UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 0-28308
CollaGenex Pharmaceuticals, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 52-1758016 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
| 41 University Drive, Newtown, PA | 18940 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
(215) 579-7388
(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 Registrant’s classes of Common Stock as of November 1, 2004:
| Class |
Number of Shares | |
| Common Stock $.01 par value | 14,385,377 |
COLLAGENEX PHARMACEUTICALS, INC.
| Page | ||||
| 1 | ||||
| Item 1. |
1 | |||
|
Condensed Consolidated Balance Sheets as of September 30, 2004 and |
2 | |||
| 3 | ||||
| 4 | ||||
| 5 | ||||
| Notes to Condensed Consolidated Financial Statements (unaudited) |
6 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 | ||
| 14 | ||||
| 22 | ||||
| 26 | ||||
| Item 3. |
33 | |||
| Item 4. |
34 | |||
| 35 | ||||
| Item 1. |
35 | |||
| Item 6. |
35 | |||
| 36 | ||||
Periostat®, Metastat®, Dermostat®, Nephrostat®, Osteostat®, Arthrostat®, Rheumastat®, Corneostat®, Gingistat®, IMPACS™, PS20®, The Whole Mouth Treatment®, Restoraderm™, Dentaplex®, Lytra™ and Periostat-MR™ are United States trademarks of CollaGenex Pharmaceuticals, Inc. Periostat®, Nephrostat®, Optistat®, Xerostat® Lytra™ and IMPACS™ are European Community trademarks of CollaGenex Pharmaceuticals, Inc. Periostat®, Nephrostat®, Optistat®, Xerostat®, IMPACS®, Dentaplex®, Restoraderm™, Periocycline®, Periostatus® and Periostat-SR® are United Kingdom trademarks of our wholly-owned subsidiary, CollaGenex International Ltd. CollaGenex®, PS20®, Dermastat®, Periostan®, “C” Logo® and “The Whole Mouth Treatment” Logo® are European Community and United Kingdom trademarks of CollaGenex International Ltd. Periocycline™, Restoraderm® and Periostat-SR™ are European Community Trademarks of CollaGenex International Ltd. All other trade names, trademarks or service marks appearing in this Quarterly Report are the property of their respective owners and are not property of CollaGenex Pharmaceuticals, Inc. or any of our subsidiaries.
- i -
Item 1. Financial Statements (unaudited).
- 1 -
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, 2004 and December 31, 2003
(dollars in thousands unaudited, except share data)
| September 30, 2004 |
December 31, 2003 |
|||||||
| Assets | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 34,649 | $ | 32,670 | ||||
| Accounts receivable, net of allowances of $437 and $481 at September 30, 2004 and December 31, 2003, respectively |
4,585 | 5,786 | ||||||
| Inventories |
2,329 | 1,672 | ||||||
| Prepaid expenses and other current assets |
2,556 | 1,732 | ||||||
| Total current assets |
44,119 | 41,860 | ||||||
| Equipment and leasehold improvements, net |
537 | 496 | ||||||
| License fees |
1,310 | 1,749 | ||||||
| Other assets |
44 | 27 | ||||||
| Total assets |
$ | 46,010 | $ | 44,132 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 2,755 | $ | 3,699 | ||||
| Accrued expenses |
4,360 | 5,351 | ||||||
| Preferred dividends payable |
— | 800 | ||||||
| Total current liabilities |
7,115 | 9,850 | ||||||
| Deferred revenue |
310 | 326 | ||||||
| Commitments and Contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.01 par value, 5,000,000 shares authorized; 200,000 shares of Series D cumulative convertible preferred stock issued and outstanding at September 30, 2004 and December 31, 2003 (liquidation value of $20,800); 150,000 shares of Series A participating preferred stock, $0.01 par value, designated and no shares issued and outstanding at September 30, 2004 and December 31, 2003 |
2 | 2 | ||||||
| Common stock, $0.01 par value; 25,000,000 shares authorized, 14,383,877 and 13,842,200 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively |
144 | 138 | ||||||
| Additional paid in capital |
106,006 | 103,670 | ||||||
| Accumulated deficit |
(67,567 | ) | (69,854 | ) | ||||
| Total stockholders’ equity |
38,585 | 33,956 | ||||||
| Total liabilities and stockholders’ equity |
$ | 46,010 | $ | 44,132 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
- 2 -
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Three Months Ended September 30, 2004 and 2003
(amounts in thousands, except share and per share data)
(unaudited)
| Three Months Ended September 30, | |||||||
| 2004 |
2003 | ||||||
| Revenues: |
