<PAGE>
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
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________.
Commission File Number: 0-27972
TREGA BIOSCIENCES, INC.
-------------------------------------------------------
(Exact Name of Registrant as Specified in its charter)
DELAWARE 51-0336233
------------------------------- -----------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
9880 CAMPUS POINT DRIVE, SAN DIEGO, CA 92121
(858) 410-6500
(Address, including zip code, and telephone, including area code, of
registrant's principal executive offices)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
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 September 30, 2000
------------------------------ ---------------------------------
<S> <C>
Common Stock, $0.001 par value 23,371,349
</TABLE>
<PAGE>
TREGA BIOSCIENCES, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Consolidated Financial Statements (unaudited):
Consolidated Balance Sheets at September 30, 2000 and December 31, 1999........... 3
Consolidated Statements of Operations for the three and nine months ended
September 30, 2000 and 1999....................................................... 4
Consolidated Statements of Cash Flows for the nine months ended
September 30, 2000 and 1999....................................................... 5
Notes to Consolidated Financial Statements........................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................ 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk........................ 16
PART II. OTHER INFORMATION
Item 6. Exhibits......................................................................... 17
SIGNATURE................................................................................. 18
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Trega Biosciences, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------------- ---------------
ASSETS (Unaudited) (Note)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,238 $ 5,393
Short-term investments 3,602 1,041
Accounts receivable and other current assets 3,888 2,541
--------------- ---------------
Total current assets 9,728 8,975
Property and equipment, net 4,647 4,179
Investment in affiliate, net of amortization 1,844 2,581
Other assets 6,616 6,926
--------------- ---------------
$ 22,835 $ 22,661
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,386 $ 696
Accrued compensation and other accrued liabilities 2,140 2,867
Line of credit 1,500 1,500
Current portion of debt obligations 1,643 1,272
Deferred revenue 1,197 1,820
--------------- ---------------
Total current liabilities 7,866 8,155
Long-term debt obligations, net of current portion 2,727 2,484
Deferred rent and long-term deposits 783 512
Stockholders' equity:
Common stock, $.001 par value
Authorized shares - 40,000,000
Issued and outstanding shares -23,371,349 and 19,101,437 at
September 30, 2000 and December 31, 1999, respectively 23 19
Additional paid-in capital 100,333 89,067
Common stock issuable 16 16
Deferred compensation (247) (489)
Accumulated deficit (88,666) (77,103)
--------------- ---------------
Total stockholders' equity 11,459 11,510
--------------- ---------------
$ 22,835 $ 22,661
=============== ===============
</TABLE>
Note: The balance sheet at December 31, 1999, has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
3
<PAGE>
Trega Biosciences, Inc.
Consolidated Statements of Operations
(in thousands, except net loss per share)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------- ------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Compound revenues $ 2,504 $ 2,822 $ 4,814 $ 4,383
Related party contract research 825 825 2,475 2,475
Contract research and license fees 74 277 708 1,658
Net sales 7 76 50 265
------------ ------------- ------------ -------------
3,410 4,000 8,047 8,781
Costs and expenses:
Cost of sales 29 83 136 242
Research and development 5,036 4,593 13,635 13,534
Selling, general and administrative 2,271 1,682 6,568 5,187
------------ ------------- ------------ -------------
7,336 6,358 20,339 18,963
------------ ------------- ------------ -------------
Loss from operations before equity
in losses of affiliate (3,926) (2,358) (12,292) (10,182)
Equity in losses of affiliate (111) (16) (451) (16)
------------ ------------- ------------ -------------
Loss from operations (4,037) (2,374) (12,743) (10,198)
Other income:
Interest income (expense), net (78) 32 180 174
Gain on sale of ChromaXome - - 1,000 1,513
------------ ------------- ------------ -------------
Net loss $ (4,115) $ (2,342) $ (11,563) $ (8,511)
============ ============= ============ =============
Basic and diluted net loss per share $ (0.18) $ (0.13) $ (0.53) $ (0.47)
============ ============= ============ =============
Shares used in computing basic and diluted
net loss per share 23,337 18,537 21,986 18,150
============ ============= ============ =============
</TABLE>
See accompanying notes.
4
<PAGE>
Trega Biosciences, Inc.
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-----------------------------------
2000 1999
---------------- ----------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (11,563) $ (8,511)
Adjustments to reconcile net loss to net cash flows
used in operating activities:
Depreciation and amortization 1,846 1,565
Amortization of note receivable discount - (126)
Amortization of deferred compensation 541 454
Equity in losses of affiliate 451 16
Loss on disposal of assets - 2
Gain on sale of CXC (1,000) (1,513)
Changes in operating assets and liabilities, net of
effects from the transfer of assets from sale of CXC in 1999:
Accounts receivable and other current assets (1,347) (1,517)
Accounts payable 690 (91)
Accrued compensation and other accrued liabilities (726) 232
Deferred rent and long-term deposits 271 222
Deferred revenue (623) (2,024)
---------------- ----------------
Net cash flows (used in) operating activities (11,460) (11,291)
INVESTING ACTIVITIES
Purchase of short-term investments (6,110) (6,134)
Maturities of short-term investments 3,550 7,497
Purchase of property and equipment (1,498) (1,117)
Investment in affiliate - (1,000)
Net proceeds from sale of CXC 1,000 1,705
Other assets (221) 903
---------------- ----------------
Net cash (used in) provided by investing activities (3,279) 1,854
FINANCING ACTIVITIES
Principal payments under debt obligations (1,220) (1,017)
Issuance of equipment notes and notes payable 1,833 1,942
Issuance of common stock 10,971 80
---------------- ----------------
Net cash provided by financing activities 11,584 1,005
---------------- ----------------
Net (decrease) in cash and cash equivalents (3,155) (8,432)
Cash and cash equivalents at beginning of period 5,393 9,755
---------------- ----------------
Cash and cash equivalents at end of period $ 2,238 $ 1,323
================ ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for interest $ 396 $ 239
================ ================
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING
ACTIVITIES
Deferred compensation $ 210 $ 1,500
================ ================
</TABLE>
See accompanying notes.
