UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
------------------
[ ] 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: 0-26642
-------
MYRIAD GENETICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 87-0494517
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
320 WAKARA WAY, SALT LAKE CITY, UT 84108
- ------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 584-3600
--------------
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 [X] No [_]
As of November 9, 1998, the registrant had 9,400,192 shares of common stock
outstanding.
MYRIAD GENETICS, INC.
INDEX TO FORM 10-Q
Page
----
PART I - Financial Information
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets as of September 30, 1998 (unaudited) 3
and June 30, 1998
Condensed Consolidated Statements of Operations for the three months ended 4
September 30, 1998 and 1997 (unaudited)
Condensed Consolidated Statements of Cash Flows for the three months ended 5
September 30, 1998 and 1997 (unaudited)
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
PART II - Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE(S) 14
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Sept.. 30, 1998
(Unaudited) June 30, 1998
Assets ------------------ ------------------
------
Current assets:
Cash and cash equivalents $9,230,572 $14,595,034
Marketable investment securities 6,842,430 16,267,156
Prepaid expenses 759,316 266,679
Trade accounts receivables, less allowance for doubtful accounts of $75,000
at Sept. 30, 1998, $66,000 at June 30, 1998 669,944 471,327
Non-trade receivables 85,109 117,053
------------- ------------
Total current assets 17,587,371 31,717,249
------------- ------------
Equipment and leasehold improvements:
Equipment 16,983,063 16,049,721
Leasehold improvements 2,313,488 2,288,241
------------- ------------
19,296,551 18,337,962
Less accumulated depreciation and amortization 6,653,087 5,902,926
------------- ------------
Net equipment and leasehold improvements 12,643,464 12,435,036
Long-term marketable investment securities 31,627,353 22,247,303
Other assets 950,198 992,384
------------- ------------
$62,808,386 $67,391,972
============= ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $3,763,714 $5,121,279
Accrued liabilities 1,846,599 1,938,722
Deferred revenue 2,132,699 2,722,115
Current portion of notes payable 37,375 128,843
------------- ------------
Total current liabilities 7,780,387 9,910,959
------------- ------------
Stockholders' equity
Common stock, $0.01 par value, 15,000,000 shares authorized; issued and
outstanding 9,355,692 shares on September 30, 1998 and
9,337,501 shares on June 30, 1998 93,557 93,375
Additional paid-in capital 91,984,629 91,907,034
Fair value adjustment on available-for-sale marketable investment securities 94,555 1,477
Deferred compensation (497,813) (576,446)
Accumulated deficit (36,646,929) (33,944,427)
------------- ------------
Net stockholders' equity 55,027,999 57,481,013
------------- ------------
$62,808,386 $67,391,972
============= ============
See accompanying notes to condensed consolidated financial statements.
3
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
------------------
Sept. 30, 1998 Sept. 30, 1997
(Unaudited) (Unaudited)
-------------- --------------
Research revenue $4,646,516 $5,515,042
Genetic testing revenue 913,470 409,545
-------------- --------------
Total revenues 5,559,986 5,924,587
Costs and expenses:
Research and development expenses 5,817,490 6,200,637
Selling, general and administrative expenses 2,555,415 2,137,228
Genetic testing cost of revenue 602,872 235,999
-------------- --------------
Total costs and expenses 8,975,777 8,573,864
-------------- --------------
Operating loss (3,415,791) (2,649,277)
Other income (expense):
Interest income 696,219 864,803
Interest expense (2,371) (11,448)
Other 19,441 121
-------------- --------------
713,289 853,476
-------------- --------------
Net loss ($2,702,502) ($1,795,801)
============== ==============
Basic and diluted loss per share ($0.29) ($0.19)
============== ==============
Basic and diluted weighted average shares outstanding 9,342,942 9,237,843
See accompanying notes to condensed consolidated financial statements.
