United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-21994
GLYKO BIOMEDICAL LTD.
(Exact name of registrant issuer as specified in its charter)
Canada 98-0195569
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
371 Bel Marin Keys Blvd., Suite 210, Novato, California 94949
(Address of principal executive offices)
(415) 884-6700
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes ____ No_____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 34,141,490 common shares
outstanding as of April 30, 2000.
<PAGE>
GLYKO BIOMEDICAL LTD.
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets...............................................................2
Statements of Operations.....................................................3
Statements of Cash Flows.....................................................4
Notes to Financial Statements................................................5
Item 2. Management's Discussion and Analysis................................10
Item 3. Quantitative and Qualitative Disclosure about Market Risk...........13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................14
Item 2. Changes in Securities...............................................14
Item 3. Defaults upon Senior Securities.....................................14
Item 4. Submission of Matters to a Vote of Security Holders.................14
Item 5. Other Information...................................................14
Item 6. Exhibits and Reports on Form 8-K....................................14
SIGNATURE....................................................................15
<PAGE>
PART I. - FINANCIAL INFORMATION ITEM 1. Financial Statements
(Unaudited)
<TABLE>
GLYKO BIOMEDICAL LTD.
BALANCE SHEETS
(In U.S. dollars)
March 31, December 31,
2000 1999
---------------- ---------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,974,102 $ 574,648
---------------- ---------------
Total current assets 1,974,102 574,648
Investment in BioMarin Pharmaceutical Inc. 25,860,361 28,908,447
---------------- ---------------
Total assets $ 27,834,463 $ 29,483,095
================ ===============
Liabilities and Stockholders' Equity
Current liabilities:
Accrued liabilities $ 397,149 $ 365,569
---------------- ---------------
Total current liabilities 397,149 365,569
Stockholders' equity:
Common stock, no par value, unlimited shares
authorized, 34,141,490 and 31,835,322 shares
issued and outstanding at March 31, 2000
and December 31, 1999, respectively 22,313,205 20,772,469
Additional paid in capital 38,708,037 38,064,481
Common stock warrants and options 18,355 146,472
Note receivable from stockholder (746,637) (746,637)
Accumulated deficit (32,855,646) (29,119,259)
--------------- ---------------
Total stockholders' equity 27,437,314 29,117,526
--------------- ---------------
Total liabilities and stockholders' equity $ 27,834,463 $ 29,483,095
=============== ===============
The accompanying notes are an integral part of these statements.
</TABLE> 2
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GLYKO BIOMEDICAL LTD.
STATEMENTS OF OPERATIONS
(in U.S. dollars)
<TABLE>
Three months ended March 31,
---------------------------------------------
2000 1999
------------------- --------------------
(unaudited) (unaudited)
<S> <C> <C>
General and administrative $ 52,605 $ 66,914
------------------- --------------------
Total expenses: 52,605 66,914
------------------- --------------------
Loss from operations (52,605) (66,914)
Equity in loss of BioMarin Pharmaceutical Inc. (3,691,641) (1,719,032)
Interest income 7,859 41,241
------------------- --------------------
Net loss $ (3,736,387) $ (1,744,705)
=================== ====================
Net loss per common share, basic and diluted $ (0.11) $ (0.06)
=================== ====================
Weighted average number of shares
used in computing per share amounts 32,911,712 29,460,589
=================== ====================
The accompanying notes are an integral part of these statements.
3
</TABLE>
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GLYKO BIOMEDICAL LTD.
