UNITED STATES
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 March 31, 2004
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 0-21699
VIROPHARMA INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 23-2789550 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
405 Eagleview Boulevard
Exton, Pennsylvania 19341
(Address of Principal Executive Offices and Zip Code)
610-458-7300
(Registrant’s Telephone Number, Including Area 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 requirement 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 ¨ No x
Number of shares outstanding of the issuer’s Common Stock, par value $.002 per share, as of April 30, 2004: 26,583,720 shares.
INDEX
2
(A Development Stage Company)
Consolidated Balance Sheets
(unaudited)
December 31, 2003 and March 31, 2004
| December 31, 2003 |
March 31, 2004 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 12,969,261 | $ | 8,243,565 | ||||
| Short-term investments |
108,179,330 | 100,438,221 | ||||||
| Assets available for sale |
— | 1,039,877 | ||||||
| Notes receivable from officers |
88,743 | 66,557 | ||||||
| Due from partners |
— | 220,000 | ||||||
| Other current assets |
2,392,037 | 2,134,282 | ||||||
| Total current assets |
123,629,371 | 112,142,502 | ||||||
| Equipment and leasehold improvements, net |
7,212,493 | 891,677 | ||||||
| Debt issue costs, net |
1,908,860 | 1,842,370 | ||||||
| Other assets |
94,458 | 94,458 | ||||||
| Total assets |
$ | 132,845,182 | 114,971,007 | |||||
| Liabilities and Stockholders’ deficit |
||||||||
| Current liabilities: |
||||||||
| Loans payable |
$ | 8,334 | $ | — | ||||
| Accounts payable |
649,561 | 818,424 | ||||||
| Accrued expenses and other current liabilities |
6,800,484 | 6,606,737 | ||||||
| Deferred revenue - current |
3,074,245 | 1,865,006 | ||||||
| Total current liabilities |
10,532,624 | 9,290,167 | ||||||
| Convertible subordinated notes |
127,900,000 | 127,900,000 | ||||||
| Deferred revenue - noncurrent |
1,127,273 | 986,364 | ||||||
| Other liabilities |
794,580 | 724,515 | ||||||
| Total liabilities |
140,354,477 | 138,901,046 | ||||||
| Commitments and Contingencies |
||||||||
| Stockholders’ deficit: |
||||||||
| Preferred stock, par value $.001 per share. 5,000,000 shares authorized; Series A convertible participating preferred stock; no shares issued and outstanding |
— | — | ||||||
| Series A junior participating preferred stock; 200,000 shares designated; no shares issued and outstanding |
— | — | ||||||
| Common stock, par value $.002 per share. 100,000,000 shares authorized; issued and outstanding 26,462,738 at December 31, 2003 and 26,530,924 at March 31, 2004 |
52,925 | 53,062 | ||||||
| Additional paid-in capital |
250,320,035 | 250,377,902 | ||||||
| Deferred compensation |
(209,654 | ) | (142,025 | ) | ||||
| Accumulated other comprehensive loss |
(101,343 | ) | (31,707 | ) | ||||
| Deficit accumulated during the development stage |
(257,571,258 | ) | (274,187,271 | ) | ||||
| Total stockholders’ deficit |
(7,509,295 | ) | (23,930,039 | ) | ||||
| Total liabilities and stockholders’ deficit |
$ | 132,845,182 | $ | 114,971,007 | ||||
See accompanying notes to consolidated financial statements.
