UNITED STATES
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 October 3, 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 November 5, 2004 | |
| Common Stock, $0.01 par value | 38,793,559 |
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements, including statements regarding GTC’s collaborations and the Company’s future cash requirements. The words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “believes,” “expects”, or similar expressions are intended to identify “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, as amended, as enacted by the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts are based on current expectations, beliefs, assumptions, estimates, forecasts and projections for GTC’s business and the industry and markets related to its business. The statements contained in this report are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed in such forward-looking statements. Important factors which may affect future revenues, research and development programs, clinical trials and collaborations and the Company’s future cash requirements include, without limitation, regulatory review of the Company’s ATryn® product, the ability of the Company to enter into transgenic research and development collaborations in the future and the terms of such collaborations, the results of research and development and preclinical and clinical testing of the Company’s internal product, competitive and technological advances and regulatory requirements.
For a further description of these and other risks and uncertainties, the Company encourages you to read carefully the portion of the Annual Report on Form 10-K for the fiscal year ended December 28, 2003 of the Company under the caption “Factors Affecting Future Operations and Results” in Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations filed with the Securities and Exchange Commission on March 8, 2004.
The forward-looking statements contained in this Quarterly Report on Form 10-Q speak only as of the date of this report. GTC expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained in this Quarterly Report to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based, except as may be required by law.
TABLE OF CONTENTS
| PAGE # | ||
| ITEM 1 - Financial Statements |
||
| Consolidated Balance Sheets as of October 3, 2004 and December 28, 2003 |
2 | |
| 3 | ||
| 4 | ||
| 5 | ||
| ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations |
9 | |
| ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk |
14 | |
| ITEM 4 - Controls and Procedures |
14 | |
| ITEM 6 - Exhibits |
15 | |
| 16 | ||
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands except share amounts)
| October 3, 2004 |
December 28, 2003 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 9,222 | $ | 6,733 | ||||
| Marketable securities |
20,583 | 24,358 | ||||||
| Accounts receivable and unbilled contract revenue |
424 | 1,613 | ||||||
| Deferred contract costs |
992 | — | ||||||
| Other current assets |
1,750 | 1,777 | ||||||
| Total current assets |
32,971 | 34,481 | ||||||
| Net property, plant and equipment |
21,269 | 22,600 | ||||||
| Net intangible assets |
10,318 | 11,094 | ||||||
| Inventory |
1,393 | 1,574 | ||||||
| Other assets |
1,362 | 1,323 | ||||||
| Restricted cash |
450 | — | ||||||
| Total assets |
$ | 67,763 | $ | 71,072 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 2,837 | $ | 2,340 | ||||
| Accrued liabilities |
2,995 | 3,524 | ||||||
| Accrued liabilities - Genzyme |
4,133 | 1,924 | ||||||
| Deferred contract revenue |
2,066 | 323 | ||||||
| Note payable – Genzyme |
2,386 | — | ||||||
| Current portion of long-term debt and capital leases |
2,442 | 2,218 | ||||||
| Total current liabilities |
16,859 | 10,329 | ||||||
| Note payable, net of current portion – Genzyme |
2,387 | 4,773 | ||||||
| Long-term debt and capital leases, net of current portion |
7,372 | 7,769 | ||||||
| Deferred lease obligation |
27 | 40 | ||||||
| Total liabilities |
26,645 | 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; 41,575,826 and 34,749,473 shares issued and 38,755,826 and 31,929,473 shares outstanding at October 3, 2004 and December 28, 2003, respectively |
415 | 347 | ||||||
| Capital in excess of par value – common stock |
222,533 | 207,535 | ||||||
| Treasury stock, at cost, 2,820,000 shares |
(9,545 | ) | (9,545 | ) | ||||
| Accumulated deficit |
(172,164 | ) | (150,179 | ) | ||||
| Accumulated other comprehensive income (loss) |
(121 | ) | 3 | |||||
| Total shareholders’ equity |
41,118 | 48,161 | ||||||
| $ | 67,763 | $ | 71,072 | |||||
The accompanying notes are an integral part of these financial statements.
