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

_________________

FORM 10-Q
___________


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

Commission File No. 0-31261

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

Georgia
58-2108232
(State of incorporation)
(I.R.S. Employer Identification Number)

8995 Westside Parkway, Alpharetta, Georgia 30004
(Address of registrant's principal executive offices, including zip code)

_______________________

(Registrant's telephone number, including area code): (678) 336-2500

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 October 29, 2004 there were 37,341,847 shares of the registrant's common stock outstanding.

_________________________



 
     
 

 

 ATHEROGENICS, INC.

 

  FORM 10-Q

 

  INDEX

  
   
PART I. FINANCIAL INFORMATION   
Page No.
   
Item 1. Condensed Financial Statements (unaudited)
  
       
     Condensed Balance Sheets
  
          September 30, 2004 and December 31, 2003
3
       
     Condensed Statements of Operations
  
          Three and nine months ended September 30, 2004 and 2003
4
       
     Condensed Statements of Cash Flows
  
          Nine months ended September 30, 2004 and 2003
5
       
     Notes to Condensed Financial Statements   
6
       
Item 2. Management's Discussion and Analysis of Financial Condition
 
           and Results of Operations
8
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk
12
       
Item 4. Controls and Procedures
13
       
PART II. OTHER INFORMATION
  
       
Item 6. Exhibits
13
       
SIGNATURES
14
   



 
 


     
 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ATHEROGENICS, INC.
CONDENSED BALANCE SHEETS
(Unaudited)


   
September 30,
  
December 31,
  
   
2004
  
2003
  
       
ASSETS
          
               
Current assets:
              
  Cash and cash equivalents
  
$
34,432,429
  
$
72,058,249
  
  Short-term investments
    
51,606,433
    
59,525,679
  
  Prepaid expenses
    
1,694,050
    
1,144,006
  
   Notes receivable and other current assets
    
480,448
    
496,871
  
      Total current assets
   
88,213,360
    
133,224,805
  
               
Equipment and leasehold improvements, net of
             
   accumulated depreciation and amortization
    
2,095,348
    
2,520,790
  
Other assets
    
2,568,775
    
3,091,151
  
       Total assets
  
$
92,877,483
  
$
138,836,746
  
               
               
               
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY
              
               
Current liabilities:
              
   Accounts payable
  
$
3,566,475
  
$
1,778,187
  
   Accrued research and development costs
    
5,372,787
    
2,961,085
  
   Accrued compensation
    
1,675,925
    
1,038,907
  
   Accrued liabilities
    
894,895
    
2,118,500
  
   Current portion of equipment loan facility
    
206,948
    
479,439
  
       Total current liabilities
    
11,717,030
    
8,376,118
  
               
Convertible notes payable
    
100,000,000
    
100,000,000
  
Equipment loan facility, net of current portion
    
—
    
83,622
  
               
Shareholders’ (deficit) equity
              
   Preferred stock, no par value: Authorized - 5,000,000 shares
    
—
    
—
  
   Common stock, no par value: Authorized - 100,000,000
              
    shares; issued and outstanding - 37,273,997 and
             
    36,763,407 shares at September 30, 2004 and
             
    December 31, 2003, respectively
    
175,501,277
    
172,452,536
  
   Warrants
    
1,008,859
    
950,588
  
   Deferred stock compensation
    
(614,103
)
  
(505,708
)
   Accumulated deficit
    
(194,662,291
)
  
(142,531,315
)
   Accumulated other comprehensive (loss) income
    
(73,289
)
  
10,905
  
       Total shareholders’ (deficit) equity
    
(18,839,547
)
  
30,377,006
  
       Total liabilities and shareholders’ (deficit) equity
  
$
92,877,483
  
$
138,836,746
  
               

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


 
 


  3  
 

ATHEROGENICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)


   
Three months ended
  
Nine months ended
  
   
September 30,
  
September 30,
  
   
2004
  
2003
  
2004
  
2003
  
                           
Revenues
  
$
—
  
$
—
  
$
—
  
$
—
  
                           
Operating expenses:
                          
  Research and development
    
16,636,236
    
11,783,883
    
44,478,990
    
33,284,827
  
  General and administrative
    
1,410,647
    
1,677,542
    
4,846,694
    
4,391,374
  
      Total operating expenses
    
18,046,883
    
13,461,425
    
49,325,684
    
37,676,201
  
                           
Operating loss
    
(18,046,883
)
  
(13,461,425
)
  
(49,325,684
)
  
(37,676,201
)
Interest income
    
343,795
    
443,336
    
1,089,877
    
862,609
  
Interest expense
    
(1,300,028
)
  
(618,528
)
  
(3,895,169
)
  
(653,704
)
Net loss
  
$
(19,003,116
)
$
(13,636,617
)
$
(52,130,976
)
$
(37,467,296
)
                           
Net loss per share -
                         
  basic and diluted
  
$
(0.51
)
$
(0.37
)
$
(1.41
)
$
(1.06
)
                           
Weighted average shares
                          
  outstanding - basic and diluted
    
37,047,826
    
36,566,434
    
36,976,911
    
35,451,468
  
                           


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


 
 


  4  
 

ATHEROGENICS, INC.