FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended January 31, 2005
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: 0-27756
Alexion Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 13-3648318 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
352 Knotter Drive, Cheshire, Connecticut 06410
(Address of principal executive offices) (Zip Code)
203-272-2596
(Registrant’s telephone number, including area code)
N/A
(Former name, former address, and former fiscal year, if changed since last report)
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¨
| Common Stock, $0.0001 par value |
27,932,093 shares | |
| Class | Outstanding at February 28, 2005 |
INDEX
| Page | ||||||
| PART I. |
FINANCIAL INFORMATION | |||||
| Item 1. | Condensed Consolidated Financial Statements (Unaudited) | |||||
| Condensed Consolidated Balance Sheets as of January 31, 2005 and July 31, 2004 | 3 | |||||
| Condensed Consolidated Statements of Operations for the three and six months ended January 31, 2005 and 2004 | 4 | |||||
| Condensed Consolidated Statements of Cash Flows for the six months ended January 31, 2005 and 2004 | 5 | |||||
| Notes to Condensed Consolidated Financial Statements | 6 | |||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11 | ||||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 18 | ||||
| Item 4. | Controls and Procedures | 19 | ||||
| PART II. |
OTHER INFORMATION | 20 | ||||
| Item 2. | Sale of $150 million principal amount of 1.375% Convertible Senior Notes | 20 | ||||
| Item 4. | Submission of Matters to a Vote of Security Holders | 20 | ||||
| Item 6. | Exhibits | 20 | ||||
| 22 | ||||||
| CERTIFICATIONS |
||||||
2
Condensed Consolidated Balance Sheets
(UNAUDITED)
(amounts in thousands)
| January 31, 2005 |
July 31, 2004 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 177,019 | $ | 113,224 | ||||
| Marketable securities |
193,974 | 153,277 | ||||||
| Milestone receivable |
— | 4,000 | ||||||
| Reimbursable contract costs |
823 | 826 | ||||||
| State tax receivable |
700 | 1,493 | ||||||
| Prepaid expenses and other current assets |
3,018 | 3,513 | ||||||
| Total current assets |
375,534 | 276,333 | ||||||
| Property, plant and equipment, net |
11,003 | 11,336 | ||||||
| Property, plant and equipment held for sale (see Note 7) |
— | 450 | ||||||
| Goodwill |
19,954 | 19,954 | ||||||
| Prepaid manufacturing costs (see Note 8) |
12,500 | 9,500 | ||||||
| Deferred financing costs, net (see Note 3) |
5,965 | 1,547 | ||||||
| Other assets |
456 | 455 | ||||||
| TOTAL ASSETS |
$ | 425,412 | $ | 319,575 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Convertible subordinated notes (see Note 3) |
$ | 120,000 | $ | — | ||||
| Note payable (see Note 7) |
— | 3,920 | ||||||
| Accounts payable |
1,385 | 3,973 | ||||||
| Accrued expenses |
13,088 | 8,123 | ||||||
| Accrued interest |
2,628 | 2,881 | ||||||
| Deferred revenue |
828 | 588 | ||||||
| Deferred research and development payments |
188 | 188 | ||||||
| Total current liabilities |
138,117 | 19,673 | ||||||
| Deferred revenue, less current portion included above |
5,882 | 6,177 | ||||||
| Deferred research and development payments, less current portion included above |
1,110 | 1,203 | ||||||
| Convertible subordinated notes (see Note 3) |
— | 120,000 | ||||||
| Convertible senior notes (see Note 3) |
150,000 | — | ||||||
| Total liabilities |
295,109 | 147,053 | ||||||
| Stockholders’ Equity: |
||||||||
| Preferred stock $.0001 par value; 5,000 shares authorized; no shares issued or outstanding |
— | — | ||||||
| Common stock $.0001 par value; 145,000 shares authorized; 27,958 and 27,557 shares issued at January 31, 2005 and July 31, 2004, respectively |
3 | 3 | ||||||
| Additional paid-in capital |
514,488 | 512,827 | ||||||
| Accumulated deficit |
(383,019 | ) | (339,361 | ) | ||||
| Accumulated other comprehensive loss |
(569 | ) | (347 | ) | ||||
| Treasury stock, at cost; 37 shares |
(600 | ) | (600 | ) | ||||
| Total stockholders’ equity |
130,303 | 172,522 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 425,412 | $ | 319,575 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Condensed Consolidated Statements of Operations
(UNAUDITED)
(amounts in thousands, except per share amounts)
| Three months ended January 31, |
Six months ended January 31, |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| CONTRACT RESEARCH REVENUES |
$ | 563 | $ | 147 | $ | 710 | $ | 294 | ||||||||
| OPERATING EXPENSES: |
||||||||||||||||
| Research and development |
