SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For The Quarterly Period Ended June 30, 2003
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 0-19171
ICOS CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 91-1463450 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 22021 20th Avenue S.E., Bothell, WA | 98021 | |
| (Address of principal executive offices) | (Zip code) | |
(425) 485-1900
(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 (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 Exchange Act). Yes x No ¨
Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.
| Class |
Outstanding at June 30, 2003 | |
| Common Stock, $0.01 par value |
62,562,283 |
ICOS CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003
| PAGE NO. | ||||||
| PART I. Financial Information |
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| ITEM 1. | Financial Statements |
|||||
| Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2003 and 2002 | 1 | |||||
| Condensed Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002 |
2 | |||||
| Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002 |
3 | |||||
| 4 | ||||||
| ITEM 2. | Management’s Discussion and Analysis of Results of Operations and Financial Condition |
9 | ||||
| ITEM 3. | 31 | |||||
| ITEM 4. | 31 | |||||
| PART II. Other Information |
||||||
| ITEM 2. | 32 | |||||
| ITEM 4. | 32 | |||||
| ITEM 6. | 33 | |||||
| 34 | ||||||
PART 1. Financial Information
ITEM 1. Financial Statements
ICOS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| (in thousands, except per share data) |
||||||||||||||||
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| Revenue: |
||||||||||||||||
| Collaboration revenue from related parties |
$ | 2,642 | $ | 17,909 | $ | 7,990 | $ | 37,265 | ||||||||
| Licenses of technology |
21,343 | 634 | 21,976 | 2,014 | ||||||||||||
| Contract manufacturing |
2,722 | 3,432 | 3,822 | 5,232 | ||||||||||||
| Total revenue |
26,707 | 21,975 | 33,788 | 44,511 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
27,105 | 35,248 | 54,393 | 70,646 | ||||||||||||
| Marketing and selling |
1,233 | 2,780 | 2,154 | 5,938 | ||||||||||||
| General and administrative |
2,214 | 2,087 | 4,355 | 3,896 | ||||||||||||
| Total operating expenses |
30,552 | 40,115 | 60,902 | 80,480 | ||||||||||||
| Operating loss |
(3,845 | ) | (18,140 | ) | (27,114 | ) | (35,969 | ) | ||||||||
| Other income (expense): |
||||||||||||||||
| Equity in losses of affiliates |
(20,045 | ) | (25,277 | ) | (41,592 | ) | (50,001 | ) | ||||||||
| Gain on sale of partnership interests |
10,000 | — | 10,000 | — | ||||||||||||
| Interest and other income |
2,342 | 3,012 | 6,054 | 6,345 | ||||||||||||
| Loss before income taxes |
(11,548 | ) | (40,405 | ) | (52,652 | ) | (79,625 | ) | ||||||||
| Income tax recovery |
— | — | 612 | — | ||||||||||||
| Net loss |
$ | (11,548 | ) | $ | (40,405 | ) | $ | (52,040 | ) | $ | (79,625 | ) | ||||
| Net loss per common share – basic and diluted |
$ | (0.19 | ) | $ | (0.66 | ) | $ | (0.84 | ) | $ | (1.31 | ) | ||||
| Weighted average common shares outstanding – basic and diluted |
62,401 | 61,148 | 62,288 | 60,586 | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
1
ICOS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
| (in thousands) |
||||||||
| June 30, 2003 |
December 31, 2002 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 343,154 | $ | 40,450 | ||||
| Investment securities, at market value |
120,678 | 159,680 | ||||||
| Interest receivable |
3,027 | 5,099 | ||||||
| Receivables from affiliates |
7,852 | 7,959 | ||||||
| Current portion of note receivable |
4,000 | — | ||||||
| Other |
5,450 | 2,652 | ||||||
| Total current assets |
484,161 | 215,840 | ||||||
| Investment securities, at market value |
46,648 | 148,796 | ||||||
| Property and equipment, net |
18,510 | 20,209 | ||||||
| Note receivable |
2,000 | — | ||||||
| Deferred financing costs and other |
8,432 | 815 | ||||||
| $ | 559,751 | $ | 385,660 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Payables and accruals |
$ | 18,941 | $ | 25,985 | ||||
| Due to affiliates |
19,502 | 25,012 | ||||||
| Deferred revenue |
1,400 | 2,305 | ||||||
| Total current liabilities |
39,843 | 53,302 | ||||||
| Deferred revenue |
— | 14,726 | ||||||
| Convertible subordinated debt |
250,000 | — | ||||||
| Stockholders’ equity: |
||||||||
| Common stock |
626 | 621 | ||||||
| Additional paid-in capital |
783,209 | 777,697 | ||||||
| Accumulated other comprehensive income |
2,079 | 3,280 | ||||||
| Accumulated deficit |
(516,006 | ) | (463,966 | ) | ||||
| Total stockholders’ equity |
269,908 | 317,632 | ||||||
| $ | 559,751 | $ | 385,660 | |||||
See accompanying notes to condensed consolidated financial statements.
2
ICOS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| (in thousands) |
||||||||
| Six Months Ended June 30, |
||||||||
| 2003 |
2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (52,040 | ) | $ | (79,625 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
2,944 | 2,718 | ||||||
| Gain on sale of investment securities, net |
(1,290 | ) | (139 | ) | ||||
| Amortization of investment premiums, net |
3,118 | 2,476 | ||||||
| Gain on sale of partnership interests |
(10,000 | ) | — | |||||
| Equity in losses of affiliates |
41,592 | 50,001 | ||||||
| Revenue from licenses of technology in excess of cash received |
(21,976 | ) | (2,014 | ) | ||||
| Other |
380 | 87 | ||||||
| Change in operating assets and liabilities: |
||||||||
| Receivables |
445 | (13,948 | ) | |||||
| Other assets |
(1,048 | ) | (107 | ) | ||||
| Payables and accruals |
(5,007 | ) | (194 | ) | ||||
| Net cash used in operating activities |
(42,882 | ) | (40,745 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Purchases of investment securities |
(22,678 | ) | (195,982 | ) | ||||
| Maturities of investment securities |
71,991 | 64,495 | ||||||
| Sales of investment securities |
88,991 | 62,001 | ||||||
| Acquisitions of property and equipment |
(1,245 | ) | (4,392 | ) | ||||
| Proceeds from sale of partnership interests |
4,000 | — | ||||||
| Investments in affiliates |
(47,102 | ) | (36,706 | ) | ||||
| Net cash provided by (used in) investing activities |
93,957 | (110,584 | ) | |||||
| Cash flows from financing activities: |
||||||||
| Proceeds from stock options and warrants |
5,121 | 21,285 | ||||||
| Borrowings under line of credit |
4,308 | 4,115 | ||||||
| Net proceeds from issuance of convertible subordinated debt |
242,200 | — | ||||||
| Net cash provided by financing activities |
251,629 | 25,400 | ||||||
| Net increase (decrease) in cash and cash equivalents |
302,704 | (125,929 | ) | |||||
| Cash and cash equivalents, beginning of period |
40,450 | |||||||