[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
| Delaware | 0-19131 | 52-1555759 |
| (State or other jurisdiction of | (Commission File No.) | (I.R.S. Employer Identification No.) |
| incorporation or organization) |
One MedImmune Way,
Gaithersburg, MD 20878
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (301) 398-0000
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 by Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
As of July 30, 2004, 249,249,949 shares of Common Stock, par value $0.01 per share, were outstanding.
MEDIMMUNE, INC.
Index to Form 10-Q
| Page | ||||
|---|---|---|---|---|
| Part I-- FINANCIAL INFORMATION |
||||
| Item 1. Consolidated Financial Statements | ||||
| Consolidated Balance Sheets | 1 | |||
| Consolidated Statements of Operations | 2 | |||
| Condensed Consolidated Statements of Cash Flows | 3 | |||
| Notes to Consolidated Financial Statements | 4-10 | |||
| Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 11-24 | |||
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 25 | |||
| Item 4. Controls and Procedures | 25 | |||
| Part II-- OTHER INFORMATION | ||||
| Item 1. Legal Proceedings | 25 | |||
| Item 2. Changes in Securities, Use of Preceeds and Issuer Purchases of Equity Securities | 26 | |||
| Item 3. Defaults Upon Senior Securities | 26 | |||
| Item 4. Submission of Matters to a Vote of Security Holders | 26 | |||
| Item 5. Other Information | 26 | |||
| Item 6. Exhibits and Reports on Form 8-K | 26-27 | |||
Trademark information: Synagis® (palivizumab), CytoGam® (cytomegalovirus immune globulin intravenous (human)), RespiGam® (respiratory syncytial virus immune globulin intravenous (human)), and Vitaxin® are registered trademarks of MedImmune, Inc. NumaxTM is a trademark of MedImmune, Inc. Ethyol® (amifostine) and NeuTrexin® (trimetrexate glucuronate for injection) are registered trademarks of MedImmune Oncology, Inc. FluMistTM (Influenza Virus Vaccine Live, Intranasal) is a trademark of MedImmune Vaccines, Inc. |
_________________
Unless otherwise indicated, this quarterly report is as of June 30, 2004. This quarterly report will not be updated as a result of new information or future events.
PART I – FINANCIAL
INFORMATION
ITEM 1. CONSOLIDATED
FINANCIAL STATEMENTS
MEDIMMUNE, INC.
CONSOLIDATED
BALANCE SHEETS
(in thousands)
| June 30, | December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2004 |
2003 | |||||||
| (Unaudited) | ||||||||
| ASSETS: | ||||||||
| Cash and cash equivalents | $ | 193,427 | $ | 515,502 | ||||
| Marketable securities | 224,091 | 272,765 | ||||||
| Trade receivables, net | 19,236 | 161,229 | ||||||
| Inventory, net | 68,361 | 91,703 | ||||||
| Deferred tax assets | 39,320 | 29,322 | ||||||
| Other current assets | 15,945 | 32,233 | ||||||
| Total Current Assets | 560,380 | 1,102,754 | ||||||
| Marketable securities | 1,357,368 | 1,111,882 | ||||||
| Property and equipment, net | 294,307 | 273,597 | ||||||
| Deferred tax assets, net | 144,190 | 151,280 | ||||||
| Intangible assets, net | 17,453 | 96,694 | ||||||
| Goodwill | 13,614 | 13,614 | ||||||
| Other assets | 40,451 | 44,849 | ||||||
| Total Assets | $ | 2,427,763 | $ | 2,794,670 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY: | ||||||||
| Accounts payable | $ | 19,035 | $ | 22,116 | ||||
| Accrued expenses | 114,148 | 217,915 | ||||||
| Product royalties payable | 48,028 | 81,808 | ||||||
| Advances from Wyeth | -- | 51,910 | ||||||
| Taxes payable | 120 | 120 | ||||||
| Other current liabilities | 11,267 | 16,846 | ||||||
| Total Current Liabilities | 192,598 | 390,715 | ||||||
| Long-term debt | 506,664 | 681,223 | ||||||
| Obligations to Evans | 21,902 | 21,627 | ||||||
| Other liabilities | 1,693 | 1,887 | ||||||
| Total Liabilities | 722,857 | 1,095,452 | ||||||
| Commitments and Contingencies | ||||||||
| SHAREHOLDERS' EQUITY: | ||||||||
| Preferred stock, $.01 par value; authorized 5,525 shares; none issued or outstanding | -- | -- | ||||||
| Common stock, $.01 par value; authorized | ||||||||
| 420,000 shares; issued and outstanding 249,023 at June 30, 2004 and | ||||||||
| 248,036 at December 31, 2003 | 2,552 | 2,543 | ||||||
| Paid-in capital | 2,686,286 | 2,673,059 | ||||||
| Deferred compensation | (543 | ) | (1,379 | ) | ||||
| Accumulated deficit | (762,668 | ) | (772,936 | ) | ||||
| Accumulated other comprehensive income | 8,496 | 27,733 | ||||||
| 1,934,123 | 1,929,020 | |||||||
| Less: Treasury stock at cost; 6,223 shares at June 30, 2004 and 6,239 shares at | ||||||||
| December 31, 2003 | (229,217 | ) | (229,802 | ) | ||||
| Total Shareholders' Equity | 1,704,906 | 1,699,218 | ||||||
| Total Liabilities and Shareholders' Equity | $ | 2,427,763 | $ | 2,794,670 | ||||
The accompanying notes are an integral part of these financial statements.
