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: 000-31145
VICURON PHARMACEUTICALS INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 04-3278032 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
455 South Gulph Road, King of Prussia, PA 19406
(Address of Principal Executive Offices) (Zip Code)
(610) 205-2300
(Registrant’s telephone number, including area code)
n/a
(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 report(s) 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 ¨.
On April 27, 2004, there were 54,605,192 common shares outstanding of the registrant’s only class of common stock.
The Exhibit Index begins on page 32.
Quarterly Report on Form 10-Q
For the Three Months Ended March 31, 2004
INDEX
| PART I. | ||||
| Item 1. | ||||
| Condensed Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003 (Unaudited) |
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| Consolidated Statements of Operations for the Three Months Ended March 31, 2004 and 2003 (Unaudited) |
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| Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and 2003 (Unaudited) |
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3. | ||||
| Item 4. | ||||
| PART II. | ||||
| Item 1. | ||||
| Item 2. | Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities |
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| Item 3. | ||||
| Item 4. | ||||
| Item 5. | ||||
| Item 6. | ||||
2
PART I – FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
| March 31, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 102,176 | $ | 113,361 | ||||
| Marketable securities |
40,170 | 52,796 | ||||||
| Accounts receivable, net |
4,905 | 5,533 | ||||||
| Prepaid expenses and other current assets |
6,964 | 6,329 | ||||||
| Total current assets |
154,215 | 178,019 | ||||||
| Property, plant and equipment |
45,389 | 43,757 | ||||||
| Intangible assets, net |
22,201 | 23,373 | ||||||
| Long-term receivables |
11,075 | 9,787 | ||||||
| Long-term marketable securities—restricted |
125 | 3,232 | ||||||
| Other assets |
3,156 | 330 | ||||||
| Total assets |
$ | 236,161 | $ | 258,498 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 14,035 | $ | 13,986 | ||||
| Accrued liabilities |
18,436 | 15,085 | ||||||
| Current portion of long-term debt |
1,785 | 2,360 | ||||||
| Current portion of deferred revenue |
911 | 1,068 | ||||||
| Total current liabilities |
35,167 | 32,499 | ||||||
| Long-term debt, less current portion |
7,311 | 7,493 | ||||||
| Deferred revenue, less current portion |
1,750 | 1,750 | ||||||
| Other long-term liabilities |
2,985 | 2,973 | ||||||
| Total liabilities |
47,213 | 44,715 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock |
54 | 54 | ||||||
| Additional paid-in capital |
520,899 | 518,275 | ||||||
| Deferred stock compensation |
(473 | ) | (454 | ) | ||||
| Accumulated other comprehensive income |
18,712 | 22,632 | ||||||
| Accumulated deficit |
(350,244 | ) | (326,724 | ) | ||||
| Total stockholders’ equity |
188,948 | 213,783 | ||||||
| Total liabilities and stockholders’ equity |
$ | 236,161 | $ | 258,498 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
| Three Months Ended |
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| March 31, 2004 |
March 31, 2003 |
|||||||
| Revenues: |
||||||||
| Collaborative research and development, contract services and government grants |
$ | 1,792 | $ | 1,717 | ||||
| License fees and milestones |
136 | 41 | ||||||
| Total revenues |
1,928 | 1,758 | ||||||
| Operating expenses: |
||||||||
| Research and development |
22,035 | 12,723 | ||||||
| General and administrative |
4,071 | 2,082 | ||||||
| Acquired in-process research and development |
— | 94,532 | ||||||
| Total operating expenses |
26,106 | 109,337 | ||||||
| Loss from operations |
(24,178 | ) | (107,579 | ) | ||||
| Other income (expense): |
||||||||
| Investment income |
686 | 449 | ||||||
| Interest expense |
(28 | ) | (70 | ) | ||||
| Net loss |
$ | (23,520 | ) | $ | (107,200 | ) | ||
| Net loss per share: |
||||||||
| Basic and diluted |
$ | (0.44 | ) | $ | (3.15 | ) | ||
| Weighted average shares |
54,029 | 33,995 | ||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
| Three Months Ended March 31, |
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| 2004 |
2003 |
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| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (23,520 | ) | $ | (107,200 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
1,394 | 668 | ||||||
| Non-cash stock compensation expense |
