UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
(Mark
One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the
quarterly period ended March 31, 2008
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File Number: 0-19700
AMYLIN
PHARMACEUTICALS, INC.
(Exact
name of registrant as specified in its charter)
Delaware
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33-0266089
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(State or other
jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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9360
Towne Centre Drive
San Diego, California
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92121
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(Address of
principal executive offices)
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(Zip code)
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(858) 552-2200
(Registrants telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes
x
No
o
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definition of accelerated
filer large accelerated filer and smaller reporting company in Rule 12b-2
of the Exchange Act (check one):
Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
(do not check if a
smaller reporting company)
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Smaller reporting company
o
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Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes
o
No
x
Indicate the number of
shares outstanding of each of the issuers classes of common stock, as of the
latest practicable date.
Class
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Outstanding on April 21, 2008
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Common Stock,
$.001 par value
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137,073,350
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AMYLIN PHARMACEUTICALS, INC.
TABLE OF CONTENTS
COVER PAGE
2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
AMYLIN PHARMACEUTICALS, INC.
Consolidated Balance Sheets
(in thousands, except per share data)
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March 31,
2008
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December 31,
2007
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(unaudited)
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(Note 1)
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Assets
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Current assets:
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Cash and cash
equivalents
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$
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321,743
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$
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422,232
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Short-term
investments
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712,200
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708,183
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Accounts
receivable, net
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65,512
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73,579
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Inventories, net
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98,066
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100,214
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Other current
assets
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28,768
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32,100
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Total current
assets
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1,226,289
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1,336,308
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Property, plant
and equipment, net
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476,990
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390,301
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Other long-term
assets, net
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27,800
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28,082
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Debt issuance
costs, net
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18,730
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19,520
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$
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1,749,809
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$
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1,774,211
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Liabilities and Stockholders Equity
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Current
liabilities:
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Accounts payable
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$
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48,412
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$
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37,530
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Accrued
compensation
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35,050
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56,428
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Payable to
collaborative partner
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66,637
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66,116
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Other current
liabilities
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105,751
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122,924
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Current portion
of deferred revenue
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4,286
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4,286
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Total current
liabilities
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260,136
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287,284
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Deferred
revenue, net of current portion
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2,015
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3,086
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Other long-term
obligations, net of current portion
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34,760
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31,023
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Long-term note
payable
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125,000
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125,000
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Convertible
senior notes
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775,000
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775,000
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Commitments and
contingencies (Note 8)
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Stockholders
equity:
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Common stock,
$.001 par value, 200,000 shares authorized, 137,037 and 135,044 issued and
outstanding at March 31, 2008 and December 31, 2007, respectively
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137
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135
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Additional
paid-in capital
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2,059,473
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1,987,453
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Accumulated
deficit
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(1,503,117
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)
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(1,434,320
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Accumulated
other comprehensive loss
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(3,595
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(450
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Total
stockholders equity
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552,898
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552,818
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$
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1,749,809
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$
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1,774,211
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See accompanying notes to consolidated financial statements.
3
AMYLIN PHARMACEUTICALS, INC.
Consolidated Statements of
Operations
(in thousands, except per share data)
(unaudited)
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Three months ended
March 31,
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2008
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2007
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Revenues:
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Net product sales
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$
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178,721
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$
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162,003
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Revenues under collaborative agreements
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18,516
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9,975
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Total revenues
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197,237
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171,978
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Costs and expenses:
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Cost of goods sold
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22,024
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15,210
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Selling, general and administrative
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98,243
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87,787
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Research and development
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77,206
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59,564
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Collaborative profit sharing
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69,901
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66,947
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Total costs and expenses
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267,374
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229,508
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Operating loss
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(70,137
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(57,530
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Interest and other income
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11,030
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9,404
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Interest and other expense
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(9,690
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(1,288
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Net loss
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$
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(68,797
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$
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(49,414
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Net loss per share, basic and diluted
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$
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(0.51
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$
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(0.38
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Shares used in
computing net loss per share, basic and diluted
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135,859
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131,054
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See accompanying notes to consolidated financial
statements.
4
AMYLIN PHARMACEUTICALS, INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
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Three months ended
March 31,
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2008
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2007
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Operating
activities:
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Net loss
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$
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(68,797
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$
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(49,414
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Adjustments to
reconcile net loss to net cash used for operating activities:
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Depreciation and
amortization
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7,434
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4,177
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Stock-based compensation
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14,062
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13,317
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Other non-cash
expenses, net
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967
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378
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Changes in
operating assets and liabilities:
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Accounts
receivable, net
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8,067
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(25,583
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Inventories, net
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2,148
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(6,544
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Other current
assets
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2,479
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(4,579
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Accounts payable
and other current liabilities
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17,073
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9,623
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Accrued
compensation
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(99
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(6,930
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Payable to
collaborative partner
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521
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2,994
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Deferred revenue
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(1,071
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(1,072
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Other operating
assets and liabilities, net
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3,217
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1,635
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Net cash flows
used for operating activities
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(13,999
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(61,998
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Investing
activities:
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Purchases of
short-term investments
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(368,471
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(24,694
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Sales and
maturities of short-term investments
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362,162
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157,012
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Purchase of
property, plant, and equipment, net
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(86,448
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(81,168
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Increase in
patents and other long-term assets
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(339
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(2,536
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Net cash flows
(used for) provided by investing activities
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(93,096
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48,614
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Financing
activities:
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Issuance of
common stock, net
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6,606
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12,806
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Net cash flows
provided by financing activities
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6,606
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12,806
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Decrease in cash
and cash equivalents
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(100,489
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)
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(578
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)
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Cash and cash
equivalents at beginning of period
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422,232
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66,640
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Cash and cash
equivalents at end of period
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$
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321,743
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$
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66,062
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Supplemental
disclosure of cash flow information:
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Property, plant,
and equipment additions in other current liabilities
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$
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22,196
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$
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12,575
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Non-cash
financing activities:
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Issuance of
common stock for contingent share settled obligation
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$
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30,000
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$
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Shares
contributed as employer 401(k) match
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$
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4,283
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$
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5,819
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Shares
contributed to employee stock ownership plan
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$
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16,996
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$
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See accompanying notes to consolidated financial statements.
5
AMYLIN
PHARMACEUTICALS, INC.
Notes to Consolidated Financial Statements
March 31, 2008
(unaudited)
1.
Summary of Significant Accounting
Policies
Basis of Presentation
The
information contained herein has been prepared in accordance with instructions
for Form 10-Q and Article 10 of Regulation S-X. The information as of
March 31, 2008, and for the three months ended March 31, 2008, and
2007, are unaudited. In the opinion of management, the information reflects all
adjustments necessary to make the results of operations for the interim periods
a fair statement of such operations. All such adjustments are of a normal
recurring nature. Interim results are not necessarily indicative of results for
a full year. The balance sheet at December 31, 2007, has been derived from
the audited consolidated financial statements at that date but does not include
all information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements. For more complete financial
information, these financial statements should be read in conjunction with the
audited consolidated financial statements included in Amylin Pharmaceuticals, Inc.s
(referred to as the Company or Amylin) Annual Report on Form 10-K for the
year ended December 31, 2007.
Revenue Recognition
Net
Product Sales
The Company sells BYETTA
®
(exenatide)
injection and SYMLIN
®
(pramlintide acetate) injection primarily to
wholesale distributors, who, in turn, sell to retail pharmacies and government
entities. Product sales are recognized when
delivery of the products has occurred, title has
passed to the customer, the selling price is fixed or determinable,
collectability is reasonably assured and the Company has no further
obligations. The Company records allowances for product returns, rebates and
wholesaler chargebacks, wholesaler discounts, and prescription vouchers at the
time of sale and reports product sales net of such allowances. The Company must
make significant judgments in determining these allowances. If actual results differ
from the Companys estimates, the Company will be required to make adjustments
to these allowances in the future.
The
Company reports all United States BYETTA and SYMLIN product sales. With respect
to BYETTA, the Company has determined that it is qualified as a principal under
the criteria set forth in Emerging Issues Task Force (EITF), Issue 99-19,
Reporting Gross Revenue as a Principal vs. Net as an
Agent,
based on the Companys responsibilities under its contracts
with Eli Lilly and Company, or Lilly, which include manufacture of product for
sale in the United States, responsibility for establishing pricing in the
United States, distribution, ownership of product inventory and credit risk
from customers, and accordingly the Company records all United States products
sales of BYETTA.
Revenues Under Collaborative
Agreements
Amounts
received for upfront product and technology license fees under multiple-element
arrangements are deferred and recognized over the period of such services or
performance if such arrangements require on-going services or performance.
Non-refundable amounts received for substantive milestones are recognized upon
achievement of the milestone. Amounts
received for sharing of development expenses are recognized in the period in
which the related expenses are incurred. Any amounts received prior to
satisfying these revenue recognition criteria will be recorded as deferred
revenue.
Collaborative
Profit-Sharing
Collaborative
profit-sharing represents Lillys 50% share of the gross margin for BYETTA
sales in the United States.
Accounts Receivable
Trade
accounts receivable are recorded net of allowances for cash discounts for
prompt payment, doubtful accounts, product returns and chargebacks. Allowances
for rebate discounts and distribution fees are included in other current
liabilities
6
in the accompanying
consolidated balance sheets. Estimates for allowances for doubtful accounts are
determined based on existing contractual obligations, historical payment
patterns and individual customer circumstances. The allowance for
doubtful accounts was $0.3 million and $0.2 million at March 31, 2008 and December 31,
2007, respectively.
Research
and Development Expenses
Research and
development costs are expensed as incurred and include
salaries, benefits, bonus, stock-based
compensation, license fees, milestones under license agreements, costs paid to
third-party contractors to perform research, conduct clinical trials, and
develop drug materials and delivery devices; and associated overhead expenses
and facilities costs
. Clinical trial costs,
including costs associated with third-party contractors, are a significant
component of research and development expenses. Invoicing from third-party
contractors for services performed can lag several months. The Company accrues
the costs of services rendered in connection with such activities based on its
estimate of management fees, site management and monitoring costs, and data
management costs. Actual clinical trial costs may differ from estimates and are
adjusted in the period in which they become known.
Per Share Data
Basic and diluted net
loss applicable to common stock per share is computed using the weighted
average number of common shares outstanding during the period. Common stock
equivalents from stock options and warrants of 3.3 million and 6.7 million for
the three months ended March 31, 2008 and 2007, respectively, are excluded
from the calculation of diluted loss per share for all periods presented
because the effect is antidilutive. Common stock equivalents from shares
underlying our convertible senior notes of 15.2 million and 5.8 million for the
three months ended March 31, 2008 and 2007, respectively, are also
excluded from the calculation of diluted loss per share because the effect is
antidilutive. In future periods, if the
Company reports net income and the common share equivalents for our convertible
senior notes are dilutive, the common stock equivalents will be included in the
weighted average shares computation and interest expense related to the notes
will be added back to net income to calculate diluted earnings per share.
Accounting for Stock-Based
Compensation
Effective
January 1, 2006, the Company adopted the fair value method of accounting
for stock-based compensation arrangements in accordance with Financial Accounting
Standards Board (FASB) revised Statement of Financial Accounting Standards
(SFAS) No. 123 (SFAS 123R),
Share-Based
Payment,
which establishes accounting for non-cash, stock-based
awards exchanged for employee services and requires companies to expense the
estimated fair value of these awards over the requisite employee service
period, which for the Company is generally the vesting period. The Company
adopted SFAS 123R using the modified prospective method. Under the modified
prospective method, prior periods are not revised for comparative purposes. The
valuation provisions of SFAS 123R apply to new awards and to awards that are
outstanding on the effective date and subsequently modified or cancelled.
Estimated non-cash, compensation expense for awards outstanding at the
effective date will be recognized over the remaining service period using the
compensation cost calculated for pro-forma disclosure purposes under Statement
of Financial Accounting Standards No. 123 (SFAS 123),
Accounting for Stock-Based Compensation.
Total
estimated stock-based compensation was as follows (in thousands, except per
share data):
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Three months ended
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March 31,
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2008
|
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2007
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Selling, general
and administrative expenses
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$
|
8,332
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$
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7,981
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Research and
development expenses
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5,730
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5,336
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$
|
14,062
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$
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13,317
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|
|
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|
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Net stock-based
compensation expense, per common share:
|
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|
|
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Basic
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$
|
0.10
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$
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0.10
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Diluted
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$
|
0.10
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$
|
0.10
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The
Company recorded $14.1 million and $13.3 million of total non-cash, stock-based
compensation expense during the three months ended March 31, 2008 and March 31,
2007, respectively, related to stock-based awards, consisting of stock
7
options and employee
stock purchase rights, during those periods.
