Astex Pharmaceuticals (SUPG) 10-Q 2001 Q3 Quarterly report

QuickLinks -- Click here to rapidly navigate through this document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

/x/
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2001
or

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to              

Commission file number 0-27628

SUPERGEN, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	91-1841574 (IRS Employer Identification Number)
4140 Dublin Blvd, Suite 200, Dublin, California (Address of principal executive offices)	94568 (Zip Code)

(925) 560-0100
(Registrant's 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 / /

APPLICABLE ONLY TO CORPORATE ISSUERS

    The number of shares of the registrant's Common Stock, $.001 par value, outstanding as of November 8, 2001, was 32,757,597.

TABLE OF CONTENTS

			Page No.
PART I	FINANCIAL INFORMATION
	Item 1—	Financial Statements (Unaudited)
		Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000	3
		Consolidated Statements of Operations for the three and nine month periods ended September 30, 2001 and 2000	4
		Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2001 and 2000	5
		Notes to Consolidated Financial Statements	6
	Item 2—	Management's Discussion and Analysis of Financial Condition and Results of Operations	10
	Item 3—	Quantitative and Qualitative Disclosures About Market Risk	18
PART II	OTHER INFORMATION
	Item 2—	Changes in Securities	19
	Item 6—	Exhibits and Reports on Form 8-K	19
SIGNATURES			20

2

SUPERGEN, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)

			September 30, 2001			December 31, 2000
			(Unaudited)			(Note 1)
ASSETS
Current assets:
	Cash and cash equivalents		$	16,895		$	70,731
	Marketable securities			61,058			21,044
	Accounts receivable			2,608			2,023
	Other receivables			164			1,350
	Inventories			1,485			1,648
	Prepaid expenses and other current assets			2,556			2,520
		Total current assets		84,766			99,316
Marketable securities—non-current				7,606			38,828
Investment in stock of related parties				20,363			13,250
Due from related parties				486			371
Property, plant and equipment, net				6,568			5,438
Developed technology at cost, net				1,123			1,264
Goodwill and other intangibles, net				1,265			1,588
Restricted cash				3,337			3,212
Other assets				37			66
		Total assets	$	125,551		$	163,333
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable and accrued liabilities		$	6,749		$	8,024
	Deferred revenue			1,000			1,000
	Accrued employee benefits			1,885			1,197
		Total current liabilities		9,634			10,221
Deferred revenue—non-current				2,417			3,167
		Total liabilities		12,051			13,388
Commitments and contingencies
Stockholders' equity:
	Preferred stock, $.001 par value; 2,000,000 shares authorized; none outstanding			—			—
	Common stock, $.001 par value; 150,000,000 shares authorized; 32,843,097 and 33,383,723 shares issued and outstanding at September 30, 2001 and December 31, 2000, respectively			33			33
	Additional paid in capital			283,916			287,677
	Deferred compensation			(141	)		(197	)
	Accumulated other comprehensive loss			(1,993	)		(9,407	)
	Accumulated deficit			(168,315	)		(128,161	)
		Total stockholders' equity		113,500			149,945
		Total liabilities and stockholders' equity	$	125,551		$	163,333

See accompanying notes to consolidated financial statements

3

SUPERGEN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

			Three months ended September 30,						Nine months ended September 30,
			2001			2000			2001			2000
Revenues:
	Net sales revenue		$	2,593		$	450		$	7,445		$	4,006
	Other revenue			250			343			750			737
		Total revenue		2,843			793			8,195			4,743
Operating expenses:
	Cost of sales			623			163			1,898			938
	Research and development			12,116			7,955			35,577			22,601
	Selling, general, and administrative			4,752			3,511			15,522			10,928
	Acquisition of in-process research and development			—			1,585			—			1,585
		Total operating expenses		17,491			13,214			52,997			36,052
Loss from operations				(14,648	)		(12,421	)		(44,802	)		(31,309	)
Interest income				1,201			2,528			4,648			5,969
Net loss			$	(13,447	)	$	(9,893	)	$	(40,154	)	$	(25,340	)
Basic and diluted net loss per share			$	(0.41	)	$	(0.30	)	$	(1.22	)	$	(0.81	)
Weighted average shares used in basic and diluted net loss per share calculation				32,895			33,150			32,971			31,187

