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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2000
OR
( ) 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: 0-21696
ARIAD PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 22-3106987
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
26 LANDSDOWNE STREET, CAMBRIDGE, MASSACHUSETTS 02139
(Address of principal executive offices)(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 494-0400
Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report: Not Applicable
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 number of shares of the Registrant's common stock outstanding as of August
7, 2000 was 26,877,364.
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ARIAD PHARMACEUTICALS, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page No.
- -------- --------------------- --------
ITEM 1. UNAUDITED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets - June 30, 2000
and December 31, 1999...................................................... 1
Condensed Consolidated Statements of Operations for the
Three Months and Six Months Ended June 30, 2000 and 1999................... 2
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2000 and 1999.................................... 3
Notes to Unaudited Condensed Consolidated Financial Statements............. 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS........................................ 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................. 11
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HODLERS........................ 13
ITEM 5. OTHER INFORMATION.......................................................... 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................................... 14
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PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
JUNE 30, DECEMBER 31,
2000 1999
------------- ---------------
Current assets:
Cash and cash equivalents $ 29,117,658 $ 28,319,870
Marketable securities 12,639,302
Inventory and other current assets 1,588,976 1,608,695
------------- -------------
Total current assets 43,345,936 29,928,565
------------- -------------
Property and equipment:
Leasehold improvements 12,594,070 12,566,650
Equipment and furniture 4,480,408 4,413,453
------------- -------------
Total 17,074,478 16,980,103
Less accumulated depreciation and amortization 14,245,801 13,645,750
------------- -------------
Property and equipment, net 2,828,677 3,334,353
------------- -------------
Intangible and other assets, net 4,721,154 10,973,095
------------- -------------
Total $ 50,895,767 $ 44,236,013
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,200,000 $ 1,200,000
Accounts payable 1,166,931 2,276,447
Accrued liabilities 2,229,467 3,721,679
------------- -------------
Total current liabilities 4,596,398 7,198,126
------------- -------------
Long-term debt 1,300,000 1,900,000
------------- -------------
Redeemable convertible preferred stock 8,070,415
-------------
Stockholders' equity:
Common stock, $.001 par value; authorized, 60,000,000
shares; issued and outstanding, 26,828,073 shares in
2000 and 22,031,888 shares in 1999 26,828 22,032
Additional paid-in capital 126,569,235 101,928,618
Accumulated other comprehensive loss (1,491)
Accumulated deficit (81,595,203) (74,883,178)
------------- -------------
Stockholders' equity 44,999,369 27,067,472
------------- -------------
Total $ 50,895,767 $ 44,236,013
============= =============
See notes to unaudited condensed consolidated financial statements.
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ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
Revenue:
Research revenue (principally
related parties in 1999) $ 18,029 $ 2,723,576 $ 126,153 $ 7,306,473
Interest income 452,281 143,405 759,216 316,296
------------ ------------ ------------ ------------
Total revenue 470,310 2,866,981 885,369 7,622,769
------------ ------------ ------------ ------------
Operating expenses:
Research and development 2,936,245 7,824,038 5,834,893 15,970,466
General and administrative 666,333 884,343 1,643,452 1,614,590
Interest expense 57,384 91,465 119,049 197,246
------------ ------------ ------------ ------------
Total operating expenses 3,659,962 8,799,846 7,597,394 17,782,302
Equity in net loss of Genomics Center 427,711 765,750
------------ ------------ ------------ ------------
Loss before cumulative effect of change
in accounting principle (3,189,652) (6,360,576) (6,712,025) (10,925,283)
------------ ------------ ------------ ------------
Cumulative effect of change in
accounting principle (364,388)
------------ ------------ ------------ ------------
Net loss (3,189,652) (6,360,576) (6,712,025) (11,289,671)
Accretion cost attributable to redeemable
convertible preferred stock (62,329) (123,973)
------------ ------------ ------------ ------------
Net loss attributable to common
stockholders $ (3,189,652) $ (6,422,905) $ (6,712,025) $(11,413,644)
============ ============ ============ ============
Per common share (basic and diluted):
Loss attributable to common stockholders
before cumulative effect of change
in accounting principle $ (.12) $ (.29) $ (.27) $ (.50)
Cumulative effect of change in accounting
principle (.02)
------------ ------------ ------------ ------------
Net loss $ (.12) $ (.29) $ (.27) $ (.52)
============ ============ ============ ============
Weighted average number of shares of
common stock outstanding 25,549,363 22,004,467 24,635,901 21,984,138
See notes to unaudited condensed consolidated financial statements.
