UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] 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 0-23155
TRIMERIS, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1808663
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4727 University Drive
Durham, North Carolina 27707
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (919) 419-6050
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. [x] Yes [ ] No
The number of shares outstanding of the registrant's common stock as of
May 12, 2000 was 15,649,259.
Trimeris, Inc.
Amendment No. 1 on Form 10-Q/A to the Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2000.
This Amendment No. 1 on Form 10-Q/A is being filed in order to restate
the Company's financial statements as of, and for the quarterly periods ended,
March 31, 1999 and 2000, and for the cumulative period from inception (January
7, 1993) to March 31, 2000, as described below.
Under the terms of the Company's agreement with F. Hoffman -La Roche
Ltd., or Roche, Roche made a cash payment in the amount of $10 million to the
Company in July 1999, and in connection therewith the Company granted to Roche a
warrant to purchase 362,000 shares of common stock at a purchase price of
$20.72 per share. The Company also received reimbursement from Roche in 1999 for
clinical trial drug inventory subsequently consumed. The Company is restating
its financial statements as of, and for the quarterly period ended, March 31,
2000 and for the cumulative period from inception (January 7, 1993) to March 31,
2000, to:
o reflect a reduction in revenue, and corresponding increase in
stockholders' equity, equal to the fair value of this
warrant at the grant date,
o retroactively apply Staff Accounting Bulletin No. 101,
resulting in amortization of the initial payment from Roche,
net of the fair value of the warrants granted to Roche, over
the research and development term of the Roche agreement, and
o reflect a change in accounting for the reimbursement received
from Roche in 1999 for clinical trial drug inventory
subsequently consumed. This reimbursement is now being
reflected as a reduction in research and development expense
solely in the quarter ended September 30, 1999, and does not
reduce research and development expense in any other quarter.
The Company is also restating its financial statements as of, and for
the quarterly periods ended March 31, 1999 and 2000 and for the cumulative
period from inception (January 7, 1993) to March 31, 2000 to reflect a change in
accounting for stock options issued to non-employees in accordance with Emerging
Issues Task Force (EITF) 96-18, "Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services." As a result of this change in accounting, the measurement
date used to calculate non-cash compensation expense incurred by the Company for
stock options granted to non-employees is considered to be the date when all
services are rendered.
The items amended are as follows:
Part I Item 1. Financial Statements
Part I Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II Item 6. Exhibits and Reports on Form 8-K
No other items have been amended.
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 No. 1 on Form 10-Q/A
to be signed on its behalf by the undersigned, thereunto duly authorized.
Trimeris, Inc.
-------------------
(Registrant)
March 30, 2001 /s/ DANI P. BOLOGNESI
--------------------------------
Dani P. Bolognesi, Ph.D.
Chief Executive Officer
and Chief Scientific Officer
(principal executive officer)
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
TRIMERIS, INC.
(A Development Stage Company)
BALANCE SHEETS
(in thousands, except par value)
December 31, March 31,
1999 2000
---- ----
(restated) (unaudited)
(restated)
Assets
Current assets:
Cash and cash equivalents $ 37,023 $ 88,863
Short-term investments 10,775 16,447
Accounts receivable - Roche 144 3,014
Accounts receivable 24 12
Prepaid expenses 268 369
----------- ----------
Total current assets 48,234 108,705
Property, furniture and equipment, net 2,585 2,576
----------- ----------
Other assets:
Patent costs, net 643 795
Equipment deposits 188 205
----------- ----------
Total other assets 831 1,000
----------- ----------
Total assets $ 51,650 $ 112,281
=========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 6,159 $ 4,749
Current installments of capital lease obligations 717 809
Accrued compensation 1,028 799
Deferred revenue - Roche -- 840
Accrued expenses 3,474 3,495
------------- ----------
Total current liabilities 11,378 10,692
Obligations under capital leases, excluding current installments 1,206 1,270
Deferred revenue - Roche -- 3,130
----------- ----------
Total liabilities 12,584 15,092
----------- ----------
Commitments and contingencies
Stockholders' equity:
Series A, B, C, and D preferred stock at $.001 par value per share,
10,000 shares authorized, zero shares issued and outstanding at
December 31, 1999 and March 31, 2000 (unaudited) -- --
Common Stock at $.001 par value per share, 30,000
shares authorized, 13,765 and 15,648 shares issued
and outstanding at December 31, 1999 and
March 31, 2000 (unaudited) 14 16
Additional paid-in capital 112,908 187,248
Deficit accumulated during the development stage (71,298) (87,845)
Deferred compensation (2,453) (2,189)
Notes receivable from stockholders (105) (41)
------------ -----------
Net stockholders' equity 39,066 97,189
----------- ----------
Total liabilities and stockholders' equity $ 51,650 $ 112,281
============ ==========
See accompanying notes to financial statements.