STATEMENTS OF CASH FLOWS
<TABLE>
Three months ended March 31,
-----------------------------------
2000 1999
----------------- ----------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,736,387) $ (1,744,705)
Adjustments to reconcile net loss to net cash
used in operating activities:
Equity in the loss of BioMarin Pharmaceutical Inc. 3,691,641 1,719,032
Change in assets and liabilities:
Other assets - (10,990)
Accrued liabilities 31,580 17,662
----------------- ----------------
Total adjustments 3,723,221 1,725,704
----------------- ----------------
Net cash used in operating activities (13,166) (19,001)
Cash flows from financing activities:
Proceeds from the exercise of stock options and
common stock warrants 1,412,620 2,124,258
Repayment of note receivable - 100,000
----------------- ----------------
Net cash provided by financing activities 1,412,620 2,224,258
----------------- ----------------
Net increase in cash and cash equivalents 1,399,454 2,205,257
Cash and cash equivalents, beginning of period 574,648 2,567,824
----------------- ----------------
Cash and cash equivalents, end of period $ 1,974,102 $ 4,773,081
================= ================
</TABLE>
The accompanying notes are an integral part of these statements.
4
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GLYKO BIOMEDICAL LTD.
NOTES TO FINANCIAL STATEMENTS
1. The Company and Description of the Business
Glyko Biomedical Ltd. (the Company or GBL), a Canadian company, was
incorporated in 1992 to acquire all of the outstanding capital stock of
Glyko, Inc., a Delaware corporation. Both entities were under common
control and the share exchange was accounted for in a manner similar to a
pooling. Since its inception in October 1990, Glyko, Inc. has been engaged
in research, development, manufacturing and marketing of new techniques to
analyze and manipulate carbohydrates for research, diagnostic and
pharmaceutical purposes. Glyko, Inc. has developed a line of analytic
instrumentation laboratory products that include an imaging system,
analysis software and chemical analysis kits.
In October 1996, GBL incorporated BioMarin Pharmaceutical Inc. (BioMarin),
a Delaware corporation in the development stage, to develop the Company's
pharmaceutical products. BioMarin began business on March 21, 1997 and
issued 1.5 million shares of common stock to GBL for $1.5 million. As
consideration for a certain license agreement dated June 1997, BioMarin
issued GBL 7 million shares of BioMarin common stock. Beginning in October
1997, BioMarin raised capital from third parties with the result that at
December 31, 1997, GBL's ownership interest in BioMarin had been reduced to
41.3% of BioMarin's outstanding capital stock. As of December 31, 1997, the
Company began recording its share of BioMarin's net loss utilizing the
equity method of accounting.
On June 30, 1998, BioMarin raised net proceeds of $3.3 million (598,535
shares) from a private placement including a $1.0 million investment from
GBL. In another private placement, on August 3, 1998, BioMarin raised an
additional $8.1 million (1,416,800 shares) from third parties.
On September 4, 1998, BioMarin received $8 million from Genzyme Corp.
(Genzyme) upon execution of a joint venture agreement in which BioMarin
issued 1,333,333 shares of common stock to Genzyme. BioMarin has a 50%
interest in the income or loss of this joint venture, BioMarin/Genzyme LLC.
On October 7, 1998, GBL sold to BioMarin 100% of the outstanding capital
stock of Glyko, Inc. in exchange for 2,259,039 shares of BioMarin's common
stock, the assumptions of options, previously issued to employees of Glyko,
Inc., to purchase up to 585,969 shares of GBL's common stock (exercisable
into 255,540 shares of BioMarin common stock) and $500 in cash.
On April 13, 1999, GBL purchased BioMarin convertible notes in the amount
of $4.3 million, as part of BioMarin's $26 million convertible note
financing.
In May 1999, BioMarin's wholly-owned subsidiary, Glyko, Inc., acquired key
assets of the Biochemical Research Reagent Division of Oxford GlycoSciences
Plc. The acquisition was made to increase Glyko, Inc.'s product offerings
and was valued from $1.5 million to $2.1 million, depending on the future
sales of the acquired products, and was accounted for as a purchase.
On July 23, 1999, BioMarin closed its initial public offering (IPO) of 4.5
million shares at $13.00 per share concurrent with a $10 million private
placement from Genzyme, at the IPO price, raising net proceeds of
approximately $61.9 million. Additionally, BioMarin's convertible notes
payable (including interest accrued) were converted into 2,672,020 shares
of BioMarin's common stock at $10.00 per share. GBL's $4.3 million
convertible note plus interest of $119,110 was converted to 441,911 shares
of BioMarin's common stock.