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ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-----------------------------
2000 1999
------------- -------------
Cash flows from operating activities:
Net loss $ (6,712,025) $(11,289,671)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 654,107 1,836,170
Stock-based compensation 72,881 37,660
Increase (decrease) from:
Inventory and other 19,719 271,022
Due from Genomics Center (520,222)
Other assets (396,244) 131,618
Accounts payable (1,109,516) 567,465
Accrued liabilities (1,466,505) 457,918
Advance from Genomics Center (25,707) 629,192
------------ ------------
Net cash used in operating activities (8,963,290) (7,878,848)
------------ ------------
Cash flows from investing activities:
Acquisitions of marketable securities (16,502,653)
Proceeds from sales and maturities of marketable securities 4,000,000 5,369,000
Investment in Genomics Center (4,839,988)
Return of investment in Genomics Center 4,072,223
Investment in property and equipment, net (94,375) (454,680)
Acquisition of intangible assets (469,010) (468,774)
------------ ------------
Net cash (used in) provided by investing activities (13,066,038) 3,677,781
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of series B convertible preferred stock 5,747,000
Proceeds from related party long-term debt 1,228,049
Repayment of borrowings (600,000) (924,736)
Proceeds from sale/leaseback of equipment 308,753
Proceeds from issuance of common stock, net of issuance costs 7,539,323
Proceeds from exercise of common stock purchase warrants 11,637,772
Proceeds from issuance of stock pursuant to stock option and
purchase plans 4,250,021 136,634
------------ ------------
Net cash provided by financing activities 22,827,116 6,495,700
------------ ------------
Net increase in cash and equivalents 797,788 2,294,633
Cash and equivalents, beginning of period 28,319,870 6,501,648
------------ ------------
Cash and equivalents, end of period $ 29,117,658 $ 8,796,281
============ ============
See notes to unaudited condensed consolidated financial statements.
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ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. MANAGEMENT STATEMENT
In the opinion of the Company's management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial position as
of June 30, 2000 and the results of operations for the three month and six month
periods ended June 30, 2000 and 1999. These financial statements should be read
in conjunction with the Company's Annual Report on Form 10-K for the year ended
December 31, 1999, which includes consolidated financial statements and notes
thereto for the years ended December 31, 1999, 1998 and 1997.
The results of operations for the three month and six month period ended June
30, 2000 are not necessarily indicative of the results to be expected for the
full year.
2. MARKETABLE SECURITIES
The Company has classified its marketable securities as available for sale and
accordingly, carries such securities at aggregate fair value. At December 31,
1999, the Company held no marketable securities. At June 30, 2000, the aggregate
fair value was $12,639,302 and amortized cost was $12,640,793. Realized gains
and losses on sales of marketable securities were not material during the
quarter ended June 30, 2000; the net unrealized loss of $1,491 is included in
stockholders' equity at June 30, 2000.
3. INVENTORY
Inventories are carried at cost using the first in, first out method and are
charged to research and development expense when consumed. Inventory consists of
bulk pharmaceutical material to be used for multiple preclinical and clinical
drug development programs and amounted to $1,004,000 at June 30, 2000 and
$1,182,000 at December 31, 1999.
4. INTANGIBLE AND OTHER ASSETS
Intangible and other assets consist primarily of the cost of purchased patents,
patent applications, and deposits. The balance at December 31, 1999 included
$6,925,000 of cash subsequently expended on January 14, 2000 to repurchase
Series C Redeemable Convertible Preferred Stock (Note 8).
