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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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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 0-15190
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OSI Pharmaceuticals, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 13-3159796
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
106 Charles Lindbergh Boulevard, Uniondale, New York 11553
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(Address of principal executive offices) (Zip Code)
516-222-0023
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(Registrant's telephone number, including area code)
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(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:
At July 31, 1999 the registrant had outstanding 21,503,007 shares of common
stock, $.01 par value.
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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONTENTS
PART I. FINANCIAL INFORMATION............................................1
Item 1. Financial Statements.............................................1
Consolidated Balance Sheets
- June 30,1999 and September 30, 1998............................1
Consolidated Statements of Operations
-Three months ended June 30, 1999 and 1998.......................2
Consolidated Statements of Operations
-Nine months ended June 30, 1999 and 1998........................3
Consolidated Statements of Cash Flows
-Nine months ended June 30, 1999 and 1998........................4
Notes to Consolidated Financial Statements.......................5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...........................................12
Item 3. Quantitative and Qualitative Disclosures about Market Risk......16
PART II. OTHER INFORMATION...............................................17
Item 1. Legal Proceedings...............................................17
Item 2. Changes in Securities...........................................17
Item 3. Defaults Upon Senior Securities.................................17
Item 4. Submission of Matters to a Vote of Security Holders.............17
Item 5. Other Information...............................................17
Item 6. Exhibits and Reports on Form 8-K................................21
SIGNATURES..................................................................23
EXHIBIT INDEX...............................................................24
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, September 30,
Assets 1999 1998
------------- -------------
(unaudited)
Current assets:
Cash and cash equivalents $ 10,497,363 $ 11,315,166
Short-term investments 10,589,676 13,103,115
Receivables, including trade receivables of
$252,485 and $258,905 at June 30, 1999
and September 30, 1998, respectively 2,300,993 1,720,737
Interest receivable 142,997 283,908
Grants receivable 234,850 406,149
Prepaid expenses and other 889,883 788,496
------------- -------------
Total current assets 24,655,762 27,617,571
------------- -------------
Property, equipment and leasehold improvements - net 7,499,727 7,996,555
Compound library assets - net 4,313,901 5,515,517
Loans to officers and employees 6,433 6,433
Other assets 1,345,079 1,557,903
Intangible assets - net 6,628,446 7,724,001
------------- -------------
$ 44,449,348 $ 50,417,980
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 3,605,902 $ 4,232,540
Unearned revenue - current 982,196 1,116,685
Loans payable - current 166,656 --
------------- -------------
Total current liabilities 4,754,754 5,349,225
------------- -------------
Other liabilities:
Unearned revenue - long term 428,571 --
Loans payable - long term 319,140 49,326
Deferred acquisition costs 701,007 670,916
Accrued postretirement benefits cost 1,499,267 1,289,267
------------- -------------
Total liabilities 7,702,739 7,358,734
------------- -------------
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares
authorized; no shares issued at June 30, 1999
and September 30, 1998, respectively -- --
Common stock, $.01 par value; 50,000,000 shares
authorized; 22,368,393 shares and 22,288,583 shares
issued at June 30, 1999 and September 30, 1998,
respectively 223,684 222,886
Additional paid-in capital 105,049,815 104,963,082
Accumulated deficit (62,202,589) (55,842,181)
Accumulated other comprehensive (loss) income (266,599) 325
Less: treasury stock, at cost; 865,386 shares at
June 30, 1999 and 897,838 shares at
September 30, 1998 (6,057,702) (6,284,866)
------------- -------------
Total stockholders' equity 36,746,609 43,059,246
------------- -------------
Commitments and contingencies
$ 44,449,348 $ 50,417,980
============= =============
See accompanying notes to consolidated financial statements.
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OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
June 30,
----------------------------
1999 1998
------------ ------------
Revenues:
Collaborative program revenues,
principally from related parties $ 4,559,455 $ 3,958,441
Other research revenue 234,849 318,897
License revenue 121,016 702,422
Sales 317,191 362,839
------------ ------------
5,232,511 5,342,599
------------ ------------
Expenses:
Research and development 5,376,848 4,907,561
Production and service costs 388,293 356,088
Selling, general and administrative 2,337,306 2,235,727
Amortization of intangibles 365,185 365,185
------------ ------------
8,467,632 7,864,561
------------ ------------
Loss from operations (3,235,121) (2,521,962)
Other income (expense):
Net investment income 210,645 346,246
Other expense - net (21,326) (23,881)
------------ ------------
Net loss $ (3,045,802) $ (2,199,597)
============ ============
Weighted average number of shares
of common stock outstanding 21,470,797 21,373,522
============ ============
Basic and diluted loss per weighted average share
of common stock outstanding $ (.14) $ (.10)
============ ============
See accompanying notes to consolidated financial statements.
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OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended
June 30,
-----------------
1999 1998
------------ ------------
Revenues:
Collaborative program revenues,
principally from related parties $ 12,600,139 $ 11,401,317
Other research revenue 814,203 1,058,705
License revenue 2,171,016 702,422
Sales 915,608 796,903
------------ ------------
16,500,966 13,959,347
------------ ------------
Expenses:
Research and development 14,765,720 13,526,684
Production and service costs 1,239,443 720,497
Selling, general and administrative 6,363,907 6,312,744
Amortization of intangibles 1,095,555 1,095,555
------------ ------------
23,464,625 21,655,480
------------ ------------
Loss from operations (6,963,659) (7,696,133)
Other income (expense):
Net investment income 657,311 1,132,853
Other expense - net (54,060) (188,904)
------------ ------------
Net loss $ (6,360,408) $ (6,752,184)
============ ============
Weighted average number of shares
of common stock outstanding 21,430,958 21,369,805
============ ============
Basic and diluted loss per weighted average share
of common stock outstanding $ (.30) $ (.32)
============ ============
See accompanying notes to consolidated financial statements.
