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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 September 30, 2001
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 000-31719
-----------------
POZEN Inc.
(Exact name of registrant as specified in its charter)
Delaware 62-1657552
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
6330 Quadrangle Drive
Suite 240
Chapel Hill, North Carolina 27517
(Address of principal executive offices, including zip code)
(919) 490-0012
(Registrant's telephone number, including area code)
-----------------
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
October 11, 2001 was 27,969,435.
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POZEN Inc.
(A Development Stage Company)
FORM 10-Q
For the Three and Nine Months Ended September 30, 2001
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Balance Sheets as of September 30, 2001 and December 31, 2000............. 1
Statements of Operations for the Three and Nine Months Ended September 30,
2001 and 2000 and Period From Inception (September 26, 1996) Through
September 30, 2001........................................................ 2
Statements of Cash Flows for the Nine Months Ended September 30, 2001 and
2000 and Period From Inception (September 26, 1996) Through September 30,
2001...................................................................... 3
Notes to Financial Statements............................................. 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................. 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk................ 18
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds................................. 19
Item 6. Exhibits and Reports on Form 8-K.......................................... 19
Signature Page.................................................................... 20
Exhibits Index.................................................................... 21
(i)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
POZEN Inc.
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)
September 30, December 31,
2001 2000
------------- ------------
ASSETS
------
Current assets:
Cash and cash equivalents.............................................. $ 80,208,331 $ 92,350,583
Prepaid expenses....................................................... 139,924 198,144
Accrued interest receivable............................................ 1,399 113,160
Other current assets................................................... 8,000 9,091
------------ ------------
Total current assets............................................... 80,357,654 92,670,978
Equipment, net of accumulated depreciation.............................. 171,085 158,780
------------ ------------
Total assets....................................................... $ 80,528,739 $ 92,829,758
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable....................................................... $ 71,994 $ 128,329
Accrued expenses....................................................... 2,655,269 3,633,531
------------ ------------
Total current liabilities.......................................... 2,727,263 3,761,860
Common stock, $0.001 par value, 90,000,000 shares authorized, issued and
outstanding 27,964,435 and 27,732,213 shares at September 30, 2001 and
December 31, 2000, respectively....................................... 27,964 27,732
Additional paid-in capital.............................................. 143,510,362 143,330,124
Common stock warrants................................................... 310,808 426,048
Deferred compensation................................................... (4,200,746) (6,617,459)
Deficit accumulated during the development stage........................ (61,846,912) (48,098,547)
------------ ------------
Total stockholders' equity......................................... 77,801,476 89,067,898
------------ ------------
Total liabilities and stockholders' equity......................... $ 80,528,739 $ 92,829,758
============ ============
See accompanying Notes to Financial Statements.
1
POZEN Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
Period From
Inception
Three Months Ended Nine Months Ended (September 26,
September 30, September 30, 1996) Through
------------------------- -------------------------- September 30,
2001 2000 2001 2000 2001
----------- ------------ ------------ ------------ --------------
Operating expenses:
General and administrative...... $ 1,465,360 $ 1,238,735 $ 4,554,486 $ 3,288,752 $ 14,281,513
Research and development........ 4,059,084 7,550,640 12,110,853 14,847,661 51,658,856
----------- ------------ ------------ ------------ ------------
Total operating expenses......... 5,524,444 8,789,375 16,665,339 18,136,413 65,940,369
Interest income, net............. 718,458 235,237 2,916,975 540,049 5,027,936
----------- ------------ ------------ ------------ ------------
Net loss......................... (4,805,986) (8,554,138) (13,748,364) (17,596,364) (60,912,433)
----------- ------------ ------------ ------------ ------------
Deemed dividend to preferred
stockholders................... -- 10,741,990 -- 27,617,105 27,617,105
Preferred stock dividends........ -- 439,307 -- 829,882 934,478
----------- ------------ ------------ ------------ ------------
Net loss attributable to common
stockholders................... $(4,805,986) $(19,735,435) $(13,748,364) $(46,043,351) $(89,464,016)
=========== ============ ============ ============ ============
Basic and diluted net loss per
common share................... $ (0.17) $ (3.35) $ (0.49) $ (7.87)
=========== ============ ============ ============
Shares used in computing basic
and diluted net loss per common
share.......................... 27,964,435 5,887,246 27,906,237 5,850,520
=========== ============ ============ ============
Pro forma net loss per common
share--basic and diluted....... $ (1.00) $ (2.59)
============ ============
Pro forma weighted average
common shares outstanding--
basic and diluted.............. 19,737,305 17,790,301
============ ============
See accompanying Notes to Financial Statements.
