UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
- --------------------------------------------------------------------------------
Commission File Number 0-23155
TRIMERIS, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1808663
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4727 University Drive
Durham, North Carolina 27707
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (919) 419-6050
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. [ x ] Yes [ ] No
The number of shares outstanding of the registrant's common stock as of November
12, 1998 was 10,593,477.
<PAGE>
TRIMERIS, INC.
(A Development Stage Company)
FORM 10-Q
For the Nine Months Ended September 30, 1998
INDEX
PART 1. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Balance Sheets as of September 30, 1998 (unaudited) and
December 31, 1997 1
Statements of Operations (unaudited) for the Three and
Nine Months Ended September 30, 1998 and 1997 and Period
From Inception (January 7, 1993) Through September 30, 1998 2
Statements of Cash Flows (unaudited) for the Nine Months
Ended September 30, 1998 and 1997 and Period From Inception
(January 7, 1993) Through September 30, 1998 3
Notes to Financial Statements (unaudited) 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
-----------------------------------------
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
--------------------------------
Signature Page 12
Exhibit Index 13
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
TRIMERIS, INC.
(A Development Stage Company)
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, September 30,
1997 1998
---- ----
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 32,557 $ 21,457
Short-term investments 4,863 3,402
Accounts receivable 101 56
Prepaid expenses 6 223
-------- --------
Total current assets 37,527 25,138
Property, furniture and equipment, net 756 1,665
-------- --------
Other assets:
Exclusive license agreement, net 30 28
Patent costs, net 442 531
Equipment deposits 86 139
Other, net 3 2
-------- --------
Total other assets 561 700
-------- --------
Total assets $ 38,844 $ 27,503
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 722 $ 780
Current installments of capital lease obligations 259 400
Accrued compensation 608 697
Accrued expenses 1,205 1,316
-------- --------
Total current liabilities 2,794 3,193
Capital lease obligations, less current installments 240 838
-------- --------
Total liabilities 3,034 4,031
-------- --------
Commitments and contingencies
Stockholders' equity:
Series A, B, C, and D preferred stock at $.001 par value
per share, 62,667 shares authorized, zero
shares issued and outstanding at December 31,
1997 and September 30, 1998 (unaudited) -- --
Common Stock at $.001 par value per share, 80,000 shares authorized, 10,549
and 10,593 shares issued and outstanding at December 31, 1997 and
September 30, 1998 (unaudited) 11 11
Additional paid-in capital 67,360 67,549
Deficit accumulated during the development stage (29,393) (42,370)
Deferred compensation (1,950) (1,500)
Notes receivable from stockholders (218) (218)
-------- --------
Net stockholders' equity 35,810 23,472
-------- --------
Total liabilities and stockholders' equity $ 38,844 $ 27,503
======== ========
</TABLE>
See accompanying notes to financial statements.
1
<PAGE>
TRIMERIS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Cumulative
From Inception
Three Months Nine Months (January 3, 1993)
Ended September 30, Ended September 30, To September 30,
1997 1998 1997 1998 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue .................... $ 129 $ 95 $ 341 $ 270 $ 860
-------- -------- -------- -------- --------
Operating expenses:
Research and development . 2,655 4,135 5,514 11,368 33,698
General and administrative 875 994 1,661 3,221 10,677
-------- -------- -------- -------- --------
Total operating
expenses .............. 3,530 5,129 7,175 14,589 44,375
-------- -------- -------- -------- --------
Operating loss ............. (3,401) (5,034) (6,834) (14,319) (43,515)
-------- -------- -------- -------- --------
Other income (expense):
Interest income .......... 76 395 109 1,433 2,139
Interest expense ......... (28) (41) (106) (91) (994)
-------- -------- -------- -------- --------
48 354 3 1,342 1,145
-------- -------- -------- -------- --------
Net loss ................. $ (3,353) $(4,680) $(6,831) $(12,977) $ (42,370)
======== ======== ======== ======== ========
Basic net loss per share$ .. (0.45) $ (0.44) $ (1.06) $(1.22)
======== ======= ======== ========
Weighted average
shares used in per share
computations ............. 7,451 10,662 6,422 10,639
======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
TRIMERIS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Cumulative
From Inception
Nine Months Ended (January 3, 1993)
September 30, To September 30,
1997 1998 1998
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (6,831) $(12,977) $(42,370)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 434 413 2,602
Other amortization 21 12 49
Amortization of deferred compensation 233 450 836
Provision for equipment held for resale 31 -- 61
Stock issued for consulting services -- -- 5