At March 31, 2008, total unrecognized estimated compensation cost
related to non-vested share based awards granted prior to that date was $125.1
million which is expected to be recognized over a weighted-average period of
2.7 years.
In
addition to the stock-based compensation discussed above, the Company also
recorded $5.4 million of expense associated with its Employee Stock Ownership
Plan, or ESOP, during the three months ended March 31, 2008. There was no expense for the ESOP during the
three months ended March 31, 2007 as the ESOP was not adopted until December 2007.
Consolidation
The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries, Amylin Europe Limited, Amylin Puerto Rico LLC,
Amylin Ohio LLC and Amylin Investments LLC. All significant intercompany
transactions and balances have been eliminated in consolidation.
Recently Issued Accounting Pronouncements
In December 2007,
FASB issued SFAS No. 141 (revised 2007),
Business
Combinations
and SFAS No. 160,
Noncontrolling
Interests in Consolidated Financial Statements, an amendment of Accounting
Research Bulletin No. 51.
SFAS No. 141R will change how business acquisitions are
accounted for and will impact financial statements both on the acquisition date
and in subsequent periods. SFAS No. 160
will change the accounting and reporting for minority interests, which will be
recharacterized as noncontrolling interests and classified as a component of
equity. SFAS No. 141R and
SFAS No. 160 are effective for us beginning in the first quarter of
fiscal 2009. Early adoption is not
permitted. The Company is currently
evaluating the impact that adoption of SFAS No. 141R and SFAS No. 160
will have on its consolidated financial statements.
In June 2007,
the FASB ratified the EITF consensus on EITF Issue No. 07-3,
Accounting for Nonrefundable Advance Payments for Goods or Services
Received for Use in Future Research and Development Activities.
EITF Issue No. 07-3 requires that
nonrefundable advance payments for goods or services that will be used or
rendered for future research and development activities should be deferred and
capitalized. Such amounts should be
recognized as an expense as the related goods are delivered or the related
services are performed. Entities should
continue to evaluate whether they expect the goods to be delivered or services
to be rendered. If an entity does not
expect the goods to be delivered or services to be rendered, the capitalized
advance payment should be charged to expense.
The Company adopted EITF Issue No. 07-3 on January 1,
2008. The adoption of EITF Issue No. 07-3
did not have a material impact on the Companys consolidated financial
statements.
In February 2007,
the FASB issued SFAS No. 159,
The Fair Value Option for
Financial Assets and Financial Liabilities.
SFAS No. 159 gives
the Company the irrevocable option to carry many financial assets and
liabilities at fair values, with changes in fair value recognized in
earnings. The Company adopted SFAS No. 159
on January 1, 2008. The adoption of
SFAS No. 159 did not have a material impact on the Companys consolidated
financial statements.
In September 2006,
the FASB issued SFAS No. 157,
Fair Value Measurements
,
which defines fair value, establishes guidelines for measuring fair value and
expands disclosures regarding fair value measurements. SFAS No. 157 does not require any
new fair value measurements but rather eliminates inconsistencies in guidance
found in various prior accounting pronouncements. SFAS No. 157 prioritizes the inputs used
in measuring fair value into the following hierarchy:
Level 1
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Quoted prices
(unadjusted) in active markets for identical assets or liabilities;
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|
|
Level 2
|
|
Inputs other than
quoted prices included within Level 1 that are either directly or indirectly
observable; and
|
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|
|
Level 3
|
|
Unobservable inputs in
which little or no market activity exists, therefore requiring an entity to
develop its own assumptions about the assumptions that market participants
would use in pricing.
|
The
Company adopted SFAS No. 157 on January 1, 2008. The adoption of SFAS No. 157 did
not have a material impact on the Companys consolidated financial statements.
8
2.
Short-term Investment
s
The Companys short-term investments, consisting
principally of debt securities are classified as available-for-sale and are stated
at fair value based upon observed market prices (level 1 in the fair value
hierarchy).
Unrealized holding gains or losses on these securities are
included in other comprehensive income. The amortized cost of debt securities
in this category is adjusted for amortization of premiums and accretion of
discounts to maturity.
For investments in mortgage-backed securities, amortization of premiums
and accretion of discounts are recognized in interest income using the interest
method, adjusted for anticipated prepayments as applicable. Estimates of
expected cash flows are updated periodically and changes are recognized in the
calculated effective yield prospectively
as appropriate.
Such amortization is included in interest income. Realized gains and
losses and declines in value judged to be other-than-temporary (of which there
have been none to date) on available-for-sale securities are included in
interest income. In assessing potential impairment of its short-term
investments, the Company evaluates the impact of interest rates, potential
prepayments on mortgage-backed securities, changes in credit quality, the
length of time and extent to which the market value has been less than cost,
and the Companys intent and ability to retain the security in order to allow
for an anticipated recovery in fair value. The
cost of securities sold is based on the specific-identification method.
3.
Inventories, net
Inventories are stated at the lower of cost (FIFO)
or market and net of a valuation allowance for potential excess and/or obsolete
material of $7.8 million and $5.3 million at March 31, 2008 and December 31,
2007, respectively.
Raw
materials consists of bulk drug material, work-in-process primarily consists of
in-process SymlinPen
TM
pen injector devices, in-process SYMLIN
vials, in-process BYETTA cartridges, and finished goods consists of finished
SymlinPen
TM
pen injector devices, finished SYMLIN drug product in
vials and BYETTA drug product in a disposable pen/cartridge delivery system.
Inventories consist of the following
(in thousands):
|
|
March 31,
2008
|
|
December 31,
2007
|
|
Raw materials
|
|
$
|
60,468
|
|
$
|
55,706
|
|
Work-in-process
|
|
23,211
|
|
24,463
|
|
Finished goods
|
|
14,387
|
|
20,045
|
|
|
|
$
|
98,066
|
|
$
|
100,214
|
|
4.
Debt Issuance Costs
Debt
issuance costs relate to the $200 million principal
amount of 2.5% convertible senior notes, due April 15, 2011, issued in April 2004,
referred to as the 2004 Notes, the $575 million principal amount of 3.0%
convertible senior notes, due June 15, 2014, issued in June 2007,
referred to as the 2007 Notes, and the $125 million term loan entered into in December 2007. Amortization of debt issuance costs are
recorded as interest expense in the consolidated statement of operations on a
straight-line basis, which approximates the interest method, over the
contractual term of the notes. The Company incurred total debt issuance costs
of $24.3 million in connection with the 2004 Notes, the 2007 Notes and the term
loan. Amortization expense of $1.0 million and $0.2 million was recorded in
each of the three months ended March 31, 2008 and 2007, respectively.
9
5.
Other Current Liabilities
Other current liabilities consist of the following (in
thousands):
|
|
March 31,
2008
|
|
December 31,
2007
|
|
Contingent share-settled obligation (1)
|
|
$
|
|
|
$
|
30,000
|
|
Accrued contract research and development expenses
|
|
21,151
|
|
20,107
|
|
Accrued rebate discounts
|
|
24,780
|
|
19,673
|
|
Accrued
property, plant and equipment additions
|
|
22,196
|
|
15,559
|
|
Other accrued
sales allowances
|
|
13,003
|
|
13,989
|
|
Other current liabilities
|
|
24,621
|
|
23,596
|
|
|
|
$
|
105,751
|
|
$
|
122,924
|
|
(1) Represents a liability for $30 million in convertible
milestone payments received from Lilly that converted into approximately 0.8
million shares the Companys common stock during the quarter ended March 31,
2008.
6.
Comprehensive Loss
Statement
of Financial Accounting Standards No. 130 (SFAS 130),
Reporting Comprehensive Income,
requires reporting and displaying comprehensive income (loss) and
its components, which, for the Company, includes net loss and unrealized gains
and losses on investments. In accordance with SFAS 130, the accumulated balance
of other comprehensive income (loss) is disclosed as a separate component of
stockholders equity. For the three months ended March 31, 2008, and March 31,
2007, the comprehensive loss consisted of (in thousands):
|
|
Three months ended March 31,
|
|
|
|
2008
|
|
2007
|
|
Net loss
|
|
$
|
(68,797
|
)
|
$
|
(49,414
|
)
|
Other
comprehensive (loss) gain:
|
|
|
|
|
|
Unrealized (loss)
gain on investments
|
|
(3,145
|
)
|
238
|
|
Comprehensive
loss
|
|
$
|
(71,942
|
)
|
$
|
(49,176
|
)
|
7.
Convertible
Senior
Notes
In June 2007,
the Company issued the 2007 Notes, which have an aggregate principal amount of
$575 million, and are due June 15, 2014, in a private placement. The 2007
Notes are senior unsecured obligations and rank equally with all other existing
and future senior unsecured debt. The 2007 Notes bear interest at 3.0% per
year, payable in cash semi-annually, and are initially convertible into a total
of up to 9.4 million shares of common stock at a conversion price of $61.07 per
share, subject to the customary adjustment for stock dividends and other
dilutive transactions. In addition, if a fundamental change (as defined in
the associated indenture agreement) occurs prior to the maturity date, the
Company will in some cases increase the conversion rate for a holder of notes
that elects to convert its notes in connection with such fundamental change.
The maximum conversion rate is 22.9252, which would result in a maximum
issuance of 13.2 million shares of common stock if all holders converted at the
maximum conversion rate.
The
2007 Notes will be convertible into shares of the Companys common stock unless
the Company elects net-share settlement. If net-share settlement is elected by
the Company, the Company will satisfy the accreted value of the obligation in
cash and will satisfy the excess of conversion value over the accreted value in
shares of the Companys common stock based on a daily conversion value,
determined in accordance with the associated indenture agreement, calculated on
a proportionate basis for each day of the relevant 20-day observation period.
Holders may convert the 2007 Notes only in the following circumstances and to
the following extent: (1) during the five business-day period after any
five consecutive trading period (the measurement period) in which the trading
price per note for each day of such measurement period was less than 97% of the
product of the last reported sale price of the Companys common stock and the
conversion rate on each such day; (2) during any calendar quarter after
the calendar quarter ending March 31, 2007, if the last reported sale
price of the Companys common stock for 20 or more trading days in a period of
30 consecutive trading days ending on the last trading day of the immediately
preceding calendar quarter exceeds 130% of the applicable conversion price in
effect on the last trading day of the immediately preceding calendar quarter; (3) upon
the occurrence of specified events; and (4) the 2007 Notes will be
convertible at any time on or after April 15, 2014 through the scheduled
trading day immediately preceding the maturity date.
10
Subject
to certain exceptions, if the Company undergoes a designated event (as
defined in the associated indenture agreement) including a fundamental change,
holders of the 2007 Notes will, for the duration of the notes, have the option
to require the Company to repurchase all or any portion of their 2007 Notes.
The designated event repurchase price will be 100% of the principal amount of
the 2007 Notes to be purchased plus any accrued interest up to but excluding
the relevant repurchase date. The Company will pay cash for all notes so
repurchased. The Company may not redeem the Notes prior to maturity.
The
2007 Notes have been registered under the Securities Act of 1933, as amended,
to permit registered resale of the 2007 Notes and of the common stock issuable
upon conversion of the 2007 Notes.
Subject to certain limitations, the Company will be required to pay the
holders of the 2007 Notes special interest on the 2007 Notes if the Company
fails to keep such registration statement effective during specified time periods.
In April 2004,
the Company issued the 2004 Notes, which have an aggregate principal amount of
$200 million, and are due April 15, 2011, in a private placement. The 2004
Notes are senior unsecured obligations and rank equally with all other existing
and future senior unsecured debt. The 2004 Notes bear interest at 2.5% per
year, payable in cash semi-annually and are convertible into a total of up to
5.8 million shares of common stock at a conversion price of $34.35 per share,
subject to customary adjustments for stock dividends and other dilutive
transactions. The Company may not redeem the 2004 Notes prior to maturity.
Upon a
change in control, the holders of the 2004 Notes may elect to require the
Company to re-purchase the 2004 Notes. The Company may elect to pay the
purchase price in common stock instead of cash, or a combination thereof. If
paid with common stock the number of shares of common stock a holder will
receive will be valued at 95% of the closing prices of the Companys common
stock for the five-day trading period ending on the third day before the
purchase date.