|||||||
| Net product sales |
$ | 10,991 | $ | 12,797 | |||
| Contract revenues |
60 | 1,111 | |||||
| License revenues |
24 | 8 | |||||
| Total revenues |
11,075 | 13,916 | |||||
| Operating expenses: |
|||||||
| Cost of product sales |
1,537 | 1,907 | |||||
| Research and development |
2,178 | 1,777 | |||||
| Selling, general and administrative – other |
6,473 | 8,338 | |||||
| Selling, general and administrative – restructuring (note 9) |
(132 | ) | — | ||||
| Selling, general and administrative – legal settlement (note 7) |
— | 700 | |||||
| Total operating expenses |
10,056 | 12,722 | |||||
| Operating income |
1,019 | 1,194 | |||||
| Other income: |
|||||||
| Interest income |
99 | 28 | |||||
| Other income |
7 | 8 | |||||
| Net income |
1,125 | 1,230 | |||||
| Preferred stock dividend |
400 | 400 | |||||
| Net income allocable to common stockholders |
$ | 725 | $ | 830 | |||
| Net income per basic share allocable to common stockholders |
$ | 0.05 | $ | 0.07 | |||
| Weighted average shares used in computing net income per basic share allocable to common stockholders |
14,375,139 | 11,738,583 | |||||
| Net income per diluted share allocable to common stockholders |
$ | 0.05 | $ | 0.06 | |||
| Weighted average shares used in computing net income per diluted share allocable to common stockholders |
14,516,779 | 12,813,907 | |||||
See accompanying notes to unaudited condensed consolidated financial statements.
- 3 -
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Nine Months Ended September 30, 2004 and 2003
(amounts in thousands, except share and per share data)
(unaudited)
| Nine Months Ended September 30, |
|||||||
| 2004 |
2003 |
||||||
| Revenues: |
|||||||
| Net product sales |
$ | 38,691 | $ | 35,917 | |||
| Contract revenues |
180 | 2,164 | |||||
| License revenues |
55 | 679 | |||||
| Total revenues |
38,926 | 38,760 | |||||
| Operating expenses: |
|||||||
| Cost of product sales |
5,590 | 5,560 | |||||
| Research and development |
6,023 | 4,397 | |||||
| Selling, general and administrative – other |
22,122 | 24,129 | |||||
| Selling, general and administrative – restructuring (note 9) |
348 | — | |||||
| Selling, general and administrative – legal settlement (note 7) |
2,000 | 700 | |||||
| Total operating expenses |
36,083 | 34,786 | |||||
| Operating income |
2,843 | 3,974 | |||||
| Other income (expense): |
|||||||
| Interest income |
239 | 84 | |||||
| Other income (expense) |
5 | (2 | ) | ||||
| Net income |
3,087 | 4,056 | |||||
| Preferred stock dividend |
1,200 | 1,200 | |||||
| Net income allocable to common stockholders |
$ | 1,887 | $ | 2,856 | |||
| Net income per basic share allocable to common stockholders |
$ | 0.13 | $ | 0.25 | |||
| Weighted average shares used in computing net income per basic share allocable to common stockholders |
14,224,619 | 11,521,337 | |||||
| Net income per diluted share allocable to common stockholders |
$ | 0.13 | $ | 0.23 | |||
| Weighted average shares used in computing net income per diluted share allocable to common stockholders |
14,535,183 | 12,303,922 | |||||
See accompanying notes to unaudited condensed consolidated financial statements.
- 4 -
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2004 and 2003
(dollars in thousands)
(unaudited)
| Nine Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 3,087 | $ | 4,056 | ||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
||||||||
| Non-cash compensation expense |
— | 251 | ||||||
| Depreciation and amortization expense |
679 | 679 | ||||||
| Accounts receivable provisions |
(44 | ) | 110 | |||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
1,245 | 416 | ||||||
| Inventories |
(657 | ) | 73 | |||||
| Prepaid expenses and other assets |
(841 | ) | (674 | ) | ||||
| Accounts payable |
(944 | ) | (1,010 | ) | ||||
| Accrued expenses |
(991 | ) | 1,729 | |||||
| Deferred revenue |
(16 | ) | (227 | ) | ||||
| Net cash provided by operating activities |
1,518 | 5,403 | ||||||
| Cash flows from investing activities: |
||||||||
| Capital expenditures |
(281 | ) | (270 | ) | ||||
| Payment for Altana License |
— | (900 | ) | |||||
| Net cash used in investing activities |
(281 | ) | (1,170 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Net proceeds from issuance of common stock |
2,342 | 1,774 | ||||||
| Payment of preferred dividends |
(1,600 | ) | (1,600 | ) | ||||