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 Quarterly Period Ended June 30, 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 000-29959
Pain Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 91-1911336 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
416 Browning Way, South San Francisco, CA 94080
(Address of principal executive offices) (Zip Code)
(650) 624-8200
(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 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 ¨
Indicate the number of shares outstanding of each of issuer’s classes of common stock, as of the latest practicable date.
| Common Stock, $0.001 par value | 35,577,029 Shares | |
| Class | Outstanding at July 9, 2004 |
TABLE OF CONTENTS
| Page No. | ||||||
| Item 1. | Financial Statements | |||||
| Condensed Balance Sheets – June 30, 2004 and December 31, 2003 |
3 | |||||
| 4 | ||||||
| 5 | ||||||
| 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 | 25 | ||||
| Item 4. | Controls and Procedures | 26 | ||||
| Item 1. | Legal Proceedings | 26 | ||||
| Item 2. | Change in Securities, Use of Proceeds and Issuer Purchase of Equity Securities | 26 | ||||
| Item 3. | Defaults Upon Senior Securities | 26 | ||||
| Item 4. | Submission of Matters to a Vote of Security Holders | 26 | ||||
| Item 5. | Other Information | 27 | ||||
| Item 6. | Exhibits and Reports on Form 8-K | 27 | ||||
| 28 | ||||||
2
PAIN THERAPEUTICS, INC.
(A Development Stage Enterprise)
(Unaudited)
(in thousands)
| June 30, 2004 |
December 31, 2003 |
|||||||
| (Unaudited) | (1) | |||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 3,172 | $ | 12,027 | ||||
| Marketable securities |
57,820 | 65,402 | ||||||
| Prepaid expenses |
46 | 1,321 | ||||||
| Total current assets |
61,038 | 78,750 | ||||||
| Property and equipment, net |
1,791 | 1,688 | ||||||
| Other assets |
75 | 75 | ||||||
| Total assets |
$ | 62,904 | $ | 80,513 | ||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 817 | $ | 2,231 | ||||
| Accrued development expense |
3,566 | 1,210 | ||||||
| Accrued compensation and benefits |
643 | 369 | ||||||
| Other accrued liabilities |
135 | 141 | ||||||
| Total liabilities |
5,161 | 3,951 | ||||||
| Stockholders’ Equity: |
||||||||
| Preferred stock |
— | — | ||||||
| Common stock |
36 | 35 | ||||||
| Additional paid-in-capital |
151,452 | 150,732 | ||||||
| Deferred compensation |
— | (7 | ) | |||||
| Accumulated other comprehensive income (loss) |
(267 | ) | 50 | |||||
| Deficit accumulated during the development stage |
(93,478 | ) | (74,248 | ) | ||||
| Total stockholders’ equity |
57,743 | 76,562 | ||||||
| Total liabilities and stockholders’ equity |
$ | 62,904 | $ | 80,513 | ||||
| (1) | Derived from the Company’s audited financial statements as of December 31, 2003, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. |
See accompanying notes to condensed financial statements.
3
PAIN THERAPEUTICS, INC.
(A Development Stage Enterprise)
Condensed Statements of Operations
(Unaudited)
(in thousands except per share data)
| Three Months Ended June 30, |
Six Months Ended June 30, |
May 4, 1998 (inception) through June 30, 2004 |
||||||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||||||
| Operating expenses(1): |
||||||||||||||||||||
| Research and development |
$ | 8,181 | $ | 3,715 | $ | 17,677 | $ | 7,503 | $ | 76,517 | ||||||||||
| General and administrative |
1,106 | 751 | 2,044 | 1,720 | 25,078 | |||||||||||||||
| Total operating expenses |
9,287 | 4,466 | 19,721 | 9,223 | 101,595 | |||||||||||||||
| Operating loss |
(9,287 | ) | (4,466 | ) | (19,721 | ) | (9,223 | ) | (101,595 | ) | ||||||||||
| Other income: |
||||||||||||||||||||
| Interest income |
221 | 120 | 491 | 261 | 8,117 | |||||||||||||||
| Net loss |
(9,066 | ) | (4,346 | ) | (19,230 | ) | (8,962 | ) | (93,478 | ) | ||||||||||
| Return to series C preferred stockholders for beneficial conversion feature |
— | — | — | — | (14,231 | ) | ||||||||||||||
| Loss available to common stockholders |
$ | (9,066 | ) | $ | (4,346 | ) | $ | (19,230 | ) | $ | (8,962 | ) | $ | (107,709 | ) | |||||
| Basic and diluted loss per share |
$ | (0.26 | ) | $ | (0.16 | ) | $ | (0.54 | ) | $ | (0.33 | ) | ||||||||
| Weighted-average shares used in computing basic and diluted loss per share |
35,499 | 27,334 | 35,463 | 27,250 | ||||||||||||||||
| (1) | Included in research and development and general and administrative expenses are stock-based compensation expenses (reduction of expense) of $259 and ($16) for the three-month periods ended June 30, 2004 and 2003, respectively, $312 and $87 for the six-month periods ended June 30, 2004 and 2003, respectively, and $12,241 for the period from May 4, 1998 (inception) through June 30, 2004. |
See accompanying notes to condensed financial statements.
