UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
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 0-11839
ALZA TTS Research Partners, Ltd.
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(Exact name of registrant as specified in its charter)
California 94-2863497
----------------------------- ------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
950 Page Mill Road, P.O. Box 10950, Palo Alto, CA 94303-0802
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 494-5300
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Class A Limited Partnership Interests
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 requirements for the past 90 days: Yes X No
----- -----
ALZA TTS RESEARCH PARTNERS, LTD.
FORM 10-K ANNUAL REPORT FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
Description Page
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Item 1. Description of Business ................................ 1
Item 2. Properties ............................................. 9
Item 3. Legal Proceedings ...................................... 9
Item 4. Submission of Matters to a Vote of Security Holders .... 9
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters .................................. 10
Item 6. Selected Financial Data ................................ 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................. 11
Item 8. Financial Statements and Supplementary Data ............ 15
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure .................. 15
Item 10. Directors and Executive Officers of the Registrant .... 16
Item 11. Executive Compensation ................................ 17
Item 12. Security Ownership of Certain Beneficial Owners
and Management ...................................... 17
Item 13. Certain Relationships and Related Transactions ........ 18
Item 14. Exhibits, Financial Statements, Financial Statement
Schedules and Reports on Form 8-K ................... 19
PART I
Item 1. DESCRIPTION OF BUSINESS
ALZA TTS Research Partners, Ltd. (the "Partnership") is a California
limited partnership formed on December 30, 1982. ALZA Development
Corporation, the general partner of the Partnership (the "General Partner"),
is a wholly-owned subsidiary of ALZA Corporation ("ALZA"). The business of
the Partnership is the development and licensing of products ("TTS
Partnership Products") combining certain generic drug compounds in specified
areas of therapy with ALZA's proprietary transdermal therapeutic system
("TTS") technology. In order to undertake its development activities, the
Partnership obtained from ALZA a nonexclusive, worldwide, royalty-free
license to use ALZA's TTS technology solely for the development, manufacture
and sale of TTS Partnership Products.
The Partnership completed the public sale of 3,200 units of Class A
limited partnership interests and the private sale of one Class B limited
partnership interest on April 22, 1983. The gross proceeds from these sales,
including a one percent capital contribution of the General Partner, were
$16,919,192.
PRODUCTS AND TECHNOLOGIES
The Partnership entered into a research and development agreement (the
"Development Contract") with ALZA for the development of TTS Partnership
Products in December 1982. As of December 31, 1987, substantially all of the
net proceeds from the sale of Partnership interests had been applied towards
work done under the Development Contract. As a result, the Partnership has
made no payments under the Development Contract since that time.
A substantial portion of the Partnership's total funds was allocated to
two major product development programs, TTS-fentanyl and TTS-testosterone.
TTS-fentanyl is a 72-hour transdermal therapeutic system which delivers the
narcotic analgesic fentanyl. In August 1990,
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TTS-fentanyl (which is being marketed under the trade name
Duragesic-Registered Trademark- (fentanyl transdermal system) CII) (see
"Distribution Arrangements" below) was cleared for marketing by the United
States Food and Drug Administration ("FDA") for management of severe chronic
pain when opioid analgesia is indicated, such as in the management of cancer
pain. Duragesic-Registered Trademark- has been cleared for marketing in more
than 30 additional countries, including several in each of Europe, South
America and Asia (excluding Japan). Duragesic-Registered Trademark- is
marketed by Janssen Pharmaceutica, Inc. (together with its affiliates,
"Janssen"), a subsidiary of Johnson and Johnson, and is co-promoted by ALZA
in the United States.
TTS-testosterone is a controlled release dosage form of the major male
hormone testosterone designed to re-establish in hypogonadal males the plasma
concentrations of testosterone observed in healthy young men.
