Table of Contents
SECURITIES AND EXCHANGE COMMISSION
OF THE SECURITIES EXCHANGE ACT OF 1934
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
o | TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
Delaware | 94-3134940 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
San Carlos, California 94070
(Address of principal executive offices and zip code)
(Registrant’s telephone number, including area code)
Title of Each Class | Name of Each Exchange on Which Registered | |
Common Stock, $0.0001 par value | NASDAQ Global Select Market |
Large accelerated filero | Accelerated filerþ | Non-accelerated filero | Smaller reporting companyo | |||
(Do not check if a smaller reporting company) |
TABLE OF CONTENTS
Page | ||||||||
4 | ||||||||
22 | ||||||||
32 | ||||||||
32 | ||||||||
33 | ||||||||
33 | ||||||||
33 | ||||||||
35 | ||||||||
36 | ||||||||
50 | ||||||||
52 | ||||||||
86 | ||||||||
86 | �� | |||||||
86 | ||||||||
87 | ||||||||
87 | ||||||||
87 | ||||||||
87 | ||||||||
87 | ||||||||
88 | ||||||||
92 | ||||||||
Exhibit 2.1 | ||||||||
Exhibit 10.17 | ||||||||
Exhibit 10.20 | ||||||||
Exhibit 10.21 | ||||||||
Exhibit 10.22 | ||||||||
Exhibit 10.26 | ||||||||
Exhibit 10.27 | ||||||||
Exhibit 10.28 | ||||||||
Exhibit 10.29 | ||||||||
Exhibit 10.34 | ||||||||
Exhibit 10.35 | ||||||||
Exhibit 21.1 | ||||||||
Exhibit 23.1 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 |
2
Table of Contents
3
Table of Contents
4
Table of Contents
• | improve efficacy or safety in certain instances as a result of better pharmacokinetics, pharmacodynamics, longer half-life and sustained exposure of the drug; |
• | improve targeting or binding affinity of a drug to its target receptors with the potential to improve efficacy and reduce toxicity or drug resistance; |
• | enable oral administration of parenterally-administered drugs, or drugs that must be administered intravenously or subcutaneously, and increase oral bioavailability of small molecules; |
• | prevent drugs from crossing the blood-brain barrier and limiting undesirable central nervous system effects; |
• | reduce first-pass metabolism effects of certain drug classes with the potential to improve efficacy, which could reduce the need for other medicines and reduce toxicity; |
• | reduce rate of drug absorption and of elimination or metabolism by improving stability of the drug in the body and providing it with more sufficient time to act on its target; and |
• | reduce immune response to certain macromolecules with the potential to prolong their effectiveness with repeated doses. |
5
Table of Contents
6
Table of Contents
Drug | Primary or Target Indications | Licensing Partner and Drug Marketer | Status(1) | |||
Neulasta® (pegfilgrastim) | Neutropenia | Amgen Inc. | Approved | |||
PEGASYS® (peginterferon alfa-2a) | Hepatitis-C | F. Hoffmann-La Roche Ltd | Approved | |||
Somavert® (pegvisomant) | Acromegaly | Pfizer Inc. | Approved | |||
PEG-INTRON® (peginterferon alfa-2b) | Hepatitis-C | Schering-Plough Corporation | Approved | |||
Macugen® (pegaptanib sodium injection) | Age-related macular degeneration | OSI Pharmaceuticals (formerly Eyetech) | Approved | |||
CIMZIA™ (certolizumab pegol) | Crohn’s disease | UCB Pharma | Approved in U.S. and Switzerland | |||
MIRCERA® (C.E.R.A.) (Continuous Erythropoietin Receptor Activator) | Anemia associated with chronic kidney disease in patients on dialysis and patients not on dialysis | F. Hoffmann-La Roche Ltd | Approved in U.S. and EU (Launched only in the EU)* | |||
CIMZIA™ (certolizumab pegol) | Rheumatoid arthritis | UCB Pharma | Filed in the U.S. and EU | |||
Hematide™(synthetic peptide-based, erythropoiesis- stimulating agent) | Anemia | Affymax, Inc. | Phase 3 | |||
MAP0004™ | Migraine | MAP Pharmaceuticals | Phase 3 | |||
Cipro Inhale | Cystic fibrosis lung infections | Bayer Schering Pharma AG | Phase 2** | |||
CIMZIA ™ (certoluzimab pegol) | Psoriasis | UCB Pharma | Phase 2 | |||
CDP-791 (PEG-antibody fragment angiogenesis inhibitor) | Non-small cell lung cancer | UCB Pharma | Phase 2 | |||
Longer-acting Factor VIII and other blood clotting proteins | Hemophilia | Baxter | Preclinical |
(1) | Status definitions are: |
* | Amgen Inc. prevailed in a patent lawsuit against F. Hoffmann-La Roche Ltd and as a result of this legal ruling Roche is currently prevented from marketing MIRCERA® in the U.S. | |
** | This product candidate was developed using our proprietary pulmonary delivery technology that was transferred to Novartis in an asset sale transaction that closed on December 31, 2008. As part of the transaction, Novartis assumed our rights and obligations for our Cipro Inhale agreements with Bayer Schering PharmaAG; however, we maintained the rights to receive certain royalties on commercial sales of Cipro Inhale if the product candidate is approved. |
7
Table of Contents
Drug Candidate | Target Indications | Status (1) | ||
BAY41-6551 (NKTR-061, Amikacin Inhale) | Gram-negative pneumonias | Phase 2 (Partnered with Bayer Healthcare LLC)* | ||
NKTR-102 (PEGylated irinotecan) | Second-line colorectal cancer in patients with the KRAS gene mutation | Phase 2 | ||
NKTR-102 (PEGylated irinotecan) | Metastatic breast cancer | Phase 2 | ||
NKTR-102 (PEGylated irinotecan) | Metastatic ovarian cancer | Phase 2 | ||
NKTR-102 (PEGylated irinotecan) | Metastatic cervical cancer | Phase 2 | ||
Oral NKTR-118 (PEGylated naloxol) | Opioid-induced constipation (OIC) | Phase 2 | ||
NKTR-105 (PEGylated docetaxel) | Solid tumors | Phase 1 | ||
NKTR-063 (Inhaled Vancomycin) | Gram-positive pneumonias | Phase 1* | ||
NKTR-140 (protease inhibitor candidate) | HIV | Research/Preclinical | ||
NKTR-171 (undisclosed pain candidate) | Neuropathic pain | Research/Preclinical | ||
NKTR-125 (PEGylated antihistamine candidate) | Allergic rhinitis | Research/Preclinical |
(1) | Status definitions are: |
* | This product candidate uses a liquid aerosol technology platform that was transferred to Novartis in the pulmonary asset sale transaction that was completed on December 31, 2008. As part of that transaction, we retained an exclusive license to this technology for the development and commercialization of this drug candidate originally developed by Nektar. |
8
Table of Contents
9
Table of Contents
10
Table of Contents
11
Table of Contents
12
Table of Contents
13
Table of Contents
• | dry powder and liquid pulmonary technology platform including but not limited to our pulmonary inhalation devices, formulation technology, manufacturing technology and related intellectual property; |
• | capital equipment, information systems and facility lease obligations for our pulmonary development and manufacturing facility in San Carlos, California; |
• | manufacturing and associated development services payments for the Cipro Inhale program; |
• | manufacturing and royalty rights to the Tobramycin Inhalation Powder (TIP) program through the termination of our collaboration agreement with Novartis; |
• | certain other interests that we had in two private companies; and |
• | approximately 140 of our personnel primarily dedicated to our pulmonary technology, development programs, and manufacturing operations. |
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Salaries and employee benefits | $ | 58.4 | $ | 70.7 | $ | 69.9 | ||||||
Stock compensation expense | 4.6 | 6.3 | 9.7 | |||||||||
Facility and equipment | 25.9 | 33.9 | 31.0 | |||||||||
Outside services, including Contract Research Organizations | 40.2 | 26.8 | 24.1 | |||||||||
Supplies, including clinical trial materials | 19.0 | 10.8 | 8.9 | |||||||||
Travel, lodging, and meals | 3.3 | 2.2 | 2.4 | |||||||||
Other | 3.0 | 2.9 | 3.4 | |||||||||
Research and development | $ | 154.4 | $ | 153.6 | $ | 149.4 | ||||||
14
Table of Contents
• | extensive preclinical laboratory and animal testing; |
• | submission of an Investigational New Drug application (IND) prior to commencing clinical trials; |
• | adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for the intended indication; and |
• | submission to the FDA of a New Drug Application (NDA) for approval of a drug, a Biologic License Application (BLA) for approval of a biological product or a Premarket Approval Application (PMA) or Premarket Notification 510(k) for a medical device product (a 510(k)). |
15
Table of Contents
• | determine the preliminary efficacy of the product for specific targeted indications; |
• | determine dosage and regimen of administration; and |
• | identify possible adverse effects and safety risks. |
16
Table of Contents
17
Table of Contents
18
Table of Contents
19
Table of Contents
There are also a number of chemotherapies and cancer therapies approved today and in various stages of clinical development for ovarian, breast and cervical cancers including but not limited to: Avastin® (bevacizumab), Camptosar® (irinotecan), Ellence® (epirubicin), Gemzar® (gemcitabine), Herceptin® (trastuzumab), Hycamtin® (topotecan), Paraplatin® (carboplatin), and Taxol® (paclitaxel). These therapies are only partially effective in treating ovarian, breast or cervical cancers. Major pharmaceutical or biotechnology companies with approved drugs or drugs in development for these cancers include Bristol-Meyers Squibb, Genentech, Inc., GlaxoSmithKline plc, Pfizer, Inc., Eli Lilly & Co., and many others.
