SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES |
| EXCHANGE ACT OF 1934 |
For the quarterly period ended September 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 No. 0-19312
MEDAREX, INC.
(Exact Name of Registrant as Specified in Its Charter.)
| New Jersey | 22-2822175 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| 707 State Road, Princeton, New Jersey | 08540 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (609) 430-2880
Indicate by check x whether 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 x whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
The number of shares of common stock, $.01 par value, outstanding as of October 29, 2004 was 85,451,840 shares.
MEDAREX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| December 31, 2003 |
September 30, 2004 |
|||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 72,998 | $ | 90,134 | ||||
| Marketable securities |
285,460 | 288,417 | ||||||
| Segregated cash |
5,617 | 6,199 | ||||||
| Prepaid expenses and other current assets |
6,244 | 10,831 | ||||||
| Total current assets |
370,319 | 395,581 | ||||||
| Property, buildings and equipment: |
||||||||
| Land |
6,624 | 6,789 | ||||||
| Buildings and leasehold improvements |
74,764 | 77,017 | ||||||
| Machinery and equipment |
37,006 | 40,854 | ||||||
| Furniture and fixtures |
4,081 | 4,259 | ||||||
| Construction in progress |
4,384 | 3,140 | ||||||
| 126,859 | 132,059 | |||||||
| Less accumulated depreciation and amortization |
(31,494 | ) | (41,512 | ) | ||||
| 95,365 | 90,547 | |||||||
| Investments in Genmab |
10,976 | 6,861 | ||||||
| Investments in IDM |
48,199 | 48,199 | ||||||
| Investments in, and advances to, other affiliates and partners |
11,182 | 10,482 | ||||||
| Segregated cash |
11,579 | 7,752 | ||||||
| Other assets |
10,106 | 11,189 | ||||||
| Total assets |
$ | 557,726 | $ | 570,611 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||
| Current liabilities: |
||||||||
| Trade accounts payable |
$ | 2,197 | $ | 1,951 | ||||
| Accrued liabilities |
13,878 | 20,640 | ||||||
| Deferred contract revenue - current |
3,807 | 12,175 | ||||||
| Total current liabilities |
19,882 | 34,766 | ||||||
| Deferred contract revenue - long-term |
661 | 74,027 | ||||||
| Other long-term liabilities |
3,172 | 5,418 | ||||||
| 4.25% Convertible senior notes due August 15, 2010 |
125,000 | 146,986 | ||||||
| 2.25% Convertible senior notes due May 15, 2011 |
— | 150,000 | ||||||
| 4.50% Convertible subordinated notes due July 1, 2006 |
175,000 | — | ||||||
| Commitments and contingencies |
— | — | ||||||
| Shareholders’ equity: |
||||||||
| Preferred stock, $1.00 par value, 2,000,000 shares authorized; none issued and outstanding |
— | — | ||||||
| Common stock, $.01 par value; 200,000,000 shares authorized; 79,501,080 shares issued and 79,007,564 outstanding at December 31, 2003 and 85,718,849 shares issued and 85,451,740 shares outstanding at September 30, 2004 |
795 | 857 | ||||||
| Capital in excess of par value |
639,784 | 697,680 | ||||||
| Treasury stock, at cost 493,516 shares in 2003 and 267,109 shares in 2004 |
(1,242 | ) | (672 | ) | ||||
| Deferred compensation |
994 | 549 | ||||||
| Accumulated other comprehensive income |
6,560 | 3,400 | ||||||
| Accumulated deficit |
(412,880 | ) | (542,400 | ) | ||||
| Total shareholders’ equity |
234,011 | 159,414 | ||||||
| Total liabilities and shareholders’ equity |
$ | 557,726 | $ | 570,611 | ||||
See notes to these unaudited consolidated financial statements.
