<PAGE>
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 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 No. 000-24537
DYAX CORP.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 04-3053198
(State of Incorporation) (I.R.S. Employer Identification Number)
ONE KENDALL SQUARE, CAMBRIDGE, MA 02139
(Address of Principal Executive Offices)
(617) 225-2500
(Registrant's Telephone Number, including Area Code)
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__________________ NO X
Number of shares outstanding of Dyax Corp.'s Common Stock as of November 9,
2000:
Common Stock, par value $.01 18,822,054 shares outstanding
<PAGE>
DYAX CORP.
QUARTER ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Unaudited Financial Statements
Consolidated Balance Sheet (Unaudited)
September 30, 2000 and December 31, 1999 ...................3
Consolidated Statement of Operations (Unaudited)
For the three months ended September 30, 2000 and
1999 and for the nine months ended September 30,
2000 and 1999 ..............................................4
Consolidated Statement of Cash Flows (Unaudited)
For the nine months ended September 30, 2000 and 1999 ......5
Notes to Unaudited Financial Statements ...........................6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations .....................10
Item 3 - Quantitative and Qualitative Disclosures About Market Risk ........13
PART II - OTHER INFORMATION ................................................14
Item 2 - Use of Proceeds from Registered Securities .......................14
Item 6(a) - Exhibits .......................................................14
Item 6(b) - Reports on Form 8-K ............................................14
Signatures .................................................................15
Exhibit Index ..............................................................16
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Unaudited Consolidated Financial Statements
DYAX CORP.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 72,495,000 $ 16,726,000
Accounts receivable, net....................................... 5,091,000 3,098,000
Inventories.................................................... 3,174,000 2,912,000
Notes receivable, officers 1,734,000 ----
Other current assets........................................... 883,000 335,000
------------- ------------
Total current assets......................................... 83,377,000 23,071,000
Fixed assets, net.............................................. 3,583,000 2,709,000
Notes receivable, officers..................................... 100,000 1,745,000
Goodwill and other intangibles, net............................ 1,322,000 1,990,000
Other assets................................................... 77,000 93,000
------------ ------------
Total assets................................................. $ 88,459,000 $ 29,608,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.......................... $ 4,078,000 $ 5,850,000
Current portion of deferred revenue............................ 4,145,000 1,603,000
Current portion of capital leases.............................. 667,000 339,000
------------ ------------
Total current liabilities...................................... 8,890,000 7,792,000
Capital leases.................................................... 1,742,000 1,249,000
Deferred revenue.................................................. 5,281,000 1,267,000
------------ ------------
Total liabilities............................................ $ 15,913,000 $ 10,308,000
Stockholders' equity:
Class A convertible preferred stock, $.01 par value; 1,000,000
and 15,312,391 shares authorized at September 30, 2000 and
December 31, 1999, respectively; no shares and 14,696,987
shares issued and outstanding at September 30, 2000 and
December 31, 1999, respectively.............................. ---- 57,426,000
Common stock, $0.01 par value; 50,000,000 and 20,000,000
shares authorized at September 30, 2000 and December 31,
1999, respectively; 18,795,491 and 2,353,790 shares issued
and outstanding at September 30, 2000 and December 31, 1999,
respectively................................................. 188,000 24,000
Additional paid-in capital........................................ 140,732,000 18,938,000
Receivable from officer for common stock purchase................. (418,000) (418,000)
Accumulated (deficit)............................................. (62,873,000) (51,655,000)
Deferred compensation............................................. (4,928,000) (4,907,000)
Accumulated other comprehensive loss.............................. (155,000) (108,000)
------------ ------------
Total stockholders' equity................................... 72,546,000 19,300,000
------------ ------------
Total liabilities and stockholders' equity................... $ 88,459,000 $ 29,608,000
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
3
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DYAX CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
2000 1999 2000 1999
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Product sales............................. $ 3,604,000 $ 3,587,000 $ 10,291,000 $ 8,833,000
