-----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, KaeW2B+4of1Rs7A/kBnqf/MStKu3Oa49YQivAcSIbBhUAht4oGEs99MKj74sQaL3 H+kXsOV0ZVzfaQEDQ6Q43w== 0001012870-02-004410.txt : 20021114 0001012870-02-004410.hdr.sgml : 20021114 20021114143503 ACCESSION NUMBER: 0001012870-02-004410 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CV THERAPEUTICS INC CENTRAL INDEX KEY: 0000921506 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 431570294 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21643 FILM NUMBER: 02824374 BUSINESS ADDRESS: STREET 1: 3172 PORTER DR CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 6503848500 MAIL ADDRESS: STREET 1: 3172 PORTER DRIVE CITY: PALO ALTO STATE: CA ZIP: 94304 10-Q 1 d10q.htm FORM 10-Q Form 10-Q
 
 
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, 2002.
 
 
¨
 
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: 0-21643
 
CV THERAPEUTICS, INC.
(Exact name of Registrant as specified in its charter)
 
Delaware
   
43-1570294
(State of Incorporation)
   
(I.R.S. Employer Identification No.)
 
3172 Porter Drive, Palo Alto, California 94304
(Address of principal executive offices, including zip code)
 
Registrant’s telephone number, including area code: (650) 384-8500
 
Indicate by check whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities and 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 Common Stock, $0.001 par value, outstanding as of November 8, 2002 was 27,101,375.
 

 
PART I.    FINANCIAL INFORMATION
 
Item 1.    Financial Statements
 
CV THERAPEUTICS, INC.
BALANCE SHEETS
(in thousands, except share and per share amounts)
 
    
December 31,
2001
     
September 30,
2002
  
    
(A)
     
(unaudited)
  
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
80,911
 
   
$
24,676
 
Marketable securities
   
 
397,514
 
   
 
395,805
 
Other current assets
   
 
9,938
 
   
 
6,043
 
    
  
Total current assets
   
 
488,363
 
   
 
426,524
 
Notes receivable from related parties
   
 
951
 
   
 
1,120
 
Property and equipment, net
   
 
12,889
 
   
 
16,070
 
Other assets
   
 
5,041
 
   
 
4,322
 
    
  
Total assets
   
$
507,244
 
   
$
448,036
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable
   
$
5,529
 
   
$
2,327
 
Accrued liabilities
   
 
10,614
 
   
 
10,010
 
Current portion of capital lease obligation
   
 
779
 
   
 
487
 
Current portion of deferred revenue
   
 
1,029
 
   
 
1,029
 
    
  
Total current liabilities
   
 
17,951
 
   
 
13,853
 
Capital lease obligation
   
 
786
 
   
 
494
 
Convertible subordinated notes
   
 
196,250
 
   
 
196,250
 
Deferred revenue
   
 
3,630
 
   
 
2,858
 
Other liabilities
   
 
234
 
   
 
1,297
 
    
  
Total liabilities
   
 
218,851
 
   
 
214,752
 
Commitments
                  
Stockholders’ equity:
                  
Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding
   
 
—  
 
   
 
—  
 
Common stock, $0.001 par value, 85,000,000 shares authorized, 25,482,343 and 26,423,553 shares issued and outstanding at December 31, 2001 and September 30, 2002, respectively
   
 
494,604
 
   
 
518,170
 
Deferred compensation
   
 
(194
)
   
 
(57
)
Accumulated deficit
   
 
(210,752
)
   
 
(289,164
)
Cumulative other comprehensive income
   
 
4,735
 
   
 
4,335
 
    
  
Total stockholders’ equity
   
 
288,393
 
   
 
233,284
 
    
  
Total liabilities and stockholders’ equity
   
$
507,244
 
   
$
448,036
 
    
  
 
(A)
 
Derived from the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2001
 
See accompanying notes

2

 
CV THERAPEUTICS, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
    
Three months ended
September 30,
     
Nine months ended
September 30,
  
    
2001
     
2002
     
2001
     
2002
  
Revenues:
                                    
Collaborative research
   
$
2,862
 
   
$
1,179
 
   
$
5,694
 
   
$
3,513
 
Operating expenses:
                                    
Research and development
   
 
20,502
 
   
 
24,065
 
   
 
56,839
 
   
 
74,366
 
General and administrative
   
 
3,285
 
   
 
3,357
 
   
 
8,511
 
   
 
11,568
 
    
  
  
  
Total operating expenses
   
 
23,787
 
   
 
27,422
 
   
 
65,350
 
   
 
85,934
 
    
  
  
  
Loss from operations
   
 
(20,925
)
   
 
(26,243
)
   
 
(59,656
)
   
 
(82,421
)
Interest income
   
 
4,731
 
   
 
4,079
 
   
 
14,323
 
   
 
11,942
 
Interest expense
   
 
(2,612
)
   
 
(2,620
)
   
 
(7,856
)
   
 
(7,822
)
Other expense
   
 
(38
)
   
 
(39
)
   
 
(106
)
   
 
(111
)
    
  
  
  
Net loss
   
$
(18,844
)
   
$
(24,823
)
   
$
(53,295
)
   
$
(78,412
)
    
  
  
  
Basic and diluted net loss per share
   
$
(0.85
)
   
$
(0.95
)
   
$
(2.58
)
   
$
(3.04
)
    
  
  
  
Shares used in computing basic and diluted net loss per share
   
 
22,114
 
   
 
26,162
 
   
 
20,647
 
   
 
25,825
 
    
  
  
  
 
See accompanying notes

3

 
CV THERAPEUTICS, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
    
Nine months ended
September 30,
  
    
2001
     
2002
  
CASH FLOWS FROM OPERATING ACTIVITIES
                  
Net loss
   
$
(53,295
)
   
$
(78,412
)
Adjustments to reconcile net loss to net cash used in operating activities:
                  
Gains on the sale of investments
   
 
(1,320
)
   
 
(321
)
Amortization of deferred compensation
   
 
57
 
   
 
159
 
Depreciation and amortization
   
 
2,001
 
   
 
6,587
 
Change in assets and liabilities:
                  
Other current assets
   
 
(2,019
)
   
 
3,895
 
Accounts payable
   
 
1,415
 
   
 
(3,202
)
Accrued and other liabilities
   
 
(3,076
)
   
 
459
 
Deferred revenue
   
 
(1,772
)
   
 
(772
)
    
  
Net cash used in operating activities
   
 
(58,009
)
   
 
(71,607
)
CASH FLOWS FROM INVESTING ACTIVITIES
                  
Purchases of investments
   
 
(233,595
)
   
 
(393,874
)
Maturities of investments
   
 
51,088
 
   
 
57,430
 
Sales of investments
   
 
126,198
 
   
 
334,891
 
Capital expenditures
   
 
(8,620
)
   
 
(5,866
)
Notes receivable from related parties
   
 
(398
)
   
 
(168
)
    
  
Net cash used in investing activities
   
 
(65,327
)
   
 
(7,587
)
CASH FLOWS FROM FINANCING ACTIVITIES
                  
Payments on capital lease obligations
   
 
(567
)
   
 
(584
)
Proceeds from issuance of common stock, net of repurchases
   
 
119,200
 
   
 
23,543
 
    
  
Net cash provided by financing activities
   
 
118,633
 
   
 
22,959
 
    
  
Net decrease in cash and cash equivalents
   
 
(4,703
)
   
 
(56,235
)
Cash and cash equivalents at beginning of period
   
 
54,028
 
   
 
80,911
 
    
  
Cash and cash equivalents at end of period
   
$
49,325
 
   
$
24,676
 
    
  
 
See accompanying notes

4

 
CV THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS
 
1.    Summary of Significant Accounting Policies
 
Basis of Presentation
 
The accompanying financial statements of CV Therapeutics, Inc. have been prepared in accordance with generally accepted accounting principles, are unaudited and reflect all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary to present fairly the financial position at, and the results of operations for, the interim periods presented. The results of operations for the nine-month period ended September 30, 2002, are not necessarily indicative of the results to be expected for the entire year ending December 31, 2002, or of future operating results for any interim period. The financial information included herein should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2001, which includes the audited financial statements and the notes thereto.
 
Use of Estimates
 
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. Actual results could differ from those estimates.
 
Revenue Recognition
 
Revenue under our collaborative research arrangements is recognized based on the performance requirements of the contract. Amounts received under such arrangements consist of up-front license and periodic milestone payments. Up-front or milestone payments, which are still subject to future performance requirements, are recorded as deferred revenue and are amortized over the performance period. The performance period is estimated at the inception of the arrangement and is periodically reevaluated. The reevaluation of the performance period may shorten or lengthen the period during which the deferred revenue is recognized. We evaluate the appropriate period based on research progress attained and events such as changes in the regulatory and competitive environment. Payments received related to substantive, at-risk milestones are recognized upon achievement of the scientific or regulatory event specified in the underlying agreement. Payments received for research activities are recognized as the related research effort is performed.
 
Net Loss Per Share
 
Net loss per share is computed using the weighted average number of common shares outstanding. Common equivalent shares have been excluded from the computation as their effect is antidilutive.
 
2.    Comprehensive Loss
 
The components of comprehensive loss for the periods ended September 30, 2001, and September 30, 2002, are as follows:
 
    
Three months ended
September 30,
     
Nine months ended
September 30,
  
    
2001
     
2002
     
2001
     
2002
  
    
(in thousands)
  
Net loss
   
$
(18,844
)
   
$
(24,823
)
   
$
(53,295
)
   
$
(78,412
)
Unrealized gains (losses) on securities
   
 
3,170
 
   
 
2,243
 
   
 
4,177
 
   
 
(400
)
    
  
  
  
Comprehensive loss
   
$
(15,674
)
   
$
(22,580
)
   
$
(49,118
)
   
$
(78,812
)
    
  
  
  

5

 
3.    Equity
 
On March 28, 2002, we sold 209,645 shares of our common stock for net proceeds of $8.4 million under the financing commitment from Acqua Wellington North American Equities Fund, Ltd., after a discount based on our market capitalization in accordance with the terms of the arrangement.
 
On August 9, 2002, we sold 561,037 shares of our common stock for net proceeds of $12.5 million under the financing commitment from Acqua Wellington, after a discount based on our market capitalization in accordance with the terms of the arrangement.
 
On October 31, 2002, we sold 676,722 shares of our common stock for net proceeds of $15.0 million under the financing commitment from Acqua Wellington, after a discount based on our market capitalization in accordance with the terms of the arrangement.
 
As of November 1, 2002, we have issued 2,609,277 shares of common stock in exchange for aggregate net proceeds of $94.9 million since the inception of this arrangement.
 
4.    Commitments
 
We lease two facilities under noncancellable operating leases. The lease for one facility expires in April 2012. The lease for the second facility incorporates a sublease that expires in February 2005, and a master lease that expires in April 2012.
 
In addition, we have leased certain fixed assets under capital leases with expiration dates through 2004.
 
During the nine-month period ended September 30, 2002, we entered into certain manufacturing-related agreements in connection with the future commercial production of ranolazine.
 
Minimum payments under these commitments are as follows:
 
    
Manufacturing
Agreements
   
Operating
Leases
   
Capital
Leases
  
    
(in thousands)
  
Year ending December 31,
                       
2002
   
$
2,880
   
$
10,928
   
$
885
 
2003
   
 
4,195
   
 
11,918
   
 
448
 
2004
   
 
2,000
   
 
12,298
   
 
410
 
2005
   
 
2,250
   
 
9,795
   
 
—  
 
2006
   
 
2,250
   
 
13,256
   
 
—  
 
2007 and thereafter
   
 
2,250
   
 
76,019
   
 
—  
 
    
  
  
Total minimum payments
   
$
15,825
   
$
134,214
   
 
1,743
 
    
  
        
Less amount representing interest
                 
 
(178
)
                  
Present value of future lease payments
                 
 
1,565
 
Less current portion
                 
 
(779
)
                  
Long-term portion
                 
$
786
 
                  
 
Under the manufacturing-related agreements, additional payments above the specified minimums will be required if the FDA approves ranolazine, and in connection with the manufacture of ranolazine.