In August 1999, the BioMarin underwriters exercised their over-allotment
option for 675,000 shares at BioMarin's IPO price of $13 per share, raising
additional net proceeds of $8.1 million. GBL's percentage ownership of
BioMarin's outstanding common stock was 32.2% on March 31, 2000.
5
<PAGE>
GLYKO BIOMEDICAL LTD.
NOTES TO FINANCIAL STATEMENTS
Since its inception, GBL has incurred a cumulative deficit of $32.9
million and the Company expects to continue to incur losses through 2001
due to its share of BioMarin's net loss resulting from the ongoing
research and development of BioMarin's pharmaceutical product candidates.
As a result of GBL's sale of Glyko, Inc. on October 7, 1998, GBL has no
operating activities and its principal asset is its investment in
BioMarin. Accordingly, without further investment in other companies or
technologies, management believes that GBL has sufficient cash to sustain
planned operations which are of limited scope and cost for at least two
years. BioMarin had an accumulated deficit of $54.9 million at March 31,
2000 and is expected to incur significant losses at least through 2002.
Management of BioMarin believes that the proceeds from the convertible
notes and the net proceeds of approximately $70.0 million from the
initial public offering (including underwriters' exercise of
over-allotment) and the concurrent Genzyme closing will be sufficient to
meet its obligations at least through mid-2001. Management of GBL
believes that at March 31, 2000 there has not been any impairment of its
investment in BioMarin.
The accompanying financial statements should be read in conjunction with
the Company's annual report on form 10-KSB for the fiscal year ended
December 31, 1999.
2. Summary of Significant Accounting Policies
The accompanying financial statements and related footnotes have been
prepared in conformity with U.S. generally accepted accounting
principles using U.S. dollars as essentially all of the Company's
operations were located in the United States. For the three-month
periods ended March 31, 2000 and 1999, the operations of Glyko, Inc.
have been consolidated into the operations of BioMarin. The results of
operations of BioMarin have been reported in the Company's financial
statements for the three-month periods ended March 31, 2000 and 1999,
based on the equity method of accounting. All significant intercompany
accounts and transactions have been eliminated.
Use of Estimates:
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make
certain estimates and assumptions that effect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the dates of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
Cash and Cash Equivalents:
Cash and cash equivalents consist of amounts held with banks and
short-term investments with original maturities of 90 days or less.
Sale of Glyko, Inc. and Investment in BioMarin Pharmaceutical Inc.:
BioMarin acquired Glyko, Inc. from GBL through the exchange of BioMarin
stock for Glyko, Inc. stock and accounted for the acquisition based upon
the fair market value of the BioMarin stock issued (using the same per
share price as used in a recent arms-length transaction), the assumption
of responsibility for certain stock options previously issued to Glyko,
Inc. employees (see Note 1), and $500 in cash. In consolidating Glyko,
Inc., BioMarin recorded intangible assets, including goodwill, to the
extent that the fair market value of the stock issued exceeded the fair
market value of the tangible assets of Glyko, Inc. GBL recorded the stock
of BioMarin received at the historical cost basis of its investment in
Glyko, Inc. GBL accounts for its investment in BioMarin using the equity
method of accounting. However, as it has not recorded its investment in
BioMarin at fair market value, it does not record its share of the losses
recorded by BioMarin related to the write-off or amortization of
intangible assets recorded on the acquisition of Glyko, Inc.
6
<PAGE>
GLYKO BIOMEDICAL LTD.
NOTES TO FINANCIAL STATEMENTS
During the three-month period ended March 31, 2000, BioMarin recorded a
charge to operations of $271,274 in connection with its purchase of
Glyko, Inc. for the amortization of goodwill and other intangible assets,
which are being amortized over ten years. In recording its share of
BioMarin's loss for this period, GBL reduced this loss for its share of
the amortization of goodwill and other intangible assets.
