-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SG4QT0hDb4vAMey7ux1Grc79aPjkvXeYPNyXaRaqtsABAsB+F0EgcMO8U1emFF3T R0FwGgaYHmAVa2nXQ1ighA== 0000950144-95-003039.txt : 19951109 0000950144-95-003039.hdr.sgml : 19951109 ACCESSION NUMBER: 0000950144-95-003039 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951108 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: 95588412 BUSINESS ADDRESS: STREET 1: 11960 SW 144TH ST CITY: MIAMI STATE: FL ZIP: 33186 BUSINESS PHONE: 3052535099 MAIL ADDRESS: STREET 1: 11960 SW 144TH STREET CITY: MIAMI STATE: FL ZIP: 33185 10-Q 1 NOVEN PHARMACEUTICALS FORM 10-Q 9-30-95 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 September 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 October 30,1995 ----- ------------------------------ Common stock $.0001 par value 19,648,244 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 September 30, 1995 and 1994 3 Statements of Operations and Accumulated Deficit for the nine months ended September 30, 1995 and 1994 4 Balance Sheets as of September 30, 1995 and December 31, 1994 5 Statements of Cash Flows for the nine months ended September 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 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 ----------------------------------------- SEPTEMBER 30, SEPTEMBER 30, 1995 1994 ------------- ------------- REVENUES: Product sales $ 2,543,761 License revenue 366,616 $ 639,853 Interest income 405,313 480,595 Other income 15,346 4,457 ------------- ------------- Total revenues 3,331,036 1,124,905 ------------- ------------- EXPENSES: Cost of products sold 1,390,855 Research and development 2,880,340 1,710,161 General and administrative 816,777 704,273 ------------- ------------- Total expenses 5,087,972 2,414,434 ------------- ------------- NET LOSS FOR THE PERIOD (1,756,936) (1,289,529) ACCUMULATED DEFICIT BEGINNING OF PERIOD (19,344,210) (12,742,580) ------------- ------------- ACCUMULATED DEFICIT END OF PERIOD $ (21,101,146) $ (14,032,109) ============= ============= NET LOSS PER SHARE $ (0.09) $ (0.07) ============= ============= WEIGHTED AVERAGE SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS 19,396,327 18,478,324 ============= =============
The accompanying notes are an integral part of this statement. Page 3 4 NOVEN PHARMACEUTICALS, INC. STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (UNAUDITED)
NINE MONTHS ENDED ----------------------------------------- SEPTEMBER 30, SEPTEMBER 30, 1995 1994 ------------- ------------- REVENUES: Product sales $ 3,613,879 License revenue 1,646,281 $ 2,202,831 Interest income 1,314,222 755,924 Other income 30,664 281,274 ------------- ------------- Total revenues 6,605,046 3,240,029 ------------- ------------- EXPENSES: Cost of products sold 1,990,946 Research and development 7,886,753 4,673,818 General and administrative 2,345,739 2,059,791 ------------- ------------- Total expenses 12,223,438 6,733,609 ------------- ------------- NET LOSS FOR THE PERIOD (5,618,392) (3,493,580) ACCUMULATED DEFICIT BEGINNING OF PERIOD (15,482,754) (10,538,529) ------------- ------------- ACCUMULATED DEFICIT END OF PERIOD $ (21,101,146) $ (14,032,109) ============= ============= NET LOSS PER SHARE $ (0.29) $ (0.20) ============= ============= WEIGHTED AVERAGE SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS 19,094,110 17,086,064 ============= =============
The accompanying notes are an integral part of this statement. Page 4 5 NOVEN PHARMACEUTICALS, INC. BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 1995 1994 -------------- ------------- (UNAUDITED) (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 8,442,685 $ 12,070,272 Securities held to maturity 17,527,002 23,445,070 Inventory 3,796,967 1,264,553 Prepaid and other current assets 305,623 825,159 -------------- ------------- Total current assets 30,072,277 37,605,054 -------------- ------------- PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation and amortization of $1,722,354 at September 30, 1995 and $1,076,379 at December 31, 1994 15,877,316 15,022,523 -------------- ------------- OTHER ASSETS: Patent development costs, net 1,074,603 979,201 Deposits and other assets 43,428 45,394 -------------- ------------- Total other assets 1,118,031 1,024,595 -------------- ------------- TOTAL $ 47,067,624 $ 53,652,172 ============== ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued liabilities $ 1,740,542 $ 2,558,202 -------------- ------------- DEFERRED LICENSE REVENUE 6,378,510 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 - 19,648,244 shares at September 30, 1995 and 18,839,068 shares at December 31, 1994 1,965 1,884 Additional paid-in capital 60,047,753 60,026,833 Accumulated deficit (21,101,146) (15,482,754) -------------- ------------- Total stockholders' equity 38,948,572 44,545,963 -------------- ------------- TOTAL $ 47,067,624 $ 53,652,172 ============== =============
