-----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, CYzlRrxZRnT/Ks68Zbgqpe6ELGzbk+hpkf7346TkV9XFIk71oWeOX8mOTuYlzNYY W46jqY9iW7A5J/eiO8f3bw== 0000950172-03-001618.txt : 20030515 0000950172-03-001618.hdr.sgml : 20030515 20030515165231 ACCESSION NUMBER: 0000950172-03-001618 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030515 FILED AS OF DATE: 20030515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENELABS TECHNOLOGIES INC /CA CENTRAL INDEX KEY: 0000874443 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 943010150 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19222 FILM NUMBER: 03705811 BUSINESS ADDRESS: STREET 1: 505 PENOBSCOT DR CITY: REDWOOD CITY STATE: CA ZIP: 94063 BUSINESS PHONE: 6503969500 MAIL ADDRESS: STREET 1: 505 PENOBSCOT DR CITY: REDWOOD CITY STATE: CA ZIP: 94063 10-Q 1 gt10q.txt FORM 10-Q =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ---- Quarterly report pursuant to Section 13 or 15(d) of the Securities | X | Exchange Act of 1934 for the quarterly period ended March 31, 2003. ---- or ---- Transition report pursuant to Section 13 or 15(d) of the | | Securities Exchange Act of 1934 for the transition period ---- from _________ to _________. Commission File No. 0-19222 GENELABS TECHNOLOGIES, INC. (Exact name of Registrant as specified in its charter) California 94-3010150 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) 505 Penobscot Drive, Redwood City, California 94063 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (650) 369-9500 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [x] No [ ] There were 61,493,104 shares of the Registrant's Common Stock issued and outstanding on May 2, 2003. ================================================================================ FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains or incorporates by reference certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, referred to as the Exchange Act, including those identified by the words "may," "will," "anticipates," "intends," "believes," "expects," "plans," "potential" and similar expressions. These forward-looking statements include, among others, statements regarding: o estimates relating to our cash resources and our ability to obtain additional funding for our business plans; o our ability to complete the divestment of our diagnostics business or to successfully renegotiate the terms of a collaboration on a timely basis, if at all; o estimates relating to the timing and completion of our pending clinical trials; o the results of our confirmatory clinical trial of Prestara(TM); o potential FDA actions with respect to our NDA for Prestara, including whether or not the Prestara NDA ultimately will receive marketing approval; o if the NDA for Prestara is ultimately approved, our plans and ability to successfully commercialize Prestara for systemic lupus erythematosus; o our ability to secure a European partner for Prestara; o our ability to obtain approval of Prestara in Europe; o our ability to secure and defend intellectual property rights important to our business; and o the potential success of our research efforts, including our ability to identify compounds for preclinical development. All statements in this Quarterly Report on Form 10-Q that are not historical are forward-looking statements and are subject to risks and uncertainties, including those set forth in the Business Risks section at the end of Item 2, and actual results could differ materially from those expressed or implied in these statements. All forward-looking statements included in this Quarterly Report on Form 10-Q are made as of the date hereof. We assume no obligation to update any such forward-looking statement for subsequent events or any reason why actual results might differ, except as required by the Exchange Act. PART I -- FINANCIAL INFORMATION Item 1. Financial Statements GENELABS TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
March 31, December 31, 2003 2002 ------------------ ------------------- (Unaudited) ASSETS Current assets: Cash, cash equivalents and short-term investments: Cash and cash equivalents $ 1,664 $ 3,035 Short-term investments - 3,535 ------------------ ------------------- Total cash, cash equivalents and short-term investments 1,664 6,570 Net assets of diagnostics subsidiary held for sale 417 417 Other current assets 452 512 ------------------ ------------------- Total current assets 2,533 7,499 Property and equipment, net 1,220 1,306 Long-term investments 960 960 ------------------ ------------------- $ 4,713 $ 9,765 ================== =================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and other accrued liabilities $ 1,468 $ 1,853 Accrued compensation and related expenses 1,072 912 Unearned contract revenue 2,050 2,050 ------------------ ------------------- Total current liabilities 4,590 4,815 Accrued compensation 71 186 Unearned contract revenue 1,538 2,050 ------------------ ------------------- Total liabilities 6,199 7,051 ------------------ ------------------- Shareholders' equity/(deficit): Common stock 187,264 187,264 Accumulated deficit (188,750) (184,550) ------------------ ------------------- Total shareholders' equity/(deficit) (1,486) 2,714 ------------------ ------------------- $ 4,713 $ 9,765 ================== =================== See notes to condensed consolidated financial statements.
GENELABS TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited)
For the three months ended March 31, --------------------------------------------- 2003 2002 ------------------- ------------------- Contract revenue $ 727 $ 1,031 ------------------- ------------------- Operating expenses: Research and development 3,557 3,380 General and administrative 1,391 1,366 ------------------- ------------------- Total operating expenses 4,948 4,746 ------------------- ------------------- Operating loss (4,221) (3,715) Interest income, net 21 72 ------------------- ------------------- Loss from continuing operations (4,200) (3,643) Income from discontinued operations of diagnostics subsidiary - 76 ------------------- ------------------- Net loss $ (4,200) $ (3,567) =================== =================== Loss per share from continuing operations $ (0.08) $ (0.07) =================== =================== Net loss per share $ (0.08) $ (0.07) =================== =================== Weighted average shares outstanding 53,393 49,848 =================== =================== See notes to condensed consolidated financial statements.
