UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended March 31, 2013
OR
o 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.
Delaware |
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87-0439579 |
(State or Other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
550 Hills Drive, Bedminster, New Jersey |
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07921 |
(Address of Principal Executive Offices) |
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(Zip Code) |
(908) 450-5300
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 oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES
x NO oIndicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," and large "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |
x |
Accelerated filer |
o |
Non-accelerated filer |
o |
Smaller reporting company |
o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES
o NO xThe number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date is as follows:
Class |
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Outstanding at April 30, 2013 |
Common Stock $.001 par value |
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94,142,290 |
Note: PDF provided as a courtesy
TABLE OF CONTENTS
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Page No. |
PART I FINANCIAL INFORMATION |
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Item 1. |
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Financial Statements (unaudited) |
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Condensed Consolidated Balance Sheets |
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3 |
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Condensed Consolidated Statements of Operations |
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4 |
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Condensed Consolidated Statements of Comprehensive Income (Loss) |
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5 |
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Condensed Consolidated Statements of Cash Flows |
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6 |
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Notes to Condensed Consolidated Financial Statements |
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7 |
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Item 2. |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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17 |
Item 3. |
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Quantitative and Qualitative Disclosures About Market Risk |
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25 |
Item 4. |
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Controls and Procedures |
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26 |
PART II OTHER INFORMATION |
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Item 1. |
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Legal Proceedings |
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27 |
Item 1A. |
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Risk Factors |
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27 |
Item 2. |
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Unregistered Sales of Equity Securities and Use of Proceeds |
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27 |
Item 6. |
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Exhibits |
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27 |
SIGNATURES |
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2
PART I. Item 1. Financial Statements.
NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets See accompanying notes to condensed consolidated financial statements. 3
NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations See accompanying notes to condensed consolidated financial statements. 4
NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Loss See accompanying notes to condensed consolidated financial statements. 5
NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows See accompanying notes to condensed consolidated financial statements. 6
NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES (1) Basis of Presentation The accompanying unaudited condensed consolidated financial statements included herein have
been prepared by NPS Pharmaceuticals, Inc. (NPS or the Company) in accordance with the rules and
regulations of the United States Securities and Exchange Commission (SEC). The condensed
consolidated financial statements are comprised of the financial statements of NPS and its
subsidiaries collectively referred to as the Company. In management's opinion, the interim
financial data presented includes all adjustments (consisting solely of normal recurring items)
necessary for fair presentation. All intercompany accounts and transactions have been eliminated.
Certain information required by U.S. generally accepted accounting principles has been condensed or
omitted in accordance with rules and regulations of the SEC. Operating results for the three months
ended March 31, 2013 are not necessarily indicative of the results that may be expected for any
future period or for the year ending December 31, 2013. These condensed consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements and the notes thereto for the year ended
December 31, 2012, included in NPS' 2012 Annual Report on Form 10-K filed with the SEC. The preparation of the condensed consolidated financial statements requires management to make
estimates and assumptions relating to reporting of the assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these condensed consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period in conformity with U.S.
generally accepted accounting principles. Actual results could differ from these estimates. Subsequent Events The Company has evaluated all events and transactions since March 31, 2013. The
Company did not have any material recognized or non-recognized subsequent events. Significant Accounting Policies There were no significant changes in the Company's significant accounting policies from those at
December 31, 2012; however, the following information, which relates to the U.S. launch of
Gattex in February 2013, is in addition to, and should be read in conjunction with, the accounting
policies included in the Company's our Annual Report on Form 10-K for the year ended
December 31, 2012. Product Sales. Product sales represent U.S. sales of Gattex, which was approved by
the FDA in December 2012. The Company recognizes revenue from Gattex product sales when persuasive
evidence of an arrangement exists, title to product and associated risk of loss has passed to the
customer, the price is fixed or determinable, collection from the customer is reasonably assured,
the Company has no further performance obligations, and returns can be reasonably estimated. All prescriptions for Gattex, received directly by NPS from the patient's physician, are handled
through NPS Advantage, the Company's data management and patient support program, who investigates
and determines the patient's insurance coverage for Gattex. Once coverage is confirmed, NPS
forwards the prescription to the specialty pharmacy (SP) who then re-confirms the coverage and
dispenses Gattex to the patient. The Company sells Gattex directly to a limited number of SPs and a
specialty distributor (SD) who dispense product to patients, hospitals or U.S. government entities.
The Company invoices and records revenue upon the SPs' or SD's receipt of Gattex from the Company's
third-party logistics warehouse. The Company's SPs order product to fill prescriptions that have
been approved for reimbursement by payers. 7
Specific considerations for Gattex sold in the U.S. are as follows: Product sales are recorded net of accruals for estimated rebates, chargebacks, discounts, and
other deductions (collectively, sales deductions) and returns. With the exception of allowances for
prompt payment, allowances for sales deductions and returns are included in accounts payable and
accrued expenses in the accompanying consolidated balance sheets. Inventory. Inventories are stated at the lower of cost or estimated realizable
value. The Company determines the cost of inventory using the first-in, first-out, or FIFO, method.
The Company capitalizes inventory costs associated with the Company's products after regulatory
approval when, based on management's judgment, future commercialization is considered probable and
the future economic benefit is expected to be realized; otherwise, such costs are expensed as
research and development. The Company periodically analyzes its inventory levels to identify
inventory that may expire prior to expected sale or has a cost basis in excess of its estimated
realizable value, and writes-down such inventories as appropriate. In addition, the Company's
products are subject to strict quality control and monitoring which the Company performs throughout
the manufacturing process. If certain batches or units of product no longer meet quality
specifications or become obsolete due to expiration, the Company records a charge to cost of goods
sold to write down such unmarketable inventory to its estimated realizable value. (2) Income (Loss) Per Common Share Basic net income (loss) per common share is the amount of income (loss) for the period
divided by the weighted average shares of common stock outstanding during the reporting period.
Diluted income (loss) per common share is the amount of income (loss) for the period plus interest
expense on convertible debt divided by the sum of weighted average shares of common stock
outstanding during the reporting period and weighted average shares that would have been outstanding
assuming the issuance of common shares for all dilutive potential common shares. 8
Potential common shares of approximately 9.0 million and 7.4 million during the three months
ended March 31, 2013 and 2012, respectively that could potentially dilute basic income per share in
the future were not included in the computation of diluted income (loss) per share because to do so
would have been anti-dilutive for the periods presented. Potential dilutive common shares related
to convertible debt were approximately 3.0 million common shares for the three months ended March
31, 2013 and 2012, respectively. Additionally, potential dilutive common shares related to stock
options, restricted stock and restricted stock units were 6.0 million and 4.3 million common shares, for the three months ended March 31, 2013 and 2012, respectively. (3) Fair Value Measurement The Company's financial assets and liabilities are measured using inputs from the three
levels of the fair value hierarchy. The three levels are as follows: Level 1- Inputs are unadjusted quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access at the measurement date. Level 2- Inputs are other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar
assets and liabilities in active markets, quoted prices for identical or similar assets or
liabilities in markets that are not active, inputs other than quoted prices that are observable for
the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived
principally from or corroborated by observable market data by correlation or other means (market
corroborated inputs). Level 3- Inputs are unobservable and reflect the Company's assumptions that market participants
would use in pricing the asset or liability. The Company develops these inputs based on the best
information available. Summary of Assets Recorded at Fair Value In accordance with the fair value hierarchy described above, the following table shows the fair
value of the Company's financial assets (only marketable investment securities) that are required to
be measured at fair value as of March 31, 2013 and December 31, 2012 (in thousands): As of March 31, 2013 and December 31, 2012, the fair values of the Company's Level 2 securities
were $8.7 million and $15.5 million, respectively. These securities are certificates of deposit or
