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UNITED STATES
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 March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number: 0-28310
SIBIA Neurosciences, Inc.
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(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 95-3616229
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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<S> <C>
505 Coast Boulevard South, Suite 300, La Jolla, CA 92037
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(Address of principal executive offices) (Zip Code)
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(619) 452-5892
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(Registrant's telephone number, including area code)
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(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 requirement for the past 90 days. Yes ____ No X
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at June 10, 1996
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<S> <C>
Common Stock, $.001 par value 8,978,213
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SIBIA Neurosciences, Inc.
INDEX
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PAGE
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PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Financial Statements (unaudited)
Condensed Balance Sheet as of December 31, 1995
and March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Statement of Operations for the three
months ended March 31, 1995 and 1996 . . . . . . . . . . . . . . . . . . 4
Condensed Statement of Cash Flows for the three
months ended March 31, 1995 and 1996 . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . 13
ITEM 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . 15
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Financial Statements
SIBIA Neurosciences, Inc.
Condensed Balance Sheet
<TABLE>
<CAPTION>
Pro forma Balance Sheet
March 31, 1996 Unaudited (Note 1)
Assets December 31, 1995 (Unaudited) March 31, 1996
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $2,274,000 $3,199,000 $29,369,000
Investment securities 14,214,000 11,781,000 11,781,000
Contracts and accounts receivable 35,000 1,185,000 1,185,000
Prepaid expenses and other current assets 238,000 587,000 241,000
----------- ----------- -----------
Total current assets 16,761,000 16,752,000 42,576,000
----------- ----------- -----------
Property and equipment - net 1,387,000 1,423,000 1,423,000
Other assets 103,000 110,000 110,000
----------- ----------- -----------
$18,251,000 $18,285,000 $44,109,000
=========== =========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $1,006,000 $1,596,000 $1,596,000
Accrued liabilities 1,167,000 1,329,000 1,329,000
Deferred revenue 250,000 250,000 250,000
----------- ----------- -----------
Total current liabilities 2,423,000 3,175,000 3,175,000
----------- ----------- -----------
Capital lease obligations 721,000 737,000 737,000
----------- ----------- -----------
Stockholders' equity:
Convertible preferred stock, $.001 par value,
5,000,000 shares authorized:
Series A - 173,611 shares designated, issued and outstanding
as of December 31, 1995 and March 31, 1996 ($2,500,000
total liquidation preference). Convertible into Common
Stock at 2.35-for-1. No shares issued and outstanding
as of March 31, 1996 - pro forma (unaudited)
Series B - 600,000 shares designated; 22,900
and 32,200 shares issued and outstanding as of
December 31, 1995 and March 31, 1996. Convertible
into Common Stock at 2.35-for-1. No shares
issued and outstanding as of March 31, 1996 -
pro forma (unaudited)
Series C - 280,000 shares designated,
issued and outstanding as of December 31, 1995 and March 31, 1996
($7,000,000 total liquidation preference). Convertible
into Common Stock at 2.35-for-1. No shares
issued and outstanding as of March 31, 1996 -
pro forma (unaudited)
Common stock - $.001 par value, 25,000,000 shares
authorized; 4,899,884, 5,178,110 and 8,874,311 shares issued and
outstanding at December 31, 1995, March 31, 1996 and 5,000 5,000 9,000
March 31, 1996 - pro forma (unaudited)
Additional paid-in capital 31,869,000 33,539,000 59,359,000
Deferred compensation (635,000) (1,512,000) (1,512,000)
Notes receivable from stockholders (82,000) (671,000) (671,000)
Net unrealized gains on investments securities
available for sale 79,000 76,000 76,000
Accumulated deficit (16,129,000) (17,064,000) (17,064,000)
----------- ----------- -----------
Total stockholders' equity 15,107,000 14,373,000 40,197,000
----------- ----------- -----------
$18,251,000 $18,285,000 $44,109,000
=========== =========== ===========
</TABLE>
See accompanying notes.
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SIBIA Neurosciences, Inc.