2
POZEN Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
Period From
Inception
Nine Months Ended (September 26,
September 30, 1996) Through
-------------------------- September 30,
2001 2000 2001
------------ ------------ --------------
Operating activities
Net loss............................................. $(13,748,364) $(17,596,364) $(60,912,433)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation...................................... 60,997 37,027 227,613
Loss on disposal of equipment..................... 23,193 -- 23,193
Amortization of deferred compensation............. 2,374,499 2,173,074 6,685,701
Non-cash financing charge......................... -- -- 450,000
Changes in operating assets and liabilities:
Prepaid expenses and accrued interest receivable.. 169,981 (660,018) (141,323)
Other assets...................................... 1,091 462 (8,000)
Accounts payable and accrued expenses............. (1,034,597) 3,259,934 2,727,263
------------ ------------ ------------
Net cash used in operating activities................ (12,153,200) (12,785,885) (50,947,986)
------------ ------------ ------------
Investment activities
Purchase of equipment................................ (96,496) (60,891) (421,892)
------------ ------------ ------------
Net cash used in investing activities................ (96,496) (60,891) (421,892)
------------ ------------ ------------
Financing activities
Proceeds from issuance of preferred stock............ -- 27,617,105 48,651,850
Proceeds from issuance of common stock............... 107,444 24,838 79,084,344
Proceeds from notes payable.......................... -- -- 1,004,310
Proceeds from stockholders' receivables.............. -- -- 3,000,000
Payment of dividends................................. -- -- (162,295)
------------ ------------ ------------
Net cash provided by financing activities............ 107,444 27,641,943 131,578,209
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents. (12,142,252) 14,795,167 80,208,331
Cash and cash equivalents at beginning of period..... 92,350,583 4,171,086 --
------------ ------------ ------------
Cash and cash equivalents at end of period........... $ 80,208,331 $ 18,966,253 $ 80,208,331
============ ============ ============
Supplemental schedule of cash flow information
Cash paid for interest............................... $ -- $ 5,164 $ 184,416
============ ============ ============
Supplemental schedule of non-cash investing and
financing activities
Conversion of notes payable to preferred stock....... $ -- $ -- $ 3,000,000
============ ============ ============
Preferred stock dividend............................. $ -- $ 829,882 $ 772,183
============ ============ ============
See accompanying Notes to Financial Statements.
3
POZEN Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Organization
POZEN Inc. (the "Company") is a pharmaceutical company engaged in the
development of products in targeted therapeutic areas. Since its inception in
1996, the Company's business activities have been associated primarily with the
development and acquisition of pharmaceutical product candidates for the
treatment of migraine.
2. Summary of Significant Accounting Policies
Unaudited Interim Financial Statements--The accompanying unaudited interim
financial statements have been prepared in accordance with accounting
principles generally accepted in the United States and applicable Securities
and Exchange Commission ("SEC") regulations for interim financial information.
These financial statements are unaudited and, in the opinion of management,
include all adjustments necessary to present fairly the balance sheets,
statements of operations, and statements of cash flows for the periods
presented in accordance with accounting principles generally accepted in the
United States. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States have been condensed or omitted pursuant
to SEC rules and regulations. It is presumed that users of this interim
financial information have read or have access to the audited financial
statements for the preceding fiscal year contained in the Company's Annual
Report on Form 10-K/A. Operating results for the interim periods presented are
not necessarily indicative of the results that may be expected for the full
year.
1.349-for-1 Stock Split--The accompanying financial statements for the three
months and nine months ended September 30, 2000 have been adjusted
retroactively to reflect a 1.349-for-1 stock split, which was effected on
October 5, 2000.
