-----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, MmJiRsGu/P+IeRK8RHzINW0XUUm/zG0DfcWUX7QDCPY/ImRsyc6Y1LgSERqVaOft J8JzYMzXc4gq6lfn1SBEiA== 0000891618-97-003453.txt : 19970815 0000891618-97-003453.hdr.sgml : 19970815 ACCESSION NUMBER: 0000891618-97-003453 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97661700 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 QUARTERLY PERIOD ENDING JUNE 30, 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 JUNE 30, 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 incorporation (I.R.S. Employer 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: 650-428-1550 ------------ 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 July 31, 1997: 10,835,396. 2 MICROCIDE PHARMACEUTICALS, INC. INDEX FOR FORM 10-Q JUNE 30, 1997
PAGE NUMBER ------ PART I FINANCIAL INFORMATION Item 1. Financial Statements and Notes Condensed Balance Sheets as of June 30, 1997 3 and December 31, 1996 Condensed Statements of Operations for the three and six months ended June 30, 1997 and June 30, 1996 4 Condensed Statements of Cash Flows for the six months ended June 30, 1997 and June 30, 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 12 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 14
-2- 3 MICROCIDE PHARMACEUTICALS, INC. CONDENSED BALANCE SHEETS (In thousands)
June 30, December 31, 1997 1996 ------------ ------------ (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 4,191 $ 8,317 Short-term investments 39,916 39,191 Prepaid expenses and other current assets 569 334 ------------ ------------ Total current assets 44,676 47,842 Property and equipment, net 8,875 8,825 Other assets 153 159 ------------ ------------ Total assets $ 53,704 $ 56,826 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 908 $ 1,523 Construction payable 5 745 Accrued compensation 612 496 Current portion of capital lease obligations 918 1,110 Deferred revenue 1,314 1,189 Other accrued liabilities 510 237 ------------ ------------ Total current liabilities 4,267 5,300 Long-term portion of capital lease obligations 421 811 Accrued rent 173 141 Stockholders' equity: Common stock 66,583 66,314 Stockholder note receivable -- (35) Deferred compensation (1,425) (1,577) Net unrealized gain on securities available-for-sale 34 9 Accumulated deficit (16,349) (14,137) ------------ ------------ Total stockholders' equity 48,843 50,574 ------------ ------------ Total liabilities and stockholders' equity $ 53,704 $ 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 Six Months Ended June 30, June 30, ------------------------- ------------------------- 1997 1996 1997 1996 -------- -------- -------- -------- Revenues: License and milestone fees $ -- $ -- $ 1,000 $ 1,000 Research revenue 2,994 2,243 6,101 3,868 -------- -------- -------- -------- Total revenues 2,994 2,243 7,101 4,868 Operating expenses: Research and development 4,336 2,305 8,437 4,085 General and administrative 1,099 581 2,121 1,107 -------- -------- -------- -------- Total operating expenses 5,435 2,886 10,558 5,192 -------- -------- -------- -------- Loss from operations (2,441) (643) (3,457) (324) Interest income 650 416 1,338 553 Interest expense (40) (50) (93) (123) -------- -------- -------- -------- Net income (loss) $ (1,831) $ (277) $ (2,212) $ 106 ======== ======== ======== ======== Net income (loss) per share $ (0.17) $ (0.04) $ (0.21) $ 0.02 ======== ======== ======== ======== Shares used in calculation of net income (loss) per share 10,778 6,616 10,797 4,984 Pro forma net income (loss) per share $ (0.03) $ 0.01 ======== ======== Shares used in calculation of pro forma net income (loss) per share 9,408 9,248
See Notes to Condensed Financial Statements. -4- 5 MICROCIDE PHARMACEUTICALS, INC. CONDENSED STATEMENTS OF CASH FLOWS Increase (decrease) in cash and cash equivalents (Unaudited)
Six Months Ended June 30, ------------------------- 1997 1996 -------- -------- CASH FLOWS USED IN OPERATING ACTIVITIES: Net income (loss) $ (2,212) $ 106 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 1,258 738 Amortization of deferred compensation 295 209 Accrued rent 32 (5) Net unrealized gain on securities 25 -- Changes in assets and liabilities: Prepaid expenses and other current assets (235) (154) Other assets 6 73 Accounts payable (615) 295 Construction payable (740) -- Accrued compensation and other accrued liabilities 389 97 Deferred revenue 125 1,130 -------- -------- Net cash provided by (used in) operating activities (1,672) 2,489 -------- -------- CASH FLOWS USED IN INVESTING