UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

Commission File Number
000-50438

Myogen, Inc.

7575 West 103rd Avenue, Suite 102
Westminster, CO 80021
(303) 410-6666
(Address, including zip code, and telephone number,
including area code, of principal executive offices)

     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 [   ]

     Check whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes [   ]    No [X]

     As of August 4, 2004 there were 26,521,144 shares of the Registrant’s Common Stock outstanding, par value $0.001 per share.

This quarterly report on Form 10-Q consists of 35 pages.

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MYOGEN, INC.
FORM 10-Q

INDEX

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MYOGEN, INC.
(A Development Stage Enterprise)

The accompanying notes are an integral part of these consolidated financial statements.

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MYOGEN, INC.
(A Development Stage Enterprise)

The accompanying notes are an integral part of these consolidated financial statements.

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MYOGEN, INC.
(A Development Stage Enterprise)

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The accompanying notes are an integral part of these consolidated financial statements.

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MYOGEN, INC.

Note 1: Basis of Presentation

     The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto as of and for the year ended December 31, 2003, included in the Annual Report on Form 10-K of Myogen Inc. (the “Company” or “Myogen”) filed with the Securities and Exchange Commission on March 1, 2004.

     The Company has generated limited revenue to date and its activities have consisted primarily of developing products, licensing products, raising capital and recruiting personnel. Accordingly, the Company is considered to be in the development stage as of June 30, 2004 as defined in Statement of Financial Accounting Standards (“SFAS”) No. 7, Accounting and Reporting by Development Stage Enterprises.

Note 2: Liquidity

     The Company has incurred significant losses and negative cash flows from operations in every fiscal period since June 10, 1996 (Inception). For the three and six months ended June 30, 2004, the Company incurred losses from operations of $13,344,620 and $29,496,043 and negative cash flows from operations of $26,170,262 for the six months ended June 30, 2004. For the years ended December 31, 2003, 2002 and 2001, the Company incurred losses from operations of $42,972,596, $28,815,118 and $17,770,643, respectively, and negative cash flows from operations of $31,706,160, $26,459,454 and $16,409,817, respectively. As of June 30, 2004, the Company had a deficit accumulated during the development stage of $147,673,823. Management anticipates that operating losses and negative cash flows from operations will continue for at least the next several years.

     To date, the Company has satisfied its cash commitments primarily through public and private placements of equity securities. From Inception to June 30, 2004, the Company raised $200,768,591 of net cash proceeds from the sale of equity securities.

     Based on current spending projections, management believes that the cash on hand will be sufficient to continue operations through the middle of 2005. However, failure to generate sufficient revenues or raise additional capital could have a material adverse effect on the Company’s ability to achieve its intended business objectives, which include the completion of development and commercialization of its product candidates and the continuation of its research and development programs. Management plans on raising additional financing to meet future working capital and capital expenditure needs. There can be no assurance that such additional financing will be available or, if available, that such financing can be obtained on terms satisfactory to the Company.

Note 3: Inventory Components

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Note 4: Comprehensive Loss

     A reconciliation of net loss to comprehensive loss is as follows:

Note 5: Revenue Recognition

     Myogen recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 104 “Revenue Recognition in Financial Statements” (SAB 104). The Company considers this methodology to be the most appropriate for its business model and current revenue streams.

   Product Sales

     Sales are recognized when the following four revenue recognition criteria are met: (i) persuasive evidence of an arrangement exists; (ii) product is shipped from the distributor’s consignment stock to the customer; (iii) the selling price is fixed or determinable; and (iv) collection is reasonably assured. Once the product is shipped to the customer, the Company does not allow product returns.

   Research and development contracts

     Myogen may enter into collaborative agreements with pharmaceutical companies where the other party receives exclusive marketing and distribution rights for certain products for set time periods and set geographic areas. The rights associated with this research and development are assigned or can be assigned to the collaborator through a license at the collaborator’s option. The terms of the collaborative agreements can include non-refundable funding of research and development efforts, licensing fees, payments based on achievement of certain milestones, and royalties on product sales.