See accompanying notes to consolidated financial statements

4

SUPERGEN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

				Nine months ended September 30,
				2001			2000
Operating activities:
	Net loss			$	(40,154	)	$	(25,340	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization			1,356			1,428
		Amortization of deferred revenue			(750	)		(644	)
		Expense related to stock options and warrants granted to non-employees			665			653
		Non-cash charge related to acquisition of in-process research and development			—			1,585
		Non-cash charge related to acquisition of license agreement			369			—
		Changes in operating assets and liabilities:
			Accounts receivable		(585	)		1,212
			Inventories		163			(67	)
			Prepaid expenses and other assets		(7	)		(686	)
			Due from related parties		(115	)		—
			Other receivables		1,186			4,907
			Restricted cash		(125	)		(3,164	)
			Accounts payable and other liabilities		(587	)		927
Net cash used in operating activities					(38,584	)		(19,189	)
Investing activities:
	Purchases of marketable securities				(38,423	)		(51,944	)
	Sales or maturities of marketable securities				30,185			5,892
	Purchase of equity investment in related party				—			(5,000	)
	Purchase of equity investment in Peregrine Pharmaceuticals				(253	)		—
	Purchases of property and equipment				(1,966	)		(529	)
Net cash used in investing activities					(10,457	)		(51,581	)
Financing activities:
	Issuance of common stock, net of issuance costs				3,504			134,414
	Repurchases of common stock				(8,299	)		—
Net cash provided by (used in) financing activities					(4,795	)		134,414
Net increase (decrease) in cash and cash equivalents					(53,836	)		63,644
Cash and cash equivalents at beginning of period					70,731			22,546
Cash and cash equivalents at end of period				$	16,895		$	86,190
Supplemental Disclosures of Cash Flow Information:
	Non-cash investing and financing activities:
		Issuance of warrant related to consulting agreement		$	758		$	—

See accompanying notes to consolidated financial statements

5

SUPERGEN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2001

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

    The accompanying unaudited consolidated financial statements of SuperGen, Inc. ("we," "SuperGen" or "the Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2001 are not necessarily indicative of results that may be expected for the year ended December 31, 2001.

    The balance sheet at December 31, 2000 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.

    For further information, refer to the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended December 31, 2000.

NOTE 2. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

    Cash and cash equivalents include bank demand deposits, certificates of deposit, investments in debt securities with maturities of three months or less when purchased, and an interest in money market funds which invest primarily in U.S. government obligations and commercial paper. These instruments are highly liquid and are subject to insignificant risk.

    Investments in marketable securities consist of corporate or government debt securities that have a readily ascertainable market value and are readily marketable. We report these investments at fair value. We designate all debt securities as available-for-sale, with unrealized gains and losses included in equity.

    The following is a summary of available-for-sale securities as of September 30, 2001 (in thousands):

		Amortized Cost		Gross Unrealized Gains (Losses)			Estimated Fair Value
U.S. corporate debt securities		$	82,839	$	828		$	83,667
U.S. government debt securities			468		6			474
Marketable equity securities			22,919		(2,827	)		20,092
	Total	$	106,226	$	(1,993	)	$	104,233

6

    Balance sheet classification as of September 30, 2001 (in thousands):

		Amortized Cost		Gross Unrealized Gains (Losses)			Estimated Fair Value
Amounts included in cash and cash equivalents.		$	15,706	$	—		$	15,706
Marketable securities, current			60,395		663			61,058
Marketable securities, non-current			7,626		(20	)		7,606
Amounts included in investment in stock of related parties			22,499		(2,636	)		19,863
	Total	$	106,226	$	(1,993	)	$	104,233

    Available-for-sale securities by contractual maturity (in thousands):

		Estimated Fair Value
		September 30, 2001		December 31, 2000
Debt securities:
	Due in one year or less	$	76,764	$	89,583
	Due after one year through three years		7,377		38,675
			84,141		128,258
Marketable equity securities			20,092		12,903
	Total	$	104,233	$	141,161

    There were no realized gains and losses for the three and nine month periods ended September 30, 2001 and 2000.

NOTE 3. INVENTORIES

    Inventories consist of the following (in thousands):

	September 30, 2001		December 31, 2000
Raw material	$	176	$	176
Work in process		505		720
Finished goods		804		752
	$	1,485	$	1,648

7

NOTE 4. STOCKHOLDERS' EQUITY

Stock Issuance to Abbott Laboratories

    In July 2001, we issued 181,818 shares of our common stock to Abbott Laboratories ("Abbott") in exchange for $2,500,000 in cash. This equity investment was the result of our achievement of a milestone in connection with our Worldwide Sales, Distribution, and Development Agreement with Abbott. The calculation of the number of shares issued to Abbott was based on the average market price of our stock for a twenty day period surrounding the milestone achievement date.

Stock Repurchase Plan

    In September 2000, the SuperGen Board of Directors authorized a stock repurchase plan to acquire, in the open market, an aggregate of up to one million shares of our common stock, at prices not to exceed $22.00 per share or $20,000,000 in total. In March 2001, the Board authorized the repurchase of an additional one million shares, but maintained the $20,000,000 repurchase total. During the nine months ended September 30, 2001, we repurchased 864,500 shares of our common stock at a cost, net of commissions, of $8,299,000. All shares repurchased have been retired.

NOTE 5. ACQUISITION OF LICENSE FROM PEREGRINE PHARMACEUTICALS

    In February 2001, we completed a transaction to license a platform drug-targeting technology known as Vascular Targeting Agent ("VTA") and to acquire stock from Peregrine Pharmaceuticals, formerly known as Techniclone Corp. Total consideration for this transaction was $600,000 cash. We received 150,000 shares of Peregrine common stock valued at $253,000, which we included as part of Marketable Securities—non-current. The remaining $347,000 cash payment was allocated to the licensed technology which specifically relates to the Vascular Endothelial Growth Factor ("VEGF") and was recorded as research and development expense.

