-----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, QqL8ca+aMcGz6zT+SFfYUYsxbnLJWJjCq6k5bLt7aLpmHZsN30soQh78SXUjcMue ejw3DLB1dpbUJhGB3UDmbw== 0001036050-97-000976.txt : 19971114 0001036050-97-000976.hdr.sgml : 19971114 ACCESSION NUMBER: 0001036050-97-000976 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIROPHARMA INC CENTRAL INDEX KEY: 0000946840 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 232789550 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21699 FILM NUMBER: 97712813 BUSINESS ADDRESS: STREET 1: 76 GREAT VALLEY PARKWAY STREET 2: PO BOX 5000 CITY: MALVERN STATE: PA ZIP: 19355 BUSINESS PHONE: 6106510200 MAIL ADDRESS: STREET 1: 76 GREAT VALLEY PARKWAY CITY: MALVERN STATE: PA ZIP: 19355 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 or [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-21699 VIROPHARMA INCORPORATED (Exact Name of Registrant as Specified in its Charter) Delaware 94-2347624 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 76 Great Valley Parkway Malvern, Pennsylvania 19355 (Address of Principal Executive Offices and Zip Code) 610-651-0200 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days: Yes X No --- --- Number of shares outstanding of the issuer's Common Stock, par value $.002 per share, as of November 10, 1997: 11,463,106 shares. 1 VIROPHARMA INCORPORATED INDEX PART I. FINANCIAL INFORMATION Page ---- Item 1. Financial Statements: Balance Sheets at December 31, 1996 and September 30, 1997 3 Statements of Operations for the three months ended September 30, 1996 and 1997, the nine 4 months ended September 30, 1996 and 1997, and the period from December 5, 1994 (inception) to September 30, 1997 Statements of Cash Flows for the nine months ended September 30, 1996 and 1997 and the 5 period from December 5, 1994 (inception) to September 30, 1997 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 9 PART II. OTHER INFORMATION Item 2. Use of Proceeds 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 2 PART I. FINANCIAL INFORMATION - ------------------------------ ITEM 1. FINANCIAL STATEMENTS ViroPharma Incorporated (A Development Stage Company) Balance Sheets December 31, 1996 and September 30, 1997
December 31, September 30, 1996 1997 ------------ ------------ Assets Audited Unaudited ------------ ------------ Current assets: Cash and cash equivalents $ 10,810,310 6,605,265 Short-term investments 11,737,369 39,639,867 Other current assets 197,171 450,324 ------------ ------------ Total current assets 22,744,850 46,695,456 Equipment and leasehold improvements, net 672,029 998,625 Construction in progress -- 834,760 Restricted investment -- 300,000 Other assets 36,000 174,424 ------------ ------------ Total assets $ 23,452,879 49,003,265 ============ ============ Liabilities and Stockholders' Equity Current liabilities: Accounts payable 356,171 585,646 Loan payable - current -- 100,000 Obligation under capital lease - current 52,950 59,688 Accrued expenses and other current liabilities 2,334,026 5,675,217 ------------ ------------ Total current liabilities 2,743,147 6,420,551 Loan payable - non-current -- 433,333 Obligation under capital lease - noncurrent 104,571 69,250 ------------ ------------ 2,847,718 6,923,134 ------------ ------------ Stockholders' equity: Preferred stock, par value $.001 per share. Authorized 5,000,000 shares at December 31, 1996 and September 30, 1997; none outstanding -- -- Common stock, par value $.002 per share. Authorized 27,000,000 shares at December 31, 1996 and September 30, 1997; issued and outstanding 9,076,861 shares at December 31, 1996 and 11,450,522 at September 30, 1997 18,154 22,901 Additional paid-in capital 31,758,996 61,494,017 Deferred compensation (661,337) (494,513) Unrealized gains on available for sale securities 58,311 186,909 Deficit accumulated during the development stage (10,568,963) (19,129,183) ------------ ------------ Total stockholders' equity 20,605,161 42,080,131 ------------ ------------ Commitments Total liabilities and stockholders' equity $ 23,452,879 49,003,265 ------------ ------------
See accompanying notes to financial statements. 3 ViroPharma Incorporated (A Development Stage Company) Statements of Operations (unaudited) Three months ended September 30, 1996 and 1997, the nine months ended September 30, 1996 and 1997, and the period from December 5, 1994 (inception) to September 30, 1997
Period December 5, 1994 Three months ended Nine months ended (inception) to September 30, September 30, September 30, 1996 1997 1996 1997 1997 ---------------------------- --------------------------- -------------- Revenues: License fee $ 1,000,000 - 1,000,000 - 1,000,000 Milestone revenue - 750,000 - 1,500,000 1,500,000 Grant revenue 212,615 - 212,615 - 526,894 ---------------------------- --------------------------- -------------- Total revenues 1,212,615 750,000 1,212,615 1,500,000 3,026,894 Operating expenses incurred in the development stage: Research and development 1,641,013 3,980,665 4,265,571 8,529,500 18,230,088 General and administrative 352,911 814,127 1,026,630 2,364,649 5,120,790 ---------------------------- --------------------------- -------------- Total operating expenses 1,993,924 4,794,792 5,292,201 10,894,149 23,350,878 Interest income, net 67,692 378,845 141,973 833,929 1,194,801 ---------------------------- --------------------------- -------------- Net loss (713,617) (3,665,947) (3,937,613) (8,560,220) (19,129,183) Accretion of redemption value attributable to 853,476 - 1,229,008 - 1,616,445 mandatory redeemable convertible preferred stock ---------------------------- --------------------------- -------------- Net loss allocable to common shareholders (1,567,093) (3,665,947) (5,166,621) (8,560,220) (20,745,628) ============================ =========================== ============== Pro forma net loss per share (0.11) (0.34) (0.64) (0.89) ============================ =========================== ============== Shares used in computing pro forma net loss per share 6,730,740 10,750,361 6,158,187 9,636,680 ============================ =========================== ==============
See accompanying notes to financial statements. 4 ViroPharma Incorporated (A Development Stage Company) Statements of Cash Flows (unaudited) Nine months ended September 30, 1996 and 1997 and the period from December 5, 1994 (inception) to September 30, 1997
