SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[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
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO
___________
COMMISSION FILE NO.
000-28844
ALGOS PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 22-3142274
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
COLLINGWOOD PLAZA, 4900 ROUTE 33, NEPTUNE NJ 07753-6804
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (908) 938-5959
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $165 million, based on the last sales price of the
Common Stock as of February 28, 1997.
As of February 28, 1997 15,789,451 shares of Common Stock, $0.01 par value, of
the registrant were issued and outstanding.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
Set forth below are the directors, executive officers and key employees
of the Company as of April 15, 1997.
Name Age Position
---- --- --------
DIRECTORS
John W. Lyle 53 President and Chief Executive Officer and
Director
Donald G. Drapkin*/** 49 Director
Michael Hyatt* 51 Director
Roger H. Kimmel** 50 Director
James R. Ledley*/** 50 Assistant Secretary and Director
Dieter A. Sulser 48 Director
EXECUTIVE OFFICERS
Frank S. Caruso, Ph.D. 60 Executive Vice President for Research and
Development
Gastone Bello, Ph.D. 66 Executive Vice President for Technology
Transfer and Manufacturing
KEY EMPLOYEES
Donald A. Johnson, Ph.D. 42 Senior Vice President for Pharmaceutical
Development
Gary R. Anthony 36 Chief Financial Officer
- ---------
* Member of the Audit Committee.
** Member of the Compensation Committee
MR. LYLE has served as President and Chief Executive Officer and a
Director of the Company since its formation in January 1992. Mr. Lyle served as
President and Chief Executive Officer of OmniCorp Holdings, Inc. in 1991. Prior
to founding the Company, Mr. Lyle was one of the founders of Osteotech, Inc., a
public orthopaedic pharmaceutical company formed in 1986. He served as
Osteotech's Chairman and Chief Executive Officer from 1989 to 1991 and as
President from 1986 to 1989. From 1981 to 1986, Mr. Lyle served as the President
of CIBA-GEIGY Corporation's CIBA Self-Medication, Inc. From 1975 to 1981, Mr.
Lyle held various positions at Johnson & Johnson. Mr. Lyle holds a B.S. in
Marketing Management and a M.B.A. in General Management, both from the
University of Southern California.
MR. DRAPKIN has been a director of the Company since January 1994. Mr.
Drapkin has been Vice Chairman and Director of MacAndrews Holdings, Inc., and
various of its affiliates for more than five years. Mr. Drapkin is a Director of
the following corporations which file reports pursuant to the Exchange Act:
Algos Pharmaceutical Corporation, Andrews Group, Coleman, Coleman Holdings,
Coleman Worldwide, Cigar Holdings, Consolidated Cigar, Marvel, Marvel Holdings,
Marvel Parent, Marvel III, Products Corporation, Revlon Worldwide, Toy Biz and
VIMRx Pharmaceuticals Inc. On December 27, 1996, Marvel Holdings, Marvel Parent,
Marvel III and Marvel and several of its subsidiaries filed voluntary petitions
for reorganization under Chapter 11 of the United States Bankruptcy Code.
MR. HYATT has been a director of the Company since November 1996. For
more than five years, he has been a Senior Managing Director of Bear Stearns &
Co., Inc.
MR. KIMMEL has been a director of the Company since July 1996. Mr.
Kimmel has been a partner of the law firm of Latham & Watkins for more than five
years. Mr. Kimmel is also a director of Weider Nutrition International, Inc. and
TSR Paging, Inc.
MR. LEDLEY has been a director of the Company since January 1992. Since
1995, he has been a member of the law firm of Kleinberg, Kaplan, Wolff & Cohen,
P.C. From 1980 to 1995 he was a member of the law firm of Varet & Fink P.C.
(previously known as Milgrim Thomajan & Lee P.C.).
MR. SULSER has been a director of the Company since May 1995. Since
1991, Mr. Sulser has served as Head of Investment Banking for the ERB Group of
Companies, based in Zurich, Switzerland. Mr. Sulser is also General Manager of
Unifina Holding AG, an affiliate of the ERB Group of Companies.
DR. CARUSO joined Algos in 1994. From 1985 to 1993, Dr. Caruso served as
Vice President, Research & Development at Roberts Pharmaceutical Corporation
with responsibility for worldwide pre-clinical and clinical research and
development activities. From 1980 to 1985, Dr. Caruso served as Director,
Clinical Pharmacology, for Revlon Health Care. From 1963 to 1980, Dr. Caruso
served in various positions at Bristol-Myers Company, including Director,
Clinical Research-Analgesics and Central Nervous System. He holds a Ph.D. and a
M.S. in Pharmacology, both from the University of Rochester, School of Medicine
and Dentistry and a B.S. in Biology from Trinity College.