    The terms of the agreement require that we pay milestone payments and royalties to Peregrine based on the net revenues of any drugs commercialized using the VEGF technology. These payments could ultimately total $8 million.

NOTE 6. COMPREHENSIVE LOSS

    For the three months ended September 30, 2001 and 2000, total comprehensive losses amounted to $20,191,000 and $15,731,000, respectively. For the nine months ended September 30, 2001 and 2000, total comprehensive losses amounted to $32,740,000 and $26,634,000, respectively. Comprehensive losses consisted primarily of the net losses and unrealized gains or losses on investments.

NOTE 7. BASIC NET LOSS PER SHARE

    Basic and diluted net loss per common share is computed by dividing net loss by the weighted average number of shares outstanding during the quarter.

    As we have reported operating losses each period since our inception, the effect of assuming the exercise of options and warrants would be anti-dilutive and, therefore, basic and diluted net loss per share are the same.

8

NOTE 8. RECENT ACCOUNTING PRONOUNCEMENTS

    In July 2001, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"), and No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141 eliminates the pooling-of-interests method of accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. SFAS 141 further clarifies the criteria to recognize intangible assets separately from goodwill. The requirements of SFAS 141 are effective for any business combination accounted for by the purchase method that is completed after June 30, 2001. Under SFAS 142, which is effective for fiscal years beginning after December 15, 2001, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives (but with no maximum life). We will adopt SFAS 142 on January 1, 2002. At September 30, 2001, we had approximately $800,000 in goodwill, but do not expect the adoption of SFAS 142 to have a material impact on our financial position or results of operations.

NOTE 9. AGREEMENT WITH EUROGEN PHARMACEUTICALS

    In September 2001, we entered into a Supply and Distribution Agreement with EuroGen Pharmaceuticals Ltd. ("EuroGen"), a company incorporated and registered in England and Wales. Under the agreement, we granted EuroGen the exclusive European and South African rights to promote and sell certain of our existing generic and other products or compounds. The agreement also establishes a process for granting EuroGen rights to sell additional products in Europe and South Africa, subject to our compliance with our other existing licensing and distribution arrangements. After complying with these existing obligations, we will be required to offer EuroGen the option to obtain European and South African rights to our future products. EuroGen will seek and pay for all necessary regulatory approvals and authorizations necessary for the commercial sale of the products in the territories where they market and sell the products.

    EuroGen is not yet an operating company, but we intend to hold an equity interest in the company once it raises additional capital and is operational. We have agreed to loan EuroGen up to $250,000 under a line of credit arrangement designed to cover start-up expenses. At September 30, 2001, we had loaned $150,000 to EuroGen under this credit arrangement. If EuroGen is unable to adequately fund its operations, we may not recover amounts owed to us or realize any income or benefit from the relationship.

9

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion together with our consolidated financial statements and related notes included elsewhere in this report. The results discussed below are not necessarily indicative of the results to be expected in any future periods. To the extent that the information presented in this discussion addresses financial projections, information or expectations about our products or markets or otherwise makes statements about future events, such statements are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made.

Overview

    We are an emerging pharmaceutical company dedicated to the acquisition, rapid development and commercialization of oncology therapies for solid tumors and hematological malignancies. We seek to minimize the time, expense and technical risk associated with drug commercialization by identifying and acquiring pharmaceutical compounds in the later stages of development, rather than committing significant resources to the research phase of drug discovery.

    Our primary objective is to become a leading supplier of oncology therapies for solid tumors and hematological malignancies. Key elements of our strategy include:

•

Licensing or buying rights to lead compounds rather than engaging in pure discovery research.



•

Capitalizing on our existing clinical expertise to maximize the commercial value of our products.



•

Utilizing technologies to develop products for improved delivery and administration of existing compounds.



•

Expanding the scope of our development efforts in oncology.

    Since our incorporation in 1991 we have devoted substantially all of our resources to our product development efforts. Our product revenues to date have been limited and have been principally from sales of Nipent, which we are marketing in the United States for the treatment of hairy cell leukemia. As a result of our substantial research and development expenditures and minimal product revenues, we have incurred cumulative losses of $168.3 million for the period from inception through September 30, 2001. These losses include non-cash charges of $20 million for the acquisition of in-process research and development.

    We have completed patient enrollment in each of the three separate stand-alone pivotal Phase III clinical trials with rubitecan for treatment of pancreatic cancer. The three studies—"Gemzar refractory," where patients who failed treatment with Gemzar were randomized to either rubitecan or 5-FU; "Chemotherapy refractory," where patients who have failed multiple types of chemotherapy are randomized to either rubitecan or the next best therapy; and "Chemotherapy naïve," where patients who have had no prior chemotherapy are randomized to rubitecan or Gemzar—have enrolled a combined total of 1,800 patients. The process of collecting data from these clinical studies is dependent upon monitors traveling to each of the clinical sites, and this process was delayed by several weeks due in part to the terrorist events of September 11. Assuming favorable results from any one or a combination of our Phase III rubitecan studies, we anticipate filing a New Drug Application ("NDA") with the Food and Drug Administration ("FDA") in the first half of 2002.

