Delaware | 04-3221586 |
(State of Incorporation) | (I.R.S. Employer Identification Number) |
Large accelerated filer o | Accelerated filer x |
Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company) |
PART I - FINANCIAL INFORMATION | |||
Item 1. — Unaudited Condensed Financial Statements | |||
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September 30, 2014 | December 31, 2013 | |||||||
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 16,099 | $ | 15,579 | ||||
Marketable securities-short term | 45,989 | 59,116 | ||||||
Prepaid expenses and other current assets | 1,305 | 941 | ||||||
Total current assets | 63,393 | 75,636 | ||||||
Marketable securities-long term | 7,228 | 20,391 | ||||||
Property and equipment, net | 316 | 1,128 | ||||||
Other assets | 102 | 1,024 | ||||||
Total assets | $ | 71,039 | $ | 98,179 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 7,195 | $ | 8,470 | ||||
Note payable | 1,700 | 1,700 | ||||||
Current portion of deferred revenue | 11,056 | 11,031 | ||||||
Current portion of deferred gain on sale leaseback | 368 | 552 | ||||||
Total current liabilities | 20,319 | 21,753 | ||||||
Deferred revenue, net of current portion | 7,315 | 15,568 | ||||||
Deferred gain on sale leaseback, net of current portion | — | 232 | ||||||
Total liabilities | 27,634 | 37,553 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued or outstanding | — | — | ||||||
Common stock, $0.01 par value; 100,000,000 shares authorized; 62,770,092 and 62,736,207 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively | 628 | 627 | ||||||
Additional paid-in capital | 507,583 | 504,884 | ||||||
Accumulated other comprehensive income | 25 | 67 | ||||||
Accumulated deficit | (464,831 | ) | (444,952 | ) | ||||
Total stockholders’ equity | 43,405 | 60,626 | ||||||
Total liabilities and stockholders’ equity | $ | 71,039 | $ | 98,179 |
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THREE MONTHS ENDED September 30, | NINE MONTHS ENDED September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(IN THOUSANDS, EXCEPT PER SHARE DATA) | ||||||||||||||||
Research and development revenue | $ | 2,662 | $ | 3,542 | $ | 8,239 | $ | 13,639 | ||||||||
Costs and expenses: | ||||||||||||||||
Research and development | 5,014 | 5,955 | 17,981 | 22,218 | ||||||||||||
General and administrative | 2,997 | 3,113 | 9,318 | 9,711 | ||||||||||||
Restructuring and other costs | 1,099 | 667 | 1,099 | 667 | ||||||||||||
Total costs and expenses | 9,110 | 9,735 | 28,398 | 32,596 | ||||||||||||
Loss from operations | (6,448 | ) | (6,193 | ) | (20,159 | ) | (18,957 | ) | ||||||||
Interest income | 62 | 114 | 233 | 397 | ||||||||||||
Interest expense | (11 | ) | (8 | ) | (28 | ) | (18 | ) | ||||||||
Other income (expense) | (2 | ) | 4 | 75 | (66 | ) | ||||||||||
Net loss | (6,399 | ) | (6,083 | ) | (19,879 | ) | (18,644 | ) | ||||||||
Unrealized gain (loss) on marketable securities | (21 | ) | 41 | (42 | ) | (17 | ) | |||||||||
Comprehensive loss | $ | (6,420 | ) | $ | (6,042 | ) | $ | (19,921 | ) | $ | (18,661 | ) | ||||
Basic and diluted net loss per share: | ||||||||||||||||
Net loss per share | $ | (0.10 | ) | $ | (0.10 | ) | $ | (0.32 | ) | $ | (0.30 | ) | ||||
Weighted average basic and diluted common shares outstanding | 62,652 | 62,512 | 62,621 | 62,457 |
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NINE MONTHS ENDED SEPTEMBER 30, | ||||||||
2014 | 2013 | |||||||
(IN THOUSANDS) | ||||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (19,879 | ) | $ | (18,644 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 532 | 658 | ||||||
Amortization of premium on marketable securities | 893 | 1,682 | ||||||
Amortization of deferred gain on sale leaseback | (416 | ) | (416 | ) | ||||
Non-cash stock compensation | 2,643 | 3,201 | ||||||
Loss (gain) on auction rate securities | (75 | ) | 66 | |||||
