Attached files
file | filename |
---|---|
EXCEL - IDEA: XBRL DOCUMENT - INHIBITEX, INC. | Financial_Report.xls |
EX-32.1 - EX-32.1 SECTION 906 CERTIFICATION OF THE CEO & CFO - INHIBITEX, INC. | c24235exv32w1.htm |
EX-31.1 - EX-31.1 SECTION 302 CERTIFICATION OF THE CEO & CFO - INHIBITEX, INC. | c24235exv31w1.htm |
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2011
OR
o | 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. 0-50772
INHIBITEX, INC.
(Exact name of registrant as specified in its charter)
Delaware | 74-2708737 | |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
incorporation or organization) | ||
9005 Westside Parkway | ||
Alpharetta, Georgia | 30009 | |
(Address of principal executive offices) |
(Zip Code) |
(678) 746-1100
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
(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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
Large Accelerated Filer o | Accelerated Filer þ | Non-Accelerated Filer o | Smaller Reporting Company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
As of
November 3, 2011 78,293,482 shares of the Registrants Common Stock were outstanding.
TABLE OF CONTENTS
2
Table of Contents
ITEM 1. FINANCIAL STATEMENTS
INHIBITEX, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(unaudited)
September 30, 2011 | December 31, 2010 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 15,985,299 | $ | 8,554,151 | ||||
Short-term investments |
36,702,869 | 11,014,747 | ||||||
Prepaid expenses and other current assets |
1,380,336 | 599,042 | ||||||
Accounts receivable |
105,402 | 178,654 | ||||||
Total current assets |
54,173,906 | 20,346,594 | ||||||
Property and equipment, net |
687,734 | 1,090,029 | ||||||
Long-term investments |
999,870 | | ||||||
Other assets |
78,740 | 52,514 | ||||||
Total assets |
$ | 55,940,250 | $ | 21,489,137 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 2,649,345 | $ | 2,768,020 | ||||
Accrued expenses |
2,537,305 | 2,917,347 | ||||||
Current portion of notes payable |
243,056 | 243,056 | ||||||
Capital lease obligations |
22,113 | 180,792 | ||||||
Deferred revenue |
41,667 | 129,167 | ||||||
Other current liabilities |
258,382 | 238,703 | ||||||
Total current liabilities |
5,751,868 | 6,477,085 | ||||||
Long-term liabilities: |
||||||||
Notes payable, net of current portion |
121,527 | 303,819 | ||||||
Other liabilities, net of current portion |
688,830 | 867,455 | ||||||
Total long-term liabilities |
810,357 | 1,171,274 | ||||||
Total liabilities |
6,562,225 | 7,648,359 | ||||||
Stockholders equity: |
||||||||
Preferred stock, $.001 par value; 5,000,000 shares authorized at
September 30, 2011 and December 31, 2010, none issued and
outstanding |
| | ||||||
Common stock, $.001 par value; 150,000,000 shares authorized at
September 30, 2011 and December 31, 2010, respectively; 78,286,957 and
62,423,358 shares issued and outstanding at September 30, 2011 and
December 31, 2010 respectively |
78,287 | 62,423 | ||||||
Additional paid-in capital |
326,584,914 | 270,187,742 | ||||||
Accumulated other comprehensive (loss) income |
(33,006 | ) | 542 | |||||
Warrants |
8,309,413 | 11,145,558 | ||||||
Accumulated deficit |
(285,561,583 | ) | (267,555,487 | ) | ||||
Total stockholders equity |
49,378,025 | 13,840,778 | ||||||
Total liabilities and stockholders equity |
$ | 55,940,250 | $ | 21,489,137 | ||||
The accompanying notes are an integral part of these financial statements.
3
Table of Contents
INHIBITEX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue: |
||||||||||||||||
License fees and milestones |
$ | 1,012,500 | $ | 37,500 | $ | 1,087,500 | $ | 824,167 | ||||||||
Collaborative research and
development. |
250,000 | 250,000 | 750,000 | 750,000 | ||||||||||||
Total revenue |
1,262,500 | 287,500 | 1,837,500 | 1,574,167 | ||||||||||||
Operating expense: |
||||||||||||||||
Research and development |
5,675,394 | 4,700,987 | 16,847,529 | 14,406,501 | ||||||||||||
General and administrative |
888,887 | 877,177 | 3,051,202 | 2,860,052 | ||||||||||||
Total operating expense |
6,564,281 | 5,578,164 | 19,898,731 | 17,266,553 | ||||||||||||
Loss from operations. |
(5,301,781 | ) | (5,290,664 | ) | (18,061,231 | ) | (15,692,386 | ) | ||||||||
Other income (loss), net |
(7,118 | ) | (1,107 | ) | 1,484 | 14,607 | ||||||||||
Interest income, net |
32,434 | 18,309 | 53,651 | 52,374 | ||||||||||||
Net loss |
$ | (5,276,465 | ) | $ | (5,273,462 | ) | $ | (18,006,096 | ) | $ | (15,625,405 | ) | ||||
Basic and diluted net loss per
share |
$ | (0.07 | ) | $ | (0.08 | ) | $ | (0.25 | ) | $ | (0.25 | ) | ||||
Weighted average shares used to
compute basic and diluted net
loss per share |
78,119,694 | 62,248,265 | 71,933,556 | 61,884,023 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
4
Table of Contents
INHIBITEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(unaudited)
Nine Months Ended | ||||||||
September 30, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | (18,006,096 | ) | $ | (15,625,405 | ) | ||
Adjustments to reconcile net loss to net cash used in
operating activities: |
||||||||
Depreciation and amortization |
471,710 | 478,343 | ||||||
Share-based compensation |
997,232 | 420,600 | ||||||
Amortization of investment premium or discount |
372,147 | 381,128 | ||||||
Changes in operating assets and liabilities: |
||||||||
Prepaid expenses and other assets |
(807,520 | ) | 249,251 | |||||
Accounts receivable |
73,252 | (2,735 | ) | |||||
Accounts payable and other liabilities |
(277,621 | ) | (71,387 | ) | ||||
Accrued expenses |
(380,042 | ) | 564,823 | |||||
Deferred revenue |
(87,500 | ) | (112,500 | ) | ||||
Net cash used in operating activities |
(17,644,438 | ) | (13,717,882 | ) | ||||
Cash flows from investing activities: |
||||||||
Purchases of property and equipment |
(69,415 | ) | (83,650 | ) | ||||
Purchases of investments |
(55,000,666 | ) | (17,701,210 | ) | ||||
Proceeds from maturities of investments |
27,906,979 | 28,826,000 | ||||||
Net cash (used in) provided by investing activities |
(27,163,102 | ) | 11,041,140 | |||||
Cash flows from financing activities: |
||||||||
Payments on promissory notes and capital leases |
(340,971 | ) | (231,286 | ) | ||||
Proceeds from the exercise of stock options and warrants |
2,020,132 | 677,479 | ||||||
Proceeds from the issuance of common stock |
50,807,000 | | ||||||
Public offering expenses |
(247,473 | ) | | |||||
Net cash provided by financing activities |
52,238,688 | 446,193 | ||||||
Increase (decrease) in cash and cash equivalents |
7,431,148 | (2,230,549 | ) | |||||
Cash and cash equivalents at beginning of period |
8,554,151 | 11,290,332 | ||||||
Cash and cash equivalents at end of period |
$ | 15,985,299 | $ | 9,059,783 | ||||
Supplemental cash flow information: |
||||||||
Interest paid |
$ | 14,304 | $ | 31,398 | ||||
Non-cash financing activities: |
||||||||
Issuance of common stock from cashless warrant exercises |
$ | 173,019 | $ | |
The accompanying notes are an integral part of these financial statements.
