-----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, OYQXEbtfBClaTAllAEPJHcDlNnjw7z+xRFk9aZ3/OVoQke2WqamTkWz89zQyo/8j EWCtDQNo+8Cp5kxgtesF9Q== 0000927356-99-001666.txt : 19991101 0000927356-99-001666.hdr.sgml : 19991101 ACCESSION NUMBER: 0000927356-99-001666 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NPS PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000890465 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 870439579 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23272 FILM NUMBER: 99737625 BUSINESS ADDRESS: STREET 1: 420 CHIPETA WAY SUITE 240 CITY: SALT LAKE CITY STATE: UT ZIP: 84108-1256 BUSINESS PHONE: 8015834939 10-Q 1 QUARTERLY REPORT ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1999 [_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from ____________________ to ____________________. Commission File Number 0-23272 ----------- NPS PHARMACEUTICALS, INC. (Exact name of Registrant as specified in its charter) Delaware 87-0439579 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 420 Chipeta Way, Salt Lake City, Utah 84108-1256 (Address of principal executive offices) (Zip Code) (801) 583-4939 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) _______________ 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 at least the past 90 days. YES [X] NO [_] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at September 30, 1999 ----- --------------------------------- Common Stock $.001 par value 12,718,719 ================================================================================ TABLE OF CONTENTS PART I FINANCIAL INFORMATION Page No. -------- Item 1. Financial Statements. Balance Sheets.................................................. 3 Statements of Operations........................................ 4 Statements of Cash Flows........................................ 5 Notes to Financial Statements................................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................... 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk......... 11 PART II OTHER INFORMATION Item 6. Exhibits and Report on Form 8-K............................... 11 (a) Exhibit No. 27.1 Financial Data Schedule (b) Reports on Form 8-K SIGNATURES................................................................. 13 2 Item 1. Financial Statements. NPS PHARMACUETICALS, INC. (a Developmental Stage Company) Balance Sheets
September 30, December 31, Assets 1999 1998 ------------------- ------------------ (Unaudited) Current assets: Cash and cash equivalents $ 13,385,195 $ 23,615,225 Marketable investment securities 15,064,469 19,829,253 Accounts receivable 103,485 100,000 Other current assets 113,674 156,250 ------------------- ------------------ Total current assets 28,666,823 43,700,728 Plant and equipment: Equipment 6,575,797 6,325,455 Leasehold improvements 3,214,565 2,885,400 ------------------- ------------------ 9,790,362 9,210,855 Less accumulated depreciation and amortization 5,684,228 4,804,228 ------------------- ------------------ Net plant and equipment 4,106,134 4,406,627 Other assets 3,267 3,267 ------------------- ------------------ $ 32,776,224 $ 48,110,622 =================== ================== Liabilities and Stockholders' Equity Current liabilities: Current installments of obligations under capital leases $ 22,884 $ 26,291 Current installments of long-term debt - 8,567 Accounts payable 1,037,260 1,872,610 Accrued expenses 1,287,352 350,853 Deferred income 292,500 675,000 ------------------- ------------------ Total current liabilities 2,639,996 2,933,321 Obligations under capital leases, excluding current installments 17,337 31,517 ------------------- ------------------ Total liabilities 2,657,333 2,964,838 Stockholders' equity: Common stock 12,719 12,586 Additional paid-in capital 88,758,087 88,291,872 Accumulated other comprehensive income- net unrealized gain on marketable investment securities 52,116 110,352 Deficit accumulated during development stage (58,704,031) (43,269,026) ------------------- ------------------ Stockholders' equity 30,118,891 45,145,784 ------------------- ------------------ $ 32,776,224 $ 48,110,622 =================== ==================
See accompanying notes to financial statements. 3 NPS PHARMACUETICALS, INC. (A Developmental Stage Company) Statements of Operations (Unaudited)
October 22, 1986 (inception) Three Months Ended September 30, Nine Months Ended September 30, through ---------------------------------- --------------------------------- September 30, 1999 1998 1999 1998 1999 ---------------- ---------------- ---------------- ---------------- --------------- Revenues from research and license agreements $ 915,000 $ 887,500 $ 2,745,000 $ 2,662,500 $ 54,813,179 Operating expenses: Research and development 4,597,840 4,719,474 15,002,368 13,172,622 89,634,849 General and administrative 1,340,974 1,255,092 4,439,506 4,192,073 33,472,531 ---------------- ---------------- ---------------- ---------------- --------------- Total operating expenses 5,938,814 5,974,566 19,441,874 17,364,695 123,107,380 ---------------- ---------------- ---------------- ---------------- --------------- Operating