DR. BELLO joined Algos in 1994. During 1992 and 1993, Dr. Bello
performed consulting services for the Company. Also in 1992, he served on a task
force organized by the U.S. Department of State to assess the status of the
pharmaceutical industry in the former Soviet Union. From 1975 to 1991, Dr. Bello
served as CIBA-GEIGY Pharmaceutical Division Senior Vice President of Technical
Operations and was a member of the Management Committee where he was responsible
for chemical and pharmaceutical production, materials management, distribution,
engineering, safety and ecology. Dr. Bello served as President and a member of
the Board of Directors of CIBA-GEIGY Caribe, Caguas, Puerto Rico from 1990 to
1991. He served as a member of the Board of Directors of Geneva Pharmaceutical
from 1982 to 1991 and a member of the Board of Directors of Alza Corporation
from 1978 to 1982. Dr. Bello serves on the Board of Overseers, New Jersey
Institute of Technology. He received his Ph.D. in Chemistry from the University
of Trieste in Trieste, Italy.
DR. JOHNSON joined Algos in 1994. Prior to joining Algos, Dr. Johnson
served as President of Pharmaceutical Development Laboratories, Inc., a contract
research laboratory. From 1991 to 1993, Dr. Johnson was Business Director of
Applied Analytical Industries, Inc. where he developed marketing strategies,
research plans and budgets for numerous new drug contract development projects.
From 1990 to 1991, he served as Manager of Drug Delivery Systems at Noven
Pharmaceuticals and was responsible for the research and development of
transdermal drug delivery systems. From 1986 to 1990, Dr. Johnson served as
Group Leader of Pharmaceutical Research at Schering-Plough Research. Dr. Johnson
holds a Ph.D. and a M.S. in Pharmaceutics and a B.S. in Pharmacy from the
University of Wisconsin-Madison.
MR. ANTHONY joined Algos in January 1996. Prior to joining Algos, Mr.
Anthony engaged in the private practice of accounting, providing services to
pharmaceutical companies. From 1987 to 1993, he served as Controller for Roberts
Pharmaceutical Corporation where his responsibilities included public company
financial reporting, the development and implementation of accounting practices
and internal control systems, income tax planning and compliance, cash
management and analysis of acquisitions. From 1983 to 1987 he served on the
audit staff of Coopers & Lybrand. Mr. Anthony holds a B.S. in Accounting from
Monmouth College.
COMPENSATION OF OUTSIDE DIRECTORS
Non-employee members of the Board of Directors will receive cash
compensation of $1,500 per meeting attended as consideration for their services
as directors of the Company and are reimbursed for
reasonable travel expenses incurred in connection with their attendance
at such meetings. Non-employee directors upon appointment or election to the
Board of Directors will receive an option grant under the Company's 1996
Non-Employee Director Stock Option Plan to purchase 10,000 shares of Common
Stock, at the fair market value on the date of grant, vesting over a three-year
period upon each anniversary of the date of grant. In addition, on the date of
the first meeting of the Board of Directors in each calendar year, each
non-employee director will be granted options to purchase 5,000 shares of
Common Stock, at the fair market value at the date of grant, which shall vest
on the first anniversary of the date of grant.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires directors, officers and
persons who beneficially own more than 10% of a registered class of stock of the
Company to file initial reports of ownership (Forms 3) and reports of changes in
beneficial ownership (Forms 4 and 5) with Commission and the Nasdaq. Such
persons are also required under the rules and regulations promulgated by the
Commission to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on a review of the copies of such forms, as amended
furnished to the Company, the Company believes that all Section 16(a) filing
requirements applicable to its directors, officers and greater than 10%
beneficial owners were compiled with, except that Mr. Hyatt and Mr. Anthony
filed their initial reports late.
Item 11. EXECUTIVE COMPENSATION
The following tables set forth the annual, long-term, and other
compensation of the Company's Chief Executive Officer and other most highly
compensated executives (collectively, the 'Named Officers') whose annual base
salaries equal or exceed $100,000.
