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, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______ to _______
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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 11, 1999 was 13,712,515.
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<CAPTION>
TRIMERIS, INC.
(A Development Stage Company)
FORM 10-Q
For the Nine Months Ended September 30, 1999
INDEX
<S> <C> <C>
PART 1. FINANCIAL INFORMATION Page
- ------- --------------------- ----
Item 1. Financial Statements
--------------------
Balance Sheets as of September 30, 1999 (unaudited) and
December 31, 1998 1
Statements of Operations (unaudited) for the Three and Nine Months
Ended September 30, 1999 and 1998 and Period From
Inception (January 7, 1993) Through September 30, 1999 2
Statements of Cash Flows (unaudited) for the Nine Months Ended
September 30, 1999 and 1998 and Period From
Inception (January 7, 1993) Through September 30, 1999 3
Notes to Financial Statements (unaudited) 4
Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations 6
-------------------------
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
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PART II. OTHER INFORMATION
- -------- -----------------
Item 1. Legal Proceedings 14
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Item 2. Changes in Securities and Use of Proceeds 14
-----------------------------------------
Item 3. Defaults Upon Senior Securities 14
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders 14
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Item 5. Other Information 14
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Item 6. Exhibits and Reports on Form 8-K 15
--------------------------------
Signature Page 16
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Exhibit Index 17
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<CAPTION>
PART 1. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
--------------------
TRIMERIS, INC.
(A Development Stage Company)
BALANCE SHEETS
(in thousands, except par value)
December 31, September 30,
1998 1999
(unaudited)
-------------- -----------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 16,920 $ 25,899
Short-term investments 3,256 19,798
Accounts receivable 68 27
Receivable from Roche - 2,278
Prepaid expenses 321 219
----------- ----------
Total current assets 20,565 48,221
Property, furniture and equipment, net 1,598 2,017
----------- ----------
Other assets:
Exclusive license agreement, net 27 25
Patent costs, net 534 674
Equipment deposits 147 207
Other, net 1 -
----------- ----------
Total other assets 709 906
----------- ----------
Total assets $ 22,872 $ 51,144
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,176 $ 712
Current installments of capital lease obligations 471 600
Accrued compensation 829 1,118
Accrued expenses 1,527 3,698
------------- ----------
Total current liabilities 4,003 6,128
Capital lease obligations, less current installments 853 1,030
----------- ----------
Total liabilities 4,856 7,158
----------- ----------
Commitments and contingencies
Stockholders' equity:
Series A, B, C, and D preferred stock at $.001 par value per share, 10,000
shares authorized, zero shares issued and outstanding at December 31,
1998 and September 30, 1999 (unaudited) -- --
Common Stock at $.001 par value per share, 30,000 shares authorized, 10,637
and 13,703 shares issued and outstanding at December 31, 1998 and
September 30, 1999 (unaudited) 11 14
Additional paid-in capital 68,406 103,147
Deficit accumulated during the development stage (48,395) (55,705)
Deferred compensation (1,788) (3,362)
Notes receivable from stockholders (218) (108)
------------ -----------
Net stockholders' equity 18,016 43,986
----------- ----------
Total liabilities and stockholders' equity $ 22,872 $ 51,144
============ ==========
</TABLE>
See accompanying notes to financial statements.
1
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<TABLE>
<CAPTION>
TRIMERIS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Cumulative
From Inception
Three Months Nine Months (January 7, 1993)
Ended September 30, Ended September 30, To September 30,
1998 1999 1998 1999 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue $ 95 $ 10,000 $ 270 $ 10,081 $ 11,034
-------- --------- --------- --------- -----------
Operating expenses:
Research and development 4,135 4,477 11,368 13,516 52,267
General and administrative 994 1,741 3,221 4,883 16,911
-------- --------- --------- --------- -----------
Total operating
expenses 5,129 6,218 14,589 18,399 69,178
-------- --------- --------- --------- -----------
Operating income (loss) (5,034) 3,782 (14,319) (8,318) (58,144)
--------- --------- ---------- ---------- ------------
Other income (expense):
Interest income 395 633 1,433 1,121 3,582
Interest expense (41) (28) (91) (113) (1,143)
--------- ---------- ---------- ---------- ------------
354 605 1,342 1,008 2,439
-------- --------- --------- --------- -----------
Net income (loss) $ (4,680) $ 4,387 $ (12,977) $ (7,310) $ (55,705)
========= ========= ========== ========== ============
Basic net income (loss) per share $ (0.44) $ 0.32 $ (1.22) $ (0.61)
=========== ========= =========== ==========
Basic weighted average
shares used in per share
computations 10,662 13,778 10,639 12,067
======== ========= ========= =========
Diluted net income (loss)
per share $ (0.44) $ 0.30 $ (1.22) $ (0.61)
=========== ========= =========== ===========
Diluted weighted average
shares used in per share
computations 10,662 14,570 10,639 12,067
======== ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
2
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<TABLE>
<CAPTION>
TRIMERIS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Cumulative
From Inception
Nine Months Ended (January 7, 1993)
September 30, To September 30,
1998 1999 1999
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss $(12,977) $ (7,310) $(55,705)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 413 689 3,484
Other amortization 12 10 59
Amortization of deferred compensation 450 757 1,850
401(K) plan stock match - - 236
Provision for equipment held for resale - - 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 45 (2,237) (2,305)
Prepaid expenses (217) 102 (219)
Other assets (62) (67) (215)
Accounts payable 58 (464) 712
Accrued compensation 89 289 1,118
Accrued expenses 111 2,171 3,608
------- -------- --------
Net cash used by operating activities (12,078) (6,060) (46,906)
-------- --------- ---------
Cash flows from investing activities:
Sales (purchases) of short-term investments 1,461 (16,542) (19,798)
Purchases of property and equipment (257) (442) (1,289)
Equipment held for resale - - (61)
Organization costs - - (8)
Patent costs (89) (140) (688)
-------- --------- ---------
Net cash provided (used) by investing activities 1,115 (17,124) (21,844)
------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes payable - - 6,150
Lease costs - - (13)
Principal payments under capital lease obligations (326) (360) (2,598)
Proceeds from issuance of Common Stock - - 31
Proceeds from issuance of Preferred Stock - - 23,896
Proceeds from public offerings, net - 31,357 65,889
Proceeds from exercise of stock options 7 983 1,002
Proceeds from employee stock purchase plan exercise 182 73 328
Repayment of notes receivable from stockholders - 110 160
Stock issuance costs - - (196)
------- -------- ---------
Net cash provided (used) by financing activities (137) 32,163 94,649
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (11,100) 8,979 25,899
Cash and cash equivalents, beginning of period 32,557 16,920 -
------- -------- --------
Cash and cash equivalents, end of period $21,457 $25,899 $25,899
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
3
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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 1998 financial statements and notes thereto included in the
Company's 1998 Form 10-K filed with the Securities and Exchange Commission on
March 31, 1999 and the Company's Registration Statement on Form S-3 as declared
effective by the Securities and Exchange Commission on May 26, 1999.
