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 June 30, 2000
[ ] 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
August 11, 2000 was 15,750,527.
<PAGE>
TRIMERIS, INC.
(A Development Stage Company)
FORM 10-Q
For the Six Months Ended June 30, 2000
INDEX
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION Page
<S> <C> <C>
Item 1. Financial Statements
Balance Sheets as of June 30, 2000 (unaudited) and
December 31, 1999 1
Statements of Operations (unaudited) for the Three and Six Months
Ended June 30, 2000 and 1999 and Period From
Inception (January 7, 1993) Through June 30, 2000 2
Statements of Cash Flows (unaudited) for the Six Months Ended
June 30, 2000 and 1999 and Period From
Inception (January 7, 1993) Through June 30, 2000 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
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings 14
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
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature Page 15
Exhibit Index 16
</TABLE>
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
TRIMERIS, INC.
(A Development Stage Company)
BALANCE SHEETS
(in thousands, except par value)
<TABLE>
<CAPTION>
December 31, June 30,
1999 2000
---- ----
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 37,023 $ 52,452
Short-term investments 10,775 45,226
Accounts receivable - Roche 144 5,015
Accounts receivable 24 13
Prepaid expenses 268 301
----------- ----------
Total current assets 48,234 103,007
Property, furniture and equipment, net 2,585 3,368
----------- ----------
Other assets:
Patent costs, net 643 805
Equipment deposits 188 228
----------- ----------
Total other assets 831 1,033
----------- ----------
Total assets $ 51,650 $ 107,408
=========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 6,159 $ 7,080
Current installments of capital lease obligations 717 944
Accrued compensation 1,028 1,139
Accrued expenses 3,474 3,607
------------- ----------
Total current liabilities 11,378 12,770
Obligations under capital leases, excluding current installments 1,206 1,409
Deferred revenue 729 239
----------- ----------
Total liabilities 13,313 14,418
----------- ----------
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,
1999 and June 30, 2000 (unaudited) -- --
Common Stock at $.001 par value per share, 30,000
and 60,000 shares authorized, 13,765 and 15,699 shares
issued and outstanding at December 31, 1999 and
June 30, 2000 (unaudited), respectively 14 16
Additional paid-in capital 105,580 173,567
Deficit accumulated during the development stage (62,990) (77,156)
Deferred compensation (4,162) (3,412)
Notes receivable from stockholders (105) (25)
------------ -----------
Net stockholders' equity 38,337 92,990
----------- ----------
Total liabilities and stockholders' equity $ 51,650 $ 107,408
============ ==========
</TABLE>
See accompanying notes to financial statements.
1
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TRIMERIS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Cumulative
Three Months Six Months From Inception
Ended June 30, Ended June 30, (January 3, 1993)
--------------------- -------------- To June 30,
1999 2000 1999 2000 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue $ - $ - $ 81 $ - $ 11,034
-------- --------- --------- --------- -----------
Operating expenses:
Research and development 5,075 8,206 9,039 13,111 71,154
General and administrative 1,469 1,989 3,142 3,821 22,801
-------- --------- --------- --------- -----------
Total operating
expenses 6,544 10,195 12,181 16,932 93,955
-------- --------- --------- --------- -----------
Operating loss (6,544) (10,195) (12,100) (16,932) (82,921)
--------- ---------- ---------- ---------- -----------
Other income (expense):
Interest income 257 1,611 488 2,877 7,067
Interest expense (43) (57) (85) (111) (1,302)
--------- ---------- ---------- ---------- -----------
214 1,554 403 2,766 5,765
-------- --------- --------- --------- -----------
Net loss $ (6,330) $ (8,641) $ (11,697) $ (14,166) $ (77,156)
========= ========== ========== ========== ===========
Basic net loss per share $ (0.54) $ (0.55) $ (1.05) $ (0.92)
========= =========== ========== ==========
Weighted average
shares used in per share
computations 11,621 15,752 11,170 15,399
======== ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
2
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TRIMERIS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Cumulative
Six Months Ended From Inception
June 30, (January 3, 1993)
--------------------- To June 30,
1999 2000 2000
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(11,697) $(14,166) $(77,156)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 413 599 4,183
Other amortization 10 - 83
Amortization of deferred compensation 366 750 3,620
401(K) plan stock match - - 528
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 42 11 (13)
Accounts receivable - Roche - (4,871) (5,015)
Prepaid expenses (23) (33) (301)
Other assets (32) (40) (228)
Accounts payable 228 921 7,080
Accrued compensation 482 111 1,139
Accrued expenses 692 133 3,517