Stock issued to repay interest on notes to
stockholders -- -- 195
Debt issued for research and development -- -- 194
Loss on disposal of property and equipment -- -- 16
Changes in operating assets and liabilities:
Accounts receivable and loans to employees (28) 45 (56)
Prepaid expenses (420) (217) (223)
Other assets (12) (62) (149)
Accounts payable 245 58 780
Accrued compensation 452 89 697
Accrued expenses (249) 111 1,226
-------- -------- --------
Net cash used by operating activities (6,124) (12,078) (36,137)
-------- -------- --------
Cash flows from investing activities:
Purchases of short-term investments (5,586) (13,810) (18,673)
Sales of short-term investments -- 15,271 15,271
Purchases of property and equipment (287) (257) (892)
Equipment held for resale -- -- (61)
Organization costs -- -- (8)
Patent costs (66) (89) (538)
-------- -------- --------
Net cash provided (used) by investing activities (5,939) 1,115 (4,901)
======== ======== ========
Cash flows from financing activities:
Proceeds from issuance of notes payable 1 -- 6,150
Lease costs -- -- (13)
Principal payments under capital lease obligations . (229) (326) (2,153)
Proceeds from issuance of Common Stock 9 -- 31
Proceeds from issuance of Preferred Stock 12,777 -- 23,896
Proceeds from initial public offering, net -- -- 34,532
Proceeds from exercise of stock options -- 7 16
Proceeds from employee stock purchase plan exercise -- 182 182
Repayment of notes receivable from stockholders 12 -- 50
Stock issuance costs (109) -- (196)
-------- -------- --------
Net cash provided (used) by financing activities 12,461 (137) 62,495
-------- -------- --------
Net increase (decrease) in cash and cash equivalents . 398 (11,100) 21,457
Cash and cash equivalents, beginning of period 132 32,557 --
-------- -------- --------
Cash and cash equivalents, end of period $ 530 $ 21,457 $ 21,457
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
TRIMERIS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
Trimeris, Inc. (the "Company") was incorporated on January 7, 1993 to discover
and develop novel therapeutic agents that block viral infection by inhibiting
viral fusion with host cells. These financial statements have been prepared in
accordance with Statement of Financial Accounting Standards No. 7, "Accounting
and Reporting by Development Stage Enterprises," to recognize the fact that the
Company is devoting substantially all of its efforts to establishing a new
business and planned principal operations have not commenced.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles and applicable
Securities and Exchange Commission regulations for interim financial
information. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission rules and regulations. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of financial position and results of operations have been
made. Operating results for interim periods are not necessarily indicative of
results which may be expected for a full year. The information included in this
Form 10-Q should be read in conjunction with the Risk Factors and Management's
Discussion and Analysis of Financial Condition and Results of Operations
sections and the 1997 financial statements and notes thereto included in the
Company's 1997 Form 10-K filed with the Securities and Exchange Commission on
March 31, 1998, and the Company's Registration Statement on Form S-1 as declared
effective by the Securities and Exchange Commission on October 6, 1997 and
amended pursuant to Rule 462 (b) on October 7, 1997 (the "S-1 Registration
Statement").
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
2. BASIC NET LOSS PER SHARE
For periods beginning with the year ended December 31, 1997, the Company
adopted SFAS No. 128, "Earnings Per Share" ("SFAS No. 128"). In accordance with
this statement, primary net loss per common share is replaced with basic loss
per common share which is calculated by dividing net loss by the
weighted-average number of common shares outstanding for the period after
certain adjustments described below. Fully diluted net income per common share
is replaced with diluted net income per common share reflecting the maximum
dilutive effect of common stock issuable upon exercise of stock options, stock
warrants, and conversion of preferred stock. Diluted net loss per common share
is not shown, as common equivalent shares from stock options, and stock
warrants, would have an antidilutive effect. Prior period per share data has
been restated to reflect the adoption of SFAS No. 128. In accordance with
Securities and Exchange Commission Staff Accounting Bulletin No. 83 ("SAB 83"),
all common shares and common equivalent shares issued during the twelve-month
period prior to the initial filing of the registration statement relating to the
Company's initial public offering, even when anti-dilutive, have been included
in the calculation as if they were outstanding for all periods, using the
treasury stock method. The basic net loss per common share gives retroactive
effect to the conversion of all outstanding shares of Preferred Stock into
6,261,615 shares of Common Stock upon the completion of the Company's initial
public offering.