As of March 31, 2000, GBL's percentage share of BioMarin's outstanding
capital stock was 32.2%. The exercise of BioMarin options or warrants
will result in a reduction of GBL's ownership percentage and future
fundraising efforts of BioMarin may result in a similar reduction of
GBL's ownership percentage. To the extent that the issuance of common
stock by BioMarin to third parties at a per share price greater than or
less than the per share carrying value of GBL's investment in BioMarin,
the resulting gain or loss is reflected as an increase or decrease,
respectively, in additional paid in capital in the accompanying balance
sheets. Due to the issuance by BioMarin of its common stock upon the
exercise of common stock options, GBL recorded an increase to its
Investment in BioMarin and Additional Paid-in-Capital accounts of
$643,556 during the three-month period ended March 31, 2000.
Accrued Liabilities:
During 1994, the Company recorded a charge to operations of $219,811
related to the termination of an agreement with one of its stockholders.
This charge was the estimated fair value of 500,000 shares of common
stock to be received by the stockholder in settlement of the agreement.
The Toronto Stock Exchange has not permitted the issuance of the 500,000
shares because the transaction is not considered arms length. The
stockholder was a stockholder in the Company from 1990 until April 1998.
At March 31, 2000 the liability of $219,811 is included in accrued
liabilities in the accompanying balance sheets.
Net Loss per Share:
Potentially dilutive securities outstanding at March 31, 2000 and 1999,
respectively, include options for the purchase of 220,000 and 349,560
shares of common stock and warrants for the purchase of 12,833 and 2.5
million shares of common stock, respectively. These securities were not
considered in the computation of dilutive loss per share because their
effect would be anti-dilutive for the three-month periods ended March 31,
2000 and 1999.
New Accounting Standards:
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133, which is effective for
fiscal years beginning after June 15, 2000 is not expected to have a
material impact on the Company's financial position or results of
operations.
Reclassifications:
Certain balances in prior periods have been reclassified to conform with
the current period presentation.
7
<PAGE>
GLYKO BIOMEDICAL LTD.
NOTES TO FINANCIAL STATEMENTS
3. Investment in BioMarin Pharmaceutical Inc.
Results of the Company's unconsolidated affiliate, BioMarin, a
development stage company, are summarized as follows for the three-month
periods ended March 31, 1999 and 2000 and for the period from March 21,
1997 (inception) to March 31, 2000 ($ Thousands):
<TABLE>
For the period
March 21, 1997
Three Months Ended March 31, (inception), to
-------------------------------------- March 31,
1999 2000 2000
-------------------- ------------------ --------------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Revenues:
Revenues - products $ 202 $ 469 $ 2,008
Revenues - services 47 50 247
Revenues from joint venture 746 2,756 8,893
Revenues - other 109 23 316
-------------------- ------------------ --------------------
Total revenues: 1,104 3,298 11,464
Operating Costs and Expenses:
Cost of products 84 148 559
Cost of services 18 33 194
Research and development 3,892 8,663 48,285
Selling, general and administrative 1,693 1,996 13,247
Carson Street closure - 4,423 4,423
-------------------- ------------------ --------------------
Total operating costs and expenses 5,687 15,263 66,708
Loss from operations (4,583) (11,965) (55,244)
Interest income 154 788 3,370
Interest expense - (2) (734)
Equity in loss of BioMarin/Genzyme LLC (180) (557) (2,277)
-------------------- ------------------ --------------------
Net loss (4,609) (11,736) (54,885)
==================== ================== ====================
For the periods presented above, GBL's equity in loss of BioMarin was as follows ($ Thousands):
$ (1,719) $ (3,692) $ (19,991)
================== ================== ==================
</TABLE>
During the first quarter of 2000, BioMarin decided to close its Carson
Street clinical manufacturing facility. In connection with this decision,
BioMarin recorded a charge of approximately $4.4 million for the closure of
its Carson Street clinical manufacturing facility. The facility was no
longer required for the production of Aldurazyme(TM), the initial purpose of the
plant, after a decision by the BioMarin/Genzyme LLC (joint venture) to use
BioMarin's Galli Drive facility for the manufacture of bulk Aldurazyme both for
the confirmatory Phase III trial and for the commercial launch of
Aldurazyme(TM). This decision was based in part on U.S. Food and Drug
Administration guidance to use an improved production process, which was
installed in the Galli facility, for the clinical trial and biologics license
application submission and for commercial production. The Carson Street facility
is expected to complete its final production lots in May. BioMarin expects that
a majority of its technical staff at the Carson Street facility in Torrance,
California will transfer to the Galli Drive facility in Novato, California,
which has significantly greater manufacturing capacity. The provision primarily
consisted of write-downs of leasehold improvements and equipment located in the
Carson Street facility.
