FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 000-28347
TULARIK INC.
(Exact name of Registrant as specified in its charter)
| | |
Delaware | | 94-3148800 |
(State or other jurisdiction of | | (I.R.S. Employer |
incorporation or organization) | | Identification No.) |
Two Corporate Drive
South San Francisco, California 94080
(Address of principal executive offices) (Zip code)
(650) 825-7000
(Registrant’s telephone number including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
As of April 30, 2002, 50,452,221 shares of the Registrant’s common stock were outstanding.
TULARIK INC.
INDEX
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TULARIK INC.
Condensed Consolidated Balance Sheets
(unaudited)
(In thousands, except share data)
| | March 31, | | December 31, | |
| | 2002 | | 2001 (1) | |
ASSETS | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 89,784 | | $ | 109,392 | |
Short-term investments | | 109,487 | | 107,197 | |
Prepaid expenses and other current assets | | 6,858 | | 6,832 | |
Total current assets | | 206,129 | | 223,421 | |
| | | | | |
Property and equipment, net | | 34,118 | | 34,011 | |
Other investments | | 18,017 | | 25,337 | |
Restricted cash | | 4,279 | | 2,008 | |
Other assets | | 5,398 | | 5,405 | |
Goodwill | | 3,100 | | 3,100 | |
Total assets | | $ | 271,041 | | $ | 293,282 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | |
Current liabilities: | | | | | |
Accounts payable | | $ | 2,781 | | $ | 4,855 | |
Accrued compensation and related liabilities | | 2,588 | | 3,039 | |
Accrued liabilities | | 6,225 | | 5,388 | |
Current portion of long-term debt and capital lease obligations | | 6,556 | | 6,685 | |
Deferred revenue | | 12,113 | | 14,211 | |
Total current liabilities | | 30,263 | | 34,178 | |
| | | | | |
Long-term debt and capital lease obligations | | 9,286 | | 10,801 | |
Long-term portion of deferred revenue | | 11,827 | | 12,083 | |
Other non-current liabilities | | 2,231 | | 1,999 | |
Total liabilities | | 53,607 | | 59,061 | |
Commitments | | | | | |
Minority interest in Cumbre Inc. | | 26,250 | | 26,250 | |
Stockholders’ equity: | | | | | |
Convertible preferred stock; $.001 par value; 5,000,000 shares authorized; none issued and outstanding | | — | | — | |
Common stock; $.001 par value; 145,000,000 shares authorized; 50,285,230 and 49,890,865 shares issued and outstanding at March 31, 2002 and December 31, 2001, respectively | | 50 | | 50 | |
Additional paid-in capital | | 391,784 | | 387,484 | |
Notes receivable from stockholders | | (141 | ) | (230 | ) |
Deferred compensation, net | | (280 | ) | (351 | ) |
Accumulated other comprehensive (loss) income | | (453 | ) | 239 | |
Accumulated deficit | | (199,776 | ) | (179,221 | ) |
Total stockholders’ equity | | 191,184 | | 207,971 | |
Total liabilities and stockholders’ equity | | $ | 271,041 | | $ | 293,282 | |
| | | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
(1) The condensed consolidated balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
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TULARIK INC.