Product development and license fee revenues 2,692,000 1,081,000 6,269,000 2,809,000
------------ ------------ ------------ ------------
Total revenues............................... 6,296,000 4,668,000 16,560,000 11,642,000
Operating expenses:
Cost of products sold..................... 1,710,000 1,539,000 4,780,000 3,850,000
Research and development.................. 3,521,000 2,905,000 10,514,000 7,558,000
Selling, general and administrative....... 3,683,000 3,561,000 12,049,000 9,673,000
Stock-based compensation.................. 468,000 235,000 1,346,000 705,000
------------ ------------ ------------ ------------
Total operating expenses..................... 9,382,000 8,240,000 28,689,000 21,786,000
------------ ------------ ------------ ------------
Loss from operations......................... (3,086,000) (3,572,000) (12,129,000) (10,144,000)
------------ ------------ ------------ ------------
Interest income (expense), net............ 592,000 196,000 911,000 614,000
Investment income......................... ---- 265,000 ---- 265,000
------------ ------------ ------------ ------------
Net loss..................................... $ (2,494,000) $ (3,111,000) $(11,218,000) $(9,265,000)
------------ ------------ ------------ ------------
Other comprehensive income (loss):
Foreign currency translation adjustment. (190,000) 108,000 (47,000) 28,000
------------ ------------ ------------ ------------
Other comprehensive income (loss) ...... (190,000) 108,000 (47,000) 28,000
------------ ------------ ------------ ------------
Comprehensive loss........................... $ (2,684,000) $ (3,003,000) $(11,265,000) $ (9,237,000)
------------ ------------ ------------ ------------
Basic and diluted net loss per share......... $ (.24) $ (1.50) $ (2.20) $ (4.99)
Shares used in computing basic and diluted net
loss per share............................ 10,558,553 2,077,826 5,105,308 1,856,339
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
4
<PAGE>
DYAX CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................. $(11,218,000) $ (9,265,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization.................................................... 669,000 445,000
Amortization of goodwill and other intangibles................................... 668,000 252,000
Compensation expenses associated with stock options and restricted
stock.......................................................................... 1,346,000 705,000
Changes in operating assets and liabilities:
Accounts receivable.............................................................. (1,993,000) 27,000
Inventories...................................................................... (262,000) (17,000)
Notes receivable, officers....................................................... (89,000) (100,000)
Other assets..................................................................... (532,000) (157,000)
Accounts payable and accrued expenses............................................ (1,772,000) 465,000
Deferred revenue................................................................. 6,556,000 2,116,000
------------ ------------
Net cash used in operating activities................................................. (6,627,000) (5,529,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets........................................................... (1,543,000) (1,152,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the issuance of common stock from initial public offering........ 62,697,000 --
Proceeds from exercise of stock options and warrants............................... 226,000 5,000
Proceeds from sale-leaseback of equipment.......................................... 1,186,000 596,000
Repayment of capital lease obligations............................................. (366,000) (258,000)
------------ ------------
Net cash provided by financing activities............................................. 63,743,000 343,000
Effect of foreign currency translation on cash balances............................... 196,000 (1,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents.................................. 55,769,000 (6,339,000)
Cash and cash equivalents at beginning of the period.................................. 16,726,000 25,491,000
------------ ------------
Cash and cash equivalents at end of the period........................................ $ 72,495,000 $ 19,152,000
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
5
<PAGE>
DYAX CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Dyax Corp. (the "Company") is a biopharmaceutical company that has developed and
patented phage display technology with broad applications in the discovery and
development of compounds for the treatment and diagnosis of diseases and for the
purification and manufacture of biopharmaceuticals and other chemicals. Through
the use of phage display technology, Dyax's scientists, collaborators and
licensees seek to discover proteins and peptides, including human antibodies,
that bind tightly to specific molecular targets. The Company also develops,
manufactures and sells chromatography separations systems and products under the
Biotage trade name.
