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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: 000-31145

 

 

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 August 1, 2004, there were 54,766,469 common shares outstanding of the registrant’s only class of common stock.

 

The Exhibit Index begins on page 34.

 

Table of Contents

VICURON PHARMACEUTICALS INC.

 

Quarterly Report on Form 10-Q

 

For the Three Months Ended June 30, 2004

 

INDEX

 

PART I.   FINANCIAL INFORMATION   3
Item 1.   Consolidated Financial Statements   3
    Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003 (Unaudited)   3
    Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2004 and 2003 (Unaudited)   4
    Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003 (Unaudited)   5
    Notes to Condensed Consolidated Financial Statements   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   29
Item 4.   Controls and Procedures   30
PART II.   OTHER INFORMATION   31
Item 1.   Legal Proceedings   31
Item 2.   Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities   31
Item 3.   Defaults upon Senior Securities   31
Item 4.   Submission of Matters to a Vote of Security Holders   31
Item 5.   Other Information   31
Item 6.   Exhibits and Reports on Form 8-K   31
    Signatures   33
    Certifications    
    Exhibit Index   34

 

2

Table of Contents

PART I – FINANCIAL INFORMATION

 

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

VICURON PHARMACEUTICALS INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands)

 

    

June 30,

2004

    

December 31,

2003

  

ASSETS

                 

Current assets:

                 

Cash and cash equivalents

    $ 81,436     $ 113,361  

Marketable securities

      36,003       52,796  

Accounts receivable, net

      4,837       5,533  

Prepaid expenses and other current assets

      6,656       6,329  
    
 

Total current assets

      128,932       178,019  

Property, plant and equipment

      48,776       43,757  

Intangible assets, net

      21,455       23,373  

Long-term receivables

      10,928       9,787  

Long-term marketable securities—restricted

      2,925       3,232  

Other assets

      330       330  
    
 

Total assets

    $ 213,346     $ 258,498  
    
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

                 

Current liabilities:

                 

Accounts payable

    $ 14,582     $ 13,986  

Accrued liabilities

      17,920       15,085  

Current portion of long-term debt

      1,136       2,360  

Current portion of deferred revenue

      79       1,068  
    
 

Total current liabilities

      33,717       32,499  
    
 

Long-term debt, less current portion

      7,243       7,493  

Deferred revenue, less current portion

      2,437       1,750  

Other long-term liabilities

      2,933       2,973  
    
 

Total liabilities

      46,330       44,715  
    
 

Stockholders’ equity:

                 

Common stock

      55       54  

Additional paid-in capital

      524,457       518,275  

Deferred stock compensation

      (283 )     (454 )

Accumulated other comprehensive income

      17,141       22,632  

Accumulated deficit

      (374,354 )     (326,724 )
    
 

Total stockholders’ equity

      167,016       213,783  
    
 

Total liabilities and stockholders’ equity

    $ 213,346     $ 258,498  
    
 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

3

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VICURON PHARMACEUTICALS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

 

     Three Months Ended
     Six Months Ended
  
    

June 30,

2004

    

June 30,

2003

     June 30,
2004
     June 30,
2003
  

Revenues:

                                 

Collaborative research and development, contract services and government grants

    $ 1,778     $ 2,148     $ 3,570     $ 3,865  

License fees and milestones

      139       130       275       171  
    
 
 
 

Total revenues

      1,917       2,278       3,845       4,036  
    
 
 
 

Operating expenses:

                                 

Research and development

      19,355       25,158       41,390       37,883  

General and administrative

      7,192       3,643       11,263       5,724  

Acquired in-process research and development

      —         —         —         94,532  
    
 
 
 

Total operating expenses

      26,547       28,801       52,653       138,139  
    
 
 
 

Loss from operations

      (24,630 )     (26,523 )     (48,808 )     (134,103 )
    
 
 
 

Other income (expense):

                                 

Investment income

      545       718       1,231       1,168  

Interest expense

      (25 )     (47 )     (53 )     (117 )
    
 
 
 

Net loss

    $ (24,110 )   $ (25,852 )   $ (47,630 )   $ (133,052 )
    
 
 
 

Net loss per share:

                                 

Basic and diluted

    $ (0.44 )   $ (0.54 )   $ (0.88 )   $ (3.25 )
    
 
 
 

Weighted average shares

      54,616       47,709       54,323       40,890  
    
 
 
 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

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Table of Contents

VICURON PHARMACEUTICALS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

    

Six Months Ended

June 30,

  
     2004
     2003
  

Cash flows from operating activities:

                 

Net loss

    $ (47,630 )   $ (133,052 )

Adjustments to reconcile net loss to net cash used in operating activities:

                 

Depreciation and amortization

      2,801       2,064  

Non-cash stock compensation expense

      146       845  

Amortization of bond discounts

      578       —    

Acquired in-process research and development

      —         94,532  

Changes in operating assets and liabilities, net of effect of merger:

                 

Accounts receivable

      421       (293 )

Prepaid expenses and other current assets

      277       2,339  

Long-term receivables

      (1,277 )     (1,149 )

Other assets

      —         (216 )

Accounts payable

      945       (2,128 )

Accrued liabilities

      2,943       1,878  

Advances received

      —         (403 )

Deferred revenue

      (270 )     (395 )

Other long-term liabilities

      (653 )     48  
    
 

Net cash used in operating activities

      (41,719 )     (35,930 )
    
 

Cash flows from investing activities:

                 

Purchases of marketable securities

      (14,048 )     —    

Sales/maturities of marketable securities

      30,083       28,963  

Additions to property and equipment

      (8,353 )     (7,858 )

Net cash and cash equivalents acquired in Biosearch merger

      —         746  
    
 

Net cash provided by investing activities

      7,682       21,851  
    
 

Cash flows from financing activities:

                 

Proceeds from issuance of common stock, net

      6,155       564  

Proceeds from long-term debt

      —         2,779  

Repayments of long-term debt

      (1,216 )     (1,050 )
    
 

Net cash provided by financing activities

      4,939       2,293  
    
 

Effect of exchange rate changes on cash and cash equivalents

      (2,827 )     474  
    
 

Net change in cash and cash equivalents

      (31,925 )     (11,312 )
    
 

Cash and cash equivalents at beginning of period

      113,361       28,271  
    
 

Cash and cash equivalents at end of period

    $ 81,436     $ 16,959  
    
 

Supplemental cash flow information:

                 

Cash paid during the period for interest

    $ 52     $ 120  
    
 

Supplemental disclosure of non-cash investing activities:

                 

Common stock and stock options issued in Biosearch merger

    $ —       $ 236,089