SUMMARY COMPENSATION TABLE
Long - Term Compensation
--------------------------------------------
Annual Compensation Awards Payouts
------------------------------------- ------------------ ----------------------
Other
Annual Restricted Options All
Name & Principal Compen- Stock (# of LTIP Other
Position Year Salary Bonus sation Awards Shares) Payouts Compensation
-------- ---- ------ ----- ------ ------ ------- ------- -------------
John W. Lyle,
President & Chief 1996 $254,000 $127,000 --- --- 132,800 --- ---
Executive Officer 1995 $235,000 $ 75,000 --- --- --- --- ---
Frank S. Caruso,
Executive Vice
President for
Research & 1996 $173,500 $ 57,750 --- --- 33,200 --- ---
Development 1995 $165,000 $ 25,000 --- --- --- --- ---
The following table sets forth for each of the named officers the value
realized from stock options exercised during 1996 and the number and value of
exercisable and unexercisable stock options held at December 31, 1996:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grant Option Term
- --------------------------------------------------------------------------- -----------------------------
% of Total
Number of Options/
Securities SARs
Underlying Granted to Exercise
Options/ Employees or Base
SARs in Fiscal Price Expiration
Name Granted Year ( $ / Sh) Date 0% ($) 5% ($) 10% ($)
---- ------- --------- ------- ------ ------- ------ -------
John W. Lyle 132,800 57 $0.13 4/01/01 $606,040 $778,343 $986,782
Frank Caruso 33,200 14 $0.12 4/01/06 $151,910 $249,962 $400,392
AGGREGATED OPTION EXERCISES IN LAST YEAR AND YEAR END OPTION VALUES
Number of Shares of
Underlying Unexercised Value of Unexercised
Options In-The-Money Options
------------------------- -------------------------
Shares
Acquired on Value
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
--------- -------- ----------- ------------- ---------- -------------
John W. Lyle --- --- 182,200 174,300 $2,030,050 $1,937,775
Frank S.
Caruso 49,800 $233,866 58,100 74,700 $ 646,625 $ 831,375
- ---------
Employment Agreements
Mr. Lyle's employment agreement with the Company expires on December 31,
1997 and is automatically renewable for successive one-year terms unless
terminated by either Mr. Lyle or the Company. Mr. Lyle's employment agreement
provides that he will be employed as the President and Chief Executive Officer
of the Company and that the Company will use its best efforts to cause him to be
elected to the Board of Directors for the term of the agreement. Mr. Lyle's
employment agreement provides for certain upward adjustments to the preceding
year's base salary and for bonuses for individual accomplishment of key
milestone events in such amounts and on such terms as the Board of Directors may
determine. Mr. Lyle's employment agreement also provides him with certain rights
under the 1994 Option Plan (as defined). Mr. Lyle's employment agreement
acknowledges that during the period of his employment, he will also serve as the
Chief Executive Officer of U.S. Medical Development, Inc. ("USMDI"), a Delaware
corporation, incorporated in January 1994 by the founders of the Company.
Dr. Caruso's employment agreement with the Company expires on December
31, 1997 and is automatically renewable for successive one-year terms unless
terminated by either Dr. Caruso or the Company. Dr. Caruso's employment
agreement provides that he will be employed as the Executive Vice President for
Research and Development of the Company. Dr. Caruso is entitled to certain
upward adjustments to the preceding year's base salary and is entitled to
receive continuing payments equal to twelve months salary in the event of his
termination by the Company without cause. Dr. Caruso may also receive bonuses
for individual accomplishment of key milestone events in such amounts and on
such terms as the Board of Directors may determine. Dr. Caruso's employment
agreement provides him with certain rights under the 1994 Option Plan.
Dr. Bello's employment agreement with the Company expires on December
31, 1997 and is automatically renewable for successive one-year terms unless
terminated by either Dr. Bello or the Company. Dr. Bello's employment agreement
provides that he will be employed as the Executive Vice President for Technology
Transfer and Manufacturing of the Company. Dr. Bello is entitled to certain
upward adjustments to the preceding year's base salary and is entitled to
receive continuing payments equal to six months salary in the event of his
termination by the Company without cause. Dr. Bello may also receive bonuses for
individual accomplishment of key milestone events in such amounts and on such
terms as the Board of Directors may determine. Dr. Bello's employment agreement
provides him with certain rights under the 1994 Option Plan.
Item 12. SECURITY OWNERSHIP & CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of April 15, 1997 by (i) each person
who is known by the Company to own beneficially more than 5% of the Common
Stock, (ii) each director, (iii) each executive officer and (iv) all directors
and executive officers of the Company as a group. Unless otherwise indicated,
the address of each beneficial owner is c/o the Company, Collingwood Plaza, 4900
Route 33, Neptune, New Jersey 07753.