289 | 434 | ||||||
| Amortization of bond discounts |
300 | — | ||||||
| Acquired in-process research and development |
— | 94,532 | ||||||
| Changes in operating assets and liabilities, net of effect of merger: |
||||||||
| Accounts receivable |
407 | (17 | ) | |||||
| Prepaid expenses and other current assets |
812 | 3,298 | ||||||
| Long-term receivables |
(1,346 | ) | (228 | ) | ||||
| Other assets |
1 | (251 | ) | |||||
| Accounts payable |
325 | 3,027 | ||||||
| Accrued liabilities |
3,760 | (978 | ) | |||||
| Advances received |
— | (382 | ) | |||||
| Deferred revenue |
(138 | ) | (282 | ) | ||||
| Other long-term liabilities |
(633 | ) | 25 | |||||
| Net cash used in operating activities |
(18,349 | ) | (7,354 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Purchases of marketable securities |
(7,057 | ) | — | |||||
| Sales/maturities of marketable securities |
19,304 | 18,488 | ||||||
| Additions to property and equipment |
(3,962 | ) | (2,975 | ) | ||||
| Net cash and cash equivalents acquired in Biosearch merger |
— | 746 | ||||||
| Net cash provided by investing activities |
8,285 | 16,259 | ||||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of common stock, net |
1,480 | 158 | ||||||
| Proceeds from long-term debt |
— | 2,764 | ||||||
| Repayments of long-term debt |
(569 | ) | (526 | ) | ||||
| Net cash provided by financing activities |
911 | 2,396 | ||||||
| Effect of exchange rate changes on cash and cash equivalents |
(2,032 | ) | 96 | |||||
| Net change in cash and cash equivalents |
(11,185 | ) | 11,397 | |||||
| Cash and cash equivalents at beginning of period |
113,361 | 28,271 | ||||||
| Cash and cash equivalents at end of period |
$ | 102,176 | $ | 39,668 | ||||
| Supplemental cash flow information: |
||||||||
| Cash paid during the period for interest |
$ | 28 | $ | 50 | ||||
| Supplemental disclosure of non-cash investing activities: |
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| Common stock and stock options issued in Biosearch merger |
$ | — | $ | 236,089 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying interim financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The interim financial statements, in the opinion of management, reflect all adjustments (including normal recurring adjustments) necessary for a fair presentation of the results for the interim periods ended March 31, 2004.
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the fiscal year or any other interim period. These condensed consolidated interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2003, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.
On March 26, 2003, as a result of the merger, the Company changed its name from Versicor Inc. to Vicuron Pharmaceuticals Inc.
Stock Options – Fair Value Disclosures
The Company applies the measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock issued to Employees”, in accounting for its employee stock options. Had compensation expense for options granted to employees been determined based on the fair value at the grant date as prescribed by Statement of Financial Accounting Standards No. 123, “Accounting for Stock Based Information,” the Company’s net loss and net loss per share would have been as follows:
| Three Months Ended March 31, |
||||||||
| (in thousands, except per share data) |
||||||||
| 2004 |
2003 |
|||||||
| Net loss, as reported |
$ | (23,520 | ) | $ | (107,200 | ) | ||
| Add: stock-based employee compensation expense included in net loss |
51 | 311 | ||||||
| Less: total stock-based employee compensation, determined under fair value based method for all awards |
(2,001 | ) | (2,346 | ) | ||||
| Net loss pro forma |
$ | (25,470 | ) | $ | (109,235 | ) | ||
| Basic and diluted net loss per share: As reported |
$ | (0.44 | ) | $ | (3.15 | ) | ||
| Pro forma |
$ | (0.47 | ) | $ | (3.21 | ) | ||
2. Basic and Diluted Net Loss per Share
Basic net loss per share is computed using the weighted-average number of shares of common stock outstanding. Diluted net loss per share does not differ from basic net loss per share since potential shares of common stock are anti-dilutive for all periods presented and therefore are excluded from the calculation of diluted net loss per share. The following potentially dilutive shares of common stock were excluded from the computation of net loss per share because their effect was anti-dilutive (in thousands):
| March 31, | ||||
| 2004 |
2003 | |||
| Shares issuable upon exercise of stock options |
8,597 | 8,536 | ||
| Shares issuable upon exercise of warrants |
112 | |||