<PAGE>
________________________________________________________________________________
________________________________________________________________________________
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 __________
COMMISSION FILE NUMBER: 0-21643
______________________________
CV THERAPEUTICS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 43-1570294
(State of Incorporation) (I.R.S. Employer Identification No.)
3172 PORTER DRIVE, PALO ALTO, CALIFORNIA 94304
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (650) 812-0585
Indicate by check whether the Registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities and 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 No
The number of shares of Common Stock, $0.001 par value, outstanding as
of October 31, 1999 was 18,125,535.
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CV THERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
--------- ---------
(unaudited) (A)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,592 $ 11,954
Marketable securities 20,800 32,850
Other current assets 924 1,236
--------- ---------
Total current assets 34,316 46,040
Notes receivable from related parties 450 450
Property and equipment, net 2,880 2,664
Intangible and other assets 162 176
--------- ---------
Total Assets $ 37,808 $ 49,330
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 853 $ 1,001
Accrued liabilities 2,942 2,761
Current portion of long-term debt - 1,500
Current portion of capital lease obligation 348 80
--------- ---------
Total current liabilities 4,143 5,342
Long-term debt 7,500 7,500
Capital lease obligation 849 338
Deferred revenue 1,000 1,000
Other long-term liabilities 282 412
--------- ---------
Total liabilities 13,774 14,592
Commitments
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized, none
issued and outstanding - -
Common stock, $0.001 par value, 30,000,000 shares authorized, 12,373,855
and 11,209,078 shares issued and outstanding at September 30, 1999 and
December 31, 1998, respectively; at amounts paid in 109,943 104,211
Warrants to purchase common stock 1,225 1,225
Notes receivable issued for stock (87) (108)
Deferred compensation (794) (1,049)
Accumulated deficit (86,195) (69,553)
Cumulative other comprehensive income (58) 12
--------- ---------
Total stockholders' equity 24,034 34,738
--------- ---------
Total Liabilities and Stockholders' Equity $ 37,808 $ 49,330
========= =========
</TABLE>
(A) Derived from the audited financial statements included in the Company's
Annual Report on Form 10-K for 1998
See accompanying notes
<PAGE>
CV THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
------------------------- -------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Collaborative research $ - $ 37 $ - $ 4,519
Operating expenses:
Research and development 5,546 3,422 14,222 10,347
General and administrative 947 1,004 3,304 3,121
--------- --------- --------- ---------
Total operating expenses 6,493 4,426 17,526 13,468
--------- --------- --------- ---------
Loss from operations (6,493) (4,389) (17,526) (8,949)
Interest income 482 689 1,580 2,144
Interest and other expense (213) (174) (696) (971)
--------- --------- --------- ---------
Net loss $ (6,224) $ (3,874) $(16,642) $ (7,776)
========= ========= ========= =========
Basic and diluted net loss per share $ (0.50) $ (0.35) $ (1.41) $ (0.72)
========= ========= ========= =========
Shares used in computing basic and diluted
net loss per share 12,331 11,128 11,823 10,807
========= ========= ========= =========
</TABLE>
See accompanying notes
<PAGE>
CV THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(16,642) $ (7,776)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization of deferred compensation 565 565
Depreciation and amortization 1,170 843
Change in assets and liabilities:
Other current assets 312 (67)
Intangible and other assets 14 408
Accounts payable (148) 124
Accrued and other liabilities 51 1,334
Deferred revenue - (5,009)
--------- ---------
Net cash used in operating activities (14,678) (9,578)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments (14,590) (19,777)
Maturities of investments 26,246 16,815
Capital expenditures (1,062) (891)
Notes receivable from officers and employees 21 -
--------- ---------
Net cash used in investing activities 10,615 (3,853)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on capital lease obligations 859 443
Payments on capital lease obligations (80) (1,238)
Repayments of long-term debt (1,500) (1,000)
Net proceeds from issuance of common stock, net of repurchases 5,422 19,942
--------- ---------
Net cash provided by financing activities 4,701 18,147
--------- ---------
Net increase (decrease) in cash and cash equivalents 638 4,716
Cash and cash equivalents at beginning of period 11,954 6,286
--------- ---------
Cash and cash equivalents at end of period $ 12,592 $ 11,002
========= =========
</TABLE>
See accompanying notes
<PAGE>
CV THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements of CV Therapeutics,
Inc. have been prepared in accordance with generally accepted accounting
principles, are unaudited and reflect all adjustments (consisting solely of
normal recurring adjustments) which are, in the opinion of management,
necessary to present fairly the financial position at, and the results of
operations for the interim periods presented. The results of operations for
the three- and nine-month periods ended September 30, 1999 are not
necessarily indicative of the results to be expected for the entire year
ending December 31, 1999 or for future operating results. The financial
information included herein should be read in conjunction with our Annual
Report on Form 10-K for the year ended December 31, 1998 which includes the
audited consolidated financial statements and the notes thereto.