loss (5,023,814) (5,087,066) (16,696,874) (14,702,195) (68,294,201) Other income (expense): Interest income 353,348 844,163 1,265,628 2,281,978 11,159,245 Interest expense - (2,232) (3,759) (15,412) (705,575) Other - - - - 154,265 ---------------- ---------------- ---------------- ---------------- --------------- Total other income 353,348 841,931 1,261,869 2,266,566 10,607,935 ---------------- ---------------- ---------------- ---------------- --------------- Loss before taxes (4,670,466) (4,245,135) (15,435,005) (12,435,629) (57,686,266) Income tax expense - - - - 1,017,765 ---------------- ---------------- ---------------- ---------------- --------------- Net loss $ (4,670,466) $ (4,245,135) $ (15,435,005) $ (12,435,629) $ (58,704,031) ================ ================ ================ ================ =============== Net loss per common and common- equivalent share - basic and diluted $ (0.37) $ (0.34) $ (1.22) $ (1.01) ================ ================ ================ ================ Weighted average common and common-equivalent shares outstanding - basic and diluted 12,696,200 12,321,200 12,664,900 12,283,800 ================ ================ ================ ================
See accompanying notes to financial statements. 4 NPS PHARMACEUTICALS, INC. (A Development Stage Company) Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, October 22, 1986 --------------------------------------- (inception) through 1999 1998 September 30, 1999 ----------------- ------------------ --------------------- Cash flows from operating activities: Net loss $ (15,435,005) $ (12,435,629) $ (58,704,031) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 880,000 810,000 6,392,804 Gain on sale of equipment (4,000) - (33,909) Issuance of stock in lieu of cash for services 105,357 95,650 1,033,061 Compensation expense reported on cashless exercise of options 50,784 - 50,784 Amortization of deferred compensation - - 766,500 Decrease (increase) in receivables (3,485) 298,876 (103,485) Decrease (increase) in other current assets 42,576 93,750 (113,674) Increase in other assets - - (6,867) Increase (decrease) in accounts payable and accrued expenses 101,149 406,483 2,324,612 Increase (decrease) in deferred income (382,500) (300,000) 292,500 ----------------- ------------------ --------------------- Net cash used in operating activities (14,645,124) (11,030,870) (48,101,705) Cash flows from investing activities: Net sale (purchase) of marketable investment securities 4,706,548 (2,132,720) (15,012,353) Acquisition of equipment and leasehold improvements (579,507) (1,324,472) (9,865,937) Proceeds from sale of equipment 4,000 - 1,079,621 ----------------- ------------------ --------------------- Net cash provided by (used in) investing activities 4,131,041 (3,457,192) (23,798,669) Cash flows from financing activities: Proceeds from note payable to bank - - 123,855 Proceeds from issuance of preferred stock - - 17,581,416 Proceeds from issuance of common stock 310,207 378,529 69,639,045 Proceeds from long-term debt - - 1,166,434 Principal payments on note payable to bank - - (123,855) Principal payments under capital lease obligations (17,587) (28,268) (1,437,588) Principal payments on long-term debt (8,567) (246,610) (1,363,738) Repurchase of preferred stock - - (300,000) ----------------- ------------------ --------------------- Net cash provided by financing activities 284,053 103,651 85,285,569 ----------------- ------------------ --------------------- Net increase (decrease) in cash and cash equivalents (10,230,030) (14,384,411) 13,385,195 Cash and cash equivalents at beginning of period 23,615,225 36,103,533 - ----------------- ------------------ --------------------- Cash and cash equivalents at end of period $ 13,385,195 $ 21,719,122 $ 13,385,195 ================= ================== =====================
See accompanying notes to financial statements. 5 NPS PHARMACUETICALS, INC. (a Developmental Stage Company) Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, October 22, 1986 --------------------------------------- (inception) through 1999 1998 September 30, 1999 ------------------ ------------------ --------------------- Supplemental Disclosure of Cash Flow Information: Cash paid for interest $ 3,759 $ 13,180 $ 705,575 Cash paid for taxes 1,017,765 Supplemental Schedule of Noncash Investing and Financing Activities: Acquisition of equipment through incurrence of capital lease obligations - - 1,477,809 Acquisition of leasehold improvements through incurrence of debt - - 197,304 Issuance of preferred stock for stock subscription receivable - - 4,000,000 Accrual of deferred offering costs - - 150,000 Increase (decrease) in other comprehensive income - unrealized gain on marketable investment securities (58,236) - 52,116