The
2004 Notes have been registered under the Securities Act of 1933, as amended,
to permit registered resale of the 2004 Notes and of the common stock issuable
upon conversion of the 2004 Notes.
8.
Long-Term
Note Payable
In December 2007,
the Company
entered into a $140 million credit agreement with Bank
of America, N.A., as administrative agent, collateral agent and letter of
credit issuer, Silicon Valley Bank and RBS Asset Finance, Inc., as
syndication agents, and Comerica Bank and BMO Capital Markets Financing, Inc.,
as documentation agents. The credit agreement provides for a $125 million
term loan and a $15 million revolving credit facility. The proceeds of
both loans will be used for general corporate purposes. The revolving credit facility also provides
for the issuance of letters of credit and foreign exchange hedging up to the
$15 million borrowing limit. The Company
had an outstanding balance of $125.0 million under the term loan and had issued
$5.9 million of stand-by letters of credit under the revolving credit facility,
respectively, primarily in connection with office leases, at both March 31,
2008 and December 31, 2007.
The Companys
domestic subsidiaries, Amylin Ohio LLC and Amylin Investments LLC, are
co-borrowers under the credit agreement. The loans under the revolving
credit facility are secured by substantially all of the Companys and the two
domestic subsidiaries assets (other than intellectual property and certain
other excluded collateral). The term loan is repayable on a
quarterly basis, with no principal payments due quarters one through four,
6.25% of the outstanding principal due quarters five through eleven, and 56.25%
of the outstanding principal due in quarter 12.
Interest on the term loan will be paid quarterly on the unpaid principal
balance at 1.75% above the London Interbank Offered Rate, or LIBOR, based on
the Companys election of either one, two, three, or six months LIBOR term, and
payable at the end of the selected interest period but no less frequently than
quarterly as of the first business day of the quarter prior to the period in
which the quarterly installment is due.
The Company has elected to use the three month LIBOR, which was 2.73%
and 4.85% at March 31, 2008 and December 31, 2007, respectively. Interest periods on the revolving credit
facility may be either one, two, three, or six months, and payable at the end
of the selected interest period but no less frequently than quarterly, and the
interest rate will be either LIBOR plus 1.0% or the Bank of America prime rate,
as selected by the Company. Both loans
have a final maturity date of December 21, 2010.
The credit
agreement contains certain covenants, including a requirement to maintain
minimum unrestricted cash and cash equivalents, as defined in the agreement, in
excess of $400 million, and events of default that permit the administrative
agent to accelerate the Companys outstanding obligations if not cured within
applicable grace periods, including nonpayment of principal, interest, fees or
other amounts, violation of covenants, inaccuracy of representations and
warranties, and default under other indebtedness. In addition, the credit
agreement provides for automatic acceleration upon the occurrence of bankruptcy
and other insolvency events. There is an
annual commitment fee associated with the revolving
11
credit facility of 0.25%.
Maturities of long-term note payable for years ending
after March 31, 2008 are as follows (in thousands):
2008
|
|
$
|
|
|
2009
|
|
31,250
|
|
2010
|
|
93,750
|
|
Thereafter
|
|
|
|
Total minimum long-term debt payments
|
|
$
|
125,000
|
|
In connection with the
execution of the term loan, the Company entered into an interest rate swap with
an initial notional amount of $125 million on December 21, 2007. The Company will make payments to a
counter-party at 3.967% and receive payments at LIBOR which is reset every
three months, the first reset date being March 21, 2008. Payments will be made on the 21
st
of each March, June, September, and December, commencing on March 21, 2008
for the period December 21, 2007 through March 21, 2008. The Company determined that the interest rate
swap agreement is defined as Level 2 in the fair value hierarchy. As of March 31,
2008, the fair value of the interest rate swap agreement was a liability of
$4.1 million and the recognized loss on the interest rate swap for the three
months ended March 31, 2008 was $3.7 million. The interest rate swap has resulted in a
fixed rate of 5.717% for net interest receipts and payments for the term loan
and interest rate swap transactions.
9. Stockholders Equity
In March 2008, the
Company contributed approximately 0.7 million newly issued shares of its common
stock, valued at $24.87 per share, to the Companys ESOP for amounts earned by
participants during the year ended December 31, 2007.
In February 2008,
the Company contributed approximately 0.1 million newly issued shares of its common
stock, at $37.00 per share, to the Companys 401(k) plan for amounts
earned by participants during the year ended December 31, 2007.
In February 2008,
the Company issued approximately 0.8 million shares of its common stock to
Lilly, upon Lillys election to convert $30 million of development milestone
payments related to exenatide once weekly, received in 2007 at a conversion price
of $37.95, which represents the immediately preceding twenty day
average closing market price of the Companys common stock on December 31,
2007 in accordance with the Company and Lillys collaboration agreement for
exenatide.
10.
Commitments and Contingencies
Other Commitments
The
Company has committed to make potential future milestone payments to third
parties as part of in-licensing and development programs primarily related to
research and development agreements. Potential future payments generally become
due and payable only upon the achievement of certain developmental, regulatory
and/or commercial milestones, such as achievement of regulatory approval,
successful development and commercialization of products, and subsequent
product sales. Because the achievement of these milestones is neither probable
nor reasonably estimable, the Company has not recorded a liability on the
balance sheet for any such contingencies.
As of March 31,
2008, if all such milestones are successfully achieved, the potential future
milestone and other contingency payments due under certain contractual
agreements are approximately $312.9 million in aggregate, of which $4.0 million
are expected to be paid over the next twelve months.
The
Company has committed to make future minimum payments to third parties for
certain inventories in the normal course of business. The minimum purchase
commitments total $57.2 million as of March 31, 2008, the majority of
which relate to BYETTA.
ITEM
2. Managements Discussion and Analysis
of Financial Condition and Results of Operations
Except
for the historical information herein, the discussion in this quarterly report
on Form 10-Q contains forward-looking statements that involve risks and
uncertainties. These statements include projections about our accounting and
12
finances, plans and
objectives for the future, future operating and economic performance and other
statements regarding future performance. These statements are not guarantees of
future performance or events. Our actual results may differ materially from
those discussed here. Factors that could cause or contribute to differences in
our actual results include those discussed under the caption Cautionary
Factors That May Affect Future Results, as well as those discussed
elsewhere in this quarterly report on Form 10-Q or in our other public
disclosures. You should consider carefully those cautionary factors, together
with all of the other information included in this quarterly report on Form 10-Q.
Each of the cautionary factors, either alone or taken together, could adversely
affect our business, operating results and financial condition, as well as
adversely affect the value of an investment in our common stock. There may be
additional risks that we are not presently aware of or that we currently
believe are immaterial which could also impair our business and financial
position. We disclaim any obligation to update these forward-looking
statements.
Overview
Amylin
Pharmaceuticals, Inc. is a biopharmaceutical company committed to
improving the lives of people with diabetes, obesity and other diseases through
the discovery, development and commercialization of innovative medicines. We have developed and gained approval for two
first-in-class medicines to treat diabetes, BYETTA
®
(exenatide)
injection and SYMLIN
®
(pramlintide acetate) injection, both of which
were commercially launched in the United States during the second quarter of
2005. BYETTA has also been approved in
the European Union, or EU, and our collaboration partner, Eli Lilly and
Company, or Lilly, launched BYETTA in 22 countries outside of the United States
during 2007. We expect Lilly to continue
to launch BYETTA in additional EU member states and other countries in 2008.
BYETTA
is the first and only approved medicine in a new class of compounds called
incretin mimetics. We began selling
BYETTA in the United States in June 2005.
BYETTA is approved in the United States for the treatment of patients
with type 2 diabetes who have not achieved adequate glycemic control and are
using metformin, a sulfonylurea and/or a thiazolidinedone, or TZD, three common
oral therapies for type 2 diabetes. Net
product sales of BYETTA were $158.5 million and $146.5 million for the three
months ended March 31, 2008 and 2007, respectively.
We
have an agreement with Lilly for the global development and commercialization
of exenatide. This agreement includes
BYETTA and any sustained-release formulations of exenatide such as exenatide
once weekly, our once weekly formulation of exenatide for the treatment of type
2 diabetes. Under the terms of the
agreement, operating profits from products sold in the United States are shared
equally between Lilly and us. The
agreement provides for tiered royalties payable to us by Lilly based upon the
annual gross margin for all exenatide product sales, including any long-acting
release formulations, outside of the United States. Royalty payments for exenatide product sales
outside of the United States will commence after a one-time cumulative gross
margin threshold amount has been met. We
expect royalty payments to commence in 2009.
Lilly is responsible for 100% of the costs related to development of
twice-daily BYETTA for sale outside of the United States. Development costs related to all other
exenatide products for sale outside of the United States will continue to be
allocated 80% to Lilly and 20% to us.
Lilly will continue to be responsible for 100% of the costs related to
commercialization of all exenatide products for sale outside of the United
States.
SYMLIN is the first and only approved medicine in a new class of compounds called amylinomimetics. We began selling SYMLIN in the United States in April 2005. SYMLIN is approved in the United States for the treatment of patients with either type 1 or type 2 diabetes who are treated with mealtime insulin but who have not achieved adequate glycemic control. In January 2008, we commercially launched the SymlinPen
TM
120 and SymlinPen
TM
60 pen injector devices in the United States. These new pre-filled pen-injector devices feature simple, fixed dosing to improve mealtime glucose control. Net product sales of SYMLIN were $20.2 million and $15.5 million for the three months ended March 31, 2008 and 2007, respectively.
We
have a field force of approximately 600 people dedicated to marketing BYETTA
and SYMLIN in the United States. Our
field force includes our specialty and primary care sales forces, a managed
care and government affairs organization, a medical science organization and
diabetes care specialists. In addition,
Lilly co-promotes BYETTA in the United States and has primary responsibility
for developing and commercializing BYETTA outside of the United States, and any
sustained-release formulations of exenatide such as exenatide once weekly.
In
addition to our marketed products, we are working with Lilly and Alkermes, Inc.,
or Alkermes, to develop exenatide once weekly.
We are also working with Alkermes and Parsons, Inc., or Parsons, on
the construction of a manufacturing facility for exenatide once weekly in
Ohio. We are now manufacturing exenatide
once weekly at commercial scale in our facility in Ohio and we plan to begin
supplying ongoing and planned clinical trials with this material by the third
quarter of 2008. We are also working
aggressively to provide sufficient data to the United States Food and Drug
Administration, or FDA, to demonstrate comparability between exenatide once
weekly clinical trial material manufactured by our partner,
13
Alkermes, in its facility
and exenatide once weekly produced in our Ohio facility.
We
also have other early stage programs for diabetes, obesity, and other
therapeutic areas. We have a number of
compounds in development for the potential treatment of obesity which are part
of a broader clinical strategy which we refer to as INTO: Integrated
Neurohormonal Therapies for Obesity. In March 2008,
we licensed rights to sustained release technology from Pacira Pharmaceuticals, Inc.
for the potential development of sustained release formulations of our early
stage obesity and other potential product candidates.
We
also maintain an active discovery research program focused on novel peptide
therapeutics. We are actively seeking to
in-license additional drug candidates and we have made a number of strategic
investments and collaborations for the potential development of additional drug
candidates.
Since
our inception in September 1987, we have devoted substantially all of our
resources to our research and development programs and, more recently, to the
commercialization of our products. All of our revenues prior to May 2005
were derived from fees and expense reimbursements under our BYETTA
collaboration agreement with Lilly, previous SYMLIN collaborative agreements
and previous co-promotion agreements. During the second quarter of 2005, we
began to derive revenues from product sales of BYETTA and SYMLIN. We have been
unprofitable since inception and may incur additional operating losses for at
least the next few years. At March 31, 2008, our accumulated deficit was
approximately $1.5 billion.
At March 31,
2008, we had $1.0 billion in cash, cash equivalents and short-term
investments. We may not generate
positive operating cash flows for at least the next few years and accordingly, we may need to raise
additional funds from outside sources. Refer to the discussions under
the headings Liquidity and Capital Resources below and Cautionary Factors
That May Affect Future Results in Part II, Item 1A for further
discussion regarding our anticipated future capital requirements.
Application of Critical Accounting
Policies
Our
discussion and analysis of financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with U.S. generally accepted accounting principles. The preparation
of these financial statements requires us to make significant estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosures. On an on-going basis, we evaluate our
estimates, and actual results, however, they may differ significantly from our
estimates.