TTS-testosterone was cleared for marketing in the United States in October
1993. In April 1994, ALZA, through its sales and marketing division, ALZA
Pharmaceuticals, began marketing the product in the United States under the
trade name Testoderm-Registered Trademark- (testosterone transdermal system)
CIII. Testoderm-Registered Trademark- has also been cleared for marketing in
China, Singapore and in more than ten European countries.
ALZA Pharmaceuticals will market this product outside the United States
through distributors. Commercialization agreements for Testoderm-Registered
Trademark- were signed with Scitech Genetics Limited and with Pharmagenesis,
Inc. in 1995 covering various Asian countries (excluding Japan). Subsequent
to year end, Scitech Genetics launched Testoderm-Registered Trademark- in
Singapore. During the fourth quarter of 1996, ALZA signed an agreement with
Ferring NV pursuant to which Ferring has the rights to market
Testoderm-Registered Trademark- in 12 countries in Europe.
TTS Partnership Products other than the Duragesic-Registered Trademark-
and Testoderm-Registered Trademark- products were at very early stages of
development when the Partnership's available funds were exhausted in
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1987; substantial expenditures would be required if the development of these
products were to be completed and the products commercialized. For these
products at early stages of development, no arrangements have been made with
development partners, and further activities are not contemplated at this
time.
CONTINUATION OPTION
The Partnership granted ALZA an option (the "Continuation Option") to
continue the development of any TTS Partnership Product which the Partnership
determined for any reason (including lack of funds) not to complete. ALZA
exercised the Continuation Option for all TTS Partnership Products in 1987.
As a result, ALZA may fund (or obtain funding for) the development of any TTS
Partnership Product through the earlier of (i) approval either by the FDA or
regulatory authorities in certain foreign countries or (ii) ALZA's exercise
of the "License Option" described below. The Duragesic-Registered Trademark-
and Testoderm-Registered Trademark- products were completed by ALZA, without
the use of the Partnership's funds, under the Continuation Option.
LICENSE OPTION
The Partnership granted ALZA an option (the "License Option") to acquire a
license for any or all of the TTS Partnership Products, on a
product-by-product basis. When the License Option is exercised for a TTS
Partnership Product, ALZA acquires a worldwide license, including the right
to sublicense, make, use and sell such product. The license is exclusive for
a period of thirteen years after the actual reduction to practice of the
product and nonexclusive thereafter. Under each license, ALZA would make
payments to the Partnership based on ALZA's and its affiliates' and
sublicensees' sales of the licensed product. If the License Option is not
exercised with respect to any TTS Partnership Product, the rights to such
product will
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remain with the Partnership, and the Partnership will need to find other
licensees or seek other methods of obtaining a commercial return on the
product.
In 1990, ALZA exercised its License Option for the Duragesic-Registered
Trademark- and Testoderm-Registered Trademark- products. Under the terms of
the agreements between ALZA and the Partnership, the payments to the
Partnership under the license for each TTS Partnership Product will be
reduced (subject to certain limitations) in proportion to the development
costs of the product not funded by the Partnership. In accordance with the
agreements, the Partnership receives 4% of net sales of the
Duragesic-Registered Trademark- and Testoderm-Registered Trademark- products.
As described above, ALZA's licenses for Testoderm-Registered Trademark-
and Duragesic-Registered Trademark- will remain exclusive until thirteen
years after the actual reduction to practice of the product. For
Testoderm-Registered Trademark-, the period of ALZA's exclusivity ends
July 26, 1998. For Duragesic-Registered Trademark-, the period of
exclusivity ends December 4, 1998. If ALZA's license for a product becomes
nonexclusive, the General Partner will need to determine whether to appoint
others to market and sell the product. Under ALZA's agreement with Janssen
covering the Duragesic-Registered Trademark- product, if the product were to
be introduced by a third party after ALZA's loss of exclusivity from the
Partnership, ALZA's royalty rate due from Janssen with respect to
Duragesic-Registered Trademark- would drop significantly. The Partnership's
right to receive 4% of net sales from ALZA would not change. ALZA
Development Corporation, a wholly-owned subsidiary of ALZA, might have a
conflict of interest in connection with any Partnership decision as to
whether the product should be licensed to a third party in addition to ALZA.
