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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER: 0-21696
ARIAD PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 22-3106987
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
26 LANDSDOWNE STREET, CAMBRIDGE, MASSACHUSETTS 02139
(Address of principal executive offices)(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 494-0400
Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report: Not Applicable
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
--- ---
The number of shares of the Registrant's common stock outstanding as of
November 3, 2000 was 27,108,867.
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ARIAD PHARMACEUTICALS, INC.
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION Page No.
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ITEM 1 UNAUDITED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets - September 30, 2000
and December 31, 1999------------------------------------------------1
Condensed Consolidated Statements of Operations for the
Three Months and Nine Months Ended September 30, 2000 and 1999-------2
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2000 and 1999------------------------3
Notes to Unaudited Condensed Consolidated Financial Statements-------4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS----------------------------------7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK----------11
PART II. OTHER INFORMATION
---------------------------
ITEM 5. OTHER INFORMATION --------------------------------------------------12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K------------------------------------12
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,599,571 $ 28,319,870
Marketable securities 30,567,252
Inventory and other current assets 1,581,646 1,608,695
-------------- ---------------
Total current assets 39,748,469 29,928,565
-------------- ---------------
Property and equipment:
Leasehold improvements 12,602,318 12,566,650
Equipment and furniture 4,563,478 4,413,453
-------------- ---------------
Total 17,165,796 16,980,103
Less accumulated depreciation and amortization 14,571,349 13,645,750
-------------- ---------------
Property and equipment, net 2,594,447 3,334,353
-------------- ---------------
Intangible and other assets, net 4,903,483 10,973,095
-------------- ---------------
Total $ 47,246,399 $ 44,236,013
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,200,000 $ 1,200,000
Accounts payable 1,403,721 2,276,447
Accrued liabilities 1,532,598 3,721,679
-------------- ---------------
Total current liabilities 4,136,319 7,198,126
-------------- ---------------
Long-term debt 1,000,000 1,900,000
-------------- ---------------
Redeemable convertible preferred stock 8,070,415
---------------
Stockholders' equity:
Common stock, $.001 par value; authorized,
60,000,000 shares; issued and outstanding,
27,096,523 shares in 2000 and 22,031,888 shares
in 1999 27,097 22,032
Additional paid-in capital 127,107,329 101,928,618
Deferred compensation (119,129)
Accumulated other comprehensive loss (22,944)
Accumulated deficit (84,882,273) (74,883,178)
-------------- ---------------
Stockholders' equity 42,110,080 27,067,472
-------------- ---------------
Total $ 47,246,399 $ 44,236,013
============== ===============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
2000 1999 2000 1999
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenue:
Research revenue (principally
related parties in 1999) $ 1,050 $ 2,583,349 $ 127,203 $ 9,889,822
Interest income 663,303 18,284 1,422,519 334,580
------------- -------------- -------------- --------------
Total revenue 664,353 2,601,633 1,549,722 10,224,402
------------- -------------- -------------- --------------
Operating expenses:
Research and development (*) 3,192,621 6,813,407 9,027,514 22,783,873
General and administrative 705,065 949,851 2,348,517 2,564,441
Interest expense 53,737 188,876 172,786 386,122
------------- -------------- -------------- --------------
Total operating expenses 3,951,423 7,952,134 11,548,817 25,734,436
Equity in net loss of Genomics Center (376,715) (1,142,465)
------------- -------------- -------------- --------------
Loss before cumulative effect of change in
accounting principle (3,287,070) (5,727,216) (9,999,095) (16,652,499)
------------- -------------- -------------- --------------
Cumulative effect of change in accounting
principle (364,388)
------------- -------------- -------------- --------------
Net loss (3,287,070) (5,727,216) (9,999,095) (17,016,887)
Accretion cost attributable to redeemable
convertible preferred stock
(63,013) (186,986)
------------- -------------- -------------- --------------
Net loss attributable to common
stockholders $ (3,287,070) $ (5,790,229) $ (9,999,095) $ (17,203,873)
============= ============== ============== ==============
Per common share (basic and diluted):
Loss attributable to common stockholders
before cumulative effect of change in
accounting principle $ (.12) $ (.26) $ (.40) $ (.76)
Cumulative effect of change in accounting
principle (.02)
------------- -------------- -------------- --------------
Net loss $ (.12) $ (.26) $ (.40) $ (.78)
============= ============== ============== ==============
Weighted average number of shares of
common stock outstanding 26,943,454 22,019,122 25,405,085 21,995,799
* Includes non-cash stock based
compensation 58,115 19,314 130,996 56,974
</TABLE>
See notes to unaudited condensed consolidated financial statements.
