UNITED STATES
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, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
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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 11,
2001 was 17,353,770.
TRIMERIS, INC.
(A Development Stage Company)
FORM 10-Q
For the Three Months Ended March 31, 2001
INDEX
PART 1. FINANCIAL INFORMATION Page
- ------------------------------------ ----
Item 1. Financial Statements
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Balance Sheets as of March 31, 2001 (unaudited) and
December 31, 2000 1
Statements of Operations (unaudited) for the Three Months Ended
March 31, 2001 and 2000 and Period From
Inception (January 7, 1993) Through March 31, 2001 2
Statements of Cash Flows (unaudited) for the Three Months Ended
March 31, 2001 and 2000 and Period From
Inception (January 7, 1993) Through March 31, 2001 3
Notes to Financial Statements (unaudited) 4
Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations 6
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Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
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PART 2. OTHER INFORMATION
- --------------------------------
Item 1. Legal Proceedings 14
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Item 2. Changes in Securities and Use of Proceeds 14
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Item 3. Defaults Upon Senior Securities 14
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Item 4. Submission of Matters to a Vote of Security Holders 14
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Item 5. Other Information 14
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Item 6. Exhibits and Reports on Form 8-K 14
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Signature Page 16
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Exhibit Index 17
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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,
2000 2001
----------- ----------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 31,349 $ 24,217
Short-term investments 62,025 51,522
Accounts receivable 4 3
Prepaid expenses 393 417
----------- ----------
Total current assets 93,771 76,159
Property, furniture and equipment, net 3,983 3,767
----------- ----------
Other assets:
Patent costs, net 924 1,036
Equipment deposits 255 246
----------- ----------
Total other assets 1,179 1,282
----------- ----------
Total assets $ 98,933 $ 81,208
=========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 3,476 $ 1,777
Accounts payable - Roche 9,556 7,877
Current installments of capital lease obligations 1,174 1,134
Accrued compensation 1,359 1,046
Deferred revenue - Roche 1,304 1,307
Accrued expenses 2,904 2,994
------------- ----------
Total current liabilities 19,773 16,135
Obligations under capital leases, excluding current installments 1,861 1,688
Deferred revenue - Roche 3,920 3,591
----------- ----------
Total liabilities 25,554 21,414
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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,
2000 and March 31, 2001 (unaudited) -- --
Common Stock at $.001 par value per share, 60,000
shares authorized, 15,863 and 15,951 shares issued
and outstanding at December 31, 2000 and
March 31, 2001 (unaudited) 16 16
Additional paid-in capital 196,844 197,571
Deficit accumulated during the development stage (122,154) (133,826)
Deferred compensation (1,394) (4,095)
Accumulated other comprehensive income 76 137
Notes receivable from stockholders (9) (9)
------------ -----------
Net stockholders' equity 73,379 59,794
----------- ----------
Total liabilities and stockholders' equity $ 98,933 $ 81,208
============ ==========
See accompanying notes to financial statements.
1
TRIMERIS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Cumulative
from Inception
Three Months (January 7, 1993)
Ended March 31, to March 31,
---------------------
2000 2001 2001
---------- --------- -----------
Revenue $ 210 $ 326 $ 6,916
---------- --------- -----------
Operating expenses:
Research and development:
Non-cash compensation 3,504 (3,276) 5,298
Other research and development expense 5,042 13,836 102,512
---------- --------- -----------
Total research and development expense 8,546 10,560 107,810
---------- --------- -----------
General and administrative:
Non-cash compensation 3,606 490 10,827
Other general and administrative expense 1,637 2,306 28,139
---------- --------- -----------
Total general and administrative expense 5,243 2,796 38,966
---------- --------- -----------
Total operating expenses 13,789 13,356 146,776
---------- --------- -----------
Operating loss (13,579) (13,030) (139,860)
---------- --------- -----------
Other income (expense):
Interest income 1,266 1,403 11,707
Interest expense (54) (45) (1,493)
---------- --------- -----------
Total other income (expense) 1,212 1,358 10,214
---------- --------- -----------
Net loss before cumulative effect of change
in accounting principle $ (12,367) $ (11,672) $ (129,646)
Cumulative effect of change in accounting
principle (4,180) -- (4,180)
---------- --------- -----------
Net loss $ (16,547) $ (11,672) $ (133,826)
========== ========= ===========
Basic net loss per share:
Before cumulative effect of accounting change $ (0.83) $ (0.73)
Accounting change (0.28) --
--------- ---------
Basic net loss per share $ (1.11) $ (0.73)
========= =========
Weighted average shares used in per share
computations 14,942 15,914
========= ==========
See accompanying notes to financial statements.