    We are beginning Phase III clinical trials with decitabine for treatment of myelodysplastic syndrome, and are continuing to pursue Phase I and II clinical trials with rubitecan and a number of

10

other drug candidates for treatment of other cancers and hematological malignancies. We are also conducting trials with Nipent, currently approved for hairy cell leukemia, for use in other indications such as graft-versus-host disease, chronic lymphocytic leukemia, and non-Hodgkin's lymphoma. To support these additional trials, we are also continuing to increase our clinical development staff.

    We expect to continue to incur operating losses at least through 2002. This is due primarily to projected spending for the development of our product candidates. The level of our expenditures related to ongoing clinical trials has increased significantly throughout the current year as we expand the number of clinical trials and increase the patient accrual into these trials. Our ability to become profitable will depend upon a variety of factors, including regulatory approvals of our products, the timing of the introduction and market acceptance of our products and competing products, increases in sales and marketing expenses related to the launch of rubitecan and other drug candidates, and our ability to control our costs.

    As part of our strategy, we intend either to market our products directly or co-promote these products with partners. In late 1999, we entered into an alliance with Abbott Laboratories ("Abbott") under which Abbott will undertake to market and distribute rubitecan. We will co-promote rubitecan with Abbott in the United States and Abbott has exclusive rights to market rubitecan outside of the United States. In the U.S. market, we will share profits from product sales equally with Abbott. Outside the U.S. market, Abbott will pay us royalties and transfer fees based on product sales. We will remain responsible for pursuing and funding the clinical development of rubitecan and obtaining regulatory approval for the product in the United States, Canada and the member states of the European Union. In July 2001, we received an equity milestone payment of $2.5 million from Abbott under the terms of the marketing agreement for rubitecan.

    In 2000, we entered into agreements with AVI BioPharma, Inc. ("AVI") related to the development and marketing rights to Avicine™, AVI's therapeutic vaccine for colorectal cancer, which is now entering Phase III clinical trials. Under these agreements, we will share U.S. developmental and regulatory approval costs for Avicine and upon commercialization in the U.S., we will split all U.S. profits. AVI and SuperGen will jointly determine the optimum development strategy for the international marketplace and will share all profits received. In addition to an up front equity investment, we are obligated to make additional payments to AVI based on successful achievement of developmental, regulatory approval, and commercialization milestones over the next several years. As part of this agreement, we obtained the right of first discussion to all of AVI's oncology compounds and an option to acquire an additional 10% of AVI's common stock. Avicine will require significant additional expenditures to complete the clinical development necessary to gain marketing approval from the FDA and equivalent foreign regulatory agencies.

Results of Operations

Three months ended September 30, 2001 compared to three months ended September 30, 2000.

    Revenues were $2.8 million in the third quarter of 2001 compared to $0.8 million in the third quarter of 2000. The increase was due primarily to increased domestic sales of Nipent, our drug currently approved for the treatment of hairy cell leukemia. The increase in domestic Nipent sales was attributed to additional marketing efforts by our increased sales and marketing staff and purchases of Nipent by outside organizations for expanded clinical trials using Nipent for the treatment of chronic lymphocytic leukemia, low grade non-Hodgkin's lymphoma, and graft-versus-host disease. In addition, we experienced higher sales volume in early July 2001 due to a modest price increase that went into effect on July 15, 2001. Unlike our Nipent sales efforts in the U.S. market where we call on clinicians directly, our role in Europe is currently limited to that of a supplier. As such, we do not have a direct influence on Nipent sales at the clinical level, making their timing and magnitude difficult to predict and dependent on the efforts of our European distributor. We had no European sales of Nipent in

11

either the third quarter of 2001 or 2000. Based on discussions with our European distributor, we do not expect to realize further European sales for the remainder of 2001.

    Cost of sales as a percentage of net sales revenue was 24% in the third quarter of 2001 compared to 36% during the same period in 2000. The improvement in cost of sales percentage in 2001 was due to a larger proportion of our sales related to Nipent, which is sold at higher margins than our other generic products. Current margins may not be indicative of future margins due to possible variations in product mix, average selling prices, and manufacturing costs.

    Research and development expenses were $12.1 million in the third quarter of 2001 compared to $8.0 million in 2000. The increase was due primarily to expenditures relating to our clinical trial programs with rubitecan, Nipent, decitabine, and Avicine; costs associated with our drug development programs for generic versions of paclitaxel and daunorubicin; as well as additional personnel expenses related to supporting both our clinical trial and drug development programs.

