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
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-25544
Miravant Medical Technologies
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(Exact name of Registrant as specified in its charter)
Delaware 77-0222872
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
336 Bollay Drive, Santa Barbara, California 93117
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(Address of principal executive offices, including zip code)
(805) 685-9880
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at July 31, 2000
----- ----------------------------
Common Stock, $.01 par value 18,375,833
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
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Page
Item 1. Consolidated Financial Statements
Consolidated balance sheets as of June 30, 2000 and
December 31, 1999................................................... 3
Consolidated statements of operations for the three months ended
June 30, 2000 and 1999 and for the six months ended
June 30, 2000 and 1999.............................................. 4
Consolidated statements of cash flows for the six months ended
June 30, 2000 and 1999.............................................. 5
Notes to consolidated financial statements ............................ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................ 8
Item 3. Qualitative and Quantitative Disclosures About Market Risk............. 13
PART II. OTHER INFORMATION
Item 2. Changes in Securities.................................................. 13
Item 4. Submission of Matters to a Vote of Security Holders.................... 14
Item 6. Exhibits and Reports on Form 8-K....................................... 14
Signatures ............................................................ 15
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
MIRAVANT MEDICAL TECHNOLOGIES
CONSOLIDATED BALANCE SHEETS
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June 30, December 31,
2000 1999
------------------ -------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents............................................... $ 6,404,000 $ 19,168,000
Investments in short-term marketable securities......................... 20,945,000 3,621,000
Accounts receivable..................................................... 1,602,000 5,717,000
Prepaid expenses and other current assets............................... 1,561,000 1,147,000
------------------ -------------------
Total current assets....................................................... 30,512,000 29,653,000
Property, plant and equipment:
Vehicles................................................................ 28,000 28,000
Furniture and fixtures.................................................. 1,647,000 1,639,000
Equipment............................................................... 5,635,000 5,495,000
Leasehold improvements.................................................. 4,559,000 4,488,000
Capital lease equipment................................................. 184,000 184,000
------------------ -------------------
12,053,000 11,834,000
Accumulated depreciation................................................ (8,975,000) (8,112,000)
------------------ -------------------
3,078,000 3,722,000
Investments in affiliates.................................................. 1,071,000 752,000
Deferred financing costs................................................... 1,658,000 404,000
Patents and other assets................................................... 852,000 825,000
------------------ -------------------
Total assets............................................................... $ 37,171,000 $ 35,356,000
================== ===================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable........................................................ $ 3,877,000 $ 4,070,000
Accrued payroll and expenses............................................ 693,000 650,000
------------------ -------------------
Total current liabilities.................................................. 4,570,000 4,720,000
Long-term liabilities:
Long-term debt.......................................................... 23,649,000 15,379,000
Sublease security deposits.............................................. 112,000 127,000
------------------ -------------------
Total long-term liabilities 23,761,000 15,506,000
Stockholders' equity:
Common stock, 50,000,000 shares authorized; 18,344,708 and 18,038,270
shares issued and outstanding at June 30, 2000 and
December 31, 1999, respectively....................................... 155,964,000 152,731,000
Notes receivable from officers.......................................... (473,000) (460,000)
Deferred compensation................................................... (1,293,000) (2,243,000)
Accumulated other comprehensive loss.................................... (3,405,000) (3,724,000)
Accumulated deficit..................................................... (141,953,000) (131,174,000)
------------------ -------------------
Total stockholders' equity................................................. 8,840,000 15,130,000
------------------ -------------------
Total liabilities and stockholders' equity................................. $ 37,171,000 $ 35,356,000
================== ===================
See accompanying notes.
