-----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, S4BlGngXlfZmL5kCgJ1YftERtM8f1hmYy+ffwVjEkGFxK3SbSVHcNuRUHcRnakGA js9ENggbWKrGhpFHSOHULw== 0000950168-98-003509.txt : 19981116 0000950168-98-003509.hdr.sgml : 19981116 ACCESSION NUMBER: 0000950168-98-003509 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIMERIS INC CENTRAL INDEX KEY: 0000911326 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 561808663 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23155 FILM NUMBER: 98746260 BUSINESS ADDRESS: STREET 1: 4727 UNIVERSITY DR STE 100 CITY: DURHAM STATE: NC ZIP: 27707 BUSINESS PHONE: 9194196050 MAIL ADDRESS: STREET 1: 4727 UNIVERSITY DRIVE STE 100 CITY: DURHAM STATE: NC ZIP: 27707 10-Q 1 TRIMERIS, INC. FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 [ ] 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 0-23155 TRIMERIS, INC. (Exact name of registrant as specified in its charter) Delaware 56-1808663 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4727 University Drive Durham, North Carolina 27707 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (919) 419-6050 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. [ x ] Yes [ ] No The number of shares outstanding of the registrant's common stock as of November 12, 1998 was 10,593,477. TRIMERIS, INC. (A Development Stage Company) FORM 10-Q For the Nine Months Ended September 30, 1998 INDEX PART 1. FINANCIAL INFORMATION Page Item 1. Financial Statements Balance Sheets as of September 30, 1998 (unaudited) and December 31, 1997 1 Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 1998 and 1997 and Period From Inception (January 7, 1993) Through September 30, 1998 2 Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 1998 and 1997 and Period From Inception (January 7, 1993) Through September 30, 1998 3 Notes to Financial Statements (unaudited) 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART 2. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 2. Changes in Securities and Use of Proceeds 11 ----------------------------------------- Item 3. Defaults Upon Senior Securities 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11 -------------------------------- Signature Page 12 Exhibit Index 13 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements TRIMERIS, INC. (A Development Stage Company) BALANCE SHEETS (in thousands)
December 31, September 30, 1997 1998 ---- ---- (unaudited) Assets Current assets: Cash and cash equivalents $ 32,557 $ 21,457 Short-term investments 4,863 3,402 Accounts receivable 101 56 Prepaid expenses 6 223 -------- -------- Total current assets 37,527 25,138 Property, furniture and equipment, net 756 1,665 -------- -------- Other assets: Exclusive license agreement, net 30 28 Patent costs, net 442 531 Equipment deposits 86 139 Other, net 3 2 -------- -------- Total other assets 561 700 -------- -------- Total assets $ 38,844 $ 27,503 ======== ======== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 722 $ 780 Current installments of capital lease obligations 259 400 Accrued compensation 608 697 Accrued expenses 1,205 1,316 -------- -------- Total current liabilities 2,794 3,193 Capital lease obligations, less current installments 240 838 -------- -------- Total liabilities 3,034 4,031 -------- -------- Commitments and contingencies Stockholders' equity: Series A, B, C, and D preferred stock at $.001 par value per share, 62,667 shares authorized, zero shares issued and outstanding at December 31, 1997 and September 30, 1998 (unaudited) -- -- Common Stock at $.001 par value per share, 80,000 shares authorized, 10,549 and 10,593 shares issued and outstanding at December 31, 1997 and September 30, 1998 (unaudited) 11 11 Additional paid-in capital 67,360 67,549 Deficit accumulated during the development stage (29,393) (42,370) Deferred compensation (1,950) (1,500) Notes receivable from stockholders (218) (218) -------- -------- Net stockholders' equity 35,810 23,472 -------- -------- Total liabilities and stockholders' equity $ 38,844 $ 27,503 ======== ========
See accompanying notes to financial statements. 1 TRIMERIS, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
Cumulative From Inception Three Months Nine Months (January 3, 1993) Ended September 30, Ended September 30, To September 30, 1997 1998 1997 1998 1998 ---- ---- ---- ---- ---- Revenue .................... $ 129 $ 95 $ 341 $ 270 $ 860 -------- -------- -------- -------- -------- Operating expenses: Research and development . 2,655 4,135 5,514 11,368 33,698 General and administrative 875 994 1,661 3,221 10,677 -------- -------- -------- -------- -------- Total operating expenses .............. 3,530 5,129 7,175 14,589 44,375 -------- -------- -------- -------- -------- Operating loss ............. (3,401) (5,034) (6,834) (14,319) (43,515) -------- -------- -------- -------- -------- Other income (expense): Interest income .......... 76 395 109 1,433 2,139 Interest expense ......... (28) (41) (106) (91) (994) -------- -------- -------- -------- -------- 48 354 3 1,342 1,145 -------- -------- -------- -------- -------- Net loss ................. $ (3,353) $(4,680) $(6,831) $(12,977) $ (42,370) ======== ======== ======== ======== ======== Basic net loss per share$ .. (0.45) $ (0.44) $ (1.06) $(1.22) ======== ======= ======== ======== Weighted average shares used in per share computations ............. 7,451 10,662 6,422 10,639 ======== ======== ======== ========