commercial paper issued by domestic companies with an original maturity of greater than ninety days
but less than 18 months. These securities are currently rated A-1 or higher. The Company's cash
equivalents are classified within Level 1 or Level 2 of the fair value hierarchy because they are
valued using quoted market prices or broker or dealer quotations for similar assets. These
investments are initially valued at the transaction price and subsequently valued utilizing third
party pricing providers or other market observable data. Data used in the analysis include
reportable trades, broker/dealer quotes, bids and offers, benchmark yields and credit spreads. The
Company validates the prices provided by its third party pricing providers by reviewing their
pricing methods, analyzing pricing inputs and confirming that the securities have traded in normally
functioning markets. The Company did not adjust or override any fair value measurements provided by
its pricing providers as of March 31, 2013 or December 31, 2012. As of March 31, 2013 and December 31, 2012, the Company did not have any investments in Level 3
securities. 9
There were no transfers of assets or liabilities between level 1 and level 2 during the three months ended March 31, 2013 and 2012. The carrying amounts reflected in the condensed consolidated balance sheets for certain short-term
financial instruments including accounts receivable, accounts payable, accrued expenses, and
other liabilities approximate fair value due to their short-term nature except that the estimated
fair value and carrying value of a royalty liability to the Brigham and Women's Hospital related to
sales of cinacalcet HCl using a discounted cash flow model is approximately $5.0 million and $6.6
million, respectively, at March 31, 2013 and $4.8 million and $6.6 million, respectively, at
December 31, 2012. Summary of Liabilities Recorded at Carrying Value The fair and carrying value of our debt instruments are detailed as follows (in thousands): The fair values of the Company's convertible notes were estimated using the (i) terms of the
convertible notes; (ii) rights, preferences, privileges, and restrictions of the underlying
security; (iii) time until any restriction(s) are released; (iv) fundamental financial and other
characteristics of the Company; (v) trading characteristics of the underlying security (exchange,
volume, price, and volatility); and (vi) precedent sale transactions. The fair values of the
Company's non-recourse Sensipar notes, Preotact-secured debt and Regpara-secured debt were estimated
using a discounted cash flow model. Within the hierarchy of fair value measurements, these are
Level 3 fair values. (4) Financial Instruments Financial instruments that potentially subject the Company to concentrations of credit risk
are accounts receivable and marketable investment securities. The majority of the Company's
accounts receivable are payable by pharmaceutical companies and specialty pharmacies and collateral
is generally not required from these companies. Substantially all of the Company's royalty revenues
for the three months ended March 31, 2013 and 2012 were from three and four licensees, respectively,
and substantially all of the Company's accounts receivable balances at March 31, 2013 and December
31, 2012 were from three licensees. Substantially all of the Company's product sales revenues for
the three months ended March 31, 2013 and substantially all of the Company's trade accounts
receivable balances at March 31, 2013 were from six specialty pharmacies. The Company's portfolio
of marketable investment securities is subject to concentration limits set within the Company's
investment policy that help to mitigate its credit exposure. The following is a summary of the Company's marketable investment securities (in thousands): 10
Marketable investment securities available for sale in an unrealized loss position as of March
31, 2013 and December 31, 2012 are summarized as follows (in thousands): Summary of Contractual Maturities Maturities of marketable investment securities are as follows at March 31, 2013 and December 31, 2012 (in thousands): Impairments No impairment losses were recognized through earnings related to available
for sale securities during the three months ended March 31, 2013 and 2012. 11
Proceeds from Available for Sale Securities The proceeds from maturities and sales of available for sale securities and resulting
realized gains and losses, were as follows (in thousands): (5) Inventory Inventories, stated at the lower of cost or market, consisted of raw materials of $36.6
million and finished goods of $85,000 as of March 31, 2013. The Company began to capitalize
inventory after the FDA approval of Gattex in December 2012. The Company acquired approximately
$15.9 million of Revestive raw materials and $20.7 million of PTH raw materials related to the March
18, 2013 Transition and Termination Agreement with Takeda. (See note 10) (6) Long-term Debt The following table reflects the carrying value of
the Company's long-term debt under various financing arrangements as of March 31, 2013 and December 31, 2012 (in thousands): (a) Convertible Notes The Company has $16.5 million of its 5.75% Convertible Notes (5.75% Convertible Notes)
outstanding as of March 31, 2013. The 5.75% Convertible Notes originated from an August 2007
private placement of $50.0 million in 5.75% Convertible Notes due August 7, 2014. The 5.75%
Convertible Notes accrue interest at an annual rate of 5.75% payable quarterly in arrears on the
first day of the succeeding calendar quarter commencing January 1, 2008. Accrued interest on
the 5.75% Convertible Notes was $0 as of March 31, 2013 and December 31, 2012. The holders may
convert all or a portion of the 5.75% Convertible Notes into common stock at any time, subject to
certain limitations, on or before August 7, 2014. The 5.75% Convertible Notes are convertible
into common stock at a conversion price of $5.44 per share (see below), subject to adjustments in
certain events. The 5.75% Convertible Notes are unsecured debt obligations and rank equally in
right of payment with all existing and future unsecured senior indebtedness. Since August 7,
2012, the Company has had the right to redeem any or all of the 5.75% Convertible Notes at a
redemption price of 100% of their principal amount, plus accrued and unpaid interest to the day
preceding the redemption date. The 5.75% Convertible Notes provide for certain events of default,
including payment defaults, breaches of covenants and certain events of bankruptcy, insolvency and
reorganization. The 5.75% Convertible Notes also provide that if there shall occur a fundamental
change, as defined, at any time prior to the maturity of the Note, then the holder shall have the
right, at the Holder's option, to require the Company to redeem the notes, or any portion thereof
plus accrued interest and liquidated damages, if any. If a change of control, as defined, occurs
and if the holder converts notes in connection with any such transaction, the Company will pay a
make whole premium by increasing the conversion rate applicable to the notes. If any event of
default occurs and is continuing, the principal amount of the 5.75% Convertible Notes, plus accrued
and unpaid interest, if any, may be declared immediately due and payable. The Company incurred debt
issuance costs of approximately $600,000, which have been deferred and which are being amortized over a seven-year period, unless earlier
12
converted, in which case the unamortized costs are recorded
in additional paid-in capital. The effective interest rate on the 5.75% Convertible Notes,
including debt issuance costs, is 5.9%. Pursuant to the Registration Rights Agreement, the Company has filed
a shelf registration statement with the SEC, covering
resales of the common stock issuable upon conversion of the 5.75% Convertible Notes.
The registration statement has been declared effective. The Company agreed to use its reasonable
best efforts to keep the registration statement effective until the earlier of (i) the date as of
which holders may sell all of the securities covered by the registration statement without
restriction pursuant to Rule 144(k) promulgated under the Securities Act of 1933 or (ii) the date on
which holders shall have sold all of the securities covered by the registration statement. If the
Company fails to comply with these covenants or suspends use of the registration statement for
periods of time that exceed what is permitted under the
Registration Rights Agreement, the Company is required
to pay liquidated damages in an amount equivalent to
1% per annum of (a) the principal amount of the notes outstanding, or (b) the conversion price of
each underlying share of common stock that has been issued
upon conversion of a note, in each case, until the Company is in
compliance with these covenants. The Company believes the likelihood of such an event occurring is
remote and, as such, the Company has not recorded a liability as of March 31, 2013. (b) Non-recourse Debt Sensipar and Mimpara-Secured Non-recourse Debt As of March 31, 2013 and December 31, 2012, the outstanding principal balances on Sensipar and
Mimpara-secured non-recourse debt were $74.0 million and $80.2 million, respectively. The Sensipar
and Mimpara-secured debt is non-recourse to the Company and solely secured and serviced by Sensipar
and Mimpara (cinacalcet HCl) royalties. The Company amended its agreement with Amgen effective
September 30, 2011 whereby Amgen advanced $145.0 million of Sensipar and Mimpara royalties to the
Company (Sensipar Notes). The Sensipar Notes accrue interest at an annual rate of 9%, compounded
quarterly and payable forty-five days after the close of each quarter. The payment of the royalty
advance and discount shall be satisfied solely by Amgen's withholding of royalties and except in the
event of a breach of certain customary representations and warranties under the agreement, the
Company will have no obligation to repay any unsettled amount. The Company further amended the
agreement with Amgen effective June 29, 2012, limiting the royalty offset of the royalty advance up
to $8.0 million per quarter with royalties in excess of $8.0 million paid to the Company for the
respective quarter, thereby extending the royalty advance repayment period. After the payment of
the royalty advance and a 9 percent per annum discount on the balance of the advance, Amgen will
resume paying NPS all royalties earned through December 31, 2018. As of March 31, 2013 and December
31, 2012, the Company classified $6.4 million and $6.3 million, respectively, of the Sensipar Notes
as current based on royalty payments accrued as of March 31, 2013 and December 31, 2012. Accrued
interest on the Sensipar Notes was approximately $806,000 and $874,000 as of March 31, 2013 and
December 31, 2012, respectively. The Company incurred debt issuance costs of $96,000, which are
being amortized using the effective interest method. The effective interest rate on the Sensipar
Notes, including debt issuance costs, is approximately 9%. Preotact-Secured Non-recourse Debt As of March 31, 2013 and December 31, 2012, the outstanding principal balances on Preotact-secured
debt were $42.8 million, respectively. In July 2007, the Company entered into an agreement
with DRI Capital, or DRI, formerly Drug Royalty L.P.3, in which the Company sold to DRI its right to
receive future royalty payments due under its license agreement with Takeda. Under the agreement,
DRI paid the Company an up-front purchase price of $50.0 million. If and when DRI receives two and
a half times the amount paid to the Company, the agreement will terminate and the remainder of the
royalties, if any, will revert back to the Company. In connection with the Company's July 2007
agreement with DRI, the Company granted DRI a security interest in its license agreement with Takeda
for Preotact and certain of its patents and other intellectual property underlying that agreement.
