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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2002

Commission File Number 000-23736

GUILFORD PHARMACEUTICALS INC.

(Exact name of Registrant as specified in its charter)
     
Delaware   52-1841960
(State or other jurisdiction of
incorporation or organization)
   (IRS Employer
Identification No.)
 
6611 Tributary Street
Baltimore, Maryland
   21224
(Zip Code)
(Address of principal executive offices)
    

410-631-6300

(Registrant’s telephone number, including area code)

      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 November 11, 2002
Common Stock, $.01 par value
  29,868,288

 

Guilford Pharmaceuticals Inc.

INDEX
                 
Page
Part I Financial Information
 
Item 1.
  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  
 
Item 2.
  Management’s Discussion and Analysis of Financial Condition and Results of Operations     10  
 
Item 3.
  Quantitative and Qualitative Disclosures About Market Risk     17  
 
Item 4.
  Controls and Procedures     18  
Part II Other Information        
 
Item 1.
  Legal Proceedings     19  
 
Item 2.
  Changes in Securities and Use of Proceeds     19  
 
Item 3.
  Defaults Upon Senior Securities     19  
 
Item 4.
  Submission of Matters to a Vote of Security Holders     19  
 
Item 5.
  Other Information     19  
 
Item 6.
  Exhibits and Reports on Form 8-K     19  
Signatures     20  
Certification of Principal Executive Officer     21  
Certification of Principal Financial Officer     22  

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 nine-month periods ended September 30, 2002. Interim results are not necessarily indicative of results for the full fiscal year.

3

 

GUILFORD PHARMACEUTICALS INC.

AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share data)
                     
September 30, 2002 December 31, 2001
(unaudited)
ASSETS
Current assets:
               
 
Cash and cash equivalents
  $ 20,388     $ 56,784  
 
Investments
    75,501       81,498  
 
Accounts receivable, net
    859       3,219  
 
Inventories, net
    2,414       2,687  
 
Prepaid expenses and other current assets
    1,481       3,365  
     
     
 
   
Total current assets
    100,643       147,553  
Investments — restricted
    17,932       16,456  
Property and equipment, net
    6,580       8,831  
Intangible asset, net
    6,800       7,430  
Other assets
    1,569       1,571  
     
     
 
    $ 133,524     $ 181,841  
     
     
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
               
 
Accounts payable
  $ 4,341     $ 6,040  
 
Current portion of long-term debt
    3,109       4,615  
 
Accrued payroll and related costs
    1,944       3,505  
 
Accrued contracted services
    2,386       2,652  
 
Accrued expenses and other current liabilities
    2,969       2,272  
     
     
 
   
Total current liabilities
    14,749       19,084  
Long-term debt, net of current portion
    3,932       4,137  
Other liabilities
    1,540       991  
     
     
 
   
Total liabilities
    20,221       24,212  
     
     
 
Stockholders’ equity:
               
 
Preferred stock, par value $.01 per share; authorized 4,700,000 shares, none issued
    —       —  
 
Series A junior participating preferred stock, par value $.01 per share; authorized 300,000 shares, none issued
    —       —  
 
Common stock, par value $.01 per share; authorized 75,000,000 shares, 29,980,063 and 29,975,063 issued at September 30, 2002 and December 31, 2001, respectively
    300       300  
 
Additional paid-in capital
    350,829       351,553  
 
Accumulated deficit
    (235,253 )     (190,321 )
 
Accumulated other comprehensive loss
    (711 )     (452 )
 
Note receivable from officer
    (85 )     (60 )
 
Treasury stock, at cost: 134,429 and 256,906 shares at September 30, 2002 and December 31, 2001, respectively
    (1,747 )     (3,339 )
 
Deferred compensation
    (30 )     (52 )
     
     
 
   
Total stockholders’ equity
    113,303       157,629  
     
     
 
    $ 133,524     $ 181,841  
     
     
 

See accompanying notes to consolidated financial statements.

4

 

GUILFORD PHARMACEUTICALS INC.