5
<PAGE>
Trega Biosciences, Inc.
Notes to Consolidated Financial Statements
September 30, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Trega
Biosciences, Inc. (the "Company"), have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
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 and nine month periods ended September 30, 2000
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. For more complete information, these financial
statements should be read in conjunction with the audited consolidated financial
statements and footnotes thereto for the year ended December 31, 1999, which
were included in the Company's Form 10-K filed with the Securities and Exchange
Commission.
2. SIGNIFICANT ACCOUNTING POLICIES
Use Of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and disclosures made in the accompanying notes to the consolidated
financial statements. Actual results could differ from those estimates.
Net Loss Per Share
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"),
"Earnings Per Share" requires the presentation of basic and diluted earnings per
share amounts. Basic earnings per share is calculated based upon the weighted
average number of common shares outstanding during the period, while diluted
earnings per share also gives effect to all potential diluted common shares
outstanding during the period such as those underlying outstanding options,
warrants and convertible securities and contingently issuable shares. However,
all common shares, outstanding options, warrants and convertible securities and
contingently issuable shares have been excluded from the calculation of diluted
earnings per share, as their inclusion would be anti-dilutive.
Comprehensive Income (Loss)
Statement of Financial Accounting Standard No. 130 ("SFAS No. 130"),
"Reporting Comprehensive Income" requires that all components of comprehensive
income, including net income, be reported in the financial statements in the
period in which they are recognized. Comprehensive income is defined as the
change in equity during a period from transactions and other events and
circumstances from non-owner sources. Net income and other comprehensive income,
including foreign currency translation adjustments and unrealized gains and
losses on investments, are required to be reported, net of their related tax
effect, to arrive at comprehensive income. For the three and nine months ended
September 30, 2000 and 1999, comprehensive loss is the same as net loss.
3. DEBT
LINE OF CREDIT
In August 1999, the Company entered into a line of credit in the
amount of $1.5 million that provided funds to be used primarily for working
capital purposes. The line of credit, which is secured by the general assets
of the Company, bears interest at prime plus .75% (10.25% at September 30,
2000) per annum and is for a term of one year. The line of credit contains
covenants relating to cash flow coverage and minimum cash balances. As of
September 30, 2000, the Company is in compliance with all debt covenants. In
August 1999, the entire line of credit of $1.5 million was accessed and $1.5
million remains outstanding at September 30, 2000. In connection with the
receipt of the line of credit, the Company issued a warrant to the lender to
purchase up to 20,000 shares of the Company's common stock at $1.75 per
share. The warrant expires on August 5, 2004. In July and August 2000, the
Company entered into agreements that together extended the term of the line
of credit to October 20, 2000. In November 2000, the Company entered into an
agreement to extend the term of the line of credit an additional 12 months.
Under this extension, the Company was required to place a $1.5 million time
certificate of deposit (the current outstanding balance under the line) with
the
6
<PAGE>
lender as collateral.
LONG-TERM DEBT
In March 2000, the Company obtained an equipment financing line in the
amount of $600,000, of which the Company had accessed approximately $578,000 by
September 30, 2000. The loan, which is secured by certain of the Company's
equipment, bears interest of 13.337% per annum and is to be repaid monthly over
a four-year term.
In addition, the Company obtained an additional equipment financing
line of $1.4 million in April 2000, of which the Company had accessed
approximately $1.1 million by September 30, 2000. The loan, which is secured
by certain of the Company's equipment, bears interest of 14.423% per annum
and is to be repaid monthly over a four-year term.
In connection with certain equipment financing lines, the Company
must meet certain financial covenants pertaining to the amount of its cash
and marketable securities to be maintained during the terms of the financing
lines. Due to certain covenant violations, the Company has provided required
security deposits and therefore has fulfilled its obligations related to the
covenants. The security deposits in the amount of $490,000 are included in
the other assets line item in the consolidated balance sheet.
4. COMMON STOCK
During the three and nine months ended September 30, 2000, the Company
issued 72,513 and 603,244 shares of common stock, respectively, upon the
exercise of options and warrants and as a result of participation in the
Company's employee stock purchase plan, which shares are included in common
stock outstanding at September 30, 2000.
In April 2000, the Company sold 3.7 million newly issued shares of its
common stock to selected institutional and other accredited investors for net
cash proceeds of approximately $10.1 million ("the Equity Financing"). In
addition, the Company agreed to grant a warrant to the placement agent for the
Equity Financing to purchase up to 220,000 additional shares of common stock at
an exercise price of $5.375 per share.
5. LOAN TO AFFILIATE
In June 2000, the Company made a short term secured loan of $250,000 to
ChemNavigator.com, Inc., an affiliate of the Company. All unpaid principal
together with all accrued but unpaid interest was received by the Company in
August 2000.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS QUARTERLY REPORT ON FORM 10-Q ARE FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH FORWARD-LOOKING
STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS USING WORDS SUCH AS "MAY,"
"POTENTIAL," "EXPECT," "BELIEVE," "ESTIMATE," "PLAN," "INTEND," "ANTICIPATE"
AND SIMILAR EXPRESSIONS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO
RISKS AND UNCERTAINTIES (INCLUDING THOSE SET FORTH BELOW IN THE SECTION OF
THIS ITEM 2 OF THIS QUARTERLY REPORT ON FORM 10-Q UNDER THE CAPTION "RISK
FACTORS" AND IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1999) THAT COULD CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THOSE
PROJECTED. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE HEREOF.