Revenue Recognition
Revenue under our collaborative research arrangements is recognized
based on the performance requirements of the contract. Payments received,
which are still subject to future performance requirements, are recorded as
deferred revenue until earned.
Net Loss Per Share
Net loss per share is computed using the weighted average number of
common shares outstanding. Common equivalent shares have been excluded from
the computation as their effect is antidilutive.
2. COMPREHENSIVE LOSS
The components of comprehensive loss for the nine months ended September
30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
(in thousands)
Net loss $(16,642) $ (7,776)
Unrealized gains (losses) on securities (70) 51
--------- ---------
Comprehensive loss $(16,712) $ (7,725)
========= =========
</TABLE>
3. CAPITAL LEASE OBLIGATION
On August 4, 1999, we entered into a thirty-six month equipment lease,
with Heller Financial Leasing, Inc., in the amount of $859,000. It bears an
interest rate of 9.28% per annum and has a final maturity in August 2002.
Total minimum lease payments will be $988,000.
4. FOLLOW-ON PUBLIC OFFERING
On September 2, 1999 we filed a registration statement on Form S-3 with
the Securities and Exchange Commission for a follow-on public offering. The
follow-on public offering closed in October 1999. The total number of shares
sold, including the exercise of the underwriters' over-allotment option, was
5,750,000 at a price of $12.00 per share with estimated net proceeds to us
of approximately $64.4 million.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other parts of this Quarterly Report on Form 10-Q
contain forward-looking statements which involve risks and uncertainties.
Our actual results may differ materially from the results discussed in the
forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those listed below and those listed in
"Risk Factors" in our Annual Report on Form 10-K for the year ended December
31, 1998.
OVERVIEW
CV Therapeutics is a biopharmaceutical company engaged in the discovery
and development of new small molecule drugs for the treatment of
cardiovascular diseases. Since our inception in December 1990, substantially
all of our resources have been dedicated to research and development. To
date, we have not generated any product revenues and do not expect to
generate any product revenues for at least several years. As of September
30, 1999, we had an accumulated deficit of $86.2 million. We expect our
sources of revenue, if any, for the next several years to consist of
payments under corporate partnerships and interest income. The process of
developing our products will require significant additional research and
development, preclinical testing and clinical trials, as well as regulatory
approval. These activities, together with our general and administrative
expenses, are expected to result in operating losses for the foreseeable
future. We will not receive product revenue unless we or our collaborative
partners complete clinical trials and successfully commercialize one or more
of our products.
We are subject to risks common to biopharmaceutical companies, including
risks inherent in our research and development efforts and clinical trials,
reliance on collaborative partners, enforcement of patent and proprietary
rights, the need for future capital, potential competition and uncertainty
of regulatory approval. In order for a product to be commercialized, it will
be necessary for us and, in some cases, our collaborators, to conduct
preclinical tests and clinical trials, demonstrate efficacy and safety of
our product candidates, obtain regulatory clearances and enter into
manufacturing, distribution and marketing arrangements, as well as obtain
market acceptance. We cannot provide assurance that we will generate revenues
or achieve and sustain profitability in the future.
