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
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 October 31, 2000
----- -------------------------------
Common Stock, $.01 par value 18,402,631
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
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Page
Item 1. Consolidated Financial Statements
Consolidated balance sheets as of September 30, 2000 and
December 31, 1999........................................................... 3
Consolidated statements of operations for the three months ended
September 30, 2000 and 1999 and for the nine months ended
September 30, 2000 and 1999................................................. 4
Consolidated statements of cash flows for the nine months ended
September 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 ........................................ 7
Item 3. Qualitative and Quantitative Disclosures About Market Risk..................... 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................... 13
Signatures .................................................................... 14
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
MIRAVANT MEDICAL TECHNOLOGIES
CONSOLIDATED BALANCE SHEETS
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September 30, December 31,
2000 1999
-------------------- -------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents............................................... $ 1,586,000 $ 19,168,000
Investments in short-term marketable securities......................... 20,900,000 3,621,000
Accounts receivable..................................................... 2,381,000 5,717,000
Prepaid expenses and other current assets............................... 987,000 1,147,000
-------------------- -------------------
Total current assets....................................................... 25,854,000 29,653,000
Property, plant and equipment:
Vehicles................................................................ 28,000 28,000
Furniture and fixtures.................................................. 1,649,000 1,639,000
Equipment............................................................... 5,680,000 5,495,000
Leasehold improvements.................................................. 4,557,000 4,488,000
Capital lease equipment................................................. 184,000 184,000
-------------------- -------------------
12,098,000 11,834,000
Accumulated depreciation................................................ (9,418,000) (8,112,000)
-------------------- -------------------
2,680,000 3,722,000
Investments in affiliates.................................................. 1,377,000 752,000
Deferred financing costs................................................... 1,381,000 871,000
Patents and other assets................................................... 828,000 825,000
-------------------- -------------------
Total assets............................................................... $ 32,120,000 $ 35,823,000
==================== ===================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable........................................................ $ 3,496,000 $ 4,070,000
Accrued payroll and expenses............................................ 549,000 650,000
-------------------- -------------------
Total current liabilities.................................................. 4,045,000 4,720,000
Long-term liabilities:
Long-term debt.......................................................... 24,214,000 15,379,000
Sublease security deposits.............................................. 112,000 127,000
-------------------- -------------------
Total long-term liabilities................................................ 24,326,000 15,506,000
Stockholders' equity:
Common stock, 50,000,000 shares authorized; 18,388,517 and
18,038,270 shares issued and outstanding at September 30, 2000
and December 31, 1999, respectively.................................. 157,034,000 152,731,000
Notes receivable from officers.......................................... (480,000) (460,000)
Deferred compensation................................................... (1,700,000) (1,776,000)
Accumulated other comprehensive loss.................................... (3,099,000) (3,724,000)
Accumulated deficit..................................................... (148,006,000) (131,174,000)
-------------------- -------------------
Total stockholders' equity................................................. 3,749,000 15,597,000
-------------------- -------------------
Total liabilities and stockholders' equity................................. $ 32,120,000 $ 35,823,000
==================== ===================
See accompanying notes.
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MIRAVANT MEDICAL TECHNOLOGIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three months ended September 30, Nine months ended September 30,
2000 1999 2000 1999
----------------- -------------------- ------------------ ----------------
Revenues:
License-contract research and development...... $ 778,000 $ 2,144,000 $ 3,663,000 $ 10,214,000
Grants......................................... 56,000 209,000 100,000 414,000
Royalties...................................... -- -- -- 143,000
----------------- ------------------ ------------------- ----------------
Total revenues.................................... 834,000 2,353,000 3,763,000 10,771,000
Costs and expenses:
Research and development....................... 5,059,000 5,833,000 15,340,000 21,486,000
Selling, general and administrative............ 1,572,000 1,981,000 4,710,000 5,846,000
Loss in affiliate.............................. -- 42,000 -- 370,000
----------------- ------------------ ------------------- ----------------
Total costs and expenses.......................... 6,631,000 7,856,000 20,050,000 27,702,000
Loss from operations.............................. (5,797,000) (5,503,000) (16,287,000) (16,931,000)
Interest and other income (expense):
Interest and other income...................... 413,000 280,000 1,012,000 805,000
Interest expense............................... (669,000) (164,000) (1,557,000) (201,000)
----------------- ------------------ ------------------- ----------------
Total net interest and other income (expense)..... (256,000) 116,000 (545,000) 604,000
----------------- ------------------ ------------------- ----------------
Net loss.......................................... $ (6,053,000) $ (5,387,000) $ (16,832,000) $ (16,327,000)
================= ================== =================== ================
Net loss per share - basic and diluted............ $ (0.33) $ (0.30) $ (0.92) $ (0.92)
================= ================== =================== ================
Shares used in computing net loss per share....... 18,370,705 18,007,535 18,273,764 17,683,254
================= ================== =================== ================
See accompanying notes.
