<HTML> <HEAD> <TITLE>BioCryst Pharmaceuticals</TITLE> </HEAD> <BODY> <!-- MARKER FORMAT-SHEET="Page Width Begin" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Head Major 10" --> <H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>UNITED STATES<BR>SECURITIES AND EXCHANGE COMMISSION<BR>Washington, D.C. 20549</FONT></H1> <!-- MARKER FORMAT-SHEET="Head Major 10" --> <H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FORM 10-Q</FONT></H1> <!-- MARKER FORMAT-SHEET="Para Center 10" --> <P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 </FONT></P> <!-- MARKER FORMAT-SHEET="Head Major 10" --> <H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the quarterly period ended September 30, 2000</FONT></H1> <!-- MARKER FORMAT-SHEET="Para Center 10" --> <P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>OR </FONT></P> <!-- MARKER FORMAT-SHEET="Para Center 10" --> <P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>(_) TRANSITION REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 </FONT></P> <!-- MARKER FORMAT-SHEET="Head Major 10" --> <A NAME="For_the_transition_period_from_to_."></A> <H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the transition period from ______________ to _____________.</FONT></H1> <!-- MARKER FORMAT-SHEET="Para Center 10" --> <P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Commission File Number 000-23186 </FONT></P> <!-- MARKER FORMAT-SHEET="Head Major 10" --> <H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BIOCRYST PHARMACEUTICALS, INC.<BR>(Exact name of registrant as specified in its charter)</FONT></H1> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Reg Cover Table 2 Col 10" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0> <TR VALIGN=TOP> <TD ALIGN=CENTER WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>DELAWARE<BR>(State or other jurisdiction of<BR>incorporation or organization) </FONT></TD> <TD ALIGN=CENTER WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>62-1413174<BR>(I.R.S. employer identification no.) </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para Center 10" --> <P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>2190 Parkway Lake Drive; Birmingham, Alabama 35244<BR>(Address and zip code of principal executive offices) </FONT></P> <!-- MARKER FORMAT-SHEET="Para Center 10" --> <P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>(205) 444-4600<BR> (Registrant’s telephone number, including area code) </FONT></P> <!-- MARKER FORMAT-SHEET="Para Center 10" --> <P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>NONE<BR>(Former name, former address and former fiscal year, if changed since last report) </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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: </FONT></P> <!-- MARKER FORMAT-SHEET="Para Center 10" --> <P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Yes _X_ No ___ </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 17,536,100 shares of the Company’s Common Stock, $.01 par value, were outstanding as of September 30, 2000. </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 2; page: 2" --> <HR SIZE=5 NOSHADE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Begin" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Head Major 10" --> <H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BIOCRYST PHARMACEUTICALS, INC.</FONT></H1> <!-- MARKER FORMAT-SHEET="Head Major 10" --> <H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>INDEX</FONT></H1> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600"> <TR VALIGN="BOTTOM"> <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH> <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Page No.</FONT><HR WIDTH=75% SIZE=1 NOSHADE></TH></TR> <TR VALIGN="BOTTOM"> <TD WIDTH="93%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Part I. Financial Information</FONT></TD> <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD WIDTH="2%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD> <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Item 1. Financial Statements:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Condensed Balance Sheets - September 30, 2000 and December 31, 1999</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Condensed Statements of Operations - Three and Nine Months</FONT></TD><TD ALIGN="LEFT"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Ended September 30, 2000 and 1999</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Condensed Statements of Cash Flows - Nine Months Ended September 30,</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> 2000 and 1999</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Notes to Condensed Financial Statements</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Item 2. Management’s Discussion and Analysis of Financial Condition and</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT> </TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Results of Operations</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Item 3. Quantitative and Qualitative Disclosures About Market Risk</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">15</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Part II. Other Information</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Item 1. Legal Proceedings</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">16</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Item 2. Changes in Securities and Use of Proceeds</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">16</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Item 3. Defaults Upon Senior Securities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">16</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Item 4. Submission of Matters to a Vote of Security Holders</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">16</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Item 5. Other Information</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">16</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Item 6. Exhibits and Reports on Form 8-K</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">16</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Signatures</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">18</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 3; page: 3" --> <HR SIZE=5 NOSHADE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Begin" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Head Major 10" --> <A NAME="PART_I._FINANCIAL_INFORMATION"></A> <H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART I. FINANCIAL INFORMATION</FONT></H1> <!-- MARKER FORMAT-SHEET="Head Minor" --> <A NAME="Item_1._Financial_Statements"></A> <H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Item 1. Financial Statements</FONT></H2> <!-- MARKER FORMAT-SHEET="Head Major 10" --> <A NAME="BIOCRYST_PHARMACEUTICALS_INC."></A> <H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BIOCRYST PHARMACEUTICALS, INC.<BR>CONDENSED BALANCE SHEETS<BR>September 30, 2000 and December 31, 1999<BR>(In thousands)</FONT></H1> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600"> <TR VALIGN="BOTTOM"> <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH> <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">2000<BR>(Unaudited) </FONT><HR WIDTH=75% SIZE=1 NOSHADE></TH> <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">1999<BR>(Note 1) </FONT><HR WIDTH=75% SIZE=1 NOSHADE></TH></TR> <TR VALIGN="BOTTOM"> <TD WIDTH="69%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <B>ASSETS</B></FONT></FONT></TD> <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD> <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD> <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Cash and cash equivalents</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 8,774</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 8,631</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Securities held-to-maturity</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">16,841</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">14,545</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Prepaid expenses and other current assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">835</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,377</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total current assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">26,450</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">24,553</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Securities held-to-maturity</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">42,858</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">46,871</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Furniture and equipment, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,823</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,781</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Patents</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">244</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">182</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 72,375</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 73,387</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <B>LIABILITIES AND STOCKHOLDERS’ EQUITY</B></FONT> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Accounts payable</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 254</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 292</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Accrued expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">561</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">670</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Deferred revenue</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">100</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">700</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Current maturities of capital lease obligations</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">17</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">15</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total current liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">932</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,677</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Capital lease obligations</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">0</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Deferred license fee</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">300</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">300</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,232</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,984</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Stockholders’ equity:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Convertible preferred stock, $.01 par value, shares</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> authorized - 5,000; shares issued and outstanding - none</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Common stock, $.01 par value, shares authorized -</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> 45,000; shares issued and outstanding -</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> 17,536 in 2000 and 17,264 in 1999</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">175</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">172</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Additional paid-in capital</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">131,215</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">129,698</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Accumulated deficit</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(60,247</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(58,467</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total stockholders’ equity</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">71,143</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">71,403</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total liabilities and stockholders’ equity</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 72,375</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 73,387</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR> </TABLE> <BR><BR><BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See accompanying notes to condensed financial statements. </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 4; page: 4" --> <HR SIZE=5 NOSHADE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Begin" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <BR> <!