Condensed Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1996
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Revenue:
Contract $1,117,000 $2,327,000
License and royalty 57,000 57,000
Total revenue (including $711,420
and $770,355 in related-party revenue ------------- -----------
for 1995 and 1996, respectively) 1,174,000 2,384,000
------------- -----------
Expenses:
Research and development 2,111,000 2,675,000
General and administrative 697,000 852,000
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2,808,000 3,527,000
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(1,634,000) (1,143,000)
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Other income (expense):
Settlement of litigation 555,000 --
Interest income 94,000 225,000
Interest expense (18,000) (17,000)
Other 18,000 --
------------- -----------
649,000 208,000
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Net loss ($985,000) ($935,000)
============= ===========
Net loss per common share ($0.18) ($0.19)
============= ===========
Weighted average number of common
shares outstanding 5,476,703 4,981,619
============= ===========
</TABLE>
See accompanying notes.
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SIBIA Neurosciences, Inc.
Condensed Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1996
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<S> <C> <C>
Cash flows from operating activities:
Net loss ($985,000) ($935,000)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 112,000 138,000
Compensation from issuance of common stock options -- 169,000
(Gain) loss on disposal of property (18,000) 4,000
Net amortization of premium and discount on
investment securities (51,000) (179,000)
Increase (decrease) in cash resulting from changes in:
Contract and accounts receivable 141,000 (1,150,000)
Prepaid expenses and other assets 12,000 (359,000)
Accounts payable (69,000) 590,000
Accrued liabilities and other 577,000 131,000
---------- -----------
Net cash used by operating activities (281,000) (1,591,000)
---------- -----------
Cash flows from investing activities:
Purchases of investment securities held-to-maturity (1,485,000) (4,202,000)
Maturities of investment securities held-to-maturity 1,165,000 6,792,000
Principal payments received on investment securities
available-for-sale 43,000 19,000
Proceeds from disposal of property and equipment 25,000 --
Acquisition of property and equipment (7,000) (20,000)
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Net cash (used) provided by investing activities (259,000) 2,589,000
---------- -----------
Cash flows from financing activities:
Proceeds from exercise of stock options 4,000 35,000
Principal payments on capital lease obligations (85,000) (108,000)
---------- -----------
Net cash used by financing activities (81,000) (73,000)
---------- -----------
Net (decrease) increase in cash and cash equivalents (621,000) 925,000
Cash and cash equivalents at beginning of period 1,948,000 2,274,000
---------- -----------
Cash and cash equivalents at end of period $1,327,000 $3,199,000
========== ===========
</TABLE>
See accompanying notes.
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SIBIA Neurosciences, Inc.
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1996
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31,
1996 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1996. For further information, refer to the financial
statements and footnotes thereto for the year ended December 31, 1995, included
in SIBIA Neurosciences, Inc.'s (SIBIA or the Company) prospectus dated May 9,
1996 filed with the Securities and Exchange Commission.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses
and related disclosures as of the date of the financial statements. Actual
results could differ from such estimates.
The unaudited pro forma balance sheet as of March 31, 1996 gives effect to the
net proceeds received for the issuance of Common Stock upon the closing of the
Company's private placement and initial public offering ("IPO"). The unaudited
pro forma balance sheet also gives effect to the automatic conversion of each
share of Series A, B, and C Convertible Preferred Stock into 2.35 shares of
Common Stock (Note 5).
2. NET LOSS PER COMMON SHARE
Net loss per common share is computed using the weighted average number of
common shares outstanding during the periods presented. Pursuant to Securities
and Exchange Commission Staff Accounting Bulletin No. 83, the shares
outstanding as of March 31, 1995 have been adjusted to reflect shares of common
stock and common stock equivalents issued within one year prior to the
Company's IPO at prices below the IPO price (using the treasury stock method).
Other common stock equivalents are antidilutive and are excluded from the
computation of net loss per common share. All Common Stock share and per share
information has been adjusted for the 2.35-for-1 stock split (Note 4) of the
outstanding shares of Common Stock for all periods presented.
3. SIGNIFICANT COLLABORATIVE AGREEMENTS
Total costs incurred under the Company's various collaborative agreements for
the three months ended March 31, 1995 and 1996, including certain
administrative costs, aggregated $920,000 and $1,485,000, respectively.