2
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ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------------
2000 1999
-------------- --------------
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Cash flows from operating activities:
Net loss $ (9,999,095) $ (17,016,887)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 1,134,450 2,738,780
Stock-based compensation 130,996 56,974
Increase (decrease) from:
Inventory and other current assets 27,049 495,094
Due from Genomics Center 128,622
Other assets (397,737) 45,769
Accounts payable (872,726) 702,996
Accrued liabilities (2,163,374) 666,667
Advance from Genomics Center (25,707) 920,988
-------------- --------------
Net cash used in operating activities (12,166,144) (11,260,997)
-------------- --------------
Cash flows from investing activities:
Purchases of marketable securities (38,665,592) (210,736)
Proceeds from sales and maturities of marketable securities 8,156,303 7,762,175
Investment in Genomics Center (6,973,245)
Return of investment in Genomics Center 6,032,287
Investment in property and equipment, net (185,693) (461,519)
Acquisition of intangible assets (747,408) (550,845)
-------------- --------------
Net cash (used in) provided by investing activities (31,442,390) 5,598,117
-------------- --------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs 7,539,040
Proceeds from exercise of common stock purchase warrants 11,637,772
Proceeds from issuance of stock pursuant to stock option and purchase
plans 4,611,423 151,446
Repayment of borrowings (900,000) (1,391,426)
Proceeds from issuance of series B convertible preferred stock 5,747,000
Proceeds from related party long-term debt 1,800,988
Proceeds from sale/leaseback of equipment 308,753
-------------- --------------
Net cash provided by financing activities 22,888,235 6,616,761
-------------- --------------
Net (decrease) increase in cash and equivalents (20,720,299) 953,881
Cash and equivalents, beginning of period 28,319,870 6,501,648
-------------- --------------
Cash and equivalents, end of period $ 7,599,571 $ 7,455,529
============== ==============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
3
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ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. MANAGEMENT STATEMENT
In the opinion of the Company's management, the accompanying unaudited
condensed consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly
the financial position as of September 30, 2000 and the results of
operations for the three month and nine month periods ended September 30,
2000 and 1999. These financial statements should be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended December
31, 1999, which includes consolidated financial statements and notes
thereto for the years ended December 31, 1999, 1998 and 1997.
The results of operations for the three month and nine month periods ended
September 30, 2000 are not necessarily indicative of the results to be
expected for the full year.
2. MARKETABLE SECURITIES
The Company has classified its marketable securities as available for sale
and accordingly, carries such securities at aggregate fair value. At
December 31, 1999, the Company held no marketable securities. At September
30, 2000, the aggregate fair value was $30,567,252 and amortized cost was
$30,590,196. Realized gains and losses on sales of marketable securities
were not material during the quarter ended September 30, 2000; the net
unrealized loss of $22,944 is included in stockholders' equity at September
30, 2000.
3. INVENTORY
Inventories are carried at cost using the first in, first out method and
are charged to research and development expense when consumed. Inventory
consists of bulk pharmaceutical material to be used for multiple
preclinical and clinical drug development programs and amounted to $954,000
at September 30, 2000 and $1,182,000 at December 31, 1999.
4. INTANGIBLE AND OTHER ASSETS
Intangible and other assets consist primarily of the cost of purchased
patents, patent applications, licenses and deposits. The balance at
December 31, 1999 included $6,925,000 of cash subsequently expended on
January 14, 2000 to repurchase Series C Redeemable Convertible Preferred
Stock (Note 8).
5. LONG-TERM DEBT
At September 30, 2000, the Company had outstanding with its principal bank
a five-year term loan in the amount of $2,200,000 maturing July 1, 2002.
The bank term note is collateralized by all assets of the Company. The
Company may, at its option, pledge marketable securities as collateral
under the bank term note, and in such event, the interest rate would be
adjusted from a rate of prime plus 1.0% to the equivalent of 90-day LIBOR
plus 1.25%.
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6. NET LOSS PER SHARE
Net loss per share amounts have been computed based on the weighted average
number of common shares outstanding during each period. Because of the net
loss reported in each period, diluted and basic per share amounts are the
same. In 2000 and 1999, options, warrants and the effects of the conversion
of convertible preferred stock were not included in the computation of net
loss per share because this effect would have been antidilutive.