In the event of a default by NPS under the agreement with DRI, DRI would be entitled to enforce its
security interest against NPS and the property described above. The Company determined the initial
up-front purchase price is debt and is being amortized using the effective interest method over the
estimated life of approximately 14 years. Accrued interest under the DRI agreement was $0 as of
March 31, 2013 and December 31, 2012, respectively. As of March 31, 2013, $45.5 million has been
paid to DRI. On March 18, 2013, Takeda terminated the license agreement and returned the rights to
NPS (See note 10). NPS is obligated to use its commercially reasonable efforts to negotiate,
execute and deliver a new license agreement for the licensed technology in the territory on terms
similar to the Takeda agreement or any other arrangement for the exploitation of the licensed technology, in each
13
case providing for the payment of royalties or other consideration to the same
extent and for the same period of time that royalties are currently payable to DRI. The Company
must also obtain DRI's consent related to a new agreement. This obligation is required for a period
of twelve months following the termination of the Takeda agreement. If the Company does not
complete such negotiation, execution and delivery and obtain DRI's consent, then DRI has the right
to negotiate, execute and deliver a new license agreement for the licensed technology on terms no
more extensive (when taken as a whole), without NPS' permission, then the terms contained in the
Takeda agreement. The repayment of the remaining $42.8 million is secured solely by future royalty
payments arising from sales of the licensed product. The Preotact-secured debt is non-recourse to
the Company. REGPARA-Secured Non-recourse Debt As of March 31, 2013 and December 31, 2012, the outstanding principal balances on REGPARA-secured
debt were $36.3 million, respectively. In February 2010, the Company entered into an agreement with
an affiliate of DRI, in which the Company sold to DRI its right to receive future royalty payments
arising from sales of REGPARA® (cinacalcet HC1) under its license agreement with
Kyowa Hakko Kirin. Under the agreement, DRI paid the Company an upfront purchase price of $38.4
million. If and when DRI receives two and a half times the amount paid to the Company, the
agreement will terminate and the remainder of the royalties, if any, will revert back to the
Company. In connection with the Company's February 2010 agreement with DRI, the Company granted DRI
a security interest in its license agreement with Kyowa Hakko Kirin for REGPARA and certain of its
patents and other intellectual property underlying that agreement. In the event of a default by NPS
under the agreement with DRI, DRI would be entitled to enforce its security interest against NPS and
the property described above. The Company classified the initial upfront purchase price as debt
which is being amortized using the effective interest method over the estimated life of
approximately 10 years. Accrued interest under the DRI agreement was $209,000 and $3.1 million as
of March 31, 2013 and December 31, 2012, respectively. Through March 31, 2013, $24.1 million has
been paid to DRI. The repayment of the remaining $36.3 million principal as of March 31, 2013, is
secured solely by future royalty payments arising from sales of REGPARA by Kyowa Hakko Kirin. The
effective interest rate under the agreement, including issuance costs, is approximately 16.9%. The
REGPARA-secured debt is non-recourse to the Company. (7) Income Taxes The Company accounts for penalties or interest related to uncertain tax positions as part of its
provision for income taxes. Due to the Company's net operating loss carryforwards, any
adjustment related to a liability would not be expected to result in a cash tax liability.
Accordingly, the Company has not accrued for penalties or interest for the U.S. (both federal and
state) as of March 31, 2013 and December 31, 2012. Assuming the continued existence of a full
valuation allowance on the Company's net deferred tax assets, future recognition of any of the
Company's unrecognized tax benefits would not impact the effective tax rate. The Company files income tax returns in various jurisdictions with varying statutes of
limitations. The statute of limitations for income tax audits in the U.S. will commence upon
utilization of net operating losses and will expire three years from the filing of the tax return.
In August 2012, the IRS completed its examination of the Company's U.S. federal income tax returns
for the year ended December 31, 2009. There were no adjustments as a result of the
examination. The Company is currently under audit by the State of New Jersey for the years
2007 to 2010. The Company does not expect any significant adjustments to its filed income tax
returns. (8) Commitments and Contingencies The Company has agreed to indemnify, under certain circumstances, certain manufacturers and
service providers from and against any and all losses, claims, damages or liabilities arising from
services provided by such manufacturers and service providers or from any use, including clinical
trials, or sale by the Company or any Company agent of any product supplied by the manufacturers.
The Company has entered into long-term agreements with various third-party contract manufacturers
for the production and packaging of the active pharmaceutical ingredient and drug product. Under
the terms of these various contracts, the Company may be required to purchase certain minimum
quantities of product each year. 14
(9) Stock Options The Company recognized $3.0 million and $1.9 million of compensation expense during the three
months ended March 31, 2013 and 2012, respectively, related to all stock based compensation. As of
March 31, 2013, there was $17.9 million of total unrecognized compensation cost related to all
unvested share-based compensation arrangements that is expected to be recognized over a weighted-average period of 2.86 years. During the year ended December 31, 2010, the Company's Board of Directors awarded a total of
1,130,700 performance condition options to certain of the Company's employees. Vesting of these
options is subject to the Company achieving certain performance criteria established at the grant
date and the individuals fulfilling a service condition (continued employment). As of March 31,
2013, the performance criteria of 825,340 of these options had been satisfied and will become
exercisable based on the following vesting schedule: 25% on each of the first four anniversaries of
the date of grant, which was February 20, 2010 (the date of grant). The Company recognized $161,000
and $284,000 of compensation expense during the three months ended March 31, 2013 and 2012,
respectively, related to these options. The next performance criteria could be met within the next
six months and would trigger approximately $90,000 of compensation expense related to these
options. The Company utilized the Black-Scholes option pricing model to determine the grant date fair
value of these awards. As of March 31, 2013, except for the 825,340 options discussed above, the
Company does not believe that the achievement of the remaining performance criteria is probable and
therefore, has not recognized any compensation expense related to these options during the three
months ended March 31, 2013 and 2012, respectively. Compensation expense will be recognized only
once the performance condition is probable of being achieved and then only the cumulative amount
related to the service condition that has been fulfilled. A summary of activity related to aggregate stock options under all plans is indicated in the
following table (in thousands, except per share amounts): (10) Takeda Termination and Transition Agreement On March 18, 2013, the Company entered into a Termination and Transition Agreement (the
Agreement), with Takeda GmbH (Takeda GmbH), and Takeda Pharma A/S (Takeda Pharma and, together with
Takeda GmbH, Takeda). The Agreement provides for the termination of the license agreement, dated July 2, 2007, as
amended, which granted Takeda Pharma the exclusive license to sell, market and commercialize
recombinant parathyroid hormone 1-84 [rDNA origin] (PTH) worldwide, except for the
U.S., Israel, and Japan, and a non-exclusive license to manufacture and develop PTH (the PTH
License Agreement). Pursuant to the PTH License Agreement the rights were returned to the Company
without consideration. Preotact is the brand name that Takeda Pharma has used to market PTH for the
treatment of osteoporosis in certain of its licensed territories. The Company is developing PTH in
the U.S. under the trade name Natpara for the treatment of hypoparathyroidism. 15
The Agreement also provides for the termination of the license agreement, dated
September 24, 2007, as amended, which granted Takeda GmbH the exclusive license to develop and
commercialize teduglutide worldwide, except for North America and Israel (the Revestive License
Agreement). Takeda GmbH developed and obtained approval in the EU in August 2012 for
teduglutide under the trade name Revestive for the treatment of Short Bowel Syndrome (SBS) in
adults. The Company obtained U.S. Food and Drug Administration approval in the U.S. in
December 2012 for teduglutide under the trade name Gattex for adult patients with SBS who are
dependent on parenteral support. As a result of the termination of the License Agreements, the
Company now has the exclusive rights worldwide to develop and commercialize teduglutide and PTH,
except as noted in Note 6, whereby DRI would be owed a royalty for sales of PTH in the
territory. Takeda assigned to NPS its assets related to the two products, including all of its active
pharmaceutical ingredient inventory and information related to the products' continued development,
manufacture, and commercialization, including life cycle management assets. Takeda received 6.1
million shares of NPS common stock that were valued at $54.9 million as of the date of the
transaction.
Takeda will also earn a $30.0
million milestone payment in the first calendar year that combined worldwide net sales of both
products exceed $750 million. This milestone includes an early payment trigger upon a qualified
change of control. NPS has the option of making this milestone payment in cash or NPS common stock.