4. STOCKHOLDERS' EQUITY
In March 1996, the Board of Directors authorized a 2.35-for-1 stock split and
increased the total authorized shares of Common Stock outstanding to
25,000,000. The Convertible Preferred Stock conversion rate was also changed to
2.35-for-1. The 1995 stockholders' equity accounts have
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been restated to give effect to the Common Stock split and increased share
authorization. All earnings per share and other data presented have also been
restated to give effect to the stock split.
In March 1996, options to purchase 120,200 shares of Series B Convertible
Preferred Stock were exercised at $5.00 per share in exchange for notes
receivable that bear interest at 7% per annum. Of these shares, 110,600 shares
were converted into 259,910 shares of Common Stock.
In March 1996, the Company issued options to purchase 157,168 shares of Common
Stock with an exercise price of $1.91 per share resulting in deferred
compensation of $910,000, which is being recognized as expense over the related
four-year vesting period.
5. SUBSEQUENT EVENT
The Company completed an IPO of Common Stock on May 15, 1996. The Company
issued 2,100,000 shares of Common Stock in the IPO for $11.00 per share
resulting in net proceeds of $20,825,000, after the underwriters' discount and
offering costs. Concurrently with the closing of the IPO, the Company issued
454,545 shares of Common Stock, for $11.00 per share, in a private placement to
CIBA-GEIGY Limited ("Ciba"), one of the Company's collaborative partners and an
existing stockholder, resulting in $5,000,000 in proceeds. The IPO and Ciba
Common Stock issuance resulted in Ciba's 12% ownership of the Company's
outstanding Common Stock on a pro forma basis (Note 1). The unaudited pro forma
balance sheet assumes the IPO and related sale of Common Stock to Ciba were
consummated on March 31, 1996 with the gross proceeds from the IPO reduced by
the total offering costs.
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ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
OVERVIEW
Except for the historical information contained herein, the discussion in this
report contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed in this report. Factors that could cause or contribute to such
differences include, without limitation, those discussed in the section
entitled "Liquidity and Capital Resources" herein as well as those discussed in
the Company's prospectus dated May 9, 1996 under the heading "Risk Factors".
SIBIA is engaged in the discovery and development of novel, small molecule
therapeutics for CNS disorders based on the Company's unique approach to
characterizing the molecular processes involved in such disorders. SIBIA is
focusing its efforts on developing compounds for the treatment of Parkinson's
disease, Alzheimer's disease, stroke, head trauma, epilepsy, chronic pain,
schizophrenia and other neurological, psychiatric and neurodegenerative
disorders, many of which have large patient populations and represent critical
unmet medical needs.
The Company has no products available for sale and does not expect to have any
products resulting from its research efforts, including its collaborations with
others, commercially available for at least several years, if at all. Except
for 1995, the Company has incurred net losses every year since shifting its
area of therapeutic focus to the central nervous system in 1991. The Company is
continuing to incur losses and expects to incur increasing operating losses
over the next several years as the Company's research and development
expenditures increase. The Company's revenue for the next several years will be
limited to payments under its collaborative agreements, license fees, interest
income and other miscellaneous income. As of March 31, 1996, the Company's
accumulated deficit was approximately $17.1 million.
RESULTS OF OPERATIONS
Revenue
Total revenue increased by 103%, from $1,174,000 in the first quarter 1995 to
$2,384,000 in the first quarter 1996. The increase in total revenue was
primarily the result of increases in contract revenues recognized pursuant to a
new collaborative agreement with Bristol-Myers Squibb and the reimbursement of
additional costs and fees in the aggregate amount of $475,000 from Ciba,
pursuant to the terms of the extension of a collaborative agreement.
Expenses
Total expenses increased by 26%, from $2,808,000 in the first quarter 1995 to
$3,527,000 in the first quarter 1996. The increase in total expenses was
primarily attributable to an increase in research and development expenses of
27%, from $2,111,000 in the first quarter 1995 to $2,675,000 in the first
quarter 1996. This was the result of an increase in research and development
personnel and related costs for a new collaborative agreement with
Bristol-Myers Squibb, expanded programs in drug discovery, and outside
preclinical expenses. General and administrative expenses increased by 22%,
from $697,000 in the first quarter of 1995 to $852,000 in the first quarter of
1996. The increase in general and administrative expenses was primarily due to
compensation expense relating to stock option grants and increases in fringe
benefit expenses.
