<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, 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 October 31, 2000 was 19,285,565.
________________________________________________________________________________
________________________________________________________________________________
<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, September 30,
1999 2000
--------- ---------
(A) (unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 20,763 $139,509
Marketable securities 70,494 142,221
Other current assets 2,447 3,583
--------- ---------
Total current assets 93,704 285,313
Notes receivable from related parties 448 478
Property and equipment, net 2,676 3,391
Intangible and other assets 79 6,237
--------- ---------
Total Assets $ 96,907 $295,419
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 1,541 $ 2,026
Accrued liabilities 3,227 6,001
Current portion of long-term debt 500 -
Current portion of capital lease obligation 398 426
Current portion of deferred revenue - 4,333
--------- ---------
Total current liabilities 5,666 12,786
Long-term debt 7,000 9,000
Capital lease obligation 855 532
Convertible subordinated notes - 196,250
Deferred revenue 1,000 2,593
Other liabilities 239 87
--------- ---------
Total liabilities 14,760 221,248
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 18,950,302 shares issued and outstanding at December 31, 1999 and
September 30, 2000, respectively; at amounts paid in 175,777 192,251
Notes receivable issued for stock (87) (37)
Deferred compensation (691) (728)
Accumulated deficit (92,675) (117,293)
Cumulative other comprehensive income (177) (22)
--------- ---------
Total stockholders' equity 82,147 74,171
--------- ---------
Total Liabilities and Stockholders' Equity $ 96,907 $295,419
========= =========
</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 September 30, Nine months ended September 30,
------------------------- -------------------------
1999 2000 1999 2000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Collaborative research $ - $ 469 $ - $ 2,469
Operating expenses:
Research and development 5,546 9,994 14,222 26,034
General and administrative 947 2,366 3,304 5,483
--------- --------- --------- ---------
Total operating expenses 6,493 12,360 17,526 31,517
--------- --------- --------- ---------
Loss from operations (6,493) (11,891) (17,526) (29,048)
Interest income 482 4,513 1,580 10,827
Interest and other expense (213) (2,775) (696) (6,397)
--------- --------- --------- ---------
Net loss $ (6,224) $(10,153) $(16,642) $(24,618)
========= ========= ========= =========
Basic and diluted net loss per share $ (0.50) $ (0.54) $ (1.41) $ (1.34)
========= ========= ========= =========
Shares used in computing basic and diluted
net loss per share 12,331 18,667 11,823 18,431
========= ========= ========= =========
</TABLE>
See accompanying notes
<PAGE>
CV THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------
1999 2000
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(16,642) $(24,618)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization of deferred compensation 565 553
Depreciation and amortization 1,170 1,501
Change in assets and liabilities:
Other current assets 312 (1,136)
Intangible and other assets 14 (30)
Accounts payable (148) 485
Accrued and other liabilities 51 2,622
Deferred revenue - 5,926
--------- ---------
Net cash used in operating activities (14,678) (14,697)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments (14,590) (107,063)
Maturities of investments 26,246 35,525
Capital expenditures (1,062) (1,708)
Notes receivable from officers and employees 21 50
--------- ---------
Net cash provided by (used in) investing activities 10,615 (73,196)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on capital lease obligations 859 -
Payments on capital lease obligations (80) (295)
Borrowings under covertible subordinated debt, net - 189,550
Borrowings under long-term debt - 4,500
Repayments of long-term debt (1,500) (3,000)
Net proceeds from issuance of common stock, net of repurchases 5,422 15,884
--------- ---------
Net cash provided by financing activities 4,701 206,639
--------- ---------
Net increase in cash and cash equivalents 638 118,746
Cash and cash equivalents at beginning of period 11,954 20,763
--------- ---------
Cash and cash equivalents at end of period $ 12,592 $139,509
========= =========
</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 nine-month period ended September 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. We believe 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.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities" as amended in June 2000 by
Statement of Financial Accounting Standards No. 138 ("SFAS 138"),
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities," which requires companies to recognize all derivatives as either
assets or liabilities in the balance sheet and measure such instruments at
fair value. Derivatives that are not determined to be hedges must be
adjusted to fair value through net income. As amended by Statement of
Financial Accounting Standards No. 137 ("SFAS 137"), "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133," the provisions of SFAS 133 will require
adoption no later than the beginning of our fiscal year ending December 31,
2001. We do not currently hold any derivative instruments and do not
anticipate holding any derivative instruments in the near future. Accordingly,
adoption of SFAS 133, as amended by SFAS 138, is not expected to have a
material impact on our consolidated financial statements.
<PAGE>
2. COMPREHENSIVE LOSS
The components of comprehensive loss for the nine months ended September
30, 1999 and 2000, respectively, are as follows:
<TABLE>
<CAPTION>
1999 2000
--------- ---------
<S> <C> <C>
(in thousands)
Net loss $(16,642) $(24,618)
Unrealized gains (losses) on securities (70) 155
--------- ---------
Comprehensive loss $(16,712) $(24,463)
========= =========
</TABLE>
3. EQUITY
In July 2000, we received a financing commitment from Acqua Wellington
North American Equities Fund, Ltd. to purchase up to $120 million of our
common stock through November 2002 . As of September 30, 2000, we have
issued shares representing $10.0 million under this commitment.
4. SUBSEQUENT EVENTS
On October 6, 2000, we exercised our right to convert $9.0 million in
long-term debt, from a general purpose loan facility with Biogen, Inc.
relating to our 1997 AdentriTM collaboration, into 118,932 shares of our
common stock at a price of $75.67 per share, in full repayment of the entire
principal amount under this facility.