5
Table of Contents
INHIBITEX, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Operations
Inhibitex, Inc. (Inhibitex or the Company) was incorporated in the state of Delaware in May
1994. Inhibitex is a biopharmaceutical company focused on the development of differentiated
anti-infective products to prevent and treat serious infections.
The Company is currently focused on developing oral, small molecule compounds to treat viral
infections, and in particular, chronic infections caused by hepatitis C virus (HCV), and herpes
zoster, also referred to as shingles. Currently available antiviral therapies that are used to
treat these and other infections have a number of therapeutic limitations that include inadequate
potency, significant adverse side effects, complex and inconvenient dosing schedules and
diminishing efficacy due to the emergence of drug-resistant viruses. The Company believes that its
antiviral drug candidates have the potential to address a number of these limitations, as well as
unmet medical needs in their respective intended indications. In addition to the Companys
antiviral programs it has licensed certain intellectual property to Pfizer, Inc. (Pfizer) for the
development of active vaccines to prevent staphylococcal infections.
The Company has not received regulatory approval for any of its product candidates, and the Company
does not have any commercialization capabilities; therefore, it is possible that the Company may
never successfully derive any significant revenues from any of its existing or future product
candidates.
2. Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States (U.S.) for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In
the opinion of the Companys management, all material adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. They do not include all
information and notes required by generally accepted accounting principles for complete financial
statements. However, except as disclosed herein, there has been no material change in the
information disclosed in the notes to the consolidated financial statements included in the Annual
Report on Form 10-K for the year ended December 31, 2010.
The Companys significant accounting policies have not changed since December 31, 2010, except as
outlined below:
Recent Accounting Pronouncements.
In June 2011, the Financial Accounting Standards Board (FASB) amended the guidance for reporting
other comprehensive income. Under this amendment, the Company has the option to present the total
of comprehensive income, the components of net income, and the components of other comprehensive
income either in a single continuous statement of comprehensive income or in two separate but
consecutive statements. Additionally, the Company will be required to display reclassification
adjustments on the face of the financial statements in which other comprehensive income is reported
or disclosed in the notes to the financial statements. This amendment should be applied
retrospectively and is effective for fiscal years, and interim periods within those years,
beginning after December 15, 2011. Early adoption is permitted. This amendment is effective for
the Company beginning January 1, 2012. The adoption of this amendment is not expected to have a
material impact on the Companys consolidated financial position or results of operations.
In May 2011, the FASB amended the guidance for reporting fair value measurements and disclosure
requirements. The amendments in this update change the wording used to describe the requirements
in U.S. Generally Accepted Accounting Principles (GAAP) for measuring fair value and for
disclosing information about fair value measurements. This amendment should be applied
prospectively and is effective during interim and annual periods beginning after December 15, 2011.
Early application is not permitted. The amendment is effective for the Company beginning January
1, 2012. The adoption of this amendment is not expected to have a material impact on the
Companys consolidated financial position or results of operations.
In April 2010, the FASB amended the guidance for applying the milestone method of revenue
recognition to research or development arrangements. Under this guidance, the Company may recognize
revenue contingent upon the achievement of a milestone in its entirety in the period in which the
milestone is achieved, only if the milestone meets all the criteria within the guidance to be
considered substantive. This amendment was effective on a prospective basis for research and
development milestones achieved in
fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early
adoption was permitted. This amendment was effective for the Company beginning January 1, 2011.
The adoption of this amendment did not have a material impact on the Companys consolidated
financial position or results of operations.
6
Table of Contents
In October 2009, the FASB amended the guidance for revenue recognition in multiple-element
arrangements. The guidance requires an entity to provide updated guidance on whether multiple
deliverables exist, how the deliverables in an arrangement should be separated, and how the
consideration should be allocated and; then allocate revenue in an arrangement using estimated
selling prices of deliverables if a vendor does not have vendor-specific objective evidence
(VSOE) or third-party evidence of selling price. The guidance also eliminates the use of the
residual method and requires an entity to allocate revenue using the relative selling price method.
This amendment was effective for the Company beginning January 1, 2011. The adoption of this
amendment did not have a material impact on the Companys consolidated financial position or
results of operations.
3. Net Loss Per Share
Basic and diluted net loss per share have been computed based on net loss and the weighted-average
number of common shares outstanding during the applicable period. For diluted net loss per share,
common stock equivalents (common shares issuable upon the exercise of stock options and warrants)
are excluded from the calculation of diluted net loss per share if their effect is antidilutive.
The Company has excluded all options and warrants to purchase common stock, as such potential
shares are antidilutive.
The following table sets forth the computation of historical basic and diluted net loss per share
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net loss |
$ | (5,276,465 | ) | $ | (5,273,462 | ) | $ | (18,006,096 | ) | $ | (15,625,405 | ) | ||||
Weighted average common shares outstanding used to
compute basic earnings per share |
78,119,694 | 62,248,265 | 71,933,556 | 61,884,023 | ||||||||||||
Dilutive effect of: |
||||||||||||||||
Stock options |
| | | | ||||||||||||
Warrants |
| | | | ||||||||||||
Shares used to compute diluted earnings per share |
78,119,694 | 62,248,265 | 71,933,556 | 61,884,023 | ||||||||||||
Basic net loss per share |
$ | (0.07 | ) | $ | (0.08 | ) | $ | (0.25 | ) | $ | (0.25 | ) | ||||
Diluted loss per share |
$ | (0.07 | ) | $ | (0.08 | ) | $ | (0.25 | ) | $ | (0.25 | ) | ||||
Number of antidilutive stock options excluded from
computation |
7,540,274 | 5,593,942 | 7,540,274 | 5,593,942 | ||||||||||||
Number of antidilutive warrants excluded from
computation |
10,562,598 | 13,008,484 | 10,562,598 | 13,008,484 | ||||||||||||
4. Comprehensive Loss
The components of comprehensive loss for the three and nine months ended September 30, 2011 and
2010 are as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net loss |
$ | (5,276,465 | ) | $ | (5,273,462 | ) | $ | (18,006,096 | ) | $ | (15,625,405 | ) | ||||
Change in net
unrealized (losses)
gains on
investments |
(33,381 | ) | 8,185 | (33,548 | ) | (2,475 | ) | |||||||||
Comprehensive loss |
$ | (5,309,846 | ) | $ | (5,265,277 | ) | $ | (18,039,644 | ) | $ | (15,627,880 | ) | ||||
7
Table of Contents
5. Fair Value Measurements
The following table sets forth the financial assets and liabilities that were measured at fair
value on a recurring basis at September 30, 2011, by level within the fair value hierarchy. The
assets and liabilities measured at fair value are classified in their entirety based on the lowest
level of input that is significant to the fair value measurement.
