<PAGE>
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 2000 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-16019
3-DIMENSIONAL PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware
----------------------------
(State or other jurisdiction
of incorporation or organization)
23-2716487
----------------------------
(I.R.S. Employer Identification No.)
665 Stockton Drive
Exton, Pennsylvania
19341
----------------------------------------
(Address of principal executive offices)
610/458-8959
----------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X 1. NO_____
-----
As of September 13, 2000, 20,088,962 shares of common stock were outstanding.
--------------------------------------------------------------------------------
1
<PAGE>
Part I - Financial Information
---
Item 1 - Financial Information
3-DIMENSIONAL PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------------- ------------------------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents 22,400,000 7,645,000
Prepaid expenses and other current assets 1,039,000 337,000
------------------ -----------------------
Total current assets 23,439,000 7,982,000
Property and equipment 4,031,000 4,314,000
Other assets 1,257,000 184,000
------------------ -----------------------
28,727,000 12,480,000
================== =======================
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities:
Accounts payable and accrued expenses 1,855,000 2,737,000
Deferred Income 1,236,000 888,000
Current portion of long term debt 1,268,000 1,139,000
Current portion of settlement accrual 1,000,000 1,000,000
------------------ -----------------------
Total current liabilities 5,359,000 5,764,000
Notes payable-dividends and accrued interest 1,058,000 685,000
Long -term debt, less current portion 1,990,000 2,330,000
Convertible notes payable and accrued interest 10,115,000
Long-term portion of settlement accrual 500,000
------------------ -----------------------
8,407,000 19,394,000
------------------ -----------------------
Commitment and contingency
Redeemable Convertible Series A preferred stock-$.001 par value;
35,136,963 shares authorized, 34,897,488 and 25,235,240 issued
and outstanding at June 30, 2000 and December 31, 1999
respectively (aggregate liquidating preference $63,721,218 at
June 30, 2000 and $35,004,474 at December 31, 1999) 63,550,000 34,834,000
------------------ -----------------------
Capital Deficiency
Convertible preferred stock-$.001 par value:6,000,000 shares
authorized in aggregate, 2,025,000 and 1,400,000 issued and
outstanding at June 30, 2000 and December 31, 1999
(Aggregate liquidating preference $8,250,000 and
$3,250,000, respectively) 2,000 1,000
Common stock-$.001 par value; 15,994,613 shares authorized,
975,141 and 745,418 shares outstanding at June 30, 2000
and December 31, 1999 respectively 1,000 2,000
Additional paid-in capital 9,659,000 3,428,000
Notes receivable from officers (589,000) (70,000)
Deferred compensation (975,000)
Accumulated deficit (51,328,000) (45,109,000)
------------------ -----------------------
Total capital deficiency (43,230,000) (41,748,000)
================== =======================
28,727,000 12,480,000
================== =======================
</TABLE>
2
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------------------------------------
2000 1999 2000 1999
-------------- ------------ ------------- --------------
(Consolidated) (Consolidated)
<S> <C> <C> <C> <C>
Grant and research revenue............. $ 2,131,000 $ 1,882,000 $ 3,615,000 $ 3,261,000
Costs and expenses:
Research and development........ 3,135,000 2,875,000 6,560,000 5,850,000
General and administrative...... 1,684,000 1,657,000 3,221,000 2,812,000
------------ ------------ ------------ ------------
4,819,000 4,532,000 9,781,000 8,662,000
------------ ------------ ------------ ------------
Loss from operations................... (2,688,000) (2,650,000) (6,166,000) (5,401,000)
Interest income........................ 326,000 85,000 413,000 210,000
Interest expense....................... (115,000) (128,000) (466,000) (242,000)
------------ ------------ ------------ ------------
Net loss............................... (2,477,000) (2,693,000) (6,219,000) (5,433,000)
Declared and accrued cumulative
dividends on preferred stock....... (167,000) (167,000) (334,000) (334,000)
------------ ------------ ------------ ------------
Net loss applicable to common
stock.............................. $ (2,644,000) $ (2,860,000) $ (6,553,000) $ (5,767,000)
============ ============ ============ ============
Basic and diluted net loss per
common share....................... $ (3.76) $ (4.73) $ (9.61) $ (9.74)
Weighted average common shares
outstanding....................... 703,936 604,224 682,061 592,096
------------ ------------ ------------ ------------
</TABLE>
3
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3-DIMENSIONAL PHARMACEUTICALS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
