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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

For the quarterly period ended September 30, 2003

OR

For the transition period from                               to                              .

Commission file number: 000-24207

ABGENIX, INC.
(Exact name of registrant as specified in its charter)

(510) 284-6500
(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 in 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 ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.    Yes ý    No o

        As of October 31, 2003 there were 88,211,050 shares of the Registrant's Common Stock outstanding.

TABLE OF CONTENTS

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

ABGENIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)

See accompanying notes.

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ABGENIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

See accompanying notes.

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ABGENIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

See accompanying notes.

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ABGENIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003
(unaudited)

1.    Basis of Presentation and Summary of Significant Accounting Policies

        Basis of Presentation—The unaudited condensed consolidated financial statements of Abgenix, Inc. (the "Company" or "Abgenix") included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information or footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial information included therein. These financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2002, and accompanying notes included in the Company's Annual Report as filed on Form 10-K with the Securities and Exchange Commission. The results of operations for the three and nine months ended September 30, 2003, are not necessarily indicative of the results to be expected for the full year or for any other future period.

        Revenue Recognition—The Company receives payments from customers for license, option, service and milestone fees. These payments are generally non-refundable but are reported as deferred revenue until they are recognizable as revenue. The Company has followed the following principles in recognizing revenue:

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Research license fees: Fees to license the use of the Company's proprietary technologies in research performed by the customer are generally recognized only after both the license period has commenced and the technology has been delivered. However, in multiple-element revenue arrangements, if the delivered technology does not have stand alone value or if the Company does not have objective and reliable evidence of the fair value of the undelivered products or services, the amount of revenue allocable to the delivered technology is deferred until the remaining products or services are provided to the customer.



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Product license fees: Fees to license the production, use and sale of an antibody generated by the Company's proprietary technologies are generally recognized only after both the license period has commenced and the technology has been delivered. However, in multiple-element revenue arrangements, if the delivered technology does not have stand alone value or if the Company does not have objective and reliable evidence of the fair value of the undelivered products or services, the amount of revenue allocable to the delivered technology is deferred until the remaining products or services are provided to the customer.



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Option fees: Fees for granting options to obtain product licenses to develop a product are recognized as revenue when the option is exercised or when the option period expires, whichever occurs first. However, in multiple-element revenue arrangements, if the option does not have stand alone value or if the Company does not have objective and reliable evidence of the fair value of the undelivered products or services, the amount of revenue allocable to option fees is deferred until the remaining products or services are provided to the customer.



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Research services: Fees for research services performed by Abgenix are recognized ratably over the entire period the services are performed. In the case of co-development arrangements, fees received for research services provided are recorded as contract revenues in the period the services are rendered.

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Milestones: Incentive milestone payments are recognized as revenue when the milestone is achieved. Incentive milestone payments are triggered either by the results of the Company's research efforts or by events external to Abgenix, such as regulatory approval to market a product. Incentive milestone payments are substantially at risk at the inception of the contract, and the values assigned thereto are commensurate with the type of milestone achieved. The Company has no future performance obligations related to an incentive milestone that has been achieved.

        Stock-Based Compensation—The Company accounts for stock-based awards to employees and directors using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, the Company does not recognize compensation expense for employee stock options granted at fair market value. For purposes of disclosures pursuant to Statement of Financial Accounting Standards (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 what net loss would have been had the Company accounted for its stock- based awards under the provisions of SFAS 123. Pro forma amounts may not be representative of future periods.

        The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for the three and nine months ended September 30, 2003 and 2002:

        These same assumptions were applied in the determination of the option values related to stock options granted to non-employees, except the option life, for which the term of the consulting contracts, 1 to 5 years, was used. The value of stock options granted to non-employees has been recorded in the financial statements.

        The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option

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valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the Black-Scholes model and other existing models do not necessarily provide a reliable measure of the fair value of its employee stock options.

        The weighted-average fair values of options granted during the three and nine months ended September 30, 2003 were $9.68 and $7.49 per share, respectively, and were $15.34 per share for both the three-month and nine-month periods ended September 30, 2002. All options granted were at exercise prices at the current fair market value of the stock on the date of grant.

        Net Loss Per Share—Basic net loss per share is calculated based on the weighted average number of shares outstanding during the period. The impact of common stock options and warrants was excluded from the computation of diluted net loss per share, as their effect is antidilutive for all periods presented.

        Reclassifications—Certain prior period balances have been reclassified to conform to the current period presentation.

