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: 0-10736
MGI PHARMA, INC.
(Exact name of registrant as specified in its charter)
| Minnesota | 41-1364647 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. employer identification number) |
| 5775 West Old Shakopee Road Suite 100 Bloomington, Minnesota 55437 |
(952) 346-4700 | |
| (Address of principal executive offices and zip code) | (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 the issuer’s classes of common stock, as of the latest practicable date.
| Common Stock, $.01 par value | 70,654,780 shares | |
| (Class) | (Outstanding at July 30, 2004) |
FORM 10-Q INDEX
2
BALANCE SHEETS
(unaudited)
| June 30, 2004 |
December 31, 2003 | |||||
| ASSETS |
||||||
| Current assets: |
||||||
| Cash and cash equivalents |
$ | 328,176,616 | $ | 116,570,518 | ||
| Short-term marketable investments |
37,153,496 | 23,362,898 | ||||
| Restricted marketable investments |
5,834,730 | — | ||||
| Receivables, less contractual and bad debt allowances of $5,974,550 and $3,315,399 |
39,624,381 | 6,223,964 | ||||
| Inventories |
3,051,579 | 7,437,550 | ||||
| Prepaid expenses |
448,919 | 922,070 | ||||
| Total current assets |
414,289,721 | 154,517,000 | ||||
| Equipment, furniture and leasehold improvements, at cost less accumulated depreciation of $3,629,034 and $3,041,360 |
2,661,912 | 2,828,602 | ||||
| Long-term marketable investments |
46,733,005 | 37,819,837 | ||||
| Restricted marketable investments, less current portion |
11,327,991 | — | ||||
| Debt issuance costs, less accumulated amortization of $387,403 and $10,799 |
7,748,070 | 39,044 | ||||
| Long-term equity investment |
911,512 | 3,646,052 | ||||
| Intangible assets, at cost less accumulated amortization of $4,350,319 and $3,667,412 |
4,970,551 | 5,653,457 | ||||
| Other assets |
54,206 | 54,206 | ||||
| Total assets |
$ | 488,696,968 | $ | 204,558,198 | ||
(Continued)
3
BALANCE SHEETS
(Unaudited)
Page 2
| June 30, 2004 |
December 31, 2003 |
|||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 3,357,813 | $ | 4,039,139 | ||||
| Accrued expenses |
24,849,305 | 21,632,345 | ||||||
| Deferred revenue |
245,000 | 245,000 | ||||||
| Other current liabilities |
113,474 | 28,910 | ||||||
| Total current liabilities |
28,565,592 | 25,945,394 | ||||||
| Noncurrent liabilities: |
||||||||
| Senior subordinated convertible notes, face value of $348,000,000 and $21,000,000, net of unamortized discount of $87,828,240 as of June 30, 2004 and unamortized warrant costs of $1,322,244 as of December 31, 2003. |
260,171,760 | 19,677,756 | ||||||
| Deferred revenue |
2,073,750 | 2,196,250 | ||||||
| Other noncurrent liabilities |
136,251 | 128,636 | ||||||
| Total noncurrent liabilities |
262,381,761 | 22,002,642 | ||||||
| Total liabilities |
290,947,353 | 47,948,036 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, 10,000,000 authorized and unissued shares |
— | — | ||||||
| Common stock, $.01 par value, 140,000,000 authorized shares, 70,576,368 and 63,393,964 issued and outstanding shares |
705,764 | 633,940 | ||||||
| Additional paid-in capital |
413,132,960 | 377,347,640 | ||||||
| Unearned compensation |
(2,703,751 | ) | (24,129 | ) | ||||
| Accumulated other comprehensive income |
2,555,591 | — | ||||||
| Accumulated deficit |
(215,940,949 | ) | (221,347,289 | ) | ||||
| Total stockholders’ equity |
197,749,615 | 156,610,162 | ||||||
| Total liabilities and stockholders’ equity |
$ | 488,696,968 | $ | 204,558,198 | ||||
See accompanying notes to financial statements.