WE EXPRESSLY DISCLAIM ANY OBLIGATION OR UNDERTAKING TO RELEASE PUBLICLY ANY
UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO
REFLECT ANY CHANGE IN OUR EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN
EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENTS ARE BASED.
OVERVIEW
We primarily develop and market products designed to assist
pharmaceutical and biotechnology companies in the identification of drug
candidates and to accelerate the traditional drug discovery process. These
products include our proprietary IDiscovery-TM- technologies, comprised of our
Chem.Folio-Registered Trademark- chemical compounds and our iDEA-TM- predictive
ADME simulation system. We also conduct an internal drug discovery program in
the areas of obesity, diabetes and syndrome X, a syndrome associated with
obesity and diabetes, involving the human body's resistance to insulin.
The Opportunity
Traditional drug discovery involves several sequential steps, creating
a time-consuming process with a high attrition rate. In order to discover a
drug, scientists first must identify targets in the human body. Targets are
biological molecules that cause medical conditions or diseases. Most drugs work
by binding to a target and changing the target's function or activity. Thus,
after selecting a target, scientists then must identify those chemical compounds
that change the target's function. These compounds are known as "hits."
Scientists often identify hits by first acquiring hundreds of thousands of
chemical compounds. This large quantity of compounds, otherwise known as a
compound library, may be generated by a technology called combinatory chemistry.
Combinatorial chemistry permits the rapid creation of hundreds of thousands of
chemical compounds through automated techniques. Prior to the advent of
combinatorial chemistry, chemists had to create new compounds one at a time.
The generated compounds are then tested, or screened, against the
selected target. Such screening may identify hundreds of hits. Then, in a series
of labor intensive and time consuming steps, scientists determine how the human
body absorbs, distributes, metabolizes and excretes these hits and whether they
are toxic. The pharmaceutical industry refers to these characteristics as ADMET
(absorption, distribution, metabolism, excretion and toxicity). Scientists then
chemically modify the hits to identify those with the appropriate activity and
ADMET characteristics for potentially safe and effective use in humans. This
entire process of determination and modification is called "lead optimization"
and results in the identification of drug candidates. Traditionally, lead
optimization involves the use of animal models, which is slow and inefficient
and poorly predicts successful human drug candidates. It takes approximately
three to five years for scientists to complete this initial phase of drug
discovery. A drug candidate then undergoes preclinical development and three
phases of human clinical development before receiving marketing approval from
the U.S. Food and Drug Administration. The entire process from target selection
to FDA approval of a drug typically ranges from 12-16 years, and the failure
rate is high.
Our Solution
We believe that our IDiscovery-TM- technologies increase the likelihood
of clinical success by identifying those hits with essential drug-like
characteristics at the early stages of the drug discovery process. Therefore, we
believe our products and services will improve the probability of success and
result in a shorter drug discovery process.
8
<PAGE>
CHEM.FOLIO-Registered Trademark- COMPOUNDS LIBRARIES AND SERVICES.
These include:
- off-the-shelf chemical compounds available for immediate
screening against a selected target, and rapid manufacture of
closely related compounds, or analogues, if requested by a
customer;
- chemical compounds made to a customer's specifications;
- information that will enable a customer to make additional
quantities of the chemical compounds; and
- information on the solubility, or the ability of the compound
to dissolve, and cytotoxity, the toxic effect of the compound
on cells, of the Chem.Folio-Registered Trademark- compounds.
We believe that the information provided to our customers will help
them determine whether the compounds would be appropriate drug
candidates at a much earlier stage of the drug development process than
under traditional methods of discovery. In addition to a direct sales
effort, we offer our compounds over the Internet through an electronic
commerce company, ChemNavigator.com, Inc. and through screening
companies, including EVOTEC BioSystems AG.
iDEA-TM- PREDICTIVE ADME SIMULATION SYSTEM. The iDEA-TM- predictive
ADME simulation system is a family of computer simulation programs. We
commercially launched one predictive model, the iDEA-TM- absorption
module, designed to predict the absorption characteristics of chemical
compounds in humans. We based the development of this absorption module
on human clinical data provided by a consortium of major pharmaceutical
companies. In addition, we are developing other models to predict the
other ADMET characteristics and offer our predictive models over the
Internet. We believe that our iDEA-TM- predictive ADME simulation
system will reduce the time and effort required in the lead
optimization process by reducing or eliminating the traditional drug
discovery process' reliance on animal testing.
Internal Drug Discovery
We discovered a group of chemical compounds that appear to influence
the production and activity of particular cytokines, or proteins that act as
messengers between cells, through interaction with melanocortin receptors,
which are protein molecules that bind to hormones called melanocortins
produced by the pituitary gland. We completed a Phase II clinical trial of
one of these compounds, HP-228, in the treatment of post-operative pain in
hip and knee replacements. In the past, we conducted a number of internal
drug discovery programs in this area with collaborators, including Ono
Pharmaceuticals, Co., Ltd. On February 11, 2000, we announced that we will
only conduct internal drug discovery programs if collaborators are available
to fully fund them. Currently, we are carrying out a collaborative program,
fully funded by Novartis Pharma AG, in the area of diabetes, obesity and
syndrome X, the research phase of which will end in May 2001. Additionally,
we have been seeking collaborators for our HP-228 compound and our compounds
for the treatment of sexual dysfunction.
RESULTS OF OPERATIONS
The timing and amounts of revenues from our
IDiscovery-TM-technologies, if any, may be subject to significant
fluctuations and therefore our results of operations for any period may not
be comparable to the results of operations for any other period and may not
be indicative of future operating results. We will be required to conduct
significant research and development during the next several years for the
development of our predictive models and through the middle of next year to
fulfill our obligations to Novartis. We have been unprofitable since our
inception and, while we previously set as an objective reaching positive
quarterly cash flow by the end of 2000, this goal will not be met. While our
expenses have been within our expectations, revenues related to the sale of
Chem.Folio-Registered Trademark- libraries and iDEA-TM- predictive simulation
system have not met our expectations. We are unable to predict when, if ever,
we will become profitable or give assurances as to when our positive cash
flow objective will be met. As of September 30, 2000, our accumulated deficit
was approximately $88.7 million.
