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SECURITIES AND EXCHANGE COMMISSION
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 20-4864095 | |
(State or other jurisdiction | (I.R.S. Employer Identification No.) | |
of incorporation or organization) | ||
3201 Carnegie Avenue, Cleveland, Ohio | 44115-2634 | |
(Address of principal executive offices) | (Zip Code) |
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September 30, | December 31, | |||||||
2008 | 2007 | |||||||
(Unaudited) | (Note) | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 14,748 | $ | 13,248 | ||||
Available-for-sale securities | 17,980 | 22,477 | ||||||
Accounts receivable | 947 | 836 | ||||||
Receivable from Angiotech | 243 | 63 | ||||||
Investment interest receivable | 215 | 262 | ||||||
Deposits | 740 | 163 | ||||||
Prepaid expenses and other | 597 | 394 | ||||||
Total current assets | 35,470 | 37,443 | ||||||
Available-for-sale securities | 1,988 | 13,850 | ||||||
Deposits | 144 | 100 | ||||||
Note receivable, net | 43 | 86 | ||||||
Equipment, net | 715 | 387 | ||||||
Accounts receivable, net | — | 42 | ||||||
Equity investments | 317 | 317 | ||||||
Total assets | $ | 38,677 | $ | 52,225 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,959 | $ | 1,011 | ||||
Accrued compensation and related benefits | 194 | 71 | ||||||
Accrued clinical trial costs | 98 | 735 | ||||||
Accrued expenses and other | 775 | 993 | ||||||
Current portion of long-term debt, net | — | 1,784 | ||||||
Total current liabilities | 3,026 | 4,594 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, at stated value; 10,000,000 shares authorized, and no shares issued and outstanding at September 30, 2008 and December 31, 2007 | — | — | ||||||
Common stock, $0.001 par value; 100,000,000 shares authorized, and 18,927,988 shares issued and outstanding at September 30, 2008 and December 31, 2007 | 19 | 19 | ||||||
Additional paid-in capital | 209,443 | 208,039 | ||||||
Accumulated other comprehensive (loss) income | (53 | ) | 52 | |||||
Accumulated deficit | (173,758 | ) | (160,479 | ) | ||||
Total stockholders’ equity | 35,651 | 47,631 | ||||||
Total liabilities and stockholders’ equity | $ | 38,677 | $ | 52,225 | ||||
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Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Revenues | ||||||||||||||||
License fees | $ | 885 | $ | 500 | $ | 1,728 | $ | 1,123 | ||||||||
Grant revenue | 393 | 360 | 1,118 | 1,339 | ||||||||||||
Total revenues | 1,278 | 860 | 2,846 | 2,462 | ||||||||||||
Costs and expenses | ||||||||||||||||
Research and development | 4,730 | 4,215 | 12,782 | 11,569 | ||||||||||||
General and administrative | 1,246 | 2,113 | 4,108 | 6,218 | ||||||||||||
Depreciation | 49 | 71 | 158 | 226 | ||||||||||||
Total costs and expenses | 6,025 | 6,399 | 17,048 | 18,013 | ||||||||||||
Loss from operations | (4,747 | ) | (5,539 | ) | (14,202 | ) | (15,551 | ) | ||||||||
Other income | 22 | 500 | 42 | 2,000 | ||||||||||||
Interest income | 232 | 724 | 974 | 946 | ||||||||||||
Interest expense | — | (124 | ) | (93 | ) | (1,167 | ) | |||||||||
Accretion of premium on convertible debt | — | — | — | (456 | ) | |||||||||||
Net loss | $ | (4,493 | ) | $ | (4,439 | ) | $ | (13,279 | ) | $ | (14,228 | ) | ||||
Preferred stock dividends | $ | — | $ | — | $ | — | $ | (659 | ) | |||||||
Deemed dividend resulting from induced conversion of convertible preferred stock | $ | — | $ | — | $ | — | $ | (4,800 | ) | |||||||
Net loss attributable to common stockholders | $ | (4,493 | ) | $ | (4,439 | ) | $ | (13,279 | ) | $ | (19,687 | ) | ||||
Basic and diluted net loss per common share attributable to common stockholders | $ | (0.24 | ) | $ | (0.23 | ) | $ | (0.70 | ) | $ | (2.44 | ) | ||||
Weighted average shares outstanding, basic and diluted | 18,927,988 | 18,927,988 | 18,927,988 | 8,075,763 |
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Nine months ended | ||||||||
September 30, | ||||||||
2008 | 2007 | |||||||
Operating activities | ||||||||
Net loss | $ | (13,279 | ) | $ | (14,228 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 158 | 226 | ||||||
Gain on sale of fixed assets | (24 | ) | — | |||||
Accretion of premium on convertible debt | — | 456 | ||||||
Stock-based compensation | 1,404 | 4,718 | ||||||
Provision on note receivable | 43 | 193 | ||||||
