ORPHAN MEDICAL INC - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

ý	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	for the quarterly period ended March 31, 2005

o	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: 0-24760

Orphan Medical, Inc.

(Exact name of registrant as specified in its charter)

Delaware		41-1784594
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

13911 Ridgedale Drive, Suite 250, Minnetonka, MN 55305		(952) 513-6900
(Address of principal executive offices, including zip code)		(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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, 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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Common Stock, $.01 par value		11,489,399
(Class)		(Outstanding at April 27, 2005)

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ORPHAN MEDICAL, INC.

BALANCE SHEETS

($ in thousands, except share and per share amounts)

	March 31, 2005			December 31, 2004
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	9,542		$	12,709
Restricted cash	125			125
Accounts receivable, less allowance for doubtful accounts of $25 and $25, respectively	3,044			2,303
Inventories	2,642			2,482
Prepaid expenses	1,842			372
Other	35			177
Total current assets	17,230			18,168
Office equipment and software, net	356			464
Total assets	$	17,586		$	18,632
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	1,926		$	2,014
Accrued compensation	780			1,091
Deferred revenue	833			1,250
Accrued expenses and other	4,380			3,444
Total current liabilities	7,919			7,799
Capital lease obligation-less current maturities	38			43
Commitments
Shareholders’ equity:
Senior Convertible Preferred Stock, $.01 par value; 14,000 shares authorized; 8,706 shares issued and outstanding; liquidation preference of $8,706	—			—
Series B Convertible Preferred Stock, $.01 par value; 5,000 shares authorized; 4,420 and 4,259 shares issued and outstanding; liquidity preference of $4,420 and $4,259	—			—
Series C Convertible Preferred Stock, $.01 par value; 4 ,000 shares authorized; 0 shares issued and outstanding	—			—
Series D Convertible Preferred Stock, $.01 par value; 1,500,000 shares authorized; 0 shares issued and outstanding	—			—
Common stock, $.01 par value; 23,477,000 shares authorized; 11,488,024 and 11,430,066 issued and outstanding	115			114
Additional paid-in capital	81,610			81,006
Accumulated deficit	(72,096		)	(70,330		)
Total shareholders’ equity	9,629			10,790
Total liabilities and shareholders’ equity	$	17,586		$	18,632

See Accompanying Notes.

Orphan Medical, Inc.

Statements of Operations

($ in thousands, except per share amounts)

(Unaudited)

	For the Three Months Ended March 31,
	2005			2004
Product revenues, net	$	6,692		$	4,403
Licensing and royalty revenue	1,453			1,000
Total revenue	8,145			5,403

Operating expenses:
Cost of product revenues	985			631
Product development	2,564			4,222
Sales and marketing	4,297			3,398
General and administrative	1,627			1,207
Total operating expenses	9,473			9,458
Loss from operations	(1,328		)	(4,055		)

PART I. FINANCIAL INFORMATION		Page No.

Item 1.	Financial Statements (Unaudited)

Balance Sheets - March 31, 2005 and December 31, 2004.		3

Statements of Operations – Three months ended March 31, 2005 and March 31, 2004.		4

Statements of Cash Flows - Three months ended March 31, 2005 and March 31, 2004.		5

Notes to Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22

Item 4.	Controls and Procedures	22

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23

Item 3.	Defaults Upon Senior Securities	23

Item 4.	Submission of Matters to a Vote of Security Holders	23

Item 5.	Other Information	23

Item 6.	Exhibits	23