    Selling, general, and administrative expenses were $4.8 million in the third quarter of 2001 compared to $3.5 million in 2000. This increase was due primarily to costs associated with the expansion of the sales, marketing, professional services, information technology, and general and administrative staffs together with increased costs associated with trade shows, speakers' programs, and symposiums. In addition, expenses in 2001 reflect additional rent, insurance, and depreciation expense related to the move in December 2000 of our headquarters offices from a 9,000 square foot location to a new 50,000 square foot facility.

    Interest income was $1.2 million in the third quarter of 2001 compared to $2.5 million in 2000. This was due to lower available cash and marketable securities balances and a decline in interest rates.

Nine months ended September 30, 2001 compared to nine months ended September 30, 2000.

    Revenues were $8.2 million in the first nine months of 2001 compared to $4.7 million in the first nine months of 2000. The increase was due primarily to higher domestic and European sales of Nipent, our drug currently approved for the treatment of hairy cell leukemia. The increase in U.S. sales was attributed to additional marketing efforts by our increased sales and marketing staff and purchases of Nipent by outside organizations for expanded clinical trials using Nipent for the treatment of chronic lymphocytic leukemia, low grade non-Hodgkin's lymphoma, and graft-versus-host disease. Unlike our Nipent sales efforts in the U.S. market where we call on clinicians directly, our role in Europe is currently limited to that of a supplier. As such, we do not have a direct influence on Nipent sales at the clinical level, making their timing and magnitude difficult to predict and dependent on the efforts of our European distributor. We had approximately $338,000 in European sales of Nipent in the first nine months of 2001, but had no such sales in the comparable period in 2000. Based on discussions with our European distributor, we do not expect to realize further European sales in the remainder of 2001.

    Cost of sales as a percentage of net sales revenue was 25% in the first nine months of 2001 compared to 23% during the same period in 2000. The increased cost of sales percentage is due primarily to European sales of Nipent that were made at a lower unit selling price under a supply agreement for sale outside North America. There were no European Nipent sales in 2000. Current margins may not be indicative of future margins due to possible variations in average selling prices, product mix, and manufacturing costs.

    Research and development expenses were $35.6 million in the first nine months of 2001 compared to $22.6 million in 2000. The increase was due primarily to expenditures relating to our clinical trial programs with rubitecan, decitabine, and Avicine, as well as additional personnel expenses related to supporting our clinical trial and drug development programs.

12

    Selling, general, and administrative expenses were $15.5 million in the first nine months of 2001 compared to $10.9 million in 2000. This increase was due primarily to costs associated with the expansion of the sales, marketing, professional services, information technology, and general and administrative staffs together with increased costs associated with trade shows, speakers' programs, and symposiums. In addition, expenses in 2001 reflect additional rent and depreciation expense related to the move in December 2000 of our headquarters offices from a 9,000 square foot location to a new 50,000 square foot facility.

    Interest income was $4.6 million in the first nine months of 2001 compared to $6.0 million in 2000. The decline was due to lower available cash and marketable securities balances and lower interest rates.

Liquidity and Capital Resources

    Our cash, cash equivalents, and both short and long-term marketable securities totaled $85.6 million at September 30, 2001, compared to $130.6 million at December 31, 2000. In addition, at September 30, 2001 we held approximately 2.7 million shares of registered stock of AVI BioPharma, Inc., with a market value of $19.9 million.

    The net cash used in operating activities in the first nine months of 2001 was $38.6 million, which consisted primarily of the net loss of $40.2 million offset by a reduction in other receivables of $1.2 million. In the third quarter of 2001, we received an equity milestone payment of $2.5 million from Abbott Laboratories. During the first nine months of 2001 we repurchased 864,500 shares of our common stock on the open market at a net cost of $8.3 million.

    We believe that our current cash, cash equivalents and marketable securities will satisfy our cash requirements at least through December 31, 2002. Our primary planned uses of cash during that period are:

•

for research and development activities, including expansion of clinical trials;



•

to enhance sales and marketing efforts in advance of the potential launch of rubitecan;



•

to lease and improve new facilities and potentially enhance manufacturing capabilities; and



•

to finance possible acquisitions of complimentary products, technologies and businesses.

We believe that our need for additional funding will increase in the future and that our continued ability to raise additional funds from external sources will be critical to our success. We continue to actively consider future contractual arrangements that would require significant financial commitments. If we experience currently unanticipated cash requirements, we could require additional capital much sooner than presently anticipated. We may seek such additional funding through public or private financings or collaborative or other arrangements with third parties. We may not be able to obtain additional funds on acceptable terms, if at all.

Factors Affecting Future Operating Results

You should carefully consider the risks described below before making an investment decision. The risks and uncertainties described below are not the only ones facing our company. Our business operations may be impaired by additional risks and uncertainties that we do not know of or that we currently consider immaterial.

Our business, results of operations or cash flows may be adversely affected if any of the following risks actually occur. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment.

13

This report also contains and incorporates by reference forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this Report.