1
TRIMERIS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Cumulative
Three Months from Inception
Ended March 31, (January 7, 1993)
------------------ to March 31,
1999 2000 2000
---- ---- ----
(restated) (restated) (restated)
Revenue $ 81 $ 210 $ 5,844
-------- -------- --------
Operating expenses:
Research and development:
Non-cash compensation 246 3,504 6,692
Other research and development expense 3,871 5,042 60,748
-------- -------- --------
Total research and development expense 4,117 8,546 67,440
-------- -------- --------
General and administrative:
Non-cash compensation 170 3,606 6,925
Other general and administrative expense 1,583 1,637 19,355
-------- -------- --------
Total general and administrative expense 1,753 5,243 26,280
-------- -------- --------
Total operating expenses 5,870 13,789 93,720
-------- -------- --------
Operating loss (5,789) (13,579) (87,876)
-------- -------- --------
Other income (expense):
Interest income 231 1,266 5,456
Interest expense (42) (54) (1,245)
-------- -------- --------
Total other income (expense) 189 1,212 4,211
-------- -------- --------
Net loss before cumulative effect of change
in accounting principle $ (5,600) $(12,367) $(83,665)
Cumulative effect of change in accounting
principle -- (4,180) (4,180)
-------- -------- --------
Net loss $ (5,600) $(16,547) $(87,845)
======== ======== ========
Basic net loss per share:
Before cumulative effect of accounting change $ (0.52) $ (0.83)
Accounting change -- (0.28)
-------- --------
Basic net loss per share $ (0.52) $ (1.11)
======== ========
Weighted average shares used in per share
computations 10,677 14,942
======== ========
See accompanying notes to financial statements.
2
TRIMERIS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
(restated)
Cumulative
Three Months Ended From Inception
March 31, (January 7, 1993)
--------------------- to March 31,
1999 2000 2000
---- ---- ----
Cash flows from operating activities:
Net loss $(5,600) $ (16,547) $(87,845)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 183 340 3,924
Other amortization 5 - 83
Amortization of deferred revenue - Roche -- (210) (210)
Non-cash compensation expense 416 7,110 13,617
401(K) plan stock match - - 528
Provision for equipment held for resale - - 61
Stock issued for consulting services - - 5
Stock issued to repay interest on notes to stockholders - - 195
Debt issued for research and development - - 194
Cumulative effect of change in accounting principle - 4,180 4,180
Loss on disposal of property and equipment - - 16
Changes in operating assets and liabilities:
Accounts receivable and loans to employees 22 12 (12)
Accounts receivable - Roche - (2,870) (3,014)
Prepaid expenses (12) (101) (369)
Other assets (5) (17) (205)
Accounts payable (789) (1,410) 4,749
Accrued compensation 327 (229) 799
Accrued expenses (354) 21 3,405
-------- --------- --------
Net cash used by operating activities (5,807) (9,721) (59,899)
-------- ---------- ---------
Cash flows from investing activities:
Sales (purchases) of short-term investments (895) (5,672) (16,447)
Purchases of property and equipment (306) - (1,504)
Equipment held for resale - - (61)
Organization costs - - (8)
Patent costs (7) (152) (816)
-------- ---------- ---------
Net cash used by investing activities (1,208) (5,824) (18,836)
-------- ---------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes payable - - 6,150
Lease costs - - (13)
Principal payments under capital lease obligations (127) (175) (2,933)
Proceeds from issuance of Common Stock - - 31
Proceeds from issuance of Preferred Stock - - 23,896
Proceeds from stock offerings, net - 66,570 132,459
Proceeds from exercise of stock options 29 926 2,102
Proceeds from employee stock purchase plan exercise - - 475
Repayment of notes receivable from stockholders 24 64 227
Warrant issuance -- -- 5,400
Stock issuance costs - - (196)
------- --------- ---------
Net cash provided (used) by financing activities (74) 67,385 167,598
-------- --------- --------
Net increase (decrease) in cash and cash equivalents (7,089) 51,840 88,863
Cash and cash equivalents, beginning of period 16,920 37,023 -
------- --------- --------
Cash and cash equivalents, end of period $ 9,831 $ 88,863 $ 88,863
======= ========= ========
See accompanying notes to financial statements.
