-----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, LoQdGWAmQOEBKXBKtZcQAvqfcvNyouZCnt2fcx4k063RgmyXq5Yph6sASxha1Coa tfw9uy8GiuefHuOD/mJ/yg== 0000950135-96-003422.txt : 19960812 0000950135-96-003422.hdr.sgml : 19960812 ACCESSION NUMBER: 0000950135-96-003422 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960809 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARIAD PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000884731 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 223106987 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21696 FILM NUMBER: 96606618 BUSINESS ADDRESS: STREET 1: 26 LANDSDOWNE ST CITY: CAMBRIDGE STATE: MA ZIP: 02139 BUSINESS PHONE: 6174940400 MAIL ADDRESS: STREET 2: 26 LANDSDOWNE CITY: CAMBRIDGE STATE: MA ZIP: 02139 10-Q 1 FORM 10-Q QUARTERLY REPORT 1 ================================================================================ 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, 1996 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 NUMBER: 0-21696 ARIAD PHARMACEUTICALS, INC. (Exact name of Registrant as specified in its charter) DELAWARE 22-3106987 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 26 LANDSDOWNE STREET, CAMBRIDGE, MASSACHUSETTS 02139 (Address of principal executive offices)(Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 494-0400 Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report: Not Applicable 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 ----- ----- The number of shares of the Registrant's common stock outstanding as of August 1, 1996 was 19,003,944. ================================================================================ 2 ARIAD PHARMACEUTICALS, INC. TABLE OF CONTENTS -----------------
PART I. FINANCIAL INFORMATION Page No. - -------------------------------- -------- ITEM 1. UNAUDITED FINANCIAL STATEMENTS: Condensed Consolidated Balance Sheets - June 30, 1996 and December 31, 1995 ................................................ 1 Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 1996 and 1995 ............. 2 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1996 and 1995 .............................. 3 Notes to Unaudited Condensed Consolidated Financial Statements ....... 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS .................................. 5 PART II. OTHER INFORMATION - ---------------------------- ITEM 1. LEGAL PROCEEDINGS..................................................... 8 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .................. 9 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ..................................... 9
3 PART I. FINANCIAL INFORMATION ITEM 1. UNAUDITED FINANCIAL STATEMENTS ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS JUNE 30, DECEMBER 31, 1996 1995 ------------ ------------ Current assets: Cash and cash equivalents $ 6,278,029 $ 3,750,082 Marketable securities 14,425,422 23,306,152 Prepaid expenses and other 610,622 504,460 ------------ ------------ Total current assets 21,314,073 27,560,694 ------------ ------------ Property and equipment: Leasehold improvements 6,997,749 6,978,006 Equipment and furniture 4,174,346 3,100,507 ------------ ------------ Total 11,172,095 10,078,513 Less accumulated depreciation and amortization 3,933,426 3,365,904 ------------ ------------ Property and equipment, net 7,238,669 6,712,609 ------------ ------------ Licensed technology and patent application costs, net 1,311,364 1,080,823 ------------ ------------ Other assets, net 1,679,279 1,847,604 ------------ ------------ Total $ 31,543,385 $ 37,201,730 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 1,653,129 $ 1,460,695 Accounts payable 867,999 677,918 Accrued liabilities 436,749 760,165 Deferred revenue 3,666,665 3,666,665 ------------ ------------ Total current liabilities 6,624,542 6,565,443 ------------ ------------ Long-term debt 1,401,350 1,540,727 ------------ ------------ Deferred revenue 4,744,447 6,411,113 ------------ ------------ Stockholders' equity: Common stock, $.001 par value; authorized, 60,000,000 shares; issued and outstanding, 19,003,944 in 1996 and 18,965,728 shares in 1995 19,004 18,966 Additional paid-in capital 70,508,522 70,428,410 Net unrealized loss on marketable securities (164,565) (113,273) Accumulated deficit (51,589,915) (47,649,656) ------------ ------------ Stockholders' equity 18,773,046 22,684,447 ------------ ------------ Total $ 31,543,385 $ 37,201,730 ============ ============
See notes to unaudited condensed consolidated financial statements. 1 4 ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------------- -------------------------- 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Revenue: Research revenue $ 2,093,332 $ 175,000 $ 4,151,666 $ 350,000 Interest income 288,598 343,890 636,323 675,030 ----------- ----------- ----------- ----------- Total revenue 2,381,930 518,890 4,787,989 1,025,030 ----------- ----------- ----------- ----------- Operating expenses: Research and development 3,685,457 3,308,613 7,387,662 6,653,620 General and administrative 519,345 596,584 1,202,316 1,212,923 Interest expense 66,654 84,995 138,270 177,704 ----------- ----------- ----------- ----------- Total operating expenses 4,271,456 3,990,192 8,728,248 8,044,247 ----------- ----------- ----------- ----------- Net loss $(1,889,526) $(3,471,302) $(3,940,259) $(7,019,217) =========== =========== =========== =========== Net loss per share $ (.10) $ (.19) $ (.21) $ (.41) =========== =========== =========== =========== Weighted average number of shares of common stock outstanding 18,986,829 18,064,123 18,981,684 16,987,891
