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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): March 1, 2005
NEKTAR THERAPEUTICS
(Exact name of Registrant as specified in its charter)
Delaware 0-23556 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 March 1, 2005, Nektar Therapeutics issued a press release (the "Press
Release") announcing results for the quarter and year ended December 31, 2004. 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.
Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
(a) The Press Release also announced that the Company expects to restate its
previously issued financial statements for the fiscal years ended December 31,
2002 through 2003 and for the three months ended, March 31, 2004, June 30, 2004
and September 30, 2004 to reclasssify certain expenses previously classified as
research and development expense as general and administrative expense, and
certain expenses previously classified as general and administrative expense as
interest expense. The contents of the Press Release are incorporated in this
Item 4.02(a) by reference. The information in this Current Report shall not be
incorporated by reference in any filing under the Securities Act of 1933, as
amended or the Securities Exchange Act of 1934, except as shall be expressly set
forth by specific reference in such filing.
The Company consulted with its audit committee and the Company's independent
registered public accounting firm in identifying this issue and audit committee
concluded in a meeting held on February 28, 2005 that the financial statements
identified above should no longer be relied upon.
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: March 1, 2005
By: /s/ AJAY BANSAL
Ajay Bansal
-----------------------------------
Chief Financial Officer and Vice
President, Finance and
Administration
Date: March 1, 2005
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Earnings Press Release of Nektar Therapeutics dated March 1, 2005.
Exhibit 99.1
Nektar Announces Financial Results for the Year and Fourth Quarter 2004
SAN CARLOS, Calif.--(BUSINESS WIRE)--March 1, 2005--
Will Restate 2002 to Third Quarter 2004 Financial Statements Due to
Reclassification of Certain R&D and G&A Expenses. No Change to
Cash Balance, Revenue or Net Loss
Nektar Therapeutics (Nasdaq:NKTR) today announced its financial
results for the year and fourth quarter ended December 31, 2004.
For the year ended December 31, 2004, the Company reported total
revenue of $114.3 million, compared to $106.3 million in 2003. In
2004, Nektar reported product revenue of $25.1 million compared to
$27.3 million in 2003; and contract research revenue was $89.2 million
compared to $79.0 million for the year ended December 31, 2003.
For the twelve months ended December 31, 2004, the Company
reported a net loss of $101.9 million or $(1.30) per share, compared
to a net loss of $65.9 million or $(1.18) per share for the year ended
December 31, 2003. The increase in the net loss from 2003 to 2004 is
mainly attributable to the effect of the debt related activities in
2003 and 2004. The 2003 net loss included gains from debt
extinguishments of approximately $12 million. The 2004 net loss
includes losses from debt extinguishments of approximately $9 million,
and make-whole payments for debt conversion of approximately $13
million.
For the three months ended December 31, 2004, Nektar reported
total revenue of $31.4 million, compared to $25.6 million in the same
period of 2003. In the fourth quarter of 2004, product revenue was
$9.3 million compared to $5.9 million in 2003; and contract research
revenue totaled $22.0 million compared to $19.7 million in 2003.
The Company reported a net loss of $19.3 million or $(0.23) per
share for the three months ended December 31, 2004 compared to $15.7
million or $(0.28) per share in the same period 2003.
As of December 31, 2004, the Company reported cash, cash
equivalents and short-term investments of $418.7 million compared to
$286.0 million as of December 31, 2003.
"We made considerable progress in 2004 with Exubera(R) (inhaled
insulin), our other partnered products, and our proprietary product
programs. In 2004, we also strengthened our balance sheet by
increasing our cash balance and reducing our convertible debt," said
Ajit S. Gill, Nektar president and chief executive officer. "In 2005,
we anticipate further news about Exubera and our other partnered
products, four of which are either already in Phase III or are
expected to enter Phase III trials during the current year. In
addition, the early stage progress of several of our proprietary
programs has created the opportunity for Nektar to advance products
further into clinical development, which we expect will substantially
increase our 2005 R&D expenses. We are very excited about our
proprietary product programs and believe that they have the potential
to create a higher value pipeline for us."