The Company used an independent valuation firm to calculate the fair value of the assets
acquired. Using these fair values, the Company preliminarily assigned $15.9 million to the Revestive active
pharmaceutical ingredient (API), $20.7 million to the PTH API and $18.2 million to the Revestive
product rights. The Company capitalized the Revestive and PTH API as inventory and product rights
to intangibles, net on the Company's balance sheet as of March 31, 2013 due to the fact that
Revestive and Preotact are approved in the EU for SBS and Osteoporosis, respectively. The Company
is currently in the process of evaluating the commercial strategy for both Revestive and PTH. (11) Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the FASB or other standard setting
bodies that are adopted by the Company as of the specified effective date. Unless otherwise
discussed, the Company believes that the impact of recently issued standards that are not yet
effective will not have a material impact on its financial position, results of operations or
disclosures upon adoption. In February 2013, the FASB issued ASU 2013-02 Reporting of Amounts Reclassified out of
Accumulated Other Comprehensive Income (ASU 2013-02), an Accounting Standards Update to the
Comprehensive Income Topic in the Accounting Standards Codifications (ASC). This update
requires separate presentation of the components that are reclassified out of accumulated other
comprehensive income either on the face of the financial statements or in the notes to the financial
statements. This update also requires companies to disclose the income statement line items
impacted by any significant reclassifications, such as the realized gain on marketable investment
securities. These items are required for both interim and annual reporting for public companies and
became effective for the Company beginning with its quarterly report on Form 10-Q for the period
ending March 31, 2013. The Company adopted this ASU on January 1, 2013. The adoption of this ASU
did not have a material impact on the Company's financial position or results of operations. 16
Management's Discussion and Analysis of Financial Condition and Results of
Operations. Cautionary Statement Regarding Forward-Looking Statements The following discussion and analysis is provided to further the reader's understanding of the
condensed consolidated financial statements, financial condition and results of operations of NPS in
this Quarterly Report on Form 10-Q. This discussion should be read in conjunction with the
Consolidated Financial Statements and the accompanying notes included in our filings with the SEC,
including our 2012 Annual Report on Form 10-K. This Quarterly Report on Form 10-Q contains forward-looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements represent our management's judgment regarding future events. In many cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "plan," "expect," "anticipate,"
"estimate," "predict," "intend," "potential" or
"continue" or the negative of these terms or other words of similar import, although some
forward-looking statements are expressed differently. All statements other than statements of
historical fact included in this Quarterly Report on Form 10-Q and the documents incorporated by
reference into this report regarding our financial position, business strategy and plans or
objectives for future operations are forward-looking statements. Without limiting the broader
description of forward-looking statements above, we specifically note that statements regarding
potential drug candidates, their potential therapeutic effect, the possibility of obtaining
regulatory approval, any anticipated timelines for making FDA or other regulatory filings or
submissions, or with respect to completion of milestones or targets with respect to regulatory
filings, clinical studies, preclinical work and related matters, our ability or the ability of our
collaborators to manufacture and sell any products, market acceptance, or our ability to earn a
profit from sales or licenses of any drug candidate or to discover new drugs in the future are all
forward-looking in nature. We cannot guarantee the accuracy of the forward-looking statements, and
you should be aware that results and events could differ materially and adversely from those
described in the forward-looking statements due to a number of factors, including: • our ability to effectively outsource activities critical to the advancement of our
product candidates; • our and our collaborators' ability to successfully complete clinical trials, timely
make regulatory submissions, and receive required regulatory approvals and the length, time and cost
of obtaining such regulatory approvals and commercializing products; • our ability to secure additional funds; • the successful completion of our strategic collaborations or changes in our
relationships with our collaborators; • competitive factors; • our ability to maintain the level of our expenses consistent with our internal
budgets and forecasts; • the ability of our contract manufacturers to successfully produce adequate supplies
of our product candidates and drug delivery devices to meet clinical trial and commercial launch
requirements; • variability of our royalty, license and other revenues; • our ability to enter into and maintain agreements with current and future
collaborators on commercially reasonable terms; • the demand for securities of pharmaceutical and biotechnology companies in general
and our common stock in particular; • uncertainty regarding our patents and patent rights; • any concerns about the safety of our products or product candidates; • compliance with current or prospective governmental regulation; • ability to obtain sufficient coverage or reimbursement by third-party payers and our
ability to maintain coverage or reimbursement at anticipated levels; • technological change; and • general economic and market conditions. 17
You should also consider carefully the statements set forth in Item 1A of our Annual Report on
Form 10-K for the year ended December 31, 2012 entitled "Risk Factors," which address
these and additional factors that could cause results or events to differ from those set forth in
the forward-looking statements. All subsequent written and oral forward-looking statements
attributable to us or to persons acting on our behalf are expressly qualified in their entirety by
the applicable cautionary statements. In addition, new risks emerge from time to time and it is not
possible for management to predict all such risk factors or to assess the impact of such risk
factors on our business. Given these risks and uncertainties, you should not place undue reliance
on these forward-looking statements. We undertake no obligation to update or revise these forward-looking statements. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to all such reports are available, free of charge, on our Internet website under
"Investors-SEC Filings," as soon as reasonably practicable after we file electronically
such reports with, or furnish such reports to, the SEC. Our Internet website address is
http://www.npsp.com. Information contained in or linked to through our website does not constitute
a part of this Quarterly Report on Form 10-Q. Overview We are a biopharmaceutical company pioneering and delivering therapies that transform the lives
of patients with rare diseases worldwide. Our lead product, Gattex® (U.S.)/Revestive® (EU)
0.05 mg/kg/d (teduglutide [rDNA origin]) for injection is approved for adult Short Bowel Syndrome
(SBS). We are also developing Natpara® (rhPTH[1-84]) for the treatment of adult
hypoparathyroidism and, subject to the resolution of certain manufacturing issues, we expect to
submit our Biologic License Application (BLA) to the FDA in 2013. We also have two earlier stage
calcilytic compounds with potential application in rare endocrine disorders, as well as a valuable
royalty-based portfolio of marketed products and products in development. Gattex is our novel recombinant analog of human glucagon-like peptide 2 (GLP-2), a protein
involved in the rehabilitation of the intestinal lining. Gattex is used for the treatment of adults
with SBS, who are dependent on parenteral support (parenteral nutrition and/or intravenous fluids).
SBS is a highly disabling and potentially life-threatening chronic disorder.
SBS results from surgical resection, congenital defect or disease-associated loss of absorption in the bowel in which patients are subsequently unable to maintain
fluid, electrolyte, and nutrient balances on a conventional diet. Despite an adaptation that occurs
generally in the two years after resection, many SBS patients require parenteral support to
supplement and stabilize their nutritional and hydration needs. A National Institute of Health
(NIH) publication reported that the annual mean costs of lifelong, complex home healthcare
associated with PN/IV support ranged from $185,000 to $568,000, not including the indirect costs
associated with disability and/or the dollar value that could be ascribed to the challenging daily
living for these patients (Piamjariyakul 2010). In addition, parenteral support is associated with
shortened life span, life-threatening complications including sepsis, blood clots or liver damage,
and reduced quality-of-life due to the time required for and consequences of frequent access to an
intravenous pump. Gattex is the first and only analog of GLP-2 proven to increase intestinal
absorption and decrease or eliminate the need for parenteral support. Natpara is our recombinant full-length human parathyroid hormone (rhPTH [1-84]) that we are
developing as the first hormone replacement therapy for hypoparathyroidism, a rare hormone
deficiency disorder in which patients are physiologically unable to regulate the levels of calcium
and phosphates in their blood due to insufficient levels of endogenous parathyroid hormone
(PTH). Endogenous PTH is the body's principal regulator of serum calcium and phosphate
levels. Hypoparathyroidism is associated with hypocalcemia, hyperphosphatemia, hypercalciuria
(excessive urinary calcium excretion), and increased bone mineral density. It typically results
from permanent injury to the parathyroid gland(s) during thyroid or parathyroid surgery or other
surgical procedures in the neck, radiation to the neck region, autoimmune destruction of the
parathyroid glands, or their congenital absence. Although rare, hypoparathyroidism can also result
from genetic mutations. Current therapy is limited to calcium supplementation and parenteral
or metabolic forms of vitamin D. These palliative therapies are sometimes suboptimal and can also
contribute to long-term health risks including kidney failure. Hypoparathyroidism is one of
the few hormonal deficiency syndromes with no approved replacement therapy using the native
hormone. If approved, Natpara could be the first treatment targeting the underlying cause of
hypoparathyroidism by replacing the native hormone. In November 2011, we reported positive
top-line results from our Phase 3 registration study of Natpara, known as REPLACE, which met the
primary efficacy endpoint with a statistically higher responder rate versus placebo. A responder was
defined as a 50 percent or greater reduction in oral calcium supplementation and active vitamin D
therapy and a total serum calcium concentration that was maintained compared to baseline. Subject to
the resolution of a manufacturing issue, we plan to file for U.S. marketing approval of Natpara in
the second half of 2013. 18
While SBS and hypoparathyoridism are relatively rare disorders, we believe these indications
represent a substantial commercial opportunity to us due to the significant unmet need and lack of
effective therapies, as well as the serious complications involved with and the chronic nature of
these diseases. We have incurred cumulative losses from inception through March 31, 2013 of approximately
$1.0 billion. We expect to continue to incur operating losses over the next several quarters as we
launch Gattex and Revestive and incur sales and marketing costs, incur pre-launch and launch costs
for Natpara in the U.S., invest in the development of our pipeline and pursue in-licensing
opportunities. As a result of the marketing approval for Gattex, Revestive and Preotact, we will no longer
expense manufacturing costs relating to these products as research and development expenses.
