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þ | ANNUAL 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 (State or other jurisdiction of incorporation or organization) | 77-0160744 (IRS Employer Identification No.) | |
10275 Science Center Drive San Diego, CA (Address of Principal Executive Offices) | 92121-1117 (Zip Code) |
None
Common Stock, $.001 par value
(Title of Class)
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EXHIBIT 10.278 | ||||||||
EXHIBIT 10.279 | ||||||||
EXHIBIT 10.280 | ||||||||
EXHIBIT 10.281 | ||||||||
EXHIBIT 10.282 | ||||||||
EXHIBIT 23.1 | ||||||||
EXHIBIT 31.1 | ||||||||
EXHIBIT 31.2 | ||||||||
EXHIBIT 32.1 | ||||||||
EXHIBIT 32.2 |
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Products And Indications | ||
ONTAK® (denileukin diftitox) ONZAR™ | Approved in February 1999 for sale in the U.S. for the treatment of patients with persistent or recurrent cutaneous T-cell lymphoma whose malignant cells express the CD25 component of the Interleukin-2 receptor. | |
Targretin® (bexarotene) capsules | Approved in December 1999 for sale in the U.S. and in March 2001 for sale in Europe for the treatment of cutaneous manifestations of cutaneous T-cell lymphoma in patients who are refractory to at least one prior systemic therapy. | |
Targretin® (bexarotene) gel 1% | Approved in June 2000 for sale in the U.S. for the topical treatment of cutaneous lesions in patients with cutaneous T-cell lymphoma (Stage 1A and 1B) who have refractory or persistent disease after other therapies or who have not tolerated other therapies. | |
Panretin® gel (alitretinoin) 0.1% | Approved in February 1999 for sale in the U.S. and in October 2000 for sale in Europe for the topical treatment of cutaneous lesions of patients with AIDS-related Kaposi’s sarcoma. | |
AVINZA® | Approved in March 2002 for sale in the U.S. for the once-daily treatment of moderate-to-severe pain in patients who require continuous, around-the-clock opioid therapy for an extended period of time. | |
CTCL | Cutaneous T-cell lymphoma | |
HIV | Human immunodeficiency virus | |
HT | Hormone therapy | |
KS | Kaposi’s sarcoma | |
NHL | Non-Hodgkin’s lymphoma | |
NSCLC | Non-small cell lung cancer | |
CLL | Chronic lymphocytic leukemia | |
GVHD | Graft-versus-host disease | |
SCIENTIFIC TERMS | ||
AR | Androgen Receptor | |
ER | Estrogen Receptor | |
GR | Glucocorticoid Receptor | |
IR | Intracellular Receptor | |
JAK | Janus Kinase family of tyrosine protein kinases | |
MR | Mineralocorticoid Receptor | |
PPAR | Peroxisome Proliferation Activated Receptor | |
PR | Progesterone Receptor | |
RAR | Retinoic Acid Receptor | |
RR | Retinoid Responsive Intracellular Receptor | |
RXR | Retinoid X Receptor | |
SARM | Selective Androgen Receptor Modulator | |
SERM | Selective Estrogen Receptor Modulator | |
SGRM | Selective Glucocorticoid Receptor Modulator | |
STAT | Signal Transducer and Activator of Transcription | |
REGULATORY TERMS | ||
CPMP | Committee for Proprietary Medicinal Products (Europe) | |
EC | European Commission | |
EMEA | European Agency for the Evaluation of Medicinal Products | |
FDA | United States Food and Drug Administration | |
IND | Investigational New Drug Application (United States) | |
MA | Marketing Authorization (Europe) | |
MAA | Marketing Authorization Application (Europe) | |
NDA | New Drug Application (United States) |
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Initiation of | ||||
Corporate Collaborator | Collaboration | Focus | ||
Pfizer Inc. | May 1991 | Osteoporosis, breast cancer prevention, vaginal atrophy | ||
GlaxoSmithKline (Glaxo Wellcome plc) | September 1992 | Cardiovascular diseases | ||
Wyeth | September 1994 | Women’s health, oncology | ||
GlaxoSmithKline (SmithKline Beecham) | February 1995 | Blood disorders | ||
Eli Lilly & Company | November 1997 | Type II diabetes, metabolic and cardiovascular diseases | ||
TAP Pharmaceutical Products, Inc. | June 2001 | Men’s and women’s health, osteoporosis |
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Additional Indications | ||||||
Marketed Product | Approved Indication | European Status | Studied or in Development | |||
AVINZA | Chronic, moderate-to-severe pain | N/A | None | |||
ONTAK | CTCL | MAA withdrawn (ONZAR) | CLL, B-cell NHL, other T-cell lymphomas, NSCLC | |||
Targretin capsules | CTCL | MA issued | NSCLC, renal cell cancer, breast, prostate/colon cancer and other solid tumors | |||
Targretin gel | CTCL | MAA withdrawn | Hand dermatitis, psoriasis | |||
Panretin gel | KS | MA issued | None |
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% of Incremental Net Sales | ||||
Annual Net Sales of AVINZA | Paid to Organon by Ligand | |||
$0-35 million (2003 only) | 0% (2003 only) | |||
$0-150 million | 30 | % | ||
$150-300 million | 40 | % | ||
$300-425 million | 50 | % | ||
> $425 million | 45 | % |
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Program | Disease/Indication | Development Phase | ||
AVINZA | Chronic, moderate-to-severe pain | Marketed in U.S. Phase IV | ||
ONTAK | CTCL | Marketed in U.S., Phase IV | ||
CLL | Phase II | |||
Peripheral T-cell lymphoma | Phase II | |||
B-cell NHL | Phase II | |||
NSCLC third line | Phase II | |||
Targretin capsules | CTCL | Marketed in U.S. and Europe | ||
NSCLC first-line | Phase III | |||
NSCLC monotherapy | Planned Phase II/III | |||
NSCLC second/third line | Planned Phase II/III | |||
Advanced breast cancer | Phase II | |||
Renal cell cancer | Phase II | |||
Targretin gel | CTCL | Marketed in U.S. | ||
Hand dermatitis (eczema) | Planned Phase II/III | |||
Psoriasis | Phase II | |||
LGD4665 (Thrombopoietin oral mimic) | Chemotherapy-induced thrombocytopenias (TCP), other TCPs | IND Track | ||
LGD5552 (Glucocorticoid agonists) | Inflammation, cancer | IND Track | ||
Selective androgen receptor modulators, e.g., LGD3303 (agonist/antagonist) | Male hypogonadism, female & male osteoporosis, male & female sexual dysfunction, frailty. Prostate cancer, hirsutism, acne, androgenetic alopecia. | Pre-clinical |
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Indication | Estimated U.S. Prevalence | ||
Menopausal symptoms | 50 million | ||
Osteoporosis/osteopenia (men and women) | 55 million | ||
Dyslipidemias | 109 million | ||
Contraception | 38 million | ||
Type II diabetes | 18 million | ||
Breast cancer | .8 million |
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Program | Disease/Indication | Development Phase | Marketing Rights | |||||
SEX HORMONE MODULATORS | ||||||||
SERMs | ||||||||
• | Lasofoxifene (1) | Osteoporosis prevention, vaginal atrophy | NDA and SNDA filed | Pfizer | ||||
• | Lasofoxifene | Breast cancer prevention, Osteoporosis treatment | Phase III | Pfizer | ||||
• | Bazedoxifene | Osteoporosis | Phase III | Wyeth | ||||
• | Bazedoxifene CE | Osteoporosis prevention Vasomoter symptoms | Phase III | Wyeth | ||||
• | Pipendoxifene (formerly ERA-923) (2) | Breast cancer | Phase II | Wyeth | ||||
PR modulators | ||||||||
• | NSP-989 (PR agonist) (3) | Contraception | Phase II | Wyeth | ||||
• | NSP-989 combo (PR agonist) (3) | Contraception | Phase I | Wyeth | ||||
SARMs | ||||||||
• | LGD 2941 (androgen agonist) | Osteoporosis, frailty, HT and sexual dysfunction | Phase I | TAP | ||||
METABOLIC/CARDIOVASCULAR DISEASES | ||||||||
PPAR modulators | ||||||||
• | GW516 | Cardiovascular disease, dyslipidemia | Phase II | GlaxoSmithKline | ||||
• | LY818 (naveglitazar) (4) | Type II diabetes | Phase II | Lilly | ||||
• | LY929 (5) | Type II diabetes, metabolic diseases, dyslipidemia | Phase I | Lilly | ||||
• | LY674 | Atherosclerosis/dyslipidemia | Phase II | Lilly | ||||
• | LYWWW (6) | Atherosclerosis | IND track | Lilly | ||||
• | Selective PPAR modulators | Type II diabetes, metabolic diseases, dyslipidemia | IND track | Lilly | ||||
• | LYYYY (6) | Atherosclerosis | Pre-clinical | Lilly | ||||
INFLAMMATORY DISEASES, ONCOLOGY | ||||||||
• | SB-497115 (TPO agonist) | Thrombocytopenia | Phase II | GlaxoSmithKline | ||||
• | SB-559448 (TPO agonist) | Thrombocytopenia | Phase I | GlaxoSmithKline |
(1) | In September 2005, Pfizer announced receipt of a non-approvable letter from the FDA for the prevention of osteoporosis. | |
(2) | Pipendoxifene development has been terminated for oncology; it is currently on hold as a potential back-up to bazedoxifene. | |
(3) | On internal hold; strategic alternatives for Phase III development being explored. | |
(4) | Lilly decision to advance to Phase III announced March 2004; timing of initiation delayed by new FDA guidelines. | |
(5) | Product placed on internal hold. | |
(6) | Compound number not disclosed. |
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§ | We have incurred substantial unanticipated costs for accounting and legal fees in 2005 in connection with the restatement. Although the restatement is complete, we expect to continue to incur such costs as noted below. | ||
§ | We have been named in a number of lawsuits that began in August 2004 and an additional lawsuit filed in October 2005 claiming to be class actions and shareholder derivative actions. As a result of our restatement the plaintiffs in these lawsuits may make additional claims, expand existing claims and/or expand the time periods covered by the complaints. Other plaintiffs may bring additional actions with other claims, based on the restatement. If such events occur, we may incur additional substantial defense costs regardless of their outcome. Likewise, such events might cause a diversion of our management’s time and attention. If we do not prevail in any such actions, we could be required to pay substantial damages or settlement costs. | ||
§ | The Securities and Exchange Commission (SEC) has instituted a formal investigation of the Company’s consolidated financial statements. This investigation will likely divert more of our management’s time and attention and cause us to incur substantial costs. Such investigations can also lead to fines or injunctions or orders with respect to future activities, as well as further substantial costs and diversion of management time and attention. | ||
§ | In October 2005, a lawsuit was filed in the Court of Chancery in the State of Delaware by Third Point Offshore Fund, Ltd. requesting the Court to order us to hold an annual meeting for the election of directors within 60 days of an order by the Court. We agreed to settle this matter with Third Point and to schedule the annual meeting for January 31, 2006. Third Point has indicated that it will solicit proxies to elect at least three directors at that meeting. We may incur substantial costs in connection with the annual meeting regardless of the outcome. Likewise, any proxy contest might cause a diversion of our management’s time and attention. | ||
§ | The need to reconsider our accounting treatment and the restatement of our consolidated financial statements caused us to be late in filing our required reports on Form 10-K for December 31, 2004 and Forms 10-Q for the quarters ended March 31, 2005 and June 30, 2005, respectively, which caused us to be delisted from NASDAQ National Market. See “Our common stock was delisted from the NASDAQ National Market which may reduce the price of our common stock and the levels of liquidity available to our stockholders and cause confusion among investors” for additional discussion regarding the NASDAQ delisting. | ||
§ | The Company has entered into a long term factoring arrangement under which eligible accounts receivable are sold without recourse to a finance company. The agreement requires that the Company’s consolidated financial statements be provided within 120 days after year end. A waiver of the financial reporting covenant has been granted through December 31, 2005. Our inability to maintain the waivers of the financial reporting covenant could impact our ability to continue factoring our receivables. Our inability to |
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obtain adequate working capital through the factoring arrangement could adversely affect our business and our liquidity. |
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Ø | preclinical testing or human studies may show that our potential products are ineffective or cause harmful side effects; | |
Ø | the products may fail to receive necessary regulatory approvals from the FDA or foreign authorities in a timely manner, or at all; | |
Ø | the products, if approved, may not be produced in commercial quantities or at reasonable costs; | |
Ø | the products, once approved, may not achieve commercial acceptance; | |
Ø | regulatory or governmental authorities may apply restrictions to our products, which could adversely affect their commercial success; or | |
Ø | the proprietary rights of other parties may prevent us or our partners from marketing the products. |
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Ø | conduct research, preclinical testing and human studies; | |
Ø | establish pilot scale and commercial scale manufacturing processes and facilities; and | |
Ø | establish and develop quality control, regulatory, marketing, sales and administrative capabilities to support these programs. | |
Our future operating and capital needs will depend on many factors, including: | ||
Ø | the pace of scientific progress in our research and development programs and the magnitude of these programs; | |
Ø | the scope and results of preclinical testing and human studies; | |
Ø | the time and costs involved in obtaining regulatory approvals; | |
Ø | the time and costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims; | |
Ø | competing technological and market developments; | |
Ø | our ability to establish additional collaborations; | |
Ø | changes in our existing collaborations; | |
Ø | the cost of manufacturing scale-up; and | |
Ø | the effectiveness of our commercialization activities. |
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Price Range | ||||||||
High | Low | |||||||
Year Ended December 31, 2004: | ||||||||
1st Quarter | $ | 20.94 | $ | 13.19 | ||||
2nd Quarter | 24.91 | 15.82 | ||||||
3rd Quarter | 17.38 | 7.41 | ||||||
4th Quarter | 12.97 | 8.26 | ||||||
Year Ended December 31, 2003: | ||||||||
1st Quarter | 6.90 | 3.69 | ||||||
2nd Quarter | 16.59 | 6.25 | ||||||
3rd Quarter | 15.90 | 9.90 | ||||||
4th Quarter | 15.75 | 11.35 |
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Year Ended December 31, | ||||||||||||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||
(Restated) | (Restated) | (Restated) | (Restated) | |||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(in thousands, except share and loss per share data) | ||||||||||||||||||||
Consolidated Statement of Operations Data: | ||||||||||||||||||||
Product sales (1) | $ | 120,335 | $ | 55,324 | $ | 30,326 | $ | 32,038 | $ | 18,818 | ||||||||||
Sale of royalty rights, net (2) | 31,342 | 11,786 | 17,600 | — | — | |||||||||||||||
Collaborative research and development and other revenues | 11,835 | 14,008 | 23,843 | 30,718 | 25,200 | |||||||||||||||
Cost of products sold (1) | 39,804 | 26,557 | 14,738 | 11,582 | 8,355 | |||||||||||||||
Research and development expenses | 65,204 | 66,678 | 59,060 | 49,427 | 49,903 | |||||||||||||||
Selling, general and administrative expenses | 65,798 | 52,540 | 41,825 | 35,072 | 34,370 | |||||||||||||||
Co-promotion expense (3) | 30,077 | 9,360 | — | — | — | |||||||||||||||
Loss from operations | (37,371 | ) | (74,017 | ) | (43,854 | ) | (33,325 | ) | (48,610 | ) | ||||||||||
Loss before cumulative effect of changes in accounting principles | (45,141 | ) | (94,466 | ) | (52,257 | ) | (53,305 | ) | (62,005 | ) | ||||||||||
Cumulative effect on prior years of changing method of revenue recognition (4) | — | — | — | — | (13,099 | ) | ||||||||||||||
Cumulative effect of changing method of accounting for variable interest entity (5) | — | (2,005 | ) | — | — | — | ||||||||||||||
Net loss | (45,141 | ) | (96,471 | ) | (52,257 | ) | (53,305 | ) | (75,104 | ) | ||||||||||
Basic and diluted per share amounts: | ||||||||||||||||||||
Loss before cumulative effect of changes in accounting principles | $ | (0.61 | ) | $ | (1.33 | ) | $ | (0.76 | ) | $ | (0.90 | ) | $ | (1.11 | ) | |||||
Cumulative effect on prior years of changing method of revenue recognition (4) | — | — | — | — | (0.24 | ) | ||||||||||||||
Cumulative effect of changing method of accounting for variable interest entity (5) | — | (0.03 | ) | — | — | — | ||||||||||||||
Net loss | $ | (0.61 | ) | $ | (1.36 | ) | $ | (0.76 | ) | $ | (0.90 | ) | $ | (1.35 | ) | |||||
Weighted average number of common shares | 73,692,987 | 70,685,234 | 69,118,976 | 59,413,270 | 55,664,921 | |||||||||||||||
Pro forma amounts assuming the changed method of accounting for variable interest entity is applied retroactively (5): | ||||||||||||||||||||
Net loss | $ | (94,352 | ) | $ | (52,456 | ) | $ | (53,600 | ) | $ | (75,561 | ) | ||||||||
Basic and diluted net loss per share | $ | (1.34 | ) | $ | (0.76 | ) | $ | (0.90 | ) | $ | (1.36 | ) | ||||||||
December 31, | ||||||||||||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||
(Restated) | (Restated) | (Restated) | (Restated) | |||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||||||||||
Cash, cash equivalents, short-term investments and restricted investments | $ | 114,870 | $ | 100,690 | $ | 74,894 | $ | 40,058 | $ | 25,097 | ||||||||||
Working capital (deficit) (6) | (43,888 | ) | (16,930 | ) | 18,370 | 2,375 | 8,372 | |||||||||||||
Total assets | 332,466 | 314,046 | 287,709 | 126,898 | 117,484 | |||||||||||||||
Current portion of deferred revenue, net | 152,528 | 105,719 | 48,609 | 27,152 | 13,713 | |||||||||||||||
Long-term obligations (excludes long-term portion of deferred revenues, net) | 174,214 | 173,851 | 162,329 | 138,837 | 133,575 | |||||||||||||||
Long-term portion of deferred revenue, net | 4,512 | 3,448 | 3,595 | 4,164 | 5,727 | |||||||||||||||
Common stock subject to conditional redemption/repurchase | 12,345 | 14,595 | 34,595 | 14,595 | 14,595 | |||||||||||||||
Accumulated deficit | (794,660 | ) | (749,519 | ) | (653,048 | ) | (600,791 | ) | (547,486 | ) | ||||||||||
Total stockholders’ equity (deficit) (7) | (75,317 | ) | (37,554 | ) | 8,925 | (86,849 | ) | (72,405 | ) |
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(1) | We began selling ONTAK and Panretin gel in 1999 and Targretin capsules and Targretin gel in 2000. AVINZA was approved by the FDA in March 2002 and subsequently launched in the U.S. in June 2002. | |
(2) | Represents the sale of rights to royalties. See Note 11 (Royalty Agreements) of the Notes to Consolidated Financial Statements. | |
(3) | Represents expense related to our AVINZA co-promotion agreement with Organon Pharmaceuticals USA, Inc. entered into in February 2003. See Note 8 of the Notes to the Consolidated Financial Statements. | |
(4) | In 2000, we changed our policy for the recognition of revenue related to up-front fees in accordance with SAB 104. | |
(5) | In December 2003, we adopted FIN 46(R),Consolidation of Variable Interest Entities, an interpretation of ARB No. 51. Under FIN 46(R), we were required to consolidate the variable interest entity from which we leased our corporate headquarters. Accordingly, as of December 31, 2003, we consolidated assets with a carrying value of $13.6 million, debt of $12.5 million, and a non-controlling interest of $0.6 million. In connection with the adoption of FIN 46(R), we recorded a charge of $2.0 million as a cumulative effect of the accounting change on December 31, 2003. In April 2004, we acquired the portion of the variable interest entity that we did not previously own. The acquisition resulted in Ligand assuming the existing loan against the property and making a payment of approximately $0.6 million to the entity’s other shareholder. See Note 3 (Cumulative Effect of Accounting Change) of the Notes to Consolidated Financial Statements. | |
(6) | Working capital (deficit) includes deferred product revenue recorded under the sell-through revenue recognition method. | |
(7) | The cumulative effect of the restatement at January 1, 2000 was approximately $(13.2) million, which represents the effect of the change in the revenue recognition method from the sell-in method to the sell-through method – net product sales – $(1.0) million; royalties – $0.1 million; $(1.6) million regarding rent expense for annual rent increases; $(14.6) million regarding the reclassification from equity of the Company’s issuance of common stock subject to conditional redemption to Pfizer in accordance with EITF D-98; $3.4 million regarding the capitalization of the X-Ceptor purchase right in October 1999; and $0.5 million regarding the reversal of X-Ceptor warrant amortization. |
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EFFECTS OF THE RESTATEMENT
(in thousands, except share and per share data)
For the Year Ended December 31, | ||||||||
2003 | 2002 | |||||||
Net loss, as previously reported: | $ | (37,462 | ) | $ | (32,596 | ) | ||
Adjustments to net loss (increase) decrease: | ||||||||
Product sales: | ||||||||
Net product sales (a) | (59,187 | ) | (24,160 | ) | ||||
Other (b) | (121 | ) | (36 | ) | ||||
Sale of royalty rights, net (c) | (714 | ) | (675 | ) | ||||
Cost of products sold: | ||||||||
Product cost (d) | 151 | 2,549 | ||||||
Royalties (d) | 4,910 | 3,019 | ||||||
Research and development: | ||||||||
Reclassification (e) | 55 | — | ||||||
Clinical trial (f) | 918 | (1,107 | ) | |||||
X-Ceptor warrant amortization (g) | — | 692 | ||||||
Patent expense accrual (h) | — | 345 | ||||||
Other (b) | 28 | (183 | ) | |||||
Selling, general and administrative: | ||||||||
Reclassification (e) | (55 | ) | — | |||||
Rent (i) | (111 | ) | (158 | ) | ||||
Seragen litigation (j) | (739 | ) | — | |||||
Other (b) | 26 | 11 | ||||||
Interest (b) | (172 | ) | — | |||||
Other, net: | ||||||||
X-Ceptor purchase right (k) | (3,990 | ) | — | |||||
Income tax expense (l) | 56 | 44 | ||||||
Other (b) | (8 | ) | 42 | |||||
Income tax expense (l) | (56 | ) | (44 | ) | ||||
Net loss, as restated | $ | (96,471 | ) | $ | (52,257 | ) | ||
Per Share Data | ||||||||
As previously reported: | ||||||||
Basic and diluted net loss per share | $ | (0.53 | ) | $ | (0.47 | ) | ||
Weighted average number of common shares | 70,685,234 | 69,118,976 | ||||||
As restated: | ||||||||
Basic and diluted net loss per share | $ | (1.36 | ) | $ | (0.76 | ) | ||
Weighted average number of common shares | 70,685,234 | 69,118,976 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the deferral of a portion of the sale of royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties. | |
(e) | To reclassify expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(f) | To correct clinical trial expense. | |
(g) | To reverse X-Ceptor warrant amortization. | |
(h) | To correct patent expense. | |
(i) | To adjust rent expense for contractual annual rent increase which is recognized over the lease term on a straight-line basis. | |
(j) | To reflect accrued interest for the Seragen acquisition litigation. | |
(k) | To reflect the write-off of the X-Ceptor purchase right in March 2003. | |
(l) | To reclassify income taxes related to international operations. |
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EFFECTS OF THE RESTATEMENT
(in thousands, except share and per share data)
(unaudited)
2004 Quarterly Periods | ||||||||||||
March 31, | June 30, | September 30, | ||||||||||
Net loss, as previously reported: | $ | (13,139 | ) | $ | (14,216 | ) | $ | (6,789 | ) | |||
Adjustments to net loss (increase) decrease: | ||||||||||||
Product sales: | ||||||||||||
Net product sales (a) | (9,245 | ) | (8,097 | ) | (12,842 | ) | ||||||
Other (b) | 48 | (89 | ) | 50 | ||||||||
Sale of royalty rights, net (c) | — | — | 67 | |||||||||
Cost of products sold: | ||||||||||||
Product cost (d) | 886 | 214 | 163 | |||||||||
Royalties (d) | 392 | (6 | ) | 1,029 | ||||||||
Research and development: | ||||||||||||
Reclassification (e) | 742 | 1,454 | 1,221 | |||||||||
Salk-buyout (f) | (1,120 | ) | — | — | ||||||||
Patent expense (g) | (238 | ) | — | — | ||||||||
Other (b) | (49 | ) | 154 | 12 | ||||||||
Selling, general and administrative: | ||||||||||||
Reclassification (e) | (742 | ) | (1,454 | ) | (1,221 | ) | ||||||
Legal expense (h) | 373 | — | — | |||||||||
Other (b) | 136 | (37 | ) | (200 | ) | |||||||
Interest: | ||||||||||||
Factoring arrangement (i) | — | — | (238 | ) | ||||||||
Other (b) | 44 | 12 | 12 | |||||||||
Other, net: | ||||||||||||
Factoring arrangement (i) | — | — | 238 | |||||||||
Income taxes (j) | 16 | 18 | 3 | |||||||||
Income tax expense (j) | (16 | ) | (18 | ) | (3 | ) | ||||||
Net loss, as restated | $ | (21,912 | ) | $ | (22,065 | ) | $ | (18,498 | ) | |||
Per Share Data | ||||||||||||
As previously reported: | ||||||||||||
Basic and diluted net loss per share | $ | (0.18 | ) | $ | (0.19 | ) | $ | (0.09 | ) | |||
Weighted average number of common shares | 73,299,281 | 73,754,146 | 73,845,613 | |||||||||
As restated: | ||||||||||||
Basic and diluted net loss per share | $ | (0.30 | ) | $ | (0.30 | ) | $ | (0.25 | ) | |||
Weighted average number of common shares | 73,299,281 | 73,754,146 | 73,845,613 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the recognition of revenue previously deferred in regard to the sale of royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties. | |
(e) | To reclassify expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(f) | To expense the payment to The Salk Institute to buy-out the Company’s royalty obligation on lasofoxifene in March 2004. | |
(g) | To correct patent expense. | |
(h) | To correct legal expense. | |
(i) | To reclassify interest and factoring expenses incurred under a factoring arrangement. | |
(j) | To reclassify income taxes related to international operations. |
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EFFECTS OF THE RESTATEMENT
(in thousands, except share and per share data)
(unaudited)
2003 Quarterly Periods | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
Net (loss) income, as previously reported: | $ | (20,320 | ) | $ | (11,997 | ) | $ | (11,087 | ) | $ | 5,942 | |||||
Adjustments to net (loss) (increase) decrease/ income increase (decrease): | ||||||||||||||||
Product sales: | ||||||||||||||||
Net product sales (a) | (7,468 | ) | (12,835 | ) | (13,376 | ) | (25,508 | ) | ||||||||
Other (b) | 13 | (181 | ) | 13 | 34 | |||||||||||
Sale of royalty rights, net (c) | — | — | 35 | (749 | ) | |||||||||||
Cost of products sold: | ||||||||||||||||
Product cost (d) | 3 | (437 | ) | (23 | ) | 608 | ||||||||||
Royalties (d) | 415 | 1,358 | 1,547 | 1,590 | ||||||||||||
Research and development: | ||||||||||||||||
Reclassification (e) | — | 9 | 20 | 26 | ||||||||||||
Clinical trial expense (f) | — | 331 | 281 | 233 | ||||||||||||
Other (b) | 91 | (125 | ) | (40 | ) | 175 | ||||||||||
Selling, general and administrative: | ||||||||||||||||
Reclassification (e) | — | (9 | ) | (20 | ) | (26 | ) | |||||||||
Seragen litigation (g) | — | — | — | (739 | ) | |||||||||||
Other (b) | 74 | 11 | (6 | ) | (164 | ) | ||||||||||
Interest (b) | (26 | ) | (81 | ) | (170 | ) | 105 | |||||||||
Other, net: | — | |||||||||||||||
X-Ceptor purchase right (h) | (3,990 | ) | — | — | — | |||||||||||
Income tax expense (i) | 15 | 16 | 9 | 16 | ||||||||||||
Other (b) | 80 | — | 113 | (201 | ) | |||||||||||
Income tax expense (i) | (15 | ) | (16 | ) | (9 | ) | (16 | ) | ||||||||
Net loss, as restated | $ | (31,128 | ) | $ | (23,956 | ) | $ | (22,713 | ) | $ | (18,674 | ) | ||||
Per Share Data | ||||||||||||||||
As previously reported: | ||||||||||||||||
Basic and diluted net (loss) income per share | $ | (0.29 | ) | $ | (0.17 | ) | $ | (0.16 | ) | $ | 0.08 | |||||
Weighted average number of common shares used in basic per share calculation | 70,238,438 | 69,275,323 | 70,100,280 | 73,098,427 | ||||||||||||
Weighted average number of common shares used in fully diluted per share calculation | 99,684,427 | |||||||||||||||
As restated: | ||||||||||||||||
Basic and diluted net loss per share | $ | (0.44 | ) | $ | (0.35 | ) | $ | (0.32 | ) | $ | (0.26 | ) | ||||
Weighted average number of common shares | 70,238,438 | 69,275,323 | 70,100,280 | 73,098,427 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the recognition/(deferral) regarding the sale of royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties. | |
(e) | To reclassify expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(f) | To correct clinical trial expense. | |
(g) | To reflect accrued interest for the Seragen acquisition litigation. | |
(h) | To reflect the write-off of the X-Ceptor purchase right in March 2003, which was previously deferred and recognized over the period from 1999 through June 2002. | |
(i) | To reclassify income taxes related to international operations. |
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EFFECTS OF THE RESTATEMENT
(in thousands)
December 31, 2003 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Year | Year | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 59,030 | $ | 59,030 | ||||||||||||
Short-term investments | 40,004 | 40,004 | ||||||||||||||
Accounts receivable, net | 19,051 | $ | 247 | (a) | $ | (397 | ) (a)(c) | 18,901 | ||||||||
Inventories, net | 8,262 | 150 | (a) | 68 | (a) | 8,480 | ||||||||||
Other current assets | 3,810 | 7,665 | (a)(b) | 4,886 | (a)(b) | 16,361 | ||||||||||
Total current assets | 130,157 | 8,062 | 4,557 | 142,776 | ||||||||||||
Restricted investments | 1,656 | 1,656 | ||||||||||||||
Property and equipment, net | 23,501 | 23,501 | ||||||||||||||
Acquired technology and product rights, net | 137,857 | 260 | (a)(d) | 138,117 | ||||||||||||
Other assets | 8,084 | 3,958 | (a)(e) | (4,046 | ) (a)(e) | 7,996 | ||||||||||
$ | 301,255 | $ | 12,280 | $ | 511 | $ | 314,046 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 18,691 | $ | 913 | (a)(f) | $ | (763 | ) (a)(f) | $ | 18,841 | ||||||
Accrued liabilities | 30,315 | (2,182 | ) (a)(g) | 4,534 | (a)(h) | 32,667 | ||||||||||
Current portion of deferred revenue, net | 2,564 | 43,926 | (i) | 59,229 | (i) | 105,719 | ||||||||||
Current portion of equipment financing obligations | 2,184 | 253 | (j) | (253 | ) (j) | 2,184 | ||||||||||
Current portion of long-term debt | 295 | 295 | ||||||||||||||
Total current liabilities | 54,049 | 42,910 | 62,747 | 159,706 | ||||||||||||
Long-term debt | 167,408 | 167,408 | ||||||||||||||
Long-term portion of deferred revenue, net | 2,275 | 581 | (k) | 592 | (k) | 3,448 | ||||||||||
Long-term portion of equipment financing obligations | 2,644 | (253 | ) (j) | 253 | (j) | 2,644 | ||||||||||
Other long-term liabilities | 4,151 | (463 | ) (l) | 111 | (l) | 3,799 | ||||||||||
Total liabilities | 230,527 | 42,775 | 63,703 | 337,005 | ||||||||||||
Common stock subject to conditional redemption/repurchase | 34,595 | (m) | (20,000 | ) (n) | 14,595 | |||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||
Common stock | 73 | (3 | ) (m) | 2 | (n) | 72 | ||||||||||
Additional paid-in capital | 727,410 | (30,355 | ) (a)(m) | 15,815 | (a)(n) | 712,870 | ||||||||||
Accumulated other comprehensive loss | (66 | ) | (66 | ) | ||||||||||||
Accumulated deficit | (655,778 | ) | (34,732 | ) | (59,009 | ) | (749,519 | ) | ||||||||
71,639 | (65,090 | ) | (43,192 | ) | (36,643 | ) | ||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity (deficit) | 70,728 | (65,090 | ) | (43,192 | ) | (37,554 | ) | |||||||||
$ | 301,255 | $ | 12,280 | $ | 511 | $ | 314,046 | |||||||||
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(a) | To reflect other adjustments and reclassifications. | |