See accompanying notes to financial statements. 6 NOTES TO FINANCIAL STATEMENTS (Unaudited) (1) Basis of Presentation The accompanying unaudited financial statements of NPS Pharmaceuticals, Inc. ("NPS" or the "Company") reflect all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary to present fairly the financial position and results of operations for the interim periods presented. The results of operations for the three-month and nine-month periods ended September 30, 1999, are not necessarily indicative of the results to be expected for the full year. The financial information included herein should be read in conjunction with the Company's Form 10-K/A for 1998 which includes the audited financial statements and the notes thereto for the year ended December 31, 1998. (2) Comprehensive Loss The components of the Company's comprehensive loss are as follows:
Three months ended Three months ended September 30, 1999 September 30, 1998 --------------------- ------------------- Net loss..................................... $(4,670,466) $(4,245,135) Increase in unrealized gain on marketable investment securities, net.................. 22,209 ------ --------------------- ------------------- Comprehensive loss........................... $(4,648,257) $(4,245,135) ===================== =================== Nine months ended Nine months ended September 30, 1999 September 30, 1998 --------------------- ------------------- Net loss..................................... $(15,435,005) $(12,435,629) Decrease in unrealized gain on marketable investment securities, net.................. (58,236) ------ --------------------- ------------------- Comprehensive loss........................... $(15,493,241) $(12,435,629) ===================== ===================
(3) Loss Per Common Share Loss per common share was the same for both the basic and diluted calculations. Common stock equivalents (stock options outstanding) of approximately 2.3 million and 2.1 million shares at September 30, 1999 and 1998, respectively, that could potentially dilute basic earnings per share in the future were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented. (4) Operating Segment The Company is engaged in the discovery and development of prescription drugs and in its current state of development considers its operations to be a single reportable segment. Financial results of this reportable segment are presented in the accompanying financial statements. (5) Merger On September 27, 1999, NPS entered into a definitive agreement for a stock for stock merger with Allelix Biopharmaceuticals Inc. ("Allelix"), a Canadian company. NPS will be the surviving company and the combined company will operate as NPS Pharmaceuticals, Inc. in the U.S. and as NPS Allelix Inc. in Canada. The merger 7 takes the form of a Plan of Arrangement under Canadian law and requires Canadian judicial review. The merger is subject to approval by the shareholders of Allelix and the issuance of shares by NPS is subject to approval of the Shareholders of NPS. The merger is expected to close no later than January 31, 2000. NPS will issue approximately 6.5 million shares of common stock to Allelix common shareholders at an exchange ratio of 0.3238 shares of NPS common stock for each outstanding share of Allelix stock. One million shares of NPS common stock will be reserved for issuance to the holders of Allelix options, warrants, and preferred stock at the same exchange ratio. Under the arrangement, Allelix shareholders that are U.S. residents will receive NPS common shares. Allelix shareholders that are Canadian residents can elect to receive either NPS common shares or shares of an NPS subsidiary that are exchangeable one-for-one into NPS common shares. NPS common shares will continue to trade on the Nasdaq Stock Market, while the exchangeable shares will be listed on The Toronto Stock Exchange. The transaction will be accounted for by the Company under the purchase method of accounting. (6) Plan of Termination Effective September 30, 1999, the Company terminated the employment of 39 research and administrative employees. The Company recorded a liability of $1.1 million for severance benefits for these employees which will be paid during the fourth quarter of 1999. Approximately 90% of this amount was included in research and development expense and 10% in general and administrative expense as of September 30, 1999. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES ARE DISCUSSED IN THIS DOCUMENT AND IN OUR ANNUAL REPORT ON SEC-FILED FORM 10-K/A FOR THE YEAR ENDED DECEMBER 31, 1998 UNDER THE HEADING "RISK FACTORS." Overview On September 27, 1999, we entered into a definitive agreement to merge with Allelix. The transaction was reported on Form 8-K filed on October 1, 1999. Additionally, during the third quarter, we restructured our operational functions in order to focus more on later-stage clinical programs and less on earlier-stage discovery programs. As part of this restructuring we terminated the employment of 39 research and administrative employees effective as of September 30, 1999. We recorded a liability of approximately $1.1 million as of that date for severance benefits for these employees. We included approximately 90% of this amount in research and development expense and 10% in general and administrative expense as of September 30, 1999. Substantially all of our resources are devoted to our research and development