UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
Commission file number 000-28401
MAXYGEN, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 77-0449487 | |
| (State of incorporation) | (I.R.S. Employer Identification No.) |
515 Galveston Drive
Redwood City, California 94063
(Address of principal executive offices, including zip code)
(650) 298-5300
(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 ¨
As of November 1, 2004, there were 35,354,416 shares of the registrant’s common stock, $0.0001 par value per share, outstanding, which is the only class of common or voting stock of the registrant issued.
MAXYGEN, INC.
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004
This report and the disclosures herein include, on a consolidated basis, the continuing business and operations of Maxygen, Inc. and its wholly-owned subsidiaries, Maxygen ApS and Maxygen Holdings Ltd., as well as its majority-owned subsidiary Codexis, Inc., unless, in each case, the context indicates that the disclosure applies only to a named subsidiary. The operations of Verdia, Inc. prior to its sale on July 1, 2004 are reflected as discontinued operations.
We make available on our website all reports filed with the Securities and Exchange Commission, including our reports on Form 10-K, 10-Q and 8-K, as soon as reasonably practicable after they have been filed. Our website is located at www.maxygen.com. Information contained on our website is not a part of this report.
Maxygen is a registered trademark, and MolecularBreeding is a trademark, of Maxygen, Inc. Codexis is a trademark of Codexis, Inc. Verdia is a trademark of Verdia, Inc. The use of the word “partner” and “partnership” does not mean a legal partner or legal partnership.
2
PART I – FINANCIAL INFORMATION
FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
| December 31, 2003 |
September 30, 2004 |
|||||||
| (Note 1) | (unaudited) | |||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 21,353 | $ | 47,826 | ||||
| Short-term investments |
91,116 | 186,820 | ||||||
| Accounts receivable and other receivables |
3,528 | 3,783 | ||||||
| Due from Verdia |
1,442 | — | ||||||
| Prepaid expenses and other current assets |
4,868 | 5,418 | ||||||
| Assets of discontinued operations |
7,316 | — | ||||||
| Total current assets |
129,623 | 243,847 | ||||||
| Property and equipment, net |
11,509 | 8,908 | ||||||
| Goodwill |
12,192 | 12,192 | ||||||
| Long-term investments |
79,399 | 6,912 | ||||||
| Deposits and other long-term assets |
1,346 | 2,501 | ||||||
| Total assets |
$ | 234,069 | $ | 274,360 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,599 | $ | 2,232 | ||||
| Accrued compensation |
2,439 | 5,256 | ||||||
| Other accrued liabilities |
1,904 | 2,082 | ||||||
| Deferred revenue |
4,776 | 4,103 | ||||||
| Current portion of equipment financing obligations |
55 | 446 | ||||||
| Liabilities of discontinued operations |
3,126 | — | ||||||
| Total current liabilities |
13,899 | 14,119 | ||||||
| Deferred revenue |
695 | 1,500 | ||||||
| Non-current equipment financing obligations |
— | 1,497 | ||||||
| Other long-term liabilities |
41 | 25 | ||||||
| Minority interest |
21,210 | 31,932 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding at December 31, 2003 and September 30, 2004 |
— | — | ||||||
| Common stock, $0.0001 par value, 100,000,000 shares authorized, 34,909,799 and 35,335,984 shares issued and outstanding at December 31, 2003 and September 30, 2004, respectively |
3 | 3 | ||||||
| Additional paid-in capital |
394,966 | 397,292 | ||||||
| Deferred stock compensation |
(251 | ) | — | |||||
| Accumulated other comprehensive loss |
(1,366 | ) | (1,610 | ) | ||||
| Accumulated deficit |
(195,128 | ) | (170,398 | ) | ||||
| Total stockholders’ equity |
198,224 | 225,287 | ||||||
| Total liabilities and stockholders’ equity |
$ | 234,069 | $ | 274,360 | ||||
See accompanying notes.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
| 2003 |
2004 |
