<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 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 __________
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 July 31, 2000 was 18,565,016.
________________________________________________________________________________
________________________________________________________________________________
<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>
December 31, June 30,
1999 2000
--------- ---------
(A) (unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 20,763 $225,259
Marketable securities 70,494 44,355
Other current assets 2,447 3,062
--------- ---------
Total current assets 93,704 272,676
Notes receivable from related parties 448 478
Property and equipment, net 2,676 2,637
Intangible and other assets 79 6,436
--------- ---------
Total Assets $ 96,907 $282,227
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 1,541 $ 2,688
Accrued liabilities 3,227 7,266
Current portion of long-term debt 500 -
Current portion of capital lease obligation 398 416
--------- ---------
Total current liabilities 5,666 10,370
Long-term debt 7,000 4,500
Capital lease obligation 855 643
Convertible subordinated notes - 196,250
Deferred revenue 1,000 1,000
Other liabilities 239 140
--------- ---------
Total liabilities 14,760 212,903
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, 18,157,261
and 18,448,889 shares issued and outstanding at December 31, 1999 and
June 30, 2000, respectively; at amounts paid in 175,777 177,307
Notes receivable issued for stock (87) (37)
Deferred compensation (691) (790)
Accumulated deficit (92,675) (107,141)
Cumulative other comprehensive income (177) (15)
--------- ---------
Total stockholders' equity 82,147 69,324
--------- ---------
Total Liabilities and Stockholders' Equity $ 96,907 $282,227
========= =========
</TABLE>
(A) Derived from the audited financial statements included in our Annual Report
on Form 10-K for 1999
See accompanying notes
<PAGE>
CV THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
------------------------- -------------------------
1999 2000 1999 2000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Collaborative research $ - $ 2,000 $ - $ 2,000
Operating expenses:
Research and development 4,477 9,346 8,676 16,040
General and administrative 1,173 1,585 2,357 3,117
--------- --------- --------- ---------
Total operating expenses 5,650 10,931 11,033 19,157
--------- --------- --------- ---------
Loss from operations (5,650) (8,931) (11,033) (17,157)
Interest income 523 4,265 1,098 6,314
Interest and other expense (238) (2,717) (483) (3,623)
--------- --------- --------- ---------
Net loss $ (5,365) $ (7,383) $(10,418) $(14,466)
========= ========= ========= =========
Basic and diluted net loss per share $ (0.45) $ (0.40) $ (0.90) $ (0.79)
========= ========= ========= =========
Shares used in computing basic and diluted
net loss per share 11,907 18,379 11,569 18,313
========= ========= ========= =========
</TABLE>
See accompanying notes
<PAGE>
CV THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1999 2000
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(10,418) $(14,466)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization of deferred compensation 318 401
Depreciation and amortization 775 1,079
Change in assets and liabilities:
Other current assets 112 (615)
Intangible and other assets 95 (30)
Accounts payable (57) 1,147
Accrued and other liabilities 52 3,940
--------- ---------
Net cash used in operating activities (9,123) (8,544)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments (13,120) (3,549)
Maturities of investments 15,271 29,650
Capital expenditures (897) (539)
Notes receivable from officers and employees 21 50
--------- ---------
Net cash provided by investing activities 1,275 25,612
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on capital lease obligations (40) (194)
Borrowings under long-term debt - 189,592
Repayments of long-term debt (1,500) (3,000)
Net proceeds from issuance of common stock, net of repurchases 5,203 1,030
--------- ---------
Net cash provided by (used in) financing activities 3,663 187,428
--------- ---------
Net increase (decrease) in cash and cash equivalents (4,185) 204,496
Cash and cash equivalents at beginning of period 11,954 20,763
--------- ---------
Cash and cash equivalents at end of period $ 7,769 $225,259
========= =========
</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 six-month period ended June 30, 2000 are not necessarily indicative of
the results to be expected for the entire year ending December 31, 2000 or
of future operating results for any interim period. The financial
information included herein should be read in conjunction with our Annual
Report on Form 10-K for the year ended December 31, 1999 which includes the
audited consolidated financial statements and the notes thereto.
Revenue Recognition
Revenues under our collaborative research arrangements are 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.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition", which
provides guidance on the recognition, presentation and disclosure of revenue
in financial statements filed with the SEC. SAB 101 outlines the basic
criteria that must be met to recognize revenue and provides guidance for
disclosures related to revenue recognition policies. Management believes
that our revenue recognition policy is in compliance with the provisions of
SAB 101 and that the impact of SAB 101 will have no material effect on our
financial position or results of operations.