Non-cash Preferred Stock Charge--In accordance with Emerging Issues Task
Force Issue No. ("EITF") 98-5, the Company has recorded a deemed dividend to
preferred stockholders that represents the excess of the fair value of the
underlying common stock and warrants issued to the series E and series F
convertible preferred stockholders over the sales price of the securities, but
with the charge limited to the net proceeds received from the series E and
series F offerings, respectively.
Stock-based Compensation--The Company accounts for non-cash stock-based
compensation in accordance with the provisions of Accounting Principles Board
Opinion No. ("APB") 25, "Accounting for Stock Issued to Employees," which
states that no compensation expense is recognized for stock options or other
stock-based awards that are granted to employees with an exercise price equal
to or above the estimated fair value of the Company's common stock on the grant
date. In the event that stock options are granted with an exercise price below
the estimated fair market value of the Company's common stock at the grant
date, the difference between the fair market value of the Company's common
stock and the exercise price of the stock option is recorded as deferred
compensation.
In connection with the grant of stock options to employees, the Company
recorded no deferred compensation in the nine months ended September 30, 2001
and recorded $5,882,195 in the nine months ended September 30, 2000. Deferred
compensation is recorded as a component of stockholders' equity and is being
amortized as charges to operations over the vesting period of the options using
the straight-line method. The vesting period of the options is generally three
or four years. The Company recorded amortization of deferred compensation of
$785,172 and $869,230 in the three-month periods, and $2,374,499 and $2,173,074
in the nine-month periods, ended September 30, 2001 and 2000, respectively.
4
POZEN Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Recently Issued Accounting Standards--In June 1998, the Financial Accounting
Standards Board (the "FASB") issued Statement of Financial Accounting Standard
No. ("SFAS") 133, "Accounting for Derivative Investments and Hedging
Activities." SFAS 133 establishes a new model for accounting for derivatives
and hedging activities and supersedes several existing standards. SFAS 133, as
amended by SFAS 137 and SFAS 138, is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The adoption of SFAS 133 on January
1, 2001 had no impact on the Company's financial statements.
3. Net Loss Per Share
Basic net loss per share is based on the weighted-average number of common
shares outstanding. Potentially dilutive securities, consisting of convertible
preferred stock, stock options and warrants, have been excluded from the
historical diluted earnings per share computations since their effect is
antidilutive.
In accordance with SFAS 128, basic and diluted net loss per common share has
been computed using the weighted-average number of shares of common stock
outstanding during the period. Pro forma basic and diluted net loss per common
share, as presented below and in the financial statements, has been computed
for the three months and nine months ended September 30, 2000 as described
above, and also gives effect to the conversion of the convertible preferred
stock that automatically converted to common stock upon the completion of the
Company's initial public offering from the original date of issuance.
A reconciliation of pro forma basic and diluted net loss per common share is
as follows:
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2001 2000 2001 2000
----------- ------------ ------------ ------------
Net loss...................................... $(4,805,986) $ (8,554,138) $(13,748,364) $(17,596,364)
Non-cash preferred stock charge............... -- 10,741,990 -- 27,617,105
Preferred stock dividends..................... -- 439,307 -- 829,882
----------- ------------ ------------ ------------
Net loss attributable to common stockholders.. $(4,805,986) $(19,735,435) $(13,748,364) $(46,043,351)
=========== ============ ============ ============
Shares used in computing basic and diluted net
loss per common share....................... 27,964,435 5,887,246 27,906,237 5,850,520
=========== ============ ============ ============
Basic and diluted net loss per common share... $ (0.17) $ (3.35) $ (0.49) $ (7.87)
=========== ============ ============ ============
Pro Forma:
Shares used above............................. 5,887,246 5,850,520
Adjustment to reflect weighted-average effect
of conversion of preferred stock............ 13,850,059 11,939,781
------------ ------------
Pro forma weighted average common shares
outstanding--basic and diluted.............. 19,737,305 17,790,301
============ ============
Pro forma net loss per common share--basic
and diluted................................. $ (1.00) $ (2.59)
============ ============
4. Redeemable Preferred Stock and Non-cash Preferred Stock Charge
In March 2000, the Company completed a private placement of series E
convertible preferred stock resulting in net proceeds of $16,875,115 and in
August 2000 the Company completed a private placement of series F convertible
preferred stock resulting in net proceeds of $10,741,990.