8
<PAGE>
GLYKO BIOMEDICAL LTD.
NOTES TO FINANCIAL STATEMENTS
4. Note Receivable
As part of its compensation for certain services, GBL issued stock
options to a consulting group. In September 1998, GBL loaned $100,000 to
the consulting group in anticipation that the Toronto Stock Exchange
would approve the stock options. In the first quarter of 1999, the
options were approved by the Toronto Stock Exchange and this note was
repaid in full.
In November 1998, per the terms of the BioMarin acquisition of Glyko,
Inc., GBL loaned $712,261 to an officer of the Company to exercise
expiring stock options. The loan is secured by the stock and is a full
recourse note.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis of financial condition and results
of operations contains certain forward looking statements within the
meaning of Section 27A of the U.S. Securities Act of 1933, as amended,
and Section 21E of the U.S. Securities Exchange Act of 1934, as amended,
that involve risks and uncertainties, such as statements regarding the
Company's ongoing liquidity as discussed in "Liquidity and Capital
Resources." The Company's actual results could differ materially from the
results anticipated in these forward-looking statements. Risks are
identified in "Overview, " "Results of Operations," and "Liquidity and
Capital Resources."
Overview
Glyko Biomedical Ltd. (GBL or the Company) is a Canadian company that at
March 31, 2000 owned 32.2% of the outstanding capital stock of BioMarin
Pharmaceutical Inc. (BioMarin). As of October 7, 1998, BioMarin owned 100% of
the capital stock of Glyko, Inc. Glyko, Inc. and BioMarin are operating
companies based in California. On October 7, 1998, BioMarin acquired Glyko,
Inc., in a transaction valued at $14.5 million. As consideration for the
acquisition of all of the outstanding shares of Glyko, Inc., BioMarin issued
2,259,039 shares of common stock to the Company, assumed Glyko, Inc.'s employee
stock options exercisable for 255,540 shares of BioMarin common stock, and paid
$500 in cash. Glyko Biomedical Ltd. consolidated the operations of Glyko, Inc.
through October 7, 1998. Subsequent to October 7, 1998, the accounts of Glyko
Biomedical Ltd. are presented on a stand-alone basis. In this period the results
of operations of Glyko, Inc. have been consolidated into the results of
operations of BioMarin. BioMarin's results of operations are recorded by Glyko
Biomedical Ltd. using the equity method of accounting. Numerical references in
the following discussion are rounded to the nearest thousand.
Since its inception in October 1990, Glyko, Inc. has been engaged in the
research, development, manufacturing and marketing of new techniques to analyze
and manipulate carbohydrates for research, diagnostic and pharmaceutical
purposes. Glyko, Inc. has developed a line of analytic instrumentation
laboratory products that include an imaging system, analysis software and
chemical analysis kits. Glyko, Inc., as a wholly-owned subsidiary of BioMarin,
continues to develop additional chemical kits for use with the imaging system,
and is also developing a line of carbohydrate diagnostic products. In May 1999,
Glyko, Inc., acquired key assets of the Biochemical Research Reagent Division of
Oxford GlycoSciences Plc. The acquisition was made to increase Glyko, Inc.'s
product offerings and was valued from $1.5 million to $2.1 million, depending on
the future sales of the acquired products and was accounted for as a purchase.
