<PAGE>
UNITED STATES
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, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-21699
VIROPHARMA INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Delaware 94-2347624
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
405 Eagleview Boulevard
Exton, Pennsylvania 19341
(Address of Principal Executive Offices and Zip Code)
610-458-7300
(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
requirement for the past 90 days: Yes X No
--------- ---------
Number of shares outstanding of the issuer's Common Stock, par value $.002 per
share, as of November 12, 1999: 15,049,415 shares.
<PAGE>
VIROPHARMA INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
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<S> <C>
Item 1. Financial Statements:
Balance Sheets at December 31, 1998 and September 30, 1999 3
Statements of Operations for the three months ended September 30, 1998 and 1999, 4
the nine months ended September 30, 1998 and 1999, and the period from December
5, 1994 (inception) to September 30, 1999
Statements of Cash Flows for the nine months ended September 30, 1998 and 1999 and 5
the period from December 5, 1994 (inception) to September 30, 1999
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and 8
Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 11
Signatures 12
</TABLE>
2
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PART I. FINANCIAL INFORMATION
- ---------------------------------
ITEM 1. FINANCIAL STATEMENTS
ViroPharma Incorporated
(A Development Stage Company)
Balance Sheets
December 31, 1998 and September 30, 1999
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ -------------
Assets Audited Unaudited
------------ -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,076,682 1,923,485
Short-term investments 18,935,100 10,104,679
Notes receivable from officers - current 39,205 39,205
Other current assets 435,054 250,539
------------ -----------
Total current assets 20,486,041 12,317,908
Equipment and leasehold improvements, net 2,477,105 3,269,169
Restricted investments 550,000 550,000
Notes receivable from officers - noncurrent 62,356 32,953
Other assets 81,899 81,899
------------ -----------
Total assets $ 23,657,401 16,251,929
============ ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 1,442,756 2,751,658
Loans payable - current 200,000 1,200,000
Obligation under capital lease - current 50,379 14,450
Accrued expenses and other current liabilities 7,302,511 3,912,596
------------ -----------
Total current liabilities 8,995,646 7,878,704
Loans payable - noncurrent 1,822,917 583,334
Obligation under capital lease - noncurrent 2,807 -
------------ -----------
10,821,370 8,462,038
------------ -----------
Stockholders' equity:
Preferred stock, par value $.001 per share. 5,000,000
shares authorized; Series A convertible participating preferred
stock; 2,300,000 issued and outstanding at September 30, 1999;
none at December 31, 1998 (liquidation value $14,547,031) - 2,300
Common stock, par value $.002 per share. Authorized 27,000,000 shares
at December 31, 1998 and September 30, 1999; issued and outstanding
11,516,794 shares at December 31, 1998 and 11,594,174 at September 30,
1999 23,034 23,188
Additional paid-in capital 61,373,998 74,786,302
Deferred compensation (247,601) (82,769)
Unrealized gains on available for sale securities 107,562 138,311
Deficit accumulated during the development stage (48,420,962) (67,077,441)
------------ -----------
Total stockholders' equity 12,836,031 7,789,891
------------ -----------
Commitments
Total liabilities and stockholders' equity $ 23,657,401 16,251,929
============ ===========
See accompanying notes to financial statements.
