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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 MARCH 31, 1996
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 0-28494
MILLENNIUM PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3177038
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
640 MEMORIAL DRIVE, CAMBRIDGE, MA 02139
(Address of principal executive offices, including zip code)
617-679-7000
(Registrant's telephone number, including area code)
COMMON STOCK, $.001 PAR VALUE
(Title of Class)
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 No x
--- ---
Number of shares of Common Stock outstanding as of June 18, 1996 was 23,812,678.
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MILLENNIUM PHARMACEUTICALS, INC.
REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
TABLE OF CONTENTS
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PAGE
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PART I - FINANCIAL INFORMATION 3
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Condensed Balance Sheets
March 31, 1996 and December 31, 1995 3
Condensed Statements of Operations
for the three months ended
March 31, 1996 and 1995 4
Condensed Statements of Cash Flows
for the three months ended
March 31, 1996 and 1995 5
Notes to Condensed Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION 11
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 2. CHANGES IN SECURITIES 11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 11
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 12
EXHIBIT INDEX 13
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PART I - FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS.
MILLENNIUM PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED) (NOTE)
ASSETS
Current assets:
Cash and cash equivalents $ 8,766,672 $10,586,260
Short-term investments 9,070,644 7,260,284
Prepaid expenses and other current assets 1,428,876 694,763
----------- -----------
Total current assets 19,266,192 18,541,307
Property and equipment, net 6,212,131 4,905,528
Due from strategic partner 1,533,338 1,463,333
Deposits and other assets 404,561 194,682
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$27,416,222 $25,104,850
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,506,926 $ 1,122,446
Accrued expenses 781,557 567,611
Deferred revenue 1,114,184 3,110,000
Current portion of long-term debt 1,600,000 1,600,000
Current portion of capital lease obligations 1,813,334 1,643,168
----------- -----------
Total current liabilities 6,816,001 8,043,225
Long-term debt, net 1,066,667 1,466,667
Capital lease obligations, net 2,408,919 2,499,088
Stockholders' equity:
Series A,B,C and D Convertible Preferred Stock, $0.001 par value:
14,000,000 shares authorized; 12,172,221 shares in 1996 and
11,783,333 shares in 1995 issued and outstanding ($25,950,000
aggregate liquidation preference)
12,172 11,783
Common Stock, $0.001 par value: 25,000,000 shares authorized;
6,148,420 shares in 1996 and 4,211,926 shares in 1995 issued
and outstanding 6,148 4,212
Additional paid-in capital 30,040,208 22,722,267
Deferred compensation (3,095,530) -
Note receivable from officer (320,513) (266,681)
Accumulated deficit (9,517,850) (9,375,711)
----------- -----------
Total stockholders' equity 17,124,635 13,095,870
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Total liabilities and stockholders' equity $27,416,222 $25,104,850
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<FN>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See notes to condensed financial statements.
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Millennium Pharmaceuticals, Inc.
Condensed Statements of Operations (Unaudited)
THREE MONTHS ENDED
MARCH 31,
1996 1995
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Revenue under strategic alliances $ 7,558,316 $ 2,500,000
Costs and expenses:
Research and development 6,633,649 3,867,346
General and administrative 1,265,396 772,413
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7,899,045 4,639,759
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Loss from operations (340,729) (2,139,759)
Interest income 419,919 89,192
Interest expense (221,329) (249,957)
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Net loss $ (142,139) $(2,300,524)
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Net loss per share $ (0.01) $ (0.12)
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Shares used in computing net loss
per share 19,167,206 19,150,695
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See notes to condensed financial statements.
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Millennium Pharmaceuticals, Inc.
Condensed Statements of Cash Flows
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
1996 1995
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CASH USED IN OPERATIONS $(1,958,368) $(4,373,885)
INVESTING ACTIVITIES
Purchase of property and equipment (1,330,300) (658,357)
Sale of short-term investments 7,711,712 -
Purchase of short-term investments (9,522,072) -
----------- -----------
Net cash used in investing activities (3,140,660) (658,357)
FINANCING ACTIVITIES
Proceeds from sale of Preferred Stock 3,499,992 2,250,000
Proceeds from sale of Common Stock 633,820 1,552
Repurchase of Common Stock (829) -
Payments of long-term debt (400,000) -
Payment on capital lease obligations (453,543) (162,966)
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Net cash provided by financing activities 3,279,440 2,088,586
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Decrease in cash and cash equivalents (1,819,588) (2,943,656)
Cash and cash equivalents at beginning of period 10,586,260 6,105,468
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Cash and cash equivalents at end of period $ 8,766,672 $ 3,161,812
=========== ===========
NON-CASH ACTIVITIES:
Equipment acquired under capital leases $ 418,137 $ 352,245
=========== ===========
Deferred compensation $ 3,187,283 -
=========== ===========
See notes to condensed financial statements.
