SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
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| For the quarterly period ended March 31, 2003 | ||||||
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
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| For the transition period from _____________ to ______________. | ||||||
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| Commission File No. 0-19312 | ||||||
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| MEDAREX, INC. | ||||||
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| New Jersey |
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22-2822175 | ||||
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| 707 State Road, Princeton, New Jersey |
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08540 | ||||
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Registrant’s Telephone Number, Including Area Code: (609) 430-2880 | ||||
Indicate by check x whether 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 o |
Indicate by check x whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
| Yes x |
No o |
The number of shares of common stock, $.01 par value, outstanding as of May 1, 2003 was 77,247,478 shares.
MEDAREX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
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December 31, |
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March 31, |
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(Unaudited) |
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| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
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$ |
61,812 |
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$ |
74,238 |
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| Marketable securities |
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288,234 |
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247,173 |
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| Prepaid expenses and other current assets |
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10,143 |
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8,391 |
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| Total current assets |
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360,189 |
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329,802 |
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| Property, buildings and equipment: |
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| Land |
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6,624 |
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6,624 |
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| Buildings and leasehold improvements |
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71,277 |
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73,601 |
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| Machinery and equipment |
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31,821 |
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33,407 |
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| Furniture and fixtures |
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3,963 |
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4,021 |
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| Construction in progress |
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2,148 |
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2,362 |
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115,833 |
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120,015 |
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| Less accumulated depreciation and amortization |
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(18,522 |
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(22,098 |
) |
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97,311 |
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97,917 |
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| Investments in Genmab |
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21,206 |
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19,600 |
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| Investments in IDM |
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48,199 |
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48,199 |
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| Investments in, and advances to, other affiliates and partners |
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11,982 |
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13,082 |
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| Segregated cash |
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1,300 |
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1,300 |
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| Other assets |
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8,864 |
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8,280 |
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| Total assets |
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$ |
549,051 |
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$ |
518,180 |
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| LIABILITIES AND SHAREHOLDERS' EQUITY |
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| Current liabilities: |
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| Trade accounts payable |
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$ |
2,686 |
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$ |
2,969 |
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| Accrued liabilities |
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15,377 |
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8,567 |
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| Deferred contract revenue - current |
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2,646 |
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3,447 |
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| Total current liabilities |
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20,709 |
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14,983 |
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| Deferred contract revenue - long-term |
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1,152 |
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853 |
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| Other long-term obligations |
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47 |
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2,553 |
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| Convertible subordinated notes |
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175,000 |
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175,000 |
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| Commitments and contingencies |
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— |
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— |
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| Shareholders' equity: |
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| Preferred stock, $1.00 par value, 2,000,000 shares authorized; |
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— |
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— |
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| Common stock, $.01 par value; 200,000,000 shares authorized; |
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777 |
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780 |
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| Capital in excess of par value |
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630,279 |
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631,121 |
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| Treasury stock, at cost 795,392 shares in 2002 and 719,923 shares in 2003 |
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(2,001 |
) |
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(1,811 |
) |
| Deferred compensation |
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1,311 |
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1,415 |
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| Accumulated other comprehensive income |
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5,380 |
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6,512 |
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| Accumulated deficit |
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(283,603 |
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(313,226 |
) |
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| Total shareholders' equity |
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352,143 |
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324,791 |
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| Total liabilities and shareholders' equity |
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$ |
549,051 |
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$ |
518,180 |
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See notes to these unaudited consolidated financial statements.
2
MEDAREX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
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Three Months Ended |
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2002 |
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2003 |
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| Sales |
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$ |
100 |
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$ |
25 |
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| Contract and license revenues |
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7,613 |
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2,174 |
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| Sales, contract and license revenues from Genmab (includes |
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3,058 |
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1,765 |
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| Total revenues |
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10,771 |
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3,964 |
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| Costs and expenses: |
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| Cost of sales ($1,438 from sales to Genmab in 2002) |
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1,477 |
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3 |
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| Research and development |
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17,254 |
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23,526 |
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| General and administrative |
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5,418 |
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5,684 |
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| Total costs and expenses |
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24,149 |
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29,213 |
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| Operating loss |
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(13,378 |
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(25,249 |
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| Equity in net loss of affiliate |
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(3,589 |
) |
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(3,754 |
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| Interest and dividend income |
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4,946 |
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2,632 |
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| Impairment loss on investments in partners |
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(1,600 |
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— |
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| Additional payments related to asset acquisition |
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— |
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(86 |
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| Interest expense |
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(2,218 |
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(2,308 |
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| Pre tax loss |
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(15,839 |
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(28,765 |
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| Provision for income taxes |
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— |
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28 |
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| Loss before cumulative effect of change in accounting principle |
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(15,839 |
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(28,793 |
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| Cumulative effect of change in accounting principle |
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— |
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(830 |
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| Net loss |
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$ |
(15,839 |
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$ |
(29,623 |
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| Basic and diluted net loss per share: |
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| Loss before cumulative effect of change in accounting principle |
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$ |
(0.21 |
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$ |
(0.37 |
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| Cumulative effect of change in accounting principle |
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$ |
— |
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$ |
(0.01 |
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| Net loss |
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$ |
(0.21 |
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$ |
(0.38 |
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| Weighted average number of common shares outstanding - basic and diluted |
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74,011 |
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77,953 |
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See notes to these unaudited consolidated financial statements.