BioMarin is currently developing pharmaceutical products through its own
internal operations and through research grants with various universities.
BioMarin has completed its initial clinical trial of its lead enzyme replacement
product (Aldurazyme(TM)) for Mucopolysaccharidosis (MPS-I), a crippling and
fatal disease that afflicts young children. The initial clinical trial was
conducted under a Company Investigational New Drug (IND) application that
encompassed ten patients with all levels of severity of MPS-I. In April 1999,
BioMarin completed a twelve-month evaluation period for their initial clinical
trial of AldurazymeTM. Initiated in December 1997, this clinical trial treated
ten patients with MPS-I at five medical centers in the United States. BioMarin
is treating and monitoring these patients for an additional 12-month follow-up
period and, in collaboration with BioMarin's joint venture partner, Genzyme,
plans to initiate a Phase III Confirmatory Clinical Trial in mid-year 2000.
BioMarin intends to complete the filing of the biologics license application
(BLA) with the U.S. Food and Drug Administration (FDA) in mid-year 2001.
BioMarin received orphan drug designation for Aldurazyme(TM) in September 1997,
allowing BioMarin to market the product exclusively for seven years following
FDA approval if it is the first to gain such approval. BioMarin focuses on the
development of products in four therapeutic areas: genetic diseases, burn and
wound care, fungal infections and inflammation (initially psoriasis).
On April 13, 1999, GBL purchased BioMarin notes in the amount of $4.3 million,
as part of BioMarin's $26 million convertible note financing.
On July 23,1999, BioMarin closed its initial public offering (IPO) of 4.5
million shares at $13.00 per share concurrent with a $10 million private
placement (769,230 shares) from Genzyme, raising approximately $61.9 million.
Additionally, BioMarin's convertible notes payable were converted into 2,672,020
shares of BioMarin's common stock. GBL's $4.3 million convertible note plus
interest of $119,110 was converted to 441,911 shares of BioMarin's common stock.
10
<PAGE>
In August 1999, the underwriters exercised their over-allotment option for
675,000 shares at the IPO price of $13 per share, raising additional net
proceeds of $8.1 million. . GBL's ownership of BioMarin's outstanding common
stock was 32.2% on March 31, 2000.
The Company's net loss for the three-month periods ended March 31, 2000 and 1999
was $3,736,000 and $1,745,000, respectively. The primary component of this loss
was the Company's share of the net loss of BioMarin accounted for under the
equity method of accounting. GBL expects to continue to incur losses through
2001 due to its share of BioMarin's net loss resulting from BioMarin's ongoing
research and development of pharmaceutical product candidates including
AldurazymeTM, BM102 and a burn wound enzyme. The BioMarin losses do not have an
impact on the cash position of GBL. As a result of GBL's sale of Glyko, Inc., as
of October 7, 1998, GBL has no operating activities and its principal asset is
its investment in BioMarin. BioMarin has an accumulated deficit of $54.9 million
at March 31, 2000 and is expected to incur significant losses at least through
2002. Management of BioMarin believes that the convertible note financing and
the net proceeds of approximately $70.0 million from the IPO (including
underwriters' over-allotment exercise) and the concurrent Genzyme closing will
be sufficient to meet its obligations through mid-2001. Management of GBL
believes that at March 31, 2000 there has not been any impairment of its
investment in BioMarin.
Results of Operations
The Quarters Ended March 31, 2000 and 1999
There were no revenues nor cost of revenues for the quarters ended March 31,
2000 and 1999 due to the sale of the Company's operating entity, Glyko, Inc. to
BioMarin in October 1998.
There were no research and development expenses for the quarters ended March 31,
2000 and 1999 due to the Company's sale of Glyko, Inc. to BioMarin in October
1998.
