ITEM 1. BUSINESS
INTRODUCTION
Anesta is a leader in the development of new pharmaceutical products for oral transmucosal drug administration using its proprietary oral transmucosal (OT) system. The OT-system consists of a dissolvable, non-dissolvable, or device-based drug matrix which is mounted on a handle. The Company's OT-system provides rapid absorption of certain potent drugs into the bloodstream, which can produce the onset of the desired therapeutic effect within five to ten minutes. Anesta's OT-system allows the caregiver or patient to monitor the onset of action, remove the unit and stop administration of the drug once the desired therapeutic effect has been achieved. In certain situations, this allows the caregiver or the patient an element of therapeutic control not possible with traditional drug delivery products and technologies such as tablets, capsules or transdermal patches. Prior to the development of Anesta's OT-system, infusions or injections were generally required to achieve rapid drug absorption, dose control and titration (dose-to-effect). Anesta's non-invasive OT-system is more comfortable and convenient for patients, provides flexibility to caregivers, and has the potential to be more effective and less costly in a variety of clinical settings.
The Company's first OT-system product is OT-fentanyl. OT-fentanyl was first approved as Fentanyl Oralet(R) by the U.S. Food and Drug Administration (FDA) and is being marketed by Abbott Laboratories (Abbott) for use in both children and adults as a surgical premedicant and for sedation/analgesia (conscious sedation) prior to diagnostic or therapeutic procedures in hospital settings. Fentanyl, the active ingredient, has been widely used in other dosage forms for over 30 years. Over the last five years, a fentanyl transdermal patch drug delivery system has gained acceptance among oncologists, internists and family practice physicians in treating chronic pain, primarily associated with cancer. U.S. sales of the fentanyl transdermal patch are estimated to be more than $150 million in a total cancer pain market of more than $1.2 billion annually.
In July 1996, Anesta completed its Phase 3 clinical trial program of a second OT-fentanyl product, Actiq(TM), to treat breakthrough pain (moderate to severe transitory pain) associated with cancer in patients already receiving around-the-clock opioid therapy for their persistent or constant pain. The Company believes that the ability of Actiq to provide rapid relief from breakthrough pain (onset of meaningful pain relief in five minutes) will enhance the patient's ability to more precisely control their own pain and enhance the patient's overall quality of life. Current breakthrough pain treatment most commonly includes orally administered morphine tablets or solutions which usually require 30 minutes or more to provide pain relief. In November 1996, the Company filed its New Drug Application (NDA) with the FDA for the use of Actiq for breakthrough cancer pain.
Anesta also has several other products in clinical development, targeting applications where the OT-system advantages of rapid onset of action and patient or caregiver control may provide therapeutic value. Products in clinical trials include OT-fentanyl for acute pain (Phase 2/3), OT-nicotine for smoking cessation (late Phase 2) and OT-etomidate for sedation (early Phase 2). Several drugs are being evaluated preclinically with the OT-system, including drugs to treat migraine headache and nausea and vomiting.
Anesta entered into a strategic alliance with Abbott in 1989 under which Abbott has provided funding to Anesta for the development of Fentanyl Oralet, Actiq and other applications for OT-fentanyl. Abbott contract manufactures Fentanyl Oralet and Actiq for Anesta and is marketing the OT-fentanyl product line in the U.S. Abbott has also agreed to manufacture Anesta's OT-fentanyl line of products, including Fentanyl Oralet and Actiq for Anesta's potential international distributors and licensing partners.
BACKGROUND ON DRUG DELIVERY METHODS
A wide variety of drug delivery systems are available in the market, although not all drugs can be beneficially delivered by all routes of drug delivery administration. For certain clinical applications, there are clinical benefits in providing rapid onset of therapeutic action and the appropriate drug dosage necessary to achieve the desired effects. Drug delivery should be convenient, cost-effective and as non-invasive as possible. Existing drug delivery systems each have limitations in meeting some of these requirements:
Tablets or capsules. Although orally delivered tablets or capsules may be convenient and inexpensive, they generally do not provide rapid onset of action. Also, some drugs do not achieve adequate bioavailability when administered as a tablet or capsule due to degradation of the drug by the stomach and liver.
Infusions and injections. Intravenous (IV) infusions, intramuscular (IM) and subcutaneous (SC) injections provide rapid uptake and onset of action. Infusion techniques can titrate potent drugs with very rapid changes in effect. However, infusions and injections are painful, invasive and sometimes threatening to the patient. IV infusions and SC and IM injections require highly trained medical professionals for safe and effective administration.
Transdermal patches. Transdermal patches, which allow absorption of drugs through the skin, provide convenience, ease of administration and a more steady rate of chronic drug delivery. However, the time to achieve therapeutic blood levels with transdermal patches may be four to ten hours after administration. In addition, absorption of the drug into the bloodstream may continue for many hours after removal of the patch. This slower onset of action and inability to quickly stop absorption are limiting factors of transdermal patches and present safety concerns in some clinical situations. For example, patients in acute pain cannot wait several hours to achieve analgesia and such patients sometimes may need to be hospitalized in order that more invasive methods (IV, SC, IM) can be administered by skilled health care professionals.
Nasal/Transnasal Sprays. Nasal sprays are designed to provide rapid onset of action of drugs or are designed to deliver drugs that are not orally bioavailable. Nasal sprays can cause irritation in some patients and can be difficult to administer in variable intranasal conditions. In addition, the dose of the product cannot be titrated or controlled by the patient over a period of time.
ANESTA'S PROPRIETARY OT-SYSTEM FOR DRUG DELIVERY
Anesta's proprietary OT-system is designed to address the medical need for a convenient, non-invasive, cost-effective drug delivery system that provides rapid onset of therapeutic action and allows the caregiver or patient to control drug administration until the desired effect is achieved. The OT-system consists of a dissolvable, non-dissolvable, or device-based drug matrix which is mounted on a handle. The drug is released from the matrix in the mouth, allowing rapid absorption through the oral mucosal tissues and slower absorption through the gastrointestinal tract. Oral transmucosal drug delivery achieves rapid absorption of many drugs because the oral mucosa has a large surface area (100 - 150 cm2), is highly vascularized and is significantly more permeable than the skin.
For certain drugs or certain applications, Anesta believes that its OT-system can provide one or more of the following therapeutic advantages over traditional methods of drug administration:
Rapid Onset of Action. The efficacy of many systemic drugs is related to their blood concentration. In order to achieve a therapeutic effect, a particular blood concentration must be achieved. The more rapidly that such blood concentration is reached, the sooner the drug takes effect. The Anesta OT-system allows many types of drugs to cross the oral mucosa and to be absorbed rapidly into the bloodstream, thus achieving a therapeutic blood concentration more rapidly than tablets and capsules or transdermal patches.
Dose-to-Effect Control. Anesta's OT-system allows the caregiver or patient to monitor the onset of action, remove the unit and stop administration of the drug once the desired therapeutic effect has been achieved. This avoids doses that are higher than necessary to achieve safe and effective therapy, an important and beneficial element of control. Drugs delivered by tablet and capsule may be significantly degraded by the stomach and the liver. Thus, tablets and capsules often contain higher doses of a drug than necessary to achieve a therapeutic effect, potentially leading to over-medication and undesirable side effects. Continuous
infusion therapy or more frequent administration of tablets or capsules can alleviate these dosing problems, but may lead to increased cost, patient inconvenience and patient noncompliance with prescribed dosing regimens.
Rapid Termination of Drug Delivery. In certain applications, it is desirable that drug administration be terminated once the desired effect has been obtained. For example, if a patient receives a sedative in connection with a brief outpatient procedure, substantially all of the sedative effect should be gone before the patient can be discharged. The drug contained in a tablet or capsule may dissolve and continue to be absorbed into the bloodstream over a period of hours. Similarly, when a transdermal patch is removed, the drug which has already made contact with the skin will continue to be absorbed into the bloodstream for a number of hours or even days. Thus, drug absorption from tablets, capsules and transdermal patches may continue longer than necessary or desired. By contrast, once Anesta's OT-system is removed, absorption of the drug through the oral mucosal tissues into the bloodstream stops almost immediately.
Improved Safety. Removing the OT-system limits further absorption of the drug into the body if a patient has an adverse reaction or has achieved the desired therapeutic effect. Because the dosage unit can be removed immediately, the amount of the drug delivered to the patient may be lower than if a tablet, capsule, transdermal patch or injection had been administered.
Cost-Effective. Traditionally, when rapid onset of action is critical, infusions or injections have been required. Infusions and injections require administration by a skilled caregiver and, in the case of IV or SC administration, a catheter must be inserted and an administration set-up is required. In contrast, the OT-system requires simple placement of the dosage unit in the mouth. Thus, Anesta believes that its OT-system may offer a more cost-effective means of delivering certain drugs that are now given by infusion or injection.
Greater Patient and Caregiver Convenience. The Company's OT-system is easily administered, comfortable, non-threatening and allows a caregiver or the patient the ability to titrate drug administration.
ANESTA'S BUSINESS STRATEGY
Anesta's long-term objective is to apply its proprietary OT-system in a number of therapeutic areas and to commercialize new pharmaceutical products using this system. Anesta is pursuing this objective with the following strategy:
Proprietary Technology. The Company has sought and will continue to expand its proprietary position for its OT-system, by pursuing patent protection in the U.S. and key international markets for its OT-system and for dosage forms that incorporate such technology.