3
MEDAREX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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For the Three Months Ended |
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2002 |
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2003 |
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| Operating activities: |
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| Net loss |
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$ |
(15,839 |
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$ |
(29,623 |
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| Adjustments to reconcile net loss to net cash |
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| Cumulative effect of change in accounting principle |
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— |
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830 |
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| Depreciation |
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1,586 |
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2,588 |
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| Amortization |
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478 |
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812 |
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| Stock options and awards to employees |
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61 |
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139 |
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| Stock options and warrants to non-employees |
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(8 |
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— |
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| Non cash revenue - IDM |
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(5,058 |
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— |
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| Equity in net loss of Genmab |
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3,589 |
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3,754 |
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| Impairment loss on investments |
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1,600 |
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— |
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| Changes in operating assets and liabilities |
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| Other current assets |
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(566 |
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1,959 |
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| Trade accounts payable |
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(1,303 |
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283 |
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| Accrued liabilities |
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(4,551 |
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(5,802 |
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| Deferred contract revenue |
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(2,389 |
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|
502 |
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| Net cash used in operating activities |
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(22,400 |
) |
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(24,558 |
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| Investing activities: |
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| Purchase of property and equipment |
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(12,431 |
) |
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(1,947 |
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| Increase in investments and advances to affiliates and partners |
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— |
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(1,000 |
) |
| Purchase of marketable securities |
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(2,500 |
) |
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— |
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| Sales of marketable securities |
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56,044 |
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40,044 |
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| Net cash provided by investing activities |
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41,113 |
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37,097 |
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| Financing activities: |
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| Cash received from sales of securities, net |
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28 |
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— |
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| Principal payments under debt obligations |
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— |
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(113 |
) |
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| Net cash provided by (used in) financing activities |
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28 |
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(113 |
) |
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| Net increase in cash and cash equivalents |
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18,741 |
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12,426 |
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| Cash and cash equivalents at beginning of period |
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31,269 |
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61,812 |
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| Cash and cash equivalents at end of period |
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$ |
50,010 |
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$ |
74,238 |
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| Supplemental disclosures of cash flow information |
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| Cash paid during period for: |
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| Interest |
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$ |
4,047 |
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$ |
3,944 |
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See notes to these unaudited consolidated financial statements.
4
MEDAREX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, unless otherwise indicated, except per share data)
1. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared from the books and records of Medarex, Inc. and Subsidiaries (the “Company”) in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. 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 accruals) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of the results that may be expected for the year. The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2002.
Net Loss per Share
Basic and diluted net loss per share are calculated in accordance with the Financial Accounting Standards Board (“FASB”) SFAS No. 128, Earnings per Share. Basic net loss per share is based upon the number of weighted average shares of common stock outstanding. Diluted net loss per share is based upon the weighted average number of shares of common stock and dilutive potential shares of common stock outstanding. Potential shares of common stock result from the assumed exercise of outstanding stock options, which are included under the treasury stock method. For the three month periods ended March 31, 2002 and 2003, all potentially dilutive securities have been excluded from the computation of diluted net loss per share, as their effect is antidilutive.
Marketable Securities
Marketable securities consist of fixed income investments with a maturity of greater than three months and other highly liquid investments that can readily purchased or sold using established markets. Under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, these investments are classified as available-for-sale and are reported at fair value on the Company’s consolidated balance sheet. Unrealized holding gains and losses are reported within accumulated other comprehensive income as a separate component of shareholders’ equity. Under the Company’s accounting policy, a decline in the fair value of marketable securities is deemed to be “other than temporary” and such marketable securities are generally considered to be impaired if their fair value is less than the Company’s cost basis for more than six months, or some other period in light of the particular facts and circumstances surrounding the investment. If a decline in the fair value of a marketable security