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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 2001
--------------
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
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Commission File Number 0-24424
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CIMA LABS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 41-1569769
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
10000 VALLEY VIEW ROAD, EDEN PRAIRIE, MN 55344-9361
(952) 947-8700
(Address of principal executive offices (Registrant's telephone number,
and zip code) including area code)
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $.01 par value 14,539,293
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(Class) (Outstanding at May 2, 2001)
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INDEX
CIMA LABS INC.
Page No.
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)
Balance Sheets - March 31, 2001 and December 31, 2000. 3
Statements of Operations - Three months ended March 31, 2001 and March
31, 2000 4
Statements of Cash Flows - Three months ended March 31, 2001 and
March 31, 2000. 5
Notes to Financial Statements. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 9
Item 3. Quantitative and Qualitative Disclosures about Market Risks. 22
PART II. OTHER INFORMATION
Items 1, 2, 3, 4 and 5 have been omitted since all items are inapplicable or
answers negative.
Item 6. Exhibits and Reports on Form 8-K 23
Signature 24
CIMA and the CIMA logo are trademarks of CIMA. All other trademarks used in this
report are the property of their respective owners. We have registered
"CIMA(R)," "CIMA LABS INC.(R)," and "OraSolv(R)" as trademarks with the U.S.
Patent and Trademark Office. We also use the trademarks "OraSolvSR(TM),"
"DuraSolv(TM)," "PakSolv(TM)," "OraVescent(TM)SL/BL" and "OraVescent(TM)SS."
"Triaminic(R)" and "Softchews(R)" are trademarks of Novartis. "Zomig(R),"
"Zomig-ZMT(TM)" and "Rapimelt(TM)" are trademarks of AstraZeneca. "Remeron(R)"
and "SolTab(TM)" are trademarks of Organon. "Tempra(R)" is a registered
trademark of a Canadian affiliate of Bristol-Myers Squibb. "FirsTabs(TM)" is a
trademark of Bristol-Myers Squibb. "NuLev(TM)" is a trademark of Schwarz Pharma.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
CIMA LABS INC.
March 31, December 31,
2001 2000
(Unaudited) (See note)
ASSETS
Current assets:
Cash and cash equivalents $ 16,811,944 $ 91,587,716
Available-for-sale securities 56,861,876 10,425,456
Trade accounts receivable, net 4,344,365 7,679,617
Interest receivable 1,318,669 970,997
Inventories, net 3,199,276 1,381,476
Prepaid expenses 285,794 226,908
------------- -------------
Total current assets 82,821,924 112,272,170
Other assets:
Available-for-sale securities 94,923,555 61,149,019
All other, net 300,964 299,033
------------- -------------
Total other assets 95,224,519 61,448,052
Property and equipment:
Property, plant and equipment 26,914,891 23,268,688
Accumulated depreciation (8,020,425) (7,527,218)
------------- -------------
18,894,466 15,741,470
------------- -------------
Total assets $ 196,940,909 $ 189,461,692
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,871,645 $ 976,576
Accrued expenses 1,798,286 1,484,931
Deferred revenue 95,833 75,000
------------- -------------
Total current liabilities 3,765,764 2,536,507
Stockholders' equity:
Convertible preferred stock, $.01 par value; 50,000 shares
authorized; -0- shares issued and outstanding - -
Common Stock, $.01 par value; 20,000,000 shares authorized;
14,538,153 and 14,358,370 shares issued and outstanding 145,382 143,584
Additional paid-in capital 230,164,115 228,631,594
Accumulated deficit (38,814,601) (41,990,951)
Accumulated other comprehensive income 1,680,249 140,958
------------- -------------
Total stockholders' equity 193,175,145 186,925,185
------------- -------------
Total liabilities and stockholders' equity $ 196,940,909 $ 189,461,692
============= =============
Note: The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
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STATEMENTS OF OPERATIONS
CIMA LABS INC.
(Unaudited)
For the Three Months Ended
March 31,
--------------------------------------
2001 2000
----------------- -----------------
Operating revenues:
Net sales $ 3,296,173 $ 2,777,578
Product development fees and licensing 1,868,217 2,196,685
Royalties 791,661 737,500
------------ ------------
5,956,051 5,711,763
------------ ------------
Operating expenses:
Cost of sales 2,601,428 3,156,639
Research and product development 1,486,228 1,026,545
Selling, general and administrative 1,117,638 948,488
------------ ------------
5,205,294 5,131,672
------------ ------------
Operating income 750,757 580,091
Other income (expense) 2,425,593 (21,302)
------------ ------------
Income before cumulative effect of a
change in accounting principle 3,176,350 558,789
Cumulative effect of a change in accounting
Principle - (799,337)
------------ ------------
Net income (loss) $ 3,176,350 $ (240,548)
============ ============
Net income (loss) per share:
Basic
Net income per share before cumulative
effect of a change in accounting principle $ .22 $ .06
Net loss per share from cumulative effect of a
change in accounting principle - (.08)
------------ ------------
Net income (loss) per basic share $ .22 $ (.02)
============ ============
Diluted
Net income per share before cumulative
effect of a change in accounting principle $ .20 $ .05
Net loss per share from cumulative effect of a
change in accounting principle - (.07)
------------ ------------
Net income (loss) per diluted share $ .20 $ (.02)
============ ============
Weighted average number of common shares:
Basic 14,458,728 9,898,551
Diluted 15,612,056 11,046,086
See accompanying notes.
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STATEMENTS OF CASH FLOWS
CIMA LABS INC.