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 INCOME (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 income (loss) per common share is replaced with
basic income (loss) per common share which is calculated by dividing net income
(loss) by the weighted-average number of common shares outstanding for the
period after certain adjustments described below. Fully diluted net income
(loss) per common share is replaced with diluted net income (loss) 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 the same as basic net loss per common share
for all periods other than the three months ended September 30, 1999, 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 in October
1997.
4
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3. STATEMENTS OF CASH FLOWS
Interest of approximately $91,000 and $113,000 was paid during the nine
months ended September 30, 1998 and 1999, respectively. Capital leases of
$1,064,000 and $666,000 were incurred for the nine months ended September 30,
1998 and 1999, respectively for the purchase of new furniture and equipment.
4. PUBLIC OFFERINGS 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 6,261,615
shares of the Company's common stock.
In June 1999, the Company closed a public offering of common stock at $11.75
per share. The net proceeds of the offering, including the proceeds received in
connection with the exercise of the Underwriters' over-allotment option, were
approximately $31.4 million after deducting applicable issuance costs and
expenses.
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.
6. ROCHE COLLABORATION
In July 1999, the Company announced an agreement with Hoffmann-La Roche to
develop and market T20 and T1249 worldwide. In the United States and Canada, the
Company and Roche will share equally development expenses and profits for the
two fusion inhibitors. Outside of these two countries, Roche will fund all
development costs and pay the Company royalties on net sales of these products.
Roche made an initial cash payment to the Company of $10 million and will
provide up to an additional $78 million in cash and funding upon achievement of
developmental, regulatory and commercial milestones.
5
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion of our financial condition and the results of operations
should be read together with the financial statements and notes contained
elsewhere in this Form 10-Q. Certain statements in this section and other
sections are forward-looking. While we believe these statements are accurate,
our business is dependent on many factors, some of which are discussed in the
"Risk Factors" and "Business" sections of our Form 10-Q for the three months
ended March 31, 1999 filed with the Securities and Exchange Commission on May
17, 1999 and our Registration Statement on Form S-3 as declared effective by the
Securities and Exchange Commission on May 26, 1999. These factors include, but
are not limited to: that we are an early stage company with an uncertain future;
that we have never made money and expect our losses to continue; that we will
need to raise additional funds in the future; that our quarterly operating
results are subject to fluctuations and you should not rely on them as an
indication of our future results; that we are heavily dependent on our lead
product candidate, T20; that we face many uncertainties relating to our human
clinical trial results and clinical trial strategy; that HIV may develop
resistance to our drug candidates; that we have no experience manufacturing
pharmaceutical products; that we face risks associated with manufacturing T20
and T1249; that our business is based on novel technology and is highly risky
and uncertain; that we are dependent on third-party contract research
organizations; that we have no sales, marketing or distribution capabilities;
that our stock price is highly volatile; that we depend on collaborations and
licenses with others; that there is uncertainty relating to third-party
reimbursement and health care reform measures which could limit the amount we
will be able to charge for our products; that there is uncertainty regarding
patents and proprietary rights; that we are subject to extensive government
regulation; that our products may not receive regulatory approval; that we face
intense competition; that we use hazardous materials; that we are exposed to
product liability risks; that we depend upon certain key personnel and face
risks relating to our ability to attract and retain key personnel; that we may
be adversely affected by Year 2000 issues; that future sales of common stock by
our existing stockholders could adversely affect our stock price; and that we
have implemented certain anti-takeover provisions. Many of these factors are
beyond our control and any of these and other factors could cause actual results
to differ materially from the forward-looking statements made in this 10-Q. The
results of our previous clinical trials are not necessarily indicative of the
results of future clinical trials. We undertake no obligation to release
publicly the results of any revisions to the statements contained in this Form
10-Q to reflect events or circumstances that occur subsequent to the date
hereof.
OVERVIEW
We began our operations in January 1993 and are a development stage company.
Accordingly, we have a limited operating history. Since our inception,
substantially all of our resources have been dedicated to:
o the development, patenting, preclinical testing and clinical trials of T20,
o the development of a manufacturing process for T20,
o production of drug material for future clinical trials, and
o research and development and preclinical testing of other potential product
candidates.
We have lost money since inception and, as of September 30, 1999, had an
accumulated deficit of approximately $55.7 million. We have received revenue
only from federal small business innovative research grants, otherwise known as
SBIR grants, an investigative contract, and an initial collaboration payment
from Roche, and have not generated any revenue from product sales or royalties.
We may never generate any revenue from product sales or royalties.
6
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Development of current and future drug candidates will require significant
additional, time-consuming and costly research and development, preclinical
testing and extensive clinical trials prior to submission of any regulatory
application for commercial use. We expect to incur substantial losses for the
foreseeable future and expect losses to increase as our research and
development, preclinical testing, drug production and clinical trial efforts
expand. The amount and timing of our operating expenses will depend on many
factors, including:
o the status of our research and development activities,
o product candidate discovery and development efforts, including preclinical
testing and clinical trials,
o the timing of regulatory actions,
o the costs involved in preparing, filing, prosecuting, maintaining, protecting
and enforcing patent claims and other proprietary rights,
o our ability to work with Roche to manufacture, develop, sell, market and
distribute T20 and T1249,
o technological and other changes in the competitive landscape,
o changes in our existing research and development relationships and strategic
alliances,
o evaluation of the commercial viability of potential product candidates, and
o other factors, many of which are outside of our control.
As a result, we believe that period-to-period comparisons of our financial
results in the future are not necessarily meaningful. The past results of
operations and results of previous clinical trials should not be relied on as an
indication of future performance. If we fail to meet the clinical and financial
expectations of securities analysts and investors, it could have a material
adverse effect on the market price of our common stock. Our ability to achieve
profitability will depend, in part, on our own or our collaborative partner's
ability to successfully develop and obtain regulatory approval for T20 and other
product candidates, and our ability to develop the capacity, either internally
or through relationships with third parties, to manufacture, sell, market and
distribute approved products, if any. We may never generate significant revenues
or achieve profitable operations.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
REVENUE. Total revenue increased from $95,000 for the three months ended
September 30, 1998 to $10.0 million for the three months ended September 30,
1999. Total revenue for the three months ended September 30, 1998 was entirely
derived from SBIR grants. Total revenue for the three months ended September 30,
1999 consisted entirely of the non-refundable payment from Roche for the
initiation of our collaboration for the development of T20 and T1249.
7
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RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses were
$4.1 million and $4.5 million for the three months ended September 30, 1998 and
1999, respectively. Gross research and development expenses increased during the
three months ended September 30, 1999 because we:
o continued two Phase II clinical trials for T20,
o continued a Phase I clinical trial for T1249, and
o continued manufacturing process development and purchase of drug material from
third party manufacturers to supply future clinical trials.
However, net research and development expenses decreased because Roche paid 50%
of the development costs incurred during the three months ended September 30,
1999 for T20 and T1249 as required by our collaboration agreement.
Total research personnel were 49 and 54 at September 30, 1998 and 1999,
respectively. We expect research and development expenses, net of the
reimbursements for T20 and T1249 development costs from Roche, to increase
substantially in the future due to:
o continued preclinical research and testing of product candidates,
o expanded clinical trials for T20, T1249 and other product candidates,
o the manufacture of drug material for these trials, and
o increased number of personnel to support these activities.
GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative expenses
were $1.0 million and $1.7 million for the three months ended September 30, 1998
and 1999, respectively. Expenses increased during the three months ended
September 30, 1999 because we:
o accrued severance costs for our former President,
o added personnel to support our growth, and
o incurred professional fees to support our growth.
We expect administrative expenses to increase in the future to support the
anticipated expansion of product development activities.
OTHER INCOME (EXPENSE). Other income (expense) consists of interest income and
expense. Total other income was $354,000 and $605,000 for the three months ended
September 30, 1998 and 1999, respectively. The increase was due to increased
interest income because of higher cash and investment balances during the three
months ended September 30, 1999 due to our public offering of stock closed in
June 1999.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
REVENUE. Total revenue increased from $270,000 for the nine months ended
September 30, 1998 to $10,081,000 for the nine months ended September 30, 1999.
Total revenue for the nine months ended September 30, 1998 and 1999 included
$270,000 and $81,000, respectively, derived from SBIR grants. Total revenue for
the nine months ended September 30, 1999 also included the $10.0 million
non-refundable payment from Roche for the initiation of our collaboration for
the development of T20 and T1249.
8
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RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses were
$11.4 million and $13.5 million for the nine months ended September 30, 1998 and
1999, respectively. Expenses increased during the nine months ended September
30, 1999 because we:
o completed one Phase II clinical trial and initiated two additional Phase II
clinical trials for T20,
o completed preclinical studies, filed an IND and initiated a Phase I clinical
trial for T1249, and
o continued manufacturing process development and purchase of drug material from
third party manufacturers to supply future clinical trials.
Roche paid 50% of the development costs incurred for T20 and T1249 for the three
months ended September 30, 1999 as required by our collaboration agreement.
Total research personnel were 49 and 54 at September 30, 1998 and 1999,
respectively. We expect research and development expenses, net of the
reimbursements for T20 and T1249 development costs from Roche, to increase
substantially in the future due to:
o continued preclinical research and testing of product candidates,
o expanded clinical trials for T20, T1249 and other product candidates,
o the manufacture of drug material for these trials, and
o increased number of personnel needed to support these activities.
GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative expenses
were $3.2 million and $4.9 million for the nine months ended September 30, 1998
and 1999, respectively. Expenses increased during the nine months ended
September 30, 1999 because we:
o accrued severance costs for our former Chief Executive Officer and our former
President,
o initiated and completed market research on the sales potential of T20,
o added personnel to support our growth, and
o incurred professional fees to support our growth.
We expect administrative expenses to increase in the future to support the
expansion of product development activities.
OTHER INCOME (EXPENSE). Other income (expense) consists of interest income and
expense. Total other income was $1.3 million and $1.0 for the nine months ended
September 30, 1998 and 1999, respectively. The decrease was due to decreased
interest income because of lower average cash and investment balances during the
nine months ended September 30, 1999.
9
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LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through the
private placement of equity securities, the issuance of notes to stockholders,
equipment lease financing, an initial public offering of common stock in October
1997 and a public offering of common stock in June 1999. Net cash used by
operating activities was $12.1 million and $6.1 million for the nine months
ended September 30, 1998 and 1999, respectively. The cash used by operating
activities was used primarily to fund research and development relating to T20,
T1249, and other product candidates, and decreased for the nine months ended
September 30, 1999 because of the $10.0 million non-refundable payment from
Roche for the initiation of our collaboration for the development of T20 and
T1249. Cash provided by investing activities was $1.1 million for the nine
months ended September 30, 1998 and cash used by investing activities was $17.1
million for the nine months ended September 30, 1999. The increase for the nine
months ended September 30, 1999 was due to the purchase of short-term
investments as a result of our public offering of common stock in June 1999.
As of September 30, 1999, we had $45.7 million in cash and cash equivalents
and short-term-investments, compared to $20.2 million as of December 31, 1998.
The increase is primarily a result of the closing of a public offering of common
stock in June 1999, which resulted in net proceeds of approximately $31.4
million, and the $10.0 million non-refundable payment from Roche for the
initiation of our collaboration for the development of T20 and T1249, less cash
used by operating activities.
We have experienced negative cash flows from operations since our inception
and do not anticipate generating sufficient positive cash flows to fund our
operations in the foreseeable future. Although we expect to receive
reimbursement for 50% of the development costs for T20 and T1249 from Roche, we
have expended, and expect to continue to expend in the future, substantial funds
to pursue our product candidate and compound discovery and development efforts,
including:
o expenditures for clinical trials of T20, T1249 and other product candidates,
o research and development and preclinical testing of other product candidates,
o manufacture of drug material, and
o the development of our proprietary technology platform.
As of September 30, 1999, we had commitments of approximately $18.0 million
to purchase product candidate materials and fund various clinical studies over
the next fifteen months, and expect to expend approximately $650,000 in capital
expenditures during the remainder of 1999. The majority of these expenditures
will be shared equally by Roche under our development and license agreement
signed in July 1999. Under this development and license agreement, we are
obligated to share equally the future development expenses for T20 and T1249 for
the United States and Canada. Our share of these expenditures may be financed
with capital or operating leases, debt or working capital. We expect that our
existing capital resources, together with the interest earned thereon, will be
adequate to fund our capital requirements through 1999. We believe that
substantial additional funds will be required after 1999.
If adequate funds are not available, we will be required to delay, scale-back
or eliminate certain preclinical testing, clinical trials and research and
development programs, including our collaborative efforts with Roche. In
addition, we will be required to obtain additional funds, which may be raised
through equity or debt financings. If we raise funds by selling equity, our
stockholders' interest may be diluted. Any debt financings may contain
restrictive terms that limit our operating flexibility. Additionally or
alternatively, we may have to attempt to obtain funds through arrangements with
collaborative partners. These partners may require us to relinquish rights to
our technologies or product candidates or to reduce our share of potential
profits. This could have a material adverse effect on our business, financial
condition or results of operations.
10
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YEAR 2000 COMPLIANCE
STATE OF READINESS. We have adopted a Year 2000 compliance plan and formed a
team to identify and resolve any Year 2000 issues that may affect our business.
Our compliance plan has four phases: inventory, assessment, remediation and
testing. We have completed an inventory of all of our computer systems,
computer-related equipment and equipment with embedded processors. We have also
completed the assessment of our systems. Although we cannot control whether and
how third parties will address the Year 2000 issue, we have contacted the
majority of our critical vendors and suppliers to assess their ability to ensure
smooth delivery of products without disruptions caused by Year 2000 problems. In
the course of our assessment, we have not yet identified any Year 2000 issues
that would affect our ability to do business; however, we may be affected by
Year 2000 issues. We have identified necessary repairs or replacements to
equipment and software to achieve Year 2000 compliance and are in the process of
making these repairs. We have also begun testing these repairs and replacements.
We anticipate that all testing will be completed by November 1999.
COSTS. We have not prepared estimates of costs to remediate Year 2000
problems; however, based on currently available information, including the
results of our assessment to date and our replacement schedule for equipment, we
do not believe that the costs associated with Year 2000 compliance will be
material.