Instead, we will capitalize these costs as inventory as they are incurred. There will be no cost of
goods sold associated with the sale of Gattex inventory that was on hand at the time of the FDA's
approval of the NDA for Gattex. We expect that this will result in higher gross margins during the
period that we sell off this supply than we will achieve once we begin selling Gattex that is
manufactured after the date of the FDA's approval of our NDA for Gattex. Based on our current plans
and assumptions, we believe that by the end of 2015, we will have sold off this supply of product on
hand at the time of the FDA's approval of the NDA for Gattex. We also expect to record increased
sales and incur additional marketing expenses relating to the commercialization of Gattex in the United States beginning
in the first half of 2013. Results of Operations Three Months Ended March 31, 2013 and 2012 The following table summarizes selected operating statement data for the three months ended March 31, 2013 and 2012 (amounts in thousands): 19
Revenues. Total revenues are comprised of product sales of Gattex, which was
launched in the U.S. in February 2013, and royalties from our licensees and collaborators. Royalty
revenues fluctuate from quarter to quarter. Our revenues were $25.4 million for the quarter ended
March 31, 2013 compared to $22.9 million for the quarter ended March 31, 2012. We recognized
royalty revenue under our research and license agreements and product sales during the three months
ended March 31, 2013 and 2012, respectively, as follows (amounts in thousands): Product Sales, net During the three months ended March 31, 2013, we recognized net product sales revenue of $654,000
for the sales of Gattex. We received approval from the FDA in December 2012 and subsequently
launched Gattex in February 2013. Product sales for the three months ended March 31, 2013 are not
necessarily indicative of the results that may be expected for any future period or for the year
ending December 31, 2013. We expect that product sales of Gattex will vary from period to
period. We record product sales net of allowances and accruals for prompt pay discounts, rebates and
chargebacks under governmental programs (including Medicaid), product returns, and distribution-related fees.
The following table summarizes the provisions, and credits/payments, for government
rebates and chargebacks, distribution-related fees, and returns and other sales-related deductions (in thousands): Royalties The increase in royalty revenue earned from Amgen's sales of Sensipar and Mimpara (cinacalcet
HCl) for the three months ended March 31, 2013 was primarily due to increased unit demand and a
favorable change in Amgen's accounting estimates. We amended our agreement with Amgen, effective
September 30, 2011, and Amgen began withholding the royalties on sales of Sensipar and Mimpara and
credited them, net of the discount, to the Sensipar Notes issued pursuant to the amended agreement.
In June 2012, we amended our agreement with Amgen and received a one-time non-refundable $25.0
million payment in July 2012 in exchange for our rights to receive royalties under the license
agreement that are earned after December 31, 2018. The amendment also limits the royalty offset of
the royalty advance that we received from Amgen up to $8.0 million per quarter with royalties in
excess of $8.0 million paid to us for the respective quarter, thereby extending the royalty advance
repayment period. After the repayment of the royalty advance and a 9% per annum discount factor on
the outstanding balance, Amgen will resume paying us all royalties earned through December 31,
2018. 20
During the three months ended March 31, 2013 and 2012, we recognized royalty revenue of $1.8
million and $1.9 million, respectively, from Kyowa Hakko Kirin for sales of REGPARA. The decrease
was primarily due to unfavorable foreign exchange rates. In February 2010, we sold our rights to
receive certain future royalty payments from Kyowa Hakko Kirin's sale of REGPARA to an affiliate of
DRI. The agreement provides DRI with the right to receive payments related to sales of REGPARA
occurring on or after July 1, 2009 and we therefore do not receive any such royalty payments until
the REGPARA-secured debt is repaid. For the three months ended March 31, 2013 and 2012, our revenues related to our agreement with
Takeda for Preotact were $0 and $1.8 million in royalty revenue, respectively. The decrease in
royalty revenue was primarily due to a technical production issue whereby, Takeda was unable to have
batches of finished product manufactured that are consistently within specifications and we have been
informed that as a result Takeda was no longer selling Preotact in their territories. On March 18,
2013, Takeda terminated this license agreement and returned the rights to NPS. In July 2007, we
sold our rights to receive certain future royalty payments from Takeda's sale of Preotact in Europe
to DRI Capital (DRI) and we therefore do not receive any such royalty payments until the Preotact-
secured debt is repaid. Because we previously monetized our Preotact royalty rights as non-recourse
debt, declines in Preotact sales will impact our royalty revenues but will have no material impact
on our short-term liquidity. During the three months ended March 31, 2013 and 2012, we recognized royalty revenue of $755,000
and $586,000, respectively, from Janssen Pharmaceuticals, Inc. for sales of Nucynta. The increase
in royalty revenue earned from Nucynta for the three months ended March 31, 2013 was primarily due
to increased demand. Cost of Goods Sold. For the three months
ended March 31, 2013, we began recognizing revenue and cost of goods sold from product sales of
Gattex. Upon marketing approval from the FDA in December 2012, we began capitalizing inventory
costs associated with commercial supplies of Gattex subsequent to receipt of marketing approval from
the FDA. Costs for manufacturing supplies of Gattex prior to receipt of FDA
approval were recognized as research and development expenses in the period that the costs were
incurred. Therefore, these costs are not being included in cost of goods sold when revenue is
recognized from the sale of those supplies of Gattex. Cost of goods sold for the first quarter of
2013 was $65,000 and consisted primarily of royalty and packaging costs related to Gattex commercial
supplies. Accordingly, we expect our current product gross margins to decrease to approximately 80%
as we begin sales of product that has been capitalized to inventory. Based on our current plans and
assumptions, we believe that by the end of 2015, we will have sold off this supply of product on hand
at the time of the FDA's approval of the NDA for Gattex. Research and Development.
Our research and development expenses are categorized into two major areas: clinical development
costs and product development costs. Clinical development costs were $600,000 and $7.9 million for the three months ended March 31,
2013 and 2012, respectively. Clinical development costs are primarily comprised of costs paid to
outside parties to conduct and manage clinical trials related to Gattex and Natpara as well as costs
associated with regulatory functions. Product development costs were $7.8 million and $6.3 million
for the three months ended March 31, 2013 and 2012, respectively. Product development costs are
costs related to the drug needed for our clinical studies. Unallocated research and development costs were $7.3 million and $6.0 million for the three
months ended March 31, 2013 and 2012, respectively. Unallocated research and development costs
consist primarily of personnel, personnel related costs and overhead costs that relate to medical
affairs and product development activities which have not been allocated directly to each program.