6

 
5.    Convertible Subordinated Notes
 
In March 2000, we completed a private placement of $196,250,000 aggregate principal amount of 4.75% convertible subordinated notes due March 7, 2007. The notes are unsecured and subordinated in right of payment to all existing and future senior debt as defined in the indenture governing the notes. We pay interest semi-annually on March 7th and September 7th of each year. The conversion rate is 15.66 shares of common stock per $1,000 principal amount of notes. This is equivalent to a conversion price of $63.84 per share.
 
The conversion price is subject to adjustment upon the occurrence of certain events, including the payment of dividends or distributions to our stockholders in shares of our common stock, stock splits, the issuance of rights or warrants to all of our stockholders which provide for a subscription or exercise price that is below the then current market price of our common stock, the distribution to all of our stockholders of shares of any class of our capital stock, evidence of indebtedness, cash or other assets, the distribution of cash to all of our stockholders during any twelve-month period that, in the aggregate, exceeds 10% of the aggregate market value of our then outstanding common stock, and, in certain circumstances in connection with an expired tender or exchange offer made by us, the payment to our stockholders of an aggregate consideration that exceeds 10% of the aggregate market value of our then outstanding common stock.
 
We have reserved 3,074,091 shares of authorized common stock for issuance upon conversion of the notes. We may redeem the notes on or after March 7, 2003, and prior to maturity, at a premium, or earlier if our stock price reaches certain defined levels. We incurred issuance costs related to this private placement of approximately $6,701,000, which have been recorded as other assets and are being amortized to interest expense over the seven-year life of the notes.
 
The fair value of our convertible subordinated notes on September 30, 2002 approximates $146,820,000.
 
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this Report contain forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future clinical or product development or financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of those terms and other comparable terminology. If one or more of these risks or uncertainties materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in “Risk Factors” as well as such other risks and uncertainties detailed in our other Securities and Exchange Commission reports and filings.
 
Overview
 
CV Therapeutics is a biopharmaceutical company engaged in the discovery, development and commercialization of new small molecule drugs for the treatment of cardiovascular diseases. Since our inception in December 1990, substantially all of our resources have been dedicated to research and development. To date, we have not generated any product revenues and do not expect to generate any product revenues until we receive marketing approval and launch

7

of one of our products, if at all. As of September 30, 2002, we had an accumulated deficit of $289.2 million. We expect our sources of revenues, if any, to consist of payments under corporate partnerships and interest income until one of our products receives marketing approval, if at all. The process of developing and commercializing our products requires significant research and development, preclinical testing and clinical trials, manufacturing arrangements as well as marketing approvals. These activities, together with our general and administrative expenses, are expected to result in substantial operating losses for the foreseeable future. We will not receive product revenues unless and until we or our collaborative partners complete clinical trials, obtain marketing approval, and successfully commercialize one or more of our products.
 
We are subject to risks common to biopharmaceutical companies, including risks inherent in our research, development and commercialization efforts, preclinical testing, clinical trials, uncertainty of regulatory and marketing approvals, reliance on collaborative partners, enforcement of patent and proprietary rights, the need for future capital, potential competition, use of hazardous materials and retention of key employees. In order for a product to be commercialized, it will be necessary for us and, in some cases, our collaborators, to conduct preclinical tests and clinical trials, demonstrate efficacy and safety of our product candidate to the satisfaction of regulatory authorities, obtain marketing approval, enter into manufacturing, distribution and marketing arrangements, obtain market acceptance and, in many cases, obtain adequate reimbursement from government and private insurers. We cannot provide assurance that we will generate revenues or achieve and sustain profitability in the future.
 
Critical Accounting Policies and the Use of Estimates
 
We believe the only critical accounting policy which presently involves our more significant judgments and estimates used in the preparation of our financial statements is our policy regarding revenue recognition.
 
Revenue under our collaborative research arrangements is recognized based on the performance requirements of the contract. Amounts received under such arrangements consist of up-front license and periodic milestone payments. Up-front or milestone payments which are still subject to future performance requirements are recorded as deferred revenue and are amortized over the performance period. The performance period is estimated at the inception of the arrangement and is periodically reevaluated. The reevaluation of the performance period may shorten or lengthen the period during which the deferred revenue is recognized. We evaluate the appropriate period based on research progress attained and events such as changes in the regulatory and competitive environment. Payments received related to substantive, at-risk milestones are recognized upon achievement of the scientific or regulatory event specified in the underlying agreement. Payments received for research activities are recognized as the related research effort is performed.
 
Results of Operations
 
Collaborative Research Revenues.    Collaborative research revenues decreased to $1.2 million for the quarter ended September 30, 2002, compared to $2.9 million for the quarter ended September 30, 2001. Collaborative research revenues decreased to $3.5 million for the nine-month period ended September 30, 2002, compared to $5.7 million for the nine-month period ended September 30, 2001. The decrease for both the quarter and the nine-month period ended September 30, 2002, compared to the same periods in 2001, was due to a $1.0 million milestone payment recognized in March 2001 from Biogen, Inc., earned in conjunction with their initiation of a Phase I oral development program for AdentriTM, and a $2.0 million milestone payment recognized in September 2001 from Fujisawa Healthcare Inc., related to our initiation of a Phase II clinical trial for CVT-3146, partially offset by greater reimbursement during 2002 of certain development costs related to our collaboration with Fujisawa.
 
Research and Development Expenses.    Research and development expenses increased to $24.1 million for the quarter ended September 30, 2002, compared to $20.5 million for the quarter ended September 30, 2001. Research and development expenses increased to $74.4 million for the nine-month period ended September 30, 2002, compared to $56.8 million for the nine-month period ended September 30, 2001. The increases for both the quarter and nine-month periods, compared to the same periods in 2001, were primarily due to expenses for the ranolazine program related to New Drug Application (NDA) preparation, pre-commercialization activities, and manufacturing-related

8

agreements along with hiring additional employees to support our research programs and expenses associated with our tecadenoson (CVT-510) and CVT-3146 programs. We expect research and development expenses may increase in the future as we further expand product development efforts, clinical trials and pre-commercialization efforts.
 
Management categorizes research and development expenditures into amounts related to preclinical research and amounts related to three clinical development programs, listed in rank order of estimated expenditures for all periods discussed below: ranolazine, tecadenoson (CVT-510) and CVT-3146. During the quarter ended September 30, 2002, we incurred approximately 83% of our research and development expenditures, or approximately $20.0 million, in connection with clinical development programs, and the remaining 17%, or $4.1 million, in connection with preclinical research programs. By comparison, during the quarter ended September 30, 2001, we incurred approximately 84% of our research and development expenditures, or $17.2 million, in connection with clinical development programs and the remaining 16% of our research and development expenditures, or $3.3 million, in connection with preclinical research programs. During the nine-month period ended September 30, 2002, we incurred 86% of our research and development expenditures, or approximately $63.6 million, in connection with clinical development programs, and the remaining 14% of our research and development expenditures, or $10.7 million, in connection with preclinical research programs. For the same period ended September 30, 2001, we incurred 84% of our research and development expenditures, or $47.6 million, in connection with clinical projects, and the remaining 16% of our research and development expenditures, or $9.2 million, in connection with preclinical research programs. We expect that clinical development programs will represent approximately the same portion of our overall research and development expenditures for all of 2002 as they have for the first nine months of 2002.
 
General and Administrative Expenses.    General and administrative expenses increased to $3.4 million for the quarter ended September 30, 2002, compared to $3.3 million for the quarter ended September 30, 2001. General and administrative expenses increased to $11.6 million for the nine-month period ended September 30, 2002, compared to $8.5 million for the nine-month period ended September 30, 2001. The increases for the quarter and nine-month periods ended September 30, 2002, compared to the same periods in 2001, were due to fees paid in connection with outside consulting services and additional personnel and facility expenses to support our increased research, development and commercialization efforts. We expect general and administrative expenses to continue to increase in the future in line with our research, development and commercialization activities.
 
Interest Income.    Interest income was $4.1 million for the quarter ended September 30, 2002, compared to $4.7 million for the quarter ended September 30, 2001. Interest income was $11.9 million for the nine-month period ended September 30, 2002, compared with $14.3 million for the nine-month period ended September 30, 2001. The decrease for the quarter ended September 30, 2002, compared to the same period in 2001, was due to lower average interest rates, partially offset by higher average investment balances. The decrease for the nine-month period ended September 30, 2002, compared to the same period in 2001, was due to realized losses associated with certain securities and lower average interest rates, partially offset by higher average investment balances due to the proceeds received from our follow-on equity offerings in June 2001 and December 2001. We expect that interest income will fluctuate with average investment balances and market interest rates.
 
Interest Expense.    Interest expense was $2.6 million for the quarter ended September 30, 2002, and $7.8 million for the nine-month period ended September 30, 2002, which was consistent with interest expense for the same periods in 2001. Our subordinated convertible notes account for $2.3 million of the interest expense in each quarter. We expect that interest expense will fluctuate with average loan balances.
 
Liquidity and Capital Resources
 
We have financed our operations since inception primarily through private placements and public offerings of debt and equity securities, equipment and leasehold improvement financing, other debt financing and payments under corporate collaborations. For at least the next 24 months, operations can be funded from our cash, cash equivalents and marketable securities, which totaled $420.5 million as of September 30, 2002.

9

 
In March 2000, we entered into a purchase agreement pursuant to which we sold to certain purchasers $196.3 million in aggregate principal amount of convertible subordinated notes. The offering of the notes was made to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended. Interest on the notes accrues at a rate of 4.75% per year, subject to adjustment in certain circumstances. The notes will mature on March 7, 2007, and are convertible into shares of our common stock at a conversion price of $63.84 per share, subject to adjustment in certain circumstances, as more fully described in Note 5 to our financial statements. We may, at our option, redeem the notes at any time after March 7, 2003, or earlier if our stock price reaches certain defined levels.
 
In July 2000, we entered into a collaboration agreement with Fujisawa to develop and market second generation pharmacologic cardiac stress agents. In connection with the signing of this agreement, we received $10.0 million from Fujisawa consisting of an up-front payment and the purchase of our common stock. In September 2001, we received a $2.0 million milestone payment under this collaboration for initiating a Phase II clinical trial for CVT-3146.
 
In August 2000, we entered into a financing arrangement with Acqua Wellington to purchase our common stock. Under the purchase agreement, as presently amended, we may sell a total of $149.0 million of our common stock to Acqua Wellington through December 2003. The purchase agreement provides that from time to time, in our sole discretion, we may present Acqua Wellington with draw down notices constituting offers to sell our common stock for specified total proceeds over a specified pricing period. Once presented with a draw down notice, Acqua Wellington is required to purchase a pro rata portion of shares of our common stock as allocated on each trading day during the pricing period on which the daily volume weighted average price for our common stock exceeds a threshold price that we determine and state in the draw down notice. The threshold price we set may not be below $20 per share without Acqua Wellington’s consent. The per share price then equals the daily volume weighted average price on each date during the pricing period, less a 4% to 6% discount to be determined based on our market capitalization at the start of the pricing period, unless we agree with Acqua Wellington to a different discount. However, if the daily volume weighted average price falls below the threshold price on any day in the pricing period, Acqua Wellington is not required to purchase the pro rata portion of shares allocated to that day, but can elect to buy that pro rata portion of shares at the threshold price less the applicable discount.
 
Further, if during a pricing period we enter into an agreement with a third party to issue common stock or securities convertible into common stock (excluding stock or options granted pursuant to our stock option, stock purchase or shareholder rights plans, common stock or warrants issued in connection with licensing agreements and/or collaborative agreements and warrants issued in connection with equipment financings) at a net discount to the then current market price, if we issue common stock with warrants (other than provided in the prior parenthetical), or if we implement a mechanism for the reset of the purchase price of our common stock below the then current market price, then Acqua Wellington can elect to purchase the shares so requested by us in the draw down notice at the price established pursuant to the prior paragraph, to purchase such shares at the third party’s price, net of discount or fees, or to not purchase our common stock during that pricing period.
 
