PAINEWEBBER R&D PARTNERS III L P - 10-Q Quarterly Report

United States

SECURITIES & EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended September 30, 2004

Or

[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from ______ to ______

Commission File Number 33-35938

PAINEWEBBER R&D PARTNERS III, L.P. (Exact name of registrant as specified in its charter)

Delaware	13-3588219
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

1285 Avenue of the Americas, New York, New York	10019
(Address of principal executive offices)	(Zip code)
Registrant’s telephone number, including area code: (212) 713-2000

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [X]

SPECIAL NOTE REGARDING

FORWARD LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Except for the historical information contained herein, the matters discussed herein are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of PaineWebber R&D Partners III, L.P. or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions; fluctuations in the value of securities for which only a limited, or no, public market exists; dependence on the development of new technologies; dependence on timely development and introduction of new and competitively priced products; the need for regulatory approvals; the Sponsor Companies (hereinafter defined) having insufficient funds to commercialize products to their maximum potential; the restructuring of Sponsor Companies; the dependence of PaineWebber R&D Partners III, L.P. on the skills of certain scientific personnel; and the dependence of PaineWebber R&D Partners III, L.P. on the General Partner (hereinafter defined).

PAINEWEBBER R&D PARTNERS III, L.P.

(a Delaware Limited Partnership)

Form 10-Q

September 30, 2004

	Table of Contents

PART I.	FINANCIAL INFORMATION	Page

Item 1.	Financial Statements
	Statements of Financial Condition (unaudited) at September 30, 2004 and December 31, 2003	2
	Statements of Operations (unaudited) for the three months and nine months ended September 30, 2004 and 2003	3
	Statement of Changes in Partners’ Capital (Deficit) (unaudited) for the nine months ended September 30, 2004	4
	Statements of Cash Flows (unaudited) for the nine months ended September 30, 2004 and 2003	5
	Notes to Financial Statements (unaudited)	6-9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	10-11
Item 3.	Quantitative and Qualitative Disclosures about Market Risks	12
Item 4.	Controls and Procedures	12

PART II.	OTHER INFORMATION
Item 6.	Exhibits and Reports on Form 8-K	13
	Signatures	14
	Certifications	15-18

All schedules are omitted either because they are not applicable or the information required to be submitted has been included in the financial statements or notes thereto.

PART I. FINANCIAL INFORMTAION

Item 1. Financial Statements

PAINEWEBBER R&D PARTNERS III, L.P.

(a Delaware Limited Partnership)

Statements of Financial Condition

(unaudited)

	September 30,		December 31,
	2004		2003
Assets:

Marketable securities, at market value	$	1,812,864	$	2,533,265
Receivable from securities transaction		54,814		—
Total assets	$	1,867,678	$	2,533,265

Liabilities and partners' capital:
Accrued liabilities	$	132,438	$	89,482
Due to bank		—		4,230
		132,438		93,712

Partners' capital		1,735,240		2,439,553
Total liabilities and partners' capital	$	1,867,678	$	2,533,265

See notes to financial statements.


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PAINEWEBBER R&D PARTNERS III, L.P.

(a Delaware Limited Partnership)

Statements of Operations

(unaudited)

For the three months ended September 30,	2004			2003
Revenues:
Interest income	$	10		$	151
Unrealized appreciation of marketable securities		86,114			201,698
Realized loss on sale of marketable securities		(42,912	)		—
		43,212			201,849

Expenses:
General and administrative costs		62,399			83,161

Net income (loss)	$	(19,187	)	$	118,688

Net income (loss) per partnership unit:
Limited partners (based on 50,000 units)	$	(0.38	)	$	2.35
General partner	$	(191.87	)	$	1,186.88

For the nine months ended September 30,	2004			2003
Revenues:
Interest income	$	25		$	865
Unrealized (depreciation) appreciation of marketable securities		(478,005	)		1,071,568
Loss on sale of marketable securities		(66,501	)		-
		(544,481	)		1,072,433

Expenses:
General and administrative costs		159,832			178,473

Net income (loss)	$	(704,313	)	$	893,960

Net income (loss) per partnership unit:
Limited partners (based on 50,000 units)	$	(13.95	)	$	17.70
General partner	$	(7,043.13	)	$	8,939.60

See notes to financial statements.


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PAINEWEBBER R&D PARTNERS III, L.P.

