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 June 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: 000-28397
TULARIK INC.
(Exact name of Registrant as specified in its charter)
| Delaware | 94-3148800 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 1120 Veterans Boulevard South San Francisco, California |
94080 | |
| (Address of principal executive offices) | (Zip code) |
(650) 825-7000
(Registrant’s telephone number including area code)
(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 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 July 30, 2004, 67,997,458 shares of the Registrant’s common stock were outstanding.
TULARIK INC.
| Page | ||||
| PART I. |
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| Item 1. |
3 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results Of Operations |
9 | ||
| Item 3. |
28 | |||
| Item 4. |
29 | |||
| Part II. |
OTHER INFORMATION | |||
| Item 1. |
29 | |||
| Item 5. |
29 | |||
| Item 6. |
30 | |||
| 31 | ||||
Item 1. Unaudited Condensed Consolidated Financial Statements
TULARIK INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
| June 30, 2004 |
December 31, 2003(1) |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 77,998 | $ | 92,730 | ||||
| Short-term investments |
68,550 | 95,281 | ||||||
| Prepaid expenses and other current assets |
5,956 | 7,719 | ||||||
| Accounts receivable |
10,000 | — | ||||||
| Total current assets |
162,504 | 195,730 | ||||||
| Property and equipment, net |
21,158 | 25,838 | ||||||
| Other investments |
5,178 | 14,719 | ||||||
| Restricted investments |
2,270 | 2,270 | ||||||
| Other assets |
2,244 | 2,750 | ||||||
| Goodwill |
3,100 | 3,100 | ||||||
| Total assets |
$ | 196,454 | $ | 244,407 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 3,961 | $ | 3,949 | ||||
| Accrued compensation and related liabilities |
3,910 | 3,883 | ||||||
| Accrued liabilities |
9,964 | 8,809 | ||||||
| Current portion of capital lease obligations |
4,297 | 6,691 | ||||||
| Deferred revenue |
14,874 | 18,649 | ||||||
| Total current liabilities |
37,006 | 41,981 | ||||||
| Long-term portion of capital lease obligations |
10,800 | 9,363 | ||||||
| Long-term portion of deferred revenue |
8,501 | 12,350 | ||||||
| Other non-current liabilities |
5,127 | 6,375 | ||||||
| Total liabilities |
61,434 | 70,069 | ||||||
| Minority interest in Cumbre Inc. |
26,250 | 26,250 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock |
68 | 66 | ||||||
| Additional paid-in capital |
532,978 | 524,273 | ||||||
| Notes receivable from stockholders |
(15 | ) | (15 | ) | ||||
| Accumulated other comprehensive income |
1,578 | 1,918 | ||||||
| Accumulated deficit |
(425,839 | ) | (378,154 | ) | ||||
| Total stockholders’ equity |
108,770 | 148,088 | ||||||
| Total liabilities and stockholders’ equity |
$ | 196,454 | $ | 244,407 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| (1) | The condensed consolidated balance sheet at December 31, 2003 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. |
3
TULARIK INC.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenue: |
||||||||||||||||
| Collaborative research and development |
$ | 9,765 | $ | 5,233 | $ | 20,649 | $ | 10,294 | ||||||||
| Technology license fee |
— | — | — | 1,600 | ||||||||||||
| 9,765 | 5,233 | 20,649 | 11,894 | |||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
30,718 | 31,657 | 62,275 | 59,986 | ||||||||||||
| General and administrative |
2,939 | 3,119 | 6,110 | 6,095 | ||||||||||||
| 33,657 | 34,776 | 68,385 | 66,081 | |||||||||||||
| Loss from operations |
(23,892 | ) | (29,543 | ) | (47,736 | ) | (54,187 | ) | ||||||||
| Interest and other income |
604 | 403 | 1,216 | 1,242 | ||||||||||||
| Interest expense |
(640 | ) | (389 | ) | (1,165 | ) | (795 | ) | ||||||||
| Net loss |
$ | (23,928 | ) | $ | (29,529 | ) | $ | (47,685 | ) | $ | (53,740 | ) | ||||
| Net loss per basic and diluted share |
$ | (0.35 | ) | $ | (0.53 | ) | $ | (0.71 | ) | $ | (0.97 | ) | ||||
| Weighted-average shares used in computing basic and diluted net loss per share |
67,511,961 | 55,658,173 | 67,149,743 | 55,381,887 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
TULARIK INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
| For the six months ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (47,685 | ) | $ | (53,740 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
5,624 | 5,844 | ||||||
| Amortization of deferred stock compensation |
— | 40 | ||||||
| Amortization of loan discount |
20 | 20 | ||||||
| Non-cash stock compensation |
1,177 | 565 | ||||||
| Non-cash license fee revenue |
— | (1,600 | ) | |||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