Approved Drugs. The Company develops new pharmaceutical products by applying its OT-system primarily to approved drugs, including both proprietary and generic drugs, in order to create new dosage forms for applications where existing methods of drug delivery have therapeutic or clinical limitations.
Focused Resources. Anesta focuses its resources on research, product and process development, clinical research, regulatory interactions and filings and commercial market development and preparation. Anesta works closely with Abbott in developing Fentanyl Oralet, Actiq and other OT-fentanyl applications and plans to develop strategic relationships with other pharmaceutical companies to develop, manufacture, market and distribute Anesta's OT-system products worldwide.
The Company believes that this strategy offers a number of potentially significant benefits. First, by focusing on developing new dosage forms for approved drugs, Anesta does not bear the cost and risk associated with discovery and development of new pharmaceutical compounds. Second, by entering into relationships with strategic partners for costly activities such as manufacturing, marketing, selling and distribution, Anesta is able to focus its resources on research, development, regulatory interactions and filings and commercial market development activities where the Company can add significant value to its partnerships.
ANESTA'S PRODUCTS AND DEVELOPMENT PROGRAMS
The Company's research and development activities involve formulation and methods development, invitro and invivo proof-of-concept testing, manufacturing process development, quality control and quality assurance programs, preclinical and clinical research, regulatory documentation and interaction with the FDA to gain marketing approval for its products.
The following table lists the potential therapeutic indications for and current status of Anesta's first approved product, and the primary products that are in research and development.
(1) See "Business--Government Regulation" for a description of the various phases of clinical testing.
Fentanyl Oralet (OT-fentanyl) for Premedication
Fentanyl Oralet is approved by the FDA for use in both adult and pediatric patients in a hospital setting (i) as a surgical premedication or (ii) to provide sedation/analgesia (conscious sedation) prior to diagnostic or therapeutic procedures. The unique design of Fentanyl Oralet provides physicians with a new method of administering fentanyl in a controllable yet painless and easy to use dosage form. Patients experience an onset of analgesia in six to eight minutes and sedation and reduced anxiety in 20 to 30 minutes.
Actiq (OT-fentanyl) for Breakthrough Pain
Phase 3 clinical research for Anesta's OT-fentanyl product for breakthrough pain, Actiq, was completed in July of 1996 and the Actiq NDA was filed in November of 1996. Anesta believes that Actiq has the potential to bring about a major advance in pain management for persons suffering moderate to severe breakthrough pain. Data from the Company's clinical trials in cancer and other patients show that Actiq provides patients onset of pain relief in approximately 5 minutes that is predictable, controllable, convenient and safe.
In recent years there has been a growing awareness that millions of cancer patients do not receive optimal analgesic therapy for their pain. Inadequate pain management leads to debilitation, reduced quality of life and great stress on interpersonal relationships with family, friends and caregivers. Many clinicians believe that improving a patient's control over pain also helps in his or her ability to better fight the underlying disease.
With improved clinician awareness and understanding of the importance of managing pain as an integral part of overall cancer therapy, there is a desire to find solutions to one of the most challenging components of cancer pain, namely breakthrough pain. Breakthrough pain is a transitory flare of moderate to severe pain
occurring on a background of persistent or constant pain in patients receiving chronic opioid therapy. Breakthrough pain may be related to a specific activity or may occur spontaneously and be totally unpredictable. When related to a specific activity such as walking or eating, it may be termed incident pain. Various studies have shown that over 50% of all patients with active cancer experience moderate to severe pain. Over 70% cancer patients experience moderate to severe pain in the end stage of the disease. Other studies have shown that 52 to 64% of these patients experience breakthrough pain. These studies suggest that over 800,000 cancer patients suffer from breakthrough pain each year in the U.S. alone.
Clinical practice guidelines suggest the use of a long-acting opioid analgesic, such as sustained-release morphine or the fentanyl transdermal patch, in an around-the-clock dosing regimen to treat the persistent or constant pain component of cancer pain. When the transitory flares of moderate to severe breakthrough pain occur, patients are instructed to self-medicate with an analgesic with a relatively faster onset, such as oral morphine tablets or elixirs.
Breakthrough pain typically develops rapidly and often reaches maximum intensity in three minutes. It has a variable duration averaging approximately 30 minutes. These episodes can be excruciatingly painful and may last for one or two hours. Oral morphine is not optimal to treat breakthrough pain because it typically requires 30 minutes or more to produce pain relief (analgesia). This delayed onset of pain relief results in a "pain relief gap" -- the painful and debilitating wait between onset of breakthrough pain and the beginning of pain relief.
One approach to managing breakthrough pain is to increase the dose of the around-the-clock, long-acting opioid analgesic over several days or weeks until the patient no longer experiences breakthrough pain. This approach frequently leads to over medication and an increase in undesirable side effects such as drowsiness or severe constipation. As patients and their physicians learn from their experience, they will often seek a balance of drug therapy that meets the patient's desire for fewer or less severe breakthrough pain episodes offset by a need to minimize the side effects of higher opioid doses. Often this compromise leads to an acceptance of one to four episodes of breakthrough pain every day. As a result, breakthrough pain is a frequent occurrence in the lives of many cancer patients. Most of these patients have a need for a better therapy to more effectively treat breakthrough pain.
The only currently available treatments which adequately match rapid onset of pain relief to the rapid onset of breakthrough pain are IV or SC infusions or IM injections of potent opioids, such as morphine. In many settings, these options are unacceptable because they are invasive, uncomfortable, inconvenient for patients and caregivers, and can lead to significantly increased costs.
The ideal treatment for breakthrough pain would provide very rapid pain relief in a simple, controllable, safe and patient-friendly manner. Anesta believes that Actiq meets these criteria as it provides rapid onset of pain relief (in five minutes) in a dosage form that provides the patient a means of controlling the dose (dose-to-effect), and that is safe, convenient, user-friendly and less costly than invasive methods.
Patients, nurses and physicians have stated that the two most important factors in treating breakthrough pain are speed of onset and patient control. Actiq meets these criteria in a drug delivery system that provides rapid onset of pain relief and is convenient and controllable by the patient. Moreover, U.S. Government and World Health Organization cancer pain guidelines teach early and aggressive use of oral or other non-invasive opioid analgesic therapy to treat patients with moderate to severe pain. The guidelines also teach that injections and infusions should be avoided if possible and used only as a last resort. The Company believes Actiq closely fits with these guidelines.
Anesta's Phase 3 cancer pain clinical program involved 12 studies at 45 U.S. sites. The program was designed to determine the safety and effectiveness of Actiq as well as to gather practical information such as the proper dosing recommendations for the product in patients receiving conventional around-the-clock opioids for chronic pain. Two blinded titration trials were designed to develop a practical method for patients to achieve optimal relief from breakthrough pain. Incrementally higher doses were administered until a dose was found where one unit of Actiq was effective for an average breakthrough pain episode. Another blinded trial was designed to demonstrate the efficacy of Actiq compared to placebo for breakthrough pain. Actiq was also investigated in a small supporting study as the sole source (monotherapy) for pain control in opioid tolerant patients. Additionally, long-term safety was assessed in a follow-on study where cancer patients are
allowed to continue with Actiq therapy, if they desire, after completing one of the other trials. The Company's clinical trials in total enrolled 257 cancer patients who have received over 41,000 doses of Actiq as of November 1996, during participation in these trials. Several patients have completed more than 12 months of Actiq therapy with continuing effectiveness in treating their episodes of breakthrough pain.
In double-blind dose titration studies, Actiq produced significantly faster and better pain relief scores than currently used breakthrough pain medications at 15, 30, and 60 minutes following study drug administration. Patient assessment, based on global performance ratings which blend efficacy, side-effects, dosage form and other factors, was also significantly better with Actiq when compared with baseline breakthrough pain medications. In a pain assessment trial of postoperative surgical patients, the median time for onset of meaningful pain relief (analgesia)following administration of Actiq was less than 5 minutes.
Ninety-one percent of the patients in the three pivotal studies who were eligible to continue Actiq therapy chose to enroll in an open-label, long-term study of Actiq. Mean global performance ratings for Actiq were consistently in a range indicating very good to excellent pain relief for the duration of therapy in the long-term study. The main side effects reported during the cancer pain clinical studies with Actiq were similar in type and prevalence to those caused by all opioid analgesia products used to treat chronic pain patients.
The Actiq dosage form, consisting of a drug matrix attached to a handle, facilitates absorption of the drug within the mouth and enables the patient to individually control drug delivery. This helps achieve rapid and effective pain relief while minimizing side effects in a patient-friendly, non-invasive oral transmucosal delivery system.
The proposed treatment plan for using Actiq for breakthrough pain will be simple and consistent with current practice and published guidelines. Physicians will prescribe an around-the-clock opioid analgesic for constant pain, using conventional products like sustained-release morphine tablets or fentanyl transdermal patches. The patient will be instructed to use an Actiq instead of oral morphine when the patient feels the onset of breakthrough pain. As the patient sucks on the Actiq, it dissolves and releases the drug for rapid absorption through the mucosal tissues providing a fast onset of pain relief. A recent Actiq clinical study of post-operative patients with acute pain showed that the onset of meaningful pain relief occurred in under five minutes in over 50% of the patients and within 15 minutes for substantially all patients. Currently available oral opioid products have a much slower onset of therapeutic effect.