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OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
June 30,
-----------------
1999 1998
------------ ------------
Cash flows from operating activities:
Net loss $ (6,360,408) $ (6,752,184)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 1,496,530 1,379,586
Amortization of library assets 1,201,616 1,352,216
Amortization of intangibles assets 1,095,555 1,095,556
Amortization of deferred acquisition costs 30,091 30,090
Issuance of treasury stock in connection
with services rendered 227,164 --
Changes in assets and liabilities:
Receivables (592,129) (1,018,656)
Interest receivable 140,911 (139,158)
Grants receivable 171,299 138,047
Prepaid expenses and other (117,191) (168,545)
Other assets 212,824 (941,240)
Accounts payable and accrued expenses (580,907) (1,041,792)
Unearned revenue 295,297 943,929
Accrued postretirement benefits cost 210,000 151,096
------------ ------------
Net cash used in operating activities (2,569,348) (4,971,055)
------------ ------------
Cash flows from investing activities:
Additions to short-term investments (9,632,191) (2,748,208)
Maturities and sales of short-term investments 12,122,970 11,248,490
Additions to library assets -- (498,115)
Additions to property, equipment
and leasehold improvements (1,180,244) (1,543,132)
------------ ------------
Net cash provided by investing activities 1,310,535 6,459,035
------------ ------------
Cash flows from financing activities:
Proceeds from exercise of stock options
and employee stock purchase plan 87,531 69,158
Proceeds from borrowing 500,000 --
Repayment of borrowing (61,528) (82,810)
------------ ------------
Net cash provided by (used in) financing activities 526,003 (13,652)
------------ ------------
Net (decrease) increase in cash and cash
equivalents (732,810) 1,474,328
Effect of exchange rate changes on cash and
cash equivalents (84,993) 40,211
Cash and cash equivalents at beginning of period 11,315,166 8,636,634
------------ ------------
Cash and cash equivalents at end of period $ 10,497,363 $ 10,151,173
============ ============
See accompanying notes to consolidated financial statements.
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OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position of OSI
Pharmaceuticals, Inc. and its subsidiaries (the "Company") as of June 30, 1999
and September 30, 1998, its results of operations for the three and nine months
ended June 30, 1999 and 1998 and its cash flows for the nine months ended June
30, 1999 and 1998. Certain reclassifications have been made to the prior period
consolidated financial statements to conform them to the current presentation.
It is recommended that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto in the
Company's annual report on Form 10-K for the fiscal year ended September 30,
1998.
Results for interim periods are not necessarily indicative of results for the
entire year.
Net loss per share of common stock outstanding is based on the weighted average
number of shares outstanding. Common share equivalents (stock options) are not
included in the computations for the three and nine months ended June 30, 1999
and 1998 since their inclusion would be anti-dilutive.
(2) Comprehensive Income (Loss)
In October 1998, the Company adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes new
rules for the reporting and display of comprehensive income and its components;
however, the adoption of SFAS 130 had no impact on the Company's net loss or
total stockholders' equity. SFAS 130 requires unrealized gains or losses on the
Company's available-for-sale securities (referred to as short-term investments
on the accompanying consolidated balance sheets) and foreign currency
translation adjustments, which prior to adoption were reported separately in
stockholders' equity, to be included in other comprehensive income (loss).
Components of comprehensive loss for the three and nine months ended June 30,
1999 and 1998 are as follows:
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OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
For the three months ended
June 30, June 30,
1999 1998
---- ----
Net loss $(3,045,802) $(2,199,597)
Other comprehensive income (loss):
Foreign currency translation adjustments (76,494) (18,331)
Unrealized holding gains arising
during period 78,090 2,300
----------- -----------
1,596 (16,031)
Total comprehensive loss $(3,044,206) $(2,215,628)
=========== ===========
For the nine months ended
June 30, June 30,
1999 1998
---- ----
Net loss $(6,360,408) $(6,752,184)
Other comprehensive (loss) income:
Foreign currency translation adjustments (244,264) 40,211
Unrealized holding (losses) gains arising
during period (22,660) 27,400
----------- -----------
(266,924) 67,611
Total comprehensive loss $(6,627,332) $(6,684,573)
=========== ===========
The components of accumulated other comprehensive (loss) income are as follows:
June 30, September 30,
1999 1998
--------- ---------
Cumulative foreign currency translation adjustment $(263,019) $ (18,755)
Unrealized (loss) gain on short-term investments (3,580) 19,080
--------- ---------
Accumulated other comprehensive (loss) income $(266,599) $ 325
========= =========
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OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
(3) Amendments to the Agreements Related to Anaderm Research Corp.
In 1996, the Company entered into a joint venture with Pfizer Inc. ("Pfizer")
and New York University ("NYU") to form Anaderm Research Corp. ("Anaderm"), a
company dedicated to the discovery and development of safe, effective,
pharmacologically active agents for certain cosmetic and quality-of-life
indications, such as skin pigmentation, hair loss and wrinkling. On April 23,
1996, in connection with the formation of Anaderm, the Company, Pfizer, and
Anaderm, entered into a Collaborative Research Agreement (the "1996 Research
Agreement") for the discovery and development of novel compounds to treat the
conditions to which Anaderm was dedicated. The Company also entered into a
Stockholders' Agreement (the "1996 Stockholders' Agreement") with Pfizer,
Anaderm, NYU and certain NYU faculty members (the "Faculty Members"). Under the
1996 Stockholders' Agreement, Anaderm issued common stock to Pfizer and the
Company and options to purchase common stock to NYU and the Faculty Members (who
have exercised their options fully). Pfizer holds 82%, the Company holds 14% and
NYU and the Faculty Members collectively hold 4% of Anaderm's common stock. In
exchange for its 14% of Anaderm's common stock, the Company provided formatting
for high throughput screens and conducted compound screening at its own expense
under the 1996 Research Agreement.
On April 23, 1999, the Company entered into an Amended and Restated
Collaborative Research Agreement (the "1999 Research Agreement") with Pfizer and
Anaderm to expand the collaborative program begun by the 1996 Research Agreement
and an Amended and Restated Stockholders' Agreement (the "1999 Stockholders'
Agreement") with Pfizer, Anaderm, NYU and the Faculty Members. The 1999 Research
Agreement is for a term of three years. Pfizer may terminate the 1999 Research
Agreement, however, after the first or second year of the term in its sole
discretion after consultation with Anaderm and the Company to determine whether
satisfactory progress had been made in the research program during the previous
year. The 1999 Research Agreement provides for funding by Pfizer of up to $35
million in total payments to Anaderm to fund the Company's research and
development activities during the three-year term and up to $15 million in
phase-down funding following expiration of the three-year term or earlier
termination by Pfizer. In the expanded program, the Company will continue to
provide a full range of capabilities including assay biology, high throughput
screening, compound libraries, combinatorial, medicinal, and natural product
chemistry, as well as pharmaceutics, pharmacokinetics and molecular biology. The
Company anticipates a significant increase in its staffing of the program to
conduct its drug discovery efforts during the term of the 1999 Research
Agreement. Anaderm or Pfizer will pay royalties to the Company on the sales of
products resulting from the collaboration.
