SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| x | Quarterly report pursuant to Section 13 or 15(d) of the Securities and 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 and Exchange Act of 1934 |
Commission File Number 000-50461
TERCICA, INC.
(Exact name of Registrant as specified in its charter)
| Delaware | 26-0042539 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
651 Gateway Boulevard
Suite 950
South San Francisco, CA 94080
(650) 624-4900
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
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 Act). Yes ¨ No x
As of October 22, 2004, there were 24,559,324 shares of the Registrant’s Common Stock outstanding.
(A DEVELOPMENT STAGE COMPANY)
INDEX
2
PART I – FINANCIAL INFORMATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
| September 30, 2004 |
December 31, 2003 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 6,698 | $ | 1,949 | ||||
| Short-term investments |
53,576 | 35,364 | ||||||
| Prepaid expenses and other current assets |
1,427 | 2,772 | ||||||
| Total current assets |
61,701 | 40,085 | ||||||
| Property and equipment, net |
2,388 | 2,314 | ||||||
| Other assets |
50 | 85 | ||||||
| Total assets |
$ | 64,139 | $ | 42,484 | ||||
| Liabilities and stockholders’ equity (deficit) |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 3,101 | $ | 5,351 | ||||
| Accrued expenses |
2,661 | 1,214 | ||||||
| Liability for early exercise of stock options |
162 | 174 | ||||||
| Total current liabilities |
5,924 | 6,739 | ||||||
| Liability for early exercise of stock options—noncurrent portion |
220 | 306 | ||||||
| Commitments and contingencies |
||||||||
| Series A convertible preferred stock |
— | 24,853 | ||||||
| Series B convertible preferred stock |
— | 43,784 | ||||||
| Stockholders’ equity (deficit): |
||||||||
| Common stock |
24 | 2 | ||||||
| Additional paid-in capital |
173,957 | 51,308 | ||||||
| Deferred stock compensation |
(7,613 | ) | (5,984 | ) | ||||
| Accumulated other comprehensive loss |
(54 | ) | (18 | ) | ||||
| Deficit accumulated during the development stage |
(108,319 | ) | (78,506 | ) | ||||
| Total stockholders’ equity (deficit) |
57,995 | (33,198 | ) | |||||
| Total liabilities and stockholders’ equity (deficit) |
$ | 64,139 | $ | 42,484 | ||||
See accompanying notes.
3
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
| Three months ended September 30, |
Nine months ended September 30, |
Period from October 1, 2000 (inception) through September 30, 2004 |
||||||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||||||
| Costs and expenses: |
||||||||||||||||||||
| Research and development* |
$ | 7,442 | $ | 5,745 | $ | 20,272 | $ | 11,898 | $ | 41,979 | ||||||||||
| Selling, general and administrative* |
3,503 | 1,483 | 8,757 | 3,149 | 16,195 | |||||||||||||||
| Acquired in-process research and development |
— | 1,670 | 1,417 | 1,670 | 8,158 | |||||||||||||||
| Total costs and expenses |
(10,945 | ) | (8,898 | ) | (30,446 | ) | (16,717 | ) | (66,332 | ) | ||||||||||
| Interest expense |
— | — | — | — | (106 | ) | ||||||||||||||
| Interest and other income, net |
268 | 123 | 633 | 200 | 1,147 | |||||||||||||||
| Net loss |
(10,677 | ) | (8,775 | ) | (29,813 | ) | (16,517 | ) | (65,291 | ) | ||||||||||
| Deemed dividend related to beneficial conversion feature of convertible preferred stock |
— | (44,153 | ) | — | (44,153 | ) | (44,153 | ) | ||||||||||||
| Net loss allocable to common stockholders |
$ | (10,677 | ) | $ | (52,928 | ) | $ | (29,813 | ) | $ | (60,670 | ) | $ | (109,444 | ) | |||||
| Basic and diluted net loss per share allocable to common stockholders |
$ | (0.45 | ) | $ | (28.63 | ) | $ | (1.68 | ) | $ | (34.72 | ) | ||||||||
| Shares used to compute basic and diluted net loss per share allocable to common stockholders |
23,951,624 | 1,848,752 | 17,702,650 | 1,747,461 | ||||||||||||||||
* Includes non-cash stock-based compensation expense as follows: |
| |||||||||||||||||||
| Research and development |
$ | 344 | $ | 277 | $ | 1,095 | $ | 476 | $ | 1,890 | ||||||||||
| Selling, general and administrative |
338 | 97 | 1,076 | 99 | 1,334 | |||||||||||||||
| Total |
$ | 682 | $ | 374 | $ | 2,171 | $ | 575 | $ | 3,224 | ||||||||||
See accompanying notes.