Expense related to warrants issued to lenders | 16 | 459 | ||||||
Amortization of premium (discount) on available-for-sale securities and other | (44 | ) | 7 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (69 | ) | 375 | |||||
Receivable from Angiotech | (180 | ) | — | |||||
Prepaid expenses and other assets | (777 | ) | 157 | |||||
Accounts payable and accrued expenses | 216 | 553 | ||||||
Net cash used in operating activities | (12,536 | ) | (7,084 | ) | ||||
Investing activities | ||||||||
Purchase of available-for-sale securities | (21,701 | ) | (15,002 | ) | ||||
Maturities of available-for-sale securities | 37,999 | — | ||||||
Proceeds from sale of fixed assets | 24 | — | ||||||
Purchase of equipment | (486 | ) | (66 | ) | ||||
Net cash provided by (used in) investing activities | 15,836 | (15,068 | ) | |||||
Financing activities | ||||||||
Principal payments on debt | (1,800 | ) | (2,576 | ) | ||||
Proceeds from convertible promissory note | — | 5,000 | ||||||
Proceeds from issuance of common stock, net | — | 58,494 | ||||||
Net cash (used in) provided by financing activities | (1,800 | ) | 60,918 | |||||
Increase in cash and cash equivalents | 1,500 | 38,766 | ||||||
Cash and cash equivalents at beginning of the period | 13,248 | 1,528 | ||||||
Cash and cash equivalents at end of the period | $ | 14,748 | $ | 40,294 | ||||
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1) | Outstanding stock options to purchase 3,733,240 shares of common stock at September 30, 2008 for both the three-month and nine-month periods ended September 30, 2008, and 3,701,634 shares of common stock at September 30, 2007 for both the three-month and nine-month periods ended September 30, 2007; | |
2) | Warrants to purchase 5,125,496 shares of common stock at September 30, 2008 and 2007 for each of the three-month and nine-month periods ended September 30, 2008 and September 30, 2007, respectively; | |
3) | Shares of common stock issuable upon the conversion of convertible preferred stock in the amount of 213,388 during the nine-month period ended September 30, 2007; and | |
4) | Shares of common stock issuable upon the conversion of convertible promissory notes in the approximate amount of 149,465 during the nine-month period ended September 30, 2007. |
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Net loss | $ | (4,493 | ) | $ | (4,439 | ) | $ | (13,279 | ) | $ | (14,228 | ) | ||||
Unrealized loss on available-for-sale securities | (45 | ) | — | (105 | ) | — | ||||||||||
Comprehensive loss | $ | (4,538 | ) | $ | (4,439 | ) | $ | (13,384 | ) | $ | (14,228 | ) | ||||
Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities. |
Level 2 | Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability. |
Level 3 | Unobservable inputs for the asset or liability. |
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Fair Value Measurements at September 30, 2008 Using | ||||||||||||||||
Quoted Prices in Active Markets for | Significant Other | Significant | ||||||||||||||
Balance as of | Identical Assets | Observable Inputs | Unobservable Inputs | |||||||||||||
Description | September 30, 2008 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Available-for-sale securities | $ | 19,968 | $ | 19,968 | $ | — | $ | — |
September 30, | December 31, | |||||||
2008 | 2007 | |||||||
Notes payable to lenders | $ | — | $ | 1,800 | ||||
Discount related to warrant issuance | — | (16 | ) | |||||
Total, net | — | 1,784 | ||||||
Less — current portion | — | 1,784 | ||||||
$ | — | $ | — | |||||
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Number of underlying shares | Exercise Price | Expiration | ||||||||||
4,976,470 | $ | 6.00 | June 8, 2012 | |||||||||
149,026 | $ | 5.00 | June 8, 2014 | |||||||||
5,125,496 | ||||||||||||
