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 the quarterly period ended June 30, 2004
or
| ¨ | TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 0-27488
INCYTE CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 94-3136539 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
Experimental Station, Route 141 & Henry Clay Road,
Building E336, Wilmington, DE 19880
(Address of principal executive offices)
(302) 498-6700
(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. x Yes ¨ No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). x Yes ¨ No
The number of outstanding shares of the registrant’s Common Stock, $0.001 par value, was 73,370,423 as of July 30, 2004.
INDEX
2
INCYTE CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
| June 30, 2004 |
December 31, 2003* |
|||||||
| (unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 152,933 | $ | 29,698 | ||||
| Marketable securities—available-for-sale |
320,622 | 264,109 | ||||||
| Accounts receivable, net |
3,336 | 5,733 | ||||||
| Prepaid expenses and other current assets |
6,504 | 11,387 | ||||||
| Total current assets |
483,395 | 310,927 | ||||||
| Property and equipment, net |
11,535 | 27,337 | ||||||
| Long-term investments (1) |
13,158 | 16,196 | ||||||
| Intangible and other assets, net |
30,030 | 25,085 | ||||||
| Total assets |
$ | 538,118 | $ | 379,545 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 5,010 | $ | 6,450 | ||||
| Accrued compensation |
5,856 | 12,402 | ||||||
| Interest payable |
7,077 | 3,816 | ||||||
| Accrued and other current liabilities |
5,181 | 4,321 | ||||||
| Deferred revenue |
3,523 | 6,401 | ||||||
| Accrued restructuring and acquisition costs |
41,261 | 24,036 | ||||||
| Total current liabilities |
67,908 | 57,426 | ||||||
| Convertible subordinated notes |
417,578 | 167,786 | ||||||
| Total liabilities |
485,486 | 225,212 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock |
73 | 73 | ||||||
| Additional paid-in capital |
729,797 | 726,962 | ||||||
| Deferred compensation |
(402 | ) | (649 | ) | ||||
| Accumulated other comprehensive loss |
(4,034 | ) | (566 | ) | ||||
| Accumulated deficit |
(672,802 | ) | (571,487 | ) | ||||
| Total stockholders’ equity |
52,632 | 154,333 | ||||||
| Total liabilities and stockholders’ equity |
$ | 538,118 | $ | 379,545 | ||||
| * | The condensed consolidated balance sheet at December 31, 2003 has been derived from the audited financial statements at that date. |
| (1) | Includes investments in companies considered related parties under SFAS 57 of $12.8 million and $14.7 million at June 30, 2004 and December 31, 2003, respectively. |
See accompanying notes.
3
INCYTE CORPORATION
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues |
$ | 5,163 | $ | 11,036 | $ | 11,804 | $ | 23,545 | ||||||||
| Costs and expenses: |
||||||||||||||||
| Research and development |
25,565 | 29,870 | 51,749 | 60,056 | ||||||||||||
| Selling, general and administrative |
6,004 | 7,694 | 11,804 | 15,071 | ||||||||||||
| Purchased in-process research and development |
— | — | — | 28,116 | ||||||||||||
| Other expenses |
34,537 | 290 | 42,671 | 1,393 | ||||||||||||
| Total costs and expenses |
66,106 | 37,854 | 106,224 | 104,636 | ||||||||||||
| Loss from operations |
(60,943 | ) | (26,818 | ) | (94,420 | ) | (81,091 | ) | ||||||||
| Interest and other income, net (1) |
2,387 | 2,490 | 1,974 | 3,723 | ||||||||||||
| Interest expense |
(4,868 | ) | (2,439 | ) | (8,388 | ) | (4,878 | ) | ||||||||
| Gain/(loss) on certain derivative financial instruments, net |
(77 | ) | 108 | (254 | ) | 63 | ||||||||||
| Loss before income taxes |
(63,501 | ) | (26,659 | ) | (101,088 | ) | (82,183 | ) | ||||||||
| Provision for income taxes |
99 | 241 | 227 | 501 | ||||||||||||
| Net loss |
$ | (63,600 | ) | $ | (26,900 | ) | $ | (101,315 | ) | $ | (82,684 | ) | ||||
| Basic and diluted net loss per share: |
$ | (0.87 | ) | $ | (0.37 | ) | $ | (1.39 | ) | $ | (1.17 | ) | ||||
| Shares used in computing basic and diluted net loss per share |
72,929 | 71,895 | 72,786 | 70,441 | ||||||||||||
| (1) | Includes loss on long-term investments in companies considered related parties under SFAS 57 of $1.9 million for the six months ended June 30, 2004. |
See accompanying notes.
4
INCYTE CORPORATION
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net loss |
$ | (63,600 | ) | $ | (26,900 | ) | $ | (101,315 | ) | $ | (82,684 | ) | ||||
| Other comprehensive loss: |
||||||||||||||||
| Unrealized losses on marketable securities |
(3,730 | ) | (1,363 | ) | (3,525 | ) | (1,853 | ) | ||||||||
| Foreign currency translation adjustments |
(4 | ) | 3 | 57 | (30 | ) | ||||||||||
| Other comprehensive loss |
(3,734 | ) | (1,360 | ) | (3,468 | ) | (1,883 | ) | ||||||||
| Comprehensive loss |
$ | (67,334 | ) | $ | (28,260 | ) | $ | (104,783 | ) | $ | (84,567 | ) | ||||
See accompanying notes.
5
INCYTE CORPORATION
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (101,315 | ) | $ | (82,684 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Non-cash other expenses |
42,179 | 1,393 | ||||||
| Non-cash purchased in-process research and development |
— | 28,116 | ||||||
| Depreciation and amortization |
6,842 | 8,939 | ||||||
| Compensation expense on executive loans |
38 | 172 | ||||||
| Stock compensation |
247 | 999 | ||||||
| Loss (gain) on derivative financial instruments, net |
254 | (63 | ) | |||||
| Realized gain on long-term investments, net |
(123 | ) | (456 | ) | ||||
| Impairment of long-term investments |
2,747 | 2,714 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
2,397 | 970 | ||||||
| Prepaid expenses and other assets |
3,999 | 3,487 | ||||||
| Accounts payable |
(1,440 | ) | (4,465 | ) | ||||
| Accrued and other current liabilities |
(15,391 | ) | (20,904 | ) | ||||
| Deferred revenue |
(2,878 | ) | 3,409 | |||||
| Net cash used in operating activities |
(62,444 | ) | (58,373 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Acquisition of Maxia Pharmaceuticals, net of cash acquired |
— | (4,137 | ) | |||||
| Proceeds from the sale of long-term investments |
123 | 1,838 | ||||||
| Capital expenditures |
(460 | ) | (6,959 | ) | ||||
| Proceeds from the sale of equipment |
724 | — | ||||||
| Purchases of marketable securities |
(470,256 | ) | (335,698 | ) | ||||
| Sales and maturities of marketable securities |
410,204 | 401,434 | ||||||
| Net cash (used in) provided by investing activities |
(59,665 | ) | 56,478 | |||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of common stock under stock plans |
2,787 | 1,117 | ||||||
| Repurchase of common stock |
— | (105 | ) | |||||
| Net proceeds from issuance of convertible subordinated notes |
242,500 | — | ||||||
| Net cash provided by financing activities |
245,287 | 1,012 | ||||||