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 six months ended June 30,
1999 and 2000 are as follows:
<TABLE>
<CAPTION>
1999 2000
--------- ---------
<S> <C> <C>
(in thousands)
Net loss $(10,418) $(14,466)
Unrealized gains (losses) on securities (111) 162
--------- ---------
Comprehensive loss $(10,529) $(14,304)
========= =========
</TABLE>
3. SUBSEQUENT EVENTS
In July 2000, we entered into a collaboration with Fujisawa Healthcare,
Inc. (FHI) to develop and market second generation pharmacologic cardiac
stress agents. Under this agreement FHI received exclusive North American
rights to CVT-3146, a short-acting selective A2A adenosine receptor agonist,
and a backup compound. We received $10.0 million from FHI, consisting of an
up front payment, the prepayment of a development milestone and the purchase
of our common stock. We may receive up to an additional $24.0 million in
cash based
<PAGE>
upon development and regulatory milestones. FHI will reimburse us
for 75% of the development costs, and if approved by the FDA, we will
receive a royalty based on product sales of CVT-3146 and may receive a
royalty on another product sold by FHI.
On July 19, 2000, the board of directors approved certain amendments to
our stockholders rights plan which the board of directors previously adopted
in February 1999. As described below, the amendments approved by the board
of directors included lowering the trigger percentage from a 20 percent
ownership interest to a 15 percent interest and raising the exercise price
for each right from $35.00 to $500.00. Additionally, we changed our rights
agent from Norwest Bank Minnesota, N.A. to Wells Fargo Bank Minnesota, N.A.
Under our stockholders rights plan, as amended, each right (which were
distributed as a dividend on each share of common stock outstanding as of
February 23, 1999) entitles the registered holder to purchase from us one
one-hundredth of a share of Series A Junior Participating Preferred Stock,
par value $.001 per share, at a price of $500.00 per one one-hundredth of a
share of Series A Junior Participating Preferred Stock, subject to
adjustment. Each one one-hundredth of a share of Series A Junior
Participating Preferred Stock has designations and powers, preferences and
rights, and the qualifications, limitations and restrictions which make its
value approximately equal to the value of a share of our common stock. The
rights are triggered upon the earlier to occur of (i) the date of a public
announcement that a person, entity or group of affiliated or associated
persons have acquired beneficial ownership of 15% or more of our outstanding
common stock or (ii) 10 business days following the commencement of, or
announcement of an intention to commence, a tender offer or exchange offer
the consummation of which would result in any person or entity acquiring
beneficial ownership of 15% or more of our outstanding common stock. A full
description and the terms of the rights are set forth in the First Amended
and Restated Rights Agreement, dated as of July 19, 2000, between the us and
Wells Fargo Bank Minnesota, N.A.
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 Report contain forward-looking
statements that 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 discussed in "Risk Factors".
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 June 30,
2000, we had an accumulated deficit of $107.1 million. We expect our sources
of revenues, 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 revenues 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, enter into
manufacturing, distribution and marketing arrangements, and obtain market
acceptance. We cannot provide assurance that we will generate revenues or
achieve and sustain profitability in the future.
<PAGE>
RESULTS OF OPERATIONS
Collaborative Research Revenues. Collaborative research revenues were
$2.0 million for both the quarter and for the six-month period ended June
30, 2000, while there were none for either the quarter or for the six-month
period ended June 30, 1999. The revenues consist entirely of a milestone
payment from our partner, Biogen Inc., who released it in connection with
their recent completion of a Phase II trial of CVT-124 and their decision to
continue with the adenosine A1 receptor antagonist program.
Research and Development Expenses. Research and development expenses
increased to $9.3 million for the quarter ended June 30, 2000, compared to
$4.5 million for the quarter ended June 30, 1999. Research and development
expenses increased to $16.0 million for the six-month period ended June 30,
2000, compared to $8.7 million for the six-month period ended June 30, 1999.
The increases for both the three- and the six-month periods ended June 30,
2000, compared to the same periods in 1999, were due to greater external
costs associated with ranolazine and our other clinical programs in addition
to hiring additional employees to provide support for an increased level of
activity in our research, development and clinical programs. We expect
research and development expenses to continue to increase in the future as
we further expand product development efforts and clinical trials.
General and Administrative Expenses. General and administrative
expenses increased to $1.6 million for the quarter ended June 30, 2000,
compared to $1.2 million for the quarter ended June 30, 1999. General and
administrative expenses increased to $3.1 million for the six-month period
ended June 30, 2000, compared to $2.4 million for the six-month period ended
June 30, 1999. The increases for both the three- and the six-month periods
ended June 30, 2000, compared to the same periods in 1999, were due
primarily to greater use of outside consultants for general business
matters. We expect general and administrative expenses to continue to
increase in the future in line with our research, development and
commercialization activities.
Interest Income. Interest income increased to $4.3 million for the
quarter ended June 30, 2000, compared to $523,000 for the quarter ended June
30, 1999. Interest income increased to $6.3 million for the six-month period
ended June 30, 2000, compared to $1.1 million for the six-month period ended
June 30, 1999. The increases for both the three- and the six-month periods
ended June 30, 2000, compared to the same periods in 1999, were due to
higher average investment balances as the result of our follow-on offering
in October 1999 and the sale of convertible subordinated notes in March
2000. We expect that interest income will fluctuate with average investment
balances.