MEDIMMUNE, INC.
CONSOLIDATED STATEMENTS
OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
| For the | For the | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| three months ended | six months ended | |||||||||||||
| June 30, | June 30, | |||||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||||
| Revenues: | ||||||||||||||
| Product sales | $ | 90,744 | $ | 80,596 | $ | 573,953 | $ | 511,705 | ||||||
| Other revenue | 2,932 | 31,935 | 8,724 | 35,446 | ||||||||||
| Total revenues | 93,676 | 112,531 | 582,677 | 547,151 | ||||||||||
| Costs and expenses: | ||||||||||||||
| Cost of sales | 37,328 | 23,663 | 195,521 | 127,003 | ||||||||||
| Research and development | 67,921 | 29,824 | 117,685 | 61,495 | ||||||||||
| Selling, general and administrative | 58,860 | 48,841 | 182,592 | 164,085 | ||||||||||
| Other operating expenses | 2,041 | 1,415 | 3,859 | 22,871 | ||||||||||
| Impairment of intangible asset | 72,957 | -- | 72,957 | -- | ||||||||||
| Acquired in-process research and development | 24,713 | -- | 24,713 | -- | ||||||||||
| Total expenses | 263,820 | 103,743 | 597,327 | 375,454 | ||||||||||
| Operating (loss) earnings | (170,144 | ) | 8,788 | (14,650 | ) | 171,697 | ||||||||
| Interest income | 16,545 | 14,310 | 32,745 | 27,300 | ||||||||||
| Interest expense | (2,096 | ) | (1,604 | ) | (4,262 | ) | (3,403 | ) | ||||||
| Gain (loss) on investment activities | 464 | (139 | ) | 7,171 | (396 | ) | ||||||||
| (Loss) earnings before income taxes | (155,231 | ) | 21,355 | 21,004 | 195,198 | |||||||||
| (Benefit) provision for income taxes | (54,918 | ) | 7,901 | 10,289 | 72,223 | |||||||||
| Net (loss) earnings | ($100,313 | ) | $ | 13,454 | $ | 10,715 | $ | 122,975 | ||||||
| Basic (loss) earnings per share | ($ 0.40 | ) | $ | 0.05 | $ | 0.04 | $ | 0.49 | ||||||
| Shares used in calculation of basic (loss) earnings per | ||||||||||||||
| share | 248,722 | 252,106 | 248,455 | 251,836 | ||||||||||
| Diluted (loss) earnings per share | ($ 0.40 | ) | $ | 0.05 | $ | 0.04 | $ | 0.48 | ||||||
| Shares used in calculation of diluted (loss) earnings per | ||||||||||||||
| share | 248,722 | 258,200 | 249,812 | 257,390 | ||||||||||
The accompanying notes are an integral part of these financial statements.
MEDIMMUNE, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
| For the | ||||||||
|---|---|---|---|---|---|---|---|---|
| six months ended | ||||||||
| June 30, | ||||||||
| 2004 |
2003 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net earnings | $ | 10,715 | $ | 122,975 | ||||
| Adjustments: | ||||||||
| Impairment of intangible asset | 72,957 | -- | ||||||
| Deferred taxes | 10,726 | 67,041 | ||||||
| Deferred revenue | (221 | ) | (4,580 | ) | ||||
| Advances from Wyeth | (51,910 | ) | -- | |||||
| Depreciation and amortization | 19,846 | 18,497 | ||||||
| Amortization of premium on marketable securities | 7,571 | 7,381 | ||||||
| Amortization of deferred compensation | 631 | 2,666 | ||||||
| Amortization of premium on convertible subordinated notes | (391 | ) | (933 | ) | ||||
| Amortization of bond issuance costs | 1,779 | -- | ||||||
| Realized (gains) losses on investments | (7,172 | ) | 396 | |||||
| Gain on early redemption of convertible notes | (1,010 | ) | -- | |||||
| Losses on write downs of inventory | 26,517 | 20,519 | ||||||
| Decrease in sales allowances | (20,392 | ) | (27,461 | ) | ||||
| Decrease in restructuring liability for cash employee termination costs | -- | (251 | ) | |||||
| Other | (335 | ) | 1,042 | |||||
| Other changes in assets and liabilities | 34,557 | (12,709 | ) | |||||
| Net cash provided by operating activities | 103,868 | 194,583 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Increase in marketable securities | (210,760 | ) | (183,567 | ) | ||||
| Capital expenditures | (34,465 | ) | (43,573 | ) | ||||
| Investments in strategic alliances | (17,500 | ) | (11,780 | ) | ||||
| Net cash used in investing activities | (262,725 | ) | (238,920 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of common stock | 9,907 | 20,272 | ||||||
| Debt repayments | (172,677 | ) | -- | |||||
| Repayments on long-term obligations | (443 | ) | (415 | ) | ||||
| Net cash (used in) provided by financing activities | (163,213 | ) | 19,857 | |||||
| Effect of exchange rate changes on cash | (5 | ) | (53 | ) | ||||
| Net decrease in cash and cash equivalents | (322,075 | ) | (24,533 | ) | ||||
| Cash and cash equivalents at beginning of period | 515,502 | 130,056 | ||||||
| Cash and cash equivalents at end of period | $ | 193,427 | $ | 105,523 | ||||
The accompanying notes are an integral part of these financial statements.