(Unaudited)
For the Three Months Ended
March 31,
---------------------------------------
2001 2000
------------------ ------------------
OPERATING ACTIVITIES:
Net income (loss) $ 3,176,350 $ (240,548)
Adjustments to reconcile net income or loss to net
cash used in operating activities:
Depreciation and amortization 520,333 515,029
Loss on impairment of assets - 400,000
Cumulative effect of a change in accounting principle - 799,337
Changes in operating assets and liabilities:
Accounts receivable and other assets 2,928,694 (866,697)
Inventories (1,817,800) 86,603
Accounts payable 895,069 (536,811)
Accrued expenses and other 313,355 (281,432)
Deferred revenue 20,833 (550,852)
------------ ------------
Net cash used in operating activities 6,036,834 (675,371)
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (3,646,203) (2,597,422)
Patents and trademarks (29,057) (17,378)
Purchases of available-for-sale securities (78,671,665) (1,956,924)
------------ ------------
Net cash provided by (used in) investing activities (82,346,925) (4,571,724)
FINANCING ACTIVITIES:
Stock option exercise proceeds 1,534,319 521,254
Net proceeds from stock offerings - 19,400,000
Payments on capital lease obligations - (17,239)
------------ ------------
Net cash provided by financing activities 1,534,319 19,904,014
------------ ------------
Increase (decrease) in cash and cash equivalents (74,775,772) 14,656,919
Cash and cash equivalents at beginning of period 91,587,716 2,480,698
------------ ------------
Cash and cash equivalents at end of period $ 16,811,944 $ 17,137,617
============ ============
See accompanying notes
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CIMA LABS INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
CIMA LABS INC. (the "Company"), a Delaware corporation, develops and
manufactures fast-dissolve and enhanced-absorption oral drug delivery systems.
OraSolv and DuraSolv, the Company's leading proprietary fast-dissolve
technologies, are oral dosage forms incorporating taste-masked active drug
ingredients into tablets, which dissolve quickly in the mouth without chewing or
the need for water. The Company develops applications for technologies that are
licensed to pharmaceutical company partners. The Company currently manufactures
and packages five pharmaceutical brands incorporating its proprietary
fast-dissolve technologies. Revenues are comprised of three components: net
sales of products it manufactures; product development fees and licensing
revenues for development activities conducted through collaborative agreements
with pharmaceutical companies; and royalties on the sales of products sold by
pharmaceutical companies under license from the Company.
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These
financial statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments, consisting of normal
recurring accruals, which are considered necessary for fair presentation have
been included. Operating results for the three months ended March 31, 2001 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2001. For further information, you should refer to the
audited financial statements and accompanying notes contained in our Annual
Report on Form 10-K for the year ended December 31, 2000.
2. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires us to make estimates and assumptions that may
affect the amounts we report in our financial statements and accompanying notes.
Actual results could differ from those estimates.
3. CASH EQUIVALENTS AND INVESTMENTS
The Company's investments in available-for-sale securities are carried at fair
value, with unrealized gains and losses included in accumulated other
comprehensive income as a separate component of stockholders' equity. As of
March 31, 2001, the amortized cost and estimated market value of
available-for-sale securities, all of which have contractual maturities of three
years or less, are as follows:
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GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
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As of March 31, 2001:
Commercial paper $ 13,153,458 $ 1,467 $ 823 $ 13,154,102
Asset backed securities 22,861,459 431,287 - 23,292,746
Corporate bonds and notes 80,490,472 1,051,678 - 81,542,150
Euro notes 18,371,828 209,505 - 18,581,333
Floating rate notes 15,227,964 689 13,553 15,215,100
U.S. government securities - - - -
---------------------------------------------------------------------
Totals - March 31, 2001 $150,105,181 $ 1,694,626 $ 14,376 $ 151,785,431
=====================================================================
As of December 31, 2000:
Commercial paper $ 4,449,373 $ - $ 813 $ 4,448,560
Asset backed securities 23,217,006 71,690 - 23,288,696
Corporate bonds and notes 35,445,721 158,688 10,541 35,593,868
Euro notes 5,338,075 - 77,860 5,260,215
Floating rate notes 1,998,791 - 31 1,998,760
U.S. government securities 984,551 - 175 984,376
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Totals - December 31, 2000 $ 71,433,517 $ 230,378 $ 89,420 $ 71,574,475
=====================================================================
4. INCOME (LOSS) PER SHARE
Income (loss) per share for the three months ended March 31, 2001 and 2000 are
summarized in the following table:
Three Months Ended
------------------------------------------------
March 31, 2001 March 31, 2000
---------------------- ----------------------
Numerator:
Net income (loss) $ 3,176,350 $ (240,548)
====================== ======================
Denominator:
Denominator for basic earnings (loss)
per share - weighted average shares
outstanding 14,458,728 9,898,551
Effect of dilutive stock options 1,153,328 -
---------------------- ----------------------
Denominator for diluted earnings (loss) per
share - weighted average shares outstanding 15,612,056 9,898,551
====================== ======================
Basic earnings (loss) per share $ .22 $ (.02)
Diluted earnings (loss) per share $ .20 $ (.02)
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5. COMPREHENSIVE INCOME
Comprehensive income consists of net income and net unrealized gains on
available-for-sale securities.
Three Months Ended
------------------------------------------------
March 31, 2001 March 31, 2000
---------------------- ----------------------
Net income (loss) $ 3,176,350 $ (240,548)
Unrealized gain on available-for-sale
securities 1,539,291 -
---------------------- ----------------------
Total comprehensive income (loss) $ 4,715,641 $ (240,548)
====================== ======================
6. INVENTORIES
Inventories are stated at the lower of cost (first in, first out) or fair market
value, whichever is lower.
March 31, 2001 March 31, 2000
---------------------- ----------------------
Raw materials $ 2,311,408 $ 1,966,463
Finished products 887,868 719,363
---------------------- ----------------------
$ 3,199,276 $ 2,685,826
---------------------- ----------------------
7. SEGMENT INFORMATION - MAJOR CUSTOMERS
The Company operates within a single segment: the development and manufacture of
fast-dissolve and enhanced-absorption oral drug delivery systems. Revenues are
comprised of three components: net sales of products utilizing the Company's
proprietary fast-dissolve technologies; product development fees and licensing
revenues for development activities conducted by the Company through
collaborative agreements with pharmaceutical companies; and royalties on the
sales of products manufactured by the Company, which are sold by pharmaceutical
companies under licenses from the Company. Less than 10 percent of the Company's
revenues are earned from activities conducted or products shipped outside the
United States.