See accompanying notes to financial statements. 2 TRIMERIS, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Cumulative From Inception Nine Months Ended (January 3, 1993) September 30, To September 30, 1997 1998 1998 ---- ---- ---- Cash flows from operating activities: Net loss $ (6,831) $(12,977) $(42,370) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation 434 413 2,602 Other amortization 21 12 49 Amortization of deferred compensation 233 450 836 Provision for equipment held for resale 31 -- 61 Stock issued for consulting services -- -- 5 Stock issued to repay interest on notes to stockholders -- -- 195 Debt issued for research and development -- -- 194 Loss on disposal of property and equipment -- -- 16 Changes in operating assets and liabilities: Accounts receivable and loans to employees (28) 45 (56) Prepaid expenses (420) (217) (223) Other assets (12) (62) (149) Accounts payable 245 58 780 Accrued compensation 452 89 697 Accrued expenses (249) 111 1,226 -------- -------- -------- Net cash used by operating activities (6,124) (12,078) (36,137) -------- -------- -------- Cash flows from investing activities: Purchases of short-term investments (5,586) (13,810) (18,673) Sales of short-term investments -- 15,271 15,271 Purchases of property and equipment (287) (257) (892) Equipment held for resale -- -- (61) Organization costs -- -- (8) Patent costs (66) (89) (538) -------- -------- -------- Net cash provided (used) by investing activities (5,939) 1,115 (4,901) ======== ======== ======== Cash flows from financing activities: Proceeds from issuance of notes payable 1 -- 6,150 Lease costs -- -- (13) Principal payments under capital lease obligations . (229) (326) (2,153) Proceeds from issuance of Common Stock 9 -- 31 Proceeds from issuance of Preferred Stock 12,777 -- 23,896 Proceeds from initial public offering, net -- -- 34,532 Proceeds from exercise of stock options -- 7 16 Proceeds from employee stock purchase plan exercise -- 182 182 Repayment of notes receivable from stockholders 12 -- 50 Stock issuance costs (109) -- (196) -------- -------- -------- Net cash provided (used) by financing activities 12,461 (137) 62,495 -------- -------- -------- Net increase (decrease) in cash and cash equivalents . 398 (11,100) 21,457 Cash and cash equivalents, beginning of period 132 32,557 -- -------- -------- -------- Cash and cash equivalents, end of period $ 530 $ 21,457 $ 21,457 ======== ======== ========
See accompanying notes to financial statements. 3 TRIMERIS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION Trimeris, Inc. (the "Company") was incorporated on January 7, 1993 to discover and develop novel therapeutic agents that block viral infection by inhibiting viral fusion with host cells. These financial statements have been prepared in accordance with Statement of Financial Accounting Standards No. 7, "Accounting and Reporting by Development Stage Enterprises," to recognize the fact that the Company is devoting substantially all of its efforts to establishing a new business and planned principal operations have not commenced. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles and applicable Securities and Exchange Commission regulations for interim financial information. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission rules and regulations. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of financial position and results of operations have been made. Operating results for interim periods are not necessarily indicative of results which may be expected for a full year. The information included in this Form 10-Q should be read in conjunction with the Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations sections and the 1997 financial statements and notes thereto included in the Company's 1997 Form 10-K filed with the Securities and Exchange Commission on March 31, 1998, and the Company's Registration Statement on Form S-1 as declared effective by the Securities and Exchange Commission on October 6, 1997 and amended pursuant to Rule 462 (b) on October 7, 1997 (the "S-1 Registration Statement"). The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. BASIC NET LOSS PER SHARE For periods beginning with the year ended December 31, 1997, the Company adopted SFAS No. 128, "Earnings Per Share" ("SFAS No. 128"). In accordance with this statement, primary net loss per common share is replaced with basic loss per common share which is calculated by dividing net loss by the weighted-average number of common shares outstanding for the period after certain adjustments described below. Fully diluted net income per common share is replaced with diluted net income per common share reflecting the maximum dilutive effect of common stock issuable upon exercise of stock options, stock warrants, and conversion of preferred stock. Diluted net loss per common share is not shown, as common equivalent shares from stock options, and stock warrants, would have an antidilutive effect. Prior period per share data has been restated to reflect the adoption of SFAS No. 128. In accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 83 ("SAB 83"), all common shares and common equivalent shares issued during the twelve-month period prior to the initial filing of the registration statement relating to the Company's initial public offering, even when anti-dilutive, have been included in the calculation as if they were outstanding for all periods, using the treasury stock method. The basic net loss per common share gives retroactive effect to the conversion of all outstanding shares of Preferred Stock into 6,261,615 shares of Common Stock upon the completion of the Company's initial public offering. 