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<PAGE>
MIRAVANT MEDICAL TECHNOLOGIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three months ended June 30, Six months ended June 30,
2000 1999 2000 1999
----------------- ------------------ ------------------ ----------------
Revenues:
License-contract research and development...... $ 1,516,000 $ 5,842,000 $ 2,885,000 $ 8,070,000
Royalties...................................... -- 81,000 -- 143,000
Grants......................................... 35,000 83,000 44,000 205,000
----------------- ------------------ ------------------- ----------------
Total revenues.................................... 1,551,000 6,006,000 2,929,000 8,418,000
Costs and expenses:
Research and development....................... 5,562,000 9,301,000 10,281,000 15,653,000
Selling, general and administrative............ 1,590,000 1,888,000 3,138,000 3,865,000
Loss in affiliate.............................. -- 40,000 -- 328,000
----------------- ------------------ ------------------- ----------------
Total costs and expenses.......................... 7,152,000 11,229,000 13,419,000 19,846,000
Loss from operations.............................. (5,601,000) (5,223,000) (10,490,000) (11,428,000)
Interest and other income (expense):
Interest and other income...................... 331,000 359,000 599,000 525,000
Interest expense............................... (508,000) (37,000) (888,000) (37,000)
----------------- ------------------ ------------------- ----------------
Total net interest and other income (expense)..... (177,000) 322,000 (289,000) 488,000
----------------- ------------------ ------------------- ----------------
Net loss.......................................... $ (5,778,000) $ (4,901,000) $ (10,779,000) $ (10,940,000)
================= ================== =================== ================
Net loss per share - basic and diluted............ $ (0.32) $ (0.27) $ (0.59) $ (0.62)
================= ================== =================== ================
Shares used in computing net loss per share....... 18,293,720 17,960,740 18,188,597 17,518,426
================= ================== =================== ================
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See accompanying notes.
<PAGE>
MIRAVANT MEDICAL TECHNOLOGIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six months ended June 30,
Operating activities: 2000 1999
------------------- ----------------------
Net loss.......................................................... $ (10,779,000) $ (10,940,000)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization.................................. 892,000 1,564,000
Amortization of deferred compensation.......................... 395,000 950,000
Loss on sale of property, plant and equipment.................. -- 25,000
Reserve for loan receivable from affiliate..................... -- 250,000
Stock awards................................................... 95,000 145,000
Non-cash interest and amortization of deferred financing
costs on long-term debt..................................... 887,000 40,000
Changes in operating assets and liabilities:
Accounts receivable......................................... 4,115,000 (5,352,000)
Prepaid expenses and other assets........................... (470,000) (69,000)
Accounts payable and accrued payroll........................ (178,000) 830,000
--------------------- --------------------
Net cash used in operating activities............................. (5,043,000) (12,557,000)
Investing activities:
Purchases of marketable securities ............................... (23,395,000) (11,500,000)
Sales of marketable securities ................................... 6,071,000 4,000,000
Payments of loan to affiliate..................................... -- (250,000)
Purchases of property, plant and equipment........................ (219,000) (452,000)
------------------- ----------------------
Net cash used in investing activities............................. (17,543,000) (8,202,000)
Financing activities:
Proceeds from issuance of Common Stock, less issuance costs....... 2,322,000 18,645,000
Proceeds from long-term debt...................................... 7,500,000 7,500,000
Repayments of notes to officers................................... -- 1,088,000
Payments for price protection obligations under the
Amended Securities Agreement................................... -- (4,204,000)
------------------- --------------------
Net cash provided by financing activities......................... 9,822,000 23,029,000
Net (decrease) increase in cash and cash equivalents.............. (12,764,000) 2,270,000
Cash and cash equivalents at beginning of period.................. 19,168,000 11,284,000
------------------- ----------------------
Cash and cash equivalents at end of period........................ $ 6,404,000 $ 13,554,000
=================== ======================
Supplemental disclosures:
Cash paid for:
State taxes..................................................... $ 4,000 $ --
=================== ======================
Interest ....................................................... $ -- $ --
=================== ======================
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See accompanying notes.
<PAGE>
MIRAVANT MEDICAL TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The information contained herein has been prepared in accordance with Rule
10-01 of Regulation S-X. The information at June 30, 2000 and for the three
and six month periods ended June 30, 2000 and 1999, is unaudited. In the
opinion of management, the information reflects all adjustments necessary
to make the results of operations for the interim periods a fair statement
of such operations. All such adjustments are of a normal recurring nature.
Interim results are not necessarily indicative of results for a full year.
For a presentation including all disclosures required by generally accepted
accounting principles, these financial statements should be read in
conjunction with the audited consolidated financial statements for the year
ended December 31, 1999 included in the Miravant Medical Technologies
Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
2. Comprehensive Income (Loss)
For the six months ended June 30, 2000 and 1999, comprehensive loss
amounted to approximately $10.5 million and $10.5 million, respectively.