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MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
1 - BASIS OF PRESENTATION
The accompanying condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Interim results for the three-month period ended March 31, 1996 are
not indicative of the results that may be expected for the year ended December
31, 1996. For further information, refer to the financial statements and
footnotes thereto included in the Company's Form S-1 filed on May 6, 1996.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standard (SFAS) No. 121, "Accounting for the Impairment of Long-
Lived Assets to be Disposed of." The adoption of the new standard had no effect
on the financial statements.
Effective January 1, 1996, the Company adopted SFAS No. 123 "Accounting
and Disclosure of Stock-Based Compensation." As allowed under the SFAS, the
Company has elected to continue to follow Accounting Principals Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (AFB 25) in accounting for
its employee stock options. The adoption of the standard had no effect on the
financial statements.
2 - NET LOSS PER SHARE
Net loss per share is computed using the weighted-average number of
outstanding shares of Common Stock and Common Stock equivalents, assuming
conversion of Series A, B, C and D Convertible Preferred Stock into Common Stock
(as of their original date of issuance), which occurred upon the closing of the
Company's initial public offering on May 10, 1996 and the exercise of stock
options and warrants (using the treasury stock method). Common Stock equivalents
are excluded from the computation when their effect is anti-dilutive; however,
pursuant to the requirements of the Securities and Exchange Commission, Common
Stock equivalent shares relating to stock options and warrants (using the
treasury stock method and an initial public offering price of $12.00 per share)
and Convertible Preferred Stock issued during the twelve month period prior to
the initial public offering are included for both periods presented whether or
not anti-dilutive.
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3 - STOCKHOLDERS' EQUITY
In February 1996, the Company issued 388,888 shares of Series D
Convertible Preferred Stock to a private institutional investor at $9.00 per
share and received net proceeds of approximately $3,500,000. The rights and
privileges of the Series D stock are substantially consistent with previously
issued convertible preferred stock series. The Series D stock converted into
Common Stock upon the closing of the Company's initial public offering on May
10, 1996.
4 - SUBSEQUENT EVENT
In May 1996, the Company completed an initial public offering of
5,175,000 shares of common stock at $12.00 per share (including the sale of
675,000 shares sold to the underwriters pursuant to an over-allotment option
granted to the underwriters by the Company). The Company received proceeds, net
of underwriting discounts and commissions, of approximately $57,753,000. The
proceeds of the offering are being used for research and development, working
capital and general corporate purposes.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Overview
- --------
The Company was incorporated in January 1993 and has devoted
substantially all of its resources to the development and application of
genetics, genomics and bioinformatics technology used to identify the genes
responsible for major diseases, as well as comprehensive technologies to
elucidate the role of these genes in disease initiation and progression. To
date, all of the Company's revenue has resulted from payments from strategic
partners and the Company has not received any revenue from the sale of products
or services.
The Company has entered into several strategic alliances: in March 1994
with Roche in obesity and type II diabetes; in October 1995 and March 1996 with
Lilly in atherosclerosis and select areas of oncology, respectively; and in
December 1995 with Astra in inflammatory respiratory diseases. These agreements
have provided the Company with various combinations of equity investments,
up-front and follow-on fees and research funding and may provide certain
additional payments upon the attainment of research and regulatory milestones
and royalty and/or profit sharing payments based on sales of any products
resulting from the collaborations. Revenue recognized under these collaborations
through March 31, 1996 has aggregated approximately $38,401,000.
Although the Company intends to enter into additional strategic
alliances, it also expects to incur increasing expenses and additional losses
for at least the next several years, primarily due to expansion of its research
and development programs. Payments under strategic alliance and licensing
arrangements will be subject to significant fluctuation in both timing and
amounts resulting in periods of profitability and periods of losses; therefore,
the Company's results of operations for any period may not be comparable to the
results of operations for any other period.
Results of Operations
- ---------------------
Quarters Ended March 31, 1996 and March 31, 1995
------------------------------------------------
Revenue under strategic alliances increased to $7,558,316 for the three
months ended March 31, 1996 (the "1996 Period") from $2,500,000 for the three
months ended March 31, 1995 (the "1995 Period"). The increase for the 1996
Period was due to strategic alliance revenue from three partners - Hoffman
La-Roche, Inc., Eli Lilly and Company, and Astra AB - compared with revenue in
the 1995 Period from only Hoffman La-Roche, Inc. Effective March 1996, Lilly
exercised its option to enter into a strategic alliance in select areas of
oncology. In connection with the execution of this agreement, the Company
recognized $2,750,000 of revenue that had been previously deferred.