</TABLE>
3
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ViroPharma Incorporated
(A Development Stage Company)
Statements of Operations
(unaudited)
Three months ended September 30, 1998 and 1999,
the nine months ended September 30, 1998 and 1999, and the
period from December 5, 1994 (inception) to September 30, 1999
<TABLE>
<CAPTION>
Period
December 5,
1994
Three months ended Nine months ended (inception) to
September 30, September 30, September 30,
1998 1999 1998 1999 1999
----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
License fee and milestones revenue $ 750,000 - 1,500,000 - 4,000,000
Grant revenue - - - - 526,894
----------- ----------- ------------ ----------- -----------
Tool revenues 750,000 - 1,500,000 - 4,526,894
----------- ----------- ------------ ----------- -----------
Operating expenses incurred in the
development stage:
Research and development 6,607,790 5,945,274 16,244,718 16,039,859 61,799,655
General and administrative 1,233,859 1,082,466 3,112,502 3,476,798 13,949,820
----------- ----------- ------------ ----------- -----------
Total operating expenses 7,841,649 7,027,740 19,357,220 19,516,657 75,749,475
----------- ----------- ------------ ----------- -----------
Loss from operations (7,091,649) (7,027,740) (17,857,220) (19,516,657) (71,222,581)
Interest income, net 418,069 140,664 1,121,434 860,178 4,145,140
----------- ----------- ------------ ----------- -----------
Net loss $(6,673,580) (6,887,076) (16,735,786) (18,656,479) (67,077,441)
=========== ============ ===========
Preferred stock dividends, including
beneficial conversion component 752,833 752,833
Beneficial conversion feature of
preferred stock - 4,140,000
----------- -----------
Net loss allocable common
stockholders (7,639,909) (23,549,312)
=========== ===========
Basic and dilluted net loss per share
allocable to common stockholders: (0.58) (0.66) (1.46) (2.04)
=========== =========== ============ ===========
Shares used in computing basic and diluted
net loss per share allocable to
common stockholders: 11,485,589 11,577,961 11,480,986 11,568,467
=========== =========== ============ ===========
</TABLE>
4
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ViroPharma Incorporated
(A Development Stage Company)
Statements of Cash Flows
(unaudited)
Nine months ended September 30, 1998 and 1999 and the
period from December 5, 1994 (inception) to September 30, 1999
<TABLE>
<CAPTION>
Period from
December 5, 1994
Nine months ended (inception) to
September 30, September 30,
1998 1999 1999
------------- ------------ ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(16,735,786) (18,656,479) (67,077,441)
Adjustments to reconcile net loss to net cash
used in operating activities:
Non-cash compensation expense 153,395 164,832 750,317
Non-cash warrant value 11,952 11,952 153,744
Non-cash consulting expense 12,065 4,860 46,975
Depreciation and amortization expense 305,517 401,074 1,175,539
Changes in assets and liabilities:
Other current assets 186,323 184,515 (250,539)
Notes receivable from officers 6,431 29,403 (72,158)
Other assets - - (81,899)
Accounts payable (24,604) 1,308,902 2,751,658
Accrued expenses and other current liabilities 1,120,376 (3,496,165) 3,912,596
------------ ----------- -----------
Net cash used in operating activities (14,964,331) (20,047,106) (58,691,208)
Cash flows from investing activities:
Purchase of equipment (831,486) (1,193,138) (4,444,709)
Purchase of short-term and restricted investments (24,008,371) (14,896,490) (128,566,348)
Sales of short-term investments - - 9,680,414
Maturities of short-term investments 36,045,978 23,757,660 108,369,566
------------ ----------- -----------
Net cash (used in) provided by investing activities 11,206,121 7,668,032 (14,961,077)
Cash flows from financing activities:
Net proceeds from issuance of preferred stock - 13,310,900 27,242,143
Net proceeds from issuance of common stock 19,712 87,046 45,891,718
Proceeds from loans payable and milestone advance - - 2,100,000
Payment of loans payable (75,000) (133,333) (316,666)
Proceeds received on notes receivable - - 1,625
Proceeds from notes payable - - 692,500
Payment of notes payable - - (50,000)
Obligation under capital lease (45,424) (38,736) 14,450
------------ ----------- -----------
Net cash provided by (used in) financing activities (100,712) 13,225,877 75,575,770
------------ ----------- -----------
Net increase (decrease) in cash and cash equivalents (3,858,922) 846,803 1,923,485
Cash and cash equivalents at beginning of period 4,204,330 1,076,682 -
------------ ----------- -----------
Cash and cash equivalents at end of period $ 345,408 1,923,485 1,923,485
============ =========== ===========
Supplemental disclosure of noncash transactions:
Conversion of milestone advance to loan payable $ - - 1,000,000
Unrealized gains (losses) on available for sale securities (111,905) 30,749 50,999
</TABLE>
See accompanying notes to financial statements.
5
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ViroPharma Incorporated
(A Development Stage Company)
Notes to Financial Statements
September 30, 1998 and 1999
(unaudited)
(1) Organization and Business Activities
ViroPharma Incorporated (a development stage company) (the "Company") commenced
operations on December 5, 1994. The Company is a development stage
pharmaceutical company engaged in the discovery and development of new antiviral
medicines.
The Company is devoting substantially all of its efforts towards conducting drug
discovery and development, raising capital, conducting clinical trials, pursuing
regulatory approval for products under development, recruiting personnel and
building infrastructure. In the course of such activities, the Company has
sustained operating losses and expects such losses to continue for the
foreseeable future. The Company has not generated any significant revenues or
product sales and has not achieved profitable operations or positive cash flow
from operations. The Company's deficit accumulated during the development stage
aggregated $67,077,441 through September 30, 1999. There is no assurance that
profitable operations, if ever achieved, could be sustained on a continuing
basis.
