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SECURITIES AND 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, 2002.
 
 
¨
 
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: 0-21643
 
CV THERAPEUTICS, INC.
(Exact name of Registrant as specified in its charter)
 
Delaware
   
43-1570294
(State of Incorporation)
   
(I.R.S. Employer Identification No.)
 
3172 Porter Drive, Palo Alto, California 94304
(Address of principal executive offices, including zip code)
 
Registrant’s telephone number, including area code: (650) 384-8500
 
Indicate by check whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities and 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 ¨
 
The number of shares of Common Stock, $0.001 par value, outstanding as of November 8, 2002 was 27,101,375.
 

 
PART I.    FINANCIAL INFORMATION
 
Item 1.    Financial Statements
 
CV THERAPEUTICS, INC.
BALANCE SHEETS
(in thousands, except share and per share amounts)
 
    
December 31,
2001
     
September 30,
2002
  
    
(A)
     
(unaudited)
  
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
80,911
 
   
$
24,676
 
Marketable securities
   
 
397,514
 
   
 
395,805
 
Other current assets
   
 
9,938
 
   
 
6,043
 
    
  
Total current assets
   
 
488,363
 
   
 
426,524
 
Notes receivable from related parties
   
 
951
 
   
 
1,120
 
Property and equipment, net
   
 
12,889
 
   
 
16,070
 
Other assets
   
 
5,041
 
   
 
4,322
 
    
  
Total assets
   
$
507,244
 
   
$
448,036
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable
   
$
5,529
 
   
$
2,327
 
Accrued liabilities
   
 
10,614
 
   
 
10,010
 
Current portion of capital lease obligation
   
 
779
 
   
 
487
 
Current portion of deferred revenue
   
 
1,029
 
   
 
1,029
 
    
  
Total current liabilities
   
 
17,951
 
   
 
13,853
 
Capital lease obligation
   
 
786
 
   
 
494
 
Convertible subordinated notes
   
 
196,250
 
   
 
196,250
 
Deferred revenue
   
 
3,630
 
   
 
2,858
 
Other liabilities
   
 
234
 
   
 
1,297
 
    
  
Total liabilities
   
 
218,851
 
   
 
214,752
 
Commitments
                  
Stockholders’ equity:
                  
Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding
   
 
—  
 
   
 
—  
 
Common stock, $0.001 par value, 85,000,000 shares authorized, 25,482,343 and 26,423,553 shares issued and outstanding at December 31, 2001 and September 30, 2002, respectively
   
 
494,604
 
   
 
518,170
 
Deferred compensation
   
 
(194
)
   
 
(57
)
Accumulated deficit
   
 
(210,752
)
   
 
(289,164
)
Cumulative other comprehensive income
   
 
4,735
 
   
 
4,335
 
    
  
Total stockholders’ equity
   
 
288,393
 
   
 
233,284
 
    
  
Total liabilities and stockholders’ equity
   
$
507,244
 
   
$
448,036
 
    
  
 
(A)
 
Derived from the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2001
 
See accompanying notes

2

 
CV THERAPEUTICS, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
    
Three months ended
September 30,
     
Nine months ended
September 30,
  
    
2001
     
2002
     
2001
     
2002
  
Revenues:
                                    
Collaborative research
   
$
2,862
 
   
$
1,179
 
   
$
5,694
 
   
$
3,513
 
Operating expenses:
                                    
Research and development
   
 
20,502
 
   
 
24,065
 
   
 
56,839
 
   
 
74,366
 
General and administrative
   
 
3,285
 
   
 
3,357
 
   
 
8,511
 
   
 
11,568
 
    
  
  
  
Total operating expenses
   
 
23,787
 
   
 
27,422
 
   
 
65,350
 
   
 
85,934
 
    
  
  
  
Loss from operations
   
 
(20,925
)
   
 
(26,243
)
   
 
(59,656
)
   
 
(82,421
)
Interest income
   
 
4,731
 
   
 
4,079
 
   
 
14,323
 
   
 
11,942
 
Interest expense
   
 
(2,612
)
   
 
(2,620
)
   
 
(7,856
)
   
 
(7,822
)
Other expense
   
 
(38
)
   
 
(39
)
   
 
(106
)
   
 
(111
)
    
  
  
  
Net loss
   
$
(18,844
)
   
$
(24,823
)
   
$
(53,295
)
   
$
(78,412
)
    
  
  
  
Basic and diluted net loss per share
   
$
(0.85
)
   
$
(0.95
)
   
$
(2.58
)
   
$
(3.04
)
    
  
  
  
Shares used in computing basic and diluted net loss per share
   
 
22,114
 
   
 
26,162
 
   
 
20,647
 
   
 
25,825
 
    
  
  
  
 
See accompanying notes

3

 
CV THERAPEUTICS, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
    
Nine months ended
September 30,
  
    
2001
     
2002
  
CASH FLOWS FROM OPERATING ACTIVITIES
                  
Net loss
   
$
(53,295
)
   
$
(78,412
)
Adjustments to reconcile net loss to net cash used in operating activities:
                  
Gains on the sale of investments
   
 
(1,320
)
   
 
(321
)
Amortization of deferred compensation
   
 
57
 
   
 
159
 
Depreciation and amortization
   
 
2,001
 
   
 