The purchase agreement also provides that from time to time, in our sole discretion, we may grant Acqua Wellington a right to exercise one or more call options to purchase additional shares of our common stock during a pricing period, in an amount and for a threshold price that we determine and state in the draw down notice. However, the total call amount for any given draw down cannot exceed a specified maximum amount, and the amount of proceeds we may receive by exercise of a call option for any given trading day is also limited. If Acqua Wellington exercises the call option, we will issue and sell the shares of our common stock subject to the call option at a price equal to the greater of the daily volume weighted average price of our common stock on the day Acqua Wellington exercises its call option, or the threshold price for the call option that we have determined, less a 4% to 6% discount (based on our market capitalization).
 
The combined total value of shares that we may sell to Acqua Wellington through draw downs and call option exercises under the arrangement may not exceed $149.0 million. As of November 1, 2002, we have issued 2,609,277 shares of common stock in exchange for aggregate net proceeds of $94.9 million under this arrangement, including $20.9 million in the nine-month period ended September 30, 2002, and $15.0 million on October 31, 2002.

10

 
In June 2001, we sold 2,020,203 shares of our common stock in an underwritten public offering at a price to the public of $49.50 per share pursuant to a prospectus supplement under a shelf registration statement, resulting in net proceeds of $95.9 million, after deducting the underwriting expenses and commissions and other offering expenses. In December 2001, we sold 2,875,000 shares of our common stock in an underwritten public offering at a price to the public of $52.50 per share pursuant to a prospectus supplement under a shelf registration statement, resulting in net proceeds of $143.3 million, after deducting the underwriting expenses and commissions and other offering expenses. We are using and intend to continue to use the net proceeds from these sales for general corporate purposes, which may include funding research, development and product manufacturing, development of clinical trials, preparation and submission of a new drug application, product commercialization, increasing our working capital, reducing indebtedness, acquisitions of or investments in businesses, products or technologies that are complementary to our own, and capital expenditures.
 
Cash, cash equivalents and marketable securities at September 30, 2002 totaled $420.5 million compared to $478.4 million at December 31, 2001. The decrease was due to utilizing $71.6 million to fund operations and $5.9 million for capital expenditures, partially offset by $23.5 million raised from the issuance of our common stock, including $20.9 million of common stock issued pursuant to our arrangement with Acqua Wellington.
 
Net cash used in operations for the nine months ended September 30, 2002, was $71.6 million compared to $58.0 million for the nine months ended September 30, 2001. The increase was primarily due to increased research, development and commercialization efforts.
 
As of September 30, 2002, we have invested $27.3 million in property and equipment, with the rate of investment having increased in line with increased research, development and commercialization efforts and as we expand our facilities. We expect to continue to make investments in property and equipment to support our growth.
 
Under our license agreement with Syntex (U.S.A.) relating to ranolazine, we paid an initial license fee. In addition, we are obligated to make certain milestone payments to Syntex, upon receipt of the first and second product approvals for ranolazine in any of certain major market countries (consisting of France, Germany, Italy, the United States and the United Kingdom). Unless the agreement is terminated, we will pay Syntex, on or before March 31, 2005, $7.0 million plus interest accrued thereon from May 1, 2002 until the date of payment. Unless the agreement is terminated, if the second product approval in one of the major market countries occurs before May 1, 2004, we will pay Syntex, on or before March 31, 2006, $7.0 million plus interest accrued thereon from the date of approval until the date of payment, and if the second such product approval occurs after May 1, 2004 but before March 31, 2006, we will pay Syntex, on or before March 31, 2006, $7.0 million plus interest accrued thereon from May 1, 2004, until the date of payment. Unless the agreement is terminated, if the second product approval in one of the major market countries has not occurred by March 31, 2006, we will pay Syntex $3.0 million on or before March 31, 2006, and if we receive the second product approval after March 31, 2006, we will pay Syntex $4.0 million within thirty (30) days after the date of such second product approval.
 
We may require substantial additional funding in order to complete our research and development activities and commercialize any potential products. We currently estimate that our existing resources and projected interest income will enable us to maintain our current and planned operations for at least the next 24 months. However, we cannot assure you that we will not require additional funding prior to then or that additional financing will be available on acceptable terms or at all.
 
Our future capital requirements will depend on many factors, including scientific progress in our research, development and commercialization programs, the size and complexity of these programs, the timing, scope and results of preclinical studies and clinical trials, our ability to establish and maintain corporate partnerships, the time and costs involved in obtaining regulatory approvals, the costs involved in filing, prosecuting and enforcing patent claims, competing technological and market developments, the cost of manufacturing preclinical and clinical material and other factors not within our control. We cannot guarantee that the additional financing to meet our capital requirements will be available on acceptable terms or at all. Insufficient funds may require us to delay, scale back or eliminate some or all of our research, development or commercialization programs, to lose rights under existing licenses or to

11

relinquish greater or all rights to product candidates on less favorable terms than we would otherwise choose, or may adversely affect our ability to operate as a going concern. If we issue equity securities to raise additional funds, substantial dilution to existing stockholders may result.
 
Contractual Obligations and Significant Commercial Commitments
 
During the nine-month period ended September 30, 2002, we entered into certain manufacturing-related agreements in connection with the future commercial production of ranolazine.
 
The following summarizes our contractual obligations for the fiscal years ending December 31, 2002, through December 31, 2006, and thereafter:
 
    
2002
   
2003
   
2004
   
2005
   
2006
   
Thereafter
   
Total
    
(in thousands)
Convertible subordinated notes
   
$
9,322
   
$
9,322
   
$
9,322
   
$
9,322
   
$
9,322
   
$
200,911
   
$
247,521
Capital leases
   
 
885
   
 
448
   
 
410
   
 
—  
   
 
—  
   
 
—  
   
 
1,743
Operating leases
   
 
10,928
   
 
11,918
   
 
12,298
   
 
9,795
   
 
13,256
   
 
76,019
   
 
134,214
Manufacturing-related agreements
   
 
2,880
   
 
4,195
   
 
2,000
   
 
2,250
   
 
2,250
   
 
2,250
   
 
15,825
    
  
  
  
  
  
  
    
$
24,015
   
$
25,883
   
$
24,030
   
$
21,367
   
$
24,828
   
$
279,180
   
$
399,303
    
  
  
  
  
  
  
 
Under the manufacturing-related agreements, additional payments above the specified minimums will be required if the FDA approves ranolazine, and in connection with the manufacture of ranolazine.
 
Risk Factors
 
Our product candidates will take at least several years to develop, and we cannot assure you that we will successfully develop, market and manufacture these products.
 
Since our inception in 1990, we have dedicated substantially all of our resources to research and development. We do not have any marketed products, and we have not generated any product revenue. Because all of our potential products are in research, preclinical or clinical development, we have not generated any product revenues to date, and do not expect to generate any product revenues until we receive marketing approval and launch one of our products, if at all.
 
We have not applied for or received regulatory approval in the United States or any foreign jurisdiction for the commercial sale of any of our products. All of our product candidates are either in clinical trials under an Investigational New Drug application, or IND, or applicable foreign regulatory authority submission, or are in preclinical research and development. We have not submitted a New Drug Application, or NDA, to the United States Food and Drug Administration, or FDA, or an equivalent application to any other foreign regulatory authorities for any of our product candidates, and the products have not been determined to be safe or effective in humans for their intended uses.
 
Conducting clinical trials is a lengthy, time-consuming and expensive process. Before obtaining regulatory approvals for the commercial sale of any products, we must demonstrate to regulatory authorities through preclinical testing and clinical trials that our product candidates are safe and effective for use in humans. We will continue to incur substantial expense for, and devote a significant amount of time to, preclinical testing and clinical trials.
 
Drug discovery methods based upon molecular cardiology are relatively new. We cannot be certain that these methods will lead to commercially viable pharmaceutical products. In addition, some of our compounds within our adenosine receptor research, metabolism, atherosclerosis and cell cycle inhibition programs are in the early stages of

12

research and development. We have not submitted IND applications or commenced clinical trials for these new compounds. We cannot be certain when these clinical trials will commence, if at all. Because these compounds are in the early stages of product development, we could abandon further development efforts before they reach clinical trials.
 
We cannot be certain that any of our product development efforts will be completed or that any of our products will be shown to be safe and effective. Regulatory authorities have broad discretion to interpret safety and efficacy data in making approval and other regulatory decisions. Even if we believe that a product is safe and effective, we cannot assure you that regulatory authorities will interpret the data the same way and we may not obtain the required regulatory approvals. Furthermore, we may not be able to manufacture our products in commercial quantities or market any products successfully.
 
If we are unable to satisfy the regulatory requirements for our products, we will not be able to commercialize our drug candidates.
 
All of our products may require additional development, preclinical studies and/or clinical trials, and will require regulatory approval, prior to commercialization. Any delays in our clinical trials would delay market launch, increase our cash requirements, increase the volatility of our stock price and result in additional operating losses.
 
Many factors could delay completion of our clinical trials, including:
 
 
•
 
slower than anticipated patient enrollment;
 
 
•
 
difficulty in obtaining sufficient supplies of clinical trial materials; and
 
 
•
 
adverse events occurring during the clinical trials.
 
For example, our first Phase III clinical trial of ranolazine, called Monotherapy Assessment of Ranolazine In Stable Angina, or MARISA, had challenging enrollment criteria. As a result, enrollment for this trial was slower than anticipated.
 
In addition, data obtained from preclinical and clinical activities are susceptible to different interpretations, which could delay, limit or prevent regulatory approval of our products. For example, some drugs that prolong the electrocardiographic QT interval carry an increased risk of serious cardiac rhythm disturbances, or arrhythmias, while other drugs that prolong the QT interval do not carry an increased risk of arrhythmias. Small but statistically significant increases in the QT interval were observed in clinical trials of ranolazine. However, other clinical and preclinical data do not suggest that ranolazine significantly pre-disposes patients to arrhythmias. Regulatory authorities such as the FDA may interpret these data differently, which could delay, limit or prevent regulatory approval of ranolazine.
 
Delays in approvals or rejections of marketing applications may be based upon many factors, including regulatory requests for additional analyses, data and/or studies, regulatory questions regarding data and results, changes in regulatory policy during the period of product development and/or the emergence of new information regarding our products or other products. For example, the initial clinical trials with ranolazine used an immediate release formulation of ranolazine, while a sustained release formulation, which is the formulation intended for commercial use, was used in the Phase III MARISA and CARISA trials and most other clinical trials conducted after 1997. Consequently, the NDA for ranolazine will contain data from trials using two different formulations, which is subject to interpretation by the FDA. An unfavorable interpretation of these combined data could delay or prevent regulatory approval. Furthermore, regulatory attitudes towards the data and results required to demonstrate safety and efficacy change over time and can be affected by many factors, including the emergence of new information (including on other products) and agency funding, staffing and leadership. We cannot be sure whether future changes to the regulatory environment will be favorable or unfavorable to our business prospects.

13

 
We may be unable to maintain our proposed schedules for IND applications and clinical protocol submissions to the FDA, initiations of clinical trials and completions of clinical trials, as a result of FDA regulatory action or other factors such as lack of funding or complications that may arise in any phase of the clinical trial program.
 
Furthermore, even if our clinical trials occur on schedule, the results may differ from those obtained in preclinical studies and earlier clinical trials. Clinical trials may not demonstrate sufficient safety or efficacy to obtain the necessary approvals.
 
If we are unable to satisfy governmental regulations relating to the development of our drug candidates, we may be unable to obtain or maintain necessary regulatory approvals to commercialize our products.
 
The research, testing, manufacturing and marketing of drug products are subject to extensive regulation by numerous regulatory authorities in the United States and other countries. Failure to comply with FDA or other applicable regulatory requirements may subject a company to administrative or judicially imposed sanctions. These include:
 
 
•
 
warning letters;
 
 
•
 
civil penalties;
 
 
•
 
criminal penalties;
 
 
•
 
injunctions;
 
 
•
 
product seizure or detention;
 
 
•
 
product recalls;
 
 
•
 
total or partial suspension of manufacturing; and
 
 
•
 
FDA refusal to review or approve pending NDAs or supplements to approved NDAs.
 
