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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended September 30, 1996
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-19756
PROTEIN DESIGN LABS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3023969
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2375 Garcia Avenue
Mountain View, CA 94043
(Address of principal executive offices)
Telephone Number (415) 903-3700
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and, (2) has been subject to such filing
requirements for the past 90 days:
Yes [X] No [ ]
As of September 30, 1996, there were 15,653,678 shares of the Registrant's
Common Stock outstanding.
This report contains 28 pages. The index to exhibits begins on page 27
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PROTEIN DESIGN LABS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
ITEM 1. FINANCIAL STATEMENTS
Statements of Operations
Three months ended September 30, 1996 and 1995 3
Nine months ended September 30, 1996 and 1995
Balance Sheets
September 30, 1996 and December 31, 1995 4
Statements of Cash Flows
Nine months ended September 30, 1996 and 1995 5
Notes to Unaudited Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION - RISK FACTORS 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 25
Signatures 26
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PROTEIN DESIGN LABS, INC.
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
Revenues:
Research and development revenue under
collaborative agreements-related parties $ 3,000,000 $ 2,500,000 $ 10,000,000 $ 7,575,000
Research and development revenue under
collaborative agreements-other 1,000,000 - 1,500,000 -
Interest and other income 1,553,310 1,557,461 4,629,472 4,660,592
------------ ------------ ------------ ------------
Total revenues 5,553,310 4,057,461 16,129,472 12,235,592
Costs and expenses:
Research and development 8,492,291 5,340,707 22,119,234 15,111,308
General and administrative 1,366,343 1,392,949 3,992,667 3,716,804
------------ ------------ ------------ ------------
Total costs and expenses 9,858,634 6,733,656 26,111,901 18,828,112
------------ ------------ ------------ ------------
Net loss $ (4,305,324) $ (2,676,195) $ (9,982,429) $ (6,592,520)
============ ============ ============ ============
Net loss per share $ (0.28) $ (0.17) $ (0.64) $ (0.43)
============ ============ ============ ============
Shares used in computation of net loss
per share 15,632,000 15,380,000 15,578,000 15,325,000
============ ============ ============ ============
See accompanying notes
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PROTEIN DESIGN LABS, INC.
BALANCE SHEETS
September 30, December 31,
1996 1995
------------- -------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 6,735,013 $ 4,686,259
Short-term investments 66,648,600 41,743,675
Other current assets 1,897,512 648,536
------------- -------------
Total current assets 75,281,126 47,078,470
Property and equipment, net 7,971,139 7,850,485
Long-term investments 26,074,354 60,635,550
Other assets 982,891 847,891
------------- -------------
$ 110,309,509 $ 116,412,396
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 628,474 $ 637,637
Accrued compensation 781,552 605,127
Accrued clinical trials 1,454,429 235,649
Other accrued liabilities 1,138,890 1,078,156
Deferred revenue 1,000,000 1,000,000
------------- -------------
Total current liabilities 5,003,345 3,556,569
Stockholders' equity:
Preferred stock, par value $0.01 per share, 10,000,000
shares authorized; no shares issued and outstanding - -
Common stock, par value $0.01 per share, 40,000,000
shares authorized; 15,653,678 and 15,405,761
issued and outstanding at September 30, 1996 and
December 31, 1995, respectively 156,537 154,058
Additional paid-in capital 138,764,875 135,616,420
Accumulated deficit (33,693,485) (23,711,056)
Unrealized gain on investments 78,237 796,405
------------- -------------
Total stockholders' equity 105,306,164 112,855,827
------------- -------------
$ 110,309,509 $ 116,412,396
============= =============
See accompanying notes
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STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(unaudited)
Nine months ended September 30,
1996 1995
------------ ------------
Cash flows from operating activities:
Net loss $ (9,982,429) $ (6,592,520)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 2,398,830 1,828,447
Other 278,566 (2,108,003)
Changes in assets and liabilities:
Other current assets (1,248,976) (544,229)
Accounts payable (9,163) (274,896)
Accrued compensation 176,426 180,446
Other accrued liabilities 1,279,511 (79,410)
Deferred revenue - (75,000)
------------ ------------
Total adjustments 2,875,194 (1,072,645)
------------ ------------
Net cash used in operating activities (7,107,235) (7,665,165)
Cash flows from investing activities:
Purchases of short and long term investments (24,458,022) (59,311,586)
Maturities of short and long term investments 32,900,000 29,000,000
Sales of short and long term investments - 36,348,806
Capital expenditures (2,301,923) (2,850,961)
(Increase) decrease in other assets (135,000) 25,200
------------ ------------
Net cash provided by investing activities 6,005,055 3,211,459
Cash flows from financing activities:
Principal payments on capital lease obligations - (24,971)
Net proceeds from issuance of common stock 3,150,934 1,398,934
------------ ------------
Net cash provided by financing activities 3,150,934 1,373,963
Net increase (decrease) in cash and cash equivalents 2,048,754 (3,079,743)
Cash and cash equivalents at beginning of period 4,686,259 5,440,065
------------ ------------
Cash and cash equivalents at end of period $ 6,735,013 $ 2,360,322
============ ============
See accompanying notes
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PROTEIN DESIGN LABS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. ORGANIZATION AND BUSINESS.
Protein Design Labs, Inc. (the "Company") is a biotechnology company
incorporated in the State of Delaware on July 24, 1986. The Company is engaged
in the research and development of human therapeutic products based on the
concept of protein engineering.
2. BASIS OF PRESENTATION AND RESPONSIBILITY FOR INTERIM FINANCIAL
STATEMENTS.
The balance sheet as of September 30, 1996 and the statements of operations and
cash flows for the nine month periods ended September 30, 1996 and 1995 are
unaudited but include all adjustments (consisting of normal recurring
adjustments) which the Company considers necessary for a fair presentation of
the financial position at such dates and the operating results and cash flows
for those periods. Although the Company believes that the disclosures in these
financial statements are adequate to make the information presented not
misleading, certain information and footnote information normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. The accompanying financial statements
should be read in conjunction with the Company's Annual Report on Form 10-K,
filed with the Securities and Exchange Commission for the year ended December
31, 1995 and the Company's Quarterly Report on Form 10- Q, filed with the
Securities and Exchange Commission for the quarter ended June 30, 1996.