(a Delaware Limited Partnership)

Statement of Changes in Partners' Capital (Deficit)

(unaudited)

	Limited			General
For the nine months ended September 30, 2004	Partners			Partner			Total

Balance at January 1, 2004	$	3,969,722		$	(1,530,169	)	$	2,439,553
Net loss		(697,270	)		(7,043	)		(704,313	)
Balance at September 30, 2004	$	3,272,452		$	(1,537,212	)	$	1,735,240

See notes to financial statements.


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PAINEWEBBER R&D PARTNERS III, L.P.

(a Delaware Limited Partnership)

Statements of Cash Flows

(unaudited)

For the nine months ended September 30,	2004			2003

Cash flows from operating activities:
Net income (loss)	$	(704,313	)	$	893,960
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Unrealized depreciation (appreciation) of marketable securities		478,005			(1,071,568	)

Decrease (increase) in operating assets:
Marketable securities		242,396			157,467
Receivable from securities transactions		(54,814	)		—

Increase (decrease) in operating liabilities:
Accrued liabilities		42,956			20,141
Due to bank		(4,230	)		—
Cash provided by operating activities		—			—

Cash at beginning of period		—			—

Cash at end of period	$	—		$	—

Supplemental disclosure of cash flow information:

The Partnership paid no cash for interest or taxes during the three months and nine months ended September 30, 2004 and 2003.

See notes to financial statements.


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PAINEWEBBER R&D PARTNERS III, L.P.

(a Delaware Limited Parntership)

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

1. Organization and Business

The financial information as of September 30, 2004, and for the nine months ended September 30, 2004 and 2003 is unaudited. However, in the opinion of management of PaineWebber R&D Partners III, L.P. (the “Partnership”), such information includes all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation. The results of operations reported for the interim periods ended September 30, 2004, are not necessarily indicative of results to be expected for the year ended December 31, 2004. These financial statements should be read in conjunction with the most recent annual report of the Partnership on Form 10-K for the year ended December 31, 2003, and the previously issued quarterly reports on Form 10-Q for the quarters ended June 30, 2004 and March 31, 2004.

The Partnership is a Delaware limited partnership that commenced operations on June 3, 1991. Paine Webber Development Corporation (“PWDC” or the “General Partner”), an indirect, wholly-owned subsidiary of UBS Americas Inc. is the general partner and manager of the Partnership. The Partnership will terminate on December 15, 2015, unless its term is extended or reduced by the General Partner.

The principal objective of the Partnership has been to provide long-term capital appreciation to investors through investing in the development and commercialization of new products with technology and biotechnology companies (“Sponsor Companies”), which have been expected to address significant market opportunities. The Partnership has been engaged in diverse product development projects (the “Projects”) including product development contracts, participation in other partnerships and investments in securities of Sponsor Companies. Once the product development phase has been completed, the Sponsor Companies have had the option to license and commercialize the products resulting from the product development project, and the Partnership has had the right to receive payments based upon the sale of such products.


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PAINEWEBBER R&D PARTNERS III, L.P.

(a Delaware Limited Parntership)

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

(Note 1 Continued)

The following table sets forth the proportion of each distribution to be received by limited partners of the Partnership (the “Limited Partners”) and the General Partner (collectively, the “Partners”). All distributions to the individual Limited Partners have been made pro rata in accordance with their individual capital contributions.

		Limited Partners			General Partner
I.	Until the value of the aggregate distributions for each limited partnership unit (“Unit”) equals $1,000 plus simple interest on such amount accrued at 5% per annum (“Contribution Payout”) Contribution Payout as of September 30, 2004 is $1,662 per Unit		99	%		1	%
II.	After Contribution Payout and until the value of the aggregate distributions for each Unit equals $5,000 (“Final Payout”)		80	%		20	%
III.	After Final Payout		75	%		25	%

Aggregate distributions per Unit reached Contribution Payout as of June 30, 2000. As a result, the General Partner will be allocated 20% of future cash distributions until Final Payout. For the three months and nine months ended September 30, 2004, the Partnership made no cash distributions. As of this date, the Partnership has made cash and security distributions, as valued on the dates of distribution, since inception of $1,483 and $98 per Unit, respectively.

Profits and losses of the Partnership are allocated as follows: (i) until cumulative profits and losses for each Unit equals Contribution Payout, 99% to Limited Partners and 1% to the General Partner, (ii) after Contribution Payout and until cumulative profits and losses for each unit equals Final Payout, 80% to Limited Partners and 20% to the General Partner, and (iii) after Final Payout, 75% to Limited Partners and 25% to the General Partner. As of September 30, 2004, the cumulative profits of the Partnership were $784 per Unit.