The difference between net loss and comprehensive loss relates to the
change in the unrealized loss or gain the Company recorded for its
available-for-sale securities on its investment in its affiliate Xillix
Technologies Corp.
3. Per Share Data
Basic loss per common share is computed by dividing the net loss by the
weighted average shares outstanding during the period. Diluted earnings per
share reflects the potential dilution that would occur if securities or
other contracts to issue common stock were exercised or converted to common
stock. Since the effect of the assumed exercise of common stock options and
other convertible securities was anti-dilutive, basic and diluted loss per
share as presented on the consolidated statements of operations are the
same.
4. Reclassifications
Certain reclassifications have been made to the 1999 consolidated financial
statements to conform to the current period presentation.
5. Commitments and Contingencies
In February 1998, the Company agreed to guaranty a term loan in the amount
of $7.6 million from a bank to a director of the Company at the time. In
June 1998, the director did not stand for re-election on the Board of
Directors. The loan was due and payable on July 31, 1999, and was
subsequently extended to October 31, 2000. In conjunction with the
extension, the Company increased its security interest to include
substantially all of the personal assets of the former director.
Additionally, with the extension of the guaranty of this loan, the former
director paid to the Company a transaction fee of $152,000. As of July 31,
2000, the former director has reduced the outstanding balance of the loan,
and the Company's guaranty, to $2.1 million. Under the loan agreement and
the guaranty, the individual and Miravant are subject to the maintenance of
specified financial and other covenants.
6. Long-Term Debt
During the second quarter of 2000, in accordance with the Credit Agreement
entered into with Pharmacia Corporation, the Company requested and received
the final two quarterly loans for a total of $7.5 million of the $22.5
million it had available under the Credit Agreement. Under the terms of the
Credit Agreement and in connection with the loan amounts received, the
Company issued warrants for the purchase of 120,000 shares of Miravant
Common Stock at an exercise price of $20.62 per share. In addition, in
accordance with the Credit Agreement, the Company issued a promissory note
to Pharmacia Corporation for the loan amounts received and issued an
additional promissory note for the related interest due on the outstanding
loan balance as of June 30, 2000. The promissory notes mature in June 2004,
subject to certain limitations and restrictions as defined by the Credit
Agreement, and accrue interest at the prime rate, which was 9.50% at June
30, 2000. As of June 30, 2000, the Company has received the entire $22.5
million available under the Credit Agreement.
7. Deferred Financing Costs
The warrants issued in connection with the loan amounts received under the
Credit Agreement have been recorded at fair value using a Black-Scholes
Model. This amount has been recorded on the balance sheet as a long-term
asset under deferred financing costs. The deferred financing costs related
to these warrants are being amortized to interest expense over the term of
the loan received under the Credit Agreement. The deferred financing costs
related to these warrants amounted to $1.7 million and $404,000 as of June
30, 2000 and December 31, 1999, respectively.
8. Subsequent Event
On July 13, 2000, the Board of Directors of the Company adopted a Preferred
Stockholder Rights Plan (the "Rights Plan"). Under the Rights Plan,
Miravant will issue a dividend of one right for each share of its common
stock held after the close of business on July 31, 2000. The Rights Plan is
designed to assure stockholders' fair value in the event of a future
unsolicited business combination or similar transaction involving the
Company. This Rights Plan was not adopted in response to any attempt to
acquire the Company, and Miravant is not aware of any such efforts.
The rights will become exercisable only if a person or group (i) acquires
20 percent or more of Miravant's common stock, or (ii) announces a tender
offer that would result in ownership of 20 percent or more of the common
stock. Each right would entitle a stockholder to buy a fractional share of
the Company's preferred stock. Each right has an initial exercise price of
$180.00. Once the acquiring person or group has acquired 20 percent or more
of the outstanding common stock of Miravant, each right shall entitle its
holder (other than the acquiring person or group) to acquire shares of the
Company or of the third party acquirer having a value of twice the right's
then-current exercise price.
