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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 28, 2006
NEKTAR THERAPEUTICS
(Exact name of Registrant as specified in its charter)
Delaware 0-24006 94-3134940
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
150 Industrial Road
San Carlos, California 94070
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (650) 631-3100
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02 Results of Operations and Financial Condition.
On February 28, 2006, Nektar Therapeutics issued a press release (the "Press
Release") announcing results for the three and twelve month periods ended
December 31, 2005; and its financial outlook for 2006. A copy of the Press
Release is attached as Exhibit 99.1 to this Current Report and is incorporated
herein by reference.
The information in this report, including the exhibit hereto, shall not be
deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934, as amended, or otherwise subject to the liabilities of that Section or
Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The
information contained herein and in the accompanying exhibit shall not be
incorporated by reference into any filing with the Securities and Exchange
Commission made by Nektar Therapeutics, whether made before or after the date
hereof, regardless of any general incorporation language in such filing.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
By: /s/ AJIT S. GILL
Ajit S. Gill
----------------------------------------
Chief Executive Officer,
President and Director
Date: February 28, 2006
By: /s/ Louis Drapeau
Louis Drapeau
----------------------------------------
Senior Vice President, Finance and
Chief Financial Officer
Date: February 28, 2006
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Earnings Press Release of Nektar Therapeutics dated February 28,
2006.
Exhibit 99.1
Nektar Announces Financial Results for the Year and Fourth Quarter 2005
SAN CARLOS, Calif.--(BUSINESS WIRE)--Feb. 28, 2006--Nektar Therapeutics
(Nasdaq:NKTR):
-- Exubera(R) (insulin human (rDNA origin)) Inhalation Powder approved in
U.S. and EU;
-- First Nektar proprietary product receives FDA Orphan Drug Designation
(amphotericin B inhalation powder);
-- Phase II trial underway for inhaled antibiotics product;
-- Three new partner agreements announced in 2005.
Nektar Therapeutics (Nasdaq:NKTR) today announced its financial results for
the year and fourth quarter ended December 31, 2005.
For 2005, the Company reported total revenue of $126.3 million, compared to
$114.3 million in 2004. In 2005, product and royalty revenue was $29.4 million
compared to $25.1 million in 2004; contract research revenue was $81.6 million
compared to $89.2 million for 2004. In 2005, the Company reported Exubera
commercialization readiness revenue from Pfizer of $15.3 million for
reimbursement of certain agreed-upon operating costs related to preparation for
commercial manufacture of Exubera drug powder.
For 2005, the Company reported a net loss of $185.1 million or $(2.15) per
share, including $73.2 million of special charges associated with the
acquisition of Aerogen, Inc., and an impairment to goodwill and certain fixed
assets associated with Nektar UK (formerly Bradford Particle Design) compared to
a net loss of $101.9 million or $(1.30) per share for 2004. Excluding the
special charges of $65.3 million for non-cash impairment of goodwill and certain
fixed assets related to Nektar UK and $7.9 million for purchased in-process
research and development expense associated with the acquisition of Aerogen,
Inc., the Company's non-GAAP net loss for 2005 was $111.9 million or $(1.30) per
share. No such special charges were included in the Company's 2004 results of
operations. The determination that the goodwill and certain fixed assets
associated with Nektar UK were impaired was made in connection with the
Company's year-end financial close process and preparation of its financial
statements.
For the three months ended December 31, 2005, Nektar reported total revenue
of $32.9 million compared to $31.4 million in the same period of 2004. In the
fourth quarter of 2005, product and royalty revenue was $9.0 million compared to
$9.3 million in the same period of 2004; contract research revenue totaled $18.9
million compared to $22.0 million in the same period of 2004. For the three
months ended December 31, 2005, the Company also reported Exubera
commercialization readiness revenue from Pfizer of $5.0 million for
reimbursement of certain agreed-upon operating costs related to preparation for
commercial manufacture of Exubera drug powder product.
The Company reported a net loss of $108.2 million or $(1.23) per share for
the three months ended December 31, 2005, compared to a net loss of $19.3
million or $(0.23) per share in the same period 2004. Excluding the special
charges related to the acquisition of Aerogen and the impairment of goodwill and
certain fixed assets associated with Nektar UK, the Company's non-GAAP net loss
for the fourth quarter 2005 was $35.0 million or $(0.40) per share.
As of December 31, 2005, the Company reported cash, cash equivalents and
short-term investments of $566.4 million compared to $418.7 million as of
December 31, 2004.