Other Products in Development
Anesta has several OT-system products under clinical development for the following clinical applications:
OT-fentanyl for acute pain. OT-fentanyl is also being studied for acute pain. There are multiple causes of acute pain including surgery, trauma and conditions such as kidney stones. Acute pain usually requires the rapid onset of pain relief. Historically, hospitalized patients have received IV or SC infusions or IM injections in order to receive rapid pain relief. A more recent enhancement to the IV route of administration of analgesics has been the development of patient controlled devices with sophisticated microelectronics, which allow patients to self-administer the IV pain medication when they feel the need for pain relief. This method of patient controlled analgesia (PCA) has been shown to improve pain management, at the same time decreasing the total daily dose of medication used. There are also psychological benefits to the patients who gain more control over their analgesic therapy.
PCA therapy is a major improvement for pain management and reduces the need for skilled caregivers to provide repeat IV or SC infusions or IM injections. Anesta's OT-system takes the PCA concept one step further. Instead of relying on invasive and costly IV infusions, OT-fentanyl will provide the rapid onset of pain relief in a noninvasive and cost-effective delivery system in a hospital setting.
Anesta has completed several Phase 2/3 clinical studies in over 300 patients experiencing acute pain after surgery. During the past year, data from some of these studies have been presented at peer-reviewed scientific meetings. These early data provide evidence that OT-fentanyl can be clinically effective for acute pain in a hospital setting.
OT-nicotine (OTNC) for smoking cessation. Anesta's OT-nicotine product is in late-stage Phase 2 clinical development. OTNC is a new therapy targeted to help individuals overcome dependence on tobacco.
Seven clinical studies with OTNC have been completed. These studies have evaluated the effects of different dosage strengths, the acceptability of different taste formulations, and the ability of OTNC to aid smoking cessation with limited, short-term use and with eight weeks of therapy. Clinical pharmacokinetic data showing blood levels after different OTNC doses were presented at the Society for Research on Nicotine and Tobacco annual meeting in March 1996 and clinical data with short-term use were presented at the American Society of Addiction Medicine in November 1996. These data demonstrated that blood concentrations increase in proportion to dose, the desire to smoke decreases at higher doses, high patient acceptance, and side effects typical of nicotine.
Nicotine replacement therapy has become established as a successful aid to smoking and tobacco cessation programs. Nicotine replacement products that have been approved include a nicotine gum, several transdermal nicotine patches and nicotine nasal spray. In February 1996, nicotine gum was approved by the FDA in the U.S. for over-the-counter sales and distribution and in July 1996, two nicotine transdermal patches were approved by the FDA for over-the-counter sales and distribution. A number of other companies are developing other types of nicotine replacement products, as well as other smoking cessation products, which, if approved, would compete with OTNC. Smoking cessation experts believe that increasing the availability and number of nicotine replacement products will increase their benefits on public health, as no single therapy will be effective for all smokers desiring to quit. These experts foresee a need for a broad range of readily available products and therapies to increase the success rate of smoking cessation programs.
OTNC provides a combination of pharmacokinetic profile and behavioral characteristics that are different from the other nicotine replacement products currently on the market. Some smokers who have used OTNC for up to one week have commented that the ability to control dosing by repeatedly inserting and removing the OTNC unit from their mouths has given them a greater ability to manage their urge to smoke. This element of control is different from that offered by these other treatment modalities. Anesta believes that this ability to titrate the dose of nicotine and rapidly deliver adequate doses of nicotine to the individual may more closely displace the physiologic dependence and psychological craving effects of cigarettes. These properties of OTNC may be especially effective in the early stages of smoking cessation and in smoking relapse prevention.
OT-etomidate (OTET), an ultra-short acting, non-opioid sedative and anxiolytic. OTET is beginning Phase 2 clinical studies. This product is designed to broaden Anesta's product line in providing sedation and reducing anxiety in situations where the procedure is not painful or where pain is managed by other methods such as local or regional anesthesia. The active ingredient in OTET, etomidate, is an approved anesthetic drug when supplied in an IV dosage form.
The first two Phase 1 clinical studies confirmed that OTET delivers dose-related therapeutic blood levels to produce sedation and anxiolysis in 10 to 20 minutes. Sedation and anxiolysis continue for 30 to 40 minutes. Emergence from sedation to a level indicative of complete recovery occurs 60 to 90 minutes after taking the drug. This profile is very close to the sedation specifications described as ideal by anesthesiologists for many short procedures and by experts in dental sedation.
An additional clinical study has just been completed, where the primary objective was to evaluate and document the rapid, uneventful recovery of psychomotor and cognitive function after administration of OTET. Such rapid recovery is critically important in managed health care environments emphasizing productivity in health care delivery. The Company is seeking to establish in its Phase 2 clinical trials that OTET can provide rapid clear-headed patient recovery and discharge after a procedure is completed. The Company believes this addresses an important goal in managed care to maximize the utilization of high cost facilities.
OT-system products to treat migraine headaches. Anesta is conducting preclinical research and development of products to treat migraine headaches. The Company believes that the OT-system has the potential to provide therapeutic benefit for persons suffering migraine headaches because of the ability to produce rapid uptake of drug into the bloodstream without the need for infusions or injections.
OT-system products to treat nausea and vomiting. Anesta is conducting preclinical research and development of OT-system products to deliver anti-emetic drugs. The Company believes that its OT-system can be used to treat post-surgical nausea and vomiting, emesis induced by chemotherapy, or nausea and vomiting secondary to conditions such as migraine headache or AIDS. Currently, anti-emetics are administered orally, rectally, by injection or by transdermal patches. Unlike oral tablet delivery, Anesta's OT-system would allow the patient the ability to remove the dosage form from the mouth should an emetic episode occur during administration of the drug. In addition, oral transmucosal delivery avoids painful injections yet would provide rapid onset similar to an injection. Patches typically require hours to reach effective blood levels, making them less attractive for treating acute episodes of nausea and vomiting. Anesta believes there is an unmet clinical need for a non-invasive method which allows patients the ability to control the delivery of anti-emetic drugs.
RESEARCH AND DEVELOPMENT STRATEGY
Anesta develops its proprietary OT-system and products both independently and with the collaboration of the University of Utah and its assignee, the University of Utah Research Foundation (collectively, the UURF) and Abbott. Future development projects may involve collaboration with other established pharmaceutical companies. The Company's primary emphasis is on research, product and process development, clinical research, regulatory interactions and filings and commercial market development and preparation. The Company currently produces its clinical supplies for clinical studies in its own pilot manufacturing facility and intends to expand manufacturing capabilities to develop improved manufacturing technologies to support larger clinical research projects and to demonstrate scale-up capabilities (manufacturing process development). Since its inception, Anesta has managed most aspects of its clinical trials and has prepared substantially all U.S. regulatory filings for its products. In 1996, 1995, and 1994, Anesta's research and development expenditures were $8,304,000, $5,228,000 and $3,210,000 respectively.
COLLABORATIVE RELATIONSHIPS
Anesta's commercial strategy is to develop products independently and, where appropriate, including internationally, in collaboration with established pharmaceutical companies and institutions. Collaborative partners may provide financial resources, research and manufacturing capabilities and marketing infrastructure to aid in the commercialization of Anesta's products in development and potential future products. Depending on the availability of financial, marketing and scientific resources, among other factors, the Company may license its technology or products to others and retain profit sharing, royalty, manufacturing, co-marketing, co-promotion or similar rights. Any such arrangements could limit the Company's flexibility in pursuing alternatives for the commercialization of its products.
Abbott Laboratories
In December 1989, Anesta entered into a research and development, license, supply and distribution agreement with Abbott. Under the agreement, as amended (the "1989 Agreement"), Anesta granted to Abbott the exclusive right to make, use and market in the U.S. OT-products resulting from technology owned or licensed by Anesta consisting of OT-fentanyl or other central nervous system-acting drugs or intermediates thereof used for pre-medication, sedation, analgesia, diagnostic procedures, emergency room, post-operative pain, burn treatment or cancer-related pain management. Abbott's exclusive license terminates upon the expiration of the last U.S. patent relative to such licensed technology. Under the 1989 Agreement, Abbott has provided development funding and milestone payments and Abbott is obligated to pay royalties and other payments on product sales. In 1995, the Company entered into two new funding agreements with Abbott under which Abbott agreed to provide to the Company $1,500,000 in each of 1995 and 1996 to further the development of the OT-fentanyl product, Actiq, for cancer pain. Through December 31, 1996, Abbott had paid a total of $9,375,000 with $375,000 due to the Company. An additional $300,000 is payable from Abbott to Anesta upon approval of the Actiq NDA in the U.S. Abbott is Anesta's contract manufacturer for the OT-fentanyl product line and sells such products to Anesta. Anesta resells OT-fentanyl products to Abbott for marketing in the U.S. under Abbott's trademark Fentanyl Oralet and Anesta's trademark Actiq.
