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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-20017
TEXAS BIOTECHNOLOGY CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3532643
(State of (I.R.S. Employer
Incorporation) Identification Number)
7000 FANNIN, 20TH FLOOR
HOUSTON, TEXAS 77030
(713) 796-8822
(Address and telephone number of principal executive offices and zip code)
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
--------------------------------- -----------------------
Common Stock, $.005 par value Nasdaq National Market
Preferred Stock Purchase Rights Nasdaq National Market
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 [ ]
The approximate aggregate market value of voting stock held by nonaffiliates
of the registrant is $150,048,000 as of July 1, 2002.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The number of shares outstanding of each of the registrant's classes of
common stock as of July 1, 2002:
TITLE OF CLASS NUMBER OF SHARES
------------------------------- ----------------
Common Stock, $.005 par value 43,745,872
Documents incorporated by reference:
DOCUMENT FORM 10-K PARTS
---------------------------------------------- ---------------
Definitive Proxy Statement, to be filed within III
120 days of December 31, 2001
(specified portions)
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PART IV
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reference is made to the Consolidated Financial Statements, the reports
thereon, and the notes thereto commencing at Page F-1 of this Annual
Report on Form 10-K. Set forth below is an index to such Financial
Statements.
<Table>
<Caption>
PAGE
----
Independent Auditors' Report................................... F-1
Consolidated Balance Sheets.................................... F-2
Consolidated Statements of Operations and Comprehensive Loss... F-3
Consolidated Statements of Stockholders' Equity................ F-4
Consolidated Statements of Cash Flows.......................... F-6
Notes to Consolidated Financial Statements..................... F-7
</Table>
2. FINANCIAL STATEMENT SCHEDULES
Independent Auditors' Report
Balance Sheets of ICOS-Texas Biotechnology L.P. (A Development Stage
Limited Partnership) as of December 31, 2001 and 2000, and the related
statements of operations, statements of partners' deficit and cash
flows for the year ended December 31, 2001, the period from June 6,
2000 (inception) through December 31, 2000 and the period from June 6,
2000 (inception) through December 31, 2001, and notes thereto.
All other schedules have been omitted since the information is not
required or is not material to require submission of the schedule, or
because the information is included in the financial statements or the
notes thereto.
3. INDEX TO EXHIBITS
Information with respect to this Item is contained in the attached
Index to Exhibits.
The Company will furnish a copy of any one or more of these exhibits to
a shareholder who so requests upon receipt of payment for the costs of
duplication and mailing the requested item.
2
(b) REPORTS ON FORM 8-K
One report on Form 8-K dated October 30, 2001 was filed during the
quarter ended December 31, 2001, regarding the Company's third quarter
2001 financial results, market growth for Argatroban and clinical trials
status.
Four reports on Form 8-K were filed after December 31, 2001 but prior
to the filing of this Form 10-K. A report on Form 8-K dated January 3,
2002 was filed regarding the issuance of rights under the Shareholder
Rights Plan. A report on Form 8-K dated February 5, 2002 was filed
regarding confirmation of the Company's 2001 guidance and a review of the
outlook for 2002. A report on Form 8-K dated February 26, 2002 was filed
regarding the Company's 2001 fourth quarter and year-end financial
results. A report on Form 8-K dated March 21, 2002 was filed regarding
Bruce D. Given, M.D. being named as President and CEO and the retirement
of David B. McWilliams.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to the
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Houston and State of Texas on the 8th day of July, 2002.
