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.
| ¨ | 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 ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
The number of shares of Common Stock, $0.001 par value, outstanding as of May 1, 2003 was 28,277,507.
CV THERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| December 31, 2002 |
March 31, 2003 |
|||||||
| (A) |
(unaudited) |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
18,767 |
|
$ |
16,259 |
| ||
| Marketable securities |
|
392,146 |
|
|
385,048 |
| ||
| Other current assets |
|
8,952 |
|
|
7,705 |
| ||
| Total current assets |
|
419,865 |
|
|
409,012 |
| ||
| Notes receivable from related parties |
|
1,120 |
|
|
1,038 |
| ||
| Property and equipment, net |
|
15,934 |
|
|
15,992 |
| ||
| Other assets |
|
4,083 |
|
|
3,872 |
| ||
| Total assets |
$ |
441,002 |
|
$ |
429,914 |
| ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
5,542 |
|
$ |
2,143 |
| ||
| Accrued liabilities |
|
13,943 |
|
|
7,732 |
| ||
| Current portion of capital lease obligations |
|
393 |
|
|
402 |
| ||
| Current portion of deferred revenue |
|
1,029 |
|
|
1,029 |
| ||
| Total current liabilities |
|
20,907 |
|
|
11,306 |
| ||
| Capital lease obligations |
|
393 |
|
|
289 |
| ||
| Convertible subordinated notes |
|
196,250 |
|
|
196,250 |
| ||
| Deferred revenue |
|
2,601 |
|
|
2,344 |
| ||
| Other liabilities |
|
1,886 |
|
|
2,188 |
| ||
| Total liabilities |
|
222,037 |
|
|
212,377 |
| ||
| 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, 27,116,805 and 28,276,807 shares issued and outstanding at December 31, 2002 and March 31, 2003, respectively; at amounts paid in |
|
533,522 |
|
|
553,592 |
| ||
| Accumulated deficit |
|
(318,525 |
) |
|
(339,251 |
) | ||
| Accumulated other comprehensive income |
|
3,968 |
|
|
3,196 |
| ||
| Total stockholders’ equity |
|
218,965 |
|
|
217,537 |
| ||
| Total liabilities and stockholders’ equity |
$ |
441,002 |
|
$ |
429,914 |
| ||
| (A) | Derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2002 |
See accompanying notes
2
CV THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
| Three months ended March 31, |
||||||||
| 2002 |
2003 |
|||||||
| Revenues: |
||||||||
| Collaborative research |
$ |
1,214 |
|
$ |
1,797 |
| ||
| Operating expenses: |
||||||||
| Research and development |
|
19,461 |
|
|
16,878 |
| ||
| Sales and marketing |
|
1,339 |
|
|
2,859 |
| ||
| General and administrative |
|
4,198 |
|
|
3,516 |
| ||
| Total operating expenses |
|
24,998 |
|
|
23,253 |
| ||
| Loss from operations |
|
(23,784 |
) |
|
(21,456 |
) | ||
| Interest income |
|
4,560 |
|
|
3,355 |
| ||
| Interest expense |
|
(2,603 |
) |
|
(2,587 |
) | ||
| Other expense, net |
|
(39 |
) |
|
(38 |
) | ||
| Net loss |
$ |
(21,866 |
) |
$ |
(20,726 |
) | ||
| Basic and diluted net loss per share |
$ |
(0.86 |
) |
$ |
(0.75 |
) | ||
| Shares used in computing basic and diluted net loss per share |
|
25,522 |
|
|
27,476 |
| ||
See accompanying notes
3
CV THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three months ended March 31, |
||||||||
| 2002 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
| Net loss |
$ |
(21,866 |
) |
$ |
(20,726 |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Gain on the sale of investments |
|
(287 |
) |
|
(884 |
) | ||
| Non cash stock compensation |
|
(42 |
) |
|
61 |
| ||
| Depreciation and amortization |
|
2,132 |
|
|
3,086 |
| ||
| Change in assets and liabilities: |
||||||||
| Other current assets |
|
1,974 |
|
|
1,247 |
| ||
| Other assets |
|
– |
|
|
(28 |
) | ||
| Accounts payable |
|
(439 |
) |
|
(3,399 |
) | ||
| Accrued and other liabilities |
|
(4,442 |
) |
|
(5,909 |
) | ||
| Deferred revenue |
|
(257 |
) |
|
(257 |
) | ||
| Net cash used in operating activities |
|
(23,227 |
) |
|
(26,809 |
) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
| Purchases of investments |
|
(108,486 |
) |
|
(121,645 |
) | ||
| Maturities of investments |
|
25,250 |
|
|
– |
| ||
| Sales of investments |
|
50,678 |
|
|
127,004 |
| ||
| Capital expenditures |
|
(2,383 |
) |
|
(1,054 |
) | ||
| Notes receivable from officers and employees |
|
81 |
|
|
82 |
| ||