Revenues as a percentage of total revenues from major customers are as follows:
Three Months Ended
---------------------------------------------------
March 31, 2001 March 31, 2000
----------------------- -----------------------
AstraZeneca 39% 15%
N.V. Organon 23 24
Novartis 19 48
Schwarz Pharma 11 -
Other 8 13
----------------------- -----------------------
Total 100% 100%
Trade accounts receivable at March 31, 2001 of approximately $4,344,000 were
comprised primarily of the following customers: Organon (21%), Schwarz (1%),
Novartis (22%), Bristol-
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Myers Squibb (15%) and AstraZeneca (39%).
8. RECLASSIFICATIONS
Certain prior period balances have been reclassified in order to conform with
the presentation for the three months ended March 31, 2001. These
reclassifications have no impact on the net loss or shareholders' equity as
previously reported.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
We make many statements in this Quarterly Report on Form 10-Q under the captions
Management's Discussion and Analysis of Financial Condition and Results of
Operations, and Factors That Could Affect Future Results and elsewhere, which
are forward-looking and are not based on historical facts. These statements
relate to our future plans, objectives, expectations and intentions. We may
identify these statements by the use of words such as believe, expect, will,
anticipate, intend and plan and similar expressions. These forward-looking
statements involve a number of risks and uncertainties. Our actual results could
differ materially from those anticipated in these forward-looking statements as
a result of various factors, including those we discuss in Factors That Could
Affect Future Results and elsewhere in this report. These forward-looking
statements speak only as of the date of this report, and we caution you not to
rely on these statements without considering the risks and uncertainties
associated with these statements and our business that are addressed in this
report.
These forward-looking statements include statements relating to the timing of
the operation, and potential capacity, of our second production line; expected
growth in product sales in 2001; the expected construction of a second
manufacturing facility; future expense levels; the timing of availability of
products; expected demand for products using our technologies and the adequacy
of our production capacity; and future research and development activities
relating to our current or new technologies. We are not under any duty to update
any of the forward-looking statements after the date of this report to conform
these statements to actual results, except as required by law.
OVERVIEW
We develop and manufacture pharmaceutical products based on our proprietary
OraSolv and DuraSolv technologies. We have agreements with several
pharmaceutical companies regarding a variety of potential products, with an
emphasis on prescription products. We currently manufacture five commercial
pharmaceutical brands using our fast-dissolve technologies. These products
include Triaminic for Novartis, Tempra for Bristol-Meyers Squibb and Zomig for
AstraZeneca. We operate within a single segment: pharmaceutical product
development. Our revenues are comprised of three components: net sales of
products utilizing our proprietary fast-dissolve technologies; product
development fees and licensing revenues for development activities we conduct
through collaborative agreements with pharmaceutical companies; and royalties on
the sales of products we manufacture, which are sold by pharmaceutical companies
under licenses from us. In addition, we are currently developing other drug
delivery technologies.
Revenues from product sales and from royalties will fluctuate from quarter to
quarter and from year to year depending on, among other factors, demand for our
products by patients, new product introductions, the seasonal nature of some of
our products and pharmaceutical company
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ordering patterns. Our ability to generate product sales and royalty revenues in
excess of our current forecast for 2001 may be constrained by our manufacturing
capacity. We expect a second production line, now being developed, to be
operational in the second half of 2001. Revenues from product development fees
and licensing revenue will fluctuate from quarter to quarter and from year to
year depending on, among other factors, the number of new collaborative
agreements that we enter into; the number of product development milestones we
achieve under collaborative agreements, including making submissions to, and
obtaining approvals from, the FDA for products in development; and the level of
our development activity conducted for pharmaceutical companies under
collaborative agreements.
RESULTS OF OPERATIONS
THREE MONTH PERIODS ENDED MARCH 31, 2001 AND 2000
Operating Revenues. Our total operating revenues were $6.0 million in the first
quarter of 2001, compared to $5.7 million in the first quarter of 2000.
Operating revenues from AstraZeneca, Organon and Novartis, our three largest
pharmaceutical company partners, together represented 81% and 87% of our total
operating revenues in first quarters of 2001 and 2000, respectively. The
increase in total operating revenues was due to higher sales of products we
manufacture and royalties on our pharmaceutical company partners' sales of CIMA
developed fast dissolve products, partially offset by lower product development
fees and licensing revenue.
Revenues from net sales of products we manufacture totaled $3.3 million in the
first quarter of 2001, compared to $2.8 million in the first quarter of 2000.
The increase of $500,000 is due to shipments of branded prescription products,
including recently approved U.S. launch supplies for Remeron SolTab, NuLev and
Zomig-ZMT, as well as increased international shipments of Zomig Rapimelt. In
the first quarter of 2000, our manufacturing was dedicated principally to
over-the-counter products. In the first quarter of 2001, shipments of
over-the-counter products were substantially below year-earlier levels due to a
shift of scheduled shipments from the first to the second quarter of 2001 and,
as planned, we expect to more evenly distribute over-the-counter shipments
throughout 2001. In 2001, revenues from sales of branded prescription products
are expected to exceed 50% of total sales of products using our drug delivery
technologies.
Product development fees and licensing revenues were $1.9 million in the first
quarter of 2001, compared to $2.2 million in the first quarter of 2000. The
decrease of $300,000 is primarily due to lower amortization of deferred revenue
due to our change in accounting policy for up-front license fees, which resulted
from the implementation of SAB 101, retroactive to January 1, 2000. Product
development fees and licensing revenues include amortization of deferred revenue
of $79,000 and $851,000 in the first quarters of 2001 and 2000, respectively.
Product development fees and licensing revenues in subsequent quarters will
depend on our success in signing new license and development agreements with
pharmaceutical companies. In 2001, we expect this revenue category to decline as
a percentage of total operating revenues.
Royalties were $792,000 in the first quarter of 2001, compared to $737,000 in
the first quarter of 2000. The increase of $55,000 is due primarily to strong
European sales by AstraZeneca of
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Zomig Rapimelt, initial U.S. launch sales of Remeron SolTab and NuLev, which
were partially offset by lower royalties on over-the counter products. Effective
with the first quarter of 2001, royalties payable by Bristol-Myers Squibb for
Tempra were based on a lower minimum annual payment schedule. In 2001, we expect
royalties to increase in terms of dollar amounts and as a percentage of total
operating revenues.