Research and Development expenses increased to $6,633,649 for the three
months ended March 31, 1996 from $3,867,346 for the three months ended March 31,
1995. The increase was primarily attributable to increased payroll and personnel
expenses as the Company hired additional research and development personnel,
increased purchase of laboratory supplies, increased equipment
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depreciation and facilities expenses in connection with the expansion of the
Company's research efforts and increased costs associated with the collection of
patient information and DNA samples. The Company expects research and
development expenses to continue to increase as personnel and research and
development facilities are expanded to accommodate the Company's existing
strategic alliances. Such expenses will also increase to the extent that the
Company enters into additional strategic alliances with third parties.
General and administrative expenses increased to $1,265,396 for the
three months ended March 31, 1996 from $772,413 for the three months ended March
31, 1995. The increase was primarily attributable to increased payroll and
personnel expenses as the Company hired additional management and administrative
personnel, and professional fees in connection with the overall scale-up of the
Company's operations and business development efforts. It is anticipated that
general and administrative expenses will continue to increase as the Company
continues to expand its operations.
The Company had net interest income of $198,590 for the three months
ended March 31, 1996 and net interest expense of $160,765 for the three months
ended March 31, 1995. The transition to net interest income was due to increased
interest income earned on higher balances of cash and investment securities.
The Company has recorded a non-cash charge of approximately $3,200,000
relating to compensation expense associated with the grant of options between
January 1, 1996 and May 2, 1996 to purchase 1,174,447 shares of Common Stock.
For the period ended March 31, 1996 the Company recognized approximately $91,000
of such compensation expense. The remaining deferred compensation will be
recognized ratably over the vesting period of the options, which is generally
four years.
Liquidity and Capital Resources
- -------------------------------
The Company has financed its operations since inception primarily
through strategic alliances, private placement of equity securities, issuance of
debt and capital leases. Through March 31, 1996 the Company recognized
approximately $38,401,000 of revenue under strategic alliances. The private
placement of equity securities has provided the Company with aggregate gross
proceeds of approximately $25,950,000 including approximately $3,500,000 in
February 1996 from the sale of 388,888 shares of Series D Convertible Preferred
Stock. The Company has obtained $4,000,000 in long-term debt and $6,888,000 in
capital lease financings. In February 1996 the Company entered into a $1,100,000
loan agreement to finance the build-out of an 8,000 square foot in-house animal
facility. In conjunction with the loan agreement, the Company issued a warrant
for 44,000 shares of Series C Convertible Preferred Stock at $6.00 per share. In
May 1996 the Company drew down approximately $700,000 on this line. In May 1996
the Company completed an initial public offering of common stock resulting in
proceeds, net of underwriting discounts, of $57,753,000. As of March 31, 1996,
the Company had approximately $17,837,000 in cash, cash equivalents and
short-term investments.
The Company believes that existing cash and investment securities,
anticipated cash flow from its current strategic alliances, and net proceeds
from the initial public offering in May 1996 will be sufficient to support the
Company's operations for at least the next 24 months. The Company's actual
future cash
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requirements, however, will depend on many factors, including progress of its
disease research programs, the number and breadth of these programs, achievement
of milestones under strategic alliance arrangements, the ability of the Company
to establish and maintain additional strategic alliance and licensing
arrangements, and the progress of the development efforts of the Company's
strategic partners. These factors also include the level of the Company's
activities relating to commercialization rights it has retained in its strategic
alliance arrangements, competing technological and market developments, the
costs associated with the collection of patient information and DNA samples, the
costs involved in obtaining and enforcing patent claims and other intellectual
property rights, and the costs and timing of regulatory approvals. The Company
expects that it will require significant additional financing in the future,
which it may seek to raise through public or private equity offerings, debt
financings, or additional strategic alliance and licensing arrangements. No
assurance can be given that additional financing or strategic alliance and
licensing arrangements will be available when needed or that, if available, such
financing will be obtained on terms favorable to the Company or its
stockholders. The Company's forecast of the period of time through which its
financial resources will be adequate to support its operations is
forward-looking information, and, as such, actual results may vary.
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PART II - OTHER INFORMATION
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Item 1. Legal Proceedings.
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None
Item 2. Changes in Securities.
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None
Item 3. Defaults Upon Senior Securities.
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None
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
None
Item 5. Other Information.
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None
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
The exhibits listed in the Exhibit Index are included in this report.
(b) Reports on form 8-K
None
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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.
MILLENNIUM PHARMACEUTICALS, INC.
(Registrant)
Date: June 20, 1996 By: /s/ Mark J. Levin
------------------------------------
Mark J. Levin
Chief Executive Officer (Principal
Executive Officer)
Date: June 20, 1996 By: /s/ Harry F. Arader, Jr.
------------------------------------
Harry F. Arader, Jr.
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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EXHIBIT INDEX
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The following exhibits are filed as part of this Quarterly Report on
Form 10-Q:
Exhibit
No. Description
- ------- -----------
4.1 Restated Certificate of
Incorporation of the Registrant
4.2 Restated By-laws of the Registrant
11.1 Statement Regarding Computation
of Per Share Earnings
27 Financial Data Schedule
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