Selling, general and administrative expense was $53,000 for the quarter ended
March 31, 2000, a decrease of $14,000 from selling, general and administrative
expenses of $67,000 incurred for the quarter ended March 31, 1999. The decrease
was primarily due to the additional expense in 1999 of a Special Meeting of
Shareholders which took place in March 1999 and which did not occur in 2000.
Selling, general and administrative expense for the quarters ended March 31,
2000 and 1999 represented management fees billed to BioMarin for management,
accounting, finance and government reporting, and legal and other outside
administrative support expenses.
Equity in loss of BioMarin for the quarter ended March 31, 2000 was $3,692,000
compared to $1,719,000 for the quarter ended March 31, 1999, an increase of
$1,973,000. The increase was due to the increased net loss of BioMarin, which
was primarily from the development of its lead product candidate, AldurazymeTM
for the treatment of Mucopolysaccharidosis-I or MPS-I, pre-clinical studies and
development of BM102 for the treatment of MPS-VI and pre-clinical studies and
development of BM202 for the treatment of serious burn wounds. During the
quarter ended March 31, 2000, BioMarin decided to close its Carson
Street clinical manufacturing facility. In connection with this decision,
BioMarin recorded a charge of $4.4 million for the quarter ended March 31, 2000
related to the closure.
Interest income earned for the quarters ended March 31, 2000 and 1999 of $8,000
and $41,000, respectively, resulted from earnings on cash invested in short term
interest bearing accounts. The decrease in interest income in the first quarter
2000 compared to the same period in 1999 resulted from lower cash balances
available for investment due to the Company's investment in the BioMarin
convertible note financing of $4.3 million in April 1999. Interest expense for
the quarters ended March 31, 2000 and 1999 was immaterial.
Liquidity and Capital Resources
The Company's cash position increased by $1,399,000 in the first quarter of 2000
to $1,974,000. Net cash proceeds of $1,413,000 relating to, primarily, the
issuance of common stock from the exercise of stock warrants and options were
partially offset by net cash used in operating activities of $13,000.
11
<PAGE>
Since its inception, the Company has incurred a cumulative deficit of $32.9
million and GBL expects to continue to incur losses through 2001 due to its
share of BioMarin's net loss resulting from BioMarin's ongoing research and
development of pharmaceutical product candidates. As a result of GBL's sale of
Glyko, Inc., as of October 7, 1998, GBL has no operating activities and its
principal asset is its investment in BioMarin. Accordingly, without further
investments in other companies or technologies, management believes that GBL has
sufficient cash to sustain planned operations, which are of limited scope and
cost for at least two years. BioMarin has an accumulated deficit of $54.9
million at March 31, 2000 and is expected to incur significant losses at least
through 2002. Management of BioMarin believes that the proceeds from the
convertible note financing, the net proceeds of approximately $70.0 million from
the IPO (including underwriters' exercise of over-allotment) and the concurrent
Genzyme closing will be sufficient to meet its obligations through mid-2001.
Management of GBL believes that at March 31, 2000 there has not been any
impairment of its investment in BioMarin. See "Risk Factors" - "The Company's
success is dependent on the successful operations of BioMarin" and "If
the Company continues to incur operating losses for a period longer than
anticipated, we may be unable to continue our operations."
12
<PAGE>
RISK FACTORS
The Company's success is dependent on the successful operations of
BioMarin.
As of March 31, 2000, GBL's principal asset was its 32.2% ownership of
BioMarin's outstanding capital stock. GBL's success is dependent on the
successful operations of BioMarin including, but not limited to, BioMarin's
ability to receive FDA approval of existing and future pharmaceutical product
candidates, BioMarin's ability to retain key personnel, BioMarin's ability to
manufacture and market products effectively and successfully and BioMarin's
ability to raise additional cash to fund future operations. BioMarin is a
development stage company, with its only revenues currently being earned from
the sale of its analytic and diagnostic products resulting from the acquisition
of Glyko, Inc. and cost reimbursement revenues for services performed from its
joint venture with Genzyme for development and commercialization of
Aldurazyme(TM).
If the Company continues to incur operating losses for a period longer than
anticipated, we may be unable to continue our operations.