Results for any interim period are not necessarily indicative of results for any
other interim period or for the entire year.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
REVENUE RECOGNITION UNDER DEVELOPMENT CONTRACTS. Non-refundable signing fees
that are not dependent on future performance under collaborative agreements are
recognized as revenue when received. Payments for research and development
performed by the Company under contractual arrangements are recognized as
revenue ratably over the quarter in which the payment is received and the
related work is performed. Revenue from achievement of milestone events is
recognized when the funding party agrees that the scientific or clinical results
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stipulated in the agreement have been met. Deferred revenue arises principally
due to timing of cash payments received under research and development
contracts.
NET LOSS PER SHARE. Net loss per share is computed using the weighted average
number of shares of common stock outstanding. Common equivalent shares from
options are excluded in the computation because their net effect is
anti-dilutive.
MANAGEMENT ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of management's
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. These estimates and assumptions could differ
significantly from the amounts which may actually be realized.
4. ACCRUED CLINICAL TRIALS.
HALTED CLINICAL TRIAL. In August 1996, the National Eye Institute through its
Center for Clinical Trials under the auspices of Studies of Ocular Complications
of AIDS ("NEI SOCA"), acting on the recommendation of an independent data and
safety monitoring board, halted its study of PROTOVIR(TM) (Human
Anti-Cytomegalovirus Antibody), one of the Company's compounds, based on lack of
evidence of efficacy. As a result of this action, the Company has accrued
approximately $1.1 million of estimated expenses in connection with the closing
of this trial.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Quarterly Report contains, in addition to historical information,
forward-looking statements which involve risks and uncertainties. The Company's
actual results may differ significantly from the results discussed in
forward-looking statements. Factors that might cause such a difference include
those discussed in the material set forth under "Risk Factors" and elsewhere in
this document, the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 and the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1996.
Overview
Since the Company's founding in 1986, a primary focus of its operations
has been research and development. Achievement of successful research and
development and commercialization of products derived from such efforts is
subject to high levels of risk and significant resource commitments. The Company
has a history of operating losses and expects to incur substantial additional
expenses over at least the next few years as it continues to develop its
proprietary products and devote significant resources to preclinical studies,
clinical trials, and manufacturing. At September 30, 1996, the Company had an
accumulated net loss of approximately $33.7 million. The Company's revenues to
date have consisted, and for the near future are expected to consist,
principally of research and development funding, licensing and signing fees and
milestone payments from pharmaceutical companies under collaborative research
and development agreements. These revenues may vary considerably from quarter to
quarter and from year to year and revenues in any period may not be predictive
of revenues in any subsequent period.
While the Company historically has received significant revenue
pursuant to certain of its collaborations, the Company has recognized
substantially all of the research and development and milestone revenue due
under these collaborations. While the Company anticipates entering into new
collaborations from time to time, the Company presently does not anticipate
realizing revenue from its new and proposed collaborations at levels
commensurate with the revenue historically recognized under its older
collaborations. Moreover, the Company anticipates that its operating expenses
will continue to increase significantly as the Company increases its research
and development, administrative and patent activities. Accordingly, in the
absence of substantial revenues from new corporate collaborations, royalties on
Zenapax sales or other sources, the Company expects to incur substantial and
increased operating losses in the foreseeable future as certain of its earlier
stage potential products move into later stage clinical development, as
additional potential products are selected as clinical candidates for further
development, as the Company defends or prosecutes its patent and patent
applications and as the Company invests in additional manufacturing facilities
or capacity.
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Three months ended September 30, 1996 and 1995
Total revenues for the three months ended September 30, 1996 increased
to $5.6 million, from $4.1 million in the comparable period in 1995. Research
and development revenues, consisting of reimbursement funding, up-front
licensing and signing fees and milestone payments, increased by $1.5 million,
and interest income approximately equaled the year-earlier period.
The Company's research and development revenues under collaborative
agreements primarily consist of up-front licensing and signing fees, research
and development reimbursement funding and milestone payments. Increases in
related party research and development revenues for the three months ended
September 30, 1996 reflected amounts earned under the Company's joint
development, marketing and licensing agreement with Boehringer Mannheim GmbH
("Boehringer Mannheim"), which increased by $0.5 million from the comparable
period in 1995. This increase is attributable to increased reimbursement funding
under the agreement by the Company. The current research and development
reimbursement funding arrangement with Boehringer Mannheim expired as scheduled
in October 1996. In addition, the Company earned research and development
revenues of $1.0 million for the three months ended September 30, 1996 under the
Company's development and licensing agreement with an unrelated third party
compared to no revenues from such parties in the comparable period in 1995.
Interest and other income for the three months ended September 30, 1996
in the amount of $1.6 million approximately equaled the amount in the comparable
period of 1995. Although cash and investments were lower, interest rates on cash
and investments for the three month period ended September 30, 1996 were higher
than the comparable period in 1995.
Total costs and expenses for the three months ended September 30, 1996
increased to $9.9 million from $6.7 million in the comparable period in 1995.
The increase in costs and expenses was due primarily to increases in research
and development efforts and related expenses and the accrual of expenses
associated with the halting of one clinical trial.
Research and development expenses for the three months ended September
30, 1996 increased to $8.5 million from $5.3 million in the comparable period in
1995, primarily as a result of the Company's conducting additional research and
development efforts independently and under its agreements with its
collaborative partner Boehringer Mannheim. These expenses included an accrual of
expenses associated with the halting of one clinical trial; continuation of
three other clinical trials; higher costs in the expanded operation of the
manufacturing facility; expansion of pharmaceutical development capabilities,
including support for both clinical development and manufacturing process
development; costs of conducting preclinical tests; and the addition of staff.
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General and administrative expenses for the three months ended
September 30, 1996 in the amount of $1.4 million equaled the amount in the
comparable period in 1995. The Company believes that its general and
administrative expenses will increase as the Company increases its staffing,
enhances its administrative capabilities and expands its patent activities.
Nine months ended September 30, 1996 and 1995
Total revenues for the nine months ended September 30, 1996 increased
to $16.1 million, from $12.2 million in the comparable period in 1995. Research
and development revenues, consisting of reimbursement funding, up-front
licensing and signing fees and milestone payments increased by approximately
$3.9 million, and interest income approximately equaled the year-earlier period.