6,587
 
Change in assets and liabilities:
                  
Other current assets
   
 
(2,019
)
   
 
3,895
 
Accounts payable
   
 
1,415
 
   
 
(3,202
)
Accrued and other liabilities
   
 
(3,076
)
   
 
459
 
Deferred revenue
   
 
(1,772
)
   
 
(772
)
    
  
Net cash used in operating activities
   
 
(58,009
)
   
 
(71,607
)
CASH FLOWS FROM INVESTING ACTIVITIES
                  
Purchases of investments
   
 
(233,595
)
   
 
(393,874
)
Maturities of investments
   
 
51,088
 
   
 
57,430
 
Sales of investments
   
 
126,198
 
   
 
334,891
 
Capital expenditures
   
 
(8,620
)
   
 
(5,866
)
Notes receivable from related parties
   
 
(398
)
   
 
(168
)
    
  
Net cash used in investing activities
   
 
(65,327
)
   
 
(7,587
)
CASH FLOWS FROM FINANCING ACTIVITIES
                  
Payments on capital lease obligations
   
 
(567
)
   
 
(584
)
Proceeds from issuance of common stock, net of repurchases
   
 
119,200
 
   
 
23,543
 
    
  
Net cash provided by financing activities
   
 
118,633
 
   
 
22,959
 
    
  
Net decrease in cash and cash equivalents
   
 
(4,703
)
   
 
(56,235
)
Cash and cash equivalents at beginning of period
   
 
54,028
 
   
 
80,911
 
    
  
Cash and cash equivalents at end of period
   
$
49,325
 
   
$
24,676
 
    
  
 
See accompanying notes

4

 
CV THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS
 
1.    Summary of Significant Accounting Policies
 
Basis of Presentation
 
The accompanying financial statements of CV Therapeutics, Inc. have been prepared in accordance with generally accepted accounting principles, are unaudited and reflect all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary to present fairly the financial position at, and the results of operations for, the interim periods presented. The results of operations for the nine-month period ended September 30, 2002, are not necessarily indicative of the results to be expected for the entire year ending December 31, 2002, or of future operating results for any interim period. The financial information included herein should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2001, which includes the audited financial statements and the notes thereto.
 
Use of Estimates
 
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
 
Revenue Recognition
 
Revenue under our collaborative research arrangements is recognized based on the performance requirements of the contract. Amounts received under such arrangements consist of up-front license and periodic milestone payments. Up-front or milestone payments, which are still subject to future performance requirements, are recorded as deferred revenue and are amortized over the performance period. The performance period is estimated at the inception of the arrangement and is periodically reevaluated. The reevaluation of the performance period may shorten or lengthen the period during which the deferred revenue is recognized. We evaluate the appropriate period based on research progress attained and events such as changes in the regulatory and competitive environment. Payments received related to substantive, at-risk milestones are recognized upon achievement of the scientific or regulatory event specified in the underlying agreement. Payments received for research activities are recognized as the related research effort is performed.
 
Net Loss Per Share
 
Net loss per share is computed using the weighted average number of common shares outstanding. Common equivalent shares have been excluded from the computation as their effect is antidilutive.
 
2.    Comprehensive Loss
 
The components of comprehensive loss for the periods ended September 30, 2001, and September 30, 2002, are as follows:
 
    
Three months ended
September 30,
     
Nine months ended
September 30,
  
    
2001
     
2002
     
2001
     
2002
  
    
(in thousands)
  
Net loss
   
$
(18,844
)
   
$
(24,823
)
   
$
(53,295
)
   
$
(78,412
)
Unrealized gains (losses) on securities
   
 
3,170
 
   
 
2,243
 
   
 
4,177
 
   
 
(400
)
    
  
  
  
Comprehensive loss
   
$
(15,674
)
   
$
(22,580
)
   
$
(49,118
)
   
$
(78,812
)
    
  
  
  

5

 
3.    Equity
 
On March 28, 2002, we sold 209,645 shares of our common stock for net proceeds of $8.4 million under the financing commitment from Acqua Wellington North American Equities Fund, Ltd., after a discount based on our market capitalization in accordance with the terms of the arrangement.
 
On August 9, 2002, we sold 561,037 shares of our common stock for net proceeds of $12.5 million under the financing commitment from Acqua Wellington, after a discount based on our market capitalization in accordance with the terms of the arrangement.
 
On October 31, 2002, we sold 676,722 shares of our common stock for net proceeds of $15.0 million under the financing commitment from Acqua Wellington, after a discount based on our market capitalization in accordance with the terms of the arrangement.
 
As of November 1, 2002, we have issued 2,609,277 shares of common stock in exchange for aggregate net proceeds of $94.9 million since the inception of this arrangement.
 
4.    Commitments
 
We lease two facilities under noncancellable operating leases. The lease for one facility expires in April 2012. The lease for the second facility incorporates a sublease that expires in February 2005, and a master lease that expires in April 2012.
 
In addition, we have leased certain fixed assets under capital leases with expiration dates through 2004.
 
During the nine-month period ended September 30, 2002, we entered into certain manufacturing-related agreements in connection with the future commercial production of ranolazine.
 
Minimum payments under these commitments are as follows:
 
    
Manufacturing
Agreements