The process of obtaining FDA and other required regulatory approvals, including foreign approvals, often takes many years and can vary substantially based upon the type, complexity and novelty of the products involved. Furthermore, this approval process is extremely expensive and uncertain. We may not be able to maintain our proposed schedules for the submission of an NDA for any of our products. If we submit an NDA to the FDA for any of our products, the FDA must decide whether to either accept or reject the submission for filing. We cannot guarantee that any of our NDA submissions will be accepted for filing and review by the FDA. We also cannot guarantee that any of our products under development will be approved for marketing by the FDA or corresponding foreign regulatory authorities. Even if marketing approval of a product is granted, we cannot be certain that we will be able to obtain the labeling claims necessary or desirable for the promotion of the product.
 
In addition, the regulatory environment in which our regulatory submissions may be reviewed changes over time. For example, average review times at the FDA for marketing approval applications have fluctuated over the last 10 years, and we cannot predict what the review time for any of our submissions will be. In addition, review times at the FDA can be affected by a variety of factors, including federal budget and funding levels and statutory and regulatory changes.
 
Even if we obtain a marketing approval, we may be required to undertake post-marketing clinical trials. In addition, identification of side effects or potential safety issues after a drug is on the market or the occurrence of manufacturing-related problems could cause or require subsequent withdrawal of approval, reformulation of the drug, additional preclinical testing or clinical trials, changes in labeling of the product, and/or additional regulatory approvals.

14

 
If we receive a marketing approval, we will also be subject to ongoing FDA post-marketing obligations and continued regulatory review, such as continued safety reporting requirements. In addition, we or our third party manufacturers will be required to adhere to stringent federal regulations setting forth current good manufacturing practices for pharmaceuticals, known as cGMP regulations. These regulations require, among other things, that we manufacture our products and maintain our records in a carefully prescribed manner with respect to manufacturing, testing and quality control activities.
 
If we receive marketing approval and if any of our products or services become reimbursable by a government health care program, such as Medicare or Medicaid, we will become subject to certain federal and state health care fraud and abuse and reimbursement laws. These laws include the federal Medicare and Medicaid Fraud and Abuse Act,” “False Claims Act,” “Prescription Drug Marketing Act,” and “Physician Self-Referral Law,” and their many state counterparts. If and when we become subject to such laws, our arrangements with third parties, including health care providers, physicians, vendors, distributors, wholesalers and Innovex, will need to comply with these laws, as applicable. We do not know whether our existing or future arrangements will be found to be compliant. Violations of these statutes could result in substantial criminal and civil penalties and exclusion from governmental health care programs.
 
Our products, even if approved by the FDA or foreign regulatory agencies, may not achieve market acceptance.
 
If any of our products, after receiving FDA or foreign regulatory approvals, fail to achieve market acceptance, our ability to become profitable in the future will be adversely affected. We believe that market acceptance will depend on our ability to provide acceptable evidence of safety, efficacy and cost effectiveness. If the data from our programs do not provide this evidence, market acceptance of our products will be adversely affected.
 
In addition, we believe that the level of market acceptance of our products will depend in part on our ability to obtain favorable labeling claims from regulatory authorities. Regulatory authorities have broad discretion in approving the labeling for products. Approved labeling (if any) would have a direct impact on our marketing, promotional and sales programs. Unfavorable labeling would restrict our marketing, promotional and sales programs, which would adversely affect market acceptance of our products.
 
If we are unable to compete successfully in our market, it will harm our business.
 
Our ability to compete successfully in our market will directly affect the market acceptance of our products. The pharmaceutical and biopharmaceutical industries, and the market for cardiovascular drugs in particular, are intensely competitive. If our products receive marketing approvals, they will often compete with well-established, proprietary and generic cardiovascular therapies that have generated substantial sales over a number of years. Even if our products have no direct competition, the promotional efforts for our products will have to compete against the promotional efforts of other products to be noticed by physicians and patients. Moreover, the level of promotional effort in the pharmaceutical and biopharmaceutical markets has increased substantially. Market acceptance of our products will be affected by the level of promotional effort that we are able to provide for our products. We cannot assure you that the level of promotional effort that we provide for our products will be sufficient to obtain market acceptance of those products.
 
In addition, we are aware of companies that are developing products that may compete in the same markets as our products. There may also be potentially competitive products of which we are not aware. Many of these potential competitors may have substantially greater product development capabilities and financial, scientific, marketing and sales resources. Other companies may succeed in developing products earlier or obtain approvals from regulatory authorities more rapidly than either we or our corporate partners are able to achieve. Potential competitors may also develop products that are safer or more effective than those under development or proposed to be developed by us and our corporate partners. In addition, research and development by others could render our technology or our products obsolete or non-competitive.

15

 
Failure to obtain adequate reimbursement from government health administration authorities, private health insurers and other organizations could materially adversely affect our future business, results of operations and financial condition.
 
Our ability and the ability of our existing and future corporate partners to market and sell our products will depend in part on the extent to which reimbursement for the cost of our products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Third party payers are increasingly challenging the price of medical products and services.
 
Significant uncertainty exists as to the reimbursement status of newly approved health care products. In addition, for sales of our products in Europe, we will be required to seek reimbursement on a country-by-country basis. We cannot be certain that any products approved for marketing will be considered cost effective, that reimbursement will be available, or that allowed reimbursement will be adequate. In addition, payers’ reimbursement policies could adversely affect our or any corporate partner’s ability to sell our products on a profitable basis.
 
We have no marketing or sales experience, and if we are unable to enter into or maintain collaborations with marketing partners or if we are unable to develop our own sales and marketing capability, we may not be successful in commercializing our products.
 
We currently have no sales or distribution capability and only limited marketing capability. As a result, we depend on collaborations with third parties, such as Innovex, Biogen and Fujisawa, which have established distribution systems and direct sales forces. To the extent that we enter into co-promotion or other licensing arrangements, our revenues will depend upon the efforts of third parties, over which we may have little control. For instance, we have entered into a sales and marketing services agreement with Innovex with respect to ranolazine. Innovex will market and sell ranolazine in the United States using a dedicated sales force if and when the FDA approves the marketing of ranolazine. Our successful commercialization of ranolazine depends on Innovex performing its contractual obligations, and the level of success will depend at least in part on Innovex’s efforts. Similarly, Biogen is responsible for worldwide marketing and sales of any product that results from the AdentriTM program, and Fujisawa is responsible for marketing and sales of CVT-3146 in North America.
 
If we are unable to reach and maintain agreement with one or more partners, we may be required to market our products directly. We may elect to establish our own specialized sales force and marketing organization to market our products to cardiologists. In order to do this, we would have to develop a marketing and sales force with technical expertise and with supporting distribution capability. Developing a marketing and sales force is expensive and time consuming and could delay any product launch. We cannot be certain that we will be able to develop this capacity.
 
If we are unable to attract and retain collaborators, licensors and licensees, the development of our products could be delayed and our future capital requirements could increase substantially.
 
We may not be able to retain current or attract new corporate and academic collaborators, licensors, licensees and others. Our business strategy requires us to enter into various arrangements with these parties, and we are dependent upon the success of these parties in performing their obligations. If we fail to obtain and maintain these arrangements, the development and/or commercialization of our products would be delayed. We may be unable to proceed with the development, manufacture or sale of products or we might have to fund development of a particular product candidate internally. If we have to fund the development and commercialization of substantially all of our products internally, our future capital requirements will increase substantially.
 
The collaborative arrangements that we may enter into in the future may place responsibility on the collaborative partner for preclinical testing and clinical trials, manufacturing and preparation and submission of applications for regulatory approval of potential pharmaceutical products. We cannot control the amount and timing of resources that our collaborative partners devote to our programs. If a collaborative partner fails to successfully develop or

16

commercialize any product, product launch would be delayed. In addition, our collaborators may pursue competing technologies or product candidates.
 
Under our collaborative arrangements, we or our collaborative partners may also have to meet performance milestones. If we fail to meet our obligations under our collaborative arrangements, our collaborators could terminate their arrangements or we could lose our rights to the compounds under development. For example, under our agreement with Innovex, we are required to launch the product by a specific date. If we fail to reach this milestone, Innovex will no longer be obligated to provide sales and marketing services for ranolazine. Under our agreement with Biogen, in order for us to receive development milestone payments, Biogen must meet development milestones. Under our license agreement with Syntex for ranolazine, we are required to use commercially reasonable efforts to develop and commercialize ranolazine for angina, and have related milestone payment obligations. Under our agreement with Fujisawa, we are responsible for development activities and must meet development milestones in order to receive development milestone payments.
 
In addition, collaborative arrangements in our industry are extremely complex, particularly with respect to intellectual property rights, financial provisions, and the parties’ respective rights with respect to decision making. Disputes may arise in the future with respect to these issues, such as the ownership of rights to any technology developed with or by third parties. These and other possible disagreements between us and our collaborators could lead to delays in the collaborative research, development or commercialization of product candidates. These disputes could also result in litigation or arbitration, which is time consuming, expensive and uncertain.
 
We expect to continue to operate at a loss and may never achieve profitability.
 
We cannot be certain that we will ever achieve and sustain profitability. Since our inception, we have been engaged in research and development activities. We have generated no product revenues. As of September 30, 2002, we had an accumulated deficit of $289.2 million. The process of developing and commercializing our products requires significant additional research and development, preclinical testing and clinical trials, as well as regulatory approvals and marketing and sales efforts. These activities, together with our general and administrative expenses, are expected to result in operating losses for the foreseeable future. Even if we are able to obtain marketing approvals and generate product revenues, we may not achieve profitability.
 
If we are unable to secure additional financing, we may be unable to complete our research and development activities or successfully commercialize any products.
 
We may require substantial additional funding in order to complete our research and development activities and commercialize any of our products. In the past, we have financed our operations primarily through the sale of equity and debt securities, payments from our collaborators, equipment and leasehold improvement financing and other debt financing. We have generated no product revenue and do not expect to do so for at least several years. We anticipate that our existing resources and projected interest income will enable us to maintain our current and planned operations for at least the next 24 months. However, we may require additional funding prior to that time.
 
Additional financing may not be available on acceptable terms or at all. If we are unable to raise additional funds, we may, among other things:
 
 
•
 
have to delay, scale back or eliminate some or all of our research and/or development programs;
 
 
•
 
lose rights under existing licenses;
 
 
•
 
have to relinquish more of, or all of, our rights to product candidates on less favorable terms than we would otherwise seek; and
 
 
•
 
be unable to operate as a going concern.

17

 
Our future capital requirements will depend on many factors, including:
 
 
•
 
the amount of revenue, if any, that we are able to obtain from any approved products, and the time and costs required to achieve those revenues;
 
 
•
 
the timing, scope and results of preclinical studies and clinical trials;
 
 
•
 
the size and complexity of our programs;
 
 
•
 
the time and costs involved in obtaining regulatory approvals;
 
 
•
 
the cost of launching our products;
 
 
•
 
the costs of commercializing our products, including marketing, promotional and sales costs;
 
 
•
 
the cost of manufacturing or obtaining preclinical, clinical and commercial materials;
 
 
•
 
our ability to establish and maintain corporate partnerships;
 
 
•
 
competing technological and market developments;
 
 
•
 
the costs involved in filing, prosecuting and enforcing patent claims; and
 
 
•
 
scientific progress in our research and development programs.
 
If additional funds are raised by issuing equity securities, our existing stockholders will experience dilution. There may be additional factors that could affect our need for additional financing. Many of these factors are not within our control.
 
If we are unable to effectively protect our intellectual property, we may be unable to complete development of any products and we may be put at a competitive disadvantage; and if we are involved in an intellectual property rights dispute, we may not prevail and may be subject to significant liabilities or required to license rights from a third party.
 
Our success will depend to a significant degree on our ability to:
 
 
•
 
obtain patents and licenses to patent rights;
 
 
•
 
maintain trade secrets;
 
 
•
 
obtain trademarks; and
 
 
•
 
operate without infringing on the proprietary rights of others.
 