2
MEDAREX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2003 |
2004 |
2003 |
2004 |
|||||||||||||
| Sales |
$ | — | $ | — | $ | 25 | $ | — | ||||||||
| Contract and license revenues |
943 | 2,499 | 4,593 | 4,807 | ||||||||||||
| Sales, contract and license revenues from Genmab |
1,317 | 1,183 | 3,857 | 2,714 | ||||||||||||
| Total revenues |
2,260 | 3,682 | 8,475 | 7,521 | ||||||||||||
| Costs and expenses: |
||||||||||||||||
| Cost of sales |
— | — | 3 | — | ||||||||||||
| Research and development |
24,742 | 40,583 | 72,018 | 93,695 | ||||||||||||
| General and administrative |
5,322 | 5,682 | 16,204 | 16,985 | ||||||||||||
| Acquisition of in-process technology |
— | 5,439 | — | 5,439 | ||||||||||||
| Total costs and expenses |
30,064 | 51,704 | 88,225 | 116,119 | ||||||||||||
| Operating loss |
(27,804 | ) | (48,022 | ) | (79,750 | ) | (108,598 | ) | ||||||||
| Equity in net loss of affiliate |
(4,652 | ) | (4,106 | ) | (11,593 | ) | (14,478 | ) | ||||||||
| Interest and other income |
2,584 | 2,454 | 8,299 | 8,323 | ||||||||||||
| Additional payments related to asset acquisitions |
— | (245 | ) | (86 | ) | (245 | ) | |||||||||
| Interest expense |
(3,395 | ) | (2,504 | ) | (8,013 | ) | (10,090 | ) | ||||||||
| Net loss on extinguishment of debt |
— | (2,402 | ) | — | (4,241 | ) | ||||||||||
| Pre tax loss |
(33,267 | ) | (54,825 | ) | (91,143 | ) | (129,329 | ) | ||||||||
| Provision for income taxes |
3 | 182 | 45 | 191 | ||||||||||||
| Loss before cumulative effect of change in accounting principle |
(33,270 | ) | (55,007 | ) | (91,188 | ) | (129,520 | ) | ||||||||
| Cumulative effect of change in accounting principle |
— | — | (830 | ) | — | |||||||||||
| Net loss |
$ | (33,270 | ) | $ | (55,007 | ) | $ | (92,018 | ) | $ | (129,520 | ) | ||||
| Basic and diluted net loss per share: |
||||||||||||||||
| Loss before cumulative effect of change in accounting principle |
$ | (0.43 | ) | $ | (0.68 | ) | $ | (1.17 | ) | $ | (1.62 | ) | ||||
| Cumulative effect of change in accounting principle |
— | — | (0.01 | ) | — | |||||||||||
| Net loss |
$ | (0.43 | ) | $ | (0.68 | ) | $ | (1.18 | ) | $ | (1.62 | ) | ||||
| Weighted average number of common shares outstanding - basic and diluted |
78,088 | 80,904 | 78,046 | 79,981 | ||||||||||||
See notes to these unaudited consolidated financial statements.
3
MEDAREX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| For the Nine Months Ended September 30, |
||||||||
| 2003 |
2004 |
|||||||
| Operating activities: |
||||||||
| Net loss |
$ | (92,018 | ) | $ | (129,520 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Cumulative effect of change in accounting principle |
830 | — | ||||||
| Depreciation |
7,811 | 8,750 | ||||||
| Amortization |
2,560 | 3,365 | ||||||
| Loss on extinguishment of debt |
— | 4,566 | ||||||
| Loss on sale of equipment |
— | 105 | ||||||
| Stock options and awards |
718 | 387 | ||||||
| Non-cash revenue - Genmab |
(333 | ) | (1,500 | ) | ||||
| Equity in net loss of Genmab |
11,593 | 14,478 | ||||||
| Impairment loss on investments in partners |
— | 316 | ||||||
| License fees paid with stock |
— | 2,563 | ||||||
| Write off of in-process technology |
— | 5,439 | ||||||
| Gain on exchange of convertible debt |
— | (325 | ) | |||||
| Gain on exchange of Eos Stock |
(393 | ) | — | |||||
| Gain on sale of equity securities |
— | (1,664 | ) | |||||
| Changes in operating assets and liabilities |
||||||||
| Prepaid expenses and other current assets |
3,414 | (4,581 | ) | |||||
| Trade accounts payable |
(986 | ) | (246 | ) | ||||
| Accrued liabilities |
(876 | ) | 9,584 | |||||
| Deferred contract revenue |
(782 | ) | 83,234 | |||||
| Net cash used in operating activities |
(68,462 | ) | (5,049 | ) | ||||
| Investing activities: |
||||||||
| Purchase of property and equipment |
(6,170 | ) | (6,620 | ) | ||||
| Proceeds from sale of equipment |
— | 600 | ||||||
| Increase in investments and advances to affiliates and partners |
(1,000 | ) | — | |||||
| Purchase of Ability Biomedical Corp., net of cash acquired |
— | (563 | ) | |||||
| (Increase) decrease in segregated cash |
(15,838 | ) | 3,245 | |||||
| Purchase of marketable securities |
(121,260 | ) | (255,500 | ) | ||||