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EXHIBIT 20.3
ANESTA CORP.
INDEX
Balance Sheets -
June 30, 2000 and December 31, 1999 (unaudited) 2
Statements of Operations and Comprehensive Loss -
for the three and six months ended June 30, 2000 and
1999 (unaudited) 3
Statements of Cash Flows -
for the six months ended June 30, 2000 and 1999 (unaudited) 4
Notes to Financial Statements (unaudited) 5
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ANESTA CORP.
BALANCE SHEETS
(Unaudited)
--------------
June 30, December 31,
ASSETS 2000 1999
----------- ------------
Current assets:
Cash and cash equivalents $16,592,225 $11,746,093
Current portion of
certificate of deposit 340,000 340,000
Marketable debt securities, available-for-sale 23,078,033 59,031,849
Accounts receivable 2,329,472 1,956,357
Prepaid expenses and other current assets 952,635 667,960
------------ ------------
Total current assets 43,292,365 73,742,259
------------ ------------
Property and equipment, at cost:
Furniture and equipment 1,111,786 1,099,529
Leasehold improvements 2,820,691 2,813,166
Accumulated depreciation (1,610,292) (1,447,484)
------------ ------------
2,322,185 2,465,211
------------ ------------
Other assets:
Certificate of deposit 1,700,000 1,700,000
Other assets 24,061,930 301,327
Accumulated amortization (439,596)
------------ ------------
25,322,334 2,001,327
------------ ------------
Total assets $70,936,884 $78,208,797
============ ============
June 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
----------- ------------
Current liabilities:
Accounts payable $1,558,858 $409,584
Accrued liabilities:
Accrued compensation 714,887 655,870
Other 1,061,625 139,062
Current portion of unearned revenues 93,275 746,389
Current portion of note payable 333,333 333,333
------------- -------------
Total current liabilities 3,761,978 2,284,238
Unearned revenues 1,832,647 1,831,759
Note payable 1,666,667 1,666,667
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Total liabilities 7,261,292 5,782,664
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Commitments
Stockholders' equity:
Common stock, par value, $.001 per share; Authorized:
35,000,000 shares; Issued: 13,398,554 shares
in 2000 and 13,311,839 shares in 1999 13,399 13,312
Additional paid-in capital 131,607,925 130,742,839
Accumulated deficit (67,832,212) (58,166,809)
Accumulated other comprehensive loss (113,520) (163,209)
------------- -------------
Total stockholders' equity 63,675,592 72,426,133
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Total liabilities and stockholders' equity $70,936,884 $78,208,797
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The accompanying notes are an integral part of the financial statements
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ANESTA CORP.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
Three months ended Six months ended
------------------ ----------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
Revenues:
Product sales $3,085,248 $1,094,955 $3,993,060 $1,128,063
Royalty revenue -- 28,828 26,211 29,809
Revenues from license agreements 256,666 450,000 652,225 621,148
--------- --------- --------- ---------
Total revenues 3,341,914 1,573,783 4,671,496 1,779,020
--------- --------- --------- ---------
Operating costs and expenses:
Cost of goods sold 774,926 361,813 1,022,657 371,007
Royalties 96,388 30,885 124,319 31,908
Research and development 2,429,729 2,506,1459 4,940,497 4,712,785
Depreciation and amortization 522,837 74,468 605,482 147,517
Selling, general and administrative 6,992,669 2,210,044 9,197,875 4,004,323
--------- --------- --------- ---------
Total costs and expenses 10,816,549 5,183,355 15,890,830 9,267,540
---------- --------- --------- ---------
Loss from operations (7,474,635) (3,609,572) (11,219,334) (7,488,520)
Non operating income (expense):
Interest income 667,729 1,085,098 1,654,754 2,106,915
Interest expense (35,778) (32,200) (71,167) (58,275)
Other -- 591 1,675 562
--------- --------- --------- ---------
Loss before provision for
income taxes (6,842,684) (2,556,083) (9,634,072) (5,439,318)
Provision for income taxes (5,710) (8,400) (31,331) (14,800)
--------- --------- --------- ---------
Net loss (6,848,394) (2,564,483) (9,665,403) (5,454,118)
Other comprehensive income (loss):
Foreign currency translation
adjustment (6,964) (10,236) (13,234) (18,001)
Unrealized gain (loss) on
marketable debt securities,
available-for-sale 62,323 (142,401) 62,923 (203,508)
