þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) |
94-3134940 (IRS Employer Identification No.) |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
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Item 1. | Condensed Consolidated Financial Statements: |
June 30, 2011 | December 31, 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 11,626 | $ | 17,755 | ||||
Short-term investments |
351,280 | 298,177 | ||||||
Accounts receivable |
8,460 | 25,102 | ||||||
Inventory |
9,797 | 7,266 | ||||||
Other current assets |
7,932 | 5,679 | ||||||
Total current assets |
389,095 | 353,979 | ||||||
Long-term investments |
118,941 | | ||||||
Property and equipment, net |
85,381 | 89,773 | ||||||
Goodwill |
76,501 | 76,501 | ||||||
Other assets |
936 | 972 | ||||||
Total assets |
$ | 670,854 | $ | 521,225 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 3,243 | $ | 7,194 | ||||
Accrued compensation |
9,435 | 9,252 | ||||||
Accrued expenses |
8,129 | 8,540 | ||||||
Accrued clinical trial expenses |
13,832 | 12,144 | ||||||
Deferred revenue, current portion |
19,867 | 20,584 | ||||||
Other current liabilities |
6,768 | 6,394 | ||||||
Total current liabilities |
61,274 | 64,108 | ||||||
Convertible subordinated notes |
214,955 | 214,955 | ||||||
Capital lease obligations, less current portion |
15,863 | 17,014 | ||||||
Deferred revenue, less current portion |
117,931 | 124,763 | ||||||
Deferred gain |
3,715 | 4,152 | ||||||
Other long-term liabilities |
5,840 | 5,571 | ||||||
Total liabilities |
419,578 | 430,563 | ||||||
Commitments and contingencies
|
||||||||
Stockholders equity: |
||||||||
Preferred stock, 10,000 shares authorized
Series A, $0.0001 par value; 3,100 shares
designated; no shares issued or outstanding
at June 30, 2011 and December 31, 2010 |
| | ||||||
Common stock, $0.0001 par value; 300,000
authorized; 114,305 shares and 94,517
shares issued and outstanding at June 30,
2011 and December 31, 2010, respectively |
11 | 9 | ||||||
Capital in excess of par value |
1,587,461 | 1,354,232 | ||||||
Accumulated other comprehensive income |
766 | 968 | ||||||
Accumulated deficit |
(1,336,962 | ) | (1,264,547 | ) | ||||
Total stockholders equity |
251,276 | 90,662 | ||||||
Total liabilities and stockholders equity |
$ | 670,854 | $ | 521,225 | ||||
4
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue: |
||||||||||||||||
Product sales and royalties |
$ | 11,008 | $ | 11,154 | $ | 15,801 | $ | 14,738 | ||||||||
License, collaboration and other |
6,323 | 31,409 | 12,829 | 61,062 | ||||||||||||
Total revenue |
17,331 | 42,563 | 28,630 | 75,800 | ||||||||||||
Operating costs and expenses: |
||||||||||||||||
Cost of goods sold |
8,140 | 4,889 | 11,403 | 9,185 | ||||||||||||
Research and development |
32,270 | 25,600 | 62,446 | 48,886 | ||||||||||||
General and administrative |
11,185 | 10,207 | 22,912 | 19,220 | ||||||||||||
Total operating costs and expenses |
51,595 | 40,696 | 96,761 | 77,291 | ||||||||||||
Income (loss) from operations |
(34,264 | ) | 1,867 | (68,131 | ) | (1,491 | ) | |||||||||
Non-operating income (expense): |
||||||||||||||||
Interest income |
529 | 393 | 961 | 856 | ||||||||||||
Interest expense |
(2,570 | ) | (2,909 | ) | (5,155 | ) | (5,860 | ) | ||||||||
Other income (expense), net |
(16 | ) | 163 | 118 | 187 | |||||||||||
Total non-operating expense |
(2,057 | ) | (2,353 | ) | (4,076 | ) | (4,817 | ) | ||||||||
Loss before provision for income taxes |
(36,321 | ) | (486 | ) | (72,207 | ) | (6,308 | ) | ||||||||
Provision for income taxes |
60 | 31 | 208 | 339 | ||||||||||||
Net loss
|
$ | (36,381 | ) | $ | (517 | ) | $ | (72,415 | ) | $ | (6,647 | ) | ||||
Basic and diluted net loss per share |
$ | (0.32 | ) | $ | (0.01 | ) | $ | (0.65 | ) | $ | (0.07 | ) | ||||
Weighted average shares outstanding used in
computing basic and diluted net loss per share |
114,153 | 94,065 | 111,430 | 93,849 | ||||||||||||
5
Six months ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | (72,415 | ) | $ | (6,647 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Depreciation and amortization |
7,649 | 8,334 | ||||||
Stock-based compensation |
9,682 | 8,105 | ||||||
Other non-cash transactions |
620 | (205 | ) | |||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
16,642 | (4,645 | ) | |||||
Inventory |
(2,531 | ) | (3,306 | ) | ||||
Other assets |
(2,191 | ) | (136 | ) | ||||
Accounts payable |
(3,149 | ) | 2,183 | |||||
Accrued compensation |
183 | (2,144 | ) | |||||
Accrued expenses |
2,371 | 1,012 | ||||||
Accrued clinical trial expenses |
1,688 | (818 | ) | |||||
Deferred revenue |
(7,549 | ) | (55,120 | ) | ||||
Other liabilities |
(658 | ) | (729 | ) | ||||
Net cash used in operating activities |
$ | (49,658 | ) | $ | (54,116 | ) | ||
Cash flows from investing activities: |
||||||||
Purchases of investments |
(509,681 | ) | (218,275 | ) | ||||
Sales of investments |
180,478 | 8,197 | ||||||
Maturities of investments |
156,962 | 241,256 | ||||||
Purchases of property and equipment |
(6,845 | ) | (8,796 | ) | ||||
Net cash (used in) provided by investing activities |
$ | (179,086 | ) | $ | 22,382 | |||
Cash flows from financing activities: |
||||||||
Payments of loan and capital lease obligations |
(934 | ) | (731 | ) | ||||
Issuance of common stock, net of issuance costs |
223,549 | 6,148 | ||||||
Net cash provided by financing activities |
$ | 222,615 | $ | 5,417 | ||||
Effect of exchange rates on cash and cash equivalents |
| (36 | ) | |||||
Net decrease in cash and cash equivalents |
$ | (6,129 | ) | $ | (26,353 | ) | ||
Cash and cash equivalents at beginning of period |
17,755 | 49,597 | ||||||
Cash and cash equivalents at end of period |
$ | 11,626 | $ | 23,244 | ||||
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Estimated Fair Value at | ||||||||
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Cash and cash equivalents |
$ | 11,626 | $ | 17,755 | ||||
Short-term investments |
351,280 | 298,177 | ||||||
Long-term investments |
118,941 | | ||||||
Total cash, cash equivalents, and available-for-sale investments |
$ | 481,847 | $ | 315,932 | ||||
Estimated Fair Value at | ||||||||
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Corporate notes and bonds |
$ | 360,536 | $ | 190,527 | ||||
U.S. corporate commercial paper |
101,434 | 82,361 | ||||||
Obligations of U.S. government agencies |
8,251 | 25,289 | ||||||
Cash and money market funds |
11,626 | 17,755 | ||||||
Total cash, cash equivalents, and available-for-sale investments |
$ | 481,847 | $ | 315,932 | ||||
Estimated Fair Value at | ||||||||
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Less than one year |
$ | 351,280 | $ | 298,177 | ||||
Greater than one year but less than two years |
118,941 | | ||||||
Total available-for-sale investments |
$ | 470,221 | $ | 298,177 | ||||
10
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
As of June 30, 2011: |
||||||||||||||||
Money market funds |
$ | 10,594 | $ | | $ | | $ | 10,594 | ||||||||
U.S. corporate commercial paper |
| 101,434 | | 101,434 | ||||||||||||
Corporate notes and bonds |
| 360,536 | | 360,536 | ||||||||||||
Obligations of U.S. government agencies |
| 8,251 | | 8,251 | ||||||||||||
Cash equivalents and available-for-sale investments |
$ | 10,594 | $ | 470,221 | $ | | $ | 480,815 | ||||||||
Cash |
1,032 | |||||||||||||||
Cash, cash equivalents, and available-for-sale investments |
$ | 481,847 | ||||||||||||||
As of December 31, 2010: |
||||||||||||||||
Money market funds |
$ | 16,028 | $ | | $ | | $ | 16,028 | ||||||||
U.S. corporate commercial paper |
| 82,361 | | 82,361 | ||||||||||||
Corporate notes and bonds |
| 190,527 | | 190,527 | ||||||||||||
Obligations of U.S. government agencies |
| 25,289 | | 25,289 | ||||||||||||
Cash equivalents and available-for-sale investments |
$ | 16,028 | $ | 298,177 | $ | | $ | 314,205 | ||||||||
Cash |
1,727 | |||||||||||||||
Cash, cash equivalents, and available-for-sale investments |
$ | 315,932 | ||||||||||||||
Level 1
|
Quoted prices in active markets for identical assets or liabilities. | |
Level 2
|
Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |
Level 3
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Raw materials |
$ | 8,985 | $ | 6,101 | ||||
Work-in-process |
808 | | ||||||
Finished goods |
4 | 1,165 | ||||||
Total |
$ | 9,797 | $ | 7,266 | ||||
11
Three months ended | Six months ended | |||||||||||||||||
June 30, | June 30, | |||||||||||||||||
Partner | Drug or Drug Candidate | 2011 | 2010 | 2011 | 2010 | |||||||||||||
F. Hoffmann- LaRoche |
PEGASYS® | $ | 1,283 | $ | 1,283 | $ | 2,566 | $ | 2,566 | |||||||||
Amgen, Inc. |
Neulasta® | 1,250 | | 2,500 | | |||||||||||||
Bayer Healthcare LLC |
BAY41-6551 (Amikacin Inhale) | 750 | 818 | 1,500 | 1,705 | |||||||||||||
AstraZeneca AB |
NKTR-118 and NKTR-119 | 845 | 27,579 | 1,086 | 53,306 | |||||||||||||
Other |
2,195 | 1,729 | 5,177 | 3,485 | ||||||||||||||
License, collaboration, and other revenue |
$ | 6,323 | $ | 31,409 | $ | 12,829 | $ | 61,062 | ||||||||||
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Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Cost of goods sold |
$ | 330 | $ | 229 | $ | 662 | $ | 435 | ||||||||
Research and development expense |
2,120 | 1,734 | 4,089 | 3,301 | ||||||||||||
General and administrative expense |
2,430 | 2,398 | 4,931 | 4,369 | ||||||||||||
Total stock-based compensation |
$ | 4,880 | $ | 4,361 | $ | 9,682 | $ | 8,105 | ||||||||
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Convertible subordinated notes |