The 1989 Agreement with Abbott contains provisions regarding the development, manufacture and commercialization of future products by the Company. The Company intends to continue to provide information to Abbott regarding its development programs for new products, and to discuss with Abbott its possible participation in the commercialization of such products.
The 1989 Agreement with Abbott can be terminated with respect to a particular market or indication upon thirty days notice by Abbott if (i) there exists a material adverse safety concern with respect to a licensed product, (ii) there exists a material adverse concern regarding the efficacy of a licensed product, (iii) action by the FDA precludes the continued testing or commercialization of a licensed product, and such preclusion is more than temporary in nature, or (iv) a third party patent poses an infringement risk with respect to the commercialization of a licensed product in the U.S.
Effective October 12, 1995, the Company entered into an amendment to a prior agreement between Abbott International (A.I.) and the Company to provide the Company the right to terminate or cause to become nonexclusive A.I.'s license rights to OT-fentanyl products in one or more countries in the world except the U.S. The amendment also eliminated $100,000 of the $450,000 unearned advance royalty obligation, which amount was recognized as royalty revenue during the year ended December 31, 1995.
University of Utah Research Foundation
In 1985, the Company obtained an exclusive worldwide license, including the right to sublicense, from the UURF to all of the UURF's technology developed or to be developed by Dr. Theodore H. Stanley, Chairman of the Board of the Company, and others during employment at the University of Utah in (i) the field of anesthetic and other drug delivery systems incorporating a matrix to deliver compounds to the central nervous system via the mucosal tissues of the mouth, pharynx and esophagus, (ii) drug-based immobilization systems for human and veterinary applications and (iii) transdermal drug delivery systems. The Company is obligated to pay certain royalties to the UURF subject to certain minimum royalty payments. In addition, Anesta is obligated to pay to the UURF a higher percentage of the royalties it receives in the event Anesta sublicenses the licensed technology without any improvement or added value. The Company also has an exclusive option with UURF to acquire an exclusive worldwide license to similar technology and intellectual property that may be conceived, invented or reduced to practice at the University of Utah after the date of its license grant. Anesta has exercised such option as to all technology covered by its patents and pending patent applications. The UURF exclusive worldwide license terminates as to each country upon the expiration of the last patent in such country relating to the licensed technology.
MANUFACTURING
Anesta has a pilot manufacturing facility capable of producing limited quantities of its proprietary OT-products for formulation and methods development, animal studies and clinical studies. Anesta has licensed manufacturing rights to certain of its products to Abbott subject to the right of Anesta to manufacture such products under certain circumstances.
The Company is in the process of developing manufacturing processes and the capacity to produce sufficient amounts of OT-products to conduct larger scale clinical studies. This manufacturing process is designed to produce large volumes and reduce the unit cost of producing OT-products. The Company will also have to adhere to cGMP regulations enforced by the FDA's facilities inspection program, as well as requirements imposed by the Drug Enforcement Agency (DEA).
COMPETITION
Fentanyl Oralet, Actiq and other Company products will compete with other drugs and drug delivery systems. Anesta believes that its products will compete on the basis of quality, efficacy, cost, convenience, safety, patient compliance and patient preference.
The new products being developed by the Company will compete with drugs marketed in both traditional and advanced forms of drug delivery. New drugs or further developments in alternative drug delivery methods may provide greater therapeutic benefits for a specific drug or indication, or may offer comparable performance at lower cost, than those offered by the Company's proprietary OT-system.
Competition in the pharmaceutical industry is intense. Many pharmaceutical companies, biotechnology companies, public and private universities and research organizations actively engage in research and development of pharmaceutical products and drug delivery systems. Many of the Company's existing or potential competitors have substantially greater financial, technical and human resources than the Company and may be better equipped to develop, manufacture and market products. In addition, many of these companies may develop and introduce products and processes competitive with or superior to those of the Company. The Company's product development programs are subject to significant competition from companies utilizing alternative development strategies.
PATENTS, PROPRIETARY RIGHTS AND LICENSES
The basic technology underlying the Company's proprietary OT-system was invented by Dr. Stanley and Brian Hague, both employees of the Company, while employed at the University of Utah. Anesta is the exclusive worldwide licensee of such technology under patents held by the UURF through a license granted in 1985 which remains in effect for the life of all applicable patents. The U.S. patents expire on various dates ranging from 2004 to 2010 and the foreign patents expire on various dates ranging from 2003 to 2010. Anesta maintains, at its expense, all U.S. patent rights with respect to the licensed technology and files and prosecutes the relevant patent applications in the U.S. and foreign countries. The OT-system technology underlying Anesta's exclusive license is covered by 10 issued U.S. patents, 76 issued foreign patents, 22 pending U.S. patent applications and 31 pending foreign patent applications. The Company also relies upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain its competitive position. The Company plans to prosecute and defend its technology and the patents and patent applications being licensed from the UURF.
Substantially all of the patents issued and pending which underlie the licensed technology relate to different embodiments of OT technology and other transmucosal therapeutic technologies. The Company believes that its proprietary technologies, which are protected by issued and pending U.S. patents, may provide it a significant competitive advantage. The Company's agreement with Abbott provides that Anesta owns all rights to inventions made by Anesta personnel and owns joint rights to inventions made by Anesta and Abbott jointly which underlie the licensed technology.
The Company's policy is to protect its technology by, among other things, filing, or requiring the UURF to file, patent applications for technology that it considers important to the development of its business. Anesta intends to file additional patent applications, when appropriate, relating to its technology, improvements to its technology and to specific products it develops.
It is the Company's policy to require its employees, consultants, outside scientific collaborators and sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with the Company. These agreements provide that all confidential information developed or made known to the individual during the course of the individual's relationship with the Company is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all inventions conceived by the individual in the course of his or her employment shall be the exclusive property of the Company.
GOVERNMENT REGULATION
The Company's activities and products are subject to significant regulation by a number of governmental entities, especially the FDA and DEA in the U.S. and by comparable authorities in other countries. These entities regulate, among other things, research and development activities and the testing, manufacture, safety, effectiveness, labeling, storage, record keeping, approval, advertising, promotion, distribution and sale of the Company's products. Product development and approval within this regulatory framework takes a number of years and involves the expenditure of substantial resources. Many products that appear promising initially ultimately do not reach the market because they are found to be unsafe (perhaps too toxic) or lack effectiveness, as demonstrated by testing required by government regulation during the development process.
The activities required before a pharmaceutical product may be marketed in the U.S. primarily begin with preclinical testing. Preclinical tests include extensive laboratory evaluation of product chemistry and other end points and animal studies to assess the potential safety and efficacy of the product as formulated. Almost all preclinical studies pertinent to drug approval are regulated by the FDA under a series of regulations called the Good Laboratory Practice (GLP) regulations. Violations of these regulations can, in some cases, lead to invalidation of the studies, requiring such studies to be replicated.
The entire body of preclinical development work necessary to administer investigational drugs to volunteers or patients is summarized in an Investigational New Drug (IND) submission to the FDA. FDA regulations provide that clinical trials may begin 30 days following the submission and receipt of an IND, unless the FDA advises otherwise or requests additional information, clarification or additional time to review the IND submission; it is generally considered good practice to obtain affirmative FDA acquiescence before commencing trials. There is no assurance that the submission of an IND will eventually allow a company to commence clinical trials. Once trials have commenced, the FDA may stop the trials, or particular types or parts of trials, by placing a "clinical hold" on such trials because of concerns about, for example, safety of the product being tested or the adequacy of the trial design. Such holds can cause substantial delay and in some cases may require abandonment of a product.
Clinical testing involves the administration of a drug to healthy volunteers or to patients under the careful supervision of a qualified principal investigator, usually a physician, pursuant to an FDA-reviewed protocol. Clinical tests pertinent to an IND are usually conducted in the following sequential phases, although the phases may overlap. Phase I trials generally involve administration of a drug product to a small number of persons to determine aspects of safety, tolerance, pharmacokinetic characteristics, and possible early data on effectiveness. Phase II trials generally involve administration of a product to a limited number of patients with a particular disease to determine dosage, efficacy and safety. Phase III trials generally examine the clinical efficacy and safety in an expanded patient population at multiple clinical sites. Pivotal Phase III trials are trials designed to demonstrate definitive efficacy. At least one such trial is required for FDA approval to market a drug. Each clinical study is conducted under the auspices of an independent Institutional Review Board (IRB) at every institution at which the study will be conducted. An IRB will consider, among other things, ethical factors, the safety of human subjects and the possible liability of the institution.
The regulatory process required to be completed by the FDA before a new drug delivery system may be marketed in the U.S. depends significantly on whether the drug (which will be delivered by the drug delivery system in question) has existing approval for use and in what dosage forms. If the drug is a new chemical entity that has not been approved, then the process includes (i) preclinical laboratory and animal tests, (ii) an IND application which has become effective, (iii) adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug in its intended indication and (iv) FDA approval of a pertinent NDA. If the drug has been previously approved, then the approval process is similar, except that certain toxicity tests normally required for the IND may not be necessary. Even with previously approved drugs, additional toxicity testing may be required when the delivery form is substantially changed. Because the Company's OT-system, by design, produces high drug concentrations at the surface of the oral mucosa, new toxicity tests at this site may need to be performed. In addition to the foregoing, the FDA requires proof that the product delivers sufficient quantities of the drug to the bloodstream to produce the desired therapeutic result.
