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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996.........................
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
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COMMISSION FILE NUMBER
0-25970
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
A DELAWARE CORPORATION IRS EMPLOYER IDENTIFICATION
33-0642614
2525 DUPONT DRIVE, IRVINE, CALIFORNIA 92715
TELEPHONE NUMBER 714/246-4500
Indicate by a 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.
(1) X yes no
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(2) X yes no
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of May 3, 1996 there were 3,250,000 shares of callable common stock
outstanding, and 200 shares of special common stock outstanding.
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ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996
INDEX
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Page
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Statement of Operations - 3
Quarter Ended March 31, 1996
Condensed Balance Sheets at March 31, 1996 4
and December 31, 1995
Statement of Cash Flows - 5
Quarter Ended March 31, 1996
Notes to Financial Statements 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7-8
PART II - OTHER INFORMATION
ITEM 6 9
Signature 10
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PART I - FINANCIAL INFORMATION
Allergan Ligand Retinoid Therapeutics, Inc.
Statement of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter ended
March 31,
1996
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<S> <C>
Revenues:
Interest income $ 955
Costs and expenses:
Research and development 5,878
General and administrative expenses 353
-------
Total costs and expenses 6,231
-------
Net loss $(5,276)
=======
Net loss per callable common share $ (1.62)
=======
Weighted average callable common
shares outstanding 3,250
</TABLE>
See accompanying notes.
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Allergan Ligand Retinoid Therapeutics, Inc.
Condensed Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
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<S> <C> <C>
ASSETS
Cash and cash equivalents $ 54,062 $ 79,793
Marketable securities 20,459 --
Other assets 503 335
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$ 75,024 $ 80,128
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Payable to Allergan, Inc. and Ligand
Pharmaceuticals Incorporated $ 3,580 $ 2,886
Accounts payable and accrued liabilities 408 766
-------- --------
Total current liabilities 3,988 3,652
Stockholders' equity:
Callable Common stock, $.001 par value;
3,250,000 shares authorized, issued
and outstanding 3 3
Additional paid-in capital 94,256 94,256
Accumulated deficit (23,059) (17,783)
Unrealized holding loss on
marketable securities (164) --
-------- --------
Total stockholders' equity 71,036 76,476
-------- --------
$ 75,024 $ 80,128
======== ========
</TABLE>
See accompanying notes.
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Allergan Ligand Retinoid Therapeutics, Inc.
Statement of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Quarter
ended March 31,
1996
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<S> <C>
OPERATING ACTIVITIES:
Net loss $ (5,276)
Changes in operating assets and liabilities:
Other assets (168)
Payable to Allergan, Inc. and Ligand
Pharmaceuticals Incorporated 694
Accounts payable and accrued liabilities (358)
--------
Net cash used in operating activities (5,108)
INVESTING ACTIVITIES:
Purchase of marketable securities (20,623)
--------
-
Net decrease in cash and equivalents (25,731)
Cash and equivalents at beginning of period 79,793
--------
Cash and equivalents at end of period $ 54,062
========
</TABLE>
See accompanying notes.
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Allergan Ligand Retinoid Therapeutics, Inc.
Notes to Financial Statements
1. Allergan Ligand Retinoid Therapeutics, Inc. (the Company) was incorporated in
Delaware in 1994 and commenced operations on June 3, 1995 to continue the
efforts of the Allergan Ligand Joint Venture (Joint Venture), established by
Allergan, Inc. (Allergan) and Ligand Pharmaceuticals Incorporated (Ligand) in
June 1992, to discover, develop and commercialize drugs based on retinoids.