20
Table of Contents
Name | Age | Position | ||||
Howard W. Robin | 56 | Director, President and Chief Executive Officer | ||||
John Nicholson | 57 | Senior Vice President and Chief Financial Officer | ||||
Bharatt M. Chowrira, Ph.D., J.D. | 43 | Senior Vice President and Chief Operating Officer | ||||
Randall W. Moreadith, M.D., Ph.D. | 55 | Senior Vice President, Drug Development and Chief Development Officer | ||||
Gil M. Labrucherie, J.D. | 37 | Senior Vice President, General Counsel and Secretary | ||||
Jillian B. Thomsen | 43 | Vice President and Chief Accounting Officer |
21
Table of Contents
22
Table of Contents
23
Table of Contents
• | design and conduct large scale clinical studies; |
• | prepare and file documents necessary to obtain government approvals to sell a given product candidate; and/or |
• | market and sell our products when and if they are approved. |
• | we may be unable to control whether, and the extent to which, our partners devote sufficient resources to the development programs or commercial efforts; |
• | disputes may arise in the future with respect to the ownership of rights to technology or intellectual property developed with partners; |
• | disagreements with partners could lead to delays in, or termination of, the research, development or commercialization of product candidates or to litigation or arbitration; |
• | contracts with our partners may fail to provide us with significant protection, or to be effectively enforced, in the event one of our partners fails to perform; |
• | partners have considerable discretion in electing whether to pursue the development of any additional product candidates and may pursue alternative technologies or products either on their own or in collaboration with our competitors; |
• | partners with marketing rights may choose to devote fewer resources to the marketing of our partnered products than they do to products of their own development; |
• | the timing and level of resources that our partners dedicate to the development program will affect the timing and amount of revenue we receive; |
• | partners may be unable to pay us as expected; and |
• | partners may terminate their agreements with us unilaterally for any or no reason, in some cases with the payment of a termination fee penalty and in other cases with no termination fee penalty. |
24
Table of Contents
• | research and development performance and reimbursement obligations for our personnel and other resources allocated to partnered product development programs; |
• | clinical and commercial manufacturing agreements, some of which are priced on an actual cost basis for products supplied by us to our partners with complicated cost allocation formulas and methodologies; |
• | intellectual property ownership allocation between us and our partners for improvements and new inventions developed during the course of the partnership; |
• | royalties on end product sales based on a number of complex variables, including net sales calculations, geography, patent life and other financial metrics; and |
• | indemnity obligations for third-party intellectual property infringement, product liability and certain other claims. |
25
Table of Contents
26
Table of Contents
• | develop products utilizing our technologies, either independently or in collaboration with other pharmaceutical or biotech companies; |
• | receive necessary regulatory and marketing approvals; |
• | maintain or expand manufacturing at necessary levels; |
• | achieve market acceptance of our partnered products; |
• | receive royalties on products that have been approved, marketed or submitted for marketing approval with regulatory authorities; and |
• | maintain sufficient funds to finance our activities. |
27
Table of Contents
• | making it more difficult to obtain additional financing; |
• | constraining our ability to react quickly in an unfavorable economic climate; |
• | constraining our stock price; and |
• | constraining our ability to invest in our proprietary product development programs. |
28
Table of Contents
29
Table of Contents
30
Table of Contents
• | establishment of a classified board of directors such that not all members of the board may be elected at one time; |
• | lack of a provision for cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates; |
• | the ability of our board to authorize the issuance of “blank check” preferred stock to increase the number of outstanding shares and thwart a takeover attempt; |
• | prohibition on stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of stockholders; |
• | establishment of advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and |
• | limitations on who may call a special meeting of stockholders. |
31
Table of Contents
• | announcements of data from, or material developments in, our clinical trials or those of our competitors, including delays in clinical development, approval or launch; |
• | announcements by collaboration partners as to their plans or expectations related to products using our technologies; |
• | announcements or terminations of collaborative relationships by us or our competitors; |
• | fluctuations in our results of operations; |
• | developments in patent or other proprietary rights, including intellectual property litigation or entering into intellectual property license agreements and the costs associated with those arrangements; |
• | announcements of technological innovations or new therapeutic products that may compete with our approved products or products under development; |
• | announcements of changes in governmental regulation affecting us or our competitors; |
• | hedging activities by purchasers of our convertible senior notes; |
• | litigation brought against us or third parties to whom we have indemnification obligations; |
• | public concern as to the safety of drug formulations developed by us or others; and |
• | general market conditions. |
32
Table of Contents
Item 5. | Market for Registrant’s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities |
High | Low | |||||||
Year Ended December 31, 2007: | ||||||||
1st Quarter | $ | 15.24 | $ | 11.20 | ||||
2nd Quarter | 13.58 | 9.32 | ||||||
3rd Quarter | 9.75 | 7.63 | ||||||
4th Quarter | 8.98 | 5.22 | ||||||
Year Ended December 31, 2008: | ||||||||
1st Quarter | $ | 7.50 | $ | 6.12 | ||||
2nd Quarter | 7.35 | 3.35 | ||||||
3rd Quarter | 5.36 | 3.10 | ||||||
4th Quarter | 5.97 | 2.83 |
33
Table of Contents
34
Table of Contents
(In thousands, except per share information)
Years ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Statements of Operations Data: | ||||||||||||||||||||
Revenue: | ||||||||||||||||||||
Product sales and royalties (1) | $ | 41,255 | $ | 180,755 | $ | 153,556 | $ | 29,366 | $ | 25,085 | ||||||||||
Collaboration and other (2) | 48,930 | 92,272 | 64,162 | 96,913 | 89,185 | |||||||||||||||
Total revenue | 90,185 | 273,027 | 217, 718 | 126,279 | 114,270 | |||||||||||||||
Total operating costs and expenses (3)(4) | 172,837 | 309,175 | 376,948 | 308,912 | 188,212 | |||||||||||||||
Loss from operations | (82,652 | ) | (36,148 | ) | (159,230 | ) | (182,633 | ) | (73,942 | ) | ||||||||||
Gain (loss) on debt extinguishment | 50,149 | — | — | (303 | ) | (9,258 | ) | |||||||||||||
Interest and other income (expense), net | (2,639 | ) | 4,696 | 5,297 | (2,312 | ) | (18,849 | ) | ||||||||||||
Provision (benefit) for income taxes | (806 | ) | 1,309 | 828 | (137 | ) | (163 | ) | ||||||||||||
Net loss | $ | (34,336 | ) | $ | (32,761 | ) | $ | (154,761 | ) | $ | (185,111 | ) | $ | (101,886 | ) | |||||
Basic and diluted net loss per share (5) | $ | (.37 | ) | $ | (0.36 | ) | $ | (1.72 | ) | $ | (2.15 | ) | $ | (1.30 | ) | |||||
Shares used in computing basic and diluted net loss per share (5) | 92,407 | 91,876 | 89,789 | 85,915 | 78,461 |
As of December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Cash, cash equivalents and investments | $ | 378,994 | $ | 482,353 | $ | 466,977 | $ | 566,423 | $ | 418,740 | ||||||||||
Working capital | $ | 337,846 | $ | 425,191 | $ | 369,457 | $ | 450,248 | $ | 223,880 | ||||||||||
Total assets | $ | 560,536 | $ | 725,103 | $ | 768,177 | $ | 858,554 | $ | 744,921 | ||||||||||
Deferred revenue | $ | 65,577 | $ | 80,969 | $ | 40,106 | $ | 23,861 | $ | 31,021 | ||||||||||
Convertible subordinated notes | $ | 214,955 | $ | 315,000 | $ | 417,653 | $ | 417,653 | $ | 173,949 | ||||||||||
Other long-term liabilities | $ | 25,585 | $ | 27,543 | $ | 29,189 | $ | 27,598 | $ | 36,250 | ||||||||||
Accumulated deficit | $ | (1,124,090 | ) | $ | (1,089,754 | ) | $ | (1,056,993 | ) | $ | (902,232 | ) | $ | (717,121 | ) | |||||
Total stockholders’ equity | $ | 190,154 | $ | 214,439 | $ | 227, 060 | $ | 326,811 | $ | 467,342 |
(1) | 2006 and 2007 product sales and royalties include commercial manufacturing revenue from Exubera bulk dry powder insulin and Exubera inhalers. | |
(2) | 2007, 2006, and 2005 collaboration and other revenue included Exubera commercialization readiness revenue. | |
(3) | We changed our method of accounting for stock based compensation on January 1, 2006 in connection with the adoption of SFAS No. 123R,Share-Based Payment. | |
(4) | Operating costs and expenses includes the Gain on sale of pulmonary assets of $69.6 million in 2008 and the Gain on termination of collaborative agreements, net of $79.2 million in 2007. | |
(5) | Basic and diluted net loss per share is based upon the weighted average number of common shares outstanding. |
35
Table of Contents
36
Table of Contents
37
Table of Contents
Percentage | Percentage | |||||||||||||||||||||||||||
Increase/ | Increase/ | Increase/ | Increase/ | |||||||||||||||||||||||||
Years ended December 31, | (Decrease) | (Decrease) | (Decrease) | (Decrease) | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||||||||
Product sales and royalties | $ | 41,255 | $ | 180,755 | $ | 153,556 | $ | (139,500 | ) | $ | 27,199 | (77 | )% | 18 | % | |||||||||||||
Collaboration and other | 48,930 | 92,272 | 64,162 | (43,342 | ) | 28,110 | (47 | )% | 44 | % | ||||||||||||||||||