programs. To date, we have not completed development of any pharmaceutical product for sale. We have incurred cumulative losses through September 30, 1999 of $58.7 million, net of cumulative revenues from research and license agreements of $54.8 million. We expect to incur significant operating losses over at least the next several years as we continue our research activities and our preclinical and clinical development activities. Substantially all our revenues are derived from license fees, milestone payments, and research and development support payments from licensees and these revenues fluctuate from quarter to quarter. Accordingly, we expect that income or loss will fluctuate from quarter to quarter, that the fluctuations may be substantial, and that results from prior quarters may not be indicative of future operating results. Profitability will depend in part on our ability and the ability of our licensees, to complete product development, to obtain the required regulatory approvals, and to manufacture and market products. We cannot assure that these events will occur. 8 Results of Operations Revenues were $915,000 for the quarter ended September 30, 1999 compared to $887,500 for the quarter ended September 30, 1998, and $2.7 million for each of the nine-month periods ended on those dates. Most of our revenues for each of these periods were derived from research, development, and license agreements with SmithKline Beecham Corporation, Kirin Brewery Company, Ltd., and Amgen Inc. See "Liquidity and Capital Resources" below for further discussion of payments that may be received in the future under these agreements. Research and development expenses decreased to $4.6 million for the quarter ended September 30, 1999, from $4.7 million in the comparable period of 1998, and increased to $15.0 million for the nine-month period ended September 30, 1999, from $13.2 million in the comparable period of 1998. The increase in research and development expenses during the nine-month period of 1999 was principally due to the costs incurred during the first half of 1999 for the conduct of clinical trials for NPS 1776 which commenced in the third quarter of 1998. Those clinical trials were substantially completed before the third quarter of 1999. Research and development expenses include approximately $980,000 for severance benefits for the three-month and nine-month periods ended September 30, 1999. Development expenses may increase in the future if we choose to conduct increasingly expensive later-stage clinical trials and if we start clinical trials for new product candidates. We may choose not to start certain clinical trials in order to limit such expenses and to conserve cash for future operations. Such actions could substantially delay the development and potential commercialization of our product candidates currently in development. General and administrative expenses were $1.3 million for the quarters ended September 30, 1999 and 1998, and increased to $4.4 million for the nine- month period ended September 30, 1999, from $4.2 million in the comparable period of 1998. General and administrative expenses include approximately $110,000 for severance benefits for the three-month and nine-month periods ended September 30, 1999. We expect that general and administrative expenses will increase only modestly in the future and then only in response to need for support of any increase in research and development activities. Interest income decreased to $353,000 for the quarter ended September 30, 1999, from $844,000 for the comparable quarter of 1998 and to $1.3 million for the nine-month period ended September 30, 1999, from $2.3 million in the comparable period of 1998. These decreases were primarily due to decreases in the average balances of cash, cash equivalents, and marketable investment securities. We anticipate that interest income will decrease in the future as cash is utilized for operations. Liquidity and Capital Resources We have financed operations since inception primarily through collaborative research and license agreements and the private and public placement of equity securities. As of September 30, 1999, we had recognized $54.8 million of cumulative revenues from payments for research support and license fees and $88.8 million in consideration for the sale of equity securities for cash and services. Our principal sources of liquidity are cash, cash equivalents, and marketable investment securities which totaled $28.4 million at September 30, 1999. We receive quarterly research and/or development support payments under our agreements with Amgen, Kirin, and SmithKline Beecham. The payments are scheduled to aggregate $2.9 million from October 1999 through the scheduled expiration dates of the respective agreements in December, June, and October 2000. In addition, SmithKline Beecham will purchase 249,000 shares of NPS common stock on November 1, 1999, at a premium to the market price. There can be no assurance that our licensees will not terminate their respective agreements with us and thereby terminate their obligations to make support payments in the