The Company plans to continue to finance its operations with a combination of
stock issuances, license payments, payments from strategic research and
development arrangements and, in the longer term, revenues from product sales.
There are no assurances, however, that the Company will be successful in
obtaining an adequate level of financing needed for the long-term development
and commercialization of its planned products.
Basis of Presentation
The information at September 30, 1999, and for the three and nine months ended
September 30, 1998 and 1999, is unaudited but includes all adjustments
(consisting only of normal recurring adjustments) which, in the opinion of
management, are necessary to state fairly the financial information set forth
therein in accordance with generally accepted accounting principles. The
interim results are not necessarily indicative of results to be expected for the
full fiscal year. These financial statements should be read in conjunction with
the audited financial statements for the year ended December 31, 1998 included
in the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
(2) Comprehensive Loss
In 1998 the Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting on Comprehensive Income" ("SFAS 130"). SFAS 130 requires that all
items defined as comprehensive income, including changes in the amounts of
unrealized gains and losses on available for sale securities, be shown as a
component of comprehensive loss. In the Company's annual financial statements,
comprehensive loss is presented as a separate financial statement. For interim
financial statements, the Company is permitted to disclose the information in
the footnotes to the financial statements. The disclosures are required for
comparative purposes. The only comprehensive income item the Company has is
unrealized gains and losses on available for sale securities.
The following reconciles net loss to comprehensive loss for the quarter and
nine-month periods ended September 30, 1998 and 1999:
<TABLE>
<CAPTION>
Quarter ended Nine-month period ended
Septemer 30, September 30,
1998 1999 1998 1999
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net loss $(6,673,580) (6,887,076) (16,735,786) (18,656,479)
Other comprehensive income:
Unrealized gains (losses) on
available for sale securities 73,958 87,312 (111,905) 30,749
----------- ---------- ----------- -----------
Comprehensive loss $(6,599,622) (6,799,764) (16,847,691) (18,625,730)
=========== ========== =========== ===========
</TABLE>
6
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ViroPharma Incorporated
(A Development Stage Company)
Notes to Financial Statements
(3) Preferred Stock
On May 5, 1999, the Company completed the sale of 2,300,000 shares of Series A
Convertible Participating Preferred Stock ("preferred stock"). Net proceeds
approximated $13,300,000. In addition, the Company issued warrants to purchase
595,000 shares of common stock at $9.53 per share to the purchasers of the
preferred stock. The warrants expire on May 5, 2004. The preferred stock is
convertible into shares of common stock on a one-for-one basis (subject to
adjustment) at any time by the holder and under certain conditions by the
Company. There is a 5% dividend per annum associated with the preferred stock
in which the Company may choose to permanently defer cash payment of the
dividend. In such case, the dividend is added to the liquidation value of the
preferred stock and the preferred stock's conversion ratio is increased. The
holders of the preferred stock have voting rights equivalent to the common stock
holders. In addition, the holders of the preferred stock have liquidation
rights equal to their original investment, subject to adjustment. As a result
of the difference in the price paid per share of preferred stock and the fair
market value per share of the underlying common stock at the date of the closing
of the transaction, the Company has reflected the amount of the beneficial
conversion feature in the Statement of Operations for the nine-month period
ended September 30, 1999. The beneficial conversion feature aggregated
$4,140,000 and is included in the net loss allocable to common stockholders.
The Company has chosen to defer the September 30, 1999 dividend and as a result,
the difference between the conversion price per share of preferred stock and the
fair market value per share of the underlying common stock at September 30, 1999
has been reflected as a beneficial conversion feature in the Statement of
Operations for the quarter and nine-month period ended September 30, 1999. The
fair market values were determined using the closing prices as quoted on Nasdaq.
The beneficial conversion feature related to the quarterly preferred stock
dividends aggregated $465,802 and is included in the net loss allocable to
common stockholders for the quarter and nine-month period ended September 30,
1999.
(4) Subsequent Event
On October 27, 1999 the Company completed a follow-on public offering of
3,000,000 shares of common stock. Net proceeds from this offering were
approximately $53,300,000. In addition, the underwriters exercised their over-
allotment option for 450,000 shares resulting in net proceeds of approximately
$8,060,000.