Impairment of property and equipment | 280 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other assets | 558 | 142 | ||||||
Accounts payable and accrued expenses | (1,275 | ) | (2,073 | ) | ||||
Deferred revenue | (8,228 | ) | (10,609 | ) | ||||
Net cash used in operating activities | (24,967 | ) | (25,993 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of marketable securities | (27,504 | ) | (29,275 | ) | ||||
Proceeds from sale or maturity of marketable securities | 52,934 | 57,777 | ||||||
Net cash provided by investing activities | 25,430 | 28,502 | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from stock option exercises and employee stock plan purchases | 57 | 213 | ||||||
Net cash provided by financing activities | 57 | 213 | ||||||
Net increase in cash and cash equivalents | 520 | 2,722 | ||||||
Cash and cash equivalents, beginning of period | 15,579 | 14,327 | ||||||
Cash and cash equivalents, end of period | $ | 16,099 | $ | 17,049 |
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1. | NATURE OF OPERATIONS AND BASIS OF PRESENTATION |
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2. | COLLABORATIONS AND ALLIANCES |
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3. | MARKETABLE SECURITIES AND FAIR VALUE MEASUREMENTS |
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September 30, 2014 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
Security type | �� | ||||||||||||||||
Corporate debt securities-short term | $ | 45,956 | $ | 38 | $ | (5 | ) | $ | 45,989 | ||||||||
Corporate debt securities-long term | 5,315 | — | (8 | ) | 5,307 | ||||||||||||
Total available-for-sale marketable securities | $ | 51,271 | $ | 38 | $ | (13 | ) | $ | 51,296 |
December 31, 2013 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
Security type | |||||||||||||||||
Corporate debt securities-short term | $ | 59,059 | $ | 62 | $ | (5 | ) | $ | 59,116 | ||||||||
Corporate debt securities-long term | 18,535 | 23 | (13 | ) | 18,545 | ||||||||||||
Total available-for-sale marketable securities | $ | 77,594 | $ | 85 | $ | (18 | ) | $ | 77,661 |
September 30, 2014 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
Security type | |||||||||||||||||
Auction rate securities | $ | 2,100 | $ | — | $ | (179 | ) | $ | 1,921 | ||||||||
Total trading securities | $ | 2,100 | $ | — | $ | (179 | ) | $ | 1,921 |
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December 31, 2013 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
Security type | |||||||||||||||||
Auction rate securities | $ | 2,100 | $ | — | $ | (254 | ) | $ | 1,846 | ||||||||
Total trading securities | $ | 2,100 | $ | — | $ | (254 | ) | $ | 1,846 |
September 30, 2014 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Cash equivalents | $ | 14,785 | $ | 14,785 | $ | — | $ | — | ||||||||
Corporate debt securities-short term | 45,989 | — | 45,989 | — | ||||||||||||
Corporate debt securities-long term | 5,307 | — | 5,307 | — | ||||||||||||
Auction rate securities-long term | 1,921 | — | — | 1,921 | ||||||||||||
Total | $ | 68,002 | $ | 14,785 | $ | 51,296 | $ | 1,921 |
December 31, 2013 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Cash equivalents | $ | 12,247 | $ | 12,247 | $ | — | $ | — | ||||||||
Corporate debt securities-short term | 59,116 | — | 59,116 | — | ||||||||||||
Corporate debt securities-long term | 18,545 | — | 18,545 | — | ||||||||||||
Auction rate securities-long term | 1,846 | — | — | 1,846 | ||||||||||||
Total | $ | 91,754 | $ | 12,247 | $ | 77,661 | $ | 1,846 |
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Amount | ||||
Balance at December 31, 2013 | $ | 1,846 | ||
Gain on auction rate securities | 75 | |||
Balance at September 30, 2014 | $ | 1,921 |
Amount | ||||
Balance at December 31, 2012 | $ | 1,789 | ||
Loss on auction rate securities | (66 | ) | ||
Balance at September 30, 2013 | $ | 1,723 |
Estimated Fair Value at September 30, 2014 | Valuation Technique | Unobservable Inputs | Range | ||||||||