4 3. STATEMENTS OF CASH FLOWS Interest of approximately $106,000 and $91,000 was paid during the nine months ended September 30, 1997 and 1998, respectively. Capital leases of $195,000 and $1,064,000 were incurred for the nine months ended September 30, 1997 and 1998, respectively, for the purchase of new furniture and equipment. 4. INITIAL PUBLIC OFFERING OF STOCK In October, 1997, the Company closed its initial public offering of common stock at $12 per share. The net proceeds of the offering, including the proceeds received in connection with the exercise of the Underwriters' over-allotment option which closed in November, 1997, were approximately $34.5 million after deducting applicable issuance costs and expenses. In connection with the public offering, all the outstanding Preferred Stock was converted into approximately 6,261,615 shares of the Company's Common Stock. 5. STOCK SPLIT Effective July 11, 1997, the Company declared a one for eight and one-half reverse stock split for common stockholders. This stock split has been retroactively applied and all periods presented have been restated. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Statements in this Form 10-Q that are not historical fact are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based largely on the Company's expectations and are subject to a number of known and unknown risks and uncertainties, many of which are beyond the Company's control. Accordingly, the Company's actual prospective results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, in addition to those discussed herein under the heading "Factors That May Affect Future Results" and elsewhere in this Form 10-Q, the following: (i) uncertainties associated with the Company's status as a development stage company with a limited operating history and a history of losses since inception; (ii) risks inherent in the Company's present reliance on a single product candidate; (iii) uncertainties, unanticipated developments or delays related to the Company's technology, clinical trials and clinical trial strategy and the adverse impact such events may have on the Company's existing capital resources; (iv) the ability of the Company to maintain existing or enter into additional collaborative and/or licensing arrangements with third parties to assist in the commercialization, testing, manufacturing and marketing of its product candidates; (v) the Company's ability to obtain adequate additional funding needed to meet the substantial costs associated with the development of existing and new product candidates; (vi) the enactment of new or unanticipated regulatory requirements related to the testing and United States Food and Drug Administration ("FDA") approval of the Company's product candidates and the ability to receive FDA approval for the Company's product candidates; (vii) the possibility of infringement of the Company's intellectual property rights and the Company's ability to protect its product candidates, technology and other proprietary information; (viii) the Company's ability to develop manufacturing, sales, marketing and distribution capabilities; (ix) the Company's dependence on third parties for clinical trials; (x) the Company's ability to obtain third-party reimbursement for any products that may be approved by the FDA; (xi) the Company's ability to recruit and retain key employees; (xii) year 2000 risks; and (xiii) the Company's ability to achieve market acceptance of its product candidates and to effectively compete with other companies currently developing similar product candidates, including companies with substantially greater financial and technical resources. Further information regarding these factors, as well as other factors that could cause actual results to differ materially from those set forth in such forward-looking statements, is discussed under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in the 1997 financial statements and notes thereto included in the Company's 1997 Form 10-K, which should be read in conjunction with this Form 10-Q. The Company undertakes no obligation to release publicly the results of any revisions to the statements contained in this report to reflect events or circumstances arising after the date hereof. Overview Trimeris commenced operations in January 1993, has a limited operating history and is a development stage company. Since its inception, substantially all of the Company's resources have been dedicated to the development, patenting, preclinical testing, nonclinical animal studies, and human clinical trials of T-20, the development of a manufacturing process for T-20, production of drug material for future clinical trials, the development of its proprietary technology platform and research and development and preclinical testing of other potential product candidates and compounds discovered by the Company. The Company has received revenue solely from SBIR grants and an investigative contract and has yet to generate any revenue from product sales or royalties, and there can be no assurance that it will be able to generate any such revenue or royalties in the future. 