The
financial information as of March 31, 2008, should be read in conjunction
with the financial statements for the year ended December 31, 2007
contained in our Form 10-K filed on February 27, 2008.
There
were no significant changes in critical accounting policies from those at December 31,
2007. For a discussion of the Companys
critical accounting policies, see Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations in our Form 10-K filed
on February 27, 2008.
Results
of Operations
Three
Months Ended March 31, 2008
Net Product Sales
Net
product sales for the three months ended March 31, 2008 and 2007 were
$178.7 million and $162.0 million, respectively, and consisted of shipments of
BYETTA and SYMLIN, less allowances for product returns, rebates and wholesaler
chargebacks, wholesaler discounts, and prescription vouchers.
The
following table provides information regarding net product sales (in millions):
|
|
Three months ended March 31,
|
|
|
|
2008
|
|
2007
|
|
BYETTA
|
|
$
|
158.5
|
|
$
|
146.5
|
|
SYMLIN
|
|
20.2
|
|
15.5
|
|
|
|
$
|
178.7
|
|
$
|
162.0
|
|
The
increases in net product sales for BYETTA and SYMLIN in the current period,
both of which were launched in the
14
United States during the
second quarter of 2005, reflect continued growth in patient demand.
Revenues Under Collaborative Agreements
Revenues under collaborative agreements for the three
months ended March 31, 2008 were $18.5
million
compared to $10.0 million for the same period in 2007. Substantially all of the
revenue recorded in these periods consists of amounts earned pursuant to our
BYETTA collaboration agreement with Lilly. The $8.5 million increase in
revenues under collaborative agreements in the current quarter compared to the
same period in 2007 reflects higher cost-sharing payments from Lilly due
primarily to increased development expenses for exenatide once weekly. The following
table summarizes the components of revenues under collaborative agreements for
the three months ended March 31, 2008 and 2007 (in millions):
|
|
Three months ended
March 31,
|
|
|
|
2008
|
|
2007
|
|
Amortization of
up-front payments
|
|
$
|
1.1
|
|
$
|
1.1
|
|
Cost-sharing
payments
|
|
17.4
|
|
8.9
|
|
|
|
$
|
18.5
|
|
$
|
10.0
|
|
In future periods, revenues under collaborative
agreements will consist of ongoing cost-sharing payments from Lilly for sharing
of development costs, possible future milestone payments and the continued amortization
of the $30 million portion of the up-front payment received from Lilly upon
signing of our collaboration agreement in 2002. The amount of cost-sharing
revenue recorded will be dependent on the timing, extent and relative
proportion of total development costs for the exenatide once weekly and BYETTA
development programs incurred by us and by Lilly. The receipt and recognition
as revenue of future milestone payments is subject to the achievement of
performance requirements underlying such milestone payments.
Cost of Goods Sold
Cost
of goods sold for the three months ended March 31, 2008 and 2007 was $22.0
million, representing a gross margin of 88%, and $15.2 million, representing a
gross margin of 91%, respectively, and is comprised primarily of manufacturing
costs associated with BYETTA and SYMLIN sales during the period. The decrease
in gross margin for the three months ended March 31, 2008, compared to the
same period in 2007 primarily reflects increased product costs for BYETTA due
to lower production volumes, and product mix, including the introduction of the
SymlinPen during the three months ended March 31, 2008, partially offset
by a higher net sales price per unit for BYETTA. Quarterly fluctuations in
gross margins may be influenced by product mix, pricing, and the level of sales
allowances.
Selling, General
and Administrative Expenses
Selling,
general and administrative expenses increased to $98.2 million for the three
months ended March 31, 2008, from $87.8 million for the same period in 2007.
The increase primarily reflects higher promotional expenses for BYETTA and SYMLIN, increased expenses associated with
our sales force, prelaunch education activities for exenatide once weekly, and
increased business infrastructure to support our growth.
Research and
Development Expenses
Our
research and development expenses are comprised of salaries, benefits and
stock-based compensation, license fees, milestones under license agreements,
costs paid to third-party contractors to perform research, conduct clinical
trials, and develop drug materials and delivery devices, and a portion of our
facilities costs. We charge direct internal and external program costs to the
respective development programs. We also incur indirect costs that are not
allocated to specific programs because such costs benefit multiple development
programs and allow us to increase our pharmaceutical development capabilities.
These consist primarily of facilities costs and other internal shared resources
related to the development and maintenance of systems and processes applicable
to all of our programs.
Our
research and development efforts are focused on diabetes, obesity, and other
diseases. We also maintain an active discovery research program. In diabetes,
we have two approved products, BYETTA and SYMLIN, and we are developing
exenatide once weekly, a long acting release formulation of exenatide, the
active pharmaceutical ingredient in BYETTA. In obesity, we have a number of
compounds in development for the potential treatment of obesity which are part
of a broader program which we refer to as INTO: Integrated Neurohormonal
Therapies for Obesity. As part of this program, we are
15
currently conducting
several clinical trials of our drug candidates, or combinations of our drug
candidates.
The
following table provides information regarding our research and development
expenses for our major projects (in millions):
|
|
Three months ended March 31,
|
|
|
|
2008
|
|
2007
|
|
Increase
(Decrease)
|
|
Diabetes (1)
|
|
$
|
37.7
|
|
$
|
28.0
|
|
$
|
9.7
|
|
Obesity
|
|
14.8
|
|
13.9
|
|
0.9
|
|
Research and early-stage programs
|
|
13.4
|
|
9.1
|
|
4.3
|
|
Indirect costs
|
|
11.3
|
|
8.6
|
|
2.7
|
|
|
|
$
|
77.2
|
|
$
|
59.6
|
|
$
|
17.6
|
|
(1) Research
and development expenses consist primarily of costs associated with BYETTA and
exenatide once weekly which are shared by Lilly pursuant to our collaboration
agreement. Cost-sharing payments
received by Lilly are included in revenues under collaborative agreements. Increased expenditures for our diabetes
development programs are generally partially offset by an increase in
cost-sharing payments from Lilly.
Cost-sharing payments were $17.4 million and $8.9 million for the three
months ended March 31, 2008 and 2007, respectively.
The $17.6 million increase in research and development expenses for the
three months ended March 31, 2008 as compared to the same period in 2007
primarily reflects increased expenses of $9.7 million and $4.3 million for our
diabetes programs and our research and early-stage programs, respectively. The
increase in expenses for our diabetes programs primarily reflects increased
expenses for exenatide once weekly including costs associated with
manufacturing scale up at third party manufacturers and at our manufacturing
facility in Ohio. The increase in
expenses for our research and early-stage programs primarily reflects continued
investment in our early stage discovery and preclinical research programs.
Collaborative Profit Sharing
Collaborative
profit sharing was $69.9 million and $66.9 million for the three months ended March 31,
2008 and 2007, respectively, and consists of Lillys 50% share of the gross
margin for BYETTA in the United States.
The $3.0 million increase in collaborative profit sharing for the three
months ended March 31, 2008 as compared to the same period in 2007
primarily reflects increased net product sales for BYETTA, partially offset by
reduced gross margin for BYETTA.
Interest and Other Income and Expense
Interest
and other income consist primarily of interest income from investment of cash
and other investments. Interest and other income increased to $11.0 million for
the three months ended March 31, 2008, from $9.4 million for the same
period in 2007. The increase primarily reflects higher average investment
balances due to net proceeds of $559 million from our 2007 Notes issued in June 2007.
Interest and other expense consist primarily of
interest expense resulting from our long-term debt obligations. Interest
expense in the three months ended March 31, 2008 consists of interest on
our $775 million of outstanding convertible senior notes and our $125 million
of outstanding long-term note payable, and the amortization of associated debt
issuance costs.
Interest
and other expense was $9.7 million and $1.3 million for the three months ended March 31,
2008 and 2007, respectively. The increase reflects additional interest expense
for our 2007 Notes issued in June 2007 and long-term note payable entered
into in December 2007 and recognized losses on an interest rate swap
associated with the long-term note payable.
Net Loss
Our
net loss for the three months ended March 31, 2008 was $68.8 million
compared to a net loss of $49.4 million for the same period in 2007. The
increase in net loss primarily reflects the increased selling, general and
administrative expenses, increased research and development expenses, increased
collaborative profit-sharing and increased interest and other expense,
partially offset by the increased net product sales and the increased revenues
under collaborative agreements discussed above.
We may
incur operating losses for the next few years. Our ability to reach
profitability in the future will be heavily
16
dependent upon the amount
of product sales that we achieve for BYETTA and SYMLIN. In addition, ongoing
and potential increased expenses associated with the continued
commercialization of BYETTA and SYMLIN, costs associated the development and
commercialization of exenatide once weekly, if approved, and expenses
associated with the potential expansion of our research and development
programs, including our obesity and early-stage development programs, and
related support infrastructure, may impact our ability to reach profitability in
the future. Our operating results may fluctuate from quarter to quarter as a
result of differences in the timing of expenses incurred and revenues
recognized.
Liquidity and Capital Resources
Since
our inception, we have financed our operations primarily through public sales
and private placements of our common and preferred stock, debt financings,
payments received pursuant to our BYETTA collaboration with Lilly,
reimbursement of SYMLIN development expenses through earlier collaboration
agreements, and since the second quarter of 2005, through product sales of
BYETTA and SYMLIN.
At March 31,
2008, we had $1.0 billion in cash, cash equivalents and short-term investments,
compared to $1.1 billion at December 31, 2007. We used cash of $14.0 million and $62.0
million for our operating activities in the three months ended March 31,
2008 and March 31, 2007, respectively.
Our cash used for operating activities in the three months ended March 31,
2008 included sources of cash due to increases in current assets, including
decreases in accounts receivable and inventories of $8.1 million and $2.1
million, respectively and an increase in accounts payable of $17.1
million. The decrease in accounts
receivable reflects lower net product sales in the quarter ended March 31,
2008 as compared to the quarter ended December 31, 2007. The increase in
accounts payable primarily reflects timing of cash disbursements.
Our
investing activities used cash of $93.1 million and provided cash of $48.6 million in the three months ended March 31,
2008 and March 31, 2007, respectively.
Investing activities in both quarters consisted primarily of purchases
and sales of short-term investments and purchases of property, plant, and
equipment. Purchases of property,
plant, and equipment increased to $86.4 million in the three months ended March 31,
2008 from $81.2 million for the three months ended March 31, 2007. Purchases of property plant and equipment in
the three months ended March 31, 2008 and 2007 consists primarily of costs associated with our Ohio
manufacturing facility for exenatide once weekly. We are now manufacturing exenatide
once weekly at commercial scale in our facility in Ohio and we plan to begin
supplying ongoing and planned clinical trials with this material by the third
quarter of 2008. Through March 31,
2008, we had expended approximately $347.1 million associated with the
construction of this facility and we expect the total investment to be
approximately $500 million by the end of 2008, which includes costs associated
with the construction of the facility, purchase and installation of equipment
and capitalized labor and materials required to validate the facility. The full expansion of this project is
dependent upon on the continued progress of exenatide once weekly through the
development process.
Financing
activities provided cash of $6.6 million and $12.8 million in the three months
ended March 31, 2008 and March 31, 2007, respectively. Financing activities in the first quarter
2008 represent proceeds from the exercise of stock options and proceeds from
our employee stock purchase plan.
At March 31,
2008, we had $200 million in aggregate principal amount of our 2.5% convertible
senior notes due in 2011, or the 2004 Notes, and $575 million in aggregate principal
amount of our 3.0% convertible senior notes due in 2014, or the 2007 Notes,
outstanding. The 2004 Notes are currently convertible into a total of up to 5.8
million shares of our common stock at approximately $34.35 per share and are
not redeemable at our option. The 2007 Notes are currently convertible into a
total of up to 9.4 million shares of our common stock at approximately $61.07
per share and are not redeemable at our option.