7
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our disclosure and analysis in this report contains some forward-looking
statements. Forward-looking statements give our current expectations or
forecasts of future events. You can identify these statements by the fact that
they do not relate strictly to historical or current facts. They use words such
as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe,"
and other words and terms of similar meaning in connection with any discussion
of future operating or financial performance. In particular, these include
statements relating to present or anticipated scientific progress, development
of potential pharmaceutical products, future revenues, the timing of regulatory
filings and the actions taken by regulatory bodies, capital expenditures,
research and development expenditures, future financings and collaborations,
personnel, manufacturing requirements and capabilities, and other statements
regarding matters that are not historical facts or statements of current
condition.
Any or all of our forward-looking statements in this report may turn out to
be wrong. They can be affected by inaccurate assumptions we might make or by
known or unknown risks and uncertainties. Many factors, including those
mentioned in the discussion below and those described in the "Risk Factors"
discussion of our registration statement on Form S-3 filed with the Securities
and Exchange Commission, will be important in determining future results.
Consequently, no forward-looking statement can be guaranteed. Actual future
results may vary materially. We do not intend to update our forward-looking
statements to reflect future events or developments.
Since inception, we have devoted substantially all of our resources to our
research and product development programs. We have generated no revenues from
product sales and have been dependent upon funding primarily from equity
financing. We do not expect any revenues from product sales for at least the
next twelve months, if at all. We have not been profitable since inception and
have incurred a cumulative net loss of $67,077,441 through September 30, 1999.
Losses have resulted principally from costs incurred in research and development
activities and general and administrative expenses. We expect to incur
additional operating losses over at least the next several years. We expect
such losses to increase over historical levels, primarily due to expected
increases in our research and development expenses, further clinical trials of
our most advanced drug candidate, pleconaril (including any significant
additional studies for approval in the European Union, if any are required), and
milestone payments that may be payable under the terms of our agreement with
Sanofi-Synthelabo for pleconaril. Also, we expect to incur expenses related to
our marketing and market research activities for pleconaril, our development of
a marketing and sales staff and further research and development related to
other product candidates. Our ability to achieve profitability is dependent on
a number of factors, including our ability to develop and obtain regulatory
approvals for our product candidates, successfully commercialize those product
candidates (which may include entering into collaborative agreements for product
development and commercialization), and secure contract manufacturing and
distribution and logistics services.
Liquidity and Capital Resources
We began operations in December 1994. We are a development stage company
and to date have not generated revenues from product sales. The cash flows used
in operations are primarily for research and development activities and the
supporting general and administrative expenses. Through September 30, 1999, we
have used approximately $58.7 million in operating activities. We invest our
cash in short-term investments. Through September 30, 1999, we have used
approximately $15.0 million in investing activities, including $10.6 million in
short-term investments and $4.4 million in equipment purchases and new
construction. Through September 30, 1999, we have financed our operations
primarily through public offerings of Common Stock, private placements of
preferred stock, two bank loans, equipment lease lines and a milestone advance
totaling approximately $75.6 million. At September 30, 1999, we had cash and
cash equivalents and short-term investments aggregating approximately $12.0
million. On October 27, 1999, we completed a follow-on public offering of
3,000,000 shares of common stock for net proceeds of approximately $53.3
million. The over-allotment option was exercised by the underwriters for the
offering and we received approximately $8.0 million for the additional 450,000
shares.
We lease our corporate and research and development facilities under an
operating lease expiring in 2008. We also have the right to expand the facility
and, under certain circumstances, to purchase the facility. We have financed
substantially all of our equipment under two bank loans and two master lease
agreements. The first bank loan, which we entered into in February 1997, is for
$600,000, is payable in equal monthly installments over 72 months and has a
9.06%
8
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interest rate. The second bank loan, which we entered into in December
1998, is for $500,000, is payable in equal monthly installments over 60 months
and has a 7.25% interest rate. We are required to repay amounts outstanding
under the two master lease agreements within periods ranging from 36 to 48
months. As of November 1, 1999, outstanding borrowings under these arrangements
were approximately $815,000.
Under our agreement with Sanofi-Synthelabo, we are required to make
milestone payments upon the achievement of certain development milestones and,
until the expiration of the agreement, royalty payments on any sales in the
United States and Canada of products developed under the agreement. The
development milestones include regulatory submissions of New Drug Applications
and regulatory approvals in various jurisdictions, however, we may not be able
to achieve these milestones. Unless the agreement is terminated earlier, in
September 2001, or within 60 days after we file a New Drug Application for
pleconaril for the treatment of viral meningitis, whichever occurs sooner, we
will be required to pay Sanofi-Synthelabo $900,000.