"Nektar enters 2006 with the key elements in place for growth. Pfizer is
preparing to launch Exubera, a product that is being hailed as a major medical
breakthrough in diabetes therapy. Our partner pipeline includes two late stage
products using Nektar technology that we expect to be filed for approval this
year. Finally, we are building value in our proprietary product pipeline with
two pulmonary products in the clinic and two additional products in pre-clinical
stages," said Ajit S. Gill, Nektar president and CEO.
Financial Outlook for 2006
The following outlines Nektar's financial outlook for 2006:
-- Nektar expects that revenue for 2006 will be in the range of $160 to
$190 million. The Company expects manufacturing and royalty revenue
related to Exubera to be in the range of $60 to $80 million, with the
majority of the revenue being generated by manufacturing sales to
Pfizer. The remaining $100 to $110 million is expected to be divided
fairly evenly between contract revenue and product sales revenue other
than Exubera.
-- Net loss will be in the range of $115 to $130 million, including
approximately $15 million for stock-based compensation charges.
Included in the net loss are estimated expenditures of approximately
$80 to $90 million for the development of Nektar's products and
technology platforms that include clinical trials for amphotericin B
inhalation powder, a product recently granted orphan drug designation
by the Food and Drug Administration (FDA). Amphotericin B inhalation
powder is expected to enter pivotal trials in the first half of 2007.
Other proprietary product investments include Phase II clinical trials
for inhaled antibiotics; and the initiation of clinical trials for a
third proprietary product.
-- The Company anticipates ending the year with cash, cash equivalents
and short-term investments at approximately $415 to $440 million.
Summary of Progress in 2005 and Early 2006
Exubera Approved in the U.S. and EU
"The approval of Exubera in the U.S. and the EU marks the beginning of a
new era for diabetes patients who for the first time have an alternative to
injectable insulin therapy to control their blood sugars. Exubera is the first
non-injectable, inhaleable form of insulin to be approved since the discovery of
insulin in the 1920s, and represents a major advance in diabetes treatment,"
said Dr. John Patton, co-founder and chief scientific officer at Nektar.
Nektar developed the inhalers and the powdered insulin formulation for
Exubera in partnership with Pfizer. On January 26, 2006, the European Commission
approved Exubera for the treatment of adults with type 1 and type 2 diabetes. On
January 27, 2006, the U.S. FDA approved Exubera for the treatment of adults with
type 1 and type 2 diabetes.
Proprietary Products Focus on Promising Breakthrough Therapies in Specialty
Markets
"Nektar is developing a pipeline of breakthrough products that will make a
difference in patients' lives. Because they focus on improving existing
medicines, we believe they offer a lower development risk profile than
traditional new chemical entities, yet offer the promise of addressing unmet
needs. Lower development risk associated with differentiated products offer the
potential to provide for significant returns-on-investment," said Gill.
The Company's proprietary products strategy matches Nektar's technologies
and expertise in drug delivery with established medicines to create innovative
products that have the potential to provide better efficacy, safety and
ease-of-use. The proprietary pipeline has two products in clinical trials and
two products in pre-clinical testing.
On February 14, 2006, Nektar announced that the FDA has granted orphan drug
designation to one of these clinical products, amphotericin B inhalation powder,
to prevent pulmonary fungal infections in immunocompromised patients. Orphan
products are developed to treat diseases or conditions that affect fewer than
200,000 people in the U.S. The Orphan Drug Act provides a seven-year period of
exclusive marketing to the first sponsor who obtains marketing approval for a
designated orphan drug.
Following the close of the Aerogen acquisition in the fourth quarter 2005,
the Company merged its inhaled ICU antibiotics program, which was in
proof-of-concept for prevention of ventilator-associated pneumonia, with
Aerogen's ongoing Phase II program, that uses aerosolized amikacin to treat
hospital pneumonias. The new combined inhaled antibiotics program leverages the
proprietary OnQ(R) Aerosol Generator from Aerogen which delivers
highly-efficient aerosolized antibiotics to a mechanically-ventilated patient.
The new program will focus on adjunctive treatment of gram negative pneumonias
in patients on mechanical ventilation. Gram-negative bacilli account for most
hospital-acquired pneumonias and can have a high mortality rate of 25-50%. A
Phase II trial for the inhaled antibiotics program is underway.
Partner Program Highlights Nektar Contribution to Innovative Products
"Our deep partner pipeline highlights the value of our drug delivery
technology to create innovative, new therapies that raise the standards of
patient care," said Gill.