Number of Shares Percentage of Shares
Name of Beneficial Owner Beneficially Owned (a) Beneficially Owned
------------------------ -------------------- ---------------------
DIRECTORS AND EXECUTIVE OFFICERS
John W. Lyle (b) 1,620,566 10.1%
Frank S. Caruso (c) 299,800 1.9
Gastone Bello 153,550 *
Donald G. Drapkin (d) 16,600 *
Michael Hyatt (e) 1,196,894 7.6
Roger H. Kimmel (f) 931,858 5.9
James R. Ledley (g) 110,950 *
Dieter A. Sulser (h) 153,550 *
Directors and Executive Officers as a
group (I) 4,471,318 27.9
OTHER PRINCIPAL STOCKHOLDERS
Unifina Holding AG and related
investors (j) 1,734,700 11.0
Karen Lyle (k) 1,620,566 10.1
Lawrence Canarelli 871,500 5.5
Gilbert Goldstein (l) 862,750 5.5
Paul Shapiro (m) 809,250 5.1
Morris J. Kramer (n) 809,246 5.1
Mellon Bank Corporation (o) 800,000 5.1
- ---------
* represents less than 1.0%
(a) For purposes of this table, a person or group is deemed to have 'beneficial
ownership' of any shares which such person has the right to acquire within
60 days after the date of this Prospectus. For purposes of calculating the
percentage of outstanding shares held by each person named above, any
shares which such person has the right to acquire within 60 days after the
date of the Prospectus are deemed to be outstanding, but not for the
purpose of calculating the percentage ownership of any other person.
(b) Includes (i) 74,700 shares of Common Stock owned directly by Mr. Lyle, (ii)
1,354,966 shares of Common Stock and options to purchase 8,300 shares of
Common Stock owned by Karen Lyle, wife of Mr. Lyle, as to which Mr. Lyle
disclaims beneficial ownership, (iii) options to purchase 182,600
shares of Common Stock, and excludes 664,000 shares of Common Stock held in
a trust for the benefit of the children of Mr. and Mrs. Lyle, as to which
shares Mr. Lyle has neither the power of disposition nor the power to vote.
(c) Includes 1,000 owned by P. Caruso, wife of Dr. Caruso and to which shares
he disclaims beneficial ownership. Excludes a total of 24,900 shares held
in trust for the benefit of the children of Dr. Caruso, as to which shares
Dr. Caruso has neither the power of disposition nor the power to vote.
(d) Excludes a total of 809,246 shares of Common Stock held in six trusts for
the benefit of the children of Mr. Drapkin, as to which shares Mr. Drapkin
has neither the power of disposition nor the power to vote.
(e) Includes (i) 829,751 shares of Common Stock owned directly by Mr. Hyatt and
(ii) 363,810 shares held in three trusts for which Mr. Hyatt serves as
trustee and as to which shares Mr. Hyatt holds either the sole or the
shared power of disposition or the power to vote, and (iii) options to
purchase 3,333 shares of common stock and excludes 221,332 shares of Common
Stock held in a trust for the benefit of the children of Mr. Hyatt, as to
which shares Mr. Hyatt has neither the power of disposition nor the power
to vote.
(f) Includes (i) 507,193 shares of Common Stock owned by an estate of which Mr.
Kimmel is the executor and (ii) 371,332 shares held in trusts for which
Mr. Kimmel serves as a trustee and as to which shares Mr. Kimmel holds
either the sole or the shared power of disposition and power to vote and
(iii) options to purchase 3,333 shares of common stock and excludes 343,060
shares of Common Stock held in two trusts for the benefit of the children
of Mr. Kimmel, as to which shares Mr. Kimmel has neither the power of
disposition nor the power to vote.
(g) Includes a total of 1,500 shares of Common Stock held in trust for the
benefit of the mother of Mr. Ledley, as to which shares Mr. Ledley holds
the shared power of disposition and power to vote.
(h) Includes 141,100 shares of Common Stock and 12,450 warrants to purchase
shares of Common Stock owned directly by Gaby Sulser, wife of Mr. Sulser,
as to which Mr. Sulser disclaims beneficial ownership and excludes
1,734,700 shares beneficially owned by Unifina Holding AG, as to which
shares Mr. Sulser disclaims beneficial ownership. Mr. Sulser is the General
Manager of Unifina Holding AG.
(i) Includes options and warrants to purchase 210,016 shares of Common Stock.
