UNITED STATES
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 March 31, 2003
OR
| ¨ |
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 000-31615
DURECT CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware |
94-3297098 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
10240 Bubb Road
Cupertino, California 95014
(Address of principal executive offices, including zip code)
(408) 777-1417
(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 x NO ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). YES x NO ¨
As of April 30, 2003, there were 50,532,873 shares of the registrant’s Common Stock outstanding.
| Page | ||||
| PART I. FINANCIAL INFORMATION | ||||
| Item 1. |
3 | |||
| Condensed Consolidated Statements of Operations For the three months ended March 31, 2003 and 2002 (unaudited) |
3 | |||
| Condensed Consolidated Balance Sheets As of March 31, 2003 (unaudited) and December 31, 2002 |
4 | |||
| Condensed Consolidated Statements of Cash Flows For the three months ended March 31, 2003 and 2002 (unaudited) |
5 | |||
| Notes to Condensed Consolidated Financial Statements (unaudited) |
6 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 | ||
| Item 3. |
34 | |||
| Item 4. |
35 | |||
| PART II. OTHER INFORMATION | ||||
| Item 1. |
36 | |||
| Item 2. |
36 | |||
| Item 3. |
36 | |||
| Item 4. |
36 | |||
| Item 5. |
36 | |||
| Item 6. |
37 | |||
| 37 | ||||
| 37 | ||||
| 37 | ||||
| 38 | ||||
2
PART I. FINANCIAL INFORMATION
DURECT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
| Three months ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Product revenue, net |
$ |
1,507 |
|
$ |
1,613 |
| ||
| Collaborative research and development and other revenue |
|
1,074 |
|
|
11 |
| ||
| Total revenues |
|
2,581 |
|
|
1,624 |
| ||
| Operating expenses: |
||||||||
| Cost of revenues |
|
595 |
|
|
750 |
| ||
| Research and development |
|
5,572 |
|
|
7,995 |
| ||
| Selling, general and administrative |
|
2,243 |
|
|
2,323 |
| ||
| Amortization of intangible assets |
|
335 |
|
|
335 |
| ||
| Stock-based compensation(1) |
|
(154 |
) |
|
598 |
| ||
| Total operating expenses |
|
8,591 |
|
|
12,001 |
| ||
| Loss from operations |
|
(6,010 |
) |
|
(10,377 |
) | ||
| Other income (expense): |
||||||||
| Interest income |
|
241 |
|
|
711 |
| ||
| Interest expense |
|
(124 |
) |
|
(83 |
) | ||
| Net other income |
|
117 |
|
|
628 |
| ||
| Net loss |
$ |
(5,893 |
) |
$ |
(9,749 |
) | ||
| Net loss per common share, basic and diluted |
$ |
(0.12 |
) |
$ |
(0.20 |
) | ||
| Shares used in computing basic and diluted net loss per share |
|
50,123 |
|
|
47,782 |
| ||
(1) Stock-based compensation related to the following: |
||||||||
| Cost of revenues |
$ |
8 |
|
$ |
29 |
| ||
| Research and development |
|
(236 |
) |
|
394 |
| ||
| Selling, general and administrative |
|
74 |
|
|
175 |
| ||
| $ |
(154 |
) |
$ |
598 |
| |||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
DURECT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
| March 31, 2003 |
December 31, 2002 |
|||||||
| (unaudited) |
(Note 1) |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
16,211 |
|
$ |
14,089 |
| ||
| Short-term investments |
|
21,049 |
|
|
28,711 |
| ||
| Accounts receivable, net of allowances of $205 and $207, respectively |
|
1,407 |
|
|
944 |
| ||
| Inventories |
|
1,669 |
|
|
1,707 |
| ||
| Prepaid expenses and other current assets |
|
1,613 |
|
|
1,590 |
| ||
| Total current assets |
|
41,949 |
|
|
47,041 |
| ||
| Property and equipment, net |
|
10,869 |
|
|
11,625 |
| ||
| Goodwill |
|
4,716 |
|
|
4,716 |
| ||
| Intangible assets, net |
|
3,786 |
|
|
4,121 |
| ||
| Long-term investments |
|
2,159 |
|
|
2,578 |
| ||
| Restricted investments |
|
3,750 |
|
|
2,890 |
| ||
| Total assets |
$ |
67,229 |
|
$ |
72,971 |
| ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
486 |
|
$ |
352 |
| ||
| Accrued liabilities |
|
2,179 |
|
|
2,140 |
| ||
| Contract research liability |
|
1,275 |
|
|
1,128 |
| ||
| Deferred revenue |
|
680 |
|
|
948 |
| ||
| Equipment financing obligations, current portion |
|
283 |
|
|
447 |
| ||
| Bonds payable, current portion |
|
170 |
|
|
170 |
| ||
| Total current liabilities |
|
5,073 |
|
|
5,185 |
| ||
| Equipment financing obligations, noncurrent portion |
|
519 |
|
|
134 |
| ||
| Bonds payable, noncurrent portion |
|
1,245 |
|
|
1,245 |
| ||
| Other long-term liabilities |
|
238 |
|
|
225 |
| ||
| Commitments |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock, $0.0001 par value: 110,000 shares authorized at March 31, 2003 and December 31, 2002 respectively; 50,415 and 50,443 shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively |
|
5 |
|
|
5 |
| ||
| Additional paid-in capital |
|
193,823 |
|
|
194,312 |
| ||
| Notes receivable from stockholders |
|
(338 |
) |
|
(469 |
) | ||
| Deferred compensation |
|
(446 |
) |
|
(732 |
) | ||
| Deferred royalties and commercial rights |
|
(13,480 |
) |
|
(13,480 |
) | ||
| Accumulated other comprehensive income |
|
39 |
|
|
102 |
| ||
| Accumulated deficit |
|
(119,449 |
) |
|
(113,556 |
) | ||
| Stockholders’ equity |
|
60,154 |
|
|
66,182 |
| ||
| Total liabilities and stockholders’ equity |
$ |
67,229 |
|
$ |
72,971 |
| ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
DURECT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three months ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Cash flows from operating activities |
||||||||
| Net loss |
$ |
(5,893 |
) |
$ |
(9,749 |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
|
1,184 |
|
|
870 |
| ||
| Noncash charges related to stock-based compensation |
|
(154 |
) |
|
598 |
| ||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
|
(463 |
) |
|
48 |
| ||
| Inventories |
|
38 |
|
|
188 |
| ||
| Prepaid expenses and other assets |
|
(23 |
) |
|
364 |
| ||
| Accounts payable |
|
134 |
|
|
(210 |
) | ||
| Accrued liabilities and other long-term liabilities |
|
52 |
|
|
(276 |
) | ||
| Contract research liability |
|
147 |
|
|
113 |
| ||