** **

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON,D.C.  20549**

 

**FORM 10-Q**

 

 

 

ý           **Quarterly Report Pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934 for the Period Ended September 30, 2002.**

 

**or**

 

**o           TransitionReport Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934for the Transition Period From                                       to                                      .**

 

**Commissionfile number 0-27436**

 

 

**TitanPharmaceuticals, Inc.**

(Exact name ofregistrant as specified in its charter)
| **Delaware**                     |   | **94-3171940**      |
|----------------------------------|--------|---------------------|
| (State or Other  Jurisdiction of |   | (I.R.S. Employer    |
| Incorporation or  Organization)  |   | Identification No.) |

 

**400 Oyster Point Blvd., Suite 505,South San Francisco, California 94080**

(Address ofPrincipal Executive Offices including zip code)

 

**(650) 244-4990**

(Registrant’sTelephone Number, Including Area Code)

 

 

Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the preceding 12 months (or forsuch shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90 days.  Yes ýNo o

 

 

There were27,642,085 shares of the Registrant’s Common Stock issued and outstanding onNovember 6, 2002.

 

 

 

 

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**TitanPharmaceuticals, Inc**.

**Index toForm 10-Q**

 

 

 
| **Part I.**        |   | **Financial Information**                                                                                      |   |   |
|--------------------|--------|----------------------------------------------------------------------------------------------------------------|--------|--------|
|               |   |                                                                                                           |   |   |
|               |   | Item 1.  Condensed Financial Statements (unaudited)                                                       |   |   |
|               |   |                                                                                                           |   |   |
|               |   | Condensed Consolidated  Balance Sheets September 30, 2002 and December 31, 2001                           |   |   |
|               |   |                                                                                                           |   |   |
|               |   | Condensed  Consolidated Statements of Operations Three and nine months ended  September 30, 2002 and 2001 |   |   |
|               |   |                                                                                                           |   |   |
|               |   | Condensed  Consolidated Statements of Cash Flows Nine months ended September 30,  2002 and 2001           |   |   |
|               |   |                                                                                                           |   |   |
|               |   | Notes  to Condensed Consolidated Financial Statements                                                          |   |   |
|               |   |                                                                                                           |   |   |
|               |   | Item  2.  Management’s Discussion and  Analysis of Financial Condition and Results of Operations     |   |   |
|               |   |                                                                                                           |   |   |
|               |   | Item  3.  Quantitative and Qualitative  Disclosures About Market Risk                                     |   |   |
|               |   |                                                                                                           |   |   |
|               |   | Item 4. Controls and  Procedures                                                                               |   |   |
|               |   |                                                                                                           |   |   |
| **Part II.**       |   | **Other Information**                                                                                          |   |   |
|               |   |                                                                                                           |   |   |
|               |   | Item  4.  Submission of Matters to a Vote of Security Holders                                             |   |   |
|               |   |                                                                                                           |   |   |
|               |   | Item 6.  Exhibits and Reports on Form 8-K                                                                 |   |   |
|               |   |                                                                                                           |   |   |
| **SIGNATURES**     |   |                                                                                                           |   |   |
|               |   |                                                                                                           |   |   |
| **CERTIFICATIONS** |   |                                                                                                           |   |   |

** **

 

 

 

----

 

 

##### **Part I.  Financial Information**

 