Pursuant to the terms of the Agreement of Limited Partnership, upon termination of the Partnership, the General Partner is required to pay to the Partnership an amount in cash equal to the debit balance in the

General Partner’s capital account. Such amount then becomes part of the assets of the Partnership.

2. Summary of Significant Accounting Policies

The financial statements are prepared in conformity with accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Marketable securities consist of a money market fund and common stock which are recorded at market value. Marketable securities are not considered cash equivalents for the Statements of Cash Flows.


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PAINEWEBBER R&D PARTNERS III, L.P.

(a Delaware Limited Parntership)

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

(Note 2 Continued)

Realized and unrealized gains or losses are generally determined on a specific identification method and are reflected in the Statements of Operations during the period in which the sale or change in value occurs.

3.	Marketable Securities

The Partnership held the following marketable securities at:

	September 30, 2004				December 31, 2003
	Carrying Value		Cost		Carrying Value		Cost
Money market fund	$	10,001	$	10,001	$	—	$	—
Genzyme General Division (26,065 common shares)		1,418,210		646,609		1,284,757		646,609
Repligen Corporation (205,700 and 285,700 common shares as of September 30, 2004 and December 31, 2003, respectively)		384,653		649,017		1,248,508		901,433
	$	1,812,864	$	1,305,627	$	2,533,265	$	1,548,042

As of September 30, 2004, the market value of the Partnership’s investment of 26,065 shares of Genzyme General Division (“GENZ”) was $54.41 per share as compared to the market value of its investment as of June 30, 2004 and December 31, 2003 of $47.33 and $49.29 per share, respectively. The Partnership recognized unrealized appreciation of $184,540 and $133,453 for the three months and nine months ended September 30, 2004, respectively. As of September 30, 2003, the market value of the Partnership’s investment of 26,065 shares of GENZ was $46.31 per share as compared to the market value of its investment as of June 30, 2003 of $41.86 per share resulting in the recognition of unrealized appreciation of $115,989 for the three months ended September 30, 2003. In accordance with Genzyme Corporation’s decision to eliminate its tracking stock structure and pursuant to its Restated Articles of Organization, on June 30, 2003, each share of the Partnership’s investment in Genzyme Molecular Oncology (“GMO”) common stock was converted to 0.05653 shares of GENZ common stock. Prior to the conversion, the Partnership had an investment of 461,091 common shares of GMO. The market value of the Partnership’s investment of 461,091 shares as of December 31, 2002, was $806,910 resulting in the recognition of unrealized appreciation for the nine months ended September 30, 2003 of $ 400,173.

During the quarter ended September 30, 2004, the Partnership sold in an open-market transaction 33,000 shares of Repligen Corporation (“Repligen”) at a price of $1.90 per share. The cost basis of the shares approximates $3.155 per share. Accordingly, the Partnership recognized a loss on the sale for the three months ended September 30, 2004, of $42,912. For the nine months ended September 30, 2004, the Partnership sold 80,000 shares of Repligen for total proceeds of $185,897 and recognized a loss on the sales of $66,501 for the period then ended. The market value of Repligen as of September 30, 2004, was $1.87 per share as compared to $2.46 per share and $4.37 per share as of June 30, 2004 and December 31, 2003, respectively. The Partnership recognized an unrealized loss on its remaining investment of 205,700 shares of $121,363 and $514,250 for the three months and nine months ended September 30, 2004, respectively. Also, the change in unrealized depreciation relating to the sale of Repligen shares was $22,937 for the three months ended September 30, 2004 and $97,308 for the nine months then ended. The market value of Repligen as of September 30, 2003, was $5.39 per share increasing from $5.09 per share as of June 30, 2003 and $3.04 per share as of December 31, 2002. The Partnership recognized unrealized appreciation on its investment of 285,700 shares of $85,710 for the three months ended September 30, 2003 and $671,395 for the nine months then ended.


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PAINEWEBBER R&D PARTNERS III, L.P.

(a Delaware Limited Parntership)

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

4. Related Party Transactions

The money market fund invested in by the Partnership is managed by an affiliate of UBS Financial Services Inc.

PWDC and UBS Financial Services Inc., and their affiliates, have acted in an investment banking capacity for several of the Sponsor Companies. In addition, PWDC and its affiliates have direct limited partnership interests in some of the same product development limited partnerships as the Partnership.