ACTIVITIES: Purchase of short-term investments (62,015) -- Maturities of short-term investments 61,290 -- Capital expenditures (1,308) (1,729) -------- -------- Net cash provided by (used in) investing activities (2,033) (1,729) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on capital lease obligations (582) (502) Repayment of shareholder note receivable 35 -- Net proceeds from issuance of common stock 126 36,618 Net proceeds from issuance of convertible preferred stock -- 4,988 -------- -------- Net cash provided by (used in) financing activities (421) 41,104 -------- -------- Net increase (decrease) in cash and cash equivalents (4,126) 41,864 Cash and cash equivalents, beginning of period 8,317 8,517 -------- -------- Cash and cash equivalents, end of period $ 4,191 $ 50,381 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Income taxes paid $ 21 $ -- ======== ======== Interest paid $ 81 $ 120 ======== ======== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Conversion of convertible preferred stock to common stock $ -- $ 27,423 ======== ========
See Notes to Condensed Financial Statements. -5- 6 MICROCIDE PHARMACEUTICALS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS June 30, 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):
June 30, December 31, 1997 1996 -------- ------------ Cash equivalents and short-term investments: Money market funds $ 199 $ 420 U.S. government securities 4,097 -- Corporate debt securities 39,093 44,174 ------- ------- $43,389 $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 for 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). 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 and six months ended June 30, 1997 and the three months ended June 30, 1996 as the Company incurred net losses in these periods and, accordingly, the calculation of earnings per share for these periods excluded stock options as their effect was antidilutive. The impact for the six months ended June 30, 1996 resulted in no change in primary earnings per share. 4. SUBSEQUENT EVENTS In July 1997, the Company signed a 30 month agreement to sublease two buildings, each building consisting of approximately 18,000 square feet of additional research and office space. The agreement calls for total minimum monthly rental payments ranging from $62,000 to $64,000 beginning on November 1, 1997. The Company intends to temporarily sublease one building and to utilize the other building for additional research and administrative space. - 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. In June 1997, Microcide signed an agreement to provide Daiichi Pharmaceutical Co., Ltd. with a subset of its synthetic molecular diversity collection for use in Daiichi's own drug discovery screening programs in consideration for future payments by Daiichi of $1.5 million. Delivery of the compounds, receipt of the associated payments and recognition of related revenues are expected to occur during the second half of 1997. In July 1997, Microcide signed a one-year agreement to provide a minimum of 40,000 extracts from its natural products diversity collection to Tularik Inc. for use in Tularik's non-antimicrobial drug discovery screening programs. Pursuant to the agreement, Microcide will receive payments for the extracts upon delivery to Tularik, may provide refermentation of extracts for agreed upon amounts and may potentially receive license fees and royalties on resulting products. Through June 30, 1997, the Company had received in the aggregate $24.5 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 up to an additional $23.0 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 under its collaborative agreements with three major pharmaceutical companies 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. -8- 9 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, payments related to delivering molecular diversity samples to Daiichi and Tularik, and 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, expectations concerning the Company's future research and development and general and administrative expenses and future facility needs. 