<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-15609
AGOURON PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0061928
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
10350 NORTH TORREY PINES ROAD, LA JOLLA, CALIFORNIA 92037-1020
(Address and zip code of principal executive offices)
(619) 622-3000
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:
Yes __X__ No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Approximately 10,422,000
shares of the Company's Common Stock, no par value, were outstanding as of
October 16, 1995.
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AGOURON PHARMACEUTICALS, INC.
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Balance Sheet - 3
September 30, 1995 and June 30, 1995
Statement of Operations - 4
Three Months Ended September 30, 1995 and 1994
Statement of Cash Flows - 5
Three Months Ended September 30, 1995 and 1994
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
Part II. Other Information 8
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
Signature 9
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AGOURON PHARMACEUTICALS, INC.
BALANCE SHEET
(Dollas in thoudands)
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
--------- --------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 57,935 $ 4,358
Short-term investments 59,482 15,886
Accounts receivable 219 344
Other current assets 542 871
--------- ---------
Total current assets 118,178 21,459
Property and equipment, net of accumulated
depreciation and amortization of $11,986
and $11,344 5,328 5,638
--------- ---------
$123,506 $ 27,097
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,893 $ 5,426
Accrued liabilities 884 683
Deferred revenue 25,010 5,745
Current portion of long-term debt 620 768
--------- ---------
Total current liabilities 32,407 12,622
--------- ---------
Long-term liabilities:
Long-term debt, less current portion 462 580
Accrued rent 1,306 1,304
--------- ---------
Total long-term liabilities 1,768 1,884
--------- ---------
Stockholders' equity:
Common stock, no par value, 75,000,000 shares
authorized, 10,420,336 and 7,359,282 shares
issued and outstanding 155,376 76,113
Accumulated deficit (66,045) (63,522)
--------- ---------
Total stockholders' equity 89,331 12,591
--------- ---------
$123,506 $ 27,097
========= =========
</TABLE>
See accompanying notes to financial statements.
3
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AGOURON PHARMACEUTICALS, INC.
STATEMENT OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------
1995 1994
--------- ---------
<S> <C> <C>
Revenues:
Contract $ 10,963 $ 5,835
Interest 397 329
--------- ---------
11,360 6,164
--------- ---------
Costs and expenses:
Research and development 12,528 7,985
General and administrative 1,249 866
Interest 106 52
--------- ---------
13,883 8,903
--------- ---------
Net loss $ (2,523) $ (2,739)
========= =========
Net loss per common share $ (.33) $ (.38)
========= =========
Shares used in computing net loss
per common share 7,719,000 7,279,000
========= =========
</TABLE>
See accompanying notes to financial statements.
4
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AGOURON PHARMACEUTICALS, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------
1995 1994
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Cash received from contracts $ 30,353 $ 7,306
Cash paid to suppliers, employees and
service providers (12,179) (5,852)
Interest received 397 329
Interest paid (106) (52)
--------- ---------
Net cash provided (used) by operating
activities 18,465 1,731
--------- ---------
Cash flows from investing activities:
Net (increase) decrease in short-term
investments (43,596) 1,816
Expenditures for property and equipment (289) (1,384)
--------- ---------
Net cash provided (used) by investing
activities (43,885) 432
--------- ---------
Cash flows from financing activities:
Net proceeds from issuance of common stock 79,263 2
Principal payments under equipment leases (122) (149)
Increase (decrease) in long-term debt, net (144) (145)
--------- ---------
Net cash provided (used) by financing
activities 78,997 (292)
--------- ---------
Net increase (decrease) in cash and cash equivalents 53,577 1,871
Cash and cash equivalents at beginning of period 4,358 2,104
--------- ---------
Cash and cash equivalents at end of period $ 57,935 $ 3,975
========= =========
Reconciliation of net loss to net cash provided
(used) by operating activities:
Net loss $ (2,523) $ (2,739)
Depreciation and amortization 599 595
Net (increase) decrease in accounts
receivable and other current assets 454 142
Net increase (decrease) in accounts payable,
accrued liabilities, deferred revenue
and other liabilities 19,935 3,733
--------- ---------
Net cash provided (used) by operating
activities $ 18,465 $ 1,731
========= =========
</TABLE>
See accompanying notes to financial statements.
5
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AGOURON PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Financial Statements
The balance sheet as of September 30, 1995 and the statement of operations
and cash flows for the three-month period ended September 30, 1995 have been
prepared by the Company and have not been audited. Such financials, in the
opinion of management, include all adjustments (consisting only of normal,
recurring accruals) necessary to present fairly the financial position,
results of operations and cash flows for all periods presented. These
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's June 30, 1995 Annual
Report on Form 10-K. Interim operating results are not necessarily
indicative of operating results for the full year.
2. Short-term Investments
Included in short-term investments at September 30, 1995 and June 30, 1995 is
$741,000 and $172,000 of accrued interest receivable. Included in short-term
investments at September 30, 1995 is $400,000 which has been pledged as
collateral in conjunction with certain long-term debt obligations.