(b) | Cumulative effect of prior year adjustments includes $7,603 related to the change to the sell-through revenue recognition method (deferred royalties – $4,215; deferred cost of products sold – $3,388). Current year adjustments include $5,668 related to the change to the sell-through revenue recognition method (deferred royalties – $5,465; deferred cost of products sold – $203); correct prepaid clinical trial expense – $(254); reclassify Organon cost-sharing receivable balance to co-promotion liability – $(461). | |
(c) | To correct bad debt expense – $(205). | |
(d) | To correct accumulated amortization related to ONTAK acquired technology – $357. | |
(e) | To record the capitalization of the X-Ceptor Purchase Right in October 1999 – $3,990; to write-off the X-Ceptor Purchase Right in March 2003, which was previously recognized over the period from 1999 to June 2002 – $(3,990). | |
(f) | To correct clinical trial expense. Cumulative effect of prior year adjustments – $918; current year adjustments – $(918). | |
(g) | Includes $(1,089) related to the change to the sell-through revenue recognition method (product cost – $(1,491); royalties – $402); to correct accruals for bonus expense – $694; and property tax expense – $(316); reclassification of Seragen acquisition liability from other long-term liabilities – $2,700; reclassification of the Elan shares from accrued liabilities to additional paid-in capital – $(4,133). | |
(h) | Includes $446 adjustment related to the change to the sell-through revenue recognition method (product cost – $(108); royalties $554); to correct accruals for bonus expense – $(424) and legal, trademark and patent expense — $230; to reclassify Organon cost-sharing receivable balance to co-promotion liability – $(461); to reflect accrued interest for the Seragen acquisition liability – $739; reclassification of the Elan shares from accrued liabilities to additional paid-in capital – $4,133. | |
(i) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(j) | To reclassify equipment lease obligation from long-term to current obligation. | |
(k) | To reflect the deferral of a portion of the sale of the royalty rights to Royalty Pharma. | |
(l) | The cumulative effect of prior year adjustments reflects the effect of the adjustment to rent expense for contractual annual rent increases recognized over the lease term on a straight line basis – $2,237; to reclassify the Seragen acquisition litigation to accrued liabilities – $(2,700). Current year adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis – $111. | |
(m) | In accordance with EITF D-98, to reclassify from equity the Company’s issuance of common stock to Pfizer – common stock – $(1); additional paid in capital $(14,594) and Elan shares – common stock $(2); additional paid in capital $(19,998); reclassification of the Elan shares from accrued liabilities to additional paid-in capital – $4,133. | |
(n) | To reflect the repurchase and retirement of the Elan shares in February 2003 – $20,000 – common stock – $2; additional paid-in capital – $19,998; reclassification of the Elan shares from accrued liabilities to additional paid-in capital – $(4,133). |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share and per share data)
Year Ended December 31, 2003 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 114,632 | $ | (59,308 | ) (a)(b) | $ | 55,324 | |||||
Sale of royalty rights, net | 12,500 | (714 | ) (c) | 11,786 | ||||||||
Collaborative research and development and other revenues | 14,008 | 14,008 | ||||||||||
Total revenues | 141,140 | (60,022 | ) | 81,118 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 31,618 | (5,061 | ) (d) | 26,557 | ||||||||
Research and development | 67,679 | (1,001 | ) (b)(e)(f) | 66,678 | ||||||||
Selling, general and administrative | 51,661 | 879 | (b)(f)(g) | 52,540 | ||||||||
Co-promotion | 9,360 | 9,360 | ||||||||||
Total operating costs and expenses | 160,318 | (5,183 | ) | 155,135 | ||||||||
Loss from operations | (19,178 | ) | (54,839 | ) | (74,017 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 783 | 783 | ||||||||||
Interest expense | (10,970 | ) | (172 | ) (b) | (11,142 | ) | ||||||
Other, net | (6,092 | ) | (3,942 | ) (b)(h)(i) | (10,034 | ) | ||||||
Total other expense, net | (16,279 | ) | (4,114 | ) | (20,393 | ) | ||||||
Loss before income taxes and cumulative effect of a change in accounting principle | (35,457 | ) | (58,953 | ) | (94,410 | ) | ||||||
Income tax expense | — | (56 | ) (i) | (56 | ) | |||||||
Loss before cumulative effect of a change in accounting principle | (35,457 | ) | (59,009 | ) | (94,466 | ) | ||||||
Cumulative effect of changing method of accounting for variable interest entity | (2,005 | ) | (2,005 | ) | ||||||||
Net loss | $ | (37,462 | ) | $ | (59,009 | ) | $ | (96,471 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Loss before cumulative effect of a change in accounting principle | $ | (0.50 | ) | $ | (1.33 | ) | ||||||
Cumulative effect of changing method of accounting for variable interest entity | (0.03 | ) | (0.03 | ) | ||||||||
Net loss | $ | (0.53 | ) | $ | (1.36 | ) | ||||||
Weighted average number of common shares | 70,685,234 | 70,685,234 | ||||||||||
Pro forma amounts assuming the changed method of accounting for variable interest entity is applied retroactively: | ||||||||||||
Net loss | $ | (35,557 | ) | $ | (94,352 | ) | ||||||
Basic and diluted net loss per share | $ | (0.50 | ) | $ | (1.34 | ) |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method – net product sales – $(59,187). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the deferral of a portion of the sale of the royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties – product cost – $(151); royalties – $(4,910). | |
(e) | To correct clinical trial expense – $(918). | |
(f) | To reclassify $55 of expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(g) | To reflect interest expense for the Seragen acquisition liability – $739. | |
(h) | To reflect the write-off of the X-Ceptor Purchase Right in March 2003 – $3,990. | |
(i) | To reclassify income taxes related to international operations – $56. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED BALANCE SHEET
(unaudited) (in thousands)
December 31, 2002 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Year | Year | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 42,423 | $ | $ | (1,600 | )(a) | $ | 40,823 | ||||||||
Short-term investments | 21,825 | 1,600 | (a) | 23,425 | ||||||||||||
Accounts receivable, net | 12,176 | 196 | (b) | 51 | (b) | 12,423 | ||||||||||
Inventories, net | 4,841 | 596 | (c) | (446 | )(c) | 4,991 | ||||||||||
Other current assets | 7,308 | 1,456 | (b)(d) | 6,209 | (b)(d) | 14,973 | ||||||||||
Total current assets | 88,573 | 2,248 | 5,814 | 96,635 | ||||||||||||
Restricted investments | 10,646 | 10,646 | ||||||||||||||
Property and equipment, net | 9,672 | 248 | (e) | (248 | )(e) | 9,672 | ||||||||||
Acquired technology and product rights, net | 148,546 | 357 | (f) | (97 | )(b) | 148,806 | ||||||||||
Other assets | 17,992 | 3,868 | (b)(g) | 90 | (b) | 21,950 | ||||||||||
$ | 275,429 | $ | 6,721 | $ | 5,559 | $ | 287,709 | |||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 11,979 | $ | 79 | (b) | $ | 834 | (b)(h) | $ | 12,892 | ||||||
Accrued liabilities | 16,606 | 3,219 | (b)(i) | (5,401 | )(b)(i) | 14,424 | ||||||||||
Current portion of deferred revenue, net | 4,683 | 18,423 | (j) | 25,503 | (j) | 48,609 | ||||||||||
Current portion of equipment financing obligations | 2,087 | 253 | (k) | 2,340 | ||||||||||||
Current portion of long-term debt | — | — | ||||||||||||||
Total current liabilities | 35,355 | 21,721 | 21,189 | 78,265 | ||||||||||||
Long-term debt | 155,250 | 155,250 | ||||||||||||||
Long-term portion of deferred revenue, net | 3,014 | 581 | (l) | 3,595 | ||||||||||||
Long-term portion of equipment financing obligations | 4,095 | (253 | )(k) | 3,842 | ||||||||||||
Other long-term liabilities | 3,700 | (621 | )(m) | 158 | (m) | 3,237 | ||||||||||
Total liabilities | 201,414 | 21,100 | 21,675 | 244,189 | ||||||||||||
Common stock subject to conditional redemption/repurchase | 14,595 | (n) | 20,000 | (o) | 34,595 | |||||||||||
Stockholders’ equity: | ||||||||||||||||
Common stock | 72 | (1 | )(n) | (2 | )(o) | 69 | ||||||||||
Additional paid-in capital | 693,213 | (14,594 | )(n) | (15,761 | )(b)(o) | 662,858 | ||||||||||
Deferred warrant expense | — | 692 | (p) | (692 | )(p) | — | ||||||||||
Accumulated other comprehensive loss | (43 | ) | (43 | ) | ||||||||||||
Accumulated deficit | (618,316 | ) | (15,071 | )(q) | (19,661 | ) | (653,048 | ) | ||||||||
74,926 | (28,974 | ) | (36,116 | ) | 9,836 | |||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity | 74,015 | (28,974 | ) | (36,116 | ) | 8,925 | ||||||||||
$ | 275,429 | $ | 6,721 | $ | 5,559 | $ | 287,709 | |||||||||
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(a) | To reclassify cash to short-term investments. | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reverse replacement reserve. | |
(d) | Cumulative effect of prior year adjustments includes $1,576 related to the change to the sell-through revenue recognition method (deferred royalties — $1,055; deferred cost of products sold — $521). Current year adjustments include $6,027 related to the change to the sell-through revenue recognition method (deferred royalties — $3,160; deferred cost of products sold — $2,867). | |
(e) | To accrue for fixed asset additions at December 31, 2001 — $248. | |
(f) | To correct accumulated amortization expense related to ONTAK acquired technology. | |
(g) | To record the capitalization of the X-Ceptor Purchase Right in October 1999 — $3,990. | |
(h) | To correct clinical trial expense — $1,168 and fixed asset additions — $(248). | |
(i) | Cumulative effect of prior year adjustments includes $90 related to the change to the sell-through revenue recognition method (product cost — $(268); royalties — $358); to correct accruals for vendor expenses — $321, bonus expense — $236, property tax expense - $(364); reclassification of Seragen acquisition liability from other long-term liabilities - - $2,700. Current year adjustments include $(1,179) related to the change to the sell-through revenue recognition method (product cost — $(1,223); royalties — $44); correct accruals for vendor expenses — $(321), bonus expense — $458, legal, trademark and patent expense — $(263); reclassification of the Elan shares from accrued liabilities to additional paid-in capital — $(4,133). | |
(j) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(k) | To reclassify equipment lease obligation from long term to current obligation. | |
(l) | To reflect the deferral of a portion of the sale of the royalty rights to Royalty Pharma. | |
(m) | The cumulative effect of prior year adjustments reflects the effect of the adjustment to rent expense for contractual annual rent increases recognized over the lease term on a straight line basis — $2,079, to reclassify the Seragen acquisition liability to accrued liabilities $(2,700). Current year adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis - $158. | |
(n) | To reclassify from equity the Company’s issuance of common stock to Pfizer in accordance with EITF D-98 — $(14,595) — common stock — $(1); additional paid in capital - $(14,594). | |
(o) | To reclassify from equity the Elan shares in accordance with EITF D-98 — $(20,000) - common stock — $(2); additional paid-in capital — $(19,998); reclassification of the Elan shares from accrued liabilities to additional paid-in capital — $4,133. | |
(p) | To write off deferred warrant amortization in connection with the capitalization of the X-Ceptor Purchase Right. | |
(q) | To reflect the cumulative effect, as of January 1, 2002, of the restatement for years prior to 2000 — $(2,033) — product sales — $(1,015), rent expense — $(1,614), royalties - $59, reversal of X-Ceptor warrant amortization — $530, other — $7; 2000 — $(2,728) - product sales — $(4,092), rent expense — $(255), royalties — $(235); reversal of X-Ceptor warrant amortization — $1,384, amortization of acquired technology — $357, other — $113; 2001 — $(10,310) — product sales — $(13,585), rent expense — $(209), royalties — $1,368, reversal of X-Ceptor warrant amortization — $1,384, other — $732. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share and per share data)
Year Ended December 31, 2002 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 54,522 | $ | (24,196 | )(a)(b) | $ | 30,326 | |||||
Sale of royalty rights, net | 18,275 | (675 | )(c) | 17,600 | ||||||||
Collaborative research and development and other revenues | 23,843 | 23,843 | ||||||||||
Total revenues | 96,640 | (24,871 | ) | 71,769 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 20,306 | (5,568 | )(b)(d) | 14,738 | ||||||||
Research and development | 58,807 | 253 | (b)(e) | 59,060 | ||||||||
Selling, general and administrative | 41,678 | 147 | (b) | 41,825 | ||||||||
Total operating costs and expenses | 120,791 | (5,168 | ) | 115,623 | ||||||||
Loss from operations | (24,151 | ) | (19,703 | ) | (43,854 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 1,086 | 1,086 | ||||||||||
Interest expense | (6,295 | ) | (6,295 | ) | ||||||||
Debt conversion expense | (2,015 | ) | (2,015 | ) | ||||||||
Other, net | (1,221 | ) | 86 | (b)(f) | (1,135 | ) | ||||||
Total other expense, net | (8,445 | ) | 86 | (8,359 | ) | |||||||
Loss before income taxes | (32,596 | ) | (19,617 | ) | (52,213 | ) | ||||||
Income tax expense | (44 | )(f) | (44 | ) | ||||||||
Net loss | $ | (32,596 | ) | $ | (19,661 | ) | $ | (52,257 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Net loss | $ | (0.47 | ) | $ | (0.76 | ) | ||||||
Weighted average number of common shares | 69,118,976 | 69,118,976 | ||||||||||
Pro forma amounts assuming the changed method of accounting for variable interest entity is applied retroactively: | ||||||||||||
Net loss | $ | (32,795 | ) | $ | (52,456 | ) | ||||||
Basic and diluted net loss per share | $ | (0.47 | ) | $ | (0.76 | ) |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method — net product sales — $(24,160). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the deferral of a portion of the sale of the royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties — product cost — $(2,549); royalties — $(3,116). | |
(e) | To correct clinical trial expense — $1,107; to reverse X-Ceptor warrant amortization - $(692); to correct patent expense — $(345). | |
(f) | To reclassify income taxes related to international operations — $44. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED BALANCE SHEET
(unaudited) (in thousands)
March 31, 2004 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Period | Quarter | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 65,558 | $ | 65,558 | ||||||||||||
Short-term investments | 31,625 | 31,625 | ||||||||||||||
Accounts receivable, net | 14,185 | $ | (150 | )(a) | $ | 37 | (a) | 14,072 | ||||||||
Inventories, net | 9,770 | 218 | (a) | (121 | )(a) | 9,867 | ||||||||||
Other current assets | 3,764 | 12,551 | (a)(b) | 1,273 | (a)(b) | 17,588 | ||||||||||
Total current assets | 124,902 | 12,619 | 1,189 | 138,710 | ||||||||||||
Restricted investments | 1,656 | 1,656 | ||||||||||||||
Property and equipment, net | 23,620 | 23,620 | ||||||||||||||
Acquired technology and product rights, net | 135,189 | 260 | (a)(c) | 135,449 | ||||||||||||
Other assets | 8,822 | (88 | )(a) | (1,120 | )(d) | 7,614 | ||||||||||
$ | 294,189 | $ | 12,791 | $ | 69 | $ | 307,049 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 16,866 | $ | 150 | (a) | $ | (149 | )(a) | $ | 16,867 | ||||||
Accrued liabilities | 35,304 | 2,352 | (a)(e) | (2,286 | )(a)(e) | 35,370 | ||||||||||
Current portion of deferred revenue, net | 2,346 | 103,155 | (f) | 10,657 | (f) | 116,158 | ||||||||||
Current portion of equipment financing obligations | 2,439 | 2,439 | ||||||||||||||
Current portion of long-term debt | 303 | 303 | ||||||||||||||
Total current liabilities | 57,258 | 105,657 | 8,222 | 171,137 | ||||||||||||
Long-term debt | 167,328 | 167,328 | ||||||||||||||
Long-term portion of deferred revenue, net | 2,198 | 1,173 | (g) | 3,371 | ||||||||||||
Long-term portion of equipment financing obligations | 3,518 | 3,518 | ||||||||||||||
Other long-term liabilities | 3,516 | (352 | )(h) | 620 | (h) | 3,784 | ||||||||||
Total liabilities | 233,818 | 106,478 | 8,842 | 349,138 | ||||||||||||
Common stock subject to conditional redemption | 14,595 | (i) | 14,595 | |||||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||
Common stock | 74 | (1 | )(i) | 73 | ||||||||||||
Additional paid-in capital | 730,178 | (14,540 | )(a)(i) | 715,638 | ||||||||||||
Accumulated other comprehensive loss | (53 | ) | (53 | ) | ||||||||||||
Accumulated deficit | (668,917 | ) | (93,741 | ) | (8,773 | ) | (771,431 | ) | ||||||||
61,282 | (108,282 | ) | (8,773 | ) | (55,773 | ) | ||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity (deficit) | 60,371 | (108,282 | ) | (8,773 | ) | (56,684 | ) | |||||||||
$ | 294,189 | $ | 12,791 | $ | 69 | $ | 307,049 | |||||||||
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(a) | To reflect other adjustments and reclassifications. | |
(b) | Cumulative effect of prior period adjustments includes $13,271 related to the change to the sell-through revenue recognition method (deferred royalties — $9,680; deferred cost of products sold — $3,591); to reclassify Organon cost sharing receivable balance to co-promotion liability — $(461). Current quarter adjustments include $786 related to the change to the sell-through revenue recognition method (deferred royalties — $(100); deferred cost of products sold — $886); to reclassify Organon cost-sharing receivable balance to co-promotion liability — $461; to correct prepaid clinical trial expense - $(192);. | |
(c) | To correct accumulated amortization expense related to ONTAK acquired technology - $357. | |
(d) | To expense the payment to The Salk Institute to buy-out the Company’s royalty obligation on lasofoxifene in March 2004. | |
(e) | Cumulative effect of prior period adjustments includes $(643) related to the change to the sell-through revenue recognition method (product cost — $(1,599); royalties — $956); to reclassify Organon cost-sharing receivable balance to co-promotion liability — $(461); to correct accruals for bonus expense — $270 and property tax expense — $(277); to reclassify Seragen acquisition liability from other long-term liabilities — $2,700; to accrue interest for the Seragen acquisition liability — $739. Current quarter adjustments include $(2,055) related to the change to the sell-through revenue recognition method (product cost - $(1,563); royalties — $(492)); to reclassify Organon cost-sharing receivable balance to co-promotion liability — $461; to reclassify from other long term liabilities the payment of a portion of the Seragen acquisition liability — $(600). | |
(f) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(g) | To reflect the deferral of a portion of the sales of royalty rights to Royalty Pharma. | |
(h) | The cumulative effect of prior period adjustments reflects the effect of the adjustment to rent expense for contractual annual rent increases recognized over the lease term on a straight line basis — $2,348; to reclassify the Seragen acquisition liability to accrued liabilities — $(2,700). Current quarter adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis — $20; to reclassify to accrued liabilities the payment of a portion of the Seragen acquisition liability — $600. | |
(i) | To reclassify from equity the Company’s issuance of common stock subject to conditional redemption to Pfizer, in connection with the Pfizer settlement agreement in accordance with EITF D-98 — $(14,595) — common stock — $(1), additional paid in capital — $(14,594). |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
Three Months Ended March 31, 2004 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 34,136 | $ | (9,197 | )(a)(b) | $ | 24,939 | |||||
Collaborative research and development and other revenues | 2,476 | 2,476 | ||||||||||
Total revenues | 36,612 | (9,197 | ) | 27,415 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 8,823 | (1,278 | )(c) | 7,545 | ||||||||
Research and development | 16,852 | 665 | (b)(d)(e) | 17,517 | ||||||||
Selling, general and administrative | 14,472 | 233 | (b)(d)(f) | 14,705 | ||||||||
Co-promotion | 6,731 | 6,731 | ||||||||||
Total operating costs and expenses | 46,878 | (380 | ) | 46,498 | ||||||||
Loss from operations | (10,266 | ) | (8,817 | ) | (19,083 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 231 | 231 | ||||||||||
Interest expense | (3,091 | ) | 44 | (b) | (3,047 | ) | ||||||
Other, net | (13 | ) | 16 | (g) | 3 | |||||||
Total other expense, net | (2,873 | ) | 60 | (2,813 | ) | |||||||
Loss before income taxes | (13,139 | ) | (8,757 | ) | (21,896 | ) | ||||||
Income tax expense | (16 | )(g) | (16 | ) | ||||||||
Net loss | $ | (13,139 | ) | $ | (8,773 | ) | $ | (21,912 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Net loss | $ | (0.18 | ) | $ | (0.30 | ) | ||||||
Weighted average number of common shares | 73,299,281 | 73,299,281 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method — net product sales — $(9,245). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties — product cost — $(886); royalties — $(392). | |
(d) | To reclassify $742 of expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(e) | To expense $1,120 payment to The Salk Institute to buy-out the Company’s royalty obligation on lasofoxifene in March 2004; to reflect patent expense in the proper accounting period — $238. | |
(f) | To reflect legal expense in the proper accounting period — $(373). | |
(g) | To reclassify income taxes related to international operations — $16. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED BALANCE SHEET
(unaudited) (in thousands)
June 30, 2004 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Period | Quarter | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 41,920 | $ | 41,920 | ||||||||||||
Short-term investments | 43,958 | 43,958 | ||||||||||||||
Accounts receivable, net | 17,936 | $ | (113 | )(a) | $ | (49 | )(a) | 17,774 | ||||||||
Inventories, net | 11,752 | 97 | (a) | 118 | (a) | 11,967 | ||||||||||
Other current assets | 3,245 | 13,824 | (a)(b) | (601 | )(a)(b) | 16,468 | ||||||||||
Total current assets | 118,811 | 13,808 | (532 | ) | 132,087 | |||||||||||
Restricted investments | 1,656 | 1,656 | ||||||||||||||
Property and equipment, net | 23,910 | 23,910 | ||||||||||||||
Acquired technology and product rights, net | 132,520 | 260 | (a)(c) | 132,780 | ||||||||||||
Other assets | 8,420 | (1,208 | )(a)(d) | 7,212 | ||||||||||||
$ | 285,317 | $ | 12,860 | $ | (532 | ) | $ | 297,645 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 20,225 | $ | 1 | (a) | $ | $ | 20,226 | ||||||||
Accrued liabilities | 36,108 | 66 | (a)(e) | (364 | )(a)(e) | 35,810 | ||||||||||
Current portion of deferred revenue, net | 2,381 | 113,812 | (f) | 7,661 | (f) | 123,854 | ||||||||||
Current portion of equipment financing obligations | 2,453 | 2,453 | ||||||||||||||
Current portion of long-term debt | 303 | 303 | ||||||||||||||
Total current liabilities | 61,470 | 113,879 | 7,297 | 182,646 | ||||||||||||
Long-term debt | 167,256 | 167,256 | ||||||||||||||
Long-term portion of deferred revenue, net | 2,120 | 1,173 | (g) | 3,293 | ||||||||||||
Long-term portion of equipment financing obligations | 3,547 | 3,547 | ||||||||||||||
Other long-term liabilities | 2,925 | 268 | (h) | 20 | (h) | 3,213 | ||||||||||
Total liabilities | 237,318 | 115,320 | 7,317 | 359,955 | ||||||||||||
Common stock subject to conditional redemption | 14,595 | (i) | 14,595 | |||||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||
Common stock | 74 | (1 | )(i) | 73 | ||||||||||||
Additional paid-in capital | 732,096 | (14,540 | )(a)(i) | 717,556 | ||||||||||||
Accumulated other comprehensive loss | (127 | ) | (127 | ) | ||||||||||||
Accumulated deficit | (683,133 | ) | (102,514 | ) | (7,849 | ) | (793,496 | ) | ||||||||
48,910 | (117,055 | ) | (7,849 | ) | (75,994 | ) | ||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity (deficit): | 47,999 | (117,055 | ) | (7,849 | ) | (76,905 | ) | |||||||||
$ | 285,317 | $ | 12,860 | $ | (532 | ) | $ | 297,645 | ||||||||
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(a) | To reflect other adjustments and reclassifications. | |
(b) | Cumulative effect of prior period adjustments includes $14,057 related to the change to the sell-through revenue recognition method (deferred royalties — $9,580; deferred cost of products sold — $4,477). Current quarter adjustments include $(781) related to the change to the sell-through revenue recognition method (deferred royalties — $(876); deferred cost of products sold — $95). | |
(c) | To correct accumulated amortization expense related to ONTAK acquired technology - $357. | |
(d) | To expense the effect of The Salk Institute payment to buy-out the Company’s royalty obligation on lasofoxifene — $(1,120). | |
(e) | Cumulative effect of prior period adjustments includes $(2,698) related to the change to the sell-through revenue recognition method (product cost — $(3,162); royalties — $464); to correct property tax expense — $(260); to reclassify Seragen acquisition liability from other long-term liabilities — $2,100; accrual of interest on the Seragen acquisition liability — $739. Current quarter adjustments include $(358) related to the change to the sell-through revenue recognition method (product cost — $510; royalties — $(868)). | |
(f) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(g) | To reflect the deferral of a portion of the sales of royalty rights to Royalty Pharma. | |
(h) | The cumulative effect of prior period adjustments reflects the effect of the adjustment to rent expense for contractual annual rent increases recognized over the lease term on a straight line basis — $2,368; to reclassify the Seragen acquisition liability to accrued liabilities — $(2,100). Current quarter adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis — $20. | |
(i) | To reclassify from equity the Company’s issuance of common stock subject to conditional redemption to Pfizer, in connection with the Pfizer settlement agreement in accordance with EITF D-98 — $(14,595) — common stock — $(1), additional paid-in capital — $(14,594). |
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LIGAND PHARMACEUTICALS INCORPORATED |
EFFECTS OF THE RESTATEMENT |
CONSOLIDATED STATEMENT OF OPERATIONS |
(unaudited) |
(in thousands, except share and per share data) |
Three Months Ended June 30, 2004 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 37,485 | $ | (8,186 | )(a)(b) | $ | 29,299 | |||||
Collaborative research and development and other revenues | 2,975 | 2,975 | ||||||||||
Total revenues | 40,460 | (8,186 | ) | 32,274 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 9,926 | (208 | )(c) | 9,718 | ||||||||
Research and development | 18,174 | (1,608 | )(b)(d) | 16,566 | ||||||||
Selling, general and administrative | 16,625 | 1,491 | (b)(d) | 18,116 | ||||||||
Co-promotion | 7,000 | 7,000 | ||||||||||
Total operating costs and expenses | 51,725 | (325 | ) | 51,400 | ||||||||
Loss from operations | (11,265 | ) | (7,861 | ) | (19,126 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 208 | 208 | ||||||||||
Interest expense | (3,140 | ) | 12 | (b) | (3,128 | ) | ||||||
Other, net | (19 | ) | 18 | (e) | (1 | ) | ||||||
Total other expense, net | (2,951 | ) | 30 | (2,921 | ) | |||||||
Loss before income taxes | (14,216 | ) | (7,831 | ) | (22,047 | ) | ||||||
Income tax expense | (18 | )(e) | (18 | ) | ||||||||
Net loss | $ | (14,216 | ) | $ | (7,849 | ) | $ | (22,065 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Net loss | $ | (0.19 | ) | $ | (0.30 | ) | ||||||
Weighted average number of common shares | 73,754,146 | 73,754,146 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method — net product sales — $(8,097). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties — product sales — $(214); royalties — $6. | |
(d) | To reclassify $1,454 of expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(e) | To reclassify income taxes related to international operations — $18. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED BALANCE SHEET
(unaudited) (in thousands)
September 30, 2004 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Period | Quarter | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 46,020 | $ | 46,020 | ||||||||||||
Short-term investments | 34,387 | 34,387 | ||||||||||||||
Accounts receivable, net | 30,583 | $ | (162 | )(a) | $ | 36 | (a) | 30,457 | ||||||||
Inventories, net | 11,355 | 215 | (b) | 21 | (a) | 11,591 | ||||||||||
Other current assets | 2,985 | 13,223 | (a)(c) | 2,729 | (a)(c) | 18,937 | ||||||||||
Total current assets | 125,330 | 13,276 | 2,786 | 141,392 | ||||||||||||
Restricted investments | 1,656 | 1,656 | ||||||||||||||
Property and equipment, net | 23,844 | 23,844 | ||||||||||||||
Acquired technology and product rights, net | 129,852 | 260 | (a)(d) | 130,112 | ||||||||||||
Other assets | 7,977 | (1,208 | )(a)(e) | 6,769 | ||||||||||||
$ | 288,659 | $ | 12,328 | $ | 2,786 | $ | 303,773 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 16,719 | $ | 1 | (a) | $ | 68 | (a) | $ | 16,788 | ||||||
Accrued liabilities | 49,527 | (298 | )(a)(f) | (3,308 | )(a)(f) | 45,921 | ||||||||||
Current portion of deferred revenue, net | 2,352 | 121,473 | (g) | 17,720 | (g) | 141,545 | ||||||||||
Current portion of equipment financing obligations | 2,617 | 2,617 | ||||||||||||||
Current portion of long-term debt | 314 | 314 | ||||||||||||||
Total current liabilities | 71,529 | 121,176 | 14,480 | 207,185 | ||||||||||||
Long-term debt | 167,171 | 167,171 | ||||||||||||||
Long-term portion of deferred revenue, net | 2,043 | 1,173 | (h) | 3,216 | ||||||||||||
Long-term portion of equipment financing obligations | 4,087 | 4,087 | ||||||||||||||
Other long-term liabilities | 2,870 | 288 | (i) | 15 | (i) | 3,173 | ||||||||||
Total liabilities | 247,700 | 122,637 | 14,495 | 384,832 | ||||||||||||
Common stock subject to conditional redemption | 14,595 | (j) | (2,250 | )(k) | 12,345 | |||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||
Common stock | 74 | (1 | )(j) | 73 | ||||||||||||
Additional paid-in capital | 731,841 | (14,540 | )(a)(j) | 2,250 | (k) | 719,551 | ||||||||||
Accumulated other comprehensive loss | (123 | ) | (123 | ) | ||||||||||||
Accumulated deficit | (689,922 | ) | (110,363 | ) | (11,709 | ) | (811,994 | ) | ||||||||
41,870 | (124,904 | ) | (9,459 | ) | (92,493 | ) | ||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity (deficit) | 40,959 | (124,904 | ) | (9,459 | ) | (93,404 | ) | |||||||||
$ | 288,659 | $ | 12,328 | $ | 2,786 | $ | 303,773 | |||||||||
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(a) | To reflect other adjustments and reclassifications. | |
(b) | To reverse replacement reserve. | |
(c) | Cumulative effect of prior period adjustments includes $13,276 related to the change to the sell-through revenue recognition method (deferred royalties — $8,704; deferred cost of products sold — $4,572). Current quarter adjustments include $2,654 related to the change to the sell-through revenue recognition method (deferred royalties — $2,486; deferred cost of products sold — $168). | |
(d) | To correct accumulated amortization expense related to ONTAK acquired technology - $357. | |