GENELABS TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (increase/(decrease) in cash and cash equivalents) (in thousands) (Unaudited)
For the three months ended March 31, ---------------------------------------- 2003 2002 --------------- ----------------- Cash flows from operating activities: Net loss $ (4,200) $ (3,567) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 135 185 Income from discontinued operations of diagnostics subsidiary - (76) Changes in assets and liabilities: Other current assets 60 95 Accounts payable, accrued liabilities, accrued compensation and long-term obligations (340) (527) Unearned contract revenue (512) (750) --------------- ----------------- Net cash used in operating activities (4,857) (4,640) --------------- ----------------- Cash flows from investing activities: Proceeds from sales and maturities of short-term investments 3,535 488 Purchases of short-term investments - (152) Capital expenditures (49) (136) --------------- ----------------- Net cash provided by investing activities 3,486 200 --------------- ----------------- Cash flows from financing activities: Proceeds from issuance of common stock, net - 9 --------------- ----------------- Net decrease in cash and cash equivalents (1,371) (4,431) Cash and cash equivalents, beginning of the period 3,035 8,626 --------------- ----------------- Cash and cash equivalents, end of the period $ 1,664 $ 4,195 =============== ================= See notes to condensed consolidated financial statements.
GENELABS TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (all amounts in thousands, except per share data) (Unaudited) March 31, 2003 1. Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Genelabs Technologies, Inc. and its wholly owned subsidiaries, Accelerated Clinical Research Organization, Inc., Genelabs Diagnostic, Inc. and Genelabs Europe B.V. Genelabs Technologies, Inc. and its subsidiaries are collectively referred to as Genelabs or the Company. All intercompany accounts and transactions have been eliminated. The Company operates in one business segment, the discovery and development of pharmaceutical products. Genelabs accounts for its diagnostics operation, Genelabs Diagnostics Pte. Ltd. (GLD), as a discontinued operation. The Company's consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business for the foreseeable future. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. It is possible that actual amounts will differ from those estimates. Genelabs is a biopharmaceutical company focused on discovery and development of novel pharmaceutical products to improve human health. We have built drug discovery and clinical development capabilities that can support various research and development projects. We are currently concentrating our capabilities on three core programs: developing a late-stage product for lupus, discovering novel antimicrobial lead compounds, and discovering novel lead compounds that selectively inhibit replication of the hepatitis C virus. These financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. These unaudited condensed consolidated financial statements are meant to be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. 2. Comprehensive Loss During the three months ended March 31, 2003 and 2002, the Company's comprehensive loss amounted to $4,200 and $3,567, respectively. 3. Stock-Based Compensation The Company grants employee stock options at an exercise price equal to the fair market value of the shares at the date of grant. The Company accounts for employee stock-based compensation using the intrinsic value method and, accordingly, recognizes no compensation expense for stock options granted to employees. The following table presents information showing the effects to the reported net loss and net loss per share if Genelabs had accounted for employee stock-based compensation using the fair-value method: 2003 2002 ---------------- ---------------- Net loss as reported $ (4,200) $ (3,567) Stock-based employee compensation cost: Included in net loss as reported - - Amount that would have been included in net loss if we had accounted for all stock- based employee compensation at its theoretical (Black-Scholes) fair value (461) (665) ---------------- ---------------- Pro forma net loss as if the fair value method had been applied to all awards $ (4,661) $ (4,232) ================ ================ Net loss per share as reported $ (0.08) $ (0.07) Stock-based employee compensation cost: Included in net loss per share as reported - - Amount that would have been included in net loss per share if we had accounted for all stock-based employee compensation at its theoretical (Black-Scholes) fair value (0.01) (0.01) ---------------- ---------------- Pro forma net loss per share as if the fair value method had been applied to all awards $ (0.09) $ (0.08) ================ ================
4. Restructuring Charges In February 2003, Genelabs reduced its workforce by approximately 20%, or 20 employees. The workforce reductions occurred in the drug discovery research and general and administrative areas. Genelabs did not make any reductions to its drug development staff working on its investigational drug Prestara(tm) for systemic lupus erythematosus. Termination and other costs associated with the reduction in workforce totaled $0.3 million, of which $0.1 million was accrued and unpaid at March 31, 2003. 5. Subsequent Events On May 2, 2003, Genelabs completed the sale of 8.1 million shares of its common stock at a price of $1.00 per share for gross proceeds of $8.1 million. In connection with the sale, Genelabs also issued warrants to purchase an additional 2.43 million shares of Genelabs common stock at an exercise price of $1.50 per share. Net proceeds from the placement are estimated to be approximately $7.3 million. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Genelabs Technologies, Inc., referred to as Genelabs or the Company, is a biopharmaceutical company pioneering the discovery and development of novel pharmaceutical products to improve human health. Genelabs is pursuing regulatory approval of Prestara(TM), its investigational drug for women with systemic lupus erythematosus, a disease for which no new drug has been approved in the past 40 years and for which current therapies are not adequate. We are also pursuing the discovery of novel antimicrobial and antiviral compounds for treatment of infections that are not well treated with currently available drugs. We believe that these high-risk, potentially high reward programs focus our research and development expertise in areas where we have the opportunity to be scientific pioneers and, if successful, we believe that these programs will yield products that will address diseases for which current therapies are inadequate. At the same time, our established capabilities can be utilized as we diversify our research and development programs. We have built drug discovery and clinical development capabilities that can