2.    Comprehensive Income (Loss)

        Other comprehensive income (loss) consists of unrealized gains or losses on available-for-sale securities. The components of comprehensive loss were as follows (in thousands):

3.    Goodwill and Identified Intangible Assets

        During the quarter ended March 31, 2003, the Company decided to discontinue the development of therapeutic antibodies to the complement protein properdin. Accordingly, the Company recorded an impairment charge of approximately $1.4 million related to the license to develop and commercialize antibodies to properdin. The impairment charge was included in research and development expenses on the Company's statement of operations.

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        Identified intangible assets consisted of the following (in thousands):

        Amortization of acquisition-related intangibles was approximately $1.8 million and $5.3 million, respectively, for each of the three and nine month periods ended September 30, 2003 and 2002. Amortization of other intangible assets was $22,000 and $90,000, respectively, for the three and nine months ended September 30, 2003 and $46,000 and $139,000, respectively, for the three and nine months ended September 30, 2002. All of the Company's acquired identified intangibles other than goodwill are subject to amortization.

        Expected amortization expense related to identified intangible assets for the three-month period from October 1, 2003, to December 31, 2003, and each of the fiscal years thereafter is as follows (in thousands):

4.    Segment Information

        The operations of the Company and its wholly owned subsidiaries constitute one business segment.

        Information about customers who provided 10% or more of contract revenues for the period is as follows:

5.    Restructuring Charges

        In October 2002, the Company announced a restructuring plan, which consisted primarily of a 15% reduction in employees. A restructuring charge of $1.8 million was recorded in 2002 to account for severance, medical and other benefits associated with this restructuring. As of December 31, 2002, approximately $1.1 million of severance benefits were accrued. During the three and nine months ended September 30, 2003, the Company made cash payments for severance benefits of approximately

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$80,000 and $1.1 million, respectively. As of September 30, 2003, approximately $22,000 of severance benefits was accrued and is expected to be paid to terminated employees over the next quarter.

6.    Contract Cancellation Obligation

        Effective June 30, 2003, the Company canceled its November 2000 agreement with Lonza Biologics plc ("Lonza") for the exclusive use of a cell culture production suite, because the Company determined that with the opening of its own manufacturing plant, it no longer needed access to the Lonza facility. Upon canceling the agreement, the Company became obligated to pay Lonza four equal installments of 4,250,000 British pounds on October 1, 2003, February 1, 2004, May 1, 2004 and August 1, 2004, which eliminated the Company's commitment to pay approximately $46.0 million in total monthly fees through August 2006. The value of this obligation on the effective date of June 30, 2003 was approximately $28.0 million and was recorded as a component of manufacturing start-up costs in the Company's statements of operations in the second quarter of 2003. In September 2003, the Company made the first of four installment payments to Lonza. The balance of the obligation as of September 30, 2003 was approximately $21.2 million.

7.    Customer Indemnification

        The Company has certain agreements with customers and collaborators that contain indemnification provisions. In such provisions, the Company typically agrees to indemnify the customer or collaborator against certain types of third-party claims. The Company would accrue for known indemnification issues if a loss were probable and could be reasonably estimated. The Company would also accrue for estimated incurred but unidentified issues based on historical activity. There was no accrual for or expense related to indemnification issues as of September 30, 2003 and 2002 and, in each case, for the three and nine months then ended.

8.    Recent Accounting Pronouncements

        In November 2002, the FASB issued Emerging Issues Task Force ("EITF") Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 addresses certain aspects of the accounting by a company for arrangements under which it will perform multiple revenue-generating activities. EITF Issue No. 00-21 addresses when and how an arrangement involving multiple deliverables should be divided into separate units of accounting. The provisions of EITF Issue No. 00-21 apply to revenue arrangements entered into after June 30, 2003. The Company adopted EITF Issue No 00-21 on July 1, 2003. The adoption of EITF Issue No. 00-21 did not result in a material change to the Company's existing revenue recognition policy for existing and prospective revenue arrangements. The adoption of EITF Issue No. 00-21 did not have a material impact on the Company's consolidated financial statements.

        In January 2003, the FASB issued Interpretation No. 46 (the "Interpretation"), Consolidation of Variable Interest Entities. The Interpretation requires the consolidation of entities in which an enterprise absorbs a majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Currently, entities are generally consolidated by an enterprise when it has controlling financial interest through ownership of a majority voting interest in the entity. The Company will implement the Interpretation in the quarter ending December 31, 2003. The Company has performed a preliminary analysis of the Interpretation and does not believe that the adoption will result in a material impact on the Company's results of operations or financial position. During the quarter ending December 31, 2003, the Company will complete its evaluation of the implications of the Interpretation with respect to all variable interest entities with which it has involvement.