4
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
------------------
Sept. 30, 1998 Sept. 30, 1997
(Unaudited) (Unaudited
------------- ------------
Cash flows from operating activities:
Net loss ($2,702,502) ($1,795,801)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 840,594 769,116
Loss on sale of assets 11,937 --
Bad debt expense 9,000 --
Increase in trade receivables (207,617) (3,310)
Decrease (increase) in non-trade receivables 31,942 (34,696)
Decrease (increase) in prepaid expenses (492,637) 289,162
Decrease in other assets 42,188 --
Increase (decrease) in accounts payable and accrued
expenses (1,449,690) 459,566
Decrease in deferred revenue (589,416) (274,497)
----------------- --------------
Net cash used in operating activities (4,506,201) (590,460)
----------------- --------------
Cash flows from investing activities:
Proceeds from sale of equipment 2,595 --
Capital expenditures (984,921) (725,631)
Net change in marketable investment securities 137,755 6,044,404
----------------- -------------
Net cash provided by (used in) investing activities (844,571) 5,318,773
----------------- -------------
Cash flows from financing activities:
Net payments of notes payable (91,467) (82,516)
Net proceeds from issuance of common stock 77,777 125,667
----------------- -------------
Net cash provided by (used in) financing activities (13,690) 43,151
----------------- -------------
Net increase (decrease) in cash and cash equivalents (5,364,462) 4,771,464
Cash and cash equivalents at beginning of period 14,595,034 15,675,763
------------------ -------------
Cash and cash equivalents at end of period $9,230,572 $20,447,227
================== =============
See accompanying notes to condensed consolidated financial statements.
5
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
---------------------
The accompanying condensed unaudited consolidated financial statements have
been prepared by Myriad Genetics, Inc. (the "Company") in accordance with
generally accepted accounting principles for interim financial information
and pursuant to the applicable rules and regulations of the Securities and
Exchange Commission. The condensed unaudited consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All material intercompany accounts and transactions have been
eliminated in consolidation. In the opinion of management, the accompanying
financial statements contain all adjustments (consisting of normal and
recurring accruals) necessary to present fairly all financial statements.
The financial statements herein should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto for
the fiscal year ended June 30, 1998, included in the Company's Annual
Report on Form 10-K for the year ended June 30, 1998. Operating results for
the three-month period ended September 30, 1998 may not necessarily be
indicative of the results to be expected for any other interim period or
for the full year.
(2) Subsequent Events
-----------------
In October 1998, the Company entered into a five-year collaboration with
Schering AG, Germany, to utilize the Company's protein interaction
technology ("ProNet") for drug discovery and development. Under the
agreement, the Company will have an option to co-promote all new
therapeutic products in North America and receive 50 percent of the profits
from North American sales of all new drugs discovered with ProNet. This
collaboration may provide the Company with licensing fees, subscription
fees, option payments and milestone fees with a value of up to $51,000,000.
(3) Comprehensive Earnings (Loss)
-----------------------------
The Company adopted Statement of Financial Accounting Standards No. 130
(SFAS 130), "Reporting Comprehensive Income", effective July 1, 1998. SFAS
130 establishes standards for reporting and displaying comprehensive
earnings (loss) and its components in financial statements. The components
of the Company's comprehensive earnings (loss) are as follows:
Three Months Ended Three Months Ended
September 30, 1998 September 30, 1998
(unaudited) (unaudited)
------------------ ------------------
Net loss ($2,702,502) ($1,795,801)
Unrealized gain (loss) on available for-sale
Marketable investment securities 93,078 (5,291)
------------------ ------------------
Comprehensive loss ($2,609,424) ($1,801,092)
================== ==================
6
(4) Net Loss Per Common and Common Equivalent Share
-----------------------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share (SFAS 128).
SFAS 128 became effective for financial statements with interim and annual
periods ending after December 15, 1997. Accordingly, the Company has
adopted SFAS 128.
SFAS 128 establishes a different method of computing earnings (loss) per
common and common-equivalent share than was previously required under the
provisions of Accounting Principles Board Opinion No. 15. SFAS 128 requires
the presentation of basic and diluted earnings (loss) per share. Basic is
the amount of net income (loss) for the period available to each share of
common stock outstanding during the reporting period. Diluted earnings per
share is the amount of net income (loss) for the period available to each
share of common stock outstanding during the reporting period and to each
share that would have been outstanding assuming the issuance of common
shares for all dilutive potential common shares outstanding during the
period.
In calculating earnings (loss) per common and common-equivalent share the
net income (loss) and the weighted average common and common-equivalent
shares outstanding were the same for both the basic and diluted
calculation.