4
STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Sales |
$ | 46,861,894 | $ | 8,529,200 | $ | 72,695,528 | $ | 14,671,987 | ||||||||
| Licensing |
1,076,907 | 1,340,634 | 2,112,443 | 1,956,595 | ||||||||||||
| 47,938,801 | 9,869,834 | 74,807,971 | 16,628,582 | |||||||||||||
| Costs and expenses: |
||||||||||||||||
| Cost of sales |
14,141,802 | 1,248,901 | 21,766,640 | 2,315,276 | ||||||||||||
| Selling, general and administrative |
16,682,962 | 11,383,651 | 34,147,837 | 20,201,631 | ||||||||||||
| Research and development |
8,032,822 | 4,172,687 | 13,048,499 | 7,632,256 | ||||||||||||
| 38,857,586 | 16,805,239 | 68,962,976 | 30,149,163 | |||||||||||||
| Income (loss) from operations |
9,081,215 | (6,935,405 | ) | 5,844,995 | (13,520,581 | ) | ||||||||||
| Interest income |
1,375,470 | 212,595 | 2,190,664 | 419,223 | ||||||||||||
| Interest expense |
(1,754,701 | ) | (249,390 | ) | (2,479,319 | ) | (498,781 | ) | ||||||||
| Income (loss) before taxes |
8,701,984 | (6,972,200 | ) | $ | 5,556,340 | $ | (13,600,139 | ) | ||||||||
| Provision for income taxes |
(150,000 | ) | — | (150,000 | ) | — | ||||||||||
| Net income (loss) |
$ | 8,551,984 | $ | (6,972,200 | ) | $ | 5,406,340 | $ | (13,600,139 | ) | ||||||
| Net income (loss) per common share: |
||||||||||||||||
| Basic |
$ | 0.12 | $ | (0.14 | ) | $ | 0.08 | $ | (0.27 | ) | ||||||
| Assuming dilution |
$ | 0.11 | $ | (0.14 | ) | $ | 0.07 | $ | (0.27 | ) | ||||||
| Weighted average number of common shares outstanding: |
||||||||||||||||
| Basic |
70,450,306 | 50,840,832 | 69,497,883 | 50,741,108 | ||||||||||||
| Diluted |
75,944,468 | 50,840,832 | 74,777,235 | 50,741,108 | ||||||||||||
See accompanying notes to financial statements.
5
STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| OPERATING ACTIVITIES: |
||||||||
| Net income (loss) |
$ | 5,406,340 | $ | (13,600,139 | ) | |||
| Adjustments for non-cash items: |
||||||||
| Depreciation and intangible amortization |
1,276,450 | 1,022,788 | ||||||
| Benefit plan contribution |
451,275 | 266,364 | ||||||
| Amortization of non-cash financing charges |
499,853 | 183,782 | ||||||
| Employee stock compensation expense |
870,940 | 71,770 | ||||||
| Deferred rent |
7,615 | 17,743 | ||||||
| Noncash consulting payments |
15,000 | 10,000 | ||||||
| Other |
2,749 | — | ||||||
| Change in operating assets and liabilities: |
||||||||
| Receivables |
(33,400,417 | ) | (1,188,593 | ) | ||||
| Inventories |
4,385,971 | 132,730 | ||||||
| Prepaid expenses |
473,151 | (627,272 | ) | |||||
| Accounts payable and accrued expenses |
2,935,380 | 184,232 | ||||||
| Deferred revenue |
(122,500 | ) | (397,192 | ) | ||||
| Other current liabilities |
84,564 | (5,256 | ) | |||||
| Net cash used in operating activities |
(17,113,629 | ) | (13,929,043 | ) | ||||
| INVESTING ACTIVITIES: |
||||||||
| Purchase of held-to-maturity investments |
(70,539,888 | ) | (2,000,000 | ) | ||||
| Maturity of held-to-maturity investments |
53,126,253 | 3,101,995 | ||||||
| Purchase of equipment, furniture and leasehold improvements |
(429,603 | ) | (450,357 | ) | ||||
| Other |
— | 2,343 | ||||||
| Net cash provided by (used in) investing activities |
(17,843,238 | ) | 653,981 | |||||
| FINANCING ACTIVITIES: |
||||||||
| Restricted marketable securities held by trustee for debt service |
(17,162,721 | ) | — | |||||
| Issuance of shares under stock plans |
7,839,399 | 2,667,114 | ||||||
| Proceeds of debt offering |
260,171,760 | — | ||||||
| Issuance costs of debt offering |
(8,135,473 | ) | — | |||||
| Issuance of shares through stock purchase warrant exercise |
3,850,000 | — | ||||||
| Net cash provided by financing activities |
246,562,965 | 2,667,114 | ||||||
| Increase (decrease) in cash and cash equivalents |
211,606,098 | (10,607,948 | ) | |||||
| Cash and cash equivalents at beginning of period |
116,570,518 | 52,933,393 | ||||||
| Cash and cash equivalents at end of period |
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