We entered into an Addendum to our Development Agreement with SELOC France
in 1998. Under this Addendum, SELOC France has manufactured three validation
batches of pleconaril drug substance. SELOC France also is assisting us in
preparing the pleconaril drug master file and is preparing certain documentation
that will be required in connection with our New Drug Application for
pleconaril. We estimate that $450,000 will be payable under the Addendum in
1999.
On October 9, 1997, we received $1,000,000 from Boehringer Ingelheim
Pharmaceuticals, Inc. as an advance on a future milestone in connection with a
Collaborative Research Agreement. The Boehringer Agreement expired in August
1998. The advance was made in the form of a loan that bears interest at 8.5%
and is evidenced by a convertible promissory note. If amounts due under the
note are not paid by August 15, 2000, Boehringer Ingelheim may convert the
then-outstanding principal balance and accrued interest into shares of our
common stock based on the last sale price of the common stock on the date
immediately prior to the date Boehringer Ingelheim notifies us of its intention
to convert the promissory note.
We are currently expanding our research and development capabilities at our
facility. To date, we have invested approximately $400,000 in the expansion and
expect to invest approximately $600,000 for this expansion over the next six
months. In addition, we have exercised our right to expand our current facility
by 22,500 square feet. We will incur no material capital expenditures in
connection with the exercise of this right and the resulting expansion and we
expect that rent expense in future years will increase approximately $268,000
per annum, commencing in mid-2000.
We have incurred losses from operations since inception. We expect to
incur additional operating losses over at least the next several years. We
expect to incur such losses at an increasing rate over at least the next several
years, primarily due to expected increases in our research and development
expenses, further clinical trials and clinical development of our most advanced
drug candidate, pleconaril (including any significant additional studies for
approval in the European Union, if any are required), and milestone payments
that may be payable under the terms of our agreement with Sanofi-Synthelabo for
pleconaril. Also, we expect to incur expenses related to our marketing and
market research activities for pleconaril, our development of a marketing and
sales staff and further research and development related to other product
candidates.
We expect that we will need to raise additional funds to continue our
business activities and to further expand our facilities. We may need
additional financing to complete all clinical studies and to develop our
marketing and sales staffs for pleconaril. We expect that we will need
additional financing for the development and required testing of our hepatitis C
and respiratory syncytial virus, or RSV, disease compounds, and for any other
product candidates. To obtain this financing, we expect to access the public or
private equity markets or enter into additional arrangements with corporate
collaborators. If we raise additional capital by issuing equity securities, the
terms and prices for these financings may be much more favorable to the new
investors than the terms obtained by our existing stockholders. These
financings also may dilute the ownership of existing stockholders.
Collaborative arrangements may require us to grant product development programs
or licenses to third parties for products that we might otherwise seek to
develop or commercialize ourselves. Additional financing, however, may not be
available on acceptable terms from any source. If sufficient additional
financing is not available, we may need to delay, reduce or eliminate current
research and development programs or other aspects of our business.
9
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Results of Operations
Quarters ended September 30, 1999 and 1998
We earned no revenues during the quarter ended September 30, 1999. We
earned milestone revenue of $750,000 during the quarter ended September 30,
1998. Research and development expenses decreased to $5,945,274 for the quarter
ended September 30, 1999 from $6,607,790 for the quarter ended September 30,
1998. Research and development expenses for both periods were primarily incurred
for the conduct of clinical trials of pleconaril and the advancement of drug
candidates for the treatment of hepatitis C and RSV pneumonia. General and
administrative expenses were $1,082,466 in the quarter ended September 30, 1999
compared to $1,233,859 for the same period of 1998. The net loss increased to
$6,887,076 for the quarter ended September 30, 1999 from $6,673,580 for the
quarter ended September 30, 1998.
We expect that research and development expenses will increase
substantially in the next twelve month period due to the anticipated clinical
trials for product candidates for hepatitis C and RSV pneumonia.
Nine-months ended September 30, 1999 and 1998
We earned no revenues for the nine-month period ended September 30, 1999.
We earned milestone revenue of $1,500,000 for the nine-month period ended
September 30, 1998. Research and development expenses decreased to $16,039,859
for the nine-month period ended September 30, 1999 from $16,244,718 for the
nine-month period ended September 30, 1998. Research and development expenses
for both periods were primarily incurred for the conduct of clinical trials of
pleconaril and the advancement of drug candidates for the treatment of hepatitis
C and RSV pneumonia. Pleconaril is our most advanced drug candidate. General
and administrative expenses were $3,476,798 in the nine-month period ended
September 30, 1999 compared to $3,112,502 for the same period of 1998. The
increase in 1999 is related to the medical education program being conducted in
preparation for the potential marketing of pleconaril. The net loss increased
to $18,656,479 for the nine-month period ended September 30, 1999 from
$16,735,786 for the nine-month period ended September 30, 1998.