Auction rate securities | $ | 1,921 | Discounted cash flow | ||||||||
Maximum rate | 1.56 | % | |||||||||
Liquidity risk premium | 3.00%–4.00 | % | |||||||||
Probability of earning maximum rate until maturity | 0.09%–0.15 | % | |||||||||
Probability of principal returned prior to maturity | 85.27%–87.47 | % | |||||||||
Probability of default | 12.44%–14.59 | % |
2014 | 2013 | |||||||
Accounts payable | $ | 176 | $ | 146 | ||||
Accrued payroll | 1,700 | 2,556 | ||||||
Accrued outsourced pre-clinical and clinical fees | 3,951 | 4,702 | ||||||
Accrued professional fees | 528 | 660 | ||||||
Accrued restructuring costs | 502 | — | ||||||
Other accrued expenses | 338 | 406 | ||||||
$ | 7,195 | $ | 8,470 |
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Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Research and development | $ | 186 | $ | 240 | $ | 854 | $ | 1,077 | ||||||||
General and administrative | 494 | 511 | 1,706 | 1,986 | ||||||||||||
Restructuring | 83 | 138 | 83 | 138 | ||||||||||||
Total stock-based compensation expense | $ | 763 | $ | 889 | $ | 2,643 | $ | 3,201 |
Stock Options | Number of Shares | Weighted Average Exercise Price | ||||||
Outstanding as of December 31, 2013 | 7,511,814 | $ | 5.28 | |||||
Granted | 1,150,119 | 2.47 | ||||||
Cancelled | (662,649 | ) | 4.97 | |||||
Outstanding as of September 30, 2014 | 7,999,284 | $ | 4.91 | |||||
Exercisable as of September 30, 2014 | 5,564,581 | $ | 5.32 |
Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |||||||||||||
Vested and unvested expected to vest at September 30, 2014 | 7,856,237 | $ | 4.91 | 5.6 | $ | — | ||||||||||
Exercisable at September 30, 2014 | 5,564,581 | $ | 5.32 | 4.4 | $ | — |
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Restricted Stock | Number of Shares | Weighted Average Grant Date Fair Value | ||||||
Unvested as of December 31, 2013 | 195,777 | $ | 2.51 | |||||
Vested | (49,041 | ) | 2.51 | |||||
Cancelled | (20,269 | ) | 2.51 | |||||
Unvested as of September 30, 2014 | 126,467 | $ | 2.51 |
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We are a clinical-stage biotechnology company organized as a Delaware corporation in 1993 engaged in the research and development of innovative cancer therapeutics. Our mission is to produce novel drugs with differentiated mechanisms of action that will extend the lives of our patients. These drugs target biological pathways implicated in a wide range of cancers. In addition to our clinical stage pipeline, our drug discovery efforts focus on a number of pre-clinical programs derived from our kinase platform technology and extensive library of proprietary compounds that have the potential to fulfill this mission.
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The NCI has reported to us that the randomized, double blind, placebo-controlled CTEP Phase 2 clinical trial of tivantinib as a single agent in prostate cancer met its primary endpoint of progression-free survival (“PFS”). In this trial, 78 patients were randomized 2 to 1 to receive either tivantinib 360 milligrams BID as a single agent or placebo. Patients were men with asymptomatic or minimally symptomatic metastatic castrate resistant, chemotherapy-naive prostate cancer. The study is designed to detect an improvement in the median PFS from 3 months to 6 months with tivantinib treatment. Additional data from this trial is expected to be presented at a future scientific forum. As final data emerge from this trial, we and our partner, Daiichi Sankyo, will discuss with the NIH the potential for additional trials in this indication. In addition, in the uncontrolled single agent, signal generation CTEP studies in breast cancer and multiple myeloma, the primary endpoint of response rate was not met. As a result, we do not plan to prioritize development in these indications at this time.