A significant change to the 1996 Stockholders' Agreement by the 1999
Stockholders' Agreement is the addition of a right on the part of each of the
Company, NYU and each of the Faculty Members, exercisable at any time prior to
December 31, 1999, to require Anaderm or
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OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Pfizer to purchase all, but not less than all, of the shares of common stock of
Anaderm held by each such stockholder for a fixed price based upon a formula as
set forth in the 1999 Stockholders' Agreement. The stockholders, including the
Company, also continue to have the right, exercisable at any time subsequent to
April 23, 2000, to require Anaderm or Pfizer to purchase all, but not less than
all, of the shares of common stock of Anaderm held by each such stockholder at
the "Fair Value" (as such term is defined in the 1999 Stockholders' Agreement)
of such shares. In addition, Anaderm or Pfizer has the right, exercisable at any
time subsequent to April 23, 2002, to require the Company, NYU or any Faculty
Member to sell to Anaderm all, but not less than all, of the shares of common
stock of Anaderm held by such stockholder at the Fair Value of such shares. In
the 1996 Stockholders' Agreement, this call right was exercisable by Anaderm
only with respect to the shares owned by NYU and the Faculty Members. Copies of
the 1999 Research Agreement and 1999 Stockholders' Agreement are attached hereto
as Exhibits 10.1 and 10.2 and are incorporated herein by reference.
(4) Development Agreement with Pfizer Inc.
Effective as of April 1, 1999, the Company entered into a Development Agreement
(the "Agreement") with Pfizer for the development of certain compounds derived
from the Collaborative Research Agreement, dated as of April 1, 1996, between
Pfizer and the Company. Under the Agreement, the Company will conduct a
development program formulated by the Company and Pfizer which includes
pre-clinical and clinical research through and including Phase II clinical
trials for compounds to assess their safety and efficacy to be developed as
therapeutic agents for the treatment of psoriasis and other related dermal
pathologies. Pursuant to the terms of the Agreement, Pfizer has granted to the
Company an exclusive, with the exception of Pfizer, license to make and use the
compounds for all research purposes in the development program other than the
sale or manufacture for sale of products or processes. At the end of the
development program, Pfizer must notify the Company of its intention to continue
development and commercialization of a compound within three (3) months
following receipt of the data package from the clinical studies. If Pfizer does
so notify the Company of such intention, it will have an exclusive, world-wide
license, with the right to grant sublicenses, to make, use, sell, offer for sale
and import products developed in the course of the development program. If
Pfizer fails to notify the Company of such intention, the Company will receive
an exclusive, world-wide, royalty-bearing license, including the right to grant
sublicenses, to manufacture, use, sell, offer for sale and import products
developed in the course of the development program. The Company, however, has
the right to refuse to accept this license. The party receiving the license must
pay milestone and royalty payments as consideration therefor. The duration of
the licenses is coextensive with the lives of patents related to the licensed
compounds. Each of the parties has rights and obligations to prosecute and
maintain patent rights related to specified areas of the research under the
Agreement. The Agreement is subject to early termination in the event of certain
defaults by the parties. A copy of the Agreement is attached hereto as Exhibit
10.3 and is incorporated herein by reference.
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OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
(5) Amendments to the Collaborative Agreement with Novartis Pharma AG
During the quarter ended June 30, 1999, the Company entered into Amendment
Nos. 1 and 2, dated April 13, 1999 and May 31, 1999, respectively, to its
Collaborative Agreement, dated April 19, 1995 (the "1995 Agreement") with
Novartis Pharma AG ("Novartis"). Pursuant to the 1995 Agreement, the Company
granted to Novartis an exclusive license with the right to grant sublicenses to
manufacture, have manufactured, use and sell products containing TGF-Beta 3 for
certain indications, referred to as Licensed Indications. The Company also
granted to Novartis an option (originally to expire in April 1999) to acquire
from the Company a license to manufacture, use and sell products containing
TGF-Beta 3 and other TGF-Betas for all other indications not included in the
Licensed Indications. The four year time limit to exercise the option was
extended until May 31, 1999 by Amendment No. 1 to the 1995 Agreement.
Amendment No. 2 changed certain terms of the 1995 Agreement including the
definition of Licensed Indications, the supply of TGF-Betas, the amount of
royalty payments, and the schedules of the Company's patents and applications
and Novartis' patents. Specifically, oral mucositis and the healing of soft
wound tissue were removed from the Licensed Indications. Novartis acknowledged
in Amendment No. 2 that it has discontinued development of products for the
indications of oral mucositis and healing of soft wound tissue. The parties
agreed that all licenses theretofore granted to Novartis with respect to such
discontinued indications are terminated and that the Company is free to continue
development work and to grant licenses to third parties with respect to such
discontinued indications. The Company is also free to use the results of any
development work with respect to the discontinued indications carried out by
Novartis prior to the date of Amendment No. 2 provided that the Company pays to
Novartis royalties and/or certain other agreed-upon amounts with respect to
sales of products resulting from any such continued development work by the
Company or a licensee thereof. Under Amendment No. 2, the new Licensed
Indications are bone, cartilage and tendon repair. Novartis' option was changed
in Amendment No. 2 from an option to include in the definition of Licensed
Indications all indications not already included to (a) an exclusive option to
include in Licensed Indications the treatment of transplant patients (e.g.,
graft protection), the treatment of ischemia (e.g., angina pectoris and
peripheral vascular disease), the treatment of stroke patients, and the
treatment of inflammatory bowel disease, and (b) a non-exclusive option to
include any other additional indications relating to TGF-Betas (other than the
discontinued indications). The payment terms for the option were also amended
and the time period to exercise the option was extended until May 31, 2003.