(e) | To expense the payment to The Salk Institute to buy-out the Company’s royalty obligation on lasofoxifene — $(1,120). | |
(f) | Cumulative effect of prior period adjustments includes $(3,056) related to the change to the sell-through revenue recognition method (product cost — $(2,652); royalties - $(404)); to correct bonus expense — $(201); to reclassify Seragen acquisition liability from other long-term liabilities — $2,100; to accrue interest on Seragen acquisition liability — $739. Current quarter adjustments include $(3,349) related to the change to the sell-through revenue recognition method (product cost — $(4,806); royalties — $1,457). | |
(g) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(h) | To reflect the deferral of a portion of the sale of royalty rights to Royalty Pharma. | |
(i) | The cumulative effect of prior period adjustments reflects the effect of the adjustment to rent expense for contractual annual rent increases recognized over the lease term on a straight line basis — $2,388; to reclassify the Seragen acquisition liability to accrued liabilities — $(2,100). Current quarter adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis — $15. | |
(j) | To reclassify from equity the Company’s issuance of common stock subject to conditional redemption to Pfizer, in connection with the Pfizer settlement agreement in accordance with EITF D-98 — $(14,595) — common stock — $(1), additional paid-in capital — $(14,594). | |
(k) | To reflect Pfizer’s redemption of shares in connection with the achievement of a milestone in accordance with the Pfizer settlement agreement. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
Three Months Ended September 30, 2004 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 44,726 | $ | (12,792 | )(a)(b) | $ | 31,934 | |||||
Sale of royalty rights, net | 67 | (c) | 67 | |||||||||
Collaborative research and development and other revenues | 4,771 | 4,771 | ||||||||||
Total revenues | 49,497 | (12,725 | ) | 36,772 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 11,011 | (1,192 | ) (d) | 9,819 | ||||||||
Research and development | 17,980 | (1,233 | ) (b)(e) | 16,747 | ||||||||
Selling, general and administrative | 15,890 | 1,421 | (b)(e) | 17,311 | ||||||||
Co-promotion | 8,501 | 8,501 | ||||||||||
Total operating costs and expenses | 53,382 | (1,004 | ) | 52,378 | ||||||||
Loss from operations | (3,885 | ) | (11,721 | ) | (15,606 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 255 | 255 | ||||||||||
Interest expense | (2,919 | ) | (226 | ) (b)(f) | (3,145 | ) | ||||||
Other, net | (240 | ) | 241 | (b)(f)(g) | 1 | |||||||
Total other expense, net | (2,904 | ) | 15 | (2,889 | ) | |||||||
Loss before income taxes | (6,789 | ) | (11,706 | ) | (18,495 | ) | ||||||
Income tax expense | (3 | ) (g) | (3 | ) | ||||||||
Net loss | $ | (6,789 | ) | $ | (11,709 | ) | $ | (18,498 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Net loss | $ | (0.09 | ) | $ | (0.25 | ) | ||||||
Weighted average number of common shares | 73,845,613 | 73,845,613 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method – net product sales – $(12,842). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the recognition of revenue previously deferred in regard to the sale of royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties – product cost – $(163), royalties – $(1,029). | |
(e) | To reclassify $1,221 of expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(f) | To reclassify $238 of interest and factoring expenses incurred under a factoring arrangement from other, net to interest expense. | |
(g) | To reclassify income taxes related to international operations – $3. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED BALANCE SHEET
(unaudited) (in thousands)
March 31, 2003 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Period | Quarter | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 12,979 | $ | 12,979 | ||||||||||||
Short-term investments | 21,004 | 21,004 | ||||||||||||||
Accounts receivable, net | 17,086 | $ | 247 | (a) | $ | 13 | (a) | 17,346 | ||||||||
Inventories, net | 5,395 | 150 | (a) | (18 | )(a) | 5,527 | ||||||||||
Other current assets | 6,547 | 7,665 | (a)(b) | (280 | )(a)(b) | 13,932 | ||||||||||
Total current assets | 63,011 | 8,062 | (285 | ) | 70,788 | |||||||||||
Restricted investments | 10,741 | 10,741 | ||||||||||||||
Property and equipment, net | 9,229 | 9,229 | ||||||||||||||
Acquired technology and product rights, net | 145,862 | 260 | (a)(c) | 146,122 | ||||||||||||
Other assets | 12,333 | 3,958 | (a)(d) | (3,958 | )(a)(d) | 12,333 | ||||||||||
$ | 241,176 | $ | 12,280 | $ | (4,243 | ) | $ | 249,213 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 13,441 | $ | 913 | (a)(e) | $ | (314 | )(a)(e) | $ | 14,040 | ||||||
Accrued liabilities | 17,640 | (2,182 | )(a)(f) | 3,386 | (a)(f) | 18,844 | ||||||||||
Current portion of deferred revenue, net | 4,637 | 43,926 | (g) | 7,594 | (g) | 56,157 | ||||||||||
Current portion of equipment financing obligations | 2,105 | 253 | (h) | 15 | (h) | 2,373 | ||||||||||
Total current liabilities | 37,823 | 42,910 | 10,681 | 91,414 | ||||||||||||
Long-term debt | 155,250 | 155,250 | ||||||||||||||
Long-term portion of deferred revenue, net | 2,709 | 581 | (i) | 3,290 | ||||||||||||
Long-term portion of equipment financing obligations | 3,707 | (253 | )(h) | (15 | )(h) | 3,439 | ||||||||||
Other long-term liabilities | 3,664 | (463 | )(j) | 32 | (j) | 3,233 | ||||||||||
Total liabilities | 203,153 | 42,775 | 10,698 | 256,626 | ||||||||||||
Common stock subject to conditional redemption/repurchase | 34,595 | (k) | (20,000 | )(l) | 14,595 | |||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||
Common stock | 70 | (3 | )(k) | 2 | (l) | 69 | ||||||||||
Additional paid-in capital | 677,561 | (30,355 | )(a)(k) | 15,865 | (l) | 663,071 | ||||||||||
Accumulated other comprehensive loss | (61 | ) | (61 | ) | ||||||||||||
Accumulated deficit | (638,636 | ) | (34,732 | ) | (10,808 | ) | (684,176 | ) | ||||||||
38,934 | (65,090 | ) | 5,059 | (21,097 | ) | |||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity (deficit) | 38,023 | (65,090 | ) | 5,059 | (22,008 | ) | ||||||||||
$ | 241,176 | $ | 12,280 | $ | (4,243 | ) | $ | 249,213 | ||||||||
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(a) | To reflect other adjustments and reclassifications. | |
(b) | Cumulative effect of prior period adjustments includes $7,603 related to the change to the sell-through revenue recognition method (deferred royalties – $4,215; deferred cost of products sold – $3,388). Current quarter adjustments include $118 related to the change to the sell-through revenue recognition method (deferred royalties – $98; deferred cost of products sold – $20); to correct prepaid clinical trial expense – $(352). | |
(c) | To correct accumulated amortization expense related to ONTAK acquired technology – $357. | |
(d) | To record the capitalization of the X-Ceptor Purchase Right in October 1999 – $3,990; to write-off the X-Ceptor Purchase Right in March 2003, which was previously recognized for the period from 1999 to June 2002 – $(3,990). | |
(e) | To correct clinical trial expense – cumulative effect of prior period adjustments – $918; current quarter adjustments – $(367). | |
(f) | Cumulative effect of prior period adjustments include $(1,089) related to the change to the sell-through revenue recognition method (product cost – $(1,491); royalties – $402); to correct accruals for bonus expense – $694, and property tax expense – $(316); to reclassify Seragen acquisition liability from other long-term liabilities – $2,700; reclassification of the Elan shares from accrued liabilities to additional paid-in capital – $(4,133). Current quarter adjustments include $(444) related to the change to the sell-through revenue recognition method (product cost – $(126); royalties – $(318)); reclassification of the Elan shares from accrued liabilities to additional paid-in capital – $4,133. | |
(g) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(h) | To reclassify equipment lease obligations from long-term to current obligations. | |
(i) | To reflect the deferral of a portion of the sales of royalty rights to Royalty Pharma. | |
(j) | The cumulative effect of prior period adjustments reflects the effect of the adjustment to rent expense for contractual annual rent increases amortized over the lease term on a straight line basis – $2,237; to reclassify the Seragen acquisition liability to accrued liabilities – $(2,700). Current quarter adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis – $32. | |
(k) | In accordance with EITF D-98, to reclassify from equity the Company’s issuance of common stock to Pfizer – common stock – $(1); additional paid in capital $(14,594); and Elan shares – common stock $(2); additional paid in capital $(19,998); reclassification of the Elan shares from accrued liabilities to additional paid-in capital – $4,133. | |
(l) | To reflect the repurchase and retirement of the Elan shares in February 2003 – $20,000 – common stock – $2; additional paid-in capital – $19,998; reclassification of the Elan shares from accrued liabilities to additional paid-in capital – $(4,133). |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
Three Months Ended March 31, 2003 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 18,928 | $ | (7,455 | ) (a)(b) | $ | 11,473 | |||||
Collaborative research and development and other revenues | 4,195 | 4,195 | ||||||||||
Total revenues | 23,123 | (7,455 | ) | 15,668 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 6,620 | (418 | ) (c) | 6,202 | ||||||||
Research and development | 16,640 | (91 | ) (b) | 16,549 | ||||||||
Selling, general and administrative | 12,426 | (74 | ) (b) | 12,352 | ||||||||
Total operating costs and expenses | 35,686 | (583 | ) | 35,103 | ||||||||
Loss from operations | (12,563 | ) | (6,872 | ) | (19,435 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 243 | 243 | ||||||||||
Interest expense | (2,682 | ) | (26 | ) (b) | (2,708 | ) | ||||||
Other, net | (5,318 | ) | (3,895 | ) (b)(d)(e) | (9,213 | ) | ||||||
Total other expense, net | (7,757 | ) | (3,921 | ) | (11,678 | ) | ||||||
Loss before income taxes | (20,320 | ) | (10,793 | ) | (31,113 | ) | ||||||
Income tax expense | (15 | ) (e) | (15 | ) | ||||||||
Net loss | $ | (20,320 | ) | $ | (10,808 | ) | $ | (31,128 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Net loss | $ | (0.29 | ) | $ | (0.44 | ) | ||||||
Weighted average number of common shares | 70,238,438 | 70,238,438 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method – net product sales – $(7,468). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties – product cost – $(3); royalties – $(415). | |
(d) | To reflect the write off of the X-Ceptor Purchase Right in March 2003 – $3,990. | |
(e) | To reclassify income taxes related to international operations – $15. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED BALANCE SHEET
(unaudited) (in thousands)
June 30, 2003 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Period | Quarter | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 24,248 | $ | 24,248 | ||||||||||||
Short-term investments | 17,595 | 17,595 | ||||||||||||||
Accounts receivable, net | 7,689 | $ | 260 | (a) | $ | (221 | )(a) | 7,728 | ||||||||
Inventories, net | 4,806 | 132 | (a) | 93 | (a) | 5,031 | ||||||||||
Other current assets | 2,635 | 7,385 | (a)(b) | 1,390 | (a)(b) | 11,410 | ||||||||||
Total current assets | 56,973 | 7,777 | 1,262 | 66,012 | ||||||||||||
Restricted investments | 6,204 | 6,204 | ||||||||||||||
Property and equipment, net | 8,843 | 8,843 | ||||||||||||||
Acquired technology and product rights, net | 143,194 | 260 | (a)(c) | 143,454 | ||||||||||||
Other assets | 11,718 | 11,718 | ||||||||||||||
$ | 226,932 | $ | 8,037 | $ | 1,262 | $ | 236,231 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 10,819 | $ | 599 | (a)(d) | $ | (185 | ) (a) | $ | 11,233 | ||||||
Accrued liabilities | 18,319 | 1,204 | (a)(e) | (26 | ) (a)(e) | 19,497 | ||||||||||
Current portion of deferred revenue, net | 4,126 | 51,520 | (f) | 13,400 | (f) | 69,046 | ||||||||||
Current portion of equipment financing obligations | 1,890 | 268 | (g) | 224 | (g) | 2,382 | ||||||||||
Total current liabilities | 35,154 | 53,591 | 13,413 | 102,158 | ||||||||||||
Long-term debt | 155,250 | 155,250 | ||||||||||||||
Long-term portion of deferred revenue, net | 2,430 | 581 | (h) | 3,011 | ||||||||||||
Long-term portion of equipment financing obligations | 3,403 | (268 | ) (g) | (224 | ) (g) | 2,911 | ||||||||||
Other long-term liabilities | 3,638 | (431 | ) (i) | 32 | (i) | 3,239 | ||||||||||
Total liabilities | 199,875 | 53,473 | 13,221 | 266,569 | ||||||||||||
Common stock subject to conditional redemption | 14,595 | (j) | 14,595 | |||||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||
Common stock | 70 | (1 | ) (j) | 69 | ||||||||||||
Additional paid-in capital | 678,577 | (14,490 | ) (a)(j) | 664,087 | ||||||||||||
Accumulated other comprehensive loss | (46 | ) | (46 | ) | ||||||||||||
Accumulated deficit | (650,633 | ) | (45,540 | ) | (11,959 | ) | (708,132 | ) | ||||||||
27,968 | (60,031 | ) | (11,959 | ) | (44,022 | ) | ||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity (deficit) | 27,057 | (60,031 | ) | (11,959 | ) | (44,933 | ) | |||||||||
$ | 226,932 | $ | 8,037 | $ | 1,262 | $ | 236,231 | |||||||||
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(a) | To reflect other adjustments and reclassifications. | |
(b) | Cumulative effect of prior period adjustments includes $7,721 related to the change to the sell-through revenue recognition method (deferred royalties – $4,313; deferred cost of products sold – $3,408); to correct prepaid clinical trial expense – $(290). Current quarter adjustments include $1,416 related to the change to the sell-through revenue recognition method (deferred royalties – $1,818; deferred cost of products sold – $(402)). | |
(c) | To correct accumulated amortization expense related to ONTAK acquired technology – $357. | |
(d) | To correct clinical trial expense – $551. | |
(e) | Cumulative effect of prior period adjustments includes $(1,533) related to the change to the sell-through revenue recognition method (product cost – $(1,617); royalties – $84); to correct accruals for bonus expense – $588, property tax expense – $(361), and legal, trademark and patent expense –$(240); to reclassify Seragen acquisition liability from long-term to current – $2,700. Current quarter adjustments includes $(105) related to the change to the sell-through revenue recognition method (product cost – $(565); royalties – $460). | |
(f) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(g) | To reclassify equipment financing obligations from long-term to current obligations. | |
(h) | To reflect the deferral of a portion of the sales of royalty rights to Royalty Pharma. | |
(i) | The cumulative effect of prior period adjustments reflects the effect of the adjustment to rent expense for contractual annual rent increases recognized over the lease term on a straight line basis – $2,269; to reclassify the Seragen acquisition liability to accrued liabilities – $(2,700). Current quarter adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis – $32. | |
(j) | To reclassify from equity the Company’s issuance of common stock subject to conditional redemption to Pfizer, in connection with the Pfizer settlement agreement in accordance with EITF D-98 – $(14,595) – common stock – $(1); additional paid in capital – $(14,594). |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
Three Months Ended June 30, 2003 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 25,187 | $ | (13,016 | )(a)(b) | $ | 12,171 | |||||
Collaborative research and development and other revenues | 3,939 | 3,939 | ||||||||||
Total revenues | 29,126 | (13,016 | ) | 16,110 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 7,766 | (921 | ) (c) | 6,845 | ||||||||
Research and development | 16,859 | (215 | ) (b)(d)(e) | 16,644 | ||||||||
Selling, general and administrative | 13,571 | (2 | ) (b)(d) | 13,569 | ||||||||
Total operating costs and expenses | 38,196 | (1,138 | ) | 37,058 | ||||||||
Loss from operations | (9,070 | ) | (11,878 | ) | (20,948 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 140 | 140 | ||||||||||
Interest expense | (2,688 | ) | (81 | ) (b) | (2,769 | ) | ||||||
Other, net | (379 | ) | 16 | (f) | (363 | ) | ||||||
Total other expense, net | (2,927 | ) | (65 | ) | (2,992 | ) | ||||||
Loss before income taxes | (11,997 | ) | (11,943 | ) | (23,940 | ) | ||||||
Income tax expense | (16 | ) (f) | (16 | ) | ||||||||
Net loss | $ | (11,997 | ) | $ | (11,959 | ) | $ | (23,956 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Net loss | $ | (0.17 | ) | $ | (0.35 | ) | ||||||
Weighted average number of common shares | 69,275,323 | 69,275,323 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method – net product sales – $(12,835). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties – product cost – $437; royalties – $(1,358). | |
(d) | To reclassify $9 of expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(e) | To correct clinical trial expense – $(331). | |
(f) | To reclassify income taxes related to international operations – $16. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED BALANCE SHEET
(unaudited) (in thousands)
September 30, 2003 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Period | Quarter | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 73,002 | $ | 73,002 | ||||||||||||
Short-term investments | 13,744 | 13,744 | ||||||||||||||
Accounts receivable, net | 9,923 | $ | 39 | (a) | $ | (42 | ) (a) | 9,920 | ||||||||
Inventories, net | 6,005 | 225 | (a) | (119 | ) (a) | 6,111 | ||||||||||
Other current assets | 3,188 | 8,775 | (a)(b) | 1,684 | (a)(b) | 13,647 | ||||||||||
Total current assets | 105,862 | 9,039 | 1,523 | 116,424 | ||||||||||||
Restricted investments | 6,203 | 6,203 | ||||||||||||||
Property and equipment, net | 9,072 | 9,072 | ||||||||||||||
Acquired technology and product rights, net | 140,526 | 260 | (a)(c) | 140,786 | ||||||||||||
Other assets | 11,134 | 11,134 | ||||||||||||||
$ | 272,797 | $ | 9,299 | $ | 1,523 | $ | 283,619 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 17,261 | $ | 414 | (a)(d) | $ | (141 | ) (a) | $ | 17,534 | ||||||
Accrued liabilities | 23,228 | 1,178 | (a)(e) | (829 | ) (a)(e) | 23,577 | ||||||||||
Current portion of deferred revenue, net | 3,502 | 64,920 | (f) | 14,092 | (f) | 82,514 | ||||||||||
Current portion of equipment financing obligations | 2,299 | 492 | (g) | (492 | ) (g) | 2,299 | ||||||||||
Total current liabilities | 46,290 | 67,004 | 12,630 | 125,924 | ||||||||||||
Long-term debt | 155,250 | 155,250 | ||||||||||||||
Long-term portion of deferred revenue, net | 2,352 | 581 | (h) | 2,933 | ||||||||||||
Long-term portion of equipment financing obligations | 2,682 | (492 | ) (g) | 492 | (g) | 2,682 | ||||||||||
Other long-term liabilities | 3,627 | (399 | ) (i) | 27 | (i) | 3,255 | ||||||||||
Total liabilities | 210,201 | 66,694 | 13,149 | 290,044 | ||||||||||||
Common stock subject to conditional redemption | 14,595 | (j) | 14,595 | |||||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||
Common stock | 73 | (1 | ) (j) | 72 | ||||||||||||
Additional paid-in capital | 725,244 | (14,490 | ) (a)(j) | 710,754 | ||||||||||||
Accumulated other comprehensive loss | (90 | ) | (90 | ) | ||||||||||||
Accumulated deficit | (661,720 | ) | (57,499 | ) | (11,626 | ) | (730,845 | ) | ||||||||
63,507 | (71,990 | ) | (11,626 | ) | (20,109 | ) | ||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity (deficit) | 62,596 | (71,990 | ) | (11,626 | ) | (21,020 | ) | |||||||||
$ | 272,797 | $ | 9,299 | $ | 1,523 | $ | 283,619 | |||||||||
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(a) | To reflect other adjustments and reclassifications. | |
(b) | Cumulative effect of prior period adjustments includes $9,137 related to the change to the sell-through revenue recognition method (deferred royalties – $6,131; deferred cost of products sold – $3,006); to correct prepaid clinical trial expense – $(234). Current quarter adjustments include $1,501 related to the change to the sell-through revenue recognition method (deferred royalties – $1,525; deferred cost of products sold – $(24)). | |
(c) | To correct accumulated amortization expense related to ONTAK acquired technology – $357. | |
(d) | To correct clinical trial expense – $276. | |
(e) | Cumulative effect of prior period adjustments includes $(1,638) related to the change to the sell-through revenue recognition method (product cost – $(2,182); royalties – $544); to correct accruals for bonus expense – $482, and property tax expense –$(340); to reclassify Seragen acquisition liability from long-term to current – $2,700. Current quarter adjustments include $(903) related to the change to the sell-through revenue recognition method (product cost – $(881); royalties – $(22)). | |
(f) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(g) | To reclassify equipment financing obligations from long-term to current obligations. | |
(h) | To reflect the deferral of a portion of the sales of royalty rights to Royalty Pharma. | |
(i) | The cumulative effect of prior period adjustments reflects the effect of the adjustment to rent expense for contractual annual rent increases recognized over the lease term on a straight line basis – $2,301; to reclassify the Seragen acquisition liability to accrued liabilities – $(2,700). Current quarter adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis – $27. | |
(j) | To reclassify from equity the Company’s issuance of common stock subject to conditional redemption to Pfizer, in connection with the Pfizer settlement agreement in accordance with EITF D-98 – $(14,595) – common stock – $(1), additional paid in capital – $(14,594). |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
Three Months Ended September 30, 2003 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 28,123 | $ | (13,363 | )(a)(b) | $ | 14,760 | |||||
Sale of royalty rights, net | 35 | (c) | 35 | |||||||||
Collaborative research and development and other revenues | 3,160 | 3,160 | ||||||||||
Total revenues | 31,283 | (13,328 | ) | 17,955 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 8,565 | (1,524 | )(d) | 7,041 | ||||||||
Research and development | 17,696 | (261 | )(b)(e)(f) | 17,435 | ||||||||
Selling, general and administrative | 13,216 | 26 | (b)(e) | 13,242 | ||||||||
Total operating costs and expenses | 39,477 | (1,759 | ) | 37,718 | ||||||||
Loss from operations | (8,194 | ) | (11,569 | ) | (19,763 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 136 | 136 | ||||||||||
Interest expense | (2,653 | ) | (170 | )(b) | (2,823 | ) | ||||||
Other, net | (376 | ) | 122 | (b)(g) | (254 | ) | ||||||
Total other expense, net | (2,893 | ) | (48 | ) | (2,941 | ) | ||||||
Loss before income taxes | (11,087 | ) | (11,617 | ) | (22,704 | ) | ||||||
Income tax expense | (9 | )(g) | (9 | ) | ||||||||
Net loss | $ | (11,087 | ) | $ | (11,626 | ) | $ | (22,713 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Net loss | $ | (0.16 | ) | $ | (0.32 | ) | ||||||
Weighted average number of common shares | 70,100,280 | 70,100,280 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method – net product sales – $(13,376). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the recognition of revenue previously deferred in regard to the sales of royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties – product cost – $23, royalties – $(1,547). | |
(e) | To reclassify $20 of expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(f) | To correct clinical trial expense – $(281). | |
(g) | To reclassify income taxes related to international operations – $9. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
Three Months Ended December 31, 2003 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 42,394 | $ | (25,474 | ) (a)(b) | $ | 16,920 | |||||
Sale of royalty rights, net | 12,500 | (749 | ) (c) | 11,751 | ||||||||
Collaborative research and development and other revenues | 2,714 | 2,714 | ||||||||||
Total revenues | 57,608 | (26,223 | ) | 31,385 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 8,667 | (2,198 | ) (d) | 6,469 | ||||||||
Research and development | 16,484 | (434 | ) (b)(e) | 16,050 | ||||||||
Selling, general and administrative | 12,448 | 929 | (b)(f)(g) | 13,377 | ||||||||
Co-promotion | 9,360 | 9,360 | ||||||||||
Total operating costs and expenses | 46,959 | (1,703 | ) | 45,256 | ||||||||
Income (loss) from operations | 10,649 | (24,520 | ) | (13,871 | ) | |||||||
Other income (expense): | ||||||||||||
Interest income | 264 | 264 | ||||||||||
Interest expense | (2,947 | ) | 105 | (b) | (2,842 | ) | ||||||
Other, net | (19 | ) | (185 | ) (b)(h) | (204 | ) | ||||||
Total other expense, net | (2,702 | ) | (80 | ) | (2,782 | ) | ||||||
Income (loss) before income taxes and cumulative effect of a change in accounting principle | 7,947 | (24,600 | ) | (16,653 | ) | |||||||
Income tax expense | — | (16 | ) (h) | (16 | ) | |||||||
Income (loss) before cumulative effect of a change in accounting principle | 7,947 | (24,616 | ) | (16,669 | ) | |||||||
Cumulative effect of changing method of accounting for variable interest entity | (2,005 | ) | (2,005 | ) | ||||||||
Net income (loss) | $ | 5,942 | $ | (24,616 | ) | $ | (18,674 | ) | ||||
Basic per share amounts: | ||||||||||||
Income (loss) before cumulative effect of a change in accounting principle | $ | 0.11 | $ | (0.23 | ) | |||||||
Cumulative effect of changing method of accounting for variable interest entity | (0.03 | ) | (0.03 | ) | ||||||||
Net income (loss) | $ | 0.08 | $ | (0.26 | ) | |||||||
Weighted average number of common shares for basic net income (loss) per share | 73,098,427 | 73,098,427 | ||||||||||
Diluted per share amounts: | ||||||||||||
Income (loss) before cumulative effect of a change in accounting principle | $ | 0.10 | $ | (0.23 | ) | |||||||
Cumulative effect of changing method of accounting for variable interest entity | (0.02 | ) | (0.03 | ) | ||||||||
Net income (loss) | $ | 0.08 | $ | (0.26 | ) | |||||||
Weighted average number of common shares for diluted net income (loss) per share | 99,684,427 | 73,098,427 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method – net product sales – $(25,508). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the deferral of a portion of the sales of royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties – product cost – $(608), royalties – $(1,590). | |
(e) | To reclassify $26 of expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense; to correct patent expense – $(233). | |
(f) | To reflect accrual of interest on Seragen acquisition liability – $739. | |
(g) | To reflect legal expense in the proper accounting period – $308. | |
(h) | To reclassify income taxes related to international operations – $16. |
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• | Impact of changed sales volumes- a significant amount of cost of products sold is comprised of “fixed costs” including amortization of acquired technology and product rights that result in lower margins at lower sales levels. | ||
• | Returns- as discussed above, when product is shipped into the wholesale channel, inventory held by the wholesaler (and subsequently held by retail pharmacies in the case of AVINZA) is classified as “deferred cost of product sold” which is included in “Other current assets.” At the time of shipment, the Company makes an estimate of units that may be returned and records a reserve for those units against the “deferred cost of goods sold” account. Upon an announced price increase, the Company revalues its estimate of deferred product revenue to be returned to recognize the potential higher credit a wholesaler may take upon product return determined as the difference between the new and the initial wholesaler acquisition cost. |
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The impact of this reserve revaluation is likewise reflected as a charge to the Company’s statement of operations in the period the Company announces such price increase. | |||
• | Change to AVINZA product cost– in November 2002, the Company and Elan Corporation agreed to amend the terms of the AVINZA license and supply agreement. Under the terms of the amended agreement, Elan’s adjusted royalty and supply price of AVINZA is approximately 10% of the product’s net sales, compared to approximately 30-35% in the prior agreement. As noted above, product shipped to the wholesaler is recorded as “deferred cost of goods sold” and subsequently recognized as cost of sales when the product sells-through. In the restated revenue, the majority of product manufactured by Elan in 2002 at the higher contractual cost of production, sold-through and was recognized as cost of sales in 2003. Accordingly, AVINZA gross margins for 2003 under sell-through revenue recognition reflect this higher product cost compared to the previously reported 2003 margins under the sell-in revenue recognition method. If future sales volume increases and future return levels and product mix are similar to the Company’s experience in 2004, the Company expects that its gross margin levels overall will increase and stabilize over time. Gross margin on all product sales for 2004, 2003, and 2002 was 67%, 52%, and 51%, respectively. | ||
• | Royalties– under the sell-through method, royalties paid based on unit shipments to wholesalers are deferred and recognized as royalty expense as those units are sold-through and recognized as revenue. |
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% of Incremental Net Sales | ||
Annual Net Sales of AVINZA | Paid to Organon by Ligand | |
$0-35 million (2003 only) | 0% (2003 only) | |
$0-150 million | 30% | |
$150-300 million | 40% | |
$300-425 million | 50% | |
> $425 million | 45% |
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Year Ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
(Restated) | (Restated) | |||||||||||
AVINZA | $ | 69,470 | $ | 16,482 | $ | 1,114 | ||||||
ONTAK | 32,200 | 24,108 | 17,706 | |||||||||
Targretin capsules | 15,105 | 11,556 | 8,563 | |||||||||
Other | 3,560 | 3,178 | 2,943 | |||||||||
Total product sales | $ | 120,335 | $ | 55,324 | $ | 30,326 | ||||||
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Year Ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Collaborative research and development | $ | 7,843 | $ | 10,887 | $ | 18,268 | ||||||
Development milestones | 3,681 | 2,807 | 5,060 | |||||||||
Other | 311 | 314 | 515 | |||||||||
$ | 11,835 | $ | 14,008 | $ | 23,843 | |||||||
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Year Ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
(Restated) | (Restated) | |||||||||||
Research | ||||||||||||
Research performed under collaboration agreements | $ | 7,853 | $ | 10,535 | $ | 14,906 | ||||||
Internal research programs | 15,517 | 12,013 | 9,990 | |||||||||
Total research | 23,370 | 22,548 | 24,896 | |||||||||
Development | ||||||||||||
New product development | 28,329 | 30,771 | 20,518 | |||||||||
Existing product support (1) | 13,505 | 13,359 | 13,646 | |||||||||
Total development | 41,834 | 44,130 | 34,164 | |||||||||
Total research and development | $ | 65,204 | $ | 66,678 | $ | 59,060 | ||||||
(1) | Includes costs incurred to comply with post-marketing regulatory commitments. |
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Program | Disease/Indication | Development Phase | ||