TEXAS BIOTECHNOLOGY CORPORATION
By: /s/ STEPHEN L. MUELLER
-------------------------------------------
Stephen L. Mueller
Vice President, Finance and Administration,
Secretary and Treasurer
3
(d) FINANCIAL STATEMENTS OF 50-PERCENT-OR-LESS OWNED PERSONS
ICOS - TEXAS BIOTECHNOLOGY L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
Independent Auditors' Report 2
Balance Sheets as of December 31, 2001 and 2000 3
Statements of Operations for the year ended December 31, 2001, the period
from June 6, 2000 (inception) through December 31, 2000 and the period
from June 6, 2000 (inception) through December 31, 2001 4
Statements of Partners' Deficit for the year ended December 31, 2001 and
the period from June 6, 2000 (inception) through December 31, 2000 5
Statements of Cash Flows for the year ended December 31, 2001, the period
from June 6, 2000 (inception) through December 31, 2000 and the period
from June 6, 2000 (inception) through December 31, 2001 6
Notes to Financial Statements 7-9
</Table>
4
ICOS - TEXAS BIOTECHNOLOGY L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
Financial Statements
December 31, 2001 and 2000
(With Independent Auditors' Report Thereon)
1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
ICOS - Texas Biotechnology L.P.:
We have audited the accompanying balance sheets of ICOS - Texas Biotechnology
L.P. (a development stage limited partnership) as of December 31, 2001 and 2000,
and the related statements of operations, partners' deficit and cash flows for
the year ended December 31, 2001, the period from June 6, 2000 (inception) to
December 31, 2000, and the period from June 6, 2000 (inception) to December 31,
2001. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ICOS - Texas Biotechnology L.P.
as of December 31, 2001 and 2000, and the results of its operations and its cash
flows for the year ended December 31, 2001, the period from June 6, 2000
(inception) to December 31, 2000, and the period from June 6, 2000 (inception)
to December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that ICOS -
Texas Biotechnology L.P. will continue as a going concern. As discussed in note
6 to the financial statements, ICOS - Texas Biotechnology L.P. has experienced
recurring losses from operations and has a partners' deficit which raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in note 6. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
KPMG LLP
Seattle, Washington
January 23, 2002
2
ICOS - TEXAS BIOTECHNOLOGY L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
BALANCE SHEETS
<Table>
<Caption>
(in thousands)
-------------------------
December 31,
-------------------------
2001 2000
---------- ----------
ASSETS
Current assets:
Cash $ 1 $ 21
Receivable from Texas Biotechnology Corporation -- 470
---------- ----------
$ 1 $ 491
========== ==========
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities - accrued expenses payable to partners $ 7,059 $ 3,397
Partners' deficit:
General partner interests:
ICOS-ET-GP LLC (30) (7)
TBC-ET, Inc. (30) (7)
Limited partner interests:
ICOS-ET-LP LLC (3,499) (1,446)
Texas Biotechnology Corporation (3,499) (1,446)
---------- ----------
Total partners' deficit (7,058) (2,906)
---------- ----------
$ 1 $ 491
========== ==========
</Table>
See accompanying notes to financial statements.
3
ICOS - TEXAS BIOTECHNOLOGY L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
<Table>
<Caption>
(in thousands)
----------------------------------------------------------------
Period from Period from
Year ended June 6, 2000 (inception) June 6, 2000 (inception)
December 31, through December 31, through December 31,
2001 2000 2001
------------ ------------------------ ------------------------
Revenue $ -- $ 547 $ 547
Operating expenses:
Development - contributed technology
license from Texas Biotechnology Corporation 4,000 4,000 8,000
Development - Texas Biotechnology Corporation 6,190 4,706 10,896
Development - ICOS Corporation 12,682 2,809 15,491
General and administrative 26 8 34
----------- ----------- -----------
Total operating expenses 22,898 11,523 34,421
----------- ----------- -----------
Net loss $ (22,898) $ (10,976) $ (33,874)
=========== =========== ===========
</Table>
See accompanying notes to financial statements.