Copies of Amendment Nos. 1 and 2 are attached hereto as Exhibits 10.4 and 10.5
and are incorporated herein by reference.
(6) Asset Purchase Agreement with Cadus Pharmaceutical Corporation
On July 30, 1999, the Company acquired certain assets from Cadus Pharmaceutical
Corporation, a Delaware corporation ("Cadus"), pursuant to the terms of an Asset
Purchase
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OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Agreement (the "Asset Purchase Agreement") dated the same date. The assets
purchased (the "Assets") include (a) certain assets associated with certain of
Cadus' research programs (including the GPCR Directed Chemistry Program and a
collaboration with Solvay Pharmaceuticals B.V.), (b) Cadus' compound library,
(c) the purchase or license of certain intellectual property rights, and (d)
certain furniture, equipment, inventory, and supplies. Several assets were
retained by Cadus, including (a) monies in escrow in connection with the
judgment of SIBIA Neurosciences, Inc. against Cadus, (b) cash and accounts
receivable, (c) Cadus' Living Chip Technology, (d) Cadus' Functional Genomics
Program, and (e) Cadus' Research Collaboration and License Agreement with
SmithKline Beecham Corporation (the "SmithKline Research Agreement").
Forty-seven Cadus employees, consisting of thirty-six employed in science and
eleven employed in administration and support, were hired by the Company. The
Company intends to continue to utilize some of the Assets in the GPCR Directed
Chemistry Program and the collaboration with Solvay Pharmaceuticals B.V., but
expects to deploy the balance of the Assets in other research areas.
The purchase price for the Assets was $1.5 million in cash plus $74,096 in cash
for certain prepaid expenses plus the assumption of certain liabilities,
including liabilities under Cadus' facility lease (the "Facility Lease") in
Tarrytown, New York (approximately 45,569 square feet) as of July 1, 1999
(approximately $898,249 in rental payments per annum through December 31, 2002)
and an equipment lease with GECC Capital Corporation (approximately $361,485 in
rental payments through December 31, 1999, and $861,730 and $439,850 for the
years 2000 and 2001, respectively). The source of the cash portion of the
purchase price was the Company's existing cash resources. Liabilities assumed
will be paid from such cash resources and working capital.
In connection with the acquisition, the Company entered into the following
additional agreements with Cadus: (a) a Patent License Agreement, (b) a
Technology License Agreement, and (c) a Software License Agreement, pursuant to
which the Company obtained non-exclusive licenses for the use and practice of
certain of Cadus' patents, Cadus' technology and Cadus' software programs,
respectively. The Company and Cadus also entered into another Patent License
Agreement, under which the Company will license back to Cadus on a non-exclusive
basis certain of the patents which were assigned to the Company as part of the
acquisition.
In connection with the acquisition, the Company adopted a Non-Qualified Stock
Option Plan for Former Employees of Cadus (the "Cadus Stock Plan") to induce
certain former employees of Cadus to accept employment with the Company. The
Company granted options to purchase an aggregate of 415,000 shares of common
stock of the Company at a purchase price of $5.00 per share. These options
become exercisable on July 30, 2000. The Asset Purchase Agreement and the Cadus
Stock Plan are attached hereto as Exhibits 2.1 and 2.2, and are incorporated
herein by reference.
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OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
(7) Changes in Securities
On January 6, 1999, the Board of Directors of the Company adopted, subject to
stockholder approval, certain amendments to the Company's Certificate of
Incorporation. At the Annual Meeting of Stockholders held on March 24, 1999, the
amendments were approved. The Certificate of Incorporation amendments (1)
authorize 5,000,000 shares of preferred stock, par value $.01 per share, with
such designations, preferences, privileges, and restrictions as may be
determined from time to time by the Company's Board of Directors (see Article IV
of the Certificate of Incorporation, as amended), and (2) require that all
actions taken by stockholders must be taken at an annual or special meeting and
may not be taken by written consent (see Article VII of the Certificate of
Incorporation, as amended). The full text of the Certificate of Incorporation,
as amended, which was effective as of April 13, 1999, was filed with the
Company's quarterly report on Form 10-Q for the quarter ended March 31, 1999 and
is incorporated herein by reference.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
THREE AND NINE MONTHS ENDED JUNE 30, 1999 AND 1998
OSI Pharmaceuticals, Inc. (the "Company") is committed to the discovery and
development of novel, small-molecule pharmaceutical products for
commercialization by the pharmaceutical industry. The Company is exploiting its
full range of discovery and development capabilities by building and sustaining
a pipeline of pharmaceutical product opportunities in selected disease areas.
Revenues
Revenues for the three and nine months ended June 30, 1999 were approximately
$5.2 million and $16.5 million, respectively, representing a decrease of
$110,000 or 2% and an increase of $2.5 million or 18%, respectively, compared to
revenues of $5.3 million and $14.0 million reported for the three and nine
months ended June 30, 1998, respectively. Collaborative research and development
agreements with Pfizer Inc. ("Pfizer"), Anaderm Research Corp. ("Anaderm"),
Hoechst Marion Roussel, Inc. ("HMRI"), Sankyo Company Ltd., Bayer Corporation,
Fujirebio, Inc., and Helicon Therapeutics, Inc. ("Helicon") accounted for
substantially all of the Company's collaborative program revenues for the three
and nine-month periods ended June 30, 1999 and 1998. Total collaborative
revenues of $4.6 million and $12.6 million for the three and nine-month periods
increased approximately $601,000 and $1.2 million, respectively. The three-month
increase was principally due to increased funding from Pfizer and Anaderm for
the discovery and development of novel cosmeceutical compounds. The nine-month
increase was primarily due to the expansion of the Anaderm program, as well as
increased funding for the program with Helicon. The increase in revenues was
partially offset by the conclusion in September 1998 of one of the Company's
funded collaborative programs with HMRI relating to the discovery and
development of orally active drugs for the treatment of chronic anemia.