AVINZA | Chronic, moderate-to-severe pain | Marketed in U.S. | ||
Phase IV | ||||
ONTAK | CTCL | Marketed in U.S., Phase IV | ||
Chronic lymphocytic leukemia | Phase II | |||
Peripheral T-cell lymphoma | Phase II | |||
B-cell Non-Hodgkin’s lymphoma | Phase II | |||
NSCLC third line | Phase II | |||
Targretin capsules | CTCL | Marketed in U.S. and Europe | ||
NSCLC first-line | Phase III | |||
NSCLC monotherapy | Planned Phase II/III | |||
NSCLC second/third line | Planned Phase II/III | |||
Advanced breast cancer | Phase II | |||
Renal cell cancer | Phase II | |||
Targretin gel | CTCL | Marketed in U.S. | ||
Hand dermatitis (eczema) | Planned Phase II/ III | |||
Psoriasis | Phase II | |||
LGD4665 (Thrombopoietin oral mimic) | Chemotherapy-induced thrombocytopenias (TCP), other TCPs | IND Track | ||
LGD5552 (Glucocorticoid agonists) | Inflammation, cancer | IND Track | ||
Selective androgen receptor modulator, e.g., LGD3303 (agonist/antagonist) | Male hypogonadism, female & male osteoporosis, male & female sexual dysfunction, frailty. Prostate cancer, hirsutism, acne, androgenetic alopecia. | Pre-clinical |
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Payments Due by Period | ||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | After 5 years | ||||||||||||||||
Capital lease obligations (1) | $ | 7,365 | $ | 2,980 | $ | 3,684 | $ | 701 | $ | ¾ | ||||||||||
Operating lease obligations | 22,464 | 2,939 | 4,177 | 3,721 | 11,627 | |||||||||||||||
Loan payable to bank (2) | 15,190 | 1,191 | 2,381 | 11,618 | ¾ | |||||||||||||||
6% Convertible Subordinated Notes (3) | 183,195 | 9,315 | 173,880 | ¾ | ¾ | |||||||||||||||
Other liabilities (4) | 3,549 | 3,000 | 549 | ¾ | ¾ | |||||||||||||||
Distribution service agreements | 6,864 | 6,864 | ¾ | ¾ | ¾ | |||||||||||||||
Consulting agreements | 418 | 418 | ¾ | ¾ | ¾ | |||||||||||||||
Manufacturing agreements (5) | 11,232 | 11,131 | 100 | ¾ | ¾ | |||||||||||||||
Total contractual obligations | $ | 250,277 | $ | 37,839 | $ | 184,771 | $ | 16,040 | $ | 11,627 | ||||||||||
(1) | Includes $0.8 million of interest payments. | |
(2) | Includes interest of $0.9 million, $1.7 million, and $0.5 million for 2005, the period from 2006 to 2007 and 2008, respectively. | |
(3) | Includes interest of $9.3 million and $18.6 million for 2005 and the period from 2006 to 2007, respectively. | |
(4) | Other liabilities include merger contingencies and a liability under a royalty financing arrangement. Deferred revenues are excluded because they have no effect on future liquidity. | |
(5) | Includes $9.2 million related to the amended Elan agreement described below and $2.0 million of other manufacturing contractual commitments. |
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Revenue Recognition | Patent | |||||
Method | Event | Expiration | ||||
AVINZA | Sell-through | Prescriptions | November 2017 | |||
ONTAK | Sell-through | Wholesaler out-movement | December 2014 | |||
Targretin capsules | Sell-through | Wholesaler out-movement | October 2016 | |||
Targretin gel | Sell-through | Wholesaler out-movement | October 2016 | |||
Panretin | Sell-in | Shipment to wholesaler | August 2016 | |||
International | Sell-in | Shipment to international distributor | February 2011 through April 2013 |
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(in thousands, except share data)
December 31, | ||||||||
2004 | 2003 | |||||||
(Restated) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 92,310 | $ | 59,030 | ||||
Short-term investments; $9,204 restricted at December 31, 2003 | 20,182 | 40,004 | ||||||
Accounts receivable, net | 30,847 | 18,901 | ||||||
Inventories, net | 11,772 | 8,480 | ||||||
Other current assets | 17,713 | 16,361 | ||||||
Total current assets | 172,824 | 142,776 | ||||||
Restricted investments | 2,378 | 1,656 | ||||||
Property and equipment, net | 23,647 | 23,501 | ||||||
Acquired technology and product rights, net | 127,443 | 138,117 | ||||||
Other assets | 6,174 | 7,996 | ||||||
$ | 332,466 | $ | 314,046 | |||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 17,352 | $ | 18,841 | ||||
Accrued liabilities | 43,908 | 32,667 | ||||||
Current portion of deferred revenue, net | 152,528 | 105,719 | ||||||
Current portion of equipment financing obligations | 2,604 | 2,184 | ||||||
Current portion of long-term debt | 320 | 295 | ||||||
Total current liabilities | 216,712 | 159,706 | ||||||
Long-term debt | 167,089 | 167,408 | ||||||
Long-term portion of equipment financing obligations | 4,003 | 2,644 | ||||||
Long-term portion of deferred revenue, net | 4,512 | 3,448 | ||||||
Other long-term liabilities | 3,122 | 3,799 | ||||||
Total liabilities | 395,438 | 337,005 | ||||||
Commitments and contingencies | ||||||||
Common stock subject to conditional redemption; 997,568 and 1,179,386 shares issued and outstanding at December 31, 2004 and 2003, respectively | 12,345 | 14,595 | ||||||
Stockholders’ deficit: | ||||||||
Convertible preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued | ¾ | ¾ | ||||||
Common stock, $0.001 par value; 200,000,000 shares and 130,000,000 shares authorized at December 31, 2004 and 2003, respectively; 72,970,670 and 72,085,399 shares issued and outstanding at December 31, 2004 and 2003, respectively | 73 | 72 | ||||||
Additional paid-in capital | 719,952 | 712,870 | ||||||
Accumulated other comprehensive income (loss) | 229 | (66 | ) | |||||
Accumulated deficit | (794,660 | ) | (749,519 | ) | ||||
(74,406 | ) | (36,643 | ) | |||||
Treasury stock, at cost; 73,842 shares | (911 | ) | (911 | ) | ||||
Total stockholders’ deficit | (75,317 | ) | (37,554 | ) | ||||
$ | 332,466 | $ | 314,046 | |||||
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(in thousands, except share and per share data)
Year Ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
(Restated) | (Restated) | |||||||||||
Revenues: | ||||||||||||
Product sales | $ | 120,335 | $ | 55,324 | $ | 30,326 | ||||||
Sale of royalty rights, net | 31,342 | 11,786 | 17,600 | |||||||||
Collaborative research and development and other revenues | 11,835 | 14,008 | 23,843 | |||||||||
Total revenues | 163,512 | 81,118 | 71,769 | |||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 39,804 | 26,557 | 14,738 | |||||||||
Research and development | 65,204 | 66,678 | 59,060 | |||||||||
Selling, general and administrative | 65,798 | 52,540 | 41,825 | |||||||||
Co-promotion | 30,077 | 9,360 | — | |||||||||
Total operating costs and expenses | 200,883 | 155,135 | 115,623 | |||||||||
Loss from operations | (37,371 | ) | (74,017 | ) | (43,854 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 1,096 | 783 | 1,086 | |||||||||
Interest expense | (12,338 | ) | (11,142 | ) | (6,295 | ) | ||||||
Debt conversion expense | — | — | (2,015 | ) | ||||||||
Other, net | 3,705 | (10,034 | ) | (1,135 | ) | |||||||
Total other expense, net | (7,537 | ) | (20,393 | ) | (8,359 | ) | ||||||
Loss before income taxes and cumulative effect of a change in accounting principle | (44,908 | ) | (94,410 | ) | (52,213 | ) | ||||||
Income tax expense | (233 | ) | (56 | ) | (44 | ) | ||||||
Loss before cumulative effect of a change in accounting principle | (45,141 | ) | (94,466 | ) | (52,257 | ) | ||||||
Cumulative effect of changing method of accounting for variable interest entity (Note 3) | — | (2,005 | ) | — | ||||||||
Net loss | $ | (45,141 | ) | $ | (96,471 | ) | $ | (52,257 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Loss before cumulative effect of a change in accounting principle | $ | (0.61 | ) | $ | (1.33 | ) | $ | (0.76 | ) | |||
Cumulative effect of changing method of accounting for variable interest entity | — | (0.03 | ) | — | ||||||||
Net loss | $ | (0.61 | ) | $ | (1.36 | ) | $ | (0.76 | ) | |||
Weighted average number of common shares | 73,692,987 | 70,685,234 | 69,118,976 | |||||||||
Pro forma amounts assuming the changed method of accounting for variable interest entity is applied retroactively (Note 3): | ||||||||||||
Net loss | $ | (94,352 | ) | $ | (52,456 | ) | ||||||
Basic and diluted net loss per share | $ | (1.34 | ) | $ | (0.76 | ) | ||||||
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(in thousands, except share data)
Accumulated | ||||||||||||||||||||||||||||||||||||||||
Additional | Deferred | other | Total | |||||||||||||||||||||||||||||||||||||
Common stock | paid-in | warrant | comprehensive | Accumulated | Treasury stock | stockholders’ | Comprehensive | |||||||||||||||||||||||||||||||||
Shares | Amount | capital | expense | income (loss) | deficit | Shares | Amount | equity (deficit) | loss | |||||||||||||||||||||||||||||||
Balance at January 1, 2002, as originally reported | 60,164,840 | $ | 60 | $ | 529,374 | $ | (692 | ) | $ | 14 | $ | (585,720 | ) | (73,842 | ) | $ | (911 | ) | $ | (57,875 | ) | |||||||||||||||||||
Cumulative effect of restatement adjustments | (1,179,386 | ) | (1 | ) | (14,594 | ) | 692 | — | (15,071 | ) | — | — | (28,974 | ) | ||||||||||||||||||||||||||
Balance at January 1, 2002, as restated | 58,985,454 | 59 | 514,780 | — | 14 | (600,791 | ) | (73,842 | ) | (911 | ) | (86,849 | ) | |||||||||||||||||||||||||||
Issuance of common stock | 11,357,316 | 12 | 163,894 | — | — | — | — | — | 163,906 | |||||||||||||||||||||||||||||||
Effect of common stock repurchase agreement | (2,222,222 | ) | (2 | ) | (15,865 | ) | — | — | — | — | — | (15,867 | ) | |||||||||||||||||||||||||||
Unrealized losses on available-for-sale securities | — | — | — | — | (63 | ) | — | — | — | (63 | ) | $ | (63 | ) | ||||||||||||||||||||||||||
Stock-based compensation | — | — | 49 | — | — | — | — | — | 49 | |||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | 6 | — | — | — | 6 | 6 | ||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (52,257 | ) | — | — | (52,257 | ) | (52,257 | ) | |||||||||||||||||||||||||||
Balance at December 31, 2002, as restated | 68,120,548 | 69 | 662,858 | — | (43 | ) | (653,048 | ) | (73,842 | ) | (911 | ) | 8,925 | $ | (52,314 | ) | ||||||||||||||||||||||||
Issuance of common stock | 3,964,851 | 3 | 49,447 | — | — | — | — | — | 49,450 | |||||||||||||||||||||||||||||||
Unrealized losses on available-for-sale securities | — | — | — | — | (62 | ) | — | — | — | (62 | ) | (62 | ) | |||||||||||||||||||||||||||
Stock-based compensation | — | — | 565 | — | — | — | — | — | 565 | |||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | 39 | — | — | — | 39 | 39 | ||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (96,471 | ) | — | — | (96,471 | ) | (96,471 | ) | |||||||||||||||||||||||||||
Balance at December 31, 2003, as restated | 72,085,399 | 72 | 712,870 | — | (66 | ) | (749,519 | ) | (73,842 | ) | (911 | ) | (37,554 | ) | $ | (96,494 | ) | |||||||||||||||||||||||
Issuance of common stock | 885,271 | 1 | 6,618 | — | — | — | — | — | 6,619 | |||||||||||||||||||||||||||||||
Effect of common stock redemption | — | — | 294 | — | — | — | — | — | 294 | |||||||||||||||||||||||||||||||
Income tax benefits of stock option deductions | — | — | 81 | — | — | — | — | — | 81 | |||||||||||||||||||||||||||||||
Unrealized gains on available-for-sale securities | — | — | — | — | 282 | — | — | — | 282 | $ | 282 | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | 89 | — | — | — | — | — | 89 | |||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | 13 | — | — | — | 13 | 13 | ||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (45,141 | ) | — | — | (45,141 | ) | (45,141 | ) | |||||||||||||||||||||||||||
Balance at December 31, 2004 | 72,970,670 | $ | 73 | $ | 719,952 | $ | — | $ | 229 | $ | (794,660 | ) | (73,842 | ) | $ | (911 | ) | $ | (75,317 | ) | $ | (44,846 | ) | |||||||||||||||||
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Year Ended December 31, | ||||||||||||
2004 | 2003 (Restated) | 2002 (Restated) | ||||||||||
Operating activities | ||||||||||||
Net loss | $ | (45,141 | ) | $ | (96,471 | ) | $ | (52,257 | ) | |||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||
Cumulative effect of change in accounting principle | — | 2,005 | — | |||||||||
Amortization of acquired technology and royalty and license rights | 10,946 | 10,961 | 4,139 | |||||||||
Depreciation and amortization of property and equipment | 3,355 | 2,451 | 3,176 | |||||||||
Non-cash development milestone | (1,956 | ) | — | — | ||||||||
Amortization of debt discount and issuance costs | 974 | 916 | 1,408 | |||||||||
Write-off of X-Ceptor purchase right | — | 8,990 | — | |||||||||
Gain on sale of equity investment | (3,705 | ) | — | — | ||||||||
Equity in loss of affiliate | — | 981 | 1,141 | |||||||||
Debt conversion expense | — | — | 2,015 | |||||||||
Other | 89 | 565 | 37 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable, net | (11,946 | ) | (6,478 | ) | 275 | |||||||
Inventories | (3,292 | ) | (3,489 | ) | (639 | ) | ||||||
Other current assets | (1,352 | ) | (1,388 | ) | (11,185 | ) | ||||||
Accounts payable and accrued liabilities | 9,753 | 24,156 | 3,947 | |||||||||
Other liabilities | 156 | 151 | 165 | |||||||||
Deferred revenue | 47,873 | 56,963 | 20,888 | |||||||||
Net cash provided by (used in) operating activities | 5,754 | 313 | (26,890 | ) | ||||||||
Investing activities | ||||||||||||
Purchases of short-term investments | (26,322 | ) | (28,026 | ) | (13,934 | ) | ||||||
Proceeds from sale of short-term investments | 40,464 | 10,053 | 18,054 | |||||||||
Decrease (increase) in restricted investments | 9,204 | 10,384 | (18,874 | ) | ||||||||
Purchases of property and equipment | (3,604 | ) | (2,783 | ) | (3,161 | ) | ||||||
Payment for AVINZA® royalty rights | — | (4,133 | ) | (101,304 | ) | |||||||
Payment to extend X-Ceptor purchase right | — | — | (5,000 | ) | ||||||||
Other, net | (131 | ) | 270 | 100 | ||||||||
Net cash provided by (used in) investing activities | 19,611 | (14,235 | ) | (124,119 | ) | |||||||
Financing activities | ||||||||||||
Principal payments on equipment financing obligations | (2,650 | ) | (2,468 | ) | (2,923 | ) | ||||||
Proceeds from equipment financing arrangements | 4,429 | 1,114 | 2,884 | |||||||||
Net proceeds from issuance of common stock and warrants | 6,619 | 49,451 | 70,755 | |||||||||
Repurchase of common stock | — | (15,867 | ) | — | ||||||||
(Decrease) increase in other long-term liabilities | (189 | ) | (101 | ) | 1,000 | |||||||
Repayment of long-term debt | (294 | ) | — | (50,717 | ) | |||||||
Net proceeds from issuance of convertible notes | — | — | 150,092 | |||||||||
Net cash provided by financing activities | 7,915 | 32,129 | 171,091 | |||||||||
Net increase in cash and cash equivalents | 33,280 | 18,207 | 20,082 | |||||||||
Cash and cash equivalents at beginning of year | 59,030 | 40,823 | 20,741 | |||||||||
Cash and cash equivalents at end of year | $ | 92,310 | $ | 59,030 | $ | 40,823 | ||||||
Supplemental disclosure of cash flow information | ||||||||||||
Interest paid | $ | 10,468 | $ | 9,948 | $ | 4,118 | ||||||
Supplemental schedule of non-cash investing and financing activities | ||||||||||||
Receipt and retirement of common stock in settlement of Pfizer development milestone | 1,956 | — | — | |||||||||
Receipt of Exelixis, Inc. common stock upon sale of equity investment in X-Ceptor | 3,908 | — | — | |||||||||
Conversion of zero coupon convertible senior notes to common stock | — | — | 86,135 | |||||||||
Issuance of common stock and notes for acquired technology and license rights | — | — | 5,000 |
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EFFECTS OF THE RESTATEMENT
(in thousands, except share and per share data)
For the Year Ended December 31, | ||||||||
2003 | 2002 | |||||||
Net loss, as previously reported: | $ | (37,462 | ) | $ | (32,596 | ) | ||
Adjustments to net loss (increase) decrease: | ||||||||
Product sales: | ||||||||
Net product sales (a) | (59,187 | ) | (24,160 | ) | ||||
Other (b) | (121 | ) | (36 | ) | ||||
Sale of royalty rights, net (c) | (714 | ) | (675 | ) | ||||
Cost of products sold: | ||||||||
Product cost (d) | 151 | 2,549 | ||||||
Royalties (d) | 4,910 | 3,019 | ||||||
Research and development: | ||||||||
Reclassification (e) | 55 | — | ||||||
Clinical trial (f) | 918 | (1,107 | ) | |||||
X-Ceptor warrant amortization (g) | — | 692 | ||||||
Patent expense accrual (h) | — | 345 | ||||||
Other (b) | 28 | (183 | ) | |||||
Selling, general and administrative: | ||||||||
Reclassification (e) | (55 | ) | — | |||||
Rent (i) | (111 | ) | (158 | ) | ||||
Seragen litigation (j) | (739 | ) | — | |||||
Other (b) | 26 | 11 | ||||||
Interest (b) | (172 | ) | — | |||||
Other, net: | ||||||||
X-Ceptor purchase right (k) | (3,990 | ) | — | |||||
Income tax expense (l) | 56 | 44 | ||||||
Other (b) | (8 | ) | 42 | |||||
Income tax expense (l) | (56 | ) | (44 | ) | ||||
Net loss, as restated | $ | (96,471 | ) | $ | (52,257 | ) | ||
Per Share Data | ||||||||
As previously reported: | ||||||||
Basic and diluted net loss per share | $ | (0.53 | ) | $ | (0.47 | ) | ||
Weighted average number of common shares | 70,685,234 | 69,118,976 | ||||||
As restated: | ||||||||
Basic and diluted net loss per share | $ | (1.36 | ) | $ | (0.76 | ) | ||
Weighted average number of common shares | 70,685,234 | 69,118,976 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the deferral of a portion of the sale of royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties. | |
(e) | To reclassify expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(f) | To correct clinical trial expense. | |
(g) | To reverse X-Ceptor warrant amortization. | |
(h) | To correct patent expense. | |
(i) | To adjust rent expense for contractual annual rent increase which is recognized over the lease term on a straight-line basis. | |
(j) | To reflect accrued interest for the Seragen acquisition litigation. | |
(k) | To reflect the write-off of the X-Ceptor purchase right in March 2003. | |
(l) | To reclassify income taxes related to international operations. |
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EFFECTS OF THE RESTATEMENT
(in thousands, except share and per share data)
(unaudited)
2004 Quarterly Periods | ||||||||||||
March 31, | June 30, | September 30, | ||||||||||
Net loss, as previously reported: | $ | (13,139 | ) | $ | (14,216 | ) | $ | (6,789 | ) | |||
Adjustments to net loss (increase) decrease: | ||||||||||||
Product sales: | ||||||||||||
Net product sales (a) | (9,245 | ) | (8,097 | ) | (12,842 | ) | ||||||
Other (b) | 48 | (89 | ) | 50 | ||||||||
Sale of royalty rights, net (c) | — | — | 67 | |||||||||
Cost of products sold: | ||||||||||||
Product cost (d) | 886 | 214 | 163 | |||||||||
Royalties (d) | 392 | (6 | ) | 1,029 | ||||||||
Research and development: | ||||||||||||
Reclassification (e) | 742 | 1,454 | 1,221 | |||||||||
Salk-buyout (f) | (1,120 | ) | — | — | ||||||||
Patent expense (g) | (238 | ) | — | — | ||||||||
Other (b) | (49 | ) | 154 | 12 | ||||||||
Selling, general and administrative: | ||||||||||||
Reclassification (e) | (742 | ) | (1,454 | ) | (1,221 | ) | ||||||
Legal expense (h) | 373 | — | — | |||||||||
Other (b) | 136 | (37 | ) | (200 | ) | |||||||
Interest: | ||||||||||||
Factoring arrangement (i) | — | — | (238 | ) | ||||||||
Other (b) | 44 | 12 | 12 | |||||||||
Other, net: | ||||||||||||
Factoring arrangement (i) | — | — | 238 | |||||||||
Income taxes (j) | 16 | 18 | 3 | |||||||||
Income tax expense (j) | (16 | ) | (18 | ) | (3 | ) | ||||||
Net loss, as restated | $ | (21,912 | ) | $ | (22,065 | ) | $ | (18,498 | ) | |||
Per Share Data | ||||||||||||
As previously reported: | ||||||||||||
Basic and diluted net loss per share | $ | (0.18 | ) | $ | (0.19 | ) | $ | (0.09 | ) | |||
Weighted average number of common shares | 73,299,281 | 73,754,146 | 73,845,613 | |||||||||
As restated: | ||||||||||||
Basic and diluted net loss per share | $ | (0.30 | ) | $ | (0.30 | ) | $ | (0.25 | ) | |||
Weighted average number of common shares | 73,299,281 | 73,754,146 | 73,845,613 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the recognition of revenue previously deferred in regard to the sale of royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties. | |
(e) | To reclassify expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(f) | To expense the payment to The Salk Institute to buy-out the Company’s royalty obligation on lasofoxifene in March 2004. | |
(g) | To correct patent expense. | |
(h) | To correct legal expense. | |
(i) | To reclassify interest and factoring expenses incurred under a factoring arrangement. | |
(j) | To reclassify income taxes related to international operations. |
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EFFECTS OF THE RESTATEMENT
(in thousands, except share and per share data)
(unaudited)
2003 Quarterly Periods | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
Net (loss) income, as previously reported: | $ | (20,320 | ) | $ | (11,997 | ) | $ | (11,087 | ) | $ | 5,942 | |||||
Adjustments to net (loss) (increase) decrease/ income increase (decrease): | ||||||||||||||||
Product sales: | ||||||||||||||||
Net product sales (a) | (7,468 | ) | (12,835 | ) | (13,376 | ) | (25,508 | ) | ||||||||
Other (b) | 13 | (181 | ) | 13 | 34 | |||||||||||
Sale of royalty rights, net (c) | — | — | 35 | (749 | ) | |||||||||||
Cost of products sold: | ||||||||||||||||
Product cost (d) | 3 | (437 | ) | (23 | ) | 608 | ||||||||||
Royalties (d) | 415 | 1,358 | 1,547 | 1,590 | ||||||||||||
Research and development: | ||||||||||||||||
Reclassification (e) | — | 9 | 20 | 26 | ||||||||||||
Clinical trial expense (f) | — | 331 | 281 | 233 | ||||||||||||
Other (b) | 91 | (125 | ) | (40 | ) | 175 | ||||||||||
Selling, general and administrative: | ||||||||||||||||
Reclassification (e) | — | (9 | ) | (20 | ) | (26 | ) | |||||||||
Seragen litigation (g) | — | — | — | (739 | ) | |||||||||||
Other (b) | 74 | 11 | (6 | ) | (164 | ) | ||||||||||
Interest (b) | (26 | ) | (81 | ) | (170 | ) | 105 | |||||||||
Other, net: | ||||||||||||||||
X-Ceptor purchase right (h) | (3,990 | ) | — | — | — | |||||||||||
Income tax expense (i) | 15 | 16 | 9 | 16 | ||||||||||||
Other (b) | 80 | — | 113 | (201 | ) | |||||||||||
Income tax expense (i) | (15 | ) | (16 | ) | (9 | ) | (16 | ) | ||||||||
Net loss, as restated | $ | (31,128 | ) | $ | (23,956 | ) | $ | (22,713 | ) | $ | (18,674 | ) | ||||
Per Share Data | ||||||||||||||||
As previously reported: | ||||||||||||||||
Basic and diluted net (loss) income per share | $ | (0.29 | ) | $ | (0.17 | ) | $ | (0.16 | ) | $ | 0.08 | |||||
Weighted average number of common shares used in basic per share calculation | 70,238,438 | 69,275,323 | 70,100,280 | 73,098,427 | ||||||||||||
Weighted average number of common shares used in fully diluted per share calculation | 99,684,427 | |||||||||||||||
As restated: | ||||||||||||||||
Basic and diluted net loss per share | $ | (0.44 | ) | $ | (0.35 | ) | $ | (0.32 | ) | $ | (0.26 | ) | ||||
Weighted average number of common shares | 70,238,438 | 69,275,323 | 70,100,280 | 73,098,427 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the recognition/(deferral) regarding the sale of royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties. | |
(e) | To reclassify expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(f) | To correct clinical trial expense. | |
(g) | To reflect accrued interest for the Seragen acquisition litigation. | |
(h) | To reflect the write-off of the X-Ceptor purchase right in March 2003, which was previously deferred and recognized over the period from 1999 through June 2002. | |
(i) | To reclassify income taxes related to international operations. |
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EFFECTS OF THE RESTATEMENT
(in thousands)
December 31, 2003 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Year | Year | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 59,030 | $ | 59,030 | ||||||||||||
Short-term investments | 40,004 | 40,004 | ||||||||||||||
Accounts receivable, net | 19,051 | $ | 247 | (a) | $ | (397 | )(a)(c) | 18,901 | ||||||||
Inventories, net | 8,262 | 150 | (a) | 68 | (a) | 8,480 | ||||||||||
Other current assets | 3,810 | 7,665 | (a)(b) | 4,886 | (a)(b) | 16,361 | ||||||||||
Total current assets | 130,157 | 8,062 | 4,557 | 142,776 | ||||||||||||
Restricted investments | 1,656 | 1,656 | ||||||||||||||
Property and equipment, net | 23,501 | 23,501 | ||||||||||||||
Acquired technology and product rights, net | 137,857 | 260 | (a)(d) | 138,117 | ||||||||||||
Other assets | 8,084 | 3,958 | (a)(e) | (4,046 | )(a)(e) | 7,996 | ||||||||||
$ | 301,255 | $ | 12,280 | $ | 511 | $ | 314,046 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 18,691 | $ | 913 | (a)(f) | $ | (763 | )(a)(f) | $ | 18,841 | ||||||
Accrued liabilities | 30,315 | (2,182 | )(a)(g) | 4,534 | (a)(h) | 32,667 | ||||||||||
Current portion of deferred revenue, net | 2,564 | 43,926 | (i) | 59,229 | (i) | 105,719 | ||||||||||
Current portion of equipment financing obligations | 2,184 | 253 | (j) | (253 | )(j) | 2,184 | ||||||||||
Current portion of long-term debt | 295 | 295 | ||||||||||||||
Total current liabilities | 54,049 | 42,910 | 62,747 | 159,706 | ||||||||||||
Long-term debt | 167,408 | 167,408 | ||||||||||||||
Long-term portion of deferred revenue, net | 2,275 | 581 | (k) | 592 | (k) | 3,448 | ||||||||||
Long-term portion of equipment financing obligations | 2,644 | (253 | )(j) | 253 | (j) | 2,644 | ||||||||||
Other long-term liabilities | 4,151 | (463 | )(l) | 111 | (l) | 3,799 | ||||||||||
Total liabilities | 230,527 | 42,775 | 63,703 | 337,005 | ||||||||||||
Common stock subject to conditional redemption/repurchase | 34,595 | (m) | (20,000 | )(n) | 14,595 | |||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||
Common stock | 73 | (3 | )(m) | 2 | (n) | 72 | ||||||||||
Additional paid-in capital | 727,410 | (30,355 | )(a)(m) | 15,815 | (a)(n) | 712,870 | ||||||||||
Accumulated other comprehensive loss | (66 | ) | (66 | ) | ||||||||||||
Accumulated deficit | (655,778 | ) | (34,732 | ) | (59,009 | ) | (749,519 | ) | ||||||||
�� | ||||||||||||||||
71,639 | (65,090 | ) | (43,192 | ) | (36,643 | ) | ||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity (deficit) | 70,728 | (65,090 | ) | (43,192 | ) | (37,554 | ) | |||||||||
$ | 301,255 | $ | 12,280 | $ | 511 | $ | 314,046 | |||||||||
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(a) | To reflect other adjustments and reclassifications. | |
(b) | Cumulative effect of prior year adjustments includes $7,603 related to the change to the sell-through revenue recognition method (deferred royalties — $4,215; deferred cost of products sold — $3,388). Current year adjustments include $5,668 related to the change to the sell-through revenue recognition method (deferred royalties — $5,465; deferred cost of products sold — $203); correct prepaid clinical trial expense — $(254); reclassify Organon cost-sharing receivable balance to co-promotion liability — $(461). | |
(c) | To correct bad debt expense — $(205). | |
(d) | To correct accumulated amortization related to ONTAK acquired technology — $357. | |
(e) | To record the capitalization of the X-Ceptor Purchase Right in October 1999 — $3,990; to write-off the X-Ceptor Purchase Right in March 2003, which was previously recognized over the period from 1999 to June 2002 — $(3,990). | |
(f) | To correct clinical trial expense. Cumulative effect of prior year adjustments — $918; current year adjustments — $(918). | |
(g) | Includes $(1,089) related to the change to the sell-through revenue recognition method (product cost — $(1,491); royalties — $402); to correct accruals for bonus expense — $694; and property tax expense — $(316); reclassification of Seragen acquisition liability from other long-term liabilities — $2,700; reclassification of the Elan shares from accrued liabilities to additional paid-in capital — $(4,133). | |
(h) | Includes $446 adjustment related to the change to the sell-through revenue recognition method (product cost — $(108); royalties $554); to correct accruals for bonus expense - $(424) and legal, trademark and patent expense — $230; to reclassify Organon cost-sharing receivable balance to co-promotion liability — $(461); to reflect accrued interest for the Seragen acquisition liability — $739; reclassification of the Elan shares from accrued liabilities to additional paid-in capital — $4,133. | |
(i) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(j) | To reclassify equipment lease obligation from long-term to current obligation. | |
(k) | To reflect the deferral of a portion of the sale of the royalty rights to Royalty Pharma. | |
(l) | The cumulative effect of prior year adjustments reflects the effect of the adjustment to rent expense for contractual annual rent increases recognized over the lease term on a straight line basis — $2,237; to reclassify the Seragen acquisition litigation to accrued liabilities — $(2,700). Current year adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis — $111. | |
(m) | In accordance with EITF D-98, to reclassify from equity the Company’s issuance of common stock to Pfizer -common stock — $(1); additional paid in capital $(14,594); Elan shares — common stock $(2); additional paid in capital $(19,998); reclassification of the Elan shares from accrued liabilities to additional paid-in capital — $4,133. | |
(n) | To reflect the repurchase and retirement of the Elan shares in February 2003 — $20,000 — common stock — $2; additional paid-in capital — $19,998; reclassification of the Elan shares from accrued liabilities to additional paid-in capital — $(4,133). |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share and per share data)
Year Ended December 31, 2003 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 114,632 | $ | (59,308 | ) (a)(b) | $ | 55,324 | |||||
Sale of royalty rights, net | 12,500 | (714 | ) (c) | 11,786 | ||||||||
Collaborative research and development and other revenues | 14,008 | 14,008 | ||||||||||
Total revenues | 141,140 | (60,022 | ) | 81,118 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 31,618 | (5,061 | ) (d) | 26,557 | ||||||||
Research and development | 67,679 | (1,001 | ) (b)(e)(f) | 66,678 | ||||||||
Selling, general and administrative | 51,661 | 879 | (b)(f)(g) | 52,540 | ||||||||
Co-promotion | 9,360 | 9,360 | ||||||||||
Total operating costs and expenses | 160,318 | (5,183 | ) | 155,135 | ||||||||
Loss from operations | (19,178 | ) | (54,839 | ) | (74,017 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 783 | 783 | ||||||||||
Interest expense | (10,970 | ) | (172 | ) (b) | (11,142 | ) | ||||||
Other, net | (6,092 | ) | (3,942 | ) (b)(h)(i) | (10,034 | ) | ||||||
Total other expense, net | (16,279 | ) | (4,114 | ) | (20,393 | ) | ||||||
Loss before income taxes and cumulative effect of a change in accounting principle | (35,457 | ) | (58,953 | ) | (94,410 | ) | ||||||
Income tax expense | — | (56 | ) (i) | (56 | ) | |||||||
Loss before cumulative effect of a change in accounting principle | (35,457 | ) | (59,009 | ) | (94,466 | ) | ||||||
Cumulative effect of changing method of accounting for variable interest entity | (2,005 | ) | (2,005 | ) | ||||||||
Net loss | $ | (37,462 | ) | $ | (59,009 | ) | $ | (96,471 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Loss before cumulative effect of a change in accounting principle | $ | (0.50 | ) | $ | (1.33 | ) | ||||||
Cumulative effect of changing method of accounting for variable interest entity | (0.03 | ) | (0.03 | ) | ||||||||
Net loss | $ | (0.53 | ) | $ | (1.36 | ) | ||||||
Weighted average number of common shares | 70,685,234 | 70,685,234 | ||||||||||
Pro forma amounts assuming the changed method of accounting for variable interest entity is applied retroactively: | ||||||||||||