6 Product candidates and compounds discovered by the Company and developed through the Company's product development programs will require significant additional, time-consuming and costly research and development, preclinical testing, nonclinical animal studies, and extensive clinical trials prior to submission of any regulatory application for commercial use. The Company has incurred losses since its inception and, as of September 30, 1998 had an accumulated deficit of approximately $42.4 million. Such losses have resulted principally from expenses incurred in the Company's research and development activities associated with the development, patenting, preclinical testing, nonclinical animal studies, and human clinical trials of T-20, the development of a manufacturing process for T-20, production of drug material for future clinical trials, the development of its proprietary technology platform, research and development and preclinical testing of other potential product candidates and compounds discovered by the Company, and from general and administrative expenses. The Company expects to continue to incur substantial losses for the foreseeable future. There can be no assurance that the Company will ever generate significant revenue or achieve profitable operations. Results of Operations COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998 REVENUE. Revenue recognized for the three months ended September 30, 1998 consisted of approximately $95,000 of income from SBIR grants. Revenue recognized for the three months ended September 30, 1997 consisted of approximately $129,000 of income from SBIR grants. RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses increased from approximately $2.7 million for the three months ended September 30, 1997 to approximately $4.1 million for the three months ended September 30, 1998. The increase is primarily due to increased costs related to additional personnel and related laboratory research supplies to support these personnel, nonclinical animal studies, the purchase and manufacture of drug product material for future T-20 Phase II clinical trials, and costs related to the Company's current Phase II clinical trial for T-20 ("TRI-003"). Total research personnel were 28 and 49 at September 30, 1997 and 1998, respectively. The Company expects its research and development expenses to increase substantially in the future due to continued expansion of product development activities, including preclinical research and testing, nonclinical animal studies, expanded clinical trials, and the manufacture of drug material. GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative expenses increased from approximately $875,000 for the three months ended September 30, 1997 to approximately $994,000 for the three months ended September 30, 1998. The increase is due to costs related to additional personnel and consultants to support the Company's growth and additional professional fees required to support the Company's obligations as a publicly traded Company. The Company expects its administrative expenses to increase in the future to support the expansion of its product development activities and to meet the requirements of operating as a public company. OTHER INCOME (EXPENSE). Other income (expense) consists of interest income and expense. Total other income increased from approximately $48,000 for the three months ended September 30, 1997 to approximately $354,000 for the three months ended September 30, 1998. This increase was primarily due to increased interest income due to larger cash balances. COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998 REVENUE. Revenue recognized for the nine months ended September 30, 1998 consisted of approximately $270,000 of income from SBIR grants. Revenue recognized for the nine months ended September 30, 1997 consisted of approximately $241,000 of income from SBIR grants and $100,000 from an investigative contract. 7 RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses increased from approximately $5.5 million for the nine months ended September 30, 1997 to approximately $11.4 million for the nine months ended September 30, 1998. The increase is primarily due to increased costs related to additional personnel and related laboratory research supplies to support these personnel, nonclinical animal studies, the purchase and manufacture of drug product material for future T-20 Phase II clinical trials, and costs related to TRI-003. Total research personnel were 28 and 49 at September 30, 1997 and 1998, respectively. The Company expects its research and development expenses to increase substantially in the future due to continued expansion of product development activities, including preclinical testing, nonclinical animal studies and clinical trials. GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative expenses increased from approximately $1.7 million for the nine months ended September 30, 1997 to approximately $3.2 million for the nine months ended September 30, 1998. The increase is due to costs related