The Companys short-term and long-term investments have been classified as Level 2, which have been
initially valued at the transaction price and subsequently revalued, at the end of each reporting
period, utilizing a third party pricing service. The pricing service utilizes industry standard
valuation models and observable market inputs to determine value that include surveying the bond
dealer community, obtaining benchmark quotes, incorporating relevant trade data, and updating
spreads daily.
There have been no transfers of assets or liabilities between the fair value measurement
classifications.
Quoted prices in | ||||||||||||||||
active markets for | Significant other | Significant | ||||||||||||||
identical assets | observable inputs | unobservable inputs | ||||||||||||||
September 30, 2011 | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Cash equivalents |
$ | 14,560,266 | $ | 9,994,350 | $ | 4,565,916 | $ | | ||||||||
Short-term investments available-for-sale |
36,702,869 | | 36,702,869 | | ||||||||||||
Long-term investments available-for-sale |
999,870 | | 999,870 | | ||||||||||||
Total |
$ | 52,263,005 | $ | 9,994,350 | $ | 42,268,655 | $ | | ||||||||
Cash equivalents primarily consist of money market funds and commercial paper. Short-term
investments consist of debt securities of U.S. government agencies, commercial paper and corporate
debt notes classified as available-for-sale and have maturities greater than 90 days, but less than
365 days from the date of maturity. Long-term investments consist of debt securities of U.S.
government agencies with maturities over 365 days from the date of maturity.
The Company has had no realized gains or losses from the sale of investments for the three months
and nine months ended September 30, 2011. The following table shows the unrealized gains and
losses and fair values for those investments as of September 30, 2011 and December 31, 2010
aggregated by major security type:
Unrealized | Unrealized | |||||||||||||||
September 30, 2011 | At Cost | Gains | (Losses) | At Fair Value | ||||||||||||
Short-term |
||||||||||||||||
Money market funds |
$ | 9,994,350 | $ | | $ | | $ | 9,994,350 | ||||||||
Debt securities of U.S. government agencies |
7,250,253 | 216 | (914 | ) | 7,249,555 | |||||||||||
Commercial paper |
14,338,423 | 14,786 | (474 | ) | 14,352,735 | |||||||||||
Corporate debt |
19,712,985 | | (46,490 | ) | 19,666,495 | |||||||||||
Long-term |
||||||||||||||||
Debt securities of U.S. government agencies |
1,000,000 | | (130 | ) | 999,870 | |||||||||||
Total |
$ | 52,296,011 | $ | 15,002 | $ | (48,008 | ) | $ | 52,263,005 | |||||||
Unrealized | Unrealized | |||||||||||||||
December 31, 2010 | At Cost | Gains | (Losses) | At Fair Value | ||||||||||||
Short-term |
||||||||||||||||
Money market funds |
$ | 7,932,606 | $ | | $ | | $ | 7,932,606 | ||||||||
Commercial paper |
6,494,842 | 2,713 | | 6,497,555 | ||||||||||||
Corporate debt |
4,519,363 | 221 | (2,392 | ) | 4,517,192 | |||||||||||
Total |
$ | 18,946,811 | $ | 2,934 | $ | (2,392 | ) | $ | 18,947,353 | |||||||
As of September 30, 2011, the Company had investments in an unrealized loss position. The
Company has determined that the unrealized losses on these investments at September 30, 2011 are
temporary in nature and expects the securities to mature at their
stated principal. The Company does not intend to sell the investments and it is not more likely
than not that the Company will be required to sell the investments before recovery of their
amortized costs bases, which may be maturity.
8
Table of Contents
6. Stockholders Equity
Public Offering. In April 2011, the Company closed a public offering of 13,182,927 shares of its
common stock, at a purchase price of $4.10 per share, for an aggregate offering amount of
$54,050,000. The net proceeds from the sale of the shares, after underwriting discounts and
commissions and other offering expenses, was $50,559,527. The Company intends to use the net
proceeds from the offering for working capital and general corporate purposes, including Phase 2
clinical trials for INX-189 and research and development expenses related to its other development
programs.
Common Stock Warrants. For the nine months ended September 30, 2011, a total of 2,304,732 warrants
were exercised with a weighted average exercise price of $0.82 and a total Black-Scholes value of
$2,832,461. As of September 30, 2011 and December 31, 2010, there were 10,562,598 and 12,868,100
warrants outstanding, respectively. As of September 30, 2011, all outstanding warrants are
exercisable and expire from September 22, 2012 to September 26, 2018. The weighted average strike
price as of September 30, 2011 and December 31, 2010 was $1.21 and $1.14, respectively.
7. Research and License Agreements
Out-licensing Agreements
Pfizer. In August 2001, the Company entered into an exclusive worldwide license and development
collaboration agreement with Wyeth Pharmaceuticals, Inc., (Wyeth), which has since been acquired
by Pfizer for the development of active staphylococcal vaccines for humans. Under the terms of
this agreement, the Company granted Pfizer an exclusive worldwide license to its MSCRAMM protein
intellectual property with respect to human vaccines against staphylococcal organisms. The
development, manufacture and sale of any products resulting from the collaboration are the
responsibility of Pfizer. The Company is required to commit two full-time equivalent employees to
the collaboration. The Company may terminate the agreement if Pfizer fails to use reasonable
commercial efforts to bring related products to market. Pfizer may terminate the agreement,
without cause, upon six months notice. Otherwise, this agreement will terminate upon the
expiration of all of the current licensed patents in 2023.