PURCHASE OPTION
The General Partner has an option (the "Purchase Option"), exercisable at
any time, to purchase all (but not less than all) of the Limited Partners'
interests in the Partnership. The
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exercise price is $120 million, less "Excess Cash" distributed to the Limited
Partners. The exercise price may be paid in cash, ALZA common stock, or a
combination, at the General Partner's option. The General Partner is under
no obligation to exercise the Purchase Option, and the General Partner will
exercise the Purchase Option only if ALZA deems such exercise to be in its
best interest. The General Partner has not made a determination as to
whether to exercise the Purchase Option.
DISTRIBUTION ARRANGEMENTS
ALZA and the Partnership entered into an agreement with Janssen pursuant
to which Janssen has rights to market the Duragesic-Registered Trademark-
product in the United States and most international markets. ALZA has the
right to co-promote the product with Janssen in the United States, and
commenced co-promotion activities during the second quarter of 1994. Janssen
launched Duragesic-Registered Trademark- in the United States during the
second quarter of 1991, and in Canada during the second quarter of 1992.
Janssen has also launched the product in more than 20 other countries,
including several in each of Europe, South America and Asia (excluding Japan).
ALZA has entered into a commercialization agreement with Scitech Genetics
Limited to distribute the Testoderm-Registered Trademark- product in
Bangladesh, Brunei, Burma, India, Indonesia, Malaysia, Pakistan, Philippines,
Singapore, South Korea, Sri Lanka, Thailand and Vietnam and with
Pharmagenesis, Inc. to distribute in China, Hong Kong, Macau and Taiwan.
Scitech Genetics launched Testoderm-Registered Trademark- in Singapore in
January 1997. ALZA also entered into an agreement with Ferring NV pursuant
to which Ferring has the rights to distribute the Testoderm-Registered
Trademark- product in Austria, Belgium, Denmark, Finland, Germany, Ireland,
Luxembourg, the Netherlands, Norway, Sweden, Switzerland and the United
Kingdom.
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PATENTS
Patent protection generally has been important in the pharmaceutical
industry, and patent applications with respect to the TTS Partnership
Products have been filed. The Partnership's success may in large part depend
upon (i) the strength of the existing ALZA patents covering the technology
used in the development of the TTS Partnership Products and (ii) the ability
to obtain strong patent protection for the TTS Partnership Products. ALZA
has obtained patents and has pending patent applications covering various
aspects of its technology licensed to the Partnership and for the
Duragesic-Registered Trademark- and Testoderm-Registered Trademark- products.
It is impossible to anticipate the breadth or degree of protection that such
patents (either current ALZA patents or future patents, if they are granted)
will provide to the TTS Partnership Products or the underlying technology.
Some of ALZA's earlier patents covering its TTS technology have begun to
expire; however, both of the Duragesic-Registered Trademark- and
Testoderm-Registered Trademark- products are covered by their own
product-specific patents.
In January 1994, a suit was filed against ALZA by Cygnus Therapeutic
Systems ("Cygnus") in the United States District Court for the Northern
District of California, seeking a declaration of unenforceability and
invalidity of an ALZA patent relating to transdermal administration of
fentanyl and alleging violation of antitrust laws. In April 1995, the
District Court granted ALZA's motion to dismiss the lawsuit. Cygnus appealed
that ruling. In August 1996, the Court of Appeals of the Federal Circuit
upheld the District Court's dismissal of Cygnus' claims against ALZA. Cygnus
has no further right of appeal.
GOVERNMENT REGULATION
TTS Partnership Products, similar to other pharmaceutical products,
require FDA marketing clearance before they can be sold in the United States
or, except on a very limited basis, exported to other countries. The
clearance of regulatory agencies is also required in
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foreign countries before TTS Partnership Products can be marketed in those
countries. It is impossible to anticipate the amount of time that will be
required to obtain regulatory clearance to market any product in any foreign
country or whether such clearance will be granted.