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, 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 JUNE 30, 1997 AND 1996 Revenues. Total revenues for the second quarter of 1997 were $3.0 million, an increase of 34% from the $2.2 million in revenues recognized in the second quarter of 1996. There were no license and milestone fees earned for either period. Research support revenue increased in the second quarter of 1997 due primarily to higher revenues earned from the Pfizer and Daiichi collaborative agreements resulting from an increase in the number of research personnel devoted to the collaborative projects, as well as an increase in reimbursable research expenses, such as costs related to certain equipment and outside consulting services. Research and Development Expenses. Research and development expenses for the second quarter increased approximately 88% from $2.3 million in 1996 to $4.3 million in 1997. The increases are due primarily to higher compensation and other employee-related expenses associated with an increase in headcount to support the Company's corporate collaborations and its internal programs, higher spending for research supplies and materials, higher expenses related to assembling the Company's molecular diversity collection, higher costs relating to expanded research and development facilities and higher expenses for outside consulting services. Research and development expenses are expected to further increase in the third quarter as the Company continues to add research personnel to support its corporate collaborations and internal programs. General and Administrative Expenses. General and administrative expenses for the second quarter increased 89% from $581,000 in 1996 to $1.1 million in 1997. Increased expenses primarily consisted of higher compensation expenses due to an increase in administrative personnel and higher costs for legal and other outside services associated with being a public company. General and administrative expenses may continue to increase in dollar amounts in the next quarter, but are expected to be at a lower percentage of total operating expenses. Interest Income and Expense. Interest income for the second quarter increased from $416,000 in 1996 to $650,000 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 -9- 10 collaborative agreements. Interest expense for the second quarter decreased from $50,000 in 1996 to $40,000 in 1997 due to a decrease in capital lease balances outstanding. SIX MONTHS ENDED JUNE 30, 1997 AND 1996 Revenues. Total revenues for the first half of 1997 were $7.1 million, an increase of 46% from the $4.9 million in revenues for the first half of 1996. License and milestone fees were $1.0 million in each period. Research support revenue increased from $3.9 million in the first half of 1996 to $6.1 million in the first half of 1997 due primarily to higher revenues earned from the Pfizer and Daiichi collaborative agreements resulting from an increase in the number of research personnel devoted to the collaborative projects, as well as an increase in reimbursable research expenses, such as costs related to certain equipment and outside consulting services. Research and Development Expenses. Research and development expenses for the first half of 1997 were $8.4 million, an increase of approximately 107% from $4.1 million in the first half of 1996, primarily due to increased compensation and other employee-related expenses associated with an increase in headcount to support the Company's corporate collaborations and its internal programs, higher spending for research supplies and materials, higher expenses related to assembling the Company's molecular diversity collection, higher costs relating to expanded research and development facilities and higher expenses for outside consulting services. Research and development expenses are expected to further increase in the second half of 1997 as the Company continues to add research personnel to support its corporate collaborations and internal programs. General and Administrative Expenses. General and administrative expenses for the first half of 1997 increased approximately 92% from $1.1 million in 1996 to $2.1 million in 1997. Increased expenses primarily consisted of higher compensation expenses due to an increase in administrative personnel and higher costs for legal and other outside services associated with being a public company. General and administrative expenses may continue to increase in dollar amounts in the second half of 1997 as compared to the first half of 1997, but are expected to be at a lower percentage of total operating expenses. Interest Income and Expense. Interest income for the first half of 1997 increased from $553,000 in 1996 to $1.3 million 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 expense for the first half of 1997 decreased from $123,000 in 1996 to $93,000 in 1997 due to a decrease in capital lease balances outstanding. 