support various research and development projects. We are concentrating our capabilities on three core programs: o developing our late-stage product for lupus, Prestara(TM); o discovering follow-on compounds to our preclinical antifungal drug candidate; and o discovering novel lead compounds that selectively inhibit replication of the hepatitis C virus, or HCV. At May 15, 2003, Genelabs had cash, cash equivalents and short-term investment balances totaling approximately $6.5 million. Genelabs estimates that its current cash resources, including the resources from the private placement, are adequate to provide liquidity only through September 2003. Accordingly, Genelabs' auditors have included a going concern qualification in their opinion in the Genelabs Annual Report on Form 10-K for 2002, because there is substantial doubt about the Company's ability to continue as a going concern due to its historical negative cash flow and because the Company does not currently have sufficient committed capital to meet its projected operating needs for at least the next twelve months. In the event that Genelabs is unable to raise additional funds, Genelabs may be required to commence bankruptcy or similar proceedings, which could result in no value to the holders of the Genelabs common stock. Alternatively, Genelabs may be required to license or sell is rights in Prestara(TM) in a manner that could be adverse to Genelabs and its stockholders. Results of Operations - First Quarter 2003 compared to First Quarter 2002 - ------------------------------------------------------------------------- Genelabs' net loss was $4.2 million for the three months ended March 31, 2003 compared to a net loss of $3.6 million for the same period in 2002. The Company recorded contract revenues of $0.7 million in the first quarter of 2003, $0.5 million of which represents the recognition into income of a previously received up-front license payment from Watson Pharmaceuticals, Inc. This up-front license payment from Watson is being deferred and recognized as revenue over the term Genelabs' management estimates that it has significant obligations to Watson, which extends to the submission of a complete response to the approvable letter from the U.S. Food and Drug Administration, or FDA, and the FDA reaching a final decision regarding approval of the New Drug Application, or NDA. The date upon which we may receive a final FDA decision on approval will vary based on, among other things, the time period necessary for the enrollment of a sufficient number of patients in the clinical trial, the results of the trial, and the length of time the FDA will take to review the data submitted after the conclusion of the trial. Based on management's estimates, Genelabs currently believes it could take until December 2004 for an FDA decision on the NDA. Therefore, the up-front payment from Watson is being amortized into revenue on a straight line-basis through December 2004. The contract revenues of $0.7 million in the first quarter 2003 compares to $1.0 million for the first quarter of 2002. The decrease in contract revenue in the first quarter of 2003 compared to the first quarter of 2002 was primarily due to our lengthening the amortization period for the up-front payment received from Watson from a period ending March 2004 to a period ending December 2004 upon the FDA's clarification of issues in the approvable letter we received in August 2002. The lengthening of the amortization period began in the third quarter 2002, and reduced contract revenue by $0.2 million in the first quarter of 2003 compared to the first quarter of 2002. Operating expenses were $4.9 million in the first quarter of 2003 compared to $4.7 million in the first quarter of 2002. Research and development expenses represented 72% of operating expenses in the 2003 period compared to 71% of operating expenses for the same period in 2002. Research and development expenses were $3.6 million for the three months ended March 31, 2003 compared to $3.4 million for the three months ended March 31, 2002. Costs increased for the development of Prestara as an investigational drug for lupus because Genelabs initiated and began enrolling patients in a confirmatory Phase III clinical trial. General and administrative expenses were $1.4 million in both the first quarter of 2003 and the first quarter of 2002. During the first quarter of 2003 Genelabs reduced its workforce by approximately 20%, or 20 employees. The workforce reductions occurred in the drug discovery research and general and administrative areas. Termination and other costs associated with the reduction in workforce and recorded in the first quarter of 2003 totaled $0.3 million. Liquidity and Capital Resources - ------------------------------- On May 15, 2003, after giving effect to a private placement completed on May 2, 2003, Genelabs had cash, cash equivalents and short-term investment balances totaling approximately $6.5 million. At March 31, 2003, the Company had cash, cash equivalents and short-term investment balances totaling $1.7 million compared to $6.6 million at December 31, 2002. The decrease in cash, cash equivalents and short-term investments during the first quarter was primarily attributable to $4.9 million cash used in operations. The cash used in operations funded our development of Prestara for lupus, the continued work on our hepatitis C virus drug discovery program, and work towards the discovery of follow-on compounds to our antifungal preclinical drug candidate. On April 15, 2003, Genelabs had $1.0 million in cash and short-term investments. Due to the low level of cash, in order to conserve short-term cash resources, from April 21, 2003 through May 2, 2003, Genelabs furloughed a majority of its employees. This furlough program ended when Genelabs closed the private placement noted above on May 2, 2003, selling 8.1 million shares of its common stock and warrants to purchase an additional 2.43 million shares of common stock for gross proceeds of $8.1 million. Net proceeds from the placement are estimated to be approximately $7.3 million, which management expects to fund its operations to the end of September 2003. The ability of the Company to continue as a going concern is dependent upon its ability to achieve profitable operations and to obtain additional capital. The Company is aggressively seeking funding in order to satisfy its projected cash needs. The Company is pursuing the close of the sale of its diagnostics operation and also renegotiating the terms of a key collaboration, which, if completed, the company expects would provide additional cash resources to the Company. The Company may be unable to complete either of these transactions as currently contemplated or at all. Genelabs is also evaluating the sale of non-core assets and exploring potential partnerships as additional ways to fund operations. However, the Company will continue to rely on outside sources of financing to meet its capital needs. The