Interest and Other Expense. Interest and other expense increased to
$2.7 million for the quarter ended June 30, 2000, compared to $238,000 for
the quarter ended June 30, 1999. Interest and other expense increased to
$3.6 million for the six-month period ended June 30, 2000, compared to
$483,000 for the six-month period ended June 30, 1999. The increases for
both the three- and the six-month periods ended June 30, 2000, compared to
the same periods in 1999, were due to interest expense related to the
convertible subordinated notes issued in March 2000. Quarterly interest
expense on the convertible subordinated notes is $2.3 million. We expect
that other interest expense will fluctuate with average debt and loan balances.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations since inception primarily through
private placements and public offerings of debt and equity securities,
equipment and leasehold improvement financing, other debt financing and
payments under corporate collaborations. 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 $4.5 million under a general purpose
loan facility with Biogen. As of June 30, 2000, the outstanding balance
under this note was $4.5 million. Interest on this note is payable at prime
plus one and one-half percent (1.5%), or 10.25% at June 30, 2000, 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
<PAGE>
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 upon
filing a New Drug Application for ranolazine. The second promissory note shall
be 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 October 1999, we completed a follow-on public offering
and raised approximately $64.3 million. In March 2000, we entered into a
purchase agreement pursuant to which we sold to certain initial purchasers
$196.3 million aggregate principal amount of convertible subordinated notes.
The offering of the notes was made to qualified institutional buyers under
Rule 144A of the Securities Act of 1933, as amended. Interest on the notes
will accrue at a rate of 4.75% per year, subject to adjustment in certain
circumstances. The notes will mature on March 7, 2007 and are convertible
into shares of our common stock at a conversion price of $63.84 per share,
subject to adjustment in certain circumstances. We may, at our option,
redeem the notes at any time after March 7, 2003 or earlier if our stock
price reaches certain defined levels.
Cash, cash equivalents and marketable securities at June 30, 2000
totaled $269.6 million compared to $91.3 million at December 31, 1999. The
increase was due to the sale of $196.3 million in aggregate principal amount
of convertible subordinated notes offset by $15.2 million used to fund
operations and $3.0 million to retire long-term debt.
Net cash used in operations decreased to $8.5 million for the six months
ended June 30, 2000, compared to $9.1 million for the six months ended June
30, 1999. The decrease for net cash used in operations occurred even though
our net loss increased to $14.5 million compared to $10.4 million for the
corresponding periods. The $4.1 million increase in net loss was offset by a
$3.9 million increase in accrued and other liabilities. These accrued and
other liabilities will be paid in the coming months leading to a
corresponding increase in net cash used.
We may 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 proceeds from our recently completed offering
of convertible subordinated notes, will enable us to maintain our current
and planned operations for at least the next 24 months. However, we cannot
assure you that we will not require additional funding prior to then or that
additional financing will be available on acceptable terms or at all.
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 guarantee 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.
RISK FACTORS
OUR PRODUCT CANDIDATES WILL TAKE AT LEAST SEVERAL YEARS TO DEVELOP, AND
WE CANNOT ASSURE YOU THAT WE WILL SUCCESSFULLY DEVELOP, MARKET AND
MANUFACTURE THESE PRODUCTS.
Since our inception in 1990, we have dedicated substantially all of our
resources to research and development. We do not have any marketed products
and we have not generated any product revenue. Because all of our potential
products are in research, preclinical or clinical development, we will not
realize product revenues for at least several years, if at all.
<PAGE>
We have not applied for or received regulatory approval in the United
States or any foreign jurisdiction for the commercial sale of any of our
products. All of our product candidates are either in clinical trials under
an Investigational New Drug, or IND, or applicable foreign authority
submission, or are in preclinical research and development. We have not
submitted an NDA to the FDA or equivalent application to any other foreign
regulatory authorities for any of our product candidates, and the products
have not been determined to be safe or effective in humans for their
intended uses.
Conducting clinical trials is a lengthy, time-consuming and expensive
process. Before obtaining regulatory approvals for the commercial sale of
any products, we must demonstrate through preclinical testing and clinical
trials that our product candidates are safe and effective for use in humans.
We will incur substantial expense for, and devote a significant amount of
time to, preclinical testing and clinical trials.
Drug discovery methods based upon molecular cardiology are relatively
new. We cannot be certain that these methods will lead to commercially
viable pharmaceutical products. In addition, some of our compounds within
our cardiac imaging, cell cycle inhibition, cardiac conduction, cardiac
metabolism and Tangier drug discovery programs are in the early stages of
research and development, and we have not submitted IND applications or
commenced clinical trials for these new compounds. We cannot be certain when
these clinical trials will commence, if at all. Because these compounds are
in the early stages of product development, we could abandon further
development efforts before they reach clinical trials.
We cannot be certain that any of our product development efforts will be
successfully completed or that any of our products will be shown to be safe
and effective. Even if we believe that any product is safe and effective, we
may not obtain the required regulatory approvals. Furthermore, we may not be
able to manufacture our products in commercial quantities or market any
products successfully.