The Duragesic-Registered Trademark- product is cleared for marketing in
the United States, and in more than 30 additional countries, including
several in each of Europe, South America and Asia (excluding Japan). The
Testoderm-Registered Trademark- product has been cleared for marketing in the
United States, China, Singapore and in more than ten European countries.
Regulatory filings for the Duragesic-Registered Trademark- and
Testoderm-Registered Trademark- products have been submitted in other
European and Asian countries.
COMPETITION
Competition among products using drug delivery technology is generally
based on performance characteristics and price. Marketing and acceptance by
hospitals, doctors and patients are also crucial to the success of a product.
Health care reimbursement policies of managed care organizations, insurers
and government agencies will continue to exert pressure on pricing. The
Duragesic-Registered Trademark- and Testoderm-Registered Trademark- products
face competition from more traditional forms of therapy using the same or
similar drugs, and from transdermal drug delivery systems developed by
others. Potential competitors in the area of more traditional forms of drug
delivery include all of the major pharmaceutical concerns throughout the
world. Many of these entities have greater financial resources, technical
staffs and marketing and manufacturing capabilities than does the Partnership
or ALZA. Many large and small companies are also competitors in the area of
newer drug delivery technologies, and some of these companies have developed
transdermal products, some of which are now in the marketplace.
The major markets for pharmaceutical products developed in the United
States are Europe, Japan, and North and South America.
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REVENUES
For the years ended December 31, 1996, 1995 and 1994, the Partnership had
royalty income of $6,265,401, $4,441,708 and $3,167,914, respectively,
derived from net sales of Duragesic-Registered Trademark- and
Testoderm-Registered Trademark-. Interest income for the years ended
December 31, 1996, 1995 and 1994 was $28,995, $20,192 and $10,398,
respectively.
EMPLOYEES
The Partnership has no employees. The Partnership requires certain
administrative, accounting, contract management and record keeping services
which are presently being provided by ALZA and are billed to the Partnership
at ALZA's standard administrative services rate.
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Item 2. PROPERTIES
The Partnership's principal office is located at 950 Page Mill Road,
P.O. Box 10950, Palo Alto, California 94303-0802. The Partnership does not
own any of its facilities.
Item 3. LEGAL PROCEEDINGS
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There is no established public trading market for the limited partnership
interests. The Partnership Agreement contains strict limitations on the
transfer of such interests. The Partnership has approximately 2,000 Class A
Limited Partners, one Class B Limited Partner and one General Partner. In
1996, 1995 and 1994, $6,097,442, $4,306,401 and $3,032,608, respectively,
were distributed to the Limited Partners and General Partner.
Item 6. SELECTED FINANCIAL DATA
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------
Royalty income $ 6,265,401 $ 4,441,708 $ 3,167,914 $ 2,720,568 $1,447,746
Interest 28,995 20,192 10,398 7,759 5,151
Net income 6,207,848 4,361,647 3,082,860 2,634,523 1,384,540
Net income,
Class A Limited Partners 6,035,020 4,318,031 3,052,032 2,608,178 656,259
Net income,
Class B Limited Partner 110,749 - - - 669,633
Net income,
General Partner 62,079 43,616 30,828 26,345 58,648
Total assets 77,586 48,245 28,155 17,757 9,996
Total liabilities 146,381 227,446 262,602 302,456 276,304
Total Cash Distribution 6,097,442 4,306,401 3,032,608 2,652,914 1,379,341
Class A Partners 5,768,192 4,073,856 2,868,864 2,509,632 1,294,880
Class B Partner 268,287 189,481 133,435 116,728 70,646
General Partner 60,963 43,064 30,309 26,554 13,815
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
All of the Partnership's Total Funds (as defined in the Development
Contract) have been utilized in the development of TTS Partnership Products.