    If the results of further clinical testing indicate that our proposed products are not safe and effective for human use, our business will suffer.  Most of our products are in the development stage and prior to their sale will require the commitment of substantial resources. All of the potential proprietary products that we are currently developing will require extensive pre-clinical and clinical testing before we can submit any application for regulatory approval. Before obtaining regulatory approvals for the commercial sale of any of our products, we must demonstrate through pre-clinical testing and clinical trials that our product candidates are safe and effective in humans. Conducting clinical trials is a lengthy, expensive and uncertain process. Completion of clinical trials may take several years or more. The length of time generally varies substantially according to the type, complexity, novelty and intended use of the product candidate. Our clinical trials may be suspended at any time if we or the FDA believe the patients participating in our studies are exposed to unacceptable health risks. We may encounter problems in our studies which will cause us or the FDA to delay or suspend the studies. Our commencement and rate of completion of clinical trials may be delayed by many factors, including:

•

ineffectiveness of the study compound, or perceptions by physicians that the compound is not effective for a particular indication;



•

inability to manufacture sufficient quantities of compounds for use in clinical trials;



•

inability to obtain FDA approval of our clinical trial protocols;



•

slower than expected rate of patient recruitment;



•

inability to adequately follow patients after treatment;



•

unforeseen safety issues;



•

lack of efficacy during the clinical trials; or



•

government or regulatory delays.

    The clinical results we have obtained to date do not necessarily predict that the results of further testing, including later-stage controlled human clinical testing, will be successful. If our trials are not successful, or are perceived as not successful by the FDA or physicians, our business, financial condition and results of operations will be harmed.

    If we fail to obtain regulatory marketing approvals in a timely manner, our business will suffer.  Even if we believe our trials are successful, the FDA may require additional clinical testing and, therefore we would have to commit additional unanticipated resources. The FDA has substantial discretion in the drug approval process. We cannot assure you that we will obtain the necessary regulatory approvals to market our products. The FDA and comparable agencies in foreign countries impose substantial requirements for the introduction of both new pharmaceutical products and generic products through lengthy and detailed clinical testing procedures, sampling activities and other costly and time-consuming compliance procedures. We have not yet received marketing approval for any of our internally developed proprietary products. Our proprietary drugs and products will require lengthy clinical trials along with FDA and comparable foreign agency review as new drugs. Our generic drugs will also require regulatory review and approval.

    We cannot predict with certainty if or when we might submit for regulatory review those products currently under development. Once we submit our potential products for review, we cannot assure you that the FDA or other regulatory agencies will grant approvals for any of our pharmaceutical products on a timely basis or at all. Sales of our products outside the United States will be subject to foreign

14

regulatory requirements governing clinical trials and marketing approval. These requirements vary widely from country to country and could delay the introduction of our products in those countries.

    If our relationship with Abbott is not successful, our business could be harmed.  Our strategic relationship with Abbott is important to our success. However, that relationship may not be successful. We cannot assure you that we will receive any additional payments from Abbott or that the relationship will be commercially successful. The transactions contemplated by our agreements with Abbott, including the equity purchases and cash payments, are subject to numerous risks and conditions. For example:

•

we may fail to achieve clinical and sales milestones;



•

rubitecan may fail to achieve regulatory approval domestically and internationally;



•

rubitecan may not be commercially successful;



•

Abbott may fail to perform its obligations under our agreements, such as failing to devote sufficient resources to marketing rubitecan; and



•

our agreements with Abbott may be terminated in their entirety or on a territory-by-territory basis against our will.

    The occurrence of any of these events could severely harm our business.

    We have granted certain rights to Abbott that could negatively affect your investment.  We have granted Abbott an option to purchase shares of our common stock so that upon its exercise Abbott will own up to 49% of our outstanding common stock. Our ability to satisfy this contractual obligation is subject to a number of conditions outside of our control, including:

•

stockholder approval of a potential change in control under the rules of the Nasdaq National Market; and



•

clearance of the purchase by federal antitrust regulators.

    If we do not satisfy any of these conditions, Abbott could terminate our relationship. If we obtain all necessary approvals and Abbott exercises its option, the stock ownership of our other stockholders will be diluted and Abbott will have significant influence over us. Abbott's right to exercise this option, and Abbott's share ownership after exercise, may discourage other parties from acquiring us.

    Abbott has a right of first discussion with respect to our product portfolio and a right of first refusal to acquire us. These rights may discourage third parties from bidding on any assets that we wish to sell or license and may discourage acquisition bids. These provisions may limit the price that investors might be willing to pay in the future for shares of our common stock.