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MIRAVANT MEDICAL TECHNOLOGIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Nine months ended September 30,
Operating activities: 2000 1999
------------------- ----------------------
Net loss.......................................................... $ (16,832,000) $ (16,327,000)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization.................................. 1,355,000 2,239,000
Amortization of deferred compensation.......................... 579,000 1,189,000
Loss on sale of property, plant and equipment.................. -- 25,000
Reserve for loan receivable from affiliate..................... -- 250,000
Reserve for patents............................................ 74,000 --
Stock awards................................................... 135,000 310,000
Non-cash interest and amortization of deferred
financing costs on long-term debt............................ 1,557,000 212,000
Changes in operating assets and liabilities:
Accounts receivable......................................... 3,336,000 (5,276,000)
Prepaid expenses and other assets........................... 34,000 (743,000)
Accounts payable and accrued payroll........................ (710,000) (485,000)
------------------- ----------------------
Net cash used in operating activities............................. (10,472,000) (18,606,000)
Investing activities:
Purchases of marketable securities ............................... (29,395,000) (17,514,000)
Sales of marketable securities ................................... 12,116,000 13,893,000
Loan to affiliate................................................. -- (250,000)
Purchases of property, plant and equipment........................ (264,000) (501,000)
------------------- ----------------------
Net cash used in investing activities............................. (17,543,000) (4,372,000)
Financing activities:
Proceeds from issuance of Common Stock, less issuance costs....... 2,933,000 18,627,000
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......................... 10,433,000 23,011,000
Net increase (decrease) in cash and cash equivalents.............. (17,582,000) 33,000
Cash and cash equivalents at beginning of period.................. 19,168,000 11,284,000
------------------- ----------------------
Cash and cash equivalents at end of period........................ $ 1,586,000 $ 11,317,000
=================== ======================
Supplemental disclosures:
Cash paid for:
State taxes..................................................... $ 4,000 $ 100,000
=================== ======================
Interest ....................................................... $ -- $ --
=================== ======================
See accompanying notes.
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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 September 30, 2000 and for the
three and nine month periods ended September 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 nine months ended September 30, 2000 and 1999, comprehensive loss
amounted to approximately $16.2 million and $17.3 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
connection with the guaranty, the former director paid to the Company
transaction fees of $304,000. As of September 30, 2000, the former director
has paid off the loan and the Company has been released from its guaranty.
<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
$148.0 million as of September 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 or royalties related to such product sales until such
approvals are received.
Until we commercialize our product(s), we expect revenues to continue to be
attributed 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.
Pharmacia Corporation, formerly Pharmacia & Upjohn, Inc., with our
assistance, is currently conducting the Phase III clinical trials for the
treatment of wet age-related macular degeneration or AMD. These trials were
fully enrolled in December 1999, and these patients are now in the two-year
follow-up period for safety and efficacy evaluation. These patients will
complete the one-year follow-up in December 2000 and the subsequent planned
analysis of this data may be available in the first half of 2001. Pharmacia
Corporation has assumed control of the clinical and regulatory aspects of SnET2
in ophthalmology and the related Phase III AMD clinical trials.
We are also conducting preclinical studies of new photoselective drugs for
cardiovascular diseases, in particular for the prevention and treatment of
restenosis. Restenosis is the renarrowing of an artery that commonly occurs
after balloon angioplasty for obstructive coronary artery disease. In our
dermatology program, we have developed a topical formulation to deliver a new
photoselective drug through the skin and continue to conduct preclinical studies
with the expectation to pursue certain clinical applications in the future. In
oncology, we are conducting preclinical research of our photoselective therapy
to destroy abnormal blood vessels in tumors. We are pursuing this tumor research
with some of our new photoselective drugs and also investigating combination
therapies with PhotoPoint and anti-angiogenic compounds. 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 ophthalmology, cardiovascular
disease, dermatology, oncology or in any other indications.
Under the 1998 amendments of the License Agreements with Pharmacia
Corporation we were to conduct all preclinical studies and U.S. clinical trials
in 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 September 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 were 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 AMD clinical trials, as well as drug manufacturing
scale-up responsibility, to Pharmacia Corporation in accordance with the 1999
Amendments. Pharmacia Corporation is now responsible for directly funding the
majority of the Phase III AMD clinical trials and drug manufacturing scale-up
costs. We will continue to be responsible for some of the drug and device
development and manufacturing necessary and the majority of the preclinical
studies required 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.
Results of Operations
Revenues. For the three months ended September 30, 2000, our revenues
decreased to $834,000 from $2.4 million for the three months ended September 30,
1999. For the nine months ended September 30, 2000, our revenues decreased to
$3.8 million from $10.8 million for the same period in 1999.
For the nine months ended September 30, 2000, we recorded revenues of $3.7
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 AMD clinical trials compared to $10.2 million for the nine
months ended September 30, 1999. The decrease in license revenues for the three
and nine months ended September 30, 2000, is directly attributed to the decrease
in reimbursement of out-of-pocket or direct costs for the AMD program due to the
December 1999 transition of the majority of the operations of the Phase III AMD
clinical trials to Pharmacia Corporation in accordance with the 1999 Amendments.
