10-Q 1 b40833ace10-q.txt ALKERMES CLINICAL PARTNERS, L.P. U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 0-26758 ALKERMES CLINICAL PARTNERS, L.P. (Exact name of registrant as specified in its charter) DELAWARE 043-145043 ------------------------------------------ ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 64 Sidney Street, Cambridge, MA 02139-4136 ------------------------------------------ ---------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (617) 494-0171 ---------------------------- Not Applicable -------------------------------------------------------------------------------- Former name, former address, and former fiscal year, if changed since last report 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 --- --- ALKERMES CLINICAL PARTNERS, L.P. (A LIMITED PARTNERSHIP) INDEX Page No. -------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets 3 -September 30, 2001 and December 31, 2000 Statements of Operations 4 -Three and nine months ended September 30, 2001 and 2000 Statements of Cash Flows 5 -Nine months ended September 30, 2001 and 2000 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of 8 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk 10 PART II - OTHER INFORMATION Item 6. Exhibits, Financial Statement Schedules and Reports 11 on Form 8-K SIGNATURES 12 EXHIBIT INDEX 13 (2) ITEM 1. FINANCIAL STATEMENTS: ALKERMES CLINICAL PARTNERS, L.P. (A Limited Partnership) BALANCE SHEETS (Unaudited)

See notes to financial statements. (3) ALKERMES CLINICAL PARTNERS, L.P. (A LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS (Unaudited)

See notes to financial statements. (4) ALKERMES CLINICAL PARTNERS, L.P. (A LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS (Unaudited)

See notes to financial statements. (5) ALKERMES CLINICAL PARTNERS, L.P. (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The financial statements for Alkermes Clinical Partners, L.P. (the "Partnership") for the three and nine month periods ended September 30, 2001 and 2000, are unaudited and include all adjustments which, in the opinion of management, are necessary to present fairly the results of operations for the periods then ended. All such adjustments are of a normal recurring nature. These financial statements should be read in conjunction with the Partnership's Annual Report on Form 10-K for the year ended December 31, 2000, which includes financial statements and notes thereto for the years ended December 31, 2000, 1999 and 1998. The results of the Partnership's operations for any interim period are not necessarily indicative of the results of the Partnership's operations for any other interim period or for a full year. 2. NET LOSS PER CLASS A AND B LIMITED PARTNERSHIP INTEREST Net loss per Class A and B limited partnership interest is calculated with the net loss attributable only to the limited partners of the Partnership (each, a "Limited Partner" and collectively, the "Limited Partners") and excludes the loss attributable to Alkermes Development Corporation II (the "General Partner"). There were no losses attributable to the Limited Partners for the three and nine months ended September 30, 2001 and 2000. 3. COMPLETION OF SCHEDULED FUNDING For the three and nine months ended September 30, 2001 and 2000, the Partnership incurred no research and development expenses related to the RMP(TM) program, notwithstanding the continuing development of the product candidate. The Partnership was providing funding to Alkermes, Inc. ("Alkermes") for research and development expenses for Cereport(R) from capital contributions received from Partners. Funding to Alkermes ended during the quarter ended June 30, 1996 when such capital contributions were substantially depleted. None of the Partners of the Partnership is obligated to make any further capital contributions. Since the funding was not sufficient for Alkermes to complete clinical trials and seek regulatory approval of Cereport, Alkermes has used its own resources, and intends to continue to use its own resources, to develop Cereport. Alkermes has obtained and intends to continue to obtain such resources through equity offerings, bank borrowings and its collaborative arrangements. Alkermes is required to fund the development of Cereport to maintain its Purchase Option with the Limited Partners. (6) Alkermes is also obligated, through the General Partner, to perform administrative services for the Partnership, such as preparing financial statements, tax returns and reports to Partners. Alkermes intends to continue to cause the General Partner to perform such services at its expense since the Partnership's current assets are depleted, unless it exercises its Purchase Option and