In December 2007, we
entered
into a $140 million credit agreement. The
credit agreement provides for a $125 million term loan and a $15 million
revolving credit facility. The revolving credit facility also provides
for the issuance of letters of credit and foreign exchange hedging up to the
$15 million borrowing limit. The term
loan is repayable on a quarterly basis, with no principal payments due quarters
one through four, 6.25% of the outstanding principal due quarters five through
eleven, and 56.25% of the outstanding principal due in quarter twelve. At March 31, 2008 we had an outstanding
balance of $125.0 million under the term loan and had issued $5.9 million of
stand-by letters of credit under the revolving credit facility. Both loans have a final maturity date of December 21,
2010. Interest on the term loan is payable
quarterly in arrears at a rate equal to 1.75% above the London Interbank
Offered Rate, or LIBOR, of either one, two, three, or six months LIBOR term at
our election. We have entered into an
interest rate swap agreement which resulted in a net fixed interest rate of
5.717% under the term loan. The interest
rate on the credit facility is either LIBOR plus 1.0% or the Bank of America
prime rate, at our election.
17
The
following table summarizes our contractual obligations and maturity dates as of
March 31, 2008 (in thousands):
|
|
Payments Due by Period
|
|
Contractual Obligations
|
|
Total
|
|
Less than 1
year
|
|
1-3 years
|
|
4-5 years
|
|
After 5 years
|
|
Long-term convertible debt
|
|
$
|
775,000
|
|
$
|
|
|
$
|
|
|
$
|
200,000
|
|
$
|
575,000
|
|
Interest payments on long-term convertible debt
|
|
129,625
|
|
22,250
|
|
44,500
|
|
37,000
|
|
25,875
|
|
Long-term note payable
|
|
125,000
|
|
7,812
|
|
117,188
|
|
|
|
|
|
Interest on long-term note payable, net of swap transactions (1)
|
|
16,526
|
|
7,147
|
|
9,379
|
|
|
|
|
|
Inventory purchase obligations(2)
|
|
136,399
|
|
83,196
|
|
49,573
|
|
3,630
|
|
|
|
Operating lease obligations
|
|
130,647
|
|
18,592
|
|
30,039
|
|
30,651
|
|
51,365
|
|
Total(3)
|
|
$
|
1,313,197
|
|
$
|
138,997
|
|
$
|
250,679
|
|
$
|
271,281
|
|
$
|
652,240
|
|
(1)
The interest payments
shown were calculated using a rate of 5.717%, the net rate from the term loan
and interest rate swap, on the outstanding principal balance of the term loan
(2) Includes $86.8 million of outstanding
purchase orders, cancelable by us upon 30 days written notice, subject to
reimbursement of costs incurred through the date of cancellation.
(3) Excludes long-term obligation of $8.4 million
related to deferred compensation, the payment of which is subject to elections
made by participants that are subject to change.
In
addition, under certain license and collaboration agreements we are required to
pay royalties and/or milestone payments upon the successful development and
commercialization of related products.
We expect to make development milestone payments up to $4.0 million
associated with licensing agreements in the next 12 months. Additional milestones of up to approximately
$312.9 million could be paid over the next ten to fifteen years if development
and commercialization of all our early stage programs continue and are
successful. The significant majority of
these milestones relate to potential future regulatory approvals and subsequent
sales thresholds. Given the inherent
risk in pharmaceutical development, it is highly unlikely that we will
ultimately make all of these milestone payments; however, we would consider
these payments as positive because they would signify that the related products
are moving successfully through development and commercialization.
Our future capital requirements will depend on many
factors, including: the amount of product sales we achieve for BYETTA and
SYMLIN; costs associated with the continued commercialization of BYETTA and
SYMLIN; costs associated with the establishment of our exenatide once weekly manufacturing
facility; costs of potential licenses or acquisitions; the potential need to
repay existing indebtedness; costs associated with an increase in our
infrastructure; our ability to receive or need to make milestone payments; our
ability, and the extent, to which we establish collaborative arrangements for
SYMLIN or any of our product candidates; progress in our research and
development programs and the magnitude of these programs; costs involved in
preparing, filing, prosecuting, maintaining, enforcing or defending our
patents; competing technological and market developments; and costs of
manufacturing, including costs associated with establishing our own
manufacturing capabilities or obtaining and validating additional manufacturers
of our products; and scale-up costs for our drug candidates.
ITEM 3.
Quantitative and Qualitative Disclosures about Market Risk
We
invest our excess cash primarily in United States Government securities,
securities of agencies sponsored by the United States Government, asset-backed
securities, mortgage-backed securities and debt instruments of financial
institutions and corporations with strong credit ratings. These
instruments have various short-term maturities, and therefore the risk of loss
due to interest rate risk is considered to be low. We do not invest in
auction rate securities. We mitigate certain financial exposures,
including currency risk and interest rate risk, through a controlled program of
risk management that includes the use of derivative financial instruments,
however we do not utilize such instruments in any material fashion.
Accordingly, we believe that, while the instruments held are subject to changes
in the financial standing of the issuer of such securities, we are not subject
to any material risks arising from changes in interest rates, foreign currency
exchange rates, commodity prices, equity prices or other market changes that
affect market risk sensitive investments. Our debt is not subject to
significant swings in valuation as interest rates on a majority of our debt are
fixed. The fair value of our 2004 Notes and 2007 Notes at March 31,
2008 was approximately $219 million and $485 million, respectively. A
hypothetical 1% adverse move in interest
18
rates along the entire
interest rate yield curve would not materially affect the fair value of our
financial instruments that are exposed to changes in interest rates.
ITEM 4.
Controls and Procedures
As of March 31,
2008, an evaluation was performed under the supervision and with the
participation of our management, including our President and Chief Executive
Officer (referred to as our CEO) and our Senior Vice President, Finance and
Chief Financial Officer (referred to as our CFO), of the effectiveness of the
design and operation of our disclosure controls and procedures. In designing
and evaluating the disclosure controls and procedures, management recognizes
that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management necessarily is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Based on that
evaluation, our management, including our CEO and CFO, concluded that our
disclosure controls and procedures were effective at a reasonable level of
assurance as of March 31, 2008.
Our
management does not expect that our disclosure control and procedures or our
internal control over financial reporting will prevent all error and all fraud.
A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, or misstatements due to error, if any, within
the company have been detected. While we believe that our disclosure controls
and procedures and internal control over financial reporting are and have been
effective, in light of the foregoing we intend to continue to examine and
refine our disclosure controls and procedures and internal control over
financial reporting.
An evaluation was also
performed under the supervision and with the participation of our management,
including our CEO and CFO, of any change in our internal control over financial
reporting that occurred during our last fiscal quarter and that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting. That evaluation did not identify any change in our
internal control over financial reporting that occurred during our latest
fiscal quarter and that has materially affected, or is reasonably likely to
affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item
1A. Risk Factors
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
The following sets forth
cautionary factors that may affect our future results, including clarifications
to the cautionary factors included in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2007.
We have a history of operating losses, anticipate future
losses and may never become profitable.
We have experienced
significant operating losses since our inception in 1987, including losses of
$68.8 million for the three months ended March 31, 2008, $211.1 million in
2007, $218.9 million in 2006 and $206.8 million in 2005. As of March 31, 2008, we had an
accumulated deficit of approximately $1.5 billion. The extent of our future losses and the
timing of potential profitability are uncertain, and we may never achieve
profitable operations. We have been
engaged in discovering and developing drugs since inception, which has
required, and will continue to require, significant research and development
expenditures. We derived substantially
all of our revenues prior to 2005 from development funding, fees and milestone
payments under collaborative agreements and from interest income. BYETTA and SYMLIN may not be as commercially
successful as we expect and we may not succeed in commercializing any of our
other drug candidates. We may incur
substantial operating losses for at least the next few years as we continue to
expand our commercial function for BYETTA and SYMLIN and our research and
development activities for the other drug candidates in our development
pipeline. These losses, among other
things, have had and will have an adverse effect on our stockholders equity
and working capital. Even if we become
profitable, we may not remain profitable.
We began selling, marketing and distributing our first
products, BYETTA and SYMLIN, in 2005 and we will depend heavily on the success
of those products in the marketplace.
Prior to the launch of
BYETTA and SYMLIN in 2005, we had never sold or marketed our own products. Our ability to generate product revenue for
the next few years will depend solely on the success of these products. The ability of BYETTA and SYMLIN to generate
revenue at the levels we expect will depend on many factors, including the
following:
·
acceptance of and ongoing satisfaction
with these first-in-class medicines in the United States and foreign markets by
the medical community, patients receiving therapy and third party payors;
19
·
a satisfactory efficacy and safety profile as
demonstrated in a broad patient population;
·
successfully expanding and sustaining manufacturing
capacity to meet demand;
·
safety concerns in the marketplace for diabetes
therapies;
·
the
competitive landscape for approved and developing therapies that will compete
with the products; and
·
our ability to expand the indications for which we can
market the products.
If we encounter safety issues with BYETTA or SYMLIN or any
other drugs we market or fail to comply with extensive continuing regulations
enforced by domestic and foreign regulatory authorities, it could cause us to
discontinue marketing those drugs, reduce our revenues and harm our ability to
generate future revenues, which would negatively impact our financial position.
BYETTA and SYMLIN, in
addition to any other of our drug candidates that may be approved by the FDA,
will be subject to continual review by the FDA, and we cannot assure you that
newly discovered or developed safety issues will not arise. With the use of any of our marketed drugs by
a wide patient population, serious adverse events may occur from time to time
that initially do not appear to relate to the drug itself, and only if the
specific event occurs with some regularity over a period of time does the drug
become suspect as having a causal relationship to the adverse event. Any safety issues could cause us to suspend
or cease marketing of our approved products, subject us to substantial liabilities,
and adversely affect our revenues and financial condition.
Moreover, the marketing
of our approved products will be subject to extensive regulatory requirements
administered by the FDA and other regulatory bodies, including adverse event
reporting requirements and the FDAs general prohibition against promoting
products for unapproved uses. The
manufacturing facilities for our approved products are also subject to
continual review and periodic inspection and approval of manufacturing
modifications. Manufacturing facilities
that manufacture drug products for the United States market, whether they are
located inside or outside the United States, are subject to biennial
inspections by the FDA and must comply with the FDAs current good
manufacturing practice, or cGMP, regulations.
The FDA stringently applies regulatory standards for manufacturing. Failure to comply with any of these
post-approval requirements can, among other things, result in warning letters,
product seizures, recalls, fines, injunctions, suspensions or revocations of
marketing licenses, operating restrictions and criminal prosecutions. Any of these enforcement actions, any
unanticipated changes in existing regulatory requirements or the adoption of
new requirements, or any safety issues that arise with any approved products,
could adversely affect our ability to market products and generate revenues and
thus adversely affect our ability to continue our business.
The manufacturers of our
products and drug candidates also are subject to numerous federal, state, local
and foreign laws relating to such matters as safe working conditions,
manufacturing practices, environmental protection, fire hazard control and
hazardous substance disposal. In the
future, our manufacturers may incur significant costs to comply with those laws
and regulations, which could increase our manufacturing costs and reduce our
ability to operate profitably.
We currently do not manufacture our own drug products or
drug candidates and may not be able to obtain adequate supplies, which could
cause delays, subject us to product shortages, or reduce product sales.
The manufacturing of
sufficient quantities of newly-approved drug products and drug candidates is a
time-consuming and complex process. We
currently have no manufacturing capabilities.
In order to successfully commercialize our products, including BYETTA
and SYMLIN, and continue to develop our drug candidates, including exenatide
once weekly, we rely on various third parties to provide the necessary
manufacturing.
There are a limited number
of manufacturers that operate under the FDAs cGMP regulations capable of
manufacturing for us. In addition, there
are a limited number of bulk drug substance suppliers, cartridge manufacturers
and disposable pen manufacturers. If we
are not able to arrange for and maintain third-party manufacturing on
commercially reasonable terms, or we lose one of our sole source suppliers used
for our existing products or for some components of our manufacturing processes
for our products or drug candidates, we may not be able to market our products
or complete development of our drug candidates on a timely basis, if at all.
Reliance on third-party
suppliers limits our ability to control certain aspects of the manufacturing
process and therefore exposes us to a variety of significant risks, including,
but not limited to, risks to our ability to commercialize our products or
conduct clinical trials, risks of reliance on the third-party for regulatory
compliance and quality assurance, third-party refusal to supply on a long-term
basis, or at all, the possibility of breach of the manufacturing agreement by
the third-party and the
20
possibility of termination or non-renewal of the
agreement by the third-party, based on its business priorities, at a time that
is costly or inconvenient for us. If any
of these risks occur, our product supply will be interrupted resulting in lost
or delayed revenues and delayed clinical trials. Our reliance on third-party manufacturers for
the production of our two commercial products is described in more detail
below.