Cost of goods sold. Cost of goods sold was $2.6 million in the first quarter of
2001, compared to $3.2 million in the first quarter of 2000. The decrease of
$600,000 is principally due to improved manufacturing efficiencies and product
mix. Manufacturing quantities of over-the-counter products comprised over 90% of
our volume in the first quarter of 2000, compared to less than 30% in the first
quarter of 2001. Our over-the-counter products cost more to make on a per unit
basis than our branded prescription products because we incur all costs
necessary to manufacture and package the finished over-the counter product. The
active drug ingredients, and sometimes the packaging, for our branded
prescription products are typically not included in cost of goods sold because
the pharmaceutical company partner that produces the active drug ingredient
incurs these costs directly. In 2001, we expect cost of goods sold to increase,
consistent with our expectation for higher production volumes of branded
prescription products.
Gross profit margins on product sales were $695,000 in the first quarter of
2001, compared to negative gross margins of $(379,000) in the first quarter of
2000. The $1.1 million improvement is principally due to significant increases
in production volumes of higher margin branded prescription products. In 2001,
we expect gross profit margins on product sales to increase in terms of dollar
amounts and as a percentage of sales of our products, but not necessarily in
each quarter, consistent with our expectation for higher production volumes of
branded prescription products.
Research and product development expenses. Research and product development
expenses were $1.5 million in the first quarter of 2001, compared to $1.0
million in the first quarter of 2000. The increase of $460,000 is due primarily
to increased development activity for AstraZeneca, Novartis and partner funded
feasibility projects for potential new products, as well as additional
development activities related to our OraVescent technology. In 2001, we expect
research and product development expense to increase significantly in the second
half of the year in support of additional development activities on our
OraVescent technology and on internally developed products utilizing our OraSolv
and DuraSolv technologies.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $1.1 million in the first quarter of 2001, compared
to $948,000 in the first quarter of 2000. The increase of $169,000 is due
primarily to costs associated with increased professional staffing. In 2001, we
expect selling, general and administrative expenses to increase moderately as we
continue to make investments in people and systems to support our anticipated
growth.
Other income (expense). Other income was $2.4 million in the first quarter of
2001, compared to other expense of $21,000 in the first quarter of 2000. Other
income consists primarily of interest income on invested funds, net of interest
expense on bank lines, loan agreements and capitalized leases. The increase of
$2.4 million is due primarily due to higher levels of cash available for
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investment as a result of the completion of a private placement in March 2000
and a public offering in November 2000. In 2001, we expect other income to
increase significantly from year 2000 levels due to anticipated levels of cash
available for investment.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations to date primarily through private and public
sales of equity securities, other income, and from operating revenues consisting
of product sales, product development fees and licensing revenues, and
royalties.
Working capital decreased from $109.7 million at December 31, 2000 to $79.1
million at March 31, 2001. The decrease of $30.6 million is due primarily to the
purchase of $33.7 million in available-for-sale securities that mature in more
than one-year year, which are classified as other assets, and approximately $3.6
million in expenditures for capital improvements to our manufacturing facility.
This decrease is partially offset by a net increase in working capital from
other operating activities, principally collecting accounts receivable. We
invest excess cash in interest-bearing money market accounts and investment
grade securities.
We plan to spend approximately $2.0 to $3.0 million over the next three months
to complete various improvements to our Eden Prairie manufacturing facility,
including construction of a second production line. During the next twelve
months, we also expect to complete the planning for, and commence the
construction or acquisition of, a second manufacturing and distribution
facility. We expect this facility to be operational in 2003. We may also
refinance or purchase our Eden Prairie and Brooklyn Park facilities, which are
currently leased under operating leases. In addition, we expect to fund
additional product development activities related to our OraVescent technology
and to develop proprietary products using our OraSolv and DuraSolv technologies,
as well as acquire new technologies. We believe that our cash and cash
equivalents and marketable securities, together with expected revenues from
operations, will be sufficient to meet our anticipated capital requirements for
the foreseeable future. However, we may require additional funds to support our
working capital requirements or for other purposes and may seek to raise such
additional funds through public or private equity financings or from other
sources. We cannot be certain that additional financing will be available on
terms favorable to us, or at all, or that any additional financing will not be
dilutive.
FACTORS THAT COULD AFFECT FUTURE RESULTS
Certain statements made in this Quarterly Report on Form 10-Q are
forward-looking statements based on our current expectations, assumptions,
estimates and projections about our business and our industry. These
forward-looking statements involve risks and uncertainties. Our business,
financial condition and results of operations could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
as more fully described below and elsewhere in this Form 10-Q. You should
consider carefully the risks and uncertainties described below, which are not
the only ones facing our company. Additional risks and uncertainties also may
impair our business operations.
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The Loss Of One Of Our Major Customers Could Reduce Our Revenues Significantly.
Revenues from AstraZeneca, Organon and Novartis together represented
approximately 82% and 87% of our total operating revenues for the year ended
December 31, 2000 and for the quarter ended March 31, 2001, respectively. The
loss of any one of these customers could cause our revenues to decrease
significantly, resulting in losses from our operations. If we cannot broaden our
customer base, we will continue to depend on a few customers for the majority of
our revenues. We may be unable to negotiate favorable business terms with
customers that represent a significant portion of our revenues. If we cannot,
our revenues and gross profits may not grow as expected and may be insufficient
to allow us to achieve sustained profitability.
We Rely On Third Parties To Market, Distribute And Sell The Products
Incorporating Our Drug Delivery Technologies And Those Third Parties May Not
Perform.