3
TRIMERIS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
Trimeris, Inc. (the "Company") was incorporated on January 7, 1993 to
discover and develop novel therapeutic agents that block viral infection by
inhibiting viral fusion with host cells. These financial statements have been
prepared in accordance with Statement of Financial Accounting Standards No. 7,
"Accounting and Reporting by Development Stage Enterprises," to recognize the
fact that the Company is devoting substantially all of its efforts to
establishing a new business and planned principal operations have not commenced.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles and applicable
Securities and Exchange Commission regulations for interim financial
information. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission rules and regulations. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of financial position and results of operations have been
made. Operating results for interim periods are not necessarily indicative of
results which may be expected for a full year. The information included in this
Form 10-Q should be read in conjunction with the Risk Factors and Management's
Discussion and Analysis of Financial Condition and Results of Operations
sections and the 1999 financial statements and notes thereto included in the
Company's 1999 Form 10-K/A filed with the Securities and Exchange Commission on
March 30, 2001.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
The financial statements for the three months ended March 31, 2000 have been
restated to reflect a reduction in revenue with a corresponding increase in
additional paid-in capital for the $5.4 million fair value of a warrant issued
to Roche in July 1999, and a change in accounting for reimbursement received
from Roche in 1999 for clinical trial drug inventory subsequently consumed. The
financial statements for the three months ended March 31, 1999 and 2000 have
also been restated to reflect a change in accounting for stock options issued to
non-employees in accordance with Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123") and Emerging
Issues Task Force (EITF) Issue No. 96-18, Accounting for Equity Instruments That
Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services. In addition, Staff Accounting Bulletin No. 101 has
been applied retroactively to January 1, 2000 as the cumulative effect of a
change in accounting principle resulting in deferral and amortization of the
initial $10 million payment from Roche, net of the $5.4 million fair value of
the warrant, over the research and development term of the Roche agreement. The
cumulative period from inception (January 7, 1993) to March 31, 2000 has also
been restated for these items.
The net impact of the restatements described above increased net loss for the
three months ended March 31, 1999 by $233,000 or $0.02 per share, increased net
loss for the three months ended March 31, 2000 by $7.1 million or $0.47 per
share, and increased the cumulative net loss from inception (January 7, 1993) to
March 31, 2000 by $15.4 million. In addition, the cumulative effect of the
change in accounting principle, net of current period amortization, increased
net loss by $3.9 million or $0.27 per share for the three months ended March 31,
2000.
4
2. BASIC NET INCOME (LOSS) PER SHARE
In accordance with SFAS No. 128, "Earnings Per Share" ("SFAS No. 128"),
basic loss per common share is calculated by dividing net loss by the
weighted-average number of common shares outstanding for the period after
certain adjustments described below. Diluted net income per common share
reflects the maximum dilutive effect of common stock issuable upon exercise of
stock options, stock warrants, and conversion of preferred stock. Diluted net
loss per common share is not shown, as common equivalent shares from stock
options, and stock warrants, would have an antidilutive effect. At March 31,
2000 there were 1,707,000 options to purchase common stock outstanding and a
warrant to purchase 362,000 shares of common stock outstanding.