Deferred revenue - (490) 239
------- --------- --------
Net cash used by operating activities (9,519) (17,075) (61,853)
------- --------- --------
Cash flows from investing activities:
Purchases of short-term investments (9,753) (34,451) (45,226)
Purchases of property and equipment (855) (578) (2,082)
Equipment held for resale - - (61)
Organization costs - - (8)
Patent costs (66) (162) (826)
-------- --------- ---------
Net cash used by investing activities (10,674) (35,191) (48,203)
-------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes payable - - 6,150
Lease costs - - (13)
Principal payments under capital lease obligations (267) (374) (3,132)
Proceeds from issuance of Preferred Stock - - 23,896
Proceeds from issuance of Common Stock 31,357 66,570 132,490
Proceeds from exercise of stock options 827 1,227 2,403
Proceeds from employee stock purchase plan exercise 73 192 667
Repayment of notes receivable from stockholders 108 80 243
Stock issuance costs - - (196)
------- -------- ---------
Net cash provided by financing activities 32,098 67,695 162,508
------- -------- --------
Net increase in cash and cash equivalents 11,905 15,429 52,452
Cash and cash equivalents, beginning of period 16,920 37,023 -
------- -------- --------
Cash and cash equivalents, end of period $28,825 $52,452 $ 52,452
======= ======= ========
</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 1999 financial statements and notes thereto included in the
Company's 1999 Form 10-K filed with the Securities and Exchange Commission on
March 29, 2000.
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
In accordance with SFAS No. 128, "Earnings Per Share" ("SFAS No. 128"),
basic loss per common share is calculated by dividing net loss by the
weighted-average number of common shares outstanding for the period after
certain adjustments described below. Diluted net income per common share
reflects 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.
3. STATEMENTS OF CASH FLOWS
Interest of approximately $85,000 and $111,000 was paid during the six months
ended June 30, 1999 and 2000, respectively. Capital leases of $0 and $804,000
were incurred for the six months ended June 30, 1999 and 2000, 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.
4
<PAGE>
In February 2000, the Company closed a private placement of 1.75 million
shares of common stock at $40.50 per share. The net proceeds of the offering
were approximately $66.6 million after deducting applicable issuance costs and
expenses.
5. ROCHE COLLABORATION
In July 1999, the Company announced an agreement with F. Hoffmann-La Roche
Ltd to develop and market T-20 and T-1249 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
<PAGE>
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 1999 Form 10-K filed with the
Securities and Exchange Commission on March 29, 2000. 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 near 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, T-20; that our success in commercializing T-20 and T-1249 is
dependent on our relationship with Roche; 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 T-20 and T-1249; 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
future sales of common stock by our existing stockholders could adversely affect
our stock price; that we have implemented certain anti-takeover provisions; and
that our actual results could differ materially from those anticipated in our
forward-looking statements. 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
T-20,
o the development of a manufacturing process for T-20,
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 June 30, 2000, had an
accumulated deficit of approximately $77.2 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.
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
6
<PAGE>
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 T-20 and T-1249,
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 T-20 or
T-1249 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.
7
<PAGE>
Results of Operations
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1999 AND 2000
REVENUE. There was no revenue for the three months ended June 30, 1999 and 2000.
RESEARCH AND DEVELOPMENT EXPENSES. Total net research and development expenses
were $5.1 million and $8.2 million for the three months ended June 30, 1999 and
2000, respectively. Gross research and development expenses increased during the
three months ended June 30, 2000 because we:
o continued four Phase II clinical trials for T-20,
o continued a Phase I clinical trial for T-1249,
o continued manufacturing process development and purchase of drug
material from third party manufacturers to supply future clinical
trials, and
o increased the number of our personnel to support these activities.
Net research and development expenses include gross research and development
expenses less reimbursements from Roche. Roche paid 50% of the development costs
incurred during the three months ended June 30, 2000 for T-20 and T-1249 as
required by our collaboration agreement.