AND SUBSIDIARIES
 
Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)
                                     
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
Revenues:
                               
 
Net product sales
  $ 3,240     $ 5,911     $ 12,932     $ 13,757  
 
License fees and royalties
    —       14       32       25  
 
Revenues under collaborative agreements
    54       —       105       —  
     
     
     
     
 
   
Total revenues
    3,294       5,925       13,069       13,782  
     
     
     
     
 
Costs and Expenses:
                               
 
Cost of sales
    617       691       2,535       1,671  
 
Research and development
    11,369       13,459       35,893       42,231  
 
Selling, general and administrative
    7,350       7,277       23,518       21,370  
     
     
     
     
 
   
Total costs and expenses
    19,336       21,427       61,946       65,272  
     
     
     
     
 
Operating loss
    (16,042 )     (15,502 )     (48,877 )     (51,490 )
Other income (expense):
                               
 
Investment and other income
    1,558       1,852       4,255       5,328  
 
Interest expense
    (87 )     (112 )     (310 )     (348 )
     
     
     
     
 
Net loss
  $ (14,571 )   $ (13,762 )   $ (44,932 )   $ (46,510 )
     
     
     
     
 
Basic and diluted loss per common share:
  $ (0.49 )   $ (0.46 )   $ (1.51 )   $ (1.68 )
     
     
     
     
 
Weighted-average shares outstanding to compute basic and diluted loss per share
    29,842       29,707       29,757       27,755  
     
     
     
     
 

See accompanying notes to consolidated financial statements.

5

 

GUILFORD PHARMACEUTICALS INC.

AND SUBSIDIARIES
 
Consolidated Statement of Changes in Stockholders’ Equity
Nine Months Ended September 30, 2002
(unaudited)
(in thousands, except share data)
                                                                               
Accumulated
Common Stock Other Note
Additional Comprehensive Receivable Total
Number of Paid-in Accumulated Income From Treasury Deferred Stockholders’
Shares Amount Capital Deficit (Loss) Officer Stock, at Cost Compensation Equity
Balance, January 1, 2002
     29,975,063     $ 300     $ 351,553     $ (190,321 )   $ (452 )   $ (60 )   $ (3,339 )   $ (52 )   $ 157,629  
 
Comprehensive loss:
                                                                      
 
Net loss
                                                                       
   
Other comprehensive income (loss):
                            (44,932 )                                     (44,932 )
   
Unrealized loss on interest rate swap agreements
                                    (544 )                             (544 )
   
Unrealized gain on available-for-sale securities
                                    285                               285  
                                                                     
 
 
Total other comprehensive
   loss
                                                                    (259 )
                                                                     
 
Total comprehensive loss
                                                                  $ (45,191 )
                                                                     
 
 
Exercise of stock options
    5,000               19                                               19  
Distribution of 49,039 shares of treasury stock to 401(k) plan
                    (201 )                             638               437  
Distribution of 73,438 shares of treasury stock for ESPP
                    (542 )                             954               412  
Increase to note receivable to Officer
                                            (25 )                     (25 )
Amortization of deferred compensation
                                                            22       22  
     
     
     
     
     
     
     
     
     
 
Balance, September 30, 2002
     29,980,063     $ 300     $ 350,829     $ (235,253 )   $ (711 )   $ (85 )   $ (1,747 )   $ (30 )   $ 113,303  
     
     
     
     
     
     
     
     
     
 

See accompanying notes to consolidated financial statements.

6

 

GUILFORD PHARMACEUTICALS INC.

AND SUBSIDIARIES
 
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
                       
Nine Months Ended
September 30,
2002 2001
Cash Flows From Operating Activities:
                
 
Net loss
  $ (44,932 )   $ (46,510 )
 
Adjustments to reconcile net loss to net cash used in operating activities:
               
   
Realized (gains)/loses on sale of available-for-sale securities
    (419 )     371  
   
Depreciation and amortization
    3,770       3,560  
   
Non-cash compensation expense
    440       629  
 
Changes in assets and liabilities:
               
   
Accounts receivable, prepaid expenses and other assets
    4,222       (3,895 )
   
Inventories
    273       (901 )
   
Accounts payable and other current liabilities
    (2,807 )     2,282  
     
     
 
     
Net cash used in operating activities
    (39,453 )