5
POZEN Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
In connection with these offerings, the Company recorded a non-cash charge
of $16,875,115 during March 2000 and a non-cash charge of $10,741,990 during
August 2000. Both non-cash charges are related to the beneficial conversion
feature of the preferred stock the Company sold. Both the series E and series F
convertible preferred stock were sold at $6.95 per share. In addition, the
terms of conversion provided for a decrease in the conversion price from $6.95
to $5.73 if the Company did not complete its initial public offering by
September 15, 2000. Subsequent to the commencement of the Company's initial
public offering process, the Company re-evaluated the deemed fair market value
of its common stock as of March 2000 and August 2000, respectively, and
determined it to be $15.00 per share. Accordingly, the incremental fair value
is deemed to be the equivalent of a preferred stock dividend. The deemed
dividend was limited to the net proceeds received from the series E and series
F offerings. The Company recorded the deemed dividend at the dates of issuance
by offsetting charges and credits to additional paid-in capital totaling
$27,617,105, without any effect on total stockholders' equity.
6
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 and the financial statements (and notes thereto)
appearing in our Form 10-K/A, filed on March 23, 2001. Some of the statements
contained in this Quarterly Report on Form 10-Q are forward-looking statements
concerning our operations, economic performance and financial condition within
the meaning of the federal securities laws. These statements may be found in
this section and elsewhere in this report.
Forward-looking statements typically are identified by use of terms such as
"may," "will," "should," "could," "expect," "plan," "anticipate," "believe,"
"estimate," "predict," "potential," "continue" and similar words, although some
forward-looking statements are expressed differently. You should be aware that
our actual results could differ materially from those contained in the
forward-looking statements, which are based on management's current
expectations and are subject to a number of risks and uncertainties, including,
but not limited to, those set forth below in "Factors That May Affect Our
Results." We do not intend to update any of these factors or to publicly
announce the results of any revisions to these forward-looking statements.
Overview
We are a pharmaceutical company engaged in the development of products in
targeted therapeutic areas. Since our inception in 1996, our business
activities have been associated primarily with the development and acquisition
of pharmaceutical product candidates. Specifically, our business activities
have included:
. product candidate research and development;
. designing and funding clinical trials for our product candidates;
. regulatory and clinical affairs;
. intellectual property prosecution and expansion; and
. business development including product acquisition or in-licensing.
Historically, we have financed our operations and internal growth primarily
through private placements of preferred stock and our initial public offering
rather than through collaborative or partnership agreements. Therefore, we have
no research funding or collaboration payments payable to us nor have we
received any payments that are refundable or subject to performance milestones.
Our results include non-cash compensation expense as a result of the
granting of stock options in years prior to 2001. Compensation expense for
options granted to employees represents the difference between the fair value
of our common stock and the exercise price of the options at the date of grant.
We account for stock-based employee compensation arrangements in accordance
with the provisions of APB 25, "Accounting for Stock Issued to Employees," and
comply with the disclosure provisions of SFAS 123, "Accounting for Stock-Based
Compensation." Compensation for options granted to consultants has been
determined in accordance with SFAS 123 as the fair value of the equity
instruments issued. APB 25 has been applied in accounting for fixed and
milestone-based stock options to employees and directors as allowed by SFAS
123. Compensation expense for options is being recorded over the respective
vesting periods of the individual stock options. The expense is included in the
respective categories of expense in the statement of operations.
We have incurred significant losses since our inception and we have not
generated any revenue. As of September 30, 2001, our accumulated deficit was
$61,846,912. Our historical operating losses have resulted principally from our
research and development activities, including Phase 3 clinical trial
activities for our product candidate MT 100, Phase 2 clinical trial activities
for our product candidates MT 300 and MT 400, and general and administrative
expenses. We expect to continue to incur operating losses over the next several
years as we complete our development of MT 100, apply for regulatory approval,
continue development of our migraine
7
therapeutic product candidates, and acquire and develop product candidate
portfolios in other therapeutic areas. Our results may vary depending on many
factors, including the progress of MT 100 and MT 300 in the regulatory process;
the acceleration of our other product candidates in the regulatory process; the
establishment of collaborations for the development and commercialization of
any of our migraine product candidates; and acquisition or in-licensing of
other therapeutic product candidates. Our ability to generate revenue is
dependent upon our ability, alone or with others, to successfully develop MT
100 or our other migraine product candidates, obtain regulatory approvals and,
alone or with others, successfully manufacture and market our future products.
