-----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, OZ/RXxcih63yFv11189WvjAB5t4ajK1EeVnR2FegRvdkXPMm7s6TzcOPmKk+C/si oAyPkCUfARmluPUJJoBU1w== 0000950144-96-002310.txt : 19960515 0000950144-96-002310.hdr.sgml : 19960515 ACCESSION NUMBER: 0000950144-96-002310 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 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: 96563413 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, INC. 10-Q 03/31/96 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 March 31, 1996 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 April 26, 1996 - ----------------------------- ----------------------------- Common stock $.0001 par value 19,766,666
Page 1 of 10 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 March 31, 1996 and 1995 3 Balance Sheets as of March 31, 1996 and December 31, 1995 4 Statements of Cash Flows for the three months ended March 31, 1996 and 1995 5 Notes to Financial Statements 6 - 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 7 - 8 PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K 9 SIGNATURES 10
Page 2 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements NOVEN PHARMACEUTICALS, INC. STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
THREE MONTHS ENDED --------------------------- MARCH 31, MARCH 31, 1996 1995 ------------ ------------ REVENUES: Product sales $ 5,171,991 $ 151,242 License revenue 106,499 639,832 Interest income 276,035 429,241 Other income 15,318 ------------ ------------ Total revenues 5,554,525 1,235,633 ------------ ------------ EXPENSES: Cost of products sold 2,891,843 75,237 Research and development 2,483,291 2,205,654 General and administrative 799,315 722,669 ------------ ------------ Total expenses 6,174,449 3,003,560 ------------ ------------ NET LOSS FOR THE PERIOD (619,924) (1,767,927) ACCUMULATED DEFICIT BEGINNING OF PERIOD (22,063,362) (15,482,754) ------------ ------------ ACCUMULATED DEFICIT END OF PERIOD $(22,683,286) $(17,250,681) ============ ============ NET LOSS PER SHARE $ (0.03) $ (0.09) ============ ============ WEIGHTED AVERAGE SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS 19,756,549 18,877,683 ============ ============
The accompanying notes are an integral part of this statement. Page 3 4 NOVEN PHARMACEUTICALS, INC. BALANCE SHEETS
MARCH 31, MARCH 31, 1996 1995 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $16,624,049 $16,131,263 Securities held to maturity 5,904,956 7,881,397 Accounts receivable 2,278,773 2,512,561 Inventories 5,882,106 5,069,946 Prepaid and other current assets 232,979 258,220 ----------- ----------- Total current assets 30,922,863 31,853,387 ----------- ----------- PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation and amortization of $2,279,916 at March 31, 1996 and $1,974,138 at December 31, 1995 15,553,018 15,532,797 ----------- ----------- OTHER ASSETS: Patent development costs, net 1,243,810 1,218,630 Deposits and other assets 65,738 40,738 ----------- ----------- Total other assets 1,309,548 1,259,368 ----------- ----------- TOTAL $47,785,429 $48,645,552 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued liabilities $ 4,096,485 $ 4,293,185 ----------- ----------- DEFERRED LICENSE REVENUE 6,265,512 6,322,011 ----------- ----------- 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 - 19,766,666 shares at March 31, 1996 and 19,674,144 shares at December 31, 1995 1,977 1,967 Additional paid-in capital 60,104,741 60,091,751 Accumulated deficit (22,683,286) (22,063,362) ----------- ----------- Total stockholders' equity 37,423,432 38,030,356 ----------- ----------- TOTAL $47,785,429 $48,645,552
=========== =========== The accompanying notes are an integral part of this statement. Page 4 5 NOVEN PHARMACEUTICALS, INC. STATEMENT OF CASH FLOWS
THREE MONTHS ENDED --------------------------- MARCH 31, MARCH 31, 1996 1995 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (619,924) $ (1,767,927) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 335,898 237,945 Increase in inventories (812,160) (725,613) Decrease in prepaid and other current assets 25,241 188,919 Decrease in accounts receivable 233,788 459,669 Decrease in accounts payable and accrued liabilities (196,700) (1,010,836) Decrease in deferred license revenue (56,499) (56,499) ------------ ------------ Cash flows used in operating activities (1,090,356) (2,674,342) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Maturity of securities 1,951,441 13,878,487 Purchase of fixed assets, net (325,999) (545,536) Payments for patent development costs (55,300) (9,016) ------------ ------------ Cash flows provided by investing activities 1,570,142 13,323,936 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Sale of common stock 13,000 2,001 ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 492,786 10,651,594 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 16,131,263 12,070,272 ------------ ------------ CASH AND CASH EQUIVALENTS - END OF PERIOD $ 16,624,049 $ 22,721,866 ============ ============