Total Funds consisted of the net proceeds from the sale by the Partnership of
the Class A Limited Partnership units, the General Partner's and Class B
Limited Partner's capital contributions to the Partnership, and interest and
other income earned through temporary investment of Partnership funds, less
all necessary expenses of operating the Partnership. In accordance with the
agreements between ALZA and the Partnership, the Partnership is entitled to
receive 4% of net sales of Duragesic-Registered Trademark- and
Testoderm-Registered Trademark-. For the year ended December 31, 1996, cash
received from royalties from Duragesic-Registered Trademark- and
Testoderm-Registered Trademark- increased to $6,265,401 from $4,441,708 for
1995. Excess Cash (defined as cash received by the Partnership, less all
amounts expended in the conduct of the Partnership's business, including
administrative expenses, and working capital) is distributed to the Partners.
Because the Partnership does not make commercialization decisions regarding
TTS Partnership Products, its potential royalty stream and income are not
within the Partnership's control.
RESULTS OF OPERATIONS
From 1982 through 1987, the Partnership utilized all of the funds raised
at the time of its formation, primarily to fund product development at ALZA.
Until the introduction of Duragesic-Registered Trademark- in 1991, the
Partnership had been without cash for either operations or distribution since
1987.
The Partnership earned net income of $6,207,848, $4,361,647 and
$3,082,860 for 1996, 1995 and 1994, respectively. The Partnership received
royalty income of $6,265,401, $4,441,708
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and $3,167,914 for 1996, 1995 and 1994, respectively, from ALZA based on
Janssen's reported net sales of Duragesic-Registered Trademark- and ALZA's
net sales of Testoderm-Registered Trademark-. The increase in royalty income
is due to increased sales of Duragesic-Registered Trademark-. As stated
above, the Partnership does not make commercialization decisions regarding
TTS Partnership Products; therefore, its potential royalty stream and income
are not within the Partnership's control. The interest income earned by the
Partnership was $28,995, $20,192, and $10,398 during the years ended December
31, 1996, 1995 and 1994, respectively. The increase was due to a higher
level of cash available for investment during 1996 as a result of the higher
royalty payments received from ALZA.
Under the terms of the Agreement of Limited Partnership (the
"Partnership Agreement"), net losses were allocated as follows: first, 1% to
the General Partner and 99% to the Class A Limited Partners and then, after
the capital account of the Class A Limited Partners was reduced to zero, 1%
to the General Partner and 99% to the Class B Limited Partner. After the
capital accounts of the Class A and Class B Limited Partners were reduced to
zero, losses were allocated 100% to the General Partner.
Under the terms of the Partnership Agreement, net income is allocated in
the inverse order of the losses previously allocated. To the extent losses
were allocated 100% to the General Partner, net income was allocated 100% to
the General Partner in an amount equal to such losses prior to allocation of
net income to the Class A and Class B Limited Partners. Then, to the extent
losses were allocated 99% to the Class B Limited Partner, any net income was
allocated 99% to the Class B Limited Partner (and 1% to the General Partner)
in an amount equal to such losses prior to any net income being allocated to
the Class A Limited Partners. Then, to the extent losses were allocated 99%
to the Class A Limited Partners, net income was allocated 99% to the Class A
Limited Partners (and 1% to the General Partner.) As provided in the
Partnership Agreement, once the amount of net income allocated to the Class A
Limited Partners
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and the General Partner equaled previously allocated losses (which occurred
during the third quarter of 1996), subsequent income began to be allocated
99% to the Class A and Class B Limited Partners, pro rata, and 1% to the
General Partner.