Total research personnel were 47 and 57 at June 30, 1999 and 2000, respectively.
We expect research and development expenses, net of reimbursements for T-20 and
T-1249 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 T-20, T-1249 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 $1.5 million and $2.0 million for the three months ended June 30, 1999 and
2000, respectively. Total expenses increased during the three months ended June
30, 2000 because in 2000 we:
o continued several market research studies which are shared equally with
Roche,
o expensed deferred compensation relating to stock options granted to
consultants during 1999,
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 (expense) was $214,000 and $1.6 million for the
three months ended June 30, 1999 and 2000, respectively. The increase was due to
increased interest income because of higher cash and investment balances during
the three months ended June 30, 2000 relating to net proceeds from our stock
offerings that closed in June 1999 and February 2000.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1999 AND 2000
8
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REVENUE. Total revenue decreased from $81,000 for the six months ended June 30,
1999 to $0 for the six months ended June 30, 2000. Total revenue for the six
months ended June 30, 1999 was entirely derived from SBIR grants which were
completed as of June 30, 2000. We currently do not expect to receive additional
future revenue from SBIR grants.
RESEARCH AND DEVELOPMENT EXPENSES. Total net research and development expenses
were $9.0 million and $13.1 million for the six months ended June 30, 1999 and
2000, respectively. Gross research and development expenses increased during the
six months ended June 30, 2000 because we:
o continued three Phase II clinical trials for T-20,
o initiated a fourth Phase II clinical trial for T-20,
o continued a Phase I clinical trial for T-1249,
o continued manufacturing process development and purchase of drug
material from third party manufacturers to supply future clinical
trials, and
o increased the number of our personnel to support these activities.
Net research and development expenses include gross research and development
expenses less reimbursements from Roche. Roche paid 50% of the development costs
incurred during the six months ended June 30, 2000 for T-20 and T-1249 as
required by our collaboration agreement.
Total research personnel were 47 and 57 at June 30, 1999 and 2000, respectively.
We expect research and development expenses, net of the reimbursements for T-20
and T-1249 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 T-20, T-1249 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 $3.1 million and $3.8 million for the six months ended June 30, 1999 and
2000, respectively. During 1999, we made a non-recurring accrual of severance
costs for our former chief executive officer. Total expenses increased during
the six months ended June 30, 2000 because we:
o initiated several market research studies which are shared equally with
Roche,
o expensed deferred compensation relating to stock options granted to
consultants during 1999,
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 (expense) was $403,000 and $2.8 million for the six
months ended June 30, 1999 and 2000, respectively. The increase was due to
increased interest income because of higher cash and investment balances during
the six months ended June 30, 2000 relating to net proceeds from our stock
offerings closed in June 1999 and February 2000.
9
<PAGE>
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, a public offering of common stock in June 1999, and a private placement of
common stock in February 2000. Net cash used by operating activities was $9.5
million and $17.1 million for the six months ended June 30, 1999 and 2000,
respectively. The cash used by operating activities was used primarily to fund
research and development relating to T-20, T-1249, and other product candidates,
and increased for the six months ended June 30, 2000 because of increased
research and development activities. Cash used by investing activities was $10.7
million and $35.2 million for the six months ended June 30, 1999 and 2000,
respectively. The increase for the six months ended June 30, 2000 was due to the
purchase of short-term investments as a result of proceeds from our private
placement of common stock in February 2000.
As of June 30, 2000, we had $97.7 million in cash and cash equivalents and
short-term investments, compared to $47.8 million as of December 31, 1999. The
increase is primarily a result of the closing of a private placement of common
stock in February 2000, which resulted in net proceeds of approximately $66.6
million, less cash used by operating activities.
In July 2000, we entered into a derivative transaction with a financial
institution that generated $2.8 million in option premiums to us. Under this
transaction, we may elect to settle by issuing up to 300,000 shares of our
common stock to the financial institution at prescribed prices which are
significantly higher than our current price per share or making a cash payment
to the financial institution. We expect to settle this transactiom by issuing
shares. At the same time, we entered into another derivative transaction with
the same financial institution on shares of our common stock, at no net cash
premium to us. Under this transaction, we may elect to settle by issuing up to
125,000 shares of our common stock to the financial institution at prescribed
prices which are significantly higher than our current price per share or
receiving a cash payment from the financial institution. All of these derivative
transactions expire or mature in July 2001. The financial institution has
advised us that it has engaged and may continue to engage in transactions,
including the buying and selling shares of our common stock, to offset its risks
related to these transactions, which may or may not affect the market price of
our stock.