The accompanying unaudited interim financial statements have been prepared by
the Company in accordance with generally accepted accounting principles ("GAAP")
in the United States for interim financial information and with the instructions
to Form 10-Q. The consolidated financial statements include the accounts of the
Company and its subsidiaries. All material intercompany balances and
transactions have been eliminated. Certain amounts from prior years have been
reclassified in the accompanying financial statements in order to be consistent
with the current year's classifications.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect (i) the reported amounts of assets and liabilities, (ii) disclosure of
contingent assets and liabilities at the dates of the financial statements and
(iii) the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates. The results of
operations for the nine months ended September 30, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000.
It is management's opinion that the accompanying interim financial statements
reflect all adjustments (which are normal and recurring) necessary for a fair
presentation of the results for the interim periods. The interim financial
statements should be read in conjunction with the consolidated financial
statements included in the Company's Prospectus included as part of its
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on August 14, 2000 (Commission File No. 333-37394).
2. INVENTORY
Inventory consists of the following:
---------------- --- -----------------
SEPTEMBER 30, DECEMBER 31,
2000 1999
---------------- -----------------
Raw Material $ 1,981,000 $ 2,191,000
Work in Progress 478,000 169,000
Finished Goods 715,000 552,000
---------------- -----------------
$ 3,174,000 $ 2,912,000
================ =================
6
<PAGE>
3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
--------------- --- ---------------
SEPTEMBER 30, DECEMBER 31,
2000 1999
Accounts payable $ 1,973,000 $ 3,864,000
Accrued wages and related taxes 1,365,000 1,283,000
Accrued warranty and installation costs 146,000 146,000
Other accrued liabilities 594,000 557,000
--------------- ---------------
$ 4,078,000 $ 5,850,000
=============== ===============
4. NET LOSS PER SHARE
Net loss per share is computed under Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" ("SFAS No. 128"). Basic net loss per share is
computed using the weighted average number of shares of common stock
outstanding. Diluted loss per share does not differ from basic loss per share
since potential common shares from the conversion of preferred stock and
exercise of stock options and warrants are antidilutive for all periods
presented and therefore are excluded from the calculation of diluted net loss
per share.
The following sets forth the computation of net loss per share:
<TABLE>
<CAPTION>
----------------------------- --------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- --------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator:
Net Loss $ (2,494,000) $ (3,111,000) $ (11,218,000) $ (9,265,000)
Denominator:
Weighted average common shares, basic and 10,558,553 2,077,826 5,105,308 1,856,339
diluted
Net loss per share:
Basic and diluted $ (.24) $ (1.50) $ (2.20) $ (4.99)
</TABLE>
At September 30, 2000 and 1999, the following potentially dilutive common shares
were excluded because their effect was antidilutive:
------------------------------
SEPTEMBER 30,
------------------------------
2000 1999
---- ----
Convertible preferred stock -- 11,585,454
Stock options 2,312,292 1,788,864
Warrants -- 27,022
Unvested restricted stock 14,265 121,030
5. STOCKHOLDERS' EQUITY
On August 18, 2000, the Company completed its initial public offering of
4,600,000 shares of common stock at $15.00 per share, including 600,000
shares of common stock issued pursuant to the exercise by the underwriters of
their over-allotment option. The gross proceeds to the Company from the
offering, including the shares sold pursuant to the exercise of the
over-allotment option, was $69,000,000. The costs associated with the initial
public offering were $6,303,000. Coincident with the initial public offering,
14,696,987 shares of preferred stock automatically converted into 11,585,454
shares of common stock.
7
<PAGE>
6. COMPREHENSIVE LOSS
The Company adopted SFAS No. 130 in 1998. Accumulated other comprehensive income
(loss) is calculated as follows:
<TABLE>
<CAPTION>
------------------------------ -- --------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment:
Balance at beginning of each period $ 35,000 $ (203,000) $ (108,000) $ (123,000)
Change during each period
(190,000) 108,000 (47,000) 28,000
-------------- --------------- ---------------- ---------------
Balance at end of each period $(155,000) $ (95,000) $ (155,000) $ (95,000)
============== =============== ================ ===============
</TABLE>
7. BUSINESS SEGMENTS
The Company discloses business segments under SFAS No. 131. Segment data does
not include allocation of corporate administrative costs to each of its
operating segments. The Company evaluates the performance of its segments and
allocates resources to them based on earnings (losses) before corporate
administrative costs, interest and taxes.