7. HOECHST-ARIAD GENOMICS CENTER, LLC
From November 1995 through December 1999, substantially all of the
Company's research revenue and the majority of its research expenses were
incurred in collaboration or in partnership with Aventis Pharmaceuticals
Inc. (formerly known as Hoechst Marion Roussel, Inc.) ("Aventis") and its
affiliates.
In November 1995, the Company entered into an agreement with Hoechst Marion
Roussel, S.A. to collaborate on the discovery and development of drugs to
treat osteoporosis and related bone diseases, one of the Company's signal
transduction inhibitor programs. In March 1997, the Company entered into an
agreement, which established a 50/50 joint venture, called the
Hoechst-ARIAD Genomics Center, LLC (the "Genomics Center"), with Aventis to
pursue functional genomics with the goal of identifying genes that encode
novel therapeutic proteins and small-molecule drug targets.
On December 31, 1999, the Company completed the sale of its 50% interest in
the Genomics Center to Aventis and received $40,000,000 in cash, the return
of 3,004,436 shares of the Company's series B convertible preferred stock,
the forgiveness of $1,857,000 of long-term debt owed to Aventis, drug
candidates and related technologies resulting from a November 1995
Osteoporosis collaboration agreement and the right to use certain genomics
and bioinformatics technologies developed by the Genomics Center. The
Company recorded a net gain on the sale of $46,440,000 for the year ended
December 31, 1999. As a result of this sale, the revenue generated from the
relationship with Aventis will not recur, and the Company expects to
realize a reduction of revenue in fiscal 2000 of $12,340,000, which will be
offset by an expected reduction in research and development expenses
associated with the Genomics Center of approximately $16,700,000.
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK
On January 14, 2000, the Company completed the repurchase of the remaining
3,000 shares of its series C redeemable convertible preferred stock for an
aggregate consideration of $6,925,000 plus 1,078,038 shares of common
stock. (Note 4).
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9. EQUITY FINANCING FACILITY
On June 27, 2000, the Company entered into an Equity Financing Facility
(the "Equity Facility") with Acqua Wellington North American Equities Fund,
Ltd. ("Acqua Wellington"). Under the terms of the purchase agreement, the
Company may from time to time sell up to $75,000,000 of its common stock to
Acqua Wellington over an 18 month period expiring in December, 2001. The
Company agreed to issue and sell the shares to Acqua Wellington at a per
share price equal to the daily volume weighted average price of the
Company's common stock on each date during a specified period during which
the shares are purchased, less a discount of between 3.5% and 6.0%, or
under certain circumstances, less a discount mutually agreed to by the
parties. The discount is determined based on the threshold price to be
established by the Company for the applicable period.
Pursuant to the terms of the Equity Facility, on October 12, 2000, the
Company completed the sale of 176,173 shares of common stock to Acqua
Wellington at a price of $12.11 per share and received proceeds of
$2,133,000.
10. REDEMPTION OF WARRANTS
The Company received additional funds aggregating $11.6 million from the
exercise of approximately 1.4 million of its publicly traded warrants
during the first and second quarters of 2000. Each warrant was exercisable
for one share of common stock at an exercise price of $8.40 per share. The
warrants had been called for redemption effective April 27, 2000.
11. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. The new
standard requires that all companies record derivatives on the balance
sheet as assets or liabilities, measured at fair value. Gains or losses
resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. Management is currently assessing the
impact of SFAS No. 133 on the consolidated financial statements of the
Company. The Company will adopt this accounting standard, as amended, on
January 1, 2001, as required.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin 101, "Revenue Recognition in Financial
Statements" ("SAB 101"), which provides guidance related to revenue
recognition based on interpretations and practices followed by the SEC. SAB
101 is effective in the quarter ending December 31, 2000, and requires
companies to report any changes in revenue recognition as a cumulative
effect of a change in accounting principle at the time of implementation in
accordance with Accounting Principles Board Opinion No. 20, "Accounting
Changes." The Company is currently assessing the impact of SAB 101 on its
financial position and results of operations.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
We are a biopharmaceutical company focused on the discovery, development
and commercialization of proprietary platform technologies and therapeutic
products based on gene regulation and signal transduction. Our core
competencies in functional genomics, protein engineering and
structure-based drug design allow us to capitalize on the wealth of genetic
information being generated by government, academic and commercial
laboratories. We apply this expertise to the development of proprietary
technology platforms that allow manipulation of signal transduction, gene
transcription, and protein secretion events using small-molecule drugs. We
believe that our ability to control the activity of genes and proteins
allows us to broadly apply discoveries in genomics to the development of
innovative therapeutic products.