-- In 2005, Nektar added three new collaborations to its partner
portfolio: a program with Bayer Healthcare for inhaled ciprofloxacin
for lung infections in cystic fibrosis patients; a partnership with
Baxter, who is using Nektar's PEGylation technology to develop
longer-acting forms of blood clotting proteins for hemophiliacs; and a
collaboration with Zelos Therapeutics to create an inhaleable powder
form of their parathyroid hormone analogue that is under development
for osteoporosis patients.
-- Several partner products advanced in the pipeline in 2005 including
Chiron Corporation's Tobramycin inhalation powder which entered Phase
III trials in the fourth quarter of 2005.
Nektar's partner pipeline now includes nine products that have been
approved for marketing in the U.S. and/or Europe as well as six additional
products in Phase II or Phase III clinical trials, including, Chiron's
Tobramycin inhalation powder for lung infections in cystic fibrosis patients in
Phase III; UCB's CDP791 for non small cell lung cancer in Phase II; Pfizer's PEG
product (undisclosed molecule) in Phase II; and Solvay's pulmonary dronabinol in
Phase II. Roche's CERA for renal anemia and UCB's Cimzia(TM) for Crohn's disease
are both in Phase III trials and are expected to be filed for approval by the
end of 2006.
Conference Call Information
Ajit S. Gill will host a conference call for analysts and investors today
beginning at 2:00 p.m. Pacific Time, to discuss further the Company's
performance.
Investors can access a live audio-only webcast through a link that is
posted on the Investor Relations section of Nektar's website at
http://www.nektar.com. The web broadcast of the conference call will be
available for replay through March 14, 2006.
Analysts and investors can also access the conference call live via
telephone by dialing (800) 559-9370 (U.S.); (847) 619-6819 (international). The
passcode is 13939488# and the host is Mr. Ajit Gill. An audio replay will be
available shortly following the call through March 14, 2006 and can be accessed
by dialing (877) 213-9653 (U.S.); or (630) 652-3041 (International) with a
passcode of 13939488#. In the event that any non-GAAP financial measure is
discussed on the conference call that is not described in the press release,
related information will be made available on the Investor Relations page at the
Nektar website as soon as practical after the conclusion of the conference call.
About Nektar
Nektar Therapeutics develops and enables high-value, differentiated
therapeutics with its industry-leading drug delivery technologies, expertise and
manufacturing capabilities. The world's top biotechnology and pharmaceutical
companies are developing new and better therapeutics using Nektar's advanced
technologies and know-how. Nektar also develops its own products by applying its
drug delivery technologies and its expertise to existing medicines to enhance
performance, such as improving efficacy, safety and compliance.
This press release contains forward-looking statements that reflect
management's current views and expectations as to the Exubera product launch,
product and technology development plans and funding, clinical plans and
expectations for the clinical advancement of our proprietary and partner
products, the potential for new product efficacy, safety, compliance, and
economic benefits for patients, the value and risk profile of our proprietary
product programs, and financial projections for the 2006 calendar year. These
forward-looking statements involve uncertainties and other risks, including but
not limited to: (i) the timing and success of the Exubera commercial launch (ii)
our ability to manufacture and supply sufficient quantities of Exubera dry
powder insulin and inhalation devices to meet market demand (iii) the discovery
of any new or more severe side effects or negative efficacy findings for Exubera
or any product liability claims related thereto (iv) increased investment in our
proprietary products prior to seeking partner collaborations may adversely
impact our results of operations and financial condition (v) our success or the
success of our partners in obtaining regulatory approvals, and (vi) a material
negative impact on our results of operations for future periods as a result of
the application of new share-based payment accounting rules. Other important
risks and uncertainties are detailed in Nektar's reports and other filings with
the SEC, including its most recent Annual Report on Form 10-K, Quarterly Report
on Form 10-Q, and Current Reports on Form 8-K. Actual results could differ
materially from the forward-looking statements contained in this press release.
The Company undertakes no obligation to update forward-looking statements,
whether as a result of new information, future events or otherwise.
Non-GAAP Financial Measures
The Company provides all information required in accordance with generally
accepted accounting principles (GAAP), but it believes that evaluating its
ongoing results of operations may be difficult to understand if limited to
reviewing only GAAP financial results. In managing the Company's business,
management reviews non-GAAP results of operations, including non-GAAP operating
income (loss), net income (loss) and net income (loss) per share, which exclude
as applicable, stock-based compensation charges, goodwill impairments, and
acquired in-process research and development expense to evaluate the Company's
ongoing operations and to allocate resources within the organization.