IF WE ARE UNABLE TO SATISFY THE REGULATORY REQUIREMENTS FOR OUR CLINICAL
TRIALS, WE WILL NOT BE ABLE TO COMMERCIALIZE OUR DRUG CANDIDATES.
All of our products may require additional development, preclinical
studies, clinical trials and regulatory approval prior to commercialization.
Any delays in our clinical trials would delay market launch and would
increase our cash requirements.
We currently have only two products in clinical development: ranolazine
and CVT-510. Many factors could delay completion of our clinical trials,
including:
* slower than anticipated patient enrollment
* difficulty in obtaining sufficient supplies of clinical trial
materials
* adverse events occurring during the clinical trials.
For example, our first Phase III clinical trial of ranolazine had
challenging enrollment criteria. These criteria required patients who suffer
from angina to stop taking all of their other anti-anginal medications and
receive only placebo during segments of the clinical trial. This meant that
they received no medication to treat their angina when they received
placebo. Given the difficulty of identifying patients willing to completely
stop taking anti-anginal medications, enrollment for this trial was slower
than anticipated. We cannot assure you that enrollment for the second Phase
III trial for ranolazine will not also be delayed.
In addition, data obtained from preclinical and clinical activities are
susceptible to different interpretations, which could delay, limit or
prevent regulatory approval. Delays or rejections may be based upon many
factors, including changes in regulatory policy during the period of product
development. For example, the initial clinical trials with ranolazine used a
different formulation of ranolazine than we used in the MARISA trials and
than we
<PAGE>
are using in the CARISA trial. This means that the NDA will contain
data from trials using two different formulations and is subject to
interpretation by the FDA. An unfavorable interpretation could result in
actions by the FDA that would delay potential approval. We may be unable to
maintain our proposed schedules for IND applications and clinical protocol
submissions to the FDA, initiations of clinical trials and completions of
clinical trials as a result of FDA reviews or complications that may arise
in any phase of the clinical trial program.
Furthermore, even if our clinical trials occur on schedule, the results
may differ from those obtained in preclinical studies and earlier clinical
trials. Clinical trials may not demonstrate sufficient safety and efficacy
to obtain the necessary approvals. For example, in November 1995, based on
unfavorable efficacy data from a Phase II trial, we terminated a prior
development program.
IF WE ARE UNABLE TO SATISFY GOVERNMENTAL REGULATIONS RELATING TO THE
DEVELOPMENT OF OUR DRUG CANDIDATES, WE MAY BE UNABLE TO OBTAIN NECESSARY
REGULATORY APPROVALS TO COMMERCIALIZE OUR PRODUCTS.
The research, testing, manufacturing and marketing of drug products are
subject to extensive regulation by numerous regulatory authorities in the
United States and other countries. Failure to comply with FDA or other
applicable regulatory requirements may subject a company to administrative
or judicially imposed sanctions. These include:
* warning letters
* civil penalties
* criminal penalties
* injunctions
* product seizure or detention
* product recalls
* total or partial suspension of production
* FDA refusal to approve pending NDAs or supplements to approved
NDAs.
The process of obtaining FDA and other required regulatory approvals,
including foreign approvals, often takes many years and can vary
substantially based upon the type, complexity and novelty of the products
involved. Furthermore, this approval process is extremely expensive and
uncertain. We cannot guarantee that any of our products under development
will be approved for marketing by the FDA. Even if regulatory approval of a
product is granted, we cannot be certain that we will be able to obtain the
labeling claims necessary or desirable for the promotion of those products.
Even if we obtain regulatory approval, we may be required to undertake
postmarketing trials. In addition, identification of side effects after a
drug is on the market or the occurrence of manufacturing problems could
cause subsequent withdrawal of approval, reformulation of the drug,
additional preclinical testing or clinical trials, changes in labeling of
the product, and additional marketing applications.
If we receive regulatory approval, we will also be subject to ongoing
FDA obligations and continued regulatory review. In particular, we or our
third party manufacturers will be required to adhere to regulations setting
forth current good manufacturing practices, known as cGMP. The regulations
require that we manufacture our products and maintain our records in a
prescribed manner with respect to manufacturing, testing and quality control
activities. Furthermore, we or our third party manufacturers must pass a
preapproval inspection of
<PAGE>
manufacturing facilities by the FDA before obtaining marketing approval. We
will also be subject to ongoing FDA requirements for submission of safety
reports and other postmarket information.
If we receive regulatory approval and if any of our products or services
become reimbursable by a government health care program, such as Medicare or
Medicaid, we may become subject to certain federal and state health care
fraud and abuse and reimbursement laws. These laws include the federal
"Anti-Kickback Statute," "False Claims Act," and "Physician Self-Referral
Law," and their state counterparts. If and when we become subject to such
laws, our arrangements with third parties, including health care providers,
physicians, vendors, and Innovex, will need to comply with these laws as
applicable. We do not know whether our existing or future arrangements will
be found to be compliant. Violations of these statutes could result in
criminal and civil penalties and exclusion from governmental health care
programs.