-- MARKER FORMAT-SHEET="Head Major 10" --> <H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BIOCRYST PHARMACEUTICALS, INC.<BR>CONDENSED STATEMENTS OF OPERATIONS<BR>Periods Ended September 30, 2000 and 1999<BR>(In thousands, except per share)<BR>(Unaudited)</FONT></H1> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600"> <TR VALIGN="BOTTOM"> <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH> <TH COLSPAN="4"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Three Months</FONT><HR WIDTH=85% SIZE=1 NOSHADE></TH> <TH COLSPAN="4"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Nine Months</FONT><HR WIDTH=85% SIZE=1 NOSHADE></TH></TR> <TR VALIGN="BOTTOM"> <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH> <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">2000</FONT><HR WIDTH=75% SIZE=1 NOSHADE></TH> <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">1999</FONT><HR WIDTH=75% SIZE=1 NOSHADE></TH> <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">2000</FONT><HR WIDTH=75% SIZE=1 NOSHADE></TH> <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">1999</FONT><HR WIDTH=75% SIZE=1 NOSHADE></TH></TR> <TR VALIGN="BOTTOM"> <TD WIDTH="49%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Revenues:</B></FONT></FONT></TD> <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD> <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD> <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD> <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD> <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Collaborative and other research and development</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 60</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 48</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 4,688</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 2,456</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Interest and other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,045</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">287</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,224</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">920</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="10"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total revenues</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,105</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">335</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7,912</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,376</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="10"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Expenses:</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Research and development</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,038</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,889</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">6,676</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,895</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">General and administrative</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">709</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">651</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,613</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,134</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Royalty expense</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">0</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">0</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">400</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">200</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Interest</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="10"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,748</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,541</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">9,692</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">8,233</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="10"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Net loss</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(1,643</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(2,206</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(1,780</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(4,857</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR> <TR> <TD COLSPAN="10"><HR NOSHADE SIZE="2"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Net loss per share (Note 2)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ (.09</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ (.15</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ (.10</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ (.32</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Weighted average shares outstanding (Note 2)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">17,523</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">15,119</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">17,444</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">15,028</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> </TABLE> <BR><BR><BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See accompanying notes to condensed financial statements. </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 5; page: 5" --> <HR SIZE=5 NOSHADE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Begin" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Head Major 10" --> <H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BIOCRYST PHARMACEUTICALS, INC.<BR>CONDENSED STATEMENTS OF CASH FLOWS<BR>Nine Months Ended September 30, 2000 and 1999<BR>(In thousands)<BR>(Unaudited)</FONT></H1> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600"> <TR VALIGN="BOTTOM"> <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH> <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">2000</FONT><HR WIDTH=75% SIZE=1 NOSHADE></TH> <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">1999</FONT><HR WIDTH=75% SIZE=1 NOSHADE></TH></TR> <TR VALIGN="BOTTOM"> <TD WIDTH="67%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Operating activities:</B></FONT></FONT></TD> <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD> <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD> <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Net loss</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(1,780</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(4,857</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Depreciation and amortization</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">508</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">379</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Non-monetary compensation</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">78</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">40</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Changes in operating assets and liabilities, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(204</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(180</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Net cash (used) by operating activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1,398</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(4,618</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Investing activities:</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Purchases of furniture and equipment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1,548</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(527</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Purchases of other assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(64</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">0</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Purchases of marketable securities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(8,905</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(13,248</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Maturities of marketable securities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">10,622</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">10,312</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Net cash provided (used) by investing activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">105</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(3,463</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Financing activities:</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Principal payments on debt and capital lease obligations</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(17</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(10</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">12</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">0</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Proceeds from sale of common stock</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,441</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,007</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Net cash provided by financing activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,436</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,997</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Increase/(decrease) in cash and cash equivalents</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">143</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(6,084</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Cash and cash equivalents at beginning of period</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">8,631</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">12,311</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR> <TR VALIGN="BOTTOM"> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Cash and cash equivalents at end of period</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 8,774</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD> <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 6,227</FONT></TD> <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR> <TR> <TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR> </TABLE> <BR><BR><BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See accompanying notes to condensed financial statements. </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 6; page: 6" --> <HR SIZE=5 NOSHADE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Begin" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Head Major 10" --> <H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BIOCRYST PHARMACEUTICALS, INC.