Net loss | $ | (35,557 | ) | $ | (94,352 | ) | ||||||
Basic and diluted net loss per share | $ | (0.50 | ) | $ | (1.34 | ) |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method — net product sales — $(59,187). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the deferral of a portion of the sale of the royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties — product cost — $(151); royalties — $(4,910). | |
(e) | To correct clinical trial expense — $(918). | |
(f) | To reclassify $55 of expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(g) | To reflect interest expense for the Seragen acquisition liability — $739. | |
(h) | To reflect the write-off of the X-Ceptor Purchase Right in March 2003 — $3,990. | |
(i) | To reclassify income taxes related to international operations — $56. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED BALANCE SHEET
(unaudited) (in thousands)
December 31, 2002 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Year | Year | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 42,423 | $ | $ | (1,600 | )(a) | $ | 40,823 | ||||||||
Short-term investments | 21,825 | 1,600 | (a) | 23,425 | ||||||||||||
Accounts receivable, net | 12,176 | 196 | (b) | 51 | (b) | 12,423 | ||||||||||
Inventories, net | 4,841 | 596 | (c) | (446 | ) (c) | 4,991 | ||||||||||
Other current assets | 7,308 | 1,456 | (b)(d) | 6,209 | (b)(d) | 14,973 | ||||||||||
Total current assets | 88,573 | 2,248 | 5,814 | 96,635 | ||||||||||||
Restricted investments | 10,646 | 10,646 | ||||||||||||||
Property and equipment, net | 9,672 | 248 | (e) | (248 | ) (e) | 9,672 | ||||||||||
Acquired technology and product rights, net | 148,546 | 357 | (f) | (97 | ) (b) | 148,806 | ||||||||||
Other assets | 17,992 | 3,868 | (b)(g) | 90 | (b) | 21,950 | ||||||||||
$ | 275,429 | $ | 6,721 | $ | 5,559 | $ | 287,709 | |||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 11,979 | $ | 79 | (b) | $ | 834 | (b)(h) | $ | 12,892 | ||||||
Accrued liabilities | 16,606 | 3,219 | (b)(i) | (5,401 | ) (b)(i) | 14,424 | ||||||||||
Current portion of deferred revenue, net | 4,683 | 18,423 | (j) | 25,503 | (j) | 48,609 | ||||||||||
Current portion of equipment financing obligations | 2,087 | 253 | (k) | 2,340 | ||||||||||||
Current portion of long-term debt | — | — | ||||||||||||||
Total current liabilities | 35,355 | 21,721 | 21,189 | 78,265 | ||||||||||||
Long-term debt | 155,250 | 155,250 | ||||||||||||||
Long-term portion of deferred revenue, net | 3,014 | 581 | (l) | 3,595 | ||||||||||||
Long-term portion of equipment financing obligations | 4,095 | (253 | ) (k) | 3,842 | ||||||||||||
Other long-term liabilities | 3,700 | (621 | ) (m) | 158 | (m) | 3,237 | ||||||||||
Total liabilities | 201,414 | 21,100 | 21,675 | 244,189 | ||||||||||||
Common stock subject to conditional redemption/repurchase | 14,595 | (n) | 20,000 | (o) | 34,595 | |||||||||||
Stockholders’ equity: | ||||||||||||||||
Common stock | 72 | (1 | ) (n) | (2 | ) (o) | 69 | ||||||||||
Additional paid-in capital | 693,213 | (14,594 | ) (n) | (15,761 | ) (b)(o) | 662,858 | ||||||||||
Deferred warrant expense | — | 692 | (p) | (692 | ) (p) | — | ||||||||||
Accumulated other comprehensive loss | (43 | ) | (43 | ) | ||||||||||||
Accumulated deficit | (618,316 | ) | (15,071 | ) (q) | (19,661 | ) | (653,048 | ) | ||||||||
74,926 | (28,974 | ) | (36,116 | ) | 9,836 | |||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity | 74,015 | (28,974 | ) | (36,116 | ) | 8,925 | ||||||||||
$ | 275,429 | $ | 6,721 | $ | 5,559 | $ | 287,709 | |||||||||
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(a) | To reclassify cash to short-term investments. | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reverse replacement reserve due. | |
(d) | Cumulative effect of prior year adjustments includes $1,576 related to the change to the sell-through revenue recognition method (deferred royalties — $1,055; deferred cost of products sold — $521). Current year adjustments include $6,027 related to the change to the sell-through revenue recognition method (deferred royalties — $3,160; deferred cost of products sold — $2,867). | |
(e) | To accrue for fixed asset additions at December 31, 2001 — $248. | |
(f) | To correct accumulated amortization expense related to ONTAK acquired technology. | |
(g) | To record the capitalization of the X-Ceptor Purchase Right in October 1999 — $3,990. | |
(h) | To correct clinical trial expense — $1,168 and fixed asset additions — $(248). | |
(i) | Cumulative effect of prior year adjustments includes $90 related to the change to the sell-through revenue recognition method (product cost — $(268); royalties — $358); to correct accruals for vendor expenses — $321, bonus expense — $236, property tax expense - $(364); reclassification of Seragen acquisition liability from other long-term liabilities — $2,700. Current year adjustments include $(1,179) related to the change to the sell-through revenue recognition method (product cost — $(1,223); royalties — $44); correct accruals for vendor expenses- $(321), bonus expense — $458, legal, trademark and patent expense — $(263); reclassification of the Elan shares from accrued liabilities to additional paid-in capital — $(4,133). | |
(j) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(k) | To reclassify equipment lease obligation from long term to current obligation. | |
(l) | To reflect the deferral of a portion of the sale of the royalty rights to Royalty Pharma. | |
(m) | The cumulative effect of prior year adjustments reflects the effect of the adjustment to rent expense for contractual annual rent increases recognized over the lease term on a straight line basis — $2,079, to reclassify the Seragen acquisition liability to accrued liabilities $(2,700). Current year adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis — $158. | |
(n) | To reclassify from equity the Company’s issuance of common stock to Pfizer in accordance with EITF D-98 — $(14,595) — common stock — $(1); additional paid in capital - $(14,594). | |
(o) | To reclassify from equity the Elan shares in accordance with EITF D-98 — $(20,000) - common stock — $(2); additional paid-in capital — $(19,998); reclassification of the Elan shares from accrued liabilities to additional paid-in capital — $4,133. | |
(p) | To write off deferred warrant amortization in connection with the capitalization of the X-Ceptor Purchase Right. | |
(q) | To reflect the cumulative effect, as of January 1, 2002, of the restatement for years prior to 2000 — $(2,033) — product sales — $(1,015), rent expense — $(1,614), royalties - $59, reversal of X-Ceptor warrant amortization — $530, other — $7; 2000 — $(2,728) - product sales — $(4,092), rent expense — $(255), royalties — $(235); reversal of X-Ceptor warrant amortization — $1,384, amortization of acquired technology — $357, other — $113; 2001 — $(10,310) — product sales — $(13,585), rent expense — $(209), royalties — $1,368, reversal of X-Ceptor warrant amortization — $1,384, other — $732. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share and per share data)
Year Ended December 31, 2002 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 54,522 | $ | (24,196 | ) (a)(b) | $ | 30,326 | |||||
Sale of royalty rights, net | 18,275 | (675 | ) (c) | 17,600 | ||||||||
Collaborative research and development and other revenues | 23,843 | 23,843 | ||||||||||
Total revenues | 96,640 | (24,871 | ) | 71,769 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 20,306 | (5,568 | ) (b)(d) | 14,738 | ||||||||
Research and development | 58,807 | 253 | (b)(e) | 59,060 | ||||||||
Selling, general and administrative | 41,678 | 147 | (b) | 41,825 | ||||||||
Total operating costs and expenses | 120,791 | (5,168 | ) | 115,623 | ||||||||
Loss from operations | (24,151 | ) | (19,703 | ) | (43,854 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 1,086 | 1,086 | ||||||||||
Interest expense | (6,295 | ) | (6,295 | ) | ||||||||
Debt conversion expense | (2,015 | ) | (2,015 | ) | ||||||||
Other, net | (1,221 | ) | 86 | (b)(f) | (1,135 | ) | ||||||
Total other expense, net | (8,445 | ) | 86 | (8,359 | ) | |||||||
Loss before income taxes | (32,596 | ) | (19,617 | ) | (52,213 | ) | ||||||
Income tax expense | (44 | ) (f) | (44 | ) | ||||||||
Net loss | $ | (32,596 | ) | $ | (19,661 | ) | $ | (52,257 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Net loss | $ | (0.47 | ) | $ | (0.76 | ) | ||||||
Weighted average number of common shares | 69,118,976 | 69,118,976 | ||||||||||
Pro forma amounts assuming the changed method of accounting for variable interest entity is applied retroactively: | ||||||||||||
Net loss | $ | (32,795 | ) | $ | (52,456 | ) | ||||||
Basic and diluted net loss per share | $ | (0.47 | ) | $ | (0.76 | ) |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method — net product sales — $(24,160). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the deferral of a portion of the sale of the royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties — product cost — $(2,549); royalties — $(3,116). | |
(e) | To correct clinical trial expense — $1,107; to reverse X-Ceptor warrant amortization — $(692); to correct patent expense — $(345). | |
(f) | To reclassify income taxes related to international operations — $44. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED BALANCE SHEET
(unaudited) (in thousands)
March 31, 2004 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Period | Quarter | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 65,558 | $ | 65,558 | ||||||||||||
Short-term investments | 31,625 | 31,625 | ||||||||||||||
Accounts receivable, net | 14,185 | $ | (150 | ) (a) | $ | 37 | (a) | 14,072 | ||||||||
Inventories, net | 9,770 | 218 | (a) | (121 | ) (a) | 9,867 | ||||||||||
Other current assets | 3,764 | 12,551 | (a)(b) | 1,273 | (a)(b) | 17,588 | ||||||||||
Total current assets | 124,902 | 12,619 | 1,189 | 138,710 | ||||||||||||
Restricted investments | 1,656 | 1,656 | ||||||||||||||
Property and equipment, net | 23,620 | 23,620 | ||||||||||||||
Acquired technology and product rights, net | 135,189 | 260 | (a)(c) | 135,449 | ||||||||||||
Other assets | 8,822 | (88 | ) (a) | (1,120 | ) (d) | 7,614 | ||||||||||
$ | 294,189 | $ | 12,791 | $ | 69 | $ | 307,049 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 16,866 | $ | 150 | (a) | $ | (149 | )(a) | $ | 16,867 | ||||||
Accrued liabilities | 35,304 | 2,352 | (a)(e) | (2,286 | ) (a)(e) | 35,370 | ||||||||||
Current portion of deferred revenue, net | 2,346 | 103,155 | (f) | 10,657 | (f) | 116,158 | ||||||||||
Current portion of equipment financing obligations | 2,439 | 2,439 | ||||||||||||||
Current portion of long-term debt | 303 | 303 | ||||||||||||||
Total current liabilities | 57,258 | 105,657 | 8,222 | 171,137 | ||||||||||||
Long-term debt | 167,328 | 167,328 | ||||||||||||||
Long-term portion of deferred revenue, net | 2,198 | 1,173 | (g) | 3,371 | ||||||||||||
Long-term portion of equipment financing obligations | 3,518 | 3,518 | ||||||||||||||
Other long-term liabilities | 3,516 | (352 | ) (h) | 620 | (h) | 3,784 | ||||||||||
Total liabilities | 233,818 | 106,478 | 8,842 | 349,138 | ||||||||||||
Common stock subject to conditional redemption | 14,595 | (i) | 14,595 | |||||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||
Common stock | 74 | (1 | ) (i) | 73 | ||||||||||||
Additional paid-in capital | 730,178 | (14,540 | ) (a)(i) | 715,638 | ||||||||||||
Accumulated other comprehensive loss | (53 | ) | (53 | ) | ||||||||||||
Accumulated deficit | (668,917 | ) | (93,741 | ) | (8,773 | ) | (771,431 | ) | ||||||||
61,282 | (108,282 | ) | (8,773 | ) | (55,773 | ) | ||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity (deficit) | 60,371 | (108,282 | ) | (8,773 | ) | (56,684 | ) | |||||||||
$ | 294,189 | $ | 12,791 | $ | 69 | $ | 307,049 | |||||||||
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(a) | To reflect other adjustments and reclassifications. | |
(b) | Cumulative effect of prior period adjustments includes $13,271 related to the change to the sell-through revenue recognition method (deferred royalties — $9,680; deferred cost of products sold — $3,591); to reclassify Organon cost sharing receivable balance to co-promotion liability — $(461). Current quarter adjustments include $786 related to the change to the sell-through revenue recognition method (deferred royalties — $(100); deferred cost of products sold — $886); to reclassify Organon cost-sharing receivable balance to co-promotion liability — $461; to correct prepaid clinical trial expense — $(192);. | |
(c) | To correct accumulated amortization expense related to ONTAK acquired technology — $357. | |
(d) | To expense the payment to The Salk Institute to buy-out the Company’s royalty obligation on lasofoxifene in March 2004. | |
(e) | Cumulative effect of prior period adjustments includes $(643) related to the change to the sell-through revenue recognition method (product cost — $(1,599); royalties — $956); to reclassify Organon cost-sharing receivable balance to co-promotion liability — $(461); to correct accruals for bonus expense — $270 and property tax expense — $(277); to reclassify Seragen acquisition liability from other long-term liabilities — $2,700; to accrue interest for the Seragen acquisition liability — $739. Current quarter adjustments include $(2,055) related to the change to the sell-through revenue recognition method (product cost - $(1,563); royalties — $(492)); to reclassify Organon cost-sharing receivable balance to co-promotion liability — $461; to reclassify from other long term liabilities the payment of a portion of the Seragen acquisition liability — $(600). | |
(f) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(g) | To reflect the deferral of a portion of the sales of royalty rights to Royalty Pharma. | |
(h) | The cumulative effect of prior period adjustments reflects the effect of the adjustment to rent expense for contractual annual rent increases recognized over the lease term on a straight line basis — $2,348; to reclassify the Seragen acquisition liability to accrued liabilities — $(2,700). Current quarter adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis — $20; to reclassify to accrued liabilities the payment of a portion of the Seragen acquisition liability — $600. | |
(i) | To reclassify from equity the Company’s issuance of common stock subject to conditional redemption to Pfizer, in connection with the Pfizer settlement agreement in accordance with EITF D-98 — $(14,595) — common stock — $(1), additional paid in capital — $(14,594). |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
Three Months Ended March 31, 2004 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 34,136 | $ | (9,197 | )(a)(b) | $ | 24,939 | |||||
Collaborative research and development and other revenues | 2,476 | 2,476 | ||||||||||
Total revenues | 36,612 | (9,197 | ) | 27,415 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 8,823 | (1,278 | ) (c) | 7,545 | ||||||||
Research and development | 16,852 | 665 | (b)(d)(e) | 17,517 | ||||||||
Selling, general and administrative | 14,472 | 233 | (b)(d)(f) | 14,705 | ||||||||
Co-promotion | 6,731 | 6,731 | ||||||||||
Total operating costs and expenses | 46,878 | (380 | ) | 46,498 | ||||||||
Loss from operations | (10,266 | ) | (8,817 | ) | (19,083 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 231 | 231 | ||||||||||
Interest expense | (3,091 | ) | 44 | (b) | (3,047 | ) | ||||||
Other, net | (13 | ) | 16 | (g) | 3 | |||||||
Total other expense, net | (2,873 | ) | 60 | (2,813 | ) | |||||||
Loss before income taxes | (13,139 | ) | (8,757 | ) | (21,896 | ) | ||||||
Income tax expense | (16 | ) (g) | (16 | ) | ||||||||
Net loss | $ | (13,139 | ) | $ | (8,773 | ) | $ | (21,912 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Net loss | $ | (0.18 | ) | $ | (0.30 | ) | ||||||
Weighted average number of common shares | 73,299,281 | 73,299,281 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method — net product sales — $(9,245). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties — product cost — $(886); royalties — $(392). | |
(d) | To reclassify $742 of expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(e) | To expense $1,120 payment to The Salk Institute to buy-out the Company’s royalty obligation on lasofoxifene in March 2004; to reflect patent expense in the proper accounting period — $238. | |
(f) | To reflect legal expense in the proper accounting period — $(373). | |
(g) | To reclassify income taxes related to international operations — $16. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED BALANCE SHEET
(unaudited) (in thousands)
June 30, 2004 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Period | Quarter | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 41,920 | $ | 41,920 | ||||||||||||
Short-term investments | 43,958 | 43,958 | ||||||||||||||
Accounts receivable, net | 17,936 | $ | (113 | ) (a) | $ | (49 | ) (a) | 17,774 | ||||||||
Inventories, net | 11,752 | 97 | (a) | 118 | (a) | 11,967 | ||||||||||
Other current assets | 3,245 | 13,824 | (a)(b) | (601 | ) (a)(b) | 16,468 | ||||||||||
Total current assets | 118,811 | 13,808 | (532 | ) | 132,087 | |||||||||||
Restricted investments | 1,656 | 1,656 | ||||||||||||||
Property and equipment, net | 23,910 | 23,910 | ||||||||||||||
Acquired technology and product rights, net | 132,520 | 260 | (a)(c) | 132,780 | ||||||||||||
Other assets | 8,420 | (1,208 | ) (a)(d) | 7,212 | ||||||||||||
$ | 285,317 | $ | 12,860 | $ | (532 | ) | $ | 297,645 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 20,225 | $ | 1 | (a) | $ | $ | 20,226 | ||||||||
Accrued liabilities | 36,108 | 66 | (a)(e) | (364 | ) (a)(e) | 35,810 | ||||||||||
Current portion of deferred revenue, net | 2,381 | 113,812 | (f) | 7,661 | (f) | 123,854 | ||||||||||
Current portion of equipment financing obligations | 2,453 | 2,453 | ||||||||||||||
Current portion of long-term debt | 303 | 303 | ||||||||||||||
Total current liabilities | 61,470 | 113,879 | 7,297 | 182,646 | ||||||||||||
Long-term debt | 167,256 | 167,256 | ||||||||||||||
Long-term portion of deferred revenue, net | 2,120 | 1,173 | (g) | 3,293 | ||||||||||||
Long-term portion of equipment financing obligations | 3,547 | 3,547 | ||||||||||||||
Other long-term liabilities | 2,925 | 268 | (h) | 20 | (h) | 3,213 | ||||||||||
Total liabilities | 237,318 | 115,320 | 7,317 | 359,955 | ||||||||||||
Common stock subject to conditional redemption | 14,595 | (i) | 14,595 | |||||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||
Common stock | 74 | (1 | )(i) | 73 | ||||||||||||
Additional paid-in capital | 732,096 | (14,540 | ) (a)(i) | 717,556 | ||||||||||||
Accumulated other comprehensive loss | (127 | ) | (127 | ) | ||||||||||||
Accumulated deficit | (683,133 | ) | (102,514 | ) | (7,849 | ) | (793,496 | ) | ||||||||
48,910 | (117,055 | ) | (7,849 | ) | (75,994 | ) | ||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity (deficit): | 47,999 | (117,055 | ) | (7,849 | ) | (76,905 | ) | |||||||||
$ | 285,317 | $ | 12,860 | $ | (532 | ) | $ | 297,645 | ||||||||
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(a) | To reflect other adjustments and reclassifications. | |
(b) | Cumulative effect of prior period adjustments includes $14,057 related to the change to the sell-through revenue recognition method (deferred royalties — $9,580; deferred cost of products sold — $4,477). Current quarter adjustments include $(781) related to the change to the sell-through revenue recognition method (deferred royalties — $(876); deferred cost of products sold — $95). | |
(c) | To correct accumulated amortization expense related to ONTAK acquired technology — $357. | |
(d) | To expense the effect of The Salk Institute payment to buy-out the Company’s royalty obligation on lasofoxifene — $(1,120). | |
(e) | Cumulative effect of prior period adjustments includes $(2,698) related to the change to the sell-through revenue recognition method (product cost — $(3,162); royalties — $464); to correct property tax expense — $(260); to reclassify Seragen acquisition liability from other long-term liabilities — $2,100; accrual of interest on the Seragen acquisition liability — $739. Current quarter adjustments include $(358) related to the change to the sell-through revenue recognition method (product cost — $510; royalties — $(868)). | |
(f) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(g) | To reflect the deferral of a portion of the sales of royalty rights to Royalty Pharma. | |
(h) | The cumulative effect of prior period adjustments reflects the effect of the adjustment to rent expense for contractual annual rent increases recognized over the lease term on a straight line basis — $2,368; to reclassify the Seragen acquisition liability to accrued liabilities — $(2,100). Current quarter adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis — $20. | |
(i) | To reclassify from equity the Company’s issuance of common stock subject to conditional redemption to Pfizer, in connection with the Pfizer settlement agreement in accordance with EITF D-98 — $(14,595) — common stock — $(1), additional paid-in capital — $(14,594). |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
Three Months Ended June 30, 2004 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 37,485 | $ | (8,186 | ) (a)(b) | $ | 29,299 | |||||
Collaborative research and development and other revenues | 2,975 | 2,975 | ||||||||||
Total revenues | 40,460 | (8,186 | ) | 32,274 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 9,926 | (208 | ) (c) | 9,718 | ||||||||
Research and development | 18,174 | (1,608 | ) (b)(d) | 16,566 | ||||||||
Selling, general and administrative | 16,625 | 1,491 | (b)(d) | 18,116 | ||||||||
Co-promotion | 7,000 | 7,000 | ||||||||||
Total operating costs and expenses | 51,725 | (325 | ) | 51,400 | ||||||||
Loss from operations | (11,265 | ) | (7,861 | ) | (19,126 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 208 | 208 | ||||||||||
Interest expense | (3,140 | ) | 12 | (b) | (3,128 | ) | ||||||
Other, net | (19 | ) | 18 | (e) | (1 | ) | ||||||
Total other expense, net | (2,951 | ) | 30 | (2,921 | ) | |||||||
Loss before income taxes | (14,216 | ) | (7,831 | ) | (22,047 | ) | ||||||
Income tax expense | (18 | ) (e) | (18 | ) | ||||||||
Net loss | $ | (14,216 | ) | $ | (7,849 | ) | $ | (22,065 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Net loss | $ | (0.19 | ) | $ | (0.30 | ) | ||||||
Weighted average number of common shares | 73,754,146 | 73,754,146 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method — net product sales — $(8,097). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties — product sales — $(214); royalties — $6. | |
(d) | To reclassify $1,454 of expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(e) | To reclassify income taxes related to international operations — $18. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED BALANCE SHEET
(unaudited) (in thousands)
September 30, 2004 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Period | Quarter | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 46,020 | $ | 46,020 | ||||||||||||
Short-term investments | 34,387 | 34,387 | ||||||||||||||
Accounts receivable, net | 30,583 | $ | (162 | ) (a) | $ | 36 | (a) | 30,457 | ||||||||
Inventories, net | 11,355 | 215 | (b) | 21 | (a) | 11,591 | ||||||||||
Other current assets | 2,985 | 13,223 | (a)(c) | 2,729 | (a)(c) | 18,937 | ||||||||||
Total current assets | 125,330 | 13,276 | 2,786 | 141,392 | ||||||||||||
Restricted investments | 1,656 | 1,656 | ||||||||||||||
Property and equipment, net | 23,844 | 23,844 | ||||||||||||||
Acquired technology and product rights, net | 129,852 | 260 | (a)(d) | 130,112 | ||||||||||||
Other assets | 7,977 | (1,208 | )(a)(e) | 6,769 | ||||||||||||
$ | 288,659 | $ | 12,328 | $ | 2,786 | $ | 303,773 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 16,719 | $ | 1 | (a) | $ | 68 | (a) | $ | 16,788 | ||||||
Accrued liabilities | 49,527 | (298 | )(a)(f) | (3,308 | ) (a)(f) | 45,921 | ||||||||||
Current portion of deferred revenue, net | 2,352 | 121,473 | (g) | 17,720 | (g) | 141,545 | ||||||||||
Current portion of equipment financing obligations | 2,617 | 2,617 | ||||||||||||||
Current portion of long-term debt | 314 | 314 | ||||||||||||||
Total current liabilities | 71,529 | 121,176 | 14,480 | 207,185 | ||||||||||||
Long-term debt | 167,171 | 167,171 | ||||||||||||||
Long-term portion of deferred revenue, net | 2,043 | 1,173 | (h) | 3,216 | ||||||||||||
Long-term portion of equipment financing obligations | 4,087 | 4,087 | ||||||||||||||
Other long-term liabilities | 2,870 | 288 | (i) | 15 | (i) | 3,173 | ||||||||||
Total liabilities | 247,700 | 122,637 | 14,495 | 384,832 | ||||||||||||
Common stock subject to conditional redemption | 14,595 | (j) | (2,250 | ) (k) | 12,345 | |||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||
Common stock | 74 | (1 | )(j) | 73 | ||||||||||||
Additional paid-in capital | 731,841 | (14,540 | )(a)(j) | 2,250 | (k) | 719,551 | ||||||||||
Accumulated other comprehensive loss | (123 | ) | (123 | ) | ||||||||||||
Accumulated deficit | (689,922 | ) | (110,363 | ) | (11,709 | ) | (811,994 | ) | ||||||||
41,870 | (124,904 | ) | (9,459 | ) | (92,493 | ) | ||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity (deficit) | 40,959 | (124,904 | ) | (9,459 | ) | (93,404 | ) | |||||||||
$ | 288,659 | $ | 12,328 | $ | 2,786 | $ | 303,773 | |||||||||
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(a) | To reflect other adjustments and reclassifications. | |
(b) | To reverse replacement reserve. | |
(c) | Cumulative effect of prior period adjustments includes $13,276 related to the change to the sell-through revenue recognition method (deferred royalties — $8,704; deferred cost of products sold — $4,572). Current quarter adjustments include $2,654 related to the change to the sell-through revenue recognition method (deferred royalties — $2,486; deferred cost of products sold — $168). | |
(d) | To correct accumulated amortization expense related to ONTAK acquired technology - $357. | |
(e) | To expense the payment to The Salk Institute to buy-out the Company’s royalty obligation on lasofoxifene — $(1,120). | |
(f) | Cumulative effect of prior period adjustments includes $(3,056) related to the change to the sell-through revenue recognition method (product cost — $(2,652); royalties - $(404)); to correct bonus expense — $(201); to reclassify Seragen acquisition liability from other long-term liabilities — $2,100; to accrue interest on Seragen acquisition liability — $739. Current quarter adjustments include $(3,349) related to the change to the sell-through revenue recognition method (product cost — $(4,806); royalties — $1,457). | |
(g) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(h) | To reflect the deferral of a portion of the sale of royalty rights to Royalty Pharma. | |
(i) | The cumulative effect of prior period adjustments reflects the effect of the adjustment to rent expense for contractual annual rent increases recognized over the lease term on a straight line basis — $2,388; to reclassify the Seragen acquisition liability to accrued liabilities — $(2,100). Current quarter adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis- $15. | |
(j) | To reclassify from equity the Company’s issuance of common stock subject to conditional redemption to Pfizer, in connection with the Pfizer settlement agreement in accordance with EITF D-98 — $(14,595) — common stock — $(1), additional paid-in capital — $(14,594). | |
(k) | To reflect Pfizer’s redemption of shares in connection with the achievement of a milestone in accordance with the Pfizer settlement agreement. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
Three Months Ended September 30, 2004 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 44,726 | $ | (12,792 | )(a)(b) | $ | 31,934 | |||||
Sale of royalty rights, net | 67 | (c) | 67 | |||||||||
Collaborative research and development and other revenues | 4,771 | 4,771 | ||||||||||
Total revenues | 49,497 | (12,725 | ) | 36,772 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 11,011 | (1,192 | )(d) | 9,819 | ||||||||
Research and development | 17,980 | (1,233 | )(b)(e) | 16,747 | ||||||||
Selling, general and administrative | 15,890 | 1,421 | (b)(e) | 17,311 | ||||||||
Co-promotion | 8,501 | 8,501 | ||||||||||
Total operating costs and expenses | 53,382 | (1,004 | ) | 52,378 | ||||||||
Loss from operations | (3,885 | ) | (11,721 | ) | (15,606 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 255 | 255 | ||||||||||
Interest expense | (2,919 | ) | (226 | )(b)(f) | (3,145 | ) | ||||||
Other, net | (240 | ) | 241 | (b)(f)(g) | 1 | |||||||
Total other expense, net | (2,904 | ) | 15 | (2,889 | ) | |||||||
Loss before income taxes | (6,789 | ) | (11,706 | ) | (18,495 | ) | ||||||
Income tax expense | (3 | )(g) | (3 | ) | ||||||||
Net loss | $ | (6,789 | ) | $ | (11,709 | ) | $ | (18,498 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Net loss | $ | (0.09 | ) | $ | (0.25 | ) | ||||||
Weighted average number of common shares | 73,845,613 | 73,845,613 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method — net product sales — $(12,842). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the recognition of revenue previously deferred in regard to the sale of royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties — product cost — $(163), royalties — $(1,029). | |
(e) | To reclassify $1,221 of expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(f) | To reclassify $238 of interest and factoring expenses incurred under a factoring arrangement from other, net to interest expense. | |
(g) | To reclassify income taxes related to international operations — $3. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED BALANCE SHEET
(unaudited) (in thousands)
March 31, 2003 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Period | Quarter | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 12,979 | $ | 12,979 | ||||||||||||
Short-term investments | 21,004 | 21,004 | ||||||||||||||
Accounts receivable, net | 17,086 | $ | 247 | (a) | $ | 13 | (a) | 17,346 | ||||||||
Inventories, net | 5,395 | 150 | (a) | (18 | )(a) | 5,527 | ||||||||||
Other current assets | 6,547 | 7,665 | (a)(b) | (280 | )(a)(b) | 13,932 | ||||||||||
Total current assets | 63,011 | 8,062 | (285 | ) | 70,788 | |||||||||||
Restricted investments | 10,741 | 10,741 | ||||||||||||||
Property and equipment, net | 9,229 | 9,229 | ||||||||||||||
Acquired technology and product rights, net | 145,862 | 260 | (a)(c) | 146,122 | ||||||||||||
Other assets | 12,333 | 3,958 | (a)(d) | (3,958 | )(a)(d) | 12,333 | ||||||||||
$ | 241,176 | $ | 12,280 | $ | (4,243 | ) | $ | 249,213 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 13,441 | $ | 913 | (a)(e) | $ | (314 | )(a)(e) | $ | 14,040 | ||||||
Accrued liabilities | 17,640 | (2,182 | )(a)(f) | 3,386 | (a)(f) | 18,844 | ||||||||||
Current portion of deferred revenue, net | 4,637 | 43,926 | (g) | 7,594 | (g) | 56,157 | ||||||||||
Current portion of equipment financing obligations | 2,105 | 253 | (h) | 15 | (h) | 2,373 | ||||||||||
Total current liabilities | 37,823 | 42,910 | 10,681 | 91,414 | ||||||||||||
Long-term debt | 155,250 | 155,250 | ||||||||||||||
Long-term portion of deferred revenue, net | 2,709 | 581 | (i) | 3,290 | ||||||||||||
Long-term portion of equipment financing obligations | 3,707 | (253 | )(h) | (15 | )(h) | 3,439 | ||||||||||
Other long-term liabilities | 3,664 | (463 | )(j) | 32 | (j) | 3,233 | ||||||||||