Period December 5, 1994 Nine months ended (inception) to September 30, September 30, 1996 1997 1997 ----------- ----------- ----------- Cash flows from operating activities: Net loss $(3,937,613) (8,560,220) (19,129,183) Adjustments to reconcile net loss to net cash used in operating activities: Non-cash compensation expense 115,384 166,824 338,573 Non-cash warrant value 15,937 11,952 121,872 Depreciation and amortization expense 32,815 183,649 241,670 Changes in assets and liabilities: Other current assets (81,397) (253,153) (450,324) Other assets - (138,424) (174,424) Accounts payable 252,006 229,475 585,646 Accrued expenses and other current liabilities 7,239 3,341,191 5,675,217 ----------- ----------- ----------- Net cash used in operating activities (3,595,629) (5,018,706) (12,790,953) Cash flows from investing activities: Purchase of equipment (215,106) (510,245) (1,240,297) Construction in Progress - (834,760) (834,760) Purchase of short-term investments available for sale (3,963,023) (45,000,027) (71,354,696) Sales of short-term investments - 1,708,140 6,071,895 Maturities of short-term investments 4,317,003 15,217,987 25,529,844 ----------- ----------- ----------- Net cash used in investing activities 138,874 (29,418,905) (41,828,014) Cash flows from financing activities: Net proceeds from issuance of preferred stock 7,222,900 - 13,931,243 Net proceeds from issuance of common stock 7,100 29,727,816 45,986,593 Deferred offering costs (243,589) Proceeds received on notes receivable - - 1,625 Proceeds from loan payable 600,000 600,000 Proceeds from notes payable 12,500 - 692,500 Payment of notes payable (50,000) (66,667) (116,667) Obligation under capital lease 180,610 (28,583) 128,938 ----------- ----------- ----------- Net cash provided by financing activities 7,129,521 30,232,566 61,224,232 Net increase (decrease) in cash and cash equivalents 3,672,766 (4,205,045) 6,605,265 Cash and cash equivalents at beginning of period 337,044 10,810,310 - ----------- ----------- ----------- Cash and cash equivalents at end of period $ 4,009,810 6,605,265 6,605,265 =========== =========== =========== Supplemental disclosure of noncash transactions: Conversion of Note Payable to Series A and Series B Preferred Stock $ - - 642,500 Conversion of mandatorily redeemable convertible preferred stock to common shares - - 16,264,199 Notes issued for 828,750 common shares - - 1,625 Deferred compensation 1,084,905 - 833,086 Accretion of redemption value attributable to mandatorily redeemable convertible preferred stock 1,229,008 - 1,616,445 Unrealized gains on available for sale securities 24,920 128,598 186,909 =========== =========== ===========
See accompanying notes to financial statements. 5 ViroPharma Incorporated (A Development Stage Company) Notes to Financial Statements September 30, 1996 and 1997 (unaudited) (1) Organization and Business Activities ViroPharma Incorporated (a development stage company) (the "Company") was incorporated in Delaware on December 5, 1994. The Company is a development stage company engaged in the discovery and development of proprietary antiviral pharmaceuticals for the treatment of diseases caused by RNA viruses. The Company is devoting substantially all of its efforts towards conducting drug discovery and development, raising capital, conducting clinical trials, pursuing regulatory approval for products under development, recruiting personnel and building infrastructure. In the course of such activities, the Company has sustained operating losses and expects such losses to continue for the foreseeable future. The Company has not generated any significant revenues or product sales and has not achieved profitable operations or positive cash flow from operations. The Company's deficit accumulated during the development stage aggregated $19,129,183 through September 30, 1997. There is no assurance that profitable operations, if ever achieved, could be sustained on a continuing basis. The Company plans to continue to finance its operations with a combination of stock issuances, private placements and follow-on public offerings, license payments, payments from strategic research and development arrangements and, in the longer term, revenues from product sales. There are no assurances, however, that the Company will be successful in obtaining an adequate level of financing needed for the long-term development and commercialization of its planned products. Basis of Presentation The information at September 30, 1997 and for the nine months ended September 30, 1996 and 1997, is unaudited but includes all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to state fairly the financial information set forth therein in accordance with generally accepted accounting principles. The interim results are not necessarily indicative of results to be expected for the full fiscal year. These financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 1996 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. 6 ViroPharma Incorporated (A Development Stage Company) Notes to Financial Statements, continued (unaudited) (2) Pro forma net loss per share For periods subsequent to the Company's Initial Public Offering (IPO) in November 1996, net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding for the respective periods adjusted for the dilutive effect, if any, of common stock equivalents, which consist of stock options and warrants using the treasury stock method. Common stock equivalents that are anti-dilutive are excluded from net loss per share calculations subsequent to the IPO. For periods prior to the Company's IPO, all common and common equivalent shares from stock options and warrants and convertible preferred stock issued during the twelve-month period prior to the IPO at prices below the IPO price are presumed to have been issued in contemplation of the IPO and have been included in the calculation of pro-forma net loss per share as if they were outstanding for all periods presented (using the treasury stock method and an IPO price of $7.00 per share). The calculation of shares used in computing pro-forma net loss per share prior to the Company's IPO also included all series of mandatorily redeemable convertible preferred stock, assuming conversion into shares of common stock (using the if-converted method) from their respective original dates of issuance. In the computation of pro forma net loss per share, accretion of the redemption value attributable to mandatorily redeemable convertible preferred stock is not included as an increase to net loss. The following table sets forth the calculation of total number of shares used in the computation of pro forma net loss per share for the nine months ended September 30, 1996 and 1997:
1996 1997 ----------- ------------ Weighted average common shares outstanding 894,170 9,636,680 Incremental shares assumed to be outstanding related to common stock, stock options and warrants granted and convertible preferred stock based on the treasury stock method 582,083 - Convertible preferred stock (if-converted method) 4,681,934 - ----------- ------------ Weighted average common and common equivalent shares used in computation of pro forma net loss per share 6,158,187 9,636,680 =========== ============
