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 April 30, 2003
OR
| ¨ | 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: 0-27756
Alexion Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 13-3648318 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
352 Knotter Drive, Cheshire, Connecticut 06410
(Address of principal executive offices) (Zip Code)
203-272-2596
(Registrant’s telephone number, including area code)
N/A
(Former address of principal executive offices) (Zip 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 ¨
| Common Stock, $0.0001 par value | 18,213,246 shares | |
| Class | Outstanding at June 11, 2003 |
ALEXION PHARMACEUTICALS, INC.
| Page | ||||
| PART I. FINANCIAL INFORMATION | ||||
| Item 1. |
Consolidated Financial Statements (Unaudited) |
|||
| Consolidated Balance Sheets as of April 30, 2003 and July 31, 2002 |
3 | |||
| Consolidated Statements of Operations for the three and nine months ended April 30, 2003 and 2002 |
4 | |||
| Consolidated Statements of Cash Flows for the nine months ended April 30, 2003 and 2002 |
5 | |||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 | ||
| Item 3. |
20 | |||
| Item 4. |
20 | |||
| PART II. OTHER INFORMATION | 21 | |||
| Item 6. |
21 | |||
| SIGNATURES | 22 | |||
| CERTIFICATIONS | 23 | |||
Page 2 of 24
ALEXION PHARMACEUTICALS, INC.
(UNAUDITED)
(amounts in thousands)
| April 30, 2003 |
July 31, 2002 |
|||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 61,208 | $ | 47,574 | ||||
| Marketable securities |
169,727 | 261,010 | ||||||
| Reimbursable contract costs |
1,393 | 863 | ||||||
| Prepaid expenses and other current assets |
2,406 | 1,337 | ||||||
| Total current assets |
234,734 | 310,784 | ||||||
| Property, plant, and equipment, net |
11,903 | 14,874 | ||||||
| Goodwill |
19,954 | 19,954 | ||||||
| Deferred financing costs, net |
2,263 | 2,692 | ||||||
| Prepaid manufacturing costs |
10,000 | 2,750 | ||||||
| Other assets |
3,189 | 3,015 | ||||||
| TOTAL ASSETS |
$ | 282,043 | $ | 354,069 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Accounts payable |
$ | 2,246 | $ | 9,843 | ||||
| Accrued expenses |
5,060 | 4,303 | ||||||
| Accrued interest |
921 | 2,627 | ||||||
| Deferred revenue |
589 | 546 | ||||||
| Total current liabilities |
8,816 | 17,319 | ||||||
| Deferred revenue, less current portion included above |
6,911 | 7,352 | ||||||
| Note payable |
3,920 | 3,920 | ||||||
| Convertible subordinated notes |
120,000 | 120,000 | ||||||
| Commitments and contingencies (see notes) |
||||||||
| Stockholders’ Equity: |
||||||||
| Preferred stock $.0001 par value; 5,000 shares authorized; no shares issued or outstanding |
— | — | ||||||
| Common stock $.0001 par value; 145,000 shares authorized; 18,249 and 18,241 shares issued at April 30, 2003 and July 31, 2002, respectively |
2 | 2 | ||||||
| Additional paid-in capital |
385,382 | 385,197 | ||||||
| Accumulated deficit |
(243,682 | ) | (180,799 | ) | ||||
| Other comprehensive income |
1,294 | 1,678 | ||||||
| Treasury stock, at cost; 37 shares |
(600 | ) | (600 | ) | ||||
| Total stockholders’ equity |
142,396 | 205,478 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 282,043 | $ | 354,069 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
Page 3 of 24
ALEXION PHARMACEUTICALS, INC.
Consolidated Statements of Operations
(UNAUDITED)
(amounts in thousands, except per share amounts)
| Three months ended April 30, |
Nine months ended April 30, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| CONTRACT RESEARCH REVENUES |
$ | 167 | $ | 539 | $ | 710 | $ | 5,779 | ||||||||
| OPERATING EXPENSES: |
||||||||||||||||
| Research and development |
13,473 | 15,906 | 52,454 | 40,620 | ||||||||||||
| General and administrative |
3,369 | 2,432 | 7,619 | 5,867 | ||||||||||||
| Impairment of fixed assets |
2,560 | — | 2,560 | — | ||||||||||||
| Total operating expenses |
19,402 | 18,338 | 62,633 | 46,487 | ||||||||||||
| Operating loss |
(19,235 | ) | (17,799 | ) | (61,923 | ) | (40,708 | ) | ||||||||
| OTHER INCOME AND EXPENSE |
||||||||||||||||
| Investment income |
1,191 | 2,621 | 4,735 | 10,077 | ||||||||||||
| Interest expense |
(1,930 | ) | (1,927 | ) | (5,783 | ) | (5,773 | ) | ||||||||
| Net loss before benefit from state income tax |
(19,974 | ) | (17,105 | ) | (62,971 | ) | (36,404 | ) | ||||||||
| BENEFIT FROM STATE INCOME TAX |
196 | — | 88 | 700 | ||||||||||||
| Net loss |
$ | (19,778 | ) | $ | (17,105 | ) | $ | (62,883 | ) | $ | (35,704 | ) | ||||
| BASIC AND DILUTED NET LOSS PER SHARE |
$ | (1.09 | ) | $ | (0.94 | ) | $ | (3.45 | ) | $ | (1.97 | ) | ||||
| SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER COMMON SHARE |
18,210 | 18,160 | 18,207 | 18,129 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
Page 4 of 24
ALEXION PHARMACEUTICALS, INC.