3. STATEMENTS OF CASH FLOWS
Interest of approximately $42,000 and $54,000 was paid during the three
months ended March 31, 1999 and 2000, respectively. Capital leases of $0 and
$331,000 were incurred for the three months ended March 31, 1999 and 2000,
respectively for the purchase of new furniture and equipment.
4. PUBLIC OFFERINGS OF STOCK
In October 1997, the Company closed its initial public offering of common
stock at $12 per share. The net proceeds of the offering, including the proceeds
received in connection with the exercise of the Underwriters' over-allotment
option which closed in November 1997, were approximately $34.5 million after
deducting applicable issuance costs and expenses. In connection with the public
offering, all the outstanding preferred stock was converted into 6,261,615
shares of the Company's common stock.
In June 1999, the Company closed a public offering of common stock at $11.75
per share. The net proceeds of the offering, including the proceeds received in
connection with the exercise of the Underwriters' over-allotment option, were
approximately $31.4 million after deducting applicable issuance costs and
expenses.
In February 2000, the Company closed a private placement of 1.75 million
shares of common stock at $40.50 per share. The net proceeds of the offering
were approximately $66.6 million after deducting applicable issuance costs and
expenses.
5. STOCK SPLIT
Effective July 11, 1997, the Company declared a one for eight and one-half
reverse stock split for common stockholders. This stock split has been
retroactively applied and all periods presented have been restated.
6. ROCHE COLLABORATION
In July 1999, the Company announced an agreement with F. Hoffmann-La Roche
Ltd to develop and market T20 and T1249 worldwide. In the United States and
Canada, the Company and Roche will share equally development expenses and
profits for the two fusion inhibitors. Outside of these two countries, Roche
will fund all development costs and pay the Company royalties on net sales of
these products. Roche made an initial cash payment to the Company of $10 million
and will provide up to an additional $58 million in cash and funding upon
achievement of developmental, regulatory and commercial milestones. In
accordance with Staff Accounting Bulletin No. 101, the initial cash payment, net
of the $5.4 million fair value of the warrant granted to Roche, is being
amortized into revenue over the research and development term of the Roche
agreement.
5
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion of our financial condition and the results of operations
should be read together with the financial statements and notes contained
elsewhere in this Form 10-Q. Certain statements in this section and other
sections are forward-looking. While we believe these statements are accurate,
our business is dependent on many factors, some of which are discussed in the
"Risk Factors" and "Business" sections of our 1999 Form 10-K filed with the
Securities and Exchange Commission on March 29, 2000. These factors include, but
are not limited to: that we are an early stage company with an uncertain future;
that we have never made money and expect our losses to continue; that we will
need to raise additional funds in the near future; that our quarterly operating
results are subject to fluctuations and you should not rely on them as an
indication of our future results; that we are heavily dependent on our lead
product candidate, T20; that our success in commercializing T20 and T1249 is
dependent on our relationship with Roche; that we face many uncertainties
relating to our human clinical trial results and clinical trial strategy; that
HIV may develop resistance to our drug candidates; that we have no experience
manufacturing pharmaceutical products; that we face risks associated with
manufacturing T20 and T1249; that our business is based on novel technology and
is highly risky and uncertain; that we are dependent on third-party contract
research organizations; that we have no sales, marketing or distribution
capabilities; that our stock price is highly volatile; that we depend on
collaborations and licenses with others; that there is uncertainty relating to
third-party reimbursement and health care reform measures which could limit the
amount we will be able to charge for our products; that there is uncertainty
regarding patents and proprietary rights; that we are subject to extensive
government regulation; that our products may not receive regulatory approval;
that we face intense competition; that we use hazardous materials; that we are
exposed to product liability risks; that we depend upon certain key personnel
and face risks relating to our ability to attract and retain key personnel; that
future sales of common stock by our existing stockholders could adversely affect
our stock price; that we have implemented certain anti-takeover provisions; and
that our actual results could differ materially from those anticipated in our
forward-looking statements. Many of these factors are beyond our control and any
of these and other factors could cause actual results to differ materially from
the forward-looking statements made in this 10-Q. The results of our previous
clinical trials are not necessarily indicative of the results of future clinical
trials. We undertake no obligation to release publicly the results of any
revisions to the statements contained in this Form 10-Q to reflect events or
circumstances that occur subsequent to the date hereof.