The Company has two reportable segments: Separations and
Therapeutics/Diagnostics. The Separations segment develops, manufactures,
markets and sells chromatography separations equipment and media cartridges
under the Biotage trade name. The Therapeutics/Diagnostic segment develops
therapeutic and diagnostic products using the Company's proprietary phage
display technology, licenses this proprietary technology to third parties and
sells affinity ligand based separations products developed using the Company's
phage display technology.
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technologies and marketing strategies.
The following table presents certain segment financial information and the
reconciliation of segment financial information to consolidated totals as of
the:
<TABLE>
<CAPTION>
THERAPEUTICS/
THREE MONTHS ENDED SEPTEMBER 30, 2000 SEPARATIONS DIAGNOSTICS TOTAL
----------- ----------- -----
<S> <C> <C> <C>
Revenue from external customers $ 3,604,000 $ 2,692,000 $ 6,296,000
Segment loss from operations $ (882,000) $ (663,000) $(1,545,000)
Segment assets $ 8,317,000 $ 2,958,000 $11,275,000
THERAPEUTICS/
THREE MONTHS ENDED SEPTEMBER 30, 1999 SEPARATIONS DIAGNOSTICS TOTAL
----------- ----------- -----
Revenue from external customers $ 3,587,000 $ 1,081,000 $ 4,668,000
Segment loss from operations $ (379,000) $(1,667,000) $ (2,046,000)
Segment assets $ 5,988,000 $ 3,907,000 $ 9,895,000
THERAPEUTICS/
NINE MONTHS ENDED SEPTEMBER 30, 2000 SEPARATIONS DIAGNOSTICS TOTAL
----------- ----------- -----
Revenue from external customers $10,291,000 $ 6,269,000 $16,560,000
Segment loss from operations $(2,428,000) $(4,738,000) $(7,166,000)
Segment assets $ 8,317,000 $ 2,958,000 $11,275,000
8
<PAGE>
THERAPEUTICS/
NINE MONTHS ENDED SEPTEMBER 30, 1999 SEPARATIONS DIAGNOSTICS TOTAL
----------- ----------- -----
Revenue from external customers $ 8,833,000 $ 2,809,000 $11,642,000
Segment loss from operations $(1,573,000) $(4,474,000) $(6,047,000)
Segment assets $ 5,988,000 $ 3,907,000 $ 9,895,000
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATIONS: THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income from operations:
Income from operations for
reportable segments $(1,545,000) $(2,046,000) $ (7,166,000) $(6,047,000)
Unallocated amounts:
Corporate expenses (1,541,000) (1,526,000) (4,963,000) (4,097,000)
Investment income -- 265,000 -- 265,000
Interest income, net 592,000 196,000 911,000 614,000
----------- ----------- ------------ -----------
Consolidated net loss $(2,494,000) $(3,111,000) $(11,218,000) $(9,265,000)
=========== =========== ============ ===========
</TABLE>
8. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") 137, Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of SFAS 133.
SFAS 137 amends SFAS 133, Accounting for Derivative Instruments and Hedging
Activities, which was issued in June 1998 and previously was to be effective for
all fiscal quarters of fiscal years beginning after June 15, 1999. SFAS 137
defers the effective date of SFAS 133 to fiscal years beginning after June 15,
2000. Earlier application is permitted. In June 2000, the FASB issued SFAS 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities.
SFAS 138 establishes accounting and reporting standards for a limited number of
derivative instruments and hedging activities when implementing SFAS 133. SFAS
133 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. While management has not determined the impact
of the new standards, they are not expected to be material to the Company.