Three months ended September 30, 2001 compared to the three months ended
September 30, 2000
Net loss per share: Net loss for the quarter was $4,805,986, compared to a
net loss of $8,554,138 for the same period in 2000 after excluding the non-cash
preferred stock charge and accrued preferred stock dividends. In the three
months ended September 30, 2000, we recorded a non-cash preferred stock charge
of $10,741,990, which resulted from the sale of series F convertible preferred
stock in August 2000 at a price per share below the deemed fair value of our
stock at the time of the sale of the preferred stock. Also, in the three months
ended September 30, 2000, we recorded an aggregate preferred stock dividend of
$439,307 to be paid in shares or cash to series E preferred stockholders and in
shares to series F preferred stockholders upon the completion of our initial
public offering. Net loss attributable to common stockholders for the three
months ended September 30, 2001 was $4,805,986, or $0.17 per share, and for the
three months ended September 30, 2000 was $19,735,435, or $3.35 per share. Pro
forma net loss allocable to common stockholders, giving effect to the automatic
conversion of preferred stock to common stock upon the completion of our
initial public offering and the assumed payment in shares of common stock of
the non-cash portion of the accumulated dividend on the series E and series F
convertible preferred stock, was $1.00 per common share for the three months
ended September 30, 2000.
Revenue: We generated no revenue during the three months ended September 30,
2001 and 2000.
Research and development: Research and development expenses decreased 46.2%
to $4,059,084 for the three months ended September 30, 2001 from $7,550,640 for
the three months ended September 30, 2000. This $3,492,000 decrease was due
primarily to a $3,987,000 decrease in the costs associated with the clinical
trials for MT 100. During the three months ended September 30, 2000, with three
Phase 3 clinical trials nearing completion, expenditures related to MT 100 were
at their highest historical level. Increased MT 300 clinical trial activities
and other development costs led to a total $367,000 increase, while MT 400 and
MT 500 costs decreased a total of $173,000 as compared to the quarter for the
prior year. Additional research and development departmental costs increased
$301,000. Total amortization of deferred stock compensation included in
research and development expenses was $351,000 and $362,000 for the three-month
periods ended September 30, 2001 and 2000, respectively. Research and
development expenses included the personnel costs related to our research
activities and costs related to clinical trial preparations, monitoring
expenses and regulatory matters.
General and administrative: General and administrative expenses increased
18.3% to $1,465,360 for the three months ended September 30, 2001 from
$1,238,735 for the three months ended September 30, 2000. This $227,000
increase resulted from an increase of $169,000 in personnel and related
benefits. Other costs related to the operational infrastructure increased by
$58,000. Total amortization of deferred compensation included in general and
administrative expenses was $434,000 and $508,000 for the three-month periods
ended September 30, 2001 and 2000, respectively. General and administrative
expenses consisted primarily of the costs of administrative personnel and
related facility costs along with legal, accounting and professional fees, and
other costs related to public disclosure and investor communication activities.
Interest income: Interest income increased to $718,458 for the three months
ended September 30, 2001 from $235,237 for the three months ended September 30,
2000. Interest income increased due to increased levels of cash and cash
equivalents available for investing.
8
Nine months ended September 30, 2001 compared to the nine months ended
September 30, 2000
Net loss per share: Net loss for the nine months ended September 30, 2001
was $13,748,364, compared to a net loss of $17,596,364 for the same period in
2000, after excluding non-cash preferred stock charges and accrued preferred
stock dividends. In the nine months ended September 30, 2000, we recorded
non-cash preferred stock charges of $27,617,105 which resulted from the sale of
series E convertible preferred stock in March 2000 and series F convertible
preferred stock in August 2000, each sale at a price per share below the deemed
fair value of our stock at the time of the sale of the preferred stock. Also,
in the nine months ended September 30, 2000, we recorded an aggregate preferred
stock dividend of $829,882 to be paid in cash or shares to series E preferred
stockholders and shares to series F preferred stockholders upon our initial
public offering. Net loss attributable to common stockholders for the nine
months ended September 30, 2001 was $13,748,364, or $0.49 per share, and for
the nine months ended September 30, 2000 was $46,043,351, or $7.87 per share.