--------------------- ---------------------
June 30, 2000 June 30, 1999
--------------------- ---------------------
(consolidated)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,219,000) $ (5,433,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 789,000 802,000
Amortization of premium of short-term investments 18,000
Valuation of options and warrants 155,000
Interest paid with preferred stock 238,000
Changes in:
Grants and contracts receivable (501,000) 266,000
Other assets (329,000) (318,000)
Accounts payable and accrued expenses (993,000) 420,000
Settlement accrual (500,000)
Deferred income 348,000 (346,000)
------------- -------------
Net cash used in operating activities (7,012,000) (4,591,000)
------------- -------------
Cash flows from investing activities:
Sale and maturities of investment securities 4,265,000
Capital expenditures (1,044,000) (143,000)
------------- -------------
Net cash provided by (used in) investing activities (1,044,000) 4,122,000
------------- -------------
Cash flows from financing activities:
Proceeds from sale of stock and exercise of options and
warrants 23,953,000 4,000
Loan made to officer (520,000)
Reduction of long-term debt and notes payable (622,000) (486,000)
------------- -------------
Net cash provided by (used in) financing activities 22,811,000 (482,000)
------------- -------------
Net increase (decrease) in cash and cash equivalents.......... 14,755,000 (951,000)
Cash and cash equivalents-beginning of period 7,645,000 2,439,000
------------- -------------
Cash and cash equivalents-end of period $ 22,400,000 $ 1,488,000
============= =============
Supplemental disclosures of cash flow information:
Cash paid for interest $ 183,000 $ 230,000
Noncash investing and financing activities:
Equipment purchased under capital leases $ 390,000
Dividend declared but not paid $ 501,000 $ 334,000
Notes payable (including interest due of $353,000)
exchanged for redeemable preferred stock $ 10,353,000
</TABLE>
4
<PAGE>
3-Dimensional Pharmaceuticals, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation:
The unaudited consolidated financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. 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 such rules and
regulations. In management's opinion, the accompanying consolidated financial
statements contain all adjustments, consisting of normally recurring
adjustments, necessary for a fair presentation of the Company's financial
position and results of operations. Interim financial results are not
necessarily indicative of results anticipated for the full year. These unaudited
consolidated financial statements should be read in conjunction with the
Company's 1999 audited financial statements and footnotes included in the
Company's Registration Statement on Form S-1, as amended (File No. 333-37606).
The preparation of financial statements in conformity with generally accepted
accounting principles requires that management 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
the reported amount of expenses incurred during the reporting period. Actual
results could differ from those estimates.
2. Revenue recognition
Revenue from corporate collaborations, is recognized over the period that the
Company performs research and development activities under the terms of the
agreements. Such revenue includes periodic payments for research and development
activities and related nonrefundable up-front technology access fees and/or
technology or software licensing fees. Revenue from nonrefundable up-front fees
for the licensing of technology, products or software under agreements which do
not require the Company to perform research or development activities or other
significant future performance obligations is recognized at the time the
agreement is executed or the software is delivered. Revenue resulting from the
achievement of milestone events stipulated in the agreements is recognized when
the milestone is achieved. Up-front fees and other amounts received in excess of
revenue recognized are recorded as deferred income.
In the year ended December 31, 1999, the Company changed its method of
recognizing revenue with respect to nonrefundable up-front fees received under
corporate collaboration research agreements to the method described above to
conform with the requirements of an accounting bulletin on revenue recognition
issued by the staff of the Securities and Exchange Commission in December 1999
and retroactively restated its prior years financial statements to reflect the
application of the new method. Prior to the change the Company recognized
revenue from such fees upon the execution of the agreement.
5
<PAGE>
3. Net Loss Per Common Share
The Company has presented basic and diluted net loss per share pursuant to the
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings per
Share," and the Securities and Exchange Commission Staff Accounting Bulletin No.