The results of product development, preclinical studies and clinical studies and other information are submitted to the FDA in an NDA seeking approval for the marketing and interstate commercial shipment of the drug. The FDA may deny an NDA if applicable regulatory criteria are not satisfied or may require additional clinical or other testing. Even if such data are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. If the FDA does ultimately approve the product, it may require, among other things, postmarketing testing, including potentially expensive Phase IV studies, and surveillance to monitor the safety and effectiveness of the drug. In addition, the FDA may in some circumstances impose restrictions on the use of the drug that may be difficult and expensive to administer and almost always seeks to require prior approval of promotional materials. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if serious problems occur after the product reaches the market. Finally, the FDA requires reporting of certain information that becomes known to a manufacturer of an investigational or approved drug.
Each domestic drug product manufacturing establishment must be registered with, and essentially approved by, the FDA. In addition, each such establishment must inform the FDA of every drug product it has in commercial distribution and keep such list updated. Establishments handling controlled substances must be licensed and are inspected by the DEA. Anesta has a current DEA license appropriate for handling the substances it uses in its facilities. Domestic establishments are also subject to inspection by the FDA for compliance with cGMP regulations before or after an NDA has been filed and thereafter, at least biannually. The labeling, advertising and promotion of drug products also must be in compliance with pertinent FDA regulatory requirements. Failures to comply with applicable requirements relating to production, distribution or promotion of a drug product can lead to FDA demands that production and shipment cease, and, in some cases, that products be recalled, or to enforcement actions that can include seizures, injunctions and criminal prosecution. Finally, manufacturers of drug products seeking FDA approval via an NDA are also required, due to recently introduced user fee requirements, to make payments to the FDA at various stages of the approval process. In addition, such payments must also be made in association with annual establishment registration.
To market its products abroad, the Company is also subject to numerous and varying foreign regulatory requirements, implemented by foreign health authorities, governing, among other things, the design and conduct of human clinical trials, pricing regulations and obtaining marketing approval. The approval procedure may vary among countries and can involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval. At present, foreign marketing authorizations are applied for at a national level, although within the European Union (EU) certain registration procedures are available to companies wishing to market a product in more than one EU member country. If a regulatory authority is satisfied that adequate evidence of safety, quality and efficacy has been presented, marketing authorization is almost always granted. The foreign regulatory approval process includes all of the risks associated with obtaining FDA approval set forth above. Approval by the FDA does not ensure approval by other countries.
Various aspects of the Company's business and operations are also regulated by a number of other governmental agencies including the DEA, U.S. Department of Agriculture, the Environmental Protection Agency, the Occupational Safety and Health Administration as well as by other federal, state and local authorities. In addition, international sales are regulated by numerous foreign authorities.
PRODUCT LIABILITY INSURANCE
The testing, marketing and sale of human pharmaceutical products involves unavoidable risks. The use of any of the Company's potential products in clinical trials and the sale of any of its products may expose the Company to potential liability resulting from the use of such products. Such liability might result from claims made directly by consumers or by regulatory agencies, pharmaceutical companies or others selling such products. The Company currently has clinical trial and product liability insurance coverage. The Company will seek to maintain and appropriately increase such insurance coverage as clinical development of its product candidates progresses and if and when its products are ready to be commercialized.
Anesta has agreed to indemnify Abbott against certain liabilities arising from Anesta's negligence or willful misconduct in its research and development activities under the agreement, or its manufacture, use or handling of licensed products or its breach of the agreement or errors or inaccuracies in the technology Anesta
licensed to Abbott, if such errors or omissions resulted from Anesta's negligence or willful misconduct. Abbott has agreed to indemnify Anesta against certain liabilities arising from Abbott's, or its affiliate's or sublicensee's, negligence or willful misconduct in the manufacture, use or distribution of licensed products or its breach of the agreement, except to the extent such liabilities arise from errors or inaccuracies in Anesta's technology resulting from Anesta's negligence or willful misconduct.
HUMAN RESOURCES
As of December 31, 1996, Anesta employed 58 individuals, of whom approximately 27 hold Ph.D., M.D. or other advanced degrees. Of its total workforce, 44 employees are engaged in research and development activities and 14 are devoted to commercial, business development and administrative activities. A significant number of the Company's management and professional employees have had prior experience with major international pharmaceutical, biotechnology or medical products companies. Anesta believes that it maintains good relations with its employees. The Company's success will depend in large part upon its ability to attract and retain these and future employees. The Company faces competition in this regard from other companies, research and academic institutions and government entities.
ITEM 2.
ITEM 2. PROPERTIES
On December 31, 1996, the Company's administrative offices and research laboratories comprised approximately 28,000 square feet located in Salt Lake City, Utah. During 1997, the Company will remodel approximately 11,000 additional square feet for office, laboratory and manufacturing space. The lease covering these facilities expires March 31, 2000, with two five year renewal options. The Company anticipates that the current and remodeled facilities will meet the Company's needs through 1998.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter ended December 31, 1996.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock (Nasdaq symbol NSTA) began trading publicly in the over-the-counter market through the Nasdaq National Market on January 28, 1994. Prior to that date, there was no public market for the Common Stock. The following table presents quarterly information on the price range of the Common Stock. This information indicates the high and low sale prices reported by the Nasdaq National Market System. These prices do not include retail markups, markdowns or commissions.
As of March 24, 1997 there were approximately 133 holders of record of the Common Stock.
The Company currently intends to retain any future earnings to finance the growth and development of its business and therefore, does not anticipate paying cash dividends in the foreseeable future.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
* Computed on the basis described for net loss per common share described in Note 1 of the Notes to Financial Statements
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Revenues.
Total revenues decreased by $78,400 or 4.7% during 1996 as compared to 1995 and increased by $826,400 or 97.2% between 1995 and 1994. The increase between 1995 and 1994 was primarily a result of revenue recognized pursuant to a 1995 collaborative agreement with Abbott Laboratories (Abbott) relating to the Actiq cancer pain program (See Note 10 to Financial Statements). Substantially all revenues in all years were from development funding and milestone payments under collaborative agreements with Abbott relating to the Actiq cancer pain program. Amounts earned under the collaborative agreements with Abbott may vary substantially in the future.
Under the Company's agreement with Abbott, Abbott manufactures Fentanyl Oralet and sells it to the Company at a price which reflects Abbott's cost of manufacturing. The Company then sells the product to Abbott at a price related to Abbott's selling price which results in a gross profit to the Company ranging from approximately 40-70%. In addition, the Company is entitled to receive a royalty on product sales by Abbott.
Operating Expenses.
Research and development expenses increased by $3,075,400 or 59% during 1996 as compared to 1995 and by $2,018,200 or 63% between 1995 and 1994. The increase in research and development expenses in 1996 and 1995 was due primarily to higher expenditures for the Actiq Cancer Pain Program (See Note 10 to Financial Statements), new product development and other expenditures for product development, including clinical trials. The Company expects that its research and development expenses will grow significantly during 1997 as a result of increased expenses related to the hiring of additional personnel, preclinical studies, clinical trials, product development and process development activities.
Depreciation expense increased by $80,000 or 51% during 1996 as compared to 1995 and by $55,100 or 54% between 1995 and 1994. The increase in 1996 is primarily due to a decrease in the estimated useful life of specific leasehold improvements and the increase in 1995 is primarily due to the Company's remodeling of new facilities.
Marketing, general and administrative expenses increased by $1,317,600 or 59% during 1996 as compared to 1995 and by $890,400 or 67% between 1995 and 1994. The increase in 1996 was due primarily to higher expenditures for corporate development activities, marketing research, Actiq pre-marketing activities, rent on new facilities, patent activities and equipment leasing. The increase in 1995 was due primarily to higher expenditures resulting from additional executives and employees, increased support required for research and development, patent and corporate development activities. The Company expects that its marketing, general and administrative expenses will increase significantly during 1997 as a result of the increased support required for research and development, marketing research, Actiq pre-launch market development activities, patent and corporate development activities.
Non Operating Income (Expense).
Interest income increased by $592,500 during 1996 as compared to 1995 and by $482,200 between 1995 and 1994. The increase in 1996 is primarily due to invested net proceeds of $27,858,225 from the Company's secondary offering in June 1996. The increase in 1995 is primarily due to higher interest rates, partially offset by lower average balances invested.
Interest expense increased by $11,600 during 1996 as compared to 1995 and by $82,300 between 1995 and 1994. The increase in both years is primarily due to interest expense related to borrowings on the Company's revolving/term loan.
Income Taxes.
As of December 31, 1996, the Company had net operating loss carryforwards of approximately $18 million and research and development tax credit carryforwards of $555,000 that expire from 2003 to 2011. A portion of the Company's net operating loss and research and development tax credit carryforwards are subject to an annual limitation in future periods pursuant to the "change in ownership" rules under section 382 of the Internal Revenue Code of 1986, as amended. Based upon the amount of carryforwards subject to limitation, the date the limitation arose, and the estimated value of the Company on the change of ownership date, the Company believes that the limitation will not have a material impact on the future use of net operating loss and research and development tax credit carryforwards. The Company's ability to realize the benefit of the deferred tax asset related to the net operating loss and research and development tax credit carryforwards will depend on the generation of future taxable income. Because the Company's operations are not currently generating taxable income, the Company believes a full valuation allowance should be provided (See Note 9 to Financial Statements).
