-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GB+jE0THrdln4Ft9lFYkBbOoVb8wjTpoXSdoRVd1VRQjOt+wXp9TbyjdcxyUogSW 3p0ULvS/LeFafwm45R6qBg== 0000891618-97-002326.txt : 19970520 0000891618-97-002326.hdr.sgml : 19970520 ACCESSION NUMBER: 0000891618-97-002326 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROCIDE PHARMACEUTICALS INC CENTRAL INDEX KEY: 0001010915 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 943186021 STATE OF INCORPORATION: CA FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28006 FILM NUMBER: 97606361 BUSINESS ADDRESS: STREET 1: 850 MAUDE AVE CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 BUSINESS PHONE: 4154281550 MAIL ADDRESS: STREET 1: 850 MAUDE AVE CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1997 1 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 MARCH 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 0-28006 MICROCIDE PHARMACEUTICALS, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 94-3186021 ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification Number) 850 MAUDE AVENUE, MOUNTAIN VIEW, CALIFORNIA 94043 - ------------------------------------------- ---------- (Address of principal executive offices) (ZIP Code) Registrant's telephone number, including area code: 415-428-1550 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 [ ] Number of shares of Common Stock, no par value, outstanding as of May 1, 1997: 10,810,561. 2 MICROCIDE PHARMACEUTICALS, INC. INDEX FOR FORM 10-Q MARCH 31, 1997
PAGE NUMBER ------ PART I FINANCIAL INFORMATION Item 1. Financial Statements and Notes Condensed Balance Sheets as of March 31, 1997 3 and December 31, 1996 Condensed Statements of Operations for the three months ended March 31, 1997 and March 31, 1996 4 Condensed Statements of Cash Flows for the three months ended March 31, 1997 and March 31, 1996 5 Notes to Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II OTHER INFORMATION 11 Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults in Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES 12
-2- 3 MICROCIDE PHARMACEUTICALS, INC. CONDENSED BALANCE SHEETS (in thousands)
March 31, December 31, 1997 1996 -------- -------- (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 8,360 $ 8,317 Short-term investments 37,849 39,191 Prepaid expenses and other current assets 565 334 -------- -------- Total current assets 46,774 47,842 Property and equipment, net 8,980 8,825 Other assets 153 159 -------- -------- Total assets $ 55,907 $ 56,826 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 821 $ 1,523 Construction payable 47 745 Accrued compensation 604 496 Current portion of capital lease obligations 1,031 1,110 Deferred revenue 1,799 1,189 Other accrued liabilities 398 237 -------- -------- Total current liabilities 4,700 5,300 Long-term portion of capital lease obligations 595 811 Accrued rent 157 141 Stockholders' equity: Common stock 66,471 66,314 Stockholder note receivable - (35) Deferred compensation (1,575) (1,577) Net unrealized gain on securities available-for-sale 77 9 Accumulated deficit (14,518) (14,137) -------- -------- Total stockholders' equity 50,455 50,574 -------- -------- Total liabilities and stockholders' equity $ 55,907 $ 56,826 ======== ========
NOTE: The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See Notes to Condensed Financial Statements. -3- 4 MICROCIDE PHARMACEUTICALS, INC. CONDENSED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited)
Three Months Ended March 31, ----------------------- 1997 1996 -------- ------- Revenues: License and milestone fees $ 1,000 $ 1,000 Research revenue 3,107 1,625 -------- ------- Total revenues 4,107 2,625 Operating expenses: Research and development 4,101 1,780 General and administrative 1,022 526 -------- ------- Total operating expenses 5,123 2,306 -------- ------- Income (loss) from operations (1,016) 319 Interest income 688 137 Interest and other expense (53) (73) -------- ------- Net income (loss) per share $ (381) $ 383 ======== ======= Net loss per share $ (0.04) ======== Shares used in calculation of net loss per share 10,760 Pro forma net income per share $ 0.04 ======= Shares used in calculation of pro forma net income per share 8,563
See Notes to Condensed Financial Statements. -4- 5 MICROCIDE PHARMACEUTICALS, INC. CONDENSED STATEMENTS OF CASH FLOWS Increase (decrease) in cash and cash equivalents (unaudited)