RISKS. Although we believe that our Year 2000 compliance plan is adequate to
address Year 2000 concerns, we may experience negative consequences as a result
of undetected defects or the non-compliance of third parties with whom we
interact. Furthermore, there may be a delay in, or increased costs associated
with, the implementation of corrections as the Year 2000 compliance plan is
performed, such as unexpected costs of equipment repair. If realized, these
risks could result in a material adverse effect on our business, financial
condition and results of operations.
We believe that our greatest risk stems from the potential non-compliance of
our suppliers. We depend on a limited number of suppliers for certain materials,
components, services, including electrical service, and equipment necessary to
operate our research effort and our clinical trials. Accordingly, if those
suppliers are unable to process or fill our orders, provide us with services, or
otherwise interact with us because of Year 2000 problems, we could experience
material adverse effects to our business. We have contacted the majority of our
critical suppliers and have received responses from them regarding their Year
2000 status. Responses to our inquiries regarding Year 2000 compliance in many
cases have been general and nonbinding. To date, substantially all respondents
indicate that their Year 2000 compliance efforts are progressing on schedule,
and that their computer systems either are or will be Year 2000-compliant at the
appropriate time. A significant majority of these respondents are presently in
the final testing phase of their Year 2000 compliance projects, and many of them
indicate that they are concurrently developing contingency plans. We intend to
continue monitoring and evaluating these third parties to the extent practical
through the end of 1999.
CONTINGENCIES. We have developed contingency plans for our critical systems,
such as electrical service, to reduce the likelihood of loss to our research
efforts and clinical programs due to Year 2000 failures. We have also identified
alternate suppliers and vendors for critical services and materials provided by
vendors who have not responded to our Year 2000 inquiries.
We believe that the Year 2000 compliance plan described above reduces the
potential for disruption of operations or significant financial impact. However,
Year 2000 failures may occur. We cannot predict with any certainty whether our
critical third-party suppliers and business partners will achieve Year 2000
compliance, or whether their failure to do so would have a material effect on
our business. However, we are establishing contingency plans for maintaining
operations with our critical third-party suppliers or alternative suppliers to
minimize any disruption in our day-to-day business operations.
11
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION
CLINICAL DEVELOPMENT
The following discussion highlights certain aspects of our on-going and
planned clinical development programs. The results of our previous clinical
trials are not necessarily indicative of the results of future clinical trials.
T20
We are developing T20, our first drug candidate for HIV fusion inhibition,
which has been granted fast track designation by the FDA. T20 is currently in
Phase II clinical trials.
PHASE II - T20-205
In March 1999, we initiated a rollover Phase II trial to continue T20 therapy
for patients who participated in the earlier clinical trials of T20. The primary
purpose of this trial is to collect data relating to the safety of long-term
administration of T20. Patients in this trial will add T20 to their
individualized anti-HIV drug combinations and will remain on therapy for as long
as they demonstrate acceptable safety and antiviral responses. We announced 16
week results from this trial at the Interscience Conference on Antimicrobial
Agents and Chemotherapy in September 1999. Results at 16 weeks showed that 33 of
55, or 60%, of heavily pre-treated patients who were given T20 in combination
with oral antiretroviral agents responded with a clinically significant
reduction of HIV in the blood. Indeed, 20 of the 55, or 36%, of patients had
virus levels below the level of quantification, <400 copies of HIV RNA/mL. No
patients discontinued the trial due to T20-related adverse events or intolerance
of the twice-daily subcutaneous injection of T20.
PHASE II - T20-204 (PEDIATRIC)
In cooperation with the Division of AIDS of the National Institute of Allergy
and Infectious Diseases, we are planning to commence a clinical trial in 1999 to
assess the safety, pharmacokinetics and preliminary antiviral activity of T20 in
children. We expect to enroll 12 HIV-infected children. We expect to begin this
pediatric trial in the fourth quarter of 1999 and complete it by mid 2000. We
will use the results from this trial to design larger scale pediatric trials
that we expect to commence following culmination of this initial safety and
pharmacokinetic trial.
PHASE II - T20-206
In June 1999, we initiated a Phase II trial that should assess the long-term
safety and efficacy of T20 when used in combination with other anti-HIV drugs.
The trial is designed to run for 48 weeks, with formal data evaluation at 16 and
48 weeks. It is a multi-site, randomized, controlled comparison of three
different doses of T20 in combination with a background regimen of a nucleoside
RT inhibitor, two protease inhibitors and a non-nucleoside RT inhibitor. We
intend to collect data from up to 68 patients who complete treatment. We expect
to have our initial data from this trial in the first half of 2000.
PIVOTAL TRIAL
Based on the results of these Phase II trials, we intend to begin a pivotal
trial in the first half of 2000 in a larger population of HIV-infected patients
who are either resistant to, or intolerant of, currently-approved anti-HIV
drugs. Historically, pivotal trials of this type involving anti-HIV drugs have
included approximately 300 to 400 patients and have taken approximately 18
months to complete.
12
<PAGE>
T1249
We are also developing T1249, our second drug candidate for HIV fusion
inhibition, which has been granted fast track designation by the FDA. T1249 is
currently in a Phase I clinical trial.
PHASE I - T1249-101
In June 1999, we initiated a Phase I dose escalation trial to assess the
safety and pharmacokinetics of T1249. Four different daily doses of T1249 will
be administered as monotherapy for 14 days to HIV-infected adults by once or
twice daily subcutaneous injection. T1249-101 will enroll up to 72 HIV-infected
individuals at up to eight sites in the United States. We expect to have our
initial data from this trial in early 2000.
RISK FACTORS
Our business is subject to certain risks and uncertainties. Please read the
"Risk Factors" and "Business" sections of our Form 10-Q for the three months
ended March 31, 1999 filed with the Securities and Exchange Commission on May
17, 1999 and our Registration Statement on Form S-3 as declared effective by the
Securities and Exchange Commission on May 26, 1999, which highlight some of
these risks. If any of these risks materialize, our business, financial
condition and results of operations could be materially adversely affected.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Our exposure to market risk is primarily in our investment portfolio. We do
not use derivative financial instruments for speculative or trading purposes. We
have an investment policy that sets minimum credit quality standards for our
investments. The policy also limits the amount of money we can invest in any one
issue, issuer or type of instrument. We have not experienced any material loss
in our investment portfolio.
The table below presents the carrying value, which is approximately equal to
fair market value, and related weighted-average interest rates for our
investment portfolio at September 30, 1999. All of our investments mature in
eighteen months or less.
Carrying Average
Amount Interest
(thousands) Rate
----------- ----
Cash equivalents - fixed rate $ 25,138 5.47%
Short-term investments - fixed rate 19,798 6.07%
Overnight cash investments - fixed rate 869 5.09%
----------- ----------
Total investment securities $ 45,805 5.72%
======== ==========
13
<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:
----------------
INITIAL PUBLIC OFFERING, OCTOBER 1997
The following information updates and supplements the
information regarding use of proceeds originally filed in our
Form 10-Q for the quarter ended September 30, 1997, as updated
and supplemented in our subsequent periodic reports to date.