(3) Manufacturing Agreement In April 1997, the Company entered into a development agreement with SELOC AG (SELOC) and SICOR S.A. (SICOR), subsidiaries of Schwarz Pharma AG, for the manufacture of clinical supplies of pleconaril, the Company's most advanced drug candidate. Under the terms of the agreement, SELOC and SICOR will manufacture pleconaril for use in clinical trials and further develop the synthetic process for production of commercial quantities of pleconaril. 7 ViroPharma Incorporated (A Development Stage Company) Notes to Financial Statements, continued (unaudited) (4) Common Stock Transactions In June 1997, certain holders of warrants exercisable for shares of the Company's common stock exercised such warrants on a cashless basis for an aggregate of 71,795 shares of common stock that were otherwise exercisable on a cash basis for 81,597 shares of common stock. On July 23, 1997, the Company completed a follow-on public offering of 2 million shares of common stock. On August 15, 1997, the underwriters exercised an over allotment option to purchase an additional 300,000 shares. Net proceeds of the follow-on offering, including the over- allotment exercise, approximated $29,728,000. (5) Related Party Transactions During 1997, the Company loaned an aggregate of $134,765 to two officers of the Company to defray relocation expenses incurred by them in connection with their employment by the Company. Each loan is evidenced by a promissory note, bears interest at the lowest Federal Applicable Rate and comes due in full on the date of such officer's resignation from the Company or in monthly installments beginning on the date of termination of such officer's employment with the Company (other than by resignation), and extending over a period of between 18 months and 192 months thereafter, depending upon when the termination of employment occurs. On each anniversary of the date of the respective loans, 25% of the original principal amount of the loans will be forgiven by the Company so long as the applicable officer is in the Company's employ. (6) Commitments On July 21, 1997, the Company entered into a lease for laboratory and office space commencing after the current lease expires in 1998. The term of the new lease is ten years with two five-year renewal options. Under the lease terms, the Company contributed $834,760 to the cost of the laboratory construction. The Company also has the right, under certain circumstances, to purchase the new facility at a purchase price based on a pre-determined formula. (7) Subsequent Events On October 9, 1997, the Company received $1,000,000 from Boehringer Ingelheim Pharmaceuticals, Inc. ("BI") as an advance on a future milestone in connection with a Collaborative Research & Development Agreement ("the Agreement"). Such amount will be creditable against a milestone, if achieved, or would become due and payable two years after the termination of the Agreement. The advance bears interest at 8.5% and is evidenced by a promissory note. If amounts due under the note are not paid as described in the note, BI may convert the then outstanding principal balance and accrued interest thereon into shares of the Company's Common Stock based on the last sale price of such Common Stock on the date immediately prior to the date on which the Company is notified of BI's intention to convert the promissory note. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in "Risk Factors" described in the Company's Prospectus dated July 23, 1997 and filed with the Securities and Exchange Commission. Since inception, the Company has devoted substantially all of its resources to its research and product development programs. ViroPharma has generated no revenues from product sales and has been dependent upon funding primarily from equity financing. The Company does not expect any revenues from product sales for at least the next three year period. The Company has not been profitable since inception and has incurred a cumulative net loss of $19,129,183 through September 30, 1997. Losses have resulted principally from costs incurred in research and development activities and general and administrative expenses. The Company expects to incur additional operating losses over at least the next several years. The Company expects such losses to increase over historical levels as the Company's research and development expenses increase due to further clinical trials, manufacture of drug substance and preclinical development of pleconaril, and further research and development related to other product candidates. The Company's ability to achieve profitability is dependent on developing and obtaining regulatory approvals for its product candidates, successfully commercializing such product candidates, which may include entering into collaborative agreements for product development and commercialization, and securing contract manufacturing services. Results of Operations Three-month period ended September 30, 1997 compared to three-month period ended September 30, 1996. The Company earned and received a milestone payment of $750,000 from Boehringer Ingelheim during the three months ended September 30, 1997 and a license fee payment of $1,000,000 from Boehringer Ingelheim during the three months ended September 30, 1996. Net interest income increased to $378,845 for the three months ended September 30, 1997 from $67,692 for the three months ended September 30, 1996, principally due to larger invested balances provided by the proceeds of the Company's initial public offering completed in November 1996 and the follow-on offering completed in July 1997. Research and development expenses increased to $3,980,665 for the three months ended September 30, 1997 from $1,641,013 for the three months ended September 30, 1996. The increase was principally due to the cost of multiple clinical trials related to pleconaril and the advancement of drug candidates for the Company's influenza, hepatitis C and viral pneumonia programs. General and administrative expenses increased to $814,127 for the three months ended September 30, 1997 from $352,911 for the three months ended September 30, 1996. The increase was principally due to increased personnel expenses and public company costs, as well as to increased costs associated with the pursuit of corporate collaborations. The net loss increased to $3,665,947 for the three months ended September 30, 1997 from $713,617 for the three months ended September 30, 1996. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued Nine-month period ended September 30, 1997 compared to nine-month period ended September 30, 1996. The Company earned and received milestone payments of $1,500,000 from Boehringer Ingelheim during the nine month period ended September 30, 1997 and a license fee payment of $1,000,000 from Boehringer Ingelheim during the nine months ended September 30, 1996. Net interest income increased to $833,929 for the nine months ended September 30, 1997 from $141,973 for the nine months ended September 30, 1996, principally due to larger invested balances provided by the proceeds of the Company's initial public offering completed in November 1996 and the follow-on offering completed in July 1997. Research and development expenses increased to $8,529,500 for the nine months ended September 30, 1997 from $4,265,571 for the nine months ended September 30, 1996. The increase was principally due to the cost of multiple clinical trials related to pleconaril and the advancement of drug candidates for the Company's influenza, hepatitis C and viral pneumonia programs. General and administrative expenses increased to $2,364,649 for the nine months ended September 30, 1997 from $1,026,630 for the nine months ended September 30, 1996. The increase was principally due to increased personnel expenses and public company costs, as well as to increased costs associated with the pursuit of corporate collaborations. The net loss increased to $8,560,220 for the nine months ended September 30, 1997 from $3,937,613 for the nine months ended September 30,1996. 10 Liquidity and Capital Resources The Company commenced operations in December 1994. The Company is a development stage company and to date has not generated revenues from product sales. The cash flows used in operations are for research and development activities and the supporting general and administrative expenses. Through September 30, 1997, the Company has used approximately $12.8 million in operating activities. The Company invests its cash in short-term investments. Through September 30, 1997, the Company has used approximately $41.8 million in investing activities, including approximately $39.7 million in short-term investments and $2.1 million in equipment purchases and new construction. Through September 30, 1997, the Company has financed its operations primarily through an initial public offering of common stock, a follow-on offering of common stock and private placements of redeemable preferred stock and common stock totaling approximately $61.2 million. At September 30, 1997, the Company had cash and cash equivalents and short-term investments aggregating approximately $46.2 million. The Company leases its corporate and research and development facilities under an operating lease expiring in 1998. On July 21, 1997, the Company entered into an operating lease for laboratory and office space aggregating 48,400 square feet commencing after the current operating lease expires. Under the lease terms, the company contributed $834,760 to the cost of the laboratory construction. Annual rent is expected to increase by approximately $400,000 over current levels. The Company also has the right, under certain circumstances, to purchase the new facility at a purchase price based on a predetermined formula. The Company has financed substantially all of its equipment under two master lease agreements and one bank loan. The bank loan, which was consummated in February 1997, is for $600,000, is payable in equal installments over 72 months, and bears interest at approximately 9%. The Company is required to repay amounts outstanding under the two leases within periods ranging from 32 to 48 months. As of September 30, 1997, outstanding borrowings under these arrangements are approximately $1.2 million. The Company is required to make a milestone payment to Sanofi, S.A. of up to $2 million upon the earlier of a future milestone event as defined in the agreement with Sanofi or December 1998. In addition, the Company would also be required to make certain significant additional payments, including royalties, as defined, should agreed-upon future milestones be attained. On October 9, 1997, the Company received $1,000,000 from Boehringer Ingelheim Pharmaceuticals, Inc. as and advance on a future milestone in connection with a Collaborative Research & Development Agreement ("the Agreement"). Such amount will be creditable against a milestone, if achieved, or would become due and payable two years after the termination of the Agreement. The advance bears interest at 8.5% and is evidenced by a promissory note. If amounts due under the note are not paid as described in the note, BI may convert the then outstanding principal balance and accrued interest thereon into shares of the Company's common stock based on the last sale price of such common stock on the date immediately prior to the date on which the Company is notified of BI's intention to convert the promissory note. The Company has incurred losses from its operations since inception. The Company expects to incur additional operating losses over at least the next several years. The Company expects such losses to increase over historical levels as the Company's research and development expenses increase due to the cost of further clinical trials, manufacture of drug substance and preclinical development of pleconaril, and further research and development related to other product candidates. The Company will require additional financing for operations prior to achieving positive cash flows from its commercial activities. The Company expects that it will need additional financing to complete all clinical studies for pleconaril and other development and required testing for any other of the Company's product candidates. To obtain this financing, the Company may seek to access the public or private equity markets or enter into additional arrangements with corporate collaborators. To the extent the Company raises additional capital by issuing equity securities, ownership dilution to existing 11 Liquidity and Capital Resources, continued stockholders may result. There can be no assurance, however, that additional financing will be available on acceptable terms from any source. In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 128 "Earnings Per Share" (Statement 128). The provisions of Statement 128 specify the computation, presentation and disclosure requirements for earnings per share effective for the year ended December 31, 1997. Statement 128 should have no significant effect on earnings per share due to the antidilutive nature of the common stock equivalents issued to date by the Company. In addition, the FASB issued three statements that may require additional future disclosure. They are for comprehensive income, capital structure disclosure and segment disclosure. The Company will implement the provisions of these statements starting in 1997 and 1998. The Company does not expect these statements to have a significant effect on the financial statements. 12 PART II - OTHER INFORMATION --------------------------- ITEM 2. Use of Proceeds The company filed its second form SR as of August 19, 1997 (in connection with its initial public offering on November 19, 1996). The information from August 19 through September 30, 1997 is as follows: ---------------------------------------------------------- --------------------- Purchase and installation of machinery and equipment $ 42,000 ---------------------------------------------------------- --------------------- Repayment of indebtedness 24,000 ---------------------------------------------------------- --------------------- Working Capital 681,000 ---------------------------------------------------------- --------------------- Clinical Development 881,000 ---------------------------------------------------------- --------------------- Research & Development 1,023,000 ---------------------------------------------------------- ---------------------