The Company's research and development revenues under collaborative
agreements primarily consist of up-front licensing and signing fees, research
and development reimbursement funding and milestone payments. Increases in
related party research and development revenues for the nine months ended
September 30, 1996 principally reflected amounts earned under the Company's
agreement with Boehringer Mannheim, which increased by $2.4 million from the
comparable period in 1995. This increase was attributable to increased research
and development reimbursement funding under the agreement by the Company as well
as receipt of a milestone payment in January 1996. Increased funding from
Boehringer Mannheim during the nine months ended September 30, 1996 was
partially offset by reduced funding from Hoffmann-La Roche Inc. and its parent
Roche Holding Ltd. (collectively, "Roche"), which reimbursement arrangement
expired in January 1995. The current research and development reimbursement
funding arrangement with Boehringer Mannheim expired as scheduled in October
1996. In addition, the Company earned research and development revenues of $1.5
million for the nine months ended September 30, 1996 under the Company's
development and licensing agreements with unrelated third parties compared to no
revenues from such parties in the comparable period in 1995.
Interest and other income for the nine months ended September 30, 1996
in the amount of $4.6 million approximately equaled the amount in the comparable
period of 1995. Although cash and investments were lower, interest rates on cash
and investments for the nine month period ended September 30, 1996 were higher
than the comparable period in 1995.
Total costs and expenses for the nine months ended September 30, 1996
increased to $26.1 million from $18.8 million in the comparable period in 1995.
The increase in costs and expenses was due primarily to increases in research
and development efforts and related expenses and an accrual of expenses
associated with the halting of one clinical trial.
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Research and development expenses for the nine months ended September
30, 1996 increased to $22.1 million from $15.1 million in the comparable period
in 1995, primarily as a result of the Company's conducting additional research
and development efforts independently and under its agreement with its
collaborative partner Boehringer Mannheim. These expenses included the
continuation of three clinical trials; higher costs in the expanded operation of
the manufacturing facility; an accrual of expenses associated with the halting
of one clinical trial; expansion of pharmaceutical development capabilities,
including support for both clinical development and manufacturing process
development; and the addition of staff.
General and administrative expenses for the nine months ended September
30, 1996 increased to $4.0 million from $3.7 million in the comparable period in
1995. These increases were primarily the result of increased staffing and
associated expenses necessary to manage and support the Company's expanding
operations. The Company believes that its general and administrative expenses
will continue to increase as the Company increases its staffing, enhances its
administrative capabilities and expands its patent activities.
Liquidity and Capital Resources
To date the Company has financed its operations primarily through
public and private placements of equity, receipt of contract revenue and
research and development funding under its collaborative agreements, capital
lease financing and interest income on invested capital. At September 30, 1996,
the Company had cash, cash equivalents and investments in the aggregate of $99.5
million as compared to $107.1 million at December 31, 1995. Pursuant to the
agreement with Boehringer Mannheim, the Company may in the future be required to
reimburse Boehringer Mannheim for up to $2.0 million for Phase II studies and up
to $8.8 million for Phase III studies of the OST 577 Human Anti-Hepatitis B
Antibody in the event certain conditions are met. The Company expects that its
existing capital resources will enable the Company to maintain current and
planned operations beyond 1997.
Net cash used in operating activities was $7.1 million for the nine
months ended September 30, 1996 compared to $7.7 million in the comparable
period in 1995. The Company expects to incur substantial additional costs in the
future, including costs related to ongoing research and development activities,
investment in or acquisition of third party research efforts, conducting
preclinical and clinical trials, operation of its manufacturing facility and
expansion of manufacturing capabilities, development of marketing and sales
capabilities, increases in patent activities and continued expansion of general
and administrative resources. These activities will require substantial
additional financial resources before the Company can expect to realize
significant revenue from product sales, if such revenues are ever achieved.
There can be no assurance that additional funds will be available when required
on terms acceptable to the Company, if at all.
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Accounting Changes
In October 1995, the Financial Accounting Standards Board ("FASB")
issued Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation" ("FAS 123") which will be effective for the Company's 1996 fiscal
year. FAS 123 allows companies which have stock-based compensation arrangements
with employees to adopt a new fair-value basis of accounting for stock options
and other equity instruments, or to continue to apply the existing accounting
principles under APB Opinion 25, "Accounting for Stock Issued to Employees" but
with additional financial statement disclosure. The Company expects to continue
to account for stock-based compensation arrangements with employees under APB
Opinion 25, and therefore does not expect FAS 123 to have a material impact on
its financial position, results of operations and cash flows.
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PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION - RISK FACTORS
HISTORY OF LOSSES; FUTURE PROFITABILITY UNCERTAIN. The Company has a
history of operating losses and expects to incur substantial additional expenses
with resulting quarterly losses over at least the next several years as it
continues to develop its potential products and to devote significant resources
to preclinical studies, clinical trials, and manufacturing. As of September 30,
1996, the Company had accumulated net losses of approximately $33.7 million. To
date, the Company has not received regulatory approval to distribute any
potential products. The time and resource commitment required to achieve market
success for any individual product is extensive and uncertain and in some cases
controlled by the Company's collaborators. No assurance can be given that the
Company's, or any of its collaborative partners', product development efforts
will be successful, that required regulatory approvals can be obtained, that
potential products can be manufactured at an acceptable cost and with
appropriate quality, or that any approved products can be successfully marketed.
The Company has not generated any material revenues from product sales
or royalties from licenses to the Company's technology, and potential products
that may be marketed by the Company, if any, are not expected to be approved for
marketing for at least the next several years. The Company's revenues to date
have consisted, and for the near future are expected to consist, principally of
research and development funding, licensing and signing fees and milestone
payments from pharmaceutical companies under collaborative research and
development agreements. These revenues may vary considerably from quarter to
quarter and from year to year, and revenues in any period may not be predictive
of revenues in any subsequent period and variations may be significant depending
on the terms of the particular agreements. While the Company historically has
received significant revenue pursuant to certain of its collaborations, the
Company has recognized substantially all of the research and development and
milestone revenue due under these collaborations. While the Company anticipates
entering into new collaborations from time to time, the Company presently does
not anticipate realizing revenue from its new and proposed collaborations at
levels commensurate with the revenue historically recognized under its older
collaborations. Moreover, the Company anticipates that its operating expenses
will continue to increase significantly as the Company increases its research
and development, manufacturing, preclinical and clinical activity, and
administrative and patent activities. Accordingly, in the absence of substantial
revenues from new corporate collaborations, royalties on Zenapax(R) sales or
other sources, the Company expects to incur substantial and increased operating
losses in the foreseeable future as certain of its earlier stage potential
products move into later stage clinical development, as additional potential
products are selected as clinical candidates for further development, as the
Company invests in additional manufacturing facilities or capacity, as the
Company defends or prosecutes its patents and patent applications, and as the
Company invests in research or acquires additional technologies, product
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candidates or businesses. The amount of net losses and the time required to
reach sustained profitability are highly uncertain. To achieve sustained
profitable operations, the Company, alone or with its collaborative partners,
must successfully discover, develop, manufacture, introduce and market its
potential products. No assurances can be given that the Company will be able to
achieve or sustain profitability, and results are expected to fluctuate from
quarter to quarter.