future. We could receive future payments of up to $49.0 million in the aggregate from Amgen, Kirin, and SmithKline Beecham upon the accomplishment of specified research and/or development milestones under the respective agreements. However, we do not control the subject matter, timing, or resources applied by our licensees under their respective development programs. Thus, potential receipt of milestone payments from these licensees is largely beyond our control. Progress under these agreements is subject to risk and each of these agreements may be 9 terminated before its scheduled expiration date by the respective licensee. We cannot assure that our licensees will make any future payments, whether as research or development milestone payments or support payments. We have entered into sponsored research and license agreements that obligate us to make research support payments to academic and/or commercial research institutions. Additional payments may be required upon the accomplishment of research milestones by the institutions, or as license fees or royalties to maintain the licenses. As of September 30, 1999, we had a total commitment of approximately $1.0 million for future research support payments. We expect to enter into additional sponsored research and license agreements in the future. As of September 30,1999, our investment in leasehold improvements, equipment, and furnishings was $4.1 million, net of accumulated depreciation and amortization. Additional equipment and facilities may be needed if we increase our internal research and development activities, a portion of which may be financed with debt or leases. We expect to maintain operations for at least the next 24 months utilizing existing capital resources, including interest earned thereon, expected research and development support payments, milestone payments, equity purchases from licensees, and our management of expenditures. After the closing of the merger with Allelix and the restructuring, we expect to maintain operations for at least the same period of time utilizing the described resources on a combined basis. A reduction in the expected amount of research and development support payments, milestone payments, or equity purchases may shorten the period during which we could maintain our operations or require us to reduce operations. Additionally, actual needs are dependent on numerous factors, including our progress toward developing and commercializing products. Furthermore, in the event we in-license or otherwise acquire a product candidate, substantial expenditures for developing and commercializing the product candidate would be required. Finally, if any licensee terminates its agreement, we might not have sufficient capital to complete the development and commercialization of a product in such licensee's respective territory. It may also become necessary to raise additional funds to support our development and commercialization programs. We are presently seeking additional funding for certain current programs through corporate collaborations and licensing agreements. We may also seek additional funding through public or private financing which could be dilutive to current shareholders. We cannot assure that additional funding will be available on acceptable terms, if at all. If adequate funds are not available, we may modify plans for some of our research and development programs. Such modifications may include: terminating programs, delaying the conduct of further clinical trials; reducing research activities; and/or reduction of personnel. Any of these actions may substantially delay the development and potential commercialization of our product candidates. Year 2000 Assessment We continue to assess impact of the year 2000 on our operations and systems. We have developed assessment procedures and a plan to address identified issues. A Y2K Task Force was assembled in the beginning of 1998 to evaluate the potential impact of the so called "Year 2000 millennium bug" on our operations. Since formation, the task force has monitored the evaluation of financial, accounting, information management, scientific equipment, and building systems. To date financial, accounting, and information management systems review has been completed. Those systems which were not compliant have been replaced. We continue to assess the impact of the year 2000 on our other systems and equipment. We expect to have identified and replaced or updated all internal systems and equipment which are not year 2000 compliant before the year 2000 to the extent necessary to enable us to continue operations. We do not expect the cost of repair or replacement to be material to our operations. We are also seeking assurance from primary third-party service and goods suppliers, including financial institutions, suppliers, CROs, and other collaborative parties that they do not expect the year 2000 matter to materially impact their dealings with us. To date, we are not aware of any critical third-party suppliers that will not be able to meet our needs in order to maintain operations. We cannot assure that these third parties