SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended July 4, 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 0-21794
GTC BIOTHERAPEUTICS, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Massachusetts | 04-3186494 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| 175 Crossing Boulevard, Framingham, Massachusetts | 01702 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, Including Area Code (508) 620-9700
Former Name, Former Address and Former Fiscal Year if Changed Since Last Report
Indicate by check 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 whether 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.
| Class |
Outstanding at August 3, 2004 | |
| Common Stock, $0.01 par value |
38,740,165 |
TABLE OF CONTENTS
| PAGE # | ||
| PART I. FINANCIAL INFORMATION |
||
| ITEM 1 - Unaudited Consolidated Financial Statements |
||
| Consolidated Balance Sheets as of July 4, 2004 and December 28, 2003 |
2 | |
| 3 | ||
| Consolidated Statements of Cash Flows for the Six Months Ended July 4, 2004 and June 29, 2003 |
4 | |
| 5 | ||
| ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 | |
| ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk |
17 | |
| 17 | ||
| PART II. OTHER INFORMATION |
||
| ITEM 4 – Submission of Matters to a Vote of Security Holders |
18 | |
| 18 | ||
| 20 | ||
PART I - FINANCIAL INFORMATION
ITEM 1 – UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
GTC BIOTHERAPEUTICS, INC.
(Unaudited, dollars in thousands except share amounts)
| July 4, 2004 |
December 28, 2003 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 13,701 | $ | 6,733 | ||||
| Marketable securities |
20,656 | 24,358 | ||||||
| Accounts receivable and unbilled contract revenue |
1,033 | 1,613 | ||||||
| Deferred contract costs |
533 | — | ||||||
| Other current assets |
1,621 | 1,777 | ||||||
| Total current assets |
37,544 | 34,481 | ||||||
| Net property, plant and equipment |
21,903 | 22,600 | ||||||
| Net intangible assets |
10,576 | 11,094 | ||||||
| Inventory |
1,566 | 1,574 | ||||||
| Other assets |
1,316 | 1,323 | ||||||
| Restricted cash |
450 | — | ||||||
| Total assets |
$ | 73,355 | $ | 71,072 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 2,264 | $ | 2,340 | ||||
| Accrued liabilities |
3,409 | 3,524 | ||||||
| Accrued liabilities - Genzyme |
3,302 | 1,924 | ||||||
| Deferred contract revenue |
1,059 | 323 | ||||||
| Current portion of long-term debt and capital leases |
2,221 | 2,218 | ||||||
| Note payable - Genzyme |
2,386 | — | ||||||
| Total current liabilities |
14,641 | 10,329 | ||||||
| Long-term debt and capital leases, net of current portion |
8,170 | 7,769 | ||||||
| Note payable – Genzyme |
2,387 | 4,773 | ||||||
| Deferred lease obligation |
31 | 40 | ||||||
| Total liabilities |
25,229 | 22,911 | ||||||
| Shareholders’ equity: |
||||||||
| Preferred stock, $.01 par value; 5,000,000 shares authorized; no shares were issued and outstanding |
— | — | ||||||
| Common stock, $.01 par value; 100,000,000 shares authorized; 41,520,253 and 34,749,473 shares issued and 38,700,253 and 31,929,473 shares outstanding at July 4, 2004 and December 28, 2003, respectively |
415 | 347 | ||||||
| Capital in excess of par value – common stock |
222,440 | 207,535 | ||||||
| Treasury stock, at cost, 2,820,000 shares |
(9,545 | ) | (9,545 | ) | ||||
| Accumulated deficit |
(165,014 | ) | (150,179 | ) | ||||
| Accumulated other comprehensive income |
(170 | ) | 3 | |||||
| Total shareholders’ equity |
48,126 | 48,161 | ||||||
| $ | 73,355 | $ | 71,072 | |||||
The accompanying notes are an integral part of these financial statements.