For the three months ended September 30, 1998 and September 30, 1997, there
were antidilutive common stock equivalents of 2,155,178 and 1,342,497,
respectively. Accordingly, these common stock equivalents were not included
in the computation of diluted earnings per share for the years presented,
but may be dilutive to future basic and diluted earnings per share.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since inception, the Company has devoted substantially all of its resources to
maintaining its research and development programs, establishing and operating a
genetic testing laboratory, and supporting collaborative research agreements.
Revenues received by the Company primarily have been payments pursuant to
collaborative research agreements and sales of genetic tests. The Company has
been unprofitable since its inception and, for the quarter ended September 30,
1998, the Company had a net loss of $2,702,502 and as of September 30, 1998 had
an accumulated deficit of $36,646,929.
In April 1995, the Company commenced a five-year collaborative research and
development arrangement with Novartis Corporation ("Novartis"). This
collaboration may provide the Company with an equity investment, research
funding and potential milestone payments of up to $60,000,000. The Company is
entitled to receive royalties from sales of therapeutic products sold by
Novartis. The Company recognized $1,426,440 in revenue under this agreement for
the quarter ended September 30, 1998.
In September 1995, the Company commenced a five-year collaborative research and
development arrangement with Bayer Corporation ("Bayer"). This collaboration
may provide the Company with an equity investment, research funding and
potential milestone payments of up to $71,000,000. In November 1997, the
Company announced an expansion of its collaborative research and development
arrangement with Bayer. The expanded collaboration may provide the Company with
additional research funding and potential milestone payments of up to
$54,000,000 or a total potential of up to $125,000,000. The Company is entitled
to receive royalties from sales of therapeutic products sold by Bayer. The
Company recognized $2,470,076 in revenue under this agreement for the quarter
ended September 30, 1998.
In October 1996, the Company announced the introduction of BRACAnalysis, a
comprehensive BRCA1 and BRCA2 gene sequence analysis for susceptibility to
breast and ovarian cancer. In January 1998, the Company announced the
introduction of CardiaRisk which may assist physicians both in (i) identifying
which hypertensive patients are at a significantly increased risk of developing
cardiovascular disease and (ii) identifying which patients are likely to respond
to low salt diet therapy and antihypertensive drug therapy. The Company,
through its wholly owned subsidiary Myriad Genetic Laboratories, Inc.,
recognized genetic testing revenues, primarily from BRACAnalysis, of $913,470
for the quarter ended September 30, 1998.
In April 1997, the Company commenced a three-year collaborative research and
development arrangement with Schering Corporation ("Schering"). The three-year
term may be extended for two additional one-year periods. This collaboration
may provide the Company with an equity investment, license fees, research
funding and potential milestone payments totalling up to $60,000,000. The
Company is entitled to receive royalties from sales of therapeutic products sold
by Schering. The Company recognized $750,000 in revenue under this agreement
for the quarter ended September 30, 1998.
The Company intends to enter into additional collaborative relationships to
locate and sequence genes associated with other common diseases as well as
continuing to fund internal research projects. There can be no assurance that
the Company will be able to enter into additional collaborative relationships on
terms acceptable to the Company. The Company expects to incur losses for at
least the next several years, primarily due to expansion of its research and
development programs, increased staffing costs and expansion of its facilities.
Additionally, the Company expects to incur substantial sales, marketing and
other expenses in connection with building its genetic testing business. The
Company expects that losses will fluctuate from quarter to quarter and that such
fluctuations may be substantial.
SUBSEQUENT EVENT
In October 1998, the Company entered into a five-year collaboration with
Schering AG, Germany, to utilize the Company's protein interaction technology
("ProNet") for drug discovery and development. Under the agreement, the Company
will have an option to co-promote all new therapeutic products in North America
and receive 50
8
percent of the profits from North American sales of all new drugs discovered
with ProNet. This collaboration may provide the Company with licensing fees,
subscription fees, option payments and milestone fees with a value of up to
$51,000,000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Research revenues for the quarter ended September 30, 1998 were $4,646,516 as
compared to $5,515,042 for the same quarter of 1997. Greater research revenue
recognized during the quarter ended September 30, 1997 versus the current
quarter is the result of a $2,000,000 milestone payment from Schering received
by the Company in 1997. Excluding the milestone payment, the Company's ongoing
research revenue increased $1,131,474 for the quarter ended September 30, 1998
versus the same quarter of 1997. This increase is primarily the result of the
expanded scope of the Bayer agreement. Research revenue from the research
collaboration agreements is recognized as related costs are incurred.