outcome of these matters cannot be predicted at this time. Further, there can be no assurance, assuming the Company successfully raises additional funds, that the Company will achieve positive cash flow. If the Company is not able to secure additional funding, Genelabs will be required to scale back its research and development programs, preclinical studies and clinical trials, and general, and administrative activities and may not be able to continue in business. These condensed consolidated financial statements do not include any adjustments to the specific amounts and classifications of assets and liabilities, which might be necessary should the Company be unable to continue in business. The following are illustrations of potential impediments to our ability to successfully secure additional funds: o our stock price and market capitalization are low, therefore there are limited funds we can raise through equity financings; o our ability to successfully complete an additional equity financing will be more difficult over the next six months due to potential integration issues with the May 2, 2003 sale of common stock and warrants, and will be further impacted should we become unable to meet Nasdaq's listing requirements; o our ability to find a European marketing partner for Prestara would be negatively impacted if we receive indications that the European Agency for the Evaluation of Medicinal Products, or EMEA, review of our Marketing Authorization Application, or MAA, is unlikely to result in approval of our application; and o our research programs are in an early stage, therefore there are fewer opportunities to enter into collaborations with other companies and up-front payments for early-stage pharmaceutical research collaborations are generally smaller for projects that are further from potential marketability. Longer-term, if we succeed in securing sufficient capital to allow us to complete the clinical trial for Prestara, Genelabs' liquidity and capital resources will potentially be materially impacted by FDA actions with respect to our NDA for Prestara. If Prestara is approved for marketing in the U.S., Genelabs may receive a one-time milestone payment of up to $45 million from Watson. Receipt of a milestone payment from Watson would materially improve Genelabs' liquidity and capital resources. However, Genelabs believes that the most important impact of the Watson collaboration for Genelabs' long-term liquidity and capital resources is the significant royalties Genelabs is entitled to receive on net sales of Prestara. During the first three quarters after product launch, a separate royalty schedule applies to support the product launch. Since Genelabs' inception, the Company has operated at a loss and has funded operations primarily through public and private offerings of equity securities and, to a lesser extent, contract revenues. We expect to incur substantial additional costs, including research costs for drug discovery and development costs for Prestara. The amount of additional costs in our business plans will depend on numerous factors including any FDA actions, progress of our research and development programs and the status of corporate partnership agreements. Additional funds for our research and development activities may not be available on acceptable terms, if at all. The unavailability of additional funds could delay or prevent the development, approval or marketing of some or all of our products and technologies, which would have a material adverse effect on our business, financial condition and results of operations. Business Risks - -------------- The following section summarizes business risks which management believes are particularly relevant at this time. It is not possible to comprehensively address all risks that exist, but the following risks should be considered, in addition to other information that is included in our Annual Report on Form 10-K, which shareholders and prospective investors are encouraged to review. RISKS RELATED TO GENELABS IF WE CANNOT OBTAIN ADDITIONAL FUNDS, WE WILL NOT BE ABLE TO CARRY OUT OUR BUSINESS PLANS. At May 15, 2003, Genelabs had cash, cash equivalents and short-term investment balances totaling approximately $6.5 million. Genelabs estimates that its current cash resources, including the resources from the private placement, are adequate to provide liquidity only through September 2003. Accordingly, Genelabs' auditors have included a going concern qualification in their opinion in the Genelabs Annual Report on Form 10-K for 2002, because there is substantial doubt about the Company's ability to continue as a going concern due to its historical negative cash flow and because the Company does not currently have sufficient committed capital to meet its projected operating needs for at least the next twelve months. In the event that Genelabs is unable to raise additional funds, Genelabs may be required to commence bankruptcy or similar proceedings, which could result in no value to the holders of the Genelabs common stock. Alternatively, Genelabs may be required to license or sell is rights in Prestara(TM) in a manner that could be adverse to Genelabs and its stockholders. Though we plan to seek additional funds, which may include the sale of equity, sale of long-term investments, establishment of corporate partnerships, funding under government grants, licensing of our clinical data or intellectual property, royalty-sharing and/or other arrangements, it is possible that none of these efforts to seek additional funds will be successful. The sale of additional equity would dilute existing shareholders. If we do not sell equity, we may have to seek other sources of capital, such as strategic alliances, which may require us to grant third parties rights to our intellectual property assets, or by adversely renegotiating the terms of our existing collaboration. We may also need to change our operating plans. Longer-term, we plan to fund our operations principally from royalties on sales of Prestara by marketing partners. However, Prestara may never receive FDA approval, and, if it does, we may never generate revenue from sales of Prestara. Although we are currently seeking to enter into licensing agreements for the marketing rights to Prestara in Europe and Japan, we may fail to enter into such license agreements on acceptable terms, if at all. We also may be unable to find buyers willing to purchase our equity or to license our products or technology on commercially favorable terms, if at all. The unavailability of additional funds would harm our business by delaying or preventing the development, testing, regulatory approval, manufacturing or marketing of our products and technologies. The following are illustrations of potential impediments to our ability to successfully secure additional funds: o our stock price and market capitalization are low, therefore there are limited funds we can raise through equity financings; o our ability to