AVENTIS RELATIONSHIP
From November 1995 through December 1999, substantially all of our research
revenue and the majority of our research expenses were incurred in
collaboration or in partnership with Aventis Pharmaceuticals Inc. (formerly
known as Hoechst Marion Roussel, Inc.) ("Aventis") and its affiliates.
In November 1995, we entered into an agreement with Hoechst Marion Roussel,
S.A. to collaborate on the discovery and development of drugs to treat
osteoporosis and related bone diseases (the "1995 Osteoporosis Agreement"),
one of our signal transduction inhibitor programs. In March 1997, we
entered into an agreement, which established a 50/50 joint venture, called
the Hoechst-ARIAD Genomics Center, LLC (the "Genomics Center"), with
Aventis to pursue functional genomics with the goal of identifying genes
that encode novel therapeutic proteins and small-molecule drug targets.
On December 31, 1999, we completed the sale of our 50% interest in the
Genomics Center to Aventis and received $40,000,000 in cash, the return of
3,004,436 shares of our series B convertible preferred stock, the
forgiveness of $1,857,000 of long-term debt we owed to Aventis, drug
candidates and related technologies resulting from the 1995 Osteoporosis
Agreement and the right to use certain genomics and bioinformatics
technologies developed by the Genomics Center. We recorded a net gain on
the sale of $46,440,000 for the year ended December 31, 1999. As a result
of this sale, the revenue generated in our relationship with Aventis will
not recur, and we expect to realize a reduction of revenue from this
relationship in fiscal 2000 of approximately $12,340,000, which will be
offset by an expected reduction in research and development expenses
associated with the Genomics Center of approximately $16,700,000.
GENERAL
Since our inception in 1991, we have devoted substantially all of our
resources to our research and development programs. We receive no revenue
from the sale of pharmaceutical
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products, and substantially all revenue to date has been received in
connection with our relationship with Aventis. Except for the gain on the
sale of the Genomics Center in December 1999, which resulted in net income
for fiscal 1999, we have not been profitable since inception. We expect to
continue to incur substantial and increasing operating losses for the
foreseeable future, primarily due to the expansion of our research and
development programs and manufacturing and clinical development. We expect
that losses will fluctuate from quarter to quarter and that these
fluctuations may be substantial. As of September 30, 2000, we had an
accumulated deficit of $84,882,000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 1999
REVENUE
We recognized research revenue of $1,000 for the quarter ended September
30, 2000 compared to $2,583,000 for the same period in 1999. Research
revenue in 2000 is comprised of transitional research revenue for services
provided to Aventis following the December 31, 1999 sale of our interest in
the Genomics Center. The decrease in research revenue for the quarter
ending September 30, 2000, when compared to the corresponding period in
1999, is due to the termination of research services provided to the
Genomics Center and the termination of research revenue associated with the
1995 Osteoporosis Agreement. Research revenue in 1999 was comprised
principally of research revenue recognized under the 1995 Osteoporosis
Agreement and research services provided to the Genomics Center.
Interest income increased by $645,000 to $663,000 for the quarter ended
September 30, 2000 compared to $18,000 for the same period in 1999
primarily as a result of higher levels of funds invested during the period.
OPERATING EXPENSES
Research and development expenses decreased to $3,193,000 for the quarter
ended September 30, 2000 compared to $6,813,000 for the same period in 1999
due primarily to the termination of research services provided to the
Genomics Center. We expect our research and development expenses to
decrease on a comparative basis over the remainder of this year as a result
of the termination of research services provided to the Genomics Center.
General and administrative expenses decreased to $705,000 for the quarter
ended September 30, 2000 compared to $950,000 for the corresponding period
in 1999 primarily due to decreased professional and legal services incurred
in connection with litigation and a private placement offering that was
canceled in 1999.
We incurred interest expense of $54,000 for the quarter ended September 30,
2000 compared to $189,000 for the corresponding period in 1999. The
decrease resulted from a lower level of long-term debt during the period.