Overview
We began our operations in January 1993 and are a development stage
company. Accordingly, we have a limited operating history. Since our inception,
substantially all of our resources have been dedicated to:
o the development, patenting, preclinical testing and clinical trials of T20,
o the development of a manufacturing process for T20,
o production of drug material for future clinical trials, and
o research and development and preclinical testing of other potential product
candidates.
We have lost money since inception and, as of March 31, 2000, had an
accumulated deficit of approximately $87.8 million. We have received revenue
only from federal small business innovative research grants, otherwise known as
SBIR grants, an investigative contract, and an initial collaboration payment
from Roche, and have not generated any revenue from product sales or royalties.
We may never generate any revenue from product sales or royalties.
6
Development of current and future drug candidates will require significant
additional, time-consuming and costly research and development, preclinical
testing and extensive clinical trials prior to submission of any regulatory
application for commercial use. We expect to incur substantial losses for the
foreseeable future and expect losses to increase as our research and
development, preclinical testing, drug production and clinical trial efforts
expand. The amount and timing of our operating expenses will depend on many
factors, including:
o the status of our research and development activities,
o product candidate discovery and development efforts, including preclinical
testing and clinical trials,
o the timing of regulatory actions,
o the costs involved in preparing, filing, prosecuting, maintaining, protecting
and enforcing patent claims and other proprietary rights,
o our ability to work with Roche to manufacture, develop, sell, market and
distribute T20 and T1249,
o technological and other changes in the competitive landscape,
o changes in our existing research and development relationships and strategic
alliances,
o evaluation of the commercial viability of potential product candidates, and
o other factors, many of which are outside of our control.
As a result, we believe that period-to-period comparisons of our financial
results in the future are not necessarily meaningful. The past results of
operations and results of previous clinical trials should not be relied on as an
indication of future performance. If we fail to meet the clinical and financial
expectations of securities analysts and investors, it could have a material
adverse effect on the market price of our common stock. Our ability to achieve
profitability will depend, in part, on our own or our collaborative partner's
ability to successfully develop and obtain regulatory approval for T20 or T1249
and other product candidates, and our ability to develop the capacity, either
internally or through relationships with third parties, to manufacture, sell,
market and distribute approved products, if any. We may never generate
significant revenues or achieve profitable operations.
7
Results of Operations
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1999 AND 2000
REVENUE. Total revenue increased from $81,000 for the three months ended March
31, 1999 to $210,000 for the three months ended March 31, 2000. Total revenue
for the three months ended March 31, 1999 was entirely derived from SBIR grants.
Total revenue for the three months ended March 31, 2000 represents the
amortization of the $10 million initial collaboration payment from Roche, net of
the $5.4 million value assigned to the warrant issued to Roche, over the
research and development term of the agreement.
RESEARCH AND DEVELOPMENT EXPENSES. Total net research and development expenses
were $4.1 million and $8.5 million for the three months ended March 31, 1999 and
2000, respectively. Gross research and development expenses increased during the
three months ended March 31, 2000 because we:
o continued three Phase II clinical trials for T20,
o initiated a fourth Phase II clinical trial for T20,
o continued a Phase I clinical trial for T1249,
o continued manufacturing process development and purchase of drug material from
third party manufacturers to supply future clinical trials, and
o increased the number of our personnel to support these activities.