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 T-20 and T-1249 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 T-20, T-1249 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 June 30, 2000, we had commitments of approximately $23.0 million to
purchase product candidate materials and fund various clinical studies over the
next twenty-three months. Substantially all of these expenditures will be shared
equally by Roche under our collaborative agreement. Under this collaborative
agreement, we are obligated to share equally the future development expenses for
T-20 and T-1249 for the United States and Canada. We also expect to have capital
expenditures of approximately $1.7 million during the remainder of 2000. 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 2000. We believe that substantial additional funds will be
required after 2000.
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
10
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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 new or existing 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.
Our future capital requirements and the adequacy of available funds will
depend on many factors, including the availability of funds from Roche under our
collaboration agreement, the results of clinical trials relating to T-20 and
T-1249, the progress and scope of our product development programs, the
magnitude of these programs, the results of preclinical testing 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 our 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 FDA, administrative and legal 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 our control.
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.
T-20
We are developing T-20, our first drug candidate for HIV fusion inhibition,
which has been granted fast track designation by the FDA. T-20 is currently in
Phase II clinical trials.
Ongoing T-20 Clinical Trials
Phase II -- T20-205. T20-205 is a Phase II trial initiated in March
1999 in which T-20 was given in combination with oral anti-HIV drugs to 71
treatment experienced HIV-1 infected adults who had received T-20 during earlier
trials. Fifty mg of T-20 was given twice daily via subcutaneous injection.
Combinations of the oral anti-HIV drugs were individualized to each patient and
were chosen based on genotypic analysis evaluating patients' resistance to
anti-HIV medications. In January 2000, we extended T20-205 beyond the initial 48
week duration because patients in the trial appeared to continue receiving
clinical benefit. Patients will continue to receive T-20 therapy at their
election, as long as they show clinical benefit. In July 2000, we reported data
from this trial. At 48 weeks, 23 of 41 patients exhibited reductions in the
amount of HIV in their blood that were 10-fold lower than baseline and/or were
reduced below the lower limit of the Roche AMPLICOR HIV-1 MONITORTM assay. This
translates to a response rate of 56% of patients completing 48 weeks of
treatment or 33% of the entire population who entered the study.
Phase II -- T20-204. In November 1999, in collaboration with the
Division of AIDS of the National Institute for Allergy and Infectious Diseases,
or NIAID, we initiated a clinical trial to evaluate the safety and
pharmacokinetics of T-20 in children living with HIV infection. The trial is
managed by the Pediatric AIDS Clinical Trial Group, or PACTG, and has been
designated as a fast-track study within the PACTG system.
The study is designed to investigate the safety, tolerability and
pharmacokinetics of T-20 in pediatric patients. The trial is conducted in two
parts and has enrolled twelve pediatric patients ages 3 to 12. Enrollment for
the first part is complete. The first part examines safety parameters to
establish a well-tolerated pediatric dose that provides target concentrations of
T-20 in the blood. The second part evaluates the safety and tolerability of T-20
in combination with other anti-HIV drugs over a 24-week period. In this study,
T-20 is administered via subcutaneous injections twice daily in conjunction with
other oral anti-HIV drugs.
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Phase II -- T20-206. In June 1999, we initiated T20-206, a Phase II
clinical trial to assess the antiviral activity and long-term safety of T-20
when used in combination with other anti-HIV drugs. T20-206 evaluates four
groups of patients over a one-year period with planned interim analyses. Three
different doses of T-20 are combined with a background regimen of amprenavir,
efavirenz, ritonavir and abacavir. The control group receives the background
regimen without T-20. T20-206 enrolled approximately 68 HIV-infected individuals
at several sites in the United States. At entry in the trial, all enrolled
patients had prior exposure to nucleoside reverse transcriptase inhibitors and
protease inhibitors, but no prior exposure to non-nucleoside reverse
transcriptase inhibitors. The trial is fully enrolled and data from an interim
analysis of this trial is expected during 2000.
