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 April 30, 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: 0-27756
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 |
22,020,751 shares | |
| Class | Outstanding at June 1, 2004 |
| Page | ||||
| PART I. |
FINANCIAL INFORMATION |
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| Item 1. |
Consolidated Financial Statements (Unaudited) |
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| Consolidated Balance Sheets as of April 30, 2004 and July 31, 2003 |
3 | |||
| Consolidated Statements of Operations for the three and nine months ended April 30, 2004 and 2003 |
4 | |||
| Consolidated Statements of Cash Flows for the nine months ended April 30, 2004 and 2003 |
5 | |||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 | ||
| Item 3. |
23 | |||
| Item 4. |
23 | |||
| PART II. |
24 | |||
| Item 6. |
Exhibits and Reports on Form 8-K |
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| 25 | ||||
Page 2
Consolidated Balance Sheets
(UNAUDITED)
(amounts in thousands)
| April 30, 2004 |
July 31, 2003 |
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| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 74,560 | $ | 24,844 | ||||
| Marketable securities |
129,613 | 190,566 | ||||||
| Reimbursable contract costs |
64 | 390 | ||||||
| State tax receivable |
1,121 | 1,012 | ||||||
| Prepaid expenses and other current assets |
3,444 | 2,948 | ||||||
| Total current assets |
208,802 | 219,760 | ||||||
| Property, plant, and equipment, net |
10,270 | 12,276 | ||||||
| Assets held for sale |
1,210 | — | ||||||
| Goodwill |
19,954 | 19,954 | ||||||
| Deferred financing costs, net |
1,690 | 2,119 | ||||||
| Prepaid manufacturing costs |
10,000 | 10,000 | ||||||
| Other assets |
1,339 | 1,968 | ||||||
| TOTAL ASSETS |
$ | 253,265 | $ | 266,077 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 4,476 | $ | 7,560 | ||||
| Accrued expenses |
3,559 | 4,312 | ||||||
| Accrued interest |
1,098 | 2,646 | ||||||
| Deferred revenue |
589 | 589 | ||||||
| Deferred research and development payments |
188 | — | ||||||
| Note payable (see Note 9) |
3,920 | — | ||||||
| Total current liabilities |
13,830 | 15,107 | ||||||
| Deferred revenue, less current portion included above |
6,323 | 6,764 | ||||||
| Deferred research and development payments, less current portion included above |
1,250 | — | ||||||
| Note payable (see Note 9) |
— | 3,920 | ||||||
| Convertible subordinated notes |
120,000 | 120,000 | ||||||
| Total liabilities |
141,403 | 145,791 | ||||||
| Commitments and contingencies (see Note 12) |
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| Stockholders’ Equity: |
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| Preferred stock $.0001 par value; 5,000 shares authorized; no shares issued or outstanding |
— | — | ||||||
| Common stock $.0001 par value; 145,000 shares authorized; 22,057 and 18,257 shares issued at April 30, 2004 and July 31, 2003, respectively |
2 | 2 | ||||||
| Additional paid-in capital |
431,799 | 385,498 | ||||||
| Accumulated deficit |
(319,238 | ) | (265,266 | ) | ||||
| Other comprehensive income (loss) |
(101 | ) | 652 | |||||
| Treasury stock, at cost; 37 shares |
(600 | ) | (600 | ) | ||||
| Total stockholders’ equity |
111,862 | 120,286 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 253,265 | $ | 266,077 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
Page 3
Consolidated Statements of Operations
(UNAUDITED)
(amounts in thousands, except per share amounts)
| Three months ended April 30, |
Nine months ended April 30, |
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| 2004 |
2003 |
2004 |
2003 |
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| CONTRACT RESEARCH REVENUES |
$ | 168 | $ | 167 | $ | 462 | $ | 710 | ||||||||
| OPERATING EXPENSES |
||||||||||||||||
| Research and development |
10,792 | 14,110 | 42,004 | 52,454 | ||||||||||||
| General and administrative |
3,569 | 2,732 | 9,683 | 7,727 | ||||||||||||
| Impairment of fixed assets |
— | 2,560 | — | 2,560 | ||||||||||||
| Total operating expenses |
14,361 | 19,402 | 51,687 | 62,741 | ||||||||||||
| Operating loss |
(14,193 | ) | (19,235 | ) | (51,225 | ) | (62,031 | ) | ||||||||
| OTHER INCOME AND EXPENSE |
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| Investment income |
720 | 1,191 | 2,715 | 4,735 | ||||||||||||
| Interest expense |
(1,926 | ) | (1,930 | ) | (5,781 | ) | (5,783 | ) | ||||||||
| Loss before state tax benefit |
(15,399 | ) | (19,974 | ) | (54,291 | ) | (63,079 | ) | ||||||||
| State tax benefit |
186 | 196 | 319 | 196 | ||||||||||||
| Net loss |
$ | (15,213 | ) | $ | (19,778 | ) | $ | (53,972 | ) | $ | (62,883 | ) | ||||
| BASIC AND DILUTED NET LOSS PER SHARE |
$ | (0.69 | ) | $ | (1.09 | ) | $ | (2.54 | ) | $ | (3.45 | ) | ||||
| SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER COMMON SHARE |