**TITAN PHARMACEUTICALS, INC.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(in thousands)**

 
|                                                           |   | **September  30,** |   | **December  31,** |   |
|----------------------------------------------------------------|--------|--------------------|--------|-------------------|--------|
|                                                           |   | **2002**           |   | **2001**          |   |
|                                                           |   | **(unaudited)**    |   | **(Note A)**      |   |
| **Assets**                                                     |   |               |   |              |   |
| Current assets                                                 |   |               |   |              |   |
| Cash and cash equivalents                                      |   | $                  | 7,037  |              | $      | 5,772 |   |
| Marketable securities                                          |   | 74,412             |   | 99,279            |   |
| Prepaid expenses, receivables, and other current  assets       |   | 1,294              |   | 906               |   |
| Total current assets                                           |   | 82,743             |   | 105,957           |   |
| Furniture and equipment, net                                   |   | 996                |   | 575               |   |
| Investment in other companies                                  |   | 300                |   | 600               |   |
|                                                           |   | $                  | 84,039 |              | $      | 107,132 |   |
| **Liabilities and Stockholders'  Equity**                      |   |               |   |              |   |
| Current liabilities                                            |   |               |   |              |   |
| Accounts payable                                               |   | $                  | 1,175  |              | $      | 894 |   |
| Accrued clinical trials expenses                               |   | 1,337              |   | 2,156             |   |
| Other accrued liabilities                                      |   | 906                |   | 714               |   |
| Deferred contract revenue                                      |   | 3⁄4             |   | 2,000             |   |
| Total current liabilities                                      |   | 3,418              |   | 5,764             |   |
| Minority interest - Series B preferred stock of  Ingenex, Inc. |   | 1,241              |   | 1,241             |   |
| Stockholders' equity                                           |   |               |   |              |   |
| Common stock, at amounts paid in                               |   | 191,685            |   | 191,684           |   |
| Additional paid-in capital                                     |   | 9,157              |   | 9,017             |   |
| Deferred compensation                                          |   | (689               | )      | (795              | )      |
| Accumulated deficit                                            |   | (120,948           | )      | (101,670          | )      |
| Accumulated other comprehensive income                         |   | 175                |   | 1,891             |   |
| Total stockholders' equity                                     |   | 79,380             |   | 100,127           |   |
|                                                           |   | $                  | 84,039 |              | $      | 107,132 |   |

----

Note A:  The balance sheet has been derived from theaudited financial statements at that date but does not include all of theinformation and footnotes required by generally accepted accounting principlesin the United States for complete financial statement presentation.

 

See Notesto Condensed Consolidated Financial Statements

 

 

 

2

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**TITAN PHARMACEUTICALS, INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(unaudited)**

**(in thousands, except per shareamount)**

 

 
|                                                                            |   | **Three  Months Ended September 30,** |   | **Nine  Months Ended September 30,** |   |
|---------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|
|                                                                            |   | **2002**                              |   | **2001**                             |   | **2002** |   | **2001** |   |
|                                                                            |   |                                  |   |                                 |   |   |   |   |   |
| Contract and grant revenue                                                      |   | $                                     | 158    |                                 | $      | 530 |   | $ | 2,656 |   | $ | 1,483 |   |
| License revenue                                                                 |   | 3⁄4                                |   | 3⁄4                               |   | 3⁄4 |   | 2,500 |   |
| Total revenue                                                                   |   | 158                                   |   | 530                                  |   | 2,656 |   | 3,983 |   |
|                                                                            |   |                                  |   |                                 |   |   |   |   |   |
| Operating expenses:                                                             |   |                                  |   |                                 |   |   |   |   |   |
| Research and development                                                        |   | 7,202                                 |   | 5,756                                |   | 21,607 |   | 16,096 |   |
| General and administrative                                                      |   | 1,314                                 |   | 1,312                                |   | 3,915 |   | 4,107 |   |
| Total operating expenses                                                        |   | 8,516                                 |   | 7,068                                |   | 25,522 |   | 20,203 |   |
| Loss from operations                                                            |   | (8,358                                | )      | (6,538                               | )      | (22,866 | ) | (16,220 | ) |
|                                                                            |   |                                  |   |                                 |   |   |   |   |   |
| Other income (expense):                                                         |   |                                  |   |                                 |   |   |   |   |   |
| Interest income, net                                                            |   | 1,070                                 |   | 1,770                                |   | 3,924 |   | 5,172 |   |
| Other expense                                                                   |   | (8                                    | )      | (19                                  | )      | (336 | ) | (92 | ) |
| Other income, net                                                               |   | 1,062                                 |   | 1,751                                |   | 3,588 |   | 5,080 |   |
| Net loss                                                                        |   | $                                     | (7,296 | )                                    | $      | (4,787 | ) | $ | (19,278 | ) | $ | (11,140 | ) |
|                                                                            |   |                                  |   |                                 |   |   |   |   |   |
| Basic and diluted net loss per share                                            |   | $                                     | (0.26  | )                                    | $      | (0.17 | ) | $ | (0.70 | ) | $ | (0.40 | ) |
|                                                                            |   |                                  |   |                                 |   |   |   |   |   |
| Weighted average shares used in computing basic and  diluted net loss per share |   | 27,642                                |   | 27,643                               |   | 27,642 |   | 27,577 |   |
|                                                                            |