Total Revenue | $ | 90,185 | $ | 273,027 | $ | 217,718 | $ | (182,842 | ) | $ | 55,309 | (67 | )% | 25 | % | |||||||||||||
38
Table of Contents
39
Table of Contents
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
United States | $ | 30,800 | $ | 212,990 | $ | 182,959 | ||||||
European countries | 59,385 | 60,037 | 33,471 | |||||||||
All other countries | — | — | 1,288 | |||||||||
Total Revenue | $ | 90,185 | $ | 273,027 | $ | 217,718 | ||||||
Percentage | Percentage | |||||||||||||||||||||||||||
Increase/ | Increase/ | Increase/ | Increase/ | |||||||||||||||||||||||||
Years ended December 31, | (Decrease) | (Decrease) | (Decrease) | (Decrease) | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||||||||
Cost of goods sold | $ | 28,216 | $ | 137,696 | $ | 113,921 | $ | (109,480 | ) | $ | 23,775 | (80 | )% | 21 | % | |||||||||||||
Product gross margin | 13,039 | 43,059 | 39,635 | (30,020 | ) | 3,424 | (70 | )% | 9 | % | ||||||||||||||||||
Product gross margin % | 32 | % | 24 | % | 26 | % | ||||||||||||||||||||||
40
Table of Contents
Percentage | Percentage | |||||||||||||||||||||||||||
Increase/ | Increase/ | Increase/ | Increase/ | |||||||||||||||||||||||||
Years ended December 31, | (Decrease) | (Decrease) | (Decrease) | (Decrease) | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||||||||
Cost of goods sold, net of change in inventory | $ | 148 | $ | 974 | $ | — | $ | (826 | ) | $ | 974 | (85 | %) | n/a | ||||||||||||||
Other cost of revenue | 1,221 | — | — | 1,221 | — | n/a | n/a | |||||||||||||||||||||
Research and development | 3,087 | 5,791 | — | (2,704 | ) | 5,791 | (47 | %) | n/a | |||||||||||||||||||
General and administrative | 517 | 1,617 | — | (1,100 | ) | 1,617 | (68 | %) | n/a | |||||||||||||||||||
Cost of workforce reduction plans | $ | 4,973 | $ | 8,382 | $ | — | $ | (3,409 | ) | $ | 8,382 | (41 | %) | n/a | ||||||||||||||
Percentage | Percentage | |||||||||||||||||||||||||||
Increase/ | Increase/ | Increase/ | Increase/ | |||||||||||||||||||||||||
Years ended December 31, | (Decrease) | (Decrease) | (Decrease) | (Decrease) | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||||||||
Other cost of revenue | $ | 6,821 | $ | 9,821 | $ | 4,168 | $ | (3,000 | ) | $ | (5,653 | ) | (31 | %) | >(100 | %) |
Percentage | Percentage | |||||||||||||||||||||||||||
Increase/ | Increase/ | Increase/ | Increase/ | |||||||||||||||||||||||||
Years ended December 31, | (Decrease) | (Decrease) | (Decrease) | (Decrease) | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||||||||
Research & development | $ | 154,417 | $ | 153,575 | $ | 149,381 | $ | 842 | $ | 4,194 | 1 | % | 3 | % |
41
Table of Contents
Clinical | Years ended December 31, | |||||||||||||
Study Status(1) | 2008 | 2007 | 2006 | |||||||||||
NKTR-102 (PEGylated irinotecan) | Phase 2 | $ | 24.2 | $ | 12.7 | $ | 2.7 | |||||||
NKTR-118 (oral PEGylated naloxol) | Phase 2 | 24.6 | 12.9 | 5.5 | ||||||||||
Tobramycin inhalation powder (TIP)(2) | Phase 2 | 19.7 | 16.3 | 12.8 | ||||||||||
BAY41-6551 (NKTR-061, Amikacin Inhale) (3) | Phase 2 | 17.7 | 15.2 | 13.6 | ||||||||||
Cipro Inhale(4) | Phase 2 | 11.4 | 8.3 | 5.9 | ||||||||||
NKTR-105 (PEGylated docetaxel) | Phase 1 | 8.4 | 0.4 | — | ||||||||||
Inhaled Insulin(5) | Discontinued | 3.5 | 37.6 | 39.5 | ||||||||||
NKTR-063 (Inhaled Vancomycin) | Phase 1 | 2.3 | — | — | ||||||||||
Other PEGylation product candidates | Various | 21.0 | 16.2 | 12.4 | ||||||||||
Other pulmonary product candidates(6) | Various | 15.7 | 28.2 | 54.0 | ||||||||||
Other(7) | 5.9 | 5.8 | 3.0 | |||||||||||
Research and development | $ | 154.4 | $ | 153.6 | $ | 149.4 | ||||||||
(1) | Clinical Study Status definitions are provided in the chart found in Part I, Item 1. Business | |
(2) | The collaboration agreement with Novartis Vaccines and Diagnostics, Inc. was terminated on December 31, 2008 in connection with the Novartis Pulmonary Asset Sale. | |
(3) | Partnered with Bayer Healthcare LLC since August 2007. As part of the Novartis Pulmonary Asset Sale , we retained an exclusive license to this technology for the development and commercialization of this product originally developed by Nektar. | |
(4) | The collaboration agreement with Bayer Schering Pharma AG was assigned to Novartis on December 31, 2008 in connection with the Novartis Pulmonary Asset Sale. | |
(5) | Partnership for the collaboration and development of Exubera inhalation powder and the next generation inhaled insulin with Pfizer was terminated on November 9, 2007. Inhaled insulin programs were terminated in April 2008. | |
(6) | Certain proprietary pulmonary intellectual property was transferred to Novartis as part of the Novartis Pulmonary Asset Sale. | |
(7) | Other includes additional costs related Novartis Pulmonary Asset Sale in 2008, workforce reduction charges in 2008 and 2007, and research and development costs related to our ceased super-critical fluids business in 2006. |
42
Table of Contents
Percentage | Percentage | |||||||||||||||||||||||||||
Increase/ | Increase/ | Increase/ | Increase/ | |||||||||||||||||||||||||
Years ended December 31, | (Decrease) | (Decrease) | (Decrease) | (Decrease) | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||||||||
General & administrative | $ | 51,497 | $ | 57,282 | $ | 82,358 | $ | (5,785 | ) | $ | (25,076 | ) | (10 | %) | (30 | %) |
Percentage | Percentage | |||||||||||||||||||||||||||
Increase/ | Increase/ | Increase/ | Increase/ | |||||||||||||||||||||||||
Years ended December 31, | (Decrease) | (Decrease) | (Decrease) | (Decrease) | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||||||||
Impairment of long lived assets | $ | 1,458 | $ | 28,396 | $ | 9,410 | $ | (26,938 | ) | $ | 18,986 | (95 | %) | >100 | % |
43
Table of Contents
Percentage | Percentage | |||||||||||||||||||||||||||
Increase/ | Increase/ | Increase/ | Increase/ | |||||||||||||||||||||||||
Years ended December 31, | (Decrease) | (Decrease) | (Decrease) | (Decrease) | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||||||||
Gain on sale of pulmonary assets | $ | (69,572 | ) | $ | — | $ | — | $ | 69,572 | $ | — | n/a | n/a |
Percentage | Percentage | |||||||||||||||||||||||||||
Increase/ | Increase/ | Increase/ | Increase/ | |||||||||||||||||||||||||
Years ended December 31, | (Decrease) | (Decrease) | (Decrease) | (Decrease) | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||||||||
Gain on termination of collaborative agreements, net | $ | — | $ | (79,178 | ) | $ | — | $ | (79,178 | ) | $ | 79,178 | n/a | n/a |
Percentage | Percentage | |||||||||||||||||||||||||||
Increase/ | Increase/ | Increase/ | Increase/ | |||||||||||||||||||||||||
Years ended December 31, | (Decrease) | (Decrease) | (Decrease) | (Decrease) | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||||||||
Litigation settlement | $ | — | $ | 1,583 | $ | 17,710 | $ | (1,583 | ) | $ | (16,127 | ) | n/a | (91 | )% |
44
Table of Contents
Percentage | Percentage | |||||||||||||||||||||||||||
Increase/ | Increase/ | Increase/ | Increase/ | |||||||||||||||||||||||||
Years ended December 31, | (Decrease) | (Decrease) | (Decrease) | (Decrease) | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||||||||
Interest income | $ | 12,495 | $ | 22,201 | $ | 23,646 | $ | (9,706 | ) | $ | (1,445 | ) | (44 | %) | (6 | %) |
Percentage | Percentage | |||||||||||||||||||||||||||
Increase/ | Increase/ | Increase/ | Increase/ | |||||||||||||||||||||||||
Years ended December 31, | (Decrease) | (Decrease) | (Decrease) | (Decrease) | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||||||||
Interest expense | $ | 15,192 | $ | 18,638 | $ | 20,793 | $ | (3,446 | ) | $ | (2,155 | ) | (18 | %) | (10 | %) |
Percentage | Percentage | |||||||||||||||||||||||||||
Increase/ | Increase/ | Increase/ | Increase/ | |||||||||||||||||||||||||
Years ended December 31, | (Decrease) | (Decrease) | (Decrease) | (Decrease) | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||||||||
Other income (expense), net | $ | 58 | $ | 1,133 | $ | 2,444 | $ | (1,075 | ) | $ | (1,311 | ) | (95 | %) | (54 | %) |
45
Table of Contents
Percentage | Percentage | |||||||||||||||||||||||||||
Increase/ | Increase/ | Increase/ | Increase/ | |||||||||||||||||||||||||
Years ended December 31, | (Decrease) | (Decrease) | (Decrease) | (Decrease) | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||||||||
Gain on debt extinguishment | $ | 50,149 | $ | — | $ | — | $ | 50,149 | $ | — | n/a | n/a |
46
Table of Contents
Payments due by period | ||||||||||||||||||||
<=1 yr | 2-3 yrs | 4-5 yrs | ||||||||||||||||||
Total | 2009 | 2010-2011 | 2012-2013 | 2014+ | ||||||||||||||||
Obligations (1) | ||||||||||||||||||||
Convertible subordinated notes, including interest | $ | 241,153 | $ | 6,986 | $ | 13,972 | $ | 220,195 | $ | — | ||||||||||
Capital leases, including interest | 38,822 | 4,717 | 9,659 | 10,022 | 14,424 | |||||||||||||||
Purchase commitments (2) | 17,042 | 17,042 | — | — | — | |||||||||||||||
Litigation settlement, including interest | 8,000 | 1,000 | 2,000 | 2,000 | 3,000 | |||||||||||||||
$ | 305,017 | $ | 29,745 | $ | 25,631 | $ | 232,217 | $ | 17,424 | |||||||||||
(1) | The above table does not include certain commitments and contingencies which are discussed in Note 8 of Item 8. Financial Statements and Supplementary Data. | |
(2) | Substantially all of this amount was subject to open purchase orders as of December 31, 2008 that were issued under existing contracts. This amount does not represent minimum contract termination liability. |
47
Table of Contents
48
Table of Contents
49
Table of Contents
50
Table of Contents
51
Table of Contents
Page | ||||
53 | ||||
55 | ||||
56 | ||||
57 | ||||
58 | ||||
59 |
52
Table of Contents
March 4, 2009
53
Table of Contents
March 4, 2009
54
Table of Contents
(In thousands, except per share information)
December 31, | ||||||||
2008 | 2007 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 155,584 | $ | 76,293 | ||||
Short-term investments | 223,410 | 406,060 | ||||||
Accounts receivable, net of allowance of $92 and $33 at December 31, 2008 and 2007, respectively | 11,161 | 21,637 | ||||||