Our pharmaceutical company partners market and sell the products we
develop and manufacture. If one or more of our pharmaceutical company partners
fails to pursue the marketing of our products as planned, our revenues and gross
profits may not reach our expectations, or may decline. We often cannot control
the timing and other aspects of the development of products incorporating our
technologies because our pharmaceutical company partners may have priorities
that differ from ours. Therefore, our commercialization of products under
development may be delayed unexpectedly. Because we incorporate our drug
delivery technologies into the oral dosage forms of products marketed and sold
by our pharmaceutical company partners, we do not have a direct marketing
channel to consumers for our drug delivery technologies. The marketing
organizations of our pharmaceutical company partners may be unsuccessful, or
they may assign a low level of priority to the marketing of our products that is
different from our priorities. Further, they may discontinue marketing the
products that incorporate our drug delivery technologies. If marketing efforts
for our products are not successful, our revenues may fail to grow as expected
or may decline.
If We Do Not Enter Into Additional Collaborative Agreements with Pharmaceutical
Companies, We May Not Be Able To Achieve Sustained Profitability.
We depend upon collaborative agreements with pharmaceutical companies to
develop, test and obtain regulatory approval for, and commercialize oral dosage
forms of, active pharmaceutical ingredients using our drug delivery
technologies. The number of products that we successfully develop under these
collaborative agreements will affect our revenues. If we do not enter into
additional agreements in the future, or if our current or future agreements do
not result in successful marketing of our products, our revenues and gross
profits may be insufficient to allow us to achieve sustained profitability. We
currently have collaborative agreements with American Home Products,
AstraZeneca, Bristol-Myers Squibb, Organon, Novartis and Schwarz Pharma.
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We face additional risks related to our collaborative agreements, including the
risks that:
- - any existing or future collaborative agreements may not result in
additional commercial products;
- - additional commercial products that we may develop may not be successful;
- - we may not be able to meet the milestones established in our current or
future collaborative agreements; and
- - we may not be able to successfully develop new drug delivery technologies
that will be attractive in the future to potential pharmaceutical company
partners.
If We Cannot Increase Our Production Capacity, We May Be Unable To Meet Expected
Demand For Our Products And We May Lose Revenues.
We must increase our production capacity to meet expected demand for our
products. We currently have one production line and a second line is being
developed. If we are unable to increase our production capacity as scheduled, we
may be unable to meet expected demand for our products, we may lose revenues and
we may not be able to maintain our relationships with our pharmaceutical company
partners. Production lines in the pharmaceutical industry generally take 16 to
24 months to complete due to the long lead times required for precision
production equipment to be manufactured and installed, as well as the required
testing and validation process that must be completed once the equipment is
installed. We expect our second production line to be operational in the second
half of 2001, although we may experience difficulties that could delay our
ability to increase our manufacturing capacity. We may not be able to increase
our production capacity quickly enough to meet the requirements of our
pharmaceutical company partners with whom we are developing our drug delivery
technologies.
If We Do Not Properly Manage Our Growth, We May Be Unable To Sustain The Level
Of Revenues We Have Attained Or Effectively Pursue Additional Business
Opportunities.
Our revenues increased 79% from the year ended December 31, 1999 to the year
ended December 31, 2000, placing significant strain on our management,
administrative and operational resources. If we do not properly manage the
growth we have recently experienced and expect in the future, our revenues may
decline or we may be unable to pursue sources of additional revenues. To
properly manage our growth, we must, among other things, implement additional
and improve existing administrative, financial and operational systems,
procedures and controls on a timely basis. We will also need to expand our
finance, administrative and operations staff. We may not be able to complete
the improvements to our systems, procedures and controls necessary to support
our future operations in a timely manner. We may not be able to hire, train,
integrate, retain, motivate and manage required personnel and may not be able to
successfully identify, manage and pursue existing and potential market
opportunities. Improving our systems and increasing our staff will increase our
operating expenses. If we fail to generate additional revenue in excess of
increased operating expenses in any fiscal period we may incur losses, or our
losses may increase in that period.
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If We Cannot Attract And Retain Key Personnel On Which We Depend, We May Not Be
Able To Execute Our Business Plan As Anticipated.
During our operating history, we have assigned many key responsibilities within
our company to a relatively small number of individuals. If we lose the services
of John Siebert, our Chief Executive Officer, John Hontz, our Chief Operating
Officer, or David Feste, our Chief Financial Officer, we may have difficulty
executing our business plan in the manner we currently anticipate. The
competition for qualified personnel is intense and the loss of services of key
personnel could adversely affect our business. We have an employment agreement
that runs to January 1, 2004 with Dr. Siebert and Mr. Feste, and an employment
agreement that runs to September 1, 2004 with Dr. Hontz. We do not maintain key
person life insurance for any of our key personnel.
We May Experience Significant Delays In Expected Product Releases While Our
Pharmaceutical Company Partners Seek Regulatory Approvals For The Products We
Develop And, If They Are Not Successful In Obtaining The Approvals, We May Be
Unable To Achieve Our Anticipated Revenues And Profits.
The federal government, principally the U.S. Food and Drug Administration, and
state and local government agencies regulate all new pharmaceutical products,
including our existing products and those under development. Our pharmaceutical
company partners may experience significant delays in expected product releases
while attempting to obtain regulatory approval for the products we develop. If
they are not successful, our revenues and profitability may decline. We cannot
control, and our pharmaceutical company partners cannot control, the timing of
regulatory approval for the products we develop.
Applicants for FDA approval often must submit extensive clinical data and
supporting information to the FDA. Varying interpretations of the data obtained
from pre-clinical and clinical testing could delay, limit or prevent regulatory
approval of a drug product. Changes in FDA approval policy during the
development period, or changes in regulatory review for each submitted new drug
application, also may cause delays or rejection of an approval. Even if the FDA
approves a product, the approval may limit the uses or "indications" for which a
product may be marketed, or may require further studies. The FDA also can
withdraw product clearances and approvals for failure to comply with regulatory
requirements or if unforeseen problems follow initial marketing.
Manufacturers of drugs also must comply with applicable good manufacturing
practices requirements. If we cannot comply with applicable good manufacturing
practices, we may be required to suspend the production and sale of our
products, which would reduce our revenues and gross profits. We may not be able
to comply with the applicable good manufacturing practices and other FDA
regulatory requirements for manufacturing as we expand our manufacturing
operations.