2003 |
2004 |
|||||||||||||
| Collaborative research and development revenue |
$ | 4,633 | $ | 3,451 | $ | 15,846 | $ | 11,087 | ||||||||
| Grant revenue |
419 | 474 | 1,578 | 1,267 | ||||||||||||
| Total revenues |
5,052 | 3,925 | 17,424 | 12,354 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
10,974 | 14,428 | 32,442 | 37,041 | ||||||||||||
| General and administrative |
2,412 | 3,670 | 8,156 | 9,950 | ||||||||||||
| Stock compensation expense (1) |
404 | 65 | 1,865 | 347 | ||||||||||||
| Amortization of goodwill and other intangible assets |
126 | — | 698 | — | ||||||||||||
| Total operating expenses |
13,916 | 18,163 | 43,161 | 47,338 | ||||||||||||
| Loss from operations |
(8,864 | ) | (14,238 | ) | (25,737 | ) | (34,984 | ) | ||||||||
| Interest income and other (expense), net |
1,029 | 1,015 | 3,789 | 2,286 | ||||||||||||
| Equity in losses of minority investee |
(231 | ) | — | (231 | ) | (1,000 | ) | |||||||||
| Loss from continuing operations |
(8,066 | ) | (13,223 | ) | (22,179 | ) | (33,698 | ) | ||||||||
| Discontinued operations: |
||||||||||||||||
| Loss from discontinued operations |
(871 | ) | — | (699 | ) | (2,769 | ) | |||||||||
| Gain on sale of discontinued operations (net of taxes and transaction costs) |
— | 61,197 | — | 61,197 | ||||||||||||
| Net income (loss) from discontinued operations |
(871 | ) | 61,197 | (699 | ) | 58,428 | ||||||||||
| Net income (loss) |
(8,937 | ) | 47,974 | (22,878 | ) | 24,730 | ||||||||||
| Subsidiary preferred stock accretion |
(319 | ) | (250 | ) | (957 | ) | (750 | ) | ||||||||
| Income (loss) applicable to common stockholders |
$ | (9,256 | ) | $ | 47,724 | $ | (23,835 | ) | $ | 23,980 | ||||||
| Basic and diluted income (loss) per share: |
||||||||||||||||
| Continuing operations |
$ | (0.23 | ) | $ | (0.38 | ) | $ | (0.65 | ) | $ | (0.96 | ) | ||||
| Discontinued operations |
$ | (0.03 | ) | $ | 1.74 | $ | (0.02 | ) | $ | 1.67 | ||||||
| Applicable to common stockholders |
$ | (0.27 | ) | $ | 1.35 | $ | (0.69 | ) | $ | 0.68 | ||||||
| Shares used in per share calculations: |
||||||||||||||||
| Basic and diluted |
34,667 | 35,236 | 34,338 | 35,082 | ||||||||||||
| (1) | Stock compensation expense related to the following: |
| Research and development |
$ | 286 | $ | 50 | $ | 1,419 | $ | 288 | ||||
| General and administrative |
118 | 15 | 446 | 59 | ||||||||
| $ | 404 | $ | 65 | $ | 1,865 | $ | 347 | |||||
See accompanying notes.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
| Nine months ended September 30, |
||||||||
| 2003 |
2004 |
|||||||
| Operating activities |
||||||||
| Loss from continuing operations |
$ | (22,179 | ) | $ | (33,698 | ) | ||
| Adjustments to reconcile loss from continuing operations to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
4,669 | 4,636 | ||||||
| Amortization of intangible assets |
698 | — | ||||||
| Equity in losses of minority investee |
— | 1,000 | ||||||
| Non-cash stock compensation |
1,828 | 538 | ||||||
| Common stock issued and stock options granted to consultants for services rendered and for certain technology rights |
710 | 535 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable and other receivables |
(122 | ) | (255 | ) | ||||
| Prepaid expenses and other current assets |
314 | (333 | ) | |||||
| Deposits and other assets |
(194 | ) | (1,155 | ) | ||||
| Accounts payable |
303 | 633 | ||||||
| Accrued compensation |
1,511 | 2,817 | ||||||
| Other accrued liabilities |
(1,502 | ) | 162 | |||||
| Deferred revenue |
464 | 132 | ||||||
| Net cash used in operating activities |
(13,500 | ) | (24,988 | ) | ||||
| Investing activities |
||||||||
| Purchases of available-for-sale securities |
(151,689 | ) | (104,678 | ) | ||||
| Maturities of available-for-sale securities |
141,714 | 80,939 | ||||||
| Investment in minority investee |
— | (1,000 | ) | |||||
| Acquisition of property and equipment |
(3,023 | ) | (1,964 | ) | ||||
| Proceeds from the sale of Verdia |
— | 62,616 | ||||||