SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
For the Quarterly Period Ended June 30, 2002
Commission File Number 000-23736
GUILFORD PHARMACEUTICALS INC.
| Delaware | 52-1841960 | |
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(State or other jurisdiction of
incorporation or organization) |
(IRS Employer Identification No.) |
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6611 Tributary Street
Baltimore, Maryland |
21224 (Zip Code) |
|
|
(Address of principal executive
offices)
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410-631-6300
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 þ No o
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.
| Class | Outstanding August 13, 2002 | |
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Common Stock, $.01 par value
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29,845,633 |
Guilford Pharmaceuticals Inc.
| Page | ||||||||
| Part I Financial Information | ||||||||
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Item 1.
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Financial Statements | 3 | ||||||
| Consolidated Balance Sheets | 4 | |||||||
| Consolidated Statements of Operations | 5 | |||||||
| Consolidated Statement of Changes in Stockholders’ Equity | 6 | |||||||
| Consolidated Statements of Cash Flows | 7 | |||||||
| Notes to Consolidated Financial Statements | 8 | |||||||
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 10 | ||||||
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk | 18 | ||||||
| Part II Other Information | ||||||||
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Item 1.
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Legal Proceedings | 19 | ||||||
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Item 2.
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Changes in Securities and Use of Proceeds | 19 | ||||||
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Item 3.
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Defaults Upon Senior Securities | 19 | ||||||
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Item 4.
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Submission of Matters to a Vote of Security Holders | 19 | ||||||
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Item 5.
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Other Information | 19 | ||||||
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Item 6.
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Exhibits and Reports on Form 8-K | 19 | ||||||
| Signatures | 20 | |||||||
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The consolidated financial statements included in this report have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures, normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited financial statements and the related notes included in our annual report on Form 10-K for the year ended December 31, 2001.
In the opinion of our management, any adjustments contained in the accompanying unaudited consolidated financial statements are of a normal recurring nature, necessary to present fairly its financial position, results of operations, changes in stockholders’ equity and cash flows as of and for the three-month and six-month periods ended June 30, 2002. Interim results are not necessarily indicative of results for the full fiscal year.
3
GUILFORD PHARMACEUTICALS INC.
Consolidated Balance Sheets
| June 30, 2002 | December 31, 2001 | |||||||||
| (unaudited) | ||||||||||
| ASSETS | ||||||||||
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Current assets:
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||||||||||
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Cash and cash equivalents
|
$ | 31,665 | $ | 56,784 | ||||||
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Investments
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73,796 | 81,498 | ||||||||
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Accounts receivable, net
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4,188 | 3,219 | ||||||||
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Inventories, net
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2,310 | 2,687 | ||||||||
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Prepaid expenses and other current assets
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2,194 | 3,365 | ||||||||
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Total current assets
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114,153 | 147,553 | ||||||||
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Investments — restricted
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18,280 | 16,456 | ||||||||
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Property and equipment, net
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7,321 | 8,831 | ||||||||
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Intangible asset, net
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7,010 | 7,430 | ||||||||
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Other assets
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1,413 | 1,571 | ||||||||
| $ | 148,177 | $ | 181,841 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
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Current liabilities:
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||||||||||
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Accounts payable
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$ | 5,275 | $ | 6,040 | ||||||
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Current portion of long-term debt
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3,227 | 4,615 | ||||||||
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Accrued payroll and related costs
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2,400 | 3,505 | ||||||||
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Accrued contracted services
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2,087 | 2,652 | ||||||||
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Accrued expenses and other current liabilities
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2,292 | 2,272 | ||||||||
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Total current liabilities
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15,281 | 19,084 | ||||||||
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Long-term debt, net of current portion
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4,175 | 4,137 | ||||||||
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Other liabilities
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1,031 | 991 | ||||||||
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Total liabilities
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20,487 | 24,212 | ||||||||
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Stockholders’ equity:
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||||||||||
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Preferred stock, par value $.01 per share;
authorized 4,700,000 shares, none issued
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— | — | ||||||||
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Series A junior participating preferred
stock, par value $.01 per share; authorized
300,000 shares, none issued
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— | — | ||||||||
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Common stock, par value $.01 per share;
authorized 75,000,000 shares, 29,975,562 and 29,975,063
issued at June 30, 2002 and December 31, 2001,
respectively
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300 | 300 | ||||||||
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Additional paid-in capital
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350,936 | 351,553 | ||||||||
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Accumulated deficit
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(220,681 | ) | (190,321 | ) | ||||||
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Accumulated other comprehensive loss
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(744 | ) | (452 | ) | ||||||
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Note receivable from officer
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(85 | ) | (60 | ) | ||||||
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Treasury stock, at cost: 153,841 and
256,906 shares at June 30, 2002 and December 31,
2001, respectively
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(2,000 | ) | (3,339 | ) | ||||||
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Deferred compensation
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(36 | ) | (52 | ) | ||||||
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Total stockholders’ equity
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127,690 | 157,629 | ||||||||
| $ | 148,177 | $ | 181,841 | |||||||
See accompanying notes to consolidated financial statements.