Pursuant to this agreement, the Company is entitled to receive minimum research support payments of
$1,000,000 per year until a target sales threshold of any product developed under this agreement is
reached. The Company is also entitled to receive additional milestones upon the commencement of
clinical trials, the filing of a Biologic License Application (BLA), and United States Food and
Drug Administration (FDA) approval of a licensed product. If all such milestones are achieved
relative to one licensed product, the Company would be entitled to receive a minimum of $10,000,000
in additional milestone payments from Pfizer. Finally, the Company is also entitled to royalties
on net sales of licensed products manufactured, sold or distributed by Pfizer.
In July 2011, Pfizer initiated a Phase 1/ 2 clinical trial of a 4-antigen S. aureus vaccine
(SA4Ag). The vaccine contains an antigen originating from the Companys proprietary MSCRAMM
protein platform. The Company earned a payment of $1,000,000 upon achievement of this substantive
milestone. The Company amortized the upfront, non-refundable license fees on a straight-line basis
over the term of such commitment as one unit of accounting. Revenue received for the ongoing
research and development activities under the collaborative arrangement is recognized as these
activities are performed or accomplished pursuant to the terms of the related agreement.
Development milestone payments that the Company has determined are substantive are recognized as
revenue when the Company has achieved the specific milestone and collectability is assured. Any
amounts received in advance of the performance of the related activities are recorded as deferred
revenue until earned.
Under this agreement, the Company reported revenue for the three months ended September 30,
2011 and 2010 of $1,262,500 and $287,500, respectively, and for the nine months ended September 30,
2011 and 2010 of $1,837,500 and $1,529,167, respectively. As of September 30, 2011 and December
31, 2010, the Company had deferred revenue in connection with this agreement of $41,667 and
$129,667, respectively. The Company has received $9,000,000 in an upfront license fee and annual
research support payments and $1,666,667 in milestone payments from Pfizer as of September 30,
2011.
9
Table of Contents
ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking
statements involve known and unknown risks, uncertainties and other factors that may cause actual
results, performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking statements. In some cases,
you can identify forward-looking statements by terms such as may, will, should, could,
would, expect, plan, intend, anticipate, believe, estimate, project, predict,
forecast, potential, likely or possible, as well as the negative of such expressions, and
similar expressions intended to identify forward-looking statements. These forward-looking
statements include, without limitation, statements relating to:
| The plan to expand the scope of our Phase 2 development program of INX-189 in the future to include interferon-free combinations in genotype 1, 2 and 3 patients in 2012; | |
| the plan to evaluate the safety, tolerability and viral kinetics of additional doses of INX-189 administered as monotherapy or in combination with ribavirin for seven days in our ongoing trial; | |
| the timing to complete an ongoing drug/drug interaction study in healthy subjects in INX-189; | |
| the timing to complete enrollment in the ongoing Phase 2 clinical trial of INX-189 in chronic HCV-infected genotype 2 and 3 treatment-naïve patients | |
| the plan and clinical strategy to advance the development of FV-100 and whether such a study will be initiated in 2012 or at all; | |
| the plan and timing of filing a protocol for a Phase 2b clinical trial of FV-100 and other related submissions to the FDA and obtain feedback; | |
| the number of months that our current cash, cash equivalents and short-term investments will allow us to operate; | |
| our future financing requirements, the factors that may influence the timing and amount of these requirements, and our ability to fund them; | |
| our potential future revenue from collaborative research agreements, partnerships, license agreements, product related revenue or materials transfer agreements; | |
| the potential of our product candidates to address a number of current therapeutic limitations, such as inadequate potency, significant adverse side effects, complex and inconvenient dosing schedules and diminishing efficacy due to the emergence of drug-resistant viruses; and | |
| anticipated future net losses from operations. |
These statements reflect our current views with respect to future events and are based on
assumptions and subject to risks and uncertainties including, without limitation: our, Pfizer, the
FDA, a data safety monitoring board, or an institutional review board (IRB), or Pfizer, delaying,
limiting, suspending or terminating the clinical development of INX-189, FV-100 or the
Staphylococcal Vaccine at any time for a lack of safety, tolerability, anti-viral activity,
commercial viability, regulatory and manufacturing issues, or any other reason; the safety or
efficacy results of ongoing or future preclinical studies and clinical trials of any of our product
candidates not supporting its further development; the results of preclinical studies or clinical
trials for our product candidates being unfavorable or delayed; our capacity for recruiting and
managing clinical trials; our ability to comply with the extensive government regulations
applicable to our business; our limited experience in the development of small molecule antiviral
product candidates and our ability to develop our product candidates or manage our operations in
the future; Pfizer not terminating our license and collaborative research agreements; our ability
to maintain sufficient resources, including executive management and key employees; our ability to
successfully develop current and future product candidates either in collaboration with a partner
or independently; our ability to secure and use qualified third-party clinical and preclinical
research and data management organizations; third party contract manufacturers not fulfilling their
contractual obligations or otherwise performing satisfactorily in the future; our ability to
manufacture and maintain sufficient quantities of preclinical and clinical trial material on hand
to complete our preclinical studies or clinical trials on a timely basis; our ability, or that of
our clinical investigators, to enroll patients in our clinical trials or on a timely
basis; our failure to obtain regulatory approval to advance the clinical development of or market
our product candidates; our ability to protect and maintain our proprietary intellectual property
rights from unauthorized use by others or not infringing on the
10
Table of Contents
intellectual property rights of
others; our collaborators failing to fulfill their obligations under our agreements with them in
the future; our ability to attract suitable organizations to collaborate on the development and
commercialization of our product candidates; the condition of the financial equity and debt markets
and our ability to raise sufficient funding in such markets; our ability to manage our current cash
reserves as planned; changes in general economic business or competitive conditions; and other
statements contained elsewhere in this Quarterly Report on Form 10-Q (including the Risk Factors
section herein) and risk factors described in or referred to in greater detail in the Risk
Factors section of our Form 10-K for the year ended December 31, 2010 and our Form 10-Qs for the
quarter ended March 31, 2011 and June 30, 2011. There may be events in the future that we are
unable to predict accurately, or over which we have no control. You should read this Form 10-Q and
the documents that we reference herein and which been filed or incorporated by reference as
exhibits completely and with the understanding that our actual future results may be materially
different from what we expect. Our business, financial condition, results of operations, and
prospects may change. We may not update these forward-looking statements, even though our situation
may change in the future, unless we have obligations under the federal securities laws to update
and disclose material developments related to previously disclosed information. We qualify all of
the information presented in this Form 10-Q, and particularly our forward-looking statements, by
these cautionary statements.
Inhibitex® and MSCRAMM® are registered trademarks of
Inhibitex, Inc.
The following discussion should be read in conjunction with the financial statements and the notes
thereto included in Item 1 of this Quarterly Report on Form 10-Q.