98. In accordance with SFAS 128, basic and diluted net loss per share has been
computed using the weighted-average number of shares of common stock outstanding
during the period, less shares subject to repurchase. Pro forma basic and
diluted net loss per common share, as presented in the statements of operations,
gives effect to the conversion of the redeemable convertible preferred stock,
which automatically converted to common stock upon the closing of the Company's
initial public offering, from the original date of issuance.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- --------------------------
2000 1999 2000 1999
==== ==== ==== ====
<S> <C> <C> <C> <C>
Net Loss $(2,477,000) $(2,693,000) $(6,219,000) $(5,433,000)
Declared and accrued cumulative dividends on preferred stock
(167,000) (167,000) (334,000) (334,000)
--------------------------- --------------------------
Net loss to common stockholders $(2,644,000) $(2,860,000) $(6,553,000) $(5,767,000)
=========================== ==========================
Basic and diluted
Weighted average shares of common stock outstanding 955,311 738,105 867,748 736,053
Less: weighted average shares subject to repurchase (251,375) (133,881) (185,687) (143,958)
--------------------------- --------------------------
Weighted average shares used in computing basic and diluted
net loss per share 703,936 604,224 682,061 592,096
=========================== ==========================
Basic and diluted net loss per share $ (3.76) $ (4.73) $ (9.61) $ (9.74)
=========================== ==========================
Pro forma:
Net loss to common stockholders $(2,644,000) $(2,860,000) $(6,553,000) $(5,767,000)
Add:Declared and accrued cumulative dividends on preferred stock 167,000 167,000 334,000 334,000
--------------------------- --------------------------
Net loss $(2,477,000) $(2,693,000) $(6,219,000) $(5,433,000)
=========================== ==========================
Shares used above 703,936 604,224 682,061 592,096
Pro forma adjustment to reflect the weighted-
average effect of assumed conversion of
convertible preferred stock (unaudited)
13,073,769 9,544,729 11,328,033 9,544,729
Add: Common shares Subject to Repurchase
with accelerated vesting Provision 45,982 45,982 45,982 45,982
Shares used in computing pro forma basic
and diluted net loss per share (unaudited) 13,823,687 10,194,935 12,056,076 10,182,806
=========================== ==========================
Pro forma basic and diluted net loss per
share (unaudited) $ (0.18) $ (0.26) $ (0.52) $ (0.53)
=========================== ==========================
</TABLE>
The Company has excluded all outstanding redeemable convertible preferred
stock, outstanding stock options and warrants, and shares subject to
repurchase from the calculation of basic and diluted loss per common share
because all such securities are antidilutive for all applicable periods
presented. The pro forma calculations exclude outstanding stock options and
warrants, and shares subject to repurchase as they are antidilutive.
6
<PAGE>
4. Schering AG
In May 2000, the Company entered into a license and research agreement with
Schering AG, Germany, in which Schering AG obtained, for human therapeutic uses,
exclusive worldwide rights to our urokinase inhibitor compounds. During the
initial two year research and development term the Company is to receive
payments for research funding totaling $5 million. In addition, the Company is
eligible to receive milestone payments up to approximately $23 million,
depending on whether stipulated milestones are met, for the first product
developed in a therapeutic area and future milestones for additional therapeutic
areas and royalties on the sales of resulting products. In connection with the
agreement, an affiliate of Schering AG made a $5 million equity investment
consisting of 625,000 shares of Series D preferred stock at $8.00 per share.
5. Subsequent Events
[a] Bristol-Myers Squibb Company
In July 2000, the Company entered into a collaboration with Bristol-Myers Squibb
Company, or BMS, under which the Company will use its DiscoverWorks technologies
to assist BMS in the discovery and development of new human drugs for specific
biological targets. In the initial three-year term of the research
collaboration, BMS will supply at least 30 biological targets and the Company
will create chemical libraries and screen such libraries against these targets.
Thereafter, the parties will agree upon which organization will conduct
subsequent lead optimization and development activities of active hits toward
creating pre-clinical drug candidates. Patentable subject matter resulting from
this collaboration will be assigned according to U.S. practice for identifying
inventorship. In addition to its collaboration in this research, BMS will be
primarily responsible for pre-clinical and clinical development, and for
marketing and sales of any resulting products.
The Company will receive upfront licensing and technology access fees amounting
to $23.5 million, and committed research funding of $14.4 million over the first
three years of the collaboration as well as payments for any purchases of
ThermoFlour instruments. In addition, the Company will receive milestone
payments through the clinical development stages, and royalty payments on sales
of any resulting products, with the amount at each level determined based on our
involvement in the related optimization and development activities. For each
compound, depending on whether all pre-clinical and clinical milestones are met,
we could receive milestone payments aggregating up to between $4.5 million and
$15 million, depending on our level of contribution to the development of the
compound.