ITEM 6. Exhibits and Reports on Form 8-K (a) List of Exhibits: 10.27 Consulting Agreement dated July 31, 1997 between the Company and Frank Baldino, Jr. 10.28 Consulting Agreement dated July 31, 1997 between the Company and Robert J. Glaser. 10.29 Promissory Note of Vincent J. Milano and Christie A. Milano, dated August 20, 1997. 27 Financial Data Schedule (b) Reports on Form 8-K: There were no reports on Form 8-K filed during the quarter ended September 1997. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VIROPHARMA INCORPORATED Date: November 10, 1997 By: /s/ Claude H. Nash ------------------------------ Claude H. Nash President, Chief Executive Officer and Chairman of the Board of Directors By: /s/ Vincent J. Milano ------------------------------ Vincent J. Milano Vice President, Finance & Administration and Treasurer (Principal Financial Officer) 14 Exhibit Index
Exhibit Description - ------- ----------- 10.27 Consulting Agreement dated July 31, 1997 between the Company and Frank Baldino, Jr. 10.28 Consulting Agreement dated July 31, 1997 between the Company and Robert J. Glaser. 10.29 Promissory Note of Vincent J. Milano and Christie A. Milano, dated August 20, 1997. 27 Financial Data Schedule
15 EX-10.27 2 CONSULTING AGREEMENT - FRANK BALDINO - 07/31/97 EXHIBIT 10.27 CONSULTING AGREEMENT THIS CONSULTING AGREEMENT (this "Agreement") is made as of this 31st day of July, 1997 by and between ViroPharma Incorporated (the "Company") and Frank Baldino, Jr. (the "Consultant"). W I T N E S E T H: - - - - - - - - - WHEREAS, the Company desires to engage Consultant to provide services to the Company in accordance with the terms and conditions set forth herein; and WHEREAS, Consultant desires to provide services to the Company upon the terms and conditions set forth herein. NOW, THEREFORE, in consideration of these premises and the mutual promises made herein and the mutual benefits to be derived herefrom, Consultant and the Company, intending to be legally bound, hereby agree as follows: 1. Engagement. Upon the terms and subject to the conditions set forth in this ---------- Agreement, the Company hereby agrees to engage Consultant, as an independent contractor, to make himself reasonably available to provide the Company with advice and consultation in the areas of financing, business development and strategic planning (the "Services") to and on behalf of the Company and Consultant hereby agrees to render such Services to and on behalf of the Company; provided that in no event shall Consultant be obligated to devote more than ten (10) hours in any calendar quarter to the Services. 2. Compensation. In full consideration of the provision of the Services and ------------ the obligations undertaken pursuant to this Agreement, the Company agrees to pay Consultant $1,250 each calendar quarter and to grant Consultant options to purchase 13,334 shares of the Company's Common Stock, par value $.002 per share, such options to have an exercise price of $15.125 per share and to vest in equal increments over a two year period, all as more fully set forth in the Non- Qualified Stock Option Agreement attached hereto as Exhibit A. 3. TERM. This Agreement shall commence on the date hereof and shall continue ---- for a three (3) year period, unless sooner terminated by the Company upon thirty (30) days advance written notice to Consultant. 4. CONFIDENTIAL INFORMATION. ------------------------ (a) Without the prior written consent of the Company, Consultant shall not disclose or use any Confidential Information (as defined below) of the Company for Consultant's direct or indirect benefit or the direct or indirect benefit of any third party, and Consultant shall maintain, both during and after Consultant's engagement, the confidentiality of all Confidential Information of the Company. In general, "Confidential Information" all information and other materials of the Company that have not been made available by the Company to the general public, except as specifically excluded in Section 4(b) below. Failure to mark any of the Confidential Information as confidential or proprietary shall not affect its status as Confidential Information under the terms of this Agreement. (b) The restrictions set forth in this Section 4 shall not apply to Confidential Information that: (i) at the time of disclosure by the Company to Consultant is in, or after disclosure by the Company to Consultant becomes part of, the public domain, through no improper act on the part of Consultant; (ii) was in Consultant's possession at the time of disclosure by the Company; (iii) is independently developed by Consultant; or (iv) Consultant receives from a third party. 5. REPRESENTATIONS. Consultant hereby represents that Consultant is not --------------- subject to any other agreement that Consultant will violate by signing this Agreement. 6. RELATIONSHIP BETWEEN PARTIES. Consultant will be retained by the Company ---------------------------- strictly for the purposes and to the extent set forth in this Agreement and his relationship to the Company shall be that of an independent contractor. Consultant shall not be considered under the provisions of this Agreement or otherwise as an employee of the Company. Consultant shall be responsible for the timely payment of his or her own self-employment and income taxes and the Company shall not deduct or withhold from any monies payable to Consultant hereunder any amount on account of any tax or employee benefit. Nothing contained in this Agreement shall create or imply the creation of a partnership between the Company and Consultant and neither party shall have any authority (actual or apparent) to bind the other. 7. GOVERNING LAW. This Agreement shall be construed and enforced in ------------- accordance with the laws of the Commonwealth of Pennsylvania, without regard to the conflict of law principles of Pennsylvania or any other jurisdiction. 8. MISCELLANEOUS. This Agreement and the Exhibit attached hereto (which is ------------- incorporated herein by reference) contains the entire agreement and understanding of the parties relating to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of every nature between them. This Agreement may not be changed or modified, except by an agreement in writing signed by both of the parties hereto. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. IN WITNESS WHEREOF, the parties have caused this Consulting Agreement to be executed the day and year first above written. VIROPHARMA INCORPORATED By: --------------------------------- Its: -------------------------------- CONSULTANT /s/ Frank Baldino, Jr. ---------------------------------- Frank Baldino, Jr. -2- EX-10.28 3 CONSULTING AGREEMENT - ROBERT J. GLASER - 07/31/97 EXHIBIT 10.28 THIS CONSULTING AGREEMENT (this "Agreement") is made as of this 31st day of July, 1997 by and between ViroPharma Incorporated (the "Company") and Robert J. Glaser (the "Consultant"). W I T N E S E T H: - - - - - - - - - WHEREAS, the Company desires to engage Consultant to provide services to the Company in accordance with the terms and conditions set forth herein; and WHEREAS, Consultant desires to provide services to the Company upon the terms and conditions set forth herein. NOW, THEREFORE, in consideration of these premises and the mutual promises made herein and the mutual benefits to be derived herefrom, Consultant and the Company, intending to be legally bound, hereby agree as follows: 1. ENGAGEMENT. Upon the terms and subject to the conditions set forth in ---------- this Agreement, the Company hereby agrees to engage Consultant, as an independent contractor, to make himself reasonably available to provide the Company with advice and consultation in the areas of pharmaceutical marketing, business development and strategic planning (the "Services") to and on behalf of the Company and Consultant hereby agrees to render such Services to and on behalf of the Company; provided that in no event shall Consultant be obligated to devote more than ten (10) hours in any calendar quarter to the Services. 2. COMPENSATION. In full consideration of the provision of the Services and ------------ the obligations undertaken pursuant to this Agreement, the Company agrees to pay Consultant $1,250 each calendar quarter and to grant Consultant options to purchase 20,000 shares of the Company's Common Stock, par value $.002 per share, such options to have an exercise price of $15.125 per share and to vest in equal increments over a three year period, all as more fully set forth in the Non- Qualified Stock Option Agreement attached hereto as Exhibit A. 3. TERM. This Agreement shall commence on the date hereof and shall continue ---- for a three (3) year period, unless sooner terminated by the Company upon thirty (30) days advance written notice to Consultant. 4. CONFIDENTIAL INFORMATION. ------------------------ (a) Without the prior written consent of the Company, Consultant shall not disclose or use any Confidential Information (as defined below) of the Company for Consultant's direct or indirect benefit or the direct or indirect benefit of any third party, and Consultant shall maintain, both during and after Consultant's engagement, the confidentiality of all Confidential Information of the Company. In general, "Confidential Information" all information and other materials of the Company that have not been made available by the Company to the general public, except as specifically excluded in Section 4(b) below. Failure to mark any of the Confidential Information as confidential or proprietary shall not affect its status as Confidential Information under the terms of this Agreement. (b) The restrictions set forth in this Section 4 shall not apply to Confidential Information that: (i) at the time of disclosure by the Company to Consultant is in, or after disclosure by the Company to Consultant becomes part of, the public domain, through no improper act on the part of Consultant; (ii) was in Consultant's possession at the time of disclosure by the Company; (iii) is independently developed by Consultant; or (iv) Consultant receives from a third party. 5. REPRESENTATIONS. Consultant hereby represents that Consultant is not --------------- subject to any other agreement that Consultant will violate by signing this Agreement. 6. RELATIONSHIP BETWEEN PARTIES. Consultant will be retained by the Company ---------------------------- strictly for the purposes and to the extent set forth in this Agreement and his relationship to the Company shall be that of an independent contractor. Consultant shall not be considered under the provisions of this Agreement or otherwise as an employee of the Company. Consultant shall be responsible for the timely payment of his or her own self-employment and income taxes and the Company shall not deduct or withhold from any monies payable to Consultant hereunder any amount on account of any tax or employee benefit. Nothing contained in this Agreement shall create or imply the creation of a partnership between the Company and Consultant and neither party shall have any authority (actual or apparent) to bind the other. 7. GOVERNING LAW. This Agreement shall be construed and enforced in accordance ------------- with the laws of the Commonwealth of Pennsylvania, without regard to the conflict of law principles of Pennsylvania or any other jurisdiction. 8. MISCELLANEOUS. This Agreement and the Exhibit attached hereto (which is ------------- incorporated herein by reference) contains the entire agreement and understanding of the parties relating to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of every nature between them. This Agreement may not be changed or modified, except by an agreement in writing signed by both of the parties hereto. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. IN WITNESS WHEREOF, the parties have caused this Consulting Agreement to be executed the day and year first above written. VIROPHARMA INCORPORATED By: --------------------------------- Its: -------------------------------- CONSULTANT /s/ Robert J. Glaser --------------------------------- Robert J. Glaser -2- EX-10.29 4 PROMISSORY NOTE - DATED 08/20/97 EXHIBIT 10.29 PROMISSORY NOTE --------------- $30,658.23 August 20, 1997 For value received, Vincent J. Milano (the "Executive") and Christie A. Milano, with an address at 301 Woodmere Way, Phoenixville, PA (each, a "Maker" and collectively, the "Makers"), jointly and severally, hereby promise to pay to the order of ViroPharma Incorporated, a Delaware corporation with an address at 76 Great Valley Parkway, Malvern PA 19355 (the "Payee"), the principal sum of Thirty Thousand Six Hundred Fifty Eight Dollars and Twenty Three Cents ($30,658.23) (the "Original Principal Amount"), or such lesser amount as determined in accordance with Sections 1(c) and 3(a) below, in lawful money of the United States of America, together with interest thereon, subject to the terms and conditions as hereinafter provided. The principal sum outstanding from time to time hereunder shall bear interest at an annual rate of 6.29% per annum (subject to Sections 3(d) and 6 below). The interest due hereunder shall be calculated on the basis of a 365-day year by multiplying the interest rate in effect hereunder by a fraction, the numerator of which is the actual number of days the principal sum is outstanding and the denominator of which is 365. 