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Other Income
The Company's other income includes interest income, interest expense and in
the first quarter of 1995, income from the settlement of certain litigation.
Other income during the first quarter of 1996 decreased by 68%, or $441,000, as
compared to the first quarter of 1995, primarily due to payments received in
1995 from the settlement of certain litigation.
The Company expects that results of operations in the future will fluctuate
significantly from period to period. Such fluctuations may result from numerous
factors, including the amount and timing of future license agreements, the
timing of revenues earned under existing or future corporate collaborations or
joint ventures, if any, technological advances and determinations as to the
commercial potential of proposed compounds, the progress of the Company's drug
discovery and development programs, the receipt of necessary regulatory
approvals, the cost of preparing, filing, prosecuting, maintaining, defending
and enforcing patent claims and other intellectual property rights, the status
of competitive products and technologies and the timing and availability of
financing for the Company, including existing or future strategic alliances and
joint ventures with third parties. In addition, because the Company is in the
early stage of development with respect to its CNS technologies and due to the
one-time nature of certain payments the Company has received, comparisons of
its historical results may not be meaningful.
LIQUIDITY AND CAPITAL RESOURCES
SIBIA has financed its operations primarily through the sale of Convertible
Preferred Stock, Common Stock and through funds provided by its partners under
collaborative agreements. The Company has also received funds from the sale of
its interest in the SISKA Diagnostics, Inc. joint venture and the settlement of
certain litigation. The funds received were invested in investment securities
and are being used to finance its operations. The Company receives payments
under collaborative agreements primarily in the form of contract revenue. Such
agreements also provide for milestone payments, if milestones are achieved, and
royalties, if products are commercialized.
On May 9, 1996, SIBIA completed an initial public offering of 2,100,000 shares
of Common Stock and concurrently, in a private placement, the Company sold
454,545 shares to Ciba, one of the Company's collaborative partners and an
existing stockholder. The share price for both the IPO and private placement
was $11.00 per share resulting in total gross proceeds of $28.1 million, before
expenses of $2,275,000.
SIBIA expects to receive royalties on sales of Myotrophin, a product based on
the insulin-like growth factor-1 ("IGF-1") molecule being developed by
Cephalon, Inc. ("Cephalon"), if it receives FDA approval, although there can be
no assurances that Myotrophin will receive such approval. With the exception of
Myotrophin, the Company does not expect to receive royalties based upon net
sales of drugs that may be developed for a significant number of years, if at
all.
To date, the majority of the Company's expenditures have been for research and
development activities. The Company expects to incur substantial research and
development expenses as its discovery and development programs progress,
including continued increases in personnel costs and costs related to
preclinical testing and clinical trials, if any. General and administrative
expenses necessary to support such expanded programs are also expected to
increase over the next several years. The Company believes that the cash, cash
equivalents and investment securities balance of $14,980,000 as of March 31,
1996 ($41,150,000 pro forma) will be used
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primarily to support continued research and development of its technologies and
general and administrative expenses and for other general corporate purposes.
The Company leases laboratory and office facilities under an agreement expiring
on December 31, 1997. The minimum annual payment under the lease is
approximately $1,290,000, before consideration of sublease income. The Company
believes that its present facility will be adequate to conduct its research
activities through December 1997. Management believes that it should be able to
secure additional space at commercially reasonable rates if necessary. The
Company has an option to extend its lease for an additional five years. The
Company recently contracted for a fully automated functional high throughput
screening system and related equipment with an expected cost of approximately
$750,000, of which $500,000 will be provided by Ciba (which may be credited
against future milestone payments) in accordance with the collaborative
agreement.