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 June 30, 1997 the Company had received approximately $64.2 million in net proceeds from the sale of equity and approximately $24.5 million from license and milestone fees and research support payments under collaborative agreements. Cash, cash equivalents and short-term investments at June 30, 1997 were $44.1 million compared to $47.5 million at December 31, 1996. Net cash used in the Company's operations was $1.7 million for the first half of 1997. Net cash used in investing activities was $2.0 million, of which $1.3 million was capital expenditures and $725,000 was purchases of investments in excess of maturities of investments. Net cash used in financing activities was $421,000, of which $582,000 was principal payments on capital lease obligations. -10- 11 In July 1997, the Company signed a 30 month agreement to sublease two buildings, each building consisting of approximately 18,000 square feet of additional research and office space. The agreement calls for total minimum monthly rental payments ranging from $62,000 to $64,000 beginning on November 1, 1997. The additional buildings are adjacent to the Company's principal offices. The Company intends to temporarily sublease one building and to utilize the other building for additional research and administrative space. It is expected that the additional space will support the Company's expansion activities through 1999. 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. 12 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 (a) The Annual Meeting of Stockholders of Microcide Pharmaceuticals, Inc. was held on May 13, 1997. (b) The following Class I Directors were elected to serve for a term of three years to expire at the Company's 2000 Annual Meeting of Stockholders:
Name Position Term Expires ------------------------------- ------------------------- ------------ Joseph S. Lacob Chairman of the Board 2000 David Schnell, M.D. Class I Director 2000 L. James Strand, M.D. Class I Director 2000
The following Class II and III Directors continue to serve their respective terms which expire on the Company's Annual Meeting of Stockholders in the year as noted:
Name Position Term Expires ------------------------------- ------------------------- ------------ Hugh Y. Rienhoff, Jr., M.D. Class II Director 1998 John P. Walker Class II Director 1998 Keith A. Bostian, Ph.D. Class III Director 1999 James E. Rurka Class III Director 1999
(c) The matters voted upon at the meeting and the voting results were as follows: (i) The election of three Class I Directors for a term of three years:
Name For Against Abstain ------------------------------ ------------- ---------- ------- Joseph S. Lacob 8,251,573 6,633 - David Schnell, M.D. 8,251,573 6,633 - L. James Strand, M.D. 8,251,573 6,633 -
(ii) Approval of amendment to the Company's 1996 Director Option Plan, increasing the initial option grant from 12,000 to 16,000 shares and increasing the vesting period from three to four years:
For Against Abstain --------- ------- ------- 8,499,347 275,969 16,723
-12- 13 (iii) Approval of amendment to the Company's 1993 Amended Incentive Stock Plan, increasing the number of shares of Common Stock reserved for issuance from 1,380,000 to 1,880,000:
For Against Abstain --------- ------- ------- 8,080,432 660,623 13,169
(iv) Ratification of the appointment of Ernst & Young LLP as independent auditors for the fiscal year ending December 31, 1997:
For Against Abstain --------- ------- ------- 8,780,373 8,736 2,430
Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits have been filed with this report: 10.18* Synthetic Compound Purchase Agreement between the Registrant and Daiichi Pharmaceutical Co., Ltd. dated June 25, 1997. 11.1 Calculation of Net Income (Loss) Per Share 27.1 Financial Data Schedule
- ---------- * Confidential Treatment granted. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended June 30, 1997. -13- 14 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: August 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) -14- 15 INDEX TO EXHIBITS
EXHIBIT NUMBER EXHIBITS - ------- -------- 10.18* Synthetic Compound Purchase Agreement between the Registrant and Daiichi Pharmaceutical Co, Ltd. dated June 25. 1997. 11.1 Calculation of Net Income (Loss) Per Share 27.1 Financial Data Schedule