OUR PRODUCTS, EVEN IF APPROVED BY THE FDA OR FOREIGN REGULATORY
AGENCIES, MAY NOT BE ACCEPTED BY PHYSICIANS, INSURERS OR PATIENTS.
If any of our products after receiving FDA or other foreign regulatory
approval fail to achieve market acceptance, our ability to become profitable
in the future will be adversely affected. We believe that market acceptance
will depend on our ability to provide acceptable evidence of safety,
efficacy and cost effectiveness. In addition, we believe market acceptance
depends on the effectiveness of our marketing strategy and the availability
of reimbursement for our products.
WE HAVE NO MARKETING OR SALES EXPERIENCE, AND IF WE ARE UNABLE TO ENTER
INTO OR MAINTAIN COLLABORATIONS WITH MARKETING PARTNERS OR IF WE ARE UNABLE
TO DEVELOP OUR OWN SALES AND MARKETING CAPABILITY, WE MAY NOT BE SUCCESSFUL
IN COMMERCIALIZING OUR PRODUCTS.
We currently have no sales, marketing or distribution capability. As a
result, we depend on collaborations with third parties, such as Innovex and
Biogen, which have established distribution systems and direct sales forces.
In particular, we have entered into a sales and marketing services agreement
with Innovex with respect to ranolazine. Innovex will market and sell
ranolazine in the United States using a dedicated sales force if and when
FDA approval to market ranolazine has been granted. Commercialization of
ranolazine depends on Innovex to perform their contractual obligations.
Their failure to do so would adversely affect commercialization of
ranolazine. To the extent that we enter into co-promotion or other licensing
arrangements, our revenues will depend upon the efforts of third parties,
over which we may have little control. In addition, Biogen is responsible
for establishing marketing and sales activities for any product that results
from the Adentri program.
If we are unable to reach and maintain agreement with one or more
pharmaceutical companies or collaborative partners, we may be required to
market our products directly. We may elect to establish our own specialized
sales force and marketing organization to market our products to
cardiologists. In order to do this, we would have to develop a marketing and
sales force with technical expertise and with supporting distribution
capability. Developing a marketing and sales force is expensive and time
consuming and could delay any product launch. We cannot be certain that we
will be able to develop this capacity.
OUR BUSINESS DEPENDS ON ATTRACTING AND RETAINING COLLABORATORS AND
LICENSORS.
We may not be able to retain current or attract new corporate and
academic collaborators, licensors, licensees and others. Our business
strategy requires us to enter into various arrangements with these parties,
and we are dependent upon the success of these parties in performing their
obligations. If we fail to obtain and maintain these arrangements, the
development of our products would be delayed. We may be unable to proceed
with the development, manufacture or sale of products or we might have to
fund development of a particular product candidate internally. If we have to
fund development and commercialization of all of our products internally,
our future capital requirements will increase substantially.
<PAGE>
The collaborative arrangements that we may enter into in the future may
place responsibility on the collaborative partner for preclinical testing
and clinical trials, manufacturing and preparation and submission of
applications for regulatory approval of potential pharmaceutical products.
We cannot control the amount and timing of resources which our collaborative
partners devote to our programs. If a collaborative partner fails to
successfully develop or commercialize any product, product launch would be
delayed. In addition, collaborators may pursue competing technologies or
product candidates.
Under our collaborative arrangements, we or our collaborative partners
may also have to meet performance milestones. If we fail to meet our
obligations under our collaborative arrangements, our collaborators could
terminate their arrangements or we could lose rights to the compounds under
development. For example, under our agreement with Innovex, we are required
to launch the product by a specific date. If we fail to reach this
milestone, Innovex will no longer be obligated to provide sales and
marketing services for ranolazine. Under our agreement with Biogen, in order
for us to receive development milestone payments, Biogen must meet
development milestones. Under our license agreement with Syntex U.S.A.,
Inc., a subsidiary of Roche, for ranolazine, we are required to make
milestone payments to Syntex following FDA approval of ranolazine and
following regulatory approval of ranolazine in Europe. These payments are
due no later than March 31, 2005 and March 31, 2006, respectively.
In addition, collaborative arrangements in our industry are extremely
complex, particularly with respect to intellectual property rights. Disputes
may arise in the future with respect to the ownership of rights to any
technology developed with or by third parties. These and other possible
disagreements between us and our collaborators could lead to delays in the
collaborative research, development or commercialization of product
candidates. These disputes could also result in litigation or arbitration,
which is time consuming and expensive.
WE EXPECT TO CONTINUE TO OPERATE AT A LOSS AND MAY NEVER ACHIEVE
PROFITABILITY.