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OPERATING RESULTS
We incurred losses of $3,287,000 for the quarter ended September 30, 2000
and $5,727,000 for the corresponding period in 1999, or $.12 and $.26 per
share, respectively. We expect that substantial operating losses will
continue for several more years but will decrease on a comparative basis
over the remainder of this year (exclusive of the gain on sale of the
Genomics Center) as a result of the sale of our interest in the Genomics
Center. However, operating losses are expected to increase thereafter as
our product development activities expand and are expected to fluctuate as
a result of differences in the timing and composition of revenue earned and
expenses incurred.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1999
REVENUE
We recognized research revenue of $127,000 for the nine months ended
September 30, 2000 compared to $9,890,000 for the same period in 1999.
Research revenue in 2000 is comprised principally of transitional research
services provided to Aventis following the December 31, 1999 sale of our
interest in the Genomics Center. The decrease in research revenue for the
nine months ending September 30, 2000, when compared to the corresponding
period in 1999 is due to the termination of research services provided to
the Genomics Center and the termination of research revenue associated with
the 1995 Osteoporosis Agreement. Research revenue in 1999 was comprised
principally of research revenue recognized under the 1995 Osteoporosis
Agreement and research services provided to the Genomics Center. As a
result of the sale of the Genomics Center and termination of the 1995
Osteoporosis Agreement, we expect to realize a reduction in revenue in
fiscal 2000 of approximately $12,340,000 from the termination of our
relationship with Aventis.
Interest income increased by $1,088,000 to $1,423,000 for the nine months
ended September 30, 2000 compared to $335,000 for the same period in 1999
primarily as a result of higher levels of funds invested during the period.
OPERATING EXPENSES
Research and development expenses decreased to $9,028,000 for the nine
months ended September 30, 2000 compared to $22,784,000 for the same period
in 1999 due primarily to the termination of research services provided to
the Genomics Center as well as a lower level of manufacturing development
and other preclinical development costs than had been incurred in the prior
period. We expect our research and development expenses to continue to
decrease over the remainder of this year on a comparative basis primarily
as a result of the termination of research services provided to the
Genomics Center.
General and administrative expenses decreased to $2,349,000 for the nine
months ended September 30, 2000 compared to $2,564,000 for the
corresponding period in 1999 primarily due to decreased professional and
legal services incurred principally in connection with litigation and a
private placement offering that was canceled in 1999.
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We incurred interest expense of $173,000 for the nine months ended
September 30, 2000 compared to $386,000 for the corresponding period in
1999. The decrease resulted from a lower level of long-term debt during the
period.
OPERATING RESULTS
We incurred losses of $9,999,000 for the nine months ended September 30,
2000 and $17,017,000 for the corresponding period in 1999, or $.40 and $.78
per share, respectively. We expect that substantial operating losses will
continue for several more years but will decrease over the remainder of
this year (exclusive of the gain on sale of the Genomics Center) as a
result of the sale of our interest in the Genomics Center. However,
operating losses are expected to increase thereafter as our product
development activities expand and are expected to fluctuate as a result of
differences in the timing and composition of revenue earned and expenses
incurred.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations and investments primarily through the
private placement and public offering of our securities, including the sale
of common stock to Acqua Wellington North American Equities Fund, Ltd.
("Acqua Wellington"), the sale of series C preferred stock to investors and
the sale of series B preferred stock to Aventis, as well as the exercise of
stock options and warrants, supplemented by the issuance of long-term debt,
operating and capital lease transactions, interest income,
government-sponsored research grants, research revenue under the 1995
Osteoporosis Agreement, research revenue under the terms of our services
agreements with the Genomics Center and, in December 1999, the sale to
Aventis of our 50% interest in the Genomics Center.
On June 27, 2000 we entered into a definitive agreement with Acqua
Wellington for an equity financing facility ("Equity Facility") providing
for the sale from time to time of up to $75,000,000 of the Company's common
stock over an 18 month period. Pursuant to the terms of the Equity
Facility, on October 12, 2000, we completed the sale of 176,173 common
shares to Acqua Wellington at a price of $12.11 per share and received
proceeds of $2,133,000. In addition, on June 27, 2000 we sold to Acqua
Wellington 680,851 shares of common stock at $11.75 per share for a total
of $8,000,000 in a direct equity placement.
At September 30, 2000, we had cash and marketable securities totaling
$38,167,000 and working capital of $35,612,000 compared to cash and cash
equivalents totaling $28,320,000 and working capital of $22,730,000 at
December 31, 1999.