If our products are marketed in foreign jurisdictions, we, and the
pharmaceutical company partners with whom we are developing our technologies,
must obtain required regulatory approvals from foreign regulatory agencies and
comply with extensive regulations regarding safety and quality. If approvals to
market our products are delayed, if we fail to receive these
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approvals, or if we lose previously received approvals, our revenues would be
reduced. We may be required to incur significant costs in obtaining or
maintaining foreign regulatory approvals.
Our Commercial Products Are Subject To Continuing Regulations And We May Be
Subject To Adverse Consequences If We Fail To Comply With Applicable
Regulations.
Even if our products receive regulatory approval, either in the U.S. or
internationally, we will continue to be subject to extensive regulatory
requirements. These regulations are wide-ranging and govern, among other things:
- adverse drug experience reporting regulations;
- product promotion;
- product manufacturing, including good manufacturing practice
requirements; and
- product changes or modifications.
If we fail to comply or maintain compliance with these laws and regulations, we
may be fined or barred from selling our products. If the FDA determines that we
are not complying with the law, it can:
- issue warning letters;
- impose fines;
- seize products or order recalls;
- issue injunctions to stop future sales of products;
- refuse to permit products to be imported into, or exported out of, the
U.S.;
- totally or partially suspend our production;
- withdraw previously approved marketing applications; and
- initiate criminal prosecutions.
We Have A Single Manufacturing Facility And We May Lose Revenues And Be Unable
To Maintain Our Relationships With Our Pharmaceutical Company Partners If We
Lose Its Production Capacity.
We manufacture all of the products that we produce on our existing production
line in our Eden Prairie facility. If our existing production line or facility
becomes incapable of manufacturing products for any reason, we may be unable to
meet production requirements, we may lose revenues and we may not be able to
maintain our relationships with our pharmaceutical company partners. Without our
existing production line, we would have no other means of manufacturing products
incorporating our drug delivery technologies until we were able to restore the
manufacturing capability at our facility or develop an alternative manufacturing
facility. Although we carry business interruption insurance to cover lost
revenues and profits in an amount we consider adequate, this insurance does not
cover all possible situations. In addition, our business interruption insurance
would not compensate us for the loss of opportunity and potential adverse impact
on relations with our existing pharmaceutical company partners resulting from
our inability to produce products for them. Although we currently plan to build
a second manufacturing facility to reduce this risk, we may encounter unforeseen
difficulties or delays in doing so.
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We Rely On Single Sources For Some Of Our Raw Materials And We May Lose Revenues
And Be Unable To Maintain Our Relationships With Our Pharmaceutical Company
Partners If Those Materials Were Not Available.
We rely on single suppliers for some of our raw materials and packaging
supplies. If these raw materials or packaging supplies were no longer available
we may be unable to meet production requirements, we may lose revenues and we
may not be able to maintain our relationships with our pharmaceutical company
partners. Without adequate supplies of raw materials or packaging supplies, our
manufacturing operations may be interrupted until another supplier could be
identified, its products validated and trading terms with it negotiated. We may
not be able to identify an alternative supplier in a timely manner, or at all.
Furthermore, we may not be able to negotiate favorable terms with an alternative
supplier. Any disruptions in our manufacturing operations from the loss of a
supplier could potentially damage our relations with our pharmaceutical company
partners.
If We Cannot Develop Additional Products, Our Ability To Increase Our Revenues
Would Be Limited.
We intend to continue to enhance our current technologies and pursue additional
proprietary drug delivery technologies. If we are unable to do so, we may be
unable to achieve our objectives of revenue growth and sustained profitability.
Even if enhanced or additional technologies appear promising during various
stages of development, we may not be able to develop commercial applications for
them because:
- the potential technologies may fail clinical studies;
- we may not find a pharmaceutical company to adopt the technologies;
- it may be difficult to apply the technologies on a commercial scale;
or
- the technologies may be uneconomical to market.
If We Cannot Keep Pace With The Rapid Technological Change And Meet The Intense
Competition In Our Industry, We May Lose Business.
Our success depends, in part, on maintaining a competitive position in the
development of products and technologies in a rapidly evolving field. If we
cannot maintain competitive products and technologies, our current and potential
pharmaceutical company partners may choose to adopt the drug delivery
technologies of our competitors. Fast dissolve tablet technologies that compete
with our OraSolv and DuraSolv technologies include the Zydis technology
developed by R.P. Scherer Corporation, a wholly-owned subsidiary of Cardinal
Health, Inc., the WOWTab technology developed by Yamanouchi Shaklee
Pharmaceuticals, the Flashtab technology developed by Laboratories Prographarm
and the FlashDose technology developed by Fuisz Technologies Ltd., a
wholly-owned subsidiary of Biovail Corporation. We also compete generally with
other drug delivery, biotechnology and pharmaceutical companies engaged in the
development of alternative drug delivery technologies or new drug research and
testing. Many of these competitors have substantially greater financial,
technological, manufacturing, marketing, managerial and research and development
resources and experience than we do and represent significant competition for
us.
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Our competitors may succeed in developing competing technologies or obtaining
governmental approval for products before us. The products of our competitors
may gain market acceptance more rapidly than our products. Developments by
competitors may render our products, or potential products, noncompetitive or
obsolete.
If We Cannot Adequately Protect Our Technology And Proprietary Information, We
May Be Unable To Sustain A Competitive Advantage.
Our success depends, in part, on our ability to obtain and enforce patents for
our products, processes and technologies and to preserve our trade secrets and
other proprietary information. If we cannot do so, our competitors may exploit
our innovations and deprive us of the ability to realize revenues and profits
from our developments. We have been granted eight patents on our drug delivery
and packaging systems in the U.S., which will expire beginning in 2010.
Any patent applications we may have made or may make relating to our potential
products, processes and technologies may not result in patents being issued. Our
current patents may not be valid or enforceable. They may not protect us against
competitors that challenge our patents, obtain patents that may have an adverse
effect on our ability to conduct business or are able to circumvent our patents.
Further, we may not have the necessary financial resources to enforce our
patents.