Consolidated Statements of Cash Flows
( UNAUDITED )
( amounts in thousands )
| Nine months ended April 30, |
||||||||
| 2003 |
2,002 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (62,883 | ) | $ | (35,704 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Realized gain from sale of marketable securities |
— | (2,039 | ) | |||||
| Impairment of fixed assets |
2,560 | — | ||||||
| Depreciation and amortization |
2,777 | 2,823 | ||||||
| Compensation expense related to grant of stock options |
97 | 175 | ||||||
| Change in assets and liabilities: |
||||||||
| Reimbursable contract costs |
(530 | ) | 6,511 | |||||
| Prepaid expenses |
(1,069 | ) | (195 | ) | ||||
| Other assets |
(156 | ) | (4,028 | ) | ||||
| Prepaid manufacturing costs |
(7,250 | ) | (2,750 | ) | ||||
| Accounts payable |
(7,597 | ) | 6,310 | |||||
| Accrued expenses |
757 | 2,047 | ||||||
| Accrued interest |
(1,706 | ) | (1,725 | ) | ||||
| Deferred revenue |
(398 | ) | (1,204 | ) | ||||
| Net cash used in operating activities |
(75,398 | ) | (29,779 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchases of marketable securities |
(65,327 | ) | (377,407 | ) | ||||
| Proceeds from marketable securities |
156,226 | 395,548 | ||||||
| Purchases of property, plant and equipment |
(1,955 | ) | (2,359 | ) | ||||
| Net cash provided by investing activities |
88,944 | 15,782 | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Net proceeds from issuance of common stock |
88 | 236 | ||||||
| NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS |
13,634 | (13,761 | ) | |||||
| CASH AND CASH EQUIVALENTS, beginning of period |
47,574 | 135,188 | ||||||
| CASH AND CASH EQUIVALENTS, end of period |
$ | 61,208 | $ | 121,427 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
||||||||
| Cash paid for interest expense |
$ | 7,076 | $ | 7,018 | ||||
| SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES |
||||||||
| Cashless exercise of stock option award |
— | $ | 600 | |||||
The accompanying notes are an integral part of these consolidated financial statements.
Page 5 of 24
ALEXION PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Operations—
Alexion Pharmaceuticals, Inc. (“Alexion” or the “Company”) was organized in 1992 and is engaged in the development of therapeutic products for the treatment of a wide array of severe diseases, including cardiovascular, autoimmune, and hematologic disorders, inflammation, and cancer.
The accompanying consolidated financial statements include Alexion Pharmaceuticals, Inc. and its wholly owned subsidiaries, Alexion Antibody Technologies (“AAT”) and Columbus Farming Corporation (“CFC”). All significant intercompany balances and transactions have been eliminated in consolidation.
The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and include, in the opinion of management, all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of interim period results. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.”) have been condensed or omitted pursuant to such rules and regulations. The results for the interim periods presented are not necessarily indicative of results to be expected for any future period. These consolidated condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K Annual Report for the fiscal year ended July 31, 2002. The year end balance sheet data presented does not include all disclosures required by accounting principles generally accepted in the U.S.
2. Accounting for Stock-Based Compensation—Transition and Disclosure—
In December 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of SFAS 123. SFAS No. 148 provides additional transition guidance for those entities that elect to voluntarily adopt the accounting provisions of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 148 also mandates certain new disclosures that are incremental to those required by SFAS No. 123. The provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002, and for interim periods beginning after December 15, 2002. The Company adopted the disclosure provisions of SFAS No. 148 during the quarter ended April 30, 2003.
At April 30, 2003, the Company has two stock-based compensation plans for employees, directors, and consultants of the Company. The Company accounts for the plans under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations.
The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation for the three and nine months ended April 30, 2003 and 2002 (dollars in thousands, except per share amounts):
| Three months ended April 30, |
Nine months ended April 30, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| Net loss, as reported |
$ | (19,778 | ) | $ | (17,105 | ) | $ | (62,883 | ) | $ | (35,704 | ) | ||||
| Add: Stock-based employee compensation expense included in reported net loss |
25 | 42 | ||||||||||||||