The registration statement on Form S-1 (File No. 333-31109) to
which this use of proceeds relates was declared effective on
October 6, 1997. A subsequent registration statement on Form
S-1 (File No. 333-37319) was filed pursuant to Rule 462(b) and
declared effective on October 7, 1997. Through September 30,
1999, we have expended for working capital approximately
$30,192,000 of the total net proceeds from our initial public
offering of $34,532,000. The unused proceeds of $4,340,000 are
invested in temporary investments, primarily short-term
corporate debt securities. All proceeds used or invested were
direct or indirect payments to others or payments to directors
and officers in the ordinary course of business. This use of
proceeds does not represent a material change in the use of
proceeds described in our prospectus filed as a part of the
registration statement for our initial public offering.
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
-----------------
Not applicable.
14
<PAGE>
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 such list is incorporated herein by reference.
(b) Reports on Form 8-K
We filed a report on Form 8-K on July 16, 1999 under Item 5
describing a collaboration agreement with Hoffman-La Roche to
develop and market T20 and T1249.
We filed a report on Form 8-K on September 10, 1999 under Item 5
describing certain changes in management. On September 7, 1999,
Mr. Robert Bonczek was appointed Acting Chief Administrative
Officer and Acting Chief Financial Officer.
15
<PAGE>
SIGNATURES
In accordance with 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 __, 1999 By: /s/ DANI P. BOLOGNESI
- ----------------- ---------------------------
Dani P. Bolognesi
Chief Executive Officer,
and Chief Scientific Officer
November __, 1999 /s/ ROBERT R. BONCZEK
- ----------------- --------------------------
Robert R. Bonczek
Acting Chief Administrative Officer and
Acting Chief Financial Officer, (Principal
Financial Officer)
November __, 1999 /s/ TIMOTHY J. CREECH
- ----------------- --------------------------
Timothy J. Creech
Director of Finance and
Administration,
and Secretary (Principal Accounting
Officer)
16
<PAGE>
EXHIBIT INDEX
-------------
Number Description
- ------ -----------
10.1 Employment Termination and General
Release Agreement between Trimeris and
Matthew A. Megaro dated September 3,
1999
11.1 Computations of Basic Loss Per Share
27.1 Financial Data Schedule
17
EMPLOYMENT TERMINATION AND GENERAL RELEASE AGREEMENT
THIS EMPLOYMENT TERMINATION AND GENERAL RELEASE AGREEMENT ("Agreement") is
made and entered into by and between Matthew A. Megaro ("Megaro" or "Employee")
and Trimeris, Inc., a Delaware corporation (the "Company");
W I T N E S S E T H:
WHEREAS, Megaro has decided voluntarily to resign from employment with the
Company; and
WHEREAS, the Company and Megaro have agreed that Megaro's employment with
the Company shall terminate, effective as of the close of business on September
1, 1999; and
WHEREAS, Megaro and the Company now desire to memorialize, by the execution
of this Agreement, their understanding with respect to all matters relating to
Megaro's termination of employment;
NOW, THEREFORE, in consideration of the premises and mutual promises
contained herein, as well as the payment of the monies and other benefits to
Megaro as hereinafter recited, the receipt and sufficiency of which are hereby
acknowledged by Megaro, it is agreed as follows:
SECTION 1. TERMINATION DATE. Employee's tenure as an employee shall cease
as of the close of business on September 1, 1999 (the "Termination Date").
SECTION 2. SEVERANCE BENEFITS. In return for Employee's execution of and
adherence to this Agreement, including the releases that form a material part of
this Agreement, and provided Employee does not revoke this Agreement by written
notice to the Company or its representative pursuant to Section 13 (g) below,
the Company shall provide Employee with certain benefits, including benefits to
which he would not otherwise be entitled:
(a) SALARY CONTINUATION. The Company shall pay Megaro his regular salary in
effect as of his Termination Date, for the period September 2, 1999
through March 1, 2000 (the "Salary Continuation Period"), in the amount
of Sixteen Thousand One Hundred Ninety Eight Dollars ($16,198.00) per
month for a total amount during the Salary Continuation Period of
Ninety-Seven Thousand One Hundred Eighty-Eight Dollars ($97,188.00).
Payments shall be made on the Company's regular paydays, and shall be
subject to usual and customary deductions required by law and Company
policy. In the event of Megaro's death before the end of the Salary
Continuation Period, any remaining payments due under this paragraph
shall be paid to Megaro's estate.
(b) GROUP HEALTH PLAN. Megaro shall be entitled to elect for himself and
any of his dependents who are currently covered under the terms and
conditions of the Company's group health
<PAGE>
plan "continuation coverage" as provided under Section 4980B of the
Internal Revenue Code of 1986, as amended ("COBRA"), unless Megaro
becomes re-employed and eligible to participate in another group health
plan at any time during the Salary Continuation Period. To the extent
that Megaro elects and is eligible for continuation coverage under
COBRA, the Company will reimburse him for the cost of such continuation
coverage for himself and his covered dependents during the Salary
Continuation Period, unless such continuation coverage is earlier
terminated as provided for above. Such reimbursements shall be treated
as additional salary continuation and shall be subject to usual and
customary deductions required by law and Company policy. After the
Salary Continuation Period, Megaro shall bear the full cost of such
continuation coverage, if available. In the event of Megaro's death
before the end of the Salary Continuation Period, and to the extent
Megaro's surviving dependents retain continuation coverage under COBRA
after his death, the Company will reimburse them for the cost through
the end of the Salary Continuation Period.
(c) VACATION. Within thirty (30) days following the execution of this
Agreement, the Company shall pay Megaro (or his estate in the event of
his death) for the twenty (20) vacation days accrued but unused by
Megaro through the Termination Date.
(d) LIFE AND DISABILITY INSURANCE. Subject to any limitations imposed by
applicable laws or by the underwriters of any group or individual life
or disability insurance policies maintained by the Company, the Company
shall continue its coverage of Megaro under such group or individual
life and disability insurance policies through the Salary Continuation
Period, and the Company shall bear a portion of the cost of such
coverage in accordance with the Company's policies in effect as of the
Termination Date. In the event Megaro becomes re-employed and eligible
for such new employer's group or individual life or disability
insurance coverage, then this benefit shall cease. If the Company is
unable to continue such coverage and if such benefit is not otherwise
terminated by re-employment, the Company shall pay to Megaro an amount
sufficient on an after-tax basis to obtain such coverage (less any
amount he would have otherwise been required to contribute to the cost
of Company-provided coverage) through the end of the Salary
Continuation Period. Such benefits or payments shall be treated as
additional salary continuation and shall be subject to usual and
customary deductions required by law and Company policy.
(e) ATTORNEY'S FEES. The Company shall reimburse Megaro for the reasonable
attorney's fees actually incurred by him in connection with the
negotiation of the terms and provisions of this Agreement up to a
maximum amount of $2,000.00, provided Megaro or his attorney provides
the Company with the attorney's invoice for such fees, which invoice
shall include an itemized statement of the fees charged. The Company
shall reimburse Megaro for such fees within thirty (30) days following
the Company's receipt of the attorney's invoice.
(f) BONUS COMPENSATION. Megaro shall be paid a bonus for fiscal year 1998
in the amount of Thirty Seven Thousand Two Hundred Dollars ($37,200).