5. LONG-TERM DEBT
At June 30, 2000, the Company had outstanding with its principal bank a
five-year term loan in the amount of $2,500,000 maturing July 1, 2002. The bank
term note is collateralized by all assets of the Company. The Company may, at
its option, pledge marketable securities as collateral under the bank term note,
and in such event, the interest rate would be adjusted to the equivalent of
90-day LIBOR plus 1.25%.
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6. NET LOSS PER SHARE
Net loss per share amounts have been computed based on the weighted average
number of common shares outstanding during each period. Because of the net loss
reported in each period, diluted and basic per share amounts are the same. In
2000 and 1999, options, warrants and the effects of the conversion of
convertible preferred stock were not included in the computation of earnings per
share because this effect would be antidilutive.
7. HOECHST-ARIAD GENOMICS CENTER, LLC
From November 1995 through December 1999, substantially all of the Company's
research revenue and the majority of its research expenses were incurred in
collaboration or in partnership with Aventis Pharmaceuticals Inc. (formerly
known as Hoechst Marion Roussel, Inc.), ("Aventis") and its affiliates.
In November 1995, the Company entered into an agreement with Hoechst Marion
Roussel, S.A. to collaborate on the discovery and development of drugs to treat
osteoporosis and related bone diseases, one of the Company's signal transduction
inhibitor programs. In March 1997, the Company entered into an agreement, which
established a 50/50 joint venture, called the Hoechst-ARIAD Genomics Center, LLC
(the "Genomics Center"), with Aventis to pursue functional genomics with the
goal of identifying genes that encode novel therapeutic proteins and
small-molecule drug targets.
On December 31, 1999, the Company completed the sale of its 50% interest in the
Genomics Center to Aventis and received $40,000,000 in cash, the return of
3,004,436 shares of the Company's series B convertible preferred stock, the
forgiveness of $1,857,000 of long-term debt owed to Aventis, drug candidates and
related technologies resulting from a November 1995 Osteoporosis collaboration
agreement and the right to use certain genomics and bioinformatics technologies
developed by the Genomics Center. The Company recorded a net gain on the sale of
$46,440,000. As a result of this sale, the revenue generated from the
relationship with Aventis will not recur, and the Company expects to realize a
reduction of revenue in fiscal 2000 of at least $12,468,000, which will be
offset by an expected reduction in research and development expenses associated
with the Genomics Center of approximately $16,700,000.
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK
On January 14, 2000, the Company completed the repurchase of the remaining 3,000
shares of its Series C Redeemable Convertible Preferred Stock for an aggregate
consideration of $6,925,000 plus 1,078,038 shares of common stock. (Note 4).
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9. EQUITY FINANCING FACILITY
On June 27, 2000, the Company entered into an Equity Financing Facility (the
"Equity Facility") with Acqua Wellington North American Equities Fund, Ltd.
("Acqua Wellington"). Under the terms of the purchase agreement, the Company may
from time to time sell up to $75 million of its common stock to Acqua Wellington
over an 18 month period expiring in December, 2001. The Company agreed to issue
and sell the shares to Acqua Wellington at a per share price equal to the daily
volume weighted average price of the Company's common stock on each date during
a specified period during which the shares are purchased, less a discount of
between 3.5% and 6.0%, or under certain circumstances, less a discount mutually
agreed to by the parties. The discount is determined based on the threshold
price to be established by ARIAD for the applicable period.
10. REDEMPTION OF WARRANTS
The Company received additional funds aggregating $11.6 million from the
exercise of approximately 1.4 million of its publicly traded Warrants. The
Warrants, exercisable one for one, with an exercise price of $8.40 per share,
had been called for redemption effective April 27, 2000.
11. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. The new standard
requires that all companies record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. Management is
currently assessing the impact of SFAS No. 133 on the consolidated financial
statements of the Company. The Company will adopt this accounting standard, as
amended, on January 1, 2001, as required.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin 101, "Revenue Recognition in Financial Statements" ("SAB
101"), which provides guidance related to revenue recognition based on
interpretations and practices followed by the SEC. SAB 101 is effective in the
quarter ended December 31, 2000, and requires companies to report any changes in
revenue recognition as a cumulative effect of a change in accounting principle
at the time of implementation in accordance with Accounting Principles Board
Opinion No. 20, "Accounting Changes." The Company is currently assessing the
impact of SAB 101 on its financial position and results of operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a biopharmaceutical company focused on the discovery,
development and commercialization of proprietary platform technologies and
therapeutic products based on gene regulation and signal transduction. Our core
competencies in functional genomics, protein engineering and structure-based
drug design allow us to capitalize on the wealth of genetic information being
generated by government, academic and commercial laboratories. We apply this
expertise to the development of proprietary technology platforms that allow
manipulation of signal transduction, gene transcription, and protein secretion
events using small-molecule drugs. We believe that our ability to control the
activity of genes and proteins allows us to broadly apply discoveries in
genomics to the development of innovative therapeutic products.
AVENTIS RELATIONSHIP
From November 1995 through December 1999, substantially all of our research
revenue and the majority of our research expenses were incurred in collaboration
or in partnership with Aventis Pharmaceuticals Inc. (formerly known as Hoechst
Marion Roussel, Inc.) ("Aventis"), and its affiliates.
In November 1995, we entered into an agreement with Hoechst Marion Roussel, S.A.
to collaborate on the discovery and development of drugs to treat osteoporosis
and related bone diseases (the "1995 Osteoporosis Agreement"), one of our signal
transduction inhibitor programs. In March 1997, we entered into an agreement,
which established a 50/50 joint venture, called the Hoechst-ARIAD Genomics
Center, LLC (the "Genomics Center"), with Aventis to pursue functional genomics
with the goal of identifying genes that encode novel therapeutic proteins and
small-molecule drug targets.
On December 31, 1999, we completed the sale of our 50% interest in the Genomics
Center to Aventis and received $40,000,000 in cash, the return of 3,004,436
shares of our series B convertible preferred stock, the forgiveness of
$1,857,000 of long-term debt we owed to Aventis, drug candidates and related
technologies resulting from the 1995 Osteoporosis Agreement and the right to use
certain genomics and bioinformatics technologies developed by the Genomics
Center. We recorded a net gain on the sale of $46,440,000. As a result of this
sale, the revenue generated in our relationship with Aventis will not recur, and
we expect to realize a reduction of revenue from this relationship in fiscal
2000 of approximately $12,500,000, which will be offset by an expected reduction
in research and development expenses associated with the Genomics Center of
approximately $16,700,000.
GENERAL
Since our inception in 1991, we have devoted substantially all of our resources
to our research and development programs. We receive no revenue from the sale of
pharmaceutical products, and substantially all revenue to date has been received
in connection with our relationship with Aventis. Except for the gain on the
sale of the Genomics Center in
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December 1999, which resulted in net income for fiscal 1999, we have not been
profitable since inception. We expect to continue to incur substantial and
increasing operating losses for the foreseeable future, primarily due to the
expansion of our research and development programs and manufacturing and
clinical development. We expect that losses will fluctuate from quarter to
quarter and that these fluctuations may be substantial. As of June 30, 2000, we
had an accumulated deficit of $81,595,000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED WITH THE THREE MONTHS ENDED
JUNE 30, 1999
REVENUE
We recognized research revenue of $18,000 for the quarter ended June 30, 2000
compared to $2,724,000 for the same period in 1999. Research revenue in 2000 is
comprised principally of transitional research revenue services provided to
Aventis following the December 31, 1999 sale of our interest in the Genomics
Center. The decrease in research revenue for the quarter ending June 30, 2000,
when compared to the corresponding period in 1999 is due to the termination of
research services provided to the Genomics Center and the termination of
research revenue associated with the 1995 Osteoporosis Agreement. Research
revenue in 1999 is comprised principally of research revenue recognized under
the 1995 Osteoporosis Agreement and research services provided to the Genomics
Center.