successfully complete an additional equity financing will be more difficult over the next six months due to potential integration issues with the May 2, 2003 sale of common stock and warrants, and will be further impacted should we become unable to meet Nasdaq's listing requirements; o our ability to find a European marketing partner for Prestara would be negatively impacted if we receive indications that the EMEA's review of our MAA is unlikely to result in approval of our application; and o our research programs are in an early stage, therefore there are fewer opportunities to enter into collaborations with other companies and up-front payments for early-stage pharmaceutical research collaborations are generally smaller for projects that are further from potential marketability. FDA actions with respect to our NDA for Prestara will have a material impact on our ability to secure funding, the amount and terms of funding available and our ability to successfully secure such funding. If Prestara is ultimately approved for marketing in the U.S., Genelabs may receive a milestone payment of up to $45 million and significant royalties on Watson's net sales of Prestara. However, the FDA may never approve Prestara and even if they do we may never receive a milestone payment or royalties on net sales. Additional funds for our research and development activities may not be available on acceptable terms, if at all. The unavailability of additional funds could delay or prevent the development, approval or marketing of some or all of our products and technologies, which would have a material adverse effect on our business, financial condition and results of operations. IF THE RESULTS OF OUR CONFIRMATORY CLINICAL TRIAL OF PRESTARA(TM), GENELABS' DRUG CANDIDATE FOR SYSTEMIC LUPUS ERYTHEMATOSUS, ARE NOT POSITIVE, THE FDA WILL NOT APPROVE PRESTARA AND OUR BUSINESS PROSPECTS WILL SUFFER BECAUSE THE U.S. ROYALTIES FOR PRESTARA ARE THE MOST SIGNIFICANT NEAR-TERM SOURCE OF POTENTIAL REVENUE. Genelabs has focused its development efforts to date on conducting clinical trials for an investigational new drug, Prestara, also referred to as GL701, Aslera(TM) and Anastar(TM), for the treatment of women with systemic lupus erythematosus, or lupus. Lupus is a severe, chronic and debilitating autoimmune disease that can affect the musculoskeletal and nervous systems, lungs, heart, kidneys, skin and joints. Prestara is a pharmaceutical formulation containing highly purified prasterone, the synthetic equivalent of dehydroepiandrosterone or DHEA, a naturally occurring hormone. Before our North American partner Watson Pharmaceuticals, Inc. can market Prestara in the United States, the FDA must approve the Prestara New Drug Application, or NDA, submitted by Genelabs. In 2000, we submitted the NDA for Prestara to the FDA and in 2002 received an approvable letter which, among other things, requires us to conduct an additional clinical trial to confirm the positive effect of Prestara we previously noted on the bone mineral density of women with lupus who are receiving treatment with glucocorticoids. Genelabs' business plans depend on FDA approval of Prestara in the United States, and if the clinical trial currently underway does not confirm our previous findings or if significant and new safety issues emerge, the FDA will not approve our new drug application in a timely manner, if at all, and our business would suffer because 1) we would not be entitled to a milestone payment from Watson and 2) royalties we are entitled to receive from Prestara sales in the United States are our most significant near-term source of potential revenue. Our enrollment targets are subject to change from time to time and may be adversely affected by our limited resources. IF WE ARE UNABLE TO FIND A EUROPEAN MARKETING PARTNER FOR PRESTARA OUR BUSINESS PROSPECTS WILL SUFFER BECAUSE WE DO NOT HAVE CAPABILITIES TO MARKET PRESTARA IN EUROPE OURSELVES AND WE WOULD LOSE A SIGNIFICANT NEAR-TERM SOURCE OF REVENUE. Because we have limited sales, marketing and distribution capabilities and no established presence in Europe, our business plans include licensing the European marketing rights to Prestara to a larger pharmaceutical or biotechnology company with established marketing capabilities. If we are unable to find a European marketing partner, we would not be able to launch Prestara in Europe in a timely manner, if at all, even if it is approved. Our business would suffer because we would not be able to generate revenue from Prestara in Europe. IF THE FDA AND THE EMEA DO NOT APPROVE PRESTARA(TM) FOR MARKETING, OUR BUSINESS PROSPECTS WILL SUFFER BECAUSE PRESTARA IS OUR ONLY NEAR-TERM SOURCE OF POTENTIAL REVENUE. Before our North American partner, Watson, and any potential European partner can market Prestara in their respective territories, appropriate regulatory agencies must review and approve applications seeking to market the investigational drug which have been submitted by Genelabs. Our business plans depend on approval of Prestara in both the United States and in Europe. If the regulatory agencies do not approve one or both of our applications in a timely manner, our business would suffer because we have no other near-term source of potential revenue. If the regulatory agencies determine that Prestara can only be approved with significant additional requirements and we determine that it is not feasible for us to satisfy one or more of the requirements requested, we could be forced to abandon the development of Prestara. We cannot predict whether the regulatory agencies will require the submission of additional data in order to approve our applications, what these requirements may be, whether we will be successful in responding to requests from these agencies for additional requirements or whether there will be additional substantial obstacles to, or delays in, our development of Prestara for lupus. Similar regulatory requirements exist in Japan and elsewhere in the world. Genelabs has not conducted any clinical trials for Prestara for lupus in other countries. We plan to enter into collaborations or licensing agreements for commercializing Prestara in other areas with pharmaceutical companies that have resources greater than Genelabs. If we do not enter into these agreements, we may not be able to sell, or might face delays related to commercial introduction of, Prestara in these other territories, because we lack the necessary resources. IF PRESTARA IS APPROVED IN THE UNITED STATES OR EUROPE BUT DOES NOT GAIN SUFFICIENT MARKET ACCEPTANCE, OUR BUSINESS WILL SUFFER BECAUSE WE WOULD NOT RECEIVE ANTICIPATED ROYALTIES TO FUND FUTURE OPERATIONS. A number of factors may affect the market acceptance of Prestara for lupus, even if it is approved, including: o availability and level of reimbursement by insurance companies or government programs such as Medicaid; o the price of Prestara relative to other drugs for lupus treatment; o the perception by patients, physicians