Inventory | 9,319 | 12,187 | ||||||
Other current assets | 6,746 | 7,106 | ||||||
Total current assets | $ | 406,220 | $ | 523,283 | ||||
Property and equipment, net | 73,578 | 114,420 | ||||||
Goodwill | 76,501 | 78,431 | ||||||
Other assets | 4,237 | 8,969 | ||||||
Total assets | $ | 560,536 | $ | 725,103 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 13,832 | $ | 3,589 | ||||
Accrued compensation | 11,570 | 14,680 | ||||||
Accrued clinical trial expenses | 17,622 | 2,895 | ||||||
Accrued expenses to contract manufacturers | — | 40,444 | ||||||
Accrued expenses | 9,923 | 9,551 | ||||||
Deferred revenue, current portion | 10,010 | 19,620 | ||||||
Other current liabilities | 5,417 | 7,313 | ||||||
Total current liabilities | $ | 68,374 | $ | 98,092 | ||||
Convertible subordinated notes | 214,955 | 315,000 | ||||||
Capital lease obligations | 20,347 | 21,632 | ||||||
Deferred revenue | 55,567 | 61,349 | ||||||
Deferred gain | 5,901 | 8,680 | ||||||
Other long-term liabilities | 5,238 | 5,911 | ||||||
Total liabilities | $ | 370,382 | $ | 510,664 | ||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, 10,000 shares authorized | ||||||||
Series A, $0.0001 par value: 3,100 shares designated; no shares issued or outstanding at December 31, 2008 and 2007 | — | — | ||||||
Common stock, $0.0001 par value; 300,000 authorized; 92,503 shares and 92,301 shares issued and outstanding at December 31, 2008 and 2007, respectively | 9 | 9 | ||||||
Capital in excess of par value | 1,312,796 | 1,302,541 | ||||||
Accumulated other comprehensive income | 1,439 | 1,643 | ||||||
Accumulated deficit | (1,124,090 | ) | (1,089,754 | ) | ||||
Total stockholders’ equity | 190,154 | 214,439 | ||||||
Total liabilities and stockholders’ equity | $ | 560,536 | $ | 725,103 | ||||
55
Table of Contents
(in thousands, except per share information)
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Revenue: | ||||||||||||
Product sales and royalties | $ | 41,255 | $ | 180,755 | $ | 153,556 | ||||||
Collaboration and other | 48,930 | 92,272 | 64,162 | |||||||||
Total revenue | $ | 90,185 | $ | 273,027 | $ | 217,718 | ||||||
Operating costs and expenses: | ||||||||||||
Cost of goods sold | 28,216 | 137,696 | 113,921 | |||||||||
Other cost of revenue | 6,821 | 9,821 | 4,168 | |||||||||
Research and development | 154,417 | 153,575 | 149,381 | |||||||||
General and administrative | 51,497 | 57,282 | 82,358 | |||||||||
Impairment of long lived assets | 1,458 | 28,396 | 9,410 | |||||||||
Gain on sale of pulmonary assets | (69,572 | ) | — | — | ||||||||
Gain on termination of collaborative agreements, net | — | (79,178 | ) | — | ||||||||
Litigation settlement | — | 1,583 | 17,710 | |||||||||
Total operating costs and expenses | $ | 172,837 | $ | 309,175 | $ | 376,948 | ||||||
Loss from operations | (82,652 | ) | (36,148 | ) | (159,230 | ) | ||||||
Non-Operating income (expense): | ||||||||||||
Interest income | 12,495 | 22,201 | 23,646 | |||||||||
Interest expense | (15,192 | ) | (18,638 | ) | (20,793 | ) | ||||||
Other income (expense), net | 58 | 1,133 | 2,444 | |||||||||
Gain on extinguishment of debt | 50,149 | — | — | |||||||||
Total non-operating income | 47,510 | 4,696 | 5,297 | |||||||||
Loss before provision (benefit) for income taxes | $ | (35,142 | ) | $ | (31,452 | ) | $ | (153,933 | ) | |||
Provision (benefit) for income taxes | (806 | ) | 1,309 | 828 | ||||||||
Net loss | $ | (34,336 | ) | $ | (32,761 | ) | $ | (154,761 | ) | |||
Basic and diluted net loss per share | $ | (0.37 | ) | $ | (0.36 | ) | $ | (1.72 | ) | |||
Shares used in computing basic and diluted net loss per share | 92,407 | 91,876 | 89,789 | |||||||||
56
Table of Contents
(in thousands)
Accumulated | ||||||||||||||||||||||||||||||||||||
Preferred Shares | Common Shares | Capital In | Other | Total | ||||||||||||||||||||||||||||||||
Amount | Excess of | Deferred | Comprehensive | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||
Shares | Paid In | Shares | Par Value | Par Value | Compensation | Income/(Loss) | Deficit | Equity | ||||||||||||||||||||||||||||
Balance at December 31, 2005 | 20 | — | 87,707 | $ | 9 | $ | 1,233,690 | $ | (2,949 | ) | $ | (1,707 | ) | $ | (902,232 | ) | $ | 326,811 | ||||||||||||||||||
Stock option exercises | — | — | 2,326 | — | 20,642 | — | — | — | 20,642 | |||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 29,143 | — | — | — | 29,143 | |||||||||||||||||||||||||||
SFAS No. 123R transition adjustment | — | — | — | (2,949 | ) | 2,949 | — | — | — | |||||||||||||||||||||||||||
Conversion of Preferred Stock | (20 | ) | — | 1,023 | — | — | — | — | — | — | ||||||||||||||||||||||||||
Warrant exercises | — | — | 12 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Shares issued for employee plans(1) | — | — | 212 | — | 3,425 | — | — | — | 3,425 | |||||||||||||||||||||||||||
Stock-based compensation to consultants | — | — | — | — | 31 | — | — | — | 31 | |||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 1,769 | — | 1,769 | |||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (154,761 | ) | (154,761 | ) | |||||||||||||||||||||||||
Comprehensive loss | (152,992 | ) | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2006 | — | — | 91,280 | $ | 9 | $ | 1,283,982 | $ | — | $ | 62 | $ | (1,056,993 | ) | $ | 227,060 | ||||||||||||||||||||
Stock option exercises and RSU release | — | — | 761 | — | 2,915 | — | — | — | 2,915 | |||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 13,193 | — | — | — | 13,193 | |||||||||||||||||||||||||||
Shares issued for employee plans(1) | — | — | 260 | — | 2,451 | — | — | — | 2,451 | |||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 1,581 | — | 1,581 | |||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (32,761 | ) | (32,761 | ) | |||||||||||||||||||||||||
Comprehensive loss | (31,180 | ) | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2007 | — | — | 92,301 | $ | 9 | $ | 1,302,541 | $ | — | $ | 1,643 | $ | (1,089,754 | ) | $ | 214,439 | ||||||||||||||||||||
Stock option exercises and RSU release | — | — | 146 | — | 122 | — | — | — | 122 | |||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 9,871 | — | — | — | 9,871 | |||||||||||||||||||||||||||
Shares issued for employee plans(1) | — | — | 56 | — | 262 | — | — | — | 262 | |||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | (204 | ) | — | (204 | ) | |||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (34,336 | ) | (34,336 | ) | |||||||||||||||||||||||||
Comprehensive loss | (34,540 | ) | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2008 | — | — | 92,503 | $ | 9 | $ | 1,312,796 | $ | — | $ | 1,439 | $ | (1,124,090 | ) | $ | 190,154 | ||||||||||||||||||||
(1) | Employee plans include Employee Stock Purchase Plan (ESPP) and 401K Plan |
57
Table of Contents
(in thousands)
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Cash flows provided by (used in) operating activities: | ||||||||||||
Net loss | $ | (34,336 | ) | $ | (32,761 | ) | $ | (154,761 | ) | |||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||
Gain on sale of pulmonary assets | (69,572 | ) | — | — | ||||||||
Gain on extinguishment of debt | (50,149 | ) | — | — | ||||||||
Depreciation and amortization | 22,489 | 29,028 | 33,509 | |||||||||
Stock-based compensation | 9,871 | 14,779 | 30,982 | |||||||||
Impairment of long lived assets | 1,458 | 28,396 | 9,410 | |||||||||
Other non-cash transactions | 1,251 | 109 | (3,003 | ) | ||||||||
Changes in assets and liabilities: | ||||||||||||
Decrease (increase) in trade accounts receivable | 10,476 | 24,318 | (34,654 | ) | ||||||||
Decrease (increase) in inventories | 2,868 | 1,503 | 3,971 | |||||||||
Decrease (increase) in other assets | 1,166 | 7,443 | 1,095 | |||||||||
Increase (decrease) in accounts payable | 6,181 | (3,147 | ) | (8,926 | ) | |||||||
Increase (decrease) in accrued compensation | (3,382 | ) | 986 | 3,581 | ||||||||
Increase (decrease) in accrued clinical trial expenses | 14,727 | 907 | 1,322 | |||||||||
Increase (decrease) in accrued expenses to contract manufacturers | (40,444 | ) | 40,444 | — | ||||||||
Increase (decrease) in accrued expenses | (1,332 | ) | (5,200 | ) | 4,181 | |||||||
Increase (decrease) in deferred revenue | (15,392 | ) | 40,863 | 16,245 | ||||||||
Increase (decrease) in other liabilities | (1,662 | ) | (1,366 | ) | 4,333 | |||||||
Net cash provided by (used in) operating activities | $ | (145,782 | ) | $ | 146,302 | $ | (92,715 | ) | ||||
Cash flows from investing activities: | ||||||||||||
Proceeds from sale of pulmonary assets, net of transaction costs | 114,831 | — | — | |||||||||
Investment in Pearl Therapeutics | (4,236 | ) | — | — | ||||||||
Purchases of property and equipment | (18,855 | ) | (32,796 | ) | (22,524 | ) | ||||||
Maturities of investments | 588,168 | 591,202 | 405,622 | |||||||||
Sales of investments | 70,060 | 2,057 | 2,252 | |||||||||
Purchases of investments | (475,316 | ) | (593,118 | ) | (502,230 | ) | ||||||
Net cash provided by (used in) investing activities | $ | 274,652 | $ | (32,655 | ) | $ | (116,880 | ) | ||||
Cash flows from financing activities: | ||||||||||||
Issuance of common stock, net of issuance costs | 384 | 3,780 | 22,259 | |||||||||
Payments of loan and capital lease obligations | (2,368 | ) | (2,895 | ) | (10,488 | ) | ||||||
Repayments of convertible subordinated notes | (47,757 | ) | (102,653 | ) | — | |||||||
Net cash provided by (used in) financing activities | $ | (49,741 | ) | $ | (101,768 | ) | $ | 11,771 | ||||
Effect of exchange rates on cash and cash equivalents | 162 | 654 | 311 | |||||||||
Net increase (decrease) in cash and cash equivalents | $ | 79,291 | $ | 12,533 | $ | (197,513 | ) | |||||
Cash and cash equivalents at beginning of year | 76,293 | 63,760 | 261,273 | |||||||||
Cash and cash equivalents at end of year | $ | 155,584 | $ | 76,293 | $ | 63,760 | ||||||
Supplemental disclosure of cash flows information: | ||||||||||||
Cash paid for interest | $ | 14,706 | $ | 17,389 | $ | 17,751 | ||||||
Cash paid for income taxes | $ | 812 | $ | 801 | $ | — | ||||||