SIBIA is an early-stage biotechnology company. The Company has no products
available for sale and does not expect to have any products resulting from its
research efforts, including its collaborations with others, commercially
available for at least several years, if at all. There can be no assurance
that any products will be successfully discovered or developed by the Company
or its collaborative partners, be approved for clinical trials, prove to be
safe and efficacious in clinical trials, meet applicable regulatory standards,
be capable of being produced in commercial quantities at acceptable costs or be
marketed successfully. The failure of the Company or its collaborative partners
to discover or develop commercially viable products or successfully market such
products would have a material adverse effect on the Company's business.
The Company will require substantial additional funds to conduct research and
development and preclinical and clinical testing of its compounds and patented
products. There can be no assurance that the Company will generate a positive
internal cash flow for several years, due to substantial additional research
and development costs. The Company believes that the net proceeds from the IPO
and the sale of the Ciba shares, together with its available cash reserves and
funds from collaborative agreements, should be adequate to satisfy its capital
requirements through the end of 1998. The Company's future capital needs will
be dependent upon many factors, including progress in its research and
development activities, the magnitude and scope of these activities, progress
with preclinical and clinical trials, the cost of preparing, filing,
prosecuting, maintaining, defending and enforcing patent claims and other
intellectual property rights, competing technological and market developments,
changes in or terminations of existing collaborative arrangements, the
establishment of additional collaborative arrangements, and the cost of
manufacturing scale-up and development of marketing activities, if undertaken
by the Company. The Company intends to seek additional funding through research
and development relationships with suitable corporate collaborators or through
public or private financing. There can be no assurance that the Company will be
successful in its efforts to collaborate with additional partners or that
additional financing from other sources will be available on favorable terms,
if at all. If adequate funds are not available, the Company may be required to
curtail significantly or eliminate one or more of its research, discovery or
development programs or obtain funds through additional arrangements with
corporate partners or others which may require the Company to relinquish rights
to certain of its technologies or product candidates that the Company would not
otherwise relinquish, which could have a material adverse effect on the
Company's business.
The Company's strategy for the development, clinical testing, manufacturing and
commercialization of certain of its compounds includes entering into various
collaborations with corporate partners, licensors, licensees and others. The
Company has entered into collaborative arrangements with Eli Lilly and Company
("Lilly"), Ciba and Bristol-Myers Squibb and intends
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to enter into additional collaborations. These collaborators have agreed to
fund the research and development of compounds discovered under their
respective agreements, conduct clinical testing of lead compounds, prepare and
file submissions for regulatory approval, make milestone payments to SIBIA upon
the achievement of certain goals and pay royalties on any resulting products.
There can be no assurance that these collaborations will continue or be
successful or that any products will be developed. There can be no assurance
that the Company will ever receive any milestone or royalty payments under
these agreements.
Each of the Company's collaborative partners has the right to terminate its
respective collaboration under certain circumstances. Furthermore, Lilly can
terminate its collaboration with the Company upon six months' prior written
notice, which may be given at anytime, and Ciba can terminate its collaboration
with the Company upon six months' prior written notice, which may be given at
anytime beginning March 1997. There can be no assurance that collaborators will
not terminate their respective collaborations. In addition, there can be no
assurance that collaborators will not pursue alternative technologies to
develop treatments for the diseases targeted by the respective collaborative
programs. If any of the Company's collaborative partners terminates or breaches
its agreement with the Company or fails to devote adequate resources to or to
conduct in a timely manner its collaborative activities, the research program
under the applicable collaborative agreement or the development and
commercialization of drug candidates subject to such collaboration would be
materially adversely affected, which would have a material adverse effect on
the Company's business. In addition, because the Company's collaborative
agreements have accounted for 95% and 98% of total revenues for the three
months ended March 31, 1995 and 1996, respectively, such a termination or
breach could materially adversely affect the Company's results of operations
and financial condition.
The Company has recently entered into discussions with Lilly regarding a
proposed amendment of its agreement with Lilly. As currently in effect, the
Company's agreement with Lilly expires pursuant to its terms in May 1997. The
Company anticipates that an amendment to the current agreement will be made
that would reduce the level of funding effective in November 1996, but may
extend the term of support one or more years. There can be no assurance that
the Company and Lilly will amend their current agreement or that they will
amend it as indicated above.