 

See Notesto Condenses Consolidated Financial Statements

 

 

 

3

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**TITAN PHARMACEUTICALS, INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(unaudited)**

**(in thousands)**

 

 
|                                                                                      |   | **Nine  Months Ended September 30,** |    |
|-------------------------------------------------------------------------------------------|--------|--------------------------------------|---------|
|                                                                                      |   | **2002**                             |    | **2001** |   |
| **Cash flows from operating  activities:**                                                |   |                                 |    |   |   |
| Net loss                                                                                  |   | $                                    | (19,278 | ) | $ | (11,140 | ) |
| Adjustments to reconcile net loss to net cash  provided by(used in) operating activities: |   |                                 |    |   |   |
| Depreciation and amortization                                                             |   | 912                                  |    | 413 |   |
| Non-cash compensation related to stock options                                            |   | 245                                  |    | 498 |   |
| Changes in operating assets and liabilities:                                              |   |                                 |    |   |   |
| Prepaid expenses, receivables and other assets                                            |   | (729                                 | )       | (865 | ) |
| Accounts payable and other accrued liabilities                                            |   | (346                                 | )       | 57 |   |
| Deferred contract revenue                                                                 |   | (2,000                               | )       | 3⁄4 |   |
| Net cash used in operating activities                                                     |   | (21,196                              | )       | (11,037 | ) |
|                                                                                      |   |                                 |    |   |   |
| **Cash flows from investing  activities:**                                                |   |                                 |    |   |   |
| Purchases of furniture and equipment, net                                                 |   | (692                                 | )       | (204 | ) |
| Purchases of marketable securities                                                        |   | (14,922                              | )       | (61,299 | ) |
| Proceeds from maturities of marketable securities                                         |   | 29,543                               |    | 41,495 |   |
| Proceeds from sales of marketable securities                                              |   | 8,531                                |    | 16,127 |   |
| Net cash provided by (used in) investing activities                                       |   | 22,460                               |    | (3,881 | ) |
|                                                                                      |   |                                 |    |   |   |
| **Cash flows from financing  activities:**                                                |   |                                 |    |   |   |
| Issuance of common stock, net                                                             |   | 1                                    |    | 850 |   |
| Net cash provided by financing activities                                                 |   | 1                                    |    | 850 |   |
|                                                                                      |   |                                 |    |   |   |
| **Net increase (decrease) in cash and  cash equivalents**                                 |   | 1,265                                |    | (14,068 | ) |
| Cash and cash equivalents at beginning of period                                          |   | 5,772                                |    | 20,300 |   |
| Cash and cash equivalents at end of period                                                |   | 7,037                                |    | 6,232 |   |
| Marketable securities at end of period                                                    |   | 74,412                               |    | 102,681 |   |
| **Cash, cash equivalents and  marketable securities********at end of period**             |   | $                                    | 81,449  |   | $ | 108,913 |   |

 

 

4

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**TITAN PHARMACEUTICALS, INC.**

### **NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(unaudited)**

 

**1.****             ****Organization and Summary of Significant Accounting Policies**

 

***The Company***

                We are a biopharmaceuticalcompany developing proprietary therapeutics for the treatment of centralnervous system disorders, cancer, and other serious and life threateningdiseases.  We operate in one businesssegment, the development of biopharmaceutical products.

 

***Basis of Presentation***

 

Theaccompanying unaudited condensed consolidated financial statements include theaccounts of Titan and its subsidiaries after elimination of all significantintercompany accounts and transactions. Certain prior year balances have beenreclassified to conform to the current year presentation.  These financial statements have beenprepared in accordance with generally accepted accounting principles in theUnited States for interim financial information and with the instructions to Form10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotesrequired by generally accepted accounting principles for a complete financialstatements presentation. In the opinion of management, all adjustments(consisting of normal recurring adjustments) considered necessary for a fairpresentation have been included. Operating results for the nine-month period ended September 30, 2002 arenot necessarily indicative of the results that may be expected for the yearending December 31, 2002.