At September 30, 1995, the Company's short-term investments are generally
available for sale and are carried at amortized cost which approximates
market. These investments, consisting principally of United States
government securities (70%) and corporate obligations (26%), have average
maturities of less than one year.
3. Public Offering
On September 20, 1995 the Company concluded a public offering of 3,000,000
shares of its common stock at $28.00 per share for an aggregate proceeds, net
of underwriters' commission, of approximately $78,589,000.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition
The Company relies principally on equity financings and corporate
collaborations to fund its operations and capital expenditures. At September
30, 1995, due principally to the receipt of a $24,000,000 milestone payment
from Japan Tobacco Inc. ("JT") in August and the net proceeds of
approximately $78,589,000 from a public offering of common stock in
September, the Company had cash, cash equivalents and short-term investments
of approximately $117,417,000. Management believes that its present capital
resources, plus the funding from certain existing collaborative
relationships, will be sufficient to meet its working capital needs at least
through fiscal 1997. The Company may require additional long-term financing
to meet the operating needs of fiscal 1998 and beyond. The Company will
consider various financing vehicles to meet such needs including
collaborative arrangements and public offerings or private placements of
Company common or preferred stock. If such vehicles are not available, the
Company may be required to delay or eliminate expenditures for certain of its
products or to license third parties to commercialize products or
technologies that the Company would otherwise seek to develop itself.
Results of Operations
The Company is engaged in the research and development of human
pharmaceuticals utilizing protein structure-based drug design. Such research
and development has been funded from the Company's equity-derived working
capital and through various collaborative arrangements. The Company's net
operating losses reflect primarily the result of its independent research and
continued increasing investment in clinical development activities
concentrated on the Company's lead compounds in cancer and AIDS. As product
sales may not begin prior to calendar 1998 and certain programs are expanding
their preclinical and clinical development activities, it is anticipated that
net operating losses will continue and possibly increase in the next several
years.
Compared to the three months ended September 30, 1994, the current period
revenues and costs and expenses have increased by 84% and 56%, with a net
loss decrease of 8%.
Contract revenues for the three months ended September 30, 1995 have
increased compared to the same quarter in the prior year due principally to
an anti-HIV collaboration with JT initiated in December 1994 and increased
activities on an anti-viral collaboration with JT which was established in
February 1994. Interest income has increased by approximately 21% from the
prior-year period due to a higher average investment portfolio balance during
the current period due principally to the net proceeds from the public
offering in September 1995 and the milestone payment from JT.
Research and development costs and expenses for the three months ended
September 30, 1995, have increased compared to the same quarter in the prior
year due generally to increasing average research and development staff
levels (approximately 19%) and staff-related expenditures, including
occupancy, and increasing preclinical and clinical activities associated with
certain of the Company's leading product development programs, including
THYMITAQ TM (AG337; a synthetic chemical compound designed specifically to
inactivate an enzyme required for the rapid proliferation of cancer cells)
and VIRACEPT TM (AG1343; a non-peptidic synthetic molecule of low molecular
weight designed to inhibit HIV protease - an enzyme that plays an essential
role in the replication cycle of HIV). The increase in general and
administrative costs and expenses in the current three month period is due
chiefly to increasing average staff levels (approximately 22%) and staff
related expenditures and certain costs associated with an evolving sales and
marketing infrastructure. Interest expense has increased from period to
period due to the exercise of buy-back options associated with certain
capital lease obligations.
7
<PAGE>
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 should have a material
adverse effect on its financial position.
Item 2. Changes in Securities:
None
Item 3. Defaults Upon Senior Securities:
None.
Item 4. Submission of Matters to a Vote of Security Holders:
None.
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
a. Exhibits:
27 Financial Data Schedule. (Exhibit 27 is submitted as an
exhibit only in the electronic format of this Quarterly
Report of Form 10-Q being submitted to the Securities and
Exchange Commission.)
b. Reports on Form 8-K:
None
8
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SIGNATURE
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.
AGOURON PHARMACEUTICALS, INC.
Date: November 2, 1995 /s/ Steven S. Cowell
-------------------------------------------
Steven S. Cowell
Vice President, Finance and Chief Financial
Officer and Chief Accounting Officer
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMAY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND THE STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 57,935
<SECURITIES> 59,482
<RECEIVABLES> 219
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 118,178
<PP&E> 17,314
<DEPRECIATION> 11,986
<TOTAL-ASSETS> 123,506
<CURRENT-LIABILITIES> 32,407
<BONDS> 0
<COMMON> 155,376
0
0
<OTHER-SE> (66,045)
<TOTAL-LIABILITY-AND-EQUITY> 123,506
<SALES> 0
<TOTAL-REVENUES> 11,360
<CGS> 0
<TOTAL-COSTS> 7,410
<OTHER-EXPENSES> 6,367
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 106
<INCOME-PRETAX> (2,523)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,523)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,523)
<EPS-PRIMARY> (0.33)
<EPS-DILUTED> (0.33)
</TABLE>