9. COLLABORATION AND LICENSE AGREEMENT
In March 2000, the Company entered into a collaboration and
license agreement with Human Genome Sciences, Inc. ("HGSI"). Under this
agreement the Company and HGSI will use Dyax's phage display technology to
identify and optimize product leads that bind to therapeutic targets selected
by HGSI, and also to develop new technologies for purifying targets. The
Company granted HGSI a non-exclusive license to its phage display technology
and compound libraries to create leads that may be used as peptide drugs,
human monoclonal antibody drugs and IN VITRO diagnostic products. With the
exception of selected IN VIVO imaging rights, HGSI will retain the rights to
all products that result from this collaboration. In exchange, HGSI will pay
the Company a minimum of $16.0 million in committed license fees and research
funding during the first three years of the five-year agreement, $6.0 million
of which was paid to the Company in March 2000. The Company will also be
entitled to receive milestone payments on therapeutic products and royalties
on all products developed by HGSI under the agreement and will share HGSI's
revenues on any of those products it out-licenses. The $6.0 million cash
payment is being recognized as revenue over the five-year collaboration term
of the agreement. For the nine months ended September 30, 2000, the Company
recognized $1,950,000 of revenue, associated with license fees and research
funding, under the collaboration and license agreement. The excess cash
received over the revenue recognized is recorded as deferred revenue in the
accompanying consolidated balance sheet.
10. SUBSEQUENT EVENTS
In October 2000, the Company entered into a collaboration and
license agreement with Bracco Group ("Bracco"). Under this agreement, the
Company and Bracco will exploit diagnostic imaging and related therapeutic
applications of Dyax's proprietary phage display technology. Bracco has been
granted exclusive worldwide rights to Dyax's technology for development of
diagnostic imaging products, including the right to develop and commercialize
existing Dyax inflammation, cardiovascular and oncology imaging product
leads. Bracco will pay the Company a $3 million up-front licensing fee plus
an additional $3 million per year in research funding over the next three to
six years. Dyax will also receive development milestones and royalties on
product sales. The $3 million up-front licensing fee will be recognized as
revenue over the life of the collaboration agreement.
9
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
BACKGROUND
We are a biopharmaceutical company that has developed and patented a
method, known as phage display, that we are using to identify a broad range of
compounds with potential for the treatment and diagnosis of diseases. We are
using phage display to build a broad portfolio of product candidates that we
plan to develop and commercialize either ourselves or through collaborations. We
are further leveraging this technology platform with collaborative arrangements
and licenses that can produce revenues through research funding, patent and/or
library license fees, milestone payments and royalties. We are currently engaged
in 10 collaborative arrangements with biotechnology and pharmaceutical companies
for the discovery and/or development of biopharmaceutical, separations and
diagnostic lead compounds, and we have licensed our phage display patents to
over 40 companies and institutions on a non-exclusive basis.
We also develop, manufacture and sell chromatography separations
systems and products under the Biotage name. We are a leading developer,
manufacturer and supplier of chromatography separations systems that use
disposable cartridges to separate and purify pharmaceuticals being produced for
research and clinical development. Using our phage display technology, we are
also developing potential separations products to purify biopharmaceuticals.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
REVENUES. Total revenues increased $1.6 million, or 35%, to $6.3
million for the three months ended September 30, 2000 from $4.7 million for the
comparable period in 1999. For the three months ended September 30, 2000,
product sales remained unchanged at $3.6 million. Our product development and
license fee revenue increased $1.6 million, or 149%, to $2.7 million for the
quarter ended September 30, 2000 from $1.1 million in the comparable period in
1999, primarily due to two significant product development collaboration and
technology license arrangements and an additional license agreement entered into
during 2000. Our deferred revenue decreased $0.2 million to $9.4 million for the
three months ended September 30, 2000 as compared with $9.6 million at June 30,
2000. Deferred revenue will remain constant as new deals offset recognition of
existing deferred revenue. Product sales and product development and license
revenues accounted for 57% and 43%, respectively, of total revenues in the 2000
period, as compared with 77% and 23%, respectively, in the 1999 period.