<BR>NOTES TO CONDENSED FINANCIAL STATEMENTS</FONT></H1> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Note 1. Basis of Preparation </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> The condensed balance sheet as of September 30, 2000 and the condensed statements of operations and cash flows for the nine months ended September 30, 2000 and 1999 have been prepared in accordance with generally accepted accounting principles by the Company and have not been audited. Such financial statements reflect all adjustments which are, in management’s opinion, necessary to present fairly, in all material respects, the financial position at September 30, 2000 and the results of operations and cash flows for the nine months ended September 30, 2000 and 1999. These condensed financial statements should be read in conjunction with the financial statements for the year ended December 31, 1999 and the notes thereto included in the Company’s 1999 Annual Report on Form 10-K. Interim operating results are not necessarily indicative of operating results for the full year. The balance sheet as of December 31, 1999 has been prepared from the audited financial statements included in the previously mentioned Annual Report. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Note 2. Net Loss Per Share </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> The Company computes net loss per share in accordance with Statement of Financial Accounting Standards No. 128, Earnings per Share. Net loss per share is based upon the weighted average number of common shares outstanding during the period. Common equivalent shares from unexercised stock options and warrants are excluded from the computation, as their effect is anti-dilutive. For the three months ended September 30, 2000 and 1999, common stock equivalents of approximately 2,359,000 and 2,393,000 shares, respectively, were not used to calculate net loss per share because of their anti-dilutive effect. For the nine months ended September 30, 2000 and 1999, common stock equivalents of approximately 2,427,000 and 2,456,000 shares, respectively, were not used to calculate net loss per share because of their anti-dilutive effect. There were no reconciling items in calculating the numerator for net loss per share for any of the periods presented. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Note 3. Recent Accounting Pronouncements </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101, which addresses accounting policies to be applied in the recognition, presentation and disclosure of revenues from contract partnerships in financial statements filed with the SEC. On June 26, 2000, the SEC issued SAB 101B, which delays the implementation of SAB 101 until no later than the fiscal quarter ending December 31, 2000, in order to provide companies with additional time to determine the effect that a change in accounting policy under SAB 101 will have on their revenue recognition practices. We are reviewing the potential effect that the implementation of SAB 101 would have on our net financial results. The implementation of SAB 101 could have a material effect on the reported financial results for the year ending December 31, 2000. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> In March 2000, the FASB issued Interpretation No. 44 “Accounting for Certain Transactions involving Stock Compensation”, which provides guidance for issues that have arisen in applying APB No. 25 “Accounting for Stock Issued to Employees”. This Interpretation is generally effective for transactions occurring after July 1, 2000 except for the provisions related to repricings and the definition of an employee, which apply to awards issued after December 31, 1998. We believe that this interpretation will not have a material impact on reported financial results. </FONT></P> <!-- MARKER FORMAT-SHEET="Head Minor" --> <H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations</FONT></H2> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>This Quarterly Report on Form 10-Q contains certain statements of a forward-looking nature relating to future events or the future financial performance of the Company. Such statements are only predictions and the actual events or results may differ materially from the results discussed in the forward-looking stat</I>e<I>ments. Factors that could cause or contribute to such differences include those discussed below as well as those discussed in other filings made by the Company with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K.</I> </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 7; page: 7" --> <HR SIZE=5 NOSHADE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Begin" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Head Minor" --> <H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><I>Overview</I></FONT></FONT></H2> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Since our inception in 1986, we have been engaged in research and development activities and organizational efforts, including: </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> identification and licensing of enzyme targets; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> drug discovery; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> structure-based design of drug candidates; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> small-scale synthesis of compounds; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> conducting pre-clinical studies and clinical trials; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> recruiting our scientific and management personnel; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> establishing laboratory facilities; and </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> raising capital. </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Our revenues have generally been limited to license fees, milestone payments, interest income, collaboration research, development and option fees. Research and development revenue on cost-reimbursing agreements is recognized as expenses are incurred up to contractual limits. Research and development revenue, license fees, milestone payments and option fees are recognized as revenue when irrevocably due. Payments received that are related to future performance are deferred and taken into income as earned over a specified future performance period. We have not received any revenue from the sale of pharmaceutical products. It could be several years, if ever, before we will recognize significant revenue from royalties received pursuant to our license agreements, and we do not expect to ever generate revenue directly from product sales. Future revenues, if any, are likely to fluctuate substantially from quarter to quarter. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> We have incurred operating losses since our inception. Our accumulated deficit at September 30, 2000 was $60.2 million. We will require substantial expenditures relating to the development of our current and future drug candidates. During the three years ended December 31, 1999, we spent 39.0% of our research and development expenses on contract research and development, including: </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> payments to consultants; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> funding of research at academic institutions; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> large scale synthesis of compounds; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> pre-clinical studies; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> engaging investigators to conduct clinical trials; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> hiring contract research organizations to monitor and gather data on clinical trials; and </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> using statisticians to evaluate the results of clinical trials. </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> The above expenditures for contract research and development for our current and future drug candidates will vary from quarter to quarter depending on the status of our research and development projects. For example, in June 2000, we further strengthened our drug research and development efforts by signing two collaborative agreements. First, we signed an agreement with Emory University to facilitate the discovery of new drug candidates designed to inhibit hepatitis C polymerase. In addition, we in-licensed a series of potent inhibitors of purine nucleoside phosphorylase from both Albert Einstein College of Medicine of Yeshiva University and Industrial Research, Ltd. </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 8; page: 8" --> <HR SIZE=5 NOSHADE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Begin" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Changes in our existing and future research and development and collaborative relationships will also impact the status of our research and development projects. Although we may, in some cases, be able to control the timing of development expenses, in part by accelerating or decelerating certain of these costs, many of these costs will be incurred irrespective of whether or not we are able to discover drug candidates or obtain collaborative partners for commercialization. As a result, we believe that quarter-to-quarter comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of future performance. If we fail to meet the research, clinical and financial expectations of securities analysts and investors, it could have a material adverse effect on the price of our common stock. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Results of Operations (three months ended September 30, 2000 compared to the three months ended September 30, 1999)</I></B> </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Revenues increased 229.9% to $1.1 million in the three months ended September 30, 2000 from $0.3 million in the three months ended September 30, 1999. The increase was primarily due to an increase in interest income of $0.8 million for the three months ending in September 2000, primarily due to reinvestment of funds from the November 1999 $46.8 million follow-on equity offering. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Research and development expenses increased 7.9% to $2.0 million in the three months ended September 30, 2000 from $1.9 million in the three months ended September 30, 1999. The increase is primarily attributable to an increase in contracted research costs at various institutions, supplies and personnel costs. These increases were partially offset by a reduction in the cost of clinical trials. These costs tend to fluctuate from period to period depending upon the status of the Company’s research projects and collaborative efforts. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> General and administrative expenses increased 8.9% to $709,000 in the three months ended September 30, 2000 from $651,000 in the three months ended September 30, 1999. The increase is primarily the net result of increased personnel costs and fees related to a new Alabama share tax assessment, partially offset by a reduction in legal expenses. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Results of Operations (nine months ended September 30, 2000 compared to the nine months ended September 30, 1999)</I></B> </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Revenues increased 134.4% to $7.9 million in the first nine months of 2000 from $3.4 million in the first nine months of 1999. The increase was primarily attributable to a milestone payment of $4.0 million received from The R.W. Johnson Pharmaceutical Research Institute (“RWJPRI”) in February 2000 versus a $2.0 million payment received from Ortho-McNeil Pharmaceutical, Inc. (“Ortho-McNeil”) in June 1999. Both RWJPRI and Ortho-McNeil are Johnson and Johnson companies. In addition, there was an increase of $2.3 million in interest income, primarily due to reinvestment of funds from the November 1999 $46.8 million follow-on equity offering. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Research and development expenses increased 13.3% to $6.7 million in the first nine months of 2000 from $5.9 million in the first nine months of 1999. The increase is primarily attributable to an increase in contracted research costs at various institutions, supplies and personnel costs. These increases were partially offset by a decrease in costs associated with conducting clinical trials. These costs tend to fluctuate from period to period depending upon the status of the Company’s research projects and collaborative efforts. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> General and administrative expenses increased 22.4% to $2.6 million in the first nine months of 2000 from $2.1 million in the first nine months of 1999. The increase is primarily the result of increased personnel costs and fees related to a new Alabama share tax assessment, partially offset by a reduction in legal expenses. Royalty expense increased 100.0% to $0.4 million for the first nine months of 2000 due to royalty payments to the University of Alabama at Birmingham (UAB) in connection with milestone payments received from RWJPRI and Ortho-McNeil. These milestone payments were $4.0 million and $2.0 million for the nine months ended September 30, 2000 and September 30, 1999, respectively. </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 1; page: 1" --> <HR SIZE=5 NOSHADE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Head Minor" --> <A NAME="Liquidity_and_Capital_Resources"></A> <H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><I>Liquidity and Capital Resources</I></FONT></FONT></H2> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Cash expenditures have exceeded revenues since the Company’s inception. Our operations have principally been funded through various sources, including the following: </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> public offerings and private placements of equity and debt securities, </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> equipment lease financing, </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> facility leases, </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> collaborative and other research and development agreements (including licenses and options for licenses), o research grants and </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> interest income. </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> In addition, we have attempted to contain costs and reduce cash flow requirements by renting scientific equipment and facilities, contracting with other parties to conduct certain research and development and using consultants. We expect to incur additional expenses, potentially resulting in significant losses, as we continue to expand our research and development activities and undertake additional pre-clinical studies and clinical trials of compounds, which have been or may be discovered. We also expect to incur substantial expenses related to the filing, prosecution, maintenance, defense and enforcement of patent and other intellectual property claims. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> At September 30, 2000, our cash, cash equivalents and securities held-to-maturity were $68.5 million, a decrease of $1.6 million from December 31, 1999, principally due to the funding of current operations and funding for the remodeling of our facilities. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> We have financed some of our equipment purchases with lease lines of credit. We currently have a $500,000 general line of credit with our bank. There was nothing drawn against this line as of September 30, 2000. In July 2000, we renegotiated our lease for our current facilities, which will expire on June 30, 2010. We have an option to renew the lease for an additional five years at current market rates. The operating lease requires us to pay monthly rent starting at $32,180 per month and escalating annually to a minimum of $41,987 per month in the final year, and our pro rata share of operating expenses and real estate taxes in excess of base year amounts. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> We are in the process of remodeling our facilities to gain additional laboratory space, update our existing laboratories, and add a small Good Manufacturing Practices (GMP) laboratory. In addition, we are updating our general office facility to provide for growth and efficiencies. The total cost of these changes, including furniture and laboratory equipment, is projected to be approximately $2.4 million. We expect to be completed with this phase of remodeling by December 31, 2000. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> At December 31, 1999, we had long-term capital lease and operating lease obligations, which provide for aggregate minimum payments of $301,171 in 2000, $299,253 in 2001 and $300,828 in 2002. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Under the terms of our license agreement with RWJPRI and Ortho-McNeil, for the development and commercialization of our influenza neuraminidase inhibitors, we received an initial $6.0 million payment from Ortho-McNeil and an additional $6.0 million common stock equity investment from Johnson & Johnson Development Corporation in 1998. In June 1999, we received a $2.0 million milestone payment from Ortho-McNeil in connection with the initiation of Phase II clinical testing in the United States. In February 2000, we received a $4.0 million milestone payment from RWJPRI in connection with the initiation of Phase III clinical testing. In addition, we may receive cash payments upon specified developmental and regulatory milestones and royalties on product sales, if any. We cannot assure you that RWJPRI or Ortho-McNeil will continue to develop the product or, if they do so, that such development will result in receiving milestone payments, obtaining regulatory approval, or achieving future sales of licensed products. For example, on October 11, 2000 we were notified by RWJPRI that “due solely to logistical considerations,” during this influenza season, they would not be able to “initiate two clinical studies in the Northern Hemisphere for our influenza neuraminidase inhibitor in elderly patients.” However, they informed us that they “anticipate proceeding as planned with the pivotal Phase III clinical studies of RWJ-270201 in the Northern Hemisphere during this influenza season.” </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 2; page: 2" --> <HR SIZE=5 NOSHADE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> We plan to finance our needs principally from the following: </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> our existing capital resources and interest earned on that capital; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> payments under collaborative and licensing agreements with corporate partners; and </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> through lease or loan financing and future public or private financing. </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> We believe that our available funds will be sufficient to fund our operations at least through 2002. However, this is a forward-looking statement, and there may be changes that would consume available resources significantly before such time. Our long-term capital requirements and the adequacy of our available funds will depend upon many factors, including: </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> the progress of our research, drug discovery and development programs; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> changes in existing collaborative relationships; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> our ability to establish additional collaborative relationships; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> the magnitude of our research and development programs; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> the scope and results of pre-clinical studies and clinical trials to identify drug candidates; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> competitive and technological advances; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> the time and costs involved in obtaining regulatory approvals; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> the costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> our dependence on others, including RWJPRI and Ortho-McNeil, for development and commercialization of our product candidates, in particular, our neuraminidase inhibitor; and </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> successful commercialization of our products consistent with our licensing strategy. </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Additional funding, whether through additional sales of securities or collaborative or other arrangements with corporate partners or from other sources, may not be available when needed or on terms acceptable to us. The issuance of preferred or common stock or convertible securities, on terms and prices significantly more favorable than those of the currently outstanding common stock, could have the effect of diluting or adversely affecting the holdings or rights of our existing stockholders. In addition, collaborative arrangements may require us to transfer certain material rights to such corporate partners. Insufficient funds may require us to delay, scale-back or eliminate certain of our research and development programs. </FONT></P> <!