Nektar management does not itself, nor does it suggest that investors
should, consider such non-GAAP financial measures in isolation from, or as a
substitute for, GAAP financial measures. The Company considers and presents such
non-GAAP financial measures in measuring and reporting its financial results to
provide management and investors with an additional tool to evaluate the
Company's operating results in a manner that focuses on what management believes
to be the Company's ongoing business operations. Management believes that the
inclusion of non-GAAP financial measures provides consistency and comparability
with past reports of financial results. Investors should note, however, that the
non-GAAP financial measures used by the Company may not be the same non-GAAP
financial measures as, and may not be calculated in the same manner as, that of
other companies with which investors may compare the financial results of the
Company. Management believes it is useful for the Company and investors to
review both GAAP information that includes the expenses and charges mentioned
above and the non-GAAP financial measures that exclude such special expenses and
charges to have a better understanding of the overall performance of the
Company's business, its allocation of resources, and its ability to perform in
the future. Investors are encouraged to review the related GAAP financial
measures and the reconciliation of these non-GAAP financial measures to their
most directly comparable GAAP financial measure.
NEKTAR THERAPEUTICS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
( In thousands, except per share information)
Unaudited Unaudited
-------------------- ---------------------
Three-Months Ended Twelve-Months Ended
December 31, December 31,
-------------------- ---------------------
2005 2004 2005 2004
---------- --------- --------- -----------
Revenue:
Contract research
revenue $ 18,865 $ 22,018 $ 81,602 $ 89,185
Product sales and
royalty revenue 9,053 9,348 29,366 25,085
Exubera
commercialization
readiness 4,963 15,311
--------- ---------- --------- ----------
Total revenue 32,881 31,366 126,279 114,270
Operating costs and
expenses:
Cost of goods sold and
royalty costs 6,915 6,052 23,728 19,798
Exubera
commercialization
readiness costs 4,233 12,268
Research and
development 42,338 34,047 151,659 133,523
General and
administrative 13,659 8,685 43,852 30,967
Purchased in-process R&D 7,859 7,859
Amortization of other
intangible assets 1,261 981 4,206 3,924
Impairment of long
lived assets 65,340 65,340
--------- --------- --------- ----------
Total operating costs
and expenses 141,605 49,765 308,912 188,212
--------- -------- --------- ---------
Loss from operations (108,724) (18,399) (182,633) (73,942)
Gain/(loss) on debt
extinguishment - - (303) (9,258)
Other income/
(expense), net 323 (7) (1,112) 296
Interest income 5,339 1,985 13,022 6,602
Interest expense (5,177) (3,144) (14,085) (25,747)
--------- -------- --------- ---------
Income/(loss) before
benefit/(provision) for
income taxes (108,239) (19,565) (185,111) (102,049)
Benefit/(provision) for
income taxes - 295 - 163
--------- -------- --------- ---------
Net income/(loss) $(108,239) $(19,270) $(185,111) $(101,886)
========= ======== ========= =========
Basic and diluted net loss
per common share $ (1.23) $ (0.23) $ (2.15) $ (1.30)
Shares used in computing
basic and diluted net loss
per share 87,648 84,153 85,915 78,461
NEKTAR THERAPEUTICS
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, December 31,
2005 2004
(unaudited) (a)
----------- -----------
ASSETS
Current assets:
Cash, cash equivalents and
short-term investments $ 566,423 $ 418,740
Inventory 18,627 10,691
Other current assets 25,015 25,108
---------- ----------
Total current assets 610,065 454,539
Restricted investments - -
Property and equipment, net 142,127 151,247
Goodwill 78,431 130,120
Other intangible assets, net 13,452 6,456
Deposits and other assets 14,479 2,559
---------- ----------
$ 858,554 $ 744,921
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 53,626 $ 24,231
Capital lease obligations - current 482 1,532
Deferred revenue 15,487 29,890
---------- ----------
Total current liabilities 69,595 55,653
Convertible subordinated debentures 417,653 173,949
Accrued rent 2,409 2,117
Capital lease obligations - noncurrent 20,276 23,568
Other long-term liabilities 21,810 22,292
Stockholders' equity:
Preferred stock at par - -
Common stock at par 9 8
Capital in excess of par 1,233,690 1,187,575
Deferred compensation (2,949) (2,764)
Accumulated other
comprehensive gain (1,707) (356)
Accumulated deficit (902,232) (717,121)
---------- ----------
Total stockholders' equity 326,811 467,342
---------- ----------
$ 858,554 $ 744,921
========== ==========
(a) The balance sheet at December 31, 2004 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements.
