ALEXION PHARMACEUTICALS INC - 10-Q Quarterly Report

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 January 31, 2004

¨	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 name, former address, and former fiscal year, if changed)

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 ¨


Common Stock, $0.0001 par value		21,956,277 shares
Class		Outstanding at March 10, 2004

ALEXION PHARMACEUTICALS, INC.

INDEX


		Page

PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)

	Consolidated Balance Sheets as of January 31, 2004 and July 31, 2003	3

	Consolidated Statements of Operations for the three and six months ended January 31, 2004 and 2003	4

	Consolidated Statements of Cash Flows for the six months ended January 31, 2004 and 2003	5

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21

Item 4.	Controls and Procedures	21

PART II.	OTHER INFORMATION	22

Item 4.	Submission of Matters to a Vote of Security Holders	22

Item 5.	Other Matters	22

Item 6.	Exhibits and Reports on Form 8-K	22

SIGNATURES		24

CERTIFICATIONS		25

Page 2

ALEXION PHARMACEUTICALS, INC.

Consolidated Balance Sheets

(UNAUDITED)

(amounts in thousands)


	January 31, 2004			July 31, 2003
ASSETS
Current assets:
Cash and cash equivalents	$	10,525		$	24,816
Marketable securities		212,691			190,566
Reimbursable contract costs		92			390
State tax receivable		933			1,012
Prepaid expenses and other current assets		2,946			2,939
Assets of discontinued operations held for sale (see Note 3)		1,217			1,247

Total current assets		228,404			220,970
Property, plant, and equipment, net		10,577			11,066
Goodwill		19,954			19,954
Deferred financing costs, net		1,833			2,119
Prepaid manufacturing costs		10,000			10,000
Other assets		1,351			1,968

TOTAL ASSETS	$	272,119		$	266,077

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	7,985		$	7,560
Accrued expenses		2,904			4,312
Accrued interest		2,587			2,587
Deferred revenue		589			589
Deferred research and development payments		188			—
Liabilities of discontinued operations held for sale (see Note 3)		4,097			59

Total current liabilities		18,350			15,107
Deferred revenue, less current portion included above		6,470			6,764
Deferred research and development payments, less current portion included above		1,296			—
Note payable of discontinued operations held for sale (see Note 3)		—			3,920
Convertible subordinated notes		120,000			120,000

Total liabilities		146,116			145,791

Commitments and contingencies (see Note 12)
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; 21,959 and 18,257 shares issued at January 31, 2004 and July 31, 2003, respectively		2			2
Additional paid-in capital		430,419			385,498
Accumulated deficit		(304,025	)		(265,266	)
Other comprehensive income		207			652
Treasury stock, at cost; 37 shares		(600	)		(600	)

Total stockholders’ equity		126,003			120,286

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	272,119		$	266,077

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

Page 3

ALEXION PHARMACEUTICALS, INC.

Consolidated Statements of Operations

(UNAUDITED)

(amounts in thousands, except per share amounts)


	Three months ended January 31,						Six months ended January 31,
	2004			2003			2004			2003
CONTRACT RESEARCH REVENUES	$	147		$	220		$	294		$	543

OPERATING EXPENSES:
Research and development		14,565			18,243			31,212			37,436
General and administrative		3,300			2,754			6,114			4,900

Total operating expenses		17,865			20,997			37,326			42,336

Operating loss from continuing operations		(17,718	)		(20,777	)		(37,032	)		(41,793	)
OTHER INCOME AND EXPENSE
Investment income		994			1,662			1,995			3,544
Interest expense		(1,867	)		(1,867	)		(3,737	)		(3,735	)

Loss from continuing operations before state tax benefit		(18,591	)		(20,982	)		(38,774	)		(41,984	)
State tax benefit		62			—			133			—

Net loss from continuing operations		(18,529	)		(20,982	)		(38,641	)		(41,984	)
Loss from discontinued operations of Columbus Farming Corporation (see Note 3)		(18	)		(483	)		(118	)		(1,121	)

Net loss	$	(18,547	)	$	(21,465	)	$	(38,759	)	$	(43,105	)

BASIC AND DILUTED NET LOSS PER SHARE:
Loss from continuing operations	$	(0.85	)	$	(1.15	)	$	(1.84	)	$	(2.31	)
Loss from discontinued operations of Columbus Farming Corporation	$	(0.00	)	$	(0.03	)	$	(0.01	)	$	(0.06	)

NET LOSS PER SHARE	$	(0.85	)	$	(1.18	)	$	(1.85	)	$	(2.37	)

SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER COMMON SHARE		21,893			18,207			20,924			18,206

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

Page 4

ALEXION PHARMACEUTICALS, INC.

Consolidated Statements Of Cash Flows

(UNAUDITED)

(amounts in thousands)


	Six months ended January 31,
	2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(38,759	)	$	(43,105	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss from discontinued operations		118			1,121
Depreciation and amortization		1,737			1,567
Compensation expense related to grant of stock options		57			67
Change in assets and liabilities:
Reimbursable contract costs		298			474
State tax receivable		79			—
Prepaid expenses		(7	)		(629	)
Other assets		601			(176	)
Prepaid manufacturing costs		—			(7,250	)
Accounts payable		425			(3,441	)
Accrued expenses		(1,408	)		(1,297	)
Accrued interest		—			(1	)
Deferred revenue		(294	)		(251	)
Deferred research and development payments		1,484			—

Net cash used in continuing operations		(35,669	)		(52,919	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities		(72,539	)		(49,667	)
Proceeds from maturity or sale of marketable securities		49,969			109,649
Investments in patents and licensed technology		(5	)		(27	)
Purchases of property, plant and equipment		(941	)		(1,299	)

Net cash provided by (used in) investing activities		(23,516	)		58,656

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock		44,864			50

Net cash provided by financing activities		44,864			50

Net cash provided by (used in) discontinued operations		30			(980	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(14,291	)		4,808
CASH AND CASH EQUIVALENTS, beginning of period		24,816			47,522

CASH AND CASH EQUIVALENTS, end of period	$	10,525		$	52,330

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION<

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