4
PAIN THERAPEUTICS, INC.
(A Development Stage Enterprise)
Condensed Statements of Cash Flows
(Unaudited)
(in thousands)
| Six Months Ended June 30, |
May 4, 1998 (inception) through June 30, 2004 |
|||||||||||
| 2004 |
2003 |
|||||||||||
| Cash flows from operating activities: |
||||||||||||
| Net loss |
$ | (19,230 | ) | $ | (8,962 | ) | $ | (93,478 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||
| Depreciation and amortization |
182 | 172 | 1,167 | |||||||||
| Non-cash interest income |
300 | 17 | 300 | |||||||||
| Non-cash stock based compensation |
312 | 87 | 12,241 | |||||||||
| Non-cash expense for warrants issued |
— | — | 34 | |||||||||
| Loss on disposal of property and equipment |
— | — | 54 | |||||||||
| Changes in operating assets and liabilities: |
||||||||||||
| Prepaid expenses |
1,275 | 1,060 | (46 | ) | ||||||||
| Other assets |
— | — | (75 | ) | ||||||||
| Accounts payable |
(1,414 | ) | (264 | ) | 817 | |||||||
| Accrued development expense |
2,356 | (653 | ) | 3,566 | ||||||||
| Accrued compensation and benefits |
274 | 268 | 643 | |||||||||
| Other accrued liabilities |
(6 | ) | 31 | 135 | ||||||||
| (15,951 | ) | (8,244 | ) | (74,642 | ) | |||||||
| Cash flows used in investing activities: |
||||||||||||
| Purchase of property and equipment |
(285 | ) | — | (3,012 | ) | |||||||
| Purchase of marketable securities |
(30,576 | ) | — | (99,405 | ) | |||||||
| Sales of marketable securities |
33,192 | 36,669 | ||||||||||
| Maturities of marketable securities |
4,350 | — | 4,350 | |||||||||
| 6,681 | — | (61,398 | ) | |||||||||
| Cash flows from financing activities: |
||||||||||||
| Proceeds from issuance of preferred stock, net |
— | — | 27,539 | |||||||||
| Proceeds from issuance of common stock, net |
415 | 699 | 111,673 | |||||||||
| 415 | 699 | 139,212 | ||||||||||
| Net increase (decrease) in cash and cash equivalents |
(8,855 | ) | (7,545 | ) | 3,172 | |||||||
| Cash and cash equivalents at beginning of period |
12,027 | 50,091 | — | |||||||||
| Cash and cash equivalents at end of period |
$ | 3,172 | $ | 42,546 | $ | 3,172 | ||||||
See accompanying notes to condensed financial statements.
5
PAIN THERAPEUTICS, INC.
(A Development Stage Enterprise)
Notes to Condensed Financial Statements
(Unaudited)
Note 1. General
We are a biopharmaceutical company that develops novel drugs. Our drugs target severe chronic pain, such as pain associated with advanced osteoarthritis, low-back pain or Irritable Bowel Syndrome, or IBS. We have three proprietary drug candidates in clinical development: Oxytrex™, Remoxy™ and PTI-901. Our two most advanced drugs, Oxytrex and PTI-901, are in Phase III clinical trials. Remoxy is in Phase I clinical trials outside the United States. We believe the target market for our three drug candidates exceeds $3 billion per year. We currently retain all commercial rights to our drug candidates.
In the course of our development activities, we have sustained operating losses and expect such losses to continue through the next several years. We expect our current cash, cash equivalents and marketable securities will be sufficient to meet our planned working capital and capital expenditure requirements for at least the next twelve months. There are no assurances that additional financing will be available on favorable terms, or at all.
Our development activities involve inherent risks. These risks include, among others, dependence on key personnel and determination of patentability and protection of our products and processes. In addition, we have drug candidates that have not yet obtained Food and Drug Administration, or FDA, approval. Successful future operations depend on our ability to obtain approval for and commercialize these products.