 

Theseunaudited condensed consolidated financial statements should be read inconjunction with the audited consolidated financial statements and footnotesthereto included in the Titan Pharmaceuticals, Inc. annual report on Form 10-Kfor the year ended December 31, 2001.

 

***Revenue Recognition***

Contract revenue for research and development isrecorded as earned based on the performance requirements of the contract.  Revenue associated with performancemilestones, considered “at-risk” until the milestones are completed, isrecognized based on the achievement of the milestones as defined in therespective agreements.  Governmentgrants, which support our research effort in specific projects, generallyprovide for reimbursement of approved costs as defined in the grant documents,and revenue is recognized when associated project costs are incurred.

*** ***

***Operating Subsidiaries***

We conduct a small portion of our operations throughtwo subsidiaries: Ingenex, Inc. and ProNeura, Inc.  At September 30, 2002, we owned 81% ofIngenex (assuming the conversion of all preferred stock to common stock) and79% of ProNeura.

 

**2.****             ****Net Loss Per Share**

 

Wecalculate net loss per share using the weighted average common sharesoutstanding for the period.  For periodsended September 30, 2002 and 2001, the effect of an additional 6,387,714 and4,662,448 shares, 

 

 

5

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respectively,related to our authorized and issued convertible preferred stock and options, werenot included in the computation of diluted earnings per share because they areanti-dilutive.

 

 

**3.****             ****Comprehensive Income**

 

Comprehensive income iscomprised of net loss and other comprehensive income.  The only component of other comprehensive income is unrealizedgains and losses from our marketable securities.  Comprehensive loss for the three and nine months ended September30, 2002 were $7.6 million and $21.0 million, respectively, and for the threeand nine months ended September 30, 2001 were $3.9 million and $9.4 million,respectively.

**4.****             ****Related Parties Transactions**

                In February 2001, we made a loanto a vice president officer in the principal amount of $373,000 bearinginterest at prime rate.  The loan wasdue and payable on August 7, 2002.  As ofNovember 14, 2002, the remaining principal balance is $53,000 and it isexpected that the remaining balance will be repaid by year end 2002.

 

**5.****             ****Spheramine milestone payment from Schering AG**

                In February 2002, we announcedthat we received a $2.0 million milestone payment from Schering, Titan’scorporate partner for worldwide development, manufacture and commercializationof SpheramineÒ,Titan’s novel cell therapy for the treatment of Parkinson’s disease.  The milestone payment followed Schering’sdecision in the first quarter 2002 to initiate larger, randomized clinicaltesting of Spheramine for the treatment of patients with late-stage Parkinson’sdisease following the successful completion of Titan’s Phase I/II clinicalstudy of Spheramine.  As a result, Titanrecognized $2.0 million in contract revenue in the first quarter.

 

 

6

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**Item 2.        Management’s Discussion and Analysisof Financial Condition and Results of Operations**

 

*                The following discussion contains certain forward-looking statements,within the meaning of the “safe harbor” provisions of the Private SecuritiesReform Act of 1995, the attainment of which involves various risks anduncertainties. Forward-looking statements may be identified by the use offorward-looking terminology such as “may,” “will,” “expect,” “believe,”“estimate,” “plan,” “anticipate,” “continue,” or similar terms, variations ofthose terms or the negative of those terms. Our actual results may differmaterially from those described in these forward-looking statements due to,among other factors, the results of ongoing research and development activitiesand pre-clinical testing, the results of clinical trials and the availabilityof additional financing through corporate partnering arrangements orotherwise.  Additional factors includeour ability to protect our patents and proprietary rights, ability to complywith extensive government regulations, and other factors and risks detailedunder the caption “Risk Factors” in the Company’s 2001 Annual Report on Form10-K and other filings with the U.S. Securities and Exchange Commission.  Stockholders and prospective investors inthe Company should carefully consider these risk factors. The Company disclaimsany obligation to update these statements for subsequent events.*

 

*                Spheramine®,CeaVac®, TriAb®, TriGemTM, Pivanex®, CCMTM, ProbuphineTM, ApromaxTM, andPromafenTM  are trademarks of TitanPharmaceuticals, Inc.*

 

***Overview***

We are a biopharmaceutical company developing proprietary therapeuticsfor the treatment of central nervous system disorders, cancer, and otherserious and life threatening diseases. Our product development programs focus on large pharmaceutical marketswith significant unmet medical needs.