The Company has also granted BMS non-exclusive licenses under DirectedDiversity
patent rights for the duration of the rights and non-exclusive perpetual
licenses under ThermoFluor and Protein Expression and Refolding Technology for
use by BMS in their research and development programs in exchange for licensing
fees. BMS also has the opportunity to purchase from us ThermoFluor instruments.
In addition, BMS has subscribed to the Company's planned Proteomica G-Protein
Coupled Receptor
7
<PAGE>
("GPCR") structure database. BMS will pay user fees based on the content of the
database which are contingent upon the Company's successful determination of one
or more GPCR structures.
BMS may terminate research activities with 90 days notice, without cause, but
must pay any remaining costs of the initial research term or one-half of the
remaining cost of any extended term. Following the end of the initial research
or any extended research term, either party may terminate the agreement on 30
days notice if no compound is being optimized or developed under the
collaborative agreement. Otherwise, the agreement will remain in effect for 10
years from the first commercial sale of a product identified from the research
program or until the expiration of patent rights relating to such product.
[b] Initial Public Offering ("IPO")
In July 2000, the Company effected a 1 for 2.8 reverse stock split of all
outstanding common and preferred stock and increased the number of authorized
shares of common stock to 50,000,000. All references in the accompanying
financial statements to the number of shares and per share amounts have been
retroactively restated to reflect the reverse stock split.
On August 9, 2000 the Company completed its initial public offering of 5,750,000
shares of common stock at $15.00 per share, including 750,000 shares of common
stock issued pursuant to the underwriter's over-allotment option. The combined
gross proceeds to the Company from the offering and over-allotment option was
$86.25 million.
Following completion of the IPO, all of the outstanding shares of the Company's
Series A redeemable, convertible preferred stock and Series B, C and D
convertible preferred stock were converted into 13,186,602 shares of common
stock. In addition, 71,234 shares of common stock were issued at the close of
the IPO upon the automatic conversion of $979,000 of convertible promissory
notes, plus accrued interest, issued in lieu of cash dividends to the holders of
the Company's series A-1 preferred stock.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations as well as information contained elsewhere in this Report
contains forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
include statements about the following:
. The Company's intentions regarding collaborations
. Anticipated operating losses
. The Company's ability to out-license internally developed products
When used in this Report, we intend the words "may," "believe," "anticipate,"
"planned," "expect," "require," "intend," "assume" and similar words to identify
"forward-looking statements." Our forward-looking statements involve
uncertainties and other factors that may cause our actual results, performance
or achievements, to be far different from that suggested by our forward-looking
statements. You should not place undue reliance on our forward-looking
statements. We do not intend to update any of these factors or to publicly
announce the results of any revisions to any of these forward-looking
statements.
OVERVIEW OF 3-DIMENSIONAL PHARMACEUTICALS, INC.'S FINANCIAL PERFORMANCE
Overview
3-Dimensional Pharmaceuticals, Inc. is a drug discovery company that has
developed and integrated a set of proprietary technologies called DiscoverWorks
which accelerate and improve the drug discovery process and capitalize on the
opportunities for drug discovery presented by the thousands of new targets for
drugs being revealed from the sequencing of the human genome. The Company's
technologies also facilitate drug discovery for well-characterized disease
targets that have proven difficult. The Company believes that its technologies,
which apply to virtually any disease target, produce compounds suitable for
development into drugs in a more timely and cost- effective manner and with a
higher probability of success than that currently achieved using conventional
methods. The Company is using its technologies both to assist collaborators in
discovering drug candidates, and to discover and develop its own drug
candidates, which the Company currently intends to license at the pre-clinical
or early clinical stage.
To date, substantially all of the Company's revenue has been from corporate
collaborations, license agreements and government grants. Revenue from corporate
collaborations and licensing agreements consists of up-front fees, ongoing
research and development funding, potential milestone payments and royalties
upon the sale of designated products. Royalties from sales of products are not
expected for at least several years, if at all. The Company recognizes revenue
from corporate collaborations,
9
<PAGE>
including periodic payments for research and development activities and related
nonrefundable technology access fees and/or technology or software licensing
fees, over the period that the Company performs research and development
activities under the terms of these agreements.
