commission file number 0-17254 ------- NOVEN PHARMACEUTICALS, INC. -------------------------------------------------------- (Exact name of Registrant as specified in its character) STATE OF DELAWARE 59-2767632 ------------------------------- ------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 11960 S.W. 144th Street, Miami, FL 33186 --------------------------------------- ------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (305) 253-5099 -------------- 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date. Class Outstanding at July 25, 1995 ----- ---------------------------- Common stock $.0001 par value 19,038,339 Page 1 of 11 2 NOVEN PHARMACEUTICALS, INC. INDEX TO FORM 10-Q PART I - FINANCIAL INFORMATION Page No. ------ --------------------- -------- Item 1 - Financial Statements Statements of Operations and Accumulated Deficit for the three months ended June 30, 1995 and 1994 3 Statements of Operations and Accumulated Deficit for the six months ended June 30, 1995 and 1994 4 Balance Sheets as of June 30, 1995 and December 31, 1994 5 Statements of Cash Flows for the six months ended June 30, 1995 and 1994 6 Notes to Financial Statements 7 - 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 10 PART II - OTHER INFORMATION -------- ----------------- Item 4 - Submission of Matters to a Vote of Security Holders 10 Item 6 - Exhibits and Reports on Form 8-K 10 SIGNATURES 11 ---------- Page 2 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements NOVEN PHARMACEUTICALS, INC. STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (UNAUDITED)
THREE MONTHS ENDED ---------------------------------------- JUNE 30, JUNE 30, 1995 1994 ------------ ----------- REVENUES: Product sales $ 918,876 License revenue 639,833 $ 839,812 Interest income 479,668 152,982 Other income 0 173,720 ------------ ----------- Total revenues 2,038,377 1,166,514 ------------ ----------- EXPENSES: Cost of products sold 524,854 Research and development 2,800,759 1,650,599 General and administrative 806,293 678,511 ------------ ----------- Total expenses 4,131,906 2,329,110 ------------ ----------- NET LOSS FOR THE PERIOD (2,093,529) (1,162,596) ACCUMULATED DEFICIT BEGINNING OF PERIOD (17,250,681) (11,579,984) ------------ ----------- ACCUMULATED DEFICIT END OF PERIOD $(19,344,210) $(12,742,580) ============ ============ NET LOSS PER SHARE $ (0.11) $ (0.07) ============ ============ WEIGHTED AVERAGE SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS 19,002,225 16,574,752 ============ ============
The accompanying notes are an integral part of this statement. Page 3 4 NOVEN PHARMACEUTICALS, INC. STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (UNAUDITED)
SIX MONTHS ENDED ---------------------------------------- JUNE 30, JUNE 30, 1995 1994 ------------ ----------- REVENUES: Product sales $ 1,070,118 License revenue 1,279,665 $ 1,562,978 Interest income 908,909 275,329 Other income 15,318 276,817 ------------ ----------- Total revenues 3,274,010 2,115,124 EXPENSES: Cost of products sold 600,091 Research and development 5,006,413 2,963,657 General and administrative 1,528,962 1,355,518 ------------ ----------- Total expenses 7,135,466 4,319,175 ------------ ----------- NET LOSS FOR THE PERIOD (3,861,456) (2,204,051) ACCUMULATED DEFICIT BEGINNING OF PERIOD (15,482,754) (10,538,529) ------------ ----------- ACCUMULATED DEFICIT END OF PERIOD $(19,344,210) $(12,742,580) ============ ============ NET LOSS PER SHARE $ (0.20) $ (0.13) ============ ============ WEIGHTED AVERAGE SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS 18,939,954 16,378,395 ============ ============
The accompanying notes are an integral part of this statement. Page 4 5 NOVEN PHARMACEUTICALS, INC. BALANCE SHEETS
JUNE 30, DECEMBER 31, 1995 1994 ------------ ------------ (UNAUDITED) (AUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 16,085,954 12,070,272 Securities held to maturity 13,414,162 23,445,070 Inventory 2,704,466 1,264,553 Prepaid and other current assets 641,132 825,159 ------------ ------------ Total current assets 32,845,714 37,605,054 ------------ ------------ PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation and amortization of $1,507,029 at June 30, 1995 and $1,076,379 at December 31, 1994 15,568,698 15,022,523 ------------ ------------ OTHER ASSETS: Patent development costs, net 1,070,611 979,201 Deposits and other assets 44,261 45,394 Total other assets 1,114,872 1,024,595 ------------ ------------ TOTAL $ 49,529,284 $ 53,652,172 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued liabilities $ 2,388,767 $ 2,558,202 ------------ ------------ DEFERRED LICENSE REVENUE 6,435,009 6,548,007 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock - authorized 100,000 shares of $.01 par value; no shares issued or outstanding Common stock - authorized 30,000,000 shares, par value $.0001 per share; issued and outstanding - 19,038,339 shares at June 30, 1995 and 18,839,068 shares at December 31, 1994 1,904 1,884 Additional paid-in capital 60,047,814 60,026,833 Accumulated deficit (19,344,210) (15,482,754) ------------ ------------ Total stockholders' equity 40,705,508 44,545,963 ------------ ------------ TOTAL $ 49,529,284 $ 53,652,172 ============ ============