In 2001, we received an issued patent from the U.S. Patent and Trademark Office for a method of using ranolazine sustained release formulations, including the formulation used in the MARISA and CARISA trials, for the treatment of chronic angina. In 2002, broadened issued claims in the United States were obtained covering a wider range of sustained release formulations. However, in general we cannot be certain that patents will issue from any of our pending or future patent applications, that any issued patent will not be lost through an interference or opposition proceeding, reexamination request, infringement litigation or otherwise, that any issued patent will be sufficient to protect our technology and investments, or that we will be able to obtain extensions of patents beyond the initial term.

18

 
Although United States patent applications are now published 18 months after their filing date, as provided by federal legislation enacted in 1999, this statutory change applies only to applications filed on or after November 29, 2000. Applications filed in the United States prior to this date are maintained in secrecy until a patent issues. As a result, we can never be certain that others have not filed patent applications for technology covered by our pending applications or that we were the first to invent the technology. There may be third party patents, patent applications, trademarks and other intellectual property relevant to our compounds, products, services and technology which are not known to us and that block or compete with our compounds, products, services or technology.
 
Competitors may have filed applications for, or may have received or in the future may receive, patents, trademarks and/or other proprietary rights relating to compounds, products, services or technology that block or compete with ours. We may have to participate in interference proceedings declared by the Patent and Trademark Office. These proceedings determine the priority of invention and, thus, the right to a patent for the technology in the United States. In addition, litigation may be necessary to enforce any patents or trademarks issued to us or to determine the scope and validity of the proprietary rights of third parties. Litigation and interference proceedings, even if they are successful, are expensive to pursue, and we could use a substantial amount of our limited financial resources in either case.
 
Just as it is important to protect our proprietary rights, we also must not infringe patents or trademarks issued to competitors that might cover technology used in our compounds, products, services or technology. If third parties own or have proprietary rights to technology or other intellectual property that we need in our product development and commercialization efforts, we will need to obtain a license to those rights. We cannot assure you that we will be able to obtain such licenses on economically reasonable terms. If we fail to obtain any necessary licenses, we may be unable to complete product development and commercialization.
 
We also rely on proprietary technology including trade secrets to develop and maintain our competitive position. Although we seek to protect all of our proprietary technology, in part by confidentiality agreements with employees, consultants, collaborators, advisors and corporate partners, these agreements may be breached. We cannot assure you that the parties to these agreements will not breach them or that these agreements will provide meaningful protection or adequate remedies in the event of unauthorized use or disclosure of our proprietary technology. In that event, we may not have adequate remedies to protect our proprietary technology including trade secrets. As a result, third parties may gain access to our trade secrets and other proprietary technology, or our trade secrets and other proprietary technology may become public. In addition, it is possible that our proprietary technology will otherwise become known or be discovered independently by our competitors.
 
Patent litigation is widespread in the biopharmaceutical industry. Although no third party has asserted a claim of infringement against us, we cannot assure you that third parties will not assert patent or other intellectual property infringement claims against us with respect to our compounds, products, services, technology or other matters. If they do, we may not prevail and, as a result, may be subject to significant liabilities to third parties, may be required to license the disputed rights from the third parties or may be required to cease using the technology. We may not be able to obtain any necessary licenses on reasonable terms, if at all. Any such claims against us, with or without merit, as well as claims initiated by us against third parties, can be time-consuming and expensive to defend or prosecute.
 
We have no manufacturing experience and will depend on third parties to manufacture our products.
 
We do not currently operate manufacturing facilities for clinical or commercial production of our products under development. We have no experience in manufacturing and currently lack the resources or capability to manufacture any of our products on a clinical or commercial scale. As a result, we are dependent on corporate partners, licensees or other third parties for the manufacturing of clinical and commercial scale quantities of our products.
 
For example, we have entered into agreements with third party manufacturers for clinical scale production of ranolazine’s active pharmaceutical ingredient and for ranolazine tableting, which we believe are sufficient to support the remainder of the clinical program to support filing of an NDA for ranolazine for chronic angina. In addition, we have entered into several other manufacturing agreements relating to ranolazine, including for commercial scale or

19

scale-up of bulk active pharmaceutical ingredient, tableting, and supply of a raw material component of the product. However, the commercial launch of ranolazine is dependent on these third party arrangements, and could be affected by any delays or difficulties in performance. In addition, because we have used different manufacturers for elements of the ranolazine supply chain in different clinical trials and for potential commercial supply prior to FDA approval of ranolazine, in order to obtain marketing approval we will be required to demonstrate to the FDA’s satisfaction the bioequivalence or therapeutic equivalence of the multiple sources of ranolazine used in our clinical trials to the product to be commercially supplied. An unfavorable regulatory interpretation by the FDA could delay or prevent regulatory approval.
 
Furthermore, we and our third party manufacturers must pass a preapproval inspection of facilities by the FDA and corresponding foreign regulatory authorities before obtaining marketing approval, and will be subject to periodic inspection by the FDA and corresponding foreign regulatory authorities. We cannot guarantee that such inspections will not result in compliance issues that could prevent or delay marketing approval, or require us to expend money or other resources to correct. In addition, drug product manufacturing facilities in California must be licensed by the State of California, and other states may have comparable requirements. We cannot assure you that we will be able to obtain such licenses.
 
Our business depends on certain key personnel, the loss of whom could weaken our management team, and on attracting and retaining qualified personnel.
 
The growth of our business and our success depends in large part on our ability to attract and retain key management, research and development, sales and marketing and other operating and administrative personnel. We cannot assure you that we will be able to attract and retain the qualified personnel or develop the expertise in these areas as needed for our business. Our ability to attract and retain key employees in a competitive recruiting environment is dependent on our ability to offer competitive compensation packages, which typically include stock option grants. Current and proposed changes in laws, regulations, corporate governance standards, listing requirements and accounting treatments regarding stock options may limit or impair our ability to attract and retain key personnel. Although we have entered into executive severance agreements with certain executives, we have not entered into any employment agreements with key executives. The loss of the services of one or more members of these groups or the inability to attract and retain additional personnel and develop expertise as needed could limit our ability to develop and commercialize our existing drugs and future drug candidates. Such persons are in high demand and often receive competing employment offers.
 
Our failure to manage our rapid growth could harm our business.
 
We have experienced rapid growth and expect to continue to expand our operations over time. As we prepare for the commercialization of ranolazine, continue to conduct clinical trials for our product candidates and expand our drug discovery efforts, we have added personnel in many areas, including operations, regulatory, clinical, finance and information systems. We may not manage this growth effectively, which would harm our business and cause us to incur higher operating costs. If rapid growth continues, it may strain our operational, managerial and financial resources.
 
Our operations involve hazardous materials, which could subject us to significant liability.
 
Our research and development and manufacturing activities involve the controlled use of hazardous materials, including hazardous chemicals, radioactive materials and pathogens, and the generation of waste products. Accordingly, we are subject to federal, state and local laws governing the use, handling and disposal of these materials. We may have to incur significant costs to comply with additional environmental and health and safety regulations in the future. Although we believe that our safety procedures for handling and disposing of hazardous materials comply in all material respects with regulatory requirements, we cannot eliminate the risk of accidental contamination or injury from these materials. In the event of an accident or environmental discharge, we may be held liable for any resulting

20

damages, which may exceed our financial resources and may materially adversely affect our business, financial condition and results of operations. Although we believe that we are in compliance in all material respects with applicable environmental laws and regulations, there can be no assurance that we will not be required to incur significant costs to comply with environmental laws and regulations in the future. There can also be no assurance that our operations, business or assets will not be materially adversely affected by current or future environmental laws or regulations.
 
We may be subject to product liability claims if our products harm people, and we have only limited product liability insurance.
 
The manufacture and sale of human therapeutic products involve an inherent risk of product liability claims and associated adverse publicity. We currently have only limited product liability insurance for clinical trials and no commercial product liability insurance. We do not know if we will be able to maintain existing or obtain additional product liability insurance on acceptable terms or with adequate coverage against potential liabilities. This type of insurance is expensive and may not be available on acceptable terms or at all. If we are unable to obtain or maintain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims, we may be unable to commercialize our products. A successful product liability claim brought against us in excess of our insurance coverage, if any, may require us to pay substantial amounts. This could adversely affect our results of operations and our need for and the timing of additional financing.
 
Our insurance policies are expensive and only protect us from some business risks, which will leave us exposed to significant, uninsured liabilities.
 
We do not carry insurance for all categories of risk that our business may encounter. For example, we do not carry earthquake insurance. In the event of a major earthquake in our region, our business could suffer significant and uninsured damage and loss. In addition, the premiums for our insurance policies have increased significantly in recent years. For example, we expect the premium for our directors’ and officers’ insurance policy to increase significantly this year. If insurance premiums continue to increase, we may not be able to maintain our current levels of insurance in the future. Any significant and uninsured liability may require us to pay substantial amounts, which would adversely affect our cash position and results of operations.
 
If the market price of our stock continues to be highly volatile, the value of your investment in our common stock may decline.
 
Within the last 12 months, our common stock has traded between $14.68 and $60.85. The market price of the shares of common stock for our company has been and may continue to be highly volatile. Announcements may have a significant impact on the market price of our common stock. These announcements may include:
 
 
•
 
results of our clinical trials and preclinical studies, or those of our corporate partners or our competitors;
 
 
•
 
achievement of other research or development milestones, such as completion of enrollment of a clinical trial or making a regulatory filing;
 
 
•
 
our operating results;
 
 
•
 
developments in our relationships with corporate partners;
 
 
•
 
developments affecting our corporate partners;
 
 
•
 
negative regulatory action or regulatory approval with respect to our new products or our competitors’ new products;

21

 
 
•
 
government regulations, reimbursement changes and governmental investigations or audits related to us or to our products;
 
 
•
 
developments related to our patents or other proprietary rights or those of our competitors;
 
 
•
 
changes in the position of securities analysts with respect to our stock;
 
 
•
 
operating results below the expectations of public market analysts and investors; and
 
 
•
 
market conditions for biopharmaceutical or biotechnology stocks in general.
 
In addition, if we fail to reach an important research, development or commercialization milestone or result by a publicly expected deadline, even if by only a small margin, there could be a significant impact on the market price of our common stock. For example, in January 2001, we announced that additional patients would need to be enrolled in our Phase III CARISA trial of ranolazine to meet a protocol requirement, thereby delaying completion of enrollment of the trial by a number of months. The price of our common stock decreased significantly after this announcement.
 
The stock market has from time to time experienced extreme price and volume fluctuations, which have particularly affected the market prices for emerging biotechnology and biopharmaceutical companies, and which have often been unrelated to their operating performance. These broad market fluctuations may adversely affect the market price of our common stock. In addition, sales of substantial amounts of our common stock in the public market could lower the market price of our common stock.
 
Provisions of Delaware law and in our charter, by-laws and our rights plan may prevent or frustrate any attempt by our stockholders to replace or remove our current management and may make the acquisition of our company by another company more difficult.
 
In February 1999, our board of directors adopted a stockholder rights plan and authorized executive severance benefit agreements for certain executives in the event of a change of control. We have subsequently entered into these severance agreements with these executives. The board of directors amended the stockholders rights plan in July 2000 to lower the triggering ownership percentage and increase the exercise price. Our rights plan and these agreements may delay or prevent a change in our current management team and may render more difficult an unsolicited merger or tender offer.
 
The following provisions of our Amended and Restated Certificate of Incorporation, as amended, and our by-laws, may have the effects of delaying or preventing a change in our current management and making the acquisition of our company by a third party more difficult: our board of directors is divided into three classes with approximately one third of the directors to be elected each year, necessitating the successful completion of two proxy contests in order for a change in control of the board to be effected; any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of the stockholders and may not be effected by a consent in writing; advance written notice is required for a stockholder to nominate a person for election to the board of directors and for a stockholder to present a proposal at any stockholder meeting; directors may be removed only for cause by a vote of a majority of the stockholders and vacancies on the board of directors may only be filled by a majority of the directors in office. In addition, our board of directors has the authority to issue up to 5,000,000 shares of preferred stock without stockholders’ approval, which also could make it more difficult for stockholders to replace or remove our current management and for another company to acquire us.
 