Accounting Change.
Effective January 1, 1995, the Company changed its method of accounting for external legal costs related to patents. Prior to the change, the Company capitalized these costs and amortized them over the term of the related patent. Under the new method, these costs are expensed as incurred.
Net Loss.
As a result of the increase in research and development, marketing, general and administrative activities and other factors discussed above, the net loss for 1996 was $8,689,800 or $1.02 per share as compared to $5,741,800 or $0.80 per share for 1995 and $2,949,200 or $0.51 per share in 1994. The net loss for 1995 includes the cumulative effect of a change in accounting for patent costs of $1,041,000 or $0.15 per share.
LIQUIDITY AND CAPITAL RESOURCES
Prior to January 1994, the Company had funded its operations primarily through private equity financings and through contract payments pursuant to the Company's agreements with Abbott. In February 1994, the Company realized net proceeds of $28,538,350 through the issuance of common stock in an initial public offering and approximately $1,426,000 from the exercise of warrants held by Abbott. In conjunction with the conversion of preferred stock, a one time payment of accrued dividends of $491,884 was made in February 1994.
In June 1996 the Company realized net proceeds of $27,858,225 through the issuance of common stock in a secondary offering. As of December 31, 1996, the Company had cash and cash equivalents totaling $22,807,600, $1,377,000 in a certificate of deposit used as collateral for a revolving/term loan as described below and $17,173,900 in marketable debt securities which are available for sale. Thus cash, cash equivalents, certificate of deposit and marketable debt securities totaled $41,358,600 as of December 31, 1996. Cash in excess of immediate requirements is invested according to the Company's investment policy, which provides guidelines with regard to liquidity and return, and, wherever possible, seeks to minimize the potential effects of concentration of credit risk.
The Company's use of cash in operating activities increased by $3,584,500 during 1996 as compared to 1995 and by $2,261,700 between 1995 and 1994. The increase in cash used was a direct result of the increase in research and development and marketing, general and administrative activities discussed above.
During 1996, the Company made capital expenditures of approximately $53,300 as compared to capital expenditures of $1,591,900 and $361,000 in 1995 and 1994 respectively. The increase in capital expenditures in 1995 was due to the Company's remodeling of new facilities. In order to finance the capital expenditures, the Company, in January 1995, secured a revolving/term loan in the amount of $1,500,000 which is collateralized by a $1,530,000 certificate of deposit purchased in 1995. This loan converted to a 10 year term loan on May 15, 1995.
During 1996 the Company paid $16,400 on capital lease obligations as compared to $35,500 and $56,500 in 1995 and 1994 respectively.
The Company expects to continue to incur substantial expenses related to the continuation and expansion of research and development, including clinical trials, and increased marketing, general and administrative activities over at least the next several years. The Company anticipates that the existing cash, cash equivalents and marketable debt securities, and interest earned thereon provides adequate working capital through 1999.
The Company's working capital requirements may change depending on numerous factors, including the following; the progress of the Company's research and development programs, the results of clinical studies, the number and nature of the indications the Company pursues in clinical studies, the timing of regulatory approvals, technological advances, determinations as to the commercial potential of the Company's products, the status of competitive products, the establishment of collaborative relationships with other companies and other factors.
In June 1996, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". SFAS No. 125 becomes effective at the beginning of 1997. The Company does not believe that SFAS No. 125 will have a significant impact on the financial statements of the Company.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share" which specifies the computation, presentation, and disclosure requirements for earnings per share. The Company will have to implement SFAS No. 128 in the fourth quarter of 1997. The impact of the adoption of SFAS No. 128 on the Company's financial statements has not been determined.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Accountants
To the Shareholders of Anesta Corp.:
We have audited the accompanying balance sheets of Anesta Corp. (a development stage company) as of December 31, 1996 and 1995, and the related statements of operations, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1996 and for the period from inception (August 1, 1985) to December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Anesta Corp. (a development stage company) as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, and for the period from inception (August 1, 1985) to December 31, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, effective January 1, 1995 the Company changed its method of accounting for external legal costs related to patents.
/s/ Coopers & Lybrand L.L.P.
Salt Lake City, Utah February 26, 1997
ANESTA CORP. (A Development Stage Company)
BALANCE SHEETS as of December 31, 1996 and 1995 ___________
The accompanying notes are an integral part of the financial statements
ANESTA CORP. (A Development Stage Company)
STATEMENTS OF OPERATIONS for the years ended December 31, 1996, 1995 and 1994 and for the period from inception (August 1, 1985) to December 31, 1996
--------
The accompanying notes are an integral part of the financial statements
ANESTA CORP. (A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY for the period from inception (August 1, 1985) to December 31, 1996
---------
- Continued -
The accompanying notes are an integral part of the financial statements.
ANESTA CORP. (A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY for the period from inception (August 1, 1985) to December 31, 1996
---------
- Continued -
The accompanying notes are an integral part of the financial statements.
Anesta Corp. (A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY for the period from inception (August 1, 1985) to December 31, 1996
---------
- Continued -
The accompanying notes are an integral part of the financial statements.
ANESTA CORP. (A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY for the period from inception (August 1, 1985) to December 31, 1996
---------
- Continued -
The accompanying notes are an integral part of the financial statements.
ANESTA CORP. (A Development Stage Company)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996,1995 and 1994 for the period from inception (August 1, 1985) to December 31, 1996
- Continued -
The accompanying notes are an integral part of the financial statements
ANESTA CORP. (A Development Stage Company)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995 and 1994 and for the period from inception (August 1, 1985) to December 31, 1996
----------
The accompanying notes are an integral part of the financial statements
NOTES TO FINANCIAL STATEMENTS
_________
1. Significant Accounting Policies:
Development Stage Activities
Since its inception in August 1985, Anesta Corp. (Anesta or the Company) has been a development stage company engaged in the research, development and commercialization of pharmaceutical products incorporating its proprietary oral transmucosal drug delivery systems. The Company has been unprofitable to date and expects to incur additional operating losses over the next few years, primarily due to the expansion of its research and development programs, including formulation development, pilot manufacturing capabilities, preclinical studies and clinical trials. As of December 31, 1996, the Company's accumulated deficit was approximately $20.4 million.
Anesta is the worldwide licensee of technology obtained pursuant to technology license agreements with the University of Utah Research Foundation (UURF). The license agreements, which remain in effect for the life of the applicable patents, may be assigned only with prior written consent of UURF (see Note 8).
Revenues recognized to date represent revenues under research and development contracts and the initial sales of the Company's first product (Fentanyl Oralet(R)). The Company's ability to achieve profitability depends in part upon its ability alone, or with others, to commercialize successfully its first product, to complete development of its proposed products, to obtain required regulatory approvals and to manufacture and market such proposed products (see Note 10).
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents. Substantially all of the Company's cash and cash equivalents are held in two financial institutions in San Francisco, California.
Investment in Marketable Debt Securities:
The Company's investment in marketable debt securities is classified as available-for-sale and carried at market value, with the unrealized gain or loss, net of deferred taxes, reflected as a separate component of stockholders' equity. Gross realized gains and losses, cost determined using the specific identification method, have not been material.
Furniture and Equipment and Leasehold Improvements
Expenditures that materially increase asset lives are capitalized at cost, while normal maintenance and repairs are expensed as incurred. Depreciation is reported on a straight-line basis over the estimated useful lives of the assets, or the term of the building lease, which range from 3 to 15 years.
The cost and related accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts and the gain or loss is reflected in the statement of operations.
Continued NOTES TO FINANCIAL STATEMENTS, Continued
_________
1. Significant Accounting Policies, Continued
Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, Accounting For Income Taxes. Deferred income taxes are provided for differences between the financial statement and tax bases of assets and liabilities using enacted future tax rates.
Revenue Recognition
The Company recognized revenues from contract research based on qualifying expenditures. Research and development expense in the accompanying statements of operations includes funded and unfunded amounts.
Net Loss Per Share
Net loss per common share is computed on the weighted average number of common and common equivalent shares outstanding during each period. Common stock equivalents consist of convertible preferred stock, common stock options and warrants. Common equivalent shares are excluded from the computation when their effect is antidilutive. The net loss per share for the year ended December 31, 1994 has been adjusted to reflect the $491,884 of dividends paid on the convertible preferred stock which increased the net loss attributable to common shareholders to $(3,450,337) or $(.51) per share. Net loss per common share for the period from inception to December 31, 1996 has not been presented as such information is not considered to be relevant or meaningful.
If the conversion of the Series A Preferred Shares into common stock had occurred on January 1, 1994, the net loss per common share would have been $(.50) for the year ended December 31, 1994.
Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications
Certain amounts of the prior year have been reclassified to conform to the current year's presentation. These reclassifications had no effect on net income or total assets.
2. Accounting Change:
Effective January 1, 1995, the Company changed its method of accounting for external legal costs related to patents. Prior to the change, the Company capitalized these costs and amortized them over the term of the related patent. Under the new method, these costs will be expensed as incurred. The Company believes that the change will provide a better comparison with the Company's industry peers, the majority of which expense these costs.