We rely on Bachem
California, or Bachem, and Mallinckrodt, Inc., or Mallinckrodt, to
manufacture our long-term commercial supply of bulk exenatide, the active
ingredient in BYETTA. In addition, we
rely on single-source manufacturers for some of our raw materials used by
Bachem and Mallinckrodt to produce bulk exenatide. We also rely on Wockhardt UK (Holdings) Ltd.,
or Wockhardt, and Baxter Pharmaceutical Solutions LLC, a subsidiary of Baxter, Inc.,
or Baxter, to manufacture the dosage form of BYETTA in cartridges. We are further dependent upon Lilly to supply
pens for delivery of BYETTA in cartridges.
We rely on Bachem and
Lonza Ltd. to manufacture our commercial supply of bulk pramlintide acetate,
the active ingredient contained in SYMLIN.
In addition, we rely on Baxter to manufacture the dosage form of SYMLIN
in vials. We recently received FDA approval
of a disposable pen for the delivery of SYMLIN in cartridges. We rely on Wockhardt for the dosage form of
SYMLIN in cartridges and Ypsomed AG to manufacture the components for the
SYMLIN disposable pen. We also rely on Hollister-Stier Laboratories LLC for the
assembly of the SYMLIN pen.
If any of our existing or
future manufacturers cease to manufacture or are otherwise unable to timely
deliver sufficient quantities of BYETTA or SYMLIN, in either bulk or dosage
form, or other product components, including pens for the delivery of these
products, it could disrupt our ability to market our products, subject us to
product shortages, reduce product sales and/or reduce our profit margins. Any delay or disruption in the manufacturing
of bulk product, the dosage form of our products or other product components,
including pens for delivery of our products, could also harm our reputation in
the medical and patient communities. In
addition, we may need to engage additional manufacturers so that we will be
able to continue our commercialization and development efforts for these products
or drug candidates. The cost and time to
establish these new manufacturing facilities would be substantial.
Our manufacturers have
not produced BYETTA or SYMLIN for commercial use for a sustained period of
time. As such, additional unforeseeable
risks may be encountered as we, together with our manufacturers, continue to
develop familiarity and experience with regard to manufacturing our
products. Furthermore, we and the other
manufacturers used for our drug candidates may not be able to produce supplies
in commercial quantities if our drug candidates are approved. While we believe that business relations
between us and our manufacturers are generally good, we cannot predict whether
any of the manufacturers that we may use will meet our requirements for
quality, quantity or timeliness for the manufacture of bulk exenatide or
pramlintide acetate, dosage form of BYETTA or SYMLIN, or pens. Therefore, we may not be able to obtain
necessary supplies of products with acceptable quality, on acceptable terms or
in sufficient quantities, if at all. Our
dependence on third parties for the manufacture of products may also reduce our
gross profit margins and our ability to develop and deliver products in a
timely manner.
In
order to manufacture exenatide once weekly on a commercial scale, if it is
approved by the FDA, we must design, construct, and commission a new facility
and validate the manufacturing process.
We are dependent on Alkermes and Parsons to assist us in the design,
construction and commissioning of the manufacturing facility. We have never established, validated, and
operated a manufacturing facility and cannot assure you that we will be able to
successfully establish or operate such a facility in a timely or economical
manner, or at all. In addition, we are
dependent on Alkermes to successfully develop and transfer to us its technology
for manufacturing exenatide once weekly and to supply us with commercial
quantities of the polymer required to manufacture exenatide once weekly. We also will need to obtain sufficient
supplies of diluents, solvents, devices, packaging and other components
necessary for commercial manufacture of exenatide once weekly. Although we are working diligently to qualify
the commercial-scale manufacturing process at this facility, we cannot be
assured that we will be able to demonstrate comparability of product
manufactured at development scale and product manufactured at commercial
scale. If we are unable to demonstrate
comparability of product, we may not be able to commercially launch exenatide
once weekly in a timely manner or at all.
Our ability to generate revenues will be diminished if we
fail to obtain acceptable prices or an adequate level of reimbursement for our
products from third-party payors.
The continuing efforts of
government, private health insurers and other third-party payors to contain or
reduce the costs of health care through various means, including efforts to
increase the amount of patient co-pay obligations, may limit our commercial
opportunity. In the United States, we
expect that there will continue to be a number of federal and state proposals
to implement government control over the pricing of prescription
pharmaceuticals. In addition, increasing
emphasis on managed care in the United States will continue to put pressure on
the rate of adoption and pricing of pharmaceutical products.
21
Significant uncertainty
exists as to the reimbursement status of health care products. Third-party payors, including Medicare, are
challenging the prices charged for medical products and services. Government and other third-party payors
increasingly are attempting to contain health care costs by limiting both
coverage and the level of reimbursement for new drugs and by refusing to
provide coverage for uses of approved products for disease indications for
which the FDA has not granted labeling approval. Third-party insurance coverage may not be
available to patients for BYETTA and/or SYMLIN or any other products we
discover and develop. If government and
other third-party payors do not provide adequate coverage and reimbursement
levels for our products, the market acceptance of these products may be
reduced.
Competition in the biotechnology and pharmaceutical
industries may result in competing products, superior marketing of other
products and lower revenues or profits for us.
There are many companies
that are seeking to develop products and therapies for the treatment of
diabetes and other metabolic disorders.
Our competitors include multinational pharmaceutical and chemical
companies, specialized biotechnology firms and universities and other research
institutions. A number of our largest
competitors, including AstraZeneca, Bristol-Myers Squibb, GlaxoSmithKline,
Lilly, Merck & Co., Novartis, Novo Nordisk, Pfizer, Sanofi-Aventis and
Takeda Pharmaceuticals, are pursuing the development or marketing of
pharmaceuticals that target the same diseases that we are targeting, and it is
possible that the number of companies seeking to develop products and therapies
for the treatment of diabetes, obesity and other metabolic disorders will
increase. Many of our competitors have
substantially greater financial, technical, human and other resources than we
do and may be better equipped to develop, manufacture and market
technologically superior products. In
addition, many of these competitors have significantly greater experience than
we do in undertaking preclinical testing and human clinical studies of new
pharmaceutical products and in obtaining regulatory approvals of human
therapeutic products. Accordingly, our
competitors may succeed in obtaining FDA approval for superior products. Furthermore, now that we have received FDA
approval for BYETTA and SYMLIN, we may also be competing against other
companies with respect to our manufacturing and product distribution efficiency
and sales and marketing capabilities, areas in which we have limited or no
experience as an organization.
Our target patient
population for BYETTA includes people with diabetes who have not achieved
adequate glycemic control using metformin, sulfonylurea and/or a TZD, three
common oral therapies for type 2 diabetes.
Our target population for SYMLIN is people with either type 2 or type 1
diabetes whose therapy includes multiple mealtime insulin injections
daily. Other products are currently in
development or exist in the market that may compete directly with the products
that we are developing or marketing.
Various other products are available or in development to treat type 2
diabetes, including:
·
sulfonylureas;
·
metformin;
·
insulins, including injectable and inhaled versions;
·
TZDs;
·
glinides;
·
DPP-IV
inhibitors;
·
incretin/GLP-1
agonists;
·
CB-1 antagonists;
·
PPARs; and
·
alpha-glucosidase
inhibitors.
In addition, several
companies are developing various approaches to improve treatments for type 1
and type 2 diabetes. We cannot predict whether our products will have
sufficient advantages to cause health care professionals to adopt them over
other products or that our products will offer an economically feasible
alternative to other products. Our
products could become obsolete before we recover expenses incurred in
developing these products.
22
Delays in the conduct or completion of our clinical trials,
the analysis of the data from our clinical trials or our manufacturing scale-up
activities may result in delays in our planned filings for regulatory
approvals, and may adversely affect our ability to enter into new collaborative
arrangements.
We cannot predict whether
we will encounter problems with any of our completed, ongoing or planned
clinical studies that will cause us to delay or suspend our ongoing and planned
clinical studies, delay the analysis of data from our completed or ongoing
clinical studies or perform additional clinical studies prior to receiving
necessary regulatory approvals. We also
cannot predict whether we will encounter delays or an inability to create manufacturing
processes for drug candidates that allow us to produce drug product in
sufficient quantities to be economical, otherwise known as manufacturing
scale-up.
If the results of our
ongoing or planned clinical studies for our drug candidates are not available
when we expect or if we encounter any delay in the analysis of data from our
clinical studies or if we encounter delays in our ability to scale-up our
manufacturing processes:
·
we may be unable to complete our
development programs for exenatide once weekly or our obesity clinical trials;
·
we
may have to delay or terminate our planned filings for regulatory approval;
·
we may not have the financial resources
to continue research and development of any of our drug candidates; and
·
we
may not be able to enter into, if we chose to do so, any additional
collaborative arrangements.
In addition, Lilly can
terminate our collaboration for the development and commercialization of BYETTA
and sustained-release formulations of exenatide at any time on 60 days notice.
Any of the following
could delay the completion of our ongoing and planned clinical studies:
·
ongoing discussions with the FDA or
comparable foreign authorities regarding the scope or design of our clinical
trials;
·
delays
in enrolling volunteers;
·
lower
than anticipated retention rate of volunteers in a clinical trial;
·
negative
results of clinical studies;
·
insufficient supply or deficient quality
of drug candidate materials or other materials necessary for the performance of
clinical trials;
·
our inability to reach agreement with
Lilly regarding the scope, design, conduct or costs of clinical trials with
respect to BYETTA, exenatide once weekly or nasal exenatide; or
·
serious
side effects experienced by study participants relating to a drug candidate.
We are substantially dependent on our collaboration with
Lilly for the development and commercialization of BYETTA and dependent on
Lilly and Alkermes for the development of exenatide once weekly.
We have entered into a
collaborative arrangement with Lilly, who currently markets diabetes therapies
and is developing additional diabetes drug candidates, to commercialize BYETTA
and further develop sustained-release formulations of BYETTA, including
exenatide once weekly. We entered into
this collaboration in order to:
·
fund
some of our research and development activities;
·
assist
us in seeking and obtaining regulatory approvals; and
·
assist
us in the successful commercialization of BYETTA and exenatide once weekly.
In general, we cannot
control the amount and timing of resources that Lilly may devote to our
collaboration. If Lilly fails to assist
in the further development of exenatide once weekly or the commercialization of
BYETTA, or if Lillys efforts are not effective, our business may be negatively
affected. We are relying on Lilly to
obtain regulatory approvals for and successfully commercialize BYETTA and
exenatide once weekly outside the United States. Our collaboration with Lilly
23
may not continue or result in additional successfully
commercialized drugs. Lilly can
terminate our collaboration at any time upon 60 days notice. If Lilly ceased funding and/or developing and
commercializing BYETTA or exenatide once weekly, we would have to seek
additional sources for funding and may have to delay, reduce or eliminate one
or more of our commercialization and development programs for these
compounds. If Lilly does not
successfully commercialize BYETTA outside the United States we may receive
limited or no revenues from them. In
addition, we are dependent on Alkermes to successfully develop and transfer to
us its technology for manufacturing exenatide once weekly. If Alkermes technology is not successfully
developed to effectively deliver exenatide in a sustained release formulation,
or Alkermes does not devote sufficient resources to the collaboration, our
efforts to develop sustained release formulations of exenatide could be delayed
or curtailed.
If our patents are determined to be
unenforceable or if we are unable to obtain new patents based on current patent
applications or for future inventions, we may not be able to prevent others
from using our intellectual property. If
we are unable to obtain licenses to third party patent rights for required technologies,
we could be adversely affected.
We own
or hold exclusive rights to many issued United States patents and pending
United States patent applications related to the development and
commercialization of exenatide, including BYETTA and exenatide once weekly,
SYMLIN and our other drug candidates.
These patents and applications cover composition-of-matter, medical
indications, methods of use, formulations and other inventive results. We have issued and pending applications for
formulations of BYETTA and exenatide once weekly, but we do not have a
composition-of-matter patent covering exenatide. We also own or hold exclusive rights to
various foreign patent applications that correspond to issued United States patents
or pending United States patent applications.
Our
success will depend in part on our ability to obtain patent protection for our
products and drug candidates and technologies both in the United States and
other countries. We cannot guarantee
that any patents will issue from any pending or future patent applications
owned by or licensed to us.