4
ICOS - TEXAS BIOTECHNOLOGY L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' DEFICIT
<Table>
<Caption>
(in thousands)
------------------------------------------------------------------------------
Texas Biotechnology Partners'
ICOS-ET-GP LLC TBC-ET, Inc. ICOS-ET-LP LLC Corporation Deficit
-------------- ------------ -------------- ------------------- -----------
Balances at June 6, 2000 (inception) $ -- $ -- $ -- $ -- $ --
Partner contributions:
Cash 4 4 4,031 2,031 6,070
Technology license -- -- -- 4,000 4,000
Capital distribution -- -- -- (2,000) (2,000)
Net loss (11) (11) (5,477) (5,477) (10,976)
---------- ---------- ----------- ----------- ----------
Balances at December 31, 2000 (7) (7) (1,446) (1,446) (2,906)
Partner contributions:
Cash -- -- 9,373 7,373 16,746
Technology license -- -- -- 4,000 4,000
Capital distribution -- -- -- (2,000) (2,000)
Net loss (23) (23) (11,426) (11,426) (22,898)
---------- ---------- ----------- ----------- ----------
Balances at December 31, 2001 $ (30) $ (30) $ (3,499) $ (3,499) $ (7,058)
========== ========== =========== =========== ==========
</Table>
See accompanying notes to financial statements.
5
ICOS - TEXAS BIOTECHNOLOGY L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<Table>
<Caption>
(in thousands)
------------------------------------------------------------------
Period from Period from
Year ended June 6, 2000 (inception) June 6, 2000 (inception)
December 31, through December 31, through December 31,
2001 2000 2001
------------ ------------------------ ------------------------
Cash flows from operating activities:
Net loss $ (22,898) $ (10,976) $ (33,874)
Adjustments to reconcile net loss to net cash used in
operating activities:
Contributed technology license 4,000 4,000 8,000
Change in operating assets and liabilities:
Receivable from Texas Biotechnology Corporation 470 (470) --
Accrued expenses payable to partners 3,662 3,397 7,059
----------- ----------- -----------
Net cash used in operating activities (14,766) (4,049) (18,815)
----------- ----------- -----------
Cash flows from financing activities:
Partner contributions 16,746 6,070 22,816
Capital distributions (2,000) (2,000) (4,000)
----------- ----------- -----------
Net cash provided by financing activities 14,746 4,070 18,816
Net increase (decrease) in cash (20) 21 1
Cash at beginning of period 21 -- --
----------- ----------- -----------
Cash at end of period $ 1 $ 21 $ 1
=========== =========== ===========
</Table>
See accompanying notes to financial statements.
6
ICOS - TEXAS BIOTECHNOLOGY L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
Notes to Financial Statements
December 31, 2001 and 2000
(Dollars in thousands, unless otherwise noted)
(1) ORGANIZATION AND BUSINESS OPERATIONS
ICOS-Texas Biotechnology L.P. (the "Partnership"), is a development stage
limited partnership that was formed on June 6, 2000 by Texas Biotechnology
Corporation, a Delaware corporation ("TBC"), and ICOS-ET-LP LLC, a
Washington limited liability company ("ICOS-LP"), as limited partners, and
TBC-ET, Inc., a Delaware corporation ("TBC-GP"), and ICOS-ET-GP LLC, a
Washington limited liability company ("ICOS-GP"), as general partners. The
Partnership was organized to develop and globally commercialize endothelin
receptor antagonists. The Partnership is managed jointly by TBC-GP and
ICOS-GP. Profits, losses and distributions, except for distributions for
payment of TBC's exclusive license (see note 3), are allocated based on
respective ownership interests. ICOS Corporation ("ICOS") is the sole
member of both ICOS-LP and ICOS-GP. Both TBC and ICOS provide the
Partnership with research and development services.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
(b) REVENUE RECOGNITION
Revenue represents research payments received by TBC, which were
assigned to the Partnership and recognized as the related services were
performed.
(c) RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
(d) INCOME TAXES
No Federal income tax expense or benefit is included in the financial
statements since such taxes, if any, are payable or recoverable by each
partner.
(e) OPERATING SEGMENTS
The Partnership has one operating segment, the development and
commercialization of endothelin receptor antagonist products for human
therapeutic use.
7
ICOS - TEXAS BIOTECHNOLOGY L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
Notes to Financial Statements
December 31, 2001 and 2000
(Dollars in thousands, unless otherwise noted)
(3) EQUITY TRANSACTIONS
TBC made an initial capital contribution to the Partnership of an exclusive
worldwide license of intellectual property associated with endothelin
receptor antagonists, including patent rights and technical information,
and ICOS-LP made an initial capital contribution to the Partnership of $2
million in cash. In exchange for their contributions, each party received a
49.9% limited partnership interest in the Partnership. ICOS-GP and TBC-GP
each contributed $4 in exchange for a .1% general partnership interest in
the Partnership.