Consequently, as these programs progress and costs increase, revenues increase
proportionately.
Genetic testing revenues of $913,470 were recognized in the quarter ended
September 30, 1998, an increase of 123% or $503,925 over the same quarter of the
prior year. The test for genetic predisposition to breast and ovarian cancer
was launched by the Company in October 1996 and the test for heart disease and
hypertension risk was launched by the Company in January 1998. Sales and
marketing efforts since that time have given rise to the increased revenues for
the quarter ended September 1998. There can be no assurance, however that
genetic testing revenues will continue to increase at the historical rate.
Research and development expenses for the quarter ended September 30, 1998 were
$5,817,490 as compared to $6,200,637 for the same quarter of 1997. Research and
development expenses were greater in the quarter ended September 30, 1997 versus
the same quarter of 1998 as a result of expenses incurred by the Company related
to a milestone achieved by one of its academic collaborators during the fiscal
1997 quarter. Excluding the milestone expense, the Company's research and
development expenses increased for the quarter ended September 30, 1998 as
compared to the same quarter of 1997. This increase was primarily due to an
increase in research activities as a result of the progress in the Company's
collaborations with Novartis, Bayer and Schering as well as those programs
funded by the Company. The increased level of research spending includes third-
party research programs, increased depreciation charges related to purchasing
additional research equipment, the hiring of additional research personnel and
the associated increase in use of laboratory supplies and reagents. Such
expenses will likely increase to the extent that the Company enters into
additional research agreements with third parties.
Selling, general and administrative expenses for the quarter ended September 30,
1998 were $2,555,415 as compared to $2,137,228 for the same quarter of 1997.
The increase was attributable to costs associated with the ongoing promotion of
BRACAnalysis as well as additional administrative, sales, marketing and
education personnel, market research activities, education material development,
and facilities-related costs. The Company expects its selling, general and
administrative expenses will continue to increase in support of its genetic
testing business and its research and development efforts.
Interest income for the quarter ended September 30, 1998 was $696,219 as
compared to $864,803 for the same quarter of 1997. Cash, cash equivalents, and
marketable investment securities were $61,799,207 at September 30, 1997 as
compared to $47,700,355 at September 30, 1998. This decrease in cash and
investments, attributable to expenditures incurred in the ordinary course of
business, has resulted in reduced interest income. Interest expense for the
quarter ended September 30, 1998, amounting to $2,371, was due entirely to
borrowings under the Company's equipment financing facility.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $4,506,201 during the quarter ended
September 30, 1998 and $590,460 during the same quarter of 1997. Cash used in
operating activities is comprised of changes in the following financial
statement accounts: depreciation and amortization, loss on sale of assets, bad
debt expense, trade receivables, non-
9
trade receivables, prepaid expenses, other assets, accounts payable and accrued
expenses, and deferred revenue. Trade receivables for the three months ended
September 30, 1998 increased $207,617. This increase is primarily attributable
to the 29% increase in genetic testing revenue for the quarter ended September
30, 1998 as compared to testing revenue for the quarter ended June 30, 1998.
Non-trade receivables decreased $31,942 between June 30, 1998 and September 30,
1998 primarily as a result of certain patent legal fees which the Company has
incurred and which were reimbursed by one of the Company's collaborative
partners. Prepaid expenses increased $492,637 during the quarter ended September
30, 1998. The increase is primarily due to advance payments to purchase lab
supplies at a discount. These expenses were offset by advance royalties and
insurance premiums being expensed during the quarter. Accounts payable and
accrued expenses decreased $1,449,690 between June 30, 1998 and September 30,
1998 primarily as a result of payments for lab supplies and equipment which were
accrued into the prior quarter. Deferred revenue, representing the difference in
collaborative payments received and research revenue recognized, decreased
$589,416 during the quarter ended September 30, 1998.
The Company's investing activities used cash of $844,571 in the three months
ended September 30, 1998 and provided cash of $5,318,773 in the three months
ended September 30, 1997. Investing activities were comprised primarily of
capital expenditures for research equipment.