We are subject to the provisions of Section 203 of the Delaware General Corporation Law, an anti-takeover law, which could delay a merger, tender offer or proxy contest or make a similar transaction more difficult. In general, the statute prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

22

 
Our indebtedness and debt service obligations may adversely affect our cash flow, cash position and stock price.
 
In March 2000, we sold $196.3 million aggregate principal amount of 4.75% convertible subordinated notes due in March 2007. Our annual debt service obligations on these notes are approximately $9.3 million per year in interest payments. We intend to fulfill our debt service obligations from our existing cash and investments. In the future, if we are unable to generate cash or raise additional cash through financings sufficient to meet these obligations and need to use existing cash or liquidate investments in order to fund these obligations, we may have to delay or curtail research and development programs.
 
The notes are convertible into shares of our common stock at a conversion price of $63.84 per share, subject to adjustment in certain circumstances. We have reserved 3,074,091 shares of authorized common stock for issuance upon conversion of the notes. If the notes are converted into shares of our common stock, our existing stockholders will experience immediate dilution and our common stock price may be subject to significant downward pressure. If the notes are not converted into shares of our common stock before the maturity date of the notes, we will have to pay the note holders the full aggregate principal amount of the notes then outstanding. Any such payment would have a material adverse effect on our cash position.
 
We may add additional lease lines to finance capital expenditures and/or may obtain additional long-term debt and lines of credit. If we issue other debt securities in the future, our debt service obligations will increase further.
 
Our indebtedness could have significant additional negative consequences, including:
 
 
•
 
requiring the dedication of a substantial portion of our expected cash flow to service our indebtedness, thereby reducing the amount of our expected cash flow available for other purposes, including funding our research and development programs and other capital expenditures;
 
 
•
 
increasing our vulnerability to general adverse economic conditions;
 
 
•
 
limiting our ability to obtain additional financing; and
 
 
•
 
placing us at a possible competitive disadvantage to less leveraged competitors and competitors that have better access to capital resources.
 
If shares of common stock are sold in our equity line of credit arrangement, existing common stockholders will experience immediate dilution and, as a result, our stock price may go down.
 
We have entered into a common stock purchase agreement with Acqua Wellington, pursuant to which Acqua Wellington may purchase shares of our common stock at a discount of 4.0% to 6.0%, to be determined based on our market capitalization at the start of the draw-down period, unless we agree with Acqua Wellington to a different discount. As a result, our existing common stockholders will experience immediate dilution upon the purchase of any shares of our common stock by Acqua Wellington. The purchase agreement with Acqua Wellington provides that, at our request, Acqua Wellington will purchase a certain dollar amount of shares, with the exact number of shares to be determined based on the per share market price of our common stock over the draw-down period for such purchase. As a result, if the per share market price of our common stock declines over the draw-down period, Acqua Wellington will receive a greater number of shares for its purchase price, thereby resulting in further dilution to our stockholders and potential downward pressure of the price of our stock.
 
Item 3.    Market Risk
 
Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio and our long-term debt. We do not use derivative financial instruments in our investment portfolio. We place our investments with high quality issuers and, by policy, limit the amount of credit exposure to any one issuer. We are averse to

23

principal loss and seek to ensure the safety and preservation of our invested funds by limiting default, market and reinvestment risk. We classify our cash equivalents and marketable securities as “fixed-rate” if the rate of return on such instruments remains fixed over their term. These “fixed-rate” investments include U.S. government securities, commercial paper, asset backed securities, corporate bonds, and foreign bonds. Fixed-rate securities may have their fair market value adversely affected due to a rise in interest rates and we may suffer losses in principal if forced to sell securities that have declined in market value due to a change in interest rates. We classify our cash equivalents and marketable securities as “variable-rate” if the rate of return on such investments varies based on the change in a predetermined index or set of indices during their term. These “variable-rate” investments primarily included money market accounts.
 
Our long-term debt includes $196,250,000 of 4.75% convertible subordinated notes due March 7, 2007. Interest on the notes is fixed and payable semi-annually on March 7th and September 7th each year. The notes are convertible into shares of our common stock at any time prior to maturity, unless previously redeemed or repurchased, subject to adjustment in certain events, as more fully described in Note 5 to our financial statements. The market value of our long-term-debt will fluctuate with movements of interest rates and with movements in the value of our common stock.
 
Item 4.    Controls and Procedures
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and utilized, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating disclosure controls and procedures.
 
Within 90 days prior to the date of this report, our Chief Executive Officer and our Chief Financial Officer, with the participation of our management, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective. Since the date of that evaluation, there have been no significant changes in our internal controls or in other factors that could significantly affect the internal controls.

24

 
PART II.    OTHER INFORMATION
 
Item 6.    Exhibits and Reports on Form 8-K
 
 
(a)
 
Exhibits required by Item 601 of Regulation S-K
 
Exhibit Number
     
10.65
   
CV Therapeutics, Inc. 2000 Nonstatutory Incentive Plan, as amended.
10.67
   
CV Therapeutics, Inc. Non-Employee Directors’ Stock Option Plan, as amended.
 
 
(b)
 
Reports on Form 8-K
 
CV Therapeutics filed current reports on Form 8-K with the Commission:
 
 
•
 
On July 19, 2002, with respect to a press release dated July 18, 2002 announcing the Registrant’s financial results for the fiscal quarter ended June 30, 2002.
 
 
•
 
On July 26, 2002, with respect to a press release dated July 25, 2002, announcing the completion of patient enrollment in a Phase III trial of tecadenoson, or CVT-510, in patients with paroxysmal supraventricular tachycardia (PSVT), an abnormally rapid heart rhythm. The purpose of the Phase III trial is to determine the safety and efficacy of tecadenoson in the conversion of PSVT to normal sinus rhythm.
 
 
•
 
On July 30, 2002, with respect to a press release dated July 29, 2002 announcing the Registrant’s plans to advance CVT-3146 into a Phase III clinical trial.
 
 
•
 
On August 9, 2002, with respect to the sale of 561,037 shares of Registrant’s common stock to Acqua Wellington North American Equities Fund, Ltd.
 
 
•
 
On August 14, 2002, with respect to the certifications required by 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, that the Registrant provided to the Securities and Exchange Commission in connection with the filing of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002.
 
 
•
 
On October 18, 2002, with respect to a press release dated October 17, 2002 announcing the Registrant’s financial results for the fiscal quarter ended September 30, 2002.
 
 
•
 
On October 23, 2002, with respect to a press release dated October 22, 2002 announcing that a Phase III clinical trial of tecadenoson (CVT-510) in patients with paroxysmal supraventricular tachycardia (PSVT), an abnormally rapid heart rhythm, met its primary endpoint, which was the conversion of PSVT to a normal, or sinus, heart rhythm without second or third degree atrio-ventricular block.
 
 
•
 
On November 1, 2002, with respect to the sale of 676,722 shares of the Registrant’s common stock to Acqua Wellington North American Equities Fund, Ltd.

25

 
SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) 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.
 
       
CV THERAPEUTICS, INC.
Date:
  
November 14, 2002
      
By:
  
/s/    LOUIS G. LANGE, M.D., PH.D.        
               
Louis G. Lange, M.D., Ph.D.
Chairman of the Board & Chief Executive Officer
(Principal Executive Officer)
 
 
         
Date:
  
November 14, 2002
      
By:
  
/s/    DANIEL K. SPIEGELMAN        
               
Daniel K. Spiegelman
Chief Financial Officer
(Principal Financial and Accounting Officer)

26

 
CERTIFICATIONS
 
I, Louis G. Lange, certify that:
 
1.    I have reviewed this quarterly report on Form 10-Q of CV Therapeutics, 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 the 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:    November 14, 2002
 
/s/    LOUIS G. LANGE, M.D., PH.D.
Louis G. Lange, M.D., Ph.D.
Chief Executive Officer
 

27

 
I, Daniel K. Spiegelman, certify that:
 
1.    I have reviewed this quarterly report on Form 10-Q of CV Therapeutics, 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 the 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:    November 14, 2002
 
/s/    DANIEL K. SPIEGELMAN
Daniel K. Spiegelman
Chief Financial Officer

28
EX-10.65 3 dex1065.htm 2000 NONSTATUTORY INCENTIVE PLAN 2000 Nonstatutory Incentive Plan
EXHIBIT 10.65
 
 
 
CV THERAPEUTICS, INC.
 
2000 Nonstatutory Incentive Plan
 
ADOPTED BY THE BOARD OF DIRECTORS JULY 19, 2000
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS FEBRUARY 9, 2001
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS JULY 20, 2001
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS DECEMBER 9, 2001
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS FEBRUARY 25, 2002
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS JUNE 7, 2002
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS AUGUST 29, 2002
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS OCTOBER 18, 2002
 
1.    PURPOSES.
 
(a)    Eligible Stock Award Recipients.    Only Eligible Participants may receive Stock Awards under this Plan.
 
(b)    Available Stock Awards.    The purpose of the Plan is to provide a means by which Eligible Participants may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Nonstatutory Stock Options.
 
(c)    General Purpose.    The Company, by means of the Plan, seeks to retain the services of the group of persons eligible to receive Stock Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.
 
2.    DEFINITIONS.
 
 
(a)    “Affiliate” means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.
 
(b)    “Board” means the Board of Directors of the Company.
 
(c)    “Code” means the Internal Revenue Code of 1986, as amended.
 
(d)    “Committee” means a committee of one or more members of the Board appointed by the Board in accordance with subsection 3(c).
 
(e)    “Common Stock” means the common stock of the Company.
 
(f)    “Company” means CV Therapeutics, Inc., a Delaware corporation.
 
(g)    “Consultant” means any person, including an advisor, (i) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or (ii) who is a member of the Board of Directors of an Affiliate. However, the term “Consultant” shall not include Directors.

1

 
(h)    “Continuous Service” means that the Holder’s service with the Company or an Affiliate, whether as an Employee or Consultant, is not interrupted or terminated. The Holder’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Holder renders service to the Company or an Affiliate as an Employee or Consultant or a change in the entity for which the Holder renders such service, provided that there is no interruption or termination of the Holder’s service to the Company or an Affiliate. For example, a change in status without interruption from an Employee of the Company to a Consultant of an Affiliate will not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.
 
(i)    “Director” means a member of the Board of Directors of the Company.
 
(j)    “Disability” means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.
 
(k)    “Eligible Participant” means any Employee or Consultant; provided, however, that except as provided in the following sentence, no Employee or Consultant who is a Director or an Officer may be granted Stock Awards under this Plan. Notwithstanding the preceding sentence, an Officer may be an Eligible Participant if he or she is granted a Stock Award in connection with his or her initial commencement of employment with the Company and such grant is an essential inducement to his or her entering into a contract of employment with the Company.
 
(l)    “Employee” means any person employed by the Company or an Affiliate. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.
 
(m)    “Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
(n)    “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:
 
(i)    If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable.
 
(ii)    In the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Board.
 
(o)    “Holder” means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.

2

 
(p)    “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. Incentive Stock Options may not be granted under the Plan.
 
(q)    “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.
 
(r)    “Officer” means a person who is either (i) an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder or (ii) an officer of the Company within the meaning of Section 4310(c)(25)(G)(i) of the NASD Manual and Notices to Members (the “NASD Manual”), or any successor provision thereto.
 
(s)    “Option” means a Nonstatutory Stock Option granted pursuant to the Plan.
 
(t)    “Option Agreement” means a written or electronic agreement between the Company and an Optionholder evidencing certain terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.
 
(u)    “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
 
(v)    “Plan” means this CV Therapeutics, Inc. 2000 Nonstatutory Incentive Plan.
 
(w)    “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
 
(x)    “Securities Act” means the Securities Act of 1933, as amended.
 
(y)    “Stock Award” means any Option granted under the Plan.
 
(z)    “Stock Award Agreement” means a written agreement between the Company and a Holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.
 