9,989 | 9,989 | 9,989 | 9,989 | ||||||||||||
Stock options |
11,620 | 9,358 | 11,308 | 8,971 | ||||||||||||
Total |
21,609 | 19,347 | 21,297 | 18,960 | ||||||||||||
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
14
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Percentage | ||||||||||||||||
Three months | Three months | Increase / | Increase / | |||||||||||||
ended | ended | (Decrease) | (Decrease) | |||||||||||||
June 30, 2011 | June 30, 2010 | 2011 vs. 2010 | 2011 vs. 2010 | |||||||||||||
Product sales and royalties |
$ | 11,008 | $ | 11,154 | $ | (146 | ) | (1 | )% | |||||||
License, collaboration and other |
6,323 | 31,409 | (25,086 | ) | (80 | )% | ||||||||||
Total revenue |
$ | 17,331 | $ | 42,563 | $ | (25,232 | ) | (59 | )% | |||||||
Percentage | ||||||||||||||||
Six months | Six months | Increase / | Increase / | |||||||||||||
ended | ended | (Decrease) | (Decrease) | |||||||||||||
June 30, 2011 | June 30, 2010 | 2011 vs. 2010 | 2011 vs. 2010 | |||||||||||||
Product sales and royalties |
$ | 15,801 | $ | 14,738 | $ | 1,063 | 7 | % | ||||||||
License, collaboration and other |
12,829 | 61,062 | (48,233 | ) | (79 | )% | ||||||||||
Total revenue |
$ | 28,630 | $ | 75,800 | $ | (47,170 | ) | (62 | )% | |||||||
17
Percentage | ||||||||||||||||
Three months | Three months | Increase / | Increase / | |||||||||||||
ended | ended | (Decrease) | (Decrease) | |||||||||||||
June 30, 2011 | June 30, 2010 | 2011 vs. 2010 | 2011 vs. 2010 | |||||||||||||
Cost of goods sold |
$ | 8,140 | $ | 4,889 | $ | 3,251 | 66 | % | ||||||||
Product gross profit |
$ | 2,868 | $ | 6,265 | $ | (3,397 | ) | (54 | )% | |||||||
Product gross margin |
26 | % | 56 | % |
Percentage | ||||||||||||||||
Six months | Six months | Increase / | Increase / | |||||||||||||
ended | ended | (Decrease) | (Decrease) | |||||||||||||
June 30, 2011 | June 30, 2010 | 2011 vs. 2010 | 2011 vs. 2010 | |||||||||||||
Cost of goods sold |
$ | 11,403 | $ | 9,185 | $ | 2,218 | 24 | % | ||||||||
Product gross profit |
$ | 4,398 | $ | 5,553 | $ | (1,155 | ) | (21 | )% | |||||||
Product gross margin |
28 | % | 38 | % |
Percentage | ||||||||||||||||
Three months | Three months | Increase / | Increase / | |||||||||||||
ended | ended | (Decrease) | (Decrease) | |||||||||||||
June 30, 2011 | June 30, 2010 | 2011 vs. 2010 | 2011 vs. 2010 | |||||||||||||
Research and development expense |
$ | 32,270 | $ | 25,600 | $ | 6,670 | 26 | % |
Percentage | ||||||||||||||||
Six months | Six months | Increase / | Increase / | |||||||||||||
ended | ended | (Decrease) | (Decrease) | |||||||||||||
June 30, 2011 | June 30, 2010 | 2011 vs. 2010 | 2011 vs. 2010 | |||||||||||||
Research and development expense |
$ | 62,446 | $ | 48,886 | $ | 13,560 | 28 | % |
18
Percentage | ||||||||||||||||
Three months | Three months | Increase / | Increase / | |||||||||||||
ended | ended | (Decrease) | (Decrease) | |||||||||||||
June 30, 2011 | June 30, 2010 | 2011 vs. 2010 | 2011 vs. 2010 | |||||||||||||
General and administrative expense |
$ | 11,185 | $ | 10,207 | $ | 978 | 10 | % |
Percentage | ||||||||||||||||
Six months | Six months | Increase / | Increase / | |||||||||||||
ended | ended | (Decrease) | (Decrease) | |||||||||||||
June 30, 2011 | June 30, 2010 | 2011 vs. 2010 | 2011 vs. 2010 | |||||||||||||
General and administrative expense |
$ | 22,912 | $ | 19,220 | $ | 3,692 | 19 | % |
Percentage | ||||||||||||||||
Three months | Three months | Increase / | Increase / | |||||||||||||
ended | ended | (Decrease) | (Decrease) | |||||||||||||
June 30, 2011 | June 30, 2010 | 2011 vs. 2010 | 2011 vs. 2010 | |||||||||||||
Interest Income |
$ | 529 | $ | 393 | $ | 136 | 35 | % | ||||||||
Interest Expense |
$ | 2,570 | $ | 2,909 | $ | (339 | ) | (12 | )% |
Percentage | ||||||||||||||||
Six months | Six months | Increase / | Increase / | |||||||||||||
ended | ended | (Decrease) | (Decrease) | |||||||||||||
June 30, 2011 | June 30, 2010 | 2011 vs. 2010 | 2011 vs. 2010 | |||||||||||||
Interest Income |
$ | 961 | $ | 856 | $ | 105 | 12 | % | ||||||||
Interest Expense |
$ | 5,155 | $ | 5,860 | $ | (705 | ) | (12 | )% |
19
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| the progress, timing, cost and results of our clinical development programs, including our clinical development of NKTR-102; | ||
| patient enrollment in our current and future clinical studies, including clinical development of NKTR-102; |
25
| whether and when we receive potential milestone payments and royalties, particularly from the product candidates that are subject to our collaboration agreements with AstraZeneca for NKTR-118 and Bayer for Amikacin Inhale; | ||
| the success, progress, timing and costs of our business development efforts to implement new business collaborations, licenses and other strategic transactions; | ||
| the cost, timing and outcomes of regulatory reviews of our product candidates (e.g., NKTR-102) and those of our collaboration partners (e.g., NKTR-118, Amikacin Inhale); | ||
| our general and administrative expenses, capital expenditures and other uses of cash; | ||
| disputes concerning patents, proprietary rights, or license and collaboration agreements; | ||
| the availability and scope of coverage from government and private insurance payment or reimbursement for our drug candidates partnered with collaboration partners and any future drug candidates that may receive regulatory approval in the future; and | ||
| the size, design (i.e., primary and secondary endpoints) and number of clinical studies required by the government health authorities in order to consider for approval our product candidates and those of our collaboration partners. |
| our inability to recruit and retain adequate numbers of effective sales and marketing personnel; | ||
| the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to use or prescribe our products; | ||
| the lack of complementary products or multiple product pricing arrangements may put us at a competitive disadvantage relative to companies with more extensive product lines; and | ||
| unforeseen costs and expenses associated with creating and sustaining an independent sales and marketing organization. |
26
| design and conduct large scale clinical studies; | ||
| prepare and file documents necessary to obtain government approvals to sell a given product candidate; and/or | ||
| market and sell our products when and if they are approved. |
27
| we may be unable to control whether, and the extent to which, our partners devote sufficient resources to the development programs or commercial marketing and sales efforts; | ||
| disputes may arise or escalate in the future with respect to the ownership of rights to technology or intellectual property developed with partners; | ||
| disagreements with partners could lead to delays in, or termination of, the research, development or commercialization of product candidates or to litigation or arbitration proceedings; | ||
| contracts with our partners may fail to provide us with significant protection, or to be effectively enforced, in the event one of our partners fails to perform; | ||
| partners have considerable discretion in electing whether to pursue the development of any additional product candidates and may pursue alternative technologies or products either on their own or in collaboration with our competitors; | ||
| partners with marketing rights may choose to devote fewer resources to the marketing of our partnered products than they do to products of their own development or products in-licensed from other third parties; | ||
| the timing and level of resources that our partners dedicate to the development program will affect the timing and amount of revenue we receive; | ||
| we do not have the ability to unilaterally terminate agreements (or partners may have extension or renewal rights) that we believe are not on commercially reasonable terms or consistent with our current business strategy; | ||
| partners may be unable to pay us as expected; and | ||
| partners may terminate their agreements with us unilaterally for any or no reason, in some cases with the payment of a termination fee penalty and in other cases with no termination fee penalty. |
28
| clinical development and commercialization obligations that are based on certain commercial reasonableness performance standards that can often be difficult to enforce if disputes arise as to adequacy of performance; | ||
| research and development performance and reimbursement obligations for our personnel and other resources allocated to partnered product development programs; | ||
| clinical and commercial manufacturing agreements, some of which are priced on an actual cost basis for products supplied by us to our partners with complicated cost allocation formulas and methodologies; | ||
| intellectual property ownership allocation between us and our partners for improvements and new inventions developed during the course of the partnership; | ||
| royalties on end product sales based on a number of complex variables, including net sales calculations, geography, patent life, generic competitors, and other factors; and | ||
| indemnity obligations for third-party intellectual property infringement, product liability and certain other claims. |
29
| develop products utilizing our technologies, either independently or in collaboration with other pharmaceutical or biotech companies; | ||