The rights are redeemable at the option of the Board of Directors up until
ten days after public announcement that any person or group has acquired 20
percent or more of Miravant's common stock. The redemption price is $0.001
per right. The rights will expire on July 31, 2010, unless redeemed prior
to that date. Distribution of the rights is not taxable to stockholders.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto. This Quarterly Report on
Form 10-Q contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. These forward-looking statements represent our expectations or beliefs
concerning future events and include statements concerning our expectation of
potential future operating losses, source and composition of revenues from
operations, future research and development expenses, future selling, general
and administrative expenses and our liquidity and capital resources and future
funding. Although we believe that our expectations are based on reasonable
assumptions, we can give no assurance that our goals will be achieved. The
important factors that could cause actual results to differ materially from
those in the forward-looking statements herein include, without limitation, the
current stage of development of both Miravant and our products, the timing and
uncertainty of results of both research and regulatory processes, the extensive
government regulation applicable to our business, the unproven safety and
efficacy of our drug and device products, our significant additional financing
requirements, the volatility of our stock price, the uncertainty of future
capital funding, our ability to maintain and establish collaborative and
licensing arrangements, the uncertainties regarding health care reimbursement
and reform, the highly competitive environment of the international
pharmaceutical and medical device industries and the presence of a number of
competitors with significantly greater financial, technical and other resources
and extensive operating histories, our potential exposure to product liability
or recall, uncertainties relating to patents and other intellectual property,
including whether we will obtain sufficient protection or competitive advantage
therefrom and our dependence upon a limited number of key personnel and
consultants and our significant reliance upon our collaborative partners for
achieving our goals, and other factors detailed in our Annual Report on Form
10-K for the year ended December 31, 1999.
General
Since our inception, we have been principally engaged in the research and
development of drugs and medical device products for use in PhotoPoint(TM), our
proprietary technologies for photodynamic therapy. We have been unprofitable
since our founding and have incurred a cumulative net loss of approximately
$142.0 million as of June 30, 2000. We expect to continue to incur substantial,
and possibly increasing, operating losses for the next few years due to
continued and increased spending on research and development programs, the
funding of preclinical studies, clinical trials and regulatory activities and
the costs of manufacturing and administrative activities.
Our revenues primarily reflect income earned from licensing agreements,
grants and royalties from device product sales. To date, we have received no
revenue from the sale of drug products and we are not permitted to engage in
commercial sales of drugs or devices until such time, if ever, as we receive
requisite regulatory approvals. As a result, we do not expect to record
significant product sales until such approvals are received.
Until we commercialize our product(s), we expect revenues to continue to be
attributable to licensing agreements and grants. We anticipate that future
revenues and results of operations may continue to fluctuate significantly
depending on, among other factors, the timing and outcome of applications for
regulatory approvals, our or our collaborative partners ability to successfully
manufacture, market and distribute our drug and device products, the level of
participation of our collaborative partners in our preclinical studies and
clinical trials and/or the restructuring or establishment of collaborative
arrangements for the development, manufacturing, marketing and distribution of
some of our products. We anticipate our operating activities will result in
substantial, and possibly increasing, operating losses for the next few years.
Under the 1998 amendments of the License Agreements with Pharmacia
Corporation, formerly Pharmacia & Upjohn, Inc., we were to conduct all
preclinical studies and U.S. clinical trials in age-related macular degeneration
or AMD and would be reimbursed by Pharmacia Corporation for most of the
out-of-pocket expenses incurred. Pharmacia Corporation was to conduct all
international clinical trials for AMD. The 1998 amendments also returned to us
the rights for SnET2 in dermatology, and provided for the quarterly funding of
$2.5 million for eight quarters for use in our oncology and urology programs. In
January 1999, we entered into an Equity Investment Agreement, whereby Pharmacia
Corporation purchased 1,136,533 shares of our Common Stock for an aggregate
purchase price of $19.0 million, or $16.71 per share. Also, in February 1999,
under a separate Credit Agreement, Pharmacia Corporation extended to us up to
$22.5 million in credit, which is subject to certain limitations and
requirements, including interest at a variable rate, in the form of up to six
quarterly loans or new loans of $3.75 million each to be used to support our
ophthalmology, oncology and other development programs, as well as for general
corporate purposes. As of June 30, 2000 we have received the entire $22.5
million available under the Credit Agreement. Under the terms of the Credit
Agreement and in connection with each draw-down, we are obligated to issue
Pharmacia Corporation a certain number of warrants based on the amount borrowed.