For the three months ended March 31, 2013, our research and development expenses decreased to
$15.7 million from $20.2 million for the three months ended March 31, 2012. The decrease in
research and development expenses is primarily related to a $7.3 million reduction in costs
associated with clinical development activities and adjustments related to completion of certain
clinical trials. This decrease was partially offset by (i) $1.5 million increase in costs for the
production of Natpara and (ii) a $1.3 million increase in unallocated
research and development which mainly consists of regulatory costs as well as personnel and
personnel-related costs. 21
Selling, General and Administrative. Our selling, general and administrative
expenses consist primarily of compensation for employees in executive, finance, legal and sales and
sales and marketing functions as well as facility costs and professional fees for accounting and
legal services. Our selling, general and administrative expenses increased to $14.2 million for the
three months ended March 31, 2013 from $7.8 million for the three months ended March 31, 2012. The
increase in selling, general and administrative expenses primarily relate to an increase in
personnel and external costs related to launch activities for Gattex. Interest Income. Interest income decreased to $55,000 for the three months ended
March 31, 2013 from $84,000 from the comparative period in 2012. Interest Expense. Our interest expense for the three months ended March 31, 2013
decreased to $3.4 million compared to $5.5 million for the three months ended March 31, 2012. Our
long-term royalty forecasts for Preotact and REGPARA are used to calculate the implicit interest
rate and the related interest expense for our non-recourse debt. Interest expense decreased due
primarily to (i) the lower principal balance on our Sensipar Notes ($899,000), (ii) a lower
effective interest rate due to a decrease in the forecast of Preotact royalties related to the
non-recourse debt associated with the sale of certain of our Preotact royalty rights ($809,000) and
(iii) a lower effective interest rate due to a decrease in the forecast of REGPARA royalties related
to the non-recourse debt associated with the sale of certain of our REGPARA royalty rights
($429,000). Liquidity and Capital Resources The following table summarizes selected financial data (amounts in thousands): Currently, we are not a self-sustaining business and certain economic, operational and strategic
factors may require us to secure additional funds. If we are unable to obtain sufficient funding at
any time in the future, we may not be able to develop or commercialize our products, take advantage
of business opportunities or respond to competitive pressures. Our current and anticipated
operations require substantial capital. We expect that our existing capital resources including
interest earned thereon will be sufficient to fund our current and planned operations through at
least the next twelve months. However, our actual needs will depend on numerous factors, including
the progress and scope of our internally funded development and commercialization activities related
to the launch of Gattex and Revestive and the pre-launch of Natpara; our ability to comply with the
terms of our research funding agreements; our ability to maintain existing collaborations; our
decision to seek additional collaborators; the success of our collaborators in developing and
marketing products under their respective collaborations with us; our success in producing clinical
and commercial supplies of our product candidates on a timely basis sufficient to meet the needs of
our clinical trials and commercial launch; the costs we incur in obtaining and enforcing patent and
other proprietary rights or gaining the freedom to operate under the patents of others; and our
success in acquiring and integrating complementary products, technologies or businesses. Our
clinical trials may be modified or terminated for several reasons including the risk that our
product candidates will demonstrate safety concerns; the risk that regulatory authorities may not
approve our product candidates for further development or may require additional or expanded
clinical trials to be performed; and the risk that our manufacturers may not be able to supply
sufficient quantities of our drug candidates to support our clinical trials, our regulatory filing
or commercial launch, which could lead to a disruption or cessation of the clinical trials, delay of
clinical filing or commercial activities. We may also be required to conduct unanticipated
preclinical or clinical trials to obtain regulatory approval of our product candidates, Natpara,
NPSP790 and NPSP795. If any of the events that pose these risks comes to fruition, our actual
capital needs may substantially exceed our anticipated capital needs and we may have to
substantially modify or terminate current and planned clinical trials or postpone conducting future
clinical trials. As a result, our business may be materially harmed, our stock price may be
adversely affected, and our ability to raise additional capital may be impaired. 22
We may need to raise additional funds to support our long-term research, product development, and
commercialization programs. We regularly consider various fund raising alternatives, including, for
example, debt or equity financing, partnering of existing programs, monetizing of potential revenue
streams, debt or equity financing and merger and acquisition alternatives. We may also seek
additional funding through strategic alliances, collaborations, or license agreements and other
financing mechanisms. There can be no assurance that additional financing will be available on
acceptable terms, if at all. If adequate funds are not available, we may be required to delay,
reduce the scope of our efforts to commercialize Gattex and or Revestive, delay, reduce the scope
of, or eliminate one or more of our research and development programs, or to obtain funds through
arrangements with licensees or others that may require us to relinquish rights to certain of our
technologies or product candidates that we may otherwise seek to develop or commercialize on our
own. We require cash to fund our operating expenses, to make capital expenditures, acquisitions and
investments and to service our debt. We have financed operations since inception primarily through
payments received under collaborative research and license agreements, the private and public
issuance and sale of equity securities, and the issuance and sale of non-recourse debt, convertible
debt and lease financing. Through March 31, 2013, we have recognized $780.8 million of
cumulative revenues from payments for research support, license fees, product sales, milestone and
royalty payments, $777.0 million from the sale of equity securities for cash and $738.6 million from
the sale of non-recourse debt and convertible debt for cash. Our principal sources of liquidity are cash, cash equivalents, and marketable investment
securities, which totaled $90.4 million at March 31, 2013. The primary objectives for our
marketable investment security portfolio are liquidity and safety of principal. Investments are
intended to achieve the highest rate of return to us, consistent with these two objectives. Our
investment policy limits investments to certain types of instruments issued by institutions with
investment grade credit ratings and places restrictions on maturities and concentration by type and
issuer. The following table summarizes our cash flow activity for the three months ended March 31, 2013 and 2012 (amounts in thousands): Net cash used in operating activities was $9.3 million and $23.9 million for
the three months ended March 31, 2013 and 2012, respectively. The decrease in net cash used in 2013
was primarily due to the decrease in interest expense and non-cash royalty receivable related to the
issuance of non-recourse Sensipar Notes to Amgen in the second quarter of 2012. The REGPARA royalty
revenue is pledged to service the principal and interest on our non-recourse notes and is not
available to fund operations. The decrease in net cash used was also related to the reduction in
research and development costs associated with clinical development activities. The above decreases
in net cash used in 2013 were partially offset by increased spending related to the launch of Gattex
in the first quarter of 2013. Net cash provided by investing activities was $11.4 million for the three months ended March 31,
2013 compared to net cash used in investing activities of $9.9 million for the three months ended
March 31, 2012. The net cash provided by investing activities during the three months ended March
31, 2013, was primarily the result of using cash to fund operations. The net cash used in investing
activities during the three months ended March 31, 2012 was primarily the result of investing excess
cash that was not currently required to fund operations. Capital expenditures for the three months
ended March 31, 2013 and 2012 were $288,000 and $532,000, respectively. 23
Net cash used in financing activities was $178,000 for the three months ended March 31, 2013
compared to net cash provided by financing activities of $324,000 for the three months ended March
31, 2012. The net cash used in financing activities for the three months ending March 31, 2013, was
primarily the result of using $574,000 to pay taxes that were due from the withholding of shares
upon the vesting of certain restricted stock units. This use of cash was partially offset by
$396,000 received from the exercise of employee stock options and the sale of shares for the
employee stock purchase plan. The net cash provided by financing activities for the three months
ended March 31, 2012 was from the exercise of employee stock options and the sale of shares for the
employee stock purchase plan. We could receive future milestone payments from all our agreements of up to $16.8 million in the
aggregate if each of our current licensees accomplishes the specified research, development and/or
sales milestones provided in the respective agreements. In addition, all of the agreements require
the licensees to make royalty payments to us if they sell products covered by the terms of our
license agreements; however, we do not control the subject matter, timing or resources applied by
our licensees to their development programs. Thus, potential receipt of milestone and royalty
payments from these licensees is largely beyond our control. Each of these agreements may be
terminated before its scheduled expiration date by the respective licensee either for any reason or
under certain conditions. We have entered into certain license agreements that may require us to pay milestone payments or
royalties. For example, we are required to make royalty payments to certain licensors on Gattex and
Revestive net sales and cinacalcet HCl royalty revenues. We expect to enter into additional
sponsored research and license agreements in the future. We have entered into long-term agreements with certain manufacturers and suppliers that require
us to make contractual payment to these organizations. We expect to enter into collaborative
research, contract research, manufacturing, and supplier agreements in the future, which may require
up-front payments and long-term commitments of cash. Critical Accounting Policies and Estimates A critical accounting policy is one that is both important to the portrayal of our financial
condition and results of operations and a policy that requires management's most difficult,
subjective or complex judgments. Such judgments are often the result of a need to make estimates
about the effect of matters that are inherently uncertain. The preparation of our financial
statements in conformity with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ
materially from those estimates. There were no significant changes in our critical accounting
policies from those at December 31, 2012; however, the following information, which relates to
the U.S. launch of Gattex in February 2013, is in addition to, and should be read in conjunction
with, the accounting policies included in Part II, Item 7 of our Annual Report on
Form 10-K for the year ended December 31, 2012. Product Sales. Product sales represent U.S. sales of Gattex, which was approved by
the FDA in December 2012. We recognize revenue from Gattex product sales when persuasive evidence
of an arrangement exists, title to product and associated risk of loss has passed to the customer,
the price is fixed or determinable, collection from the customer is reasonably assured, we have no
further performance obligations, and returns can be reasonably estimated. All prescriptions for Gattex, received directly by us from the patient's physician, are handled
through NPS Advantage, our data management and patient support program, who investigates and
determines the patient's insurance coverage for Gattex. Once coverage is confirmed, we forward the
prescription to the specialty pharmacy (SP) who then re-confirms the coverage and dispenses Gattex
to the patient. We sell Gattex directly to a limited number of SPs and a specialty distributor (SD)
who dispense product to patients, hospitals or U.S. government entities. We invoice and record
revenue upon the SPs' or SD's receipt of Gattex from our third-party logistics warehouse. Our SPs
order product to fill prescriptions that have been approved for reimbursement by payers. 24
Specific considerations for Gattex sold in the U.S. are as follows: Product sales are recorded net of accruals for estimated rebates, chargebacks, discounts, and
other deductions (collectively, sales deductions) and returns. With the exception of allowances for
prompt payment, allowances for sales deductions and returns are included in accounts payable and
accrued expenses in the accompanying consolidated balance sheets. We analyze our arrangements entered into to determine whether the elements can be separated and
accounted for individually or as a single unit of accounting. Allocation of revenue to
individual elements that qualify for separate accounting is based on the estimated fair value of the
respective elements. New Accounting Standards Refer to Note 11 in "Notes to Condensed Consolidated Financial Statements" for a discussion of new accounting standards. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk. 25
and maturities. 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 accumulated other comprehensive income as a separate component in stockholders' deficit,
unless a loss is considered other than temporary, in which case the loss is recognized in earnings.