The Company's success will depend in part on its ability to obtain patents,
maintain trade secrets and operate without infringing on the proprietary rights
of others, both in the United States and other countries. The patent positions
of biotechnology and pharmaceutical companies can be highly uncertain and
involve complex legal and factual questions, and therefore, the breadth of
claims allowed in biotechnology and pharmaceutical patents cannot be predicted.
There can be no assurance that patents issued to or licensed by the Company
will not be infringed or will not be challenged, invalidated or circumvented,
or that the rights granted thereunder will provide proprietary protection to
the Company's technology or products that the Company may develop or other
competitive advantages to the Company.
Litigation, which could result in substantial costs to the Company, may also be
necessary to enforce any patents issued to the Company or to determine the
scope and validity of third-party proprietary rights. Moreover, if competitors
of the Company prepare and file patent applications in the United States that
claim technology also claimed by the Company, the Company may have to
participate in interference proceedings declared by the United States Patent
and Trademark Office ("PTO") to determine priority of invention, which could
result in substantial cost to the Company, even if the eventual outcome is
favorable to the Company. Similarly, the Company may have to participate in
opposition proceedings with respect to granted European patents. The Company is
aware of a third-party patent application that may elicit an interference
proceeding with one of the Company's patent applications in the PTO. In
addition, the Company believes
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that certain claims in three of its other patent applications may elicit such
proceedings. Further, the Company currently is opposing an issued patent of a
third party in Europe. There can be no assurance that the Company will prevail
in these proceedings. Also, there can be no assurance that the validity of the
Company's patents, if issued, would be upheld by a court of competent
jurisdiction. An adverse outcome in patent prosecution or in litigation with
respect to the validity of any of the Company's patents could subject the
Company to significant liabilities to third parties, require disputed rights to
be licensed from third parties or require the Company to cease using such
technology, any of which could have a material adverse effect on the Company's
business.
The production and marketing of products that the Company may develop and its
ongoing research and development activities are subject to extensive regulation
by numerous governmental authorities in the United States and other countries.
Satisfaction of such regulatory requirements, which includes demonstrating to
the satisfaction of the FDA that the product is both safe and effective,
typically takes several years or more depending upon the type, complexity and
novelty of the product and requires the expenditure of substantial resources.
The Company has no experience in developing a product through the clinical
trial process. The Company intends to establish collaborative relationships to
conduct clinical trials and seek regulatory approvals to market products that
it may develop, although there can be no assurance that the Company will be
able to develop or maintain such relationships or that such approvals will be
received on a timely basis, if at all.
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PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings:
The Company is involved in certain legal or administrative proceedings
generally incidental to its normal business activities. While the
outcome of any such proceedings cannot be accurately predicted, the
Company does not believe the ultimate resolution of any such existing
matters will have a material adverse effect on its financial position
or results of operations.
ITEM 2. Changes in Securities:
In March 1996, the Company received stockholder approval to amend the
Company's Certificate of Incorporation and Bylaws in certain respects
as described in Item 4.
ITEM 3. Defaults Upon Senior Securities:
None.
ITEM 4. Submission of Matters to a Vote of Security Holders:
1. In March 1996, the Company solicited the vote of the
stockholders of the Company by written consent on the
proposals set forth below and received for each proposal the
votes indicated below:
(a) Matters which were approved effective prior to the
initial public offering of the Common Stock of the
Company:
(i) The amendment of the Company's Certificate of
Incorporation to change the name of the
Company from "The Salk Institute
Biotechnology/Industrial Associates, Inc." to
"SIBIA Neurosciences, Inc."
(ii) The amendment of the Company's Certificate of
Incorporation to increase the total number of
authorized shares of the Company's Common
Stock from 10,000,000 shares to 25,000,000
shares.
(iii) The amendment of the Company's Certificate of
Incorporation to effect a 2.35-for-1 split of
the outstanding hares of the Company's Common
Stock.
13
<PAGE> 14
(iv) The amendment of the Company's Certificate of
Incorporation to provide for the automatic
conversion of the outstanding shares of
Series B Preferred Stock of the Company into
shares of Common Stock of the Company upon
the closing of the initial public offering of
the Company's Common Stock.