The General Partner is required by the Partnership Agreement to
distribute, on a quarterly basis, all of the Partnership's Excess Cash (which
consists of all cash received by the Partnership less all amounts expended in
the conduct of the Partnership's business, including administrative expenses,
and working capital) in proportion to the Partners' respective capital
contribution percentages. Given the methodology for the allocation of losses
and income as discussed above, deficit balances have resulted in the Class A
Limited Partners' and General Partner's capital accounts and will continue
until future allocated income exceeds cumulative cash distributions required
of the General Partner.
There were no research and development expenses in 1996, 1995, or 1994
due to the fact that the Partnership had expended all of its Total Funds.
General and administrative expenses were $86,548, $100,253, and $95,452
for the years ended December 31, 1996, 1995 and 1994, respectively. These
expenses are payable to ALZA under an administrative services agreement
between ALZA and the Partnership.
In 1994 and 1995, payments made to ALZA for past administrative services
totaled $135,307 and $138,607, respectively. In 1996, payments for past and
current administrative services totaled $172,459. Between December 1987 (at
which time all Partnership funds, raised at the time of its formation, had
been utilized) and December 1991 (when the Partnership began receiving
royalty revenues on TTS Partnership Product sales), the administrative costs
were approximately $20,000 per quarter, totaling approximately $295,000.
These costs were due and payable to ALZA upon invoice; however, ALZA agreed
that the costs could be reimbursed over time, initially, at a quarterly rate
of $5.00 per Partnership unit, which were deducted from Excess
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Cash from December 1991 through December 1993. In March 1994, the quarterly
rate was increased to $10.00 per Partnership unit. In June 1996, it was
determined that a further increase in the reimbursement rate was necessary to
fully reimburse ALZA for past administrative costs on a more timely basis.
Therefore, beginning with the September 1996 distribution, a quarterly
deduction has been made from Excess Cash in an amount equal to the actual
administrative expenses of the Partnership for the previous quarter plus
$10.00 per Partnership unit to repay past administrative costs. ALZA has not
charged any interest on the past due amounts. At the rate of $10.00 per
Partnership unit per quarter, all unpaid past administrative costs (totalling
$116,691 as of December 31, 1996), are expected to be repaid by the fourth
quarter of 1997.
The Partnership maintains its books using a modified basis of cash
receipts and disbursements which is different from accrual basis accounting
in that royalty revenues are not recognized until the related cash is
received.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements: Incorporated herein by reference to the
Financial Statements and Additional Information attached as Exhibit 13.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. The affairs
of the Partnership are managed by its General Partner. David R. Hoffmann has
served as a director and officer of the General Partner from its inception.
James W. Young was named a director and a Vice President of the General
Partner in 1996 to replace a retiring director. There is presently a
vacancy on the Board of Directors due to the recent retirement of a director.
The current directors intend to appoint an additional director in the near
future.
Name Age Positions Held
---- --- ----------------------------------------------
David R. Hoffmann 52 President (Chief Executive Officer), Chief
Financial Officer and Director of the
General Partner; Vice President (since
1985) and Treasurer of ALZA (since 1987)
James W. Young 52 Vice President and Director of the
General Partner; Senior Vice President,
Commercial Development of ALZA (since 1995)
-16-
Item 11. EXECUTIVE COMPENSATION
The directors and executive officers of the General Partner do not
receive any remuneration from the Partnership or the General Partner. All of
them do, however, receive salaries from ALZA for their services to ALZA. To
the extent that they perform administrative functions on behalf of the
Partnership, a portion of their salaries is billed by ALZA to the Partnership
as an administrative cost.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Percent
Name and Address of Amount and Nature of Beneficial of
Title of Class Beneficial Owner Ownership Class Class
- ------------------- ------------------------- ------------------------------- -------
General ALZA Development General Partnership Interest 100%
Partnership Corporation which amounts to 1% of the total
Interest 950 Page Mill Road capital of the Partnership.
P.O. Box 10950
Palo Alto, CA
94303-0802
Class B Limited Stada Arzneimittel AG, Class B Limited Partnership 100%
Partnership Stadastrasse 2-18 61118 Interest which amounts to
Interest Bad Vilbel Germany $750,000.