Condensed Consolidated Statements of Operations
(unaudited)
(In thousands, except share and per share data)
| | Three months ended | |
| | March 31, | |
| | 2002 | | 2001 | |
Revenue: | | | | | |
Collaborative research and development | | $ | 6,176 | | $ | 7,041 | |
| | | | | |
Operating expenses: | | | | | |
Research and development | | 25,244 | | 18,667 | |
General and administrative | | 2,714 | | 2,852 | |
| | 27,958 | | 21,519 | |
| | | | | |
Loss from operations | | (21,782 | ) | (14,478 | ) |
| | | | | |
Interest and other income | | 1,619 | | 5,697 | |
Interest expense | | (392 | ) | (391 | ) |
Net loss | | $ | (20,555 | ) | $ | (9,172 | ) |
| | | | | |
Net loss per basic and diluted share | | $ | (0.41 | ) | $ | (0.19 | ) |
| | | | | |
Weighted average shares used in computing basic and diluted net loss per share | | 50,008,537 | | 48,338,654 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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TULARIK INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(In thousands)
| | For the three months ended | |
| | March 31, | |
| | 2002 | | 2001 | |
Cash flows from operating activities: | | | | | |
Net Loss | | $ | (20,555 | ) | $ | (9,172 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | |
Depreciation and amortization | | 2,743 | | 1,503 | |
Amortization of deferred stock compensation | | 107 | | 385 | |
Non-cash stock compensation | | 311 | | 299 | |
Changes in assets and liabilities: | | | | | |
Other assets | | (19 | ) | (1,021 | ) |
Accounts payable | | (2,074 | ) | (593 | ) |
Accrued liabilities | | 94 | | 635 | |
Other long-term liabilities | | 232 | | — | |
Deferred revenue | | (2,354 | ) | (3,205 | ) |
| | | | | |
Net cash used in operating activities | | (21,515 | ) | (11,169 | ) |
| | | | | |
Cash flows from investing activities: | | | | | |
Maturities of available-for-sale securities | | 82,255 | | 161,784 | |
Purchases of available-for-sale securities | | (77,625 | ) | (96,752 | ) |
Purchase of restricted cash | | (2,271 | ) | — | |
Acquisition of property and equipment | | (2,850 | ) | (3,255 | ) |
| | | | | |
Net cash (used in) provided by investing activities | | (491 | ) | 61,777 | |
| | | | | |
Cash flows from financing activities: | | | | | |
Payments of long-term obligations | | (1,644 | ) | (1,744 | ) |
Proceeds from notes receivable from stockholders | | 89 | | 739 | |
Proceeds from issuances of common stock, net | | 3,953 | | 2,185 | |
| | | | | |
Net cash provided by financing activities | | 2,398 | | 1,180 | |
| | | | | |
Net (decrease) increase in cash and cash equivalents | | (19,608 | ) | 51,788 | |
| | | | | |
Cash and cash equivalents at the beginning of the period | | 109,392 | | 76,312 | |
| | | | | |
Cash and cash equivalents at the end of the period | | $ | 89,784 | | $ | 128,100 | |
| | | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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TULARIK INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Basis of Presentation
The unaudited condensed consolidated financial statements of Tularik Inc.(“Tularik” or the “Company”) reflect, in the opinion of management, all adjustments, consisting only of normal and recurring adjustments, necessary to present fairly the Company’s consolidated financial position at March 31, 2002 and the Company’s consolidated results of operations for the three-month periods ended March 31, 2002 and 2001. Interim-period results are not necessarily indicative of results of operations or cash flows for a full-year period.
The year-end balance sheet data were derived from audited financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States of America.
These financial statements and the notes accompanying them should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2001. Stockholders are encouraged to review the Form 10-K for a broader discussion of the Company’s business and the opportunities and risks inherent in the Company’s business. Copies of the Form 10-K are available from the Company on request.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Tularik and its majority-owned subsidiary, Cumbre Inc., and Tularik’s wholly–owned subsidiaries, Amplicon Corporation, Tularik Pharmaceutical Company, Tularik GmbH and Tularik Limited.
It is the Company’s policy to not allocate losses to any of its subsidiaries’ minority interests to the extent that such losses reduce the minority interests below the third-party minority stockholders’ liquidation preferences. As a result of this policy, 100% of Cumbre’s net loss has been included in the Company’s determination of net loss for the quarter ended March 31, 2002 and for the year ended December 31, 2001.
Recent Accounting Pronouncement
The Company is in the process of reviewing the goodwill and other intangibles under the terms of Statement of Financial Accounting Standards No. 142 (“SFAS No. 142”), issued in June 2001 and effective for fiscal years beginning after December 15, 2001. The Company will complete its review within the allotted six-month period prior to the issuance of the 2002 second quarter results. If an impairment is identified during the analysis, the Company will record the amount as a cumulative effect of an accounting change in restated first quarter results as required by SFAS No. 142. At this time, management does not believe there will be an impairment of the goodwill or intangibles.