The Company's share of BioMarin's net loss resulted in the Company reporting a
net loss for the three-month period ended March 31, 2000 of $3.7 million. GBL
expects to continue to incur losses through 2001 due to its share of BioMarin's
net loss resulting from BioMarin's ongoing research and development of
pharmaceutical product candidates. As a result of GBL's sale of Glyko, Inc., as
of October 7, 1998, GBL has no operating activities and its principal asset is
its investment in BioMarin. Accordingly, without further investments in other
companies or technologies, management believes that GBL has sufficient cash to
sustain planned operations. BioMarin has an accumulated deficit of $54.9 million
at March 31, 2000 and is expected to incur significant losses at least through
2002. Management of BioMarin believes that the proceeds from the convertible
note financing and the net proceeds of approximately $70.0 million from the IPO
(including underwriters' exercise of over-allotment) and the concurrent Genzyme
closing will be sufficient to meet its obligations through mid-2001. Management
of GBL believes that at March 31, 2000 there has not been any impairment of its
investment in BioMarin.
Item 3: Quantitative and Qualitative Disclosure about Market Risk
GBL currently holds 11,367,617 shares of BioMarin's common stock representing
32.2% of BioMarin's outstanding common stock. Following the sale of Glyko, Inc.
in 1998, these securities represent substantially the only asset of GBL. These
securities have been acquired for investment purposes rather than for trading
purposes.
The value of GBL's common stock may be substantially influenced by to the
value of BioMarin's common stock. Following BioMarin's IPO in July 1999,
BioMarin's common stock is traded on the NASDAQ and the Swiss Exchange (SWX New
Market). There are many risks associated with the listing of these securities on
two markets and with BioMarin's business itself. GBL is subject to
additional risks as its investment portfolio is non-diversified. GBL does not
hold substantially any other securities other than the common stock of BioMarin.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. None.
Item 3. Defaults upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
The following documents are filed as part of this report
See Exhibit Index attached hereto.
(b) Reports on Form 8K
No reports were filed on Form 8-K during the three months ended March
31, 2000.
14
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GLYKO BIOMEDICAL LTD.
Dated: May 9, 2000 By: \s\ John C. Klock, M.D.
- -------------------------- ------------------------------------
John C. Klock, M.D.
President, Chief Executive Officer
and Chief Financial Officer
15
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
2.1 Share Exchange Agreement between Glyko Biomedical Ltd. and
BioMarin Pharmaceutical Inc. dated September 15, 1998.
(Filed as Exhibit 2.1 to Form 10-KSB dated December 31, 1998
and incorporated herein by reference).
3.1 Registrant's Articles of Incorporation and Bylaws (filed as
exhibit 3.1 to Form 10-SB Registration Statement No. 0-21994
dated August 6, 1993 and incorporated herein by reference).
3.2 Amended Restated Certificate of Incorporation of BioMarin
Pharmaceutical, Inc. (filed as exhibit 3.1 to Form 10-QSB
dated September 30, 1997, and incorporated herein by
reference).
3.3 Amended Bylaws of BioMarin Pharmaceutical, Inc. (filed as
exhibit 3.2 to Form 10-QSB dated September 30, 1997, and
incorporated herein by reference).
4.1 Registrant's Articles of Incorporation and Bylaws (filed as
exhibit 3.1 to Form 10-SB Registration Statement No. 0-21994
dated August 6, 1993, and icorporated herein by reference).
10.1 Glyko Biomedical Share Option Plan - 1994 (filed as exhibit
10.1 to Form 10-QSB dated June 30, 1994 and incorporated
herein by reference).
10.2 License Agreement between Glyko Biomedical Ltd. and BioMarin
Pharmaceutical, Inc. (filed as Exhibit 10 to Form 10-QSB
dated September 20, 1997, and incorporated herein by
reference).
27.1 Financial Data Schedule (see Financial Data Schedule
attached hereto in EDGAR format only)
16
<PAGE>
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