| effectively estimate and manage clinical development costs, particularly the cost of NKTR-102 since we expect to bear a majority or all of such costs; | ||
| receive necessary regulatory and marketing approvals; | ||
| maintain or expand manufacturing at necessary levels; | ||
| achieve market acceptance of our partnered products; | ||
| receive royalties on products that have been approved, marketed or submitted for marketing approval with regulatory authorities; and | ||
| maintain sufficient funds to finance our activities. |
30
| making it more difficult to obtain additional financing; | ||
| constraining our ability to react quickly in an unfavorable economic climate; | ||
| constraining our stock price; and | ||
| constraining our ability to invest in our research and development programs. |
31
32
33
| establishment of a classified board of directors such that not all members of the board may be elected at one time; | ||
| lack of a provision for cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates; | ||
| the ability of our board to authorize the issuance of blank check preferred stock to increase the number of outstanding shares and thwart a takeover attempt; | ||
| prohibition on stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of stockholders; | ||
| establishment of advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and | ||
| limitations on who may call a special meeting of stockholders. |
34
| announcements of data from, or material developments in, our clinical trials or those of our competitors, including delays in clinical development, approval or launch; | ||
| announcements by collaboration partners as to their plans or expectations related to products using our technologies; | ||
| announcements or terminations of collaboration agreements by us or our competitors; | ||
| fluctuations in our results of operations; | ||
| developments in patent or other proprietary rights, including intellectual property litigation or entering into intellectual property license agreements and the costs associated with those arrangements; | ||
| announcements of technological innovations or new therapeutic products that may compete with our approved products or products under development; | ||
| announcements of changes in governmental regulation affecting us or our competitors; | ||
| hedging activities by purchasers of our convertible notes; | ||
| litigation brought against us or third parties to whom we have indemnification obligations; | ||
| public concern as to the safety of drug formulations developed by us or others; and | ||
| general market conditions. |
35
Exhibit | |||
Number | Description of Documents | ||
31.1(1) | Certification of Nektar Therapeutics principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a). |
||
31.2(1) | Certification of Nektar Therapeutics principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a). |
||
32.1(1)* | Section 1350 Certifications. |
||
101** | The following materials from Nektar Therapeutics Quarterly Report on Form 10-Q for the quarter ended June 30,
2011, formatted in XBRL(Extensible Business Reporting Language): (i) the unaudited Condensed Consolidated
Balance Sheets, (ii) the unaudited Condensed Consolidated Statements of Operations, (iii) the unaudited
Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial
Statements. |
(1) | Filed herewith. | |
* | Exhibit 32.1 is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act, except as otherwise stated in such filing. | |
** | Exhibit 101 is being furnished and, in accordance with Rule 406T of Regulation S-T, shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act. |
36
By: | /s/ John Nicholson | |||
John Nicholson | ||||
Senior Vice President and Chief Financial Officer Date: August 5, 2011 |
||||
By: | /s/ Jillian B. Thomsen | |||
Jillian B. Thomsen | ||||
Senior Vice President,
Finance and Chief Accounting Officer Date: August 5, 2011 |
37
Exhibit | |||
Number | Description of Documents | ||
31.1(1) | Certification of Nektar Therapeutics principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a). |
||
31.2(1) | Certification of Nektar Therapeutics principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a). |
||
32.1(1)* | Section 1350 Certifications. |
||
101** | The following materials from Nektar Therapeutics Quarterly Report on Form 10-Q for the quarter ended June 30,
2011, formatted in XBRL (Extensible Business Reporting Language): (i) the unaudited Condensed Consolidated
Balance Sheets, (ii) the unaudited Condensed Consolidated Statements of Operations, (iii) the unaudited
Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial
Statements. |
(1) | Filed herewith. | |
* | Exhibit 32.1 is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act, except as otherwise stated in such filing. | |
** | Exhibit 101 is being furnished and, in accordance with Rule 406T of Regulation S-T, shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act. |
38
1. | I have reviewed this Quarterly Report on Form 10-Q of Nektar Therapeutics; | |
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 registrants other certifying officer(s) 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 registrants 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 registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting. |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants 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 registrants 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 registrants internal control over financial reporting. |
Date: August 5, 2011 | /s/ Howard W. Robin | |||
Howard W. Robin | ||||
Chief Executive Officer, President and Director |
39
1. | I have reviewed this Quarterly Report on Form 10-Q of Nektar Therapeutics; | |
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 registrants other certifying officer(s) 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 registrants 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 registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting. |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants 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 registrants 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 registrants internal control over financial reporting. |
Date: August 5, 2011 | /s/ John Nicholson | |||
John Nicholson | ||||
Senior Vice President and Chief Financial Officer |
40
1. | The Companys Quarterly Report on Form 10-Q for the three months ended June 30, 2011, to which this Certification is attached as Exhibit 32.1 (the Periodic Report), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and | |
2. | The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Howard W. Robin
|
/s/ John Nicholson | |
Howard W. Robin
|
John Nicholson | |
Chief Executive Officer, President and Director
|
Senior Vice President and | |
Chief Financial Officer |
* | This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing. |
41
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
In Thousands, except Per Share data |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Stockholders' equity: | Â | Â |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized Series A | 10,000 | 10,000 |
Preferred stock, shares designated | 3,100 | 3,100 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 300,000 | 300,000 |
Common stock, shares issued | 114,305 | 94,517 |
Common stock, shares outstanding | 114,305 | 94,517 |
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
In Thousands, except Per Share data |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Revenue: | Â | Â | Â | Â |
Product sales and royalties | $ 11,008 | $ 11,154 | $ 15,801 | $ 14,738 |
License, collaboration and other | 6,323 | 31,409 | 12,829 | 61,062 |
Total revenue | 17,331 | 42,563 | 28,630 | 75,800 |
Operating costs and expenses: | Â | Â | Â | Â |
Cost of goods sold | 8,140 | 4,889 | 11,403 | 9,185 |
Research and development | 32,270 | 25,600 | 62,446 | 48,886 |
General and administrative | 11,185 | 10,207 | 22,912 | 19,220 |
Total operating costs and expenses | 51,595 | 40,696 | 96,761 | 77,291 |
Income (loss) from operations | (34,264) | 1,867 | (68,131) | (1,491) |
Non-operating income (expense): | Â | Â | Â | Â |
Interest income | 529 | 393 | 961 | 856 |
Interest expense | (2,570) | (2,909) | (5,155) | (5,860) |
Other income (expense), net | (16) | 163 | 118 | 187 |
Total non-operating expense | (2,057) | (2,353) | (4,076) | (4,817) |
Loss before provision for income taxes | (36,321) | (486) | (72,207) | (6,308) |
Provision for income taxes | 60 | 31 | 208 | 339 |
Net loss | $ (36,381) | $ (517) | $ (72,415) | $ (6,647) |
Basic and diluted net loss per share | $ (0.32) | $ (0.01) | $ (0.65) | $ (0.07) |
Weighted average shares outstanding used in computing basic and diluted net loss per share | 114,153 | 94,065 | 111,430 | 93,849 |
Cash, Cash Equivalents, and Available-For-Sale Investments (Details 2) (USD $)
In Thousands |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Portfolio of available-for-sale investments | Â | Â |
Less than one year | $ 351,280 | $ 298,177 |
Greater than one year but less than two years | 118,941 | 0 |
Total available-for-sale investments | $ 470,221 | $ 298,177 |
Document and Entity Information (USD $)
|
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2011
|
Aug. 01, 2011
|
Jun. 30, 2010
|
|
Document and Entity Information [Abstract] | Â | Â | Â |
Entity Registrant Name | NEKTAR THERAPEUTICS | Â | Â |