Collaboration Agreement
On January 9, 2002, the Company entered into a research collaboration with Medarex, Inc. (“Medarex”) for the development of therapeutic antibodies for the treatment of a variety of cancers based on targets discovered by the Company. Medarex made a $5.0 million investment in Tularik by buying 100,036 shares of the Company’s common stock at $49.98 per share. The premium paid over the fair market value of the Company’s stock of approximately $2.5 million was recorded as deferred revenue, which will be recognized over the estimated term of the collaboration. Tularik and Medarex will share equally clinical development costs and commercialization rights pursuant to the terms of the research collaboration.
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Net Loss Per Share
The following table sets forth the computation of the Company’s basic and diluted net loss per share (in thousands, except per share amounts):
| | Three months ended | |
| | March 31, | |
| | 2002 | | 2001 | |
| | | | | |
Numerator: | | | | | |
Net loss | | $ | (20,555 | ) | $ | (9,172 | ) |
| | | | | |
Denominator: | | | | | |
Weighted average shares of common stock outstanding | | 50,138 | | 48,622 | |
Less: weighted average shares subject to repurchase | | (129 | ) | (283 | ) |
| | | | | |
Weighted average shares used in computing basic and diluted net loss per share | | 50,009 | | 48,339 | |
| | | | | |
Basic and diluted net loss per share | | $ | (0.41 | ) | $ | (0.19 | ) |
Outstanding options and warrants to purchase in the aggregate 6,049,974 shares of common stock at March 31, 2002 and 5,200,788 shares of common stock at March 31, 2001 were excluded from diluted earnings calculations for the three months ended March 31, 2002 and 2001, respectively, because inclusion of options and warrants would have an anti-dilutive effect on losses in these periods. At March 31, 2002, 113,768 shares of common stock were subject to repurchase.
Comprehensive Loss
Comprehensive loss is comprised of net loss and other comprehensive loss. Other comprehensive loss includes certain changes in equity that are excluded from net loss. Specifically, unrealized holding gains and losses on Tularik’s equity investments, which were reported separately in stockholders’ equity, are included in accumulated other comprehensive loss. Comprehensive loss and its components for the three months ended March 31, 2002 and 2001 are as follows (in thousands):
| | Three months ended | |
| | March 31, | |
| | 2002 | | 2001 | |
| | | | | |
Net loss | | $ | (20,555 | ) | $ | (9,172 | ) |
Change in cumulative translation adjustment | | (292 | ) | — | |
Change in unrealized gain on equity investments | | (400 | ) | (4,997 | ) |
Comprehensive loss | | $ | (21,247 | ) | $ | (14,169 | ) |
Restricted Cash
As of March 31, 2002, the Company has purchased $4.3 million of corporate debt securities to secure one of the Company’s long-term debt facilities and the Company’s build-to-suit lease. Accordingly, the Company has classified these investments as a restricted investment in the accompanying balance sheet.
Subsequent Events
On April 1, 2002, Cumbre Inc., the Company’s majority-owned subsidiary, entered into an equipment loan agreement that provides up to $5.0 million of equipment financing. Cumbre received approximately $2.0 million under the loan agreement. Equipment eligible under the loan includes computer, laboratory and office equipment. In connection with the equipment loan agreement, Cumbre issued a warrant to purchase 76,000 shares of Cumbre’s Series B preferred stock at an exercise price of: (i) $2.50 per share or (ii) the average of $2.50 per share and the per share price of the Series C preferred stock upon issuance of Series C preferred stock. The fair value of the warrant will be estimated using the Black-Scholes method and represents a discount to the equipment loan liability that will be amortized over the term of the lease.