1. Purpose; Use of Proceeds; Principal Adjustment. ---------------------------------------------- (a) This Promissory Note (this "Note") is executed by the Makers in connection with the Makers' relocation ("Relocation") required by Executive's employment by Payee, the reasonable costs and expenses that the Makers' have incurred in connection therewith, and Payee's agreement, subject to the conditions set forth below, to reimburse Payee for such reasonable costs and expenses in an amount not to exceed the Original Principal Amount first set forth above. This Note, by itself, is not intended by Payee to preclude Executive from participation in future compensation increases that may, in the sole discretion of Payee, be made available by Payee to its officers and employees from time to time. (b) The Makers shall use all of the proceeds of this Note to defray the reasonable costs and expenses realized or incurred by the Makers in connection with the Relocation, including but not limited to any loss on the sale of the Makers' former residence; moving, closing and other costs incident to the Makers' purchase of a new residence; and a down payment on such new residence (collectively, the "Relocation Costs"), but for no other purpose. (c) The Original Principal Amount first set forth above reflects the Makers' estimate of the Relocation Costs previously provided by them to Payee (the "Estimated Relocation Costs"). The Makers shall provide Payee, within five (5) business days after the closing of the purchase of the Makers' new residence (the "Closing"), with an itemized list of the Relocation Costs actually incurred by the Makers (the "Actual Relocation Costs"), together with a copy of the settlement sheet prepared at the Closing and copies of such other invoices and receipts that are available to document the Actual Relocation Costs. The Actual Relocation Costs shall be subject to the approval of Payee, such approval not to be unreasonably withheld by Payee (the Actual Relocation Costs so approved, the "Approved Relocation Costs"). If the Approved Relocation Costs are less than the Estimated Relocation Costs, then (i) the Makers shall remit to Payee, within five (5) business days after Payee's request, the difference between the Estimated Relocation Costs minus the Approved Relocation Costs (the "Excess"), and (ii) upon Payee's receipt of the Excess, the principal amount due under this Note automatically shall be adjusted to reflect the Approved Relocation Costs (the "Adjusted Principal Amount"). In no event shall Payee have any additional obligation to the Makers if the Actual Relocation Costs or the Approved Relocation Costs exceed the Estimated Relocation Costs. 2. Insurance. Within a reasonable time after the date hereof, Payee may --------- attempt to acquire an insurance policy on the life of Executive (the "Insurance Policy") that names Payee as the loss payee. Executive shall cooperate with Payee in obtaining the Insurance Policy, and Executive warrants that he has no knowledge of any facts concerning his physical health or otherwise that would discourage a reputable insurance company from insuring the life of Executive at reasonable rates and based on generally accepted insurance underwriting standards. 3. Principal Reduction and Payment. ------------------------------- (a) Subject to the terms and conditions set forth below, on each one (1) year anniversary of this date of this Note, commencing on the first anniversary of the date of this Note and continuing through and including the fourth anniversary of the date of this Note (such four year period, the "Forgiveness Term"), the principal amount of this Note shall be reduced by the product of twenty-five percent (25%) times the lesser of the Original Principal Amount set forth in the first paragraph of this Note or the Adjusted Principal Amount determined in accordance with Section 1(c) above (each, a "Forgiven Installment"), and on and after each such anniversary date the Makers shall have no further obligation to pay Payee, and Maker shall be released from all liability to Payee with respect to, the applicable Forgiven Installment plus all accrued and unpaid interest with respect thereto. (b) If Executive's employment by Payee is terminated prior to the expiration of the Forgiveness Term as a result of the resignation of Executive, then from and after the date that Executive notifies Payee of Executive's intention to resign (the "Resignation Date"), Section 3(a) shall be of no further force or effect, and upon the earlier of the date that Executive commences employment with any third party or the expiration of the ninety (90) day period after the Resignation Date, the Makers shall pay to Payee the principal amount of this Note and all accrued and unpaid interest with respect thereto that is then outstanding and has not been previously forgiven pursuant to Section 3(a) (the "Outstanding Balance"). (c) If Executive's employment by Payee is terminated prior to the expiration of the Forgiveness Term due to an event that is covered by the Insurance Policy, then the entire Outstanding Balance shall be deemed forgiven and the proceeds of the Policy shall be Payee's sole recourse in respect of the Outstanding Balance. (d) If Executive's employment by Payee is terminated prior to the expiration of the Forgiveness Term for any reason other than that described in Sections 3(b) or (c) above, including but not limited to the termination of Executive's employment by Payee for any reason or no reason, then from and after the effective date of such termination (the "Termination Date"), Section 3(a) shall be of no further force or effect, and the Makers shall thereafter be liable for the prompt payment of the Outstanding Balance; provided that, from and after the Termination Date, the interest rate of this Note shall be adjusted to reflect the lowest applicable Federal rate then in effect for promissory notes having a repayment period equal to the "Payment Term" of this Note, as defined below. Principal and interest payments in respect of the Outstanding Balance shall be due and payable in consecutive monthly installments in the amounts to be set forth in the amortization schedule described in Section 3(d)(ii) below (each, a "Monthly Payment"), on the first day of each month commencing with the month immediately following the Termination Date and continuing until the expiration of the Payment Term, at Payee's address set forth above or at such other address as Payee shall designate in writing to either Maker. Each Monthly Payment first shall be applied against accrued interest amounts then outstanding, and the balance of such Monthly Payment shall then be applied against the principal amount of this Note. 2 (i) The "Payment Term" shall be the number of months, commencing with the Termination Date, listed below opposite the applicable period in which the Termination Date occurs: Termination Date Payment Period ---------------- -------------- Before the first anniversary of the date of this Note 72 Months After the first anniversary of the date of this Note, but 54 Months before the second anniversary of this Note After the second anniversary of the date of this Note, but 36 Months before the third anniversary of this Note After the third anniversary of the date of this Note, but 18 Months before the fourth anniversary of this Note (ii) Within a reasonable time after the Termination Date, but in any event prior to the date that the first Monthly Payment is due and payable hereunder, Payee shall provide Maker with an amortization schedule for the Outstanding Balance that reflects the Monthly Payments due for the Payment Term, and such amortization schedule shall be a supplement to this Note. 4. Prepayment; Set-Off. This Note may be prepaid in full or in part at any ------------------- time without premium or penalty. The amounts due from the Makers hereunder shall not be subject to set-off by the Makers. 