This bonus payment shall be paid in one lump sum within three (3)
business days following the date that this Agreement becomes effective
or enforceable by reason of the
2
<PAGE>
expiration of the revocation period under Section 13(g). This bonus
payment shall be subject to the usual and customary deductions required
by law and Company policy. In the event of Megaro's death before this
bonus payment is made, any remaining payments due under this paragraph
shall be paid to Megaro's estate.
SECTION 3. STOCK OPTIONS. Effective on April 3, 1998, the Company granted
to Megaro certain stock options as evidenced by that certain Trimeris, Inc.
Incentive Stock Option Agreement executed by the Company and Megaro (the "Option
Agreement"). As of the Termination Date, Megaro had a vested right to exercise
options to purchase certain shares of the Company's common stock. Megaro and the
Company agree that paragraph 4(a) of the Option Agreement is hereby amended to
provide, effective September 1, 1999, that the vesting schedule shall be
accelerated by six (6) months. Accordingly, Megaro and the Company agree and
acknowledge that Megaro shall have the vested right under the Option Agreement,
as so amended, to exercise options to purchase up to 32,083 shares of the
Company's common stock. Such right shall remain exercisable in accordance with
and subject to the terms and provisions of the Option Agreement (including, but
not limited to, terms relating to early expiration of exercise of options
following termination of employment).
SECTION 4. EMPLOYEE NOTES. As of September 1, 1999, Megaro is indebted to
the Company under three (3) separate promissory notes dated May 2, 1997, June 2,
1997 and June 11, 1997 (the "Notes"). Each of the Notes, as amended, is due and
payable in full on April 12, 2001, January 1, 2001 and January 1, 2001,
respectively. As of September 1, 1999, the aggregate principal and accrued
interest due on the Notes is Forty-Four Thousand Two Hundred Fifty-Five Dollars
and no/100 Cents ($44,255.00). The Notes shall continue to bear interest in
accordance with their respective terms, and shall be payable as stated therein.
In the event Megaro does not make any required payments on the respective due
dates thereof, the Company reserves the right in its discretion to apply any
amounts otherwise payable to Megaro under Section 2 of this Agreement to the
repayment of the Notes.
SECTION 5. REPURCHASE OF RESTRICTED STOCK. Megaro is a party to Stock
Restriction Agreements with the Company dated May 2, 1997, June 2, 1997 and June
11, 1997 (collectively, the "Stock Restriction Agreements"). In connection with
the provisions of paragraphs 2 and 3 of each of the Stock Restriction
Agreements, the Company hereby waives its right to exercise its Purchase Options
with respect to all unvested shares of the Company's common stock previously
purchased by Megaro under such Stock Restriction Agreements. All shares of
common stock previously purchased by Megaro under the Stock Restriction
Agreements (the "Restricted Shares") are, therefore, fully vested in Megaro
(subject to the Company's rights under Stock Pledge Agreements between Megaro
and the Company dated May 2, 1997, June 2, 1997, and June 11, 1997
(collectively, the "Stock Pledge Agreements")). Upon full payment of the Notes
referenced in Section 4 above, all of the Restricted Shares shall be released
from the applicable Stock Pledge Agreements in accordance with the respective
terms of such Stock Pledge Agreements, and any certificates in the Company's
custody shall be delivered to Megaro, and shall bear all applicable legends
designating the shares as restricted. As transfer restrictions imposed by
federal securities laws (including, but not limited to, restrictions under Rule
144 of the Securities Act of 1933, as amended) lapse, the Company will cooperate
with Megaro in removing the related restrictive legends appearing on the
certificates for the Restricted Shares
3
<PAGE>
and at the appropriate time, the Company will provide a satisfactory opinion of
counsel that any such Rule 144 holding periods applicable to the Restricted
Shares have been satisfied.
SECTION 6. LIMITATIONS ON RELEASES. Megaro has accrued as of the
Termination Date certain vested rights to benefits under one or more employee
pension benefit plans (as defined in the Employee Retirement Income Security Act
of 1974, as amended) in particular, the Trimeris, Inc. 401(k) Plan maintained by
the Company. Megaro shall be entitled to receive his vested accrued benefits
under such employee pension benefit plans in accordance with their respective
terms. The releases contained in this document do not waive or otherwise affect
Megaro's rights to such vested accrued benefits. The releases contained in this
document do not waive or otherwise affect Megaro's rights that may arise under
this Agreement or Megaro's right to seek statutory indemnification, when
applicable. Similarly, the Company has certain rights in the Inventions
Agreement, the Notes, the Stock Restriction Agreements, the Stock Pledge
Agreements and the Option Agreement, as modified by the provisions of Sections
3, 4, and 5 above (the "Megaro Agreements"). The releases contained in this
document do not waive or otherwise affect (except as specified in Sections 3, 4
and 5 above) the Company's rights under the Megaro Agreements.
SECTION 7. RELEASE OF CLAIMS. In consideration of the payments and benefits
granted hereunder, Employee, on behalf of himself and his heirs and assigns,
hereby irrevocably and unconditionally releases and forever discharges,
individually and collectively, the Company, its affiliated companies, and each
of their respective officers, directors, employees, shareholders,
representatives, parent companies, subsidiaries, predecessors, successors,
assigns, attorneys and all persons acting by, through or in concert with them
(hereinafter referred to in this Section 7 as "Trimeris"), of and from any and
all charges, claims, complaints, demands, liabilities, causes of action, losses,
costs or expenses of any kind whatsoever (including related attorneys' fees and
costs), known or unknown, suspected or unsuspected, that Employee may now have
or has ever had against Trimeris by reason of any act, omission, transaction, or
event occurring up to and including the date of the signing of this Agreement.
This waiver, release and discharge includes without limitation, claims
related to any wrongful or unlawful discharge, discipline or retaliation, any
contract of employment, whether express or implied, any promotions or demotions,
compensation including commissions, short term or long term incentives, the
Company's benefit plan(s) and the management thereof, defamation, slander,
libel, invasion of privacy, misrepresentation, fraud, infliction of emotional
distress, stress, breach of any covenant of good faith and fair dealing, and any
other claims relating to the Employee's employment with the Company and the
termination thereof. This waiver, release and discharge further applies but is
not limited to any claims based on Title VII of the Civil Rights Act of 1964,
the Post Civil War Civil Rights Act (41 U.S.C. ss. 1981 - 88), the Civil Rights
Act of 1991, the Equal Pay Act, the Age Discrimination in Employment Act, the
Older Workers' Benefit Protection Act, the Rehabilitation Act of 1973, the
Americans with Disabilities Act, the Vietnam Era Veterans' Readjustment Act, the
Fair Labor Standards Act, the Workers Adjustment and Retraining Notification
Act, Executive Order 11246, the Employee Retirement Income Security Act of 1974,
the Family and Medical Leave Act (all as they may be amended), and any other
applicable federal, state or local laws, ordinances and regulations including
those relating to discrimination to the extent permitted by law.
4
<PAGE>
Employee expressly waives all claims, including those which he does not
know or suspect to exist in his favor as of the date of this Agreement against
Trimeris. As used herein, the parties understand the word "claims" to include
all actions, claims, and grievances, whether actual or potential, known or
unknown, and specifically but not exclusively including all claims against
Trimeris recited in Section 7 hereof or otherwise arising from Employee's
employment with the Company, the termination thereof or any other conduct or
negotiations occurring on or prior to the date Employee signs this Agreement.