The exercise price of each warrant is equal to 140% of the average of the
closing bid prices of the Common Stock for the ten trading days immediately
preceding the borrowing request for the related loan. In connection with the
quarterly loans received, we have issued warrants to purchase 360,000 shares of
Common Stock at an exercise price of $11.87 per warrant share for 120,000
shares, $14.83 per warrant share for 120,000 shares and $20.62 per warrant share
for the last 120,000 shares. Additionally, in connection with the Equity
Investment Agreement and the Credit Agreement, in February 1999 we amended the
1998 amendments of the License Agreements with Pharmacia Corporation to
eliminate the remaining future cost reimbursements for oncology and urology and
any future milestone payments in AMD. The amendments are referred to in this
report as the 1999 Amendments.
In February 1999, in connection with the 1999 Amendments, we refined the
use of our resources to correspond with the change in cost reimbursement and
assistance from Pharmacia Corporation while maintaining our core development
programs. We will continue to evaluate the use of our resources in connection
with our funding provisions, external resource assistance and as opportunities
present themselves. In December 1999, we transitioned the majority of the
operations of the Phase III clinical trials in AMD to Pharmacia Corporation in
accordance with the 1999 Amendments. Pharmacia Corporation will now be
responsible for directly funding the majority of the Phase III AMD clinical
trial costs. We will continue to be responsible for the majority of the
preclinical studies and the drug and device development and manufacturing
necessary for the new drug application or NDA submission for AMD and will be
reimbursed for most of those costs in accordance with the 1999 Amendments.
We are currently conducting clinical trials in oncology and ophthalmology.
In dermatology, we are investigating the development of topical formulations of
our photoselective drugs. Based upon the outcome of these studies and various
economic and development factors, including cost, reimbursement and the
available alternative therapies, we may or may not elect to further develop
PhotoPoint procedures in oncology, ophthalmology, dermatology or in any other
indications.
Results of Operations
Revenues. For the three months ended June 30, 2000, our revenues decreased
to $1.6 million from $6.0 million for the three months ended June 30, 1999. For
the six months ended June 30, 2000, our revenues decreased to $2.9 million from
$8.4 million for the same period in 1999.
The decrease in license revenues for the three and six months ended June
30, 2000, is directly attributed to the December 1999 transition of the majority
of the operations of the Phase III clinical trials in AMD to Pharmacia
Corporation in accordance with the 1999 Amendments. Pharmacia Corporation will
now be responsible for directly funding the majority of the Phase III AMD
clinical trial costs. We will continue to be responsible for the majority of the
preclinical studies and the drug and device development and manufacturing
necessary for the NDA submission for AMD and will be reimbursed for most of
those costs in accordance with the 1999 Amendments. As a result, we anticipate
the 2000 license revenue related to the reimbursement of out-of-pocket or direct
costs, as well as our related expenses, will decrease compared to 1999. For the
six months ended June 30, 2000, we recorded revenues of $2.9 million for the
specific reimbursement of out-of-pocket or direct costs, including half the cost
of device and drug products, incurred in preclinical studies and Phase III
clinical trials in AMD compared to $8.1 million for the six months ended June
30, 1999.
The level of license and grant income is likely to fluctuate materially
from period to period and in the future depending on the amount of preclinical
and clinical costs incurred and/or reimbursed, the extent of development
activities under the 1999 Amendments and the amount of grant income awarded and
expended. Additionally, we currently have not been awarded any grants for 2000,
however, grant applications have been submitted and are currently under review.
The Laserscope license agreement, which provided royalties on the sale of our
previously designed device products, terminated in April 1999 and no further
royalties will be received.
Research and Development. Our research and development expenses decreased
to $5.6 million for the three months ended June 30, 2000 from $9.3 million for
the three months ended June 30, 1999. For the six months ended June 30, 2000 our
research and development expenses decreased to $10.3 million from $15.7 million
for the six months ended June 30, 1999. The decrease in research and development
expenses for the three and six months ended June 30, 2000 compared to the same
periods in 1999 related primarily to the December 1999 transition of the
majority of the operations of the Phase III clinical trials in AMD to Pharmacia
Corporation, in addition to a decrease in salaries and depreciation expense
related to research and development activities. Research and development
expenses for the three and six months ended June 30, 2000 primarily related to
the preclinical studies required for an NDA submission for AMD, the cost of
device and drug product used in AMD clinical trials and development work
associated with the development of existing and new drug compounds, formulations
and preclinical and clinical programs. Research and development expenses for the
three and six months ended June 30, 1999 primarily related to the costs
associated with the screening, treatment, monitoring and data collection of
qualified individuals participating in Phase III clinical trials for AMD and
Phase I clinical trials for prostate cancer, and the preclinical studies and
development work associated with the development of existing and new drug
compounds, formulations and preclinical and clinical programs.