Overview
We are a biopharmaceutical company that was incorporated in the state of Delaware in May 1994. We
are currently focused on developing oral, small molecule compounds to treat viral infections, and
in particular, chronic infections caused by HCV, and herpes zoster, also referred to as shingles.
Currently available antiviral therapies that are used to treat these and other infections have a
number of therapeutic limitations that include inadequate potency, significant adverse side
effects, complex and inconvenient dosing schedules and diminishing efficacy due to the emergence of
drug-resistant viruses. We believe that our antiviral drug candidates have the potential to address
a number of these limitations, as well as unmet medical needs in their respective intended
indications. In addition to our antiviral programs we have licensed certain intellectual property
to Pfizer for the development of active vaccines to prevent staphylococcal infections.
We have not received regulatory approval to sell or market any of our current or past product
candidates, nor do we currently have any commercialization capabilities. Therefore, it is possible
that we may never successfully derive any commercial revenues from any of our existing or future
product candidates.
We plan to continue to finance our operations with our existing cash, cash equivalents and
investments; through future equity and/or debt financings; with proceeds from existing or potential
future collaborations or partnerships; or through other financing vehicles. Our ability to continue
our operations is dependent, in the near-term, upon managing our cash resources, the successful
development of our product candidates, entering into collaboration or partnership agreements,
executing future financings and ultimately, upon the approval of our products for sale and
achieving positive cash flow from operations. There can be no assurance that additional funds will
be available on terms acceptable to us in the future, or that we will ever generate significant
revenue and become profitable.
Recent Corporate Developments
INX-189 for Chronic Hepatitis C Last week, we reported top-line safety and antiviral data
from our first cohort of our ongoing clinical trial of INX-189, which is designed to evaluate the
safety, tolerability, pharmacokinetics and antiviral activity of INX-189, administered as
monotherapy or in combination with ribavirin for seven days, in treatment-naïve patients with
chronic HCV genotype 1. In this study, 200 mg INX-189, dosed once-daily for seven days, continued
to demonstrate potent and dose-dependent antiviral activity with a median HCV RNA reduction from
baseline of -4.25 log10 IU/mL. Further, 200 mg INX-189 was generally well tolerated, and
there were no serious adverse events (SAE) or dose dependent adverse events (AE) observed.
In September, we announced the initiation of this trial, which included other planned cohorts of
100 mg INX-189 dosed once daily in combination with ribavirin, 100 mg INX-189 dosed twice daily as
monotherapy, 100 mg INX-189 dosed with food, and possibly higher monotherapy doses of INX-189.
Earlier this year, we reported positive top-line safety and antiviral data from our initial
monotherapy multiple ascending dose Phase 1b clinical trial of INX-189, whereby INX-189, when dosed
once-daily at 9 mg, 25 mg, 50 mg and 100 mg for seven days, demonstrated dose-dependent antiviral
activity with median HCV RNA reductions from baseline of -0.64, -1.00, -1.47, and -2.53 log10
IU/mL, respectively.
11
Table of Contents
We also reported last week that we have initiated a Phase 1 drug/drug interaction study in healthy
volunteers of INX-189 and an undisclosed HCV direct acting antiviral compound, the objective of
which is to evaluate the safety, tolerability and pharmacokinetics of the two compounds in
combination in contemplation of us expanding our Phase 2 clinical development program to include
interferon-free combinations of INX-189 with other antiviral agents in HCV genotype 1, 2, and 3
patients in 2012. We anticipate that this study will be completed by year-end.
In September, we also announced the commencement of a 90-patient randomized, placebo controlled,
response-guided, Phase 2 clinical trial to evaluate the safety, tolerability and antiviral activity
of INX-189 in combination with pegylated interferon and ribavirin in chronic HCV-infected genotype
2 and 3 treatment-naïve patients. This ongoing clinical trial is designed to evaluate three
once-daily doses of INX-189 (25 mg, 50 mg and 100 mg) administered in combination with pegylated
interferon and ribavirin for 12 weeks, and includes a control arm in which patients will receive
placebo and standard of care treatment (a combination of pegylated interferon and ribavirin for 24
weeks). Each INX-189 combination treatment cohort in the trial is expected to include 25 patients,
and the control arm is expected to include 15 patients. Patients in the INX-189 containing
treatment arms that achieve an extended rapid viral response (eRVR), defined as having HCV RNA
below the level of detection after 28 days and 12 weeks of dosing, will stop all therapy after 12
weeks. Those patients who do not achieve an eRVR will continue receiving pegylated interferon and
ribavirin for 12 additional weeks. Patients will be followed for 24 weeks after end-of-treatment to
determine if they achieve a sustained viral response (SVR), which is the currently accepted
definition of cure for chronic HCV infections. We anticipate completing enrollment in this trial
around year end.
We are presenting two abstracts at the upcoming annual meeting of the American Association for the
Study of Liver Diseases (AASLD) in San Francisco beginning November 4, 2011. On August 2, 2011,
AASLD posted the titles of these abstracts on its website, which are:
| Antiviral Activity and Safety of INX-08189, a Nucleotide Polymerase Inhibitor, Following 7-Days of Oral Therapy in Naïve Genotype-1 Chronic HCV Patients | ||
| Preclinical Characterization of a Series of Highly Potent Phosphorodiamidate Nucleotide Analogue Inhibitors of Hepatitis C Polymerase. |
FV-100 In August, we announced our intention to file a protocol and other associated
submissions, including a patient reported outcomes (PRO) dossier, to the FDA for a proposed Phase
2b trial of FV-100 in order to obtain feedback on the protocol, its PRO methodology, and a
regulatory pathway that could potentially support an indication for the reduction of
shingles-associated pain and/or the incidence of post-herpetic neuralgia (PHN). We anticipate
submitting these documents to the FDA this month. Subject to satisfactory regulatory review and
feedback concerning these and other proposed clinical endpoints and their potential to support an
indication for the reduction of shingles-associated pain and/or incidence of PHN, we will determine
whether we will initiate the proposed Phase 2b study of FV-100 in 2012.
Critical Accounting Policies
Managements Discussion and Analysis of Results of Operations discusses our financial statements,
which (except to the extent described in the Notes thereto) have been prepared in accordance with
U.S. generally accepted accounting principles. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period.
We base our estimates and judgments on historical experience, current economic and industry
conditions and on various other factors that we believe to be reasonable under the circumstances.
This forms the basis for making judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions. We believe the following critical accounting policies require
significant judgment and estimates:
| Use of Estimates | ||
| Revenue Recognition | ||
| Accrued Expenses | ||
| Share-Based Compensation |
12
Table of Contents
There has been no change in these critical accounting policies used to create the underlying
accounting assumptions and estimates used in 2011.