RESULTS OF OPERATIONS
Collaborative Research Revenues. There were no collaborative research
revenues for the quarter ended September 30, 1999, compared to $37,000 for
the quarter ended September 30, 1998. There were also no collaborative
research revenues for the nine-month period ended September 30, 1999,
compared to $4.5 million for the nine-month period ended September 30, 1998.
The collaborative research revenues for both the three- and nine-month
periods ended September 30, 1998 were the result of our completion of the
research component of our collaboration with Biogen during the first quarter
of 1998.
Research and Development Expenses. Research and development expenses
increased to $5.5 million for the quarter ended September 30, 1999, compared
to $3.4 million for the quarter ended September 30, 1998. Research and
development expenses increased to $14.2 million for the nine-month period
ended September 30, 1999, compared to $10.3 million for the nine-month
period ended September 30, 1998. The increases for both the three- and the
nine-month periods ended September 30, 1999, compared to the same periods in
1998, were due to hiring additional employees to provide support for an
increased level of activity in the research, development and clinical
programs in addition to greater external costs for the clinical programs. We
expect research and development expenses to continue to increase over the
next several years as we further expand product development efforts and
clinical trials.
General and Administrative Expenses. General and administrative
expenses were essentially unchanged at $947,000 for the quarter ended September
30, 1999, compared to $1.0 million for the quarter ended September 30, 1998.
General and administrative expenses increased to $3.3 million for the nine-
month period ended
<PAGE>
September 30, 1999, compared to $3.1 million for the nine-month period ended
September 30, 1998. The increase for the nine-month period ended September 30,
1999, compared to the same period in 1998, was primarily due to an increase in
outside legal expenses for a variety of administrative and corporate issues.
We expect general and administrative expenses to increase in the future in
line with our research and development activities.
Interest Income and Interest and Other Expense. Interest income was
$482,000 for the quarter ended September 30, 1999, compared to $689,000 for
the quarter ended September 30, 1998. Interest income was $1.6 million for
the nine-month period ended September 30, 1999, compared to $2.1 million for
the nine-month period ended September 30, 1998. The decreases for both the
three- and the nine-month periods ended September 30, 1999, compared to the
same periods in 1998, were due to lower average investment balances.
Interest and other expense was $213,000 for the quarter ended September 30,
1999 compared to $174,000 for the quarter ended September 30, 1998. Interest
and other expense was $696,000 for the nine-month period ended September 30,
1999 compared to $971,000 for the nine-month period ended September 30,
1998. The increase for the quarter ended September 30, 1999, compared to the
same period in 1998, was primarily due to interest expense associated with a
$4.5 million addition to the loan balance with Biogen, Inc. that occurred in
December 1998. The decrease for the nine-month period ended September 30,
1999, compared to the same period in 1998, was primarily due to a charge of
$371,000 recognized during the first quarter of 1998 related to the early
retirement of a capital lease obligation. We expect that interest
income/interest and other expense will fluctuate in future periods with
average investment and loan balances.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations since inception primarily through
private placements of preferred and common stock, public offerings of common
stock, equipment and leasehold improvement financing, other debt financing
and payments under corporate collaborations. In November 1996, we completed
an initial public offering and raised net proceeds of approximately $12.0
million. In March 1997, we entered into two research collaboration and
license agreements with Biogen that together resulted in cash receipts of
$16.0 million. In October 1997, we raised net proceeds of $12.3 million in a
private placement of equity securities with BB Biotech. In January 1998, we
completed a follow-on public offering and raised net proceeds of
approximately $19.6 million. In December 1998, we drew down an additional
$4.5 million under a general purpose loan facility with Biogen. As of
September 30, 1999 the outstanding balance for this note was $7,500,000.