    We have a history of operating losses and an accumulated deficit, we may not achieve or maintain profitability in the future, and we may need to obtain additional funding.  We incurred cumulative losses of $168.3 million for the period from inception through September 30, 2001. These losses included non-cash charges of $20.0 million for the acquisition of in-process research and development. Currently we are not profitable and we expect to continue to incur substantial operating losses at least through 2002. Our ability to achieve profitability will depend primarily on our ability to obtain regulatory approval for and successfully commercialize rubitecan. Our success will also depend, to a lesser extent, on our ability to develop and obtain regulatory approval of Nipent for indications other than hairy cell leukemia and to bring our proprietary products to market. Our ability to become profitable will also depend upon a variety of other factors, including the following:

•

increases in the level of our research and development, including the timing and costs of any expansion of clinical trials;

15

•

regulatory approvals of competing products, or expanded labeling approvals of existing products;



•

increases in sales and marketing expenses related to the commercial launch of rubitecan and other products;



•

delays in or inadequate commercial sales of rubitecan, once regulatory approvals have been received; and



•

expenditures associated with acquiring products, technologies or companies and further developing these assets.

    We cannot predict the outcome of these factors and we cannot assure you that we will ever become profitable.

    Even if we do become profitable, we may need substantial additional funding. We expect that our rate of spending will accelerate as a result of increased clinical trial costs and expenses associated with regulatory approval and commercialization of our products now in development. We anticipate that our capital resources will be adequate to fund operations and capital expenditures at least through 2002. However, if we experience unanticipated cash requirements during this period, we could require additional funds much sooner. Our business, results of operations and cash flows will be adversely affected if we fail to obtain adequate funding in a timely manner, or at all. We may receive funds from the sale of equity securities, or the exercise of outstanding warrants and stock options. Additionally, we may receive funds upon the achievement of certain developmental and sales milestones pursuant to our agreement with Abbott. However, we cannot assure you that any of those fundings will occur, or if they occur, that they will be on terms favorable to us. Also, the dilutive effect of those fundings could adversely affect our results per share.

    We depend on third parties for manufacturing and storage of our products and our business may be harmed if the manufacture of our products is interrupted or discontinued.  We have no manufacturing facilities and we currently rely on third parties for manufacturing activities related to all of our products. As we develop new products and increase sales of our existing products, we must establish and maintain relationships with manufacturers to produce and package sufficient supplies of our finished pharmaceutical products, including rubitecan.

    Our manufacturing strategy presents the following risks:

•

delays in scale-up to quantities needed for multiple clinical trials could delay clinical trials, regulatory submissions and commercialization of our products in development;



•

our current and future manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies for compliance with strictly enforced GMP regulations and similar foreign standards, and we do not have control over our third-party manufacturers' compliance with these regulations and standards;



•

if we need to change to other commercial manufacturing contractors, the FDA and comparable foreign regulators must approve these contractors prior to our use. This would require new testing and compliance inspections. The new manufacturers would have to be educated in, or themselves develop substantially equivalent processes necessary for, the production of our products.



•

if market demand for our products increases suddenly, our current manufacturers might not be able to fulfill our commercial needs, which would require us to seek new manufacturing arrangements and may result in substantial delays in meeting market demand; and



•

we may not have intellectual property rights, or may have to share intellectual rights, to any improvements in the manufacturing processes or new manufacturing processes for our products.

16

    Any of these factors could delay clinical trials or commercialization of our products under development, interfere with current sales, entail higher costs, and result in our being unable to effectively sell our products. In addition, we may be unable to locate replacement supply sources, or the sources that we may locate may not provide us with similar reliability or pricing and our business could suffer. For example, the company that had been purifying our Nipent finished product filed for bankruptcy. We anticipate that our current inventory levels will meet our domestic sales needs through the first quarter of 2002, and we have contracted with an new manufacturer for the purification of Nipent. However, this manufacturer must still be approved by the FDA. If this approval is not received prior to the depletion of our inventory levels, we may experience an interruption in sales of Nipent.

    In addition, we store the majority of the unpurified, bulk form of Nipent at a single location. Improper storage, fire, natural disaster, theft or other conditions at this location that may lead to the loss or destruction of the bulk concentrate could adversely affect our business, results of operations and cash flows.

    We do not currently intend to manufacture any pharmaceutical products, although we may choose to do so in the future. If we decide to manufacture products, we would be subject to the regulatory risks and requirements described above. We will also be subject to similar risks regarding delays or difficulties encountered in manufacturing these pharmaceutical products and we will require additional facilities and substantial additional capital. In addition, we have only limited experience in manufacturing pharmaceutical products. We cannot assure you that we would be able to manufacture any of these products successfully in accordance with regulatory requirements and in a cost-effective manner.

    Asserting, defending and maintaining intellectual property rights could be difficult and costly and failure to do so will harm our ability to compete and the results of our operations.  If competitors develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets, if our trade secrets are disclosed or if we cannot effectively protect our rights to unpatented trade secrets, our business will be harmed.

    The pharmaceutical fields are characterized by a large number of patent filings. A substantial number of patents have already been issued to other pharmaceutical companies, research or academic institutions or others. Competitors may have filed applications for or have been issued patents and may obtain additional patents and proprietary rights related to products or processes that compete with or are similar to ours. We may not be aware of all of the patents potentially adverse to our interests that may have been issued to others.