-- MARKER FORMAT-SHEET="Head Minor" --> <H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><I>Certain Risk Factors That May Affect Future Results, Financial Condition and the Market Price of Securities</I></FONT></FONT></H2> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>We have incurred substantial losses since our inception in 1986, expect to continue to incur such losses, may never be profitable and may need additional financing</I> </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Since our inception in 1986, we have not been profitable. We expect to incur additional losses for the foreseeable future, and our losses could increase as our research and development efforts progress. As of September 30, 2000, our accumulated deficit was approximately $60.2 million. To become profitable, we must successfully develop drug candidates, enter into profitable agreements with other parties and our drug candidates must receive regulatory approval. These other parties must then successfully manufacture and market our drug candidates. It could be several years, if ever, before we receive royalties under our existing license agreements or any future license agreements. In addition, we never expect to generate revenue directly from product sales. If we do not generate revenue, or if our drug development expenses increase, we may need to raise additional funds through new or existing collaborations or through private or public equity or debt financing. If financing is not available on acceptable terms or not available at all, we may not have enough capital to continue our current business strategy. </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 3; page: 3" --> <HR SIZE=5 NOSHADE> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <BR> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>If RWJPRI and Ortho-McNeil were to terminate, substantially modify or fail to fulfill their obligations under their license agreement with us, we would lose substantially all of our revenue</I> </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> If RWJPRI and Ortho-McNeil change their exclusive worldwide license agreement with us, including by terminating it or failing to fulfill their obligations, we would lose substantially all of our revenue. Approximately 59.2% of our revenues for the nine months ended September 30, 2000, approximately 46.9% of our revenues for the year ended December 31, 1999 and approximately 83.5% of our revenues for the year ended December 31, 1998 resulted from this license agreement. These revenues represent approximately 45.6% of our total revenues since our inception in 1986. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under this agreement, RWJPRI and Ortho-McNeil have several rights that could delay or stop the development of our flu drug candidate, including sole discretion on all elements of research and development of RWJ-270201, including timing and design of further clinical trials, sole control over the amount of resources devoted to the research and development of RWJ-270201 and the right to terminate or cancel the agreement, which they may do at any time on four months notice. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>If our development collaborations with other parties fail, the development of our drug candidates will be delayed or stopped</I> </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> We rely completely upon other parties for many important stages of our drug development programs, including: </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> discovery of proteins that cause or enable biological reactions necessary for the progression of the disease or disorder, called enzyme targets; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> execution of some pre-clinical studies and late-stage development for our compounds and drug candidates; and </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> manufacturing, sales, marketing and distribution of our drug candidates. </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Our failure to engage in successful collaborations at any one of these stages would greatly impact our business. For example, if we do not license enzyme targets from academic institutions or from other biotechnology companies on acceptable terms, our product development efforts would suffer. Similarly, if the contract research organizations that conduct our initial clinical trials breached their obligations to us, this would delay or prevent the development of our drug candidates. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Even more critical to our success is our ability to enter into successful collaborations for the late-stage clinical development, regulatory approval, manufacture, marketing, sales and distribution of our drug candidates. Our strategy is to rely upon other parties for all of these steps so that we can focus exclusively on the key areas of our expertise. This heavy reliance upon third parties for these critical functions presents several risks, including: </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> these contracts may expire or the other parties to the contract may terminate them; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> our partners may choose to pursue alternative technologies, including those of our competitors; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> we may have disputes with a partner that could lead to litigation or arbitration; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> our partners may not devote sufficient capital or resources towards our drug candidates; and </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> our partners may not comply with applicable government regulatory requirements. </FONT></TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 4; page: 4" --> <HR SIZE=5 NOSHADE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Any problems encountered with our partners could delay or prevent the development of our compounds, which would severely affect our business, because if our compounds do not reach the market in a timely manner, or at all, we will experience a significant decrease in milestone payments received by us and may never receive any royalty payments. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>If the clinical trials of our drug candidates fail, our drug candidates will not be marketed, which would result in a decrease in, or complete absence of, revenue</I> </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> To receive the regulatory approvals necessary for the sale of our drug candidates, we or our licensees must demonstrate through pre-clinical studies and clinical trials that each drug candidate is safe and effective. If we or our licensees are unable to demonstrate that our drug candidates are safe and effective, our drug candidates will not receive regulatory approval and will not be marketed, which would result in a decrease in, or complete absence of, revenue. The clinical trial process is complex and uncertain. Positive results from pre-clinical studies and early clinical trials do not ensure positive results in clinical trials designed to permit application for regulatory approval, called pivotal clinical trials. We may suffer significant setbacks in pivotal clinical trials, even after earlier clinical trials show promising results. Any of our drug candidates may produce undesirable side effects in humans. These side effects could cause us or regulatory authorities to interrupt, delay or halt clinical trials of a drug candidate. These side effects could also result in the FDA or foreign regulatory authorities refusing to approve the drug candidate for any targeted indications. We, our licensees, the FDA or foreign regulatory authorities may suspend or terminate clinical trials at any time if we or they believe the trial participants face unacceptable health risks. Clinical trials may fail to demonstrate that our drug candidates are safe or effective. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Clinical trials are lengthy and expensive. We or our licensees incur substantial expense for, and devote significant time to, pre-clinical testing and clinical trials, yet cannot be certain that the tests and trials will ever result in the commercial sale of a product. For example, clinical trials require adequate supplies of drug and sufficient patient enrollment. Delays in patient enrollment can result in increased costs and longer development times. Even if we or our licensees successfully complete clinical trials for our product candidates, our licensees might not file the required regulatory submissions in a timely manner and may not receive regulatory approval for the drug candidate. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> We licensed our flu drug candidate, RWJ-270201, to Ortho-McNeil and to RWJPRI, who are conducting Phase III clinical trials. However, the Phase III clinical trials may not be successful. Even if RWJPRI completes the Phase III trials, we do not know when, if ever, it will receive FDA or foreign regulatory agency approvals for, or when Ortho-McNeil will begin marketing of, RWJ-270201. If RWJPRI is unable to complete the clinical trials or demonstrate the safety and efficacy of our compounds, the loss of our future revenues that depend on the success of RWJ-270201 will harm our business. Even if the results of RWJPRI’s trials are positive, a product is not likely to be commercially available for one or more years, if at all. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> On October 11, 2000, we were notified by RWJPRI that “due solely to logistical considerations, The R.W. Johnson Research Institute will not be in a position during this influenza season to initiate two clinical studies in the Northern Hemisphere for our influenza neuraminidase inhibitor in elderly patients.” RWJPRI also added that, “we anticipate proceeding as planned with the pivotal Phase III clinical studies of RWJ-270201 in the Northern Hemisphere during this influenza season.” RWJPRI also informed BioCryst that it is unlikely they will be able to file a new drug application (NDA) for RWJ-270201 with the U.S. Food and Drug Administration (FDA) before 2002. We issued a press release on October 12, 2000 to announce that we had been notified of this information by RWJPRI. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>If we or our licensees do not obtain and maintain governmental approvals for our products under development, we or our partners will not be able to sell these potential products, which would significantly harm our business because we will receive no revenue</I> </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> We or our licensees must obtain regulatory approval before marketing or selling our future drug products. If we or our licensees are unable to receive regulatory approval and do not market or sell our future drug products, we will never receive any revenue from such product sales. In the United States, we or our partners must obtain FDA approval for each drug that we intend to commercialize. The FDA approval process is typically lengthy and expensive, and approval is never certain. Products distributed abroad are also subject to foreign government regulation. The FDA or foreign regulatory agencies have not approved any of our drug candidates. If we or our licensees fail to obtain regulatory approval we will be unable to market and sell our future drug products. We have several drug products in various stages of pre-clinical and clinical development; however, we are unable to determine when, if ever, any of these products will be commercially available. Because of the risks and uncertainties in biopharmaceutical development, our drug candidates could take a significantly longer time to gain regulatory approval than we expect or may never gain approval. If the FDA delays regulatory approval of our drug candidates, our management’s credibility, our company’s value and our operating results may suffer. Even if the FDA or foreign regulatory agencies approve a drug candidate, the approval may limit the indicated uses for a drug candidate and/or may require post-marketing studies. </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 5; page: 5" --> <HR SIZE=5 NOSHADE> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <BR> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> The FDA regulates, among other things, the record keeping and storage of data pertaining to potential pharmaceutical products. We currently store most of our pre-clinical research data at our facility. While we do store duplicate copies of some of our clinical data offsite, we could lose important pre-clinical data if our facility incurs damage. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> If we get approval to market our potential products, whether in the United States or internationally, we will continue to be subject to extensive regulatory requirements. These requirements are wide ranging and govern, among other things: </FONT></P> </TD> </TR> </TABLE><BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> adverse drug experience reporting regulations; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> product promotion; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> product manufacturing, including good manufacturing practice requirements; and </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> product changes or modifications. </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Our failure to comply with existing or future regulatory requirements, or our loss of, or changes to, previously obtained approvals, could have a material adverse effect on our business because we will not receive royalty revenues if our licensees do not receive approval of our products for marketing. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> In June 1995, we notified the FDA that we submitted incorrect efficacy data for our Phase II trials of BCX-34 applied to the skin for the treatment of cutaneous T-cell lymphoma and psoriasis. Cutaneous T-cell lymphoma is a skin cancer in which T-cells, which normally help fight disease in the body, duplicate rapidly and cause skin cancer. Psoriasis is a disease where the immune system attacks the body’s own skin cells. The FDA inspected us and issued to us Lists of Inspectional Observations, on Form FDA 483, that cited our failure to follow good clinical practices. The FDA also issued a Form FDA 483 to a principal investigator at a clinical trial site, and the FDA notified us that they would not accept any work performed by this investigator without further validation. Because of these investigations by the FDA, our ongoing and future clinical studies or trials may receive increased scrutiny, which would delay the regulatory review process. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>If our drug candidates do not achieve broad market acceptance, our business may never become profitable</I></FONT></FONT> </P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Our drug candidates, including our influenza neuraminidase inhibitor, may not gain the market acceptance required for us to be profitable even after they receive approval for sale by the FDA or foreign regulatory agencies. Influenza neuraminidase inhibitors are drugs designed to stop the spread of the flu virus in the body. The degree of market acceptance of any drug candidates that we or our partners develop will depend on a number of factors, including: </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> cost-effectiveness of our drug candidates; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> their safety and effectiveness relative to alternative treatments, such as Hoffmann-La Roche’s and Glaxo Wellcome’s influenza neuraminidase inhibitors, amantadine, rimantadine, or vaccines for prevention of influenza; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> reimbursement policies of government and third-party payers; and </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> marketing and distribution support for our drug candidates. </FONT></TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 6; page: 6" --> <HR SIZE=5 NOSHADE> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <BR> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Physicians, patients, payers or the medical community in general may not accept or use our drug candidates even after the FDA or foreign regulatory agencies approve the drug candidates. If our drug candidates do not achieve significant market acceptance, we will not have enough revenues to become profitable. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>If competitive products from other companies are better than our product candidates, our future revenues might fail to meet expectations</I> </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> The biotechnology and pharmaceutical industries are highly competitive and are subject to rapid and substantial technological change. Other products and therapies that either currently exist on the market or are under development could compete directly with some of the compounds that we are seeking to develop and market. These other products may render some or all of our compounds under development noncompetitive or obsolete. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> If our influenza neuraminidase inhibitor drug candidate, RWJ-270201, receives FDA or foreign regulatory approval, it will have to compete with a number of products that are already on the market such as vaccines, the two influenza neuraminidase inhibitors already on the market, the drugs amantadine and rimantadine and with additional products that may beat RWJ-270201 to the market. If approved, RWJ-270201 will be, at best, the third neuraminidase inhibitor to the market, because the FDA has approved both Glaxo-Wellcome’s and Hoffman-La Roche’s neuraminidase inhibitors in the U.S. and both companies have also obtained approval in several other countries. Both Glaxo-Wellcome and Hoffmann-La Roche, the companies responsible for the development and marketing of the two neuraminidase inhibitors that reached the market before RWJ-270201, are large multinational pharmaceutical companies that have significant financial, technical and human resources and could therefore establish brand recognition and loyalty with consumers before RWJ-270201 is on the market. Another potential competitor is Aviron Inc. with their inhaled FluMist vaccine. They are in the process of completing the requirements they believe necessary to support a Biologics License Application to the FDA in the fourth quarter 2000. Products marketed by our competitors may prove to be more effective than our own, and our products, if any, may not offer an economically feasible or preferable alternative to existing therapies. If we fail to adequately protect or enforce our intellectual property rights or secure rights to patents of others, the value of those rights would diminish. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Our success will depend in part on our ability and the abilities of our licensors to obtain patent protection for our products, methods, processes and other technologies to preserve our trade secrets, and to operate without infringing the proprietary rights of third parties. If we or our partners are unable to adequately protect or enforce our intellectual property rights for our products, methods, processes and other technologies, the value of the drug candidates that we license to derive revenue would diminish. Additionally, if our products, methods, processes and other technologies infringe the proprietary rights of other parties, we could incur substantial costs. The U.S. Patent and Trademark Office has issued to us a number of U.S. patents for our various inventions and we have in-licensed several patents from various institutions. We have filed additional patent applications and provisional patent applications with the U.S. Patent and Trademark Office. We have filed a number of corresponding foreign patent applications and intend to file additional foreign and U.S. patent applications, as appropriate. We cannot assure you as to: </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> the degree and range of protection any patents will afford against competitors with similar products; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> if and when patents will issue; or </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> whether or not others will obtain patents claiming aspects similar to those covered by our patent applications. </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> If the U.S. Patent and Trademark Office upholds patents issued to others or if the U.S. Patent and Trademark Office grants patent applications filed by others, we may have to: </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> obtain licenses or redesign our products or processes to avoid infringement; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> stop using the subject matter claimed in those patents; or </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> pay damages. </FONT></TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 7; page: 7" --> <HR SIZE=5 NOSHADE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> We may initiate, or others may bring against us, litigation or administrative proceedings related to intellectual property rights, including proceedings before the U.S. Patent and Trademark Office. Any judgement adverse to us in any litigation or other proceeding arising in connection with a patent or patent application could materially and adversely affect our business, financial condition and results of operations. In addition, the costs of any such proceeding may be substantial whether or not we are successful. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Our success is also dependent upon the skills, knowledge and experience, none of which is patentable, of our scientific and technical personnel. To help protect our rights, we require all employees, consultants, advisors and collaborators to enter into confidentiality agreements that prohibit the disclosure of confidential information to anyone outside of our company and require disclosure and assignment to us of their ideas, developments, discoveries and inventions. These agreements may not provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure or the lawful development by others of such information, and if any of our proprietary information is disclosed, our business will suffer because our revenues depend upon our ability to license our technology and any such events would significantly impair the value of such a license. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>If we fail to retain our existing key personnel or fail to attract and retain additional key personnel, the development of our drug candidates and the expansion of our business will be delayed or stopped</I> </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> We are highly dependent upon our senior management and scientific team, the loss of whose services might impede the achievement of our development and commercial objectives. Although we maintain, and are the beneficiary of, a $1.8 million key-man insurance policy on the life of Charles E. Bugg, Ph.D., Chairman of the Board of Directors and Chief Executive Officer, we do not believe the proceeds would be adequate to compensate for his loss. Competition for key personnel with the experience that we require is intense and is expected to continue to increase. Our inability to attract and retain the required number of skilled and experienced management, operational and scientific personnel, will harm our business because we rely upon these personnel for many critical functions of our business. In addition, we rely on members of our scientific advisory board and consultants to assist us in formulating our research and development strategy. All of the members of the scientific advisory board and all of our consultants are otherwise employed and each such member or consultant may have commitments to other entities that may limit their availability to us. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>If users of our drug products are not reimbursed for use, future sales of our drug products will decline</I> </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> The lack of reimbursement for the use of our product candidates by hospitals, clinics, patients or doctors will harm our business. Medicare, Medicaid, health maintenance organizations and other third-party payers may not authorize or otherwise budget for the reimbursement of our products. Governmental and third-party payers are increasingly challenging the prices charged for medical products and services. We cannot be sure that third-party payers would view our product candidates as cost-effective, that reimbursement will be available to consumers or that reimbursement will be sufficient to allow our product candidates to be marketed on a competitive basis. Changes in reimbursement policies, or attempts to contain costs in the health care industry, limit or restrict reimbursement for our product candidates, would materially and adversely affect our business, because future product sales would decline and we would receive less royalty revenue. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>If we face clinical trial liability claims related to the use or misuse of our compounds in clinical trials, our management’s time will be diverted and we will incur litigation costs</I> </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> We face an inherent business risk of liability claims in the event that the use or misuse of our compounds results in personal injury or death. We have not experienced any clinical trial liability claims to date, but we may experience these claims in the future. After commercial introduction of our products we may experience losses due to product liability claims. We currently maintain clinical trial liability insurance coverage in the amount of $1.0 million per occurrence and $2.0 million in the aggregate, with an additional $5.0 million potentially available under our umbrella policy. The insurance policy may not be sufficient to cover claims that may be made against us. Clinical trial liability insurance may not be available in the future on acceptable terms, if at all. Any claims against us, regardless of their merit, could materially and adversely affect our financial condition, because litigation related to these claims would strain our financial resources in addition to consuming the time and attention of our management. </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 8; page: 8" --> <HR SIZE=5 NOSHADE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>If our computer systems fail, our business will suffer harm</I></FONT></FONT> </P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Our drug development activities depend on the security, integrity and performance of the computer systems supporting them, and the failure of our computer systems would delay or stop our drug development efforts. We currently store most of our pre-clinical and clinical data at our facility. Duplicate copies of some data are stored off-site, but we could lose important data if our systems are impaired. Any significant degradation or failure of our computer systems could cause us to inaccurately calculate or lose our data. Loss of data could result in significant delays in our drug development process and any system failure could harm our business and operations. We are in the process of upgrading our computer network and systems company-wide. Software we have installed is designed to automatically archive critical scientific raw data. We have installed additional hardware and software to protect our systems from outside intrusion. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>If, because of our use of hazardous materials, we violate any environmental controls or regulations that apply to such materials, we may incur substantial costs and expenses in our remediation efforts</I> </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Our research and development involves the controlled use of hazardous materials, chemicals and various radioactive compounds. We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and some waste products. Accidental contamination or injury from these materials could occur. In the event of an accident, we could be liable for any damages that result and any liabilities could exceed our resources. Compliance with environmental laws and regulations could require us to incur substantial unexpected costs, which would materially and adversely affect our results of operations. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Because stock ownership is concentrated, you and other investors will have minimal influence on stockholder decisions</I> </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Our directors, executive officers and some principal stockholders and their affiliates, including Johnson & Johnson Development Corporation, beneficially own approximately 31.2% of our outstanding common stock and common stock equivalents. As a result, these holders, if acting together, are able to significantly influence matters requiring stockholder approval, including the election of directors. This concentration of ownership may delay, defer or prevent a change in our control. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>We have anti-takeover provisions in our corporate charter documents that may result in outcomes with which you do not agree</I> </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> Our board of directors has the authority to issue up to 5,000,000 shares of undesignated preferred stock and to determine the rights, preferences, privileges and restrictions of those shares without further vote or action by our stockholders. The rights of the holders of any preferred stock that may be issued in the future may adversely affect the rights of the holders of common stock. The issuance of preferred stock could make it more difficult for third parties to acquire a majority of our outstanding voting stock. </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> In addition, our certificate of incorporation provides for staggered terms for the members of the board of directors and supermajority approval of the removal of any member of the board of directors and prevents our stockholders from acting by written consent. Our certificate also requires supermajority approval of any amendment of these provisions. These provisions and other provisions of our by-laws and of Delaware law applicable to us could delay or make more difficult a merger, tender offer or proxy contest involving us. </FONT></P> <!