The primary uses of cash during the nine months ended September 30, 2000
were $12,166,000 to finance our operations and working capital
requirements, $38,666,000 to purchase marketable securities, $186,000 to
purchase laboratory equipment, $900,000 to repay long-term debt, and
$747,000 to purchase and license intellectual property. The primary source
of funds during the nine months ended September 30, 2000, were $8,156,000
from the sales and maturities of marketable securities, $11,638,000 from
the exercise of
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warrants, $4,611,000 from the issuance of common stock pursuant to employee
stock option and purchase plans and $7,539,000 from the issuance of common
stock, net of issuance costs.
We have substantial fixed commitments under various research and licensing
agreements, consulting and employment agreements, lease agreements and
long-term debt instruments. These fixed commitments currently aggregate in
excess of $4,600,000 per year and may increase. We will require substantial
additional funding for our research and development programs, including
preclinical development and clinical trials, for operating expenses, for
the pursuit of regulatory clearances and for establishing manufacturing,
marketing and sales capabilities. Adequate funds for these purposes,
whether obtained through financial markets or collaborative or other
arrangements with collaborative partners, or from other sources, may not be
available when needed or on terms acceptable to us.
We believe that our available funds will be adequate to satisfy our capital
and operating requirements through the next two years. However, there can
be no assurance that changes in our research and development plans or other
events affecting our revenues or operating expenses will not result in the
earlier depletion of our funds.
SECURITIES LITIGATION REFORM ACT
Safe harbor statement under the Private Securities Litigation Reform Act of
1995: Except for the historical information contained in this Quarterly
Report on Form 10-Q, the matters discussed herein are forward-looking
statements that involve risks and uncertainties, including but not limited
to risks and uncertainties regarding our ability to succeed in developing
marketable drugs or generating product revenues, our ability to accurately
estimate the actual research and development expenses and other costs
associated with the preclinical and clinical development of our products,
the success of our preclinical studies, our ability to commence clinical
studies, the adequacy of our capital resources and the availability of
additional funding, as well as general economic, competitive, governmental
and technological factors affecting our operations, markets, products,
services and prices, and other factors discussed under the heading
"Cautionary Statement Regarding Forward-Looking Statements" in our Annual
Report on Form 10-K for the year ended December 31, 1999, which has been
filed with the Securities and Exchange Commission. As a result of these or
other factors, actual events or results could differ materially from those
described herein.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We own financial instruments that are sensitive to market risks as part of
our investment portfolio. The investment portfolio is used to preserve our
capital until it is required to fund operations, including our research and
development activities. Our marketable securities generally consist of
commercial and corporate paper and corporate notes. Substantially all
investments mature within one year, are not callable by the issuer and have
fixed interest rates and are available for sale. These investments are
subject to interest rate risk, and could decline in value if interest rates
fluctuate. Due to the conservative nature of our marketable securities, we
do not believe that we have a material exposure to interest rate risk.
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At September 30, 2000, we have a bank term note outstanding with an
interest rate of prime plus 1%. This note is sensitive to interest rate
risk. In the event of a hypothetical 10% increase in the prime rate, or 95
basis points, we would incur approximately $21,000 of additional interest
expense per year.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Ms. Tamar Howson, former senior vice president and director, worldwide
business development at SmithKline Beecham, plc, was elected as a director
of the Company, effective September 1, 2000, to serve with the class of
directors whose terms of service expire at the Annual Meeting of
Stockholders in 2001.
Mr. Jay R. LaMarche, executive vice president, chief financial officer and
treasurer of the Company, resigned from these positions effective November
10, 2000 and retired due to health reasons. Mr. LaMarche will continue to
serve as a director of the Company. Mr. Brian A. Lajoie, former vice
president of finance at Biopure Corporation, a biotechnology company, was
appointed interim chief financial officer until a permanent replacement is
employed.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed herewith:
Exhibit
No. Title
--- -----
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed one current report on Form 8-K during the
quarter ended September 30, 2000.
The Form 8-K, dated June 27, 2000 and filed on July 7, 2000,
reported that the Company had entered into two common stock
purchase agreements for the sale of up to an aggregate of
3,480,851 shares of Common Stock.
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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.
ARIAD Pharmaceuticals, Inc.
(Registrant)
By: /s/ Jay R. LaMarche
-----------------------------------------
Jay R. LaMarche
Executive Vice President and
Chief Financial Officer
(Duly authorized Officer and Principal
Financial Officer)
Date: November 9, 2000
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EXHIBIT INDEX
Exhibit
No. Title
------- -----
27.1 Financial Data Schedule
14