Our 5.75% Convertible Notes due 2014 and our 9% non-recourse Sensipar Notes, each have a fixed
interest rate. As of March 31, 2013, our Convertible Notes and Sensipar Notes had $16.5 million and
$74.0 million, respectively, in aggregate principal amount outstanding. The fair value of the
Convertible Notes is affected by changes in the interest rates and by changes in the price of our
common stock. The fair value of the Sensipar Notes is affected by changes in interest rates and by
historical and projected rates of royalty revenues from cinacalcet HCl sales. Foreign Currency Risk. We have significant clinical and commercial-scale
manufacturing agreements which are denominated in euros and Canadian dollars. As a result, our
financial results could be affected by factors such as a change in the foreign currency exchange
rate between the U.S. dollar and the Canadian dollar or euro, or by weak economic conditions in
Canada or Europe. When the U.S. dollar strengthens against the Canadian dollar or euros, the cost
of expenses in Canada or Europe decreases. When the U.S. dollar weakens against the Canadian dollar
or euro, the cost of expenses in Canada or Europe increases. The monetary assets and liabilities in
our foreign subsidiary which are impacted by the foreign currency fluctuations are cash, accounts
payable, and certain accrued liabilities. A hypothetical ten percent increase or decrease in the
exchange rate between the U.S. dollar and the Canadian dollar or euro from the March 31, 2013 rate
would cause the fair value of such monetary assets and liabilities in our foreign subsidiary to
change by an insignificant amount. We are not currently engaged in any foreign currency hedging
activities. Item 4. Controls and Procedures. We maintain "disclosure controls and procedures" within the meaning of Rule 13a-15(e)
of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls
and procedures, or Disclosure Controls, are designed to ensure that information required to be
disclosed by us in the reports we file under the Exchange Act, such as this Quarterly Report on Form
10-Q, is recorded, processed, summarized and reported within the time periods specified in the U.S.
Securities and Exchange Commission's rules and forms. Our Disclosure Controls are also designed to
ensure that such information is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating our Disclosure Controls, management recognized
that any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating and implementing possible controls and procedures. Evaluation of Disclosure Controls and Procedures. As of March 31, 2013, we
evaluated the effectiveness of the design and operation of the Company's disclosure controls and
procedures, which was done under the supervision and with the participation of our management,
including our Chief Executive Officer and our Chief Financial Officer. Immediately following the
Signatures section of the Quarterly report on Form 10-Q are certifications of our Chief Executive
Officer and Chief Financial Officer, which are required in accordance with Rule 13a-14 of the
Exchange Act. This Controls and Procedures section includes the information concerning the controls
evaluation referred to in the certifications and it should be read in conjunction with the
certifications for a more complete understanding of the topics presented. Based on the controls
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the date of
their evaluation, our disclosure controls and procedures were effective to accomplish their intended
purpose. Change in Internal Control over Financial Reporting. There have been no
changes in our internal control over financial reporting that occurred during our most recent fiscal
quarter that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting. 26
PART II OTHER INFORMATION Legal Proceedings. There are no material litigation matters as of March 31, 2013. In addition to the other information set forth in this Report, consider the factors
discussed in Part 1, "Item 1A. Risk Factors" in the Company's Annual Report filed on
Form 10-K for the year ended December 31, 2012, which could materially
affect our business, financial condition or future results. The risks described in the
aforementioned report are not the only risks facing the Company. Additional risks and uncertainties
not currently known to the Company or that it currently deems to be not material also may materially
adversely affect the Company's business, financial condition and or operating results. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. On March 18, 2013, the Company entered into a letter agreement (the Letter Agreement) with
Leerink Swan LLC (Leerink) as its financial advisor in connection with the Termination and
Transition Agreement with Takeda. As consideration for the services rendered
pursuant to the Letter Agreement, the Company issued 60,680 shares of its common stock to Leerink in
a private placement transaction on March 18, 2013. The private placement was exempt from
registration pursuant to the exemption for transactions by an issuer not involving any public
offering under Section 4(2) of the Securities Act of 1933. Exhibits. Exhibit Description of Document 31.1* Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer 31.2* Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer 32* Section 1350 Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial
Officer 101.INS(1)
XBRL Instance Document
101.SCH(1)
XBRL Taxonomy Extension Schema Document
101.CAL(1)
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF(1)
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB(1)
XBRL Taxonomy Extension Label Linkbase Document
101.PRE(1)
XBRL Taxonomy Extension Presentation Linkbase Document
* Furnished herewith. (1)
This exhibit is furnished with this Quarterly Report on Form 10-Q, is not deemed filed with the Securities and Exchange
Commission, and is not incorporated by reference into any filing of NPS Pharmaceuticals, Inc. under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and
irrespective of any general incorporation language contained in such filing. 37
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: May 9, 2013 By: /s/ Francois Nader
Francois Nader, Date: May 9, 2013 By: /s/ Luke M. Beshar
Luke M. Beshar,
EXHIBIT INDEX Exhibit Description of Document 31.1* Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
PDF 31.2* Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
PDF 32* Section 1350 Certification of Periodic Financial Report by the Chief Executive Officer and Chief
Financial Officer
PDF 101.INS(1)
XBRL Instance Document
101.SCH(1)
XBRL Taxonomy Extension Schema Document
101.CAL(1)
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF(1)
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB(1)
XBRL Taxonomy Extension Label Linkbase Document
101.PRE(1)
XBRL Taxonomy Extension Presentation Linkbase Document
* Furnished herewith. (1)
This exhibit is furnished with this Quarterly Report on Form 10-Q, is not deemed filed with the Securities and Exchange
Commission, and is not incorporated by reference into any filing of NPS Pharmaceuticals, Inc. under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and
irrespective of any general incorporation language contained in such filing.
FINANCIAL INFORMATION
(In thousands)
(Unaudited)
March 31,
December 31,
2013
2012
Assets
Current assets:
Cash and cash equivalents
$
19,356
$
17,471
Marketable investment securities
71,083
83,244
Accounts receivable
25,403
30,276
Inventory
36,728
-
Prepaid expenses
2,975
4,317
Other current assets
824
1,743
Total current assets
156,369
137,051
Property and equipment, net
4,079
4,193
Goodwill
9,429
9,429
Intangibles, net
18,178
-
Debt issuance costs, net
410
436
Total assets
$
188,465
$
151,109
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued expenses
$
16,606
$
23,289
Current portion of non-recourse debt
6,389
6,278
Total current liabilities
22,995
29,567
Convertible notes payable
16,545
16,545
Non-recourse debt, less current portion
146,635
153,024
Other liabilities
6,535
6,614
Total liabilities
192,710
205,750
Commitments and contingencies (notes 6, and 8)
Stockholders' deficit:
Preferred stock, $0.001 par value. Authorized 5,000,000 shares;
issued and outstanding no shares
-
-
Common stock, $0.001 par value. Authorized 175,000,000 shares;
issued and outstanding 93,199,571 shares and
86,779,049 shares, respectively
93
87
Additional paid-in capital
1,012,627
954,452
Accumulated other comprehensive income
16
5
Accumulated deficit
(1,016,981)
(1,009,185)
Total stockholders' deficit
(4,245)
(54,641)
Total liabilities and stockholders' deficit
$
188,465
$
151,109
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
2013
2012
Revenues:
Product sales, net
$
654
$
-
Royalties
24,780
22,924
Total revenues
25,434
22,924
Operating expenses:
Cost of goods sold
65
-
Research and development
15,695
20,199
Selling, general and administrative
14,205
7,770
Total operating expenses
29,965
27,969