Revenue from nonrefundable up-front fees for the licensing of technology,
products or software under agreements that do not require us to perform research
or development activities or other significant future performance obligations is
recognized at the time the agreement is executed or the software is delivered.
Revenue resulting from the achievement of milestone events stipulated in the
agreements is recognized when the milestone is achieved. Up- front fees and
other amounts received in excess of revenue recognized are recorded as deferred
income.
The Company has incurred substantial operating losses since its inception in
1993. As of June 30, 2000, the Company's accumulated deficit was $51.3 million.
The Company has funded its operations primarily through private placements of
equity securities totaling $73.1 million and revenues of $18.2 million. The
Company's losses have resulted principally from costs incurred in research and
development activities related to its efforts to develop its technologies and
internal drug discovery programs and from the associated administrative costs
required to support these efforts. The Company expects to incur additional
operating losses over the next several years as it continues to develop its
technologies and fund internal product research and development. The Company's
ability to achieve profitability is dependent on the progress and
commercialization of drug candidates from existing internal programs and
collaborations and the Company's ability to initiate and develop new internal
programs and enter into additional collaborations with favorable economic terms.
Payments either under collaborative agreements or related to the licensing of
drug candidates the Company develops internally will be subject to significant
fluctuation in both timing and amount and therefore the results of operations
for any period may not be comparable to the results of operations from any other
period.
Results of Operations
Three Months Ended June 30, 2000 and 1999
Revenue. Revenue for the three months ended June 30, 2000 was $2.1 million as
compared to $1.9 million for the three months ended June 30, 1999. Revenues in
the second quarter of 2000 included $1.9 million from corporate collaborations,
including revenue from new agreements with DuPont Pharmaceuticals Company,
Boehringer Ingelheim Pharmaceuticals, Inc. and Berlex Pharmaceuticals,Inc., and
continued funding from Aventis and Heska Corporation and $0.2 million from
government grants. Revenues in the second quarter of 1999 included $1.9 million
from corporate collaborations, including revenues from Wyeth-Ayerst, Merck KGaA,
and Heska Corporation.
Research and Development Expenses. Research and development expenses increased
$0.3 million, to $3.1 million for the three months ended June 30, 2000 from $2.8
million for the three months ended June 30, 1999. This increase was connected to
the expansion of research efforts in the Company's internal programs, including
clinical testing of our lead internal compound, the commencement of
collaborative discovery
10
<PAGE>
programs and investment in the Company's core technologies, with related
increases in expenses for personnel, equipment and lab supplies for all of these
activities.
General and Administrative Expenses. General and administrative expenses were
$1.7 million for both the three months ended June 30, 2000 and for the three
months ended June 30, 1999.
Other Income (Expenses). Interest income was approximately $0.3 million for the
second quarter of 2000 and approximately $0.1 million in the second quarter of
1999. The increase of $0.2 million is attributable to the investment of the
proceeds from the private placements of securities completed during this period.
Interest expense was approximately $0.1 million for the second quarter of 2000
and 1999.
Six Months Ended June 30, 2000 and 1999
Revenue. Revenue for the six months ended June 30, 2000 was $3.6 million as
compared to $3.3 million for the six months ended June 30, 1999. Revenues in the
first half of 2000 included $3.3 million from corporate collaborations,
including revenue from new agreements with DuPont Pharmaceuticals Company,
Boehringer Ingelheim Pharmaceuticals, Inc. and Berlex Pharmaceuticals,Inc., and
continued funding from Aventis and Heska Corporation and $0.3 million from
government grants. Revenues in the first half of 1999 included $3.2 million from
corporate collaborations, including revenues from Wyeth-Ayerst, Merck KGaA, and
Heska Corporation and $0.1 million from government grants.
Research and Development Expenses. Research and development expenses increased
$0.7 million, to $6.6 million for the six months ended June 30, 2000 from $5.9
million for the six months ended June 30, 1999. This increase was connected to
the expansion of research efforts in the Company's internal programs, including
clinical testing of our lead internal compound, the commencement of
collaborative discovery programs and investment in the Company's core
technologies, with related increases in expenses for personnel, equipment and
lab supplies for all of these activities.