In June 2011, FASB amended the guidance for reporting other comprehensive income. Under this
amendment, we have the option to present the total of comprehensive income, the components of net
income, and the components of other comprehensive income either in a single continuous statement of
comprehensive income or in two separate but consecutive statements. Additionally, we will be
required to display reclassification adjustments on the face of the financial statements in which
other comprehensive income is reported or disclosed in the notes to the financial statements. This
amendment should be applied retrospectively and is effective for fiscal years, and interim periods
within those years, beginning after December 15, 2011. Early adoption is permitted. This
amendment is effective for us beginning January 1, 2012. The adoption of this amendment is not
expected to have a material impact on our consolidated financial position or results of operations.
In May 2011, the FASB amended the guidance for reporting fair value measurements and disclosure
requirements. The amendments in this update change the wording used to describe the requirements
in GAAP for measuring fair value and for disclosing information about fair value measurements.
This amendment should be applied prospectively and is effective during interim and annual periods
beginning after December 15, 2011. Early application is not permitted. The amendment is effective
for us beginning January 1, 2012. The adoption of this amendment is not expected to have a
material impact on our consolidated financial position or results of operations.
In April 2010, the FASB amended the guidance for applying the milestone method of revenue
recognition to research or development arrangements. Under this guidance, we may recognize revenue
contingent upon the achievement of a milestone in its entirety in the period in which the milestone
is achieved, only if the milestone meets all the criteria within the guidance to be considered
substantive. This amendment was effective on a prospective basis for research and development
milestones achieved in fiscal years, and interim periods within those years, beginning on or after
June 15, 2010. Early adoption was permitted. This amendment was effective for us beginning
January 1, 2011. The adoption of this amendment did not have a material impact on our consolidated
financial position or results of operations.
In October 2009, the FASB amended the guidance for revenue recognition in multiple-element
arrangements. The guidance requires an entity to provide updated guidance on whether multiple
deliverables exist, how the deliverables in an arrangement should be separated, and how the
consideration should be allocated and; then allocate revenue in an arrangement using estimated
selling prices of deliverables if a vendor does not have vendor-specific objective evidence
(VSOE) or third-party evidence of selling price. The guidance also eliminates the use of the
residual method and requires an entity to allocate revenue using the relative selling price method.
This amendment was effective for us beginning January 1, 2011. The adoption of this amendment did
not have a material impact on our consolidated financial position or results of operations.
Results of Operations
Three Months Ended September 30, 2011 and 2010
Summary. We incurred a net loss for the third quarter of 2011 of $5.3 million, which was the
same as in the third quarter of 2010. The net loss in the third quarter of 2011 was primarily
the result of an increase in milestone revenue earned in the quarter, offset by higher research
and development expense. Basic and diluted net losses per share were $0.07 for the third
quarter of 2011 as compared to $0.08 for the third quarter of 2010.
We expect to incur losses for the foreseeable future as we intend to continue to support the
clinical and preclinical development of our product candidates.
Revenue. Revenue increased to $1.3 million for the three months ended September 30, 2011 from $0.3
million in the same period in 2010, as a result of a $1.0 million milestone earned in the third
quarter from our licensee and collaborator, which initiated a Phase 1/ 2 clinical trial of a S.
aureus vaccine.
13
Table of Contents
Research and Development Expense. Research and development expense increased to
$5.7 million during the three months ended September 30, 2011 from $4.7 million in the same
quarter of 2010. The following table summarizes the components of our research and development
expense for the three months ended September 30, 2011 and 2010.
September 30, | ||||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
Direct clinical, preclinical and manufacturing expense |
$ | 3.1 | $ | 2.7 | ||||
Salaries, benefits and share-based compensation expense |
1.4 | 1.0 | ||||||
License fees, patent-related legal and other expense |
0.7 | 0.6 | ||||||
Depreciation and facility related expense |
0.5 | 0.4 | ||||||
Total research and development expense |
$ | 5.7 | $ | 4.7 | ||||
Direct clinical, preclinical and manufacturing expenses increased by $0.4 million due to a $1.4
million increase in direct expenses associated with the initiation of the Phase 2 clinical trial
for INX-189 and the additional Phase 1b clinical trial of INX-189 designed to evaluate higher doses
of INX-189, offset by a decrease in direct expenses of $1.0 million associated with the completion
of the FV-100 Phase 2 clinical trial in late 2010. Salaries, benefits and share-based compensation
expense increased primarily due to an increase in research and development personnel. License
fees, patent-related legal fees and other expense increased due to slightly higher laboratory
supply expenses. Depreciation and facility related expense increased due to slight increase in
various laboratory facility expenses.
General and Administrative Expense. General and administrative expense was $0.9 million during
the three months ended September 30, 2011 and 2010. The following table summarizes the
components of our general and administrative expense for the three months ended September 30,
2011 and 2010.
September 30, | ||||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
Salaries, benefits and share-based compensation expense |
$ | 0.5 | $ | 0.4 | ||||
Professional and legal expense |
0.2 | 0.2 | ||||||
Other expense |
0.2 | 0.3 | ||||||
Total general and administrative expense |
$ | 0.9 | $ | 0.9 | ||||
Salaries, benefits and share-based compensation expense increased primarily due to slightly higher
salaries and benefits. Other expense decreased due to lower office facility expenses.
Nine Months Ended September 30, 2011 and 2010
Summary. We incurred a net loss for the nine months ended September 30, 2011 of $18.0 million,
as compared to a net loss of $15.6 million in the same period in 2010. The $2.4 million net
increase in net loss for the nine months ended September 30, 2011 was primarily the result of
higher research and development expense and slightly higher general and administrative expense,
offset by a slight increase in revenue and other income. Basic and diluted net losses per share
were $0.25 for the nine months ended September 30, 2011 and 2010.
We expect to incur losses for the foreseeable future as we intend to continue to support the
clinical and preclinical development of our antiviral programs.
Revenue. Revenue increased to $1.8 million for the nine months ended September 30, 2011 from
$1.6 million in the same period in 2010, reflecting a $1.0 million milestone earned in the third
quarter of 2011 and a $0.7 million milestone payment earned in the first quarter of 2010.
Research and Development Expense. Research and development expense increased to $16.8 million
during the nine months ended September 30, 2011 from $14.4 million in the same period of 2010. The
following table summarizes the components of our research and development expense for the nine
months ended September 30, 2011 and 2010.