UNCERTAINTY OF CLINICAL TRIAL RESULTS. Before obtaining regulatory
approval for the commercial sale of any of its potential products, the Company
must demonstrate through preclinical studies and clinical trials that the
product is safe and efficacious for use in the clinical indication for which
approval is sought. There can be no assurance that the Company will be permitted
to undertake or continue clinical trials for any of its potential products or,
if permitted, that such products will be demonstrated to be safe and
efficacious. The results from preclinical studies and early clinical trials may
not be predictive of results that will be obtained in later-stage clinical
trials, and there can be no assurance that the Company's future clinical trials
will demonstrate the safety and efficacy of any potential products or will
result in approval to market products.
In advanced clinical development numerous factors may be involved that
may lead to different results in larger, later-stage trials from those obtained
in earlier stage trials. For example, early stage trials usually involve a small
number of patients and thus may not accurately reflect the actual results
regarding safety and efficacy that may be demonstrated with a large number of
patients in a later-stage trial. Also, differences in the clinical trial design
between an early-stage and late-stage trial may cause different results
regarding the safety and efficacy of a product to be obtained. In addition, many
early stage trials are unblinded and based on qualitative evaluations by
clinicians involved in the performance of the trial whereas later stage trials
are generally required to be blinded in order to provide more objective data for
assessing the safety and efficacy of the product. The Company at times has
elected to aggressively enter many of its potential products into Phase I/II
trials to determine preliminary efficacy in specific indications. In addition,
in certain cases the Company has commenced clinical trials without conducting
preclinical animal testing where an appropriate animal model does not exist.
Similarly, the Company or its partners at times will conduct potentially pivotal
Phase II/III or Phase III trials based on limited Phase I or Phase II data. As a
result, the Company anticipates that only some of its potential products will
show efficacy in these clinical trials and that the number of products that fail
to show efficacy may be significant.
The Company is conducting a Phase II trial evaluating PROTOVIR(TM) for
the prevention of CMV infections in bone marrow transplant recipients based on
very limited and inconclusive data from Phase I trials primarily designed to
obtain safety data. Thus, there can be no assurance that the results of such
trial will be favorable. In addition, an interim analysis of the data by an
independent data and safety monitoring board is planned in this trial for the
fourth quarter of 1996. No assurance
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can be given that such analysis will not be unfavorable and result in an early
termination of the trial.
The Company and a number of other companies in the biotechnology
industry have suffered significant setbacks in advanced clinical trials, even
after promising results in earlier-stage trials. For example, in June 1995,
Roche Holding Ltd and its subsidiary Hoffmann-La Roche Inc. ("Roche") and the
Company announced the results of a Phase II/III clinical trial using the
Company's SMART Anti-Tac Antibody, Zenapax, for the prevention of
graft-versus-host disease ("GvHD"). The analysis of this data led Roche to
conclude that Zenapax was not effective in reducing the incidence of GvHD in the
patient population studied. In addition, in August 1996, the Company announced
the halt of a Phase II/III clinical trial using the Company's PROTOVIR human
anti-cytomegalovirus ("CMV") antibody for treatment of CMV retinitis in AIDS
patients conducted by the National Eye Institute Studies of the Ocular
Complications of AIDS study group ("NEI SOCA") due to lack of evidence of
efficacy. Based on the findings and actions in the above study, a second Phase
II clinical trial for treatment of CMV retinitis in AIDS patients conducted by
the National Institute of Allergy and Infectious Disease through its Aids
Clinical Trials Group ("NIAID ACTG") has had enrollment suspended with a
recommendation to continue using a higher dose. There can be no assurance that
enrollment will be resumed. Also, there is not sufficient data to determine
whether the proposed higher dose might be effective if enrollment in the Phase
II trial were resumed at a higher dose, and there can therefore be no assurance
that such trial will be successful.
DEPENDENCE ON COLLABORATIVE PARTNERS. The Company has collaborative
agreements with several pharmaceutical companies to develop, manufacture and
market certain potential products, which include the most advanced products
under development by the Company. The Company granted to its collaborative
partners certain exclusive rights to commercialize the products covered by these
collaborative agreements. In some cases, the Company is relying on its
collaborative partners to conduct clinical trials, to compile and analyze the
data received from such trials, to obtain regulatory approvals and, if approved,
to manufacture and market these licensed products, including Zenapax, and the
Company's Human Anti-Hepatitis B Virus Antibody ("OST 577"). As a result, the
Company often has little or no control over the development of these potential
products and little or no opportunity to review clinical data prior to or
following public announcement.
The Company's collaborative research agreements are generally
terminable by its partners on short notice. Suspension or termination of certain
of the Company's current collaborative research agreements could have a material
adverse effect on the Company's operations and could significantly delay the
development of the affected products. Continued funding and participation by
collaborative partners will depend not only on the timely achievement of
research and development objectives by the Company and the successful
achievement of clinical trial goals, neither of which can be assured, but also
on each collaborative partner's own financial, competitive, marketing and
strategic considerations. Such considerations include, among other
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things, the commitment of management of the collaborative partners to the
continued development of the licensed products, the relationships among the
individuals responsible for the implementation and maintenance of the
collaborative efforts, the relative advantages of alternative products being
marketed or developed by the collaborators or by others, including their
relative patent and proprietary technology positions, and their ability to
manufacture potential products successfully. In this regard, the Company has, at
times, experienced difficulty in its continuing relationship with Boehringer
Mannheim GmbH ("Boehringer Mannheim") due to a number of factors, including
disagreements regarding the timing of the initiation and design of certain
proposed clinical trials involving the development of certain products licensed
to Boehringer Mannheim, particularly OST 577.