Alternatively, a third party may successfully challenge or circumvent
our patents. Our rights under any issued
patents may not provide us with sufficient protection against competitive
products or otherwise cover commercially valuable products or processes. In addition, because patent applications in
the United States are maintained, in general, in secrecy for eighteen months
after the filing of the applications, and publication of discoveries in the
scientific or patent literature often lag behind actual discoveries, we cannot
be sure that the inventors of subject matter covered by our patents and patent
applications were the first to invent or the first to file patent applications
for these inventions. Third parties have
filed, and in the future are likely to file, patent applications on inventions
similar to ours. From time-to-time we
have participated in, and in the future are likely to participate in,
interference proceedings declared by the United States Patent and Trademark
Office to determine priority of invention, which could result in a loss of our
patent position. We have also
participated in, and in the future are likely to participate in, opposition
proceedings against our patents in other jurisdictions, such as Europe and
Australia. Furthermore, we may not have
identified all United States and foreign patents that pose a risk of
infringement.
We
also rely upon licensing opportunities for some of our technologies. We cannot be certain that we will not lose
our rights to certain patented technologies under existing licenses or that we
will be able to obtain a license to any required third-party technology. If we lose our licensed technology rights or
if we are not able to obtain a required license, we could be adversely
affected.
We may be unable to obtain regulatory
clearance to market our drug candidates in the United States or foreign
countries on a timely basis, or at all.
Our
drug candidates are subject to extensive government regulations related to
development, clinical trials, manufacturing and commercialization. The process of obtaining FDA and other
regulatory approvals is costly, time-consuming, uncertain and subject to
unanticipated delays. Regulatory
authorities may refuse to approve an application for approval of a drug
candidate if they believe that applicable regulatory criteria are not
satisfied. Regulatory authorities may
also require additional testing for safety and efficacy. Moreover, if the FDA grants regulatory
approval of a product, the approval may be limited to specific indications or
limited with respect to its distribution, and expanded or additional
indications for approved drugs may not be approved, which could limit our
revenues. Foreign regulatory authorities
may apply similar limitations or may refuse to grant any approval. Unexpected changes to the FDA or foreign
regulatory approval process could also delay or prevent the approval of our
drug candidates.
The data collected from
our clinical trials may not be sufficient to support approval of our drug
candidates or additional or expanded indications by the FDA or any foreign
regulatory authorities. Biotechnology
stock prices have declined significantly in certain instances where companies
have failed to meet expectations with respect to FDA approval or the timing for
FDA approval. If the FDAs or any
foreign regulatory authoritys response is delayed or not favorable for any of
our drug candidates, our stock price could decline significantly.
24
Moreover, manufacturing
facilities operated by the third-party manufacturers with whom we may contract
to manufacture our unapproved drug candidates may not pass an FDA or other
regulatory authority preapproval inspection.
Any failure or delay in obtaining these approvals could prohibit or
delay us or any of our business partners from marketing these drug candidates.
Consequently, even if we
believe that preclinical and clinical data are sufficient to support regulatory
approval for our drug candidates, the FDA and foreign regulatory authorities
may not ultimately approve our drug candidates for commercial sale in any
jurisdiction. If our drug candidates are
not approved, our ability to generate revenues may be limited and our business
will be adversely affected.
Litigation regarding patents and other proprietary rights
may be expensive, cause delays in bringing products to market and harm our
ability to operate.
Our success will depend in part on our ability to
operate without infringing the proprietary rights of third parties and
preventing others from infringing our patents.
Challenges by pharmaceutical companies against the patents of
competitors are common. Legal standards
relating to the validity of patents covering pharmaceutical and
biotechnological inventions and the scope of claims made under these patents
are still developing. As a result, our
ability to obtain and enforce patents is uncertain and involves complex legal
and factual questions. Third parties may
challenge, in courts or through patent office proceedings, or infringe upon,
existing or future patents. In the event
that a third party challenges a patent, a court or patent office may invalidate
the patent or determine that the patent is not enforceable. Proceedings involving our patents or patent
applications or those of others could result in adverse decisions about:
·
the patentability of our inventions, products and drug
candidates; and/or
·
the enforceability, validity or scope of protection
offered by our patents.
The manufacture, use or sale of any of our products
or drug candidates may infringe on the patent rights of others. If we are unable to avoid infringement of the
patent rights of others, we may be required to seek a license, defend an
infringement action or challenge the validity of the patents in court. Patent
litigation is costly and time consuming.
We may not have sufficient resources to bring these actions to a
successful conclusion. In addition, if
we do not obtain a license, develop or obtain non-infringing technology, fail
to successfully defend an infringement action or have infringing patents
declared invalid, we may:
·
incur substantial monetary damages;
·
encounter significant delays in bringing our drug candidates
to market; and/or
·
be precluded from participating in the manufacture,
use or sale of our products or drug candidates or methods of treatment
requiring licenses.
We are subject to fraud and abuse and
similar laws and regulations, and a failure to comply with such regulations or
prevail in any litigation related to noncompliance could harm our business.
Upon approval of BYETTA
and SYMLIN by the FDA, we became subject to various health care fraud and
abuse laws, such as the Federal False Claims Act, the federal anti-kickback
statute and other state and federal laws and regulations. Pharmaceutical companies have faced lawsuits
and investigations pertaining to violations of these laws and regulations. We cannot guarantee that measures that we
have taken to prevent such violations, including our corporate compliance
program, will protect us from future violations, lawsuits or
investigations. If any such actions are
instituted against us, and we are not successful in defending ourselves or asserting
our rights, those actions could have a significant impact on our business,
including the imposition of significant fines or other sanctions.
Our financial results will fluctuate, and these fluctuations
may cause our stock price to fall.
Forecasting future
revenues is difficult, especially since we launched our first products in 2005
and when the level of market acceptance of these products may change
rapidly. In addition, our customer base
is highly concentrated with four customers accounting for most of our net
product sales. Fluctuations in the
buying patterns of these customers, which may result from seasonality,
wholesaler buying decisions or other factors outside of our control, could
significantly affect the level of our net sales on a period to period
basis. As a result, it is reasonably
likely that our financial results will fluctuate to an extent, that may not
meet with market expectations and that also may adversely affect our stock
price. There are a number of
25
other factors that could cause our financial results
to fluctuate unexpectedly, including:
·
product sales;
·
cost of product sales;
·
achievement and timing of research and development
milestones;
·
collaboration revenues;
·
cost and timing of clinical trials, regulatory
approvals and product launches;
·
marketing and other expenses;
·
manufacturing or supply issues; and
·
potential acquisitions of businesses and technologies
and our ability to successfully integrate any such acquisitions into our
existing business.
We may require additional financing in the future, which may
not be available to us on favorable terms, or at all.
We intend to use our
available cash for:
·
Commercialization of BYETTA and SYMLIN;
·
Establishment of additional manufacturing sources,
including our Ohio manufacturing facility;
·
Development of exenatide once weekly and other
pipeline candidates;
·
Executing our INTO strategy;
·
Our other research and development activities;
·
Other operating expenses;
·
Potential acquisitions or investments in complementary
technologies or businesses; and
·
Other general corporate purposes.
We may also be required
to use our cash to pay principal and interest on outstanding debt, including a
$125 million term loan due in 2010 and $775 million in outstanding principal
amount of convertible senior notes, of which $200 million is due in 2011,
referred to as the 2004 Notes, and $575 million is due in 2014, referred to as
the 2007 Notes.
Our business has a substantial risk of product liability
claims, and insurance may not be adequate to cover these claims.
Our business exposes us
to potential product liability risks that are inherent in the testing,
manufacturing and marketing of human therapeutic products. Product liability claims could result in the
imposition of substantial liability on us, a recall of products, or a change in
the indications for which they may be used.
We currently have limited product liability insurance coverage. We cannot assure you that our insurance will
provide adequate coverage against potential liabilities.
Our ability to enter into and maintain third-party
relationships is important to our successful development and commercialization
of BYETTA, SYMLIN and our other drug candidates and to our potential
profitability.
With respect to sales,
marketing and distribution outside the United States, we will be substantially
dependent on Lilly for activities relating to BYETTA and sustained-release
formulations of BYETTA, including exenatide once weekly. We believe that we will likely need to enter
into marketing and distribution arrangements with third parties for, or find a
corporate partner who can provide support for, the development and commercialization
of SYMLIN or our other drug candidates outside the United States. We may also enter into arrangements with
third parties for the commercialization of
26
SYMLIN or any of our other drug candidates within the
United States.
With respect to BYETTA
and, if approved, exenatide once weekly, Lilly is co-promoting within the
United States. If Lilly ceased
commercializing BYETTA or, if approved, exenatide once weekly, for any reason,
we would likely need to either enter into a marketing and distribution
arrangement with a third party for those products or significantly increase our
internal sales and commercialization infrastructure.
We may not be able to
enter into marketing and distribution arrangements or find a corporate partner
for SYMLIN or our other drug candidates as we deem necessary. If we are not able to enter into a marketing
or distribution arrangement or find a corporate partner who can provide support
for commercialization of our drug candidates as we deem necessary, we may not
be able to successfully perform these marketing or distribution
activities. Moreover, any new marketer
or distributor or corporate partner for our drug candidates, including Lilly,
with whom we choose to contract may not establish adequate sales and
distribution capabilities or gain market acceptance for our products, if any.
We have a significant amount of indebtedness. We may not be able to make payments on our
indebtedness, and we may incur additional indebtedness in the future, which
could adversely affect our operations.
In April 2004, we
issued $200 million of the 2004 Notes and in June 2007, we issued $575
million of the 2007 Notes. In December 2007,
we entered into a $125 million term loan due in December 2010, or the Term
Loan. Our ability to make payments on
our debt, including the 2004 and 2007 Notes and the Term Loan, will depend on
our future operating performance and ability to generate cash and may also
depend on our ability to obtain additional debt or equity financing. During each
of the last five years, our operating cash flows were negative and insufficient
to cover our fixed charges. We may need
to use our cash to pay principal and interest on our debt, thereby reducing the
funds available to fund our research and development programs, strategic
initiatives and working capital requirements.
Our ability to generate sufficient operating cash flow to service our
indebtedness, including the 2004 and 2007 Notes and the Term Loan, and fund our
operating requirements will depend on our ability, alone or with others, to
successfully develop, manufacture, obtain required regulatory approvals for and
market our drug candidates, as well as other factors, including general
economic, financial, competitive, legislative and regulatory conditions, some
of which are beyond our control. Our
debt service obligations increase our vulnerabilities to competitive pressures,
because many of our competitors are less leveraged than we are. If we are unable to generate sufficient
operating cash flow to service our indebtedness and fund our operating
requirements, we may be forced to reduce or defer our development programs,
sell assets or seek additional debt or equity financing, which may not be
available to us on satisfactory terms or at all. Our level of indebtedness may make us more
vulnerable to economic or industry downturns.
If we incur new indebtedness, the risks relating to our business and our
ability to service our indebtedness will intensify.
We may be required to redeem our convertible senior notes
upon a designated event or repay the Term Loan upon an event of default.
Holders of the 2004 and
2007 Notes may require us to redeem all or any portion of their notes upon the
occurrence of certain designated events which generally involve a change in
control of our company. The lenders
under the Term Loan may require us to repay outstanding principal and accrued
interest due under the Term Loan upon the occurrence of an event of default,
which could include, among other things, nonpayment of principle and interest,
violation of covenants and a change in control.
We may not have sufficient cash funds to redeem the notes upon a
designated event or repay the Term Loan upon an event of default. We may elect, subject to certain conditions,
to pay the redemption price for the 2004 Notes in our common stock or a
combination of cash and our common stock.
We may be unable to satisfy the requisite conditions to enable us to pay
some or all of the redemption price for the 2004 Notes in our common stock. In addition, although there are currently no
restrictions on our ability to pay the redemption price under our existing debt
agreements, future debt agreements may prohibit us from repaying the redemption
price of either of the notes in either cash or common stock. If we are prohibited from redeeming the 2004
Notes or 2007 Notes, we could seek consent from our lenders to redeem the
notes. If we are unable to obtain their
consent, we could attempt to refinance the notes. If we were unable to obtain a consent or
refinance, we would be prohibited from redeeming the notes. If we were unable to redeem the notes upon a
designated event, it would result in an event of default under the indentures
governing the notes. An event of default
under the indentures could result in a further event of default under our other
then-existing debt including the Term Loan.
In addition, the occurrence of a designated event may be an event of
default under our other debt. Further,
an event of default under the Term Loan could result in an event of default
under the indentures governing the notes.