Total liabilities | 203,153 | 42,775 | 10,698 | 256,626 | ||||||||||||
Common stock subject to conditional redemption/repurchase | 34,595 | (k) | (20,000 | )(l) | 14,595 | |||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||
Common stock | 70 | (3 | )(k) | 2 | (l) | 69 | ||||||||||
Additional paid-in capital | 677,561 | (30,355 | )(a)(k) | 15,865 | (l) | 663,071 | ||||||||||
Accumulated other comprehensive loss | (61 | ) | (61 | ) | ||||||||||||
Accumulated deficit | (638,636 | ) | (34,732 | ) | (10,808 | ) | (684,176 | ) | ||||||||
38,934 | (65,090 | ) | 5,059 | (21,097 | ) | |||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity (deficit) | 38,023 | (65,090 | ) | 5,059 | (22,008 | ) | ||||||||||
$ | 241,176 | $ | 12,280 | $ | (4,243 | ) | $ | 249,213 | ||||||||
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(a) | To reflect other adjustments and reclassifications. | |
(b) | Cumulative effect of prior period adjustments includes $7,603 related to the change to the sell-through revenue recognition method (deferred royalties — $4,215; deferred cost of products sold — $3,388). Current quarter adjustments include $118 related to the change to the sell-through revenue recognition method (deferred royalties — $98; deferred cost of products sold — $20); to correct prepaid clinical trial expense — $(352). | |
(c) | To correct accumulated amortization expense related to ONTAK acquired technology — $357. | |
(d) | To record the capitalization of the X-Ceptor Purchase Right in October 1999 — $3,990; to write-off the X-Ceptor Purchase Right in March 2003, which was previously recognized for the period from 1999 to June 2002 — $(3,990). | |
(e) | To correct clinical trial expense — cumulative effect of prior period adjustments — $918; current quarter adjustments — $(367). | |
(f) | Cumulative effect of prior period adjustments include $(1,089) related to the change to the sell-through revenue recognition method (product cost — $(1,491); royalties — $402); to correct accruals for bonus expense — $694, and property tax expense — $(316); to reclassify Seragen acquisition liability from other long-term liabilities — $2,700; reclassification of the Elan shares from accrued liabilities to additional paid-in capital — $(4,133). Current quarter adjustments include $(444) related to the change to the sell-through revenue recognition method (product cost — $(126); royalties — $(318)) ; reclassification of the Elan shares from accrued liabilities to additional paid-in capital — $4,133. | |
(g) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(h) | To reclassify equipment lease obligations from long-term to current obligations. | |
(i) | To reflect the deferral of a portion of the sales of royalty rights to Royalty Pharma. | |
(j) | The cumulative effect of prior period adjustments reflects the effect of the adjustment to rent expense for annual rent increases amortized over the lease term on a straight line basis — $2,237; to reclassify the Seragen acquisition liability to accrued liabilities - $(2,700). Current quarter adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis — $32. | |
(k) | In accordance with EITF D-98, to reclassify from equity the Company’s issuance of common stock to Pfizer — common stock — $(1); additional paid in capital $(14,594); Elan shares — common stock $(2); additional paid in capital $(19,998); reclassification of the Elan shares from accrued liabilities to additional paid-in capital — $4,133. | |
(l) | To reflect the repurchase and retirement of the Elan shares in February 2003 — $20,000 — common stock — $2; additional paid-in capital — $19,998; reclassification of the Elan shares from accrued liabilities to additional paid-in capital — $(4,133). |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
Three Months Ended March 31, 2003 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 18,928 | $ | (7,455 | )(a)(b) | $ | 11,473 | |||||
Collaborative research and development and other revenues | 4,195 | 4,195 | ||||||||||
Total revenues | 23,123 | (7,455 | ) | 15,668 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 6,620 | (418 | )(c) | 6,202 | ||||||||
Research and development | 16,640 | (91 | )(b) | 16,549 | ||||||||
Selling, general and administrative | 12,426 | (74 | )(b) | 12,352 | ||||||||
Total operating costs and expenses | 35,686 | (583 | ) | 35,103 | ||||||||
Loss from operations | (12,563 | ) | (6,872 | ) | (19,435 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 243 | 243 | ||||||||||
Interest expense | (2,682 | ) | (26 | )(b) | (2,708 | ) | ||||||
Other, net | (5,318 | ) | (3,895 | )(b)(d)(e) | (9,213 | ) | ||||||
Total other expense, net | (7,757 | ) | (3,921 | ) | (11,678 | ) | ||||||
Loss before income taxes | (20,320 | ) | (10,793 | ) | (31,113 | ) | ||||||
Income tax expense | (15 | )(e) | (15 | ) | ||||||||
Net loss | $ | (20,320 | ) | $ | (10,808 | ) | $ | (31,128 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Net loss | $ | (0.29 | ) | $ | (0.44 | ) | ||||||
Weighted average number of common shares | 70,238,438 | 70,238,438 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method — net product sales — $(7,468). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties — product cost — $(3); royalties — $(415). | |
(d) | To reflect the write off of the X-Ceptor Purchase Right in March 2003 — $3,990. | |
(e) | To reclassify income taxes related to international operations — $15. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED BALANCE SHEET
(unaudited) (in thousands)
June 30, 2003 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Period | Quarter | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 24,248 | $ | 24,248 | ||||||||||||
Short-term investments | 17,595 | 17,595 | ||||||||||||||
Accounts receivable, net | 7,689 | $ | 260 | (a) | $ | (221 | ) (a) | 7,728 | ||||||||
Inventories, net | 4,806 | 132 | (a) | 93 | (a) | 5,031 | ||||||||||
Other current assets | 2,635 | 7,385 | (a)(b) | 1,390 | (a)(b) | 11,410 | ||||||||||
Total current assets | 56,973 | 7,777 | 1,262 | 66,012 | ||||||||||||
Restricted investments | 6,204 | 6,204 | ||||||||||||||
Property and equipment, net | 8,843 | 8,843 | ||||||||||||||
Acquired technology and product rights, net | 143,194 | 260 | (a)(c) | 143,454 | ||||||||||||
Other assets | 11,718 | 11,718 | ||||||||||||||
$ | 226,932 | $ | 8,037 | $ | 1,262 | $ | 236,231 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 10,819 | $ | 599 | (a)(d) | $ | (185 | )(a) | $ | 11,233 | ||||||
Accrued liabilities | 18,319 | 1,204 | (a)(e) | (26 | )(a)(e) | 19,497 | ||||||||||
Current portion of deferred revenue, net | 4,126 | 51,520 | (f) | 13,400 | (f) | 69,046 | ||||||||||
Current portion of equipment financing obligations | 1,890 | 268 | (g) | 224 | (g) | 2,382 | ||||||||||
Total current liabilities | 35,154 | 53,591 | 13,413 | 102,158 | ||||||||||||
Long-term debt | 155,250 | 155,250 | ||||||||||||||
Long-term portion of deferred revenue, net | 2,430 | 581 | (h) | 3,011 | ||||||||||||
Long-term portion of equipment financing obligations | 3,403 | (268 | )(g) | (224 | )(g) | 2,911 | ||||||||||
Other long-term liabilities | 3,638 | (431 | )(i) | 32 | (i) | 3,239 | ||||||||||
Total liabilities | 199,875 | 53,473 | 13,221 | 266,569 | ||||||||||||
Common stock subject to conditional redemption | 14,595 | (j) | 14,595 | |||||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||
Common stock | 70 | (1 | )(j) | 69 | ||||||||||||
Additional paid-in capital | 678,577 | (14,490 | )(a)(j) | 664,087 | ||||||||||||
Accumulated other comprehensive loss | (46 | ) | (46 | ) | ||||||||||||
Accumulated deficit | (650,633 | ) | (45,540 | ) | (11,959 | ) | (708,132 | ) | ||||||||
27,968 | (60,031 | ) | (11,959 | ) | (44,022 | ) | ||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity (deficit) | 27,057 | (60,031 | ) | (11,959 | ) | (44,933 | ) | |||||||||
$ | 226,932 | $ | 8,037 | $ | 1,262 | $ | 236,231 | |||||||||
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(a) | To reflect other adjustments and reclassifications. | |
(b) | Cumulative effect of prior period adjustments includes $7,721 related to the change to the sell-through revenue recognition method (deferred royalties — $4,313; deferred cost of products sold — $3,408); to correct prepaid clinical trial expense — $(290). Current quarter adjustments include $1,416 related to the change to the sell-through revenue recognition method (deferred royalties — $1,818; deferred cost of products sold — $(402)). | |
(c) | To correct accumulated amortization expense related to ONTAK acquired technology — $357. | |
(d) | To correct clinical trial expense — $551. | |
(e) | Cumulative effect of prior period adjustments includes $(1,533) related to the change to the sell-through revenue recognition method (product cost — $(1,617); royalties — $84); to correct accruals for bonus expense — $588, property tax expense — $(361), and legal, trademark and patent expense -$(240); to reclassify Seragen acquisition liability from long-term to current — $2,700. Current quarter adjustments includes $(105) related to the change to the sell-through revenue recognition method (product cost — $(565); royalties — $460). | |
(f) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(g) | To reclassify equipment financing obligations from long-term to current obligations. | |
(h) | To reflect the deferral of a portion of the sales of royalty rights to Royalty Pharma. | |
(i) | The cumulative effect of prior period adjustments reflects the effect of the adjustment to rent expense for contractual annual rent increases recognized over the lease term on a straight line basis — $2,269; to reclassify the Seragen acquisition liability to accrued liabilities — $(2,700). Current quarter adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis — $32. | |
(j) | To reclassify from equity the Company’s issuance of common stock subject to conditional redemption to Pfizer, in connection with the Pfizer settlement agreement in accordance with EITF D-98 — $(14,595) — common stock — $(1); additional paid in capital — $(14,594). |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
Three Months Ended June 30, 2003 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 25,187 | $ | (13,016 | )(a)(b) | $ | 12,171 | |||||
Collaborative research and development and other revenues | 3,939 | 3,939 | ||||||||||
Total revenues | 29,126 | (13,016 | ) | 16,110 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 7,766 | (921 | )(c) | 6,845 | ||||||||
Research and development | 16,859 | (215 | )(b)(d)(e) | 16,644 | ||||||||
Selling, general and administrative | 13,571 | (2 | )(b)(d) | 13,569 | ||||||||
�� | ||||||||||||
Total operating costs and expenses | 38,196 | (1,138 | ) | 37,058 | ||||||||
Loss from operations | (9,070 | ) | (11,878 | ) | (20,948 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 140 | 140 | ||||||||||
Interest expense | (2,688 | ) | (81 | )(b) | (2,769 | ) | ||||||
Other, net | (379 | ) | 16 | (f) | (363 | ) | ||||||
Total other expense, net | (2,927 | ) | (65 | ) | (2,992 | ) | ||||||
Loss before income taxes | (11,997 | ) | (11,943 | ) | (23,940 | ) | ||||||
Income tax expense | (16 | )(f) | (16 | ) | ||||||||
Net loss | $ | (11,997 | ) | $ | (11,959 | ) | $ | (23,956 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Net loss | $ | (0.17 | ) | $ | (0.35 | ) | ||||||
Weighted average number of common shares | 69,275,323 | 69,275,323 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method — net product sales — $(12,835). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties — product cost — $437; royalties — $(1,358). | |
(d) | To reclassify $9 of expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(e) | To correct clinical trial expense — $(331). | |
(f) | To reclassify income taxes related to international operations — $16. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED BALANCE SHEET
(unaudited) (in thousands)
September 30, 2003 | ||||||||||||||||
Cumulative | ||||||||||||||||
As | Effect of | Current | ||||||||||||||
Previously | Prior Period | Quarter | As | |||||||||||||
Reported | Adjustments | Adjustments | Restated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 73,002 | $ | 73,002 | ||||||||||||
Short-term investments | 13,744 | 13,744 | ||||||||||||||
Accounts receivable, net | 9,923 | $ | 39 | (a) | $ | (42 | )(a) | 9,920 | ||||||||
Inventories, net | 6,005 | 225 | (a) | (119 | )(a) | 6,111 | ||||||||||
Other current assets | 3,188 | 8,775 | (a)(b) | 1,684 | (a)(b) | 13,647 | ||||||||||
Total current assets | 105,862 | 9,039 | 1,523 | 116,424 | ||||||||||||
Restricted investments | 6,203 | 6,203 | ||||||||||||||
Property and equipment, net | 9,072 | 9,072 | ||||||||||||||
Acquired technology and product rights, net | 140,526 | 260 | (a)(c) | 140,786 | ||||||||||||
Other assets | 11,134 | 11,134 | ||||||||||||||
$ | 272,797 | $ | 9,299 | $ | 1,523 | $ | 283,619 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 17,261 | $ | 414 | (a)(d) | $ | (141 | )(a) | $ | 17,534 | ||||||
Accrued liabilities | 23,228 | 1,178 | (a)(e) | (829 | )(a)(e) | 23,577 | ||||||||||
Current portion of deferred revenue, net | 3,502 | 64,920 | (f) | 14,092 | (f) | 82,514 | ||||||||||
Current portion of equipment financing obligations | 2,299 | 492 | (g) | (492 | )(g) | 2,299 | ||||||||||
Total current liabilities | 46,290 | 67,004 | 12,630 | 125,924 | ||||||||||||
Long-term debt | 155,250 | 155,250 | ||||||||||||||
Long-term portion of deferred revenue, net | 2,352 | 581 | (h) | 2,933 | ||||||||||||
Long-term portion of equipment financing obligations | 2,682 | (492 | )(g) | 492 | (g) | 2,682 | ||||||||||
Other long-term liabilities | 3,627 | (399 | )(i) | 27 | (i) | 3,255 | ||||||||||
Total liabilities | 210,201 | 66,694 | 13,149 | 290,044 | ||||||||||||
Common stock subject to conditional redemption | 14,595 | (j) | 14,595 | |||||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||
Common stock | 73 | (1 | )(j) | 72 | ||||||||||||
Additional paid-in capital | 725,244 | (14,490 | )(a)(j) | 710,754 | ||||||||||||
Accumulated other comprehensive loss | (90 | ) | (90 | ) | ||||||||||||
Accumulated deficit | (661,720 | ) | (57,499 | ) | (11,626 | ) | (730,845 | ) | ||||||||
63,507 | (71,990 | ) | (11,626 | ) | (20,109 | ) | ||||||||||
Treasury stock | (911 | ) | (911 | ) | ||||||||||||
Total stockholders’ equity (deficit) | 62,596 | (71,990 | ) | (11,626 | ) | (21,020 | ) | |||||||||
$ | 272,797 | $ | 9,299 | $ | 1,523 | $ | 283,619 | |||||||||
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(a) | To reflect other adjustments and reclassifications. | |
(b) | Cumulative effect of prior period adjustments includes $9,137 related to the change to the sell-through revenue recognition method (deferred royalties — $6,131; deferred cost of products sold — $3,006); to correct prepaid clinical trial expense — $(234). Current quarter adjustments include $1,501 related to the change to the sell-through revenue recognition method (deferred royalties — $1,525; deferred cost of products sold — $(24)). | |
(c) | To correct accumulated amortization expense related to ONTAK acquired technology - $357. | |
(d) | To correct clinical trial expense — $276. | |
(e) | Cumulative effect of prior period adjustments includes $(1,638) related to the change to the sell-through revenue recognition method (product cost — $(2,182); royalties — $544); to correct accruals for bonus expense — $482, and property tax expense -$(340); to reclassify Seragen acquisition liability from long-term to current — $2,700. Current quarter adjustments include $(903) related to the change to the sell-through revenue recognition method (product cost — $(881); royalties — $(22)). | |
(f) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method. | |
(g) | To reclassify equipment financing obligations from long-term to current obligations. | |
(h) | To reflect the deferral of a portion of the sales of royalty rights to Royalty Pharma. | |
(i) | The cumulative effect of prior period adjustments reflects the effect of the adjustment to rent expense for contractual annual rent increases recognized over the lease term on a straight line basis — $2,301; to reclassify the Seragen acquisition liability to accrued liabilities — $(2,700). Current quarter adjustment reflects the adjustment to rent expense for contractual annual rent increase recognized over the lease term on a straight line basis — $27. | |
(j) | To reclassify from equity the Company’s issuance of common stock subject to conditional redemption to Pfizer, in connection with the Pfizer settlement agreement in accordance with EITF D-98 — $(14,595) — common stock — $(1), additional paid in capital — $(14,594). |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
Three Months Ended September 30, 2003 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 28,123 | $ | (13,363 | )(a)(b) | $ | 14,760 | |||||
Sale of royalty rights, net | 35 | (c) | 35 | |||||||||
Collaborative research and development and other revenues | 3,160 | 3,160 | ||||||||||
Total revenues | 31,283 | (13,328 | ) | 17,955 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 8,565 | (1,524 | ) (d) | 7,041 | ||||||||
Research and development | 17,696 | (261 | ) (b)(e)(f) | 17,435 | ||||||||
Selling, general and administrative | 13,216 | 26 | (b)(e) | 13,242 | ||||||||
Total operating costs and expenses | 39,477 | (1,759 | ) | 37,718 | ||||||||
Loss from operations | (8,194 | ) | (11,569 | ) | (19,763 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 136 | 136 | ||||||||||
Interest expense | (2,653 | ) | (170 | ) (b) | (2,823 | ) | ||||||
Other, net | (376 | ) | 122 | (b)(g) | (254 | ) | ||||||
Total other expense, net | (2,893 | ) | (48 | ) | (2,941 | ) | ||||||
Loss before income taxes | (11,087 | ) | (11,617 | ) | (22,704 | ) | ||||||
Income tax expense | (9 | ) (g) | (9 | ) | ||||||||
Net loss | $ | (11,087 | ) | $ | (11,626 | ) | $ | (22,713 | ) | |||
Basic and diluted per share amounts: | ||||||||||||
Net loss | $ | (0.16 | ) | $ | (0.32 | ) | ||||||
Weighted average number of common shares | 70,100,280 | 70,100,280 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method – net product sales – $(13,376). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the recognition of revenue previously deferred in regard to the sales of royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties – product cost – $23, royalties – $(1,547). | |
(e) | To reclassify $20 of expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense. | |
(f) | To correct clinical trial expense – $(281). | |
(g) | To reclassify income taxes related to international operations – $9. |
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EFFECTS OF THE RESTATEMENT
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
Three Months Ended December 31, 2003 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Product sales | $ | 42,394 | $ | (25,474 | ) (a)(b) | $ | 16,920 | |||||
Sale of royalty rights, net | 12,500 | (749 | ) (c) | 11,751 | ||||||||
Collaborative research and development and other revenues | 2,714 | 2,714 | ||||||||||
Total revenues | 57,608 | (26,223 | ) | 31,385 | ||||||||
Operating costs and expenses: | ||||||||||||
Cost of products sold | 8,667 | (2,198 | ) (d) | 6,469 | ||||||||
Research and development | 16,484 | (434 | ) (b)(e) | 16,050 | ||||||||
Selling, general and administrative | 12,448 | 929 | (b)(f)(g) | 13,377 | ||||||||
Co-promotion | 9,360 | 9,360 | ||||||||||
Total operating costs and expenses | 46,959 | (1,703 | ) | 45,256 | ||||||||
Income (loss) from operations | 10,649 | (24,520 | ) | (13,871 | ) | |||||||
Other income (expense): | ||||||||||||
Interest income | 264 | 264 | ||||||||||
Interest expense | (2,947 | ) | 105 | (b) | (2,842 | ) | ||||||
Other, net | (19 | ) | (185 | ) (b)(h) | (204 | ) | ||||||
Total other expense, net | (2,702 | ) | (80 | ) | (2,782 | ) | ||||||
Income (loss) before income taxes and cumulative effect of a change in accounting principle | 7,947 | (24,600 | ) | (16,653 | ) | |||||||
Income tax expense | — | (16 | ) (h) | (16 | ) | |||||||
Income (loss) before cumulative effect of a change in accounting principle | 7,947 | (24,616 | ) | (16,669 | ) | |||||||
Cumulative effect of changing method of accounting for variable interest entity | (2,005 | ) | (2,005 | ) | ||||||||
Net income (loss) | $ | 5,942 | $ | (24,616 | ) | $ | (18,674 | ) | ||||
Basic per share amounts: | ||||||||||||
Income (loss) before cumulative effect of a change in accounting principle | $ | 0.11 | $ | (0.23 | ) | |||||||
Cumulative effect of changing method of accounting for variable interest entity | (0.03 | ) | (0.03 | ) | ||||||||
Net income (loss) | $ | 0.08 | $ | (0.26 | ) | |||||||
Weighted average number of common shares for basic net income (loss) per share | 73,098,427 | 73,098,427 | ||||||||||
Diluted per share amounts: | ||||||||||||
Income (loss) before cumulative effect of a change in accounting principle | $ | 0.10 | $ | (0.23 | ) | |||||||
Cumulative effect of changing method of accounting for variable interest entity | (0.02 | ) | (0.03 | ) | ||||||||
Net income (loss) | $ | 0.08 | $ | (0.26 | ) | |||||||
Weighted average number of common shares for diluted net income (loss) per share | 99,684,427 | 73,098,427 |
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(a) | To reflect the change in the revenue recognition method from the sell-in method to the sell-through method – net product sales – $(25,508). | |
(b) | To reflect other adjustments and reclassifications. | |
(c) | To reflect the deferral of a portion of the sales of royalty rights to Royalty Pharma. | |
(d) | To reflect the effect of the sell-through revenue recognition method on cost of products sold and royalties – product cost – $(608), royalties – $(1,590). | |
(e) | To reclassify $26 of expenses incurred for the technology transfer and validation effort related to the second source of supply for AVINZA from research and development expense to selling, general and administrative expense; to correct patent expense – $(233). | |
(f) | To reflect accrual of interest on Seragen acquisition liability – $739. | |
(g) | To reflect legal expense in the proper accounting period – $308. | |
(h) | To reclassify income taxes related to international operations – $16. |
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December 31, | ||||||||
2004 | 2003 | |||||||
Current: | ||||||||
U.S. government securities | $ | –– | $ | 9,204 | ||||
Non-current: | ||||||||
Exelixis, Inc. common stock | $ | 722 | $ | — | ||||
Certificates of deposit | 1,656 | 1,656 | ||||||
$ | 2,378 | $ | 1,656 | |||||
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December 31, | ||||||||
2004 | 2003 | |||||||
(Restated) | ||||||||
Raw materials | $ | 1,855 | $ | 314 | ||||
Work-in-process | 2,302 | 5,567 | ||||||
Finished goods | 8,642 | 3,776 | ||||||
Less inventory reserves | (1,027 | ) | (1,177 | ) | ||||
$ | 11,772 | $ | 8,480 | |||||
December 31, | ||||||||
2004 | 2003 | |||||||
Land | $ | 5,176 | $ | 5,124 | ||||
Equipment, building, and leasehold improvements | 59,568 | 56,563 | ||||||
Less accumulated depreciation and amortization | (41,097 | ) | (38,186 | ) | ||||
$ | 23,647 | $ | 23,501 | |||||
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December 31, | ||||||||
2004 | 2003 | |||||||
(Restated) | ||||||||
AVINZA | $ | 114,437 | $ | 114,437 | ||||
Less accumulated amortization | (16,096 | ) | (8,467 | ) | ||||
98,341 | 105,970 | |||||||
ONTAK | 45,312 | 45,312 | ||||||
Less accumulated amortization | (16,210 | ) | (13,165 | ) | ||||
29,102 | 32,147 | |||||||
$ | 127,443 | $ | 138,117 | |||||
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December 31, 2004 | December 31, 2003 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
6% Convertible Subordinated Notes (Note 10) | $ | 155,250 | $ | 308,948 | $ | 155,250 | $ | 387,931 | ||||||||
Note payable to bank | 12,159 | 12,808 | 12,453 | 13,261 |
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Revenue Recognition | Patent | |||||
Method | Event | Expiration | ||||
AVINZA | Sell-through | Prescriptions | November 2017 | |||
ONTAK | Sell-through | Wholesaler out-movement | December 2014 | |||
Targretin capsules | Sell-through | Wholesaler out-movement | October 2016 | |||
Targretin gel | Sell-through | Wholesaler out-movement | October 2016 | |||
Panretin | Sell-in | Shipment to wholesaler | August 2016 | |||
International | Sell-in | Shipment to international distributor | February 2011 through April 2013 |
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Year Ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
(Restated) | (Restated) | |||||||||||
Collaborative research and development | $ | 7,843 | $ | 10,887 | $ | 18,268 | ||||||
Development milestones | 3,681 | 2,807 | 5,060 | |||||||||
Other | 311 | 314 | 515 | |||||||||
$ | 11,835 | $ | 14,008 | $ | 23,843 | |||||||
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Year Ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
(Restated) | (Restated) | |||||||||||
AVINZA | $ | 69,470 | $ | 16,482 | $ | 1,114 | ||||||
ONTAK | 32,200 | 24,108 | 17,706 | |||||||||
Targretincapsules | 15,105 | 11,556 | 8,563 | |||||||||
Other | 3,560 | 3,178 | 2,943 | |||||||||
$ | 120,335 | $ | 55,324 | $ | 30,326 | |||||||
December 31, | ||||||||
2004 | 2003 | |||||||
(Restated) | ||||||||
Deferred product revenue | $ | 153,632 | $ | 105,839 | ||||
Other deferred revenue | 5,574 | 6,228 | ||||||
Deferred discounts | (2,166 | ) | (2,900 | ) | ||||
Deferred revenue, net | $ | 157,040 | $ | 109,167 | ||||
Current, net | $ | 152,528 | $ | 105,719 | ||||
Long-term, net | $ | 4,512 | $ | 3,448 | ||||
Deferred product revenue, net (1) | ||||||||
Current | $ | 151,466 | $ | 102,939 | ||||
Long-term | $ | — | $ | — | ||||
Other deferred revenue | ||||||||
Current | $ | 1,062 | $ | 2,780 | ||||
Long-term | $ | 4,512 | $ | 3,448 | ||||
(1) | Deferred product revenue does not include other gross to net revenue adjustments made when the Company reports net product sales. Such adjustments include Medicaid rebates, managed health care rebates, and government chargebacks, which are included in accrued liabilities in the accompanying consolidated financial statements. |
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2004 | 2003 | 2002 | ||||||||||
Risk free interest rates | 3.61 | % | 3.25 | % | 2.80 | % | ||||||
Dividend yields | — | — | — | |||||||||
Volatility | 74 | % | 74 | % | 77 | % | ||||||
Weighted average expected life | 5 years | 5 years | 5 years |
Year Ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
(Restated) | (Restated) | |||||||||||
Net loss, as reported | $ | (45,141 | ) | $ | (96,471 | ) | $ | (52,257 | ) | |||
Stock-based employee compensation expense included in reported net loss | 89 | 565 | 49 | |||||||||
Less total stock-based compensation expense determined under fair value based method for all awards | (7,674 | ) | (6,797 | ) | (6,434 | ) | ||||||
Net loss pro forma | $ | (52,726 | ) | $ | (102,703 | ) | $ | (58,642 | ) | |||
Net loss per share, as reported | $ | (0.61 | ) | $ | (1.36 | ) | $ | (0.76 | ) | |||
Net loss per share pro forma | $ | (0.72 | ) | $ | (1.45 | ) | $ | (0.85 | ) | |||
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Gross | Gross | Estimated | ||||||||||||||
unrealized | unrealized | fair | ||||||||||||||
Cost | gains | losses | value | |||||||||||||
December 31, 2004 | ||||||||||||||||
U.S. government securities | $ | 12,463 | $ | ¾ | $ | (29 | ) | $ | 12,434 | |||||||
Corporate obligations | 4,234 | 1 | (11 | ) | 4,224 | |||||||||||
16,697 | 1 | (40 | ) | 16,658 | ||||||||||||
Certificates of deposit — restricted | 1,656 | ¾ | ¾ | 1,656 | ||||||||||||
Total debt securities | 18,353 | 1 | (40 | ) | 18,314 | |||||||||||
Equity securities | 3,186 | 338 | ¾ | 3,524 | ||||||||||||
Equity securities — restricted | 722 | ¾ | ¾ | 722 | ||||||||||||
$ | 22,261 | $ | 339 | $ | (40 | ) | $ | 22,560 | ||||||||
December 31, 2003 | ||||||||||||||||
U.S. government securities | $ | 14,265 | $ | 8 | $ | (1 | ) | $ | 14,272 | |||||||
Corporate obligations | 16,518 | 11 | (1 | ) | 16,528 | |||||||||||
30,783 | 19 | (2 | ) | 30,800 | ||||||||||||
U.S. government securities — restricted | 9,204 | ¾ | ¾ | 9,204 | ||||||||||||
Certificates of deposit — restricted | 1,656 | ¾ | ¾ | 1,656 | ||||||||||||
$ | 41,643 | $ | 19 | $ | (2 | ) | $ | 41,660 | ||||||||
December 31, 2004 | ||||||||
Estimated | ||||||||
Cost | fair value | |||||||
Due in one year or less | $ | 10,439 | $ | 10,418 | ||||
Due after one year through three years | 7,914 | 7,896 | ||||||
$ | 18,353 | $ | 18,314 | |||||
December 31, | ||||||||
2004 | 2003 | |||||||
(Restated) | ||||||||
Trade accounts receivable | $ | 25,860 | $ | 5,809 | ||||
Due from finance company | 6,084 | 14,034 | ||||||
Less discounts and allowances | (1,097 | ) | (942 | ) | ||||
$ | 30,847 | $ | 18,901 | |||||
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December 31, | ||||||||
2004 | 2003 | |||||||
(Restated) | ||||||||
Deferred royalty cost | $ | 9,363 | $ | 9,680 | ||||
Deferred cost of products sold | 4,784 | 3,590 | ||||||
Prepaid insurance | 1,024 | 1,036 | ||||||
Prepaid other | 2,102 | 1,278 | ||||||
Other | 440 | 777 | ||||||
$ | 17,713 | $ | 16,361 | |||||
December 31, | ||||||||
2004 | 2003 | |||||||
(Restated) | ||||||||
Prepaid royalty buyout, net | $ | 2,584 | $ | 2,856 | ||||
Debt issue costs, net | 3,231 | 4,205 | ||||||
Investments | ¾ | 203 | ||||||
Other | 359 | 732 | ||||||
$ | 6,174 | $ | 7,996 | |||||
December 31, | ||||||||
2004 | 2003 | |||||||
(Restated) | ||||||||
Allowances for loss on returns, rebates, chargebacks, other discounts, ONTAK end-customer and Panretin product returns | $ | 16,151 | $ | 9,196 | ||||
Co-promotion | 7,845 | 8,899 | ||||||
Distribution services | 3,693 | ¾ | ||||||
Compensation | 4,324 | 4,129 | ||||||
Royalties | 5,134 | 4,297 | ||||||
Seragen purchase liability | 2,838 | 3,439 | ||||||
Interest | 1,164 | 1,164 | ||||||
Other | 2,759 | 1,543 | ||||||
$ | 43,908 | $ | 32,667 | |||||
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Year Ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
(Restated) | (Restated) | |||||||||||
Balance — beginning of year | $ | 9,196 | $ | 3,952 | $ | 3,190 | ||||||
Provision for ONTAK end-customer and Panretin returns | 3,015 | 1,547 | 2,886 | |||||||||
Returns | (2,492 | ) | (1,308 | ) | (2,986 | ) | ||||||
Net change — ONTAK end-customer and Panretin returns | 523 | 239 | (100 | ) | ||||||||
Provision for losses on returns due to changes in prices | 5,018 | 4,229 | 2,265 | |||||||||
Charges | (3,025 | ) | (856 | ) | (1,802 | ) | ||||||
Net change — losses on returns | 1,993 | 3,373 | 463 | |||||||||
Provision for Medicaid rebates | 14,430 | 2,724 | 511 | |||||||||
Payments | (11,074 | ) | (1,239 | ) | (445 | ) | ||||||
Net change — Medicaid rebates | 3,356 | 1,485 | 66 | |||||||||
Provision for chargebacks | 3,962 | 2,184 | 936 | |||||||||
Payments | (3,684 | ) | (2,123 | ) | (958 | ) | ||||||
Net change — chargebacks | 278 | 61 | (22 | ) | ||||||||
Provision for managed care rebates and other contract discounts | 5,773 | 852 | 34 | |||||||||
Payments | (4,455 | ) | (457 | ) | (3 | ) | ||||||
Net change — managed care rebates and other contract discounts | 1,318 | 395 | 31 | |||||||||
Provision for other discounts | 6,495 | 9,035 | 2,091 | |||||||||
Payments | (7,008 | ) | (9,344 | ) | (1,767 | ) | ||||||
Net change — other discounts | (513 | ) | (309 | ) | 324 | |||||||
Balance — end of year | $ | 16,151 | $ | 9,196 | $ | 3,952 | ||||||
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% of Incremental Net Sales | |||||