Pharmacia Corporation is now responsible for directly funding the majority of
the Phase III AMD clinical trials and drug manufacturing scale-up 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 fourth quarter 2000 and the 2001
license revenue related to the reimbursement of out-of-pocket or direct costs,
as well as our related expenses, will decrease compared to 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 reimbursable
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. We currently have not been awarded any grants for 2000,
nor are any grant applications 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 $5.1 million for the three months ended September 30, 2000 from $5.8 million
for the three months ended September 30, 1999. For the nine months ended
September 30, 2000 our research and development expenses decreased to $15.3
million from $21.5 million for the nine months ended September 30, 1999. The
decrease in research and development expenses for the three and nine months
ended September 30, 2000 compared to the same periods in 1999 related primarily
to the December 1999 transition of the majority of the operations and funding
responsibility of the Phase III AMD clinical trials 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
nine months ended September 30, 2000 primarily related to the preclinical
studies required for an NDA submission for AMD, the cost of device and drug
product used in the 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 nine
months ended September 30, 1999 primarily related to the costs associated with
the screening, treatment, monitoring and data collection of qualified
individuals participating in Phase III AMD clinical trials 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
available funds, 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 existing or the commencement of new
preclinical studies and clinical trials and the development of new drug
compounds and formulations.
Selling, General and Administrative. For the three months ended September
30, 2000, selling, general and administrative expenses decreased to $1.6 million
from $2.0 million for the three months ended September 30, 1999. For the nine
months ended September 30, 2000, selling, general and administrative expenses
decreased to $4.7 million from $5.8 million for the same period in 1999. The
overall decrease in selling, general and administrative expenses for the three
and nine months ended September 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 are expected to remain
consistent with prior years and may fluctuate depending on available funds, and
the support required for research and development activities, continuing
corporate development and professional services, compensation expense associated
with stock options and warrants granted to 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 September 30, 2000. The $370,000
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 increased to $413,000
for the three months ended September 30, 2000 from $280,000 for the three months
ended September 30, 1999. For the nine months ended September 30, 2000 interest
and other income increased to $1.0 million from $805,000 for the nine months
ended September 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 $669,000 for the three
months ended September 30, 2000 from $164,000 for the same period in 1999.
Interest expense increased to $1.6 million for the nine months ended September
30, 2000 from $201,000 for the same period in 1999. The increase for both the
three and nine 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 and
the balance of such borrowings.
Liquidity and Capital Resources
Since inception through September 30, 2000, we have accumulated a deficit
of approximately $148.0 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 September
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 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 amounts borrowed until December 2000. Beginning in
2001, we will be able to issue promissory notes for the quarterly interest due
for any quarter in which our adjusted net earnings, as described by the Credit
Agreement, is less than the quarterly interest due. The ability to issue
promissory notes may also be restricted by certain sales of our equity
securities. 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 September
30, 2000. As of September 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 $1.7 million for the
related interest due on each of the quarterly due dates through September 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. The warrants to purchase
360,000 shares of Common Stock are callable by us if the average closing prices
of the Common Stock for 30 trading days, preceding such request, exceeds the
related warrant exercise price.
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 connection with the
guaranty, the former director paid to Miravant transaction fees of $304,000. As
of September 30, 2000, the former director has paid off the loan and we have
been released from our guaranty.
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 nine months ended September 30, 2000, we have received $2.9
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 nine months ended September 30, 2000 and September 30, 1999 we
required cash for operations of $10.5 million and $18.6 million, respectively.
The decrease in cash required for operations for the nine months ended September
30, 2000 compared to the nine months ended September 30, 1999 was due primarily
to the timing of the funds received from Pharmacia Corporation for reimbursable
research and development costs.
For the nine months ended September 30, 2000 and September 30, 1999 net
cash used in investing activities was $17.5 million and $4.4 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 nine months ended September 30, 2000 and September 30, 1999 net
cash provided by financing activities was $10.4 million and $23.0 million,
respectively. Cash provided by financing activities for the nine months ended
September 30, 2000 was related to the $7.5 million received from Pharmacia
Corporation under the Credit Agreement and $2.9 million provided by warrant and
option exercises. Cash provided by financing activities for the nine months
ended September 30, 1999 was primarily attributed to Pharmacia Corporation's
$19.0 million equity investment and $7.5 million received under the Credit
Agreement which was offset by the payment of $4.2 million 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 September 30, 2000. During 1998, we entered into a new lease agreement
for an additional facility, which we subleased in December 1999. Based on
available funds, we may continue to purchase property and equipment in the
future as we 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 September 30, 2001, our ability to generate substantial additional
funding to continue our research and development activities, preclinical studies
and clinical trials and manufacturing scale-up, and 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 their credit
agreement with us.
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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27.1 Financial Data Schedule - EDGAR filing.
(b) Reports on Form 8-K.
Form 8-K dated July 14, 2000, Other Events - Item 5:
announcing that the Board of Directors of Miravant
Medical Technologies approved the adoption of a
Preferred Stock Rights Agreement.
<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: November 13, 2000 By: /s/ John M. Philpott
-----------------------
John M. Philpott
Chief Financial Officer
(on behalf of the Company and as
Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
27.1 Financial Data Schedule.