Other research revenues, representing primarily government grants and other
research grants, decreased by $84,000 and $245,000, for the three and nine-month
periods ended June 30, 1999, respectively. The changes were due to timing and
awarding of grant funding. License revenues of $2,000,000, in the second quarter
of fiscal 1999, were recorded pursuant to a license agreement entered into in
March 1999 with BioChem Pharma Inc., which replaces an earlier co-venture
program, focused on anti-viral drug discovery. During the third quarter of
fiscal 1998, the Company recognized license revenue of approximately $700,000
from the signing of a license agreement with Aurora Biosciences Corporation
covering the Company's gene transcription patent estate. Sales revenues derived
from the pharmaceutic services of the Company's Aston Molecules Ltd. ("Aston")
subsidiary and from diagnostic sales of the Company's Oncogene Science
Diagnostics Inc. ("OSDI") subsidiary, decreased by $46,000 and increased by
$119,000 for the three and nine-month periods ended June 30, 1999, respectively.
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Expenses
The Company's operating expenses increased by approximately $603,000 and $1.8
million or 8% and 8%, respectively, for the three and nine months ended June 30,
1999 compared to the three and nine months ended June 30, 1998. Research and
development spending for the current three and nine-month periods increased
$470,000 and $1.2 million, respectively, from the prior year periods generally
due to costs associated with increasing average staff levels and increasing
expenses related to: (1) the continued expansion in the discovery and
development of novel cosmeceutical compounds; (2) the joint venture with Helicon
for the discovery of novel drugs for the treatment of long-term memory
disorders; (3) certain other of the Company's proprietary programs; and (4) the
expansion of the Company's medicinal chemistry operations at its Aston
subsidiary.
The Company's production and service costs increased by approximately $32,000
and $519,000 for the three and nine-month periods ended June 30, 1999,
respectively. The increase was primarily related to costs associated with OSDI
as it expands its manufacturing capacity. Selling, general and administrative
costs for the current three and nine-month periods ended June 30, 1999 increased
by $102,000 and $51,000, respectively, from the prior year periods.
Other Income and Expense
Investment income decreased approximately $136,000 and $476,000 or 39% and 42%,
respectively, for the three and nine months ended June 30, 1999 compared to the
three and nine months ended June 30, 1998. This decrease relates to the decrease
in the principal balance of cash invested.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, working capital (representing primarily cash, cash equivalents
and short-term investments) aggregated approximately $19.9 million. The Company
is dependent upon collaborative research revenues, government research grants,
interest income and cash balances, and will remain so until products developed
from its technology are successfully commercialized. The Company believes that
with the funding from its collaborative research programs, government research
grants, interest income, and cash balances, its financial resources are adequate
for its operations for approximately the next three to four years based on its
current business plan even if no milestone payments or royalties are received
during this period. The Company's capital requirements, however, may vary as a
result of a number of factors, including, but not limited to, competitive and
technological developments, funds required for further expansion or enhancement
of the Company's technology platform (including possible additional
collaborations, acquisitions and joint ventures), potential milestone payments,
and the time and expense required to obtain governmental approval of products,
some of which factors are beyond the Company's control.
An additional factor which may cause the Company's capital requirements to vary
is the acquisition by the Company, on July 30, 1999, of certain assets from
Cadus Pharmaceutical Corporation ("Cadus") pursuant to the terms of an Asset
Purchase Agreement dated the same
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date. The assets include certain of Cadus' ongoing research programs, Cadus'
compound library, certain intellectual property rights, Cadus' facility lease in
Tarrytown, New York and certain of Cadus' equipment leases as well as other
fixed assets. The Company intends to maintain Cadus' former facility for at
least one year, but is considering subletting a portion of it. In addition to
the acquisition of the assets, the Company hired forty-seven former Cadus
employees. The Company expects to employ the former Cadus employees in ongoing
and expanding programs at both Cadus' former facility and the Company's
headquarters in Uniondale, New York. The Company, however, expects its cash burn
to remain at similar levels to its current annual burn, despite the acquisition
and additional operations. This will be due, in part, to absorbing some of the
acquired resources into an ongoing funded collaboration with Solvay
Pharmaceuticals B.V. that was purchased from Cadus, expanding the Company's
current programs such as in Anaderm, and entering into potentially new funded
programs. The Company is also considering the buyout of certain operating leases
for research equipment assumed from Cadus.
One of the Company's strategic objectives is to manage its financial resources
and the growth of its drug discovery and development programs so as to balance
its proprietary investments with its funded collaborations. There can be no
assurance that scheduled payments will be made by third parties, that current
agreements will not be canceled, that government research grants will continue
to be received at current levels, that milestone payments will be made, or that
unanticipated events requiring the expenditure of funds will not occur. Further,
there can be no assurance that the Company will be able to obtain any additional
required funds on acceptable terms, if at all. Failure to obtain additional
funds when required would have a material adverse effect on the Company's
business, financial condition and results of operations.
YEAR 2000 COMPLIANCE
The Company is aware of the challenges associated with the inability of certain
systems to properly format information after December 31, 1999 (the "Year 2000
problem"). The Year 2000 problem is the result of computer programs being
written using two digits (rather than four) to define an applicable year. The
Company is currently working to resolve the potential impact of the Year 2000
problem on the processing of date-sensitive information by the Company's
computerized information systems. Substantially all of the Company's biology and
chemistry databases are stored on Oracle tables and ISIS chemical structure
databases, which are Year 2000 compliant, as are its Novell network servers. The
Company has essentially completed the conversion of its financial records to an
Oracle based system which is Year 2000 compliant. The Company does not
anticipate any material disruption in its operations as the result of any
failure of its internal Year 2000 compliance. Through the current period, the
Company has not incurred any significant costs in addressing the Year 2000
problem. Based on current information, any additional costs of addressing
remaining potential Year 2000 problems associated with the Company's internal
systems and operations are not expected to have a material adverse impact to the
Company's financial position, results of operations, or cash flows in future
periods.
The Company is in the process of conducting an evaluation of the extent to which
the operations of the material third parties with whom it regularly deals may be
disrupted by any
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Year 2000 noncompliance of any of their systems. These third parties include the
Company's collaborative partners and its suppliers and vendors. Disruption of
the operations of any of its partners could delay or halt important research and
development programs, cause the loss of data, or have other unforeseen
consequences. The Company is currently contacting all significant collaborators,
suppliers, vendors and financial institutions in order to identify potential
areas of concern. The Company will finalize this inquiry during the fourth
quarter of fiscal 1999. Year 2000 problems experienced by the Company's
suppliers and vendors could cause a disruption of the Company's operations. The
Company currently is unable to estimate the likelihood of any of these risks
being realized, or if realized, the impact they may have on the Company. Any
such occurrence could have a material adverse effect on the Company's business,
financial condition and results of operations.