In addition, certain collaborative partners have developed and may be
developing competitive products that may result in delay or a relatively smaller
resource commitment to product launch and support efforts than might otherwise
be obtained if the potentially competitive product were not under development or
being marketed. For example, Roche controls the development of Zenapax, the most
advanced of the Company's products in development, and the Company is dependent
upon the resources and activities of Roche to pursue commercialization of
Zenapax in order for the Company to achieve milestones or royalties from the
development of this product. There can be no assurance that Roche will proceed
to bring this product to market in a rapid and timely manner, if at all, or, if
marketed, that other independently developed products of Roche (including its
recently introduced product CellCept(R)) or others will not compete with or
prevent Zenapax from achieving meaningful sales. Roche also has conducted or
stated that it plans to conduct or support other clinical trials of Zenapax in
autoimmune indications. There can be no assurance that Roche will continue or
pursue additional clinical trials in these indications or that, even if the
additional clinical trials are completed, Zenapax will be shown to be safe and
efficacious or will result in approval to market Zenapax in these indications.
Any adverse event or announcement related to Zenapax would have a material
adverse affect on the Company's business and financial condition of the Company.
Further, because the Company expects, in some cases, to rely on its
contractual rights to access data collected by its collaborative partners in
various phases of its clinical development efforts, the Company is dependent on
the continued satisfaction by such parties of their contractual obligations to
provide such access and cooperate with the Company in the preparation and
submission of appropriate filings with the FDA and equivalent foreign government
regulatory agencies. The Company currently relies on Boehringer Mannheim for the
manufacturing and clinical development of OST 577. Boehringer Mannheim has
marketing rights to this antibody in countries outside of North America. There
can be no assurance that Boehringer Mannheim will provide timely access to the
manufacturing and clinical data, that the U.S. Food and Drug Administration
("FDA") will permit the Company to rely on that data or that the trials
conducted by Boehringer Mannheim will produce data appropriate for approval by
the FDA. If the Company were unable to rely on the clinical data collected by
Boehringer Mannheim or its other collaborative partners, the Company may be
16
17
required to repeat clinical trials or perform supplemental clinical trials in
order to achieve regulatory approval in North America. Compliance with these
requirements could significantly delay commercialization efforts and require
substantially greater investment by the Company, either of which would have a
material adverse effect on the business and financial condition of the Company.
The Company's ability to enter into new collaborations and the
willingness of the Company's existing collaborators to continue development of
the Company's potential products is dependent upon, among other things, the
Company's patent position with respect to such products. In this regard, the
Company recently was issued a patent by the European Patent Office ("EPO") with
claims that, based on its survey of the scientific literature, the Company
believes cover Zenapax and most other humanized antibodies. This patent is
already subject to at least one opposition and the Company believes it is likely
to be further challenged by some or all of the third parties who may be affected
by the patent. The Company has applied for similar patents in the U.S. and
Japan. The Company recently entered into several new collaborations related to
the humanization of certain antibodies whereby it granted nonexclusive licenses
to its patent rights relating to such antibodies, and the Company anticipates
entering into additional collaborations partially as a result of the Company's
patent and patent applications with respect to humanized antibodies. As a
result, the inability of the Company to successfully defend the patent granted
by the EPO or to successfully prosecute corresponding patent applications in the
U.S. or elsewhere could adversely affect the ability of the Company to enter
into additional collaborations and could therefore have a material adverse
effect on the Company's business or financial condition.
LIMITED EXPERIENCE WITH CLINICAL TRIALS; RISKS OF DELAY. The Company
has conducted only a limited number clinical trials to date. There can be no
assurance that the Company will be able to successfully commence and complete
all of its planned clinical trials without significant additional resources and
expertise. In addition, there can be no assurance that the Company will meet its
contemplated development schedule for any of its potential products. The
inability of the Company or its collaborative partners to commence or continue
clinical trials as currently planned, to complete the clinical trials on a
timely basis or to demonstrate the safety and efficacy of its potential
products, would have a material adverse effect on the business and financial
condition of the Company.
The rate of completion of the Company's or its collaborators' clinical
trials is significantly dependent upon, among other factors, the rate of patient
enrollment. Patient enrollment is a function of many factors, including, among
others, the size of the patient population, perceived risks and benefits of the
drug under study, availability of competing therapies, access to reimbursement
from insurance companies or government sources, design of the protocol,
proximity of and access by patients to clinical sites, patient referral
practices, eligibility criteria for the study in question and efforts of the
sponsor of and clinical sites involved in the trial to facilitate timely
enrollment in the trial. Delays in the planned rate of patient enrollment may
result in
17
18
increased costs and expenses in completion of the trial or may require the
Company to undertake additional studies in order to obtain regulatory approval
if the applicable standard of care changes in the therapeutic indication under
study. For example, patient accrual in the Company's ongoing Phase II/III trial
of the SMART M195 Antibody in myeloid leukemia has been negatively affected by
changes in referral patterns, with such patients now more commonly being treated
in local hospitals rather than being referred to tertiary care hospitals where
the Company's trial is being conducted. There can be no assurance that any
actions by the Company to accelerate accrual in this trial will be successful or
that, to the extent that they involve modifications in the design of the trial,
will not cause that trial to be considered a Phase II clinical trial and thereby
require one or more additional potentially pivotal trials to be conducted.
In addition, recent FDA approvals of other products for treatment of
CMV retinitis in patients with AIDS as well as the failure of PROTOVIR in the
NEI SOCA Phase II/III trial may adversely impact the accrual of patients in the
NIAID ACTG Phase II clinical trial of PROTOVIR, if enrollment is resumed. Any
such delays or additional studies with respect to these or other potential
products could have a material adverse effect on the business and financial
condition of the Company.
