KERYX BIOPHARMACEUTICALS INC - 10-Q Quarterly Report

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UNITED STATES

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 June 30, 2004

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 000-30929
___________________

KERYX BIOPHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	13-4087132 (I.R.S. Employer Identification No.)

750 Lexington Avenue

New York, New York 10022

(Address including zip code of principal executive offices)

(212) 531-5965

(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 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 £ No x

There were 30,681,180 shares of the registrant’s common stock, $0.001 par value, outstanding as of August 10, 2004.

KERYX BIOPHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2004

TABLE OF CONTENTS

		Page

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS		2

PART I	FINANCIAL INFORMATION

Item 1	Financial Statements

	Interim Consolidated Balance Sheets as of June 30, 2004 (unaudited) and December 31, 2003 (audited)	3

	Interim Consolidated Statements of Operations for the three and six months ended June 30, 2004 and 2003 (unaudited)	4

	Interim Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003 (unaudited)	5

	Notes to Interim Consolidated Financial Statements of June 30, 2004 (unaudited)	8

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4	Controls and Procedures	32

PART II	OTHER INFORMATION

Item 4	Submission of Matters to a Vote of Security Holders	32

Item 6	Exhibits and Reports on Form 8-K	33

SIGNATURES		34

CERTIFICATIONS

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this report, including matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended, or the Securities Act, and the Securities Exchange Act of 1934, as amended, or the Exchange Act, and as such matters may involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” and similar expressions are intended to identify such forward-looking statements. Our actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation, those discussed under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, as well as factors which may be identified from time to time in our other filings with the Securities and Exchange Commission, or SEC, or in the documents where such forward-looking statements appear. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements. Such forward-looking statements include, but are not limited to, those relating to:

our expectations for increases or decreases in expenses;
our expectations for the development, manufacturing, and approval of KRX-101, KRX-0401, KRX-0402, KRX-0403 or any other products we may acquire or in-license;
our expectations for incurring additional capital expenditures to expand our research and development capabilities;
our expectations for generating revenue or becoming profitable on a sustained basis;
our expectations or ability to enter into marketing and other partnership agreements;
our expectations or ability to enter into product acquisition and in-licensing transactions;
our estimates of the sufficiency of our existing cash and cash equivalents and investments to finance our operating and capital requirements;
our expected losses; and
our expectations for future capital requirements.

The forward-looking statements contained in this report reflect our views and assumptions only as of the date this report is signed. Except as required by law, we assume no responsibility for updating any forward-looking statements.

We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.


	2

ITEM 1. FINANCIAL STATEMENTS

Keryx Biopharmaceuticals, Inc. (A Development Stage Company)

Interim Consolidated Balance Sheets as of June 30, 2004, and December 31, 2003

(in thousands, except share and per share amounts)

		June 30, 2004			December 31, 2003

		(Unaudited)			(Audited)

Assets
Current assets
Cash and cash equivalents	$	38,446		$	21,672
Short-term investment securities, held-to-maturity		10,415			9,631
Note and accrued interest receivable from related party		--			352
Accrued interest receivable		117			111
Other receivables and prepaid expenses		488			213

Total current assets		49,466			31,979
Long-term investment securities, held-to-maturity		5,044			--
Property, plant and equipment, net		164			24
Other assets (primarily intangible assets), net		253			220

Total assets	$	54,927		$	32,223

Liabilities and stockholders’ equity
Current liabilities
Accounts payable and accrued expenses	$	2,031		$	894
Accrued compensation and related liabilities		30			103
Deferred revenue		478			--

Total current liabilities		2,539			997
Contingent equity rights		4,003			--
Other liabilities		126			--

Total liabilities		6,668			997

Stockholders’ equity
Common stock, $0.001 par value per share (60,000,000 and 40,000,000 shares authorized, 30,595,364 and 25,016,873 shares issued, 30,539,264 and 24,960,773 shares outstanding at June 30, 2004, and December 31, 2003, respectively)		31			25
Additional paid-in capital		130,778			86,042
Treasury stock, at cost, 56,100 shares at June 30, 2004, and December 31, 2003, respectively		(89	)		(89	)
Unearned compensation		(2,769	)		(142	)
Deficit accumulated during the development stage		(79,692	)		(54,610	)

Total stockholders’ equity		48,259			31,226

Total liabilities and stockholders’ equity	$	54,927		$	32,223

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


	3

Keryx Biopharmaceuticals, Inc. (A Development Stage Company)

Interim Unaudited Consolidated Statements of Operations for the
Three Months and Six Months Ended June 30, 2004 and 2003

(in thousands, except share and per share amounts)

	Three months ended June 30,						Six months ended June 30,						Amounts accumulated during the development stage

		2004			2003			2004			2003

Revenue
Service revenue	$	150		$	--		$	245		$	--		$	245
Management fees from related party		--			--			--			--			300

Total revenue		150			--			245			--			545

Operating expenses:
Cost of services		123			--			203			--			203

Research and development:
Non-cash compensation		23			(249	)		225			(515	)		6,952
Non-cash acquired in-process research and development		--			--			18,800			--			18,800
Other research and development		2,067			554			3,719			3,925			33,626

Total research and development expenses		2,090			305			22,744			3,410			59,378

General and administrative:
Non-cash compensation		621			50			806			52			4,385
Other general and administrative		745			1,205			1,838			1,869			19,927

Total general and administrative expenses		1,366			1,255			2,644			1,921			24,312

Total operating expenses		3,579			1,560			25,591			5,331			83,893

Operating loss		(3,429	)		(1,560	)		(25,346	)		(5,331	)		(83,348	)

Interest income, net		170			65			265			150			4,147

Net loss before income taxes		(3,259	)		(1,495	)		(25,081	)		(5,181	)		(79,201	)

Income taxes		--			14			1			116			491

Net loss	$	(3,259	)	$	(1,509	)	$	(25,082	)	$	(5,297	)	$	(79,692	)

Basic and diluted loss per common share	$	(0.11	)	$	(0.07	)	$	(0.86	)	$	(0.26	)	$	(5.30	)