    We actively seek patent protection for our proprietary products and technologies. We have a number of United States patents and also have licenses to, or assignments of, numerous patents issued both in the United States and elsewhere. We may also license our patents outside the United States. Limitations on patent protection outside the United States, and differences in what constitutes patentable subject matter in countries outside the United States, may limit the protection we have on patents or licenses of patents outside the United States.

    Litigation may be necessary to protect our patent position, and we cannot be certain that we will have the required resources to pursue the necessary litigation or otherwise to protect our patent rights. Our efforts to protect our patents may fail. In addition to pursuing patent protection in appropriate cases, we also rely on trade secret protection for unpatented proprietary technology. However, trade secrets are difficult to protect. Our trade secrets or those of our collaborators may become known or may be independently discovered by others.

    Our proprietary products are dependent upon compliance with numerous licenses and agreements. These licenses and agreements require us to make royalty and other payments, reasonably exploit the underlying technology of the applicable patents, and comply with regulatory filings. If we fail to comply

17

with these licenses and agreements, we could lose the underlying rights to one or more of these potential products, which would adversely affect our business, results of operations and cash flows.

    From time to time we receive correspondence inviting us to license patents from third parties. Although we know of no pending patent infringement suits, discussions regarding possible patent infringements or threats of patent infringement litigation either related to patents held by us or our licensors or our products or proposed products, there has been, and we believe that there will continue to be, significant litigation in the pharmaceutical industry regarding patent and other intellectual property rights. Claims may be brought against us in the future based on patents held by others. These persons could bring legal actions against us claiming damages and seeking to enjoin clinical testing, manufacturing and marketing of the affected product. If we become involved in any litigation, it could consume a substantial portion of our resources, regardless of the outcome of the litigation. If any of these actions are successful, in addition to any potential liability for damages, we could be required to obtain a license to continue to manufacture or market the affected product. We cannot assure you whether we would prevail in any of these actions or that we could obtain any licenses required under any of these patents on acceptable terms, if at all.

    If we lose key personnel or are unable to attract and retain additional, highly skilled personnel required for the expansion of our activities, our business will suffer.  Our success is dependent on key personnel, including Dr. Rubinfeld, our President and Chief Executive Officer, and members of our senior management and scientific staff. To successfully expand our operations, we will need to attract and retain additional, highly skilled individuals, particularly in the areas of sales, marketing, clinical administration, manufacturing and finance. We compete with other companies for the services of existing and potential employees. We believe our compensation and benefits packages are competitive for our geographical region and our industry group. However, we may be at a disadvantage to the extent that potential employees may favor larger, more established employers.

    We may face interruption of our ability to adequately monitor important clinical research and test sites due to increased security measures in response to recent and future terrorist activities.  Our business depends on the ability of our researchers to travel to and communicate with various clinical research and test sites around the country. Recently, in response to terrorists' activities and threats aimed at the United States, transportation, mail and other services have been slowed or stopped altogether. Further delays or stoppages in transportation, mail or other services, particularly any such delays or stoppages which harm our ability to reach or communicate in a timely manner with these clinical research and test sites, could harm our business, results of operations and financial condition. Furthermore, we may experience an increase in operating costs, such as costs for transportation, insurance and security. Moreover, we cannot determine whether other attacks may occur in the future and the effects of such attacks on our business.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

    Due to the short-term nature of our interest bearing assets, which consist primarily of certificates of deposit, U.S. corporate obligations, and U.S. government obligations, we believe that our exposure to interest rate market risk would not significantly affect our operations.

18

SUPERGEN, INC.
PART II—OTHER INFORMATION

Item 2. Changes in Securities

    In July 2001, we issued 181,818 shares of our common stock to Abbott Laboratories in exchange for $2,500,000 in cash. This equity investment was the result of our achievement of a milestone in connection with our Worldwide Sales, Distribution, and Development Agreement with Abbott. The securities were issued pursuant to an exemption from registration provided under Section 4(2) of the Securities Act. Abbott Laboratories had access to information about the Company and made representations to the Company concerning their sophistication and investment intent.

Item 6. Exhibits and Reports on Form 8-K

(a)

Exhibits

10.1* Supply and Distribution Agreement between Registrant and EuroGen Pharmaceuticals Ltd.

(b)

No reports were filed on Form 8-K during the quarter for which this report is filed.

*

Confidential treatment has been requested for portions of this document.

19

SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		SUPERGEN, INC.
Date:	November 14, 2001	By:	/s/ JOSEPH RUBINFELD   Joseph Rubinfeld, Ph.D. President and Chief Executive Officer (Principal Executive Officer)
		By:	/s/ EDWARD L. JACOBS   Edward L. Jacobs Chief Business Officer and Chief Financial Officer (Principal Financial and Accounting Officer)

20

QuickLinks

TABLE OF CONTENTS
SUPERGEN, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts)
SUPERGEN, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
SUPERGEN, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)

Item 2.
Item 3. Quantitative and Qualitative Disclosures About Market Risk

SUPERGEN, INC. PART II—OTHER INFORMATION

Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K

SIGNATURES