The technology license contributed to the Partnership by TBC was initially
valued at $4 million, based on the cash contribution from ICOS-LP and the
concurrent capital distribution to TBC discussed below. The contributed
valuation of the technology license increased by $4 million in 2001, upon
the achievement of certain development objectives, and may increase by up
to $103 million in the future, if certain additional milestones are
achieved as provided for in the Agreement of Limited Partnership of
ICOS-Texas Biotechnology L.P. (the "Agreement").
Under the terms of the Agreement, TBC received a capital distribution of $2
million in conjunction with formation of the Partnership and received an
additional $2 million capital distribution in October 2001 upon the
achievement of certain development objectives. TBC may receive up to $51.5
million in further milestone-related capital distributions based on the
achievement of certain other objectives as specified in the Agreement. Any
such capital distributions are required to be funded by additional capital
contributions from ICOS-LP.
(4) LICENSE AGREEMENTS
In connection with TBC's initial capital contribution, the Partnership
entered into an Endothelin License Agreement with TBC, subject to the
rights of an agreement with LG Chemical, Ltd. discussed below. Under the
Endothelin License Agreement, the Partnership received an exclusive right
and license to certain proprietary patent rights, technical information,
technology and know-how relating to, and useful in, the manufacture,
production and worldwide commercial sale of endothelin products for human
therapeutic use. The value of the license was charged to development
expense as the underlying technology represented incomplete product
research and development.
In October 1996, TBC entered into a Strategic Alliance Agreement with LG
Chemical, Ltd. ("LG Chem"), a Korean corporation, (the "LG Chem
Agreement"), pursuant to which TBC granted LG Chem certain technology
rights and agreed to perform certain research and development activities on
behalf of LG Chem in exchange for the right to receive research and royalty
payments in the future.
In conjunction with its formation, the Partnership was assigned and assumed
certain of TBC's rights and obligations under the LG Chem Agreement. During
2000, the Partnership recognized $547 in revenue associated with services
performed under the LG Chem Agreement, of which $470 was due from TBC at
December 31, 2000, which was collected in 2001. The LG Chem Agreement was
terminated during 2001. The Partnership will not recognize any further
revenue or receive any additional payments under the LG Chem Agreement.
8
ICOS - TEXAS BIOTECHNOLOGY L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
Notes to Financial Statements
December 31, 2001 and 2000
(Dollars in thousands, unless otherwise noted)
(5) RESEARCH AND DEVELOPMENT SERVICE AGREEMENT
In June 2000, the Partnership entered into a Research and Development
Service Agreement (the "R&D Agreement") with TBC and ICOS, pursuant to
which TBC and ICOS agreed to provide research and development services for,
and on behalf of, the Partnership. The Partnership reimburses TBC and ICOS,
at a per-hour amount, calculated on the basis of actual hours incurred by
TBC and ICOS, plus certain development and administrative expenses. There
is no minimum commitment for research and development, and the Partnership
can contract with other parties to provide research and development
services.
(6) FINANCING
Pursuant to the Agreement, ongoing activities of the Partnership are to be
funded by the limited partners in relation to their limited partnership
interests. At December 31, 2001, the Partnership had a partners' deficit of
$7.1 million. To continue operations, the Partnership will need to obtain
additional financing from the partners or other sources. However, there is
no assurance that the partners will provide adequate financing to fund the
Partnership, or that additional funding will be available from other
sources. If additional funds are not available, the Partnership will be
required to delay, reduce, or eliminate its research and development
programs.
9
INDEX TO EXHIBITS
<Table>
<Caption>
EXHIBIT NO DESCRIPTION OF EXHIBIT
---------- ----------------------
23.1+ -- Independent Auditors' Consent
23.2+ -- Independent Auditors' Consent
</Table>
- ---------------
+ Filed herewith