COST OF PRODUCTS SOLD. The cost of products sold increased 11% to
$1.7 million in the three months ended September 30, 2000 from $1.5 million in
the 1999 period as a result of increased product sales. The cost of products
sold as a percentage of product sales increased to 47% in 2000 from 43% in 1999
primarily due to sales of relatively higher cost separations systems. The
Company does not expect gross margins to continue to decrease.
RESEARCH AND DEVELOPMENT. Research and development expenses
increased $0.6 million, or 21%, to $3.5 million in the three months ended
September 30, 2000 from $2.9 million in the comparable period in 1999. The
increase resulted primarily from expenditures on new collaboration
arrangements and compound manufacturing expenditures on the DX-88 project
with Genzyme as Phase I clinical trials began in April 2000. We expect that
research and development expenditures will continue to increase as products
progress through clinical trials. Additionally, we increased internal efforts
to develop products in biopharmaceuticals, separations, diagnostics and
industrial enzymes.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses increased $0.1 million, or 3%, to $3.7 million in the
three months ended September 30, 2000 from $3.6 million in the 1999 period.
These expenses increased due to increased selling and marketing expenses in
connection with the growth in product sales and business development expenses to
support increased collaboration and licensing activity.
STOCK-BASED COMPENSATION EXPENSES. Stock-based compensation expense
increased $233,000, or 99%, to $468,000 in the three months ended September 30,
2000 as compared with $235,000 in the comparable period in
10
<PAGE>
1999, due to increased amortization arising from an increase in the number of
options granted under our equity incentive plan. Stock-based compensation
expense represents the difference between the fair market value of the common
stock on the option grant date and the option exercise price.
INTEREST AND INVESTMENT INCOME. Interest and investment income
increased 28% to $592,000 in the three months ended September 30, 2000 from
$461,000 in 1999 due to higher average cash balance in the 2000 period than in
the 1999 period.
NET LOSS. Our net loss for the three months ended September 30, 2000
was $2.5 million as compared to our net loss for the three months ended
September 30, 1999 of $3.1 million.
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
REVENUES. Total revenues increased $4.9 million, or 42%, to $16.6
million for the nine months ended September 30, 2000 from $11.6 million for the
comparable period in 1999. For the nine months ended September 30, 2000, product
sales increased $1.5 million, or 17%, to $10.3 million from $8.8 million in
1999, primarily due to increased market share of our existing product lines,
particularly in the Flash chromatography product line. Our product development
and license fee revenue increased $3.5 million, or 123%, to $6.3 million for the
quarter ended September 30, 2000, from $2.8 million in the comparable period in
1999, primarily due to two significant product development collaboration and
technology license arrangements and an additional license agreement entered into
during 2000. As a result of these collaboration and license agreements, our
deferred revenue increased $6.5 million to $9.4 million for the nine months
ended September 30, 2000 as compared with $2.9 million at December 31, 1999.
Deferred revenue will remain constant as new deals offset recognition of
existing deferred revenue. Product sales and product development and license
revenues accounted for 62% and 38%, respectively, of total revenues in the 2000
period, as compared with 76% and 24%, respectively, in the 1999 period.
COST OF PRODUCTS SOLD. The cost of products sold increased 24% to
$4.8 million in the nine months ended September 30, 2000 from $3.9 million in
the 1999 period as a result of increased product sales. The cost of products
sold as a percentage of product sales increased to 46% in 2000 from 44% in 1999
primarily due to sales of relatively higher cost separations systems. The
Company does not expect this trend to continue.
RESEARCH AND DEVELOPMENT. Research and development expenses
increased $3.0 million, or 39%, to $10.5 million in the nine months ended
September 30, 2000 from $7.6 million in the comparable period in 1999. The
increase resulted primarily from expenditures on new collaboration
arrangements and compound manufacturing expenditures on the DX-88 project
with Genzyme as Phase I clinical trials began in April 2000. We expect that
research and development expenditures will continue to increase as products
progress through clinical trials. Additionally, we increased internal efforts
to develop products in biopharmaceuticals, separations, diagnostics and
industrial enzymes.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses increased $2.4 million, or 25%, to $12.0 million in the
nine months ended September 30, 2000 from $9.7 million in the 1999 period. These
expenses increased due to increased selling and marketing expenses in connection
with the growth in product sales and business development expenses to support
increased collaboration and licensing activity.