Summary of Progress in 2004 and Early 2005
Exubera
-- In March 2004, the marketing authorization application for
Exubera was accepted by the European Medicines Evaluation
Agency (EMEA).
-- In September 2004, Pfizer and Sanofi-Aventis presented new
data from a trial whose primary objective was to assess
long-term pulmonary safety that showed that Exubera was
effective and well tolerated in controlling blood glucose
levels over a two-year period in patients with type 2
diabetes.
Partnered pipeline
-- On December 17, 2004, Eyetech Pharmaceuticals, Inc. and Pfizer
Inc. announced that the U.S. Food and Drug Administration
(FDA) has approved Macugen(R) (pegaptanib sodium injection)
for the treatment of neovascular (wet) age-related macular
degeneration (AMD). This is the sixth product using Nektar
PEGylation technology approved in the U.S.
-- During 2004 and January 2005, Nektar announced five
collaborative agreements, including with Pfizer,
GlaxoSmithKline, and Bayer.
Proprietary pipeline
-- The company has four development programs underway of which
one has entered a Phase I clinical trial, one has entered
proof-of-concept clinical testing, and two are in pre-clinical
testing.
Restatement of Financial Statements
Nektar also announced today that as a result of its year-end
financial statement review and Sarbanes-Oxley Section 404 evaluation,
the Company has determined that it is necessary to reclassify certain
expenses previously classified as research and development expense to
general and administrative expense, and to reclassify the amortization
of debt issuance costs previously classified as general and
administrative expense to interest expense.
As a result of these reclassifications, Nektar will restate its
2002 through third quarter 2004 financial statements. The restatement
will be reflected in Nektar's Annual Report on Form 10-K for the year
ended December 31, 2004, to be filed on or before March 16, 2005. A
summary of the restated amounts versus amounts previously reported for
the years 2003 and 2002 is attached to this press release preceding
the tables for 2004 which include the restated numbers for the first
nine months of 2004.
The reclassifications giving rise to the restatement of Nektar's
financial statements do not result in a change to its cash balance,
revenue or net loss.
The reclassifications announced today relate to intellectual
property expenses and certain corporate support expenses that were
previously classified as research and development expenses. The
Company has determined that these expenses should be classified as
general and administrative expenses under Statement of Financial
Accounting Standards No. 2, "Accounting for Research and Development
Costs". The reclassified amount for the nine months ended September
30, 2004 was $8.4 million and the amounts for the full-years 2003 and
2002 were $9.4 million and $9.8 million, respectively.
In addition, the Company has determined that the amortization of
debt issuance costs previously classified as general and
administrative expense should be classified as interest expense under
Accounting Principles Board Opinion No. 21, "Interest on Receivables
and Payables" and Emerging Issues Task Force 86-15, "Increasing-Rate
Debt." The reclassified amount for the nine months ended September 30,
2004 was $0.7 million and the amounts for the full years 2003 and 2002
were $1.4 million and $1.3 million, respectively.
Material Weakness and Remediation
In connection with management's assessment of its internal control
over financial reporting as of December 31, 2004, Nektar has
determined that it has a material weakness in its financial statement
close process, including insufficient timely review of the application
of its accounting policies, documentation, as well as disclosure
controls and procedures. The material weakness arises from staff with
inadequate proficiency to apply the Company's accounting policies in
accordance with U.S. generally accepted accounting principles.
This material weakness impacts the Company's ability to report
financial information in conformity with U.S. generally accepted
accounting principles, which could affect all significant financial
statement accounts and has resulted in (i) a restatement of the 2002
and 2003 consolidated financial statements to reflect reclassification
of certain amounts between research and development expense, general
and administrative expense, and interest expense; and (ii) the prior
restatement of the 2003 consolidated financial statements to reduce
the gain on debt extinguishment.