All such claims are forever barred by this Agreement whether they arise in
contract or tort or under a statute or any other law. The final release of all
claims by Employee against Trimeris constitutes a material part of the
consideration flowing from Employee to Trimeris under this Agreement, and each
of the individuals and entities included within the term "Trimeris" is an
intended beneficiary of this consideration.
SECTION 8. COOPERATION. Megaro hereby agrees to reasonably cooperate with
the Company, now or at any time in the future at the Company's request or in
accordance with any court order, in any investigation, analysis, proceeding,
charge, claim, complaint, demand, cause of action, deposition, arbitration or
trial arising out of or relating to matters and things which occurred during
Megaro's employment with the Company. The Company shall reimburse Megaro for the
reasonable out-of-pocket expenses actually incurred by him in connection with
such cooperation, provided that Megaro submits to the Company an itemized
statement of such expenses supported by receipt(s). The Company shall reimburse
Megaro for such expenses within thirty (30) days following the Company's receipt
of the expense statement.
SECTION 9. CONFIDENTIAL TERMS. Employee and the Company agree that each
will keep the contents of this Agreement (including its existence and the terms
and provisions thereof) and the negotiations leading to it completely
confidential, that neither will hereafter publish or disclose any information
concerning such matters to anyone, and that each shall take every reasonable
precaution to prevent the direct or indirect disclosure of such information to
third parties, provided that the foregoing provisions shall not be construed to
prevent Employee from disclosing such matters to his family, accountant and/or
any attorney consulted by him or from disclosing the existence of this Agreement
and non-compete provisions to prospective future employers or to prevent the
Company from disclosing such matters to its accountants and attorneys, and
provided further that Employee may also make such disclosures as are finally
compelled by law provided Employee gives the Company immediate notice of such
legal process in order that the Company shall have the opportunity to object to
the disclosure of such information. Notwithstanding the foregoing, the Company
shall have the right to make any and all disclosures as it determines to be
necessary to comply with any judicial order or the requirements of any law
(including, without limitation, any requirement to disclose the terms of this
Agreement or to include this Agreement in any filing with the Securities and
Exchange Commission), and any such disclosures shall not have the effect of
terminating or waiving the continuing confidentiality obligations of the parties
hereunder.
SECTION 10. PRESERVATION OF COMPANY CONFIDENTIAL INFORMATION. Employee
shall not use for himself, publish or disclose to any third party any
confidential or proprietary information concerning the Company or its business
which was acquired or learned during the course of Employee's employment with
the Company. By way of example and not limitation, such information includes
management organization, salary structures, financial results and
5
<PAGE>
conditions, product quality, product pricing, transfer pricing, production
capacity, customer and vendor lists, pricing, contacts and preferences, customer
product configurations, marketing and sales strategies and plans, inventions,
research and product development, trade secrets, patents, severance agreements
with other employees, MIS and telecommunications codes, and other business
activities, strategies and plans. Employee acknowledges, ratifies and reaffirms
without limitation all of the terms and conditions stated in that certain
Proprietary Information and Inventions Agreement between Employee and the
Company and dated March 10, 1995 (the "Inventions Agreement"), including but not
limited to the Statement Regarding Proprietary Information and Inventions
Agreement executed by Employee and dated March 10, 1995. Further, Employee
agrees that immediately upon the execution of this Agreement, Employee will
return all Company property loaned to Employee during the course of his
employment with the Company, including, but not limited to, laptop computers,
mobile phones, fax machines and printers.
SECTION 11. AGREEMENT NOT TO COMPETE. Megaro agrees that for a period of
six (6) months following the Termination Date, Megaro shall not, directly or
indirectly, acting alone or as a member of a partnership or as an officer,
director, stockholder, employee, consultant or representative of any company or
other business entity, (i) engage in any business activity anywhere in the world
involving viral membrane fusion or peptide manufacturing, or (ii) request any
present or future customers or suppliers of the Company to curtail or cancel
their business with the Company. Megaro further agrees that for a period of six
(6) months following the Termination Date, Megaro will not induce or attempt to
induce, directly or indirectly, any employees or consultants of the Company to
terminate his or her employment or association with the Company or any
successors or affiliates. The foregoing shall apply during the aforesaid six (6)
month period whether Megaro is contacted directly by such employee or consultant
or otherwise.
SECTION 12. NONDISPARAGEMENT. Employee agrees that he will not denigrate,
defame, disparage or cast aspersions upon collectively, the Company, its
affiliated companies, and each of their respective officers, directors,
employees, stockholders, representatives, parent companies, subsidiaries,
predecessors, successors, assigns, attorneys and all persons acting by, through
or in concert with them (hereinafter referred to in this Section 12 as
"Trimeris") or any of Trimeris' employees, past or present, or products or
activities of Trimeris, to anyone, whether in the employ of Trimeris or
elsewhere. Employee further agrees that he will use all reasonable efforts to
prevent any member of his immediate family from denigrating, defaming,
disparaging or casting aspersions upon Trimeris or any of Trimeris' employees,
past or present, or products or activities of Trimeris, to anyone, whether in
the employ of Trimeris or elsewhere. The Company agrees that it will not
denigrate, defame, disparage or cast aspersions upon Megaro and the Company will
instruct its' officers and directors not to denigrate, defame, disparage or cast
aspersions upon Megaro.
SECTION 13. EMPLOYEE ACKNOWLEDGEMENTS. Employee understands and agrees that
Employee:
(a) Has carefully read and fully understands all of the provisions of this
Agreement;
6
<PAGE>
(b) Has been offered a full twenty-one (21) days from receipt of this
Agreement to consider its terms, and having had adequate opportunity to
consider the terms of the Agreement and consult with advisors of his
choice, has elected to sign the Agreement as of the date hereof;
(c) Is, through this Agreement, releasing Trimeris from any and all claims
Employee may have against Trimeris, including but not limited to claims
under the Age Discrimination in Employment Act, as amended;
(d) Knowingly and voluntarily agrees to all of the terms set forth in this
Agreement;
(e) Knowingly and voluntarily intends to be legally bound by the same;
(f) Was advised and is hereby advised in writing to consider the terms of
this Agreement and to consult with an attorney of Employee's choice
prior to executing this Agreement; and
(g) Has a full seven (7) days following his execution of this Agreement to
revoke this Agreement and has been and hereby is advised in writing
that this Agreement shall not become effective or enforceable until the
revocation period has expired. Revocation must occur by hand delivery
of a letter of revocation to Dani P. Bolognesi at Trimeris, Inc., 4727
University Drive, Durham, NC 27707, on or before the end of the
business day on September 10, 1999.
(h) Is receiving under this Agreement severance benefits and stock options
to which he would not otherwise be entitled;
(i) Will not retain any materials, supplies, equipment, originals or copies
of any Company or other business records, documents, or data.
SECTION 14. INJUNCTIVE RELIEF. Megaro acknowledges and recognizes that a
violation of this Agreement and its covenants will cause irreparable damage to
the Company and that it will have no adequate remedy at law for such violation.