Operating loss
(4,531)
(5,045)
Other income (expense):
Interest income, net
55
84
Interest expense
(3,395)
(5,534)
Other
75
(68)
Total other expense, net
(3,265)
(5,518)
Loss before income tax expense
(7,796)
(10,563)
Income tax expense
-
-
Net loss
$
(7,796)
$
(10,563)
Net loss per common and potential common share
Basic
$
(0.09)
$
(0.12)
Diluted
$
(0.09)
$
(0.12)
Weighted average common and potential common
shares outstanding:
Basic
88,402
86,850
Diluted
88,402
86,850
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2013
2012
Net loss
$
(7,796)
$
(10,563)
Other comprehensive (loss) income:
Unrealized gains on securities:
Unrealized holding gains arising during period
9
99
Reclassification for recognized gain on marketable investment
securities during the period
-
-
Net unrealized gain on marketable investment securities
9
99
Foreign currency translation gain (loss)
2
(7)
Other comprehensive income
11
92
Comprehensive loss
$
(7,785)
$
(10,471)
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2013
2012
Cash flows from operating activities:
Net loss
$
(7,796)
$
(10,563)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
342
247
Accretion of premium (discount) on marketable investment securities
502
539
Shares issued for payment of services
549
-
Non-cash interest expense
3,159
5,296
Non-cash royalties
(9,810)
(22,341)
Compensation expense on share based awards
2,956
1,880
(Increase) decrease in operating assets:
Accounts receivable
2,310
84
Inventory
(85)
-
Prepaid expenses, other current assets and other assets
2,261
871
(Decrease) increase in operating liabilities:
Accounts payable and accrued expenses
(3,628)
152
Other liabilities
(79)
(29)
Net cash used in operating activities
(9,319)
(23,864)
Cash flows from investing activities:
Sales of marketable investment securities
2,085
-
Maturities of marketable investment securities
25,922
27,196
Purchases of marketable investment securities
(16,339)
(36,545)
Acquisitions of property and equipment
(288)
(532)
Net cash provided by (used in) investing activities
11,380
(9,881)
Cash flows from financing activities:
Net proceeds from the sale of common stock and exercise of stock options
396
324
Shares withheld for the payment of taxes
(574)
-
Net cash (used in) provided by financing activities
(178)
324
Effect of exchange rate changes on cash
2
(7)
Net increase (decrease) in cash and cash equivalents
1,885
(33,428)
Cash and cash equivalents at beginning of period
17,471
82,401
Cash and cash equivalents at end of period
$
19,356
$
48,973
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest
$
235
$
237
Cash paid for income taxes
-
-
Supplemental Disclosure of Non-cash Investing and Financing Activities:
6.1 million shares of NPS common stock issued in connection with
the Takeda Termination and Transition agreement, see note 10
55,403
-
Unrealized gains on marketable investment securities
9
100
Accrued acquisition of property and equipment
3
228
Noncash reductions of debt
6,278
19,584
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
As of March 31, 2013:
Level 1
Level 2
Level 3
Total
Marketable investment securities
$
62,432
$
8,651
$
-
$
71,083
As of December 31, 2012:
Level 1
Level 2
Level 3
Total
Marketable investment securities
$
67,723
$
15,521
$
-
$
83,244
As of March 31, 2013
As of December 31, 2012
Fair
Carrying
Fair
Carrying
Value
Value
Value
Value
5.75% Convertible Notes
$
31,241
$
16,545
$
28,131
$
16,545
Sensipar Notes
73,090
73,982
79,129
80,234
Preotact-Secured Debt
29,324
42,790
28,605
42,816
Regpara-Secured Debt
41,639
36,252
48,887
36,252
Total
$
175,294
$
169,569
$
184,752
$
175,847
Gross
Gross
unrealized
unrealized
Amortized
holding
holding
Fair
cost
gains
losses
value
As of March 31, 2013:
Debt securities:
Corporate
$
38,452
$
3
$
(31)
$
38,424
Government agency
32,644
16
(1)
32,659
Total marketable investment securites
$
71,096
$
19
$
(32)
$
71,083
Gross
Gross
unrealized
unrealized
Amortized
holding
holding
Fair
cost
gains
losses
value
As of December 31, 2012:
Debt securities:
Corporate
$
50,822
$
3
$
(31)
$
50,794
Government agency
32,444
10
(4)
32,450
Total marketable investment securites
$
83,266
$
13
$
(35)
$
83,244
Held for less than 12 months
Held for more than 12 months
Total
Unrealized
Unrealized
Unrealized
Fair value
losses
Fair value
losses
Fair value
losses
As of March 31, 2013:
Available for Sale:
Debt securities:
Corporate
$
33,304
$
31
$
-
$
-
$
33,304
$
31
Government agency
4,932
1
-
-
4,932
1
$
38,236
$
32
$
-
$
-
$
38,236
$
32
As of December 31, 2012:
Available for Sale:
Debt securities:
Corporate
$
37,974
$
31
$
-
$
-
$
37,974
$
31
Government agency
7,110
4
-
-
7,110
4
$
45,084
$
35
$
-
$
-
$
45,084
$
35
As of March 31, 2013
As of December 31, 2012
Amortized
Amortized
cost
Fair value
cost
Fair value
Due within one year
$
69,674
$
69,660
$
65,637
$
65,632
Due after one year through five years
1,422
1,423
17,629
17,612
Due after five years through ten years
-
-
-
-
Due after ten years
-
-
-
-
$
71,096
$
71,083
$
83,266
$
83,244
For the Three Months
Ended March 31,
2013
2012
Proceeds from sales and maturities
$
28,007
$
27,196
Realized gains
-
-
Realized losses
-
-
March 31,
December 31,
2013
2012
Convertible notes
$
16,545
$
16,545
Non-recourse debt
153,024
159,302
Total debt
169,569
175,847
Less current portion
6,389
6,278
Total long-term debt
$
163,180
$
169,569
As of March 31, 2013
Weighted
Weighted
Number
average
average remaining
Aggregate
of
exercise
contractual
intrinsic
options
price
term
value
(in thousands)
(in years)
(in thousands)
Options outstanding at beginning
of year
7,390
$
6.75
Options granted
1,717
8.29
Options exercised
57
3.34
Options forfeited/expired
141
6.00
Options outstanding at end of year
8,909
7.08
7.23
$
32,294
$
Vested and expected to vest
8,322
7.02
7.08
$
31,007
$
Options exercisable at March 31, 2013
4,731
$
6.67
5.60
$
21,205
Three Months Ended
March 31,
2013
2012
Revenues:
Product sales, net
$
654
$
-
Royalties
24,780
22,924
Total revenues
$
25,434
$
22,924
Operating expenses:
Cost of goods sold
$
65
$
-
Research and development
$
15,695
$
20,199
% of total revenues
62
%
88
%
Selling, general and administrative
$
14,205
$
7,770
% of total revenues
56
%
34
%
Three Months Ended
March 31,
2013
2012
Product sales, net
$
654
$
-
Royalties:
Sensipar and Mimpara (cinacalcet HC1)
22,207
18,678
Regpara (cinacalcet HCl)
1,818
1,854
Preotact (parathyroid hormone (PTH 1-84))
-
1,806
Nucynta (tapentadol)
755
586
Total royalties
24,780
22,924
Total revenues
$
25,434
$
22,924
Returns and
Rebates and
Distribution-
Other Sales-
Chargebacks
Related Fees
Related Deductions
Total
Balance as of December 31, 2012
$
-
$
-
$
-
$
-
Provision related to current period sales
64
65
160
289
Credits/payments
-
-
(6)
(6)
Balance as of March 31, 2013
$
64
$
65
$
154
$
283
March 31,
December 31,
2013
2012
Cash, cash equivalents, and marketable investment securities
$
90,439
$
100,715
Total assets
188,465
151,109
Current debt
6,389
6,278
Non-current debt
163,180
169,569
Stockholders' deficit
$
(4,245)
$
(54,641)
Three Months Ended
March 31,
2013
2012
Net cash used in operating activities
$
(9,319)
$
(23,864)
Net cash provided by (used in) investing activities
$
11,380
$
(9,881)
Net cash (used in) provided by financing activities
$
(178)
$
324
Number
President and Chief Executive Officer (Principal Executive Officer)
Chief Financial Officer (Principal Financial and Accounting Officer)
Number
Exhibit 31.1
RULE 13a-14(a)/15d-14(a) CERTIFICATION
I, Francois Nader, President and Chief Executive Officer, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of NPS Pharmaceuticals, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: May 9, 2013 |
/s/ FRANCOIS NADER Francois Nader President and Chief Executive Officer |
Exhibit 31.2
RULE 13a-14(a)/15d-14(a) CERTIFICATION
I, Luke M. Beshar, Executive Vice President and Chief Financial Officer, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of NPS Pharmaceuticals, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: May 9, 2013 |
/s/ LUKE M. BESHAR Luke M. Beshar Executive Vice President and Chief Financial Officer |
Exhibit 32
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we the undersigned Chief Executive Officer and Chief Financial Officer of NPS Pharmaceuticals, Inc. certify that the Quarterly Report of NPS Pharmaceuticals, Inc. on Form 10-Q for the quarter ended March 31, 2013 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects, the financial condition and results of operations of NPS Pharmaceuticals, Inc.
Date: May 9, 2013 |
/s/ FRANCOIS NADER Francois Nader President and Chief Executive Officer |
Date: May 9, 2013 |
/s/ LUKE M. BESHAR Luke M. Beshar Executive Vice President and Chief Financial Officer |
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.
A signed original of this written statement required by Section 906 has been provided to NPS Pharmaceuticals, Inc. and will be retained by NPS Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
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