Three Months Ended March 31, ------------------------ 1997 1996 -------- -------- CASH FLOWS USED IN OPERATING ACTIVITIES: Net income (loss) $ (381) $ 383 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 528 351 Amortization of deferred compensation 145 64 Accrued rent 16 (2) Net unrealized gain on securities 68 - Changes in assets and liabilities: Prepaid expenses and other current assets (231) (74) Other assets 6 23 Accounts payable (702) 360 Construction payable (698) - Accrued compensation and other accrued liabilities 269 36 Deferred revenue 610 1,624 -------- -------- Net cash provided by (used in) operating activities (370) 2,765 -------- -------- CASH FLOWS USED IN INVESTING ACTIVITIES: Purchase of short-term investments (39,298) - Maturities of short-term investments 40,640 - Capital expenditures (683) (922) -------- -------- Net cash provided by (used in) investing activities 659 (922) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on capital lease obligations (295) (265) Repayment of shareholder note receivable 35 - Net proceeds from issuance of common stock 14 8 Net proceeds from issuance of convertible preferred stock - 4,990 -------- -------- Net cash provided by (used in) financing activities (246) 4,733 -------- -------- Net increase in cash and cash equivalents 43 6,576 Cash and cash equivalents, beginning of period 8,317 8,517 -------- -------- Cash and cash equivalents, end of period $ 8,360 $ 15,093 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Income taxes paid $ 21 $ - ======== ======== Interest paid $ 42 $ 70 ======== ========
See Notes to Condensed Financial Statements. -5- 6 MICROCIDE PHARMACEUTICALS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS March 31, 1997 (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Basis of Presentation Microcide Pharmaceuticals, Inc. (the "Company") is a biopharmaceutical company founded to discover, develop and commercialize novel antibiotics for the treatment of serious bacterial infections. The Company's discovery and development programs address the growing problem of antibiotic resistance in certain bacteria through two principal themes: (i) Targeted Antibiotics, which focuses on developing novel antibiotics and antibiotic potentiators, and (ii) Targeted Genomics, which utilizes bacterial genetics to discover new classes of antibiotics and other novel treatments for bacterial disease. The Company has also extended its functional genomics technology platform into a program designed to discover improved systemic antifungal agents. The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the interim periods shown herein are not necessarily indicative of operating results for the entire year. This unaudited financial data should be read in conjunction with the financial statements and footnotes contained in the Company's annual report on Form 10-K for the year ended December 31, 1996. 2. INVESTMENTS Investment securities are classified as available-for-sale (estimated fair value) and consist of the following investments (in thousands):
March 31, December 31, 1997 1996 ------- ------- Cash equivalents and short-term investments: Money market funds $ 1,275 $ 420 U.S. government securities 4,016 - Corporate debt securities 40,082 44,174 ------- ------- $45,373 $44,594 ======= =======
-6- 7 3. PER SHARE INFORMATION Net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the periods presented. Common equivalent shares are included in the computation for income periods and excluded from the computation in loss periods as their effect is antidilutive, except that, pursuant to the Securities and Exchange Commission Staff Accounting Bulletins, common and common equivalent shares (stock options, warrants, and convertible preferred stock) issued during the 12 month period prior to the Company's initial public offering have been included in the calculation as if they were outstanding for all periods through March 31, 1996 (using the treasury stock method for stock options and warrants and the if-converted method for convertible preferred stock). Historical net income per share for the three months ended March 31, 1996 was $0.14. The pro forma calculation of net income (loss) per share has been computed as described above but also gives retroactive effect from the date of issuance to the conversion of the convertible preferred stock which automatically converted to common shares upon closing of the Company's initial public offering in May 1996. In February 1997, the Financial Accounting Standards Board issued Statement 128, "Earnings per Share", which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact is not expected to result in a change in primary earnings per share for the three months ended March 31, 1997 as the Company incurred a net loss in that period and, accordingly, the calculation of earnings per share for that period excluded stock options as their effect was antidilutive. The impact is expected to result in an increase in primary earnings per share for the three months ended March 31, 1996 of $0.02 per share. -7- 8 MICROCIDE PHARMACEUTICALS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW As part of the Company's strategy to enhance its research and development capabilities and to fund, in part, its capital requirements, Microcide has