--------- --------- --------- ---------
Total other comprehensive income
(loss) 55,359 (152,637) 49,689 (221,509)
--------- --------- --------- ---------
Comprehensive loss $(6,793,035) $(2,717,120) $(9,615,714) $(5,675,627)
------------ ------------ ------------ ------------
Basic and diluted loss per common share--
Net loss per common share $(0.51) $(0.19) $(0.72) $(0.41)
--------- --------- --------- ---------
Weighted average shares outstanding 13,385,565 13,220,051 13,372,861 13,170,944
------------ ------------ ------------ ------------
The accompanying notes are an integral part of the financial statements
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ANESTA CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
--------
Six months ended
-----------------------------------
June 30, June 30,
2000 1999
-------- --------
Cash flows from operating activities:
Net loss $(9,665,403) $(5,454,118)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 605,482 147,517
Gain on retirement of assets (25) (435)
Increase (decrease) due to changes in:
Accounts receivable (373,114) (787,289)
Prepaid expenses and other current assets (284,674) (1,154,667)
Other assets 89,396 (26,987)
Accounts payable 1,149,274 (966,459)
Accrued liabilities 981,580 (642,921)
Unearned revenues (652,226) 535,102
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Net cash used in operating activities (8,149,710) (8,350,257)
------------ ------------
Cash flows from investing activities:
Capital expenditures (22,861) (96,762)
Proceeds from sales of assets 25 488
Purchase of other assets (23,850,000)
Purchase of marketable debt securities,
available-for-sale (6,020,987) (45,078,675)
Sales and maturities of marketable debt securities,
available-for-sale 42,037,726 22,822,626
------------ ------------
Net cash provided by (used in) investing
activities 12,144,403 (22,352,323)
------------ ------------
Cash flows from financing activities:
Net proceeds from issuance of common stock 865,173 1,333,306
------------ ------------
Net cash provided by financing activities 865,173 1,333,306
------------ ------------
Effect of exchange rate changes on cash (13,234) (18,001)
------------ ------------
Net increase (decrease) in cash and cash
equivalents 4,846,132 (29,387,275)
Cash and cash equivalents at beginning of period 11,746,093 55,889,226
------------ ------------
Cash and cash equivalents at end of period $16,592,225 $26,501,951
============ ============
The accompanying notes are an integral
part of the financial statements
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ANESTA CORP.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Significant Accounting Policies:
In the opinion of management, the accompanying financial statements contain
all adjustments (consisting only of normal recurring items) necessary to
present fairly the financial position of Anesta Corp. (the Company) as of
June 30, 2000, the results of its operations for the three and six months
ended June 30, 2000 and 1999, and its cash flows for the six months ended
June 30, 2000 and 1999. The results of operations for the periods presented
are not necessarily indicative of the results to be expected for the full
year period.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
financial statements be read in conjunction with the Company's Annual
Report on Form 10-K for the period ended December 31, 1999 and Quarterly
Report on Form 10-Q for the period ended March 31, 2000.
Net Loss Per Share
Basic and diluted earnings per share are computed in accordance with
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per
Share (EPS). Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution from convertible securities or contracts to issue common
stock. Common equivalent shares are excluded from the computation of
diluted EPS when their effect is antidilutive. As of June 30, 2000, options
to purchase 1,927,647 shares of common stock at prices between $9.25 and
$25.1875 per share were outstanding. As of June 30, 1999, options to
purchase 1,322,487 shares of common stock at prices between $5.25 and
$25.1875 were outstanding. None of these options were included in the
computation of diluted loss per share because the effect would have been
antidilutive.
2. Cash, Cash Equivalents and Marketable Debt Securities:
At June 30, 2000, the Company maintained a majority of its cash, cash
equivalents and marketable debt securities in two banks in San Francisco,
California.