and other members of the health care community of the effectiveness and safety of Prestara for the treatment of lupus; o the effectiveness of sales and marketing efforts by our licensees; o side effects; o competition from other prescription and over-the-counter products; and o unfavorable publicity concerning Prestara or other drugs on the market. In addition, if regulatory authorities fail to restrict the sale of dietary supplement DHEA products, which do not require a prescription, the market may not accept Prestara. A number of dietary supplement manufacturers market products containing DHEA as dietary supplements in the United States. Prestara contains highly purified prasterone, the synthetic equivalent of DHEA, as the active ingredient. The body produces DHEA, an androgenic hormone or steroid hormone that develops and maintains masculine characteristics, which is not a component of the diet. While we have consistently maintained that a governmental entity should regulate DHEA as a drug and as a controlled substance, neither the FDA nor the Drug Enforcement Agency, or DEA, has taken any specific action to date to limit or regulate the sale of dietary supplement DHEA. The FDA and DEA may not wish to, or may be unable to, regulate DHEA in the future. We have submitted documentation to the FDA requesting clarification of DHEA's status as a drug and removal from the market as a dietary supplement. We have also submitted documentation to the DEA requesting clarification of DHEA's status as an anabolic steroid, a steroid that promotes the storage of protein and growth of tissue. Anabolic steroids are scheduled as controlled substances. If the FDA restricts the marketing of DHEA as a dietary supplement or the DEA agrees that DHEA is an anabolic steroid, DHEA may no longer be publicly available as a dietary supplement. In the event that Prestara receives FDA approval, the concurrent sale of these dietary supplement products could significantly adversely affect or significantly limit the market for or the selling price of Prestara. OUR OUTSIDE SUPPLIERS AND MANUFACTURERS FOR PRESTARA ARE SUBJECT TO REGULATION, INCLUDING BY THE FDA, AND IF THEY DO NOT MEET THEIR COMMITMENTS, WE WOULD HAVE TO FIND SUBSTITUTE SUPPLIERS OR MANUFACTURERS WHICH COULD DELAY SUPPLY OF PRODUCT TO THE MARKET. Regulatory requirements applicable to pharmaceutical products tend to make the substitution of suppliers and manufacturers costly and time consuming. We rely on a single supplier of prasterone, the active ingredient in Prestara, and we rely on a single finished product manufacturer for production of Prestara capsules and for packaging. The disqualification of these suppliers and manufacturers through their failure to comply with regulatory requirements could negatively impact our business because of delays and costs in obtaining and qualifying alternate suppliers. We have no internal manufacturing capabilities for pharmaceutical products and are entirely dependent on contract manufacturers and suppliers for the manufacture of Prestara as a finished product and for its active ingredient. The FDA requires the existence of at least one qualified manufacturer before it will approve a drug for commercialization. If we fail to maintain a relationship with at least one qualified supplier of prasterone and at least one qualified manufacturer of the Prestara finished pharmaceutical product it would negatively impact our business because the NDA could not be approved by the FDA. If our NDA is approved and our supplier or manufacturer fails to meet and maintain compliance with FDA requirements or if they fail to manufacture Prestara active ingredient, capsules and packaging as required for our needs, we may not be able to ship product in a timely manner, if at all. This failure could negatively impact our relationships with customers and would harm sales of Prestara. The following could harm our ability to manufacture and market Prestara: o the unavailability of adequate quantities of the active ingredient for commercial sale; o the loss of a supplier's or manufacturer's regulatory approval; o the failure of a supplier or manufacturer to meet regulatory agency pre-approval inspection requirements; o the failure of a supplier or manufacturer to maintain compliance with ongoing regulatory agency requirements; o the inability to develop alternative sources in a timely manner or at all; o an interruption in supply of prasterone or finished product; and o competing demands on the contract manufacturer's capacity, for example, shifting manufacturing priorities to their own products or more profitable products for other customers. WE ARE DEPENDENT ON WATSON PHARMACEUTICALS TO MARKET PRESTARA IN NORTH AMERICA AND IF PRESTARA IS APPROVED BY THE FDA AND THEY FAIL TO MEET EXPECTED LEVELS OF SALES OUR BUSINESS WILL SUFFER. We must rely on Watson to market Prestara in North America. Because royalties from sales of Prestara would be our primary near-term source of revenue, successful marketing, promotion and distribution of this product in the United States are critical to our success. We have limited internal sales, marketing and distribution capabilities and are entirely dependent on Watson to promote Prestara. If Prestara is approved by the FDA and Watson fails to promote Prestara, our business will suffer because we will not receive anticipated revenue from product sales. Our ability to market Prestara in Europe will depend upon our ability to obtain a European partner. Similar to the United States, successful marketing, promotion and distribution of this product in Europe are important to our success. As we have limited capabilities and will rely on our potential future European partner for marketing, promotion and distribution, if they fail to promote Prestara our business will suffer because we will not receive anticipated revenue from product sales. IF WE ARE UNABLE TO OBTAIN PATENTS OR PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, WE WOULD LOSE COMPETITIVE ADVANTAGE. Agency or court proceedings could invalidate our current patents, or patents that issue on pending applications. Our business would suffer if we do not successfully defend or enforce our patents, which would result in loss of proprietary protection for our technologies and products. Patent litigation may be necessary to enforce patents to determine the scope and validity of our proprietary rights or the proprietary rights of another. The active ingredient in Prestara is prasterone, more commonly known as dehydroepiandrosterone, or DHEA. DHEA is a compound that has been in the public domain for many years. It is not possible to obtain patent protection for the chemical compound anywhere in the world. Genelabs licensed two United States patents covering uses of DHEA in treating lupus from Stanford University in 1993. The Stanford patents expire in 2015 and the license expires when the patents expire. In addition, we have filed patent applications covering additional