If necessary, the Company intends to create a remediation and contingency plan
to identify and document potential business disruptions and continuity planning
procedures. The focus of this activity would be on potential failures of
external systems required to carry out normal business operations including
services provided by the public infrastructure such as, but not limited to,
power, electric, transportation and telecommunications. The Company expects this
activity to continue through the remainder of fiscal 1999.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which is effective for all quarters of
fiscal year beginning after June 15, 2000. SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. In
accordance with SFAS 133, an entity is required to recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gain and losses to offset related results on the hedged
item in the income statement and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. The Company does not believe that the implementation of SFAS 133
will have a material effect on its results of operations and financial position.
FORWARD LOOKING STATEMENTS
Certain of the matters and subject areas discussed in this report that are not
statements of current or historical fact are "forward-looking statements" that
convey information about potential future circumstances and developments. These
forward-looking statements are necessarily based on various assumptions, involve
known and unknown risks and generally are subject to the inherent risks and
uncertainties surrounding expectations regarding future occurrences. As a
result, the Company's actual future experience may differ materially from the
results, achievements or performance described or implied in such statements.
Factors that might cause the Company's actual future experience to differ
materially from the forward-looking statements include, but are not limited to,
(i) the Company's absence of
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commercialized drug products, (ii) the Company's dependence on third parties for
clinical development and commercialization of potential products, (iii) the
potential failure of the Company's lead compound currently in clinical trials to
progress successfully through clinical development, (iv) the potential failure
of any drug candidates that emerge from the Company's discovery operations to
progress successfully to or through clinical development, (v) competition, (vi)
government regulation, (vii) pharmaceutical pricing and (viii) the effect of any
internal or external Year 2000 problems. Certain of these and additional factors
that may cause the Company's actual future experience to differ materially from
the forward-looking statements contained in this report are discussed in the
Company's annual report on Form 10-K for the fiscal year ended September 30,
1998.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's cash flow and earnings are subject to fluctuations due to changes
in interest rates in its investment portfolio of debt securities, the fair value
of equity instruments held, and foreign currency exchange rates. The Company
maintains an investment portfolio of various issuers, types and maturities.
These securities are classified as available-for-sale and, consequently, are
recorded on the balance sheet at fair value with unrealized gains or losses
reported as a component of accumulated comprehensive income (loss). The
Company's investments in certain biotechnology companies are carried on either
the equity method of accounting or at cost for equity securities that do not
have readily determinable fair values. Other-than-temporary losses are recorded
against earnings in the same period the loss was deemed to have occurred. The
Company does not currently hedge this exposure and there can be no assurance
that other-than-temporary losses will not have a material adverse impact on the
Company's results of operations in the future.
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PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Amendments to the Agreements Related to Anaderm Research Corp.
In 1996, the Company entered into a joint venture with Pfizer Inc.
("Pfizer") and New York University ("NYU") to form Anaderm Research Corp.
("Anaderm"), a company dedicated to the discovery and development of safe,
effective, pharmacologically active agents for certain cosmetic and
quality-of-life indications, such as skin pigmentation, hair loss and wrinkling.
On April 23, 1996, in connection with the formation of Anaderm, the Company,
Pfizer, and Anaderm, entered into a Collaborative Research Agreement (the "1996
Research Agreement") for the discovery and development of novel compounds to
treat the conditions to which Anaderm was dedicated. The Company also entered
into a Stockholders' Agreement (the "1996 Stockholders' Agreement") with Pfizer,
Anaderm, NYU and certain NYU faculty members (the "Faculty Members"). Under the
1996 Stockholders' Agreement, Anaderm issued common stock to Pfizer and the
Company and options to purchase common stock to NYU and the Faculty Members (who
have exercised their options fully). Pfizer holds 82%, the Company holds 14% and
NYU and the Faculty Members collectively hold 4% of Anaderm's common stock. In
exchange for its 14% of Anaderm's common stock, the Company provided formatting
for high throughput screens and conducted compound screening at its own expense
under the 1996 Research Agreement.
On April 23, 1999, the Company entered into an Amended and Restated
Collaborative Research Agreement (the "1999 Research Agreement") with Pfizer and
Anaderm to expand the collaborative program begun by the 1996 Research Agreement
and an Amended and Restated Stockholders' Agreement (the "1999 Stockholders'
Agreement") with Pfizer, Anaderm, NYU and the Faculty Members. The 1999 Research
Agreement is for a term of three years. Pfizer may terminate the 1999 Research
Agreement, however, after the first or second year of the term in its sole
discretion after consultation with Anaderm and the Company
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to determine whether satisfactory progress has been made in the research program
during the previous year. The 1999 Research Agreement provides for funding by
Pfizer of up to $35 million in total payments to Anaderm to fund the Company's
research and development activities during the three-year term and up to $15
million in phase-down funding following expiration of the three-year term or
earlier termination by Pfizer. In the expanded program, the Company will
continue to provide a full range of capabilities including assay biology, high
throughput screening, compound libraries, combinatorial, medicinal, and natural
product chemistry, as well as pharmaceutics, pharmacokinetics and molecular
biology. The Company anticipates a significant increase in its staffing of the
program to conduct its drug discovery efforts during the term of the 1999
Research Agreement. Anaderm or Pfizer will pay royalties to the Company on the
sales of products resulting from the collaboration.