Entity Central Index Key | 0000906709 | Â | Â |
Document Type | 10-Q | Â | Â |
Document Period End Date | Jun. 30, 2011 | ||
Amendment Flag | false | Â | Â |
Document Fiscal Year Focus | 2011 | Â | Â |
Document Fiscal Period Focus | Q2 | Â | Â |
Current Fiscal Year End Date | --12-31 | Â | Â |
Entity Well-known Seasoned Issuer | Yes | Â | Â |
Entity Voluntary Filers | No | Â | Â |
Entity Current Reporting Status | Yes | Â | Â |
Entity Filer Category | Large Accelerated Filer | Â | Â |
Entity Public Float | Â | Â | $ 1,134,446,342 |
Entity Common Stock, Shares Outstanding | Â | 114,418,913 | Â |
Inventory (Details) (USD $)
In Thousands |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Inventory [Abstract] | Â | Â |
Raw materials | $ 8,985 | $ 6,101 |
Work-in-process | 808 | 0 |
Finished goods | 4 | 1,165 |
Total | $ 9,797 | $ 7,266 |
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Stock-Based Compensation
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
|
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Stock-Based Compensation [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation |
Note 7—Stock-Based Compensation
Total stock-based compensation cost was recorded in our Condensed Consolidated Financial
Statements as follows (in thousands):
During the three months ended June 30, 2011 and 2010, we granted 263,910 and 718,230
stock options, respectively. The weighted average grant-date fair value of options granted during
the three months ended June 30, 2011 and 2010 was $4.90 per share and $7.34 per share,
respectively.
During the six months ended June 30, 2011 and 2010, we granted 2,391,965 and 4,475,155 stock
options, respectively. The weighted average grant-date fair value of options granted during the six
months ended June 30, 2011 and 2010 was $5.65 per share and $6.17 per share, respectively.
As a result of stock issuances under our equity compensation plans, during the three months
ended June 30, 2011 and 2010, we issued 281,776 and 212,299 common shares, respectively, and during
the six months ended June 30, 2011 and 2010, we issued 787,476 and 850,423 common shares,
respectively.
|
Inventory (Details Textuals) (USD $)
In Millions |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Inventory (Textuals) [Abstract] | Â | Â |
Inventory reserves | $ 2.9 | $ 4.0 |
Cash, Cash Equivalents, and Available-For-Sale Investments (Details Textuals)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Cash Cash Equivalents and Available For Sale Investments (Textuals) [Abstract] | Â | Â |
Realized gains and losses from sales of available-for-sale securities | less than $0.1 million | less than $0.1 million |
Maturity term for debt securities investment | two years or less | Â |
License and Collaboration Agreements (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
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License and Collaboration Agreements (Tables) [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
License, collaboration, and other revenue |
|
Inventory
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
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Inventory [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory |
Note 3—Inventory
Inventory consists of the following (in thousands):
Inventory
is manufactured upon receipt of firm orders from our collaboration
partners. Inventory includes
direct materials, direct labor, and manufacturing overhead and is determined on a first-in,
first-out basis. Inventory is stated at the lower of cost or market and is net of reserves of $2.9
million and $4.0 million as of June 30, 2011 and December 31, 2010, respectively. Reserves are
determined using specific identification plus an estimated reserve for potential defective or
excess inventory based on historical experience or projected usage.
|
Organization and Summary of Significant Accounting Policies (Policies)
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Organization and Summary of Significant Accounting Policies (Policies) [Abstract] | Â |
Organization |
We are a clinical-stage biopharmaceutical company headquartered in San Francisco, California
and incorporated in Delaware. We are developing a pipeline of drug candidates that utilize our
PEGylation and advanced polymer conjugate technology platforms designed to improve the benefits of
drugs for patients.
|
Basis of Presentation and Principles of Consolidation |
Our consolidated financial statements include the financial position, results of operations
and cash flows of our wholly-owned subsidiaries: Nektar Therapeutics (India) Private Limited
(Nektar India) and Nektar Therapeutics UK Limited and Aerogen, Inc. All intercompany accounts and
transactions have been eliminated in consolidation. On December 2, 2010, we completed the
dissolution of Aerogen, Inc. and all remaining assets were transferred to Nektar Therapeutics.
We prepared our Condensed Consolidated Financial Statements following the requirements of the
Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules,
certain footnotes or other financial information that are normally required by U.S. generally
accepted accounting principles (GAAP) for annual periods can be condensed or omitted. In the
opinion of management, these financial statements include all normal and recurring adjustments that
we consider necessary for the fair presentation of our financial position and operating results.
Our Condensed Consolidated Financial Statements are denominated in U.S. dollars. Accordingly,
changes in exchange rates between the applicable foreign currency and the U.S. dollar will affect
the translation of each foreign subsidiary’s financial results into U.S. dollars for purposes of
reporting our consolidated financial results. Translation gains and losses are included in
accumulated other comprehensive income in the stockholders’ equity section of the Condensed
Consolidated Balance Sheets. To date, such cumulative currency translation adjustments have not
been material to our consolidated financial position.
Revenue, expenses, assets, and liabilities can vary during each quarter of the year. The
results and trends in these interim Condensed Consolidated Financial Statements may not be
indicative of the results to be expected for the full year or any other periods.
The accompanying Condensed Consolidated Balance Sheet as of June 30, 2011, the Condensed
Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010,
and the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and
2010 are unaudited. The Condensed Consolidated Balance Sheet data as of December 31, 2010 was
derived from the audited consolidated financial statements which are included in our Annual Report
on Form 10-K filed with the SEC on March 1, 2011. The information included in this quarterly report
on Form 10-Q should be read in conjunction with the consolidated financial statements and the
accompanying notes to those financial statements included in our Annual Report on Form 10-K for the
year ended December 31, 2010.
|
Use of Estimates |
The preparation of financial statements in conformity with U.S. GAAP 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 revenue and expenses during the reporting period. Actual results could differ
materially from these estimates. On an ongoing basis, we evaluate our estimates, including those
related to deferred revenue recognition periods, inventories, the impairment of investments and
long-lived assets, restructuring and contingencies, stock-based compensation, and litigation,
amongst others. We base our estimates on historical experience and on other assumptions that
management believes are reasonable under the circumstances. These estimates form the basis for
making judgments about the carrying values of assets and liabilities when these values are not
readily apparent from other sources.
|
Reclassifications |
Certain items previously reported in specific financial statement captions have been
reclassified to conform to the current period presentation. Such reclassifications do not impact
previously reported revenue, operating loss or net loss or total assets, liabilities or
stockholders’ equity.
|
Segment Information |
We operate in one business segment which focuses on applying our technology platforms to
improve the performance of established and novel medicines. We operate in one segment because our
business offerings have similar economics and other characteristics, including the nature of
products and manufacturing processes, types of customers, distribution methods and regulatory
environment. We are comprehensively managed as one business segment by our Chief
Executive Officer and his management team.
|
Significant Concentrations |
Our customers are primarily pharmaceutical and biotechnology companies that are located in the
U.S. and Europe. Our accounts receivable balance contains billed and unbilled trade receivables
from product sales, royalties, and other amounts due under collaborative research, development and
commercialization agreements. We provide for an allowance for doubtful accounts by reserving for
specifically identified doubtful accounts. We generally do not require collateral from our
customers. We regularly review our customers’ payment histories and associated credit risk. We have
not experienced significant credit losses from our accounts receivable and therefore recorded no
allowance for doubtful accounts at both June 30, 2011 and December 31, 2010.