See notes to unaudited condensed consolidated financial statements. 2 5 ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ---------------------------- 1996 1995 ------------ ------------ Cash flows from operating activities: Net loss $ (3,940,259) $ (7,019,217) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,062,430 687,312 Deferred revenue (1,666,666) Stock-based compensation 9,930 Increase (decrease) from: Prepaid expenses and other (106,162) (85,526) Other assets (154,326) (121,492) Accounts payable 190,081 (136,086) Accrued liabilities (323,426) 83,561 ------------ ------------ Net cash used in operating activities (4,928,398) (6,591,448) ------------ ------------ Cash flows from investing activities: Acquisitions of marketable securities (11,121,994) (10,123,008) Proceeds from sale and maturities of marketable securities 19,873,770 5,239,699 Investment in property and equipment, net (1,140,052) (126,964) Acquisitions of licensed technology and patents (325,126) (178,988) ------------ ------------ Net cash provided by (used in) investing activities 7,286,598 (5,189,261) ------------ ------------ Cash flows from financing activities: Repayment of borrowings (736,530) (671,430) Proceeds from sale/leaseback of equipment 836,057 263,826 Proceeds from issuance of common stock, net of issuance costs 7,000,000 Proceeds from exercise of stock options 70,220 75,466 Purchase of warrants (50,000) ------------ ------------ Net cash provided by financing activities 169,747 6,617,862 ------------ ------------ Net increase (decrease) in cash and equivalents 2,527,947 (5,162,847) Cash and equivalents, beginning of period 3,750,082 8,074,320 ------------ ------------ Cash and equivalents, end of period $ 6,278,029 $ 2,911,473 ============ ============
See notes to unaudited condensed consolidated financial statements. 3 6 ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Management Statement -------------------- In the opinion of the Company's management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of June 30, 1996 and December 31, 1995 and the results of operations for the three-month and six-month periods ended June 30, 1996 and 1995. Certain reclassifications have been made to the 1995 financial statements to conform with the 1996 presentation. The results of operations for such periods are not necessarily indicative of the results to be expected for the full year. 2. Marketable Securities --------------------- The Company has classified its marketable securities as available for sale and, accordingly, carries such securities at aggregate fair value. At June 30, 1996 and December 31, 1995, the Company's marketable securities consisted of the following:
Aggregate Amortized Gross Unrealized 1996 Fair Value Cost Basis Gains Losses - ---- ---------- ---------- ------- --------- U.S. Government obligations $ 3,898,981 $ 4,021,813 $(122,832) Corporate debt securities 10,276,970 10,318,703 $ 2,576 (44,309) Certificate of deposit 249,471 249,471 ----------- ----------- ------- --------- Total $14,425,422 $14,589,987 $ 2,576 $(167,141) =========== =========== ======= ========= 1995 - ---- U.S. Government obligations $14,871,417 $14,981,763 $ 2,623 $(112,969) Corporate debt securities 8,185,264 8,188,191 19,376 (22,303) Certificate of deposit 249,471 249,471 ----------- ----------- ------- --------- Total $23,306,152 $23,419,425 $21,999 $(135,272) =========== =========== ======= =========
At June 30, 1996, approximately $10,326,000 of investments in marketable securities had contractual maturities of one year or less, and approximately $260,000 of such investments had periodic contractual maturity dates. Realized gains and losses on sales of marketable securities were not material during the six months ended June 30, 1996; the net unrealized loss of $164,565 is included in stockholders' equity. 4 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW ARIAD was formed in 1991 to pursue the discovery and development of pharmaceuticals based on an understanding of intracellular signal transduction pathways and their role in disease. ARIAD combines the knowledge of molecular cell biology with an advanced capability in structure-based drug design and combinatorial chemistry in an effort to create a new class of biopharmaceuticals capable of treating a broad range of diseases. ARIAD has focused its drug discovery efforts on two major programs: 1) the development of small-molecule drugs that inhibit critical signal transduction pathways in cells responsible for allergy and asthma, immune-related disorders and osteoporosis; and 2) the development of small-molecule drugs that control signal transduction pathways in genetically engineered cells to provide a means to regulate protein production in gene and cell therapy. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THE THREE MONTHS ENDED JUNE 30, 1995 Revenues for the quarter ended June 30, 1996 were $2,382,000 compared to $519,000 for the same period in 1995. Revenues are comprised principally of research revenues from the collaborative research and development agreement with Hoechst Marion Roussel ("HMR") (the "HMR Agreement") (see "-- Liquidity and Capital Resources") and government-sponsored research grants and interest income earned on investments of cash equivalents and marketable securities. Research revenues earned in the quarter ended June 30, 1996 increased by $1,918,000 over the corresponding period in 1995 primarily as a result of the HMR Agreement, which commenced in November 1995. Interest income for the current period decreased by $55,000 in 1996 over 1995 primarily as a result of lower levels of funds invested. Research and development expenses increased by 11.4% to $3,685,000 for the quarter ended June 30, 1996 from $3,309,000 for the same period in 1995 due primarily to increased research activity as a result of the HMR Agreement. The Company expects its research and development expenses to increase moderately as a result of the HMR Agreement. General and administrative expenses decreased by 13.1% to $519,000 for the quarter ended June 30, 1996 from $597,000 for the corresponding period in 1995 primarily due to savings in insurance expense and the timing of legal expenses associated with litigation. The Company incurred interest expense of $67,000 for the quarter ended June 30, 1996 compared to $85,000 for the corresponding period in 1995. The decrease resulted from a lower level of long-term debt and lower interest rates during the period. 5 8 The Company incurred losses of $1,890,000 for the quarter ended June 30, 1996 and $3,471,000 for the corresponding period in 1995, or $.10 and $.19 per share, respectively. SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1995 Revenues for the six months ended June 30, 1996 were $4,788,000 compared to $1,025,000 for the corresponding period in 1995. Interest income for the six months ended June 30, 1996 decreased by $39,000 over the corresponding period in 1995 primarily as a result of a slightly lower level of funds invested. Research revenue earned in 1996 increased by $3,802,000 over 1995 primarily as a result of the HMR Agreement, which commenced in November 1995. Research and development expenses increased by 11.0% to $7,388,000 for the six months ended June 30, 1996 from $6,654,000 in 1995, primarily due to increased research activity as a result of the HMR Agreement. General and administrative expenses remained relatively unchanged at $1,202,000 for the six months ended June 30, 1996 compared to $1,213,000 for the corresponding period in 1995. The Company incurred interest expense of $138,000 for the six months ended June 30, 1996 compared to $178,000 for the corresponding period in 1995. The decrease results from a lower level of long-term debt and lower interest rates. The Company incurred losses of $3,940,000 for the six months ended June 30, 1996 and $7,019,000 for the corresponding period in 1995, or $.21 and $.41 per share, respectively. The Company expects that operating losses will continue for several more years and may increase as its activities expand and may fluctuate as a result of differences in the timing and composition of revenue earned and expenses incurred. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1996, the Company had cash, cash equivalents and marketable securities totaling $20,703,000 and working capital of $14,690,000 compared to cash, cash equivalents and marketable securities totaling $27,056,000 and working capital amounting to $20,995,000 at December 31, 1995. The primary uses of cash during the six months ended June 30, 1996 were $4,928,000 to finance the Company's operations and working capital requirements, $1,140,000 to purchase equipment, $325,000 to acquire licensed technology and patents and $737,000 to repay long-term debt. During the six months ended June 30, 1996, net proceeds of $836,000 from the sale/leaseback of laboratory equipment were received. 6 9 The Company has financed its operations and investments in property and equipment primarily through the private placement and public offering of its securities, supplemented by the issuance of long-term debt, sale/leaseback and capital lease transactions, interest income, government-sponsored research grants and, commencing in November 1995, the HMR Agreement. In November 1995, the Company entered into an agreement with HMR to collaborate on the discovery and development of drugs to treat osteoporosis and related bone diseases, one of the Company's signal transduction drug discovery programs. Under the HMR Agreement, the Company granted to HMR exclusive rights to develop and commercialize these drugs worldwide. ARIAD has the right, under certain circumstances, to participate in the development and commercialization of these products for certain nonosteoporosis indications in North America. Under the terms of the Agreement, HMR made an initial cash payment to the Company of $10,000,000, will provide research funding in equal quarterly amounts of $1,000,000 up to an aggregate of $20,000,000 over a five-year period and will provide an aggregate of up to $10,000,000 upon the attainment of certain research milestones. In addition, HMR has established a dedicated research group to collaborate with the Company on the discovery of osteoporosis drugs and has agreed to fund all of the preclinical and clinical development costs for products that emerge from the collaboration. The agreement further provides for the payment of royalties to the Company based on product sales. HMR may elect to terminate the Agreement and further payment obligations after three years if certain scientific milestones have not been achieved, whereupon all rights would revert back to the Company. Revenue recognized under the Agreement amounted to $1,833,000 and $3,667,000 for the three months and six months ended June 30, 1996, respectively. From its inception and through