Supplemental schedule of non-cash investing and financing activities: | ||||||||||||
Property acquired through capital leases | $ | — | $ | 4,445 | $ | — |
58
Table of Contents
59
Table of Contents
60
Table of Contents
61
Table of Contents
62
Table of Contents
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Convertible subordinated notes | 13,804 | 15,781 | 16,896 | |||||||||
Stock options | 14,147 | 11,108 | 8,901 | |||||||||
Warrants | — | — | 13 | |||||||||
Total | 27,951 | 26,889 | 25,810 | |||||||||
63
Table of Contents
Estimated Fair Value at | ||||||||
December 31, 2008 | December 31, 2007 | |||||||
Cash and cash equivalents | $ | 155,584 | $ | 76,293 | ||||
Short-term investments (less than one year to maturity) | 223,410 | 406,060 | ||||||
Total cash, cash equivalents, and available-for-sale investments | $ | 378,994 | $ | 482,353 | ||||
Estimated Fair Value at | ||||||||
December 31, 2008 | December 31, 2007 | |||||||
U.S. corporate commercial paper | $ | 115,658 | $ | 293,866 | ||||
Obligations of U.S. corporations | 26,275 | 100,727 | ||||||
Obligations of U.S. government agencies | 91,667 | 37,333 | ||||||
Cash and money market funds | 145,394 | 50,427 | ||||||
Total cash, cash equivalents, and available-for-sale investments | $ | 378,994 | $ | 482,353 | ||||
64
Table of Contents
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Money market funds | $ | 134,686 | $ | — | $ | — | $ | 134,686 | ||||||||
U.S. corporate commercial paper | — | 115,658 | — | 115,658 | ||||||||||||
Obligations of U.S. corporations | — | 26,275 | — | 26,275 | ||||||||||||
Obligations of U.S. government agencies | — | 91,667 | — | 91,667 | ||||||||||||
Cash equivalents and available-for-sale investments | $ | 134,686 | $ | 233,600 | $ | — | $ | 368,286 | ||||||||
Cash | 10,708 | |||||||||||||||
Cash, Cash equivalents, and available-for-sale investments | $ | 378,994 | ||||||||||||||
December 31, | ||||||||
2008 | 2007 | |||||||
Raw materials | $ | 6,964 | $ | 9,522 | ||||
Work-in-process | 1,743 | 1,749 | ||||||
Finished goods | 612 | 916 | ||||||
Total | $ | 9,319 | $ | 12,187 | ||||
December 31, | ||||||||
2008 | 2007 | |||||||
Building and leasehold improvements | $ | 62,260 | $ | 114,210 | ||||
Laboratory equipment | 24,549 | 48,425 | ||||||
Manufacturing equipment | 8,682 | 18,493 | ||||||
Furniture, fixtures and other equipment | 14,717 | 21,169 | ||||||
Construction-in-progress | 6,875 | 18,374 | ||||||
Property and equipment at cost | $ | 117,083 | $ | 220,671 | ||||
Less: accumulated depreciation | ( 43,505 | ) | (106,251 | ) | ||||
Property and equipment, net | $ | 73,578 | $ | 114,420 | ||||
65
Table of Contents
Semi-Annual | December 31, | |||||||||||
Interest Payment Dates | 2008 | 2007 | ||||||||||
3.25% Notes due September 2012 | March 28, September 28 | $ | 214,955 | $ | 315,000 |
66
Table of Contents
December 31, | ||||||||
2008 | 2007 | |||||||
Building and leasehold improvements | $ | 23,962 | $ | 23,962 | ||||
Furniture, fixtures and other equipment | 261 | 591 | ||||||
Construction in progress | — | 1,602 | ||||||
Total assets recorded under capital leases | $ | 24,223 | $ | 26,155 | ||||
Less: accumulated depreciation | (8,050 | ) | (6,124 | ) | ||||
Net assets recorded under capital leases | $ | 16,173 | $ | 20,031 | ||||
Years ending December 31, | ||||
2009 | $ | 4,717 | ||
2010 | 4,752 | |||
2011 | 4,907 | |||
2012 | 4,958 | |||
2013 | 5,064 | |||
2014 and thereafter | 14,424 | |||
Total minimum payments required | $ | 38,822 | ||
Less: amount representing interest | (17,190 | ) | ||
Present value of future payments | $ | 21,632 | ||
Less: current portion | (1,285 | ) | ||
Non-current portion | $ | 20,347 | ||
67
Table of Contents
68
Table of Contents
69
Table of Contents
As of December 31, 2008 | ||||
Convertible subordinated notes | 9,989 | |||
Option Plans | 28,922 | |||
ESPP | 161 | |||
401(k) retirement plans | 220 | |||
Total | 39,292 | |||
Number of securities remaining | ||||||||||||
available for issuance under | ||||||||||||
Number of securities to be | Weighted-average | equity compensation plans | ||||||||||
issued upon exercise of | exercise price of | (excluding securities reflected | ||||||||||
outstanding options | outstanding options | in column(a)) | ||||||||||
Plan Category | (a) (1) | (b) | (c) | |||||||||
Equity compensation plans approved by security holders (2) | 7,833 | $ | 12.53 | 12,443 | ||||||||
Equity compensation plans not approved by security holders | 5,948 | $ | 11.66 | 2,827 | ||||||||
Total | 13,781 | $ | 12.16 | 15,270 | ||||||||
(1) | Does not include options 31,738 shares we assumed in connection with the acquisition of Shearwater Corporation (with a weighted-average exercise price of $0.03 per share). | |
(2) | Includes shares of common stock available for future issuance under our ESPP as of December 31, 2008. |
70
Table of Contents
71
Table of Contents
72
Table of Contents
Years ended December 31, | ||||||||||||||
Partner | Agreement | 2008 | 2007 | 2006 | ||||||||||
Novartis Vaccines and Diagnostics, Inc. | Tobramycin inhalation powder (TIP) | $ | 13,723 | $ | 17,036 | $ | 8,516 | |||||||
Bayer Schering Pharma AG | Cipro Inhale | 11,653 | 8,116 | 4,884 | ||||||||||
Bayer Healthcare LLC | BAY41-6651 (NKTR-061, Amikacin Inhale) | 10,054 | 1,306 | — | ||||||||||
Pfizer Inc. | Exubera® inhalation powder | — | 49,490 | 33,674 | ||||||||||
Next-generation inhaled insulin (NGI) | ||||||||||||||
Other | 13,500 | 16,324 | 17,088 | |||||||||||
Collaboration and other revenue | $ | 48,930 | $ | 92,272 | $ | 64,162 | ||||||||
73
Table of Contents
• | dry powder and liquid pulmonary technology platform including but not limited to our pulmonary inhalation devices, formulation technology, manufacturing technology and related intellectual property; |
• | manufacturing and associated development services payments for the Cipro Inhale program; | ||
• | manufacturing and royalty rights to the TIP program; | ||
• | capital equipment, information systems and facility lease obligations for our pulmonary development and manufacturing facility in San Carlos, California; | ||
• | certain other interests that we had in two private companies, Pearl Therapeutics Inc. and Stamford Devices Limited; and | ||
• | approximately 140 of our personnel primarily dedicated to our pulmonary technology, development programs, and manufacturing operations, whom Novartis hired immediately following the closing of the transaction. |
74
Table of Contents
Year ended December 31, 2008 | ||||
Proceeds from sale of certain pulmonary assets | $ | 115,000 | ||
Transaction costs | (4,609 | ) | ||
Net book value of property and equipment sold | (37,291 | ) | ||
Equity investment in Pearl Therapeutics, net | (2,658 | ) | ||
Goodwill related to pulmonary assets sold | (1,930 | ) | ||
Other, net | 1,060 | |||
Gain on sale of pulmonary assets | $ | 69,572 | ||
75
Table of Contents
Year ended December 31, 2007 | ||||
Pfizer termination settlement payment received | $ | 135,000 | ||
Exubera Inhaler Manufacturing and Supply Agreement Termination | ||||
Tech Group | (13,765 | ) | ||
Bespak | (18,598 | ) | ||
102,637 | ||||
Settlement of assets and liabilities related to Pfizer | (23,459 | ) | ||
Gain on termination of collaborative agreements, net | $ | 79,178 | ||
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Property and Equipment | ||||||||||||
PEGylation manufacturing equipment | $ | 1,458 | $ | — | $ | — | ||||||
Exubera-related | — | 28,396 | — | |||||||||
Bradford, UK | — | — | 1,156 | |||||||||
Construction in progress | — | — | 2,757 | |||||||||
Aerogen core-technology intangible assets | — | — | 5,497 | |||||||||
Impairment of long lived assets | $ | 1,458 | $ | 28,396 | $ | 9,410 | ||||||
76
Table of Contents
Years ended December 31, | ||||||||
2008 | 2007 | |||||||
Cost of goods sold, net of inventory change | $ | 148 | $ | 974 | ||||
Other cost of revenue | 1,221 | — | ||||||
Research and development expense | 3,087 | 5,791 | ||||||
General and administrative expense | 517 | 1,617 | ||||||
Total workforce reduction charges | $ | 4,973 | $ | 8,382 | ||||
77
Table of Contents
2007 Plan | 2008 Plan | Total | ||||||||||
Balance at December 31, 2007 | $ | 580 | $ | — | $ | 580 | ||||||
Charges | — | 4,973 | 4,973 | |||||||||
Payments | (580 | ) | (4,868 | ) | (5,448 | ) | ||||||
Balance at December 31, 2008 | $ | — | $ | 105 | $ | 105 | ||||||
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Cost of goods sold, net of change in inventory | $ | 269 | $ | 1,003 | $ | 1,614 | ||||||
Research and development | 4,642 | 6,275 | 9,692 | |||||||||
General and administrative | 4,960 | 5,915 | 17,837 | |||||||||
Total compensation cost for share-based arrangements | $ | 9,871 | $ | 13,193 | $ | 29,143 | ||||||
As of | ||||
December 31, | ||||
Fiscal Year | 2008 | |||
2009 | $ | 8,080 | ||
2010 | 6,845 | |||
2011 | 5,662 | |||
2012 and thereafter | 966 | |||
$ | 21,553 | |||
Year ended December 31, 2008 | Year ended December 31, 2007 | Year ended December 31, 2006 | ||||||||||||||||||||||
Employee | Employee | Employee | ||||||||||||||||||||||
Stock Options | ESPP | Stock Options | ESPP | Stock Options | ESPP | |||||||||||||||||||
Average risk-free interest rate | 2.5 | % | 2.00 | % | 4.2 | % | 4.8 | % | 4.8 | % | 5.2 | % | ||||||||||||
Dividend yield | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||||||
Volatility factor | 51.58 | % | 72.34 | % | 53.3 | % | 38.4 | % | 63.1 | % | 33.3 | % | ||||||||||||
Weighted average expected life | 4.97 years | 0.5 years | 5.09 years | 0.5 years | 5.20 years | 0.5 years |
78
Table of Contents
Weighted- | Weighted- | |||||||||||||||||||
Average | Average | |||||||||||||||||||
Options Outstanding | Exercise | Remaining | Aggregate | |||||||||||||||||
Number of | Exercise Price | Price | Contractual | Intrinsic | ||||||||||||||||
Shares | Per Share | Per Share | Life (in years) | Value (1) | ||||||||||||||||
Balance at December 31, 2005 | 13,253 | $ | 0.01–61.63 | $ | 17.85 | 5.38 | $ | 37,678 | ||||||||||||
Options granted | 1,115 | 14.36–21.51 | 17.88 | |||||||||||||||||