21,969 | 18,210 | 21,268 | 18,207 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
Page 4
Consolidated Statements Of Cash Flows
(UNAUDITED)
(amounts in thousands)
| Nine months ended April 30, |
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| 2004 |
2003 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net loss |
$ | (53,972 | ) | $ | (62,883 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Impairment of fixed assets |
— | 2,560 | ||||||
| Depreciation and amortization |
2,547 | 2,777 | ||||||
| Compensation expense related to grant of stock options |
115 | 97 | ||||||
| Change in assets and liabilities: |
||||||||
| Reimbursable contract costs |
326 | (530 | ) | |||||
| State tax receivable |
(109 | ) | — | |||||
| Prepaid expenses |
(496 | ) | (1,069 | ) | ||||
| Other assets |
603 | (125 | ) | |||||
| Prepaid manufacturing costs |
— | (7,250 | ) | |||||
| Accounts payable |
(3,084 | ) | (7,597 | ) | ||||
| Accrued expenses |
(753 | ) | 757 | |||||
| Accrued interest |
(1,548 | ) | (1,706 | ) | ||||
| Deferred revenue |
(441 | ) | (398 | ) | ||||
| Deferred research and development payments |
1,438 | — | ||||||
| Net cash used in operating activities |
(55,374 | ) | (75,398 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchases of marketable securities |
(122,566 | ) | (65,327 | ) | ||||
| Proceeds from maturity or sale of marketable securities |
182,766 | 156,226 | ||||||
| Investments in patents and licensed technology |
(5 | ) | (31 | ) | ||||
| Purchases of property, plant and equipment |
(1,291 | ) | (1,955 | ) | ||||
| Net cash provided by investing activities |
58,904 | 88,944 | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Net proceeds from issuance of common stock |
46,186 | 88 | ||||||
| Net cash provided by financing activities |
46,186 | 88 | ||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS |
49,716 | 13,634 | ||||||
| CASH AND CASH EQUIVALENTS, beginning of period |
24,844 | 47,574 | ||||||
| CASH AND CASH EQUIVALENTS, end of period |
$ | 74,560 | $ | 61,208 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
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| Cash paid for interest |
$ | 6,900 | $ | 7,076 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
Page 5
ALEXION PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| 1. | Organization and Operations - |
Alexion Pharmaceuticals, Inc. (“Alexion”) was organized in 1992 and is engaged in the discovery and development of therapeutic products for the treatment of a wide array of severe disease states, including hematologic, cardiovascular, and autoimmune disorders, inflammation, and cancer.
The accompanying consolidated financial statements include Alexion Pharmaceuticals, Inc. and our wholly owned subsidiaries, Alexion Antibody Technologies (“AAT”) and Columbus Farming Corporation (“CFC”). All significant inter-company balances and transactions have been eliminated in consolidation. With the abandonment of our UniGraft xenotransplantation research and development program in fiscal 2003, CFC activities were suspended (see Note 9).
The consolidated financial statements included herein have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and include, in the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of interim period results. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The results for the interim periods presented are not necessarily indicative of results to be expected for any future period. Certain amounts in the fiscal 2003 financial statements have been reclassified to conform to the fiscal 2004 presentation. These consolidated condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Form 10-K Annual Report for the fiscal year ended July 31, 2003, as amended. The year-end balance sheet data presented does not include all disclosures required by accounting principles generally accepted in the United States of America.
| 2. | Accounting for Stock-Based Compensation - |
As permitted by Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of SFAS 123”, we account for our stock-based compensation awards using the intrinsic method and disclose the effect on the net loss per share as if the fair value method had been used.
At April 30, 2004, we have two stock-based compensation plans for employees, directors and consultants of Alexion. We account for the plans under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations.
The following table illustrates the effect on net loss and net loss per share if we had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation for the three and nine months ended April 30, 2004 and 2003 (dollars in thousands, except per share amounts):
| Three months ended April 30, |
Nine months ended April 30, |
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| 2004 |
2003 |
2004 |
2003 |
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