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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, 2003

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 by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     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 7, 2003
Common Stock, $.01 par value
  29,038,897

 

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
    12  
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
    20  
 
Item 4. Controls and Procedures
    21  
 
Part II Other Information
        
 
Item 1. Legal Proceedings
    22  
 
Item 2. Changes in Securities and Use of Proceeds
    22  
 
Item 3. Defaults Upon Senior Securities
    22  
 
Item 4. Submission of Matters to a Vote of Security Holders
    22  
 
Item 5. Other Information
    22  
 
Item 6. Exhibits and Reports on Form 8-K
    39  
 
Signatures
    40  

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, 2002.

      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, 2003 as set forth in the Index. 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, 2003 December 31, 2002
(unaudited)
ASSETS
Current assets:
               
 
Cash and cash equivalents
  $ 66,237     $ 14,777  
 
Investments, net
    44,597       68,454  
 
Accounts receivable, net
    771       768  
 
Inventories, net
    2,166       2,993  
 
Prepaid expenses and other current assets
    2,154       907  
     
     
 
   
Total current assets
    115,925       87,899  
Investments – restricted
    22,021       18,572  
Property and equipment, net
    23,216       6,534  
Intangible asset, net
    5,958       6,589  
Other assets
    4,556       1,492  
     
     
 
    $ 171,676     $ 121,086  
     
     
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
               
 
Accounts payable
  $ 4,947     $ 6,279  
 
Current portion of long-term debt
    3,651       3,200  
 
Accrued payroll related costs
    3,150       1,700  
 
Accrued contracted services
    1,863       3,308  
 
Accrued expenses and other current liabilities
    2,365       2,096  
 
Deferred revenue
    703       —  
     
     
 
   
Total current liabilities
    16,679       16,583  
Long-term debt, net of current portion
    89,352       3,720  
Other liabilities
    1,386       1,525  
     
     
 
   
Total liabilities
    107,417       21,828  
     
     
 
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, 30,080,582 and 29,980,063 issued, and 28,996,517 and 29,901,033 outstanding at September 30, 2003 and December 31, 2002, respectively
    301       300  
 
Additional paid-in capital
    350,143       350,352  
 
Accumulated deficit
    (279,420 )     (249,591 )
 
Accumulated other comprehensive loss
    (1,332 )     (691 )
 
Note receivable from officer
    (85 )     (85 )
 
Treasury stock, at cost; 1,084,065 and 79,030 shares at September 30, 2003 and December 31, 2002, respectively
    (5,348 )     (1,027 )
     
     
 
   
Total stockholders’ equity
    64,259       99,258  
     
     
 
    $ 171,676     $ 121,086  
     
     
 

      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,
2003 2002 2003 2002
Revenues:
                               
 
Net product sales
  $ 5,302     $ 3,240     $ 13,708     $ 12,932  
 
Revenues from license fees and milestones
    118       54       5,777       137  
     
     
     
     
 
   
Total revenues
    5,420       3,294       19,485       13,069  
Costs and Expenses:
                               
 
Cost of sales
    975       617       2,899       2,535  
 
Research and development
    9,056       11,369       24,253       35,893  
 
Selling, general and administrative
    8,072       7,350       22,880       23,518  
     
     
     
     
 
   
Total costs and expenses
    18,103       19,336       50,032       61,946  
     
     
     
     
 
Operating loss
    (12,683 )     (16,042 )     (30,547 )     (48,877 )
Other income (expense):
                               
 
Investment income
    585       1,558       2,361       4,255  
 
Interest expense
    (1,184 )     (87 )     (1,643 )     (310 )
     
     
     
     
 
Net loss
  $ (13,282 )   $ (14,571 )   $ (29,829 )   $ (44,932 )
     
     
     
     
 
Basic and diluted loss per common share:
  $ (0.46 )   $ (0.49 )   $ (1.01 )   $ (1.51 )
     
     
     
     
 
Weighted-average shares outstanding to compute basic and diluted loss per share
    28,967       29,842       29,541       29,757  
     
     
     
     
 

      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, 2003
(unaudited)
(in thousands, except share data)
                                                                       
Common Stock Accumulated
Other Note
Number of Additional Comprehensive Receivable Total
Issued Paid-in Accumulated Income From Treasury Stockholders’
Shares Amount Capital Deficit (Loss) Officer Stock, at Cost Equity
Balance, January 1, 2003
     29,980,063     $ 300     $ 350,352     $ (249,591 )   $ (691 )   $ (85 )   $ (1,027 )   $ 99,258  
 
Comprehensive loss:
                                                               
 
Net loss
                            (29,829 )                             (29,829 )
 
Other comprehensive loss:
                                                               
   
Unrealized gain on interest rate swap agreements
                                    226                       226  
   
Unrealized loss on available-for-sale securities
                                    (867 )                     (867 )
                                                             
 
     
Total other comprehensive loss
                                                            (641 )
                                                             
 
Total comprehensive loss
                                                          $ (30,470 )
                                                             
 
Purchase of 1.1 million shares for treasury stock
                                                    (5,280 )     (5,280 )
Issuance of common stock under employee stock purchase plan
    61,387       1       177                                       178  
Exercise of stock options
    39,132               168                                       168  
Distribution of 84,548 shares of treasury stock to 401(k) plan
                    (487 )                             847       360  
Distribution of 10,417 shares of treasury stock to consultant
                    (67 )                             112       45  
     
     
     
     
     
     
     
     
 
Balance, September 30, 2003
     30,080,582     $ 301     $ 350,143     $ (279,420 )   $ (1,332 )   $ (85 )   $ (5,348 )   $ 64,259  
     
     
     
     
     
     
     
     
 

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,
2003 2002
Cash Flows From Operating Activities:
                
 
Net loss
  $ (29,829 )   $ (44,932 )
 
Adjustments to reconcile net loss to net cash used in operating activities:
               
   
Realized gains on sale of available-for-sale securities
    (168 )     (419 )
   
Depreciation and amortization
    3,914       3,770  
   
Non-cash compensation expense
    405       440  
 
Changes in assets and liabilities:
               
   
Accounts receivable, prepaid expenses and other assets
    (1,357 )     4,222  
   
Inventories
    827       273  
   
Accounts payable and other operating liabilities
    (222 )     (2,807 )
     
     
 
     
Net cash used in operating activities
    (26,430 )     (39,453 )
     
     
 
 
Cash Flows From Investing Activities:
                
 
Purchases of property and equipment
    (18,766 )     (122 )
 
Maturities and sales of available-for-sale securities
    64,500       66,170  
 
Purchases of available-for-sale securities
    (44,956 )     (61,382 )
     
     
 
     
Net cash provided by investing activities
    778       4,666  
     
     
 
 
Cash Flows From Financing Activities:
                
 
Net proceeds from issuances of common stock
    346       19  
 
Purchase of treasury stock
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