The accompanying notes are an integral part of this statement. Page 5 6 NOTES TO FINANCIAL STATEMENTS 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, 1995 included in the Company's annual report on Form 10-K. The interim financial statements for the first quarter ended March 31, 1996 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 first quarter ended March 31, 1996 are not necessarily indicative of the results to be expected for the year ending December 31, 1996. 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: "INVENTORIES" Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Inventories at March 31, 1996 related primarily to the Company's transdermal estrogen delivery system. To date Noven has not experienced and does not anticipate in the future, any difficulty acquiring materials necessary to manufacture its transdermal systems. "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 primarily 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 6 7 NOTES TO FINANCIAL STATEMENTS (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, 1996 19,674,144 $ 1,967 $60,091,751 Issuance of 92,522 shares of stock pursuant to stock option plan, net 92,522 10 12,990 ---------- ------- ----------- Balance, March 31, 1996 19,766,666 $ 1,977 $60,104,741 ========== ======= ===========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Total revenues increased approximately $4,319,000 from approximately $1,236,000 for the first quarter ended March 31, 1995 to approximately $5,555,000 for the same period in 1996. This increase in revenues was the result of the increase in product sales of the Company's transdermal estrogen delivery system to its licensee partners from approximately $151,000 in 1995 to $5,172,000 in 1996. No royalties were received or recorded during the quarter. License revenues decreased 83% from approximately $640,000 in the first quarter of 1995 to approximately $106,000 in the same period in 1996. The Company believes that license revenues will fluctuate from period to period depending on contributing factors which include, but are not limited to, future success in finalizing new collaborative agreements, timely achievement of milestones and strategic decisions on self-funding certain projects. Interest income decreased 36% from approximately $429,000 in the first quarter of 1995 to approximately $276,000 in 1996 primarily due to lower average balances in cash, cash equivalents and securities. Cost of product sold increased by $2,817,000 from approximately $75,000 in the first quarter of 1995 to approximately $2,892,000 in the same period in 1996. The gross margin percentage was 50% in the first quarter of 1995 and 44% in the same period in 1996. These manufacturing costs and attendant gross margins were primarily attributable to expenses incurred in the early stages of manufacturing the transdermal estrogen delivery systems. Page 7 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTINUED Research and development expenses increased by approximately $277,000 or 13% from approximately $2,206,000 in the first quarter of 1995 to approximately $2,483,000 in the same period in 1996. The increases 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. General and administrative expenses increased 11% from approximately $723,000 in the first quarter of 1995 to approximately $799,000 in 1996 primarily due to increases in staffing and associated office 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, interest income and through the sale of product. From its inception through March 31, 1996, the Company received net proceeds of approximately $56,000,000 from the sale of equity securities, approximately $14,000,000 from product sales, approximately $14,000,000 from license agreements, and approximately $5,000,000 from interest income. At the end of March 31, 1996 the Company had approximately $23,000,000 in cash, cash equivalents and securities held to maturity. The decrease in cash, cash equivalents, and securities held to maturity of $1,484,000 during the first quarter of 1996 reflects the funding of a net loss of approximately $620,000, an increase in inventory of approximately $812,000 and an approximate $326,000 investment in property and equipment. As of March 31, 1996 the Company had commitments for capital expenditures of approximately $97,000. 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 desire to raise additional capital. There can be no assurance that such capital will be available on acceptable terms, or at all. Page 8 9 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 27 Financial Data Schedule (for SEC use only) Page 9 10 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: May 10, 1996 By: /s/ Steven Sablotsky ------------ -------------------------- Steven Sablotsky, Chairman of the Board and President By: /s/ William A. Pecora -------------------------- William A. Pecora Chief Financial Officer Page 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 16,624,049 5,904,956 2,278,773 0 5,882,106 30,922,863 17,832,934 2,279,916 47,785,429 4,096,485 0 0 0 1,977 37,421,455 47,785,429 5,171,991 5,554,525 2,891,843 2,891,843 2,483,291 0 0 (619,924) 0 (619,924) 0 0 0 (619,924) (.03) (.03)
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