4
GUILFORD PHARMACEUTICALS INC.
| Three Months Ended | Six Months Ended | |||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||||
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Revenues:
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Net product sales
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3,543 | 3,098 | 9,692 | 7,846 | ||||||||||||||
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License fees and royalties
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22 | 11 | 32 | 11 | ||||||||||||||
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Revenues under collaborative agreements
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26 | — | 51 | — | ||||||||||||||
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Total revenues
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3,591 | 3,109 | 9,775 | 7,857 | ||||||||||||||
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Costs and Expenses:
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||||||||||||||||||
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Cost of sales
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984 | 314 | 1,918 | 980 | ||||||||||||||
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Research and development
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12,622 | 14,599 | 24,524 | 28,772 | ||||||||||||||
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Selling, general and administrative
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8,034 | 7,852 | 16,168 | 14,093 | ||||||||||||||
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Total costs and expenses
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21,640 | 22,765 | 42,610 | 43,845 | ||||||||||||||
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Operating loss
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(18,049 | ) | (19,656 | ) | (32,835 | ) | (35,988 | ) | ||||||||||
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Other income (expense):
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||||||||||||||||||
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Investment and other income
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1,316 | 1,593 | 2,697 | 3,476 | ||||||||||||||
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Interest expense
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(102 | ) | (117 | ) | (222 | ) | (236 | ) | ||||||||||
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Net loss
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$ | (16,835 | ) | $ | (18,180 | ) | $ | (30,360 | ) | $ | (32,748 | ) | ||||||
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Basic and diluted loss per common share:
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$ | (0.57 | ) | $ | (0.67 | ) | $ | (1.02 | ) | $ | (1.22 | ) | ||||||
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Weighted-average shares outstanding to compute
basic and diluted loss per share
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29,772 | 27,224 | 29,750 | 26,762 | ||||||||||||||
See accompanying notes to consolidated financial statements.
5
GUILFORD PHARMACEUTICALS INC.
Consolidated Statement of Changes in Stockholders’ Equity
| Accumulated | |||||||||||||||||||||||||||||||
| Common Stock | Other | Note | |||||||||||||||||||||||||||||
| Additional | Comprehensive | Receivable | |||||||||||||||||||||||||||||
| Number of | Paid-in | Accumulated | Income | From | Treasury | ||||||||||||||||||||||||||
| Shares | Amount | Capital | Deficit | (Loss) | Officer | Stock, at Cost | |||||||||||||||||||||||||
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Balance, January 1, 2002
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29,975,063 | $ | 300 | $ | 351,553 | $ | (190,321 | ) | $ | (452 | ) | $ | (60 | ) | $ | (3,339 | ) | ||||||||||||||
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Comprehensive loss:
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Net loss
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(30,360 | ) | |||||||||||||||||||||||||||||
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Other comprehensive income (loss):
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Unrealized loss on interest rate swap agreements
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(23 | ) | |||||||||||||||||||||||||||||
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Unrealized loss on available-for-sale securities
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(269 | ) | |||||||||||||||||||||||||||||
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Total other comprehensive income
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|||||||||||||||||||||||||||||||
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Total comprehensive loss
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Exercise of stock options
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499 | 1 | |||||||||||||||||||||||||||||
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Distribution of 29,627 shares of treasury
stock to 401(k) plan
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(76 | ) | 385 | ||||||||||||||||||||||||||||
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Distribution of 73,438 shares of treasury
stock for ESPP
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(542 | ) | 954 | ||||||||||||||||||||||||||||
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Increase to note receivable to Officer
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(25 | ) | |||||||||||||||||||||||||||||
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Amortization of deferred compensation
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Balance, June 30, 2002
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29,975,562 | $ | 300 | $ | 350,936 | $ | (220,681 | ) | $ | (744 | ) | $ | (85 | ) | $ | (2,000 | ) | ||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
| Total | |||||||||||
| Deferred | Stockholders’ | ||||||||||
| Compensation | Equity | ||||||||||
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Balance, January 1, 2002
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$ | (52 | ) | $ | 157,629 | ||||||
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Comprehensive loss:
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|||||||||||
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Net loss
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(30,360 | ) | |||||||||
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Other comprehensive income (loss):
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|||||||||||
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Unrealized loss on interest rate swap agreements
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(23 | ) | |||||||||
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Unrealized loss on available-for-sale securities
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(269 | ) | |||||||||
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Total other comprehensive income
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(292 | ) | |||||||||
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Total comprehensive loss
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$ | (30,652 | ) | ||||||||
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Exercise of stock options
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1 | ||||||||||
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Distribution of 29,627 shares of treasury
stock to 401(k) plan
|
309 | ||||||||||
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Distribution of 73,438 shares of treasury
stock for ESPP
|
412 | ||||||||||
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Increase to note receivable to Officer
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(25 | ) | |||||||||
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Amortization of deferred compensation
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16 | 16 | |||||||||
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Balance, June 30, 2002
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$ | (36 | ) | $ | 127,690 | ||||||
See accompanying notes to consolidated financial statements.
6
GUILFORD PHARMACEUTICALS INC.
| Six Months Ended | |||||||||||
| June 30 | |||||||||||
| 2002 | 2001 | ||||||||||
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Cash Flows From Operating
Activities:
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|||||||||||
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Net loss
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$ | (30,360 | ) | $ | (32,748 | ) | |||||
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Adjustments to reconcile net loss to net cash
used in operating activities:
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|||||||||||
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Realized (gains)/losses on sale of
available-for-sale securities
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(182 | ) | 214 | ||||||||
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Depreciation and amortization
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2,726 | 2,372 | |||||||||
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Noncash compensation expense
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340 | 621 | |||||||||
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Changes in assets and liabilities:
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|||||||||||
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Accounts receivable, prepaid expenses and other
assets
|
360 | (1,430 | ) | ||||||||
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Inventories
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377 | (603 | ) | ||||||||
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Accounts payable and other current liabilities
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(2,415 | ) | 1,778 | ||||||||
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Net cash used in operating activities
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(29,154 | ) | (29,796 | ) | |||||||
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Cash Flows From Investing
Activities:
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