UNITED STATES
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 March 31, 2004
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: 0-26642
MYRIAD GENETICS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 87-0494517 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 320 Wakara Way, Salt Lake City, UT | 84108 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (801) 584-3600
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 ¨
As of April 28, 2004 the registrant had 27,159,828 shares of $0.01 par value common stock outstanding.
1
MYRIAD GENETICS, INC.
| Page | ||||
| PART I—Financial Information | ||||
| Item 1. | Financial Statements: | |||
| Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2004 and June 30, 2003 | 3 | |||
| Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended March 31, 2004 and 2003 | 4 | |||
| Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended March 31, 2004 and 2003 | 5 | |||
| Notes to Condensed Consolidated Financial Statements (Unaudited) | 6 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 9 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 14 | ||
| Item 4. | Controls and Procedures | 14 | ||
| PART II—Other Information | ||||
| Item 1. | Legal Proceedings | 16 | ||
| Item 2. | Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities | 16 | ||
| Item 3. | Defaults Upon Senior Securities | 16 | ||
| Item 4. | Submission of Matters to a Vote of Security Holders | 16 | ||
| Item 5. | Other Information | 16 | ||
| Item 6. | Exhibits and Reports on Form 8-K | 16 | ||
| Signatures | 17 | |||
2
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| (in thousands, except per share amounts) |
Mar. 31, 2004 |
June 30, 2003 |
||||||
| Assets | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 46,912 | $ | 61,603 | ||||
| Marketable investment securities |
22,499 | 11,172 | ||||||
| Prepaid expenses |
8,361 | 7,740 | ||||||
| Trade accounts receivable, less allowance for doubtful accounts of $985 at Mar. 31, 2004 and $895 at June 30, 2003 |
14,816 | 12,917 | ||||||
| Other receivables |
932 | 9,241 | ||||||
| Related party receivables |
— | 150 | ||||||
| Total current assets |
93,520 | 102,823 | ||||||
| Equipment and leasehold improvements: |
||||||||
| Equipment |
33,555 | 31,826 | ||||||
| Leasehold improvements |
7,643 | 7,531 | ||||||
| 41,198 | 39,357 | |||||||
| Less accumulated depreciation and amortization |
23,549 | 20,675 | ||||||
| Net equipment and leasehold improvements |
17,649 | 18,682 | ||||||
| Long-term marketable investment securities |
29,672 | 53,517 | ||||||
| Other assets |
7,488 | 7,801 | ||||||
| $ | 148,329 | $ | 182,823 | |||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 8,927 | $ | 11,454 | ||||
| Accrued liabilities |
4,224 | 4,925 | ||||||
| Deferred revenue |
1,689 | 2,958 | ||||||
| Total current liabilities |
14,840 | 19,337 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.01 par value, 5,000 shares authorized, no shares issued and outstanding |
— | — | ||||||
| Common stock, $0.01 par value, 60,000 shares authorized; issued and outstanding 27,159 at Mar. 31, 2004 and 27,079 at June 30, 2003 |
272 | 271 | ||||||
| Additional paid-in capital |
261,762 | 261,155 | ||||||
| Accumulated other comprehensive income |
265 | 711 | ||||||
| Accumulated deficit |
(128,810 | ) | (98,651 | ) | ||||
| Total stockholders’ equity |
133,489 | 163,486 | ||||||
| $ | 148,329 | $ | 182,823 | |||||
See accompanying notes to condensed consolidated financial statements (Unaudited).