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On May 6, 2002, the Company made a loan of $200,000 to a member of Tularik’s board of directors. The loan represents a cash advance on consulting fees that would otherwise have been earned over a three-year period. Accordingly, $60,000 of the loan will be forgiven on May 1, 2003, $70,000 of the loan will be forgiven on May 1, 2004 and $70,000 of the loan will be forgiven on May 1, 2005, assuming that the consulting services continue through such dates. The loan bears an interest rate of 3.21% per annum.
This discussion and analysis should be read in conjunction with our financial statements and accompanying notes included in this report and our 2001 financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2001. Operating results are not necessarily indicative of results that may occur in future periods.
This report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to statements, about:
• our strategy;
• the progress of our research programs, including clinical testing;
• sufficiency of our cash resources;
• revenues from existing and new collaborations;
• product development; and
• our research and development and other expenses.
These forward-looking statements are generally identified by words such as “expect,” “anticipate,” “intend,” “believe,” “hope,” “assume,” “estimate,” “plan,” “will” and other similar words and expressions. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements as a result of certain factors, including those set forth in this Item 2 and those described in our Annual Report on Form 10-K for the year ended December 31, 2001, including under “Business—Risk Factors.” We undertake no obligation to publicly release any revisions to the forward-looking statements or to reflect events and circumstances after the date of this document.
Company Overview
Tularik Inc. engages in the discovery and development of a broad range of novel and superior orally available medicines that act through the regulation of gene expression. Building on our scientific strengths, we intend to become a world–class pharmaceutical company. Our research programs, all of which address attractive potential commercial markets, include cancer, cytomegalovirus (CMV) disease, inflammation, immune disorders, lipid disorders, diabetes and obesity. We have diversified our drug discovery and development efforts not only across a large number of diseases, but also across multiple targets and drug candidates for these diseases. We have established strategic partnerships with Japan Tobacco Inc., Roche Bioscience and Medarex, Inc.
The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to terms of the research collaborations, investments, intangible assets, income taxes, financing operations and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
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that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Operating Results
For the quarter ended March 31, 2002, we incurred a net loss of $20.6 million, or $0.41 per share, compared to a net loss of $9.2 million, or $0.19 per share, for the same period in 2001.
Revenue from collaborative research and development for the first quarter of 2002 was $6.2 million, compared to $7.0 million for the first quarter of 2001. The decline in revenue was a result of various research collaborations ending in 2001. The decline was partially offset by higher revenue from our collaboration with the pharmaceutical division of Japan Tobacco in the area of metabolic diseases and from our new collaboration with Medarex to develop humanized therapeutic antibodies against cancer targets identified by Tularik.
In April 2002, the pharmaceutical division of Japan Tobacco discontinued its participation in the pre-clinical development of a drug candidate identified in our lipid disorders collaboration. Japan Tobacco has the option to resume its participation in the development of the drug candidate by notifying us in writing at any time prior to the expiration of the 30-day period commencing upon the receipt from us of the final report summarizing the results of the phase 1 clinical trials for this drug candidate. In such an event, Japan Tobacco would be obligated to pay us 175% of the costs incurred from April 2002 until the date of re-engagement.
Total research and development expenses for the first quarter of 2002 increased by 35% to $25.2 million from $18.7 million for the same period in 2001, due to headcount growth, increased depreciation expenses as well as the corresponding increase in salaries, supply, manufacturing and development costs.
Total general and administrative expenses for the first quarter of 2002 decreased by 7% to $2.7 million from $2.9 million for the same period in 2001, due primarily to lower patent legal and deferred compensation expenses, partially offset by increased salary expenses.
Interest income and other income decreased to $1.6 million for the quarter ended March 31, 2002 from $5.7 million for the comparable quarter of 2001. This decrease was due primarily to our lower cash, cash equivalent and investment balances, and significantly lower interest rates during the first quarter of 2002.
Interest expense for the first quarter of 2002 was unchanged compared to the same period in 2001.