UNCERTAINTY OF PATENTS AND PROPRIETARY TECHNOLOGY. The Company's
success depends in part on its ability to obtain patent protection for its
products and technologies and to preserve its trade secrets and operate without
infringing on the proprietary rights of third parties. PDL files and prosecutes
patent applications to protect its inventions. No assurance can be given that
the Company's pending patent applications will result in the issuance of patents
or that any patents will provide competitive advantages or will not be
invalidated or circumvented by its competitors. Moreover, no assurance can be
given that patents are not issued to, or patent applications have not been filed
by, other companies which would have an adverse effect on the Company's ability
to use, manufacture or market its products or maintain its competitive position
with respect to its products. Other companies obtaining patents claiming
products or processes useful to the Company may bring infringement actions
against the Company. As a result, the Company may be required to obtain licenses
from others or not be able to use, manufacture or market its products. Such
licenses may not be available on commercially reasonable terms, if at all.
Patents in the U.S. are issued to the party that is first to invent the
claimed invention. Since patent applications in the U.S. are maintained in
secrecy until patents issue, PDL cannot be certain that it was the first
inventor of the invention covered by its pending patent applications or that it
was the first to file patent applications for such inventions. The patent
positions of biotechnology firms generally are highly uncertain and involve
complex legal and factual questions. No consistent policy has emerged regarding
the breadth of claims in biotechnology patents, and patents of biotechnology
products are uncertain so that even issued patents may later be modified or
revoked by the U.S. Patent and Trademark Office ("PTO") or the courts in
proceedings instituted by third parties. Moreover, the issuance of a patent in
one
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19
country does not assure the issuance of a patent with similar claims in another
country, so the extent of any patent protection may vary in different
territories.
PDL has several patents in the U.S. and has exclusively licensed
certain patents regarding the trioma technique and related antibodies from
Sandoz. In June 1996, PDL was issued a U.S. patent covering Zenapax and certain
related antibodies against the IL-2 receptor. In addition, PDL is currently
prosecuting other patent applications with the PTO and in other countries,
including members of the European Patent Convention, Canada, Japan and
Australia. The patent applications are directed to various aspects of PDL's
SMART and human antibodies, antibody technology and other programs, and include
claims relating to compositions of matter, methods of preparation and use of a
number of PDL's compounds. However, PDL does not know whether any pending
applications will result in the issuance of patents or whether such patents will
provide protection of commercial significance. Further, there can be no
assurance that PDL's patents will prevent others from developing competitive
products using related technology.
In January 1996, PDL was issued a patent by the European Patent Office
("EPO") with claims that cover Zenepax and that PDL believes, based on its
review of the scientific literature, covers most humanized antibodies. The EPO
procedures provide for a nine-month opposition period in which other parties may
submit arguments as to why the patent was incorrectly granted and should be
withdrawn or limited. The entire opposition process may take several years to
complete. The Company believes that its patent may be subject to challenge by
some or all of the third parties who may be affected by the patent. At least one
notice of opposition has already been filed, and the Company believes it is
likely to be further challenged by some or all of the third parties who may be
affected by the patent, either through the opposition procedure provided by the
EPO or litigation or both. During this lengthy process, the validity of the
patent is at issue, which may limit the Company's ability to negotiate or
collect royalties or to negotiate future collaborative research and development
agreements based on this patent. For example, if significant prior art were to
emerge during the opposition process, then the value of the patent to PDL could
be severely limited. The Company intends to vigorously defend this patent and
expects that opposition proceedings and significant litigation, if any, in this
matter could involve substantial costs and expenses. There can be no assurance
that the Company will prevail in any opposition proceedings or other litigation
contesting the issuance or scope of this patent. In addition, the costs and
expenses of litigation may have a material adverse effect on the business and
financial condition of the Company. Moreover, there can be no assurance that
other jurisdictions, such as the U.S. or Japan, will issue patents to the
Company with similar claims, if at all.
A number of companies, universities and research institutions have
filed patent applications or received patents in the areas of antibodies and
other fields relating to PDL's programs. Some of these applications or patents
may be competitive with PDL's applications or contain claims that conflict with
those made under PDL's applications. Such conflict could prevent issuance of
patents to PDL, provoke an
19
20
interference with PDL's patents or result in a significant reduction in the
scope or invalidation of PDL's patents, if issued. An interference is an
administrative proceeding conducted by the PTO to determine the priority of
invention and other matters relating to the decision to grant patents. Moreover,
if patents are held by or issued to other parties that contain claims relating
to PDL's products or processes, and such claims are ultimately determined to be
valid, no assurance can be given that PDL would be able to obtain licenses to
these patents at a reasonable cost, if at all, or to develop or obtain
alternative technology.
The Company is aware that Celltech Limited ("Celltech") has been
granted a patent by the EPO and has announced that it has received a notice of
allowance of a corresponding U.S. patent relating to humanization of antibodies
(the "U.S. Adair Patent") and that Celltech expects the patent to issue in early
1997. The EPO has granted a patent to Celltech in the Adair patent family, which
PDL has opposed, but because U.S. patent applications are maintained in secrecy,
PDL cannot review the scope of the claims in the U.S. Adair Patent. Accordingly,
there can be no assurance that such claims would not cover any of PDL's SMART
antibodies or be competitive with or conflict with claims in PDL's patents or
patent applications. If the U.S. Adair Patent issues and if it is determined to
be valid and to cover any of PDL's SMART antibodies, there can be no assurance
that PDL would be able to obtain a license at a reasonable cost, if at all. If
the claims of the Adair Patent conflict with claims in PDL's patents or patent
applications, there can be no assurance that an interference would not be
declared by the PTO, which could take several years to resolve and could involve
significant expense to the Company. Also, such conflict could prevent issuance
of patents to PDL relating to humanization of antibodies or result in a
significant reduction in the scope or invalidation of PDL's patents, if issued.
An interference is an administrative proceeding conducted by the PTO to
determine the priority of invention and other matters relating to the decision
to grant patents. Moreover, during any period of uncertainty as to the validity
or scope of patents, if any, issued to PDL in the U.S. relating generally to
humanization of antibodies, it may limit the Company's ability to negotiate or
collect royalties or to negotiate future collaborative research and development
agreements based on this patent.
PDL has obtained a nonexclusive license under a patent held by Celltech
(the "Boss Patent") relating to PDL's current process for producing SMART and
human antibodies. An interference proceeding was declared in early 1991 by the
PTO between the Boss Patent and a patent application filed by Genentech, Inc.