entered into collaborative agreements with three major pharmaceutical companies. The Company has received license fees, research support payments and milestone payments pursuant to these agreements and can potentially receive additional research support payments, additional milestone payments and royalty payments. License payments are typically nonrefundable up-front payments for licenses to develop, manufacture and market products, if any, that are developed as a result of the collaboration. Research support payments are typically contractually obligated payments to fund research and development over the term of the collaboration. Milestone payments are payments contingent upon the achievement of specified milestones, such as selection of candidates for drug development, the commencement of clinical trials or receipt of regulatory approvals. If drugs are successfully developed and commercialized as a result of the collaborative agreements, the Company will receive royalty payments based upon the net sales of such drugs. Through March 31, 1997, the Company had received in the aggregate $21.2 million in license fees, milestone payments and research support payments under the collaborative agreements. Assuming none of the existing collaborative agreements is terminated prior to its scheduled expiration, the Company will be entitled to receive an additional $26.3 million of research support payments. In addition, in the event that any of the collaborative agreements are extended beyond their current terms, the Company will be entitled to receive additional research support payments. In the event that the Company achieves the specified research and product development milestones, the Company will be entitled to receive milestone payments ranging from $13.0 million to $32.5 million per product. No royalty payments have yet been received and the Company does not expect to receive royalties based upon the net sales of drugs for a significant number of years, if ever. Quarterly results of operations are subject to significant fluctuations based on the timing and amount of certain revenues earned under the collaborative agreements. The Company expects to incur operating losses in the future. This Form 10-Q contains forward-looking statements based upon current expectations, including statements with regard to the potential receipt of additional research support payments, milestone payments and royalties from the Company's collaborative partners, the period of time the Company's existing capital resources and future payments under collaborative agreements will be sufficient to satisfy the Company's funding requirements. Such forward-looking statements involve risk and uncertainties, including without limitation, the risk that the Company's collaborations will be terminated, development candidates will not be identified, development candidates which are selected will not proceed through pre-clinical trials or will not prove safe and effective for treatment of humans in clinical trials, or that the identification, selection, pre-clinical, and clinical testing of development candidates will take substantially longer or be substantially more expensive than contemplated by the Company, or that the Company will not be able to obtain on a timely basis government regulatory clearance required for clinical testing, -8- 9 manufacturing, and marketing of its products, and the other risks and uncertainties set forth in the Company's annual report on Form 10-K for the year ended December 31, 1996. Actual results and timing of certain events could differ materially from those indicated in the forward-looking statements as a result of these or other factors. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997 AND 1996 Revenues. Total revenues for the first quarter of 1997 were $4.1 million, an increase of 56% from the $2.6 million in revenues received in the first quarter of 1996. License and milestone fees were $1.0 million in each period. Research support revenue increased from $1.6 million in the first quarter of 1996 to $3.1 million in the first quarter of 1997 due primarily to an increase in the number of research personnel devoted to collaborative projects, including those related to the Pfizer collaboration which commenced late in the first quarter of 1996. Research and Development Expenses. Research and development expenses for the first quarter increased approximately 130% from $1.8 million in 1996 to $4.1 million in 1997 primarily due to increased compensation and other expenses related to increased headcount to support the Company's corporate collaborations and its internal programs, as well as due to expenses related to assembling the Company's molecular diversity collection. Additionally, expenditures for research materials and outside research contributed to the increase in