Financing activities used $13,690 during the quarter ended September 30, 1998.
The Company reduced the principal on its equipment financing facility by
$91,467. This decrease was offset by proceeds of $77,777 from the exercise of
stock options. Financing activities provided $43,151 during the quarter ended
September 30, 1997. The Company reduced the principal on its equipment
financing facility by $82,516 and received proceeds from stock option exercises
of $125,667 during the 1997 quarter.
The Company anticipates that its existing capital resources will be adequate to
maintain its current and planned operations for at least the next two years,
although no assurance can be given that changes will not occur that would
consume available capital resources before such time. The Company's future
capital requirements will be substantial and will depend on many factors,
including progress of the Company's research and development programs, the
results and cost of clinical correlation testing of the Company's genetic tests,
the costs of filing, prosecuting and enforcing patent claims, competing
technological and market developments, payments received under collaborative
agreements, changes in collaborative research relationships, the costs
associated with potential commercialization of its gene discoveries, if any,
including the development of manufacturing, marketing and sales capabilities,
the cost and availability of third-party financing for capital expenditures and
administrative and legal expenses. Because of the Company's significant long-
term capital requirements, the Company intends to raise funds when conditions
are favorable, even if it does not have an immediate need for additional capital
at such time.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 Issue
The Year 2000 Issue is the result of computer programs using a two-digit format,
as opposed to four digits, to indicate the year. Any of the Company's computer
programs or other information systems that have time-sensitive software or
embedded microcontrollers may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations.
State of Readiness and Costs to Address the Year 2000 Issue
During fiscal 1998, the Company completed an initial review ("Phase I") of its
information and non-information technology systems. This review included its
existing and planned computer software and hardware. The Company has made an
initial determination, based on its Phase I review, that the costs and/or
consequences associated with the Year 2000 issue are not expected to have a
material effect on its business, operations or future financial condition.
A second, more in-depth analysis ("Phase II") is currently ongoing. Internally,
Phase II will include the testing of internally developed systems. Although the
internal portion of Phase II just recently commenced, and is not expected to be
completed until the end of calendar year 1998, the Company presently believes
that with modifications to existing software and conversions to new software and
systems, the Year 2000 Issue will not pose
10
significant operational problems for its computer and other information systems.
If required, the Company will utilize both internal and external resources to
reprogram, or replace, and test the software and systems for Year 2000
modifications. Externally, Phase II of the Company's preparations for the Year
2000 Issue will consist of soliciting and obtaining certification of Year 2000
compliance from third-party software vendors and determining the readiness of
its significant suppliers and customers.
Risks of the Year 2000 Issue
If such modifications, conversions and/or replacements are not made, are not
completed timely, or if any of the Company's suppliers or customers do not
successfully deal with the Year 2000 Issue, the Year 2000 Issue could have a
material impact on the operations of the Company. The Company could experience
delays in receiving or sending its genetic testing products that would increase
its costs and that could cause the Company to lose business and even customers
and could subject the Company to claims for damages. Problems with the Year
2000 Issue could also result in delays in the Company invoicing its genetics
testing customers or in the Company receiving payments from them. In addition,
the Company's research and development efforts which rely heavily on the storage
and retrieval of electronic information could be interrupted resulting in
significant delays in discovering genes, the loss of current collaborations, and
the impairment of the Company's ability to enter into new collaborations. The
severity of these possible problems would depend on the nature of the problem
and how quickly it could be corrected or an alternative implemented, which is
unknown at this time. In the extreme, such problems could bring the Company to
a standstill.
While management has not yet specifically determined the costs associated with
its Year 2000 readiness efforts, monitoring and managing the Year 2000 Issue
will result in additional direct and indirect costs to the Company. Direct
costs include potential charges by third-party software vendors for product
enhancements, costs involved in testing software products for Year 2000
compliance and any resulting costs for developing and implementing contingency
plans for critical software products which are not enhanced. Indirect costs
will principally consist of the time devoted by existing employees in monitoring
software vendor progress, testing enhanced software products and implementing
any necessary contingency plans. Such costs have not been material to date.
Both direct and indirect costs of addressing the Year 2000 Issue will be charged
to earnings as incurred.