We are dependent on our suppliers and contract manufacturers to provide raw materials, drugs
and devices of appropriate quality and reliability and to meet applicable regulatory requirements.
In certain cases, we rely on single sources of supply. Consequently, in the event that supplies are
delayed or interrupted for any reason, our ability to develop and produce our products could be
impaired, which could have a material adverse effect on our business, financial condition and
results of operations.
|
Revenue |
Product sales and royalties
Product sales are primarily derived from cost-plus and fixed price manufacturing and supply
agreements with our collaboration partners and revenue is recognized when there is persuasive evidence
that an arrangement exists, delivery has occurred, the price is fixed or determinable, and
collection is reasonably assured. We have
not experienced any significant returns from our customers.
Generally, we are entitled to royalties from our partners based on their net sales of approved
drugs. We recognize royalty revenue when the cash is received or when the royalty amount to be
received is estimable and collection is reasonably assured.
License, collaboration and other
We enter into license and manufacturing agreements and collaborative research, development and
commercialization arrangements with pharmaceutical and biotechnology partners that may involve
multiple deliverables. Our arrangements may contain one or more of the following elements: upfront
fees, contract research and development, milestone payments, manufacturing and supply, royalties,
and license fees. Each deliverable in the arrangement is evaluated to determine whether it meets
the criteria to be accounted for as a separate unit of accounting or whether it should be combined
with other deliverables. Revenue is recognized for each element.
On January 1, 2011, we adopted on a prospective basis Accounting Standards Update (ASU)
2009-13, which amends the criteria to identify separate units of accounting within Subtopic 605-25,
“Revenue Recognition-Multiple-Element Arrangements.” The adoption of the standard did not impact
our financial position or results of operations as of and for the three and six months ended June
30, 2011 as we did not enter into or materially modify any multiple-element arrangements during
that period. However, the adoption of this standard may result in revenue recognition patterns for
future agreements that are materially different from those recognized for our existing
multiple-element arrangements.
Upfront fees received for license and collaborative agreements entered into prior to January
1, 2011 are recognized ratably over our expected performance period under the arrangement.
Management makes its best estimate of the period over which we expect to
fulfill our performance obligations, which may include technology transfer assistance, clinical
development activities, and manufacturing activities from development through the commercialization
of the product. Given the uncertainties of these collaborative arrangements, significant judgment
is required to determine the duration of the performance period.
On January 1, 2011, we elected to prospectively adopt ASU 2010-17, “Milestone Method of
Revenue Recognition”. Under the milestone method, contingent consideration received from the
achievement of a substantive milestone is recognized in its entirety in the period in which the
milestone is achieved, which we believe is more consistent with the substance of our performance
under our various license and collaboration agreements. A milestone is defined as an event (i) that
can only be achieved based in whole or in part on either the entity’s performance or on the
occurrence of a specific outcome resulting from the entity’s performance, (ii) for which there is
substantive uncertainty at the date the arrangement is entered into that the event will be
achieved, and (iii) that would result in additional payments being due to the entity. A milestone
is substantive if the consideration earned from the achievement of the milestone is consistent with
our performance required to achieve the milestone or the increase in value to the collaboration
resulting from our performance, relates solely to our past performance, and is reasonable relative
to all of the other deliverables and payments within the arrangement.
Our license and collaboration agreements with our partners provide for payments to us upon the
achievement of development milestones, such as the completion of clinical trials or regulatory
submissions and approvals for drug candidates. As of January 1, 2011, our agreements with partners
included potential future payments for development milestones totaling approximately $183.8
million. Given the challenges inherent in developing and obtaining approval for pharmaceutical and
biologic products, there was substantial uncertainty whether any such milestones would be achieved
at the time these licensing and collaboration agreements were entered into. In addition, we
evaluated whether the development milestones met the remaining criteria to be considered
substantive. As a result of our analysis, we consider our development milestones to be substantive
and, accordingly, we expect to recognize as revenue future payments received from such milestones
as each milestone is achieved. The election to adopt the milestone method did not impact our
financial position or results of operations as of and for the three and six months ended June 30,
2011. However, this policy election may result in revenue recognition patterns for future
milestones that are materially different from those recognized for milestones received prior to
adoption.
Milestone payments received prior to January 1, 2011 have been deferred and are recognized as
revenue ratably over the period of time from the achievement of the milestone to our estimated date
on which the next milestone will be achieved. Management makes its best estimate of the period of
time until the next milestone is expected to be reached. Final milestone payments were recorded and
recognized upon achieving the respective milestone. The Company will continue to recognize
milestones payments received prior to January 1, 2011 in this manner. As of June 30, 2011,
deferred revenue from milestone payments received prior to January 1,
2011 is not significant.
Our license and collaboration agreements with certain partners also provide for contingent
payments to us based solely upon the performance of our partner. For such contingent payments we
expect to recognize the payments as revenue when they are earned under the applicable contract,
provided that collection is reasonably assured.
Our license and collaboration agreements with our partners also provide for payments to us
upon the achievement of specified sales volumes of approved drugs. We consider these payments to be
similar to royalty payments and we recognize such sales-based payments upon achievement of the
milestone, provided that collection is reasonably assured.
|
Income Taxes |
We account for income taxes under the liability method, in which deferred tax assets and
liabilities are determined based on differences between the financial reporting and tax reporting
bases of assets and liabilities and are measured using enacted tax rates and laws that are expected
to be in effect when the differences are expected to reverse. Realization of deferred tax assets is
dependent upon future earnings, the timing and amount of which are uncertain. We record a valuation
allowance against deferred tax assets to reduce their carrying value to an amount that is more
likely than not to be realized.
For the three months and six months ended June 30, 2011 and 2010, we recorded an income tax
provision for our Nektar India operations at an effective tax rate of approximately 33% and 34%,
respectively. The U.S. Federal deferred tax assets generated from our net operating losses have
been fully reserved as we believe it is not more likely than not that the benefit will be realized.
|
Net Loss Per Share (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Net Loss Per Share (Tables) [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss Per Share |
|
Cash, Cash Equivalents, and Available-For-Sale Investments (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
|
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Cash, Cash Equivalents, and Available-For-Sale Investments (Tables) [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, cash equivalents, and available-for-sale investments |
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Portfolio of cash, cash equivalents, and available-for-sale investments |
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Portfolio of available-for-sale investments |
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Financial assets measured at fair value on a recurring basis |
|
Stock-Based Compensation (Details) (USD $)
In Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Total stock-based compensation expense | Â | Â | Â | Â |
Total stock-based compensation | $ 4,880 | $ 4,361 | $ 9,682 | $ 8,105 |
Cost of goods sold [Member]
|
 |  |  |  |
Total stock-based compensation expense | Â | Â | Â | Â |
Total stock-based compensation | 330 | 229 | 662 | 435 |
Research and development expense [Member]
|
 |  |  |  |
Total stock-based compensation expense | Â | Â | Â | Â |
Total stock-based compensation | 2,120 | 1,734 | 4,089 | 3,301 |
General and administrative expense [Member]
|
 |  |  |  |
Total stock-based compensation expense | Â | Â | Â | Â |
Total stock-based compensation | $ 2,430 | $ 2,398 | $ 4,931 | $ 4,369 |
Net Loss Per Share
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Net Loss Per Share [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss Per Share |
Note 8—Net Loss Per Share
Basic net loss per share is calculated based on the weighted-average number of common shares
outstanding during the periods presented. For all periods presented in the accompanying Condensed
Consolidated Statements of Operations, the net loss available to common stockholders is equal to
the reported net loss. Basic and diluted net loss per share are the same due to our historical net
losses and the requirement to exclude potentially dilutive securities which would have an
anti-dilutive effect on net loss per share. The weighted average of these potentially dilutive
securities has been excluded from the diluted net loss per share calculation and is as follows (in
thousands):
|
Organization and Summary of Significant Accounting Policies
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Organization and Summary of Significant Accounting Policies [Abstract] | Â |
Organization and Summary of Significant Accounting Policies |
Note 1— Organization and Summary of Significant Accounting Policies
Organization
We are a clinical-stage biopharmaceutical company headquartered in San Francisco, California
and incorporated in Delaware. We are developing a pipeline of drug candidates that utilize our
PEGylation and advanced polymer conjugate technology platforms designed to improve the benefits of
drugs for patients.
Basis of Presentation and Principles of Consolidation
Our consolidated financial statements include the financial position, results of operations
and cash flows of our wholly-owned subsidiaries: Nektar Therapeutics (India) Private Limited
(Nektar India) and Nektar Therapeutics UK Limited and Aerogen, Inc. All intercompany accounts and
transactions have been eliminated in consolidation. On December 2, 2010, we completed the
dissolution of Aerogen, Inc. and all remaining assets were transferred to Nektar Therapeutics.