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,
development and commercialization 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, 2000, we had an accumulated deficit of $117.3 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
$469,000 for the quarter ended September 30, 2000 and $2.5 million for the
nine-month period ended September 30, 2000, while there was none for either
the quarter or for the nine-month period ended September 30, 1999. The
revenues for the third quarter of 2000 related entirely to our collaboration
with Fujisawa Healthcare, Inc. and consisted of both the amortization of an
up front payment and the reimbursement of certain development costs. The
revenues for the nine-month period ending September 30, 2000 included the
Fujisawa revenues plus a $2.0 million milestone payment from our partner,
Biogen Inc., which released it in connection with its completion of a Phase II
trial of CVT-124 and its decision to continue with the adenosine A1 receptor
antagonist program.
Research and Development Expenses. Research and development expenses
increased to $10.0 million for the quarter ended September 30, 2000,
compared to $5.5 million for the quarter ended September 30, 1999. Research
and development expenses increased to $26.0 million for the nine-month
period ended September 30, 2000, compared to $14.2 million for the
nine-month period ended September 30, 1999. The increases for both the
three- and the nine-month periods ended September 30, 2000, compared to the
same periods in 1999, were primarily due to greater external costs
associated with ranolazine and CVT-510 clinical trials 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 $2.4 million for the quarter ended September 30, 2000,
compared to $947,000 for the quarter ended September 30, 1999. General and
administrative expenses increased to $5.5 million for the nine-month period
ended September 30, 2000, compared to $3.3 million for the nine-month period
ended September 30, 1999. The increases for both the three- and the
nine-month periods ended September 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 $4.5 million for the
quarter ended September 30, 2000, compared to $482,000 for the quarter ended
September 30, 1999. Interest income increased to $10.8 million for the
nine-month period ended September 30, 2000, compared to $1.6 million for the
nine-month period ended September 30, 1999. The increases for both the
three- and the nine-month periods ended September 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 and market interest rates.
Interest and Other Expense. Interest and other expense increased to
$2.8 million for the quarter ended September 30, 2000, compared to $213,000
for the quarter ended September 30, 1999. Interest and other expense
increased to $6.4 million for the nine-month period ended September 30,
2000, compared to $696,000 for the nine-month period ended September 30,
1999. The increases for both the three- and the nine-month periods ended
September 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.
<PAGE>
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. 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 upon filing a New Drug
Application for ranolazine. The second promissory note shall 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 October 1999, we completed a follow-on public offering
and raised net proceeds of 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 in 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.
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 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. In August 2000, we drew down an additional
$4.5 million under a general purpose loan facility with Biogen. As of
September 30, 2000, the outstanding balance under this note was $9.0
million. Interest on this note is payable at prime plus one and one-half
percent (1.5%), or 11.00% at September 30, 2000, payable annually, in
arrears, each March 10th. In July 2000, we received a financing commitment
from Acqua Wellington North American Equities Fund, Ltd. to purchase up to
$120 million of our common stock through November 2002. As of September 30,
2000 we have issued shares representing $10.0 million under this commitment.
Cash, cash equivalents and marketable securities at September 30, 2000
totaled $281.7 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 plus $15.9 million raised through the
issuance of common stock offset by $21.4 million used to fund operations.
Net cash used in operations was $14.7 million for both the nine months
ended September 30, 2000 and for the nine months ended September 30, 1999.
Net cash used in operations remained the same even though our net loss
increased to $24.6 million compared to $16.6 million for the corresponding
periods. The $8.0 million increase in net loss was offset by a $5.9 million
increase in deferred revenue and a $2.6 million increase in accrued and
other liabilities.
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 and common stock financing, 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,
<PAGE>
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.
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:
<PAGE>
* 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, called
Monotherapy Assessment of Ranolazine In Stable Angina or MARISA, 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, called Combination Assessment of Ranolazine In
Stable Angina or CARISA, 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 we
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.
<PAGE>
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 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, a
subsidiary of Quintiles Transnational Corp., Biogen Inc. and Fujisawa
Healthcare, Inc., which have established distribution systems and direct
sales forces. For instance, 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
<PAGE>
sales activities for any product that results from the AdentriTM program and
Fujisawa is responsible for establishing marketing and sales activities for
CVT-3146.
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.
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. Under our
agreement with Fujisawa, we are responsible for development activities and
must meet development milestones in order to receive development milestone
payments.
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
September 30, 2000, we had an accumulated deficit of $117.3 million. The
process of developing our products requires significant additional research
and development, preclinical testing and clinical trials, as well as regulatory
<PAGE>
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 may 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
* 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.
<PAGE>
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 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.
<PAGE>
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 commercial launch of ranolazine may 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 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
<PAGE>
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 $11.88
and $88.31. 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:
* 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.
<PAGE>
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 authorized
severance agreements in the event of a change of control for key executives.
The Board of Directors amended the stockholders rights plan in July 2000
while maintaining it in effect.
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, 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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K
EXHIBIT NUMBER DESCRIPTION
10.81 Executive Severance
Benefits Agreement
between the Company and
David McCaleb dated
October 15, 1999
10.82 Stock Purchase Agreement
between the Company and
Fujisawa Healthcare, Inc.
dated as of July 10, 2000
10.83* Collaboration and License
Agreement between the
Company and Fujisawa
Healthcare, Inc. dated as
of July 10, 2000
10.84 Executive Severance
Benefits Agreement
between the Company and
Tricia Borga Suvari dated
August 31, 2000
27 Financial Data Schedule
* Confidential treatment is being sought for portions of this
exhibit. Brackets indicate portions of the text have been
omitted. A separate filing of such omitted text has been made
with the Commission as part of the Company's application for
confidential treatment.
(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 6, 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: November 6, 2000 By: /s/ DANIEL K. SPIEGELMAN
Daniel K. Spiegelman
Chief Financial Officer
(Principal Financial and Accounting Officer)