Interest income increased by $309,000 to $452,000 for the quarter ended June 30,
2000 compared to $143,000 for the same period in 1999 primarily as a result of
higher levels of funds invested during the period.
OPERATING EXPENSES
Research and development expenses decreased to $2,936,000 for the quarter ended
June 30, 2000 compared to $7,824,000 for the same period in 1999 due primarily
to the termination of research services provided to the Genomics Center. We
expect our research and development expenses to decrease on a comparative basis
over the remainder of this year as a result of the termination of research
services provided to the Genomics Center.
General and administrative expenses decreased to $666,000 for the quarter ended
June 30, 2000 compared to $884,000 for the corresponding period in 1999
primarily due to decreased professional and legal services.
We incurred interest expense of $57,000 for the quarter ended June 30, 2000
compared to $91,000 for the corresponding period in 1999. The decrease resulted
from a lower level of long-term debt during the period.
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OPERATING RESULTS
We incurred losses of $3,190,000 for the quarter ended June 30, 2000 and
$6,361,000 for the corresponding period in 1999, or $.12 and $.29 per share,
respectively. We expect that substantial operating losses will continue for
several more years but will decrease on a comparative basis over the remainder
of this year as a result of the sale of our interest in the Genomics Center.
However, operating losses are expected to increase thereafter as our product
development activities expand and will fluctuate as a result of differences in
the timing and composition of revenue earned and expenses incurred.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH THE SIX MONTHS ENDED
JUNE 30, 1999
REVENUE
We recognized research revenue of $126,000 for the six months ended June 30,
2000 compared to $7,306,000 for the same period in 1999. Research revenue in
2000 is comprised principally of transitional research revenue services provided
to Aventis following the December 31, 1999 sale of our interest in the Genomics
Center. The decrease in research revenue for the six months ending June 30,
2000, when compared to the corresponding period in 1999 is due to the
termination of research services provided to the Genomics Center and the
termination of research revenue associated with the 1995 Osteoporosis Agreement.
Research revenue in 1999 is comprised principally of research revenue recognized
under the 1995 Osteoporosis Agreement and research services provided to the
Genomics Center. As a result of the sale of the Genomics Center and termination
of the 1995 Osteoporosis Agreement, we expect to realize a reduction in revenue
in fiscal 2000 of approximately $12,500,000 from the termination of our
relationship with Aventis.
Interest income increased by $443,000 to $759,000 for the six months ended June
30, 2000 compared to $316,000 for the same period in 1999 primarily as a result
of higher levels of funds invested during the period.
OPERATING EXPENSES
Research and development expenses decreased to $5,835,000 for the six months
ended June 30, 2000 compared to $15,970,000 for the same period in 1999 due
primarily to the termination of research services provided to the Genomics
Center as well as a lower level of manufacturing, development and other
preclinical development costs that had been incurred in the prior period. We
expect our research and development expenses to continue to decrease over the
remainder of this year on a comparative basis as a result of the termination of
research services provided to the Genomics Center.
General and administrative expenses increased slightly to $1,643,000 for the six
months ended June 30, 2000 compared to $1,615,000 for the corresponding period
in 1999 primarily due to increased professional and legal services incurred
principally in connection with the repurchase and retirement of the remaining
outstanding series C convertible preferred stock which was offset partially by a
reduction in personnel expenses.
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We incurred interest expense of $119,000 for the six months ended June 30, 2000
compared to $197,000 for the corresponding period in 1999. The decrease resulted
from a lower level of long-term debt during the period.