2
TRIMERIS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Cumulative
From Inception
Three Months Ended (January 7, 1993)
March 31, to March 31,
---------------------
2000 2001 2001
--------- --------- -----------
Cash flows from operating activities:
Net loss $ (16,547) $ (11,672) $ (133,826)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 340 442 5,394
Other amortization - 7 116
Amortization of deferred revenue - Roche (210) (326) (1,282)
Non-cash compensation expense 7,110 (2,786) 16,125
401(K) plan stock match - - 914
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 12 1 (3)
Accounts receivable - Roche (2,870) - -
Prepaid expenses (101) (24) (417)
Other assets (17) 9 (246)
Accounts payable (1,410) (1,699) 1,777
Accounts payable - Roche - (1,679) 7,877
Accrued compensation (229) (313) 1,046
Accrued expenses 21 90 2,904
Deferred revenue - Roche - - 2,000
---------- --------- -----------
Net cash used by operating activities (9,721) (17,950) (92,970)
---------- --------- -----------
Cash flows from investing activities:
Sales (purchases) of short-term investments (5,672) 10,564 (51,385)
Purchases of property and equipment - (226) (2,446)
Equipment held for resale - - (61)
Organization costs - - (8)
Patent costs (152) (119) (1,090)
--------- ---------- -----------
Net cash provided (used) by investing activities (5,824) 10,219 (54,990)
--------- ---------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable - - 6,150
Lease costs - - (13)
Principal payments under capital lease obligations (175) (213) (3,909)
Proceeds from issuance of Common Stock 66,570 - 132,294
Proceeds from issuance of Preferred Stock - - 23,896
Proceeds from sale of options - - 2,796
Proceeds from exercise of stock options 926 812 4,495
Proceeds from employee stock purchase plan exercise - - 809
Repayment of notes receivable from stockholders 64 - 259
Warrant issuance - - 5,400
--------- --------- -----------
Net cash provided by financing activities 67,385 599 172,177
--------- --------- -----------
Net increase (decrease) in cash and cash equivalents 51,840 (7,132) 24,217
Cash and cash equivalents, beginning of period 37,023 31,349 -
--------- --------- -----------
Cash and cash equivalents, end of period $ 88,863 $ 24,217 $ 24,217
========= ========= ===========
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 2000 financial statements and notes thereto included in the
Company's 2000 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on April 2, 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.
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, 2001 there were
1,914,000 options to purchase common stock outstanding and 362,000 warrants to
purchase common stock outstanding.
3. STATEMENTS OF CASH FLOWS
Interest of approximately $54,000 and $45,000 was paid during the three
months ended March 31, 2000 and 2001, respectively. Capital leases of $331,000
and $0 were incurred for the three months ended March 31, 2000 and 2001,
respectively for the purchase of new furniture and equipment.
4
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. ROCHE COLLABORATION
In July 1999, the Company announced an agreement with F. Hoffmann-La Roche
Ltd to develop and market T-20 and T-1249 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
during 1999 and a milestone payment of $2 million in 2000. Roche will provide up
to an additional $56 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.
6. SUBSEQUENT EVENT
In May 2001, the Company closed a private placement of approximately 1.4
million shares of common stock at $33.00 per share. The net proceeds of the
offering were approximately $43.4 million after deducting applicable issuance
costs and expenses.