-- MARKER FORMAT-SHEET="Para Flush 10" --> <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Our stock price is likely to be highly volatile and the value of your investment could decline significantly</I> </FONT></P> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> The market prices for securities of biotechnology companies in general have been highly volatile and may continue to be highly volatile in the future. Moreover, our stock price has fluctuated frequently, and these fluctuations are often not related to our financial results. For the twelve months ended September 30, 2000, the 52-week range of the market price of our stock has been from $15.50 to $37.25 per share, and the market price has been as low as $4.25 since September 30, and, specifically, since the announcement by RWJPRI of the delay in two clinical studies on elderly patients using the influenza neuraminidase inhibitor RWJ-270201. This range is significantly greater than that experienced by many other companies. The following factors, in addition to other risk factors described in this section, may have a significant impact on the market price of our common stock: </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 9; page: 9" --> <HR SIZE=5 NOSHADE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> announcements of technological innovations or new products by us or our competitors; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> developments or disputes concerning patents or proprietary rights; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> our licensees achieving or failing to achieve development milestones; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> publicity regarding actual or potential medical results relating to products under development by us or our competitors; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> regulatory developments in both the United States and foreign countries; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> public concern as to the safety of pharmaceutical products; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> actual or anticipated fluctuations in our operating results; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> changes in financial estimates or recommendations by securities analysts; </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> economic and other external factors or other disasters or crises; and </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Bullet 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>•</FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> period-to-period fluctuations in our financial results. </FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Head Minor" --> <H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Item 3. Quantitative and Qualitative Disclosures about Market Risk</FONT></H2> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> The primary objective of our investment activities is to preserve principal while at the same time maximize the income we receive from our investments without significantly increasing our risk. We invest excess cash principally in U.S. marketable securities from a diversified portfolio of institutions with strong credit ratings and in U.S. government and agency bills and notes, and by policy, limit the amount of credit exposure at any one institution. Some of the securities we invest in may have market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. To minimize this risk, we schedule our investments to coincide with our cash flow needs, thus avoiding the need to redeem an investment prior to its maturity date. Accordingly, we believe we have no material exposure to interest rate risk arising from our investments. Therefore, no quantitative tabular disclosure is provided. </FONT></P> <!-- MARKER FORMAT-SHEET="Head Major 10" --> <H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART II. OTHER INFORMATION</FONT></H1> <!-- MARKER FORMAT-SHEET="Head Minor" --> <H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Item 1. Legal Proceedings:</FONT></H2> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> None. </FONT></P> <!-- MARKER FORMAT-SHEET="Head Minor" --> <H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Item 2. Changes in Securities and Use of Proceeds:</FONT></H2> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> None </FONT></P> <!-- MARKER FORMAT-SHEET="Head Minor" --> <H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Item 3. Defaults Upon Senior Securities:</FONT></H2> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> None </FONT></P> <!-- MARKER FORMAT-SHEET="Head Minor" --> <H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Item 4. Submission of Matters to a Vote of Security Holders:</FONT></H2> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> None </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 10; page: 10" --> <HR SIZE=5 NOSHADE> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <BR> <!-- MARKER FORMAT-SHEET="Head Minor" --> <H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Item 5. Other Information:</FONT></H2> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> None. </FONT></P> <!-- MARKER FORMAT-SHEET="Head Minor" --> <A NAME="Item_6._Exhibits_and_Reports_on_Form_8-K:"></A> <H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Item 6. Exhibits and Reports on Form 8-K:</FONT></H2> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> a. Exhibits: </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Number</B></FONT></FONT> </TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=91% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Description</B></FONT></FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.1 </FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Composite Certificate of Incorporation of Registrant. Incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q for the second quarter ending June 30, 1995 dated August 11, 1995.</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.2</FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Bylaws of Registrant. Incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q for the second quarter ending June 30, 1995 dated August 11, 1995.</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.1</FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> See Exhibits 3.1 and 3.2 for provisions of the Composite Certificate of Incorporation and Bylaws of the Registrant defining rights of holders of Common Stock of the Registrant.</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.1 </FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1991 Stock Option Plan, as amended and restated as of March 6, 2000. Incorporated by reference to Exhibit 99.1 to the Company’s Form S-8 Registration Statement dated June 16, 2000 (Registration No. 333-39484).</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.2</FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Employment Agreement dated December 27, 1999 between the Registrant and Charles E. Bugg, Ph.D. Incorporated by reference to Exhibit 10.10 to the Company’s Form 10-K for the year ending December 31, 1999 dated March 24, 2000.</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.3 </FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>License Agreement dated April 15, 1993 between Ciba-Geigy Corporation (now merged into Novartis) and the Registrant. Incorporated by reference to Exhibit 10.40 to the Company’s Form S-1 Registration Statement (Registration No. 33-73868).</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.4 </FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employee Stock Purchase Plan. Incorporated by reference to Exhibit 99.4 to the Company’s Form S-8 Registration Statement (Registration No. 33-95062).</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.5#</FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> License Agreement dated as of September 14, 1998 between Registrant and The R.W. Johnson Pharmaceutical Research Institute and Ortho-McNeil Pharmaceutical, Inc. Incorporated by reference to Exhibit 10.23 to the Company’s Form 10-Q for the third quarter ending September 30, 1998 dated November 10, 1998.</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.6#</FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Stock Purchase Agreement dated as of September 14, 1998 between Registrant and Johnson & Johnson Development Corporation. Incorporated by reference to Exhibit 10.24 to the Company’s Form 10-Q for the third quarter ending September 30, 1998 dated November 10, 1998.</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.7#</FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Stockholder’s Agreement dated as of September 14, 1998 between Registrant and Johnson & Johnson Development Corporation. Incorporated by reference to Exhibit 10.25 to the Company’s Form 10-Q for the third quarter ending September 30, 1998 dated November 10, 1998.</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.8</FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Warehouse Lease dated July 12, 2000 between RBP, LLC an Alabama Limited Liability Company and the Registrant for office/warehouse space. Incorporated by reference to Exhibit 10.8 to the Company’s Form 10-Q for the second quarter ending June 30, 2000 dated August 8, 2000.</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>27.1* </FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial Data Schedule.</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Footnote Rule" --> <HR SIZE=1 NOSHADE WIDTH=15% ALIGN=LEFT> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2># </FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Confidential treatment granted.</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* </FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Filed herewith.</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Hang Arabic 10" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b. </FONT></TD> <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD> <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reports on Form 8-K:</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Para Flush 10 In 1" --> <TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0> <TR VALIGN=TOP> <TD WIDTH=5%> </TD> <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> None.</FONT></TD> </TR> </TABLE> <BR> <!-- *************************************************************************** --> <!-- MARKER PAGE="sheet: 11; page: 11" --> <HR SIZE=5 NOSHADE> <BR> <!-- MARKER FORMAT-SHEET="Page Width Start" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD> <!-- MARKER FORMAT-SHEET="Head Major 10" --> <A NAME="SIGNATURES"></A> <H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SIGNATURES</FONT></H1> <!-- MARKER FORMAT-SHEET="Para 10" --> <P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> 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. </FONT></P> <!-- MARKER FORMAT-SHEET="Page Width End" --> </TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Signature (Single)" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD> <TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD> <TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>BIOCRYST PHARMACEUTICALS, INC.</B></FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Signature (Single)" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: November 8, 2000 </FONT></TD> <TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD> <TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> /s/ Charles E. Bugg<BR>——————————————<BR> Charles E. Bugg<BR>Chairman and Chief Executive Officer</FONT></TD> </TR> </TABLE> <BR> <!-- MARKER FORMAT-SHEET="Signature (Single)" --> <TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0> <TR VALIGN=TOP> <TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: November 8, 2000 </FONT></TD> <TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD> <TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> /s/ W. Randall Pittman<BR>——————————————<BR> W. Randall Pittman<BR>Chief Financial Officer and Chief Accounting Officer</FONT></TD> </TR> </TABLE> <BR> </BODY> </HTML>