Accordingly, Megaro agrees that the Company will be entitled, as a matter of
right, to an injunction from any court of competent jurisdiction restraining any
violation of the Agreement. This right to injunctive relief will be cumulative
and in addition to whatever remedies the Company may otherwise have at law.
SECTION 15. LEGAL PROCEEDINGS; AGREEMENT AS A DEFENSE. This Agreement may
be plead as a full and complete defense to, and may be used as the basis for an
injunction against, any action, suit, or other proceeding which may be
instituted, prosecuted or attempted in breach of this Agreement, except for an
action based on a breach of this Agreement. If, contrary to this Agreement,
Megaro files a lawsuit or other legal proceeding against the Company, the
Company shall have the option, in its sole discretion, either to raise this
Agreement as a defense or to rescind this Agreement, in which case Megaro shall
refund to the Company all amounts paid to him pursuant to Section 2 hereunder
and no further payments shall be due to Megaro under Section 2. Notwithstanding
the foregoing, nothing in this Agreement shall be construed to prevent either
party from pursuing claims against the other for breach of this Agreement and
from recovering appropriate legal or equitable relief in connection with such
claims.
7
<PAGE>
SECTION 16. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of North Carolina. This Agreement shall be interpreted in accordance
with the plain meaning of its terms and not strictly for or against any of the
parties hereto.
SECTION 17. NO OTHER BENEFITS. Megaro acknowledges that, except as set
forth herein, he is not entitled to any compensation, monies or benefits from
the Company, including but not limited to compensation for accrued vacation,
bonuses, commissions, expenses or other forms of compensation or benefits.
Megaro hereby waives all rights to any payments other than for outstanding bona
fide business expenses incurred by Megaro on behalf of the Company prior to
September 1, 1999.
SECTION 18. ENTIRE AGREEMENT. This Agreement represents and contains the
entire agreement and understanding between Megaro and the Company with respect
to its subject matter, and it supersedes any and all prior oral and written
agreements and understandings, and no representation, warranty, condition,
understanding, or agreement of any kind with respect to the subject matter of
this Agreement will be relied upon by Megaro unless specifically incorporated in
this Agreement; provided, however, that the Option Agreement, the Stock
Restriction Agreements, the Notes, the Inventions Agreement and the Stock Pledge
Agreements, will each remain in full force and effect, except to the extent
expressly modified or amended hereunder. Further, this Agreement is intended to
be a binding contract between the parties and shall not be modified, except by
writing signed by both parties.
SECTION 19. TAX WITHHOLDING. Certain payments made under this Agreement may
be subject to required income and other tax withholdings. Megaro will be
responsible for any taxes which may be due as a result of any payments made by
the Company or benefits otherwise provided as described above, and Megaro agrees
to indemnify and hold the Company harmless from any claim and expense that the
Company may incur as a result of any failure by Megaro to pay any such taxes.
SECTION 20. NO ADMISSIONS. Megaro acknowledges and agrees that the payments
by the Company, releases and other consideration described in this Agreement are
offered and exchanged in good faith and will not, for any purpose, be considered
as admissions of liability on the part of the Company, by whom liability is
expressly denied, and no past or present wrongdoing on the part of the Company
is implied by such payments, releases or other consideration under the terms of
this Agreement.
SECTION 21. SEVERABILITY. In the event any provision of this Agreement is
determined by a court or other tribunal to be unenforceable for any reason, the
remaining provisions hereof shall remain in full force and effect and the
unenforceable provision(s) shall be interpreted and rewritten to give effect to
the parties' economic intentions.
SECTION 22. ASSIGNMENT OF CLAIMS. Employee warrants to the Company that he
has not assigned any claim or cause of action released herein.
SECTION 23. COUNTERPARTS. This document may be executed in multiple
counterparts, each of which shall be considered an original.
8
<PAGE>
SECTION 24. VOLUNTARY AGREEMENT. EMPLOYEE ACKNOWLEDGES AND AGREES THAT HE
HAS BEEN ADVISED THAT THIS AGREEMENT IS A BINDING LEGAL DOCUMENT. EMPLOYEE
FURTHER AGREES THAT HE HAS HAD ADEQUATE TIME AND A REASONABLE OPPORTUNITY TO
REVIEW THE PROVISIONS OF THIS AGREEMENT, HAS BEEN ADVISED TO SEEK LEGAL ADVICE
REGARDING ALL ITS ASPECTS, AND THAT IN EXECUTING THIS AGREEMENT EMPLOYEE HAS
ACTED VOLUNTARILY AND HAS NOT RELIED UPON ANY REPRESENTATION MADE BY THE COMPANY
OR ANY OF ITS EMPLOYEES OR REPRESENTATIVES REGARDING THIS AGREEMENT'S SUBJECT
MATTER AND/OR EFFECT. EMPLOYEE HAS READ AND FULLY UNDERSTANDS THIS AGREEMENT AND
VOLUNTARILY AGREES TO ITS TERMS.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE TO FOLLOW.]
9
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer, and Megaro has executed this Agreement, all as of
the 3rd day of September, 1999.
EMPLOYEE: TRIMERIS, INC.
/s/ Matthew A. Megaro By: /s/ Dani P. Bolognesi
- --------------------- ---------------------
Matthew A. Megaro Dani P. Bolognesi,
Ph.D. Chief Executive
Officer and Chief
Scientific Officer
10
EXHIBIT 11.1
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,
------------------- -------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Common shares outstanding
(weighted average) (1) 10,562 13,678 10,539 11,967
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 10,662 13,778 10,639 12,067
======== ========= ========= =========
Basic net income (loss) $ (4,680) $ 4,387 $ (12,977) $ (7,310)
======== ========= ========= =========
Basic net income (loss) per share $ (0.44) $ 0.32 $ (1.22) $ (0.61)
========= ========= ========== ==========
</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.
<PAGE>
<TABLE>
<CAPTION>
TRIMERIS, INC.
STATEMENTS RE: COMPUTATIONS OF DILUTED LOSS PER SHARE
(in thousands except per share data)
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Common shares outstanding
(weighted average) (1) 10,562 13,678 10,539 11,967
Common stock equivalents
(using the treasury stock
method): Stock options and
awards (weighted average)
pursuant to Staff Accounting
Bulletin No. 83 (2) 100 892 100 100
-------- --------- --------- ---------
Total weighted average shares 10,662 14,570 10,639 12,067
======== ========= ========= =========
Diluted net income (loss) $ (4,680) $ 4,387 $ (12,977) $ (7,310)
======== ========= ========= =========
Diluted net income (loss) per share $ (0.44) $ 0.30 $ (1.22) $ (0.61)
========= ========= ========== ==========
</TABLE>
(3) 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.
(4) 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
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 25,899
<SECURITIES> 19,798
<RECEIVABLES> 2,305
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 48,221
<PP&E> 5,477
<DEPRECIATION> 3,460
<TOTAL-ASSETS> 51,144
<CURRENT-LIABILITIES> 6,128
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 43,972
<TOTAL-LIABILITY-AND-EQUITY> 51,144
<SALES> 0
<TOTAL-REVENUES> 10,081
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,399
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 113
<INCOME-PRETAX> (7,310)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,310)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,310)
<EPS-BASIC> (0.61)
<EPS-DILUTED> (0.61)
</TABLE>