None of the directors or officers of the General Partner own any direct
interest in the Partnership or the General Partner. The General Partner has
an option to purchase all of the Limited Partners' interests for $120 million
(payable in cash, ALZA common stock or a combination, at the General
Partner's option), less an amount equal to all cash distributed to the
Limited Partners by the Partnership.
-17-
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under the terms of an administrative services agreement between ALZA and
the Partnership, in 1996 the Partnership paid ALZA a total of $172,459 for
past and current administrative expenses.
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PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Annual Report on Form 10-K:
1. Financial Statements: Incorporated herein by reference to the
Financial Statements and Additional Information attached as
Exhibit 13.
2. Financial Statement Schedules: None.
3. Exhibits:
4.1 Agreement of Limited Partnership filed as Exhibit 3.A to
Amendment No. 1 to Form S-1 Registration Statement No. 2-80595
("Registration Statement") filed with the Securities and
Exchange Commission on February 11, 1983.
4.2 Certificate of Limited Partnership filed as Exhibit 3.B to the
Registration Statement.
10.1 Research and Development Contract between ALZA Corporation
and the Partnership dated 12/30/82 filed as Exhibit 10.A to the
Registration Statement.
10.2 Technology License Agreement between ALZA Corporation and the
Partnership dated 12/30/82 filed as Exhibit 10.B to the
Registration Statement.
10.3 Option Agreement between ALZA Corporation and the Partnership
dated 12/30/82 filed as Exhibit 10.C to the Registration
Statement.
13. Financial Statements and Additional Information.
23. Consent of Ernst & Young LLP, Independent Auditors.
27. Financial Data Schedule.
(b) Reports on Form 8-K: None.
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ALZA TTS Research Partners, Ltd.
Index to Financial Statements
(Item 14(a))
PAGE
FINANCIAL STATEMENTS: NUMBER
- --------------------- ------
Report of Ernst & Young LLP, Independent
Auditors 1
Statements of Assets, Liabilities, and Partners'
Capital (Deficit) at December 31, 1996 and 1995 2
Statements of Revenue Collected and Expenses for
the Years ended December 31, 1996, 1995 and 1994 3
Statements of Partners' Capital (Deficit) for the
Years ended December 31, 1996, 1995, 1994 4
Statements of Cash Flows for the Years ended
December 31, 1996, 1995 and 1994 5
Notes to Financial Statements 6 - 11
Additional Information 13 - 15
The above financial statements are included in the Financial Statements
and Additional Information, attached as Exhibit 13, and are hereby
incorporated by reference.
All schedules have been omitted because the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements, including the notes thereto.
-20-
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.
ALZA TTS Research Partners, Ltd.
(Registrant)
By: ALZA Development Corporation
General Partner
By: /s/ David R. Hoffmann
-------------------------------
David R. Hoffmann
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant by its General Partner and in the capacities and on the dates
indicated.
Date: March 26, 1997 /s/ David R. Hoffmann
-------------------------------
David R. Hoffmann
President (Chief Executive
Officer), Chief Financial
Officer and Director
Date: March 26, 1997 /s/ James W. Young
------------------------------
James W. Young
Director and Vice
President
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EXHIBIT INDEX
ALZA TTS RESEARCH PARTNERS, LTD.
ANNUAL REPORT ON FORM 10-K
Exhibit Exhibit
Number Name
------- --------------------
4.1 Agreement of Limited Partnership
4.2 Certificate of Limited Partnership
10.1 Research and Development
Contract between ALZA Corporation and the Partnership
dated 12/30/82
10.2 Technology License Agreement between ALZA Corporation
and the Partnership dated 12/30/82
10.3 Option Agreement between ALZA Corporation and the
Partnership dated 12/30/82
13 Financial Statements and Additional Information
23 Consent of Ernst & Young LLP, Independent Auditors
27 Financial Data Schedule
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