To protect our trade secrets and proprietary technologies and processes, we
rely, in part, on confidentiality agreements with our employees, consultants and
advisors. These agreements may not provide adequate protection for our trade
secrets and other proprietary information in the event of any unauthorized use
or disclosure, or if others lawfully develop the information.
Third Parties May Claim That Our Technologies, Or The Products In Which They Are
Used, Infringe On Their Rights And We May Incur Significant Costs Resolving
These Claims.
Third parties may claim that the manufacture, the use or the sale of our drug
delivery technologies infringe on their patent rights. If such claims are
asserted, we may have to seek licenses, defend infringement actions or challenge
the validity of those patents in court. If we cannot obtain required licenses,
are found liable for infringement or are not able to have these patents declared
invalid, we may be liable for significant monetary damages, encounter
significant delays in bringing products to market or be precluded from
participating in the manufacture, use or sale of products or methods of drug
delivery covered by the patents of others. We may not have identified, or be
able to identify in the future, U.S. and foreign patents that pose a risk of
potential infringement claims.
We enter into collaborative agreements with pharmaceutical companies to apply
our drug delivery technologies to drugs developed by others. Ultimately, we
receive license revenues and product development fees, as well as revenues from
the sale of products incorporating our technology and royalties. The drugs to
which our drug delivery technologies are applied are generally the property of
the pharmaceutical companies. Those drugs may be the subject of patents or
patent applications and other forms of protection owned by the pharmaceutical
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companies or third parties. If those patents or other forms of protection
expire, are challenged or become ineffective, sales of the drugs by the
collaborating pharmaceutical company may be restricted or may cease.
Because We Have A Limited Operating History, Potential Investors In Our Stock
May Have Difficulty Evaluating Our Prospects.
We recorded the first commercial sales of products using our fast dissolve
technologies in early 1997. Accordingly, we have only a limited operating
history, which may make it difficult for you and other potential investors to
evaluate our prospects. The difficulty investors may have in evaluating our
prospects may cause volatile fluctuations, including decreases, in the market
price of our common stock as investors react to information about our prospects.
Since 1997, we have generated revenues from product development fees and
licensing arrangements, sales of products using our fast dissolve technologies
and royalties. We are currently making the transition from research and product
development operations with limited production to commercial operations with
expanding production capabilities in addition to research and product
development activities. Our business and prospects, therefore, must be evaluated
in light of the risks and uncertainties of a company with a limited operating
history and, in particular, one in the pharmaceutical industry.
If We Are Not Profitable In The Future, The Value Of Our Stock May Fall.
Although we were profitable for the year ended December 31, 2000 and the quarter
ended March 31, 2001, we have accumulated aggregate net losses from inception of
approximately $42.0 and $38.8 million, respectively. If we are unable to sustain
profitable operations in future periods, the market price of our stock may fall.
The costs for research and product development of our drug delivery technologies
and general and administrative expenses have been the principal causes of our
losses. Our ability to achieve sustained profitable operations depends on a
number of factors, many of which are beyond our direct control. These factors
include:
- the demand for our products;
- our ability to manufacture our products efficiently and with the
required quality;
- our ability to increase our manufacturing capacity;
- the level of product and price competition;
- our ability to develop additional commercial applications for our
products;
- our ability to control our costs; and
- general economic conditions.
We May Require Additional Financing, Which May Not Be Available On Favorable
Terms Or At All And Which May Result In Dilution Of Your Equity Interest.
We may require additional financing to fund the development and possible
acquisition of new drug delivery technologies and to increase our production
capacity beyond what is currently anticipated. If we cannot obtain financing
when needed, or obtain it on favorable terms, we may be required to curtail our
plans to develop and possibly to acquire new drug delivery technologies or limit
the expansion of our manufacturing capacity. We believe our cash and cash
equivalents, and expected revenues from operations will be sufficient to meet
our anticipated capital
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requirements for the foreseeable future. However, we may elect to pursue
additional financing at any time to more aggressively pursue development of new
drug delivery technologies and expand manufacturing capacity beyond that
currently planned.
Other factors that will affect future capital requirements and may require us to
seek additional financing include:
- the level of expenditures necessary to develop and, or, acquire new
products or technologies;
- the progress of our research and product development programs;
- the need to construct a larger than currently anticipated
manufacturing facility, or additional manufacturing facilities, to
meet demand for our products;
- results of our collaborative efforts with current and potential
pharmaceutical company partners; and
- the timing of, and amounts received from, future product sales,
product development fees and licensing revenue and royalties.
Demand For Some Of Our Products Is Seasonal, And Our Sales And Profits May
Suffer During Periods When Demand Is Light.
Certain non-prescription products that we manufacture for our pharmaceutical
company partners treat seasonal ailments such as colds, coughs and allergies.
Our pharmaceutical company partners may choose to not market those products in
off-seasons and our sales and profits may decline in those periods as a result.
In the year 2000, revenues from Novartis, which included revenues related to
Triaminic, a seasonal cold, cough and allergy product, represented 36% of our
total revenues. We may not be successful in developing a mix of products to
reduce these seasonal variations.
If The Marketing Claims asserted About Our Products Are Not Approved, Our
Revenues May Be Limited.
Once a drug product incorporating our technologies is approved by the FDA, the
Division of Drug Marketing, Advertising and Communication, the FDA's marketing
surveillance department within the Center for Drug Evaluation and Research, must
approve marketing claims asserted about it by our pharmaceutical company
partners. If our pharmaceutical company partners fail to obtain from the
Division of Drug Marketing acceptable marketing claims for a product
incorporating our drug technology, our revenues from that product may be
limited. Marketing claims are the basis for a product's labeling, advertising
and promotion. The claims our pharmaceutical company partners are asserting
about our drug delivery technology, or the drug product itself, may not be
approved by the Division of Drug Marketing.
We May Face Product Liability Claims Related Participation In Clinical Trials Or
The Use Or Misuse Of Our Products.