A significant change to the 1996 Stockholders' Agreement by the 1999
Stockholders' Agreement is the addition of a right on the part of each of the
Company, NYU and each of the Faculty Members, exercisable at any time prior to
December 31, 1999, to require Anaderm or Pfizer to purchase all, but not less
than all, of the shares of common stock of Anaderm held by each such
stockholder for a fixed price based upon a formula as set forth in the 1999
Stockholders' Agreement. The stockholders, including the Company, also continue
to have the right, exercisable at any time subsequent to April 23, 2000, to
require Anaderm or Pfizer to purchase, all but not less than all, of the shares
of common stock of Anaderm held by each such stockholder at the "Fair Value" (as
such term is defined in the 1999 Stockholders' Agreement) of such shares. In
addition, Anaderm or Pfizer has the right, exercisable at any time subsequent to
April 23, 2002, to require the Company, NYU or any Faculty Member to sell to
Anaderm all, but not less than all, of the shares of common stock of Anaderm
held by such stockholder at the Fair Value of such shares. In the 1996
Stockholders' Agreement, this call right was exercisable by Anaderm only with
respect to the shares owned by NYU and the Faculty Members. Copies of the 1999
Research Agreement and 1999 Stockholders' Agreement are attached hereto as
Exhibits 10.1 and 10.2 and are incorporated herein by reference.
Development Agreement with Pfizer Inc.
Effective as of April 1, 1999, the Company entered into a
Development Agreement (the "Agreement") with Pfizer for the development of
certain compounds derived from the Collaborative Research Agreement, dated as of
April 1, 1996, between Pfizer and the Company. Under the Agreement, the Company
will conduct a development program formulated by the Company and Pfizer which
includes pre-clinical and clinical research through and including Phase II
clinical trials for compounds to assess their safety and efficacy to be
developed as therapeutic agents for the treatment of psoriasis and other related
dermal pathologies. Pursuant to the terms of the Agreement, Pfizer has granted
to the Company an exclusive, with the exception of Pfizer, license to make and
use the compounds for all research purposes in the development program other
than the sale or manufacture for sale of products or processes. At the end of
the development program, Pfizer must notify the Company of its intention to
continue development and commercialization of a compound within three (3) months
following receipt of the data package from the clinical studies. If Pfizer does
so notify the Company of such intention, it will have an exclusive, world-wide
license, with the right to grant sublicenses, to make, use, sell, offer for sale
and import products developed in the
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course of the development program. If Pfizer fails to notify the Company of such
intention, the Company will receive an exclusive, world-wide, royalty-bearing
license, including the right to grant sublicenses, to manufacture, use, sell,
offer for sale and import products developed in the course of the development
program. The Company, however, has the right to refuse to accept this license.
The party receiving the license must pay milestone and royalty payments as
consideration therefor. The duration of the licenses is coextensive with the
lives of patents related to the licensed compounds. Each of the parties has
rights and obligations to prosecute and maintain patent rights related to
specified areas of the research under the Agreement. The Agreement is subject to
early termination in the event of certain defaults by the parties. A copy of the
Agreement is attached hereto as Exhibit 10.3 and is incorporated herein by
reference.
Amendment to the Collaborative Agreement with Novartis Pharma AG
During the quarter ended June 30, 1999, the Company entered into
Amendment Nos. 1 and 2, dated April 13, 1999 and May 31, 1999, respectively, to
its Collaborative Agreement, dated April 19, 1995 (the "1995 Agreement") with
Novartis Pharma AG ("Novartis"). Pursuant to the 1995 Agreement, the Company
granted to Novartis an exclusive license with the right to grant sublicenses to
manufacture, have manufactured, use and sell products containing TGF-Beta 3 for
certain indications, referred to as Licensed Indications. The Company also
granted to Novartis an option (originally to expire in April 1999) to acquire
from the Company a license to manufacture, use and sell products containing
TGF-Beta 3 and other TGF-Betas for all other indications not included in the
Licensed Indications. The four year time limit to exercise the option was
extended until May 31, 1999 by Amendment No. 1 to the 1995 Agreement.
Amendment No. 2 changed certain terms of the 1995 Agreement
including the definition of Licensed Indications, the supply of TGF-Betas, the
amount of royalty payments, and the schedules of the Company's patents and
applications and Novartis' patents. Specifically, oral mucositis and the healing
of soft wound tissue were removed from the Licensed Indications. Novartis
acknowledged in Amendment No. 2 that it has discontinued development of products
for the indications of oral mucositis and healing of soft wound tissue. The
parties agreed that all licenses theretofore granted to Novartis with respect to
such discontinued indications are terminated and that the Company is free to
continue development work and to grant licenses to third parties with respect to
such discontinued indications. The Company is also free to use the results of
any development work with respect to the discontinued indications carried out by
Novartis prior to the date of Amendment No. 2 provided that the Company pays to
Novartis royalties and/or certain other agreed-upon amounts with respect to
sales of products resulting from any such continued development work by the
Company or a licensee thereof. Under Amendment No. 2, the new Licensed
Indications are bone, cartilage and tendon repair. Novartis' option was changed
in Amendment No. 2 from an option to include in the definition of Licensed
Indications all indications not already included to (a) an exclusive option to
include in Licensed Indications the treatment of transplant patients (e.g.,
graft protection), the treatment of ischemia (e.g., angina pectoris and
peripheral vascular disease), the treatment of stroke patients, and the
treatment of inflammatory bowel disease, and (b) a non-exclusive option to
include any other additional indications relating to TGF-Betas (other than the
discontinued indications). The payment terms
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for the option were also amended and the time period to exercise the option
was extended until May 31, 2003. Copies of Amendment Nos. 1 and 2 are attached
hereto as Exhibits 10.4 and 10.5 and are incorporated herein by reference.
Asset Purchase Agreement with Cadus Pharmaceutical Corporation
On July 30, 1999, the Company acquired certain assets from Cadus
Pharmaceutical Corporation, a Delaware corporation ("Cadus"), pursuant to the
terms of an Asset Purchase Agreement (the "Asset Purchase Agreement") dated the
same date. The assets purchased (the "Assets") include (a) certain assets
associated with certain of Cadus' research programs (including the GPCR Directed
Chemistry Program and a collaboration with Solvay Pharmaceuticals B.V.), (b)
Cadus' compound library, (c) the purchase or license of certain intellectual
property rights, and (d) certain furniture, equipment, inventory, and supplies.