5. Default and Acceleration. The entire principal balance that has not been ------------------------ reduced or paid pursuant to Section 3 above, and all accrued interest thereon, shall become immediately due and payable upon demand by Payee if one or more of the following events shall have happened at any time after the Termination Date (each an "Event of Default") and shall be continuing at the time of such demand (except that no demand shall be necessary in the case of Subsection (b) below): (a) Default shall have been made in the payment of any principal or interest when and as due hereunder; (b) Either Maker shall: (i) file in any court pursuant a petition in bankruptcy or insolvency or for reorganization or for the appointment of a receiver or trustee of either of their assets; (ii) propose a written agreement for the composition or extension of the debts of either of them; (iii) be served with an involuntary petition against either of them, filed in any insolvency proceeding, and such petition shall not be dismissed within sixty (60) days after the filing thereof; or (iv) make an assignment for the benefit of creditors; or (c) The entry of a material financial judgment against either Maker, or the issuing of any attachment or garnishment against any property of either Maker. 6. Default Rate. Notwithstanding anything to the contrary in this Note, upon ------------ an Event of Default, or if Executive resigns his employment with Payee and the Outstanding Balance is not paid within the period required by Section 3(b) above, interest on the unpaid balance of this Note shall be deemed to have accrued at a rate equal to the lesser of eighteen percent (18%) per annum or the highest rate otherwise allowed by law (the "Default Rate"). 3 7. Presentment, Costs, Etc. The Makers hereby waives presentment, protest, ----------------------- notice of protest, and notice of dishonor. Subject to the provisions herein, each Maker covenants that if an Event of Default occurs, he or she will, to the extent that he or she it may lawfully promise so to do, pay to Payee such further amount as shall be sufficient to cover the cost and expense of collection or any other costs incurred by Payee in the exercise of any of its rights, remedies or powers under this Note, including reasonable compensation to the attorneys and accountants of Payee, and any amount thereof not paid promptly following demand therefor shall be added to the principal sum then due hereunder and shall bear interest at the Default Rate from the date of such demand until the date that such amounts are paid in full. 8. Remedies Cumulative. No right or remedy conferred upon or reserved to ------------------- Payee hereunder, or now or hereafter existing at law or in equity or by statute or other legislative enactment, is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and concurrent, and shall be in addition to every other such right or remedy, and may be pursued singly, concurrently, successively or otherwise, at the sole discretion of Payee, and shall not be exhausted by any one exercise thereof but may be exercised as often as occasion therefor shall occur. 9. Waiver. Each Maker agrees that Payee may release, compromise, forbear ------ with respect to, waive, suspend, extend or renew any of the terms hereunder (and each Maker hereby waives any notice of any of the foregoing), and any action taken by Payee pursuant to the foregoing shall in no way be construed as a waiver or release of any right or remedy of Payee, or of any Event of Default, or of any liability or obligation of either Maker, under this Note. 10. Successors and Assigns. This Note may be freely assigned by Payee. The ----------------------- obligations of the Makers under this Note may not be assigned without the prior written consent of Payee. This Note inures to the benefit of Payee and binds the Makers, and their respective successors, heirs and permitted assigns. 11. Notices. All notices required to be given to any of the parties hereunder -------- shall be in writing and shall be deemed to have been sufficiently given for all purposes when presented personally to such party or sent by certified or registered mail, or any national overnight delivery service, to such party at its address first set forth above, or to such other address for which notice is duly given to the other party. Such notice shall be deemed to be given when received if delivered personally, the next business day after the date sent if sent by national overnight delivery service, or two (2) business days after the date mailed if mailed by certified or registered mail. Whenever the giving of notice is required, the giving of such notice may be waived in writing by the party entitled to receive such notice. 4 12. Governing Law. This Note shall be governed as to its validity, ------------- interpretation, and effect by the laws of the Commonwealth of Pennsylvania, notwithstanding the conflict-of-law doctrines of Pennsylvania or any other jurisdiction. Any legal proceeding arising out of or relating to this Note shall be heard in the Chester County, Pennsylvania Court or in the United States District Court for the Eastern District of Pennsylvania, and each Maker hereby consents to the personal and exclusive jurisdiction of such courts and hereby waives any objection that such Maker may have to the laying of venue of any such proceeding and any claim or defense of inconvenient forum. IN WITNESS WHEREOF, the undersigned has executed this Note on the date first above written. /s/ Vincent J. Milano ------------------------ Vincent J. Milano /s/ Christie A. Milano ------------------------- Christie A. Milano 5 EX-27 5 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 6,605,265 39,639,867 0 0 0 46,695,456 1,240,297 241,672 49,003,265 6,420,551 0 0 0 22,901 42,057,230 49,003,265 0 1,500,000 0 0 10,894,149 0 34,106 (8,560,220) 0 (8,560,220) 0 0 0 (8,560,220) (.89) 0
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