are using systems that are year 2000 compliant or will address any year 2000 issues in a timely fashion. Any year 2000 compliance problems of our suppliers, clinical research organizations, or our licensees could have a material adverse effect on our business, operating results, and financial condition. Certain Business Risks 10 The Arrangement and an investment in securities of NPS involve certain risks and uncertainties, including risks related to the integration of NPS and Allelix, risks associated with a fixed Exchange Ratio, risks relating to the respective businesses of NPS and Allelix and other risks and uncertainties discussed under "Risk Factors" in the Proxy Statement related to the merger and in the documents incorporated therein by reference. We are currently in the early stage of product development. NPS 1506, NPS 1776, and compounds for the treatment of HPT are the only product candidates in clinical development by us or our licensees. There is no guarantee that NPS 1506, NPS 1776, or any compound for Hyperparathyroidism ("HPT") will prove to be safe or effective or that back-up or later generation compounds will be identified or taken into clinical trials or if so identified and so tested, that the compounds will be found to be safe, effective, or marketable. All of our remaining technologies are in preclinical stages and will require significant additional research and development efforts before any commercial use. Because we have granted exclusive development, commercialization, and marketing rights in the fields of HPT and osteoporosis, the success of these programs is primarily dependent upon the efforts of Amgen, Kirin, and SmithKline Beecham. Furthermore, the merger with Allelix involves a high amount of risk. There can be no certainty that we will be successful in integrating the two companies and achieving the anticipated benefits of such merger. Other business risks include our lack of product sales, a history of operating losses, the uncertainty of regulatory approvals, rapid technological change and competition, the uncertainty of protection of our patents and proprietary technology, our dependence on third parties for manufacturing, future capital needs and the uncertainty of additional funding, our lack of marketing capabilities, the uncertainty of third-party reimbursement, the uncertainty of in-licensing efforts, our dependence on key personnel and our ability to manage growth. A more detailed discussion of factors that could cause actual results to differ materially from those in forward-looking statements is contained in our annual report on SEC-filed Form 10-K/A for the year ended December 31, 1998, under the heading "Risk Factors." Item 3. Quantitative and Qualitative Disclosures About Market Risk. Our primary objectives in managing our investment portfolio are to preserve principal, maintain proper liquidity to meet operating needs, and maximize yields. The securities held in our investment portfolio are subject to interest rate risk. We employ established policies and procedures to manage exposure to fluctuations in interest rates. We place our investments with high quality issuers and limit the amount of credit exposure to any one issuer and do not use derivative financial instruments in our investment portfolio. We maintain an investment portfolio of various issuers, types, and maturities, which consist mainly of fixed rate financial instruments. These securities are classified as available-for-sale and, consequently, are recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component in stockholders' equity. At any time, sharp changes in interest rates can affect the fair value of the investment portfolio and its interest earnings. Currently, we do not hedge these interest rate exposures. After a review of our marketable securities, we believe that in the event of a hypothetical ten percent increase in interest rates, the resulting decrease in fair market value of our marketable investment securities would be insignificant to the financial statements. PART II Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. -------- 27.1 Financial Data Schedule for the nine months ended September 30, 1999. (b) Reports on Form 8-K. The Company filed one report on Form 8-K, dated ------------------- October 1, 1999, reporting the merger between NPS and Allelix, and including a copy of the Arrangement Agreement dated September 27, 1999. 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. NPS Pharmaceuticals, Inc. Date: October __, 1999 By:______________________________________________ James U. Jensen, Vice President Corporate Development and Legal Affairs (Executive Officer) Date: October __, 1999 By:______________________________________________ Robert K. Merrell, Vice President, Finance, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1999 JUL-01-1999 SEP-30-1999 13,385,195 15,064,469 103,485 0 0 28,666,823 9,790,362 5,684,228 32,776,224 2,639,996 0 0 0 12,719 30,106,172 32,776,224 0 1,268,348 0 0 5,938,814 0 0 (4,670,466) 0 (4,670,466) 0 0 0 (4,670,466) (0.37) (0.37)
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