General and Administrative Expenses. General and administrative expenses
increased by $0.4 to $3.2 million for the six months ended June 30, 2000 from
$2.8 million for the six months ended June 30, 1999. The increase was primarily
connected to increased management and administrative personnel expenses related
to the expansion of the Company's operations and business development efforts.
Other Income (Expenses). Interest income increased by $0.2 million to $0.4
million for the first half of 2000 from approximately $0.2 million in the first
half of 1999. The increase of $0.2 million is attributable to the investment of
the proceeds from the private placements of securities completed during this
period. Interest expense was approximately $0.5 million for the first half of
2000 and approximately $0.2 million for the first half of 1999. The increase of
$0.3 million was due to an increase in interest bearing notes outstanding during
the period. The notes were converted into Series A redeemable, convertible
preferred stock on March 31, 2000.
11
<PAGE>
Liquidity and Capital Resources
At June 30, 2000, the Company held cash and cash equivalents $22.4 million and
had working capital of $18.1 million. The Company has funded its operations to
date primarily through private placements of equity and debt securities with
aggregate proceeds of approximately $73.0 million, revenues from corporate
collaborations totaling $14.8 million, government grants totaling $3.4 million,
capital equipment and leasehold improvement financing totaling $7.8 million and
interest earned on the net proceeds of private placements.
To date, all of the Company's revenue has been from collaborations, license
agreements and government grants. The Company expects that substantially all of
its revenue for the foreseeable future will come from similar sources as well as
from interest income. Furthermore, the Company's ability to achieve
profitability will be dependent upon its ability to enter into additional
corporate collaborations. There can be no assurance that the Company will be
able to negotiate additional collaborative agreements in the future on
acceptable terms, if at all, or that such current or future collaborative
agreements will be successful and provide the expected benefits.
12
<PAGE>
PART II - OTHER INFORMATION
---
ITEM 2. CHANGES IN SECURITIES
On August 3, 2000, the Company consummated its initial public offering (the
"Offering") of its common stock, no par value (the "Common Stock") based on the
registration statement relating to this offering (File No. 333-37606) which was
declared effective on that date. Bear, Stearns & Co. Inc., Chase H & Q and U.S.
Bancorp Piper Jaffray were the managing underwriters of the Offering. The
Offering terminated on August 9, 2000 upon the sale of all shares registered.
The number of shares registered, the aggregate price of the offering amount
registered, the amount sold and the aggregate offering price of the amount sold
by the Company in the Offering were as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Shares Aggregate Price Amount Aggregate Price
Registered Registered Sold Sold
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Primary Offering 5,000,000 $75,000,000 5,000,000 $75,000,000
-----------------------------------------------------------------------------------------------------------
Overallotment Offering 750,000 $11,250,000 750,000 $11,250,000
-----------------------------------------------------------------------------------------------------------
</TABLE>
The Company did not incur any expenses with respect to the Offering during the
period April 1, 2000 through July 31, 2000. At the closing of the Offering on
August 9, 2000, the Company incurred the following expenses, none of which were
direct or indirect payments to directors, officers, general partners of the
Company or their associates or to persons owning 10% or more of any class of
equity securities of the Company or to affiliates of the Company:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Underwriting Underwriter's Other Total
Discounts and Finders Expenses Expenses Expenses
Commissions Fees
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Primary Offering $5,250,000 $ 0 $ 0 $987,591 $6,237,591
----------------------------------------------------------------------------------------------------------------------
Overallotment Offering $ 787,500 $ 0 $ 0 $174,281 $ 961,781
----------------------------------------------------------------------------------------------------------------------
</TABLE>
The net offering proceeds to the Company, from the primary offering, after
deducting the foregoing discounts, commissions, fees and expenses were $
79,050,628.
13
<PAGE>
Rider 13A
Item 6. Exhibits and reports on Form 8-k.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-k
There were no reports on Form 8-k filed by the Company during the
quarter ended June 30, 2000.
14
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: September 13, 2000 /s/ Michael J. Wassil
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Michael J. Wassil
Vice President, Chief Financial Officer
(Principal Financial Officer and Duly
Authorized Signatory)
Date: September 13, 2000 /s/ Scott M., Horvitz
----- ------------------ ---------------------------------
Scott M. Horvitz
Vice President, Finance and Administration
(Principal Accounting Officer and Duly
Authorized Signatory)
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