We are in the process of reviewing the goodwill and other intangibles under the terms of SFAS No. 142, issued in June 2001 and effective for fiscal years beginning after December 15, 2001. We will complete our review within the allotted six-month period prior to the issuance of the 2002 second quarter results. If an impairment is identified during the analysis, we will record the amount as a cumulative effect of an accounting change in restated first quarter results as required by SFAS No. 142. At this time, we do not believe there will be an impairment of the goodwill or intangibles.
Liquidity and Capital Resources
Since inception, our primary sources of funds have been the sale of equity securities, capital lease financings, non-equity payments from collaborators and interest income. Combined cash, cash equivalents and investments (both current and non-current) totaled $217.3 million at March 31, 2002, a decrease of $24.6 million from December 31, 2001. The decrease was due to operating expenses of $21.5 million, the acquisition of property and equipment for $2.9 million, the repayment of long-term debt of $1.6 million and a decrease in investment from the reclassification of an available-for-sale investment to restricted cash of $2.3 million, and was partially offset by $4.0 million in proceeds from the issuance of common stock and from notes paid by stockholders. The average maturity of available-for-sale securities is approximately 121 days.
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We believe that our existing cash and investment securities and anticipated cash flow from existing collaborations will be sufficient to support our current operating plan through the end of 2003. This estimate is a forward-looking statement that involves risks and uncertainties. We have based this estimate on assumptions that may prove to be wrong. Our future capital requirements will depend on many factors, including:
• the progress of our pre-clinical and clinical development activities;
• the costs and timing of regulatory approvals;
• the progress of our research activities;
• the number and scope of our research programs;
• the progress of the development efforts of our collaborators;
• our ability to establish and maintain current and new collaboration and licensing arrangements;
• our ability to receive equity and debt financings in Cumbre Inc., our majority-owned subsidiary;
• our ability to achieve our milestones and receive funding under collaboration arrangements;
• the costs involved in enforcing patent claims and other intellectual property rights; and
• the costs of establishing sales, marketing and distribution capabilities.
Future capital requirements will also depend on the extent to which we acquire or invest in businesses, products and technologies. Until we can generate sufficient levels of cash from our operations, which we do not expect to achieve for at least several years, we expect to finance future cash needs through the sale of equity securities, strategic collaborations and debt financing as well as interest income. In August 2001, we filed a registration statement on Form S-3 to offer and sell common stock and debt securities in one or more offerings up to a total amount of $250 million. Currently, $245 million remains available on the Form S-3, and we have no current commitments to offer and sell any securities that may be offered or sold pursuant to such registration statement. We cannot assure you that additional financing or collaboration and licensing arrangements will be available when needed or that, if available, additional financing will be obtained on terms favorable to us or our stockholders. Insufficient funds may require us to delay, scale back or eliminate some or all of our research or development programs. In addition, insufficient funds may cause us to lose rights under existing licenses or to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. Insufficient funds may also adversely affect our ability to operate as a going concern. If we raise additional funds by issuing equity securities, this may result in substantial dilution to existing stockholders.
Our cash and investments policy emphasizes liquidity and preservation of principal over other portfolio considerations. We select investments that maximize interest income to the extent possible given these two constraints. We satisfy our liquidity requirements by investing excess cash in securities with different maturities to match projected cash needs and limit concentration of credit risk by diversifying our investments among a variety of high credit-quality issuers.