The Company expects that the material weakness it identified will
result in an adverse opinion by the Company's independent registered
public accounting firm on the effectiveness of the Company's internal
control over financial reporting in the Company's Annual Report on
Form 10-K for the year ended December 31, 2004.
In 2004, the Company began implementation of new processes and
controls and hired additional personnel with technical accounting
expertise to improve its financial statement close process. The
Company intends to continue to improve its financial statement close
process in 2005 including the remediation of the material weakness
discussed above by identifying, recruiting, and training personnel
with the appropriate accounting skills. In addition, the Company plans
to enhance further its technical accounting review process for
non-routine and complex transactions.
Conference Call Information
Ajit S. Gill, Nektar president and CEO, will host a conference
call today for analysts and investors 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
posted on the Investor Relations section at Nektar's Website at
www.nektar.com. The Web broadcast of the conference call will be
available for replay through March 15, 2005.
Analysts and investors can also access the conference call live
via telephone by dialing 877-691-2551 (US); 630-691-2747
(International) with a confirmation number of 10780168. An audio
replay will be available shortly following the call through March 15,
2005 and can be accessed by dialing 877-213-9653 (U.S.); or
630-652-3041 (International) with a passcode of 10780168. In the event
that any non-GAAP financial measure is discussed on the conference
call that is not described in this earnings release, related
information will be made available on the Investor Relations page at
the Nektar Website as soon as practical after the conclusion of this
conference call.
About Nektar
Nektar Therapeutics provides industry-leading drug delivery
technologies, expertise and manufacturing to enable the development of
high-value, differentiated therapeutics. Nektar's advanced drug
delivery capabilities are designed to enable the Company's
biotechnology and pharmaceutical partners to solve drug development
challenges and realize the full potential of their therapeutics, from
developing new molecular entities to managing the life cycles of
established products.
This release contains forward-looking statements that reflect
management's current views as to Nektar's business strategy, product
and technology development plans and funding, collaborative
arrangements, clinical trials, and other future events and operations.
These forward-looking statements involve uncertainties and other risks
that are detailed in Nektar's reports and other filings with the SEC,
including its Annual Report on Form 10-K for the fiscal year ended
December 2003, as amended, and its Quarterly Report on Form 10-Q for
the quarter ended September 30, 2004. Actual results could differ
materially from these forward-looking statements.
NEKTAR THERAPEUTICS
RESTATED AMOUNTS VERSUS AMOUNTS PREVIOUSLY REPORTED
(In thousands)
Year Ended December 31, 2003
------------------------------------
Amount
Amount Previously
Restated Reported Difference
------------ ------------ ----------
Research and
development expenses $122,149 $131,528 $(9,379)
General and
administrative expenses 29,966 22,017 $ 7,949
Loss from operations (64,755) (66,185) $ 1,430
Interest expense (19,327) (17,897) $(1,430)
Net loss (65,890) (65,890) $ -
Total revenues 106,257 106,257 $ -
Cash and short-term investments 285,967 285,967 $ -
Year Ended December 31, 2002
------------------------------------
Amount
Amount Previously
Restated Reported Difference
------------ ------------ ----------
Research and
development expenses $ 147,627 $ 157,383 $(9,756)
General and
administrative expenses 34,504 26,016 $ 8,488
Loss from operations (98,813) (100,081) $ 1,268
Interest expense (17,881) (16,613) $(1,268)
Net loss (107,468) (107,468) $ -
Total revenues 94,845 94,845 $ -
Cash and short-term investments 293,969 293,969 $ -
Note: The above tables should be read in conjunction with the
attached earnings release. These tables provide certain
financial statement line items to assist the reader in
analyzing the impact of the restatement the Company has
announced in the attached earnings release.