The accompanying notes are an integral part of this statement. Page 5 6 NOVEN PHARMACEUTICALS, INC. STATEMENT OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED ---------------------------------------- JUNE 30, JUNE 30, 1995 1994 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(3,861,456) $(2,204,051) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 475,890 368,619 Increase in inventory (1,439,913) (100,653) (Increase) decrease in prepaid and other current assets 184,027 (154,012) Increase (Decrease) in accounts payable and accrued liabilities (169,435) 29,770 Decrease in deferred license revenue (112,998) (112,998) ----------- ----------- Cash flows used in operating activities (4,923,885) (2,173,325) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturity of securities 10,030,908 12,018,980 Purchase of fixed assets (976,825) (797,453) Payments for patent development costs (136,650) (230,289) Refund of deposits 1,133 ----------- ----------- Cash flows provided by investing activities 8,918,566 10,991,238 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Sale of common stock 21,001 28,319,129 ----------- ----------- Cash flows provided by financing activities 21,001 28,319,129 ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS 4,015,682 37,137,042 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 12,070,272 2,658,187 ----------- ----------- CASH AND CASH EQUIVALENTS - END OF PERIOD $16,085,954 $39,795,229 =========== ===========
The accompanying notes are an integral part of this statement. Page 6 7 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The financial statements of Noven Pharmaceuticals, Inc. (the "Company"), included herein, do not include all footnote disclosures normally included in annual financial statements and, therefore, should be read in conjunction with the Company's financial statements and notes thereto for each of the three years in the period ended December 31, 1994 included in the Company's annual report on Form 10-K. The interim financial statements for the six months and the three months ended June 30, 1995 are unaudited and, in the opinion of management, reflect all adjustments (consisting only of normal recurring accruals) necessary for fair presentation of the balance sheets, statements of operations and cash flows of the Company. The statements of operations for the six months and three months ended June 30, 1995 are not necessarily indicative of the results to be expected for the year ending December 31, 1995. Certain amounts in the 1995 and 1994 financial statements have been reclassified for comparative purposes. 2. SUMMARY OF ACCOUNTING POLICIES The following is a summary of the significant accounting policies consistently applied in the preparation of Noven's financial statements: "PROPERTY AND EQUIPMENT" Property and equipment is recorded at cost. Depreciation is provided over the estimated useful lives of the assets. Leasehold improvements are amortized over the life of the lease or the service life of the improvements, whichever is shorter. The straight-line method of depreciation is followed for financial purposes. "PATENT DEVELOPMENT COSTS" Costs, principally legal fees related to the development of patents are capitalized and amortized over the lesser of their estimated economic useful lives or their remaining legal lives. "LOSS PER SHARE" Loss per share is based on the weighted average number of shares outstanding during the period. Page 7 8 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) 3. STOCKHOLDERS' EQUITY A schedule of the transactions in the common stock and the additional paid in capital accounts is as follows:
Common Stock Additional ------------ Paid-In Shares Amount Capital ------ ------ ------- Balance, January 1, 1995 18,839,068 $1,884 $60,026,833 Issuance of 90,542 shares of stock pursuant to stock option plan, net 90,542 9 20,992 Issuance of 108,729 shares of stock pursuant to price protection provisions of 1993 contract for land purchase 108,729 11 (11) ---------- ------ ----------- Balance, June 30, 1995 19,038,339 $1,904 $60,047,814 ========== ====== ===========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Since it commenced operations in 1987, the Company has been engaged primarily in the research and development of transdermal drug delivery systems. The Company's revenues have been generated principally by license fees, milestone payments pursuant to various license agreements and interest. The Company anticipates that a significant portion of its revenues in 1995 will be attributable to the launch of its first commercial product, a transdermal estrogen delivery system. To date, the Company's product development efforts have been undertaken independently and pursuant to license agreements with Rhone-Poulenc Rorer, Inc. and/or its affiliates ("RPR") and Ciba-Geigy Corporation ("Ciba-Geigy"). Under these agreements a license fee was paid upon execution. All of the agreements provide for the payments of monthly development fees or cost reimbursements for product development and/or milestone payments upon achieving certain technical and regulatory goals. The Company's results of operations vary significantly from quarter to quarter and depend, among other factors, on the execution of new product development agreements, the timing of fees and milestone payments made by its licensees, the progress of clinical trials conducted by the Company and/or its licensees and costs associated with the development of the Company's products. The timing of the Company's license revenue may not match the timing of the Company's associated product development expenses for any particular period. Page 8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS The Company's revenues increased approximately $872,000 or 75% for the three month period ended June 30, 1995 from the same period in the prior year and increased approximately $1,159,000 or 55% for the comparable six month period. The increase in revenue during the second quarter and first half of 1995 was primarily a result of increased product sales from the launch of the Company's first product, a transdermal estrogen delivery system, and increased interest income from the investment of the proceeds of the June 1994 offering of common stock. Cost of products sold were approximately $525,000 for the three month period ended June 30, 1995 and $600,000 for the six months ended June 30, 1995. These manufacturing costs include the costs of being in the early stages of manufacturing the transdermal estrogen delivery system. Research and development expenses increased approximately $1,150,000 or 70% for the three month period ended June 30, 1995 from the same period in the prior year and increased approximately $2,043,000 or 69% for the comparable six month period. The increase in research and development expenses were attributable to new product development, validation of the manufacturing process, preproduction start-up expense and the hiring of additional staff for new and existing programs. New product development included products such as the transoral dental anesthetic system and the transdermal estrogen/progestogen combination delivery system. Preproduction start-up includes the costs associated with staffing and operating the Company's commercial manufacturing facilities, obtaining regulatory approvals and preparing for product commercialization. The increase in general and administrative expenses of approximately $128,000 or 19% for the second quarter from the same period last year and $173,000 or 13% for the comparable six month period was primarily due to increases in staffing and recruitment expenses. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its operations through public offerings of common stock, including the exercise of warrants issued in connection with the first such offering, private placements of its equity securities, license and contract revenues and interest income. From its inception through June 30, 1995, the Company received net proceeds of approximately $56,000,000 from the sale of equity securities, approximately $13,000,000 from license agreements and approximately $4,000,000 from interest income. At the end of June 30, 1995 the Company had approximately $29,500,000 in cash and securities held to maturity. During the first half of 1995, the Company utilized approximately $4,900,000 of its cash resources to fund research and operating activities and $1,100,000 to fund investing activities, primarily the purchase of property and equipment. As of June 30, 1995 the Company had commitments for capital expenditures of approximately $100,000. Page 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The Company's future capital requirements depend upon numerous factors, including (i) the progress of its product development programs, (ii) the time required to obtain government regulatory approvals of products in development,(iii) the resources that the Company devotes to the development of self-funded products, proprietary manufacturing methods, advanced technologies and a marketing and sales administration infrastructure, (iv) the ability of the Company to obtain additional license agreements and to manufacture products pursuant to those agreements and (v) the demand for its products. The Company expects to incur additional costs related to product development activities, increased general and administrative expenses and the completion of its manufacturing facilities. Although the Company believes that existing cash, securities held to maturity, anticipated contract and manufacturing revenues will be adequate for the foreseeable future, circumstances could arise which may result in a need to raise additional capital. There can be no assurance that such capital will be available on acceptable terms, or at all. PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders Annual Meeting of Stockholders held on June 6, 1995. (i) Election of Directors
For Against Abstain ---- ------- ------- Steven Sablotsky 15,971,068 81,650 0 Mitchell Goldberg 15,971,068 81,650 0 Sheldon H. Becher 15,970,968 81,750 0 Sidney Braginsky 15,966,468 86,250 0 Lawrence J. Dubow 15,968,468 84,250 0
(ii) The ratification of the appointment of Deloitte & Touche LLP as the independent certified public accountants for 1995 was approved by an affirmative vote of 15,997,624 shares to a negative vote of 15,480 shares, with 39,614 shares abstaining. Item 6. Exhibits and Reports on Form 8-K Exhibit 27 - Financial Data Schedule (for SEC use only). Page 10 11 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. NOVEN PHARMACEUTICALS, INC. (Registrant) Date: August 9, 1995 By: /s/ Steven Sablotsky --------------------- -------------------- Steven Sablotsky, Chairman of the Board and President By: /s/ William A. Pecora --------------------- William A. Pecora Chief Financial Officer Page 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF NOVEN PHARMACEUTICALS, INC. FOR THE SIX MONTHS ENDED JUNE 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 16,085,954 13,414,162 0 0 2,704,466 32,845,714 17,075,727 1,507,029 49,529,284 2,388,767 0 1,904 0 0 40,703,604 49,529,284 1,070,118 3,274,010 600,091 600,091 5,006,413 0 0 (3,861,456) 0 (3,861,456) 0 0 0 (3,861,456) (.20) (.20)