NEKTAR THERAPEUTICS
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share information)
Unaudited
Three-Months Ended
December 31, 2005
--------------------------------
GAAP Non-GAAP Non-GAAP
Adjustments
---------- ----------- ---------
Revenue:
Contract research revenue $ 18,865 - $ 18,865
Product sales and royalty
revenue 9,053 - 9,053
Exubera commercialization
readiness 4,963 - 4,963
--------- --------
Total revenue 32,881 - 32,881
Operating costs and expenses:
Cost of goods sold and
royalty costs 6,915 - 6,915
Exubera commercialization
readiness costs 4,233 - 4,233
Research and development 42,338 - 42,338
General and administrative 13,659 - 13,659
Purchased in-process R&D(a) 7,859 (7,859) -
Amortization of other
intangible assets 1,261 - 1,261
Impairment of long lived
assets(b) 65,340 (65,340) -
--------- ----------- --------
Total operating costs and expenses 141,605 (73,199) 68,406
--------- ----------- --------
Loss from operations (108,724) 73,199 (35,525)
Gain/(loss) on debt extinguishment - - -
Other income/(expense), net 323 - 323
Interest income 5,339 - 5,339
Interest expense (5,177) - (5,177)
--------- ----------- --------
Income/(loss) before
benefit/(provision) for income taxes (108,239) 73,199 (35,040)
Benefit/(provision) for income taxes - - -
--------- ----------- --------
Net income/(loss) $(108,239) 73,199 $(35,040)
========= =========== ========
Basic and diluted net loss per
common share $ (1.23) 0.84 $ (0.40)
Shares used in computing basic and
diluted net loss per share 87,648 87,648 87,648
Non-GAAP results for the three months and year ended December 31, 2005 exclude
the following items, which are included in Nektar's Consolidated Statements of
Operations when presented in accordance with GAAP:
(a) Expensing of acquired in-process research and development related to the Q4
2005 Aerogen acquisition.
(b) Impairment of goodwill and certain fixed assets related to Nektar UK
(formerly Bradford Particle Design, which was acquired by Nektar in January
2001)
NEKTAR THERAPEUTICS
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
( In thousands, except per share information)
Unaudited
---------------------------------
Twelve-Months Ended
December 31, 2005
---------------------------------
GAAP Non-GAAP Non-GAAP
Adjustments
---------- ----------- ----------
Revenue:
Contract research revenue $ 81,602 - $ 81,602
Product sales and royalty
revenue 29,366 - 29,366
Exubera commercialization
readiness 15,311 - 15,311
--------- ----------- ---------
Total revenue 126,279 - 126,279
Operating costs and expenses:
Cost of goods sold and
royalty costs 23,728 - 23,728
Exubera commercialization
readiness costs 12,268 - 12,268
Research and development 151,659 - 151,659
General and administrative 43,852 - 43,852
Purchased in-process R&D(a) 7,859 (7,859) -
Amortization of other
intangible assets 4,206 - 4,206
Impairment of long lived
assets(b) 65,340 (65,340) -
--------- ----------- ----------
Total operating costs and expenses 308,912 (73,199) 235,713
--------- ----------- ---------
Loss from operations (182,633) 73,199 (109,434)
Gain/(loss) on debt extinguishment (303) - (303)
Other income/(expense), net (1,112) - (1,112)
Interest income 13,022 - 13,022
Interest expense (14,085) - (14,085)
--------- ----------- ---------
Income/(loss) before
benefit/(provision) for income
taxes (185,111) 73,199 (111,912)
Benefit/(provision) for income taxes - - -
--------- ----------- ---------
Net income/(loss) $(185,111) 73,199 $(111,912)
========= =========== =========
Basic and diluted net loss per
common share $ (2.15) 0.85 $ (1.30)
Shares used in computing basic and
diluted net loss per share 85,915 85,915 85,915
Non-GAAP results for the three months and year ended December 31, 2005 exclude
the following items, which are included in Nektar's Consolidated Statements of
Operations when presented in accordance with GAAP:
(a) Expensing of acquired in-process research and development related to the Q4
2005 Aerogen acquisition.
(b) Impairment of goodwill and certain fixed assets related to Nektar UK
(formerly Bradford Particle Design, which was acquired by Nektar in January
2001)
CONTACT: Nektar Therapeutics
Joyce Strand, 650-631-3138
Jennifer Ruddock, 650-631-4954