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,
-------------------- ----------------------
2004 2003 2004 2003
-------- -------- --------- --------
(restated) (restated) (restated)
(a) (b) (a)
Revenue:
Contract research
revenue $ 22,018 $ 19,735 $ 89,185 $ 78,962
Product sales 9,348 5,889 25,085 27,295
-------- -------- --------- --------
Total revenue 31,366 25,624 114,270 106,257
Operating costs and
expenses:
Cost of goods sold 6,052 2,807 19,798 14,678
Research and
development 34,047 32,978 133,523 122,149
General and
administrative 8,685 8,402 30,967 29,966
Amortization of other
intangible assets 981 983 3,924 4,219
-------- -------- --------- --------
Total operating costs
and expenses 49,765 45,170 188,212 171,012
-------- -------- --------- --------
Loss from operations (18,399) (19,546) (73,942) (64,755)
Gain/(loss) on debt
extinguishment - 7,698 (9,258) 12,018
Other income/
(expense), net (7) 275 296 983
Interest income 1,985 1,223 6,602 5,360
Interest expense (3,144) (5,177) (25,747) (19,327)
-------- -------- --------- --------
Income/(loss) before
benefit/(provision) for
income taxes (19,565) (15,527) (102,049) (65,721)
Benefit/(provision) for
income taxes 295 (169) 163 (169)
-------- -------- --------- --------
Net income/(loss) $(19,270) $(15,696) $(101,886) $(65,890)
======== ======== ========= ========
Basic and diluted net
loss per common share $ (0.23) $ (0.28) $ (1.30) $ (1.18)
Shares used in computing
basic and diluted
net loss per share 84,153 56,121 78,461 55,821
(a) For the year 2003, research and development expenses, general
and administrative expenses and interest expense have been
restated to correct the misapplication of GAAP. The
restatement is as follows:
For the year and the quarter $9,379 and $2,252 have been
reclassified from research and development expenses to
general and administrative expenses, respectively.
For the year and the quarter $1,430 and $363 related to
amortization of debt issuance costs have been reclassified
from general and administrative expenses to interest
expense, respectively.
(b) For the year 2004, research and development expenses, general
and administrative expenses and interest expense for the
nine-months period ended September 30, 2004 have been restated
to correct the misapplication of GAAP. The restatement is as
follows:
For the nine-months period ended September 30, 2004,
$8,416 have been reclassified from research and
development expenses to general and administrative
expenses.
For the nine-months period ended September 30, 2004, $739
related to amortization of debt issuance costs have been
classified from general and administrative expenses to
interest expense.
NEKTAR THERAPEUTICS
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, December 31,
2004 2003
(unaudited) (c)
----------- ----------
ASSETS
Current assets:
Cash, cash equivalents and
short-term investments $ 418,740 $ 285,967
Inventory $ 10,691 $ 8,559
Other current assets 25,108 11,972
---------- ---------
Total current assets 454,539 306,498
Restricted investments - 12,442
Property and equipment, net 151,247 149,388
Goodwill 130,120 130,120
Other intangible assets, net 6,456 10,963
Deposits and other assets 2,559 7,377
---------- ---------
$ 744,921 $ 616,788
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 24,231 $ 26,797
Capital lease
obligations - current 1,532 1,341
Deferred revenue 29,890 18,719
---------- ---------
Total current liabilities 55,653 46,857
Convertible subordinated debentures 173,949 359,988
Accrued rent 2,117 2,110
Capital lease obligations - noncurrent 23,568 31,686
Other long-term liabilities 22,292 11,956
Stockholders' equity:
Preferred stock at par - -
Common stock at par 8 6
Capital in excess of par 1,187,575 778,500
Deferred compensation (2,764) (38)
Accumulated other
comprehensive gain (356) 958
Accumulated deficit (717,121) (615,235)
---------- ---------
Total stockholders' equity 467,342 164,191
---------- ---------
$ 744,921 $ 616,788
========== =========
(c) The balance sheet at December 31, 2003 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.
CONTACT: Nektar Therapeutics
Joyce Strand, 650-631-3138