Third Quarter 2000 Compared With Third Quarter 1999
We recorded revenues of approximately $3.4 million for the three months
ended September 30, 2000 compared with approximately $4.0 million for the same
period in 1999. Revenues decreased approximately $590,000, or 15%, from the same
quarter in the prior year. This decrease was due primarily to a $318,000
decrease in revenues from the sale of our Chem.Folio-Registered Trademark-
combinatorial libraries. Additionally, revenue for the three months ended
September 30, 1999 included one-time payments from members of the consortium of
companies with whom we collaborated for the development of the initial version
of the iDEA-TM- predictive simulation system for absorption.
9
<PAGE>
As of September 30, 2000, our financial statements reflect a liability
for deferred revenue in the amount of approximately $1.2 million. This amount
primarily represents the advance payments received under our research
collaboration with Novartis Pharma AG which will be recognized when the
correlative services are performed, and payments under our iDEA-TM- absorption
module license agreements which will be recognized over the license agreement
terms.
The cost of sales of $29,000 in the third quarter of 2000 was related
primarily to revenues from the sale of our Chem.Folio-Registered Trademark-
combinatorial libraries, Caco-2 cells, and royalty costs associated with certain
license fee revenues, compared to the cost of sales in the third quarter of 1999
of $83,000, which was related primarily to diffusion chamber sales. The
diffusion chamber business was sold in the fourth quarter of 1999.
Our research and development expenses total approximately $5.0
million and $4.6 million for the three months ended September 30, 2000 and
1999, respectively. This increase of approximately 10% was related primarily
to the continued development of our iDEA-TM- predictive ADME simulation
system, including software licenses purchased to support our enterprise
version. Additionally, expenses related to our Chem.Folio-Registered
Trademark-combinatorial library business increased primarily due to the cost
of manufacturing compounds to fulfill our contract with a single customer.
These increases in expenses were partially offset by a decrease in research
carried out to support internal drug discovery programs.
Our selling, general and administrative expenses total approximately
$2.3 million and $1.7 million for the three months ended September 30, 2000
and 1999, respectively. The increase of approximately 35% was due primarily
to salaries, benefits and travel expenses related to the expansion of our
sales and marketing organization to support the distribution of our products
and services. In addition, we recognized increased non-cash amortization
expenses during the quarter ended September 30, 2000, as a result of an
investment in ChemNavigator.com, Inc. in August 1999.
Our interest income decreased to approximately $64,000 for the quarter
ended September 30, 2000, compared to $114,000 for the same quarter in 1999. The
decrease was a result of lower short-term investment balances in the quarter
ended September 30, 2000.
Interest expense for the three months ended September 30, 2000 and
1999 was approximately $142,000 and $82,000, respectively. The increase in
interest expense resulted from obligations related to a line of credit
entered into in August 1999 and additional equipment financing accessed in
the quarter ended September 30, 2000.
Nine Months Ended September 30, 2000 Compared With Nine Months Ended September
30, 1999
We recorded revenues of approximately $8.0 million for the nine months
ended September 30, 2000 compared with approximately $8.8 million for the same
period in 1999. Revenues decreased approximately $734,000, or 8%, from the same
period in the prior year. This decrease was due primarily to a decrease in
revenues from research conducted under collaborative research agreements due to
the completion of certain of those agreements. Additionally, revenues decreased
as a result of the sale of our diffusion chamber business in the fourth quarter
of 1999. These decreases in revenues were partially offset by an increase in
revenues from sales of our Chem.Folio-Registered Trademark- combinatorial
libraries in the nine months ended September 30, 2000 compared with the same
period in 1999.
The cost of sales of $136,000 in the nine months ended September 30,
2000 was related primarily to revenues from sales of our
Chem.Folio-Registered Trademark- combinatorial libraries, Caco-2 cells to a
lesser extent, and royalty costs associated with certain license fee
revenues, compared to the cost of sales in the nine months ended September
30, 1999 of $242,000, which was related primarily to diffusion chamber sales.
The diffusion chamber business was sold in the fourth quarter of 1999.
Our research and development expenses total approximately $13.6
million and $13.5 million for the nine months ended September 30, 2000 and
1999, respectively. The increase of approximately 1% resulted primarily from
continued development of our iDEA-TM- predictive ADME simulation system and
increased activity in our Chem.Folio-Registered Trademark- combinatorial
libraries business, substantially offset by a decrease in expenses from
research carried out to support internal drug discovery programs.
Our selling, general and administrative expenses total approximately
$6.6 million and $5.2 million for the nine months ended September 30, 2000 and
1999, respectively. The increase of approximately 27%, was due primarily to
increases in salaries, benefits and travel associated with the commencement of
efforts in June 1999 to establish a sales and marketing organization to support
the distribution of our products and services. In addition, we recognized
increased non-cash amortization expenses during the nine months ended September
30, 2000 as a result of an investment in ChemNavigator.com, Inc. in August 1999.
10
<PAGE>
Our interest income increased to approximately $587,000 for the nine
months ended September 30, 2000, compared to $415,000 for the same period in
1999. The increase was due primarily from the receipt of interest on the
promissory notes of TerraGen Discovery Inc. which were issued in conjunction
with the March 1999 sale of substantially all of the assets of ChromaXome Corp.,
a wholly owned subsidiary of Trega. The outstanding principal balance along with
all accrued interest was received in April 2000.
Interest expense for the nine months ended September 30, 2000 and
1999 was approximately $407,000 and $241,000, respectively. The increase in
interest expense resulted from obligations related to a line of credit
entered into in August 1999 and additional equipment financing accessed in
the nine months ended September 30, 2000.