Annual Net Sales of AVINZA | Paid to Organon by Ligand | ||||
$0-35 million (2003 only) | 0% (2003 only) | ||||
$0-150 million | 30 | % | |||
$150-300 million | 40 | % | |||
$300-425 million | 50 | % | |||
> $425 million | 45 | % |
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December 31, | ||||||||
2004 | 2003 | |||||||
6% Convertible Subordinated Notes | $ | 155,250 | $ | 155,250 | ||||
Note payable to bank | 12,159 | 12,453 | ||||||
167,409 | 167,703 | |||||||
Less current portion | (320 | ) | (295 | ) | ||||
Long-term debt | $ | 167,089 | $ | 167,408 | ||||
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Obligations under | ||||||||
capital leases and | ||||||||
equipment notes payable | Operating leases | |||||||
2005 | $ | 2,980 | $ | 2,939 | ||||
2006 | 2,176 | 2,397 | ||||||
2007 | 1,508 | 1,780 | ||||||
2008 | 701 | 1,833 | ||||||
2009 | ¾ | 1,888 | ||||||
Thereafter | ¾ | 11,627 | ||||||
Total minimum lease payments | 7,365 | $ | 22,464 | |||||
Less amounts representing interest | (758 | ) | ||||||
Present value of minimum lease payments | 6,607 | |||||||
Less current portion | (2,604 | ) | ||||||
$ | 4,003 | |||||||
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Weighted average | Options exercisable | Weighted average | ||||||||||||||
Shares | exercise price | at year end | exercise price | |||||||||||||
Balance at January 1, 2002 | 5,398,366 | $ | 11.27 | |||||||||||||
Granted | 1,345,072 | 12.34 | ||||||||||||||
Exercised | (346,187 | ) | 9.20 | |||||||||||||
Canceled | (737,006 | ) | 11.34 | |||||||||||||
Balance at December 31, 2002 | 5,660,245 | 11.64 | 3,720,719 | $ | 11.41 | |||||||||||
Granted | 1,414,228 | 10.20 | ||||||||||||||
Exercised | (345,374 | ) | 10.31 | |||||||||||||
Canceled | (565,577 | ) | 12.88 | |||||||||||||
Balance at December 31, 2003 | 6,163,522 | 11.27 | 4,014,009 | $ | 11.35 | |||||||||||
Granted | 1,430,639 | 14.93 | ||||||||||||||
Exercised | (581,759 | ) | 9.59 | |||||||||||||
Canceled | (298,333 | ) | 13.16 | |||||||||||||
Balance at December 31, 2004 | 6,714,069 | $ | 12.11 | 4,320,643 | $ | 11.68 | ||||||||||
Options Outstanding | Options exercisable | |||||||||||||||||||
Weighted | ||||||||||||||||||||
average | Weighted | |||||||||||||||||||
Options | remaining life | average | Number | Weighted average | ||||||||||||||||
Range of exerciseprices | outstanding | in years | exercise price | exercisable | exercise price | |||||||||||||||
$ 1.82 - $9.25 | 1,463,458 | 6.89 | $ | 7.59 | 853,119 | $ | 7.26 | |||||||||||||
9.31 - 11.25 | 1,367,029 | 5.80 | 10.17 | 1,018,264 | 10.20 | |||||||||||||||
11.38 - 13.25 | 1,402,170 | 4.72 | 12.29 | 1,208,295 | 12.29 | |||||||||||||||
13.31 - 15.63 | 1,468,562 | 7.07 | 14.46 | 755,857 | 14.37 | |||||||||||||||
16.06 - 20.70 | 1,012,850 | 7.77 | 17.62 | 485,108 | 16.86 | |||||||||||||||
6,714,069 | 6.39 | $ | 12.11 | 4,320,643 | $ | 11.68 | ||||||||||||||
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December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
(Restated) | (Restated) | |||||||||||
Current Provision: | ||||||||||||
Federal | $ | 81 | $ | — | $ | — | ||||||
State | 98 | — | — | |||||||||
Foreign | 54 | 56 | 44 | |||||||||
233 | 56 | 44 | ||||||||||
Deferred Provision: | ||||||||||||
Federal | — | — | — | |||||||||
State | — | — | — | |||||||||
$ | 233 | $ | 56 | $ | 44 | |||||||
December 31, | ||||||||
2004 | 2003 | |||||||
(Restated) | ||||||||
(in thousands) | ||||||||
Deferred liabilities: | ||||||||
Purchased intangible assets | $ | (8,667 | ) | $ | (9,795 | ) | ||
Total deferred tax liabilities | (8,667 | ) | (9,795 | ) | ||||
Deferred assets: | ||||||||
Net operating loss carryforwards | $ | 185,247 | $ | 185,501 | ||||
Research and development credit carryforwards | 34,070 | 31,478 | ||||||
Capitalized research and development | 7,012 | 9,402 | ||||||
Fixed assets and intangibles | 6,220 | 6,675 | ||||||
Accrued expenses | 37,183 | 22,995 | ||||||
Deferred revenue | 24,961 | 20,455 | ||||||
Other | 199 | 224 | ||||||
294,892 | 276,730 | |||||||
Valuation allowance for deferred tax assets | (286,225 | ) | (266,935 | ) | ||||
Net deferred tax asset | $ | — | $ | — | ||||
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December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
(Restated) | (Restated) | |||||||||||
Amounts computed at statutory federal rate | $ | (15,341 | ) | $ | (32,027 | ) | $ | (17,752 | ) | |||
State taxes net of federal benefit | (385 | ) | (6,635 | ) | (1,315 | ) | ||||||
Effect of foreign operations | 54 | 226 | 44 | |||||||||
Meals & entertainment | 171 | 321 | 247 | |||||||||
Federal research and development credits | (1,253 | ) | (376 | ) | (1,224 | ) | ||||||
Non-controlling interest | — | 1,013 | 367 | |||||||||
Nexus LLC acquisition | (1,159 | ) | — | — | ||||||||
Return to provision adjustments | — | — | 1,949 | |||||||||
Change in valuation allowance | 18,144 | 37,378 | 17,063 | |||||||||
Other | 2 | 156 | 665 | |||||||||
$ | 233 | $ | 56 | $ | 44 | |||||||
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Quarter ended | ||||||||||||||||
March 31 | June 30 | September 30 | December 31 | |||||||||||||
(Restated) | (Restated) | (Restated) | ||||||||||||||
2004 | ||||||||||||||||
Product sales | $ | 24,939 | $ | 29,299 | $ | 31,934 | $ | 34,163 | ||||||||
Sale of royalty rights, net | ¾ | ¾ | 67 | 31,275 | ||||||||||||
Collaborative research and development and other revenues | 2,476 | 2,975 | 4,771 | 1,613 | ||||||||||||
Total revenues | 27,415 | 32,274 | 36,772 | 67,051 | ||||||||||||
Cost of products sold | 7,545 | 9,718 | 9,819 | 12,722 | ||||||||||||
Research and development costs | 17,517 | 16,566 | 16,747 | 14,374 | ||||||||||||
Selling, general and administrative | 14,705 | 18,116 | 17,311 | 15,666 | ||||||||||||
Co-promotion | 6,731 | 7,000 | 8,501 | 7,845 | ||||||||||||
Total operating costs and expenses | 46,498 | 51,400 | 52,378 | 50,607 | ||||||||||||
Other (expense) income, net | (2,813 | ) | (2,921 | ) | (2,889 | ) | 1,086 | |||||||||
Income tax expense | 16 | 18 | 3 | 196 | ||||||||||||
Net (loss)/ income | $ | (21,192 | ) | $ | (22,065 | ) | $ | (18,498 | ) | $ | 17,334 | |||||
Basic net (loss)/income per share | $ | (0.30 | ) | $ | (0.30 | ) | $ | (0.25 | ) | $ | 0.23 | |||||
Diluted net (loss)/income per share | $ | (0.30 | ) | $ | (0.30 | ) | $ | (0.25 | ) | $ | 0.20 | |||||
Weighted average number of common shares for basic net (loss)/income per share | 73,299 | 73,754 | 73,846 | 73,861 | ||||||||||||
Weighted average number of common shares for diluted net (loss)/income per share | 73,299 | 73,754 | 73,846 | 99,450 |
Quarter ended | ||||||||||||||||
March 31 | June 30 | September 30 | December 31 | |||||||||||||
(Restated) | (Restated) | (Restated) | (Restated) | |||||||||||||
2003 | ||||||||||||||||
Product sales | $ | 11,473 | $ | 12,171 | $ | 14,760 | $ | 16,920 | ||||||||
Sale of royalty rights, net | ¾ | ¾ | 35 | 11,751 | ||||||||||||
Collaborative research and development and other revenues | 4,195 | 3,939 | 3,160 | 2,714 | ||||||||||||
Total revenues | 15,668 | 16,110 | 17,955 | 31,385 | ||||||||||||
Cost of products sold | 6,202 | 6,845 | 7,041 | 6,469 | ||||||||||||
Research and development costs | 16,549 | 16,644 | 17,435 | 16,050 | ||||||||||||
Selling, general and administrative | 12,352 | 13,569 | 13,242 | 13,377 | ||||||||||||
Co-promotion | ¾ | ¾ | ¾ | 9,360 | ||||||||||||
Total operating costs and expenses | 35,103 | 37,058 | 37,718 | 45,256 | ||||||||||||
Other expense, net | 11,678 | 2,992 | 2,941 | 2,782 | ||||||||||||
Income tax expense | 15 | 16 | 9 | 16 | ||||||||||||
Cumulative effect of accounting change | ¾ | ¾ | ¾ | (2,005 | ) | |||||||||||
Net loss | $ | (31,128 | ) | $ | (23,956 | ) | $ | (22,713 | ) | $ | (18,674 | ) | ||||
Basic and diluted net loss per share: | ||||||||||||||||
Loss before cumulative effect of a change in accounting principle | $ | (0.44 | ) | $ | (0.35 | ) | $ | (0.32 | ) | $ | (0.23 | ) | ||||
Cumulative effect of changing method of accounting for variable interest entity | — | — | — | (0.03 | ) | |||||||||||
Basic and diluted net loss per share | $ | (0.44 | ) | $ | (0.35 | ) | $ | (0.32 | ) | $ | (0.26 | ) | ||||
Weighted average number of common shares, for basic and diluted net loss per share | 70,238 | 69,275 | 70,100 | 73,098 |
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• | The Company did not have effective controls and procedures to ensure that revenues, including sales of its products and the practice it followed regarding the replacement of expired products, were recognized in accordance with generally accepted accounting principles. With respect to product sales, the Company did not have the ability to make reasonable estimates of returns which preclude the Company from recognizing revenue at the time of domestic product shipment of AVINZA, ONTAK, Targretin capsules, and Targretin gel. As a result, shipments made to wholesalers for these products did not meet the revenue recognition criteria of SFAS 48 – “Revenue Recognition When Right of Return Exists” and Staff Accounting Bulletin (“SAB”) No. 101 – “Revenue Recognition” as amended by SAB 104. | ||
• | The Company’s controls and procedures intended to prevent shipping of short-dated products (i.e., products shipped within six months of expiration) to its wholesalers were not operating effectively which resulted in the shipment of ONTAK during 2004 to wholesalers within six months of product |
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expiration. The shipment of short-dated product subsequently resulted in significant product returns/replacements. | |||
• | The Company did not have adequate records and documentation supporting the decisions made and the accounting for past transactions. This material weakness resulted from the fact that the Company did not have sufficient controls surrounding the preparation and maintenance of adequate contemporaneous records and documentation. | ||
• | The Company did not have adequate manpower in its accounting and finance department and has a lack of sufficient qualified accounting personnel to identify and resolve complex accounting issues in accordance with generally accepted accounting principles. This material weakness contributed to the following errors in accounting, among other things: (1) revenue recognition and related gross to net sales adjustments and cost of goods (products) sold, (2) revenues received under our agreement with Royalty Pharma, (3) warrants issued in connection with the X-Ceptor transaction, (4) the classification of the Elan Shares in connection with the Company’s purchase obligation relating to the November 2002 restructuring of the AVINZA license agreement with Elan and the shares of stock issued to Pfizer in connection with the Pfizer Settlement Agreement, (5) accrual of interest in connection with the Seragen litigation, and (6) the calculation of contractual annual rent increases. | ||
• | The Company did not have sufficient controls over accrued liability estimates in the proper accounting periods (i.e., “accruals and cut-off”). This material weakness caused errors in accounting relating to (1) estimation of accruals for clinical trials, bonuses to employees, and other miscellaneous accrued liabilities, and (2) royalty payments made to technology partners. | ||
• | The Company did not have adequate financial reporting and close procedures. This material weakness resulted from the fact that the Company did not have sufficient controls in place nor trained personnel to adequately prepare and review documentation and schedules necessary to support its financial reporting and period-end close procedures. |
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• | During the second and third quarters of 2005, the Company’s finance and accounting department, with the assistance of outside expert consultants, developed accounting models to recognize sales of its domestic products, except Panretin, under the sell-through revenue recognition method in accordance with generally accepted accounting principles. In connection with the development of these models, the Company also implemented a number of new and enhanced controls and procedures to support the sell-through revenue recognition accounting models. These controls and procedures include approximately 35 models used in connection with the sell-through revenue recognition method including related contra-revenue models, and demand reconciliations to support and assess the reasonableness of the data and estimates, which includes information and estimates obtained from third-parties, required for sell-through revenue recognition. | ||
• | The Company’s commercial operations department is implementing a number of improvements that will further enhance the controls surrounding the recognition of product revenue. These include the development of an information operations system that will provide management with a greater amount of reliable, timely data including changes related to product movement, demand and inventory levels. The department is also adding additional personnel to review, analyze and report this information. | ||
• | During the second and third quarters of 2005, the accounting and finance department established procedures surrounding the month-end close process to ensure that the information and estimates necessary for reporting product revenues under the sell-through method were available in a timely manner. | ||
• | The Company will hire an expert manager on revenue recognition who will be responsible for managing all aspects of the Company’s revenue recognition accounting, sell-through revenue recognition models and supporting controls and procedures. The Company expects that this position will be filled during the fourth quarter of 2005 or the first quarter of 2006. However, until this position is filled, the Company will continue to use outside expert consultants to fulfill this function. | ||
• | The Company is developing a training program for its accounting and finance and commercial operations personnel regarding the sell-through revenue recognition method. The core training program is expected to be implemented by the end of the fourth quarter of 2005. Additional training will be provided on a regular and periodic basis and updated as considered necessary. |
• | During the second quarter of 2005, the Company’s internal audit department conducted a detailed audit of the controls, policies and procedures surrounding the shipment of the Company’s products. This internal audit resulted in recommended remediation actions that were subsequently implemented in the second and third quarters of 2005 by the Company’s technical and supply operations department, including: |
o | A review of all existing policies and procedures surrounding the shipment of the Company’s products. In connection with this review a number of enhancements |
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were made to the existing policies and procedures including daily review and reconciliation of the Company’s inventory report to the third party vendor’s inventory report for verification of the distribution date and expiration date and daily review of the third party vendor’s sales report for verification that all products shipped had appropriate dating. These review procedures are now performed by a senior-level staff person in the Company’s supply operations department. | |||
o | Each of the Company’s employees involved in the shipment of product received training regarding the controls and procedures surrounding the shipment of product. Additional training will be provided on a regular and periodic basis and updated as considered necessary to reflect any changes in the Company’s or its customers’ business practices or activities. | ||
o | Management also ensured that its third-party vendor responsible for product inventories, shipping and logistics is aware and understands all applicable controls and procedures surrounding product shipment and the requirement to prepare and maintain appropriate documentation for all such product transactions. The third-party vendor has instituted controls in its accounting system to prevent the shipment of product that is not within the Company’s shipping policies. |
• | The Company is implementing improved procedures for analyzing, reviewing, and documenting the support for significant and complex transactions. Documentation for all complex transactions is now maintained by the Corporate Controller and the development of additional procedures for preparing and maintaining documentation is expected to be completed in the fourth quarter of 2005. | ||
• | The Company’s accounting and finance and legal departments are developing a formal policy regarding the preparation and maintenance of contemporaneous documentation supporting accounting transactions and contractual interpretations. The formal policy, which will also provide for enhanced communication between the Company’s finance and legal personnel, is expected to be completed during the fourth quarter of 2005. | ||
• | The Company’s internal audit department will also routinely audit the adequacy of the Company’s internal record keeping and documentation. |
• | During the second quarter of 2005, the Company hired a second internal auditor reporting to the Company’s Director of Internal Audit. The Company’s Director of Internal Audit has resigned effective as of December 2, 2005. The Company is in the process of filling this position and it is expected that this position will be filled in the first quarter of 2006. | ||
• | During the second and third quarters of 2005, the Company engaged expert accounting consultants to assist the Company’s accounting and finance department with a number of activities including the management and implementation of controls surrounding the Company’s new sell-through revenue recognition models, the administration of existing controls and procedures, preparation of the Company’s SEC filings and the documentation of complex accounting transactions. | ||
• | The Company will hire additional senior accounting personnel who are certified public accountants including a Director of Accounting and, as discussed above, a Director of Internal Audit and a Manager of Revenue Recognition. The Director of Accounting and Director of Internal Audit are expected to be hired during the first quarter of 2006. Additionally, the |
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Manager of Revenue Recognition position is expected to be filled during the fourth quarter of 2005 or the first quarter of 2006. Until such positions are filled, the Company will continue to use outside expert accounting consultants to fulfill such functions. | |||
• | The Company continues to consider alternatives for organizational or responsibility changes which it believes may be necessary to attract additional senior accounting personnel who are certified public accountants or have recent public accounting firm experience. |
• | Developed monthly review procedures to review applicable documentation supporting period-end accruals. | ||
• | Developed quarterly review procedures to review invoices to ensure that such invoices were properly accounted for in the correct period. | ||
• | Completed training of accounting and finance personnel to explain accrual methodologies and supporting documentation requirements. Additional training will be provided on a regular basis and updated as considered necessary to reflect changes in the Company’s accounting system. | ||
• | The Company’s internal audit department will perform periodic reviews and audits of the Company’s controls surrounding accruals and cut-off. |
• | The Company intends to design and implement process improvements concerning the Company’s financial reporting and close procedures. In this regard, the Company will conduct training sessions during the fourth quarter of 2005 or early 2006 and on a regular quarterly basis to provide training to its finance and accounting personnel to review procedures for timely and accurate preparation and management review of documentation and schedules to support the Company’s financial reporting and period-end close procedures As discussed above, the additional management personnel to be hired into the department will also help ensure that all documentation necessary for the financial reporting and period end close procedures are properly prepared and reviewed. |
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Costa Mesa, California
November 11, 2005
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Long-Term | ||||||||||||||||||||||||
Compensation | ||||||||||||||||||||||||
Awards | ||||||||||||||||||||||||
Securities | ||||||||||||||||||||||||
Annual Compensation | Underlying | |||||||||||||||||||||||
Other Annual | Options/ | All Other | ||||||||||||||||||||||
Name and Principal Position | Year | Salary($)(1) | Bonus($) | Compensation ($)(2) | SARs(#) | Compensation(S)(3) | ||||||||||||||||||
David E. Robinson | 2004 | 643,333 | 0 | 188,049 | 150,000 | 2,322 | ||||||||||||||||||
Chairman of the Board, | 2003 | 623,333 | 250,000 | 334,966 | 175,000 | 2,322 | ||||||||||||||||||
President and CEO | 2002 | 600,000 | 50,000 | 0 | 100,000 | 1,242 | ||||||||||||||||||
Andres F. Negro-Vilar | 2004 | 423,800 | 70,000 | 142,987 | 30,000 | 3,564 | ||||||||||||||||||
Executive Vice President, | 2003 | 407,500 | 91,750 | 211,352 | 75,000 | 3,564 | ||||||||||||||||||
Research and Development and Chief Scientific Officer | 2002 | 382,500 | 75,700 | 0 | 30,000 | 3,564 | ||||||||||||||||||
Giambattista Aliprandi(4) | 2004 | 278,250 | 48,000 | 0 | 10,000 | 3,564 | ||||||||||||||||||
Senior Vice President, | 2003 | 240,375 | 73,000 | 4,000 | 30,000 | 3,313 | ||||||||||||||||||
Technical, Supply and International Operations | 2002 | 229,500 | 48,000 | 2,500 | 30,000 | 3,180 | ||||||||||||||||||
James J. L’Italien(5) | 2004 | 250,800 | 45,000 | 909 | 20,000 | 1,216 | ||||||||||||||||||
Senior Vice President, | 2003 | 240,000 | 54,000 | 0 | 25,000 | 1,178 | ||||||||||||||||||
Regulatory & Compliance | 2002 | 120,212 | 115,000 | 9,590 | 80,000 | 580 | ||||||||||||||||||
Paul V. Maier | 2004 | 304,750 | 0 | 31,665 | 30,000 | 2,322 | ||||||||||||||||||
Senior Vice President, | 2003 | 287,500 | 63,250 | 54,268 | 75,000 | 2,322 | ||||||||||||||||||
Chief Financial Officer | 2002 | 273,500 | 54,200 | 0 | 40,000 | 2,322 |
(1) | Compensation deferred at the election of the executive, pursuant to the Ligand Pharmaceuticals 401(k) Plan and Ligand Deferred Compensation Plan are included in the year earned. | |
(2) | Amounts which are not otherwise described in this note represent the value of excess earnings on contributions to the Deferred Compensation Plan that were either paid or for which payment was deferred at the election of the officer. The amounts for 2003 include $4,000 of housing allowance for Mr. Aliprandi. The amounts for 2002 include the following: for Dr. L’Italien, $9,590 of relocation reimbursement; for Mr. Aliprandi, $2,500 of housing allowance. | |
(3) | Amounts which are not otherwise described in this note for the Named Executive Officers represent the value of life insurance premiums. | |
(4) | Mr. Aliprandi retired on April 22, 2005. Upon his retirement in April 2005, the Company entered into a one year consulting agreement with Mr. Aliprandi under which he is paid a per-day fee plus expenses. Aggregate fees may not exceed $101,000. The contract was reviewed and ratified by the Audit Committee. | |
(5) | Dr. L’Italien joined the Company in June 2002. Dr. L’Italien’s bonus for 2002 includes an $85,000 sign on bonus that was paid in 2003. |
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Potential Realizable | ||||||||||||||||||||||||
% of Total | Value at Assumed | |||||||||||||||||||||||
Number of | Options/SARs | Annual Rates of | ||||||||||||||||||||||
Securities | Granted to | Stock Price | ||||||||||||||||||||||
Underlying | Employees in | Exercise or | Appreciation for | |||||||||||||||||||||
Options/SARs Granted | Fiscal | Base Price | Expiration | Option Term | ||||||||||||||||||||
Name | (#) | Year | ($/Sh) | Date | 5%($) | 10%($) | ||||||||||||||||||
David E. Robinson | 150,000 | 11.1042 | 14.39 | 7/7/14 | 1,357,469 | 3,440,093 | ||||||||||||||||||
Andres F. Negro-Vilar | 30,000 | 2.2208 | 20.70 | 6/1/14 | 390,544 | 989,714 | ||||||||||||||||||
Giambattista Aliprandi | 10,000 | 0.7403 | 20.70 | 6/1/14 | 130,181 | 329,905 | ||||||||||||||||||
James J. L’Italien | 20,000 | 1.4806 | 20.70 | 6/1/14 | 260,362 | 659,809 | ||||||||||||||||||
Paul V. Maier | 30,000 | 2.2208 | 20.70 | 6/1/14 | 390,544 | 989,714 |
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FISCAL YEAR-END OPTION VALUES
Number of Securities Underlying | ||||||||||||||||||||||||
Shares | Value | Unexercised Options/SARs | Value of Unexercised In-the-Money | |||||||||||||||||||||
acquired | realized | at December 31, 2004 | Options/SARs at December 31, 2004 | |||||||||||||||||||||
Name | on exercise | ($) | Exercisable (#) | Unexercisable (#) | Exercisable ($) | Unexercisable ($) | ||||||||||||||||||
David E. Robinson | 73,290 | 323,381 | 705,208 | 294,792 | 715,365 | 256,885 | ||||||||||||||||||
Andres Negro-Vilar | 0 | 0 | 319,417 | 86,458 | 392,899 | 110,162 | ||||||||||||||||||
Giambattista Aliprandi | 0 | 0 | 125,417 | 44,583 | 32,800 | 5,600 | ||||||||||||||||||
James J. L’Italien | 8,000 | 101,130 | 53,250 | 63,750 | 175,339 | 152,971 | ||||||||||||||||||
Paul V. Maier | 47,629 | 95,346 | 260,477 | 90,000 | 263,230 | 110,162 |
• | a change in position, duties and responsibilities without consent, | ||
• | a reduction in salary or benefits, or | ||
• | certain events occurring upon a change in control of the Company, |
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• | an acquisition of the Company by merger or asset sale or | ||
• | a change in control of the Company effected through a successful tender offer for more than 50% of the Company’s outstanding common stock or through a change in the majority of the Board as a result of one or more contested elections for Board membership. |
• | one times the annual rate of base salary in effect for such officer at the time of involuntary termination plus | ||
• | one times the average of bonuses paid to such officer for services rendered in the two fiscal years immediately preceding the fiscal year of involuntary termination. The severance amount will be payable in 12 monthly installments following the officer’s termination of employment. |
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• | base salary which reflects individual performance and is designed primarily to be competitive with salary levels in the industry, | ||
• | annual variable performance awards payable in cash and tied to the achievement of financial performance goals established by the Company, and | ||
• | long-term stock-based incentive awards which strengthen the mutuality of interests between the executive officers and the Company’s stockholders. |
• | industry experience, knowledge and qualifications, | ||
• | the salary levels in effect for comparable positions within the Company’s principal industry marketplace competitors and | ||
• | internal comparability considerations. |
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COMPENSATION COMMITTEE | ||||
HENRY F. BLISSENBACH, CHAIR JOHN GROOM |
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![](https://capedge.com/proxy/10-K/0000892569-05-001059/a13901a1390101.gif)
12/31/99 | 12/31/00 | 12/31/01 | 12/31/02 | 12/31/03 | 12/31/04 | |||||||||||||||||||
Ligand | 100.00 | % | 108.74 | % | 139.03 | % | 41.71 | % | 114.10 | % | 90.41 | % | ||||||||||||
NASDAQ Composite | 100.00 | % | 60.71 | % | 47.93 | % | 32.82 | % | 49.23 | % | 53.46 | % | ||||||||||||
NASDAQ Pharmaceutical Stocks | 100.00 | % | 124.73 | % | 106.31 | % | 68.69 | % | 100.69 | % | 107.25 | % |
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• | all persons who are beneficial owners of 5% or more of the Company’s common stock, | ||
• | each director and nominee for director, | ||
• | the Named Executive Officers and | ||
• | all current directors and executive officers as a group. |
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Shares Beneficially | ||||||||||||
Number of Shares | Owned via Options, | |||||||||||
Beneficially | Warrants or | Percent of | ||||||||||
Beneficial Owner | Owned | Convertible Notes | Class Owned | |||||||||
Orbimed Advisors LLC(1) | 6,384,824 | — | 8.61 | % | ||||||||
767 Third Avenue, 30th Floor New York, NY 10017 | ||||||||||||
Vanguard Horizon Funds(2) | 5,220,900 | — | 7.04 | % | ||||||||
P.O.Box 2600 V26 Valley Forge, PA 19482 | ||||||||||||
Barclays Global Investors NA(3) | 4,719,605 | — | 6.37 | % | ||||||||
45 Fremont St., 17th Floor San Francisco, CA 94105 | ||||||||||||
Janus Capital Management LLC(4) | 4,418,275 | — | 5.96 | % | ||||||||
100 Fillmore Street 2nd Floor Denver, CO 80206-4923 | ||||||||||||
Dorset Management/David M. Knott(5) | 4,247,262 | — | 5.73 | % | ||||||||
485 Underhill Blvd., Ste. 205 Syosset, NY 11791-3419 | ||||||||||||
Maverick Capital Ltd. (6) | 3,761,431 | — | 5.07 | % | ||||||||
300 Crescent Court, 18th Floor Dallas, TX 75201 | ||||||||||||
Henry F. Blissenbach | 100,739 | 95,739 | * | |||||||||
Alexander D. Cross | 128,031 | 91,387 | * | |||||||||
John Groom | 120,338 | 104,101 | * | |||||||||
Irving S. Johnson | 110,546 | 87,617 | * | |||||||||
John W. Kozarich | 40,525 | 35,525 | * | |||||||||
Carl C. Peck | 108,721 | 102,721 | * | |||||||||
Michael A. Rocca | 82,799 | 74,799 | * | |||||||||
David E. Robinson | 1,296,301 | 884,376 | 1.73 | % | ||||||||
Giambattista Aliprandi† | 170,000 | 170,000 | * | |||||||||
James J. L’Italien | 92,625 | 92,625 | * | |||||||||
Paul V. Maier | 422,075 | 322,352 | * | |||||||||
Andres F. Negro-Vilar | 384,983 | 377,750 | * | |||||||||
�� | ||||||||||||
Directors and executive officers as a group† (17 persons) | 3,425,485 | 2,794,119 | 4.45 | % | ||||||||
(footnotes on next page.) |
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* | Less than 1% | |
† | Mr. Aliprandi retired from the Company in April 2005. The total ownership for current executive officers excludes Mr. Aliprandi but includes Mr. Crouch who joined the Company in May 2005. | |
(1) | Pursuant to a Schedule 13G/A filed February 14, 2005 by Orbimed Advisors LLC which reported shared voting and dispositive power over 6,384,824 shares. | |
(2) | Pursuant to a Schedule 13G filed February 11, 2005 by Vanguard Horizon Funds which reported sole voting power over 5,220,900 shares. | |
(3) | Pursuant to a Schedule 13G filed February 14, 2005 by Barclays Global Investors NA, which reported group aggregate sole voting power over 4,427,746 shares and dispositive power over 4,719,605 shares. | |
(4) | Pursuant to a Schedule 13G filed February 15, 2005 by Janus Capital Management LLC, which reported sole voting and dispositive power over 4,418,275 shares. | |
(5) | Pursuant to a Schedule 13G filed May 12, 2005 by David M. Knott which reported sole voting power over 3,606,988 shares, shared voting power over 640,274 shares, sole dispositive power over 3,834,677 shares and shared dispositive power over 412,585 shares. | |
(6) | Pursuant to a Schedule 13G filed February 14, 2005 by Maverick Capital Ltd. which reported shared voting and dispositive power over 3,761,431 shares. |
(c) | ||||||||||||
Number of securities | ||||||||||||
(a) | remaining available for future | |||||||||||