to additional personnel and consultants to support the Company's growth and additional professional fees required to support the Company's obligations as a publicly traded Company. The Company expects its administrative expenses to increase in the future to support the expansion of its product development activities and to meet the requirements of operating as a public company. OTHER INCOME (EXPENSE). Other income (expense) consists of interest income and expense. Total other income increased from approximately $3,000 for the nine months ended September 30, 1997 to approximately $1.3 million for the nine months ended September 30, 1998. This increase was primarily due to increased interest income due to larger cash balances. Liquidity and Capital Resources Since inception, the Company has financed its operations primarily through the private placement of equity securities, the issuance of notes to stockholders, equipment lease financing and the Company's initial public offering, which provided approximately $34.5 million after deducting applicable issuance costs and expenses. Net cash used by operating activities was approximately $6.1 million and approximately $12.1 million for the nine months ended September 30, 1997 and 1998, respectively. The cash used by operating activities was used primarily to fund research and development and general and administrative expenses. Cash provided by financing activities was approximately $12.4 million for the nine months ended September 30, 1997, primarily from the sale of equity securities, compared to a use of approximately $137,000 for the nine months ended September 30, 1998. As of September 30, 1998, the Company had approximately $24.9 million in cash and cash equivalents and short-term investments, compared to approximately $37.4 million as of December 31, 1997. The Company has experienced negative cash flows from operations since its inception and does not anticipate generating sufficient positive cash flows to fund its operations in the foreseeable future. The Company has expended, and expects to continue to expend in the future, substantial funds to pursue its product candidate and compound discovery and development efforts, including expenditures for continued nonclinical animal studies and clinical trials of T-20, research and development and preclinical testing of other product candidates and compounds discovered by the Company and the development of its proprietary technology platform. As of September 30, 1998, the Company had commitments to conduct nonclinical animal studies of approximately $1.0 million, and commitments to purchase drug material for use in clinical trials of approximately $1.2 million. These expenditures may be financed with capital or operating leases, debt or working capital. The Company expects that its existing capital resources and the interest earned thereon will be adequate to fund its capital requirements through 1998. However, the Company's future capital requirements and the adequacy of available funds will depend on many factors, including the results of the clinical trials relating to T-20, the progress and scope of the Company's product development programs, the magnitude of these programs, the results of preclinical testing, nonclinical animal studies and clinical trials, the need for additional facilities based on the results of these clinical trials and other product development programs, changes in the focus and direction of the Company's product development programs, the costs involved in preparing, filing, processing, maintaining, protecting and enforcing patent claims and other intellectual property rights, competitive factors and technological advances, the cost, timing and outcome of regulatory reviews, changes in the requirements of the United States Food and Drug Administration (the "FDA"), administrative and legal 8 expenses, evaluation of the commercial viability of potential product candidates and compounds, the establishment of capacity, either internally or through relationships with third parties, for manufacturing, sales, marketing and distribution functions and other factors, many of which are outside of the Company's control. Thus, there can be no assurance that the Company's existing capital resources, together with the interest earned thereon, will be sufficient to fund the Company's capital requirements during the period discussed above. The Company believes that substantial additional funds will be required to continue to fund its operations and that the Company will be required to obtain additional funds through equity or debt financing or licenses, agreements or other arrangements with collaborative partners and others, or from other sources. The terms of any such equity financings may be dilutive to stockholders and the terms of any debt financings may contain restrictive covenants which limit the Company's ability to pursue certain courses of action. There can be no assurance that such funds will be available to the Company on acceptable terms, if at all, or that such financings will be adequate to meet the Company's future capital requirements. If adequate funds are not available, the Company may be required to delay, scale-back or eliminate certain aspects of its preclinical testing, clinical trials and research and development programs or