We recorded gains of approximately $1.0 million and $1.5 million in the
nine months ended September 30, 2000 and 1999, respectively, in connection with
the sale of the assets of ChromaXome Corp.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception through September 30, 2000, we have financed our
activities primarily from public and private sales of equity, funding from
collaborations with corporate partners, sales derived from shipments of
combinatorial libraries or individual compounds, sales of custom peptides and
combinatorial peptide libraries (through our former subsidiary, Multiple Peptide
Systems, Inc.), sales of our businesses believed to be no longer strategic to us
and interest income. At September 30, 2000, we had cash, cash equivalents and
short-term investments aggregating $5.8 million compared to $6.4 million on
December 31, 1999. We have invested a significant portion of our excess funds in
cash equivalents and short-term investments primarily of highly-rated debt
instruments of financial institutions and corporations. (See "Item 3 -
Qualitative and Quantitative Disclosure About Market Risk" below.)
We intend to fund a significant portion of our business with revenues
derived from our IDiscovery-TM- technologies that include Chem.Folio-Registered
Trademark- combinatorial libraries and services and the iDEA-TM- predictive
ADME simulation system. The timing and amounts of revenues from our
IDiscovery-TM- technologies, if any, may be subject to significant fluctuations
and therefore our results of operations for any period may not be comparable to
the results of operations for any other period and may not be indicative of
future operating results. For example, in September 1998, we entered into a $7.5
million agreement with a single customer to supply compounds over a two-year
period. This agreement was substantially completed in September 2000. To date,
we have not been able to offset this anticipated loss of revenues and may not be
able to sell a sufficient number of compounds to replace these revenues in the
near future. We have been unprofitable since our inception and we are unable to
predict when, if ever, we will become profitable.
In April 2000, we sold approximately 3.7 million newly issued shares of
our common stock to selected institutional and other accredited investors for
approximately $10.1 million in net proceeds. Additionally, in the nine month
period ended September 30, 2000, we received approximately $1.0 million in
connection with the sale of the assets of ChromaXome, approximately $1.8 million
from the issuance of equipment notes and notes payable, and $863,000 from the
issuance of the our common stock upon the exercise of options and warrants and
as a result of participation in our employee stock purchase plan. During the
nine months ended September 30, 2000, cash used to fund operating activities was
approximately $11.5 million. In addition, we purchased $1.5 million of property
and equipment as well as made $1.2 million in principal payments under debt
obligations. The amounts invested in property and equipment were funded, in
part, by equipment financing lines. (See "Note 3 to our Consolidated Financial
Statements".)
In August 1999, we entered into a line of credit in the amount of
$1.5 million that provides funds to be used primarily for working capital
purposes. The line of credit, which is secured by our general assets, bears
interest at prime plus .75% (10.25% at September 30, 2000) per annum and is
for a term of one year. The line of credit contains covenants relating to
cash flow coverage and minimum cash balances. As of September 30, 2000, we
are in compliance with all debt covenants. In August 1999, the entire line of
credit of $1.5 million was accessed and $1.5 million remains outstanding at
September 30, 2000. In connection with the receipt of the line of credit, we
issued a warrant to the lender to purchase up to 20,000 shares of our common
stock at $1.75 per share. The warrant expires on August 5, 2004. In July and
August 2000, we entered into agreements that together extended the term of
the line of credit to October 20, 2000. In November 2000, we entered into an
agreement to extend the term of the line of credit an additional 12 months.
Under this extension, we were required to place a $1.5 million time
certificate of deposit (the current outstanding balance under the line) with
the lender as collateral.
In March 2000, we obtained an equipment financing line of $600,000, of
which we had accessed approximately $578,000 by September 30, 2000. The loan,
which is secured by certain equipment, bears interest of 13.337% per annum and
is to be repaid monthly over a four-year term. In addition, we obtained an
additional equipment financing line of $1.4 million in April 2000. We
11
<PAGE>
have accessed approximately $1.1 million through September 30, 2000. The loan,
which is secured by certain of our equipment, bears interest of 14.423% per
annum and is to be repaid monthly over a four-year term.
In connection with certain other equipment financing lines, we must
meet certain financial covenants pertaining to the amount of our cash and
marketable securities to be maintained during the terms of the financing. Due
to certain covenant violations, in November 1999, we provided required
security deposits in the amount of $490,000 and therefore have fulfilled our
obligations related to the covenants. The security deposits are included in
the other assets line item in the consolidated balance sheet.
During 1998, we moved into a combined research and development facility
and corporate headquarters in San Diego, California. The ten-year lease covering
the facility requires annual rent payments of approximately $2.0 million and is
subject to a 3.5% annual escalation clause. Effective July 2000, we entered into
an agreement to sublease approximately 23% of the facility for a term of five
years. In accordance with the sublease agreement, we will receive monthly rent
payments from the subtenant totaling approximately 23% of our required annual
rent payments.
In June 1999, we signed a Mutual Release with Dura Pharmaceuticals
("Dura") which terminates a research agreement entered into in February 1996,
other than in certain limited regards. Under the original research agreement, we
were committed to fund $6 million over four years in a drug discovery and
development collaboration using Dura's proprietary drug delivery technology and
our compounds (such as HP 228). As of March 31, 2000, our obligation under the
Mutual Release with Dura had been paid.
We intend to use our financial resources primarily to fund research and
development relating to our Chem.Folio-Registered Trademark- combinatorial
chemistry library inventories and our iDEA-TM- predictive ADME simulation
system. The amounts actually expended for each purpose may vary significantly
from time to time as well as with respect to each other.