 

We currently have 12 products in development,seven of which are in clinical development, with two products in expanded humantrials for safety and efficacy, known as Phase III clinical trials.  We have five products in earlier stagetrials for dosing, and preliminary safety and efficacy, known as Phase I andPhase II clinical trials.  In additionto these programs, we have three products in pre-clinical development.

 

We are independently developing our product candidates and alsoutilizing strategic partnerships, including collaborations with Novartis PharmaAG (Novartis) and Schering AG (Schering), as well as collaborations withseveral government-sponsored clinical cooperative groups.  These collaborations help fund productdevelopment and enable us to retain significant economic interest in ourproducts.

 

The results of astudy evaluating the potential effect of iloperidone, an antipsychoticmedication in development, on the EKG profile of patients receiving the drugwere announced in July 2002.  The studyindicated that results for iloperidone were roughly comparable to that forziprasidone, one of the approved agents in the study.  The potential of these data to support any possible regulatorysubmission for iloperidone is not currently known.  In addition, this may potentially limit the opportunity ofiloperidone as first line therapy for schizophrenia.  Novartis and Titan are currently preparing to evaluate next stepsfor the iloperidone program.

 

The followingtable provides a summary status of our products in development:

 

### **CNS Products in Development**

| **Product** |   | **Potential  Indication(s)** |   | **Phase of  Development**           |   | **Marketing  Rights** |   |
|-------------|--------|------------------------------|--------|-------------------------------------|--------|-----------------------|--------|
| Iloperidone |   | Schizophrenia,  psychosis    |   | Phase III                           |   | Novartis Pharma AG    |   |
| Spheramine  |   | Parkinson’s Disease     |   | Phase II (to be  initiated Q4 2002) |   | Schering AG           |   |
| Probuphine  |   | Opiate addiction             |   | Phase I (to be  initiated Q1 2003)  |   | Titan                 |   |
| Promafen    |   | Alcoholism                   |   | Pre-clinical                        |   | Titan                 |   |
| Apromax     |   | Parkinson’s Disease     |   | Pre-clinical                        |   | Titan                 |   |

### ** **

 

7

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### **Oncology Products in Development**

| **Product**         |   | **Potential Indication(s)**                                    |   | **Phase of Development**                                  |   | **Marketing Rights** |
|---------------------|--------|----------------------------------------------------------------|--------|-----------------------------------------------------------|--------|----------------------|
| CeaVac              |   | Colorectal,  gastrointestinal and pancreatic cancer            |   | Phase III  (colorectal cancer)                            |   | Titan                |
| TriAb               |   | Breast and  ovarian cancer                                     |   | Phase II (breast  cancer)                                 |   | Titan                |
| CeaVac &  TriAb |   | Metastatic  breast, non-small cell lung, and colorectal cancer |   | Phase II  (colorectal cancer, non-small cell lung cancer) |   | Titan                |
| TriGem &  TriAb |   | Small cell lung  cancer                                        |   | Phase II (to be  initiated Q4 2002)                       |   | Titan                |
| Pivanex             |   | Non-small cell  lung cancer                                    |   | Phase II                                                  |   | Titan                |
| Gallium  Maltolate  |   | Myeloma,  prostate and bladder cancer, lymphoma                |   | Phase I/II                                                |   | Titan                |
| RB94                |   | Head, neck, and  pancreatic cancer                             |   | Pre-clinical                                              |   | Titan                |

 

Our products areat various stages of development and may not be successfully developed orcommercialized. We do not currently have any products being commerciallysold.  Our proposed products willrequire significant further capital expenditures, development, testing, andregulatory clearances prior to commercialization.  We may experience unanticipated problems relating to product developmentand cannot predict whether we will successfully develop and commercialize anyproducts.  An estimation of productcompletion dates and completion costs can vary significantly for each productand are difficult to predict.  Variousstatutes and regulations also influence our product development progress andthe success of obtaining approval is highly uncertain.  For a full discussion of risks anduncertainties in our product development, see “Risk Factors­­ — Our products are at various stages ofdevelopment and may not be successfully developed or commercialized” in our2001 annual report on Form 10-K.