June 30, 1996, the Company has invested an aggregate of $17,828,000 in property and equipment, including $6,998,000 in leasehold improvements and $10,830,000 in laboratory equipment and furniture. An aggregate of $6,553,000 of equipment and furniture was sold in the four years prior to 1996 pursuant to sale/leaseback transactions under its lease credit facilities. These lease agreements, which are classified as operating leases for financial reporting purposes, have terms ranging from three to four years. Pursuant to a commitment from its principal equipment lessor, the Company has $1,000,000 of additional lease credit available through 1996. In 1995, the Company arranged a $2,000,000 capital lease line with its principal bank under which it may finance, over a four-year period, the purchase of equipment. The Company placed equipment with an acquisition cost of $836,000 and $598,000 under this agreement in 1996 and 1995, respectively. The capital lease obligations are payable in monthly installments of $33,772. The agreements under which these lease obligations and other long-term debt were issued contain certain restrictive covenants that limit the amount of additional indebtedness, capital spending and stock redemption; prohibit dividend distributions; and require the Company to maintain certain minimum levels of net worth, working capital and liquid assets. 7 10 The Company will require substantial additional funding for its research and product development programs, for operating expenses, for the pursuit of regulatory clearances and for building manufacturing, sales and marketing capabilities. Adequate funds for these purposes, whether obtained through financial markets or collaborative or other arrangements with corporate partners, or from other sources, may not be available when needed or on terms acceptable to the Company. The Company believes that its available cash and existing sources of funding will be adequate to satisfy its capital and operating requirements through mid-1998. However, there can be no assurance that changes in the Company's research and development plans or other events affecting the Company's operating expenses will not result in the Company depleting its funds before that time. SECURITIES LITIGATION REFORM ACT Safe harbor statement under the Private Securities Litigation Reform Act of 1995: Except for the historical information contained in this Quarterly Report on Form 10-Q, the matters discussed herein are forward-looking statements that involve risks and uncertainties, including but not limited to economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services and prices, and other factors discussed under the heading "Cautionary Statement Regarding Forward-Looking Statements" in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As previously reported, the Company was named as a defendant in a purported class action lawsuit that commenced in the United States District Court for the Southern District of New York on October 21, 1994 (the "Blech Securities Litigation"). The Company filed a motion to dismiss the Blech Securities Litigation, and on June 6, 1996, the Court granted that motion as to the Company. Although the Court gave plaintiffs an opportunity to replead their allegations, the Company was not named as a defendant in the amended complaint that plaintiffs subsequently filed. As previously reported, the Company was also named as a defendant in a purported class action lawsuit that commenced on June 8, 1995 in the United States District Court for the Southern District of New York (the "Degulis Action"). The Company filed a motion to dismiss the Degulis Action, and on June 6, 1996, the Court denied the motion. The Company intends to continue to defend vigorously the Degulis Action. Other than the Degulis Action, the Company is not party to any legal proceedings. 8 11 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Stockholders was held on June 18, 1996. Of 18,984,036 shares issued and outstanding and eligible to vote as of the record date of April 22, 1996, a quorum of 16,105,640 shares or 84.8% of the eligible shares were present. The only action taken at such meeting was the re-election of the following Class 2 Directors:
Number of Shares -------------------------------------- For Withheld Authority ---------- ------------------ Philip Felig, M.D. 15,731,110 374,530 Peter T. Joseph 15,726,539 379,101 Jay R. LaMarche 15,731,510 374,130 Joel S. Marcus 15,731,510 374,130
Continuing Class 3 Directors (terms to expire 1997): Harvey J. Berger, M.D. Vaughn D. Bryson Sandford D. Smith Raymond S. Troubh Continuing Class 1 Directors (terms to expire 1998): Joan S. Brugge, Ph.D. Edgar Haber, M.D. Frank J. Hoenemeyer ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the quarter ended June 30, 1996. 9 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ARIAD Pharmaceuticals, Inc. (Registrant) By: /s/ Jay R. LaMarche ---------------------------------------- Jay R. LaMarche Senior Vice President, Finance and Chief Financial Officer (Duly authorized Officer and Principal Financial Officer) Date: August 9, 1996 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 1 U.S. DOLLARS 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1 6,278,029 14,425,422 0 0 0 21,314,073 11,172,095 3,933,426 31,543,385 6,624,542 1,401,350 19,004 0 0 18,754,042 31,543,385 0 4,787,989 0 0 8,589,978 0 138,270 (3,940,259) 0 0 0 0 0 (3,940,259) (.21) (.21)
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