The testing, manufacturing and marketing of products using our drug delivery
technologies may expose us to potential product liability and other claims
resulting from their use. If any such claims against us are successful, we may
be required to make significant compensation payments. Any indemnification that
we have obtained, or may obtain, from contract research organizations
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or pharmaceutical companies conducting human clinical trials on our behalf may
not protect us from product liability claims or from the costs of related
litigation. Similarly, any indemnification we have obtained, or may obtain, from
pharmaceutical companies with whom we are developing our drug delivery
technologies may not protect us from product liability claims from the consumers
of those products or from the costs of related litigation. If we are subject to
a product liability claim, our product liability insurance may not reimburse us,
or be sufficient to reimburse us, for any expenses or losses we may suffer. A
successful product liability claim against us, if not covered by, or if in
excess of, our product liability insurance, may require us to make significant
compensation payments, which would be reflected as expenses on our statement of
operations and reduce our earnings.
Anti-Takeover Provisions Of Our Corporate Charter Documents, Delaware Law And
Our Stockholders' Rights Plan May Affect The Price Of Our Common Stock.
Our corporate charter documents, Delaware law and our stockholders' rights plan
include provisions that may discourage or prevent parties from attempting to
acquire us. These provisions may have the effect of depriving our stockholders
of the opportunity to sell their stock at a price in excess of prevailing market
prices in an acquisition of us by another company. Our board of directors has
the authority to issue up to 5,000,000 shares of preferred stock and to
determine the rights, preferences and privileges of those shares without any
further vote or action by our stockholders. The rights of holders of our common
stock may be adversely affected by the rights of the holders of any preferred
stock that may be issued in the future. Additional provisions of our certificate
of incorporation and bylaws could have the effect of making it more difficult
for a third party to acquire a majority of our outstanding voting common stock.
These include provisions that limit the ability of stockholders to call special
meetings or remove a director for cause.
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, which prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. For purposes of Section 203, a "business combination"
includes a merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder, and an "interested stockholder" is a
person who, either alone or together with affiliates and associates, owns (or
within the past three years, did own) 15% or more of the corporation's voting
stock.
We also have a stockholders' rights plan, commonly referred to as a poison pill,
which makes it difficult, if not impossible, for a person to acquire control of
us without the consent of our board of directors.
Our Stock Price Has Been Volatile And May Continue To Be Volatile.
The trading price of our common stock has been, and is likely to continue to be,
highly volatile. The market value of your investment in our common stock may
fall sharply at any time due to this volatility. In the year ended December 31,
2000, the closing sale price for our common stock ranged from $12.13 to $72.13.
In the quarter ended March 31, 2001, the closing sale price of our common stock
ranged from $46.75 to $73.38. The market prices for securities of drug delivery,
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biotechnology and pharmaceutical companies historically have been highly
volatile. Factors that could adversely affect our stock price include:
- fluctuations in our operating results;
- announcements of technological collaborations, innovations or new
products by us or our competitors;
- governmental regulations;
- developments in patent or other proprietary rights owned by us or
others;
- public concern as to the safety of drugs developed by us or others;
- the results of pre-clinical testing and clinical studies or trials by
us or our competitors;
- litigation;
- decisions by our pharmaceutical company partners relating to the
products incorporating our technologies;
- actions by the FDA in connection with submissions related to the
products incorporating our technologies; and
- general market conditions.
Our Operating Results May Fluctuate, Causing Our Stock Price To Fall.
Fluctuations in our operating results may lead to fluctuations, including
declines, in our stock price. Our operating results may fluctuate from quarter
to quarter and from year to year depending on:
- demand by consumers for the products we produce;
- new product introductions;
- the seasonal nature of the products we produce to treat seasonal
ailments;
- pharmaceutical company ordering patterns;
- our production schedules;
- the number of new collaborative agreements that we enter into;
- the number and timing of product development milestones that we
achieve under collaborative agreements;
- the level of our development activity conducted for, and at the
direction of, pharmaceutical companies under collaborative agreements;
and
- the level of our spending on new drug delivery technology development
and technology acquisition, and internal product development.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company is subject to interest rate and foreign currency risks. Our
investments in fixed-rate debt securities, which are classified as
available-for-sale at March 31, 2001 have remaining maturities ranging from 3 to
36 months and thus are exposed to the risk of fluctuating interest rates.
Available-for-sale securities had a market value of $151.8 million at March 31,
2001, and represented 77% of total assets. We have a contractual commitment to
purchase assets for our manufacturing expansion, which commitment is denominated
in foreign currency, but we have entered into forward foreign exchange contracts
to limit our exposure to fluctuating exchange rates.
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We performed a sensitivity analysis assuming a hypothetical 10% adverse movement
in foreign exchange rates to the underlying currency exposures described above
and in interest rates applicable to fixed rate investments maturing during the
next twelve months that are subject to reinvestment risk. As of March 31, 2001,
the analysis indicated that these hypothetical market movements would not have a
material effect on our financial position, results of operations or cash flow.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT DESCRIPTION OF DOCUMENT METHOD OF FILING
------- ----------------------- ----------------
3.1 Fifth Restated Certificate of Incorporation.(1) Incorporated by
Reference
3.2 Third Restated Bylaws.(2) Incorporated by
Reference
4.1 Form of Certificate for Common Stock.(3) Incorporated by
Reference
4.2 Rights Agreement dated March 14, 1997, between Incorporated by
the Registrant and Norwest Bank Minnesota, N.A. Reference
as Rights Agent.(4)
(1) Incorporated by reference to Exhibit 3.1 to the Registrant's Form 10-K for
the year ended December 31, 1994, File No. 0-24424.
(2) Incorporated by reference to Exhibit 3.2 to the Registrant's Form 10-Q for
the period ended June 30, 1999, File No. 0-24424.
(3) Incorporated by reference to an exhibit to the Registrants Registration
Statement on Form S-1, File No. 33-80194.
(4) Incorporated by reference to Exhibit 2 to the Registrant's Current Report
of Form 8-K, filed March 25, 1997, File No. 0-24424.
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the quarter ended March 31, 2001.
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SIGNATURE
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.
CIMA LABS INC.
--------------
Registrant
Date May 10, 2001 By /s/ David A. Feste
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David A. Feste
Chief Financial Officer
(principal financial and
accounting officer, duly
authorized to sign on behalf of
the registrant)
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