attempt to obtain funds through arrangements with collaborative partners or others that may require the Company to relinquish rights to certain of its technologies or product candidates or compounds, which could have a material adverse effect on the Company's business, financial condition and results of operations. Factors That May Affect Future Results The Company expects to incur substantial losses for the foreseeable future and expects losses to increase as the Company's research and development, preclinical testing, nonclinical animal studies and clinical trial efforts expand. The amount and timing of the Company's operating expenses will depend on several factors, many of which are beyond the Company's control, including the status of the Company's research and development activities, product candidate and compound discovery and development efforts, including preclinical testing, nonclinical animal studies and clinical trials, the timing of regulatory actions, the costs involved in preparing, filing, prosecuting, maintaining, protecting and enforcing patent claims and other proprietary rights, the ability of the Company to establish, internally or through relationships with third parties, manufacturing, sales, marketing and distribution capabilities, technological and other changes in the competitive landscape, changes in the Company's existing research and development relationships and strategic alliances, evaluation of the commercial viability of potential product candidates and other factors. As a result, the Company believes that period-to-period comparisons of financial results in the future are not necessarily meaningful and results of operations in prior periods should not be relied upon as an indication of future performance. Any deviations in the Company's clinical trial schedule, results from the Company's clinical trials, or the Company's financial results, from the expectations of securities analysts and investors could have a material adverse effect on the market price of the Common Stock. In addition, any adverse movements in the stock market in general, technology stocks, or biotechnology stocks could have a material adverse effect on the market price of the Common Stock. The Company's ability to achieve profitability will depend, in part, upon its or its collaborative partners' ability to successfully develop and obtain regulatory approval for T-20 and other product candidates and compounds discovered by the Company, and to develop the capacity, either internally or through relationships with third parties, to manufacture, sell, market and distribute approved products, if any. Achievement of these goals is dependent upon many factors which are beyond the control of the Company, including, but not limited to, results of planned and future clinical trials, changes in the requirements of the FDA, results of preclinical and nonclinical studies, the Company's ability to obtain third-party reimbursement for any products that may be approved by the FDA, the Company's ability to develop, or enter into favorable agreements with third parties to develop efficient manufacturing and distribution processes for its products, and the development of competitive therapies. There can be no assurance that the Company will ever generate significant revenues or achieve profitable operations. The Company is currently attempting to develop a novel manufacturing process for T-20 which could be more cost-effective than currently available methods of production. There can be no assurance of success of this process development. Currently available manufacturing methodologies are expensive and such costs, as well as the Company's current dependence on third parties for the manufacture of its products, and product candidates, could adversely affect the Company's profit margins and its ability to 9 commercialize T-20. There can be no assurance that the Company will be able to manufacture T-20 on a cost-effective or timely basis. T-20 Clinical Trials In August 1997, T-20 completed TRI-001, a multi-dose, dose escalation Phase I/II trial which assessed the safety, plasma pharmacokinetics and antiviral activity of T-20 as a monotherapy over 14 days. No drug-related adverse effects were seen in any of the 16 patients tested. The four patients in the highest dose group experienced a reduction in viral load to below detectable levels (less than 500 copies/ml) during the treatment period. In September 1998, TRI-003, a Phase II clinical trial that will enroll up to 78 patients at up to 12 sites in the United States, was initiated. TRI-003 is designed to assess the anitiviral activity, safety and plasma pharmacokinetics of T-20 in six treatment arms. Four distinct doses will be administered by continuous subcutaneous infusion via an infusion device developed by MiniMed Inc. (NASDAQ: MNMD), a product currently approved for insulin infusion by diabetics, and two distinct doses will be administered via intermittent subcutaneous injection. At entry all enrolled patients may either be on no other antiretroviral therapy or a stable regimen which will not change during the trial. Results from TRI-003 are expected to be reported in early 1999. The Company is currently considering various other Phase II trials which will evaluate the chronic effect of T-20 when used alone and with