Pro forma net loss allocable to common stockholders, giving effect to the
automatic conversion of preferred stock to common stock upon the completion of
our initial public offering and the assumed payment in shares of common stock
of the non-cash portion of the accumulated dividend on the series E and series
F convertible preferred stock, was $2.59 per common share for the nine months
ended September 30, 2000.
Revenue: We generated no revenue during the nine months ended September 30,
2001 and 2000.
Research and development: Research and development expenses decreased 18.4%
to $12,110,853 for the nine months ended September 30, 2001 from $14,847,661
for the nine months ended September 30, 2000. This net $2,737,000 decrease was
due primarily to a $5,056,000 decrease in the costs associated with the
clinical trial activities for MT 100 and decreased development costs, primarily
in the area of pre-clinical toxicology, for MT 500 of $714,000. Other
development costs increased by $1,297,000 for MT 400 and by $1,149,000 for MT
300 and other development costs, as compared to the nine months of the prior
year. Additional research and development departmental costs increased
$587,000, including a $283,000 increase in personnel costs. Total amortization
of deferred stock compensation included in research and development expenses
was $1,069,000 and $1,030,000 for the nine-month periods ended September 30,
2001 and 2000, respectively.
General and administrative: General and administrative expenses increased
38.5% to $4,554,486 for the nine months ended September 30, 2001 from
$3,288,752 for the nine months ended September 30, 2000. This increase of
$1,266,000 resulted primarily from an increase of $779,000 in personnel and
related benefits, of which $162,000 represented amortization of deferred stock
compensation. Other increases included an increase in fees and other costs
related to public disclosure and investor communication activities, along with
increases in the operational infrastructure that totaled $487,000. Amortization
of deferred compensation included in general and administrative expenses was
$1,305,000 and $1,143,000 for the nine-month periods ended September 30, 2001
and 2000, respectively.
Interest income: Interest income increased to $2,916,975 for the nine months
ended September 30, 2001 from interest income of $540,049 for the nine months
ended September 30, 2000. Interest income increased due to increased levels of
cash and cash equivalents available for investing.
Income Taxes
As of September 30, 2001, we had federal and state net operating loss
carryforwards of approximately $48,309,000 and research and development credit
carryforwards of approximately $2,100,000. These federal net operating loss
carryforwards and research and development credit carryforwards begin to expire
in 2012. State net operating loss carryforwards begin to expire in 2011. The
utilization of the loss carryforwards to reduce future income taxes will depend
on our ability to generate sufficient taxable income prior to the expiration of
the net loss carryforwards. In addition, the maximum annual use of net loss
carryforwards is limited in certain situations where changes occur in our stock
ownership.
9
Liquidity and Capital Resources
Since our inception, we have financed our operations and internal growth
primarily through private placements of preferred stock and our initial public
offering, resulting in aggregate net proceeds to us of $131,578,209. As of
September 30, 2001, cash and cash equivalents totaled $80,208,331.
Financing activities since inception represent the net proceeds we received
from the sale of preferred and common stock and proceeds from notes payable. In
March 2000, we closed a private placement of series E convertible preferred
stock in which we raised net proceeds of $16,875,115 after commission and
expenses. In connection with this offering, we recorded a non-cash charge of
$16,875,115 during March 2000 related to the beneficial conversion feature of
the preferred stock we sold in March 2000. The series E convertible preferred
stock was sold in March 2000 at $6.95 per share, which represented the fair
value of the preferred stock and was in excess of the deemed fair value of our
common stock at that time.
In August 2000, we closed a private placement of series F convertible
preferred stock in which we raised net proceeds of $10,741,990 after commission
and expenses. In connection with this offering, we recorded a non-cash charge
of $10,741,990 during August 2000 related to the beneficial conversion feature
of the preferred stock we sold in the series F offering. Similarly to the
series E, the series F convertible preferred stock was sold at $6.95 per share,
which represented the fair value of the preferred stock and was in excess of
the deemed fair value of our common stock at that time.