3.    ADMINISTRATION.
 
(a)    Administration by Board.    The Board shall administer the Plan unless and until the Board delegates administration to a Committee, as provided in subsection 3(c).
 
(b)    Powers of Board.    The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:
 
(i)    To determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and how each Stock Award shall be granted; what type or combination of types of Stock Award shall be granted; the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive Common Stock pursuant to a Stock Award; and the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person.

3

 
(ii)    To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.
 
(iii)    To amend the Plan or a Stock Award as provided in Section 11.
 
(iv)    To terminate or suspend the Plan as provided in Section 12.
 
(v)    Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company which are not in conflict with the provisions of the Plan.
 
(c)    Delegation to Committee.    The Board may delegate administration of the Plan to a Committee or Committees of one (1) or more members of the Board. The term “Committee” shall apply to any person or persons to whom such authority has been delegated. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan.
 
(d)    Effect of Board’s Decision.    All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.
 
4.    SHARES SUBJECT TO THE PLAN.
 
(a)    Share Reserve.    Subject to the provisions of Section 10 relating to adjustments upon changes in Common Stock, the Common Stock that may be issued pursuant to Stock Awards shall not exceed in the aggregate Two Million Six Hundred and Ten Thousand Three Hundred and Twenty Five (2,610,325) shares of Common Stock.
 
(b)    Reversion of Shares to the Share Reserve.    If any Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, the shares of Common Stock not acquired under such Stock Award shall revert to and again become available for issuance under the Plan.
 
(c)    Source of Shares.    The shares of Common Stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise.
 
5.    ELIGIBILITY.
 
(a)    Eligibility for Specific Stock Awards.    Stock Awards may be granted only to Eligible Participants.

4

 
(b)    Consultants.    A Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”) is not available to register either the offer or the sale of the Company’s securities to such Consultant because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by the rules governing the use of Form S-8, unless the Company determines both (i) that such grant (A) shall be registered in another manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or (B) does not require registration under the Securities Act in order to comply with the requirements of the Securities Act, if applicable, and (ii) that such grant complies with the securities laws of all other relevant jurisdictions.
 
6.    OPTION PROVISIONS.
 
(a)    Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:
 
(b)    Option Exercise Price.    The exercise price of each Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, a Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.
 
(c)    Consideration.    The purchase price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised or (ii) at the discretion of the Board at the time of the grant of the Option (or subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the Company of other Common Stock, (2) according to a deferred payment or other similar arrangement with the Optionholder or (3) in any other form of legal consideration that may be acceptable to the Board. Unless otherwise specifically provided in the Option, the purchase price of Common Stock acquired pursuant to an Option that is paid by delivery to the Company of other Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the Company that have been held for more than six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes). At any time that the Company is incorporated in Delaware, payment of the Common Stock’s “par value,” as defined in the Delaware General Corporation Law, shall not be made by deferred payment.
 
(d)    In the case of any deferred payment arrangement, interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement.
 
(e)    Transferability of a Nonstatutory Stock Option.    A Nonstatutory Stock Option shall be transferable to the extent provided in the Option Agreement. If the Nonstatutory Stock Option does not provide for transferability, then the Nonstatutory Stock Option shall not be

5

transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.
 
(f)    Vesting Generally.    The total number of shares of Common Stock subject to an Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this subsection 6(d) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised.
 
(g)    Termination of Continuous Service.    In the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate.
 
(h)    Extension of Termination Date.    An Optionholder’s Option Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in subsection 6(a) or (ii) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements.
 
(i)    Disability of Optionholder.    In the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option Agreement) or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein, the Option shall terminate.
 
(j)    Death of Optionholder.    In the event (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the

6

Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder’s death pursuant to subsection 6(e) or 6(f), but only within the period ending on the earlier of (1) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement) or (2) the expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate.
 
(k)    Early Exercise.    The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option. Any unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Board determines to be appropriate. The Company will not exercise its repurchase option until at least six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option.
 
7.    COVENANTS OF THE COMPANY.
 
(a)    Availability of Shares.    During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Stock Awards.
 
(b)    Securities Law Compliance.    The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained.
 
8.    USE OF PROCEEDS FROM STOCK.    Proceeds from the sale of Common Stock pursuant to Stock Awards shall constitute general funds of the Company.
 
9.    MISCELLANEOUS.
 
(a)    Acceleration of Exercisability and Vesting.    The Board shall have the power to accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest.
 
(b)    Stockholder Rights.    No Holder shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Stock

7

Award unless and until such Holder has satisfied all requirements for exercise of the Stock Award pursuant to its terms.
 
(c)    No Employment or Other Service Rights.    Nothing in the Plan or any instrument executed or Stock Award granted pursuant thereto shall confer upon any Holder any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause or (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate.
 
(d)    Investment Assurances.    The Company may require a Holder, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Holder’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Holder is acquiring Common Stock subject to the Stock Award for the Holder’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the shares of Common Stock upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act or (2) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.
 
(e)    Withholding Obligations.    The Holder agrees that he shall be liable for any Employer’s United Kingdom National Insurance Contribution and to the extent provided by the terms of a Stock Award Agreement, the Company may require that any liability it has to account for United Kingdom income tax under the Pay As You Earn system and National Insurance Contributions or any other federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under a Stock Award be satisfied by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Holder by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Holder as a result of the exercise or acquisition of Common Stock under the Stock Award, provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the Company owned and unencumbered shares of Common Stock.
 
10.    ADJUSTMENTS UPON CHANGES IN STOCK.
 
(a)    Capitalization Adjustments.    If any change is made in the Common Stock subject to the Plan, or subject to any Stock Award, without the receipt of consideration by the

8

Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum number of securities subject to the Plan pursuant to subsection 4(a) and the maximum number of securities subject to award to any person pursuant to subsection 5(c), and the outstanding Stock Awards will be appropriately adjusted in the class(es) and number of securities and price per share of Common Stock subject to such outstanding Stock Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.
 
(b)    Dissolution or Liquidation.    In the event of a dissolution or liquidation of the Company, then all outstanding Stock Awards shall terminate immediately prior to such event.
 
(c)    Change of Control.    (i) Subject to clause (ii) below, in the event of a Change of Control, to the extent permitted by law, any surviving corporation or acquiring corporation may assume any Stock Awards outstanding under the Plan or substitute similar stock awards (including awards to acquire the same consideration paid to the stockholders in the Change of Control) for those outstanding under the Plan. In the event any surviving corporation or acquiring corporation does not assume such Stock Awards or substitute similar stock awards for those outstanding under the Plan, then with respect to Stock Awards held by Holders whose Continuous Service has not terminated, the time during which such Stock Awards may be exercised shall be accelerated in full, and the Stock Awards shall terminate if not exercised at or prior to such event. With respect to any other Stock Awards outstanding under the Plan, such Stock Awards shall terminate if not exercised prior to such event.
 
(ii)    In the event of a Change of Control not approved by the Board, each outstanding Stock Award under the Plan shall become fully vested, and the Company’s right of repurchase shall lapse with respect to shares received upon exercise of a Stock Award prior to full vesting, notwithstanding the terms of the Stock Award or any early exercise stock purchase agreement, immediately prior to the consummation of such Change of Control.
 
(d)    For purposes of this Plan, “Change of Control” means: (i) a sale of substantially all of the assets of the Company; (ii) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation in which shareholders immediately before the merger or consolidation have, immediately after the merger or consolidation, equal or greater stock voting power); (iii) a reverse merger in which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise (other than a reverse merger in which stockholders immediately before the merger have, immediately after the merger, greater stock voting power); or (iv) any transaction or series of related transactions in which in excess of 50% of the Company’s voting power is transferred.
 
11.    AMENDMENT OF THE PLAN AND STOCK AWARDS.
 
(a)    Amendment of Plan.    The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 10 relating to adjustments upon changes in

9

Common Stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing requirements.
 
(b)    Contemplated Amendments.    It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code.
 
(c)    No Impairment of Rights.    Rights under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Holder and (ii) the Holder consents in writing.
 
(d)    Amendment of Stock Awards.    The Board at any time, and from time to time, may amend the terms of any one or more Stock Awards; provided, however, that the rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the Holder and (ii) the Holder consents in writing. Notwithstanding the foregoing, the Board shall not, without the approval of the stockholders of the Company, authorize the amendment of any outstanding Option to reduce its exercise price. Furthermore, no Option shall be canceled and replaced with grants having a lower exercise price without the further approval of stockholders of the Company.
 
12.    TERMINATION OR SUSPENSION OF THE PLAN.
 
(a)    Plan Term.    The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate on the day before the tenth (10th) anniversary of the date the Plan is adopted by the Board. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
 
(b)    No Impairment of Rights.    Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the Holder.
 
13.    EFFECTIVE DATE OF PLAN.    The Plan shall become effective upon its adoption by the Board.
 
14.    CHOICE OF LAW/INTERPRETATION.    The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of laws rules. Notwithstanding the foregoing, it is expressly intended that approval of the Company’s stockholders not be required as a condition of the effectiveness of the Plan, and the Plan’s provisions shall be interpreted in a manner consistent with such intent for all purposes (including without limitation, for purposes of determining whether stockholder approval of the Plan is necessary pursuant to the NASD Manual or any successor provisions thereto).
 
15.    PARTICIPANTS IN FOREIGN COUNTRIES.    The Board shall have the authority to adopt such modifications, procedures and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or any Affiliate may operate to assure the viability of Options granted under the Plan in such countries and to meet the objectives of the Plan.

10
EX-10.67 4 dex1067.htm NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN Non-Employee Directors' Stock Option Plan
 
EXHIBIT 10.67
 
 
 
CV Therapeutics, Inc.
 
NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN
 
Amended and Restated by the Board of Directors on September 23, 1996
Approved by the Stockholders on October 29, 1996
Amended by the Board of Directors on February 23, 2000
Approved by the Stockholders on May 16, 2000
Amended and Restated by the Board of Directors on August 21, 2000
Amended and Restated by the Board of Directors on February 25, 2002
Amended and Restated by the Board of Directors on April 15, 2002
Approved by the Stockholders on June 7, 2002
Amended and Restated by the Board of Directors on July 19, 2002
 
1.    Purpose.
 
(a)    The purpose of the Non-Employee Directors’ Stock Option Plan (the “Plan”) is to provide a means by which each director of CV Therapeutics, Inc. (the “Company”) who is not otherwise an employee of the Company or of any Affiliate of the Company (each such person being hereafter referred to as a “Non-Employee Director”) will be given an opportunity to purchase stock of the Company.
 
(b)    The word “Affiliate” as used in the Plan means any parent corporation or subsidiary corporation of the Company as those terms are defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended from time to time (the “Code”).
 
(c)    The Company, by means of the Plan, seeks to retain the services of persons now serving as Non-Employee Directors of the Company, to secure and retain the services of persons capable of serving in such capacity, and to provide incentives for such persons to exert maximum efforts for the success of the Company.

1

 
2.    Administration.
 
(a)    The Plan shall be administered by the Board of Directors of the Company (the “Board”) unless and until the Board delegates administration to a committee, as provided in subparagraph 2(b).
 
(b)    The Board may delegate administration of the Plan to a committee composed of not fewer than two (2) members of the Board (the “Committee”). If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan.
 
3.    Shares Subject To The Plan.
 
(a)    Subject to the provisions of paragraph 10 relating to adjustments upon changes in stock, the stock that may be sold pursuant to options granted under the Plan shall not exceed in the aggregate five hundred fifty thousand (550,000) shares of the Company’s common stock. If any option granted under the Plan shall for any reason expire or otherwise terminate without having been exercised in full, the stock not purchased under such option shall again become available for the Plan.
 
(b)    The stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise.
 
4.    Eligibility.
 
Options shall be granted only to Non-Employee Directors of the Company.

2

 
5.    Non-Discretionary Grants.
 
(a)    Each person who is a Non-Employee Director on September 23, 1996 automatically shall be granted an option to purchase fifteen thousand (15,000) shares of the Company’s common stock (after taking into account the 1:10 reverse split adopted by the Board in September 1996) on the terms and conditions set forth herein.
 