other antiretroviral drugs. The Company is also considering other Phase II trials which will evaluate T-20's use in other acute indications. The Company expects that data from TRI-003 and any other Phase II trials conducted should provide a basis for initiating pivotal clinical trials during 1999. Year 2000 Compliance The Company recognizes the importance of ensuring that its computer and business systems will not be adversely affected by Year 2000 issues, which result from the fact that many computer programs use only two digits to identify a year in the date field. The Company is in the process of implementing a plan to target and resolve any Year 2000 issues. The plan includes identifying all critical applications, including vendors and suppliers, assessing their compliance with Year 2000 issues, and developing contingency plans for any non-compliant critical applications. The Company expects to have completed its review and assessment of all critical systems and applications by mid-1999. To date, the Company has not identified any critical applications or vendors that are Year 2000 non-compliant. The Company believes that, based on currently available information, the cost to convert any non-compliant critical applications will not be material and will not have a material adverse effect on the Company's results of operations or financial condition. However, there can be no assurance that there will not be some unexpected costs incurred or delays encountered during the completion of the Company's Year 2000 plan, and such costs or delays could have an adverse effect on future results of operations. 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities and Use of Proceeds (a) Not applicable. (b) Not applicable. (c) Not applicable. (d) Use of Proceeds: The following information updates and supplements the information regarding use of proceeds originally filed in the Company's Form 10-Q for the quarter ended September 30, 1997, as amended to date, and relates to securities sold by the Company pursuant to the S-1 Registration Statement. Through September 30, 1998, the Company has expended approximately $9,673,000 of the total net proceeds from its initial public offering of $34,532,000 for working capital. The unused proceeds of $24,859,000 are invested in temporary investments, primarily short-term corporate debt securities. All proceeds used or invested were direct or indirect payments to others. This use of proceeds does not represent a material change in the use of proceeds described in the Company's Prospectus filed as a part of the S-1 Registration Statement. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information Any stockholder proposal submitted outside the processes of Rule 14a-8 under the Securities and Exchange Act of 1934 for presentation to the Company's 1999 Annual Meeting of Stockholders will be considered untimely for purposes of Rules 14a-4 and 14a-5 if notice thereof is received by the Company after April 4, 1999. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The exhibits filed as part of this Quarterly Report on Form 10-Q are listed on the Exhibit Index immediately preceding such exhibits and are incorporated herein by reference. (b) Reports on Form 8-K None 11 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. Trimeris, Inc. (Registrant) November 12, 1998 /s/ M.ROSS JOHNSON M. Ross Johnson President, Chief Executive Officer, and Chief Scientific Officer November 12, 1998 /s/ MATTHEW A. MEGARO - ----------------- --------------------------- Matthew A. Megaro Chief Operating Officer, Chief Financial Officer, Executive Vice President and Secretary (Principal Accounting and Financial Officer) 12 EXHIBIT INDEX Number Description 11.1 Computations of Basic Loss Per Share 27.1 Financial Data Schedule 13 EX-11 2 EXHIBIT 11.1 Exhibit 11.1 Computations of Basic Loss Per Share. TRIMERIS, INC. STATEMENTS RE: COMPUTATIONS OF BASIC LOSS PER SHARE (in thousands except per share data)
Three Months Nine Months Ended September 30, Ended September 30, 1997 1998 1997 1998 ------ ----- ---- ----- Common shares outstanding (weighted average) (1) 7,351 10,562 6,322 10,539 Common Stock equivalents (using the treasury stock method): Stock Options and Awards (weighted average) Pursuant to Staff Accounting Bulletin No. 83 (2) 100 100 100 100 ------ ------ ------ ------ Total weighted average shares 7,451 10,662 6,422 10,639 ======= ======= ====== ======= Net loss $(3,353) $(4,680) $(6,831)$(12,977) ======= ======= ======= ======= Basic net loss per share $ (0.45) $ (0.44) $ (1.06) $ 1.22) ========== ======= ======= =======
(1)Assumes the retroactive conversion of the Preferred Stock into shares of Common Stock which occurred upon the completion of the Company's Initial Public Offering in October, 1997, for all periods presented. (2)Includes all options and awards issued during the twelve-month period prior to the initial filing of the registration statement relating to the Company's Initial Public Offering, in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 83. EX-27 3 FDS --
5 0000911326 TRIMERIS, INC. 1,000 9-MOS DEC-31-1998 SEP-30-1998 21,457 3,402 56 0 0 25,138 4,247 2,582 27,503 3,193 0 0 0 11 23,461 27,503 0 270 0 0 14,589 0 91 (12,977) 0 (12,977) 0 0 0 (12,977) (1.22) (1.22)
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