 

***Results of Operations***

Revenues for thethird quarter of 2002 were $158,000,compared to $0.5 million for the same quarter in 2001.  For the first nine months of 2002, revenueswere $2.7 million, compared to $4.0 million for the same nine-month period in2001.  The higher revenue in 2001 was aresult of higher one-time license fee payments to Titan from corporatepartners, higher contract revenue and SBIR grant payments for a program whichwas completed in Q1 2002.

 

Research and development expenses forthe third quarter of 2002 were $7.2 million,compared to $5.8 million for the samequarter in 2001.  For the first ninemonths of 2002, research and development expenses were $21.6 million, compared to $16.1million for the same nine-month period in 2001.  The increase resulted primarily from ourexpanded clinical and pre-clinical operations, including planned increases inexpenditures associated with our ongoing randomized, placebo-controlled PhaseIII clinical study of CeaVac in Dukes D colorectal cancer, our study of galliummaltolate in several different cancers, as well as other clinical studies ofCeaVac and TriAb and progress in our pre-clinical development of drugcandidates for the treatment of opiate and alcohol addiction.

 

 

8

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General and administrative expensesfor the third quarter of 2002 were $1.3 millioncompared to $1.3 million for the samequarter in 2001.  For the first ninemonths of 2002, general and administrative expenses were $3.9 million, compared to $4.1 million for the same nine-month periodin 2001.  The slight decrease for thenine-month period resulted primarily from the absence of certain administrativecosts.

 

Other income, net, for the thirdquarter of 2002 was $1.1 million compared to $1.8 million for the same quarterin 2001.  For the first nine months of2002, other income, net of a $300,000 write-down of certain long-terminvestments, was $3.6 million compared to $5.1 million for the same nine-monthperiod in 2001.  The decrease, primarilyin interest income, was a result of lower interest rates and decreased cash andmarketable securities.

 

 As a result of the foregoing, we had and expected net loss for thethird quarter of 2002 of $7.3 million, or $0.26 per share, compared to $4.8million, or $0.17 per share, for the same quarter in 2001.  For the first nine months of 2002, our netloss was $19.3 million, or $0.70 per share, compared to $11.1 million, or $0.40per share, for the same nine-month period in 2001.

 

***Liquidity andCapital Resources***

                Wehave funded our operations since inception through our initial public offeringand private placements of our securities, as well as proceeds from warrant andoption exercises, corporate licensing and collaborative agreements, andgovernment sponsored research grants. At September 30, 2002, we had $81.4 million of cash, cash equivalents,and marketable securities.

 

                Usesof cash in operating activities were primarily to fund product developmentprograms and administrative expenses. Our operating activities used $21.2 million and $11.0million of cash in the first nine months in2002 and 2001, respectively.  We haveentered into various agreements with research institutions, universities, andother entities for the performance of research and development activities andfor the acquisition of licenses related to those activities.  The aggregate commitments we have underthese agreements, including minimum license payments, for the next12 months is approximately $0.6 million.  Certain of our licenses require us to payroyalties on future product sales, if any. In addition, in order to maintain license and other rights whileproducts are under development, we must comply with customary licenseeobligations, including the payment of patent related costs and diligent effortsin product development.

 

                Weexpect to continue to incur substantial additional operating losses from costsrelated to continuation and expansion of product and technology development,clinical trials, and administrative activities.  We believe that we currently have sufficient working capital tosustain our planned operations through 2005.

**Item 3.        Quantitativeand Qualitative Disclosures About Market Risk**

 

                Our market risk disclosures set forth in our Form 10-Kfor the period ended December 31, 2001, have not changed significantly.