Options exercised | (2,160 | ) | 0.05–20.41 | 9.51 | $ | 18,651 | ||||||||||||||
Options forfeited & canceled | (1,501 | ) | 4.62–52.16 | 21.86 | ||||||||||||||||
Balance at December 31, 2006 | 10,707 | $ | 0.01–61.63 | $ | 18.97 | 4.78 | $ | 15,348 | ||||||||||||
Options granted | 5,257 | 5.98–15.24 | 9.87 | |||||||||||||||||
Options exercised | (429 | ) | 0.01–14.25 | 6.80 | $ | 1,770 | ||||||||||||||
Options forfeited & canceled | (3,323 | ) | 4.50–55.19 | 18.47 | ||||||||||||||||
Balance at December 31, 2007 | 12,212 | $ | 0.01–61.63 | $ | 15.62 | 5.20 | $ | 643 | ||||||||||||
Options granted | 6,180 | 2.83–7.13 | 6.02 | |||||||||||||||||
Options exercised | (39 | ) | 0.03–7.33 | 5.72 | $ | 42 | ||||||||||||||
Options forfeited & canceled | (4,802 | ) | 0.01–61.63 | 12.93 | ||||||||||||||||
Balance at December 31, 2008 | 13,551 | $ | 0.01–60.88 | $ | 12.13 | 4.84 | $ | 2,032 | ||||||||||||
Exercisable at December 31, 2008 | 7,144 | $ | 16.57 | 2.89 | $ | 276 | ||||||||||||||
Exercisable at December 31, 2007 | 7,023 | $ | 19.15 | 3.64 | $ | 584 | ||||||||||||||
Exercisable at December 31, 2006 | 8,185 | $ | 19.88 | 4.09 | $ | 12,229 |
(1) | Aggregate Intrinsic Value represents the difference between the exercise price of the option and the closing market price of our common stock on the exercise date or December 31, as applicable. |
Options Outstanding | Options Exercisable | |||||||||||||||||||
Range of | Weighted-Average | Weighted-Average | Weighted-Average | |||||||||||||||||
Exercise | Exercise Price Per | Remaining Contractual | Exercise Price Per | |||||||||||||||||
Prices | Number of Shares | Share | Life (in years) | Number of Shares | Share | |||||||||||||||
$0.01 – $4.83 | 1,505 | $ | 4.34 | 7.40 | 38 | $ | 0.20 | |||||||||||||
$4.90 – $6.46 | 1,376 | $ | 5.99 | 6.24 | 521 | $ | 5.97 | |||||||||||||
$6.50 – $6.65 | 2,590 | $ | 6.65 | 5.99 | 499 | $ | 6.65 | |||||||||||||
$6.66 – $7.58 | 1,463 | $ | 7.01 | 5.99 | 568 | $ | 7.04 | |||||||||||||
$7.63 – $11.86 | 1,423 | $ | 9.86 | 4.64 | 970 | $ | 9.88 | |||||||||||||
$12.30 – $14.52 | 1,626 | $ | 13.97 | 3.74 | 1,162 | $ | 13.90 | |||||||||||||
$14.53 – $19.29 | 1,373 | $ | 17.55 | 3.47 | 1,216 | $ | 17.62 | |||||||||||||
$19.40 – $27.88 | 1,864 | $ | 26.16 | 1.99 | 1,839 | $ | 26.24 | |||||||||||||
$27.96 – $60.88 | 331 | $ | 37.91 | 1.12 | 331 | $ | 37.91 | |||||||||||||
13,551 | $ | 12.13 | 4.84 | 7,144 | $ | 16.57 | ||||||||||||||
79
Table of Contents
Weighted-Average | ||||||||||||||||
Remaining | Weighted-Average | Aggregate | ||||||||||||||
contractual Life | Grant-Date | Intrinsic | ||||||||||||||
Units Issued | (in years) | Fair value(1) | Value | |||||||||||||
Balance at December 31, 2005 | 284 | 1.14 | $ | 4,676 | ||||||||||||
Granted | 1,088 | $ | 19.55 | |||||||||||||
Released | (178 | ) | $ | 3,184 | ||||||||||||
Forfeited & Canceled | (110 | ) | ||||||||||||||
Balance at December 31, 2006 | 1,084 | 1.52 | $ | 16,479 | ||||||||||||
Granted | 345 | $ | 11.01 | |||||||||||||
Released | (334 | ) | $ | 3,808 | ||||||||||||
Forfeited & Canceled | (360 | ) | ||||||||||||||
Balance at December 31, 2007 | 735 | 2.03 | $ | 4,925 | ||||||||||||
Granted | 48 | $ | 5.26 | |||||||||||||
Released | (107 | ) | $ | 487 | ||||||||||||
Forfeited & Canceled | (411 | ) | ||||||||||||||
Balance at December 31, 2008 | 265 | 2.48 | $ | 1,472 | ||||||||||||
(1) | Fair value represents the difference between the exercise price of the award and the closing market price of our common stock on the release date or the year ended December 31, 2008 as applicable. |
80
Table of Contents
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Domestic | $ | (69,350 | ) | $ | (30,143 | ) | $ | (147,059 | ) | |||
Foreign | 34,208 | (1,309 | ) | (6,874 | ) | |||||||
Total | $ | (35,142 | ) | $ | (31,452 | ) | $ | (153,933 | ) | |||
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Current: | ||||||||||||
Federal | $ | (970 | ) | $ | 194 | $ | — | |||||
State | (69 | ) | 782 | 6 | ||||||||
Foreign | 519 | 333 | — | |||||||||
Total Current | (520 | ) | 1,309 | 6 | ||||||||
Deferred: | ||||||||||||
Federal | — | — | — | |||||||||
State | — | — | 822 | |||||||||
Foreign | (286 | ) | — | — | ||||||||
Total Deferred | (286 | ) | — | 822 | ||||||||
Provision (Benefit) for income taxes | $ | (806 | ) | $ | 1,309 | $ | 828 | |||||
81
Table of Contents
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
U.S. federal provision (benefit) | ||||||||||||
At statutory rate | $ | (12,300 | ) | $ | (10,998 | ) | $ | (52,337 | ) | |||
State taxes | (69 | ) | 782 | 6 | ||||||||
Change in valuation allowance | 29,768 | 27,829 | 50,385 | |||||||||
Foreign tax differential | (11,754 | ) | — | — | ||||||||
Foreign subsidiary investment | (4,777 | ) | — | — | ||||||||
Unrecognized tax credits | (2,366 | ) | (13,109 | ) | — | |||||||
Capital lease true-up | (1,431 | ) | — | — | ||||||||
Expiring tax attributes | 1,508 | — | — | |||||||||
Non-deductible employee compensation | 14 | 210 | 2,138 | |||||||||
Sale of Irish subsidiary | — | (3,604 | ) | — | ||||||||
Investment impairment and non-deductible amortization | — | — | 636 | |||||||||
Other | 601 | 199 | — | |||||||||
Total | $ | (806 | ) | $ | 1,309 | $ | 828 | |||||
December 31, | ||||||||
2008 | 2007 | |||||||
Deferred tax assets: | ||||||||
Net operating loss carryforwards | $ | 289,631 | $ | 254,419 | ||||
Research and other credits | 50,350 | 47,274 | ||||||
Capitalized research expenses | 4,563 | 6,670 | ||||||
Deferred revenue | 28,659 | 11,050 | ||||||
Depreciation | — | 7,423 | ||||||
Reserve and accruals | 9,629 | 24,495 | ||||||
Stock based compensation | 20,315 | 16,375 | ||||||
Capital loss carryforward | — | 3,918 | ||||||
Other | 5,163 | 6,170 | ||||||
Deferred tax assets before valuation allowance | 408,310 | 377,794 | ||||||
Valuation allowance for deferred tax assets | (402,907 | ) | (375,318 | ) | ||||
Total deferred tax assets | $ | 5,403 | $ | 2,476 | ||||
Deferred tax liabilities: | ||||||||
Depreciation | (1,479 | ) | — | |||||
Acquisition related intangibles | (3,352 | ) | (2,476 | ) | ||||
Other | (286 | ) | — | |||||
Total deferred tax liabilities | $ | (5,117 | ) | $ | (2,476 | ) | ||
Net deferred tax assets | $ | 286 | $ | — | ||||
82
Table of Contents
December 31, | ||||||||
2008 | 2007 | |||||||
Beginning balance | $ | 9,222 | $ | 7,176 | ||||
Tax positions related to current year | ||||||||
Additions | 2,438 | 2,046 | ||||||
Reductions | — | — | ||||||
Tax positions related to prior year | ||||||||
Additions | — | — | ||||||
Reductions | — | — | ||||||
Settlements | — | — | ||||||
Lapses in statute of limitations | — | — | ||||||
Ending balance | $ | 11,660 | $ | 9,222 | ||||
83
Table of Contents
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
United States | $ | 30,800 | $ | 212,990 | $ | 182,959 | ||||||
European countries | 59,385 | 60,037 | 33,471 | |||||||||
All other countries | — | — | 1,288 | |||||||||
Total Revenue | $ | 90,185 | $ | 273,027 | $ | 217,718 | ||||||
Fiscal Year 2008 | Fiscal Year 2007 | |||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |||||||||||||||||||||||||
Product sales and royalty revenue (1) | $ | 10,371 | $ | 9,010 | $ | 9,474 | $ | 12,400 | $ | 71,355 | $ | 47,001 | $ | 35,697 | $ | 26,702 | ||||||||||||||||
Collaboration and other revenue | $ | 9,621 | $ | 11,392 | $ | 11,965 | $ | 15,952 | $ | 13,661 | $ | 18,916 | $ | 20,624 | $ | 39,071 | ||||||||||||||||
Gross margin on product sales | $ | 3,144 | $ | 3,566 | $ | 4,125 | $ | 2,204 | $ | 15,727 | $ | 8,626 | $ | 9,391 | $ | 9,315 | ||||||||||||||||
Research and development expenses | $ | 37,373 | $ | 33,500 | $ | 38,265 | $ | 45,279 | $ | 37,492 | $ | 41,000 | $ | 35,773 | $ | 39,310 | ||||||||||||||||
General and administrative expenses (2) | $ | 11,947 | $ | 13,329 | $ | 12,386 | $ | 13,835 | $ | 16,971 | $ | 13,415 | $ | 12,663 | $ | 14,233 | ||||||||||||||||
Impairment of long lived assets | $ | — | $ | — | $ | — | $ | 1,458 | $ | — | $ | — | $ | — | $ | 28,396 | ||||||||||||||||
Gain on sale of pulmonary assets | $ | — | $ | — | $ | — | $ | (69,572 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Gain on termination of collaborative agreements, net | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (79,178 | ) | |||||||||||||||
Operating income (loss) | $ | (41,889 | ) | $ | (33,358 | ) | $ | (34,561 | ) | $ | 27,156 | $ | (25,969 | ) | $ | (27,988 | ) | $ | (19,572 | ) | $ | 37,381 | ||||||||||
Interest expense | $ | 3,918 | $ | 3,929 | $ | 3,988 | $ | 3,357 | $ | 4,933 | $ | 4,702 | $ | 4,773 | $ | 4,230 | ||||||||||||||||
Gain on extinguishment of debt | $ | — | $ | — | $ | — | $ | 50,149 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Net income (loss) | $ | (40,705 | ) | $ | (33,375 | ) | $ | (37,038 | ) | $ | 76,782 | $ | (25,673 | ) | $ | (27,510 | ) | $ | (18,620 | ) | $ | 39,042 | ||||||||||
Basic and diluted net income (loss) per share (3)(4) | $ | (0.44 | ) | $ | (0.36 | ) | $ | (0.40 | ) | $ | 0.83 | $ | (0.28 | ) | $ | (0.30 | ) | $ | (0.20 | ) | $ | 0.42 |
(1) | Exubera commercialization readiness revenue was reclassified from Product sales and royalties to Collaboration and other revenue. | |
(2) | Amortization of other intangible assets was previously separately disclosed, but has been combined with General and administrative expenses for the years ended December 31, 2008, 2007, and 2006. | |
(3) | Quarterly loss per share amounts may not total the year-to-date loss per share due to rounding. | |
(4) | During the fourth quarter of 2008 and 2007, there were approximately 81 dilutive shares and 578 dilutive shares, respectively, outstanding which did not change earnings per share. |
84
Table of Contents
Charged to | ||||||||||||||||
Balance at | Costs and | Balance At | ||||||||||||||
Beginning | Expenses, | End | ||||||||||||||
Description | of Year | Net of Reversals | Utilizations | of Year | ||||||||||||
(In thousands) | ||||||||||||||||
2008: | ||||||||||||||||
Allowance for doubtful accounts | $ | 33 | $ | 61 | $ | (2 | ) | $ | 92 | |||||||