expense. Research and development expenses are expected to further increase in the second quarter as the Company adds research personnel to support its corporate collaborations and internal programs. General and Administrative Expenses. General and administrative expenses for the first quarter increased 94% from $526,000 in 1996 to $1.0 million in 1997. Increased expenses primarily consisted of higher compensation expenses due to an increase in administrative personnel and bonus expenses that were awarded in the first quarter of 1997 and higher costs for legal and other outside services associated with being a public company. General and administrative expenses are not expected to change significantly in the second quarter as compared to the first quarter of 1997. Interest Income and Expense. Interest income for the first quarter increased from $137,000 in 1996 to $688,000 in 1997, primarily due to an increase in average cash balances in 1997 related to proceeds received from the Company's initial public offering in May 1996, proceeds received from the sale of other equity and cash received under collaborative agreements. Interest and other expense for the first quarter decreased from $73,000 in 1996 to $53,000 in 1997 due to a decrease in capital lease balances outstanding. Net Income (Loss). The net loss for the first quarter of 1997 was $381,000 as compared to net income of $383,000 in the first quarter of 1996, primarily as a result of the items discussed above. -9- 10 LIQUIDITY AND CAPITAL RESOURCES The Company has financed its operations since inception primarily through the sale of equity, through funds provided under collaborative agreements and through equipment financing. As of March 31, 1997 the Company had received approximately $63.8 million in net proceeds from the sale of equity and approximately $21.2 million for license and milestone fees and research support payments under collaborative agreements. Cash, cash equivalents and short-term investments at March 31, 1997 were $46.2 million compared to $47.5 million at December 31,1996. The decrease during the first quarter of 1997 was due primarily to cash used by operations of $370,000, $683,000 in capital expenditures and $295,000 utilized in financing activities which predominantly consisted of principal payments on capital lease obligations. The Company believes that its existing capital resources, interest income and future payments due under collaborative agreements will enable the Company to maintain current and planned operations at least through 1998. The foregoing is a forward-looking statement. -10- 11 PART II OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults in Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits have been filed with this report: 11.1 Calculation of Net Income (Loss) Per Share 27.1 Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter ended March 31, 1997. -11- 12 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. Dated: March 14, 1997 MICROCIDE PHARMACEUTICALS, INC. (Registrant) /s/ James E. Rurka ------------------------------------------------- President, Chief Executive Officer and Director (principal executive officer) /s/ Matthew J. Hogan ------------------------------------------------- Chief Financial Officer (principal financial and accounting officer) -12- 13 EXHIBIT INDEX
Exhibit No. Description - -------- ----------- 11.1 Calculation of Net Income (Loss) Per Share 27.1 Financial Data Schedule
EX-11.1 2 CALCULATION OF NET INCOME (LOSS) PER SHARE 1 EXHIBIT 11.1 CALCULATION OF NET INCOME (LOSS) PER SHARE (In thousands, except per share amounts)
Three Months Ended March 31, ---------------------- 1997 1996 -------- ------ Net income (loss) $ (381) $ 383 ======== ====== Weighted average shares of common stock outstanding 10,760 876 Net effect of dilutive stock options and warrants using the treasury stock method - 484 Shares related to staff accounting bulletin topic 4D: Stock options - 322 Preferred stock(1) - 1,145 -------- ------ Shares used in calculating net income (loss) per share 10,760 2,827 ======== ====== Net income (loss) per share $ (0.04) $ 0.14 ======== ====== Calculation of shares outstanding for computing pro forma net income per share: Shares used in computing net income per share 2,827 Adjusted to reflect the effect of the assumed conversion of preferred stock from the date of issuance (2) 5,736 ------ Shares used in computing pro forma net income per share 8,563 ====== Pro forma net income per share $ 0.04 ======
- -------------------- (1) Series D and E shares (2) Series A, B and C shares EX-27.1 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 8,360 37,849 0 0 0 46,774 13,237 (4,257) 55,907 4,700 0 0 0 64,095 878 55,907 0 4,107 0 5,123 0 0 53 (381) 0 (381) 0 0 0 (381) (0.04) (0.04)
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