Continued NOTES TO FINANCIAL STATEMENTS, Continued
_________
2. Accounting Change, Continued
The cumulative effect of this accounting change for years prior to 1995, which is shown separately in the statement of operations for 1995, resulted in a charge to operations of $1,041,047 or $.15 per share of common stock. The effect of this change on 1995 results of operations was to increase the net loss by approximately $310,000.
The pro forma amount presented below for 1994 reflects the effect of retroactive application on net loss and net loss per common share had the new method been in effect at the beginning of the year.
3. Investment in Marketable Debt Securities:
The cost and estimated market values of marketable debt securities available-for-sale at December 31, 1996, are as follows:
The cost and estimated market value of marketable debt securities available-for-sale at December 31, 1996, by contractual maturity, are shown below:
Continued NOTES TO FINANCIAL STATEMENTS, Continued
_________
3. Investment in Marketable Debt Securities, Continued
The cost and estimated market values of marketable debt securities available-for-sale at December 31, 1995, are as follows:
4. Related Party Transactions:
The Company paid expenses of $317,349, $321,539 and $444,622 in 1996, 1995 and 1994, respectively, to the Stanley Research Foundation for research. Stanley Research Foundation and its principal trustee are shareholders of the Company.
5. Note Payable:
The note payable as of December 31, 1996 is comprised of the following:
Continued NOTES TO FINANCIAL STATEMENTS, Continued
_________
5. Note Payable, Continued
The Company's note payable matures for periods ending December 31, as follows:
Rates currently available to the Company for notes payable with similar terms and maturities are used to estimate the fair value of notes payable. At December 31, 1996, the carrying value of the note payable approximates fair value.
6. Stock Based Compensation Plan:
The Company maintains three stock option plans: the 1989 Stock Option Plan (the "1989 Plan"), the 1993 Stock Option Plan (the "1993 Plan"), and the 1993 Non-Employee Directors' Stock Option Plan (The "Non-Employee Directors' Plan").
The 1989 Plan provides for the issuance of nonqualified stock options ("NQSOs") to employees and directors of and consultants to the Company.
The 1993 Plan provides for the issuance of Incentive Stock Options ("ISOs") and NQSOs to employees and directors of and consultants to the Company. The Non-Employee Directors' Plan provides for the issuance of NQSOs to non-employee members of the Company's Board of Directors who are not prohibited by their employer from receiving options. Additionally, the Company has granted NQSOs to non-employee Directors and consultants on an individual basis and not under a plan.
Under the 1989 Plan, NQSOs to purchase a total of 250,000 shares were authorized for issuance, of which 85,753 options were outstanding and 77,399 options were exercisable at December 31, 1996. All options have been granted at the market price of the Company's common stock at the date of grant. The NQSOs vest over a period not to exceed four years from the date of grant and terminate five years from the date of grant.
Under the 1993 Plan, ISOs and NQSOs to purchase a total of 750,000 shares were authorized for issuance, of which 842,939 options were outstanding and 271,962 options were exercisable at December 31, 1996. During 1996, the Board of Directors authorized an additional 450,000 shares subject to stockholder approval at the 1997 annual meeting. All options have been granted at the market price of the Company's common stock at the date of grant. The ISOs and NQSOs vest over a period not to exceed four years from the date of grant and terminate from five to ten years from the date of grant.
Under the Non-Employee Directors' Plan, NQSOs to purchase a total of 150,000 shares were authorized for issuance, of which 58,500 options were outstanding and 16,000 options were exercisable at December 31, 1996. All options have been granted at the market price of the Company's common stock at the date of grant. The NQSOs vest over a period not to exceed four years from the date of grant and terminate five years from the date of grant.
The Company has granted NQSOs to purchase shares on an individual basis and not under a plan, on terms similar to the 1989 Plan. At December 31, 1996, 14,360 options were outstanding and 5,712 options were exercisable.
Continued NOTES TO FINANCIAL STATEMENTS, Continued
_________
6. Stock Based Compensation Plan, Continued
The Company has adopted the provisions of SFAS No. 123. Under these provisions, the Company is allowed to continue to apply Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its option plans. Accordingly, no compensation expense has been recognized as options are granted at the stock's then market price. Had compensation expense for the Company's stock-based compensation plans been determined based on the fair value at the grant dates for awards under the option plans as recommended by SFAS No. 123, the Company's net loss and loss per share would have been increased to the pro forma amounts indicated below:
NOTE: Primary and fully diluted loss per share are essentially the same.
The SFAS No. 123 method of accounting has not been applied to options granted prior to January 1, 1995. The pro forma compensation expense may not be representative of such expense in future years.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1995 and 1996, respectively: expected volatility of 83 percent, risk-free interest rates of 5.4 - 7.8 percent, expected lives of 5 - 10 years, and a dividend yield of zero for all years.
Changes in all outstanding options are as follows:
Continued NOTES TO FINANCIAL STATEMENTS, Continued
_________
6. Stock Based Compensation Plan, Continued
The following table summarizes information about fixed stock options outstanding at December 31, 1996:
In November 1993, the Company adopted the Employee Stock Purchase Plan (the "Purchase Plan"), authorizing the issuance of 250,000 shares pursuant to purchase rights granted to employees of the Company. Participants may use up to 10% of their compensation to purchase the Company's common stock at the end of each year for 85% of the lower of the beginning or ending stock price in the plan period. As of December 31, 1996, there were 226,778 shares available for issuance under the Purchase Plan. Compensation expense under the fair value method of SFAS No. 123 is not significant relative to shares purchased under the Purchase Plan for the years ending December 31, 1996 and 1995.
7. Capital Stock:
The Company has 1,000,000 shares of authorized preferred voting shares with a par value of $.001. The Company also has 50,000 shares of authorized non-voting preferred stock with a par value of $.10. At December 31, 1996 and 1995 there were no preferred voting or preferred non-voting shares issued and outstanding.
In conjunction with the Company's initial public offering in January 1994, the Series A Preferred Shares were converted into common stock and accrued dividends of $491,884 were paid. This amount is reflected in the accumulated deficit.
In June 1996, the Company closed a secondary offering of 2,000,000 shares of common stock at an offering price of $15.00 per share resulting in net proceeds to the Company of $27,858,225.
8. Technology License Agreement:
In September 1985, the Company obtained an exclusive worldwide license from UURF to use technology and knowledge developed or to be developed under Dr. Theodore H. Stanley's direction at the University of Utah, for anesthetic and other drug delivery systems based on oral transmucosal technology. In return, the UURF received 6,000 shares of Company stock and certain royalty rights based on product sales incorporating the technology.
The license expires on the date of the last expiring patent which occurs in 2010.
Continued NOTES TO FINANCIAL STATEMENTS, Continued
_________
9. Income Taxes:
The provision for income taxes for the years ended December 31, 1996, 1995 and 1994 relates solely to state income taxes.
Net operating losses (NOLs) totaling approximately $18 million are available to offset future taxable income, and research and development (R&D) tax credits totaling approximately $555,000 are available to offset future tax liabilities. The NOLs and the R&D tax credit carryforwards expire from 2003 to 2011.
The Company's utilization of approximately $1,380,000 of the NOLs against future taxable income will be subject to an annual limitation of approximately $140,000 per year because of a cumulative change in ownership within a three-year period exceeding 50%. Approximately $110,000 of the R&D tax credit carryforwards is subject to the same annual limitation, under the constraint that the total NOLs must be utilized before the R&D credits may be used. To the extent the $140,000 annual limitation is not fully utilized in any given year, the unused portion of the NOLs and the R&D tax credit carryforwards for potential utilization in future years.
SFAS No. 109 requires that a valuation allowance be provided if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company's ability to realize the benefit of its deferred tax asset will depend on the generation of future taxable income. Because the Company's operations are not currently generating taxable income, the Company believes that a full valuation allowance should be provided. The valuation allowance increased $2,779,000 during 1996 and $2,694,000 during 1995, primarily as a result of the increase in net operating loss carryforwards.
The components of the net deferred tax asset as of December 31, 1996 and 1995 under SFAS 109 are as follows:
Continued NOTES TO FINANCIAL STATEMENTS, Continued
_________
10. Research and Development:
In December 1989, the Company entered into a research and development, license, supply and distribution agreement with Abbott Laboratories Hospital Products Division (Abbott). Under the agreement as amended, the Company granted to Abbott the exclusive right to make, use and sell in the U.S. oral transmucosal products resulting from technology owned or licensed by the Company consisting of Oral Transmucosal Fentanyl Citrate (OTFC(R)) or other central nervous system acting drugs or intermediates thereof used for premedication, sedation, analgesia, diagnostic procedures, emergency room, post-operative pain, burn treatment or cancer-related pain management. The first product developed under this agreement is being marketed for premedication (sedation/analgesia) under Abbott's trademark Fentanyl Oralet. The second product under the agreement will be marketed for cancer pain by Abbott under Anesta's trademark Actiq(TM). Substantially all of the Company's revenues, accounts receivable, certain accrued research and development costs, and unearned advance royalty amounts are a result of the various agreements and transactions with Abbott.