We prepared our Condensed Consolidated Financial Statements following the requirements of the
Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules,
certain footnotes or other financial information that are normally required by U.S. generally
accepted accounting principles (GAAP) for annual periods can be condensed or omitted. In the
opinion of management, these financial statements include all normal and recurring adjustments that
we consider necessary for the fair presentation of our financial position and operating results.
Our Condensed Consolidated Financial Statements are denominated in U.S. dollars. Accordingly,
changes in exchange rates between the applicable foreign currency and the U.S. dollar will affect
the translation of each foreign subsidiary’s financial results into U.S. dollars for purposes of
reporting our consolidated financial results. Translation gains and losses are included in
accumulated other comprehensive income in the stockholders’ equity section of the Condensed
Consolidated Balance Sheets. To date, such cumulative currency translation adjustments have not
been material to our consolidated financial position.
Revenue, expenses, assets, and liabilities can vary during each quarter of the year. The
results and trends in these interim Condensed Consolidated Financial Statements may not be
indicative of the results to be expected for the full year or any other periods.
The accompanying Condensed Consolidated Balance Sheet as of June 30, 2011, the Condensed
Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010,
and the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and
2010 are unaudited. The Condensed Consolidated Balance Sheet data as of December 31, 2010 was
derived from the audited consolidated financial statements which are included in our Annual Report
on Form 10-K filed with the SEC on March 1, 2011. The information included in this quarterly report
on Form 10-Q should be read in conjunction with the consolidated financial statements and the
accompanying notes to those financial statements included in our Annual Report on Form 10-K for the
year ended December 31, 2010.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP 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 revenue and expenses during the reporting period. Actual results could differ
materially from these estimates. On an ongoing basis, we evaluate our estimates, including those
related to deferred revenue recognition periods, inventories, the impairment of investments and
long-lived assets, restructuring and contingencies, stock-based compensation, and litigation,
amongst others. We base our estimates on historical experience and on other assumptions that
management believes are reasonable under the circumstances. These estimates form the basis for
making judgments about the carrying values of assets and liabilities when these values are not
readily apparent from other sources.
Reclassifications
Certain items previously reported in specific financial statement captions have been
reclassified to conform to the current period presentation. Such reclassifications do not impact
previously reported revenue, operating loss or net loss or total assets, liabilities or
stockholders’ equity.
Segment Information
We operate in one business segment which focuses on applying our technology platforms to
improve the performance of established and novel medicines. We operate in one segment because our
business offerings have similar economics and other characteristics, including the nature of
products and manufacturing processes, types of customers, distribution methods and regulatory
environment. We are comprehensively managed as one business segment by our Chief
Executive Officer and his management team.
Significant Concentrations
Our customers are primarily pharmaceutical and biotechnology companies that are located in the
U.S. and Europe. Our accounts receivable balance contains billed and unbilled trade receivables
from product sales, royalties, and other amounts due under collaborative research, development and
commercialization agreements. We provide for an allowance for doubtful accounts by reserving for
specifically identified doubtful accounts. We generally do not require collateral from our
customers. We regularly review our customers’ payment histories and associated credit risk. We have
not experienced significant credit losses from our accounts receivable and therefore recorded no
allowance for doubtful accounts at both June 30, 2011 and December 31, 2010.
We are dependent on our suppliers and contract manufacturers to provide raw materials, drugs
and devices of appropriate quality and reliability and to meet applicable regulatory requirements.
In certain cases, we rely on single sources of supply. Consequently, in the event that supplies are
delayed or interrupted for any reason, our ability to develop and produce our products could be
impaired, which could have a material adverse effect on our business, financial condition and
results of operations.
Revenue
Product sales and royalties
Product sales are primarily derived from cost-plus and fixed price manufacturing and supply
agreements with our collaboration partners and revenue is recognized when there is persuasive evidence
that an arrangement exists, delivery has occurred, the price is fixed or determinable, and
collection is reasonably assured. We have
not experienced any significant returns from our customers.
Generally, we are entitled to royalties from our partners based on their net sales of approved
drugs. We recognize royalty revenue when the cash is received or when the royalty amount to be
received is estimable and collection is reasonably assured.
License, collaboration and other
We enter into license and manufacturing agreements and collaborative research, development and
commercialization arrangements with pharmaceutical and biotechnology partners that may involve
multiple deliverables. Our arrangements may contain one or more of the following elements: upfront
fees, contract research and development, milestone payments, manufacturing and supply, royalties,
and license fees. Each deliverable in the arrangement is evaluated to determine whether it meets
the criteria to be accounted for as a separate unit of accounting or whether it should be combined
with other deliverables. Revenue is recognized for each element.
On January 1, 2011, we adopted on a prospective basis Accounting Standards Update (ASU)
2009-13, which amends the criteria to identify separate units of accounting within Subtopic 605-25,
“Revenue Recognition-Multiple-Element Arrangements.” The adoption of the standard did not impact
our financial position or results of operations as of and for the three and six months ended June
30, 2011 as we did not enter into or materially modify any multiple-element arrangements during
that period. However, the adoption of this standard may result in revenue recognition patterns for
future agreements that are materially different from those recognized for our existing
multiple-element arrangements.
Upfront fees received for license and collaborative agreements entered into prior to January
1, 2011 are recognized ratably over our expected performance period under the arrangement.
Management makes its best estimate of the period over which we expect to
fulfill our performance obligations, which may include technology transfer assistance, clinical
development activities, and manufacturing activities from development through the commercialization
of the product. Given the uncertainties of these collaborative arrangements, significant judgment
is required to determine the duration of the performance period.
On January 1, 2011, we elected to prospectively adopt ASU 2010-17, “Milestone Method of
Revenue Recognition”. Under the milestone method, contingent consideration received from the
achievement of a substantive milestone is recognized in its entirety in the period in which the
milestone is achieved, which we believe is more consistent with the substance of our performance
under our various license and collaboration agreements. A milestone is defined as an event (i) that
can only be achieved based in whole or in part on either the entity’s performance or on the
occurrence of a specific outcome resulting from the entity’s performance, (ii) for which there is
substantive uncertainty at the date the arrangement is entered into that the event will be
achieved, and (iii) that would result in additional payments being due to the entity. A milestone
is substantive if the consideration earned from the achievement of the milestone is consistent with
our performance required to achieve the milestone or the increase in value to the collaboration
resulting from our performance, relates solely to our past performance, and is reasonable relative
to all of the other deliverables and payments within the arrangement.
Our license and collaboration agreements with our partners provide for payments to us upon the
achievement of development milestones, such as the completion of clinical trials or regulatory
submissions and approvals for drug candidates. As of January 1, 2011, our agreements with partners
included potential future payments for development milestones totaling approximately $183.8
million. Given the challenges inherent in developing and obtaining approval for pharmaceutical and
biologic products, there was substantial uncertainty whether any such milestones would be achieved
at the time these licensing and collaboration agreements were entered into. In addition, we
evaluated whether the development milestones met the remaining criteria to be considered
substantive. As a result of our analysis, we consider our development milestones to be substantive
and, accordingly, we expect to recognize as revenue future payments received from such milestones
as each milestone is achieved. The election to adopt the milestone method did not impact our
financial position or results of operations as of and for the three and six months ended June 30,
2011. However, this policy election may result in revenue recognition patterns for future
milestones that are materially different from those recognized for milestones received prior to
adoption.
Milestone payments received prior to January 1, 2011 have been deferred and are recognized as
revenue ratably over the period of time from the achievement of the milestone to our estimated date
on which the next milestone will be achieved. Management makes its best estimate of the period of
time until the next milestone is expected to be reached. Final milestone payments were recorded and
recognized upon achieving the respective milestone. The Company will continue to recognize
milestones payments received prior to January 1, 2011 in this manner. As of June 30, 2011,
deferred revenue from milestone payments received prior to January 1,
2011 is not significant.
Our license and collaboration agreements with certain partners also provide for contingent
payments to us based solely upon the performance of our partner. For such contingent payments we
expect to recognize the payments as revenue when they are earned under the applicable contract,
provided that collection is reasonably assured.
Our license and collaboration agreements with our partners also provide for payments to us
upon the achievement of specified sales volumes of approved drugs. We consider these payments to be
similar to royalty payments and we recognize such sales-based payments upon achievement of the
milestone, provided that collection is reasonably assured.
Income Taxes
We account for income taxes under the liability method, in which deferred tax assets and
liabilities are determined based on differences between the financial reporting and tax reporting
bases of assets and liabilities and are measured using enacted tax rates and laws that are expected
to be in effect when the differences are expected to reverse. Realization of deferred tax assets is
dependent upon future earnings, the timing and amount of which are uncertain. We record a valuation
allowance against deferred tax assets to reduce their carrying value to an amount that is more
likely than not to be realized.