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September 30, 2014 | December 31, 2013 | Increase (decrease) | ||||||||||||||
$ | % | |||||||||||||||
(in millions) | ||||||||||||||||
Cash, cash equivalents and marketable securities-short term | $ | 62.1 | $ | 74.7 | (12.6 | ) | (17 | )% | ||||||||
Marketable securities-long term | 7.2 | 20.4 | (13.2 | ) | (65 | )% | ||||||||||
Notes payable | 1.7 | 1.7 | — | — | ||||||||||||
Working capital | 43.1 | 53.9 | (10.8 | ) | (20 | )% |
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Nine Months Ended | |||||||||||||
September 30, 2014 | September 30, 2013 | Increase (decrease) | |||||||||||
(in millions) | |||||||||||||
Cash flow from: | |||||||||||||
Operating activities | $ | (25.0 | ) | $ | (26.0 | ) | $ | 1.0 | |||||
Investing activities | 25.4 | 28.5 | (3.1 | ) | |||||||||
Financing activities | 0.1 | 0.2 | (0.1 | ) |
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Payment due by period | ||||||||||||||||
Contractual Obligations | Total | Less than 1 year | 1 - 3 years | 3 - 5 years | More than 5 years | |||||||||||
Note payable | $ | 1,700 | $ | 1,700 | $ | — | $ | — | $ | — | ||||||
Operating lease obligations | 1,865 | 1,865 | — | — | — | |||||||||||
Purchase obligations | 3,951 | 3,951 | — | |||||||||||||
Restructuring costs | 502 | 502 | — | — | — | |||||||||||
Total | $ | 8,018 | $ | 8,018 | $ | — | $ | — | $ | — |
Increase (decrease) | |||||||||||||||
2014 | 2013 | $ | % | ||||||||||||
(in millions) | |||||||||||||||
For the three months ended September 30: | |||||||||||||||
Research and development revenue | $ | 2.7 | $ | 3.5 | $ | (0.8 | ) | (25 | )% | ||||||
For the nine months ended September 30: | |||||||||||||||
Research and development revenue | $ | 8.2 | $ | 13.6 | $ | (5.4 | ) | (40 | )% |
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Increase (decrease) | ||||||||||||||||
2014 | 2013 | $ | % | |||||||||||||
(in millions) | ||||||||||||||||
For the three months ended September 30: | ||||||||||||||||
Research and development | $ | 5.0 | $ | 6.0 | $ | (1.0 | ) | (16 | )% | |||||||
For the nine months ended September 30: | ||||||||||||||||
Research and development | $ | 18.0 | $ | 22.2 | $ | (4.2 | ) | (19 | )% |
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Oncology program | Current status | Nine Months Ended September 30, 2014 | Program-to-date | |||||||
c-Met program—tivantinib | Phase 3 | $ | 1.4 | $ | 83.5 |
Clinical Phase | Estimated Completion Period | |
Phase 1 | 1 – 2 years | |
Phase 2 | 2 – 3 years | |
Phase 3 | 2 – 4 years |
● | the number of clinical sites included in the trials; |
● | the length of time required to enroll suitable patients; |
● | the number of patients that ultimately participate in the trials; |
● | the duration of patient follow-up to ensure the absence of long-term product-related adverse events; and |
● | the efficacy and safety profile of the product. |
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Increase (decrease) | ||||||||||||||||
2014 | 2013 | $ | % | |||||||||||||
(in millions) | ||||||||||||||||
For the three months ended September 30: | ||||||||||||||||
General and administrative | $ | 3.0 | $ | 3.1 | $ | (0.1 | ) | (4 | )% | |||||||
For the nine months ended September 30: | ||||||||||||||||
General and administrative | $ | 9.3 | $ | 9.7 | $ | (0.4 | ) | (4 | )% |
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Increase (decrease) | ||||||||||||||||
2014 | 2013 | $ | % | |||||||||||||
(in thousands) | ||||||||||||||||
For the three months ended September 30: | ||||||||||||||||
Interest income | $ | 62 | $ | 114 | $ | (52 | ) | (46 | )% | |||||||
Interest expense | (11 | ) | (8 | ) | 3 | 38 | % | |||||||||
Other income (expense) | (2 | ) | 4 | (6 | ) | (150 | )% | |||||||||
For the nine months ended September 30: | ||||||||||||||||
Interest income | $ | 233 | $ | 397 | $ | (164 | ) | (41 | )% | |||||||
Interest expense | (28 | ) | (18 | ) | 10 | 56 | % | |||||||||
Other income (expense) | 75 | (66 | ) | 141 | 214 | % |
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EXHIBIT NO. | DESCRIPTION | |
31.1 | Rule 13a-14(a) Certificate of Chief Executive Officer, filed herewith. | |
31.2 | Rule 13a-14(a) Certificate of Principal Financial Officer, filed herewith. | |
32 | Rule 13a-14(b) Certificate of Chief Executive Officer and Chief Financial Officer, filed herewith. | |
101 | Interactive Data File |
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ArQule, Inc. | |
Date: November 10, 2014 | /s/ PETER S. LAWRENCE |
Peter S. Lawrence | |
President and Chief Operating Officer | |
(Principal Financial Officer) | |
/s/ ROBERT J. WEISKOPF | |
Robert J. Weiskopf | |
Vice President of Finance, | |
Corporate Controller and Treasurer | |
(Principal Accounting Officer) |
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