Risk Factors
An investment in our common stock is risky. Investors should carefully consider the following risks, as well as the further description and discussion of these risks contained in the “Business—Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2001, which description and discussion is incorporated herein by reference:
• if we continue to incur operating losses for a period longer than anticipated, we may be unable to continue our operations;
• because our product candidates are in an early stage of development, there is a high risk of failure;
• the progress and results of our animal and human testing are uncertain;
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• because we must obtain regulatory approval to market our products in the United States and foreign jurisdictions, we cannot predict whether or when we will be permitted to commercialize our products;
• failure to attract, retain and motivate skilled personnel and cultivate key academic collaborations will delay our product development programs and our research and development efforts;
• the drug discovery methods that we employ are relatively new and may not lead to the development of drugs;
• if we cannot maintain our current corporate collaborations and enter into new corporate collaborations, our product development could be delayed;
• if we do not realize value from our retained commercialization rights, we may not achieve our commercial objectives;
• if our competitors develop and market products that are more effective than our product candidates, our commercial opportunity will be reduced or eliminated;
• because it is difficult and costly to protect our proprietary rights, we cannot ensure their protection;
• even if regulatory authorities approve our products or product candidates for the treatment of the diseases we are targeting, our products may not be marketed or commercially successful;
• we rely on third parties to conduct clinical trials for our drug candidates, and those third parties may not perform satisfactorily;
• if we are unable to contract with third parties to manufacture our products in sufficient quantities and at an acceptable cost, we may be unable to meet demand for our products and lose potential revenues;
• if we are unable to create sales, marketing and distribution capabilities or enter into agreements with third parties to perform these functions, we will not be able to commercialize products;
• our ability to generate revenues will be diminished if we fail to obtain acceptable prices or an adequate level of reimbursement for our products from third-party payors;
• if conflicts arise between our collaborators, advisors or directors and us, they may act in their self-interest, which may be adverse to your best interests;
• if we fail to obtain the capital necessary to fund our operations, we will be unable to successfully develop products;
• if product liability lawsuits are successfully brought against us, we may incur substantial liabilities and may be required to limit commercialization of our products;
• if our officers, directors and largest stockholders choose to act together, they may be able to control our management and operations, acting in their best interests and not necessarily those of other stockholders;
• our stock price may be volatile, and your investment in our stock could decline in value;
• if we use biological and hazardous materials in a manner that causes injury or violates laws, we may be liable for damages;
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• anti-takeover provisions in our charter documents and under Delaware law may make an acquisition of us, which may be beneficial to our stockholders, more difficult; and
• the financial results of Cumbre may impact our future operating results.
If any of the foregoing or other risks actually occur, our business could be harmed. In that case, the trading price of our common stock could decline, and investors might lose all or part of their investment. The risks and uncertainties described above are not the only ones facing us. Additional risks and uncertainties not currently known to us, or that we currently see as immaterial, may also harm our business. If any of these additional risks or uncertainties occur, the trading price of our common stock could decline, and investors might lose all or part of their investment.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Sensitivity
Our exposure to market risk is principally limited to our cash equivalents and investments that have maturities of less than two years and one equity investment. We maintain a non-trading investment portfolio of investment grade, liquid debt securities that limits the amount of credit exposure to any one issue, issuer or type of instrument. The securities in our investment portfolio are not leveraged, are classified as available-for-sale and are therefore subject to interest rate risk. We currently do not hedge interest rate exposure. If market interest rates were to increase by 100 basis points, or 1%, from March 31, 2002 levels, the fair value of our portfolio would decline by approximately $736,000. The modeling technique used measures the change in fair values arising from an immediate hypothetical shift in market interest rates and assumes ending fair values include principal plus accrued interest.
Foreign Currency Exchange Risk
Because we translate foreign currencies into United States dollars for reporting purposes, currency can have an impact, though generally immaterial, on our financial results. We believe that our exposure to currency exchange risk is low because our German and UK subsidiaries satisfy their financial obligations almost exclusively in their local currencies. As of March 31, 2002, we did not engage in foreign currency hedging activities.
On March 28, 2002, we issued 4,668 shares of common stock to Michael H. Wigler pursuant to his cashless warrant exercise at an exercise price of $13.00 per share. The shares were issued pursuant to an exemption from registration in reliance upon Rule 144 and Section 4(2) of the Securities Act.
Tularik held its annual meeting of stockholders on April 18, 2002. At
such meeting the following actions were voted upon:
(a) Election of directors to serve for the ensuing year:
| | For | | Withheld | |
| | | | | |
David V. Goeddel, Ph.D. | | 32,971,032 | | 1,914,499 | |
A. Grant Heidrich, III | | 34,608,495 | | 277,036 | |
Edward R. McCracken | | 34,607,553 | | 277,978 | |
Steven L. McKnight, Ph.D. | | 34,813,264 | | 72,267 | |
Craig A.P.D. Saxton, M.D. | | 34,837,663 | | 47,868 | |
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(b) Approval of Tularik’s 1997 Non-Employee Directors’ Stock Option Plan, as amended, to increase (1) the aggregate number of shares of common stock authorized for issuance under such plan by 400,000 shares and (2) the size of the annual grant to each director by 2,000 shares.