Future research and development expenses may fluctuate depending on
continued expenses incurred in our preclinical studies and clinical trials in
our ophthalmology and other programs, costs associated with the purchase of raw
materials and supplies for the production of devices and drug for use in
preclinical studies and clinical trials, the pharmaceutical manufacturing
scale-up to expanded commercial levels and expansion of our research and
development programs, which includes the increased hiring of personnel, the
continued expansion of preclinical studies and clinical trials and the
development of new drug compounds and formulations.
Selling, General and Administrative. For the three months ended June 30,
2000, selling, general and administrative expenses decreased to $1.6 million
from $1.9 million for the three months ended June 30, 1999. For the six months
ended June 30, 2000, selling, general and administrative expenses decreased to
$3.1 million from $3.9 million for the same period in 1999. The overall decrease
in selling, general and administrative expenses for the three and six months
ended June 30, 2000 compared to the same periods in 1999 is primarily due to a
decrease in compensation expense associated with options and warrants issued to
consultants and a decrease in rent expense as a result of subleasing one of our
buildings in December 1999.
Future selling, general and administrative expenses may fluctuate depending
on the support required for research and development activities, continuing
corporate development and professional services, compensation expense associated
with stock options and warrants granted to financial consultants and expenses
for general corporate matters.
Loss in Investment in Affiliate. In connection with the $2.0 million line
of credit we have provided to our affiliate, Ramus Medical Technologies or
Ramus, we have recorded a reserve for the entire $2.0 million outstanding credit
line balance plus accrued interest as of June 30, 2000. The $328,000 expense
recorded in 1999 represents a reserve for the final amount of borrowings plus
accrued interest under the credit line.
Interest and Other Income. Interest and other income decreased slightly to
$331,000 for the three months ended June 30, 2000 from $359,000 for the three
months ended June 30, 1999. For the six months ended June 30, 2000 interest and
other income increased slightly to $599,000 from $525,000 for the six months
ended June 30, 1999. The fluctuations in interest and other income are directly
related to the levels of cash and marketable securities earning interest. The
level of future interest and other income will primarily be subject to the level
of cash balances we maintain from period to period and the interest rates
earned.
Interest Expense. Interest expense increased to $508,000 for the three
months ended June 30, 2000 from $37,000 for same period in 1999. Interest
expense increased to $888,000 for the six months ended June 30, 2000 from
$37,000 for same period in 1999. The increase for both the three and six month
periods is directly related to the amount of borrowings under the Credit
Agreement with Pharmacia Corporation and the value of the warrants issued in
connection with the borrowings. Interest expense may fluctuate in the future
based on the interest rate related to the borrowings.
We do not believe that inflation has had a material impact on our results
of operations.
Liquidity and Capital Resources
Since inception through June 30, 2000, we have accumulated a deficit of
approximately $142.0 million and expect to continue to incur substantial, and
possibly increasing, operating losses for the next few years. We have financed
our operations primarily through private placements of Common Stock and
Preferred Stock, private placements of convertible notes and short-term notes,
our initial public offering, a secondary public offering, Pharmacia
Corporation's purchases of Common Stock and credit arrangements. As of June 30,
2000, we have received proceeds from the sale of equity securities, convertible
notes and credit arrangements of approximately $223.0 million. We do not
anticipate achieving profitability in the next few years, as such we expect to
continue to rely on external sources of financing to meet our cash needs for the
foreseeable future.
In September and October 1997, we entered into a private placement
offering, which was subsequently amended with respect to certain purchasers,
which provided net proceeds to Miravant of approximately $68.2 million. During
1998, under the price protection and repurchase provisions of these agreements,
we issued an additional 2,444,380 shares of Common Stock, repurchased 337,500
shares of Common Stock for $16.9 million and paid $8.6 million. During the first
quarter of 1999, we completed our price protection obligations through the
payment of $4.2 million, the issuance of 688,996 shares Common Stock and the
issuance of 450,000 warrants to purchase Common Stock at an exercise price of
$35.00 per share. As such, we have no further obligation to these purchasers
under the price protection or repurchase provisions of the Securities Purchase
Agreements and the amendments to those agreements.