For the three months and six months ended June 30, 2011 and 2010, we recorded an income tax
provision for our Nektar India operations at an effective tax rate of approximately 33% and 34%,
respectively. The U.S. Federal deferred tax assets generated from our net operating losses have
been fully reserved as we believe it is not more likely than not that the benefit will be realized.
|
Commitments and Contingencies
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Commitments and Contingencies [Abstract] | Â |
Commitments and Contingencies |
Note 4—Commitments and Contingencies
Legal Matters
From time to time, we are involved in lawsuits, arbitrations, claims, investigations and
proceedings, consisting of intellectual property, commercial, employment and other matters, which
arise in the ordinary course of business. We make provisions for liabilities when it is both
probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
Such provisions, if necessary, are reviewed at least quarterly and adjusted to reflect the impact
of settlement negotiations, judicial and administrative rulings, advice of legal counsel, and other
information and events pertaining to a particular case. Litigation is inherently unpredictable. If
any unfavorable ruling were to occur in any specific period, there exists the possibility of a
material adverse impact on the results of operations of that period or on our cash flows and
liquidity.
Indemnifications in Connection with Commercial Agreements
As part of our collaboration agreements with our partners related to the license, development,
manufacture and supply of drugs based on our proprietary technologies, we generally agree to
defend, indemnify and hold harmless our partners from and against third party liabilities arising
out of the agreement, including product liability (with respect to our activities) and infringement
of intellectual property to the extent the intellectual property is developed by us and licensed to
our partners. The term of these indemnification
obligations is generally perpetual any time after execution of the agreement. There is generally no
limitation on the potential amount of future payments we could be required to make under these
indemnification obligations.
As part of our pulmonary asset sale to Novartis that was effective as of December 31, 2008, we
and Novartis made representations and warranties and entered into certain covenants and ancillary
agreements which are supported by an indemnity obligation. In the event it were determined that we
breached certain of the representations and warranties or covenants and agreements made by us in
the transaction documents, we could incur an indemnification liability depending on the timing,
nature, and amount of any such claims.
To date we have not incurred costs to defend lawsuits or settle claims related to these
indemnification obligations. If any of our indemnification obligations is triggered, we may incur
substantial liabilities. Because the obligated amount under these agreements is not explicitly
stated, the overall maximum amount of any such obligations cannot be reasonably estimated. No
liabilities have been recorded for these obligations on our Condensed Consolidated Balance Sheets
as of June 30, 2011 or December 31, 2010.
|
License and Collaboration Agreements (Details Textuals) (USD $)
In Millions |
3 Months Ended | 12 Months Ended | 6 Months Ended | 3 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2009
AstraZeneca AB [Member]
Up-front Payment arrangement [Member]
|
Dec. 31, 2007
Bayer Healthcare LLC [Member]
Up-front Payment arrangement [Member]
|
Dec. 31, 2008
Bayer Healthcare LLC [Member]
Performance milestone payments [Member]
|
Dec. 31, 2007
Bayer Healthcare LLC [Member]
Performance milestone payments [Member]
|
Dec. 31, 2009
F Hoffmann La Roche [Member]
License option [Member]
|
Jun. 30, 2011
AstraZeneca AB [Member]
|
Jun. 30, 2011
AstraZeneca AB [Member]
NKTR-118 [Member]
|
Jun. 30, 2011
AstraZeneca AB [Member]
NKTR-119 [Member]
|
Jun. 30, 2011
Bayer Healthcare LLC [Member]
|
Jun. 30, 2011
F Hoffmann La Roche [Member]
|
Dec. 31, 2010
Amgen Inc [Member]
|
Jun. 30, 2011
Amgen Inc [Member]
|
|
License and Collaboration Agreements (Textuals) [Abstract] | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
Received upfront payment | $ 125.0 | $ 40.0 | $ 10.0 | $ 10.0 | $ 31.0 | Â | Â | Â | Â | Â | $ 50.0 | Â |
Development milestone payments receivable upon achievement of Milestone | Â | Â | Â | Â | Â | Â | Â | Â | 60.0 | Â | Â | Â |
Contingent payments receivable based on development events | Â | Â | Â | Â | Â | 310.0 | 235.0 | 75.0 | Â | Â | Â | Â |
Performance milestone used to reimburse clinical trial costs | Â | Â | Â | Â | Â | Â | Â | Â | 10.0 | Â | Â | Â |
Deferred Revenue | Â | Â | Â | Â | Â | Â | Â | Â | $ 29.0 | $ 23.1 | Â | $ 46.7 |
Stockholders' Equity
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Stockholders' Equity [Abstract] | Â |
Stockholders' Equity |
Note 5— Stockholders’ Equity
On January 24, 2011, we completed the issuance and sale of 19,000,000 shares of our common
stock for proceeds to the Company of approximately $220.4 million. Additionally, we incurred
approximately $0.6 million in legal and accounting fees, filing fees, and other offering expenses.
|
Commitments and Contingencies (Details Textuals) (USD $)
In Thousands |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Commitments and Contingencies (Textuals) [Abstract] | Â | Â |
Liabilities related to indemnification obligations | $ 0 | $ 0 |
Stock-Based Compensation (Details Textuals) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Stock Based Compensation (Textuals) [Abstract] | Â | Â | Â | Â |
Granted stock options | 263,910 | 718,230 | 2,391,965 | 4,475,155 |
Weighted average grant-date fair value of options granted | $ 4.90 | $ 7.34 | $ 5.65 | $ 6.17 |
Stock issuances under equity compensation | 281,776 | 212,299 | 787,476 | 850,423 |
License and Collaboration Agreements (Details) (USD $)
In Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
License, collaboration, and other revenue | Â | Â | Â | Â |
License, collaboration and other | $ 6,323 | $ 31,409 | $ 12,829 | $ 61,062 |
BAY41-6651 (Amikacin Inhale) [Member] | Bayer Healthcare LLC [Member]
|
 |  |  |  |
License, collaboration, and other revenue | Â | Â | Â | Â |
License, collaboration and other | 750 | 818 | 1,500 | 1,705 |
NKTR-118 and NKTR-119 [Member] | AstraZeneca AB [Member]
|
 |  |  |  |
License, collaboration, and other revenue | Â | Â | Â | Â |
License, collaboration and other | 845 | 27,579 | 1,086 | 53,306 |
Pegasys [Member] | F Hoffmann La Roche [Member]
|
 |  |  |  |
License, collaboration, and other revenue | Â | Â | Â | Â |
License, collaboration and other | 1,283 | 1,283 | 2,566 | 2,566 |
Neulasta [Member] | Amgen Inc [Member]
|
 |  |  |  |
License, collaboration, and other revenue | Â | Â | Â | Â |
License, collaboration and other | 1,250 | 0 | 2,500 | 0 |
Other Partner [Member]
|
 |  |  |  |
License, collaboration, and other revenue | Â | Â | Â | Â |
License, collaboration and other | $ 2,195 | $ 1,729 | $ 5,177 | $ 3,485 |
Stock-Based Compensation (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Stock-Based Compensation (Tables) [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total stock-based compensation expense |
|
License and Collaboration Agreements
|
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Jun. 30, 2011
|
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License and Collaboration Agreements [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
License and Collaboration Agreements |
Note 6—License and Collaboration Agreements
We have entered into various license and manufacturing agreements and collaborative research,
development and commercialization agreements with pharmaceutical and biotechnology companies. Under
these arrangements, we are entitled to receive license fees, upfront payments, milestone payments
when and if certain development or regulatory milestones are achieved, royalties, sales milestones,
payment for the manufacture and supply of certain drug materials, and/or reimbursement for research
and development activities. All of our research, development and commercialization agreements are
generally cancelable by our partners without significant financial penalty to the partner. Our
costs of performing these services are included in research and development expense in the
accompanying Condensed Consolidated Statements of Operations.
In accordance with these agreements, we recorded license, collaboration and other revenue as
follows (in thousands):
F. Hoffmann-LaRoche Ltd and Hoffmann-LaRoche Inc.
PEGASYS®
In February 1997, we entered into a license, manufacturing and supply agreement with F.
Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. (Roche), under which we granted Roche a worldwide,
exclusive license to use certain PEGylation materials in the manufacture of PEGASYS. As a result of
Roche exercising a license extension option in December 2009, Roche has the right to manufacture
all of its requirements for our proprietary PEGylation materials for PEGASYS and we will perform
additional manufacturing, if any, only on an as-requested basis. In connection with Roche’s
exercise of the license option extension in December 2009, we received a payment of $31.0 million.
As of June 30, 2011, we have deferred revenue of approximately $23.1 million, which we expect to
amortize through December 2015, which is the period through which we are required to provide
back-up manufacturing and supply services on an as-requested basis.