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We have an active development program focused on small molecules that stimulate the 5HT2c receptor, a key receptor in the brain that regulates appetite and food intake. We have identified multiple compounds with the potential for treating obesity, and our lead candidate, ATHX-105, has been in clinical development. In January 2008, we completed a Phase I clinical trial in the United Kingdom with ATHX-105, the primary objective of which was to assess the short-term safety of ATHX-105 and to establish an appropriate dose range for subsequent clinical studies conducted in order to assess safety and effectiveness. There were no severe or serious adverse events observed in the clinical trial, no negative effects on cardiovascular, hematology or other clinical parameters, and no discontinuations due to adverse events. In the third quarter of 2008, we completed two additional Phase I studies in the United Kingdom that provided further safety and tolerability data for ATHX-105. These studies indicated that the drug is well absorbed throughout the gastrointestinal tract, demonstrating the potential for the development of a controlled release formulation.
In the third quarter of 2008, we filed an additional investigational new drug application, or IND, in the United States to initiate a Phase II clinical trial to examine the safety and effectiveness of ATHX-105 in clinically obese patients. We received a letter from the FDA in September 2008 with comments on the IND filing along with a request for additional information, placing the program on partial clinical hold.
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In response to this letter, we assembled relevant information and conducted certain non-clinical studies as requested by the FDA. We recently submitted this information and preliminary data from these studies to the FDA for its review and comment prior to submission of a formal response to the FDA’s letter. We have discussed this information with the FDA, and based on these discussions, we believe that continued successful development of ATHX-105 may be difficult or impractical, even if our responses to the FDA comments and the requested additional information are ultimately adequate to support removal of the partial clinical hold. Furthermore, if the FDA authorizes ATHX-105 development to move forward, we believe that the increased risks of development could make it substantially more difficult or impractical for us to establish an attractive, third-party collaboration for the further development and commercialization of ATHX-105. We are continuing to work with outside experts to further evaluate recently obtained data, information and guidance from the FDA, as well as conduct some additional analysis. We intend to submit our formal response to the FDA in the fourth quarter of 2008 and hope to get feedback from the FDA by year-end to determine if further development would be possible and warranted. We believe that the FDA may request additional information and/or studies as a condition to lifting the partial clinical hold and, if so, we will evaluate the costs and benefits of conducting such studies in light of these changes to the development profile for ATHX-105. Based on the FDA response, and our assessment of available information, we may decide to amend, delay, suspend, or terminate the further development of this program.
MultiStem
We are developing MultiStem for multiple disease indications, and believe it could have therapeutic relevance across a range of areas. In the fourth quarter of 2007, we received FDA authorization to advance two MultiStem product development programs into clinical trials, in the areas of transplant support in leukemia and lymphoma patients and for treatment of damage from myocardial infarction. The application of MultiStem for certain cardiovascular applications, including myocardial infarction, is being developed with our partner, Angiotech Pharmaceuticals, Inc. (“Angiotech”). We initiated both of these trials in 2008 and have begun enrolling patients in each study. In addition to these programs, we are also developing MultiStem for certain other conditions and intend to seek FDA authorization to conduct clinical trials for some of these indications, including ischemic stroke.
In September 2008, Angiotech announced certain reorganization initiatives to reduce its costs, citing the potential need for an amendment and reduction in cash outlays related to our collaboration, on a list of possible actions. At this time, no such amendment or reduction has been requested or made to our collaboration, and Angiotech continues to fund its share of Phase I costs on a timely basis. In the event that Angiotech fails to fund its obligations under the terms of our contract, our net costs for the Phase I clinical study would increase or the study may be curtailed.