uses for Prestara and various pharmaceutical formulations and intend to file additional applications as appropriate. We have filed patent applications covering compounds from our drug discovery programs; however, no patents are currently issued. A number of patents have issued covering Genelabs' drug discovery technologies and methods related to selective regulation of gene expression and the control of viral infections. A number of patent applications are pending. If another company successfully brings legal action against us claiming our activities violate, or infringe, their patents, a court may require us to pay significant damages and prevent us from using or selling products or technologies covered by those patents. Others could independently develop the same or similar discoveries and may have priority over any patent applications Genelabs has filed on these discoveries. Prosecuting patent priority proceedings and defending litigation claims can be very expensive and time-consuming for management. In addition, intellectual property that is important for advancing our drug discovery efforts or for uses for the active ingredient in Prestara owned by others might exist that we do not currently know about now or in the future. We might not obtain licenses to a necessary product or technology on commercially reasonable terms, or at all, and therefore, we may not pursue research, development or commercialization of promising products. OUR RESEARCH PROGRAMS ARE IN AN EARLY STAGE AND MAY NOT SUCCESSFULLY PRODUCE COMMERCIAL PRODUCTS. Pharmaceutical discovery research is inherently high-risk because of the high failure rate of projects. To date, our research has been focused on a limited number of mechanisms which have not been proven as a viable mechanism of drug action, such as DNA-binding. Although we have identified a compound that has met our criteria for advancement to preclinical status, our drug discovery programs have not produced a compound in which extensive preclinical development work has begun. Genelabs' product candidates, other than Prestara, are in an early stage of research. The goal of our research programs is to discover novel chemical compounds and develop them into drugs. All of our research projects may fail to produce commercial products. If Genelabs discovers compounds that have the potential to be drugs, public information about our research success may lead other companies with greater resources to focus more efforts in areas similar to ours. Genelabs has limited human and financial resources. Creation of the type of compounds we seek to discover requires sophisticated and expensive lab equipment and facilities, a team of scientists with advanced scientific knowledge in many disciplines such as chemistry, biochemistry and biology, and time and effort. Large pharmaceutical companies have access to the latest equipment and have many more personnel available to focus on solving particular research problems, including those that Genelabs is investigating. Therefore, even if our research programs are successful, we have a competitive disadvantage. WE HAVE INCURRED LOSSES EACH YEAR SINCE OUR INCEPTION AND MAY NOT BE PROFITABLE IN THE NEAR FUTURE OR AT ALL. We have incurred losses each year since our inception and have accumulated approximately $189 million in net losses through March 31, 2003, including a net loss of $4.2 million in the first quarter of 2003 and $16 million in the year ended December 31, 2002. If the FDA approves Prestara, we anticipate realizing a net loss at least until Prestara is sufficiently accepted by the market, and we may never achieve profitability. If the FDA does not approve Prestara, we may never be profitable and our revenues may never be sufficient to fund operations. INDUSTRY RISKS OUR ACTIVITIES INVOLVE HAZARDOUS MATERIALS AND IMPROPER HANDLING OF THESE MATERIALS BY OUR EMPLOYEES OR AGENTS COULD EXPOSE US TO SIGNIFICANT LEGAL AND FINANCIAL PENALTIES. Our research and development activities involve the controlled use of hazardous materials, including infectious agents, chemicals and various radioactive compounds. Our organic chemists use solvents, such as chloroform, isopropyl alcohol and ethanol, corrosives such as hydrochloric acid and other highly flammable materials, some of which are pressurized, such as hydrogen. We use the following radioactive compounds in small quantities under license from the State of California, including Carbon(14), Cesium(137), Chromium(51), Hydrogen(3), Iodine(125), Phosphorus(32), Phosphorus(33) and Sulfur(35). Our biologists use biohazardous materials, such as bacteria, fungi, parasites, viruses and blood and tissue products. We also handle chemical, medical and radioactive waste, byproducts of our research, through licensed contractors. As a consequence, we are subject to numerous environmental and safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials. Federal, state and local governments may adopt additional laws and regulations affecting us in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate, current or future laws or regulations. Although we believe that our safety procedures for using, handling, storing and disposing of hazardous materials comply with the standards prescribed by state and federal regulations, we cannot eliminate the risk of accidental contamination or injury from these materials. In the event of an accident, state or federal authorities may curtail our use of these materials and we could be liable for any civil damages that result, the cost of which could be substantial. Further, any failure by us to control the use, disposal, removal or storage of, or to adequately restrict the discharge of, or assist in the cleanup of, hazardous chemicals or hazardous, infectious or toxic substances could subject us to significant liabilities, including joint and several liability under state or federal statutes. While we believe that the amount of insurance we carry is sufficient for typical risks regarding our handling of these materials, it may not be sufficient to cover extraordinary or unanticipated events. Additionally, an accident could damage, or force us to shut down, our research facilities and operations. WE MAY NOT BE ABLE TO OBTAIN OR MAINTAIN SUFFICIENT INSURANCE ON COMMERCIALLY REASONABLE TERMS OR WITH ADEQUATE COVERAGE AGAINST POTENTIAL LIABILITIES IN ORDER TO PROTECT OURSELVES AGAINST PRODUCT LIABILITY CLAIMS. Our business exposes us to potential product liability risks that are inherent in the testing, manufacturing and marketing of human therapeutic products. We may become subject to product liability claims if someone alleges that the use of our products, such as Prestara for lupus, if approved, injured subjects or patients. This risk exists for products tested in human clinical trials as well as products that are sold commercially. Although we currently have clinical trial liability insurance, we may not be able to maintain this type of insurance for any of our clinical trials