We cannot be certain that we will ever achieve and sustain
profitability. Since our inception, we have been engaged in research and
development activities. We have generated no product revenues. As of June
30, 2000, we had an accumulated deficit of $107.1 million. The process of
developing our products requires significant additional research and
development, preclinical testing and clinical trials, as well as regulatory
approvals. These activities, together with our general and administrative
expenses, are expected to result in operating losses for the foreseeable
future.
WE MUST SECURE ADDITIONAL FINANCING TO MEET OUR FUTURE NEEDS.
We will require substantial additional funding in order to complete our
research and development activities and commercialize any products. In the
past, we have financed our operations primarily through the sale of equity
securities, payments from our collaborators, equipment and leasehold
improvement financing and other debt financing. We have generated no product
revenue, and none is expected for at least several years. We anticipate that
our existing resources and projected interest income will enable us to
maintain our current and planned operations for at least the next 24 months.
However, we may require additional funding prior to that time.
Additional financing may not be available on acceptable terms or at all.
If we are unable to raise additional funds, we may:
* have to delay, scale back or eliminate some or all of our
research or development programs
* lose rights under existing licenses
* have to relinquish more of, or all of, our rights to product
candidates at an earlier stage of development or on less
favorable terms than we would otherwise seek
<PAGE>
* be unable to operate as a going concern.
Our future capital requirements will depend on many factors, including:
* scientific progress in our research and development programs
* the size and complexity of our programs
* the timing, 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 or obtaining preclinical and clinical
material.
There may be additional factors that could affect our need for
additional financing. Many of these factors are not within our control.
INABILITY TO COMPETE SUCCESSFULLY IN OUR MARKET WILL HARM OUR BUSINESS.
The pharmaceutical and biopharmaceutical industries, and the market for
cardiovascular drugs in particular, are intensely competitive. If regulatory
approvals are received, some of our products will compete with
well-established, proprietary and generic cardiovascular therapies that have
generated substantial sales over a number of years. Many of these therapies
are reimbursed from government health administration authorities and private
health insurers.
In addition, we are aware of companies which are developing products
that may compete in the same markets as our products. Many of these
potential competitors have substantially greater product development
capabilities and financial, scientific, marketing and sales resources. Other
companies may succeed in developing products earlier or obtain approvals
from the FDA more rapidly than either we or our corporate partners are able
to achieve. Competitors may also develop products that are safer or more
effective than those under development or proposed to be developed by us and
our corporate partners. In addition, research and development by others
could render our technology or our products obsolete or non-competitive.
WE MAY BE UNABLE TO EFFECTIVELY PROTECT OUR INTELLECTUAL PROPERTY.
Our success will depend to a significant degree on our ability to:
* obtain patents and licenses to patent rights
* maintain trade secrets
* operate without infringing on the proprietary rights of others.
We cannot be certain that patents will issue from any of our pending or
future patent applications, that any issued patent will be sufficient to
protect our technology or that we will be able to obtain extensions of
patents beyond the initial term. For example, a primary patent relating to
ranolazine will expire in May 2003 unless we
<PAGE>
are granted an extension based upon the Waxman-Hatch Act, which we anticipate
would extend the patent protection for an additional five years.
Patent applications in the United States are maintained in secrecy until
a patent issues. As a result, we can never be certain that others have not
filed patent applications for technology covered by our pending applications
or that we were the first to invent the technology. There may be third party
patents, patent applications and other intellectual property relevant to our
products and technology which are not known to us and that block or compete
with our compounds, products or processes.
Competitors may have filed applications for, or may have received
patents and may obtain additional patents and proprietary rights relating
to, compounds, products or processes that block or compete with ours. We may
have to participate in interference proceedings declared by the Patent and
Trademark Office. These proceedings determine the priority of invention and,
thus, the right to a patent for the technology in the United States. In
addition, litigation may be necessary to enforce any patents issued to us or
to determine the scope and validity of the proprietary rights of third
parties. Litigation and interference proceedings, even if they are
successful, are expensive to pursue, and we could use a substantial amount
of our limited financial resources in either case.
Just as it is important to protect our proprietary rights, we also must
not infringe patents issued to competitors and not breach the licenses that
might cover technology used in our potential products. If our competitors
own or have rights to technology that we need in our product development
efforts, we will need to obtain a license to those rights. If we fail to
obtain any necessary licenses, we may be unable to complete product
development.
We also rely on trade secrets to develop and maintain our competitive
position. Although we protect our proprietary technology in part by
confidentiality agreements with employees, consultants, collaborators,
advisors and corporate partners, these agreements may be breached. We cannot
assure you that these agreements will provide this meaningful protection or
adequate remedies in the event of unauthorized use or disclosure of this
information. We also cannot assure you that the parties to these agreements
will not breach them. In that event, we may not have adequate remedies for
any breach. As a result, third parties may gain access to our trade secrets,
and third parties may disclose our trade secrets and confidential technology
to the public. In addition, it is possible that our trade secrets will
otherwise become known or be discovered independently by our competitors.