Contingency Plan
After evaluating its internal compliance efforts as well as the compliance of
third parties as described above, the Company will develop during calendar year
1999 appropriate contingency plans to address situations in which various
systems of the Company, or of third parties with which the Company does
business, are not Year 2000 compliant. Some risks of the Year 2000 Issue,
however, are beyond the control of the Company and its suppliers and customers.
For example, no preparations or contingency plan will protect the Company from a
downturn in economic activity caused by the possible ripple effect throughout
the entire economy caused by the Year 2000 Issue.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
The Company believes that this report on Form 10-Q contains certain forward-
looking statements as that term is defined in the Private Securities Litigation
Reform Act of 1995. Such statements are based on management's current
expectations and are subject to a number of factors and uncertainties which
could cause actual results to differ materially from those described in the
forward-looking statements. The Company cautions investors that there can be no
assurance that actual results or business conditions will not differ materially
from those projected or suggested in such forward-looking statements as a result
of various factors, including, but not limited to, the following: the timely
implementation by the Company of its plan to prepare its computer systems for
the Year 2000, the costs to the Company of such preparation, and the timely
conversion by other parties on which the Company's business relies; intense
competition related to the discovery of disease-related genes and the
possibility that others may discover, and the Company may not be able to gain
rights with respect to, genes important to the establishment of a successful
genetic testing business, difficulties inherent in developing genetic tests once
genes have been discovered; the Company's limited experience in operating a
genetic testing laboratory; the Company's limited marketing and sales experience
and the risk that tests which the Company has or may develop may not be able to
be marketed at acceptable prices or receive commercial acceptance in the markets
that the Company is targeting or expects to target;
11
uncertainty as to whether there will exist adequate reimbursement for the
Company's services from government, private healthcare insurers and third-party
payors; and uncertainties as to the extent of future government regulation of
the Company's business. As a result, the Company's future development efforts
involve a high degree of risk. For further information, refer to the more
specific risks and uncertainties disclosed throughout this Quarterly Report on
Form 10-Q.
12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any legal proceedings.
ITEM 2. CHANGES IN SECURITIES.
(c) Sales of Unregistered Securities
--------------------------------
During the three months ended September 30, 1998, the Company issued a total of
7,834 shares of Common Stock to a consultant of the Company pursuant to the
exercise of stock options at a weighted average price of $3.50 per share.
No person acted as an underwriter with respect to the transactions set forth
above. In the foregoing instance, the Company relied on Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act") or Rule 701
promulgated under the Securities Act for the exemption from the registration
requirements of the Securities Act, since no public offerings were involved.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
--------
The following is a list of exhibits filed as part of this Quarterly Report on
Form 10-Q.
Exhibit
Number Description
- ------ -----------
10.1 Memorandum of Lease between the Company and Boyer Foothill Associates,
LTD. dated August 24, 1998.
10.2 Memorandum of Lease between the Company and Boyer Research Park
Associates VI, L.C. dated August 24, 1998.
10.3 Subordination Agreement and Estoppel, Attornment and
Non-Disturbance Agreement (Lease to Deed of Trust) between the Company
and Wells Fargo Bank, National Association dated June 24, 1998.
11.1 Statement Regarding Computation of Net Loss Per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended September 30, 1998.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MYRIAD GENETICS, INC.
Date: November 12, 1998 By: /s/ Peter D. Meldrum
--------------------------
Peter D. Meldrum
President and Chief Executive Officer
Date: November 12, 1998 /s/ Jay M. Moyes
---------------------------
Jay M. Moyes
Vice President of Finance and Chief Financial
Officer
(principal financial and accounting officer)
14
MYRIAD GENETICS, INC.
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.1 Memorandum of Lease between the Company and Boyer Foothill
Associates, LTD. dated August 24, 1998.
10.2 Memorandum of Lease between the Company and Boyer Research Park
Associates VI, L.C. dated August 24, 1998.
10.3 Subordination Agreement and Estoppel, Attornment and Non-Disturbance
Agreement (Lease to Deed of Trust) between the Company and Wells
Fargo Bank, National Association dated June 24, 1998.
11.1 Statement Regarding Computation of Net Loss Per Share
27.1 Financial Data Schedule
15