4
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine months Ended September 30, |
Period from October 1, 2000 (inception) through September 30, 2004 |
|||||||||||
| 2004 |
2003 |
|||||||||||
| Cash flows from operating activities: |
||||||||||||
| Net loss |
$ | (29,813 | ) | $ | (16,517 | ) | $ | (65,291 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||
| Depreciation and amortization |
330 | 44 | 441 | |||||||||
| Property and equipment written-off |
— | — | 8 | |||||||||
| Amortization of deferred stock compensation, net of forfeitures |
2,097 | 479 | 3,001 | |||||||||
| Amortization of premiums relating to available-for-sale securities |
514 | 186 | 985 | |||||||||
| Stock compensation in exchange for consulting services |
73 | 96 | 223 | |||||||||
| Issuance of warrants in connection with convertible note |
— | — | 105 | |||||||||
| Issuance of stock in exchange for intellectual property |
— | — | 130 | |||||||||
| Acquired in-process research and development |
— | — | 4,071 | |||||||||
| Changes in operating assets and liabilities: |
||||||||||||
| Prepaid expenses and other assets |
1,379 | (1,693 | ) | (1,477 | ) | |||||||
| Accounts payable |
(2,251 | ) | 2,698 | 3,101 | ||||||||
| Accrued expenses |
1,447 | 785 | 2,661 | |||||||||
| Net cash used in operating activities |
(26,224 | ) | (13,922 | ) | (52,042 | ) | ||||||
| Cash flows from investing activities: |
||||||||||||
| Purchases of property and equipment |
(403 | ) | (1,621 | ) | (2,837 | ) | ||||||
| Purchases of available-for-sale securities |
(112,167 | ) | (47,657 | ) | (175,820 | ) | ||||||
| Proceeds from sales and maturities of available-for-sale securities |
93,405 | 11,700 | 121,206 | |||||||||
| Net cash used in investing activities |
(19,165 | ) | (37,578 | ) | (57,451 | ) | ||||||
| Cash flows from financing activities: |
||||||||||||
| Net proceeds from issuance of Class A and B shares |
— | — | 1,004 | |||||||||
| Liquidating distribution to Tercica Limited shareholders |
— | — | (9 | ) | ||||||||
| Net proceeds from issuance of preferred stock |
— | 43,784 | 63,800 | |||||||||
| Proceeds from issuance of convertible note |
— | — | 500 | |||||||||
| Proceeds from issuance of Series A convertible preferred stock for exercise of warrants |
— | — | 160 | |||||||||
| Proceeds from issuance of common stock, excluding early exercised options |
77 | — | 164 | |||||||||
| Proceeds from early exercised options |
40 | 511 | 551 | |||||||||
| Net proceeds from initial public offering of common stock |
50,021 | — | 50,021 | |||||||||
| Net cash provided by financing activities |
50,138 | 44,295 | 116,191 | |||||||||
| Net increase (decrease) in cash and cash equivalents |
4,749 | (7,205 | ) | 6,698 | ||||||||
| Cash and cash equivalents, beginning of period |
1,949 | 15,871 | — | |||||||||