Allowance for inventory reserves | $ | 5,772 | $ | 2,668 | $ | (3,451 | ) | $ | 4,989 | |||||||
2007: | ||||||||||||||||
Allowance for doubtful accounts | $ | 357 | $ | (16 | ) | $ | (308 | ) | $ | 33 | ||||||
Allowance for inventory reserves | $ | 4,160 | $ | 4,670 | $ | (3,058 | ) | $ | 5,772 | |||||||
2006: | ||||||||||||||||
Allowance for doubtful accounts | $ | 70 | $ | 380 | $ | (93 | ) | $ | 357 | |||||||
Allowance for inventory reserves | $ | 3,068 | $ | 2,592 | $ | (1,500 | ) | $ | 4,160 |
85
Table of Contents
86
Table of Contents
87
Table of Contents
Page | ||||
Reports of Independent Registered Public Accounting Firm | 53 | |||
Consolidated Balance Sheets at December 31, 2008 and 2007 | 55 | |||
Consolidated Statements of Operations for each of the three years in the period ended December 31, 2008 | 56 | |||
Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, 2008 | 57 | |||
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2008 | 58 | |||
Notes to Consolidated Financial Statements | 59 |
Exhibit | ||||||||
Number | Description of Documents | |||||||
2.1 | (23 | ) | Asset Purchase Agreement, dated October 20, 2008, by and between Nektar Therapeutics, a Delaware corporation, AeroGen, Inc., a Delaware corporation and wholly-owned subsidiary of Nektar Therapeutics, Novartis Pharmaceuticals Corporation, a Delaware corporation, and Novartis Pharma AG, a Swiss corporation+ | |||||
3.1 | (1 | ) | Certificate of Incorporation of Inhale Therapeutic Systems (Delaware), Inc. | |||||
3.2 | (2 | ) | Certificate of Amendment of the Amended Certificate of Incorporation of Inhale Therapeutic Systems, Inc. | |||||
3.3 | (3 | ) | Certificate of Designation of Series A Junior Participating Preferred Stock of Nektar Therapeutics | |||||
3.4 | (4 | ) | Certificate of Designation of Series B Convertible Preferred Stock of Nektar Therapeutics | |||||
3.5 | (5 | ) | Certificate of Ownership and Merger of Nektar Therapeutics | |||||
3.6 | (6 | ) | Amended and Restated Bylaws of Nektar Therapeutics | |||||
4.1 | Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5 and 3.6 | |||||||
4.2 | (5 | ) | Specimen Common Stock certificate | |||||
4.3 | (3 | ) | Rights Agreement, dated as of June 1, 2001, by and between Nektar Therapeutics and Mellon Investor Services LLC, as Rights Agent | |||||
4.4 | (3 | ) | Form of Right Certificate | |||||
4.5 | (7 | ) | Indenture, dated September 28, 2005, by and between Nektar Therapeutics, as Issuer, and J.P. Morgan Trust Company, National Association, as Trustee | |||||
4.6 | (7 | ) | Registration Right Agreement, dated as of September 28, 2005, among Nektar Therapeutics and entities named therein |
88
Table of Contents
Exhibit | ||||||||
Number | Description of Documents | |||||||
10.1 | (8 | ) | 1994 Non-Employee Directors’ Stock Option Plan, as amended++ | |||||
10.2 | (9 | ) | 1994 Employee Stock Purchase Plan, as amended and restated++ | |||||
10.3 | (10 | ) | 2000 Non-Officer Equity Incentive Plan, as amended and restated++ | |||||
10.4 | (11 | ) | Form of 2000 Non-Officer Equity Incentive Plan Stock Option Agreement (Nonstatutory Stock Option)++ | |||||
10.5 | (11 | ) | Form of 2000 Non-Officer Equity Incentive Plan Stock Option Agreement (Nonstatutory (Unapproved) Stock Option)++ | |||||
10.6 | (12 | ) | Forms of 2000 Non-Officer Equity Incentive Plan Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement++ | |||||
10.7 | (13 | ) | 2000 Equity Incentive Plan, as amended and restated++ | |||||
10.8 | (14 | ) | Form of Stock Option Agreement under the 2000 Equity Incentive Plan++ | |||||
10.9 | (12 | ) | Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under the 2000 Equity Incentive Plan++ | |||||
10.10 | (15 | ) | Form of Non-Employee Director Stock Option Agreement under the 2000 Equity Incentive Plan++ | |||||
10.11 | (15 | ) | Form of Non-Employee Director Restricted Stock Unit Agreement under the 2000 Equity Incentive Plan++ | |||||
10.12 | (15 | ) | Employment Transition and Separation Release Agreement, executed effective on September 4, 2007, with Louis Drapeau++ | |||||
10.13 | (15 | ) | Employment Transition and Separation Release Agreement, executed effective on October 5, 2007, with David Johnston++ | |||||
10.14 | (22 | ) | Compensation Plan for Non-Employee Directors, as amended and restated++ | |||||
10.15 | (10 | ) | 401(k) Retirement Plan++ | |||||
10.16 | (22 | ) | 2008 Discretionary Performance-Based Incentive Compensation Policy++ | |||||
10.17 | (23 | ) | Amended and Restated Change of Control Severance Benefit Plan++ | |||||
10.18 | (17 | ) | Transition and Retirement Agreement, dated March 13, 2006, with Ajit S. Gill++ | |||||
10.19 | (18 | ) | Letter Amendment, dated October 5, 2006, with Ajit S. Gill, amending that certain Transition and Retirement Agreement, dated March 13, 2006, with Mr. Gill++ | |||||
10.20 | (23 | ) | 2008 Equity Incentive Plan++ | |||||
10.21 | (23 | ) | Forms of Stock Option Grant Notice and of Stock Option Agreement under the 2008 Equity Incentive Plan++ | |||||
10.22 | (23 | ) | Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under the 2008 Equity Incentive Plan++ | |||||
10.23 | (19 | ) | Separation and General Release Agreement, dated November 17, 2008, with John S. Patton++ | |||||
10.24 | (20 | ) | Bonus and General Release Agreement, dated December 27, 2008, with Nevan C. Elam++ | |||||
10.25 | (15 | ) | Form of Severance Letter for executive officers of the company++ | |||||
10.26 | (23 | ) | Amended and Restated Letter Agreement, executed effective on December 1, 2008, with Howard W. Robin++ | |||||
10.27 | (23 | ) | Amended and Restated Letter Agreement, executed effective on December 1, 2008, with John Nicholson++ | |||||
10.28 | (23 | ) | Amended and Restated Letter Agreement, executed effective on December 1, 2008, with Bharatt M. Chowrira, Ph.D., J.D.++ |
89
Table of Contents
Exhibit | ||||||||
Number | Description of Documents | |||||||
10.29 | (23 | ) | Amended and Restated Letter Agreement, executed effective on December 1, 2008, with Dr. Randall Moreadith++ | |||||
10.30 | (15 | ) | Amended and Restated Built-to-Suite Lease between Nektar Therapeutics and BMR-201 Industrial Road LLC, dated August 17, 2004, as amended on January 11, 2005 and July 19, 2007 | |||||
10.31 | (21 | ) | Settlement Agreement and General Release, dated June 30, 2006, by and between The Board of Trustees of the University of Alabama, The University of Alabama in Huntsville, Nektar Therapeutics AL Corporation (a wholly-owned subsidiary of Nektar Therapeutics), Nektar Therapeutics and J. Milton Harris | |||||
10.32 | (15 | ) | Co-Development, License and Co-Promotion Agreement, dated August 1, 2007, between Nektar Therapeutics (and its subsidiaries) and Bayer Healthcare LLC+ | |||||
10.33 | (16 | ) | Termination Agreement and Mutual Release, dated November 9, 2007, between Nektar Therapeutics and Pfizer Inc.+ | |||||
10.34 | (23 | ) | Exclusive Research, Development, License and Manufacturing and Supply Agreement, by and among Nektar AL Corporation, Baxter Healthcare SA, and Baxter Healthcare Corporation, dated September 26, 2005, as amended+ | |||||
10.35 | (23 | ) | Exclusive License Agreement, dated December 31, 2008, between Nektar Therapeutics, a Delaware corporation, and Novartis Pharma AG, a Swiss corporation+ | |||||
21.1 | (23 | ) | Subsidiaries of Nektar Therapeutics | |||||
23.1 | (23 | ) | Consent of Independent Registered Public Accounting Firm | |||||
24 | Power of Attorney (reference is made to the signature page) | |||||||
31.1 | (23 | ) | Certification of Nektar Therapeutics’ principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a) | |||||
31.2 | (23 | ) | Certification of Nektar Therapeutics’ principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a) | |||||
32.1 | * | (23 | ) | Section 1350 Certifications |
+ | Confidential treatment with respect to specific portions of this Exhibit has been requested, and such portions are omitted and have been filed separately with the SEC. | |
++ | Management contract or compensatory plan or arrangement. | |
* | Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act, except as otherwise stated in such filing. | |
(1) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 1998. | |
(2) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2000. | |
(3) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on June 4, 2001. | |
(4) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on January 8, 2002. | |
(5) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on January 23, 2003. | |
(6) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on December 12, 2007. | |
(7) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on September 28, 2005. |
90
Table of Contents
(8) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 1996. | |
(9) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Registration Statement on Form S-8 (No. 333-98321), filed on August 19, 2002. | |
(10) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2004. | |
(11) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Registration Statement on Form S-8 (No. 333-71936), filed on October 19, 2001, as amended. | |
(12) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K, as amended, for the year ended December 31, 2005. | |
(13) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on June 7, 2006. | |
(14) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2000. | |
(15) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2007. | |
(16) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K for the year ended December 31, 2007. | |
(17) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K/A, filed on March 16, 2006. | |
(18) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2006. | |
(19) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on November 21, 2008. | |
(20) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on January 2, 2009. | |
(21) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2006. | |
(22) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2008. | |
(23) | Filed herewith. |
91
Table of Contents
By: | /s/John Nicholson | |||