3. Income Taxes:
The provision for income taxes for the three and six months ended June 30,
2000 and 1999 is related solely to state income taxes.
4. Revolving/Term Promissory Note Agreements:
In January 1995, the Company secured a revolving/term loan in the amount of
$1,500,000. This loan converted to a 10 year term loan on May 15, 1995. In
March 1997 and July 1999, the Company borrowed an additional $800,000 and
$500,000, respectively.
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ANESTA CORP.
NOTES TO FINANCIAL STATEMENTS, Continued
(Unaudited)
4. Revolving/Term Promissory Note Agreements, Continued
As of June 30, 2000, the balance of the loan is $2,000,000. Annual
principal payments in the amount of $333,333 will be made on approximately
July 15 for the next 6 years beginning on July 15, 2000. Interest at the
rate of 8% is paid quarterly. As of June 30, 2000, borrowings under the
agreement are collateralized by a certificate of deposit in the amount of
$2,040,000, which is maintained in a bank in Salt Lake City, Utah.
5. Collaborative Relationships:
In 1989, Anesta entered into a research and development, license, supply
and distribution agreement (1989 Agreement) with Abbott Laboratories
(Abbott). Under the agreement, as amended, Anesta granted to Abbott the
exclusive right to make, use and market in the United States OTS products
resulting from technology owned or licensed by Anesta consisting of OTS
fentanyl. Under the 1989 Agreement, Abbott provided development funding and
milestone payments and was obligated to pay royalties and other payments on
product sales. Through June 30, 2000, Abbott had paid a total of
$10,050,000 for the development of Anesta's OTS fentanyl product line.
Anesta anticipates it will receive no further payments in the future from
Abbott.
On March 13, 2000, Anesta announced that it had reaquired the U.S.
marketing rights for Actiq with Abbott. Effective April 2000, Anesta has
responsibility for the sales and marketing of Actiq in the U.S. As part of
the reacquisition, Anesta made cash payments to Abbott of $23,850,000,
which amount is included in other assets in the accompanying balance sheet.
Anesta is also obligated to make on-going earn-out payments to Abbott until
May 1,2005. Capitalized amounts related to this agreement, which relate
primarily to the acquired marketing rights, are being amortized on a
straight-line basis over a ten year expected life. Abbott will continue to
manufacture Actiq and Fentanyl Oralet for Anesta in the U.S. for a period
of 24 to 36 months, after which Anesta has the right to manufacture such
products.
6. Subsequent Events
On July 17, 2000, the Company announced that Cephalon, Inc. (Cephalon) will
acquire all of the outstanding shares of Anesta in a tax-free, stock-for-
stock transaction intended to be accounted for as a pooling of interests.
Upon completion of the transaction, Anesta shareholders will receive 0.4765
shares of newly-issued Cephalon common stock for each share of Anesta they
own. As part of the transaction, Anesta has agreed to a termination fee of
$15 million, which is payable under certain conditions. The boards of
directors of both companies have unanimously approved the proposed merger,
which is subject to the approval of Anesta shareholders, regulatory
agencies and customary closing conditions. The merger is expected to be
completed during the fourth quarter of 2000. Under the terms of the merger
agreement, Anesta will become a wholly-owned subsidiary of Cephalon.
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ANESTA CORP.
NOTES TO FINANCIAL STATEMENTS, Continued
(Unaudited)
7. Stockholders' Equity:
The table below presents the activity in stockholders' equity from
January 1, 2000 to June 30, 2000:
Common Stock Accumulated
---------------------------------------------
Additional Other
Paid-in Accumulated Comprehensive
Shares Amount Capital Deficit Loss Total
------ ------ ------- ------- ---- -----
Balance at January 1, 2000 13,311,839 $13,312 $130,742,839 $(58,166,809) $(163,209) $72,426,133
Exercise of stock
options for cash 86,715 87 865,086 865,173
Net loss (9,665,403) (9,665,403)
Other comprehensive income 49,689 49,689
---------- ----------- ------------ ------------ --------- -----------
Balance at June 30, 2000 13,398,554 $13,399 $131,607,925 $(67,832,212) $(113,520) $63,675,592
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