If our research and development programs fail to result in
additional drug candidates, the growth of our business could be impaired.
Certain of our research
and development programs for drug candidates are at an early stage and will
require significant
27
research, development, preclinical and clinical
testing, manufacturing scale-up activities, regulatory approval and/or
commitments of resources before commercialization. We cannot predict whether our research will
lead to the discovery of any additional drug candidates that could generate
additional revenues for us.
Our future success depends on our chief executive officer,
and other key executives and our ability to attract, retain and motivate
qualified personnel.
We are highly dependent
on our chief executive officer, and the other principal members of our
executive and scientific teams. The
unexpected loss of the services of any of these persons might impede the
achievement of our research, development and commercialization objectives. Recruiting and retaining qualified sales,
marketing, regulatory, scientific and other personnel and consultants will also
be critical to our success. We may not
be able to attract and retain these personnel and consultants on acceptable
terms given the competition between numerous pharmaceutical and biotechnology
companies. We do not maintain key
person insurance on any of our employees.
We may be unable to adequately prevent disclosure of trade
secrets and other proprietary information.
In order to protect our
proprietary technology and processes, we rely in part on confidentiality
agreements with our corporate partners, employees, consultants, manufacturers,
outside scientific collaborators and sponsored researchers and other
advisors. These agreements may not
effectively prevent disclosure of confidential information and may not provide
an adequate remedy in the event of unauthorized disclosure of confidential
information. In addition, others may
independently discover our trade secrets and proprietary information.
Costly and time-consuming
litigation could be necessary to enforce and determine the scope of our
proprietary rights, and failure to obtain or maintain trade secret protection
could adversely affect our competitive business position.
Our research and development activities and planned
manufacturing activities involve the use of hazardous materials, which subject
us to regulation, related costs and delays and potential liabilities.
Our research and
development and our planned manufacturing activities involve the controlled use
of hazardous materials, chemicals and various radioactive compounds. Although we believe that our research and
development safety procedures for handling and disposing of these materials
comply with the standards prescribed by state and federal regulations, the risk
of accidental contamination or injury from these materials cannot be
eliminated. In addition, as part of the
development of our planned manufacturing activities, we will need to develop
additional safety procedures for the handling and disposing of hazardous
materials. If an accident occurs, we
could be held liable for resulting damages, which could be substantial. We are also subject to numerous
environmental, health and workplace safety laws and regulations, including
those governing laboratory procedures, exposure to blood-borne pathogens and
the handling of biohazardous materials.
Additional federal, state and local laws and regulations affecting our
operations may be adopted in the future.
We may incur substantial costs to comply with, and substantial fines or
penalties if we violate, any of these laws or regulations.
We are exposed to potential risks from recent legislation
requiring companies to evaluate internal control over financial reporting.
The Sarbanes-Oxley Act
requires that we report annually on the effectiveness of our internal control
over financial reporting. Among other
things, we must perform systems and processes evaluation and testing. We must also conduct an assessment of our
internal control to allow management to report on, and our independent
registered public accounting firm to attest to, our internal control over
financial reporting, as required by Section 404 of the Sarbanes-Oxley
Act. In connection with our Section 404
compliance efforts, we have incurred or expended, and expect to continue to
incur or expend, substantial accounting and other expenses and significant
management time and resources. We have
implemented certain remediation activities resulting from our ongoing
assessment of internal control over financial reporting. Our future assessment, or the future
assessments by our independent registered public accounting firm, may reveal
material weaknesses in our internal control.
If material weaknesses are identified in the future we would be required
to conclude that our internal control over financial reporting are ineffective
and we could be subject to sanctions or investigations by the SEC, the NASDAQ
Stock Market or other regulatory authorities, which would require additional
financial and management resources and could adversely affect the market price
of our common stock.
We have implemented anti-takeover provisions that could
discourage or prevent an acquisition of our company, even if the acquisition
would be beneficial to our stockholders, and as a result our management may
become entrenched and hard to replace.
Provisions in our
certificate of incorporation and bylaws could make it more difficult for a
third party to acquire us, even if doing so would benefit our
stockholders. These provisions include:
28
·
|
|
allowing our board of
directors to elect a director to fill a vacancy created by the expansion of
the board of directors;
|
|
|
|
·
|
|
allowing our board of directors to issue, without
stockholder approval, up to 5.5 million shares of preferred stock with terms
set by the board of directors;
|
|
|
|
·
|
|
limiting the ability of holders of our outstanding
common stock to call a special meeting of our stockholders; and
|
|
|
|
·
|
|
preventing stockholders from taking actions by
written consent and requiring all stockholder actions to be taken at a
meeting of our stockholders.
|
Each of these provisions,
as well as selected provisions of Delaware law, could discourage potential
takeover attempts, could adversely affect the trading price of our securities
and could cause our management to become entrenched and hard to replace. In addition to provisions in our charter
documents and under Delaware law, an acquisition of our company could be made
more difficult by our employee benefits plans and our employee change in
control plan, under which, in connection with a change in control, stock
options held by our employees may become vested and our officers may receive
severance benefits. We also have
implemented a stockholder rights plan, also called a poison pill, which could make
it uneconomical for a third party to acquire us on a hostile basis.
Our executive officers, directors and major stockholders
control approximately 66% of our common stock.
As of March 31,
2008, executive officers, directors and holders of 5% or more of our
outstanding common stock, in the aggregate, owned or controlled approximately
66% of our outstanding common stock. As
a result, these stockholders are able to influence all matters requiring
approval by our stockholders, including the election of directors and the
approval of corporate transactions. This
concentration of ownership may also delay, deter or prevent a change in control
of our company and may make some transactions more difficult or impossible to
complete without the support of these stockholders.
Substantial future sales of our common stock by us or our
existing stockholders or the conversion of our convertible senior notes to
common stock could cause the trading price of our common stock to fall.
Sales by existing
stockholders of a large number of shares of our common stock in the public
market or the perception that additional sales could occur could cause the
trading price of our common stock to drop.
Likewise, the issuance of shares of common stock upon conversion of our
convertible notes or redemption of our convertible notes upon a designated
event, or upon additional convertible debt or equity financings or other share
issuances by us, including shares issued in connection with potential future
strategic alliances, could adversely affect the trading price of our common
stock. Our convertible notes are
currently convertible into a total of up to 15.2 million shares. In addition,
the existence of these notes may encourage short selling of our common stock by
market participants.
Significant volatility in the market price for our common
stock could expose us to litigation risk.
The market prices for
securities of biopharmaceutical and biotechnology companies, including our
common stock, have historically been highly volatile, and the market from time
to time has experienced significant price and volume fluctuations that are
unrelated to the quarterly operating performance of these biopharmaceutical and
biotechnology companies. Since January 1,
2006, the high and low sales price of our common stock varied significantly, as
shown in the following table:
|
|
High
|
|
Low
|
|
Year
ending December 31, 2008
|
|
|
|
|
|
Second Quarter
(through April 18, 2008)
|
|
$
|
33.17
|
|
$
|
29.00
|
|
First Quarter
|
|
$
|
37.38
|
|
$
|
23.75
|
|
Year
ended December 31, 2007
|
|
|
|
|
|
Fourth Quarter
|
|
$
|
51.10
|
|
$
|
35.83
|
|
Third Quarter
|
|
$
|
53.25
|
|
$
|
40.86
|
|
Second Quarter
|
|
$
|
46.93
|
|
$
|
36.91
|
|
First Quarter
|
|
$
|
42.45
|
|
$
|
35.55
|
|
Year
ended December 31, 2006
|
|
|
|
|
|
Fourth Quarter
|
|
$
|
48.48
|
|
$
|
35.74
|
|
Third Quarter
|
|
$
|
51.54
|
|
$
|
40.76
|
|
Second Quarter
|
|
$
|
49.37
|
|
$
|
38.16
|
|
First Quarter
|
|
$
|
49.08
|
|
$
|
35.58
|
|
29
Given the uncertainty of
our future funding, whether BYETTA and SYMLIN will meet our expectations, and
the regulatory approval of our other drug candidates, we may continue to
experience volatility in our stock price for the foreseeable future. In addition, the following factors may
significantly affect the market price of our common stock:
·
|
|
our financial results and/or fluctuations in our
financial results;
|
|
|
|
|
|
·
|
|
safety issues with BYETTA, SYMLIN or our product
candidates;
|
|
|
|
|
|
·
|
|
clinical study results;
|
|
|
|
|
|
·
|
|
determinations by regulatory authorities with
respect to our drug candidates;
|
|
|
|
|
|
·
|
|
our ability to complete our Ohio manufacturing
facility and the commercial manufacturing process for exenatide once weekly;
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·
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developments in our relationships with current or
future collaborative partners;
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·
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our ability to successfully execute our
commercialization strategies;
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·
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developments in our relationships with third-party
manufacturers of our products and other parties who provide services to us;
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·
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technological innovations or new commercial
therapeutic products by us or our competitors;
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·
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developments in patent or other proprietary rights;
and
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·
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governmental policy or regulation, including with
respect to pricing and reimbursement.
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Broad market and industry
factors also may materially adversely affect the market price of our common
stock, regardless of our actual operating performance. Periods of volatility in the market price of
our common stock expose us to securities class-action litigation, and we may be
the target of such litigation as a result of market price volatility in the
future.
ITEM
6. Exhibits
The following exhibits are included as part of this
report:
Exhibit Number
|
|
Description
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|
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3.1
|
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Amended and Restated Certificate of Incorporation
(filed as an exhibit to Registrants registration statement on Form S-1
(File No. 333-44195) or amendments thereto and incorporated herein by
reference)
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3.2
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Third Amended and Restated Bylaws (filed as an
exhibit to Registrants Current Report on Form 8-K filed on
October 31, 2007 and incorporated herein by reference)
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3.3
|
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Certificate of Amendment of Amended and Restated
Certificate of Incorporation (filed as an exhibit to Registrants Quarterly
Report on Form 10-Q for the quarter ended September 30, 2001 and
incorporated herein by reference)
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3.4
|
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Certificate of Amended and Restated Certificate of
Incorporation (filed as an exhibit to Registrants Quarterly Report on
Form 10-Q for the quarter ended June 30, 2007 and incorporated
herein by reference)
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|
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4.1
|
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Specimen Common Stock Certificate (filed as an
exhibit to Registrants registration statement on Form S-1 (File
No. 333-44195) or amendments thereto and incorporated herein by
reference)
|
30
4.2
|
|
Rights Agreement, dated as of June 17, 2002,
between the Registrant and American Stock Transfer & Trust Company
(filed as an exhibit to Registrants Current Report on Form 8-K filed on
June 18, 2002 and incorporated herein by reference)
|
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4.3
|
|
First Amendment to Rights Agreement dated December 13,
2002, between the Registrant and American Stock Transfer & Trust
Company (filed as an exhibit to Registrants Annual Report on Form 10-K
for the fiscal year ended December 31, 2002 and incorporated herein by
reference)
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4.4
|
|
Second Amendment to Rights Agreement, dated
March 31, 2008, between the Registrant and American Stock Transfer and
Trust Company (filed as an exhibit to Registrants Current Report on
Form 8-K filed on March 13, 2008 and incorporated herein by
reference)
|
|
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4.5
|
|
Form of Rights Certificate (filed as an exhibit
to Registrants Current Report on Form 8-K filed on June 18, 2002
and incorporated herein by reference)
|
|
|
|
4.6
|
|
Certificate of Designation of Series A Junior
Participating Preferred Stock (filed as an exhibit to Registrants Current
Report on Form 8-K filed on June 18, 2002 and incorporated herein
by reference)
|
|
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10.1
|
|
Registrants Amended and Restated 2001 Equity
Incentive Plan
|
|
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31.1
|
|
Certification of Principal Financial Officer
pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act of 1934, as amended
|
|
|
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31.2
|
|
Certification of Principal Executive Officer
pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act of 1934, as amended
|
|
|
|
32.1
|
|
Certifications Pursuant to U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
31
SIGNATURE
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
Amylin Pharmaceuticals, Inc.
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|
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Date: May 2, 2008
|
By:
|
/S/ MARK G. FOLETTA
|
|
|
Mark G. Foletta,
|
|
|
Senior
Vice President, Finance and
|
|
|
Chief
Financial Officer
|
|
|
(on behalf
of the registrant and as the
|
|
|
registrants
principal financial and accounting
officer)
|
32
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