The accompanying notes are an integral part of this statement. Page 5 6 NOVEN PHARMACEUTICALS, INC. STATEMENT OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED ------------------------------------------- SEPTEMBER 30, SEPTEMBER 30, 1995 1994 ------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (5,618,392) $ (3,493,580) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 713,835 598,377 Increase in inventory (2,532,414) (428,342) Decrease (increase) in prepaid and other current assets 519,536 (131,006) Decrease in accounts payable and accrued liabilities (817,660) (229,045) Decrease in deferred license revenue (169,497) (169,497) ------------ ------------ Cash flows used in operating activities (7,904,592) (3,853,093) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturity of securities 5,918,068 Purchase of securities held to maturity (16,238,308) Purchase of fixed assets (1,500,768) (1,826,249) Payments for patent development costs (163,262) (236,444) Refund of deposits 1,966 ------------ ------------ Cash flows used in investing activities 4,256,004 (18,301,001) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Sale of common stock 21,001 28,334,204 ------------ ------------ Cash flows provided by financing activities 21,001 28,334,204 ------------ ------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (3,627,587) 6,180,110 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 12,070,272 2,658,187 ------------ ------------ CASH AND CASH EQUIVALENTS - END OF PERIOD $ 8,442,685 $ 8,838,297 ============ ============
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 nine months and the three months ended September 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 nine months and three months ended September 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 700,447 shares of stock pursuant to stock option plan, net 700,447 70 20,931 Issuance of 108,729 shares of stock pursuant to price protection provisions of 1993 contract for land purchase 108,729 11 (11) ------- -- --- Balance, September 30, 1995 19,648,244 $ 1,965 $ 60,047,753 ============ ======= ============
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. A significant portion of revenues in 1995 is attributable to the purchase by the Company's licensee partners of transdermal estrogen delivery systems in anticipation of that product's commercial launch. 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 $2,206,000 or 196% for the three month period ended September 30, 1995 from the same period in the prior year and increased approximately $3,365,000 or 104% for the comparable nine month period. The increase in revenue during the third quarter and first nine months of 1995 was primarily a result of increased product sales of the Company's transdermal estrogen delivery system to its licensee partners. The increase in revenues for the first nine months of 1995 was also attributable to increased interest income from the investment of the proceeds of the June 1994 offering of common stock. Cost of products sold were approximately $1,391,000 for the three month period ended September 30, 1995 and $1,991,000 for the nine months ended September 30, 1995. The gross margin percentage was 45% for the three and nine month periods ended September 30, 1995. These manufacturing costs and attendant gross margins are primarily attributable to expenses incurred in the early stages of manufacturing the transdermal estrogen delivery system. Research and development expenses increased approximately $1,170,000 or 68% for the three month period ended September 30, 1995 from the same period in the prior year and increased approximately $3,213,000 or 69% for the comparable nine 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 $113,000 or 16% for the third quarter from the same period last year and $286,000 or 14% for the comparable nine month period was primarily due to increases in staffing and recruitment expenses. LIQUIDITY AND CAPITAL RESOURCES The Company has historically 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, interest income and during the current year through the sale of product. From its inception through September 30, 1995, the Company received net proceeds of approximately $56,000,000 from the sale of equity securities, approximately $14,000,000 from license agreements, approximately $4,000,000 from interest income and approximately $4,000,000 from product sales. At the end of September 30, 1995 the Company had approximately $26,000,000 in cash and securities held to maturity. Page 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) During the first nine months of 1995, the Company utilized approximately $7,900,000 of its cash resources to fund research and operating activities and $1,700,000 to fund investing activities, primarily the purchase of property and equipment. As of September 30, 1995 the Company had commitments for capital expenditures of approximately $20,000. 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 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: November 8, 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 NINE MONTHS ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 8,442,685 17,527,002 0 0 3,796,967 30,072,277 17,599,670 1,722,354 47,067,624 1,740,542 0 1,965 0 0 38,946,607 47,067,624 3,613,879 6,605,046 1,990,946 1,990,946 7,886,753 0 0 (5,618,392) 0 (5,618,392) 0 0 0 (5,618,392) (.29) (.29)
-----END PRIVACY-ENHANCED MESSAGE-----