20,088 | 14,524 | 38,751 | 31,212 | ||||||||||||
| General and administrative |
4,280 | 3,300 | 7,959 | 6,114 | ||||||||||||
| Total operating expenses |
24,368 | 17,824 | 46,710 | 37,326 | ||||||||||||
| Operating loss |
(23,805 | ) | (17,677 | ) | (46,000 | ) | (37,032 | ) | ||||||||
| OTHER INCOME AND EXPENSE: |
||||||||||||||||
| Investment income |
1,168 | 994 | 2,217 | 1,995 | ||||||||||||
| Interest expense |
(1,921 | ) | (1,926 | ) | (3,829 | ) | (3,855 | ) | ||||||||
| Gain from extinguishment of debt |
— | — | 3,804 | — | ||||||||||||
| Loss before state tax benefit |
(24,558 | ) | (18,609 | ) | (43,808 | ) | (38,892 | ) | ||||||||
| State tax benefit |
88 | 62 | 150 | 133 | ||||||||||||
| Net loss |
$ | (24,470 | ) | $ | (18,547 | ) | $ | (43,658 | ) | $ | (38,759 | ) | ||||
| BASIC AND DILUTED NET LOSS PER COMMON SHARE |
$ | (0.88 | ) | $ | (0.85 | ) | $ | (1.57 | ) | $ | (1.85 | ) | ||||
| SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER COMMON SHARE |
27,838 | 21,893 | 27,722 | 20,924 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Condensed Consolidated Statements Of Cash Flows
(UNAUDITED)
(amounts in thousands)
| Six months ended January 31, |
||||||||
| 2005 |
2004 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (43,658 | ) | $ | (38,759 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Gain from extinguishment of debt |
(3,804 | ) | — | |||||
| Depreciation and amortization |
1,636 | 1,737 | ||||||
| Compensation expense related to grant of stock options |
15 | 57 | ||||||
| Change in assets and liabilities: |
||||||||
| Milestone receivable and reimbursable contract costs |
4,003 | 298 | ||||||
| State tax receivable |
793 | 79 | ||||||
| Prepaid expenses |
495 | 2 | ||||||
| Prepaid manufacturing costs |
(3,000 | ) | — | |||||
| Other assets |
(1 | ) | 601 | |||||
| Accounts payable |
(2,588 | ) | 425 | |||||
| Accrued expenses |
4,965 | (1,408 | ) | |||||
| Accrued interest |
80 | 118 | ||||||
| Deferred revenue |
(55 | ) | (294 | ) | ||||
| Deferred research and development payments |
(93 | ) | 1,484 | |||||
| Net cash used in operating activities |
(41,212 | ) | (35,660 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchases of marketable securities |
(90,631 | ) | (72,539 | ) | ||||
| Proceeds from maturity or sale of marketable securities |
49,712 | 49,969 | ||||||
| Investments in patents and licensed technology |
— | (5 | ) | |||||
| Purchases of property, plant and equipment |
(1,003 | ) | (941 | ) | ||||
| Net cash used in investing activities |
(41,922 | ) | (23,516 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Net proceed from convertible debt offering |
145,283 | — | ||||||
| Net proceeds from issuance of common stock |
1,646 | 44,864 | ||||||
| Net cash provided by financing activities |
146,929 | 44,864 | ||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
63,795 | (14,312 | ) | |||||
| CASH AND CASH EQUIVALENTS, beginning of period |
113,224 | 24,844 | ||||||
| CASH AND CASH EQUIVALENTS, end of period |
$ | 177,019 | $ | 10,532 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
||||||||
| Cash paid for interest |
$ | 3,450 | $ | 3,450 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Operations -
Alexion Pharmaceuticals, Inc. (“Alexion”) was incorporated in 1992 and is engaged in the discovery and development of therapeutic products to treat patients with a wide array of severe disease states, including hematologic and cardiovascular disorders, autoimmune diseases, and cancer.
The accompanying condensed consolidated financial statements include Alexion Pharmaceuticals, Inc. and our wholly owned subsidiaries, Alexion Antibody Technologies (“AAT”) and Columbus Farming Corporation (“CFC”). All significant inter-company balances and transactions have been eliminated in consolidation.
The condensed consolidated financial statements included herein have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and include, in the opinion of management, all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of interim period results. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The results for the interim periods presented are not necessarily indicative of results to be expected for any future period. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Form 10-K Annual Report for the fiscal year ended July 31, 2004. Certain reclassifications have been made to prior period accounts payable balances and accrued expenses to conform to current year classifications. The year-end balance sheet data