(j) Consists of 1,577,000 shares of Common Stock and 157,700 warrants to
purchase shares of Common Stock held by EBC Zurich AG. The address of
Unifina Holding AG is Zurcherstrasse 62; CH 8406, Winterthur, Switzerland
and the address of EBC Zurich AG is Bellariastrasse 23; CH 8027, Zurich,
Switzerland. Excludes (i) 166,000 shares of Common Stock and warrants to
purchase 16,600 shares of Common Stock held by Mr. Rolf P. Erb, Chairman of
EBC Zurich AG and a member of the board of directors of Unifina Holding AG,
as to which shares each of Unifina Holding AG and EBC Zurich AG disclaim
beneficial ownership and (ii) 141,100 shares of Common Stock and warrants
to purchase 12,450 shares of Common Stock beneficially owned by Mr. Sulser,
General Manager of Unifina Holding AG, as to which shares Unifina Holding
AG disclaims beneficial ownership.
(k) Includes (i) 1,354,966 shares of Common Stock and options to purchase 8,300
shares of Common Stock, owned directly by Mrs. Lyle and (ii) 74,700 shares
of Common Stock and options to purchase 182,600 shares of Common Stock
owned by directly by John Lyle, husband of Mrs. Lyle, as to which Mrs. Lyle
disclaims beneficial ownership, and excludes 664,000 shares of Common Stock
held in a trust for the benefit of the children of Mr. and Mrs. Lyle, as to
which shares Mrs. Lyle has neither the power of disposition nor the power
to vote.
(l) Includes 809,250 shares of Common Stock deemed to be beneficially owned by
Mr. Goldstein in his capacity as trustee for a trust as to which shares Mr.
Goldstein has the shared power of disposition and power to vote.
(m) Includes 809,250 shares of Common Stock deemed to be beneficially owned by
Mr. Shapiro in his capacity as trustee for a trust as to which shares Mr.
Shapiro has the shared power of disposition and power to vote.
(n) Includes 809,246 shares of Common Stock deemed to be beneficially owned by
Mr. Kramer in his capacity as trustee for a trust as to which shares Mr.
Kramer holds the power of disposition and the power to vote.
(o) The shares of Common Stock for Mellon Bank Corporation are held by its
subsidiary, the Dreyfus Corporation. The address of the Dreyfus Corporation
is One Mellon Bank Center, Pittsburgh, PA 15258.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Roger H. Kimmel, a director of the Company, is a partner at Latham &
Watkins which performs legal services for the Company from time to time.
Mr. James R. Ledley, a director of the Company, is a member of the law
firm of Kleinberg, Kaplan, Wolff & Cohen, P.C. which performs legal services for
the Company from time to time.
In August 1996, the Company entered into a transfer agreement (the
"Transfer Agreement") with PharmaDyn, pursuant to which the Company transferred
certain intangible assets having no book value and which were unrelated to any
of the Company's products in development to PharmaDyn (the "Transferred
Assets"). Pursuant to the Transfer Agreement, PharmaDyn licensed to the Company
certain rights with respect to sales of pharmaceutical products that may result
from the Transferred Assets for which the Company will pay royalties at rates
the Company believes are consistent with fair market value. The stockholders of
PharmaDyn are primarily the same as the stockholders of the Company immediately
prior to the consummation of the Company's initial public offering. Messrs.
Kimmel and Lyle beneficially own approximately 10.2% and 13.9% respectively, of
the outstanding common stock of PharmaDyn, Inc.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Algos Pharmaceutical Corporation
Date: April 30, 1997 BY: /s/ John W. Lyle
----------------------------------
JOHN W. LYLE
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
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 and in the capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ John W. Lyle President, Chief Executive April 30, 1997
- -------------------------- Officer and Director
JOHN W. LYLE
/s/ Donald G. Drapkin Director April 30, 1997
- --------------------------
DONALD G. DRAPKIN
/s/ Michael Hyatt Director April 30, 1997
- --------------------------
MICHAEL HYATT
/s/ Roger H. Kimmel Director April 30, 1997
- --------------------------
ROGER H. KIMMEL
/s/ James R. Ledley Assistant Secretary and Director April 30, 1997
- --------------------------
JAMES R. LEDLEY
/s/ Dieter A. Sulser Director April 30, 1997
- --------------------------
DIETER A. SULSER
/s/ Gary Anthony Chief Financial Officer April 30, 1997
- -------------------------- (Principal Accounting Officer)
GARY ANTHONY