Non-cash compensation expense increased from $246,000 for the three months ended
March 31, 1999 to $3.5 million for the three months ended March 31, 2000 due to
the effect that increases in the market value of our stock during the quarter
ended March 31, 2000 had on the calculation of this expense under EITF 96-18 for
stock options granted to non-employees. Total research and development expenses
include gross research and development expenses less Roche's share of
development costs for T-20 and T-1249. Under our collaboration agreement we and
Roche shared the development costs for T-20 and T-1249 incurred during the three
months ended March 31, 2000.
Total research personnel were 41 and 55 at March 31, 1999 and 2000,
respectively. We expect research and development expenses, net of the
reimbursements for T20 and T1249 development costs from Roche, to increase
substantially in the future due to:
o continued preclinical research and testing of product candidates,
o expanded clinical trials for T20, T1249 and other product candidates,
o the manufacture of drug material for these trials, and
o increased number of personnel to support these activities.
GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative expenses
were $1.8 million and $5.2 million for the three months ended March 31, 1999 and
2000, respectively. During 1999 we made a non-recurring accrual of severance
costs for our former chief executive officer. Total expenses increased during
the three months ended March 31, 2000 because in 2000 we:
o initiated several market research studies which are shared equally with Roche,
o expensed deferred compensation relating to stock options granted to
consultants during 1999,
o added personnel to support our growth, and
o incurred professional fees to support our growth.
8
Non-cash compensation expense increased from $170,000 for the three months ended
March 31, 1999 to $3.6 million for the three months ended March 31, 2000 due to
the effect that increases in the market value of our stock during the quarter
ended March 31, 2000 had on the calculation of this expense under EITF 96-18 for
stock options granted to non-employees. We expect administrative expenses to
increase in the future to support the anticipated expansion of product
development activities.
OTHER INCOME (EXPENSE). Other income (expense) consists of interest income and
expense. Total other income was $189,000 and $1.2 million for the three months
ended March 31, 1999 and 2000, respectively. The increase was due to increased
interest income because of higher cash and investment balances during the three
months ended March 31, 2000 due to our stock offerings closed in June 1999 and
February 2000.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through the
private placement of equity securities, the issuance of notes to stockholders,
equipment lease financing, an initial public offering of common stock in October
1997, a public offering of common stock in June 1999, and a private placement of
common stock in February 2000. Net cash used by operating activities was $5.8
million and $9.7 million for the three months ended March 31, 1999 and 2000,
respectively. The cash used by operating activities was used primarily to fund
research and development relating to T20, T1249, and other product candidates,
and increased for the three months ended March 31, 2000 because of increased
research and development activities. Cash used by investing activities was $1.2
million and $5.8 million for the three months ended March 31, 1999 and 2000,
respectively. The increase for the three months ended March 31, 2000 was due to
the purchase of short-term investments as a result of our public offering of
common stock in February 2000.
As of March 31, 2000, we had $105.3 million in cash and cash equivalents
and short-term-investments, compared to $47.8 million as of December 31, 1999.
The increase is primarily a result of the closing of a private placement of
common stock in February 2000, which resulted in net proceeds of approximately
$66.6 million, less cash used by operating activities.
We have experienced negative cash flows from operations since our inception
and do not anticipate generating sufficient positive cash flows to fund our
operations in the foreseeable future. Although we expect to receive
reimbursement for 50% of the development costs for T20 and T1249 from Roche, we
have expended, and expect to continue to expend in the future, substantial funds
to pursue our product candidate and compound discovery and development efforts,
including:
o expenditures for clinical trials of T20, T1249 and other product candidates,
o research and development and preclinical testing of other product candidates,
o manufacture of drug material, and
o the development of our proprietary technology platform.