We expect that research and development expenses will increase
substantially in the next twelve month period due to the anticipated clinical
trials for product candidates for hepatitis C and RSV pneumonia.
Year 2000 Impact
Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, beginning on January
1, 2000, computer systems and software used by many companies and organizations
in a wide variety of industries including technology, transportation, utilities,
finance and telecommunications will produce erroneous results or fail unless
they have been modified or upgraded to process date information correctly.
There is significant uncertainty concerning the scope and magnitude of problems
associated with the century change. We recognize the need to ensure that our
operations will not be harmed by year 2000 software failures. We are assessing
the potential overall impact of the impending century change on our business,
financial condition and operating results. We have assessed our exposure to year
2000 related problems, focusing on four potential areas of exposure: internal
information systems, scientific equipment, facility support systems, and the
readiness of significant third parties with whom we have material business
relationships. We have substantially completed the implementation of all
necessary upgrades and believe that the year 2000 issue will not pose
significant operational problems for our internal information systems. We have
conducted an inventory of our major pieces of scientific equipment and of our
major facility support systems such as communications, security and building
maintenance systems, and we believe them to be year 2000-compliant.
We have contacted our significant suppliers and service providers to
determine if such parties are Year 2000 compliant. To date, we have not been
advised of material Year 2000 issues by any of these parties. In addition, all
contracts between us and third parties providing product development or
manufacturing services to us require such third parties be in compliance with
the laws, regulations and guidelines of the Food, Drug and Cosmetic Act, which
requires appropriate steps to eliminate Year 2000 computer risks.
The failure of third party suppliers and service providers, particularly
contract research organizations engaged by us to monitor clinical trials, to be
year 2000 compliant could adversely affect our operations. If such third
parties are not year 2000 compliant, or are unable to fix problems that they
encounter related to the year 2000 issue in a timely manner, our business or
operation could be disrupted. If systems used by our contract research
organizations are not year 2000 compliant, and the data collected by the
contract research organizations on our behalf is corrupted or not available, we
will have to recreate such data from the source documents, either by ourselves
or by engaging others to perform the task on our behalf. If we are required to
recreate such data, significant delays in reporting the results of our clinical
trials could result.
To date, we have not expended material amounts on the Year 2000 issue. We
believe that costs, if any, of addressing Year 2000 issues presented by our
internal systems will not have a material adverse impact on our financial
position or results of operations. We also face the risks that the year 2000
issue poses to industry generally, such as the risk that communications,
transportation or utility service will be interrupted.
10
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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
PART II - OTHER INFORMATION
----------------------------
ITEM 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended
September 30, 1999.
11
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SIGNATURES
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.
VIROPHARMA INCORPORATED
Date: November 12, 1999 By: /s/ Claude H. Nash
-------------------------------------
Claude H. Nash
President, Chief Executive Officer and
Chairman of the Board of Directors
(Principal Executive Officer)
By: /s/ Vincent J. Milano
-------------------------------------
Vincent J. Milano
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting
Officer)
12
<PAGE>
Exhibit Index
- --------------------------------------------------------------------------------
Exhibit Description
27 Financial Data Schedule
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> JUL-01-1999 JAN-01-1999
<PERIOD-END> SEP-30-1999 SEP-30-1999
<CASH> 1,923,485 1,923,485
<SECURITIES> 10,104,679 10,104,679
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 12,317,908 12,317,908
<PP&E> 4,359,762 4,359,762
<DEPRECIATION> 1,090,593 1,090,593
<TOTAL-ASSETS> 16,251,929 16,251,929
<CURRENT-LIABILITIES> 7,878,704 7,878,704
<BONDS> 0 0
0 0
2,300 2,300
<COMMON> 23,188 23,188
<OTHER-SE> 7,764,403 7,764,403
<TOTAL-LIABILITY-AND-EQUITY> 16,251,929 16,251,929
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 7,027,740 19,516,657
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 38,596 116,937
<INCOME-PRETAX> (6,887,076) (18,656,479)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (6,887,076) (18,656,479)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (6,887,076) (18,656,479)
<EPS-BASIC> (0.66) (2.04)
<EPS-DILUTED> (0.66) (2.04)
</TABLE>