("Genentech") to which PDL does not have a license. PDL is not a party to this
proceeding, and the timing and outcome of the proceeding or the scope of any
patent subsequently issuing cannot be predicted. If the Genentech patent
application were held to have priority over the Boss Patent, and if it were
determined that PDL's processes and products were covered by a patent issuing
from such patent application, PDL may be required to obtain a license under such
patent or to significantly alter its processes or products. There can be no
assurance that PDL would be able to successfully alter its processes or products
to avoid infringing such
20
21
patent or to obtain such a license on commercially reasonable terms, if at all,
and the failure to do so could have a material adverse impact on PDL.
The Company is aware of another Celltech patent issued in Europe to
which it does not have a license (although Roche does have a license covering
Zenapax) and which may cover the process the Company uses to produce its
potential products. If it were determined that PDL's processes were covered by
such patent, PDL may be required to obtain a license under such patent or to
significantly alter its processes or products, if necessary to manufacture or
import its products in Europe. There can be no assurance that PDL would be able
to successfully alter its processes or products to avoid infringing such patent
or to obtain such a license on commercially reasonable terms, if at all, and the
failure to do so could have a material adverse impact on the business and
financial condition of the Company.
Also, Genentech has a patent in the U.S. and Europe that relates to
chimeric antibodies and which is being opposed in Europe. The European patent is
currently in the opposition process. If Genentech were to assert that the
Company's SMART antibodies infringe this patent, there can be no assurance that
PDL would be successful in either obtaining such a license on commercially
reasonable terms, if at all, or that it would be successful in such a challenge
of the Genentech patent, and the failure to do so would have a material adverse
impact on the business and financial condition of the Company.
In addition to seeking the protection of patents and licenses, PDL also
relies upon trade secrets, know-how and continuing technological innovation
which it seeks to protect, in part, by confidentiality agreements with
employees, consultants, suppliers and licensees. There can be no assurance that
these agreements will not be breached, that PDL would have adequate remedies for
any breach or that PDL's trade secrets will not otherwise become known or
independently developed by competitors.
ABSENCE OF MANUFACTURING EXPERIENCE; DEPENDENCE ON MANUFACTURING BY
BOEHRINGER MANNHEIM. Of the products developed by the Company which are
currently in clinical development, Roche is responsible for manufacturing
Zenapax and Boehringer Mannheim is responsible for manufacturing OST 577. The
Company intends to manufacture the SMART M195 Antibody, PROTOVIR and some of its
other products in preclinical development. PDL currently leases approximately
45,000 square feet housing its manufacturing facility in Plymouth, Minnesota.
PDL intends to continue to manufacture potential products for use in preclinical
and clinical trials using this manufacturing facility in accordance with
standard procedures that comply with current Good Manufacturing Practices
("cGMP") and appropriate regulatory standards. The manufacture of sufficient
quantities of antibody products in accordance with such standards is an
expensive, time-consuming and complex process and is subject to a number of
risks that could result in delays. Production interruptions, if they occur,
could significantly delay clinical development of potential products, reduce
third party or clinical researcher interest and support of proposed clinical
trials, and possibly delay commercialization of such
21
22
products and impair their competitive position, which would have a material
adverse effect on the business and financial condition of the Company.
PDL has no experience in manufacturing commercial quantities of its
potential products and generally does not have sufficient capacity to
manufacture its potential products on a commercial scale. In order to obtain
regulatory approvals and to expand its capacity to produce its products for
commercial sale at an acceptable cost, PDL will need to improve and expand its
existing manufacturing capabilities, including demonstration to the FDA of its
ability to manufacture its products using controlled, reproducible processes.
Accordingly, the Company is evaluating plans to improve and expand the capacity
of its current manufacturing facility. Such plans, if instituted, would result
in substantial costs to the Company and may require a suspension of
manufacturing operations during construction. There can be no assurance that
construction delays would not occur and any such delays could impair the
Company's ability to produce adequate supplies of its potential products for
clinical use or commercial sale on a timely basis. There can be no assurance
that PDL will successfully improve and expand its manufacturing capability
sufficiently to obtain necessary regulatory approvals and to produce adequate
commercial supplies of its potential products on a timely basis. Failure to do
so could delay commercialization of such products and impair their competitive
position, which could have a material adverse effect on the business or
financial condition of the Company.
In addition, PDL and Boehringer Mannheim have agreed to negotiate
additional agreements under which each company could manufacture and supply the
other with certain of the antibodies covered by the collaborative agreement.
There can be no assurance that the parties will enter into an agreement that
will provide for the Company's potential product requirements to be met in a
consistent, timely and cost effective manner. Specifically, with respect to OST
577, the Company currently does not manufacture this product and has no
alternative manufacturing sources for this product. In the event that Boehringer
Mannheim and the Company are unable to reach an acceptable agreement, or if
material is not supplied in accordance with such an agreement, there can be no
assurance that the Company could make alternative manufacturing arrangements on
a timely basis, if at all, and thus could have a material adverse effect on the
business and financial condition of the Company. Moreover, even if such
alternative manufacturing arrangements are made, such arrangements would likely
involve manufacturing changes from the process used by Boehringer Mannheim and
could result in risks as described in "Uncertainties Resulting from
Manufacturing Changes".
UNCERTAINTIES RESULTING FROM MANUFACTURING CHANGES. Manufacturing of
antibodies for use as therapeutics in compliance with regulatory requirements is
complex, time-consuming and expensive. When certain changes are made in the
manufacturing process, it is necessary to demonstrate that the changes have not
caused the resulting drug material to differ significantly from the drug
material previously produced if results of prior preclinical and clinical trials
performed using the previously produced drug material are to be relied upon in
regulatory filings. Such
22
23
changes could include, for example, changing the cell line used to produce the
antibody, changing the fermentation or purification process or moving the
production process to a new manufacturing plant. Depending upon the type and
degree of differences between the newer and older drug material, various studies
could be required to demonstrate that the newly produced drug material is
sufficiently similar to the previously produced drug material, possibly
requiring additional animal studies or human clinical trials. Manufacturing
changes have been made or are likely to be made for the production of PDL's
products currently in clinical development. There can be no assurance that such
changes will not result in delays in development or regulatory approvals or, if
occurring after regulatory approval, in reduction or interruption of commercial
sales. Such delays could have an adverse effect on the competitive position of
those products and could have a material adverse effect on the business and
financial condition of the Company.