As of September 30, 2000, we estimate that our current gross quarterly
cash outlay for operations is approximately $5.8 million. Assuming our cash
outlay declines when our existing research and development collaboration expires
(at the end of May 2001), and including estimated debt payments of $1.8 million,
we will need total capital of approximately $23.9 million over the next twelve
months. Assuming a level of Chem.Folio-Registered Trademark- compound library
revenues for the next twelve months that is comparable to Chem.Folio-Registered
Trademark- compound library revenues for the twelve months ended September 30,
2000 ($7.9 million), we anticipate that our existing capital resources, funding
under an existing research and development collaboration, the potential sale of
nonessential assets, and our currently available property and equipment
financing and line of credit, will be sufficient to fund approximately $19.5
million of our current and planned operations through the next twelve months. We
believe that product licenses of our iDEA-TM- predictive ADME simulation system
over the next year will provide a portion of this remaining needed capital while
the balance is expected to come from additional financing. However, this level
of anticipated revenues may not be achieved as we may not be able to offset the
loss of revenues due to the impending completion of a compound supply agreement
with a single customer which contributed $7.5 million to revenues over its two
year term. Additionally, the remaining capital needed in excess of that provided
by product revenues may not be available on terms acceptable to us, or at all.
If we cannot raise more money we may have to reduce our capital expenditures,
scale back our development of new products, delay, or curtail operations
significantly. Any additional equity financing may be dilutive to stockholders,
and debt financing, if available, may include restrictive covenants.
We intend to consider the acquisition or licensing of technologies
that will add value to our IDiscovery-TM- technologies. We anticipate that we
will be required to raise additional capital over a period of several years
in order to acquire such complementary technologies. Such capital may be
raised through additional public or private financings, as well as
collaborative arrangements, borrowings and other available sources. There can
be no assurance that additional financing will be available on acceptable
terms, if at all. If adequate funds are not available, whether through the
generation of revenue, the sale of assets, or resulting from raising
additional capital, we may be required to delay, reduce the scope of, or
eliminate certain of our activities, which could have a material adverse
effect on us.
In June 2000, our Stockholders approved a 2.5 million increase in the
number of shares reserved for issuance under our 1996 Stock Incentive Plan.
RISK FACTORS
WE WISH TO CAUTION READERS THAT THE FOLLOWING IMPORTANT FACTORS, AMONG
OTHERS (INCLUDING THOSE NOTED IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1999 AND OUR REGISTRATION STATEMENT ON FORM S-3), IN SOME
CASES HAVE AFFECTED, AND IN THE FUTURE COULD AFFECT, OUR ACTUAL CONSOLIDATED
RESULTS AND COULD CAUSE OUR ACTUAL CONSOLIDATED RESULTS FOR FUTURE
12
<PAGE>
PERIODS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING
STATEMENTS MADE BY US OR ON OUR BEHALF.
WE EXPECT TO CONTINUE TO INCUR LOSSES AND MAY NEVER ACHIEVE PROFITABILITY, WHICH
MAY HARM OUR FUTURE OPERATING PERFORMANCE AND CAUSE OUR STOCK PRICE TO DECLINE.
We have experienced significant operating losses since our inception in
1991. For the years ended December 31, 1999, 1998 and 1997, we had net losses of
approximately $8.7 million, $12.8 million and $9.4 million, respectively. As of
September 30, 2000, we had an accumulated deficit of approximately $88.7
million.
Throughout 2000, we intend to continue to spend additional amounts on
developing, marketing and selling our IDiscovery-TM- products and services.
These amounts include investments in marketing our iDEA-TM- absorption module,
developing additional iDEA-TM- modules, expanding our Chem.Folio-Registered
Trademark- chemical compound inventory, acquiring and licensing complementary
technologies and expanding our use of the Internet and intranet to market and
disseminate our products and services.
If revenues do not correspondingly increase, our operating results
and financial condition could be negatively affected. Should we continue to
incur net losses in future periods, we may not be able to increase or
continue our investment in the development of our products and services under
our present plans. Although we previously set an objective to reach positive
quarterly cash flow by the end of 2000, this goal will not be met, and we may
never obtain sufficient revenues to achieve profitability. If we do achieve
profitability, we may not sustain or increase profitability in the future.
This in turn may cause our stock price to decline.
OUR OPERATING RESULTS ARE UNPREDICTABLE, WHICH MAY CAUSE OUR STOCK PRICE TO
DECLINE AND RESULT IN LOSSES TO OUR INVESTORS.
Our operating results are unpredictable and may fluctuate significantly
from period to period, which may cause our stock price to decline and result in
losses to investors. Some of the factors that could cause our operating results
to fluctuate include:
- changes in the demand for our IDiscovery-TM- products and
services;
- the introduction of competitive products or services;
- the nature, pricing and timing of other products and services
provided to our customers;
- acquisition, licensing and other costs related to the
expansion of our operations;
- changes in the research and development budgets of our
customers and collaborators; and
- payments of milestones, license fees or royalty payments under
the terms of our external alliances or future collaborations.
Moreover, the nature of our revenues underwent a significant shift due
to the change in our strategic focus. For example, in the nine months ended
September 30, 2000, revenues from our compound libraries accounted for
approximately 60% of our total revenues as compared to only 50% in the
comparable period in 1999. In the nine months ended September 30, 2000, revenues
from research conducted under collaborative research agreements accounted for
only 40% of our total revenues versus 47% in the comparable period in 1999. As a
result of these changes, we believe that period-to-period comparisons of our
financial results will not necessarily be meaningful. You should not rely on
these comparisons as an indication of our future performance. If our operating
results in any future period fall below the expectations of securities analysts
and investors, our stock price will likely fall, possibly by a significant
amount.
WE WILL NEED TO RAISE ADDITIONAL CAPITAL THAT MAY BE UNAVAILABLE, WHICH COULD
ADVERSELY AFFECT OUR OPERATIONS AND STOCK PRICE.