STOCK-BASED COMPENSATION EXPENSES. Stock-based compensation
expense increased $641,000, or 91%, to $1.3 million in the nine months ended
September 30, 2000 as compared with $705,000 in the comparable period in
1999, due to increased amortization arising from an increase in the number of
options granted under our equity incentive plan. Stock-based compensation
expense represents the difference between the fair market value of the common
stock on the option grant date and the option exercise price.
INTEREST AND INVESTMENT INCOME. Interest and investment income
increased 4% to $911,000 in the nine months ended September 30, 2000 from
$879,000 in 1999 due to higher average cash balance in the 2000 period than in
the 1999 period.
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NET LOSS. Our net loss for the nine months ended September 30, 2000
was $11.2 million as compared to our net loss for the nine months ended
September 30, 1999 of $9.3 million.
LIQUIDITY AND CAPITAL RESOURCES
On August 18, 2000, the Company completed its initial public offering
of 4,600,000 shares of Common Stock at a price of $15.00 per share resulting in
net proceeds to the Company, after commissions and expenses, of $62.7 million.
Through September 30, 2000, we have funded our operations principally through
the sale of equity securities, which have provided aggregate net cash proceeds
since inception of approximately $130.9 million. We have also generated funds
from product sales, product development and license fee revenues, interest
income and other sources. As of September 30, 2000, we had cash and cash
equivalents of approximately $72.5 million, an increase of $55.8 million from
December 31, 1999. Our funds are currently invested in U.S. Treasury
obligations.
Our operating activities used cash of $6.6 million and $5.5 million
for the nine months ended September 30, 2000 and 1999, respectively. The use of
cash in all years primarily resulted from our losses from operations and change
in our working capital accounts.
Our investing activities used cash of $1.5 million and $1.2 million
for the nine months ended September 30, 2000 and 1999, respectively. Our
investment activities consisted of purchases of property and equipment.
Our financing activity provided $63.7 million and $.3 million for the
nine months ended September 30, 2000 and 1999, respectively. Our financing
activities consisted primarily of the sale of 4.6 million shares of common stock
in connection with our initial public offering of common stock in August 2000.
We currently have a $3.0 million loan facility available from Genzyme
Corporation that was established as part of the collaboration to bring DX-88 to
market. Interest on any outstanding balance accrues at a rate equal to one
percent over the prime rate of interest. There is currently no amount
outstanding under this facility.
The Company's forecast of the period of time through which financial
resources will be adequate to support the Company's operations is a
forward-looking statement that involves risks and uncertainties, and actual
results could vary as a result of a number of factors. The Company believes that
existing cash, cash equivalents and marketable securities plus anticipated cash
flow from product sales and existing collaborations will be sufficient to
support the Company's current operating plan through the end of 2001. If our
existing resources and the proceeds of our initial public offering are
insufficient to satisfy our liquidity requirements, we may need to sell
additional equity or debt securities. The sale of any equity and/or debt
securities may result in additional dilution to our stockholders, and we cannot
be certain that additional financing will be available in amounts or on terms
acceptable to us, if at all. If we are unable to obtain any required additional
financing, we may be required to reduce the scope of our planned research,
development and commercialization activities, which could harm our financial
condition and operating results.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Quarterly Report on Form 10-Q contains forward-looking
statements, including statements regarding our strategies, results of
operations, research and development programs and collaborations. Statements
that are not historical facts are based on Dyax's current expectations, beliefs,
assumptions, estimates, forecasts and projections about the industry and markets
in which Dyax competes. The statements contained in this release are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed in such forward-looking
statements. Important factors which may affect future operating results include,
without limitation, those set forth under the caption "Risk Factors" in our
Prospectus, dated August 14, 2000, included as a part of our Registration
Statement on Form S-1, Commission File No. 333- 37394, filed with the Securities
and Exchange Commission.