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 2000 Annual Report on Form 10-K
filed with the Securities and Exchange Commission on April 2, 2001. 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, T-20; that the success of T-20 depends
on the results of our Phase III clinical trials currently in progress; that our
success in commercializing T-20 and T-1249 depends on our relationship with
Roche; that we face many uncertainties relating to our human clinical trial
results and clinical trial strategy; that we have no experience manufacturing
pharmaceutical products; that we face risks associated with manufacturing T-20
and T-1249; that HIV may develop resistance to our drug candidates; 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, health care reform
measures, and recent developments in Africa 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 our products may not achieve market acceptance; 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 or key management 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 T-20
and T-1249,
o the development of a manufacturing process for T-20 and T-1249,
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, 2001, had an
accumulated deficit of approximately $133.8 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 and
a milestone 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 T-20 and T-1249,
o technological and other changes in the competitive landscape,
o changes in our existing or research and development relationships and
strategic alliances,
o development of any future research and development relationships or 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 T-20 or
T-1249 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, 2000 AND 2001
REVENUE. Total revenue increased from $210,000 for the three months ended March
31, 2000 to $326,000 for the three months ended March 31, 2001. 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. Total revenue for the three months ended March 31, 2001
includes this amortization and amortization of a $2.0 million milestone payment
received from Roche in 2000.
RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses were
$8.5 million and $10.6 million for the three months ended March 31, 2000 and
2001, respectively. Gross research and development expenses excluding non-cash
compensation charges increased from $5.0 million during the three months ended
March 31, 2000 to $13.8 million during the three months ended March 31, 2001
because we:
o continued two Phase III clinical trials for T-20,
o continued four Phase II clinical trials for T-20,
o continued a Phase I clinical trial for T-1249,
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 changed from $3.5 million in expense for the three months
ended March 31, 2000 to $3.3 million in expense reversal for the three months
ended March 31, 2001 primarily due to the effect that decreases in the market
value of our stock during the quarter ended March 31, 2001 had on the
calculation of this amount under 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" 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 incurred during the period from July 1, 1999 until March 31,
2001 for T-20 and T-1249 equally.
Total research personnel were 55 and 66 at March 31, 2000 and 2001,
respectively. We expect total research and development expenses, which are net
of the reimbursements for T-20 and T-1249 development costs from Roche, to
increase substantially in the future due to:
o expansion of the two Phase III clinical trials for T-20,
o expanded clinical trials for T-20, T-1249 and other product candidates,
o the manufacture of drug material for these trials,
o increased preclinical research and testing of potential product candidates,
and
o increased number of personnel to support these activities.
8
GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative expenses
were $5.2 million and $2.8 million for the three months ended March 31, 2000 and
2001, respectively. Expenses excluding non-cash compensation charges increased
from $1.6 million for the three months ended March 31, 2000 to $2.3 million for
the three months ended March 31, 2001 because in 2001 we:
o performed market research and pre-marketing activities which are shared
equally with Roche,
o added personnel to support our growth, and
o incurred professional fees to support our growth.
Non-cash compensation expense decreased from $3.6 million for the three months
ended March 31, 2000 to $490,000 for the three months ended March 31, 2001
primarily due to the effect that decreases in the market value of our stock
during the quarter ended March 31, 2001 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 $1.2 million and $1.4 million for the three
months ended March 31, 2000 and 2001, respectively. The increase was due to
increased interest income because of higher cash and investment balances during
the three months ended March 31, 2001 due to our stock offering, which closed in
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 $9.7
million and $18.0 million for the three months ended March 31, 2000 and 2001,
respectively. The cash used by operating activities was used primarily to fund
research and development relating to T-20, T-1249, and other product candidates,
and increased for the three months ended March 31, 2001 because of increased
research and development activities. Cash used by investing activities was $5.8
million for the three months ended March 31, 2000. Cash provided by investing
activities was $10.2 million for the three months ended March 31, 2001. The
amount used for the three months ended March 31, 2000 resulted from the purchase
of short-term investments as a result of our private placement of common stock
in February 2000. The amount provided for the three months ended March 31, 2001
resulted from the net sale of short-term investments to fund our operations.
As of March 31, 2001, we had $75.7 million in cash and cash equivalents and
short-term-investments, compared to $93.4 million as of December 31, 2000. The
decrease is primarily due to the $18.0 million used by operating activities
during the three months ended March 31, 2001.