Under the Company's agreement with Abbott, Abbott manufactures Fentanyl Oralet and Actiq and sells these products to the Company at a price which reflects Abbott's cost of manufacturing. The Company then sells the product to Abbott at a price related to Abbott's selling price which results in a gross profit to the Company ranging from approximately 40-70%. In addition, the Company is entitled to receive a royalty on product sales by Abbott.
Effective March 31, 1995, the Company entered into a 1995 funding agreement with Abbott, under which Abbott agreed to provide up to $1,500,000 of funding during 1995 to further the clinical development of Actiq to treat cancer-related pain (the "Actiq Cancer Pain Program"). Additionally, the Company entered into a 1996 funding agreement with Abbott, effective September 8, 1995, under which Abbott agreed to provide up to an additional $1,500,000 of funding during 1996 for the Actiq Cancer Pain Program. The funding was to be provided for qualifying work performed and expenses incurred by the Company during 1995 and 1996 in connection with the Actiq Cancer Pain Program. Under the agreements, the Company agreed to provide additional funding required for this program and to complete certain program milestones.
By agreement, Abbott has committed to pay a total of $10.05 million to the Company to fund the clinical development of Fentanyl Oralet and Actiq and to obtain regulatory approval for these products. During 1996, 1995 and 1994, the Company received $1,500,000, $1,125,000 and $1,050,000, and incurred $5,430,252, $2,530,215 and $1,700,086 of costs relating to the agreements, respectively. Revenue of $1,500,000, $1,500,000 and $799,510 related to the agreements was recognized in 1996, 1995 and 1994, respectively. At December 31, 1996 and 1995, accounts receivable relating to the agreements totaled $375,000. Abbott is also obligated to pay the Company $300,000 upon receipt of FDA approval of Actiq to treat cancer pain. In connection with such development funding, Abbott was granted warrants to purchase 1,202,840 shares of the Company's common stock at prices ranging from $1.00 to $2.40 per share. These warrants were exercised upon the closing of the Company's IPO in January 1994 resulting in net proceeds to the Company of $1,426,000.
Effective August 31, 1995, the Company entered into another agreement with Abbott whereby Abbott has agreed to be the Company's contract manufacturer for clinical and commercial supplies of OTFC products for territories outside the U.S. The parties have agreed to consult with each other regarding collaborative agreements with other companies and negotiate in good faith as to specific terms regarding product supply by Abbott to any Anesta licensees.
Continued
NOTES TO FINANCIAL STATEMENTS
_________
11. Unearned Advance Royalty Revenues:
Effective October 12, 1995, the Company entered into an amendment to a prior agreement between Abbott International (A.I.) and the Company to provide the Company the right to terminate or cause to become nonexclusive A.I.'s license rights to OTFC products in one or more countries in the world except the U.S. The amendment also eliminated $100,000 of the $450,000 unearned advance royalty obligation, which amount was recognized as royalty revenue during the year ended December 31, 1995.
12. Leases:
In December 1994, the Company entered into a five year operating lease agreement for a building which has two additional five year renewal options. During 1996 and 1995 the Company also entered into operating lease agreements for furniture and equipment.
Future minimum rental payments under operating leases as of December 31, 1996 are as follows:
Total expense under operating lease agreements for 1996, 1995 and 1994 was $457,915, $239,135 and $76,688 respectively.
13. Employee Benefits:
In October 1995, the Board of Directors approved the adoption of a 401(k) Retirement Plan (the "401(k) Plan") effective January 1, 1996. Under the terms of the 401(k) Plan, all full-time employees who are at least 21 years of age and have 6 months of service are eligible to participate. Participants my contribute up to 15% of their annual compensation to the 401(k) Plan, subject to statutory limitations. The Company may make discretionary matching contributions to the 401(k) Plan equal to 25 percent of participant contributions up to 6% of participant compensation. For 1996, the Company declared and paid discretionary matching contributions to the 401(k) Plan in the amount of $30,395.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to the section of the Company's 1997 Proxy Statement entitled "Proposal 1--Election of Directors," page 2, and the section entitled "Management," page 16.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the section of the Company's 1997 Proxy Statement entitled "Executive Compensation," page 17.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the section of the Company's 1997 Proxy Statement entitled "Security Ownership of Certain Beneficial Owners and Management," page 14.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the section of the Company's 1997 Proxy Statement entitled "Certain Transactions," page 22.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)-1 INDEX TO FINANCIAL STATEMENTS
The following documents are incorporated in Part II of this Annual Report in Item 8.
(a)-2 FINANCIAL STATEMENT SCHEDULES
None.
(a)-3 EXHIBITS
The exhibits to this Annual Report on Form 10-K are listed under Item 14(c) below.
The following management compensatory plans and arrangements are required to be filed as exhibits to this Annual Report on Form 10-K pursuant to Item 14(c):
Exhibit Number Description ------- -----------
10.2** Registrant's 1989 Stock Option Plan. 10.3** Registrant's 1993 Stock Option Plan. 10.4** Form of Incentive Stock Option Agreement under the 1993 Stock Option Plan, with related Schedule. 10.5** Form of Nonstatutory Stock Option Agreement under the 1993 Stock Option Plan. 10.6** Employee Stock Purchase Plan and related offering document. 10.7** Stock option grant letters from the Registrant to William C. Moeller, dated as of the dates set forth therein. 10.8** Stock option grant letters from the Registrant to Theodore H. Stanley, dated as of the dates set forth therein. 10.9** Stock option grant letters from the Registrant to Emanuel Papper, dated as of the dates set forth therein. 10.16** 1993 Non-Employee Directors' Stock Option Plan.
(b) REPORTS ON FORM 8-K
None.
(c) EXHIBITS
Exhibit Number Description ------- -----------
3.1** Amended and Restated Certificate of Incorporation of Registrant. 3.2** Bylaws of Registrant. 4.1** Specimen stock certificate. 4.2** Reference is made to Exhibits 3.1 and 3.2. 10.1** Form of Indemnity Agreement entered into between the Registrant and its directors and executive officers. 10.2** Registrant's 1989 Stock Option Plan. 10.3** Registrant's 1993 Stock Option Plan. 10.4** Form of Incentive Stock Option Agreement under the 1993 Stock Option Plan, with related Schedule. 10.5** Form of Nonstatutory Stock Option Agreement under the 1993 Stock Option Plan. 10.6** Employee Stock Purchase Plan and related offering document. 10.7** Stock option grant letters from the Registrant to William C. Moeller, dated as of the dates set forth therein. 10.8** Stock option grant letters from the Registrant to Theodore H. Stanley, dated as of the dates set forth therein. 10.9** Stock option grant letters from the Registrant to Emanuel Papper, dated as of the dates set forth therein. 10.10** Registration Rights Agreement between the Registrant and the parties named therein, dated as of April 14, 1987. 10.11** Technology License Agreement between the Registrant and the University of Utah Research Foundation, dated as of September 16, 1985, as amended through December 3, 1993. (With certain portions in brackets deleted) 10.12** Research and Development, License, Supply and Distribution Agreement between the Registrant and Abbott Laboratories, dated as of December 27, 1989, as amended through December 30, 1992. (With certain portions in brackets deleted) 10.13** Agreement between the Registrant and Abbott International Ltd., dated as of February 28, 1991, as amended through September 16, 1991. (With certain portions in brackets deleted) 10.14** Agreement between the Registrant, Stanley Research Foundation and TheraTech, Inc., dated as of December 3, 1990. (With certain portions in brackets deleted) 10.15** Northgate Business Center Lease between the Registrant and Medforte Research Foundation, dated as of October 1, 1990, as amended through May 1, 1993. 10.16** 1993 Non-Employee Directors' Stock Option Plan. 10.17** Registration Rights Agreement between Registrant and certain stockholders named therein.
10.18*** Wiley Post Plaza Lease between the Registrant and Asset Management Services, dated as of December 7, 1994. 10.19**** Letter Agreement dated August 31, 1995, between the Company and Abbott Laboratories. 10.20**** Amendment to Agreement dated August 31, 1995, between the Company and Abbott International, Ltd. 10.21**** Funding Agreement dated September 8, 1995, between the Company and Abbott Laboratories. 11.1**** Statement regarding calculation of net income (loss) per share. 18.1***** Letter from Coopers & Lybrand L.L.P. regarding change in accounting principles. 24.1 Power of Attorney. Reference is made to page 45. 27.1 Financial Data Schedule.
** Previously filed with the Commission as an exhibit to the Company's Registration Statement on Form S-1 (File No. 33-72608) and incorporated herein by reference thereto.
*** Previously filed with the Commission as an exhibit to the Company's 1994 Annual Report on Form 10-K (File No. 0-23160) and incorporated herein by reference thereto.
**** Previously filed with the Commission as an exhibit to the Company's September 30, 1995 Form 10-Q (File No. 0-23160) and incorporated herein by reference thereto.
***** Previously filed with the Commission as an exhibit to the Company's 1995 Annual Report on Form 10-K (File No. 0-23160) and incorporated herein by reference thereto.
ANESTA CORP. SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Salt Lake City, State of Utah, on the 29th day of March, 1997.
ANESTA CORP.
By /s/ William C. Moeller ------------------------------------ William C. Moeller Chief Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints William C. Moeller and Theodore H. Stanley, or any of them, his or her attorney-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Report, and to file the same, with exhibits thereto and other documents in connections therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
INDEX TO EXHIBITS