or in a sufficient amount. In addition, product liability insurance is becoming increasingly expensive. As a result, we may not be able to obtain or maintain product liability insurance in the future on acceptable terms or with adequate coverage against potential liabilities which could harm our business by requiring us to use our resources to pay potential claims. MARKET RISKS BECAUSE OUR STOCK IS VOLATILE, THE VALUE OF YOUR INVESTMENT IN GENELABS MAY SUBSTANTIALLY DECREASE. The market price of our common stock, like the stock prices of many publicly traded biopharmaceutical companies, has been and will probably continue to be highly volatile. Between January 1, 2002 and December 31, 2002, the price of our common stock fluctuated between $0.63 and $3.55 per share. Between January 1, 2003 and May 15, 2003, the price of our common stock fluctuated between $1.12 and $1.88 per share. In addition to the factors discussed in this Risk Factors section, a variety of events can impact the stock price, including the low percentage of institutional ownership of our stock, which contributes to lack of stability for the stock price. In addition, numerous events occurring outside of our control may also impact the price of our common stock, including market conditions related to the biopharmaceutical industry. Other companies have defended themselves against securities class action lawsuits following periods of volatility in the market price of their common stock. If a party brings this type of lawsuit against us, it could result in substantial costs and diversion of management's time. BECAUSE WE MAY NOT CONTINUE TO QUALIFY FOR LISTING ON THE NASDAQ QUOTATION SYSTEM, THE VALUE OF YOUR INVESTMENT IN GENELABS MAY SUBSTANTIALLY DECREASE. Genelabs may be unable to meet the requirements of the Nasdaq National Market System in the future. To maintain its listing on the Nasdaq National Market, Genelabs is required, among other things, to either maintain stockholders' equity of at least $10 million or a market value of at least $50 million, as well as to maintain a bid price of at least $1.00 per share of common stock. If Genelabs is unable to meet these requirements, it may be delisted from the National Market System. If delisted from the Nasdaq National Market, Genelabs might apply for listing on the Nasdaq SmallCap Market. The Nasdaq SmallCap Market, however, also has listing requirements, which Genelabs may fail to meet for initial listing or with which Genelabs may fail to maintain compliance. Delisting from the National Market System could adversely affect the trading price of our common stock, and delisting from the Nasdaq SmallCap Market would significantly limit the liquidity of our common stock and would adversely affect its trading price. Item 3. Quantitative and Qualitative Disclosures About Market Risk Genelabs' exposure to market risk for changes in foreign currency exchange rates relates primarily to the Company's investment in a Taiwan-based biopharmaceutical company, Genovate Biotechnology Co., Ltd., which is accounted for at cost, based on the lower of cost or market value method. This investment is the only item included in the balance sheet caption "Long-term investments." Genelabs may attempt to divest a portion of this investment, in which case changes in foreign currency exchange rates would impact the proceeds received upon sale of these shares. Because the book value of Genelabs' ownership percentage of Genovate is greater than our carrying cost, we currently do not believe that any foreign currency exchange rate changes would impact the value of this investment as reported in the financial statements unless the value of a Taiwan dollar depreciates by greater than 60% compared to the U.S. dollar, which, depending on other circumstances, might require Genelabs to record a non-cash charge to write-down the long-term investment. Item 4. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures. The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of a date within 90 days prior to the filing date of this Quarterly Report on Form 10-Q (the "Evaluation Date"). Based on this evaluation, these officers have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's reports filed or submitted under the Exchange Act. (b) Changes in Internal Controls. Since the Evaluation Date, there have not been any significant changes in the Company's internal controls or in other factors that could significantly affect such controls. (c) Limitations on the Effectiveness of Controls. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended March 31, 2003. On May 5, 2003, we filed a Current Report on Form 8-K attaching a press release and a Securities Purchase Agreement for a private placement of common stock and warrants to purchase common stock. 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. GENELABS TECHNOLOGIES, INC. (Registrant) Principal Executive Officer: /s/ IRENE A. CHOW Date: May 15, 2003 ____________________________________ Irene A. Chow Chairman and Chief Executive Officer Principal Financial and Accounting Officer: /s/ MATTHEW M. LOAR Date: May 15, 2003 ____________________________________ Matthew M. Loar Chief Financial Officer CERTIFICATION I, Irene A. Chow, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Genelabs Technologies, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 15, 2003 /s/ IRENE A. CHOW _____________________________ Irene A. Chow Chairman and Chief Executive Officer CERTIFICATION I, Matthew M. Loar, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Genelabs Technologies, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 15, 2003 /s/ MATTHEW M. LOAR ______________________________ Matthew M. Loar Chief Financial Officer EXHIBIT INDEX Exhibit Number Description - ----------- ---------------------------------------------------------------- 99.1 Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 99.1 Certification of CEO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report of Genelabs Technologies, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Irene A. Chow, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of her knowledge, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ IRENE A. CHOW _____________________________ Irene A. Chow Chairman and Chief Executive Officer May 15, 2003 This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (the "Act") and shall not, except to the extent required by the Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Exhibit 99.2 Certification of CFO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report of Genelabs Technologies, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Matthew M. Loar, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ MATTHEW M. LOAR ______________________________ Matthew M. Loar Chief Financial Officer May 15, 2003 This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (the "Act") and shall not, except to the extent required by the Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----