5. Product Development Projects

Of the Partnership’s seven original Projects, the Partnership continues to own an interest in one Project: a $6.0 million investment in Cephalon Clinical Partners, L.P. (“CCP”), a $45.0 million limited partnership formed to fund the development, clinical testing, manufacturing and marketing of Myotrophin™ for use in the treatment of amyotrophic lateral sclerosis and certain other peripheral neuropathies. If CCP produces a product for commercial sale, Cephalon, Inc. (as the Sponsor Company) has the option to license the Partnership’s technology to manufacture and market the product developed. In addition, Cephalon, Inc. has the option to purchase the Partnership’s interest in the technology. As of September 30, 2004, the Partnership is carrying this investment at zero.

6. Income Taxes

The Partnership is not subject to federal, state or local income taxes. Accordingly, individual Partners are required to report their distributive share of realized income or loss on their respective federal and state income tax returns.


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

Liquidity and Capital Resources

Partners’ capital decreased from $2.4 million at December 31, 2003 to $1.7 million at September 30, 2004 resulting from the recognition of a net loss of $0.7 million for the nine months ended September 30, 2004 (as discussed in the Results of Operations below).

The Partnership’s funds are invested in marketable securities until cash is needed for the payment of ongoing management and administrative expenses or the remittance of cash distributions to the Partners. Liquid assets decreased from $2.5 million at December 31, 2003 to $1.8 million at September 30, 2004 resulting from the sale of marketable securities to pay Partnership operating expenses as well as a decrease in the market values of marketable securities held as of these dates.

On March 1, 2004, the General Partner determined to sell at the end of each calendar quarter at the then prevailing market price, shares of Repligen and/or GENZ to the extent necessary to pay the Partnership’s operating expenses.

The General Partner has been exploring various alternatives that would achieve the dual goals of an early termination of the Partnership and retaining for the Limited Partners any value that may be realized from the Partnership’s CCP investment. Each of the options under consideration by the General Partner present potential regulatory or other issues. The General Partner is attempting to resolve these issues. Until the Partnership terminates, the General Partner will continue efforts to minimize the need to further liquidate the Partnership’s remaining liquid assets.

Results of Operations

Three months ended September 30, 2004 compared to the three months ended September 30, 2003:

Net income (loss) for the quarters ended September 30, 2004 and 2003 was $(19,187) and $118,688, respectively. The variance resulted primarily from unfavorable changes in unrealized appreciation (depreciation) of marketable securities of $115,584 and the realized loss on sale of marketable securities of $42,912.

During the third quarter of 2004, the Partnership sold 33,000 shares of Repligen for $1.90 a share as compared to a cost basis of approximately $3.155 per share resulting in the recognition of a loss upon the sale of $42,912. The Partnership recognized unrealized appreciation of marketable securities of $86,114 and $201,698 for the three months ended September 30, 2004 and 2003, respectively. As of September 30, 2004, the market value of Repligen was $1.87 as compared to $2.46 as of June 30, 2004 resulting in the recognition of unrealized depreciation of $121,363 for this period. The market value of GENZ increased from $47.33 as of June 30, 2004, to $54.41 as of September 30, 2004, resulting in unrealized appreciation of $184,540. As a result of the sale of Repligen during this quarter there was a re-allocation from unrealized loss to realized loss of $22,937. The market value of Repligen increased from $5.09 per share as of June 30, 2003, to $5.39 per share as of September 30, 2003. The Partnership recognized unrealized appreciation on its investment 285,700 shares in the amount of $85,710. The market value of the Partnership’s investment in GENZ as of June 30, 2003 was $41.86 per share as compared to a market value as of September 30, 2003 of $46.31. The Partnership recognized unrealized appreciation for the quarter ended September 30, 2003 of $115,989.

There were no material variances in expenses for the three months ended September 30, 2004 as compared to the same period in 2003.


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Nine months ended September 30, 2004 compared to the nine months ended September 30, 2003:

For the nine months ended September 30, 2004, the Partnership recognized a net loss of $(704,313) as compared to net income of $893,960 for this same period in 2003. The variance results primarily from an unfavorable change in unrealized appreciation (depreciation) of marketable securities.