John Nicholson | ||||
Senior Vice President and Chief Financial Officer | ||||
By: | /s/Jillian B. Thomsen | |||
Jillian B. Thomsen | ||||
Vice President and Chief Accounting Officer |
92
Table of Contents
SIGNATURE | TITLE | DATE | ||
/s/Howard W. Robin | Chief Executive Officer, President and Director (Principal Executive Officer) | March 6, 2009 | ||
/s/John Nicholson | Senior Vice President and Chief Financial Officer (Principal Financial Officer) | March 6, 2009 | ||
/s/Jillian B, Thomsen | Vice President Finance and Chief Accounting Officer (Principal Accounting Officer) | March 6, 2009 | ||
/s/Robert B. Chess | Director, Chairman of the Board of Directors | March 6, 2009 | ||
/s/Michael A. Brown | Director | March 6, 2009 | ||
/s/Hoyoung Huh | Director | March 6, 2009 | ||
/s/Joseph J. Krivulka | Director | March 6, 2009 | ||
/s/Christopher A. Kuebler | Director | March 6, 2009 | ||
/s/Lutz Lingnau | Director | March 6, 2009 | ||
/s/Susan Wang | Director | March 6, 2009 | ||
/s/Roy A. Whitfield | Director | March 6, 2009 |
93
Table of Contents
Exhibit | ||||||||
Number | Description of Documents | |||||||
2.1 | (23 | ) | Asset Purchase Agreement, dated October 20, 2008, by and between Nektar Therapeutics, a Delaware corporation, AeroGen, Inc., a Delaware corporation and wholly-owned subsidiary of Nektar Therapeutics, Novartis Pharmaceuticals Corporation, a Delaware corporation, and Novartis Pharma AG, a Swiss corporation+ | |||||
3.1 | (1 | ) | Certificate of Incorporation of Inhale Therapeutic Systems (Delaware), Inc. | |||||
3.2 | (2 | ) | Certificate of Amendment of the Amended Certificate of Incorporation of Inhale Therapeutic Systems, Inc. | |||||
3.3 | (3 | ) | Certificate of Designation of Series A Junior Participating Preferred Stock of Nektar Therapeutics | |||||
3.4 | (4 | ) | Certificate of Designation of Series B Convertible Preferred Stock of Nektar Therapeutics | |||||
3.5 | (5 | ) | Certificate of Ownership and Merger of Nektar Therapeutics | |||||
3.6 | (6 | ) | Amended and Restated Bylaws of Nektar Therapeutics | |||||
4.1 | Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5 and 3.6 | |||||||
4.2 | (5 | ) | Specimen Common Stock certificate | |||||
4.3 | (3 | ) | Rights Agreement, dated as of June 1, 2001, by and between Nektar Therapeutics and Mellon Investor Services LLC, as Rights Agent | |||||
4.4 | (3 | ) | Form of Right Certificate | |||||
4.5 | (7 | ) | Indenture, dated September 28, 2005, by and between Nektar Therapeutics, as Issuer, and J.P. Morgan Trust Company, National Association, as Trustee | |||||
4.6 | (7 | ) | Registration Right Agreement, dated as of September 28, 2005, among Nektar Therapeutics and entities named therein | |||||
10.1 | (8 | ) | 1994 Non-Employee Directors’ Stock Option Plan, as amended++ | |||||
10.2 | (9 | ) | 1994 Employee Stock Purchase Plan, as amended and restated++ | |||||
10.3 | (10 | ) | 2000 Non-Officer Equity Incentive Plan, as amended and restated++ | |||||
10.4 | (11 | ) | Form of 2000 Non-Officer Equity Incentive Plan Stock Option Agreement (Nonstatutory Stock Option)++ | |||||
10.5 | (11 | ) | Form of 2000 Non-Officer Equity Incentive Plan Stock Option Agreement (Nonstatutory (Unapproved) Stock Option)++ | |||||
10.6 | (12 | ) | Forms of 2000 Non-Officer Equity Incentive Plan Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement++ | |||||
10.7 | (13 | ) | 2000 Equity Incentive Plan, as amended and restated++ | |||||
10.8 | (14 | ) | Form of Stock Option Agreement under the 2000 Equity Incentive Plan++ | |||||
10.9 | (12 | ) | Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under the 2000 Equity Incentive Plan++ | |||||
10.10 | (15 | ) | Form of Non-Employee Director Stock Option Agreement under the 2000 Equity Incentive Plan++ | |||||
10.11 | (15 | ) | Form of Non-Employee Director Restricted Stock Unit Agreement under the 2000 Equity Incentive Plan++ | |||||
10.12 | (15 | ) | Employment Transition and Separation Release Agreement, executed effective on September 4, 2007, with Louis Drapeau++ | |||||
10.13 | (15 | ) | Employment Transition and Separation Release Agreement, executed effective on October 5, 2007, with David Johnston++ | |||||
94
Table of Contents
Exhibit | ||||||||
Number | Description of Documents | |||||||
10.14 | (22 | ) | Compensation Plan for Non-Employee Directors, as amended and restated++ | |||||
10.15 | (10 | ) | 401(k) Retirement Plan++ | |||||
10.16 | (22 | ) | 2008 Discretionary Performance-Based Incentive Compensation Policy++ | |||||
10.17 | (23 | ) | Amended and Restated Change of Control Severance Benefit Plan++ | |||||
10.18 | (17 | ) | Transition and Retirement Agreement, dated March 13, 2006, with Ajit S. Gill++ | |||||
10.19 | (18 | ) | Letter Amendment, dated October 5, 2006, with Ajit S. Gill, amending that certain Transition and Retirement Agreement, dated March 13, 2006, with Mr. Gill++ | |||||
10.20 | (23 | ) | 2008 Equity Incentive Plan++ | |||||
10.21 | (23 | ) | Form of Stock Option Agreement under the 2008 Equity Incentive Plan++ | |||||
10.22 | (23 | ) | Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under the 2008 Equity Incentive Plan++ | |||||
10.23 | (19 | ) | Separation and General Release Agreement, dated November 17, 2008, with John S. Patton++ | |||||
10.24 | (20 | ) | Bonus and General Release Agreement, dated December 27, 2008, with Nevan C. Elam++ | |||||
10.25 | (15 | ) | Form of Severance Letter for executive officers of the company++ | |||||
10.26 | (23 | ) | Amended and Restated Letter Agreement, executed effective on December 1, 2008, with Howard W. Robin++ | |||||
10.27 | (23 | ) | Amended and Restated Letter Agreement, executed effective on December 1, 2008, with John Nicholson++ | |||||
10.28 | (23 | ) | Amended and Restated Letter Agreement, executed effective on December 1, 2008, with Bharatt M. Chowrira, Ph.D., J.D.++ | |||||
10.29 | (23 | ) | Amended and Restated Letter Agreement, executed effective on December 1, 2008, with Dr. Randall Moreadith++ | |||||
10.30 | (15 | ) | Amended and Restated Built-to-Suite Lease between Nektar Therapeutics and BMR-201 Industrial Road LLC, dated August 17, 2004, as amended on January 11, 2005 and July 19, 2007 | |||||
10.31 | (21 | ) | Settlement Agreement and General Release, dated June 30, 2006, by and between The Board of Trustees of the University of Alabama, The University of Alabama in Huntsville, Nektar Therapeutics AL Corporation (a wholly-owned subsidiary of Nektar Therapeutics), Nektar Therapeutics and J. Milton Harris | |||||
10.32 | (15 | ) | Co-Development, License and Co-Promotion Agreement, dated August 1, 2007, between Nektar Therapeutics (and its subsidiaries) and Bayer Healthcare LLC+ | |||||
10.33 | (16 | ) | Termination Agreement and Mutual Release, dated November 9, 2007, between Nektar Therapeutics and Pfizer Inc.+ | |||||
10.34 | (23 | ) | Exclusive Research, Development, License and Manufacturing and Supply Agreement, by and among Nektar AL Corporation, Baxter Healthcare SA, and Baxter Healthcare Corporation, dated September 26, 2005, as amended+ | |||||
10.35 | (23 | ) | Exclusive License Agreement, dated December 31, 2008, between Nektar Therapeutics, a Delaware corporation, and Novartis Pharma AG, a Swiss corporation+ | |||||
21.1 | (23 | ) | Subsidiaries of Nektar Therapeutics | |||||
23.1 | (23 | ) | Consent of Independent Registered Public Accounting Firm |
95
Table of Contents
Exhibit | ||||||||
Number | Description of Documents | |||||||
24 | Power of Attorney (reference is made to the signature page) | |||||||
31.1 | (23 | ) | Certification of Nektar Therapeutics’ principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a) | |||||
31.2 | (23 | ) | Certification of Nektar Therapeutics’ principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a) | |||||
32.1 | * | (23 | ) | Section 1350 Certifications |
+ | Confidential treatment with respect to specific portions of this Exhibit has been requested, and such portions are omitted and have been filed separately with the SEC. | |
++ | Management contract or compensatory plan or arrangement. | |
* | Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act, except as otherwise stated in such filing. | |
(1) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 1998. | |
(2) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2000. | |
(3) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on June 4, 2001. | |
(4) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on January 8, 2002. | |
(5) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on January 23, 2003. | |
(6) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on December 12, 2007. | |
(7) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on September 28, 2005. | |
(8) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 1996. | |
(9) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Registration Statement on Form S-8 (No. 333-98321), filed on August 19, 2002. | |
(10) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2004. | |
(11) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Registration Statement on Form S-8 (No. 333-71936), filed on October 19, 2001, as amended. | |
(12) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K, as amended, for the year ended December 31, 2005. | |
(13) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on June 7, 2006. | |
(14) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2000. | |
(15) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2007. | |
(16) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K for the year ended December 31, 2007. | |
(17) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K/A, filed on March 16, 2006. | |
(18) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2006. | |
(19) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on November 21, 2008. | |
(20) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on January 2, 2009. | |
(21) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2006. | |
(22) | Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2008. | |
(23) | Filed herewith. |
96