Interest on this note is payable at prime plus one and one-half percent
(1.5%) or 9.75% at September 30, 1999, payable annually, in arrears, each
March 10th. In May 1999, we entered into a sales and marketing services
agreement with Innovex Inc. pursuant to which Innovex's parent, Quintiles
Transnational Corp., purchased 1,043,705 shares of our common stock for a
total investment of $5.0 million. In addition, we entered into two
promissory notes with Quintiles. The first promissory note in the amount of
$10.0 million may be drawn down by us when we file our NDA for ranolazine
with the FDA. The second promissory note will be for a cash amount to be
determined after commercial launch of ranolazine. Both notes are convertible
into shares of common stock at the option of Quintiles upon certain events.
In August 1999, we arranged equipment financing in the amount of $859,000
resulting in the establishment of a new capital lease. As of September 30,
1999 the outstanding balance for this capital lease, which bears interest at
9.28% per annum and has a final maturity of August 2002, was $839,000. In
October 1999, we completed a follow-on public offering and raised
approximately $64.4 million.
Cash, cash equivalents and marketable securities at September 30, 1999
totaled $33.4 million compared to $44.8 million at December 31, 1998. The
decrease in the first nine months of 1999 was due to the funding of ongoing
operations and the repayment of $1.5 million of long-term debt offset by the
$5.0 million received from the Quintiles stock purchase.
Net cash used in operations for the nine months ended September 30, 1999
was $14.7 million compared to $9.6 million for the nine months ended
September 30, 1998. The increase in cash used in operations for the first
<PAGE>
nine months of 1999, compared to the first nine months of 1998, was
primarily due to increased research and development efforts.
As of September 30, 1999, we have invested $8.4 million in property and
equipment with the rate of investment having increased during the last
fifteen months in line with increased research and development efforts. This
trend should continue for the foreseeable future.
We will require substantial additional funding in order to complete our
research and development activities and commercialize any potential
products. We currently estimate that our existing resources and projected
interest income, including the net proceeds from our October 1999 follow-on
public offering, will enable us to maintain our current and planned
operations through at least the end of the first quarter of 2001. However,
we cannot provide assurance that we will not require additional funding prior
to then or that additional financing will be available on acceptable terms or
at all.
Our forecast of the period of time through which our financial resources
will be adequate to support our operations is a forward-looking statement
that involves risks and uncertainties, and actual results could vary as a
result of a number of factors. Our future capital requirements will depend
on many factors, including scientific progress in our research and
development programs, the size and complexity of these programs, the scope
and results of preclinical studies and clinical trials, our ability to
establish and maintain corporate partnerships, the time and costs involved
in obtaining regulatory approvals, the costs involved in filing, prosecuting
and enforcing patent claims, competing technological and market
developments, the cost of manufacturing preclinical and clinical material
and other factors not within our control. We cannot provide assurance that the
additional financing to meet our capital requirements will be available on
acceptable terms or at all. Insufficient funds may require us to delay,
scale back or eliminate some or all of our research or development programs,
to lose rights under existing licenses or to relinquish greater or all
rights to product candidates at an earlier stage of development or on less
favorable terms than we would otherwise choose or may adversely affect our
ability to operate as a going concern. If additional funds are raised by
issuing equity securities, substantial dilution to existing stockholders may
result.
YEAR 2000
Many computer systems, applications, information technologies and
equipment containing computer related components are unable to differentiate
between the year 2000 and the year 1900 because they were programmed with
two-digit, rather than four-digit, date fields. Accordingly, older computer
systems that have time-sensitive applications may not properly recognize the
year 2000 and beyond. This could cause system or equipment shut downs,
failures or miscalculations resulting in inaccuracies in computer output or
disruptions of operations, including, among other things, inaccurate
processing of financial information and/or temporary inabilities to process
transactions, manufacture products, or engage in similar normal business
activities.
We have formed a committee to assess the impact of the problem on our
operations. We tested our key computer systems and equipment, including
financial, informational and operational systems, and determined that these
systems were largely Year 2000 compliant. We completed upgrades to the
systems which we determined were not Year 2000 compliant. We believe that
with these upgrades, the Year 2000 issue will not pose significant
operational problems for our computer systems and equipment. We currently
have no contingency plans to deal with major Year 2000 failures.