We will need to raise more money to continue the research and
development necessary to bring our products to market and to establish or
expand manufacturing and marketing capabilities. Additionally, we intend to
consider acquisitions and licensing of technologies that will add value to
our IDiscovery-TM- technologies, although our financial resources may
materially inhibit or preclude us from doing so. We may seek additional funds
through public and private stock offerings, arrangements with corporate
partners, borrowings under lease lines of credit or other sources. The amount
of money needed will depend on many factors, including among others:
13
<PAGE>
- expenses in connection with the development of our
IDiscovery-TM- technologies or other products or services;
- expenses in connection with maintaining our intellectual
property, including preparing, filing, and prosecuting patent
claims and enforcing patents;
- our current and potential collaborative relationships; and
- the need to increase research and development spending to keep
up with competing technologies and market developments.
As of September 30, 2000, we estimate that our current gross quarterly
cash outlay for operations is approximately $5.8 million. Assuming our cash
outlay declines when our existing research and development collaboration expires
(at the end of May 2001), and including estimated debt payments of $1.8 million,
we will need total capital of approximately $23.9 million over the next twelve
months. Assuming a level of Chem.Folio-Registered Trademark- compound library
revenues for the next twelve months that is comparable to Chem.Folio-Registered
Trademark- compound library revenues for the twelve months ended September 30,
2000 ($7.9 million), we anticipate that our existing capital resources, funding
under an existing research and development collaboration, the potential sale of
nonessential assets, and our currently available property and equipment
financing and line of credit, will be sufficient to fund approximately $19.5
million of our current and planned operations through the next twelve months. We
believe that product licenses of our iDEA-TM- predictive ADME simulation system
over the next year will provide a portion of this remaining needed capital while
the balance is expected to come from additional financing. However, this level
of anticipated revenues may not be achieved as we may not be able to offset the
loss of revenues due to the impending completion of a compound supply agreement
with a single customer which contributed $7.5 million to revenues over its two
year term. Additionally, the remaining capital needed in excess of that provided
by product revenues may not be available on terms acceptable to us, or at all.
If we cannot raise more money we may have to reduce our capital expenditures,
scale back our development of new products, delay, or curtail operations
significantly. Any additional equity financing may be dilutive to stockholders,
and debt financing, if available, may include restrictive covenants.
OUR NEW BUSINESS STRATEGY OF FOCUSING ON OUR IDISCOVERY-TM- TECHNOLOGIES AND
UNPREDICTABLE FUTURE REVENUES MAKES EVALUATION OF OUR BUSINESS AND PROSPECTS
DIFFICULT.
Our new business strategy of focusing on IDiscovery-TM- technologies,
that we believe will allow oUR customers to identify drug candidates more
efficiently, is unproven. Because of this strategic shift in focus, we cannot
accurately predict our future revenues. We currently have limited customers for
our first module of the iDEA-TM- predictive ADME simulation system, the
absorption module. We generated only limited revenues OF approximately $4.8
million for the nine months ended September 30, 2000 from our
Chem.Folio-Registered Trademark- compound customers. In addition, we still
depend in part on revenues received from a collaborator, Novartis, for one of
our internal drug discovery programs. Our success will depend in large part
upon:
- the performance of our IDiscovery-TM- technologies in
accelerating the drug discovery process;
- the acceptance of our IDiscovery-TM- technologies by our
customers;
- our ability to enter into collaboration, licensing and other
agreements for IDiscovery-TM- technologies ON favorable terms;
and
- our ability to generate revenues with existing and potential
collaborators in our internal drug discovery programs.
Moreover, we have limited experience marketing our iDEA-TM- absorption
module, which we launched in December 1999. Additionally, the sales cycle of
such module is unknown. Furthermore, the plans for our future predictive
modules, such as a metabolism module, are unproven, and we cannot be sure that
we will ever develop these products or that any product that we develop will be
commercially successful. As a result of these factors, it is difficult to
predict our future revenues and evaluate our business prospects.
OUR IDISCOVERY-TM- TECHNOLOGIES AND PRODUCTS MAY NOT BE COMMERCIALLY VIABLE OR
SUCCESSFUL, WHICH COULD CAUSE US TO GENERATE INSUFFICIENT REVENUES TO BECOME
PROFITABLE.
Our ability to succeed depends upon the acceptance by potential
customers of our IDiscovery-TM- technologies, in place of more traditional
methods, as effective tools in the discovery of new drugs. Drug discovery
methods based upon our IDiscovery-TM-
14
<PAGE>
technologies may not lead to the discovery or development of commercial
pharmaceutical products. Moreover, we have not yet completed or commenced most
of our iDEA-TM- predictive ADME simulation system development program. These
technology programs may not be developed, employed or commercialized
successfully, work efficiently or otherwise enhance our ability to engage in the
acceleration of the drug discovery process. Some of the factors that will
determine the demand for our IDiscovery-TM- technologies include:
- the efficacy of our iDEA-TM- modules;
- the development of iDEA-TM- modules in addition to the
absorption module; and
- the novelty and diversity of our Chem.Folio-Registered
Trademark- libraries.
In order for us to achieve our business objectives, we must convince
these companies that our iDEA-TM- modules and compound libraries will reduce
both the cost and length of the drug discovery process. If we cannot convince
companies in the pharmaceutical industry of the effectiveness of our
IDiscovery-TM- technologies, we may BE unable to keep our existing customers or
attract additional customers on acceptable terms or develop a sustainable,
profitable business.
IF WE FAIL TO SECURE NEW COLLABORATORS, OR LOSE OUR EXISTING COLLABORATORS, OR
IF OUR COLLABORATORS DO NOT APPLY ADEQUATE RESOURCES TO THEIR COLLABORATIONS
WITH US, OUR PRODUCT DEVELOPMENT ACTIVITIES AND OUR POTENTIAL FOR PROFITABILITY
MAY SUFFER.