September 30, | ||||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
Direct clinical, preclinical and manufacturing expense |
$ | 9.8 | $ | 8.3 | ||||
Salaries, benefits and share-based compensation expense |
3.8 | 3.0 | ||||||
License fees, patent-related legal and other expense |
1.8 | 1.8 | ||||||
Depreciation and facility related expense |
1.4 | 1.3 | ||||||
Total research and development expense |
$ | 16.8 | $ | 14.4 | ||||
14
Table of Contents
Direct clinical, preclinical and manufacturing expense increased by $1.5 million due to a $3.6
million increase in direct expenses associated with the initiation of the Phase 2 clinical trial
for INX-189, the additional Phase 1b clinical trial of INX-189 designed to evaluate higher doses of
INX-189 and the completion of the Phase 1b MAD trial for INX-189, offset by a decrease in direct
expenses of $2.1 million associated with the completion of the FV-100 Phase 2 clinical trial in
late 2010. Salaries, benefits and share-based compensation expense increased primarily due to an
increase in research and development personnel and higher non-cash share-based compensation.
Depreciation and facility related expense increased due to a slight increase in various laboratory
facility expenses.
General and Administrative Expense. General and administrative expense increased to $3.1 million
for the nine months ended September 30, 2011 from $2.9 million in the same period of 2010. The
following table summarizes the components of our general and administrative expense for the nine
months ended September 30, 2011 and 2010.
September 30, | ||||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
Salaries, benefits and share-based compensation expense |
$ | 1.5 | $ | 1.1 | ||||
Professional and legal expense |
0.9 | 0.9 | ||||||
Other expense |
0.7 | 0.9 | ||||||
Total general and administrative expense |
$ | 3.1 | $ | 2.9 | ||||
Salaries, benefits and share-based compensation expense increased largely due to an increase in
non-cash, share-based compensation expense and slightly higher salaries and benefits. Other
expense decreased due to lower office facility expenses.
Liquidity and Capital Resources
For the nine months ended September 30, 2011, cash, cash equivalents and investments increased by
$34.1 million, from $19.6 million to $53.7 million. This increase was primarily the result of net
cash received from our public offering offset by cash used for operating activities and, to a
lesser extent, the repayment of capital lease obligations and notes payable.
Net cash used for operating activities was $17.6 million for the nine months ended September 30,
2011, which reflected our net loss for the period of $18.0 million, an increase in net operating
assets of $0.7 million, and net decrease in operating liabilities of $0.7 million, offset by
non-cash charges of $1.8 million. Our net loss resulted largely from the funding of clinical
trials, preclinical studies, manufacturing and formulation expenses, other research and development
activities, and general and administrative expenses, offset in part by the revenue from our license
and collaboration agreements and net other income. The net change in operating assets and
liabilities reflects a $0.8 million increase in prepaid expenses, a $0.4 million decrease in
accrued expenses, a $0.1 million decrease in deferred revenue, and a $0.2 million decrease in
accounts payable and other liabilities, offset by a $0.1 million decrease in accounts receivable.
Net cash used for investing activities during the nine months ended September 30, 2011 was $27.2
million, which consisted of $55.0 million in purchases of investments and $0.1 million in purchases
of equipment, offset by $27.9 million in proceeds from maturities of investments.
Net cash provided from financing activities during the nine months ended September 30, 2011 was
$52.2 million which was largely due to $50.6 million in net proceeds from our public offering, $2.0
million in proceeds from the exercise of stock options and warrants, offset by $0.4 million in
scheduled payments on our capital leases and notes payable.
At September 30, 2011, our cash, cash equivalents, short-term and long-term investments totaled
$53.7 million and our investments had an average maturity of less than 12 months. Our cash, cash
equivalents, short-term and long-term investments are generally held in a variety of
interest-bearing instruments, generally consisting of money market accounts, commercial paper,
corporate debt notes and U.S. government agencies.
15
Table of Contents
Our future funding requirements are difficult to determine and will depend on a number of factors,
including:
| our development timelines and plans for our INX-189, FV-100 and any of our product candidates, including any changes in our strategy; | |
| the variability, timing and costs associated with conducting clinical trials, the rate of enrollment in such clinical trials and the results of these clinical trials: | |
| the variability, timing and costs associated with conducting preclinical studies, and the results of these studies; | |
| the cost of formulating and manufacturing preclinical and clinical trial materials to evaluate our product candidates; | |
| whether we receive regulatory approval to advance the clinical development of our product candidates in a timely manner, if at all; | |
| the cost and time to obtain regulatory approvals required to advance the development of our product candidates; | |
| the scope and size of our research and development efforts; | |
| the terms and timing of any collaborative, licensing and other arrangements that we may establish in the future; | |
| future payments we may receive or make under existing or future license or collaboration agreements, if any; | |
| the cost to maintain a corporate infrastructure to support being a publicly-traded company; and | |
| the cost of filing, prosecuting, and enforcing patent and other intellectual property claims. |
Based on our current strategy and operating plan, and considering the potential costs associated
with advancing the clinical development of our product candidates on our planned timelines, we
believe that our existing cash, cash equivalents and investments of $53.7 million as of September
30, 2011 along with the anticipated proceeds from our existing license and collaboration
agreements, will enable us to operate for a period of at least 15 months from September 30, 2011.
We currently do not have any commitments for future funding, nor do we anticipate that we will
generate significant revenue from the sale of any products in the foreseeable future. Therefore, in
order to meet our anticipated liquidity needs beyond 15 months to continue the development of our
product candidates, or possibly sooner in the event we enter into other transactions or change our
strategy or development plans, we may need to raise or secure additional capital. We would expect
to do so primarily through the sale of additional common stock or other equity securities, as well
as through proceeds from licensing agreements, strategic collaborations, forms of debt financing,
or any other financing vehicle. Funds from these sources may not be available to us on acceptable
terms, if at all, and our failure to raise such funds could have a material adverse impact on our
future business strategy, plans, financial condition and results of operations. If adequate funds
are not available to us on acceptable terms in the future, we may be required to delay, reduce the
scope of, or eliminate one or more of our research and development programs, or delay or curtail
our preclinical studies and clinical trials. If additional capital is not available to us on
acceptable terms, we may need to obtain funds through license agreements, or collaborative or
partner arrangements pursuant to which we will likely relinquish rights to certain product
candidates that we might otherwise choose to develop or commercialize independently, or be forced
to enter into such arrangements earlier than we would prefer, which would likely result in less
favorable transaction terms. Additional equity financings may be dilutive to holders of our common
stock, and debt financing, if available, may involve significant payment obligations and
restrictive covenants that restrict how we operate our business.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Interest Rate Risk
We invest our excess cash in high quality, interest-bearing securities. The primary objective of
our investment activities is to preserve principal while at the same time achieving acceptable
yields without any significant risk. To achieve this objective, cash, cash equivalents and
short-term investments are generally held in a variety of interest-bearing instruments, consisting
of U.S. treasury securities, U.S. government agency securities, commercial paper, corporate debt
and money market accounts that have an average maturity date of less than 12 months. If a 10%
change in interest rates were to have occurred on September 30, 2011, this change would not have
had a material effect on future earnings, cash flows or the fair value of our investment portfolio
as of that date.