In January 1999, under the Equity Investment Agreement, Pharmacia
Corporation purchased 1,136,533 shares of our Common Stock for an aggregate
purchase price of $19.0 million. In February 1999, in accordance with the Credit
Agreement, Pharmacia Corporation also extended to us up to $22.5 million in
credit over two years to be used to support our ophthalmology, oncology and
other development programs, as well as for general corporate purposes. We are
able to issue promissory notes for the quarterly interest amounts due on the
amounts borrowed until December 2000 when the issuance of such promissory notes
for the quarterly interest due will be subject to certain restrictions. The
promissory notes for both principal and interest mature in June 2004 and, at our
option, can be repaid in the form of our Common Stock, subject to certain
limitations and restrictions as defined by the Credit Agreement. The promissory
notes accrue interest at the prime rate, which was 9.50% at June 30, 2000. As of
June 30, 2000, in accordance with the Credit Agreement, we have received all six
quarterly loans for a total of $22.5 million available under the Credit
Agreement. In accordance with the Credit Agreement, we have issued promissory
notes to Pharmacia Corporation for the loan amounts received and issued
additional promissory notes for a total of $1.1 million for the related interest
due on each of the quarterly due dates through June 30, 2000. In connection with
the quarterly loans received, we have issued warrants to purchase 360,000 shares
of Common Stock at an exercise price of $11.87 per warrant share for 120,000
shares, $14.83 per warrant share for 120,000 shares and $20.62 per warrant share
for 120,000 shares.
In February 1998, we agreed to guaranty a term loan in the amount of $7.6
million from a bank to a director of ours at the time. In June 1998, the
director did not stand for re-election on the Board of Directors. The loan was
due and payable on July 31, 1999 and was subsequently extended to October 31,
2000. In conjunction with the extension, we increased our security interest to
include substantially all of the personal assets of the former director.
Additionally, with the extension of the guaranty of this loan, the former
director paid to Miravant a transaction fee of $152,000. As of July 31, 2000,
the former director has reduced the outstanding balance of the loan, and our
guaranty, to $2.1 million. Under the loan agreement and the guaranty, the
individual and Miravant are subject to the maintenance of specified financial
and other covenants.
In addition to receiving funds through private and public stock offerings,
we have also received funding through the exercise of warrants and stock
options. Through the six months ended June 30, 2000, we received $2.3 million in
proceeds from warrant and option exercises. Based on the exercise prices,
expiration dates and call features contained in certain warrants, and depending
on the market value of our Common Stock, we may receive additional funding
through the exercise of these outstanding warrants and stock options in
the future.
For the six months ended June 30, 2000 and June 30, 1999 we required cash
for operations of $5.0 million and $12.6 million, respectively. The decrease in
cash required for operations for the six months ended June 30, 2000 compared to
the six months ended June 30, 1999 was due primarily to the timing of the funds
received from Pharmacia Corporation for reimbursable research and development
costs.
For the six months ended June 30, 2000 and June 30, 1999 net cash used in
investing activities was $17.5 million and $8.2 million, respectively. The funds
used for investing activities were used to purchase investments to maximize the
interest earned on our cash balances and the amounts were based on an analysis
of the funds available for investment.
For the six months ended June 30, 2000 and June 30, 1999 net cash provided
by financing activities was $9.8 million and $23.0 million, respectively. Cash
provided by financing activities for the six months ended June 30, 2000 was
primarily related to the $7.5 million received from Pharmacia Corporation under
the Credit Agreement and warrant and option exercises. Cash provided by
financing activities for the six months ended June 30, 1999 was primarily
attributed to Pharmacia Corporation's $19.0 million equity investment and the
$7.5 million received under the Credit Agreement which was offset by the payment
of cash under the price protection provisions of the Amended Securities Purchase
Agreement.
We invested a total of $9.4 million in property and equipment from 1996
through June 30, 2000. During 1998, we entered into a new lease agreement for an
additional facility, which we completely subleased in December 1999. We expect
to continue to purchase property and equipment in the future as we continue to
expand our preclinical, clinical and research and development activities as well
as the buildout and expansion of laboratories and office space.