     Non-refundable license fees received are recorded as deferred revenue once received or irrevocably committed and are recognized ratably over the longer of the development period to which they relate or the expected duration of the contractual relationship. Where there are two or more distinct phases embedded into one contract (such as product development and subsequent commercialization or manufacturing), the contracts may be considered multiple element arrangements. When it can be demonstrated that each of these phases are at fair value, they are treated as separate earnings processes with upfront fees being recognized over only the initial product development phase. The relevant time period for the product development phase is based on management estimates and could vary depending upon the outcome of clinical trials and the regulatory approval process. As a result, management frequently reviews the appropriate time period.

     Milestone payments based on designated achievement points that are considered at risk and substantive at the inception of the collaborative contract are recognized as earned when the earnings process is complete and the payment is reasonably assured. The Company evaluates whether milestones are at risk and substantive based on the contingent nature of the milestone, specifically reviewing factors such as the technological and commercial risk that needs to be overcome and the level of investment required. Milestone payments related to arrangements under which the Company has continuing performance obligations are recognized as revenue upon achievement of the milestone only if all of the following conditions are met: the milestone payments are non-refundable; achievement of the milestone was not reasonably assured at the inception of the arrangement; substantive effort is involved in achieving the milestone; and the amount of the milestone payment is reasonable in relation to the effort expended or the risk associated with the achievement of the milestone. If any of these conditions are not met, the

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milestone payments are deferred and recognized as revenue over the term of the arrangement as the Company completes its performance obligations.

     Revenue from research funding is recognized when the services are performed in order to match revenues to expenses incurred and is typically based on the fully burdened cost of a researcher working on a collaboration. Revenue is recognized ratably over the period as services are performed, with the balance reflected as deferred revenue until earned.

Note 6: Net Loss Per Common Share

     Basic net loss per common share is computed by dividing the net loss attributable to common stockholders for the period by the weighted average number of common shares outstanding during the period and diluted net loss per common share is computed by giving effect to all dilutive potential common stock, including options, mandatorily redeemable convertible preferred stock, convertible preferred stock and warrants.

     Diluted net loss per common share for all periods presented is the same as basic net loss per share because the potential common shares were anti-dilutive. Anti-dilutive common shares not included in net loss attributable to common stockholders are summarized as follows:

     The Company’s historical capital structure is not indicative of its prospective structure due to the automatic conversion of all shares of preferred stock into common stock concurrent with the closing of the Company’s initial public offering. The 2003 anti-dilutive common shares are not indicative of the 2004 anti-dilutive common shares. Accordingly, historical basic net loss per common share should not be used as an indicator of future earnings per common share.

Note 7: Stock-Based Compensation

     The Company measures compensation expense to employees using the intrinsic value method as prescribed by Accounting Principles Board Opinion (“APB”) No. 25, Accounting For Stock Issued to Employees (“APB 25”) and provides pro forma disclosures of net loss as if the fair value based method was applied as prescribed by SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”). Accordingly, the Company does not recognize compensation expense for options granted to employees when the exercise price equals or exceeds the fair value of common stock as of the grant date. Stock-based awards to consultants are accounted for under the provisions of SFAS 123 and Emerging Issues Task Force (“EITF”) Issue 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.

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     Had employee compensation cost for the Company’s stock-based compensation plan been determined based on the fair value at the grant dates for awards using the Black-Scholes model prescribed by SFAS 123, the Company’s pro forma net loss and pro forma net loss per share would be as follows:

Note 8: Accounts Payable

     Accounts payable are comprised of the following:

Note 9: Commitments and Contingencies

     In the ordinary course of its business, the Company makes certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These include indemnities of clinical investigators, consultants and contract research organizations involved in the development of the Company’s clinical stage products, indemnities of distributors of its marketed product, indemnities to its lenders and indemnities to directors and officers of the Company to the maximum extent permitted under the laws of the State of Delaware. The duration of these indemnities, commitments and guarantees varies, and in certain cases, is indefinite. The majority of these indemnities, commitments and guarantees does not provide for any limitation of the maximum potential future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets. However, the Company accrues for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable and in accordance with SFAS No. 5, Accounting for Contingencies. No such losses have been recorded to date.

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Note 10: Business Segments

     The Company operates in the United States and in certain countries throughout Europe under one operating segment. All product sales from Inception to June 30, 2004 have occurred in Europe through the Company’s subsidiary.