16
Table of Contents
Foreign Currency Exchange Rate Risk
We have entered into some contractual agreements denominated, wholly or partly, in foreign
currencies, and, in the future, we may enter into additional, agreements denominated in foreign
currencies. If the values of these currencies increase against the United States dollar, our costs
would increase. To date, we have not entered into any contracts to reduce the risk of fluctuations
in currency exchange rates. In the future, depending upon the amounts payable under any such
agreements, we may enter into forward foreign exchange contracts to reduce the risk of
unpredictable changes in these costs. However, due to the variability of timing and amount of
payments under any such agreements, foreign exchange contracts may not mitigate the potential
adverse impact on our financial results.
ITEM 4. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the reports that we file or submit pursuant to the Securities Exchange
Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commissions rules and forms and that such information is
accumulated and communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, who is currently the same individual, as appropriate to allow timely decisions
regarding required disclosure. Our management, under the supervision of the Chief Executive
Officer/Chief Financial Officer, carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures as of the end of the period covered by this
report. Based on the evaluation of these disclosure controls and procedures, the Chief Executive
Officer/Chief Financial Officer concluded that our disclosure controls and procedures were
effective. It should be noted that any system of controls, however well designed and operated, can
provide only reasonable, and not absolute, assurance that the objectives of the system are met. In
addition, the design of any control system is based in part upon certain assumptions about the
likelihood of future events. Because of these and other inherent limitations of control systems,
there can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended
September 30, 2011 that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
17
Table of Contents
PART II
OTHER INFORMATION
OTHER INFORMATION
ITEM 1A. | RISK FACTORS |
You should carefully consider the following discussion of risks, together with the other
information contained in this Form 10-Q. The occurrence of any of the following risks could
materially harm our business, our ability to continue to operate our business, our financial
condition, or our ability to raise additional capital in the future, or ever become profitable. In
that event, the market price of our common stock could decline and you could lose part or all of
your investment. The Risk Factors included in the Companys Annual Report on Form 10-K for the year
ended December 31, 2010, as updated by our Form 10-Q for quarters ended March 31, 2011 and June 30,
2011, have not materially changed, except as set forth below.
Risks Relating to our Development of our Product Candidates
In order to develop our product candidates and support our operations beyond 15 months from
September 30, 2011, we expect that we will need to raise or secure additional capital. Such capital
may not be available to us on acceptable terms, if at all, which could materially harm our business
and business prospects.
We anticipate that our existing cash, cash equivalents, short-term and long-term investments
on hand as of September 30, 2011, along with the anticipated proceeds from our existing license and
collaboration agreements, will enable us to operate for a period of at least 15 months from
September 30, 2011. We have no other committed sources of additional capital at this time. We
currently do not have any commitments for future funding, nor do we anticipate that we will
generate significant revenue from the sale of any products in the foreseeable future. Therefore, in
order to meet our anticipated liquidity needs beyond 15 months to continue the development of our
product candidates, or possibly sooner in the event we enter into other transactions or change our
strategy or accelerate our development plans, we will need to secure additional capital. We would
expect to fund the Company primarily through the sale of additional common stock or other equity
securities, as well as through proceeds from licensing agreements, strategic collaborations, forms
of debt financing, or any other financing vehicle. Funds from these sources may not be available to
us on acceptable terms, if at all, and our failure to raise such funds could have a material
adverse impact on our future business strategy, plans, financial condition and results of
operations. If adequate funds are not available to us on acceptable terms in the future, we may be
required to delay, reduce the scope of, or eliminate one or more of our research and development
programs, or delay or curtail our preclinical studies and clinical trials. If additional capital is
not available to us on acceptable terms, we may need to obtain funds through license agreements, or
collaborative or partner arrangements pursuant to which we will likely relinquish rights to certain
product candidates that we might otherwise choose to develop or commercialize independently, or be
forced to enter into such arrangements earlier than we would prefer, which would likely result in
less favorable transaction terms. Additional equity financings may be dilutive to holders of our
common stock, and debt financing, if available, may involve significant payment obligations and
restrictive covenants that restrict how we operate our business.
The timing and extent of our future financing needs will depend on many factors, some of which are
very difficult to predict and others that may be beyond our control, including:
| our development timelines and plans for INX-189, FV-100 and any of our product candidates, including any changes in our strategy; | |
| the variability, timing and costs associated with conducting clinical trials, the rate of enrollment in such clinical trials and the results of these clinical trials: | |
| the variability, timing and costs associated with conducting preclinical studies, and the results of these studies; | |
| the cost of formulating and manufacturing preclinical and clinical trial materials to evaluate our product candidates; | |
| whether we receive regulatory approval to advance the clinical development of our product candidates in a timely manner, if at all; |
18
Table of Contents
| the cost and time to obtain regulatory approvals required to advance the development of our product candidates; | |
| the scope and size of our research and development efforts; | |
| the terms and timing of any collaborative, licensing and other arrangements that we may establish in the future; | |
| future payments we may receive or make under existing or future license or collaboration agreements, if any; | |
| the cost to maintain a corporate infrastructure to support being a publicly-traded company; and | |
| the cost of filing, prosecuting, and enforcing patent and other intellectual property claims. |
19
Table of Contents
ITEM 6. | EXHIBITS |
The following is a list of exhibits filed as part of this Report:
Exhibit No. | Description | |||
31.1 | Section 302 Certification of the Chief Executive Officer and Chief Financial Officer
Required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|||
32.1 | Section 906 Certifications of the Chief Executive Officer and the Chief Financial Officer |
|||
101.INS* | XBRL Instance Document |
|||
101.SCH* | XBRL Taxonomy Extension Schema Document |
|||
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document |
|||
101.LAB* | XBRL Taxonomy Extension Labels Linkbase Document |
|||
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections. |
20
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November 8, 2011
|
INHIBITEX, INC | |||
/s/ Russell H. Plumb | ||||
Russell H. Plumb | ||||
President, Chief Executive Officer, | ||||
Chief Financial Officer and Chief Accounting Officer |
21
Table of Contents
EXHIBIT INDEX
Exhibit No. | Description | |||
31.1 | Section 302 Certification of the Chief Executive Officer and Chief Financial Officer as
Required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|||
32.1 | Section 906 Certifications of the Chief Executive Officer and the Chief Financial Officer |
|||
101.INS* | XBRL Instance Document |
|||
101.SCH* | XBRL Taxonomy Extension Schema Document |
|||
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document |
|||
101.LAB* | XBRL Taxonomy Extension Labels Linkbase Document |
|||
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections. |
22