Our future capital funding requirements will depend on numerous factors
including:
o The progress and magnitude of our research and development
programs, preclinical studies and clinical trials;
o The time involved in obtaining regulatory approvals;
o The cost involved in filing and maintaining patent claims;
o Competitor and market conditions;
o Investment opportunities;
o Our ability to establish and maintain collaborative arrangements;
o The level of Pharmacia Corporation's involvement in our Phase III
AMD clinical trials;
o The cost of manufacturing scale-up and the cost and effectiveness
of commercialization activities and arrangements; and
o Our ability to obtain grants to finance research and development
projects.
Although we anticipate that we have sufficient cash to fund our operations
through at least the end of the year, our ability to generate substantial
additional funding to continue our research and development activities,
preclinical studies and clinical trials and manufacturing, scale-up,
administrative activities and to pursue any additional investment opportunities
is subject to a number of risks and uncertainties and will depend on numerous
factors including:
o Our ability to raise funds in the future through public or
private financings, collaborative arrangements or from other
sources;
o Our requirement to allocate 50% of the net proceeds from public
or private financings towards the repayment of the funds received
under the Credit Agreement;
o The potential for equity investments, collaborative arrangements,
license agreements or development or other funding programs with
us in exchange for manufacturing, marketing, distribution or
other rights to products developed by us;
o The amount of funds received from outstanding warrant and stock
option exercises;
o Our ability to maintain our existing collaborative arrangements;
o Our ability to liquidate our equity investments in Ramus, Xillix
or other assets;
o Our requirement to allocate 100% of the net proceeds from the
liquidation of an existing asset towards the repayment of the
funds received under the Credit Agreement; and
o Our ability to collect the loan provided to Ramus under the
credit agreement.
We can not guarantee that additional funding will be available to us when
needed. If additional funding is not available, we will be required to scale
back our research and development programs, preclinical studies and clinical
trials and administrative activities and our business and financial results and
condition would be materially adversely affected.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk related to changes in interest rates. The
risks related to foreign currency exchange rates are immaterial and we do not
use derivative financial instruments. From time to time, we maintain a portfolio
of highly liquid cash equivalents maturing in three months or less as of the
date of purchase. Given the short-term nature of these investments and that our
borrowings outstanding are under variable interest rates, we are not subject to
significant interest rate risk.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In May 2000, we issued warrants for the purchase of 120,000 shares of our
Common Stock at a price of $20.62 per share to Pharmacia Corporation in
connection with a loan received under the terms of the Credit Agreement. The
warrants were issued pursuant to an exemption from registration provided by
Section 4(2) of the Securities Act of 1933. In issuing the warrants, we relied
on representations from Pharmacia Corporation that they purchased the securities
for investment for their own account and not with a view to, or for resale in
connection with, any distribution thereof and that they were aware of our
business affairs and financial condition and had sufficient information to reach
an informed and knowledgeable decision regarding their acquisition of the
securities. Under the terms of the Credit Agreement, we have filed a
registration statement on Form S-3 providing for the resale of our Common Stock
underlying the warrants by Pharmacia Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 14, 2000, the Company held its Annual Meeting of Stockholders. The
following individuals were elected to the Board of Directors:
Votes Votes
For Withheld
--------------- --------------
Larry S. Barels 15,863,143 187,757
William P. Foley II 15,863,143 187,757
Charles T. Foscue 15,863,143 187,757
Gary S. Kledzik, Ph.D. 15,844,613 206,287
David E. Mai 15,853,279 197,621
Jonah Shacknai 15,863,143 187,757
In addition, the stockholders also approved the following proposals:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Votes Votes Broker
For Against Abstained Non-Votes
-------------- -------------- --------------- ----------------
1. Proposal to approve the Miravant
Medical Technologies 2000 Stock
Compensation Plan. 4,757,462 1,505,820 57,455 9,733,163
2. Proposal to ratify the selection of
the Company's independent auditors. 16,037,273 3,297 10,330 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27.1 Financial Data Schedule - EDGAR filing.
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
Miravant Medical Technologies
Date: August 11, 2000 By: /s/ John M. Philpott
---------------------
John M. Philpott
Chief Financial Officer and Controller
(on behalf of the Company and as
Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
27.1 Financial Data Schedule.