- ---------- * Confidential Treatment granted. EX-10.18 2 SYNTHETIC COMPOUND PURCHASE AGREEMENT 1 EXHIBIT 10.18 SYNTHETIC COMPOUND PURCHASE AGREEMENT This Synthetic Compound Purchase Agreement ("Agreement"), is effective as of June 25, 1997 ("Effective Date"), by and between Microcide Pharmaceuticals, Inc. ("Microcide"), a Delaware corporation, with its principal place of business located at 850 Maude Avenue, Mountain View, California, 94043, U.S.A. and Daiichi Pharmaceutical Co., Ltd. ("Daiichi"), a Japanese corporation, with its offices located at 16-13, Kitakasai 1-chome, Edogawa-Ku, Tokyo 134, Japan. WHEREAS, Daiichi desires to obtain certain synthetic compounds ("Compounds") from Microcide for use in its drug discovery screening programs; and WHEREAS, Microcide desires to provide such Compounds to Daiichi. NOW, THEREFORE, in consideration of the recitals and the covenants and conditions set forth in this Agreement, the parties agree as follows. 1. Delivery of Compounds. Microcide will provide to Daiichi [*] Compounds in 96-well microtitre plate format (100 microliters at a concentration of 10 milligrams per milliliter in 100% DMSO) at a mutually acceptable date which is not expected to be later than June 30, 1997. Microcide will also provide structure and source files (SD files), and a description of plate well locations. Microcide will subsequently provide, in shipments of [*] Compounds each, the following supplies of synthetic compounds in dry powder format: [*] Compounds - 10-15 mg each [*] Compounds - 5 mg each The last shipment of the supplies of synthetic compounds in dry powder format is expected to be made prior to December 31, 1997. Microcide will use its best efforts to provide SD files and description of plate well locations and to carry out the weighing and labeling of the Compounds hereunder. 2. Purchase Price and Costs. In consideration for the delivery of the Compounds, Daiichi will pay to Microcide [*] within 30 days of receiving the [*] Compounds in microtiter plates and a further [*] within 30 days of receiving each shipment of [*] Compounds in dry powder format. These payments would be net of payments for withholding taxes, if any, and fulfillment of any withholding tax obligations would be the sole responsibility of Daiichi. Daiichi will reimburse Microcide for its labor and material costs incurred in weighing out the compounds, labeling the containers and packaging for shipment, as well as for the actual shipping costs related to the delivery of the compounds, including any customs duties that might arise. Microcide shall keep true and accurate written records of such costs and shall invoice Daiichi for the entire amount of such costs after the delivery of the last supplies of synthetic compounds in dry powder format. Daiichi shall pay Microcide within 30 days after receiving the invoice. Any payments to Microcide under this agreement shall be made to the designated bank account of Microcide by bank wire transfer. - -------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. 2 3. No Warranties; Limitation of Liability 3.1 No Warranties. Daiichi acknowledges that the Compounds are being provided "as-is", without warranty of any kind, including but not limited to no warranty of merchantability or fitness for a particular program, and no warranty of non-infringement with respect to the patent or other intellectual property rights of third parties. 3.2 Limitation of Liability. In no event shall either party be liable to the other party for any lost profits or revenues or any special consequential or incidental damages under any theory of liability. 4. Miscellaneous. 4.1 Disclosure of Agreement. Recognizing that Microcide is subject to certain disclosure obligations as a publicly traded company, Microcide will have the right to issue a press release, in form and substance similar to Exhibit A, upon the execution of this Agreement. 4.2 Indemnification. Daiichi hereby agrees to indemnify, protect, defend and hold Microcide harmless from all claims, suits or actions, damages, judgments, costs, expenses, including attorney's fees which may be sustained by reason of Daiichi's screening and use of the Compounds, except to the extent that such liabilities are caused by negligence, recklessness or intentional misconduct of Microcide. 