2
GTC BIOTHERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited, dollars in thousands except per share amounts)
| Three months ended |
Six months ended |
|||||||||||||||
| July 4, 2004 |
June 29, 2003 |
July 4, 2004 |
June 29, 2003 |
|||||||||||||
| Revenues |
||||||||||||||||
| Revenue |
$ | 1,416 | $ | 4,111 | $ | 2,463 | $ | 5,855 | ||||||||
| Revenue from related party (Genzyme) |
23 | — | 42 | — | ||||||||||||
| 1,439 | 4,111 | 2,505 | 5,855 | |||||||||||||
| Costs of revenue and operating expenses: |
||||||||||||||||
| Cost of revenue |
1,491 | 3,293 | 2,563 | 6,869 | ||||||||||||
| Research and development |
3,625 | 4,261 | 9,065 | 7,285 | ||||||||||||
| Selling, general and administrative |
2,421 | 2,647 | 5,618 | 5,340 | ||||||||||||
| 7,537 | 10,201 | 17,246 | 19,494 | |||||||||||||
| Operating loss |
(6,098 | ) | (6,090 | ) | (14,741 | ) | (13,639 | ) | ||||||||
| Other income (expense): |
||||||||||||||||
| Interest income |
125 | 215 | 108 | 507 | ||||||||||||
| Interest expense |
(332 | ) | (133 | ) | (474 | ) | (269 | ) | ||||||||
| Other income |
46 | — | 272 | — | ||||||||||||
| Net loss |
$ | (6,259 | ) | $ | (6,008 | ) | $ | (14,835 | ) | $ | (13,401 | ) | ||||
| Net loss per common share (basic and diluted) |
$ | (0.16 | ) | $ | (0.21 | ) | $ | (0.41 | ) | $ | (0.48 | ) | ||||
| Weighted average number of common shares outstanding (basic and diluted) |
38,692 | 28,058 | 35,998 | 27,920 | ||||||||||||
| Comprehensive loss: |
||||||||||||||||
| Net loss |
$ | (6,259 | ) | $ | (6,008 | ) | $ | (14,835 | ) | $ | (13,401 | ) | ||||
| Other comprehensive income: |
||||||||||||||||
| Unrealized change in holding loss on securities available for sale |
(157 | ) | (58 | ) | (173 | ) | (93 | ) | ||||||||
| Total other comprehensive loss |
(157 | ) | (58 | ) | (173 | ) | (93 | ) | ||||||||
| Comprehensive loss |
$ | (6,416 | ) | $ | (6,066 | ) | $ | (15,008 | ) | $ | (13,494 | ) | ||||
The accompanying notes are an integral part of these financial statements.
3
GTC BIOTHERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollars in thousands)
| Six months ended |
||||||||
| July 4, 2004 |
June 29, 2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (14,835 | ) | $ | (13,401 | ) | ||
| Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
1,977 | 1,516 | ||||||
| Stock based compensation |
475 | — | ||||||
| Amortization of premium (discount) on marketable securities |
1,098 | (320 | ) | |||||
| Non-cash common stock issuance to GTC savings and retirement plan |
309 | 172 | ||||||
| Inventory write-off |
8 | — | ||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable and unbilled contract revenue |
580 | (1,665 | ) | |||||
| Inventory |
— | (1,625 | ) | |||||
| Deferred contract costs |
(533 | ) | — | |||||
| Other assets and liabilities |
154 | 718 | ||||||
| Accounts payable |
(76 | ) | (877 | ) | ||||
| Accrued liabilities |
(115 | ) | (1,080 | ) | ||||
| Accrued liabilities – Genzyme |
1,378 | (973 | ) | |||||
| Deferred contract revenue |
736 | (1 | ) | |||||
| Net cash used in operating activities |
(8,844 | ) | (17,536 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Purchase of property, plant and equipment |
(762 | ) | (3,094 | ) | ||||
| Purchase of marketable securities |
(14,804 | ) | (15,118 | ) | ||||
| Redemption of marketable securities |
17,235 | 25,030 | ||||||
| Restricted cash |
(450 | ) | — | |||||
| Net cash provided by investing activities |
1,219 | 6,818 | ||||||
| Cash flows from financing activities: |
||||||||
| Net proceeds from the issuance of common stock, net of offering costs |
13,868 | — | ||||||
| Net proceeds from long-term debt |
10,386 | 1,624 | ||||||
| Repayment of long-term debt |
(9,868 | ) | (760 | ) | ||||
| Repayment of principal on capital leases |
(114 | ) | (169 | ) | ||||
| Net proceeds from employee stock purchase plan |
210 | 363 | ||||||
| Net proceeds from the exercise of stock options |
111 | — | ||||||
| Net cash provided by financing activities |
14,593 | 1,058 | ||||||
| Net increase (decrease) in cash and cash equivalents |
6,968 | (9,660 | ) | |||||
| Cash and cash equivalents at beginning of period |
6,733 | 26,911 | ||||||
| Cash and cash equivalents at end of period |
$ | 13,701 | ||||||