Phase II - T20-208. In March 2000, we initiated T20-208, a Phase II
clinical trial for T-20 that will evaluate alternative formulations of T-20,
which could lead to a simpler dosing regimen. The trial is designed to enroll
approximately 60 patients in the United States, and will evaluate two
formulations of T-20 compared to the formulation presently used in our other
ongoing clinical trials. All three formulations are given as twice daily
subcutaneous injections in combination with oral anti-HIV agents selected for
each patient on an individualized basis.
Future T-20 Clinical Trials
We expect to begin pivotal trials with T-20 during 2000.
Pivotal Trials. Based on the results of the Phase II trials, we intend
to begin pivotal trials during 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.
The most common adverse events observed with T-20 to date have been
mild to moderate in severity. The most frequent adverse events include injection
site reaction, headache, nausea, fever, increased energy levels, asthenia,
diarrhea, and dizziness, although a causal relationship to T-20 cannot be
established for some of these events.
During the second quarter of 2000, in accordance with the terms of our
collaboration agreement with Roche, the investigational new drug application, or
IND, for T-20 was transferred to Roche.
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T-1249
We are also developing T-1249, our second drug candidate for HIV fusion
inhibition, which has been granted fast track designation by the FDA. T-1249 is
currently in a Phase I clinical trial.
Phase I - T1249-101
In June 1999, we initiated T1249-101, a Phase I clinical trial designed
to assess the safety and pharmacokinetics of T-1249. Four different daily doses
of T-1249 were administered as monotherapy for 14 days to HIV-infected adults by
once or twice daily subcutaneous injection. T1249-101 enrolled approximately 72
HIV-infected individuals at several sites in the United States. At entry, these
patients had received no other anti-HIV drugs for at least two weeks prior to
entering the study. This trial is fully enrolled and ongoing.
Risk Factors
Our business is subject to certain risks and uncertainties. Please read the
"Risk Factors" and "Business" sections of our 1999 Form 10-K filed with the
Securities and Exchange Commission on March 29, 2000, 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 June 30, 2000. All of our investments mature in eighteen
months or less.
Carrying Average
Amount Interest
(thousands) Rate
Cash equivalents - fixed rate $ 52,863 6.64 %
Short-term investments - fixed rate 44,206 6.90 %
Overnight cash investments - fixed rate 1,611 6.61 %
------------- ---------
Total investment securities $ 98,680 6.76%
========== =========
In July 2000, we entered into a series of call transactions with respect to
our common stock. These transactions are described in detail under Item 2
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
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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) Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were voted upon at the Company's Annual
Stockholders' Meeting held on June 22, 2000:
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD
<S> <C> <C> <C>
Election of the following Directors:
Dani P. Bolognesi, Ph.D. 10,721,549 N/A 142,148
J. Richard Crout, M.D. 10,720,949 N/A 142,748
Appointment of KPMG
LLP as independent accountants for
the year ended December 31, 2000 10,852,808 6,200 4,689
Amendment to the Company's Amended
and Restated Stock Incentive Plan 9,491,529 1,367,184 4,984
Amendment to the Company's Third
Amended and Restated Certificate
of Incorporation 10,633,959 224,381 5,357
</TABLE>
Item 5. Other Information
Not applicable.
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 April 3, 2000 under Item 5
describing certain changes in management. On April 3, 2000, Dr.
M. Nixon Ellis was appointed Executive Vice President and Chief
Business Officer, and Mr. Robert Bonczek was appointed Chief
Financial Officer.
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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)
August 14, 2000 By: /s/ DANI P. BOLOGNESI
---------------------------
Dani P. Bolognesi
Chief Executive Officer,
and Chief Scientific Officer
August 14, 2000 /s/ ROBERT R. BONCZEK
----------------------
Robert R. Bonczek
Chief Financial Officer (Principal
Financial Officer) and General Counsel
August 14, 2000 /s/ TIMOTHY J. CREECH
----------------------
Timothy J. Creech
Director of Finance
and Secretary (Principal
Accounting Officer)
15
<PAGE>
EXHIBIT INDEX
Number Description
------ ------------
3.1 Fourth Amended and Restated Certificate of Incorporation
10.1 Form of Equity Option Confirmation for Capped Call Option
Transaction
10.2 Form of Equity Option Confirmation for Call Option
Transaction
27.1 Financial Data Schedule
16