4
<PAGE>
3. STATEMENTS OF CASH FLOWS
Interest of approximately $106,000 and $91,000 was paid during the nine months
ended September 30, 1997 and 1998, respectively. Capital leases of $195,000 and
$1,064,000 were incurred for the nine months ended September 30, 1997 and 1998,
respectively, for the purchase of new furniture and equipment.
4. INITIAL PUBLIC OFFERING OF STOCK
In October, 1997, the Company closed its initial public offering of common
stock at $12 per share. The net proceeds of the offering, including the proceeds
received in connection with the exercise of the Underwriters' over-allotment
option which closed in November, 1997, were approximately $34.5 million after
deducting applicable issuance costs and expenses. In connection with the public
offering, all the outstanding Preferred Stock was converted into approximately
6,261,615 shares of the Company's Common Stock.
5. STOCK SPLIT
Effective July 11, 1997, the Company declared a one for eight and one-half
reverse stock split for common stockholders. This stock split has been
retroactively applied and all periods presented have been restated.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Statements in this Form 10-Q that are not historical fact are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements are based largely on the Company's expectations
and are subject to a number of known and unknown risks and uncertainties, many
of which are beyond the Company's control. Accordingly, the Company's actual
prospective results could differ materially from those discussed herein. Factors
that could cause or contribute to such differences include, but are not limited
to, in addition to those discussed herein under the heading "Factors That May
Affect Future Results" and elsewhere in this Form 10-Q, the following: (i)
uncertainties associated with the Company's status as a development stage
company with a limited operating history and a history of losses since
inception; (ii) risks inherent in the Company's present reliance on a single
product candidate; (iii) uncertainties, unanticipated developments or delays
related to the Company's technology, clinical trials and clinical trial strategy
and the adverse impact such events may have on the Company's existing capital
resources; (iv) the ability of the Company to maintain existing or enter into
additional collaborative and/or licensing arrangements with third parties to
assist in the commercialization, testing, manufacturing and marketing of its
product candidates; (v) the Company's ability to obtain adequate additional
funding needed to meet the substantial costs associated with the development of
existing and new product candidates; (vi) the enactment of new or unanticipated
regulatory requirements related to the testing and United States Food and Drug
Administration ("FDA") approval of the Company's product candidates and the
ability to receive FDA approval for the Company's product candidates; (vii) the
possibility of infringement of the Company's intellectual property rights and
the Company's ability to protect its product candidates, technology and other
proprietary information; (viii) the Company's ability to develop manufacturing,
sales, marketing and distribution capabilities; (ix) the Company's dependence on
third parties for clinical trials; (x) the Company's ability to obtain
third-party reimbursement for any products that may be approved by the FDA; (xi)
the Company's ability to recruit and retain key employees; (xii) year 2000
risks; and (xiii) the Company's ability to achieve market acceptance of its
product candidates and to effectively compete with other companies currently
developing similar product candidates, including companies with substantially
greater financial and technical resources. Further information regarding these
factors, as well as other factors that could cause actual results to differ
materially from those set forth in such forward-looking statements, is discussed
under the headings "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in the 1997 financial
statements and notes thereto included in the Company's 1997 Form 10-K, which
should be read in conjunction with this Form 10-Q. The Company undertakes no
obligation to release publicly the results of any revisions to the statements
contained in this report to reflect events or circumstances arising after the
date hereof.
Overview
Trimeris commenced operations in January 1993, has a limited operating history
and is a development stage company. Since its inception, substantially all of
the Company's resources have been dedicated to the development, patenting,
preclinical testing, nonclinical animal studies, and human clinical trials of
T-20, the development of a manufacturing process for T-20, production of drug
material for future clinical trials, the development of its proprietary
technology platform and research and development and preclinical testing of
other potential product candidates and compounds discovered by the Company. The
Company has received revenue solely from SBIR grants and an investigative
contract and has yet to generate any revenue from product sales or royalties,
and there can be no assurance that it will be able to generate any such revenue
or royalties in the future.