The Partnership recognized unrealized depreciation of $478,005 for the nine months ended September 30, 2004. The market value of the Partnership’s investment in Repligen decreased from $4.37 per share as of December 31, 2003, to $1.87 per share as of September 30, 2004, resulting in the recognition of unrealized depreciation of $514,250 on its investment of 205,700 shares for this period. Also included in unrealized depreciation for the nine months ended September 30, 2004, is the amount of $97,308 representing the change in unrealized depreciation relating to the sale of 80,000 shares of Repligen. During the nine months ended September 30, 2004, the Partnership sold 80,000 shares of Repligen for total proceeds of $185,897. The cost basis of the shares was $252,398 re sulting in the recognition of a net loss on the sale of $66,501 for this period. On September 30, 2004, the Partnership’s investment of 26,065 shares of GENZ had a market value of $54.41 as compared to $49.29 as of December 31, 2003. Accordingly, the Partnership recognized unrealized appreciation of $133,453 for the nine months ended September 30, 2004. For the nine months ended September 30, 2003, the Partnership recognized unrealized appreciation of $1,017,568. As of June 30, 2003, the Partnership’s investment of 416,091 shares of GMO was exchanged for 26,065 shares of GENZ. The carrying value of the GMO shares as of December 31, 2002 was $806,910 as compared to a fair value of the GENZ shares as of September 30, 2003, of $1,207,083 resulting in unrealized appreciation of $400,173 for the nine months ended September 30, 2003. The market value of Repligen increased from $3.04 per share as of December 31, 2002 to $5.39 per share as of September 30, 2003, resulting in the recognition of unrealized appreciation of $671,395 on its investment of 285,700 shares for this period.

There were no material variances in expenses for the nine months ended September 30, 2004 as compared to the same period in 2003.

Critical Accounting Policies

The General Partner makes judgements in valuing its investments in product development projects. (See Note 5 of the “Notes to Financial Statements” included in this filing on Form 10-Q.) The General Partner’s judgement involves estimating the prospect of the Projects producing a commercially viable product. These estimates are based on the General Partner’s experience in evaluating similar investments, publicly available information from the Sponsor Companies and other sources the General Partner considers reliable. Based on these estimates, as of September 30, 2004, the Partnership is carrying its investment in CCP at zero.


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Item 3. Quantitative and Qualitative Disclosures about Market Risks

Substantially all of the Partnership’s non-cash assets consist of 26,065 shares of GENZ and 205,700 shares of Repligen. The Partnership acquired these shares in connection with its investments in Projects. The Partnership holds these shares until cash is needed for the payment of Partnership expenses or to make cash distributions to the Partners.

The carrying values of investments subject to equity price risks are based on quoted market prices as of the balance sheet dates. Market prices are subject to fluctuation and, consequently, the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. Fluctuation in the market price of a security may result from perceived changes in the underlying economic characteristics of the issuer, the relative price of alternative investments and general market conditions. Furthermore, amounts realized in the sale of a particular security may be affected by the relative quantity of the security being sold.

The table below summarizes the Partnership’s equity price risks as of September 30, 2004 and 2003 and shows the effects of a hypothetical 30% increase and a 30% decrease in market prices as of those dates. The selected hypothetical change does not reflect what could be considered the best or worst case scenarios. Indeed, results could be far worse due to the nature of the equity markets.

	Market Value		Hypothetical Price Change		Estimated Market Value After Hypothetical Change in Price		Estimated Partners’ Capital After Hypothetical Change in Price
As of September 30, 2004	$	1,802,863		30% increase 30% decrease	$ $	2,343,722 1,262,004	$ $	2,276,099 1,194,381

As of September 30, 2003	$	2,747,005		30% increase 30% decrease	$ $	3,571,107 1,922,904	$ $	3,542,684 1,894,481

Item 4. Controls and Procedures

(a)

Evaluation of Disclosure Controls and Procedures. The President and Principal Financial Officer of the General Partner, after evaluating the effectiveness of the Partnership’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e) as of a date within 90 days of the filing date of this Quarterly Report on Form 10-Q (the “Evaluation Date”)), have concluded that as of the Evaluation Date, the Partnership’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Partnership would be made known to them by others within the General Partner, or its affiliates particularly during the period in which this Quarterly Report on Form 10-Q was being prepared.

(b)

Changes in Internal Controls. There were no significant changes in the Partnership’s internal controls or in other factors that could significantly affect the Partnership’s internal controls subsequent to the date of their evaluation, nor any significant deficiencies or material weaknesses in such internal controls requiring corrective actions. As a result, no corrective actions were taken.


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PART II - OTHER INFORMATION

Item 6.

Exhibits and Reports on Form 8-K.

Exhibits:

	31.1	Chief Executive Officer - Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2	Chief Financial Officer - Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	32.1	Chief Executive Officer - Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	32.2	Chief Financial Officer - Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

b)	Reports on Form 8-K:

	None


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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on this 15^th day of November 2004.


	PAINEWEBBER R&D PARTNERS III, L.P.


	By:	PaineWebber Development Corporation (General Partner)

	By:	/s/ Stephen R. Dyer

		Stephen R. Dyer President



	By:	/s/ Robert J. Chersi

		Robert J. Chersi Principal Financial and Accounting Officer