In July 2000, we entered into a derivative transaction with a financial
institution that may be settled by selling up to 300,000 shares of our stock to
the financial institution at prices significantly higher than the market price
per share of our stock at the inception of the transaction. We received $2.8
million in proceeds that were accounted for as an increase to additional paid-in
capital in accordance with generally accepted accounting principles at the time
of the transaction. Concurrently, we entered into a second derivative
transaction with the same financial institution on shares of our common stock at
no net premium to either party. Under this transaction, we may elect to settle
by issuing up to 125,000 shares of our common stock to the financial institution
at prescribed prices significantly higher than the market price of our stock at
the date of the transaction and receive a net cash payment from the financial
institution. Alternatively, we have the option to settle these contracts by
making a cash payment to the financial institution for the underlying value of
the derivative contracts to the financial institution on the settlement date. We
intend to settle the contracts by issuing shares. In December 2000 these
contracts were amended to allow settlement in unregistered shares of our common
stock. All of these derivative transactions expire or mature in July 2001. The
financial institution has advised us that it has engaged and may continue to
engage in transactions, including the buying and selling of shares of our common
stock, to offset its risks related to these transactions, which may or may not
affect the market price of our stock.
9
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 T-20 and T-1249 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 T-20, T-1249 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, 2001, we had commitments of approximately $12.7 million to
purchase product candidate materials and fund various clinical studies over the
next 13 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 T-20 and
T-1249. We also expect to have capital expenditures of approximately $2.5
million during the remainder of 2001. Our share of these expenditures may be
financed with capital or operating leases, debt or working capital. In May 2001,
we closed a private placement of approximately 1.4 million shares of common
stock at a price of $33.00 per share. The net proceeds of the offering were
approximately $43.4 million after deducting applicable issuance costs and
expenses. We expect that our existing capital resources, together with the
interest earned thereon, will be adequate to fund our capital requirements
through 2001. We believe that substantial additional funds will be required
after 2001.
We will be required to obtain additional funds, which may be raised through
equity or debt financings. Since our initial public offering in 1997, we have
obtained the majority of our funding through public or private offerings of our
common stock. The public capital markets in which shares of our common stock are
traded have declined during the first quarter of 2001 and the general ability of
companies to obtain additional financing has become more difficult than in 2000.
If and when 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. If adequate
funds are not available through debt or equity financings, we may be required to
delay, scale-back or eliminate certain preclinical testing, clinical trials and
research and development programs, including our collaborative efforts with
Roche. 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 condition of public capital markets, the results of
clinical trials relating to T-20 and T-1249, 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.
10
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.
T-20
We are developing T-20, our first drug candidate for HIV fusion inhibition,
which has been granted fast track designation by the FDA. T-20 is currently in
Phase III clinical trials.
Ongoing T-20 Clinical Trials
Phase III -- T20-301. In November 2000, we began enrollment of T20-301, a
48-week Phase III clinical trial in North America, Mexico, and Brazil, that will
evaluate the safety and pharmacokinetics of T-20 in up to 525 HIV-infected
patients who had previously used all three classes of currently-approved
anti-HIV drugs. In this trial, patients will be randomly assigned to receive an
optimized background regimen of other anti-HIV drugs alone or in combination
with twice daily subcutaneous injection delivering 90 mg of T-20 each. The
background regimen will be optimized based on the genotype and phenotype of the
patient's virus. T20-301 is ongoing and we expect data from this trial to be
available in the future.
Phase III -- T20-302. In January 2001, we began enrollment of T20-302, a
48-week Phase III clinical trial in Western Europe and Australia. The protocol
for T20-302 is substantially similar to T20-301 and will also involve up to 525
HIV-infected patients.
Phase II -- T20-205. T20-205 is an ongoing Phase II trial that has been
extended beyond its initial 48-week protocol. This trial involves 71 patients
from earlier T-20 Phase I/II studies. In T20-205, 50 mg of T-20 is administered
via subcutaneous injection in combination with oral anti-HIV drugs. Combinations
of the oral anti-HIV drugs were optimized based on genotypic and phenotypic
analysis of each patient's virus.
At 48 weeks, 41 of the 71 patients were evaluated. No patients discontinued
this trial due to T-20 related toxicity, but 14 patients discontinued this trial
due to a virologic failure, or HIV viral load less than -0.5 log10 from baseline
at the beginning of the trial. At 48 weeks, 23 of 41 patients or 56% exhibited a
decrease in HIV viral load of more than 1.0 log(10) or less than 400 copies/ml,
and 16 of 41 patients or 39% had an HIV viral load below 400 copies/ml.