6
<PAGE>
Product candidates and compounds discovered by the Company and developed
through the Company's product development programs will require significant
additional, time-consuming and costly research and development, preclinical
testing, nonclinical animal studies, and extensive clinical trials prior to
submission of any regulatory application for commercial use. The Company has
incurred losses since its inception and, as of September 30, 1998 had an
accumulated deficit of approximately $42.4 million. Such losses have resulted
principally from expenses incurred in the Company's research and development
activities associated with the development, patenting, preclinical testing,
nonclinical animal studies, and human clinical trials of T-20, the development
of a manufacturing process for T-20, production of drug material for future
clinical trials, the development of its proprietary technology platform,
research and development and preclinical testing of other potential product
candidates and compounds discovered by the Company, and from general and
administrative expenses. The Company expects to continue to incur substantial
losses for the foreseeable future. There can be no assurance that the Company
will ever generate significant revenue or achieve profitable operations.
Results of Operations
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
REVENUE. Revenue recognized for the three months ended September 30, 1998
consisted of approximately $95,000 of income from SBIR grants. Revenue
recognized for the three months ended September 30, 1997 consisted of
approximately $129,000 of income from SBIR grants.
RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses
increased from approximately $2.7 million for the three months ended September
30, 1997 to approximately $4.1 million for the three months ended September 30,
1998. The increase is primarily due to increased costs related to additional
personnel and related laboratory research supplies to support these personnel,
nonclinical animal studies, the purchase and manufacture of drug product
material for future T-20 Phase II clinical trials, and costs related to the
Company's current Phase II clinical trial for T-20 ("TRI-003"). Total research
personnel were 28 and 49 at September 30, 1997 and 1998, respectively. The
Company expects its research and development expenses to increase substantially
in the future due to continued expansion of product development activities,
including preclinical research and testing, nonclinical animal studies, expanded
clinical trials, and the manufacture of drug material.
GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative expenses
increased from approximately $875,000 for the three months ended September 30,
1997 to approximately $994,000 for the three months ended September 30, 1998.
The increase is due to costs related to additional personnel and consultants to
support the Company's growth and additional professional fees required to
support the Company's obligations as a publicly traded Company. The Company
expects its administrative expenses to increase in the future to support the
expansion of its product development activities and to meet the requirements of
operating as a public company.
OTHER INCOME (EXPENSE). Other income (expense) consists of interest income and
expense. Total other income increased from approximately $48,000 for the three
months ended September 30, 1997 to approximately $354,000 for the three months
ended September 30, 1998. This increase was primarily due to increased interest
income due to larger cash balances.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
REVENUE. Revenue recognized for the nine months ended September 30, 1998
consisted of approximately $270,000 of income from SBIR grants. Revenue
recognized for the nine months ended September 30, 1997 consisted of
approximately $241,000 of income from SBIR grants and $100,000 from an
investigative contract.
7
<PAGE>
RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses
increased from approximately $5.5 million for the nine months ended September
30, 1997 to approximately $11.4 million for the nine months ended September 30,
1998. The increase is primarily due to increased costs related to additional
personnel and related laboratory research supplies to support these personnel,
nonclinical animal studies, the purchase and manufacture of drug product
material for future T-20 Phase II clinical trials, and costs related to TRI-003.
Total research personnel were 28 and 49 at September 30, 1997 and 1998,
respectively. The Company expects its research and development expenses to
increase substantially in the future due to continued expansion of product
development activities, including preclinical testing, nonclinical animal
studies and clinical trials.
GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative expenses
increased from approximately $1.7 million for the nine months ended September
30, 1997 to approximately $3.2 million for the nine months ended September 30,
1998. The increase is due to costs related to additional personnel and
consultants to support the Company's growth and additional professional fees
required to support the Company's obligations as a publicly traded Company. The
Company expects its administrative expenses to increase in the future to support
the expansion of its product development activities and to meet the requirements
of operating as a public company.