| Net cash (used in) provided by investing activities |
|
(34,860 |
) |
|
4,387 |
| ||
| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
| Payments on capital lease obligations |
|
(202 |
) |
|
(95 |
) | ||
| Net proceeds from issuance of common stock, net of repurchases |
|
9,786 |
|
|
20,009 |
| ||
| Net cash provided by financing activities |
|
9,584 |
|
|
19,914 |
| ||
| Net decrease in cash and cash equivalents |
|
(48,503 |
) |
|
(2,508 |
) | ||
| Cash and cash equivalents at beginning of period |
|
80,911 |
|
|
18,767 |
| ||
| Cash and cash equivalents at end of period |
$ |
32,408 |
|
$ |
16,259 |
| ||
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 three-month period ended March 31, 2003 are not necessarily indicative of the results to be expected for the entire year ending December 31, 2003 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, 2002 which includes the audited consolidated financial statements and the notes thereto.
Principles of Consolidation
The financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany transactions and balances have been eliminated.
Reclassification
Certain reclassifications of prior period amounts have been made to conform with the current period presentation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.
Comprehensive Income
Statement of Financial Accounting Standards No. 130 “Reporting Comprehensive Income” (SFAS 130), established standards for the reporting and display of comprehensive income and its components. SFAS 130 requires unrealized gains or losses on our available-for-sale securities to be included in other comprehensive income (loss) as an element of stockholder’s equity. At each balance sheet date presented, our cumulative other comprehensive income consists solely of unrealized gains and losses on available-for-sale investment securities.
Revenue Recognition
Revenue under our collaborative research arrangements is recognized based on the performance requirements of each contract. Amounts received under such arrangements consist of up-front license and periodic milestone payments. Up-front or milestone payments, which are subject to future performance requirements, are recorded as deferred revenue and are recognized 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, performance-based 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.
5
| 1. | Summary of Significant Accounting Policies (Continued) |
Stock-Based Compensation
In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure.” SFAS 148 amends SFAS 123, “Accounting for Stock-Based Compensation” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require more prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.
We have elected to continue to account for stock options granted to employees using the intrinsic-value method as prescribed by Accounting Principles Board Opinion No. 25 (or APB 25), “Accounting for Stock Issued to Employees,” and, thus recognize no compensation expense for options granted with exercise prices equal to the fair market value of our common stock on the date of grant. We recognize compensation for options granted to consultants based on the Black-Scholes option pricing model in accordance with Emerging Issues Task Force Consensus No. 96-18. Deferred compensation is recorded when stock options are granted to employees at prices lower than the fair market value. The amount is amortized to expense over the vesting period of the related options.
For purposes of disclosures pursuant to SFAS 123 as amended by SFAS 148, the estimated fair value of options is amortized to expense over the options’ vesting period.
The following table illustrates the effect on reported net loss and net loss per share if we had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation, for the quarters ended March 31 (in thousands, except per share amounts):
| Three months ended March 31, |
||||||||
| 2002 |
2003 |
|||||||
| Net loss: |
||||||||
| As reported |
$ |
(21,866 |
) |
$ |
(20,726 |
) | ||
| Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards |
|
(5,987 |
) |
|
(5,565 |
) | ||
| Pro forma net loss |
$ |
(27,853 |
||||||