Other Programs
We are also developing pharmaceutical products for the treatment of certain conditions affecting the central nervous system, such as ADHD, narcolepsy and other cognitive or attention disorders. We plan to complete certain preclinical studies in the fourth quarter of 2008, and if appropriate, select a clinical candidate for this program within the next several months upon the successful conclusion of current studies.
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Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
License fees | $ | 885 | $ | 500 | $ | 1,728 | $ | 1,123 | ||||||||
Grant revenue | 393 | 360 | 1,118 | 1,339 | ||||||||||||
$ | 1,278 | $ | 860 | $ | 2,846 | $ | 2,462 | |||||||||
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Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Type of expense | ||||||||||||||||
Personnel costs | $ | 675 | $ | 621 | $ | 2,241 | $ | 2,067 | ||||||||
Research supplies | 267 | 126 | 649 | 485 | ||||||||||||
Facilities | 196 | 193 | 608 | 568 | ||||||||||||
Clinical and preclinical development costs | 2,639 | 2,067 | 6,471 | 3,500 | ||||||||||||
Sponsored research | 89 | 105 | 300 | 286 | ||||||||||||
Patent legal fees | 452 | 145 | 1,077 | 806 | ||||||||||||
Other | 216 | 699 | 880 | 1,567 | ||||||||||||
Stock-based compensation | 196 | 259 | 556 | 2,290 | ||||||||||||
$ | 4,730 | $ | 4,215 | $ | 12,782 | $ | 11,569 | |||||||||
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Type of expense | ||||||||||||||||
Personnel costs | $ | 370 | $ | 405 | $ | 1,335 | $ | 1,404 | ||||||||
Facilities | 86 | 96 | 259 | 247 | ||||||||||||
Legal and professional fees | 227 | 604 | 733 | 883 | ||||||||||||
Other | 258 | 682 | 933 | 1,256 | ||||||||||||
Stock-based compensation | 305 | 326 | 848 | 2,428 | ||||||||||||
$ | 1,246 | $ | 2,113 | $ | 4,108 | $ | 6,218 | |||||||||
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• | our ability to successfully initiate or complete clinical trials for our product candidates; | ||
• | the possibility of delays in, adverse results of and excessive costs of the development process; | ||
• | changes in external market factors; | ||
• | changes in our industry’s overall performance; | ||
• | changes in our business strategy; | ||
• | our ability to protect our intellectual property portfolio; | ||
• | our possible inability to enter into licensing or co-development arrangements for certain product candidates; | ||
• | our possible inability to execute our strategy due to changes in our industry or the economy generally, including the current economic crisis; | ||
• | our ability to obtain capital in difficult market conditions; | ||
• | changes in financial stability of collaborators; | ||
• | changes in productivity and reliability of suppliers; and | ||
• | the success of our competitors and the emergence of new competitors. |
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Exhibit No. | Description | |||
31.1 | Certification of Gil Van Bokkelen, Chairman and Chief Executive Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
31.2 | Certification of Laura K. Campbell, Vice President of Finance, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
32.1 | Certification of Gil Van Bokkelen, Chairman and Chief Executive Officer, and Laura Campbell, Vice President of Finance, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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ATHERSYS, INC. | ||||
Date: November 10, 2008 | /s/ Gil Van Bokkelen | |||
Gil Van Bokkelen | ||||
Chairman and Chief Executive Officer (principal executive officer authorized to sign on behalf of the registrant) |
/s/ Laura K. Campbell | ||||
Laura K. Campbell | ||||
Vice President, Finance (principal financial and accounting officer authorized to sign on behalf of the registrant) |
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Exhibit No. | Description | |||
31.1 | Certification of Gil Van Bokkelen, Chairman and Chief Executive Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
31.2 | Certification of Laura K. Campbell, Vice President of Finance, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
32.1 | Certification of Gil Van Bokkelen, Chairman and Chief Executive Officer, and Laura Campbell, Vice President of Finance, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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