While our reliance on collaborators to date has been limited, our
current strategy for the utilization and development of our IDiscovery-TM-
technologies and internal drug discovery programs requires us to enter into
contractual arrangements with corporate collaborators, licensors, licensees and
others. In fact, we intend to proceed with our internal drug discovery programs
only if collaborators are available to fully fund such programs. There may only
be a limited number of pharmaceutical or biotechnology companies that would
potentially collaborate with us. Thus, we may not be successful in negotiating
additional commercially and scientifically sound collaborations.
We currently have material arrangements with the following third
parties: EVOTECH Biosystems AG, ChemNavigator.com, Inc., Novartis Pharma AG and
The Scripps Clinic and Research Foundation. To date, we have relied on
collaborators such as Novartis to fund our internal drug discovery programs in
the area of melanocortin receptors. In addition, we license from Scripps the Tea
Bag technology, which is a key production technique used in our compound
business.
Our success depends in part upon the performance by these collaborators
under these arrangements. We will have little or no control over the resources
that any collaborator may devote to its collaboration with us. If any
collaborator breaches or terminates its agreement with us to develop an
IDiscovery-TM- product OR service, or fails to conduct its collaborative
activities in a timely manner, the commercialization of our products could be
delayed or prevented completely. In the case of our internal drug discovery
programs, the failure to conduct a collaborative program in a timely manner
would prevent us from receiving potential milestones and royalties. Furthermore,
our collaborators may resist sharing revenue derived from the successful
commercialization of a drug through royalty payments, or others may have
competing claims to all or a portion of such revenue.
Disputes may arise with our collaborators over ownership rights to
intellectual property, know-how or technologies developed with our
collaborators. Our arrangements with our collaborators involving our
Chem.Folio-Registered Trademark- chemical compounds may require us to provide
identical or similar chemical compounds, or chemical compound technologies or
information to multiple parties. Disputes may arise between collaborators as to
proprietary rights to particular compounds in our libraries. If disputes arise,
our existing customers could stop using our chemical compounds; we could lose
existing and potential customers; we could have difficulty in attracting future
collaborators to assist with our product development efforts; and we could incur
litigation costs, which would affect our financial position.
WE DEPEND ON KEY EMPLOYEES IN A COMPETITIVE MARKET FOR SKILLED PERSONNEL, AND
THE LOSS OF THEIR SERVICES WOULD AFFECT OUR ABILITY TO ACHIEVE OUR OBJECTIVES.
Our products and services are highly technical. Our key personnel must
have specialized training or advanced degrees in order to develop and refine
these products and services. There is a shortage of qualified scientific,
management and software development personnel who possess the technical
background necessary to adequately understand and improve our products and
services. We compete for these personnel with other pharmaceutical and
biotechnology companies, software firms, academic institutions and government
entities. If we are unable to attract and retain scientific and management
personnel with the appropriate
15
<PAGE>
credentials and experience, our products and services could become
noncompetitive and obsolete. Our product development, operations and marketing
efforts would be delayed or curtailed if we lose the services of any of these
people. Further development of our products, including our iDEA-TM- predictive
models and Chem.Folio-Registered Trademark- compound libraries, requires us to
hire additional qualified scientific personnel to perform research and
development, as well as personnel with software development expertise. If we are
unable to continue to attract, train and retain these personnel, we may be
unable to expand our business.
BECAUSE OUR REVENUES ARE DERIVED PRIMARILY FROM THE PHARMACEUTICAL AND
BIOTECHNOLOGY INDUSTRIES, OUR REVENUES MAY FLUCTUATE SUBSTANTIALLY DUE TO
REDUCTIONS AND DELAYS IN RESEARCH AND DEVELOPMENT EXPENDITURES.
We expect to derive revenues primarily from products and services
provided to the pharmaceutical and biotechnology industries. Accordingly, our
success will depend in large part upon the success of the companies within those
industries and their demand for our products and services. Our operating results
may fluctuate substantially due to reductions and delays in research and
development expenditures by companies in those industries. These reductions and
delays may result from factors such as:
- changes in economic conditions;
- consolidation in the pharmaceutical and biotechnology
industries;
- changes in the regulatory environment affecting health care
and health care providers;
- pricing pressures;
- market-driven pressures on companies to consolidate and reduce
costs; and
- other factors affecting research and development spending.
We have no control over these factors.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to changes in interest rates primarily from our
long-term debt arrangements and, secondarily, our investments in certain
available for sale securities. We invest our excess cash in highly liquid
short-term investments that are typically held for the duration of the term of
the respective instrument. We do not utilize derivative financial instruments,
derivative commodity instruments or other market risk sensitive instruments,
positions or transactions to manage exposure to interest rate changes.
Accordingly, we believe that, while the securities we hold are subject to
changes in the financial standing of the issuer of such securities, we are not
subject to any material risks arising from changes in interest rates, foreign
currency exchange rates, commodity prices, equity prices or other market changes
that affect market risk sensitive instruments.
16
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 Sublease Agreement dated July 25, 2000 between Trega
and Neurovir Therapeutics, Inc.
10.2 Loan Extension Agreement dated August 18, 2000
between Trega and Imperial Bank
10.3 First Amendment to Promissory Note and Credit
Agreement dated November 13, 2000
between Trega and Imperial Bank
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
On August 3, 2000, the Company filed a report on Form 8-K relating to the
financial information for Trega Biosciences, Inc. for the quarter ended June 30,
2000 and forward-looking statements relating to the second half of 2000 as
presented in a press release of August 3, 2000.
17
<PAGE>
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.
Trega Biosciences, Inc.
Date: November 14, 2000 /s/ Michael G. Grey
--------------------
Michael G. Grey
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Gerard A. Wills
---------------------
Gerard A. Wills
Vice President, Finance and Chief Financial
Officer
(Principal Financial and Accounting Officer)
18