Amgen, Inc.
Neulasta®
On October 29, 2010, we amended and restated an existing supply and license agreement by
entering into a supply, dedicated suite and manufacturing guarantee agreement (the amended and
restated agreement) and a license agreement with Amgen Inc. and Amgen Manufacturing, Limited
(together referred to as Amgen). Under the terms of the amended and restated agreement, we
guarantee the manufacture and supply of our proprietary PEGylation materials (Polymer Materials) to
Amgen in an existing manufacturing suite to be used exclusively for the manufacture of Polymer
Materials for Amgen (the Manufacturing Suite) in our manufacturing facility in Huntsville, Alabama
(Facility). This supply arrangement is on a non-exclusive basis (other than the use of the
Manufacturing Suite and certain equipment) whereby Nektar is free to manufacture and supply the
Polymer Materials to any other third party and Amgen is free to procure the Polymer Materials from
any other third party. Under the terms of the amended and restated agreement, we received a $50.0
million payment in the fourth quarter of 2010 in return for our guaranteeing the supply of certain
quantities of Polymer Materials to Amgen including without limitation the Additional Rights
described below and manufacturing fees that are calculated based on fixed and variable components
applicable to the Polymer Materials ordered by Amgen and delivered by us. Amgen has no minimum
purchase commitments. If quantities of the Polymer Materials ordered by Amgen exceed specified
quantities, significant additional payments become payable to us in return for our guaranteeing the
supply of additional quantities of the Polymer Materials.
The term of the amended and restated agreement ends on October 29, 2020. In the event we
become subject to a bankruptcy or insolvency proceeding, we cease to own or control the Facility,
we fail to manufacture and supply or certain other events, Amgen or its designated third party will
have the right to elect, among certain other options, to take title to the dedicated equipment and
access the Facility to operate the Manufacturing Suite solely for the purpose of manufacturing the
Polymer Materials (the Additional Rights). Amgen may terminate the amended and restated agreement
for convenience or due to an uncured material default by us.
As of June 30, 2011, we have deferred revenue of approximately $46.7 million, which we expect
to amortize through October 2020, the estimated end of our obligations under the amended and
restated agreement.
Bayer Healthcare LLC
BAY41-6551 (Amikacin Inhale)
On August 1, 2007, we entered into a co-development, license and co-promotion agreement with
Bayer Healthcare LLC (Bayer) to develop a specially-formulated inhaled Amikacin. We are responsible
for development and manufacturing and supply of the nebulizer device
included in the Amikacin product. Bayer is responsible for most future clinical development and
commercialization costs, all activities to support worldwide regulatory filings, approvals and
related activities, further development of Amikacin Inhale and final product packaging and
distribution. We received an upfront payment of $40.0 million in 2007 and performance milestone
payments of $20.0 million, of which $10.0 million will be used to reimburse Bayer for Phase 3
clinical trial costs. We are entitled to $60.0 million of development milestones upon achievement
of certain development objectives, sales milestones upon achievement of annual sales targets, and
royalties based on annual worldwide net sales of Amikacin Inhale. As of June 30, 2011, we have
deferred revenue of approximately $29.0 million, which we expect to amortize through July 2021, the
estimated end of our obligations under this agreement.
AstraZeneca AB
NKTR-118 and NKTR-119
On September 20, 2009, we entered into a License Agreement with AstraZeneca AB, a Swedish
corporation (AstraZeneca), under which we granted AstraZeneca a worldwide, exclusive, perpetual,
royalty-bearing, and sublicensable license under our patents and other intellectual property to
develop, sell and otherwise commercially exploit NKTR-118 and NKTR-119. AstraZeneca is responsible
for all costs associated with research, development and commercialization and will control drug
development and commercialization decisions for NKTR-118 and NKTR-119. Under the terms of the
agreement, AstraZeneca paid us an upfront payment of $125.0 million, which we received in the
fourth quarter of 2009. As of December 31,
2010, we completed our obligations under the license agreement and related manufacturing technology
transfer agreement. The upfront payment was amortized over approximately 15 months beginning in
October 2009 in accordance with our performance obligation period and was fully recognized as of
December 31, 2010.
We are also entitled to $235.0 million
and $75.0 million of contingent payments related to NKTR-118 and
NKTR-119, respectively, based on
development events to be pursued and completed solely by AstraZeneca, sales milestones, and
royalties based on annual worldwide net sales of NTKR-118 and NKTR-119 products.
|
Cash, Cash Equivalents, and Available-For-Sale Investments (Details) (USD $)
In Thousands |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Cash, cash equivalents, and available-for-sale investments | Â | Â |
Cash and cash equivalents | $ 11,626 | $ 17,755 |
Short-term investments | 351,280 | 298,177 |
Long-term investments | 118,941 | 0 |
Total cash, cash equivalents, and available-for-sale investments | $ 481,847 | $ 315,932 |
Stockholders' Equity (Details Textuals) (USD $)
In Millions, except Share data |
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Stockholders' Equity (Textuals) [Abstract] | Â |
Common stock, shares issued | 19,000,000 |
Value of common stock issued | $ 220.4 |
Legal and accounting fees, filing fees, and other offering expenses | $ 0.6 |
Cash, Cash Equivalents, and Available-For-Sale Investments (Details 1) (USD $)
In Thousands |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Schedule of Available-for-sale Securities [Line Items] | Â | Â |
Total cash, cash equivalents, and available-for-sale investments | $ 481,847 | $ 315,932 |
Corporate notes and bonds [Member]
|
 |  |
Schedule of Available-for-sale Securities [Line Items] | Â | Â |
Total cash, cash equivalents, and available-for-sale investments | 360,536 | 190,527 |
U.S. corporate commercial paper [Member]
|
 |  |
Schedule of Available-for-sale Securities [Line Items] | Â | Â |
Total cash, cash equivalents, and available-for-sale investments | 101,434 | 82,361 |
Obligations of U.S. government agencies [Member]
|
 |  |
Schedule of Available-for-sale Securities [Line Items] | Â | Â |
Total cash, cash equivalents, and available-for-sale investments | 8,251 | 25,289 |
Cash and money market funds [Member]
|
 |  |
Schedule of Available-for-sale Securities [Line Items] | Â | Â |
Total cash, cash equivalents, and available-for-sale investments | $ 11,626 | $ 17,755 |
Cash, Cash Equivalents, and Available-For-Sale Investments
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
|
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Cash, Cash Equivalents, and Available-For-Sale Investments [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents, and Available-For-Sale Investments |
Note 2 — Cash, Cash Equivalents, and Available-For-Sale Investments
Cash, cash equivalents, and available-for-sale investments are as follows (in thousands):
Our portfolio of cash, cash equivalents, and available-for-sale investments includes (in
thousands):
The following table summarizes our portfolio of available-for-sale investments reported as
short-term and long-term investments by contractual maturity (in thousands):
We invest in liquid, high quality debt securities. Our investments in debt securities are
subject to interest rate risk. To minimize the exposure due to an adverse shift in interest rates,
we invest in securities with maturities of two years or less and maintain a weighted average
maturity of one year or less. Investments in securities with maturities of less than one year are
classified as short-term investments.
During the six months ended June 30, 2011 and 2010, we realized gains and losses of less than
$0.1 million from sales of available-for-sale securities in each of the periods. The cost of
securities sold is based on the specific identification method.
Gross unrealized gains and losses were not significant at June 30, 2011 and December 31, 2010.
The gross unrealized losses were primarily due to changes in interest rates on fixed income
securities. Based on our available cash and our expected operating cash requirements, we do not
intend to sell these securities and it is more likely than not that we will not be required to sell
these securities before we recover the amortized cost basis. Accordingly, we believe there are no
other-than-temporary impairments on these securities and have not recorded a provision for
impairment.
We use a market approach to value our Level 2 investments as described in the table below. The
disclosed fair value related to our investments is based primarily on the reported fair values in
our period-end brokerage statements. We independently validate these fair values using available
market quotes and other information.
The following table represents the fair value hierarchy for our financial assets measured at
fair value on a recurring basis as of June 30, 2011 and December 31, 2010 (in thousands):
|
Inventory (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory (Tables) [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory |
|
Net Loss Per Share (Details)
In Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Antidilutive securities excluded from computation of earnings per share | Â | Â | Â | Â |
Total | 21,609 | 19,347 | 21,297 | 18,960 |
Convertible subordinated notes [Member]
|
 |  |  |  |
Antidilutive securities excluded from computation of earnings per share | Â | Â | Â | Â |
Total | 9,989 | 9,989 | 9,989 | 9,989 |
Stock options [Member]
|
 |  |  |  |
Antidilutive securities excluded from computation of earnings per share | Â | Â | Â | Â |
Total | 11,620 | 9,358 | 11,308 | 8,971 |
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