OTHER INCOME (EXPENSE). Other income (expense) consists of interest income and
expense. Total other income increased from approximately $3,000 for the nine
months ended September 30, 1997 to approximately $1.3 million for the nine
months ended September 30, 1998. This increase was primarily due to increased
interest income due to larger cash balances.
Liquidity and Capital Resources
Since inception, the Company has financed its operations primarily through the
private placement of equity securities, the issuance of notes to stockholders,
equipment lease financing and the Company's initial public offering, which
provided approximately $34.5 million after deducting applicable issuance costs
and expenses. Net cash used by operating activities was approximately $6.1
million and approximately $12.1 million for the nine months ended September 30,
1997 and 1998, respectively. The cash used by operating activities was used
primarily to fund research and development and general and administrative
expenses. Cash provided by financing activities was approximately $12.4 million
for the nine months ended September 30, 1997, primarily from the sale of equity
securities, compared to a use of approximately $137,000 for the nine months
ended September 30, 1998.
As of September 30, 1998, the Company had approximately $24.9 million in cash
and cash equivalents and short-term investments, compared to approximately $37.4
million as of December 31, 1997.
The Company has experienced negative cash flows from operations since its
inception and does not anticipate generating sufficient positive cash flows to
fund its operations in the foreseeable future. The Company has expended, and
expects to continue to expend in the future, substantial funds to pursue its
product candidate and compound discovery and development efforts, including
expenditures for continued nonclinical animal studies and clinical trials of
T-20, research and development and preclinical testing of other product
candidates and compounds discovered by the Company and the development of its
proprietary technology platform. As of September 30, 1998, the Company had
commitments to conduct nonclinical animal studies of approximately $1.0 million,
and commitments to purchase drug material for use in clinical trials of
approximately $1.2 million. These expenditures may be financed with capital or
operating leases, debt or working capital. The Company expects that its existing
capital resources and the interest earned thereon will be adequate to fund its
capital requirements through 1998. However, the Company's future capital
requirements and the adequacy of available funds will depend on many factors,
including the results of the clinical trials relating to T-20, the progress and
scope of the Company's product development programs, the magnitude of these
programs, the results of preclinical testing, nonclinical animal studies and
clinical trials, the need for additional facilities based on the results of
these clinical trials and other product development programs, changes in the
focus and direction of the Company's product development programs, the costs
involved in preparing, filing, processing, maintaining, protecting and enforcing
patent claims and other intellectual property rights, competitive factors and
technological advances, the cost, timing and outcome of regulatory reviews,
changes in the requirements of the United States Food and Drug Administration
(the "FDA"), administrative and legal
8
<PAGE>
expenses, evaluation of the commercial viability of potential product candidates
and compounds, the establishment of capacity, either internally or through
relationships with third parties, for manufacturing, sales, marketing and
distribution functions and other factors, many of which are outside of the
Company's control. Thus, there can be no assurance that the Company's existing
capital resources, together with the interest earned thereon, will be sufficient
to fund the Company's capital requirements during the period discussed above.
The Company believes that substantial additional funds will be required to
continue to fund its operations and that the Company will be required to obtain
additional funds through equity or debt financing or licenses, agreements or
other arrangements with collaborative partners and others, or from other
sources. The terms of any such equity financings may be dilutive to stockholders
and the terms of any debt financings may contain restrictive covenants which
limit the Company's ability to pursue certain courses of action. There can be no
assurance that such funds will be available to the Company on acceptable terms,
if at all, or that such financings will be adequate to meet the Company's future
capital requirements. If adequate funds are not available, the Company may be
required to delay, scale-back or eliminate certain aspects of its preclinical
testing, clinical trials and research and development programs or attempt to
obtain funds through arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain of its technologies or
product candidates or compounds, which could have a material adverse effect on
the Company's business, financial condition and results of operations.