3
(A Development Stage Company)
Consolidated Statements of Operations
(unaudited)
Three months ended March 31, 2003 and 2004
and the period from December 5, 1994 (Inception) to March 31, 2004
| Three months ended March 31, |
Period from to March 31, 2004 |
|||||||||||
| 2003 |
2004 |
|||||||||||
| Revenues: |
||||||||||||
| License fee and milestone revenue |
$ | 168,309 | $ | 1,346,388 | $ | 17,148,629 | ||||||
| Grant revenue |
— | 156,957 | 1,094,714 | |||||||||
| Other revenue |
34,000 | 233,964 | 554,489 | |||||||||
| Total revenues |
202,309 | 1,737,309 | 18,797,832 | |||||||||
| Continuing operating expenses incurred in the development stage: |
||||||||||||
| Research and development |
6,084,911 | 8,365,400 | 222,599,425 | |||||||||
| Acquisition of technology rights |
— | — | 20,000,000 | |||||||||
| Marketing |
— | — | 23,360,873 | |||||||||
| General and administrative |
1,928,952 | 8,244,759 | 56,547,058 | |||||||||
| Total operating expenses |
8,013,863 | 16,610,159 | 322,507,356 | |||||||||
| Gain on repurchase of debt, net |
2,805,337 | — | 31,527,142 | |||||||||
| Interest income |
306,050 | 329,768 | 35,149,938 | |||||||||
| Interest expense |
2,146,636 | 2,072,931 | 43,495,390 | |||||||||
| Loss from continuing operations |
(6,846,803 | ) | (16,616,013 | ) | (280,527,834 | ) | ||||||
| Discontinued operations: |
||||||||||||
| Income from discontinued sales operations |
— | — | 6,340,563 | |||||||||
| Net loss |
$ | (6,846,803 | ) | $ | (16,616,013 | ) | $ | (274,187,271 | ) | |||
| Basic and diluted loss per share from continuing operations |
$ | (0.27 | ) | $ | (0.63 | ) | ||||||
| Basic and diluted net loss per share |
$ | (0.27 | ) | $ | (0.63 | ) | ||||||
| Shares used in computing basic and diluted loss per share amounts |
25,726,726 | 26,423,948 | ||||||||||
See accompanying notes to consolidated financial statements.
4
(A Development Stage Company)
Consolidated Statements of Cash Flows
(unaudited)
Three months ended March 31, 2003 and 2004 and the
period from December 5, 1994 (Inception) to March 31, 2004
| Three months ended March 31, |
Period from to March 31, 2004 |
|||||||||||
| 2003 |
2004 |
|||||||||||
| Cash flows from operating activities: |
||||||||||||
| Net loss |
$ | (6,846,803 | ) | $ | (16,616,013 | ) | $ | (274,187,271 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||
| Non-cash gain on sale of sales force |
— | — | (15,410,000 | ) | ||||||||
| Non-cash gain on reduction of convertible subordinated notes |
(2,875,000 | ) | — | (32,449,373 | ) | |||||||
| Non-cash settlement of interest payable related to note reduction |
— | — | 23,501 | |||||||||
| Write-off of deferred financing costs on reduction of notes |
69,663 | — | 922,231 | |||||||||
| Non-cash charge for lease costs |
— | — | 1,650,000 | |||||||||
| Non-cash acquisition of technology rights |
— | — | 16,500,000 | |||||||||
| Non-cash compensation expense |
22,555 | 67,629 | 2,235,272 | |||||||||
| Non-cash warrant value |
— | — | 153,751 | |||||||||
| Non-cash consulting expense |
— | — | 46,975 | |||||||||
| Non-cash interest expense |
155,291 | 66,490 | 2,960,816 | |||||||||
| Non-cash asset impairment from restructuring |
— | 5,168,999 | 6,686,171 | |||||||||
| Depreciation and amortization expense |
713,725 | 126,260 | 8,245,376 | |||||||||
| Changes in assets and liabilities: |
||||||||||||
| Notes receivable from officers |
21,185 | 22,186 | (66,557 | ) | ||||||||
| Due from partners |
(88 | ) | (220,000 | ) | (220,000 | ) | ||||||
| Other current assets |
304,154 | 257,755 | (2,134,282 | ) | ||||||||
| Other assets |
48,558 | — | (94,458 | ) | ||||||||
| Accounts payable |
(440,485 | ) | 168,863 | 818,424 | ||||||||
| Accrued expenses and other current liabilities |
(2,837,804 | ) | (193,747 | ) | 15,751,317 | |||||||
| Deferred revenue |
(168,309 | ) | (1,350,148 | ) | 2,851,370 | |||||||
| Other liabilities |
— | (70,065 | ) | 9,929,935 | ||||||||
| Net cash used in operating activities |
(11,833,182 | ) | (12,571,791 | ) | (255,786,802 | ) | ||||||
| Cash flows from investing activities: |
||||||||||||
| Purchase of equipment and leasehold improvements |
$ | (285,529 | ) | $ | (14,320 | ) | $ | (17,059,638 | ) | |||
| Proceeds from sale equipment |
— | — | 196,537 | |||||||||
| Purchases of short-term investments |
(33,801,065 | ) | (37,225,387 | ) | (1,203,390,110 | ) | ||||||
| Sales of short-term investments |
— | — | 9,680,414 | |||||||||
| Maturities of short-term investments |
44,086,895 | 45,036,132 | 1,093,239,767 | |||||||||
| Net cash provided by (used in) investing activities |
10,000,301 | 7,796,425 | (117,333,030 | ) | ||||||||
| Cash flows from financing activities: |
||||||||||||