Number of securities to be | (b) | issuance under equity | ||||||||||
issued upon exercise of | Weighted-average exercise | compensation plans | ||||||||||
outstanding options, | price of outstanding options, | (excluding securities | ||||||||||
warrants and rights | warrants and rights | reflected in column (a)) | ||||||||||
Equity compensation plans approved by security holders | 6,714,069 | $ 12.1127 | 656,532 | (1) | ||||||||
Equity compensation plans not approved by security holders (2) | — | — | — | |||||||||
6,714,069 | $ 12.1127 | 656,532 | ||||||||||
(1) | At December 31, 2004, 452,577and 203,955 shares were available under the 2002 Option Plan and the 2002 Employee Stock Purchase Plan, respectively, for future grants of stock options or sale of stock. | |
(2) | There were no equity compensation plans at December 31, 2004 (including individual compensation arrangements) not approved by the Company’s security holders. |
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2004 | ||||
Audit fees (1) | $ | 575,883 | ||
Audit-related fees (2) | 21,027 | |||
Tax fees (3) | 37,681 | |||
All other fees | — | |||
$ | 634,591 | |||
(1) | Audit Fees consist of fees for professional services rendered for the audit of the Company’s consolidated annual financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided in connection with statutory and regulatory filings or engagements. In 2004, audit fees include fees for professional services rendered for the audits of (i) management’s assessment of the effectiveness of internal control over financial reporting and (ii) the effectiveness of internal control over financial reporting. | |
(2) | Audit-related Fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review of our consolidated financial statements but are not reported under “Audit Fees.” Such fees include, among other things, employee benefit plan audits and certain consultations concerning financial accounting and reporting standards. | |
(3) | Tax Fees consist of fees for professional services rendered for assistance with federal, state and international tax compliance. |
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(a) | The following documents are included as part of this Annual Report onForm 10-K. |
(1) | Financial statements |
Exhibit Number | Description | |
2.1 (1) | Agreement and Plan of Reorganization dated May 11, 1998, by and among the Company, Knight Acquisition Corp. and Seragen, Inc. (Filed as Exhibit 2.1). | |
2.2 (1) | Option and Asset Purchase Agreement, dated May 11, 1998, by and among the Company, Marathon Biopharmaceuticals, LLC, 520 Commonwealth Avenue Real Estate Corp. and 660 Corporation. (Filed as Exhibit 10.3). | |
2.3 (19) | Asset Purchase Agreement among CoPharma, Inc., Marathon Biopharmaceuticals, Inc., Seragen, Inc. and the Company dated January 7, 2000. (The schedules referenced in this agreement have not been included because they are either disclosed in such agreement or do not contain information which is material to an investment decision (with certain confidential portions omitted). The Company agrees to furnish a copy of such schedules to the Commission upon request.) | |
2.5 (1) | Form of Certificate of Merger for acquisition of Seragen, Inc. (Filed as Exhibit 2.2). | |
3.1 (1) | Amended and Restated Certificate of Incorporation of the Company. (Filed as Exhibit 3.2). | |
3.2 (1) | Bylaws of the Company, as amended. (Filed as Exhibit 3.3). | |
3.3 (2) | Amended Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock of the Company. | |
3.5 (31) | Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company dated June 14, 2000. | |
3.6 (3) | Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company dated September 30, 2004. | |
4.1 (4) | Specimen stock certificate for shares of Common Stock of the Company. | |
4.2 (16) | Preferred Shares Rights Agreement, dated as of September 13, 1996, by and between the Company and Wells Fargo Bank, N.A. (Filed as Exhibit 10.1). | |
4.3 (13) | Amendment to Preferred Shares Rights Agreement, dated as of November 9, 1998, between the Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent. (Filed as Exhibit 99.1). |
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Exhibit Number | Description | |
4.4 (17) | Second Amendment to the Preferred Shares Rights Agreement, dated as of December 23, 1998, between the Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (Filed as Exhibit 1). | |
4.7 (37) | Fourth Amendment to the Preferred Shares Rights Agreement and Certification of Compliance with Section 27 Thereof, dated as of October 3, 2002, between the Company and Mellon Investor Services LLC, as Rights Agent. | |
4.9 (38) | Indenture dated November 26, 2002, between Ligand Pharmaceuticals Incorporated and J.P. Morgan Trust Company, National Association, as trustee, with respect to the 6% convertible subordinated notes due 2007. (Filed as Exhibit 4.3). | |
4.10 (38) | Form of 6% Convertible Subordinated Note due 2007. (Filed as Exhibit 4.4). | |
4.11 (38) | Pledge Agreement dated November 26, 2002, between Ligand Pharmaceuticals Incorporated and J.P. Morgan Trust Company, National Association. (Filed as Exhibit 4.5). | |
4.12 (38) | Control Agreement dated November 26, 2002, among Ligand Pharmaceuticals Incorporated, J.P. Morgan Trust Company, National Association and JP Morgan Chase Bank. (Filed as Exhibit 4.6). | |
4.13 (5) | Amended and Restated Preferred Shares Rights Agreement dated as of March 20, 2004, which includes as Exhibit A the Form of Rights Certificate and as Exhibit B the Summary of Rights. | |
10.3 (4) | Form of Stock Issuance Agreement. | |
10.30 (4) | Form of Proprietary Information and Inventions Agreement. | |
10.31 (4) | Agreement, dated March 9, 1992, between the Company and Baylor College of Medicine (with certain confidential portions omitted). | |
10.33 (4) | License Agreement, dated November 14, 1991, between the Company and Rockefeller University (with certain confidential portions omitted). | |
10.34 (4) | License Agreement and Bailment, dated July 22, 1991, between the Company and the Regents of the University of California (with certain confidential portions omitted). | |
10.35 (4) | Agreement, dated May 1, 1991, between the Company and Pfizer Inc (with certain confidential portions omitted). | |
10.36 (4) | License Agreement, dated July 3, 1990, between the Company and the Brigham and Woman’s Hospital, Inc. (with certain confidential portions omitted). | |
10.38 (4) | License Agreement, dated January 5, 1990, between the Company and the University of North Carolina at Chapel Hill (with certain confidential portions omitted). | |
10.41 (4) | License Agreement, dated October 1, 1989, between the Company and Institute Pasteur (with certain confidential portions omitted). | |
10.43 (4) | License Agreement, dated June 23, 1989, between the Company and La Jolla Cancer Research Foundation (with certain confidential portions omitted). | |
10.44 (4) | License Agreement, dated October 20, 1988, between the Company and the Salk Institute for Biological Studies, as amended by Amendment to License Agreement dated September 15, 1989, Second Amendment to License Agreement, dated December 1, 1989 and Third Amendment to License Agreement dated October 20, 1990 (with certain confidential portions omitted). | |
10.46 (4) | Form of Indemnification Agreement between the Company and each of its directors. | |
10.47 (4) | Form of Indemnification Agreement between the Company and each of its officers. | |
10.58 (4) | Stock Purchase Agreement, dated September 9, 1992, between the Company and Glaxo, Inc. |
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Exhibit Number | Description | |
10.59 (4) | Research and Development Agreement, dated September 9, 1992, between the Company and Glaxo, Inc. (with certain confidential portions omitted). | |
10.60 (4) | Stock Transfer Agreement, dated September 30, 1992, between the Company and the Rockefeller University. | |
10.61 (4) | Stock Transfer Agreement, dated September 30, 1992, between the Company and New York University. | |
10.62 (4) | License Agreement, dated September 30, 1992, between the Company and the Rockefeller University (with certain confidential portions omitted). | |
10.67 (4) | Letter Agreement, dated September 11, 1992, between the Company and Mr. Paul Maier. | |
10.73 (21) | Supplementary Agreement, dated October 1, 1993, between the Company and Pfizer, Inc. to Agreement, dated May 1, 1991. | |
10.78 (23) | Research, Development and License Agreement, dated July 6, 1994, between the Company and Abbott Laboratories (with certain confidential portions omitted). (Filed as Exhibit 10.75). | |
10.82 (23) | Research, Development and License Agreement, dated September 2, 1994, between the Company and American Home Products Corporation, as represented by its Wyeth-Ayerst Research Division (with certain confidential portions omitted). (Filed as Exhibit 10.77). | |
10.83 (23) | Option Agreement, dated September 2, 1994, between the Company and American Home Products Corporation, as represented by its Wyeth-Ayerst Research Division (with certain confidential portions omitted). (Filed as Exhibit 10.80). | |
10.93 (6) | Indemnity Agreement, dated June 3, 1995, between the Company, Allergan, Inc. and Allergan Ligand Retinoid Therapeutics, Inc. | |
10.97 (6) | Research, Development and License Agreement, dated December 29, 1994, between SmithKline Beecham Corporation and the Company (with certain confidential portions omitted). | |
10.98 (6) | Stock and Note Purchase Agreement, dated February 2, 1995, between SmithKline Beecham Corporation, S.R. One, Limited and the Company (with certain confidential portions omitted). | |
10.140 (28) | Promissory Notes, General Security Agreements and a Credit Terms and Conditions letter dated March 31, 1995, between the Company and Imperial Bank (Filed as Exhibit 10.101). | |
10.146 (24) | Amendment to Research and Development Agreement, dated January 16, 1996, between the Company and American Home Products Corporation, as amended. | |
10.148 (24) | Lease, dated July 6, 1994, between the Company and Chevron/Nexus partnership, First Amendment to lease dated July 6, 1994. | |
10.149 (25) | Successor Employment Agreement, signed May 1, 1996, between the Company and David E. Robinson. | |
10.150 (7) | Master Lease Agreement, signed May 30, 1996, between the Company and USL Capital Corporation. | |
10.151 (25) | Settlement Agreement and Mutual Release of all Claims, signed April 20, 1996, between the Company and Pfizer, Inc. (with certain confidential portions omitted). | |
10.152 (25) | Letter Amendment to Abbott Agreement, dated March 14, 1996, between the Company and Abbott Laboratories (with certain confidential portions omitted). | |
10.153 (26) | Letter Agreement, dated August 8, 1996, between the Company and Dr. Andres Negro-Vilar. |
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Exhibit Number | Description | |
10.155 (7) | Letter Agreement, dated November 4, 1996, between the Company and William Pettit. | |
10.157 (7) | Master Lease Agreement, signed February 13, 1997, between the Company and Lease Management Services. | |
10.158 (7) | Lease, dated March 7, 1997, between the Company and Nexus Equity VI LLC. | |
10.161 (29) | Settlement Agreement, License and Mutual General Release between Ligand Pharmaceuticals and SRI/LJCRF, dated August 23, 1995 (with certain confidential portions omitted). | |
10.163 (30) | Extension of Master Lease Agreement between Lease Management Services and Ligand Pharmaceuticals dated July 29, 1997. | |
10.164 (27) | Third Amendment to Agreement, dated September 2, 1997, between the Company and American Home Products Corporation. | |
10.165 (8) | Amended and Restated Technology Cross License Agreement, dated September 24, 1997, among the Company, Allergan, Inc. and Allergan Ligand Retinoid Therapeutics, Inc. | |
10.167 (8) | Development and License Agreement, dated November 25, 1997, between the Company and Eli Lilly and Company (with certain confidential portions omitted). | |
10.168 (8) | Collaboration Agreement, dated November 25, 1997, among the Company, Eli Lilly and Company, and Allergan Ligand Retinoid Therapeutics, Inc. (with certain confidential portions omitted). | |
10.169 (8) | Option and Wholesale Purchase Agreement, dated November 25, 1997, between the Company and Eli Lilly and Company (with certain confidential portions omitted). | |
10.171 (8) | First Amendment to Option and Wholesale Purchase Agreement dated February 23, 1998, between the Company and Eli Lilly and Company (with certain confidential portions omitted). | |
10.172 (8) | Second Amendment to Option and Wholesale Purchase Agreement, dated March 16, 1998, between the Company and Eli Lilly and Company (with certain confidential portions omitted). | |
10.176 (10) | Secured Promissory Note, dated March 7, 1997, in the face amount of $3,650,000, payable to the Company by Nexus Equity VI LLC. (Filed as Exhibit 10.1). | |
10.177 (10) | Amended memorandum of Lease effective March 7, 1997, between the Company and Nexus Equity VI LLC. (Filed as Exhibit 10.2). | |
10.178 (10) | First Amendment to Lease, dated March 7, 1997, between the Company and Nexus Equity VI LLC. (Filed as Exhibit 10.3). | |
10.179 (10) | First Amendment to Secured Promissory Note, date March 7, 1997, payable to the Nexus Equity VI LLC. (Filed as Exhibit 10.4). | |
10.184 (11) | Letter agreement, dated May 11, 1998, by and among the Company, Eli Lilly and Company and Seragen, Inc. (Filed as Exhibit 99.6). | |
10.185 (1) | Amendment No. 3 to Option and Wholesale Purchase Agreement, dated May 11, 1998, by and between Eli Lilly and Company and the Company. (Filed as Exhibit 10.6). | |
10.186 (1) | Agreement, dated May 11, 1998, by and among Eli Lilly and Company, the Company and Seragen, Inc. (Filed as Exhibit 10.7). | |
10.188 (11) | Settlement Agreement, dated May 1, 1998, by and among Seragen, Inc., Seragen Biopharmaceuticals Ltd./Seragen Biopharmaceutique Ltee, Sofinov Societe Financiere D’Innovation Inc., Societe Innovatech Du Grand Montreal, MDS Health Ventures Inc., Canadian Medical Discoveries Fund Inc., Royal Bank Capital Corporation and Health Care and Biotechnology Venture Fund (Filed as Exhibit 99.2). |
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Exhibit Number | Description | |
10.189 (11) | Accord and Satisfaction Agreement, dated May 11, 1998, by and among Seragen, Inc., Seragen Technology, Inc., Trustees of Boston University, Seragen LLC, Marathon Biopharmaceuticals, LLC, United States Surgical Corporation, Leon C. Hirsch, Turi Josefsen, Gerald S.J. and Loretta P. Cassidy, Reed R. Prior, Jean C. Nichols, Elizabeth C. Chen, Robert W. Crane, Shoreline Pacific Institutional Finance, Lehman Brothers Inc., 520 Commonwealth Avenue Real Estate Corp. and 660 Corporation (Filed as Exhibit 99.4). | |
10.191 (10) | Letter of Agreement dated September 28, 1998 among the Company, Elan Corporation, plc and Elan International Services, Ltd. (with certain confidential portions omitted), (Filed as Exhibit 10.5). | |
10.198 (14) | Stock Purchase Agreement by and between the Company and Warner-Lambert Company dated September 1, 1999 (with certain confidential portions omitted). (Filed as Exhibit 10.2). | |
10.200 (14) | Nonexclusive Sublicense Agreement, effective September 8, 1999, by and among Seragen, Inc., Hoffmann-La Roche Inc. and F. Hoffmann-La Roche Ltd. (with certain confidential portions omitted). (Filed as Exhibit 10.4). | |
10.203 (14) | License Agreement effective June 30, 1999 by and between the Company and X-Ceptor Therapeutics, Inc. (with certain confidential portions omitted). (Filed as Exhibit 10.7). | |
10.218 (18) | Royalty Stream Purchase Agreement dated as of December 31, 1999 among Seragen, Inc., the Company, Pharmaceutical Partners, L.L.C., Bioventure Investments, Kft, and Pharmaceutical Royalties, LLC. (with certain confidential portions omitted). | |
10.220 (19) | Research, Development and License Agreement by and between Organon Company and Ligand Pharmaceuticals Incorporated dated February 11, 2000 (with certain confidential portions omitted). | |
10.224 (20) | Research, Development and License Agreement by and between Bristol Myers Squibb Company and Ligand Pharmaceuticals Incorporated dated May 19, 2000 (with certain confidential portions omitted). | |
10.230 (31) | Amended and Restated Registration Rights Agreement, dated as of June 29, 2000 among the Company and certain of its investors. | |
10.231 (2) | Marketing and Distribution Agreement with Ferrer Internacional S.A. to market and distribute Ligand Pharmaceuticals Incorporated products in Spain, Portugal and Greece. (Filed as Exhibit 10.3). | |
10.232 (2) | Marketing and Distribution Agreement with Ferrer Internacional S.A. to market and distribute Ligand Pharmaceuticals Incorporated products in Central and South America. (Filed as Exhibit 10.4). | |
10.233 (32) | Second Amendment to the Research, Development and License Agreement, dated as of September 2, 1994, between the Company and American Home Products Corporation (with certain confidential portions omitted). | |
10.234 (32) | Fourth Amendment to the Research, Development and License Agreement, dated as of September 2, 1994, between the Company and American Home Products Corporation (with certain confidential portions omitted). | |
10.235 (32) | Distributorship Agreement, dated February 29, 2001, between the Company and Elan Pharma International Limited (with certain confidential portions omitted). | |
10.238 (33) | Letter Agreement, dated May 17, 2001, between the Company and Gian Aliprandi. | |
10.239 (33) | Research, Development and License Agreement by and between the Company and TAP Pharmaceutical Products Inc. dated June 22, 2001 (with certain confidential portions omitted). | |
10.240 (34) | Letter Agreement, dated December 13, 2001, between the Company and Warner R. Broaddus, Esq. |
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Exhibit Number | Description | |
10.242 (34) | First Addendum to Amended and Restated Registration Rights Agreement dated June 29, 2000, effective as of December 20, 2001. | |
10.244 (35) | Second Addendum to Amended and Restated Registration Rights Agreement dated June 29, 2000, effective as of March 28, 2002. | |
10.245 (35) | Purchase Agreement, dated March 6, 2002, between the Company and Pharmaceutical Royalties International (Cayman) Ltd. | |
10.246 (36) | Amended and Restated License Agreement Between The Salk Institute for Biological Studies and the Company (with certain confidential portions omitted). | |
10.247 (37) | Amendment Number 1 to Purchase Agreement, dated July 29, 2002, between the Company and Pharmaceutical Royalties International (Cayman) Ltd. | |
10.250 (40) | Amended and Restated License and Supply Agreement, dated December 6, 2002, between the Company, Elan Corporation, plc and Elan Management Limited (with certain confidential portions omitted). | |
10.252 (40) | Amendment Number 1 to Amended and Restated Registration Rights Agreement, dated November 12, 2002, between the Company and Elan Corporation plc and Elan International Services, Ltd. | |
10.253 (40) | Second Amendment to Purchase Agreement, dated December 19, 2002, between the Company and Pharmaceuticals Royalties International (Cayman) Ltd. | |
10.254 (40) | Amendment Number 3 to Purchase Agreement, dated December 30, 2002, between the Company and Pharmaceuticals Royalties International (Cayman) Ltd. (with certain confidential portions omitted). | |
10.255 (40) | Purchase Agreement, dated December 30, 2002, between the Company and Pharmaceuticals Royalties International (Cayman) Ltd. (with certain confidential portions omitted). | |
10.256 (41) | Co-Promotion Agreement, dated January 1, 2003, by and between the Company and Organon Pharmaceuticals USA Inc. (with certain confidential portions omitted). | |
10.257 (42) | Letter Agreement, dated June 26, 2002, between the Company and James J. L’Italien, Ph.D. | |
10.258 (42) | Letter Agreement, dated May 20, 2003, between the Company and Tod G. Mertes. | |
10.259 (42) | Amendment No. 2 to Amended and Restated Registration Rights Agreement, dated June 25, 2003. | |
10.261 (43) | Letter Agreement, dated July 1, 2003, between the Company and Paul V. Maier. | |
10.262 (43) | Letter Agreement, dated July 1, 2003, between the Company and Ronald C. Eld. | |
10.263 (43) | Separation Agreement and General Release, effective July 10, 2003, between the Company and Thomas H. Silberg (with certain confidential portions omitted). | |
10.264 (44) | Option Agreement Between Investors Trust & Custodial Services (Ireland) Ltd., as Trustee for Royalty Pharma, Royalty Pharma Finance Trust and the Company, dated October 1, 2003 (with certain confidential portions omitted). | |
10.265 (44) | Amendment to Purchase Agreement Between Royalty Pharma Finance Trust and the Company, dated October 1, 2003 (with certain confidential portions omitted). | |
10.266 (44) | Manufacture and Supply Agreement between Seragen and Cambrex Bio Science Hopkinton, Inc., dated October 11, 2003 (with certain confidential portions omitted). | |
10.267 (9) | 2002 Stock Incentive Plan, dated May 16, 2002 (as amended through June 4, 2004). |
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Exhibit Number | Description | |
10.268 (44) | 2002 Employee Stock Purchase Plan, dated July 1, 2002 (as amended through June 30, 2003). | |
10.269 (44) | Form of Stock Option Agreement. | |
10.270 (44) | Form of Employee Stock Purchase Plan Stock Purchase Agreement. | |
10.271 (44) | Form of Automatic Stock Option Agreement. | |
10.272 (44) | Form of Director Fee Stock Option Agreement. | |
10.273 (45) | Letter Agreement, dated as of February 26, 2004, between the Company and Martin Meglasson. | |
10.274 (45) | Adoption Agreement for Smith Barney Inc. Execchoice (R) Nonqualified Deferred Compensation Plan. | |
10.275 (45) | Commercial Supply Agreement, dated February 27, 2004, between Seragen Incorporated and Holister-Stier Laboratories LLC (with certain confidential portions omitted). | |
10.276 (45) | Manufacturing and Packaging Agreement, dated February 13, 2004 between Cardinal Health PTS, LLC and the Company (with certain confidential portions omitted). | |
10.277 (45) | Letter Agreement, dated July 1, 2003 between the Company and William A. Pettit. | |
10.278 | Letter Agreement, dated as of October 1, 2004, between the Company and Eric S. Groves | |
10.279 | Form of Distribution, Storage, Data and Inventory Management Services Agreement. | |
10.280 | Amendment Number 1 to the Option Agreement between Investors Trust & Custodial Services (Ireland) Ltd., solely in its capacity as Trustee for Royalty Pharma, Royalty Pharma Finance Trust and Ligand Pharmaceuticals Incorporated dated November 5, 2004. | |
10.281 | Amendment to Agreement among Ligand Pharmaceuticals Incorporated, Seragen, Inc. and Eli Lilly and Company dated November 8, 2004 | |
10.282 | Amendment to Purchase Agreement between Royalty Pharma Finance Trust, Ligand Pharmaceuticals Incorporated, & Investors Trust and Custodial Services (Ireland) Ltd., solely in its capacity as Trustee of Royalty Pharma dated November 5, 2004. | |
14.1 (44) | Code of Business Conduct and Ethics | |
21.1 | Subsidiaries of Registrant (See Item 1 — Description of Business). | |
23.1 | Consent of BDO Seidman, LLP | |
24.1 | Power of Attorney (See page 240) | |
31.1 | Certification by Principal Executive Officer, Pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification by Principal Financial Officer, Pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification by Principal Executive Officer, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification by Principal Financial Officer, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
(1) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the numbered exhibit filed with the Company’s Registration Statement on Form S-4 (No. 333-58823) filed on July 9, 1998. | |
(2) | This exhibit was previously filed as part of and is hereby incorporated by reference to same numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 1999. |
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(3) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s quarterly report on Form 10-Q for the period ended September 30, 2004. |
(4) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Registration Statement on Form S-1 (No. 33-47257) filed on April 16, 1992 as amended. |
(5) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Form 8-A 12G/A, filed on April 6, 2004. |
(6) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Registration Statement on Form S-1/S-3 (No. 33-87598 and 33-87600) filed on December 20, 1994, as amended. |
(7) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Annual Report on Form 10-K for the period ended December 31, 1996. |
(8) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Annual Report on Form 10-K for the period ended December 31, 1997. |
(9) | This exhibit was previously filed as part of, and is hereby incorporated by reference to Exhibit 99.1 filed with the Company’s Registration Statement on Form S-8 (333-117129) on July 2, 2004. |
(10) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 1998. |
(11) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the numbered exhibit filed with the Current Report on Form 8-K of Seragen, Inc. filed on May 15, 1998. |
(12) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Annual Report on Form 10-K for the period ended December 31, 1998. |
(13) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the numbered exhibit filed with the Registration Statement on Form 8-A/A Amendment No. 1 (No. 0-20720) filed on November 10, 1998. |
(14) | This exhibit was previously filed as part of and is hereby incorporated by reference to the numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 1999. |
(15) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the numbered exhibit filed with the Schedule 13D of Elan Corporation, plc, filed on January 6, 1999, as amended. |
(16) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the numbered exhibit filed with the Company’s Registration Statement on Form S-3 (No. 333-12603) filed on September 25, 1996, as amended. |
(17) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the numbered exhibit filed with the Registration Statement on Form 8-A/A Amendment No. 2 (No. 0-20720) filed on December 24, 1998. |
(18) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Annual Report on Form 10-K for the period ended December 31, 1999. |
(19) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2000. |
(20) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2000. |
(21) | This exhibit was previously filed as part of, and are hereby incorporated by reference to the same numbered exhibit filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 1993. |
(23) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 1994. |
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(24) | This exhibit was previously filed, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 1995. |
(25) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Quarterly report on Form 10-Q for the period ended June 30, 1996. |
(26) | This exhibit was previously filed as part of, and is hereby incorporated by reference at the same numbered exhibit filed with the Company’s Quarterly report on Form 10-Q for the period ended September 30, 1996. |
(28) | This exhibit was previously filed as part of, and are hereby incorporated by reference to the same numbered exhibit filed with the Company’s Quarterly report on Form 10-Q for the period ended September 30, 1995. |
(29) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 1997. |
(30) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 1997. |
(31) | This exhibit was previously filed as part of, and are hereby incorporated by reference to the same numbered exhibit filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2000. |
(32) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2001. |
(33) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2001. |
(34) | This exhibit was previously filed as part of, and are hereby incorporated by reference to the same numbered exhibit filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2001. |
(35) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2002. |
(36) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2002. |
(37) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2002. |
(38) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the numbered exhibit filed with the Company’s Registration Statement on Form S-3 (No. 333-102483) filed on January 13, 2003, as amended. |
(40) | This exhibit was previously filed as part of, and are hereby incorporated by reference to the same numbered exhibit filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. |
(41) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2003. |
(42) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2003. |
(43) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2003. |
(44) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. |
(45) | This exhibit was previously filed as part of, and is hereby incorporated by reference to the same numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2004. |
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Balance at | Balance at | |||||||||||||||
Beginning of | End of | |||||||||||||||
Period | Charges | Deductions | Period | |||||||||||||
December 31, 2004: | ||||||||||||||||
Allowance for doubtful accounts and cash discounts | $ | 942 | $ | 4,612 | $ | 4,457 | $ | 1,097 | ||||||||
Reserve for inventory valuation | 1,177 | 1,179 | 1,329 | 1,027 | ||||||||||||
Valuation allowance on deferred tax assets | 266,935 | 19,290 | — | 286,225 | ||||||||||||
December 31, 2003 (Restated): | ||||||||||||||||
Allowance for doubtful accounts and cash discounts | $ | 233 | $ | 1,928 | $ | 1,219 | $ | 942 | ||||||||
Reserve for inventory valuation | 1,438 | 426 | 687 | 1,177 | ||||||||||||
Valuation allowance on deferred tax assets | 229,162 | 37,773 | — | 266,935 | ||||||||||||
December 31, 2002 (Restated): | ||||||||||||||||
Allowance for doubtful accounts and cash discounts | $ | 560 | $ | 1,155 | $ | 1,482 | $ | 233 | ||||||||
Reserve for inventory valuation | 1,726 | 293 | 581 | 1,438 | ||||||||||||
Valuation allowance on deferred tax assets | 211,212 | 17,950 | — | 229,162 |
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LIGAND PHARMACEUTICALS INCORPORATED | ||||
By: | /s/ DAVID E. ROBINSON | |||
David E. Robinson, | ||||
President and Chief Executive Officer | ||||
Signature | Title | Date | ||
/s/ DAVID E. ROBINSON | Chairman of the Board, President, | November 18, 2005 | ||
David E. Robinson | Chief Executive Officer and Director (Principal Executive Officer) | |||
/s/ PAUL V. MAIER | Senior Vice President, Chief Financial Officer | November 18, 2005 | ||
Paul V. Maier | (Principal Financial and Accounting Officer) | |||
/s/ HENRY F. BLISSENBACH | Director | November 18, 2005 | ||
Henry F. Blissenbach | ||||
/s/ ALEXANDER D. CROSS | Director | November 18, 2005 | ||
Alexander D. Cross | ||||
/s/ JOHN GROOM | Director | November 18, 2005 | ||
John Groom | ||||
/s/ IRVING S. JOHNSON | Director | November 18, 2005 | ||
Irving S. Johnson | ||||
/s/ JOHN W. KOZARICH | Director | November 18, 2005 | ||
John W. Kozarich | ||||
/s/ CARL C. PECK | Director | November 18, 2005 | ||
Carl C. Peck | ||||
/s/ MICHAEL A. ROCCA | Director | November 18, 2005 | ||
Michael A. Rocca |
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