For | | Against | | Abstentions | | Broker Non-Votes |
| | | | | | |
33,546,234 | | 1,285,511 | | 53,786 | | 0 |
(c) Ratification of the selection of PricewaterhouseCoopers LLP as Tularik’s independent auditors for the fiscal year ending December 31, 2002.
For | | Against | | Abstentions | | Broker Non-Votes |
| | | | | | |
34,327,744 | | 506,566 | | 51,221 | | 0 |
Clinical Trial Update
During the quarter ended March 31, 2002, we disclosed plans to pursue phase 3 clinical studies with T67 for the treatment of hepatocellular carcinoma, or primary liver cancer. T67, discovered and developed at Tularik, is an anti-cancer drug candidate that binds irreversibly to tubulin. T67 has shown activity in phase 1 and phase 2 trials for the treatment of hepatocellular carcinoma, a refractory malignancy for which there are no approved systemic chemotherapeutic agents. T67 also demonstrated activity in the phase 2 brain cancer trial, but did not demonstrate activity in the other indications tested. Data from the phase 2 hepatocellular carcinoma trials with T67 will be available at the American Society of Clinical Oncology (ASCO) meeting in May 2002.
Our second anti-cancer drug candidate, T607, is an analog of T67. The phase 2 dosing regimen has been selected, and we expect to begin phase 2 studies during the second quarter. Malignancies to be studied include hepatocellular carcinoma, non-Hodgkin’s lymphoma, gastric/esophageal cancer and ovarian cancer. Data from certain phase 1 trials with T607 will be available at the ASCO meeting.
Our third anti-cancer drug candidate, T64, is an anti-metabolite. T64 is completing a phase 2 trial in 1st line non small-cell lung cancer (NSCLC). T64 demonstrated activity against NSCLC and melanoma in phase 2 trials, but did not demonstrate activity in other indications. We have recently initiated a phase 2 trial with T64 in 2nd line NSCLC, and we are in discussions with potential partners who may be interested in licensing this drug candidate.
T611 is our oral drug candidate to prevent CMV disease in transplant patients. T611 is progressing through a phase 2 proof-of-concept trial in AIDS patients with CMV disease. We plan to initiate phase 2 studies in kidney transplant patients and in bone marrow transplant patients in the second half of 2002.
(a) Exhibits
EXHIBIT | | |
NUMBER | | |
| | |
3.1 | | Amended and Restated Certificate of Incorporation (1). |
3.2 | | Amended and Restated Bylaws. |
4.1 | | Specimen Common Stock Certificate (2). |
(1) Filed as an exhibit to our quarterly report on Form 10-Q for the quarter ended March 31, 2000, and incorporated herein by reference.
(2) Filed as an exhibit to our registration statement on Form S-1, as amended (File No. 333-89177), and incorporated herein by reference.
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(b) Reports on Form 8-K
On January 9, 2002, we filed a current report on Form 8-K announcing the sale of 100,036 shares of common stock to Medarex, Inc.
On March 19, 2002, we filed a current report on Form 8-K announcing the dismissal of Ernst & Young LLP as our independent public accountants on March 15, 2002 and the appointment of PricewaterhouseCoopers LLP as our independent auditors. An amendment to this report was filed on April 10, 2002.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | TULARIK INC. |
| | |
May 15, 2002 | by: | /s/ David V. Goeddel |
| | David V. Goeddel |
| | Chief Executive Officer |
| | |
May 15, 2002 | by: | /s/ Corinne H. Lyle |
| | Corinne H. Lyle |
| | Chief Financial Officer |
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