At 48 weeks, the patients continued to tolerate T-20. Data suggest that
T-20 in combination with other anti-HIV drugs may contribute to a lasting and
clinically relevant suppression of HIV in the blood in patients with extensive
prior anti-HIV treatment.
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 Phase I/II trial to evaluate the safety, tolerability and
pharmacokinetics of T-20 in children living with HIV infection. The trial is
managed by the Pediatric AIDS Clinical Trial Group, or PACTG, and has been
designated as a fast-track study within the PACTG system.
The trial is being conducted in two parts and has enrolled 12 pediatric
patients ages three to 12. The first part, week one, examined safety parameters
to establish a well-tolerated pediatric dose that provides target concentrations
of T-20 in the blood. The second part, conducted over a twenty-four week period,
evaluates the safety and tolerability of T-20 via twice daily subcutaneous
injections in combination with a background of other anti-HIV drugs selected for
each particular patient based on the patient's prior treatment history. Within
seven days of dosing with T-20 as an addition to an inactive anti-HIV therapy,
patients in the highest dose group had an average reduction in HIV viral load of
approximately 10 fold from baseline at the beginning of the trial. At eight
weeks, three of four patients in the lowest dose group and six of seven patients
in the highest dose group continued to maintain a similar reduction in HIV viral
load from baseline at the beginning of the trial. Data at the 12 week interim
analysis suggest that short-term subcutaneous dosing of T-20 is well tolerated
in pediatric patients.
11
Of the 12 patients enrolled in the trial, one patient withdrew due to an
aversion to the method of administration of T-20 via subcutaneous injection.
T20-204 is ongoing and the next analysis of data is scheduled to occur
based on 24-week data.
Phase II -- T20-206. In June 1999, we initiated T20-206, a 48 week Phase II
clinical trial for T-20 to assess the antiviral activity and long-term safety of
T-20 when used in combination with other anti-HIV drugs. The trial consists of
four treatment groups:
o arm A who received only the background regimen of 300 mg of abacavir twice
daily, 1200 mg of amprenavir twice daily, 200 mg of ritonavir twice daily,
600 mg of efavirenz once daily, and
o arms B, C and D who received 50mg, 75mg, and 100 mg, respectively, of T-20
via twice daily subcutaneous injection in addition to the background regimen.
T20-206 enrolled 71 HIV-infected individuals at several sites in the United
States. At entry in the trial, all enrolled patients had prior exposure to NRTIs
and PIs, but no prior exposure to NNRTIs.
In February 2001, we announced 16 week interim data from T20-206. At week
16, the median maximum reduction in HIV viral load from the viral load at the
beginning of the trial for all patients ranged from 2.16 log(10) or 99.3% to
2.84 log(10) or 99.9% across the T-20 treatment groups. The median maximum
reduction in HIV viral load for patients with HIV viral loads greater than
20,000 copies/microliter at the beginning of the trial was 2.64 log(10) or 99.8%
across the T-20 treatment groups versus 1.55 log(10) or 97.2% for the control
arm only. Data from 16 weeks suggest that T-20 is safe and active in combination
with other anti-HIV therapy.
T20-206 is ongoing and the next analysis of data is scheduled to occur
based on 48-week data.
Phase II - T-20-208. In March 2000, we initiated T-20-208, a Phase II
clinical trial for T-20 that will evaluate alternative formulations of T-20,
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 T-20 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 2001, we expect to initiate additional Phase II
trials.
T-1249
We are also developing T-1249, our second drug candidate for HIV fusion
inhibition, which has been granted fast track designation by the FDA. T-1249 is
currently in a Phase I clinical trial.
Phase I - T-1249-101
In July 1999, we initiated T1249-101, a Phase I/II clinical trial designed
to assess the safety and pharmacokinetics of T-1249. T1249-101 enrolled 72
HIV-infected individuals at several sites in the United States, with 61 patients
completing the study. Three different daily doses of T-1249 were administered
alone and not in combination with any other anti-HIV drugs for 14 days to
HIV-infected adults by once or twice daily subcutaneous injection. Of the 72
patients randomized for the trial, nine withdrew before receiving T-1249
therapy, and two withdrew during the course of the therapy. For at least two
weeks prior to entering the study, these patients had not received any other
anti-HIV drugs. This trial protocol has been amended in order to evaluate
further different daily doses of T-1249 by once daily subcutaneous injection and
is ongoing.