(10,000 | ) | (10,000 | ) | ||||
| Other assets |
2,269 | (843 | ) | |||||
| Accounts payable and other liabilities |
(703 | ) | 4,124 | |||||
| Deferred revenue |
(7,624 | ) | 22,649 | |||||
| Net cash used in operating activities |
(56,922 | ) | (32,941 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Maturities of available-for-sale securities |
227,590 | 259,009 | ||||||
| Purchases of available-for-sale securities |
(191,382 | ) | (231,462 | ) | ||||
| Acquisition of property and equipment |
(904 | ) | (3,343 | ) | ||||
| Net cash provided by investing activities |
35,304 | 24,204 | ||||||
| Cash flows from financing activities: |
||||||||
| Payments of long-term obligations |
(3,279 | ) | (5,480 | ) | ||||
| Proceeds from issuance of long-term obligations |
2,224 | 2,463 | ||||||
| Proceeds from notes receivable from stockholders |
— | 1 | ||||||
| Proceeds from issuances of common stock, net |
7,944 | 23,792 | ||||||
| Net cash provided by financing activities |
6,889 | 20,776 | ||||||
| Effect of exchange rates on cash |
(3 | ) | 46 | |||||
| Net change in cash and cash equivalents |
(14,732 | ) | 12,085 | |||||
| Cash and cash equivalents at the beginning of the period |
92,730 | 95,670 | ||||||
| Cash and cash equivalents at the end of the period |
$ | 77,998 | $ | 107,755 | ||||
| Supplemental disclosure of non-cash financing activities: |
||||||||
| Issuance of warrant in connection with lease amendment |
$ | — | $ | 255 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
TULARIK INC.
Notes to Unaudited Condensed Consolidated Financial Statements
Basis of Presentation
The unaudited condensed consolidated financial statements of Tularik Inc. (“Tularik” or the “Company”) reflect, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position at June 30, 2004, the Company’s consolidated results of operations for the three- and six-month periods ended June 30, 2004 and 2003 and the Company’s consolidated cash flows for the six-month periods ended June 30, 2004 and 2003. Interim-period results are not necessarily indicative of results of operations or cash flows for a full-year period.
The year-end balance sheet data were derived from audited consolidated financial statements at that date, but do not include all disclosures required by accounting principles generally accepted in the United States of America.
These unaudited condensed consolidated financial statements and the notes accompanying them should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. Stockholders are encouraged to review the Form 10-K for a broader discussion of the Company’s business and the opportunities and risks inherent therein. Copies of the Form 10-K are available from the Company upon request.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of Tularik, its majority-owned subsidiary, Cumbre Inc. (“Cumbre”), and Tularik’s wholly owned subsidiaries, Amplicon Corporation, Tularik Pharmaceutical Company, Tularik GmbH and Tularik Limited.
It is the Company’s policy to not allocate losses to any minority interests of Cumbre to the extent that such losses reduce the minority interests below the third-party minority stockholders’ liquidation preferences. As a result of this policy, 100% of Cumbre’s net loss has been included in the Company’s determination of net loss for the three- and six-month periods ended June 30, 2004 and 2003.
Recent Accounting Pronouncements
At its March 2004 meeting, the Emerging Issues Task Force (“EITF”) reached a consensus on recognition and measurement guidance previously discussed under EITF 03-01. The consensus clarifies the meaning of other-than-temporary impairment and its application to investments classified as either available-for-sale or held-to-maturity under FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and investments accounted for under the cost method or the equity method. The recognition and measurement guidance for which the consensus was reached in the March 2004 meeting is to be applied to other-than-temporary impairment evaluations in reporting periods beginning after June 15, 2004. We do not expect the adoption of the disclosure requirements of EITF 03-01 to have a material impact on our financial position, cash flows or results of operations.
6
Net Loss Per Share
The following table sets forth the computation of the Company’s basic and diluted net loss per share (in thousands, except per share data):
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Numerator: |
||||||||||||||||
| Net loss |
$ | (23,928 | ) | $ | (29,529 | ) | $ | (47,685 | ) | $ | (53,740 | ) | ||||
| Denominator: |
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