 

**Item 4.        Controlsand Procedures**

 

Basedon the evaluation by Titan under the supervision and with the participation ofour management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of the design and operation of Titan’s disclosurecontrols and procedures pursuant to Rule 13a-14 of the Securities and ExchangeAct of 1934, as amended (the Exchange Act), as of a date within 90 days of thefiling date of this quarterly report, our Chief Executive Officer and ChiefFinancial Officer have concluded that the disclosure controls and proceduresare effective in ensuring that information required to be disclosed by Titan inthe reports we file or submit under the Exchange Act is recorded, processed,summarized and reported within the time period specified by the Securities andExchange Commission’s rules and forms.

 

 

9

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Subsequent to thedate of their evaluation, there were no significant changes in Titan’s internalcontrols or in other factors that could significantly affect these controls norwere any corrective actions required with regard to significant deficienciesand material weaknesses.

 

**PARTII**

**Item 4.**        **Submission of Matters to a Vote of Security Holders**

                OnAugust 15, 2002, the Company held its Annual Meeting of Stockholders.  Matters voted upon at the meeting and thenumber of affirmative votes, negative votes, withheld votes and abstentionscast with respect to each such matter were as follows:
|   |                                       |   | **Affirmative** |   | **Withheld** |
|--------|--------------------------------------------|--------|-----------------|--------|--------------|
|   |                                       |   | **Votes**       |   | **Votes**    |
| 1.     | Election of the  Company’s Directors: |   |            |   |         |
|   | Louis R. Bucalo, M.D.                      |   | 19,539,655      |   | 1,985,907    |
|   | Ernst-Günter Afting,  M.D., Ph.D.     |   | 20,516,587      |   | 1,008,975    |
|   | Victor J. Bauer, Ph.D.                     |   | 19,532,605      |   | 1,992,957    |
|   | Eurelio M. Cavalier                        |   | 20,517,137      |   | 1,008,425    |
|   | Michael K. Hsu                             |   | 20,520,287      |   | 1,005,275    |
|   | Hubert Huckel, M.D.                        |   | 20,513,641      |   | 1,011,921    |
|   | M. David MacFarlane,  Ph.D.                |   | 20,517,287      |   | 1,008,275    |
|   | Ley S. Smith                               |   | 20,501,526      |   | 1,024,036    |
|   | Konrad M. Weis, Ph.D.                      |   | 20,498,555      |   | 1,027,007    |

 
|                                                                             |   | **Affirmative** |   | **Against** |   |            |
|----------------------------------------------------------------------------------|--------|-----------------|--------|-------------|--------|-----------------|
|                                                                             |   | **Votes**       |   | **Votes**   |   | **Abstentions** |
|                                                                             |   |            |   |        |   |            |
| 2. Approval  and ratification of the Company’s  2002 Stock Option Plan      |   | 8,713,388       |   | 2,285,888   |   | 63,611          |
|                                                                             |   |            |   |        |   |            |
| There were 10,462,675  broker non-votes on this matter.                          |   |            |   |        |
|                                                                             |   |            |   |        |   |            |
| 3. Approval of the appointment of Ernst & Young  LLP as independent auditors |   | 21,199,882      |   | 295,233     |   | 30,447          |

 

                As a result of theforegoing, each of the nominees was elected director of the Company until thenext annual meeting of stockholders or until their successor is elected andqualified, the Company’s 2002 Stock Option Plan was approved and ratified, andthe appointment of Ernst & Young LLP as the Company’s independent auditorswas approved.

 

**Item 6.**        **Exhibits and Reports on Form 8-K**

(a)                                  Exhibits

99.0                           Section906 Certifications

(b)                                 Reportson Form 8-K

Wefiled a current report on Form 8-K with the Securities Exchange Commission onJuly 22, 2002 to announce Novartis Pharma AG has completed a study evaluatingthe potential effect of iloperidone, an antipsychotic medication indevelopment, on the EKG profile of patients receiving the drug.

 

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**SIGNATURES**

In accordance with therequirements of the Exchange Act, the registrant caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.