As of March 31, 2000, we had commitments of approximately $29.0 million to
purchase product candidate materials and fund various clinical studies over the
next fifteen months. Substantially all of these expenditures will be shared
equally by Roche under our collaborative agreement. Under this collaborative
agreement, we are obligated to share equally the future development expenses for
T20 and T1249 for the United States and Canada. We also expect to have capital
expenditures of approximately $2.5 million during the remainder of 2000. Our
share of these expenditures may be financed with capital or operating leases,
debt or working capital. We expect that our existing capital resources, together
with the interest earned thereon, will be adequate to fund our capital
requirements through 2000. We believe that substantial additional funds will be
required after 2000.
9
If adequate funds are not available, we will be required to delay,
scale-back or eliminate certain preclinical testing, clinical trials and
research and development programs, including our collaborative efforts with
Roche. In addition, we will be required to obtain additional funds, which may be
raised through equity or debt financings. If we raise funds by selling equity,
our stockholders' interest may be diluted. Any debt financings may contain
restrictive terms that limit our operating flexibility. Additionally or
alternatively, we may have to attempt to obtain funds through arrangements with
new or existing collaborative partners. These partners may require us to
relinquish rights to our technologies or product candidates or to reduce our
share of potential profits. This could have a material adverse effect on our
business, financial condition or results of operations.
Our future capital requirements and the adequacy of available funds will
depend on many factors, including the availability of funds from Roche under our
collaboration agreement, the results of clinical trials relating to T20 and
T1249, the progress and scope of our product development programs, the magnitude
of these programs, the results of preclinical testing and clinical trials, the
need for additional facilities based on the results of these clinical trials and
other product development programs, changes in the focus and direction of our
product development programs, the costs involved in preparing, filing,
processing, maintaining, protecting and enforcing patent claims and other
intellectual property rights, competitive factors and technological advances,
the cost, timing and outcome of regulatory reviews, changes in the requirements
of the FDA, administrative and legal expenses, evaluation of the commercial
viability of potential product candidates and compounds, the establishment of
capacity, either internally or through relationships with third parties, for
manufacturing, sales, marketing and distribution functions, and other factors,
many of which are outside of our control.
Factors That May Affect Future Results and Financial Condition
Clinical Development
The following discussion highlights certain aspects of our on-going and
planned clinical development programs. The results of our previous clinical
trials are not necessarily indicative of the results of future clinical trials.
T20
We are developing T20, our first drug candidate for HIV fusion inhibition,
which has been granted fast track designation by the FDA. T20 is currently in
Phase II clinical trials.
Ongoing T20 Clinical Trials
Phase II -- T20-205. T20-205 is a Phase II trial initiated in March
1999 in which T20 was given in combination with oral anti-HIV drugs to 71 HIV-1
infected adults who had received T20 during earlier trials. Fifty mg of T20 was
given twice daily via subcutaneous injection. Combinations of the oral anti-HIV
drugs were individualized to each patient and were chosen based on genotypic
analysis evaluating patients' resistance to anti-HIV medications. In January
2000, we extended T20-205 beyond the initial 48 week duration because patients
in the trial appeared to continue receiving clinical benefit. Patients will
continue to receive T-20 therapy at their election, as long as they show
clinical benefit. Additional data from this trial is expected during 2000.
Phase II -- T20-204. In November 1999, in collaboration with the
Division of AIDS of the National Institute for Allergy and Infectious Diseases,
or NIAID, we initiated a clinical trial to evaluate the safety and
pharmacokinetics of T20 in children living with HIV infection. The trial will be
managed by the Pediatric AIDS Clinical Trial Group, or PACTG, and has been
designated as a fast-track study within the PACTG system.
The study is designed to investigate the safety, tolerability and
pharmacokinetics of T20 in pediatric patients. The trial is conducted in two
parts and will enroll up to twelve pediatric patients ages 3 to 12. The first
part examines safety parameters to establish a well-tolerated pediatric dose
that provides target concentrations of T-20 in the blood. The second part
evaluates the safety and tolerability of T20 in combination with other anti-HIV
drugs over a 24-week period. In this study, T20 is administered via subcutaneous
injections twice daily in conjunction with other oral anti-HIV drugs.