Roche has equipped an existing manufacturing facility that is expected
to be used to produce Zenapax. Phase III trials of Zenapax in kidney
transplantation were conducted using material produced for Roche by a third
party manufacturer. Roche has stated that it has produced Zenapax at its own
facility and has data indicating that this material is comparable to the
material used in the Phase III clinical trials. However, there can be no
assurance that Roche's manufacturing method and facility would be accepted by
regulatory agencies as developed and Roche may be required to adopt some
modifications or changes in the manufacturing method or facility that may cause
delays in the development or commercialization of Zenapax. Such delays could
have an adverse effect on the competitive position of Zenapax and could have a
material adverse effect on the business and financial condition of the Company.
In addition, with respect to two of the antibodies in clinical
development licensed from Sandoz Pharmaceuticals Corporation ("Sandoz"),
PROTOVIR and OST 577, the cell lines developed by PDL for both antibodies and
the production processes developed by PDL for PROTOVIR and Boehringer Mannheim
for OST 577 are different from those utilized by Sandoz for the manufacture of
the antibody supplies used in earlier clinical trials. There can be no assurance
that this new material, when used in humans, will have the same characteristics
or produce results similar to the antibody material originally developed and
used by Sandoz in earlier clinical trials. Accordingly, Boehringer Mannheim or
the Company may be required to conduct additional laboratory or clinical
testing, which could result in significant delays and/or additional expenses and
could have a material adverse effect on the competitive position of these
potential products and on the business and financial condition of the Company.
DEPENDENCE ON SUPPLIERS. The Company is dependent on outside vendors
for the supply of raw materials used to produce its product candidates. The
Company currently qualifies only one or a few vendors for its source of certain
raw materials. Therefore, once a supplier's materials have been selected for use
in the Company's manufacturing process, the supplier in effect becomes a sole or
limited source of such raw materials to the Company due to the extensive
regulatory
23
24
compliance procedures governing changes in manufacturing processes. Although the
Company believes it could qualify alternative suppliers, there can be no
assurance that the Company would not experience a disruption in manufacturing if
it experienced a disruption in supply from any of these sources. A problem or
suspected problem with the quality of raw materials supplied could result in a
suspension of clinical trials, notification of patients treated with products or
product candidates produced using such materials, potential product liability
claims, a recall of products or product candidates produced using such
materials, and an interruption of supplies, any of which could have a material
adverse effect on the business or financial condition of the Company. Any
significant interruption in the supply of any of the raw materials currently
obtained from such sources or the time and expense necessary to transition a
replacement supplier's product into the Company's manufacturing process, could
disrupt its operations and have a material adverse effect on the business and
financial condition of the Company.
POTENTIAL VOLATILITY OF STOCK PRICE. The market for the Company's
securities is volatile and investment in these securities involves substantial
risk. The market prices for securities of biotechnology companies (including the
Company) have been highly volatile, and the stock market from time to time has
experienced significant price and volume fluctuations that may be unrelated to
the operating performance of particular companies. Factors such as results of
clinical trials, delays in manufacturing or clinical trial plans, fluctuations
in the Company's operating results, disputes or disagreements with collaborative
partners, market reaction to announcements by other biotechnology or
pharmaceutical companies, announcements of technological innovations or new
commercial therapeutic products by the Company or its competitors, initiation,
termination or modification of agreements with collaborative partners, failures
or unexpected delays in manufacturing or in obtaining regulatory approvals or
FDA advisory panel recommendations, developments or disputes as to patent or
other proprietary rights, loss of key personnel, litigation, public concern as
to the safety of drugs developed by the Company, regulatory developments in
either the U.S. or foreign countries (such as opinions, recommendations or
statements by the FDA or FDA advisory panels, health care reform measures or
proposals), and general market conditions could result in the Company's failure
to meet the expectations of securities analysts or investors. In such event, or
in the event that adverse conditions prevail or are perceived to prevail with
respect to the Company's business, the price of PDL's common stock would likely
drop significantly. In the past, following significant drops in the price of a
company's common stock, securities class action litigation has often been
instituted against such a company. Such litigation against the Company could
result in substantial costs and a diversion of management's attention and
resources, which would have a material adverse effect on the Company's business
and financial condition.
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25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Number Page
11.1 Statement of Computation of Earnings Per Share 28
(b) No Reports on Form 8-K were filed during the quarter ended September 30,
1996.
25
26
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 11, 1996
PROTEIN DESIGN LABS, INC.
(Registrant)
/S/ Laurence Jay Korn
----------------------------------------
Laurence Jay Korn
Chief Executive Officer, Chairperson of
the Board of Directors
(Principal Executive Officer)
/S/ Fred Kurland
----------------------------------------
Fred Kurland
Chief Financial Officer
(Chief Accounting Officer)
26
27
Exhibit Index
Exhibit 11.1 - Statement of Computation of Earning Per Share.
Exhibit 27.1 - Financial Data Schedule.
1
PROTEIN DESIGN LABS, INC.
Exhibit 11.1 STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
(In thousands except per share amounts)
Three Months Ended September 30, Nine Months Ended September 30,
1996 1995 1996 1995
------------------------ ------------------------
Computation of common and common equivalent shares outstanding:
Weighted average common shares outstanding 15,632 15,380 15,578 15,325
Weighted average shares outstanding assuming
conversion of preferred stock - - - -
-------- -------- -------- --------
15,632 15,380 15,578 15,325
-------- -------- -------- --------
Stock related to SAB No. 55, 64. and 83 - - - -
-------- -------- -------- --------
Total weighted average common and common equivalent
shares outstanding 15,632 15,380 15,578 15,325
======== ======== ======== ========
Net loss $ (4,305) $ (2,676) $ (9,982) $ (6,593)
======== ======== ======== ========
Loss per share $ (0.28) $ (0.17) $ (0.64) $ (0.43)
======== ======== ======== ========
5
0000882104
Protein Design Labs, Inc.
1,000
9-MOS
DEC-31-1996
JAN-01-1996
SEP-30-1996
6,735
92,723
2,881
0
0
102,339
16,362
(8,391)
110,310
5,003
0
0
0
157
105,150
110,310
0
16,130
0
26,112
0
0
0
(9,982)
0
(9,982)
0
0
0
(9,982)
(.64)
(.64)