OPERATING RESULTS
We incurred losses of $6,712,000 for the six months ended June 30, 2000 and
$11,290,000 for the corresponding period in 1999, or $.27 and $.52 per share,
respectively. We expect that substantial operating losses will continue for
several more years but will decrease over the remainder of the year as a result
of the sale of our interest in the Genomics Center. However, operating losses
are expected to increase thereafter as our product development activities expand
and will fluctuate as a result of differences in the timing and composition of
revenue earned and expenses incurred.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations and investments primarily through the private
placement and public offering of our securities, including the sale of series C
preferred stock to investors and the sale of series B preferred stock to Aventis
as well as the exercise of stock options and warrants, supplemented by the
issuance of long-term debt, operating and capital lease transactions, interest
income, government-sponsored research grants, research revenue under the 1995
Osteoporosis Agreement, research revenue under the terms of our services
agreements with the Genomics Center and, in December 1999, the sale to Aventis
of our 50% interest in the Genomics Center.
On June 27, 2000 we entered into a definitive agreement with Acqua Wellington
North American Equities Fund, Ltd. ("Acqua Wellington") for an equity financing
facility providing for the sale from time to time of up to $75,000,000 of the
Company's common stock over an eighteen month period. In addition, on June 27,
2000 we sold to Acqua Wellington 680,851 shares of common stock for $8,000,000
in a direct equity placement at $11.75 per share.
At June 30, 2000, we had cash and marketable securities totaling $41,757,000 and
working capital of $38,750,000 compared to cash and cash equivalents totaling
$28,320,000 and working capital of $22,730,000 at December 31, 1999.
The primary uses of cash during the six months ended June 30, 2000 were
$8,963,000 to finance our operations and working capital requirements,
$16,503,000 to purchase marketable securities, $94,000 to purchase laboratory
equipment, $600,000 to repay long-term debt, and $469,000 to acquire
intellectual property. The primary source of funds during the six months ended
June 30, 2000, were $4,000,000 for the sales and maturities of marketable
securities, $11,638,000 from the exercise of warrants, $4,250,000 from the
exercise of stock options and $7,539,000 from the issuance of common stock, net
of issuance costs.
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We have substantial fixed commitments under various research and licensing
agreements, consulting and employment agreements, lease agreements and long-term
debt instruments. These fixed commitments currently aggregate in excess of
$4,600,000 per year and may increase. We will require substantial additional
funding for our research and development programs, including preclinical
development and clinical trials, for operating expenses, for the pursuit of
regulatory clearances and for establishing manufacturing, marketing and sales
capabilities. Adequate funds for these purposes, whether obtained through
financial markets or collaborative or other arrangements with collaborative
partners, or from other sources, may not be available when needed or on terms
acceptable to us.
We believe that our available funds will be adequate to satisfy our capital and
operating requirements at least through the next two years. However, there can
be no assurance that changes in our research and development plans or other
events affecting our revenues or operating expenses will not result in the
earlier depletion of our funds.
SECURITIES LITIGATION REFORM ACT
Safe harbor statement under the Private Securities Litigation Reform Act of
1995: Except for the historical information contained in this Quarterly Report
on Form 10-Q, the matters discussed herein are forward-looking statements that
involve risks and uncertainties, including but not limited to risks and
uncertainties regarding our ability of the Company to succeed in developing
marketable drugs or generating product revenues, our ability to accurately
estimate the actual research and development expenses and other costs associated
with the preclinical and clinical development of our products, the success of
our preclinical studies, our ability to commence clinical studies, the adequacy
of our capital resources and the availability of additional funding, as well as
general economic, competitive, governmental and technological factors affecting
our operations, markets, products, services and prices, and other factors
discussed under the heading "Cautionary Statement Regarding Forward-Looking
Statements" in our Annual Report on Form 10-K for the year ended December 31,
1999 which has been filed with the Securities and Exchange Commission. As a
result of these or other factors, actual events or results could differ
materially from those described herein.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We own financial instruments that are sensitive to market risks as part of our
investment portfolio. The investment portfolio is used to preserve our capital
until it is required to fund operations, including our research and development
activities. Our marketable securities consist of U.S. Treasuries and other
government securities, commercial and corporate paper and corporate notes.
Substantially all investments mature within one year, are not callable by the
issuer and have fixed interest rates and are available for sale. These
investments are subject to interest rate risk, and could decline in value if
interest rates fluctuate. Due to the conservative nature of our marketable
securities, we do not believe that we have a material exposure to interest rate
risk.