(b)    Each person who is, after August 21, 2000, elected for the first time to be a Non-Employee Director automatically shall, upon the date of such person’s initial election to be a Non-Employee Director by the Board or stockholders of the Company, be granted an option to purchase twenty-five thousand (25,000) shares of the Company’s common stock on the terms and conditions set forth herein.
 
(c)    At each annual meeting of the stockholders following the effectiveness of the initial public offering of the Company’s common stock until and including the 1998 Annual Meeting, each person then serving as a Non-Employee Director automatically shall be granted an option to purchase five thousand (5,000) shares of the Company’s common stock (after taking into account the 1:10 reverse split adopted by the Board in September 1996) on the terms and conditions set forth herein; at each annual meeting of the stockholders beginning with the 1999 Annual Meeting, each person then serving as a Non-Employee Director automatically shall be granted an option to purchase seven thousand five hundred (7,500) shares of the Company’s common stock on the terms and conditions set forth herein.
 
6.    Option Provisions.
 
Each option shall be subject to the following terms and conditions:
 
(a)    The term of each option commences on the date it is granted and, unless sooner terminated as set forth herein, expires on the date (“Expiration Date”) ten (10) years from the date of grant. If the optionee’s service as a Director of the Company terminates for any reason or for no reason, the option shall terminate on the earlier of the Expiration Date or the date three

3

(3) months following the date of termination of service; provided, however, that if such termination of service is due to the optionee’s death, the option shall terminate on the earlier of the Expiration Date or eighteen (18) months following the date of the optionee’s death. In any and all circumstances, an option may be exercised following termination of the optionee’s service as a Non-Employee Director of the Company only as to that number of shares as to which it was exercisable on the date of termination of such service under the provisions of subparagraph 6(e).
 
(b)    Subject to applicable law, the exercise price of each option shall be the fair market value of the stock subject to such option on the date such option is granted.
 
(c)    The optionee may elect to make payment of the exercise price under one of the following alternatives:
 
(i)    Payment of the exercise price per share in cash at the time of exercise; or
 
(ii)    Provided that at the time of the exercise the Company’s common stock is publicly traded and quoted regularly in the Wall Street Journal, payment by delivery of shares of common stock of the Company already owned by the optionee, held for the period required to avoid a charge to the Company’s reported earnings, and owned free and clear of any liens, claims, encumbrances or security interest, which common stock shall be valued at its fair market value on the date preceding the date of exercise; or
 
(iii)    Payment by a combination of the methods of payment specified in subparagraph 6(c)(i) and 6(c)(ii) above.
 
Notwithstanding the foregoing, this option may be exercised pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board which results in the receipt of cash (or check) by the Company prior to the issuance of shares of the Company’s common stock.

4

 
(d)    An option shall by its terms be personal and may not be sold, pledged, assigned, transferred, encumbered or otherwise alienated or hypothecated in any manner other than by will or the laws of descent and distribution or to a Permitted Transferee (as defined below) or by a Permitted Transferee to a Family Member (as defined below). During the lifetime of an optionee, only he or she or a Permitted Transferee may exercise an option, or any portion thereof, granted to the optionee under the Plan.
 
(i)    An option transferred to a Permitted Transferee shall not be assignable or transferable by the Permitted Transferee to any person or entity, other than the original optionee’s Family Members.
 
(ii)    Any option which is transferred to a Permitted Transferee shall continue to be subject to all the terms and conditions of the option as applicable to the original optionee.
 
(iii)    The optionee and the Permitted Transferee shall execute any and all documents reasonably requested by the Company, including without limitation documents to (A) confirm the status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer under applicable federal and state securities laws and (C) evidence the transfer. In the event any option is exercised by, or to be paid to, the executors, administrators, heirs or distributees of the estate of a deceased optionee, or such an optionee’s beneficiary, or the transferee of an option, in any such case pursuant to the terms and conditions of the Plan, the Company shall be under no obligation to issue stock, or make any payment, thereunder unless and until the Company is satisfied that the person or persons exercising such option, or to receive such payment, is the duly appointed legal representative of the deceased optionee’s estate or the proper legatee or distributee thereof or the named beneficiary of such optionee, or the Permitted Transferee of such option, as applicable.

5

 
(iv)    Shares of stock acquired by a Permitted Transferee through exercise of an option may not be transferred, nor will any assignee or transferee thereof be recognized as an owner of such shares of common stock for any purpose, unless a registration statement under the Securities Act of 1933, as amended, and any applicable state securities act with respect to such shares shall then be in effect or unless the availability of an exemption from registration with respect to any proposed transfer or disposition of such shares shall be established to the satisfaction of counsel for the Company.
 
(v)    For purposes of this Plan, the following terms shall have the following meanings:
 
A.    “Permitted Transferee” shall mean a Family Member who receives an option from an optionee as a gift not for value or a person or entity to whom an option is transferred by an optionee in a Permitted Transfer for Value.
 
B.    “Permitted Transfer for Value” shall mean any transfer of an option (i) under a domestic relations order in a settlement of marital property rights, or (ii) to an entity in which more than fifty percent (50%) of the voting interests are owned by Family Members (or the optionee) in exchange for an interest in that entity.
 
C.    “Family Member” shall mean an optionee’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother in law, father in law, son in law, daughter in law, brother in law or sister in law, including adoptive relationships, any person sharing the optionee’s household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the optionee) control the management of assets, and any other entity in which these persons (or the optionee) own more than fifty percent (50%) of the voting interest.

6

 
(e)    Each option shall become exercisable as follows: the initial grants described in Sections 5(a) and 5(b) shall become exercisable (“vest”) at the rate of two and seventy-seven one hundredths percent (2.77%) per month over the thirty-six (36) months after the date of grant; and the annual grants described in Section 5(c) shall vest at the rate of eight and thirty-three one hundredths (8.33%) per month over the twelve-month (12-month) period following the date of grant; provided that the optionee has, during the entire period prior to such vesting date, continuously served as a Non-Employee Director or as an employee of or consultant to the Company or any Affiliate of the Company, whereupon such option shall become fully exercisable in accordance with its terms with respect to that portion of the shares represented by that installment.
 
(f)    The Company may require any optionee, or any person to whom an option is transferred under subparagraph 6(d), as a condition of exercising any such option: (i) to give written assurances satisfactory to the Company as to the optionee’s knowledge and experience in financial and business matters; and (ii) to give written assurances satisfactory to the Company stating that such person is acquiring the stock subject to the option for such person’s own account and not with any present intention of selling or otherwise distributing the stock. These requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise of the option has been registered under a then-currently-effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), or (ii), as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then-applicable securities laws.
 
(g)    Notwithstanding anything to the contrary contained herein, an option may not be exercised unless the shares issuable upon exercise of such option are then registered under the

7

Securities Act or, if such shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act.
 
(h)    The Company (or a representative of the underwriters) may, in connection with the first underwritten registration of the offering of any securities of the Company under the Securities Act, require that any optionee not sell or otherwise transfer or dispose of any shares of common stock or other securities of the Company during such period (not to exceed one hundred eighty (180) days) following the effective date of the registration statement of the Company filed under the Securities Act as may be requested by the Company or the representative of the underwriters.
 
7.    Covenants Of The Company.
 
(a)    During the terms of the options granted under the Plan, the Company shall keep available at all times the number of shares of stock required to satisfy such options.
 
(b)    The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of stock upon exercise of the options granted under the Plan; provided, however, that this undertaking shall not require the Company to register under the Securities Act either the Plan, any option granted under the Plan, or any stock issued or issuable pursuant to any such option. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of such options.
 
8.    Use Of Proceeds From Stock.
 
Proceeds from the sale of stock pursuant to options granted under the Plan shall constitute general funds of the Company.

8

 
9.    Miscellaneous.
 
(a)    Neither an optionee nor any person to whom an option is transferred under subparagraph 6(d) shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such option unless and until such person has satisfied all requirements for exercise of the option pursuant to its terms.
 
(b)    Nothing in the Plan or in any instrument executed pursuant thereto shall confer upon any Non-Employee Director any right to continue in the service of the Company or any Affiliate or shall affect any right of the Company, its Board or stockholders or any Affiliate to terminate the service of any Non-Employee Director with or without cause.
 
(c)    No Non-Employee Director, individually or as a member of a group, and no beneficiary or other person claiming under or through him, shall have any right, title or interest in or to any option reserved for the purposes of the Plan except as to such shares of common stock, if any, as shall have been reserved for him pursuant to an option granted to him.
 
(d)    In connection with each option made pursuant to the Plan, it shall be a condition precedent to the Company’s obligation to issue or transfer shares to a Non-Employee Director, or to evidence the removal of any restrictions on transfer, that such Non-Employee Director make arrangements satisfactory to the Company to insure that the amount of any federal or other withholding tax required to be withheld with respect to such sale or transfer, or such removal or lapse, is made available to the Company for timely payment of such tax.
 
(e)    As used in this Plan, fair market value means, as of any date, the value of the common stock of the Company determined as follows:
 
(i)    If the common stock of the Company is listed on any established stock exchange, or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the fair market value of a share of common stock of the Company shall be the closing sales price for

9

such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in common stock of the Company) on the last market trading day prior to the day of determination, as reported in the Wall Street Journal or such other source as the Board deems reliable;
 
(ii)    In the absence of such markets for the common stock of the Company, the fair market value shall be determined in good faith by the Board.
 
10.    Adjustments Upon Changes In Stock.
 
(a)    If any change is made in the stock subject to the Plan, or subject to any option granted under the Plan (through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise), the Plan and outstanding options will be appropriately adjusted in the class(es) and maximum number of shares subject to the Plan and the class(es) and number of shares and price per share of stock subject to outstanding options.
 
(b)    In the event of: (1) a merger or consolidation in which the Company is not the surviving corporation; (2) a reverse merger in which the Company is the surviving corporation but the shares of the Company’s common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (3) any other capital reorganization in which more than fifty percent (50%) of the shares of the Company entitled to vote are exchanged, any surviving corporation, other than the Company, shall assume any options outstanding under the Plan or shall substitute similar options for those outstanding under the Plan or, if the Company is the surviving corporation, such options shall continue in full force and effect.

10

 
11.    Amendment Of The Plan And Options.
 
(a)    The Board at any time, and from time to time, may amend the Plan. Except as provided in paragraph 10 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the stockholders of the Company within twelve (12) months before or after the adoption of the amendment, where the amendment will increase the number of shares which may be issued under the Plan.
 
(b)    The Board at any time, and from time to time, may amend the terms of any one or more options granted under the Plan; provided, however, that the rights and obligations under any option granted before any amendment of the Plan shall not be altered or impaired by such amendment unless (i) the Company requests the consent of the person to whom the option was granted and (ii) such person consents in writing. Notwithstanding the foregoing, the Board shall not, without the approval of the stockholders of the Company, authorize the amendment of any outstanding option to reduce its exercise price. Furthermore, no option shall be canceled and replaced with grants having a lower exercise price without the further approval of stockholders of the Company.
 
12.    Termination Or Suspension Of The Plan.
 
(a)    The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate on September 23, 2006. No options may be granted under the Plan while the Plan is suspended or after it is terminated.
 
(b)    Rights and obligations under any option granted while the Plan is in effect shall not be altered or impaired by suspension or termination of the Plan, except with the consent of the person to whom the option was granted.
 
(c)    The Plan shall terminate upon the occurrence of any of the events described in Section 10(b) above.

11

 
13.    Effective Date Of Plan; Conditions Of Exercise.
 
(a)    This amendment and restatement of the Plan shall become effective upon adoption by the Board of Directors, subject to the condition subsequent that this amendment and restatement of the Plan is approved by the stockholders of the Company. Following the effective date of this amendment and restatement, options shall not be granted under the terms of the Plan in effect prior to such effective date.
 
(b)    No option granted under the Plan shall be exercised or exercisable unless and until the condition of subparagraph 13(a) above has been met.

12
-----END PRIVACY-ENHANCED MESSAGE-----