thereby acquires all the interests in the Partnership. The services performed by Alkermes and the General Partner constitute all of the activities undertaken by or on behalf of the Partnership. After September 30, 2001, the Partnership is expected to continue to have no future liquidity or capital resources requirements other than those funded by Alkermes. (7) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION Alkermes Clinical Partners, L.P. (the "Partnership") was formed on February 7, 1992, and is managed by its general partner, Alkermes Development Corporation II (the "General Partner"), a wholly owned subsidiary of Alkermes, Inc. ("Alkermes" or the "Company"). The Partnership was organized to fund the further development and clinical testing of a family of molecules, designated by Alkermes as Receptor-Mediated Permeabilizers(TM) ("RMPs(TM)"), for human pharmaceutical use in the United States and Canada. IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS Any statements set forth below or otherwise made in writing or orally by the Partnership or the General Partner with regard to its expectations as to financial results and other aspects of its business may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by forward-looking words such as "may," "will," "expects," "anticipates," "believes," "estimates," "continues" or similar words. Although the General Partner believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results of the Partnership's or the Company's development activities and the Partnership's results of operations will not differ materially from its expectations. Factors which could cause actual results to differ from expectations include, among others: (i) the Partnership and the Company could not be permitted by regulatory authorities to undertake additional clinical trials for Cereport(R) or clinical trials could be delayed or regulatory authorities could require additional clinical trials before approving Cereport; (ii) clinical trials for Cereport may not proceed as planned, the trials may require more time to enroll patients than anticipated, and even if they are completed Cereport could prove to be ineffective or unsafe; (iii) the Company could incur difficulties or set-backs in obtaining the substantial additional funding required to continue research and development programs and clinical trials; (iv) the Company could reduce or discontinue funding of Cereport; (v) even if Cereport appears promising at an early stage of development, it could fail to receive necessary regulatory approvals, be difficult to manufacture on a large scale, be uneconomical, fail to achieve market acceptance, be precluded from commercialization by proprietary rights of third parties or experience substantial competition in the marketplace; and (vi) technological change in the biotechnology or pharmaceutical industries and the approval of other drugs or therapies to treat brain tumors could render Cereport obsolete or noncompetitive. (8) RESULTS OF OPERATIONS Revenue The Partnership had no revenue for the three and nine months ended September 30, 2001 and 2000. The Partnership anticipates that it will have no revenue in the foreseeable future. Expenses The Partnership had no research and development expenses for the three and nine months ended September 30, 2001 and 2000. The research and development expenses were zero because of the completion of the development funding to Alkermes pursuant to the product development agreement between Alkermes and the Partnership (the "Product Development Agreement"). General and administrative expenses for the three and nine months ended September 30, 2001 were $4,887 and $8,846 as compared to $6,615 and $17,422 for the three and nine months ended September 30, 2000. The decrease for the three and nine months ended September 30, 2001 compared to September 30, 2000 was mainly a result of decreased professional service fees. Alkermes is obligated through the General Partner to perform general and administrative services for the Partnership at its expense, unless Alkermes exercises its Purchase Option and thereby acquires all limited partnership interests in the Partnership (see Liquidity and Capital Resources). LIQUIDITY AND CAPITAL RESOURCES At September 30, 2001, the Partnership had no remaining assets or liabilities. The Partnership's primary source of funding and capital resources had been the annual capital contributions by the Limited Partners and the General Partner. The Limited Partners' capital contributions were remitted to the Partnership in four annual installments, the fourth and final payment of which was due on April 15, 1995. There have been and will be no additional capital contributions