At June 30, 2000, we have an outstanding bank term note with an interest rate of
prime plus 1%. This note is sensitive to interest rate risk. In the event of a
hypothetical 10% increase in
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the prime rate, or 95 basis points, we would incur approximately $24,000 of
additional interest expense per year.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders was held on June 8, 2000. Of 25,968,118
shares of common stock issued and outstanding and eligible to vote as of the
record date of April 27, 2000, a quorum of 20,901,615 shares or 80.48% of the
eligible shares were present in person or represented by proxy.
The following actions were taken at such meeting:
(a) Re-election of the following Class 3 Directors:
Number of Shares
----------------------------------
For Withheld Authority
---------- ------------------
Harvey J. Berger, M.D. 20,818,532 83,083
Vaughn D. Bryson 20,829,446 72,169
Sanford D. Smith 20,827,298 74,317
Raymond S. Troubh 20,822,256 79,359
ITEM 5. OTHER INFORMATION
On June 8, 2000, the Board of Directors of the Company adopted the Restated
By-laws of the Company in the form previously filed with the Securities and
Exchange Commission and incorporated by reference elsewhere in this Form 10-Q.
Also on June 8, 2000, the Board of Directors of the Company adopted a new Rights
Agreement, dated as of June 8, 2000 (the "Rights Agreement"), between the
Company and State Street Bank and Trust Company, as Rights Agent, and approved
the declaration of a dividend distribution of one Preferred Share Purchase Right
(a "Right") on each outstanding share of its Common Stock. In general, the
Rights become exercisable if a person or group hereafter acquires 15% or more of
the Common Stock of the Company or announces a tender offer for 15% or more of
the Common Stock. The Board of Directors will, in general, be entitled to redeem
the Rights at one cent per Right at any time before any such person hereafter
acquires 15% or more of the outstanding Common Stock. The Rights Agreement was
previously filed with the Securities and Exchange Commission and is incorporated
by reference elsewhere in this Form 10-Q.
On June 27, 2000, the Company entered into two common stock purchase agreements
for the sale of up to an aggregate of 3,480,851 shares of Common Stock. The
shares had been registered pursuant to an effective Registration Statement on
Form S-3. Pursuant to one common stock purchase agreement, the Company has
issued 680,851 shares of
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Common Stock to Acqua Wellington North American Equities Fund, Ltd. ("Acqua
Wellington") at a purchase price of $11.75 per share for a total purchase price
of $8,000,000. The Company may sell up to an additional 2,800,000 shares of
Common Stock, at a small discount to the market price, to Acqua Wellington
pursuant to another common stock purchase agreement for up to an additional
$75,000,000. The common stock purchase agreements were previously filed with the
Securities and Exchange Commission and are incorporated by reference elsewhere
in this Form 10-Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed herewith:
EXHIBIT
NO. TITLE
------- -----
3.1 Restated By-laws of the Company, as amended. (Filed as Exhibit
4.2 to the Company's Registration Statement on Form S-3
(Registration No. 333-38664) filed with the Securities and
Exchange Commission and incorporated herein by reference.)
4.1 Rights Agreement, dated as of June 8, 2000, between the
Company and State Street Bank and Trust Company, which
includes the Form of Certificate of Designations in respect of
the Series A Preferred Stock, as Exhibit A, the Form of Right
Certificate as Exhibit B and the Summary of Rights to Purchase
Series A Preferred Stock as Exhibit C. (Previously filed and
incorporated by reference to Form 8-A of the Company filed
with the Securities and Exchange Commission on June 19, 2000.)
10.1 Common Stock Purchase Agreement, dated as of June 27, 2000, by
and between the Company and the Purchaser named therein.
(Filed as Exhibit 10.1 to the Company's Form 8-K filed with
the Securities and Exchange Commission on July 7, 2000 and
incorporated herein by reference.)