1. Organization
MedImmune, Inc., a Delaware
corporation (together with its subsidiaries, the “Company”), is a biotechnology
company headquartered in Gaithersburg, Maryland. The Company currently actively markets
four products, Synagis, Ethyol, CytoGam, and FluMist, and has a diverse pipeline of
development-stage products. The Company is focused on developing vaccines and antibodies
that address significant medical needs in the areas of infectious diseases, autoimmune
disease and cancer.
2. Summary of
Significant Accounting Policies
General
The financial information presented
as of and for the three months and six months ended June 30, 2004 (“Q2 2004” and
“YTD 2004,” respectively) and as of and for the three months and six months
ended June 30, 2003 (“Q2 2003” and “YTD 2003,” respectively) is
unaudited. In the opinion of the Company’s management, the financial information
presented herein contains all adjustments, which consist only of normal recurring
adjustments, necessary for a fair presentation of results for the interim periods
presented. Interim results are not necessarily indicative of results for an entire year or
for any subsequent interim period. These consolidated financial statements should be read
in conjunction with the Company’s annual report on Form 10-K/A for the year ended
December 31, 2003.
Inventory
All inventories are stated at the
lower of cost or market, determined using the first-in, first-out method. The Company
evaluates inventories available for commercial sale separately from inventories related to
product candidates (“pre-approval inventory”) that have not yet been approved.
In the lower of cost or market evaluation for inventories available for commercial sale, market value is defined as the lower of replacement cost or estimated net realizable value, based upon management’s estimates about future demand and market conditions. When the Company determines that inventories for commercial sale have expired, become excess or otherwise considered unmarketable, the Company measures the amount of the permanent write down as the difference between the historical cost of the expired, excess or unmarketable inventory and its market value.
The Company may capitalize pre-approval inventories if management believes that 1) commercial approval by the FDA is probable, such as would be evidenced by a favorable recommendation for approval regarding the safety and efficacy of the product candidate by the FDA or one of its advisory bodies (or other regulatory body with authority to grant marketing approval for drugs and biological products for international sale), and 2) it is probable that its manufacturing facilities will be approved by the FDA (or other regulatory body) for the production of inventory as determined by the nature and scope of any unresolved issues and the remediation required.
In the lower of cost or market evaluation for pre-approval inventories, market value is defined as the lower of replacement cost or estimated net realizable value, based upon management’s estimates about future demand and market conditions, including probability of market acceptance of the product. When the Company determines that pre-approval inventories will not have a sufficient shelf life to be sold commercially, or if sold, will not generate sufficient revenues to cover production costs, the Company measures the amount of permanent write down as the difference between the historical cost and its estimated probable future market value.
Currently, the Company does not have pre-approval inventories.
Stock-based Compensation
Compensation costs attributable to
stock option and similar plans are recognized based on any excess of the quoted market
price of the stock on the date of grant over the amount the employee is required to pay to
acquire the stock, in accordance with the intrinsic-value method under Accounting
Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”
(“APB 25”). Such amount, if any, is accrued over the related vesting period.
In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure” (“SFAS 148”). SFAS 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation (“SFAS 123”),” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The alternative methods of transition and additional disclosure requirements of SFAS 148 became effective January 1, 2003.
The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation (in millions, except per share data):
| Q2 | Q2 | YTD | YTD | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2004 |
2003 |
2004 |
2003 | |||||||||||
| Net (loss) earnings, as reported | ($100.3 | ) | $ | 13.5 | $ | 10.7 | $ | 123.0 | ||||||
| Add: stock-based employee compensation expense included in | ||||||||||||||
| historical results for the vesting of stock options assumed in | ||||||||||||||
| conjunctio | ||||||||||||||