Several assets were retained by Cadus, including (a) monies in escrow in
connection with the judgment of SIBIA Neurosciences, Inc. against Cadus, (b)
cash and accounts receivable, (c) Cadus' Living Chip Technology, (d) Cadus'
Functional Genomics Program, and (e) Cadus' Research Collaboration and License
Agreement with SmithKline Beecham Corporation (the "SmithKline Research
Agreement"). Forty-seven Cadus employees, consisting of thirty-six employed in
science and eleven employed in administration and support, were hired by the
Company. The Company intends to continue to utilize some of the Assets in the
GPCR Directed Chemistry Program and the collaboration with Solvay
Pharmaceuticals B.V., but expects to deploy the balance of the Assets in other
research areas.
The purchase price for the Assets was $1.5 million in cash plus
$74,096 in cash for certain prepaid expenses plus the assumption of certain
liabilities, including liabilities under Cadus' facility lease (the "Facility
Lease") in Tarrytown, New York (approximately 45,569 square feet) as of July 1,
1999 (approximately $898,249 in rental payments per annum through December 31,
2002) and an equipment lease with GECC Capital Corporation (approximately
$361,485 in rental payments through December 31, 1999, and $861,730 and $439,850
for the years 2000 and 2001, respectively). The source of the cash portion of
the purchase price was the Company's existing cash resources. Liabilities
assumed will be paid from such cash resources and working capital.
In connection with the acquisition, the Company entered into the
following additional agreements with Cadus: (a) a Patent License Agreement, (b)
a Technology License Agreement, and (c) a Software License Agreement, pursuant
to which the Company obtained non-exclusive licenses for the use and practice of
certain of Cadus' patents, Cadus' technology and Cadus' software programs,
respectively. The Company and Cadus also entered into another Patent License
Agreement under which the Company will license back to Cadus on a non-exclusive
basis certain of the patents which were assigned to the Company as part of the
acquisition.
In connection with the acquisition, the Company adopted a
Non-Qualified Stock Option Plan for Former Employees of Cadus (the "Cadus Stock
Plan") to induce certain former employees of Cadus to accept employment with the
Company. The Company granted options to purchase an aggregate of 415,000 shares
of common stock of the Company at a purchase price of $5.00 per share. These
options become exercisable on July 30, 2000. The
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Asset Purchase Agreement and the Cadus Stock Plan are attached hereto as
Exhibits 2.1 and 2.2, and are incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1+* Asset Purchase Agreement, dated July 30, 1999, by and between
Cadus Pharmaceutical Corporation and the Company.
2.2 OSI Pharmaceuticals, Inc. Non-Qualified Stock Option Plan for
Former Employees of Cadus Pharmaceutical Corporation.
3.1 Certificate of Incorporation, as amended. (1)
3.2 Amended and Restated By-Laws. (2)
10.1* Collaborative Research Agreement, dated as of April 23, 1999,
by and among Pfizer Inc., the Company and Anaderm Research
Corp.
10.2* Anaderm Research Corp. Amended and Restated Stockholders'
Agreement, dated April 23, 1999.
10.3* Development Agreement, dated as of April 1, 1999, by and
between Pfizer Inc. and the Company.
10.4 Amendment No. 1, dated as of May 31, 1999, by and between
Novartis Pharma AG and the Company.
10.5* Amendment No. 2, dated as of April 13, 1999, by and between
Novartis Pharma AG and the Company.
27 Financial Data Schedule.
----------
+ The Schedules to the Asset Purchase Agreement have been
omitted pursuant to Item 601(b)(2) of Regulation S-K
under the Securities Exchange Act of 1934, as amended.
The omitted schedules from this filing will be provided
upon request.
* Portions of this exhibit have been redacted and are the
subject of a confidential treatment request filed with
the Secretary of the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
(1) Included as an exhibit to the Company's quarterly report
on Form 10-Q, filed on May 14, 1999, and incorporated
herein by reference.
(2) Included as an exhibit to the Company's current report
on Form 8-K, filed on January 8, 1999, and incorporated
herein by reference.
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(b) Reports on Form 8-K
The Company filed a current report on Form 8-K on June 28,
1999 with the Securities and Exchange Commission via EDGAR,
pertaining to the adoption of a new Shareholders Rights Plan,
redemption of rights under the Company's old Shareholders
Rights Plan and termination of the Company's old Shareholders
Rights Plan by the Board of Directors. The earliest event
covered by the report occurred on June 23, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
OSI PHARMACEUTICALS, INC.
-------------------------------------
(Registrant)
Date: August 16, 1999 /s/ Colin Goddard, PhD.
-------------------------------------
Colin Goddard, Ph.D.
President and Chief Executive Officer
Date: August 16, 1999 /s/ Robert L. Van Nostrand
-------------------------------------
Robert L. Van Nostrand
Vice President and Chief Financial
Officer (Principal Financial Officer)
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EXHIBIT INDEX
Exhibit No. Description
2.1+* Asset Purchase Agreement, dated July 30, 1999, by and between Cadus
Pharmaceutical Corporation and the Company.
2.2 OSI Pharmaceuticals, Inc. Non-Qualified Stock Option Plan for Former
Employees of Cadus Pharmaceutical Corporation.
3.1 Certificate of Incorporation, as amended. (1)
3.2 Amended and Restated By-Laws. (2)
10.1* Collaborative Research Agreement, dated as of April 23, 1999, by and
among Pfizer Inc., the Company and Anaderm Research Corp.
10.2* Anaderm Research Corp. Amended and Restated Stockholders' Agreement,
dated April 23, 1999.
10.3* Development Agreement, dated as of April 1, 1999, by and between
Pfizer Inc. and the Company.
10.4 Amendment No. 1, dated as of May 31, 1999, by and between Novartis
Pharma AG and the Company.
10.5* Amendment No. 2, dated as of April 13, 1999, by and between Novartis
Pharma AG and the Company.
27 Financial Data Schedule.
- ----------
+ The Schedules to the Asset Purchase Agreement have been omitted pursuant
to Item 601(b)(2) of Regulation S-K under the Securities Exchange Act of
1934, as amended. The omitted schedules from this filing will be provided
upon request.
* Portions of this exhibit have been redacted and are the subject of a
confidential treatment request filed with the Secretary of the Securities
and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.
(1) Included as an exhibit to the Company's quarterly report on Form 10-Q,
filed on May 14, 1999, and incorporated herein by reference.
(2) Included as an exhibit to the Company's current report on Form 8-K, filed
on January 8, 1999, and incorporated herein by reference.
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