10
Phase II -- T20-206. In June 1999, we initiated T20-206, a Phase II
clinical trial for T20 that will assess the antiviral activity and long-term
safety of T-20 when used in combination with other anti-HIV drugs. T20-206
evaluates four groups of patients over a one-year period with planned interim
analyses. Three different doses of T20 will be combined with a background
regimen of amprenavir, efavirenz, ritonavir and abacavir. The control group will
receive the background regimen without T20. T20-206 will enroll approximately 68
HIV-infected individuals at several sites in the United States. At entry in the
trial, all enrolled patients will have prior exposure to nucleoside reverse
transcriptase inhibitors and protease inhibitors, but no prior exposure to
non-nucleoside reverse transcriptase inhibitors. The trial is fully enrolled and
data from an interim analysis of this trial is expected during 2000.
Phase II - T20-208. In March 2000, we initiated T20-208, a Phase II
clinical trial for T20 that will evaluate alternative formulations of T20, which
could lead to a simpler dosing regimen. The trial is designed to enroll
approximately 60 patients in the United States, and will evaluate two
formulations of T20 compared to the formulation presently used in other ongoing
clinical trials. All three formulations will be given as twice daily
subcutaneous injections in combination with oral anti-HIV agents selected for
each patient on an individualized basis.
Future T-20 Clinical Trials
Throughout the remainder of 2000, we expect to initiate additional
Phase II trials. We expect to begin a pivotal trial during 2000.
Pivotal Trial. Based on the results of the Phase II trials, we intend
to begin a pivotal trial during 2000 in a larger population of HIV-infected
patients who are either resistant to, or intolerant of, currently-approved
anti-HIV drugs. Historically, pivotal trials of this type involving anti-HIV
drugs have included approximately 300 to 400 patients and have taken
approximately 18 months to complete.
T1249
We are also developing T1249, our second drug candidate for HIV fusion
inhibition, which has been granted fast track designation by the FDA. T1249 is
currently in a Phase I clinical trial.
Phase I - T1249-101
In July 1999, we initiated T1249-101, a Phase I clinical trial designed
to assess the safety and pharmacokinetics of T1249. Three different daily doses
of T1249 will be administered as monotherapy for 14 days to HIV-infected adults
by once or twice daily subcutaneous injection. T1249-101 will enroll
approximately 60 HIV-infected individuals at several sites in the United States.
At entry, these patients will have received no other anti-HIV drugs for at least
two weeks prior to entering the study. This trial is fully enrolled and ongoing,
and we expect data from this trial to be available during 2000.
Risk Factors
Our business is subject to certain risks and uncertainties. Please read the
"Risk Factors" and "Business" sections of our 1999 Form 10-K filed with the
Securities and Exchange Commission on March 29, 2000, which highlight some of
these risks. If any of these risks materialize, our business, financial
condition and results of operations could be materially adversely affected.
11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits filed as part of this Quarterly Report on Form 10-Q
are listed on the Exhibit Index immediately preceding such
exhibits and such list is incorporated herein by reference.
(b) Reports on Form 8-K
We filed a report on Form 8-K on January 28, 2000 under Item 5
describing our plans to complete a private placement of our common
stock to new and current shareholders in order to raise net
proceeds of up to approximately $65 million.
We filed a report on Form 8-K on February 4, 2000 under Item 5
announcing the closing of a private placement of 1,750,000 shares
of common stock to new and current shareholders at a price per
share of $40.50.
We filed a report on Form 8-K on April 3, 2000 under Item 5
describing certain changes in management. On April 3, 2000,
Dr. M. Nixon Ellis was appointed Executive Vice President and
Chief Business Officer, and Mr. Robert Bonczek was appointed
Chief Financial Officer.
12
EXHIBIT INDEX
Number Description
- ------ -----------
10.1* Employment Agreement between Trimeris, Inc. and M. Nixon Ellis
dated March 31, 2000
11.1 Computations of Basic Loss Per Share
27.1 Financial Data Schedule
* Incorporated by reference to Trimeris' Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000