Factors That May Affect Future Results
The Company expects to incur substantial losses for the foreseeable future
and expects losses to increase as the Company's research and development,
preclinical testing, nonclinical animal studies and clinical trial efforts
expand. The amount and timing of the Company's operating expenses will depend on
several factors, many of which are beyond the Company's control, including the
status of the Company's research and development activities, product candidate
and compound discovery and development efforts, including preclinical testing,
nonclinical animal studies and clinical trials, the timing of regulatory
actions, the costs involved in preparing, filing, prosecuting, maintaining,
protecting and enforcing patent claims and other proprietary rights, the ability
of the Company to establish, internally or through relationships with third
parties, manufacturing, sales, marketing and distribution capabilities,
technological and other changes in the competitive landscape, changes in the
Company's existing research and development relationships and strategic
alliances, evaluation of the commercial viability of potential product
candidates and other factors. As a result, the Company believes that
period-to-period comparisons of financial results in the future are not
necessarily meaningful and results of operations in prior periods should not be
relied upon as an indication of future performance. Any deviations in the
Company's clinical trial schedule, results from the Company's clinical trials,
or the Company's financial results, from the expectations of securities analysts
and investors could have a material adverse effect on the market price of the
Common Stock. In addition, any adverse movements in the stock market in general,
technology stocks, or biotechnology stocks could have a material adverse effect
on the market price of the Common Stock.
The Company's ability to achieve profitability will depend, in part, upon its
or its collaborative partners' ability to successfully develop and obtain
regulatory approval for T-20 and other product candidates and compounds
discovered by the Company, and to develop the capacity, either internally or
through relationships with third parties, to manufacture, sell, market and
distribute approved products, if any. Achievement of these goals is dependent
upon many factors which are beyond the control of the Company, including, but
not limited to, results of planned and future clinical trials, changes in the
requirements of the FDA, results of preclinical and nonclinical studies, the
Company's ability to obtain third-party reimbursement for any products that may
be approved by the FDA, the Company's ability to develop, or enter into
favorable agreements with third parties to develop efficient manufacturing and
distribution processes for its products, and the development of competitive
therapies. There can be no assurance that the Company will ever generate
significant revenues or achieve profitable operations.
The Company is currently attempting to develop a novel manufacturing process
for T-20 which could be more cost-effective than currently available methods of
production. There can be no assurance of success of this process development.
Currently available manufacturing methodologies are expensive and such costs, as
well as the Company's current dependence on third parties for the manufacture of
its products, and product candidates, could adversely affect the Company's
profit margins and its ability to
9
<PAGE>
commercialize T-20. There can be no assurance that the Company will be able to
manufacture T-20 on a cost-effective or timely basis.
T-20 Clinical Trials
In August 1997, T-20 completed TRI-001, a multi-dose, dose escalation Phase
I/II trial which assessed the safety, plasma pharmacokinetics and antiviral
activity of T-20 as a monotherapy over 14 days. No drug-related adverse effects
were seen in any of the 16 patients tested. The four patients in the highest
dose group experienced a reduction in viral load to below detectable levels
(less than 500 copies/ml) during the treatment period.
In September 1998, TRI-003, a Phase II clinical trial that will enroll up to
78 patients at up to 12 sites in the United States, was initiated. TRI-003 is
designed to assess the anitiviral activity, safety and plasma pharmacokinetics
of T-20 in six treatment arms. Four distinct doses will be administered by
continuous subcutaneous infusion via an infusion device developed by MiniMed
Inc. (NASDAQ: MNMD), a product currently approved for insulin infusion by
diabetics, and two distinct doses will be administered via intermittent
subcutaneous injection. At entry all enrolled patients may either be on no other
antiretroviral therapy or a stable regimen which will not change during the
trial. Results from TRI-003 are expected to be reported in early 1999.
The Company is currently considering various other Phase II trials which will
evaluate the chronic effect of T-20 when used alone and with other
antiretroviral drugs. The Company is also considering other Phase II trials
which will evaluate T-20's use in other acute indications. The Company expects
that data from TRI-003 and any other Phase II trials conducted should provide a
basis for initiating pivotal clinical trials during 1999.
Year 2000 Compliance
The Company recognizes the importance of ensuring that its computer and
business systems will not be adversely affected by Year 2000 issues, which
result from the fact that many computer programs use only two digits to identify
a year in the date field. The Company is in the process of implementing a plan
to target and resolve any Year 2000 issues. The plan includes identifying all
critical applications, including vendors and suppliers, assessing their
compliance with Year 2000 issues, and developing contingency plans for any
non-compliant critical applications. The Company expects to have completed its
review and assessment of all critical systems and applications by mid-1999. To
date, the Company has not identified any critical applications or vendors that
are Year 2000 non-compliant. The Company believes that, based on currently
available information, the cost to convert any non-compliant critical
applications will not be material and will not have a material adverse effect on
the Company's results of operations or financial condition. However, there can
be no assurance that there will not be some unexpected costs incurred or delays
encountered during the completion of the Company's Year 2000 plan, and such
costs or delays could have an adverse effect on future results of operations.