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Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk is confined to our cash, cash equivalents
and marketable securities. We place our investments in high-quality financial
instruments, primarily money market funds and corporate debt securities with
maturities or auction dates of less than one year, which we believe are subject
to limited credit risk. We currently do not hedge interest rate exposure. As of
September 30, 2000, we had cash and cash equivalents of $72.5 million consisting
of cash and highly liquid, short-term investments. Our short-term investments
will decline by an immaterial amount if market interest rates increase, and
therefore, our exposure to interest rate changes is immaterial. Declines of
interest rates over time will, however, reduce our interest income from our
short-term investments. Our outstanding capital lease obligations are all at
fixed interest rates and therefore have minimal exposure to changes in interest
rates.
Most of our transactions are conducted in U.S. dollars. We have
certain collaboration and technology license agreements with parties located
outside the United States. Transactions under certain of these agreements are
conducted in U.S. dollars, subject to adjustment based on significant
fluctuations in currency exchange rates. Transactions under certain other of
these agreements are conducted in the local foreign currency. If the exchange
rate undergoes a change of 10%, we do not believe that it would have a material
impact on our results of operations or cash flows.
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PART II - OTHER INFORMATION
Item 2 - Use of Proceeds from Registered Securities
On August 14, 2000 the Securities and Exchange Commission declared
effective our Registration Statement on Form S-1 (File No. 333-37394)
in connection with the initial public offering of our common stock.
J.P. Morgan & Co., Lehman Brothers and Pacific Growth Equities, Inc.
served as managing underwriters of the offering.
On August 18, 2000, we sold 4,600,000 shares of our common stock
(including 600,000 shares pursuant to the exercise by the underwriters
of their overallotment option) at a price of $15.00 per share to the
underwriters. We received net proceeds in the initial public offering
of approximately $62,697,000, net of underwriter commissions of
approximately $4,830,000 and other offering costs of approximately
$1,473,000. No expenses were paid or payments made to our directors,
officers or affiliates or 10% owners of any class of our equity
securities. From August 18, 2000 through September 30, 2000, we
invested the net proceeds from the offering in cash equivalents and
short-term investments.
The offering has terminated with the sale of all of the securities that
were registered.
Item 6(a) - Exhibits
EXHIBITS DESCRIPTION
3.1 Restated Certificate of Incorporation of Dyax Corp.
3.2 Amended and Restated Bylaws of Dyax Corp.
10.1 Registration Rights Agreement, dated August 31, 1998,
between holders of the Registrant's capital stock named
therein and the Registrant, as amended on October 24, 2000.
10.2+ Collaboration and License Agreement, dated October 31,
2000, between Bracco Holding, B.V. and Bracco
International, B.V. and the Registrant.
10.3 Amended and Restated 1995 Equity Incentive Plan, as
amended on August 18, 2000.
27 Financial Data Schedule. EDGAR only.
+ Certain confidential material contained in this exhibit has been
omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.
Item 6(b) - Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
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DYAX CORP.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DYAX CORP.
Date: November 9, 2000 /s/ STEPHEN S. GALLIKER
----------------------------------
Executive Vice President, Finance
and Administration, and Chief
Financial Officer
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DYAX CORP.
EXHIBIT INDEX
EXHIBITS DESCRIPTION
3.1 Restated Certificate of Incorporation of Dyax Corp.
3.2 Amended and Restated Bylaws of Dyax Corp.
10.1 Registration Rights Agreement, dated August 31, 1998,
between holders of the Registrant's capital stock named
therein and the Registrant, as amended on October 24, 2000.
10.2+ Collaboration and License Agreement, dated October 31,
2000, between Bracco Holding, B.V. and Bracco
International, B.V. and the Registrant.
10.3 Amended and Restated 1995 Equity Incentive Plan, as
amended on August 18, 2000.
27 Financial Data Schedule. EDGAR only.
+ Certain confidential material contained in this exhibit has been
omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.
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