Patent litigation is becoming more widespread in the biopharmaceutical
industry. Although no third party has asserted a claim of infringement
against us, we cannot assure you that third parties will not assert patent
or other intellectual property infringement claims against us with respect
to our products or technology or other matters. If they do, we may not
prevail and we may not be able to obtain any necessary licenses on
reasonable terms, if at all. Any such claims against us, with or without
merit, as well as claims initiated by us against third parties, can be
time-consuming and expensive to defend or prosecute.
WE HAVE NO MANUFACTURING EXPERIENCE AND WILL DEPEND ON THIRD PARTIES TO
MANUFACTURE OUR PRODUCTS.
We do not currently operate manufacturing facilities for clinical or
commercial production of our products under development. We have no
experience in manufacturing, and we currently lack the resources or
capability to manufacture any of our products on a clinical or commercial
scale. As a result, we are dependent on corporate partners, licensees or
other third parties for the manufacturing of clinical and commercial scale
quantities of our products.
For example, we have entered into an agreement with a third party
manufacturer for clinical scale production of an amount of ranolazine's
active pharmaceutical ingredient that we believe will be sufficient to
support the remainder of the Phase III clinical program. We cannot be
certain that we will be able to enter into an agreement for the commercial
scale manufacture of the active ingredient in ranolazine. If we are unable
to do so, our Phase III trials of ranolazine will be delayed. We have
entered into an agreement with a third party manufacturer for clinical scale
production of ranolazine tablets sufficient to support the remainder of the
Phase III clinical program
<PAGE>
and are negotiating with them for registration and commercialization supply of
ranolazine tablets. If we are unable to negotiate an agreement to supply
ranolazine tablets for registration and commercialization, commercial launch of
ranolazine may be delayed. In addition, because we have used various
manufacturers for ranolazine in different clinical trials prior to FDA approval
of ranolazine, we will be required to demonstrate to the FDA's satisfaction the
bioequivalence of the multiple sources of ranolazine used in our clinical
trials and their bioequivalence to the product to be commercially supplied.
FAILURE TO OBTAIN ADEQUATE REIMBURSEMENT FROM GOVERNMENT HEALTH
ADMINISTRATION AUTHORITIES, PRIVATE HEALTH INSURERS AND OTHER ORGANIZATIONS
COULD MATERIALLY ADVERSELY AFFECT OUR FUTURE BUSINESS, RESULTS OF OPERATIONS
AND FINANCIAL CONDITION.
Our ability and the ability of our existing and future corporate
partners to market and sell our products will depend in part on the extent
to which reimbursement for the cost of our products and related treatments
will be available from government health administration authorities, private
health insurers and other organizations. Third party payors are increasingly
challenging the price of medical products and services.
Significant uncertainty exists as to the reimbursement status of newly
approved health care products. In addition, for sales of our products in
Europe, we will be required to seek reimbursement on a country-by-country
basis. We cannot be certain that any products approved for marketing will be
considered cost effective or that reimbursement will be available or that
allowed reimbursement in foreign countries will be adequate. In addition,
payors' reimbursement policies could adversely affect our or any corporate
partner's ability to sell our products on a profitable basis.
OUR OPERATIONS INVOLVE HAZARDOUS MATERIALS, WHICH COULD SUBJECT US TO
SIGNIFICANT LIABILITY.
Our research and development activities involve the controlled use of
hazardous materials, including hazardous chemicals, radioactive materials
and pathogens. Accordingly, we are subject to federal, state and local laws
governing the use, handling and disposal of these materials. We may incur
significant costs to comply with additional environmental and health and
safety regulations in the future. Although we believe that our safety
procedures for handling and disposing of hazardous materials comply with
regulatory requirements, we cannot eliminate the risk of accidental
contamination or injury from these materials. In the event of an accident or
environmental discharge, we may be held liable for any resulting damages,
which may exceed our financial resources and may materially adversely affect
our business, financial condition and results of operations.
WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS IF OUR PRODUCTS HARM
PEOPLE, AND WE HAVE ONLY LIMITED PRODUCT LIABILITY INSURANCE.
The manufacture and sale of human therapeutic products involve an
inherent risk of product liability claims and associated adverse publicity.
We currently have only limited product liability insurance for clinical
trials and no commercial product liability insurance. We do not know if we
will be able to maintain existing or obtain additional product liability
insurance on acceptable terms or with adequate coverage against potential
liabilities. This type of insurance is expensive and may not be available on
acceptable terms. If we are unable to obtain or maintain sufficient
insurance coverage on reasonable terms or to otherwise protect against
potential product liability claims, we may be unable to commercialize our
products. A successful product liability claim brought against us in excess
of our insurance coverage, if any, may require us to pay substantial
amounts. This could adversely affect our results of operations and our need
for and the timing of additional financing.
THE MARKET PRICE OF OUR STOCK MAY CONTINUE TO BE HIGHLY VOLATILE.