10
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Use of Proceeds:
The following information updates and supplements the information
regarding use of proceeds originally filed in the Company's Form
10-Q for the quarter ended September 30, 1997, as amended to date,
and relates to securities sold by the Company pursuant to the S-1
Registration Statement. Through September 30, 1998, the Company has
expended approximately $9,673,000 of the total net proceeds from its
initial public offering of $34,532,000 for working capital. The
unused proceeds of $24,859,000 are invested in temporary
investments, primarily short-term corporate debt securities. All
proceeds used or invested were direct or indirect payments to
others. This use of proceeds does not represent a material change in
the use of proceeds described in the Company's Prospectus filed as a
part of the S-1 Registration Statement.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Any stockholder proposal submitted outside the processes of Rule 14a-8
under the Securities and Exchange Act of 1934 for presentation to the
Company's 1999 Annual Meeting of Stockholders will be considered untimely
for purposes of Rules 14a-4 and 14a-5 if notice thereof is received by the
Company after April 4, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits filed as part of this Quarterly Report on Form 10-Q are
listed on the Exhibit Index immediately preceding such exhibits and are
incorporated herein by reference.
(b) Reports on Form 8-K
None
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Trimeris, Inc.
(Registrant)
November 12, 1998 /s/ M.ROSS JOHNSON
M. Ross Johnson
President, Chief Executive
Officer, and Chief Scientific
Officer
November 12, 1998 /s/ MATTHEW A. MEGARO
- ----------------- ---------------------------
Matthew A. Megaro
Chief Operating Officer,
Chief Financial Officer,
Executive Vice President and
Secretary (Principal Accounting
and Financial Officer)
12
<PAGE>
EXHIBIT INDEX
Number Description
11.1 Computations of Basic Loss Per Share
27.1 Financial Data Schedule
13
<PAGE>
Exhibit 11.1 Computations of Basic Loss Per Share.
TRIMERIS, INC.
STATEMENTS RE: COMPUTATIONS OF BASIC LOSS PER SHARE
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1997 1998 1997 1998
------ ----- ---- -----
<S> <C> <C> <C> <C>
Common shares outstanding
(weighted average) (1) 7,351 10,562 6,322 10,539
Common Stock equivalents
(using the treasury stock method):
Stock Options and Awards
(weighted average) Pursuant
to Staff Accounting Bulletin
No. 83 (2) 100 100 100 100
------ ------ ------ ------
Total weighted average shares 7,451 10,662 6,422 10,639
======= ======= ====== =======
Net loss $(3,353) $(4,680) $(6,831)$(12,977)
======= ======= ======= =======
Basic net loss per share $ (0.45) $ (0.44) $ (1.06) $ 1.22)
========== ======= ======= =======
</TABLE>
(1)Assumes the retroactive conversion of the Preferred Stock into shares of
Common Stock which occurred upon the completion of the Company's Initial
Public Offering in October, 1997, for all periods presented.
(2)Includes all options and awards issued during the twelve-month period prior
to the initial filing of the registration statement relating to the Company's
Initial Public Offering, in accordance with Securities and Exchange
Commission Staff Accounting Bulletin No. 83.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000911326
<NAME> TRIMERIS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 21,457
<SECURITIES> 3,402
<RECEIVABLES> 56
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,138
<PP&E> 4,247
<DEPRECIATION> 2,582
<TOTAL-ASSETS> 27,503
<CURRENT-LIABILITIES> 3,193
<BONDS> 0
0
0
<COMMON> 11
<OTHER-SE> 23,461
<TOTAL-LIABILITY-AND-EQUITY> 27,503
<SALES> 0
<TOTAL-REVENUES> 270
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,589
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 91
<INCOME-PRETAX> (12,977)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,977)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,977)
<EPS-PRIMARY> (1.22)
<EPS-DILUTED> (1.22)
</TABLE>