2
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited, dollars in thousands except per share amounts)
| Three months ended |
Nine months ended |
|||||||||||||||
| October 3, 2004 |
September 28, 2003 |
October 3, 2004 |
September 28, 2003 |
|||||||||||||
| Revenues |
||||||||||||||||
| Revenue |
$ | 920 | $ | 2,164 | $ | 3,383 | $ | 8,019 | ||||||||
| Revenue from related party (Genzyme) |
4 | — | 46 | — | ||||||||||||
| 924 | 2,164 | 3,429 | 8,019 | |||||||||||||
| Costs of revenue and operating expenses: |
||||||||||||||||
| Cost of revenue |
1,182 | 2,369 | 3,745 | 9,238 | ||||||||||||
| Research and development |
4,561 | 4,804 | 13,626 | 12,089 | ||||||||||||
| Selling, general and administrative |
2,194 | 2,893 | 7,812 | 8,233 | ||||||||||||
| 7,937 | 10,066 | 25,183 | 29,560 | |||||||||||||
| Operating loss |
(7,013 | ) | (7,902 | ) | (21,754 | ) | (21,541 | ) | ||||||||
| Other income (expense): |
||||||||||||||||
| Interest income |
111 | 344 | 219 | 851 | ||||||||||||
| Interest expense |
(271 | ) | (129 | ) | (745 | ) | (398 | ) | ||||||||
| Other income |
23 | 81 | 295 | 81 | ||||||||||||
| Net loss |
$ | (7,150 | ) | $ | (7,606 | ) | $ | (21,985 | ) | $ | (21,007 | ) | ||||
| Net loss per common share (basic and diluted) |
$ | (0.18 | ) | $ | (0.25 | ) | $ | (0.60 | ) | $ | (0.73 | ) | ||||
| Weighted average number of common shares outstanding (basic and diluted) |
38,751 | 30,480 | 36,894 | 28,726 | ||||||||||||
| Comprehensive loss: |
||||||||||||||||
| Net loss |
$ | (7,150 | ) | $ | (7,606 | ) | $ | (21,985 | ) | $ | (21,007 | ) | ||||
| Other comprehensive income (loss): |
||||||||||||||||
| Unrealized change in holding gain (loss) on securities available for sale |
49 | 75 | (124 | ) | (18 | ) | ||||||||||
| Total other comprehensive income (loss) |
49 | 75 | (124 | ) | (18 | ) | ||||||||||
| Comprehensive loss |
$ | (7,101 | ) | $ | (7,531 | ) | $ | (22,109 | ) | $ | (21,025 | ) | ||||
The accompanying notes are an integral part of these financial statements.
3
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollars in thousands)
| Nine months ended |
||||||||
| October 3, 2004 |
September 28, 2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (21,985 | ) | $ | (21,007 | ) | ||
| Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
3,041 | 2,514 | ||||||
| Stock based compensation |
475 | — | ||||||
| Amortization of premium (discount) on marketable securities |
1,220 | (113 | ) | |||||
| Non-cash common stock issuance to GTC savings and retirement plan |
313 | 172 | ||||||
| Inventory write-off |
181 | — | ||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable and unbilled contract revenue |
1,189 | (1,892 | ) | |||||
| Inventory |
— | (2,038 | ) | |||||
| Deferred contract costs |
(992 | ) | — | |||||
| Other assets and liabilities |
(25 | ) | (121 | ) | ||||
| Accounts payable |
497 | 2 | ||||||
| Accrued liabilities |
(529 | ) | (755 | ) | ||||
| Accrued liabilities – Genzyme |
2,209 | (1,625 | ) | |||||
| Deferred contract revenue |
1,743 | (159 | ) | |||||
| Net cash used in operating activities |
(12,663 | ) | (25,022 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Purchase of property, plant and equipment |
(1,160 | ) | (2,965 | ) | ||||
| Sale of property, plant and equipment |
226 | — | ||||||
| Purchase of marketable securities |
(14,804 | ) | (21,968 | ) | ||||
| Redemption of marketable securities |
17,235 | 25,880 | ||||||
| Restricted cash |
(450 | ) | — | |||||
| Net cash provided by investing activities |
1,047 | 947 | ||||||
| Cash flows from financing activities: |
||||||||
| Proceeds from the issuance of common stock, net of offering costs |
13,868 | 8,541 | ||||||
| Net proceeds from long-term debt |
10,386 | 1,901 | ||||||
| Repayment of long-term debt |
(10,395 | ) | (1,241 | ) | ||||
| Repayment of principal on capital leases |
(164 | ) | (228 | ) | ||||
| Net proceeds from employee stock purchase plan |
291 | 475 | ||||||
| Net proceeds from the exercise of stock options |
119 | 2 | ||||||
| Net cash provided by financing activities |
14,105 | 9,450 | ||||||