On June 3, 1995, the Company and Ligand completed a public offering (the
Offering) of 3.25 million units, each unit consisting of one share of the
Company's callable common stock (Callable Common Stock) and two warrants, each
to purchase one share of Ligand common stock. The Offering raised net proceeds
for the Company of $26.8 million. At the completion of the Offering, Ligand
contributed $17.5 million in cash, as well as warrants in exchange for (i) a
right to acquire all of the Callable Common Stock at specified future dates and
amounts and (ii) a right to acquire all rights to the 1057 product, jointly with
Allergan, currently under development by the Company. At the same time, Allergan
contributed $50.0 million in cash to the Company in exchange for (i) the right
to acquire one-half of technologies and other assets in the event Ligand
exercises its right to acquire all of the Callable Common Stock, (ii) a similar
right to acquire all of the Callable Common Stock if Ligand does not exercise
its right and (iii) a right to acquire all rights to the 1057 product, jointly
with Ligand.
2. In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting only of normal recurring accruals) necessary
to present fairly the financial information contained therein. These statements
do not include all disclosures required by generally accepted accounting
principles. The results of operations for the quarter ended March 31, 1996 are
not necessarily indicative of the results to be expected for the year ending
December 31, 1996. Net loss per callable common share is computed by dividing
the net loss by the number of callable common shares outstanding, which was
3,250,000 at all times during the quarter.
3. The Company invests its excess cash in money market funds and debt
instruments of financial institutions and corporations with strong credit
ratings. The Company has established guidelines with respect to the
diversification and maturities in order to maintain safety and liquidity. The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. The Company's investments are
classified as available-for-sale and are carried at fair value, with unrealized
gains and losses reported as a separate component of stockholders' equity. The
investments are adjusted for amortization of premiums and discounts to maturity
and such amortization is included in interest income.
6
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ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1996
Allergan Ligand Retinoid Therapeutics, Inc. (ALRT) commenced operations in June
1995 and received net proceeds of approximately $26.8 million upon issuance of
3.25 million Units, each of which consists of one share of Callable Common Stock
and two Warrants, each to purchase one share of Ligand Pharmaceuticals
Incorporated (Ligand) common stock. At that time, ALRT also received cash
contributions of $50.0 million from Allergan, Inc. (Allergan) and $17.5 million
from Ligand (the Contributions). ALRT is utilizing substantially all of the net
proceeds of the Offering and the Contributions to continue the research and
development of potential retinoid compounds.
The shares of Callable Common Stock are subject to the Stock Purchase Option,
pursuant to which Ligand, and in the event not exercised by Ligand, Allergan,
has an irrevocable option to purchase all, but not less than all, of the
Callable Common Stock outstanding at the time such option is exercised at stated
exercise prices from June 3, 1997 until the expiration of the Stock Purchase
Option on the earlier of June 3, 2000 or a limited period of time after a major
agreement among ALRT, Ligand and Allergan is terminated due to an event of
default. Ligand and Allergan also have the option, which must be exercised
together, to acquire assets related to the development of ALRT 1057.
RESULTS OF OPERATIONS
The Company incurred a net loss of $5.4 million in the quarter ended March 31,
1996. Interest income for the first quarter of 1996 was $1.0 million as a result
of investment of the remaining unexpended cash held by ALRT from the completion
of the Offering in June 1995. Interest income will decrease in future periods as
funds are used in performance of research and development activities, subject to
general interest rate trends.
Research and development expenses in the first quarter of 1996 were $5.9
million. Research and development activities were performed primarily by Ligand
and Allergan under contracts with ALRT since June 1995. Research and development
expenses are anticipated to increase in 1996 in comparison with total expenses
incurred in 1995 due to the anticipated acceleration of development activities.
General and administrative expenses in the first quarter of 1996 were $0.3
million.
The Company's activities will be limited to conducting research and development
under the agreements with Ligand and Allergan. The Company does not expect to
generate any revenues other than interest income during subsequent periods.
Consequently, it expects to continue to incur net losses in subsequent periods.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, ALRT had cash and cash equivalents of $54.1 million and
marketable securities of $20.4 million. Although ALRT believes that the proceeds
of the June 1995 Offering together with the Contributions will be sufficient to
enable it to continue development of a limited number of
7
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Allergan Ligand Retinoid Therapeutics, Inc.