10.2 Common Stock Purchase Agreement, dated as of June 27, 2000, by
and between the Company and Acqua Wellington North American
Equities Fund, Ltd. (Filed as Exhibit 10.2 to the Company's
Form 8-K filed with the Securities and Exchange Commission on
July 7, 2000 and incorporated herein by reference.)
10.3+ Executive Employment Agreement, dated May 1, 1992, Fourth
Amendment to Employment Agreement dated June 8, 2000, Third
Amendment to Employment Agreement dated January 1, 1999, and
Amendments to Employment Agreements dated January 1, 1997 and
March 2, 1994 between ARIAD Pharmaceuticals, Inc. and John Iuliucci,
Ph.D.
10.4+ Executive Employment Agreement dated August 1, 1993, Third
Amendment to Employment Agreement dated June 8, 2000, and
Amendments to Employment Agreements dated January 1, 1997 and
March 2, 1994 between ARIAD Pharmaceuticals, Inc. and David L.
Berstein, J.D.
27.1 Financial Data Schedule
- -----------
+ Management Contract or Compensatory Plan or Arrangement
(b) Reports on Form 8-K
The Company filed two Current Reports on Form 8-K during the quarter ended June
30, 2000.
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The first Form 8-K, dated March 27, 2000 and filed on April 4, 2000, reported
that the Company called for redemption all of its outstanding common stock
purchase warrants.
The second Form 8-K, dated June 8, 2000 and filed on June 19, 2000, reported
that the Company adopted a new Rights Agreement between it and State Street Bank
and Trust Company, as Rights Agent, and approved the declaration of a dividend
distribution of one Preferred Share Purchase Right on each outstanding share of
its Common Stock.
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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.
ARIAD Pharmaceuticals, Inc.
(Registrant)
By: /s/ Jay R. LaMarche
----------------------------------
Jay R. LaMarche
Executive Vice President and
Chief Financial Officer
(Duly authorized Officer and Principal
Financial Officer)
Date: August 10, 2000
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EXHIBIT INDEX
Exhibit
No. Title
------- -----
3.1 Restated By-laws of the Company, as amended. (Filed as Exhibit
4.2 to the Company's Registration Statement on Form S-3
(Registration No. 333-38664) filed with the Securities and
Exchange Commission and incorporated herein by reference.)
4.1 Rights Agreement, dated as of June 8, 2000, between the
Company and State Street Bank and Trust Company, which
includes the Form of Certificate of Designations in respect of
the Series A Preferred Stock, as Exhibit A, the Form of Right
Certificate as Exhibit B and the Summary of Rights to Purchase
Series A Preferred Stock as Exhibit C. (Previously filed and
incorporated by reference to Form 8-A of the Company filed
with the Securities and Exchange Commission on June 19, 2000.)
10.1 Common Stock Purchase Agreement, dated as of June 27, 2000, by
and between the Company and the Purchaser named therein.
(Filed as Exhibit 10.1 to the Company's Form 8-K filed with
the Securities and Exchange Commission on July 7, 2000 and
incorporated herein by reference.)
10.2 Common Stock Purchase Agreement, dated as of June 27, 2000, by
and between the Company and Acqua Wellington North American
Equities Fund, Ltd. (Filed as Exhibit 10.2 to the Company's
Form 8-K filed with the Securities and Exchange Commission on
July 7, 2000 and incorporated herein by reference.)
10.3+ Executive Employment Agreement, dated May 1, 1992, Fourth
Amendment to Employment Agreement dated June 8, 2000, Third
Amendment to Employment Agreement dated January 1, 1999, and
Amendments to Employment Agreements dated January 1, 1997 and
March 2, 1994 between ARIAD Pharmaceuticals, Inc. and John Iuliucci,
Ph.D.
10.4+ Executive Employment Agreement dated August 1, 1993, Third
Amendment to Employment Agreement dated June 8, 2000, and
Amendments to Employment Agreements dated January 1, 1997 and
March 2, 1994 between ARIAD Pharmaceuticals, Inc. and David L.
Berstein, J.D.
27.1 Financial Data Schedule
- ----------
+ Management Contract or Compensatory Plan or Arrangement.
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