 

**TITAN PHARMACEUTICALS, INC.**

 
| November 14, 2002 |   | By:    |   | /s/ Louis R. Bucalo                                  |
|-------------------|--------|--------|--------|------------------------------------------------------|
|              |   |   |   | Louis R. Bucalo, M.D.                                |
|              |   |   |   | Chairman, President  and Chief Executive Officer     |
|              |   |   |   |                                                 |   |   |
| November 14, 2002 |   | By:    |   | /s/ Robert E. Farrell                                |
|              |   |   |   | Robert E. Farrell, J.D.                              |
|              |   |   |   | Executive Vice President and Chief Financial Officer |

 

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**CERTIFICATIONBY CHIEF EXECUTIVE OFFICER**

**PURSUANTTO 18 U.S.C. SECTION 1350,**

**ASADOPTED PURSUANT TO SECTION 302**

**OF THESARBANES-OXLEY ACT OF 2002**

 

 

I, Louis R. Bucalo, M.D.,Chairman, President and Chief Executive Officer of Titan Pharmaceuticals, Inc.,certify that:

 

1.               I have reviewed this quarterly report onForm 10-Q of Titan Pharmaceuticals, Inc.;

 

2.               Based on my knowledge, this quarterlyreport does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

3.               Based on my knowledge, the financialstatements, and other financial information included in this quarterly report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodspresented in this quarterly report;

 

4.               The registrant’s other certifyingofficers and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)for the registrant and we have:

 

a)              designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this quarterly reportis being prepared;

 

b)             evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within 90 daysprior to the filing date of this quarterly report (the “Evaluation Date”); and

 

c)              presented in this quarterly report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on our evaluation as of the Evaluation Date;

 

5.               The registrant’s other certifyingofficers and I have disclosed, based on our most recent evaluation, to theregistrant’s auditors and the audit committee of registrant’s board ofdirectors:

 

a)              all significant deficiencies in thedesign or operation of internal controls which could adversely affect theregistrant’s ability to record, process, summarize and report financial dataand have identified for the registrant’s auditors any material weaknesses ininternal controls; and

 

b)             any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

 

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6.               The registrant’s other certifyingofficers and I have indicated in this quarterly report whether or not therewere significant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

 
| Date: November 14, 2002 | /s/ Louis R. Bucalo                              |
|-------------------------|--------------------------------------------------|
|                    | Louis R. Bucalo, M.D.                            |
|                    | Chairman, President and  Chief Executive Officer |

 

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**CERTIFICATIONBY CHIEF FINANCIAL OFFICER**

**PURSUANTTO 18 U.S.C. SECTION 1350,**

**ASADOPTED PURSUANT TO SECTION 302**

**OF THESARBANES-OXLEY ACT OF 2002**

 

I, Robert E. Farrell,J.D., Executive Vice President and Chief Financial Officer of TitanPharmaceuticals, Inc., certify that:

 

1.               I have reviewed this quarterly report onForm 10-Q of Titan Pharmaceuticals, Inc.;

 

2.               Based on my knowledge, this quarterlyreport does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

3.               Based on my knowledge, the financialstatements, and other financial information included in this quarterly report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periods presentedin this quarterly report;

 

4.               The registrant’s other certifyingofficers and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)for the registrant and we have:

 

a)              designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this quarterly reportis being prepared;

 

b)             evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within 90 daysprior to the filing date of this quarterly report (the “Evaluation Date”); and

 

c)              presented in this quarterly report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on our evaluation as of the Evaluation Date;

 

5.               The registrant’s other certifyingofficers and I have disclosed, based on our most recent evaluation, to the registrant’sauditors and the audit committee of registrant’s board of directors:

 

a)              all significant deficiencies in thedesign or operation of internal controls which could adversely affect theregistrant’s ability to record, process, summarize and report financial dataand have identified for the registrant’s auditors any material weaknesses ininternal controls; and

 

b)             any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

 

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6.               The registrant’s other certifyingofficers and I have indicated in this quarterly report whether or not therewere significant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

 
| Date: November 14, 2002 |   | /s/ Robert E. Farrell                                 |
|-------------------------|--------|-------------------------------------------------------|
|                    |   | Robert E. Farrell, J.D.                               |
|                    |   | Executive Vice  President and Chief Financial Officer |

 

 

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