LIQUIDITY AND CAPITAL RESOURCES (Continued)
products in accordance with the Development Agreement among ALRT, Ligand and
Allergan, and to commercialize formulations of ALRT 1057, if it proves safe and
efficacious, there can be no assurance that this will be the case. Until the
expiration of the Stock Purchase Option, ALRT is significantly restricted from
raising additional funds without Allergan's and Ligand's consent and there can
be no assurance that ALRT will have sufficient funds to successfully develop any
retinoid products (Products). While Allergan and Ligand may, at their option,
provide funds for further development of the Products, they are not obligated to
do so. Such funds will be advanced to ALRT, if at all, at the option of Allergan
and Ligand and the decision to make such advances must be a joint decision. As a
result, ALRT does not anticipate any future cash inflows other than earnings on
unexpended cash balances. Substantial funding will be necessary to complete the
development of and to commercialize the Products.
If the Stock Purchase Option is not exercised, ALRT would have to raise
substantial funding from third parties through the sale of securities or the
licensing of Product or technology rights. There can be no assurance that such
funds will be available or, if available, will be on commercially reasonable
terms.
In addition, until the termination of the Stock Purchase Option, ALRT is not
able to issue additional capital stock, borrow more than $1 million in the
aggregate, declare or pay dividends or make other distributions to stockholders,
merge, consolidate or reorganize or liquidate or sell all or substantially all
of its assets without the prior written approval of Allergan and Ligand.
If ALRT does not use the available funds as provided in the Development
Agreement or otherwise breaches any of its material obligations under any of the
major agreements among ALRT, Ligand and Allergan, Allergan and Ligand may have
the right to terminate the technology license agreement among ALRT, Ligand and
Allergan, and thereby reacquire rights to all technology licensed to ALRT
thereunder, including improvements made to such technology using funds provided
by ALRT. In the event of such a termination by Allergan and Ligand, ALRT will
not receive any royalty or other compensation and it is unlikely that Ligand or
Allergan would exercise either the 1057 Purchase Option or the Stock Purchase
Option.
During the first quarter of 1996, ALRT invested its excess cash in money market
funds and debt instruments of financial institutions and corporations with
strong credit ratings. ALRT has established guidelines relative to
diversification and maturities designed to maintain safety and liquidity. The
guidelines are periodically reviewed and modified to take advantage of trends in
yields and interest rates. The net proceeds from the Offering, combined with
income on unexpended cash balances, are anticipated to provide funding for
research and development and related administrative activities through the
middle of the year 2000.
The Company does not currently maintain any line of credit agreements. The
Company believes the impact of inflation on its business activities has not been
significant to date.
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Allergan Ligand Retinoid Therapeutics, Inc.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- Exhibits
(numbered in accordance with Item 601 of Regulation S-K)
Exhibit 27 - Financial Data Schedule
- Reports on Form 8-K. None.
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SIGNATURE
Pursuant to the requirements 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.
Date: May 6, 1996 ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
--------------------
/s/ Dwight J. Yoder
-----------------------
Dwight J. Yoder
Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEETS AND THE STATEMENT OF OPERATIONS OF ALLERGAN LIGAND
RETINOID THERAPEUTICS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH REPORT ON FORM 10Q FOR THE QUARTER ENDED MARCH 31, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 54,062
<SECURITIES> 20,459
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 75,024
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 75,024
<CURRENT-LIABILITIES> 3,988
<BONDS> 0
0
0
<COMMON> 3
<OTHER-SE> 71,197
<TOTAL-LIABILITY-AND-EQUITY> 75,024
<SALES> 0
<TOTAL-REVENUES> 955
<CGS> 0
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<OTHER-EXPENSES> 5,878
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (5,276)
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<INCOME-CONTINUING> (5,276)
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<NET-INCOME> (5,276)
<EPS-PRIMARY> (1.62)
<EPS-DILUTED> (1.62)
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