Within the last 12 months, our common stock has traded between $5.75 and
$82.75. The market price of the shares of common stock for our company has
been and may continue to be highly volatile. Announcements may have a
significant impact on the market price of our common stock. These
announcements may include:
<PAGE>
* results of our clinical trials and preclinical studies, or those
of our corporate partners or our competitors
* our operating results
* developments in our relationships with corporate partners
* developments affecting our corporate partners
* negative regulatory action or regulatory approval with respect
to our announcement or our competitors' announcement of new
products
* government regulations, reimbursement changes and governmental
investigations or audits related to us or to our products
* developments related to our patents or other proprietary rights
or those of our competitors
* changes in the position of securities analysts with respect to
our stock
* operating results below the expectations of public market
analysts and investors
* market conditions for biopharmaceutical or biotechnology stocks
in general.
The stock market has from time to time experienced extreme price and
volume fluctuations, which have particularly affected the market prices for
emerging biotechnology and biopharmaceutical companies, and which have often
been unrelated to their operating performance. These broad market
fluctuations may adversely affect the market price of our common stock. In
addition, sales of substantial amounts of our common stock in the public
market could lower the market price of our common stock.
DELAWARE LAW, PROVISIONS IN OUR CHARTER AND OUR RIGHTS PLAN COULD MAKE
THE ACQUISITION OF OUR COMPANY BY ANOTHER COMPANY MORE DIFFICULT.
Provisions of our certificate of incorporation may have the effect of
delaying or preventing changes in control or management or limit the price
that investors may be willing to pay for shares of our common stock. In
addition, we are subject to the provisions of Section 203 of the Delaware
General Corporation Law, an anti-takeover law, which could delay a merger,
tender offer or proxy contest or make a similar transaction more difficult.
In addition, our board of directors has the authority to issue up to
5,000,000 shares of preferred stock without stockholders' approval. The
rights of the holders of common stock will be subject to, and may be
affected by, the rights of the holders of any preferred stock that may be
issued in the future. The issuance of preferred stock could have the effect
of making it more difficult for a third party to acquire a majority of our
outstanding voting stock.
Furthermore, in February 1999, the board of directors enacted
anti-takeover provisions, including a stockholder rights plan and severance
agreements in the event of a change of control for key executives.
ITEM 3. MARKET RISK
Our exposure to market rate risk for changes in interest rates relates
primarily to our investment portfolio. As of June 30, 2000, no significant
changes have occurred since our Annual Report on Form 10-K for the year
ended December 31, 1999.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of CV Therapeutics, Inc. was
held on May 16, 2000.
(b) Louis G. Lange, M.D., Ph.D. and Isaac Stein were elected to the
Board of Directors. The terms of Thomas L. Gutshall, Barbara J.
McNeil, M.D., Ph.D., J. Leighton Read, M.D. and Costa G.
Sevastoupoulos, Ph.D. continued after the Annual Meeting.
Election of Directors:
Nominee For Withheld
Louis G. Lange, M.D., Ph.D. 13,809,015 4,719
Isaac Stein 13,808,715 5,019
Proposal to approve our 2000 Equity Incentive Plan and the issuance of up to
1,500,000 shares of common stock under such plan, to replace our 1992 Stock
Option Plan and 1994 Equity Incentive Plan under which plans an aggregate of
approximately 113,000 shares of common stock reserved for future awards
would cease to be available for such purpose:
For Against Abstain Broker Non-Vote
8,346,767 1,615,089 453,606 3,398,272
Proposal to approve our Non-Employee Director's Stock Option Plan as amended
to increase the aggregate number of shares of common stock authorized for
issuance under such plan by 150,000 shares:
For Against Abstain Broker Non-Vote
9,068,032 893,584 453,846 3,398,272
Proposal to approve our Employee Stock Purchase Plan as amended to increase
the aggregate number of shares of common stock authorized for issuance under
such plan by 75,000 shares and to provide for annual increases for five
years as more fully described in the Proxy Statement:
For Against Abstain Broker Non-Vote
9,526,645 433,936 454,881 3,398,272
Proposal to ratify the selection of Ernst & Young LLP as our independent
auditors for the fiscal year ending December 31, 2000:
For Against Abstain Broker Non-Vote
13,795,934 10,405 7,395 -
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K
EXHIBIT NUMBER DESCRIPTION
10.76 Press release dated July
21, 2000 announcing Board
of Directors approval of
amendments to the
Stockholder Rights Plan
10.77 First Amended and
Restated Rights Agreement
dated July 19, 2000
between the Company and
Wells Fargo Bank
Minnesota, N.A.
10.78 Certificate of
Designation of Series A
Junior Participating
Preferred Stock dated
February 2, 1999
10.79 Form of Right Certificate
dated July 19, 2000
10.80 Summary of Rights to
Purchase Preferred Shares
dated July 19, 2000
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: August 14, 2000 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: August 14, 2000 By: /s/ DANIEL K. SPIEGELMAN
Daniel K. Spiegelman
Chief Financial Officer
(Principal Financial and Accounting Officer)