3
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| (in thousands, except per share amounts) |
Mar. 31, 2004 |
Mar. 31, 2003 |
Mar. 31, 2004 |
Mar. 31, 2003 |
||||||||||||
| Revenues: |
||||||||||||||||
| Predictive medicine revenue |
$ | 11,699 | $ | 9,314 | $ | 30,209 | $ | 25,329 | ||||||||
| Research revenue |
1,909 | 6,432 | 9,761 | 21,852 | ||||||||||||
| Related party research revenue |
148 | 342 | 1,606 | 1,436 | ||||||||||||
| Total research revenue |
2,057 | 6,774 | 11,367 | 23,288 | ||||||||||||
| Total revenues |
13,756 | 16,088 | 41,576 | 48,617 | ||||||||||||
| Costs and expenses: |
||||||||||||||||
| Predictive medicine cost of revenue |
3,709 | 3,361 | 9,916 | 9,277 | ||||||||||||
| Research and development expense |
12,390 | 11,053 | 38,693 | 34,217 | ||||||||||||
| Selling, general and administrative expense |
8,821 | 7,785 | 24,680 | 24,795 | ||||||||||||
| Total costs and expenses |
24,920 | 22,199 | 73,289 | 68,289 | ||||||||||||
| Operating loss |
(11,164 | ) | (6,111 | ) | (31,713 | ) | (19,672 | ) | ||||||||
| Other income (expense): |
||||||||||||||||
| Interest income |
473 | 701 | 1,569 | 2,268 | ||||||||||||
| Other |
(5 | ) | 1 | (15 | ) | 35 | ||||||||||
| Loss before taxes |
(10,696 | ) | (5,409 | ) | (30,159 | ) | (17,369 | ) | ||||||||
| Income taxes |
— | 125 | — | 375 | ||||||||||||
| Net loss |
$ | (10,696 | ) | $ | (5,534 | ) | $ | (30,159 | ) | $ | (17,744 | ) | ||||
| Basic and diluted loss per share |
$ | (0.39 | ) | $ | (0.20 | ) | $ | (1.11 | ) | $ | (0.70 | ) | ||||
| Basic and diluted weighted average shares outstanding |
27,148 | 27,012 | 27,114 | 25,294 | ||||||||||||
See accompanying notes to condensed consolidated financial statements (Unaudited).
4
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Nine Months Ended |
||||||||
| (In thousands) | Mar. 31, 2004 |
Mar. 31, 2003 |
||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (30,159 | ) | $ | (17,744 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
4,307 | 3,969 | ||||||
| (Gain) loss on disposition of assets |
15 | (35 | ) | |||||
| Bad debt expense |
906 | 290 | ||||||
| Changes in operating assets: |
||||||||
| Trade receivables |
(2,805 | ) | (4,763 | ) | ||||
| Other receivables |
8,309 | (10,026 | ) | |||||
| Related party receivables |
150 | (119 | ) | |||||
| Prepaid expenses |
(621 | ) | (1,077 | ) | ||||
| Accounts payable |
(2,527 | ) | (4,809 | ) | ||||
| Accrued liabilities |
(701 | ) | 751 | |||||
| Related party payable |
— | (1,038 | ) | |||||
| Deferred revenue |
(1,269 | ) | (10,506 | ) | ||||
| Net cash used in operating activities |
(24,395 | ) | (45,107 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Capital expenditures |
(2,876 | ) | (6,387 | ) | ||||
| Increase in other assets |
(100 | ) | (1,100 | ) | ||||
| Purchases of marketable investment securities |
(33,738 | ) | (23,123 | ) | ||||
| Proceeds from sales and maturities of marketable investment securities |
45,810 | 36,597 | ||||||
| Net cash provided by investing activities |
9,096 | 5,987 | ||||||
| Cash flows from financing activities: |
||||||||
| Net proceeds from issuance of common stock |
608 | 58,474 | ||||||
| Net cash provided by financing activities |
608 | 58,474 | ||||||
| Net increase (decrease) in cash and cash equivalents |
(14,691 | ) | 19,354 | |||||
| Cash and cash equivalents at beginning of period |
61,603 | 61,067 | ||||||
| Cash and cash equivalents at end of period |
$ | 46,912 | $ | 80,421 | ||||
See accompanying notes to condensed consolidated financial statements (Unaudited).
5
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| (1) | Basis of Presentation |
The accompanying condensed consolidated financial statements have been prepared by Myriad Genetics, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying financial statements contain all adjustments (consisting of normal and recurring accruals) necessary to present fairly all financial statements in accordance with accounting principles generally accepted in the United States. The unaudited condensed consolidated financial statements herein should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2003, included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2003. Operating results for the three and nine month periods ended March 31, 2004 may not necessarily be indicative of the results to be expected for any other interim period or for the full year.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
| (2) | Stock-Based Compensation |
In 2003 the Company adopted the 2003 Employee, Director and Consultant Stock Option Plan, which, together with our earlier stock option plan which has been terminated, are accounted for under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net loss, as all options granted under these plans have an exercise price equal to the market value of the underlying common stock on the date of grant and no modifications have been made to any of the awards. The following table illustrates the effect on net loss and loss per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.
| Three Months Ended Mar. 31, |
Nine Months Ended Mar. 31, |
|||||||||||||||
| (in thousands, except per share amounts) | 2004 |
2003 |
2004 |
2003 |
||||||||||||
| Net loss, as reported |
$ | (10,696 | ) | $ | (5,534 | ) | $ | (30,159 | ) | $ | (17,744 | ) | ||||
| Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax related effects |
(5,961 | ) | (6,363 | ) | (18,721 | ) | < | |||||||||