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9.    Subsequent Events

Agreements with AstraZeneca

        In October 2003, Abgenix entered into a collaboration and license agreement with AstraZeneca UK Limited ("AstraZeneca") to provide for the joint discovery and development of therapeutic antibodies against up to 36 oncology targets to be commercialized exclusively worldwide by AstraZeneca. The agreement provides that Abgenix will conduct early stage preclinical research on behalf of AstraZeneca with respect to these targets. Under the agreement, Abgenix also may conduct clinical, process development and manufacturing activities for which AstraZeneca is to compensate Abgenix at competitive market rates. Abgenix may also receive milestone payments at various stages of development and royalties on commercial sales. The collaboration agreement also includes a co-development component under which Abgenix will be able to generate additional antibody product candidates against up to 18 targets that AstraZeneca will have the option to co-develop with Abgenix. The companies will share development costs and responsibilities for any co-development candidates selected by AstraZeneca. During the three-year period of selection of targets for development the Company will work exclusively with AstraZeneca to generate and develop antibodies for therapeutic use in oncology subject to various exceptions, including among others for generation and development of antigens in accordance with existing collaborations, for antigens that the Company and AstraZeneca decide not to pursue in the collaboration, and for certain process development and manufacturing services.

        In October 2003, in connection with the collaboration agreement, the Company entered into a securities purchase agreement with AstraZeneca. Pursuant to the agreement, the Company issued to AstraZeneca $50.0 million of Series A-1 convertible preferred stock with a seven-year maturity and $50.0 million of Series A-2 convertible preferred stock with a 10-year maturity. The Series A-2 preferred stock, after the 60-day anniversary of the closing date, is redeemable at the option of Abgenix or exchangeable at the option of AstraZeneca for a $50.0 million convertible subordinated note. Subject to various terms and conditions, if a certain milestone event is reached, the Company will have the option to issue to AstraZeneca up to $30.0 million of Series A-3 preferred stock and if a further milestone event is reached, the Company will have the option to issue to AstraZeneca up to $30.0 million of Series A-4 preferred stock. Each of the Series A-3 preferred stock and the Series A-4 preferred stock will have a maturity date that is five years from issuance. Due to the redeemable feature, the Company expects the preferred stock to be classified as a liability on its consolidated balance sheet.

        Subject to certain conditions, the Company can force conversion of each series of preferred stock into shares of common stock at a conversion price equal to the lower of (A) the average market price for the 10 days prior to the trading day immediately preceding the conversion date (provided that the average market price shall in no event be higher than 101% of the market price on the trading day immediately preceding the conversion date) or (B) $30.00 per share. At any time prior to the earlier of (A) the redemption or repurchase of the preferred stock or (B) the relevant maturity date, AstraZeneca may convert each series of preferred stock into shares of common stock at a conversion price of $30.00 per share. When and if issued by the Company, the convertible note will have the same conversion terms as the preferred stock.

        Upon the occurrence of a "Type I Redemption Event," consisting of a change in control of Abgenix after the completion of a defined research period, AstraZeneca has the right to require Abgenix to redeem all outstanding shares of the preferred stock at their liquidation preference. At its option, and subject to certain conditions, Abgenix may deliver shares of its common stock in lieu of cash upon a Type I Redemption Event.

        Upon the occurrence of a "Type II Redemption Event," consisting of either (i) a material breach by Abgenix of a material obligation under the Collaboration Agreement or (ii) an acquisition of

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Abgenix by a competitor of AstraZeneca, in each case that occurs during a defined research period and results in AstraZeneca's termination of all research programs and its ability to designate additional antigens, AstraZeneca has the right to require Abgenix to redeem a specified portion of the outstanding shares of Preferred Stock. The amount that AstraZeneca may require Abgenix to redeem will be based upon the extent of completion of the programs for the 36 oncology targets that are the subject of the collaboration. At its option, and subject to certain conditions, Abgenix may deliver shares of its common stock in lieu of cash upon a Type II Redemption Event.

        Each series of preferred stock has a liquidation preference equal to the purchase price paid for the relevant series. The preferred stock will receive dividends or distributions if and when declared on the common stock on an as-converted basis, but shall have no other rights to dividends, except upon an event of default that is a payment default. Upon an event of default that is a payment default, the preferred stock shall receive a quarterly, cumulative cash dividend at a rate equal to the 10-year U.S. treasury rate plus 3% compounded annually.

        At any time prior to maturity, the Company can, upon at least 15 days' notice to the holder, redeem each series of preferred stock for cash in an amount equal to its liquidation preference. Holders of preferred stock will have the right to vote with the common stock on an as-converted basis. In addition, the preferred stock has a class vote on certain matters. The convertible note, when and if issued, will not have any voting rights until it is converted into common stock and