4.3 Governing Law. This Agreement shall be governed in all respects, including validity, interpretation and effect, by the laws of the State of California, with the venue for any action or dispute being the Northern District of California. IN WITNESS WHEREOF, Microcide and Daiichi have caused this Agreement to be signed by their duly authorized respective officers as of the date written above. MICROCIDE PHARMACEUTICALS, INC. By: /S/ James E. Rurka ------------------------------- President & CEO June 13, 1997 DAIICHI PHARMACEUTICAL CO., LTD. By: /S/ Tadashi Horiuchi ------------------------------- General Manager, Basic Technology Research Laboratory June 25, 1997 3 Exhibit A Form of Press Release MICROCIDE ANNOUNCES AGREEMENT TO PROVIDE SYNTHETIC COMPOUNDS TO DAIICHI Mountain View, CA (DATE, 1997) -- Microcide Pharmaceuticals, Inc. (Nasdaq: MCDE) today announced the signing of an agreement with Daiichi Pharmaceutical Co., Ltd. whereby Microcide will provide Daiichi with a subset of its synthetic molecular diversity collection for use in Daiichi's drug discovery screening programs in consideration for $1.5 million. Delivery of the compounds and receipt of the associated payments are expected to occur during the remainder of 1997. Since 1994, Microcide has been building a molecular diversity collection, for use in its partnered and unpartnered drug discovery programs. This collection, which strives for optimal structural diversity, includes extracts from natural product sources as well as synthetic molecules acquired only after careful structural analysis. Currently in excess of 140,000 samples, Microcide intends to continue to systematically grow this collection in the future. In November 1995, Microcide and Daiichi entered into a multi-year collaboration to discover and develop bacterial efflux pump inhibitors to be used in combination with Daiichi's quinolone antibiotics to target Gram-negative bacteria, including pseudomonas. Microcide 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 bacterial drug resistance through two principal themes: (i) Targeted Antibiotics, which focuses on developing novel antibiotics and antibiotic potentiators to directly address existing bacterial resistance problems, and (ii) Targeted Genomics, which utilizes bacterial genetics to discover new classes of antibiotics and other novel treatments for bacterial disease. Microcide has also extended its functional genomics technology platform into a program designed to discover improved systemic antifungal agents. The statements in this press release that are related to Microcide's expanding its sample collection, providing a portion of this library to Daiichi and the receipt of payment therefrom are forward-looking statements based upon current expectations. Such forward-looking statements involve risks and uncertainties including without limitation, the risks that the compounds will be successfully delivered to Daiichi in the time frames discussed and in return for the compensation discussed, the continuation of Microcide's collaboration with Daiichi, and the other risks and uncertainties set forth in Microcide's Form 10-K dated March 31, 1997. Actual results and timing of certain events could differ materially from those indicated in the forward-looking statements as a result of these and other factors. EX-11.1 3 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 Six Months Ended June 30, June 30, -------------------- -------------------- 1997 1996 1997 1996 ======== ======== ======== ======== Net income (loss) $ (1,831) $ (277) $ (2,212) $ 106 ======== ======== ======== ======== Weighted average shares of common stock outstanding 10,778 5,883 10,797 3,379 Net effect of dilutive stock options and warrants using the treasury stock method -- -- -- 505 Shares related to staff accounting bulletin topic 4D: Stock options -- 161 -- 241 Preferred stock (1) -- 572 -- 859 -------- -------- -------- -------- Shares used in calculating net income (loss) per share 10,778 6,616 10,797 4,984 ======== ======== ======== ======== Net income (loss) per share $ (0.17) $ (0.04) $ (0.21) $ 0.02 ======== ======== ======== ======== Calculation of shares outstanding for computing pro forma net income (loss) per share: Shares used in computing net income (loss) per share 6,616 4,984 Adjusted to reflect the effect of the assumed conversion of preferred stock from the date of issuance (2) 2,792 4,264 -------- -------- Shares used in computing pro forma net income (loss) per share 9,408 9,248 ======== ======== Pro forma net income (loss) per share $ (0.03) $ 0.01 ======== ========
- ---------- (1) Series D and E shares (2) Series A, B and C shares EX-27.1 4 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 APR-01-1997 JUN-30-1997 4,191 39,916 0 0 0 44,676 13,862 4,987 53,704 4,267 0 0 0 64,206 986 53,704 0 2,994 0 5,435 0 0 40 (1,831) 0 (1,831) 0 0 0 (1,831) (0.17) (0.17)
-----END PRIVACY-ENHANCED MESSAGE-----