received by the Partnership from the Limited Partners after the quarter ended June 30, 1996. The Partnership was funding research and development expenses for Cereport from capital contributions received from Partners. Such development was and continues to be conducted for the Partnership by Alkermes pursuant to the Product Development Agreement. The research and development funding to Alkermes ended during the quarter ended June 30, 1996 when such capital contributions were substantially depleted. None of the Partners is obligated to make any further capital contributions. Because the funding was not sufficient for Alkermes to complete clinical trials and seek regulatory approval of Cereport, Alkermes has used its own resources, and intends to continue to obtain such resources through equity offerings, bank borrowings and its collaborative arrangements. Effective September 30, 1997, Alkermes entered into an agreement with ALZA Corporation related to the development and commercialization of Cereport. Alkermes is required to fund the development of Cereport to maintain its Purchase Option with the Limited Partners. (9) The Partnership used its remaining cash and cash equivalents during the quarter ended September 30, 1997 to pay for administrative services for the Partnership. Alkermes is obligated, through the General Partner, to perform administrative services for the Partnership, such as preparing financial statements, tax returns and reports to the Limited Partners. Since the Partnership's current assets are depleted, Alkermes intends to continue to cause the General Partner to perform such services at its expense in order to maintain its Purchase Option with the Limited Partners, unless it exercises its Purchase Option and thereby acquires all limited partnership interests in the Partnership. The activities performed by Alkermes and the General Partner constitute all of the activities undertaken by or on behalf of the Partnership. After September 30, 2001, the Partnership is expected to continue to have no future liquidity or capital resources requirements other than those funded by Alkermes. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable. (10) ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Exhibits: Number Exhibit ------ ------- 3.1 Alkermes Clinical Partners, L.P. Agreement of Limited Partnership, dated as of February 7, 1992.* 3.1(a) Amendment No. 1 to Alkermes Clinical Partners, L.P. Agreement of Limited Partnership, dated as of September 29, 1992.* 3.1(b) Amendment No. 2 to Alkermes Clinical Partners, L.P. Agreement of Limited Partnership, dated as of March 30, 1993.* 4.1 Alkermes Clinical Partners, L.P. Agreement of Limited Partnership, dated as of February 7, 1992.* 4.1(a) Amendment No. 1 to Alkermes Clinical Partners, L.P. Agreement of Limited Partnership, dated as of September 29, 1992.* 4.1(b) Amendment No. 2 to Alkermes Clinical Partners, L.P. Agreement of Limited Partnership, dated as of March 30, 1993.* * Incorporated by reference to Exhibits to the Registrant's Registration Statement on Form 10 filed September 13, 1995. (b) Since the beginning of the quarter ended September 30, 2001, the Registrant has not filed any reports on Form 8-K. (11) SIGNATURES 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. ALKERMES CLINICAL PARTNERS, L.P. (Registrant) By its General Partner ALKERMES DEVELOPMENT CORPORATION II Date: November 9, 2001 By: /s/ Richard F. Pops ------------------------------------- Richard F. Pops Director, President and Chief Executive Officer (Principal Executive Officer) Date: November 9, 2001 By: /s/ James M. Frates ------------------------------------ James M. Frates Director, Vice President, Chief Financial Officer, Treasurer and Assistant Secretary (Principal Financial and Accounting Officer) (12) EXHIBIT INDEX Exhibit Number Description ------ ----------- 3.1 Alkermes Clinical Partners, L.P. Agreement of Limited Partnership, dated as of February 7, 1992.* 3.1(a) Amendment No. 1 to Alkermes Clinical Partners, L.P. Agreement of Limited Partnership, dated as of September 29, 1992.* 3.1(b) Amendment No. 2 to Alkermes Clinical Partners, L.P. Agreement of Limited Partnership, dated as of March 30, 1993.* 4.1 Alkermes Clinical Partners, L.P. Agreement of Limited Partnership, dated as of February 7, 1992.* 4.1(a) Amendment No. 1 to Alkermes Clinical Partners, L.P. Agreement of Limited Partnership, dated as of September 29, 1992.* 4.1(b) Amendment No. 2 to Alkermes Clinical Partners, L.P. Agreement of Limited Partnership, dated as of March 30, 1993.* * Incorporated by reference to Exhibits to the Registrant's Registration Statement on Form 10 filed September 13, 1995. (13)

ALKERMES CLINICAL PARTNERS LP 10-Q