(b) Matters which were approved effective upon the
closing of the initial public offering of the
Company's Common Stock:
(i) The amendment of the Company's Certificate of
Incorporation to eliminate certain provisions
relating to the Series A Preferred Stock,
Series B Preferred Stock and Series C
Preferred Stock of the Company following the
conversion of such Preferred Stock into
Common Stock of the Company upon the closing
of the initial public offering of the
Company's Common Stock.
(ii) The amendment of the Company's Certificate of
Incorporation to include a provision
authorizing the Board of Directors of the
Company to approve the issuance and designate
the rights, preferences and privileges of one
or more new series of Preferred Stock.
(iii) The amendment of the Company's Certificate of
Incorporation and Bylaws to adopt certain
stockholder protection measures.
(c) For each of the proposals presented to the
stockholders for their approval under subparagraphs
1(a) and 1(b) above, the votes cast, in each
instance, were as follows:
<TABLE>
<CAPTION>
For Against Abstained
<S> <C> <C> <C>
Common Stock 1,595,582 0 496,770
Series A Preferred 0 0 173,611
Series B Preferred 20,700 0 11,500
Series C Preferred 280,000 0 0
</TABLE>
2. In April 1996, the Company solicited the vote of the
stockholders of the Company by written consent on the
proposals set forth below and received for each proposal the
votes indicated below:
(a) To ratify, confirm and approve the adoption by the
Board of the following employee and director
compensation plans of the Company:
(i) 1996 Equity Incentive Plan;
(ii) Employee Stock Purchase Plan; and
(iii) Non-Employee Directors' Stock Option Plan
(b) To approve a form of Indemnity Agreement to be
entered into between the Company and its officers
and directors.
14
<PAGE> 15
(c) For each of the proposals presented to the
stockholders for their approval under subparagraphs
2(a) and 2(b) above, the votes cast, in each
instance, were as follows:
<TABLE>
<CAPTION>
For Against Abstained
<S> <C> <C> <C>
Common Stock 3,677,921 0 1,239,106
Series A Preferred 407,985 0 0
Series B Preferred 44,415 0 31,255
Series C Preferred 658,000 0 0
</TABLE>
ITEM 5. Other Information:
None.
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
11.1 - Statement re: Computation of Loss Per Share
(b) Reports on Form 8-K
None.
15
<PAGE> 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
SIBIA Neurosciences, Inc.
Date: 6-24-96 By: /s/ THOMAS A. REED
------------------------- -------------------------------------
Thomas A. Reed
Vice President, Finance &
Administration, and Chief Financial
Officer
(on behalf of the registrant and as
the registrant's principal financial
officer)
16
<PAGE> 1
SIBIA Neurosciences, Inc.
Exhibit 11.1 - Statement Re: Computation of Loss Per Share (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
1995 1996
---------- ---------
<S> <C> <C>
Primary Loss Per Share:
Weighted average common shares outstanding 4,885,523 4,981,619
SAB No. 83 shares (1): 591,180
---------- ----------
Total 5,476,703 4,981,619
========== ==========
Net loss ($985,000) ($935,000)
========== ==========
Net loss per common share ($0.18) ($0.19)
========== ==========
</TABLE>
(1) In accordance with Securities and Exchange Commission Staff Accounting
Bulletin No. 83, certain equity securities issued within one year of an
offering at less than the offering price ("Cheap Stock") are included as
outstanding for 1995 for the purposes of the net income per share computations.
Such securities consist of common stock and stock options computed using the
treasury stock method.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET AS OF MARCH 31, 1996 AND UNAUDITED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,199,000
<SECURITIES> 11,781,000
<RECEIVABLES> 1,185,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,752,000
<PP&E> 1,423,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,285,000
<CURRENT-LIABILITIES> 3,175,000
<BONDS> 0
0
0
<COMMON> 5,000
<OTHER-SE> 14,368,000
<TOTAL-LIABILITY-AND-EQUITY> 18,285,000
<SALES> 0
<TOTAL-REVENUES> 2,384,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,527,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,000
<INCOME-PRETAX> (935,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (935,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (935,000)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