In addition to risks associated with our own computer systems and
equipment, we have relationships with, and are to varying degrees dependent
upon, a large number of third parties that provide us with information,
goods and services. These include financial institutions, suppliers,
vendors, research partners and governmental entities. If significant numbers
of these third parties experience failures in their computer systems, or
equipment due to the Year 2000 issue, these failures could affect our
ability to process transactions, manufacture products, or engage in similar
normal business activities. While some of these risks are outside of our
control, we have
<PAGE>
instituted programs, including internal records review and use of external
questionnaires, to identify key third parties, assess their level of Year 2000
compliance, update contracts and address any non-compliance issues. As of
September 30 1999 all key third parties have responded that they are or will
be Year 2000 compliant by December 31, 1999.
The total cost of the Year 2000 systems assessment and upgrades is
funded through operating cash flows and we are expensing these costs. The
financial impact of making the required systems changes is minimal and
currently expected to be approximately $30,000. The actual financial impact
could, however, exceed this estimate.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
Our business, financial condition and results of operations are subject
to various risks, including those described below and elsewhere in this
Quarterly Report on Form 10-Q.
All of our products are at an early stage of development, and we have
not generated any product revenues. In addition, we have only three products
in clinical development, ranolazine in phase III, CVT-124 in phase II and
CVT-510 in phase I. There can be no assurance that clinical trials
conducted by us or our collaborators will demonstrate sufficient safety and
efficacy to obtain the requisite approvals or that marketable products will
result. In addition, the rate of completion of clinical trials may be
delayed by many factors. Our product candidates will require significant
additional development, preclinical studies, clinical trials and regulatory
approval prior to commercialization. These activities may take several years
and require the expenditure of substantial resources. In addition, these
activities, together with our general and administrative expenses, are
expected to result in operation losses for the foreseeable future.
Our strategy for the research, development and commercialization of our
product candidates has required, and will continue to require, us to enter
into various arrangements with corporate and academic collaborators,
licensors, licensees and others, and we are dependent upon the success of
these parties in performing their responsibilities. There can be no
assurance that we will be able to enter into additional collaborative
arrangements or license agreements on acceptable terms, or at all, or that
the contemplated benefits from any of these agreements will be realized.
Our business is affected by other factors, including: uncertainty of
market acceptance, intense competition and rapid technological change,
uncertainty of patent position and proprietary rights, dependence on key
personnel and the need to attract and retain key employees and consultants,
limited manufacturing, marketing and sales experience, significant
government regulation, uncertainty of product pricing and reimbursement,
product liability exposure and the availability of insurance.
ITEM 3. MARKET RISK
Our exposure to market rate risk for changes in interest rates relates
primarily to our investment portfolio. As of September 30, 1999 no
significant changes have occurred since our Annual Report on Form 10-K for
the year ended December 31, 1998.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K
EXHIBIT NUMBER DESCRIPTION
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CV THERAPEUTICS, INC.
Date: November 12, 1999 By: /s/ LOUIS G. LANGE, M.D., PH.D.
Louis G. Lange, M.D., Ph.D.
Chairman of the Board & Chief Executive Officer
(Principal Executive Officer)
Date: November 12, 1999 By: /s/ DANIEL K. SPIEGELMAN
Daniel K. Spiegelman
Chief Financial Officer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the Consolidated
Balance Sheet as of September 30, 1999 and the Consolidated Statement of
Operations for the nine month period ended September 30, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 12,592
<SECURITIES> 20,800
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 34,316
<PP&E> 8,410
<DEPRECIATION> (5,530)
<TOTAL-ASSETS> 37,808
<CURRENT-LIABILITIES> 4,143
<BONDS> 0
0
0
<COMMON> 109,943
<OTHER-SE> (85,909)
<TOTAL-LIABILITY-AND-EQUITY> 37,808
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 17,526
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 682
<INCOME-PRETAX> (16,642)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,642)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,642)
<EPS-BASIC> (1.41)
<EPS-DILUTED> (1.41)
</TABLE>