12
In February 2001, we announced interim data from T1249-101. Patients
received T-1249 via once or twice daily subcutaneous injections alone and not in
combination with any other anti-HIV drugs for 14 days at doses ranging from 6.25
mg per day to 50 mg per day. At entry into the trial, 98%, or 62 of 63, patients
had a clinical history of exposure to a mean number of ten anti-HIV drugs. At 14
days, the median maximum reduction in viral load reduction from baseline at the
beginning of the trial ranged from 0.1 log(10) or 20.5% to 1.5 log(10) or 96.8%
across the treatment groups. Data suggest that T-1249 was well-tolerated over a
14-day period and there were dose-related decreases in HIV viral load.
Risk Factors
Our business is subject to certain risks and uncertainties. Please read the
"Risk Factors" and "Business" sections of our 2000 Annual Report on Form 10-K
filed with the Securities and Exchange Commission on April 2, 2001, 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Our exposure to market risk is primarily in our investment portfolio. We do
not use derivative financial instruments for speculative or trading purposes. We
have an investment policy that sets minimum credit quality standards for our
investments. The policy also limits the amount of money we can invest in any one
issue, issuer or type of instrument. We have not experienced any material loss
in our investment portfolio.
In July 2000, we entered into a series of call transactions with respect to
our common stock. These transactions are described in detail under Item 2
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
The table below presents the carrying value, which is approximately equal
to fair market value, and related weighted-average interest rates for our
investment portfolio at March 31, 2001. Substantially all of our investments
mature in eighteen months or less.
Carrying Average
Amount Interest
(thousands) Rate
----------- --------
Cash equivalents - fixed rate $ 24,062 5.28 %
Short-term investments - fixed rate 51,522 6.20 %
Overnight cash investments - fixed rate 155 4.74 %
----------- ----------
Total investment securities $ 75,739 5.90 %
=========== ==========
13
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
-----------------
None.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
(a) Not applicable.
(b) Not applicable.
(c) On May 10, 2001, we completed a private placement financing by
issuing approximately 1.4 million shares of common stock at $33.00
per share to new and current stockholders for an aggregate
offering price of approximately $46.1 million (less estimated
offering costs, including underwriting commissions, of
approximately $2.7 million). Lehman Brothers, Inc. acted as
placement agent for the shares issued in connection with the
private placement financing. The registration statement on Form
S-3 (File No. 333-31662) to register the resale of the common
stock issued in this financing was filed on May 11, 2001. An
exemption from registration was claimed pursuant to Section 4(2)
of the Securities Act of 1933, as amended, and Rule 506 and
Regulation S promulgated thereunder. Net proceeds of approximately
$43.4 million from this private placement financing will be used
to fund the clinical development of our product candidates, T-20
and T-1249, to fund increased research and development activities,
to provide working capital and for general corporate purposes.
(d) Use of Proceeds:
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
Not applicable.
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 May 8, 2001 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 $43.4 million.
We filed a report on Form 8-K on May 11, 2001 under Item 5 to
report our financial results for the quarter ended March 31, 2001.
14
We filed a report on Form 8-K on May 11, 2001 under Item 5 to
report the terms and conditions of the form of the purchase
agreement filed as an exhibit to that report pursuant to which we
closed a private placement of 1,395,609 shares of common stock to
new and current shareholders at a price per share of $33.00 on May
10, 2001.
15
SIGNATURES
In accordance with 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.
Trimeris, Inc.
---------------------------
(Registrant)
May 14, 2001 By: /s/ DANI P. BOLOGNESI
- ------------ ---------------------------
Dani P. Bolognesi
Chief Executive Officer,
and Chief Scientific Officer
May 14, 2001 /s/ ROBERT R. BONCZEK
- ------------ --------------------------
Robert R. Bonczek
Chief Financial Officer
(Principal Financial Officer)
May 14, 2001 /s/ TIMOTHY J. CREECH
- ------------ --------------------------
Timothy J. Creech
Director of Finance
and Secretary (Principal
Accounting Officer)
16
EXHIBIT INDEX
-------------
Number Description
- ------ -----------
None
17