In October and November 2000, we received $78,265,552 in net proceeds from
the sale of 5,750,000 shares of our common stock in our initial public
offering, including through the exercise of the underwriters' over-allotment
option. All of our outstanding preferred shares were converted into shares of
our common stock upon the completion of our initial public offering.
Net cash used in investing activities included primarily additions of
equipment. Since inception through September 30, 2001, approximately $421,892
was spent on equipment.
At September 30, 2001, cash and cash equivalents totaled $80,208,331, a
decrease of $12,142,252 as compared to December 31, 2000. The decrease in cash
and cash equivalents resulted primarily from the cash used in operating
activities. Cash used by operations of $12,153,200 during the nine months ended
September 30, 2001 represented a net loss of $13,748,364 offset by non-cash
charges of $2,458,689, a decrease in prepaid and other assets of $171,072 and a
decrease in accounts payable and accrued liabilities of $1,034,597. Cash used
in investing activities of $96,496 during the nine months ended September 30,
2001 reflected the purchase of equipment. Cash provided by financing activities
during the nine months ended September 30, 2001, which totaled $107,444, was
generated by the exercise of stock options and warrants.
Factors That May Affect Our Results
Our business is subject to certain risks and uncertainties. If any of these
risks eventuate, our business, financial condition, cash flows and results of
operations could be materially adversely affected.
We depend heavily on the success of our lead product candidate, MT 100,
which may never be approved for commercial use. If we are unable to develop,
gain approval of or commercialize MT 100, we may never be profitable.
Since our founding, we have invested a significant portion of our time and
financial resources in the development of MT 100 and anticipate that for the
foreseeable future our ability to achieve profitability will be dependent on
its successful development, approval and commercialization. Many factors could
negatively affect the success of our efforts to develop and commercialize MT
100, including:
. negative, inconclusive or otherwise unfavorable results from our
carcinogenicity studies or from any other studies or clinical trials;
. an inability to obtain, or delay in obtaining, regulatory approval for
the commercialization of MT 100;
10
. an inability to establish collaborative arrangements with third parties
for the manufacture and commercialization of MT 100, or any disruption
of any of these arrangements, if established;
. a failure to achieve market acceptance of MT 100;
. significant delays in our carcinogenicity studies;
. any demand by the FDA that we conduct additional clinical trials or
other studies and the expenses relating thereto; and
. significant increases in the costs of any additional carcinogenicity
studies.
We have incurred losses since inception and anticipate that we will continue
to incur losses for the foreseeable future. We do not have a current source of
product revenue and may never be profitable.
We have incurred losses in each year since our inception and we currently
have no source of product revenue. As of September 30, 2001, we had an
accumulated deficit of approximately $61.8 million. We expect to incur
significant and increasing operating losses and do not know when or if we will
generate product revenue.
We expect that the amount of our operating losses will fluctuate
significantly from quarter to quarter as a result of increases and decreases in
development efforts, the timing of payments that we may receive from others,
and other factors. Our ability to achieve profitability is dependent on a
number of factors, including our ability to:
. develop and obtain regulatory approvals for our product candidates;
. receive upfront and milestone payments;
. successfully commercialize our product candidates, which may include
entering into collaborative agreements; and
. secure contract manufacturing and distribution services.
If we, or our collaborators, do not obtain and maintain required regulatory
approvals, we will be unable to commercialize our product candidates.
Our product candidates under development are subject to extensive domestic
and foreign regulation. The Food and Drug Administration ("FDA") regulates,
among other things, the development, testing, manufacture, safety, efficacy,
recordkeeping, labeling, storage, approval, advertisement, promotion, sale and
distribution of pharmaceutical products. If we market our products abroad, they
are also subject to extensive regulation by foreign governments. None of our
product candidates, including MT 100, have been approved for sale in the United
States or any foreign market. We will need to complete preclinical, toxicology,
genotoxicity and carcinogenicity studies, as well as clinical trials, on these
product candidates in support of New Drug Application ("NDA") submissions to
the FDA for approval to market the product candidates. If we are unable to
obtain and maintain FDA and foreign governmental approvals for our product
candidates, we will not be permitted to sell them.
Approval of a product candidate may be conditioned upon certain limitations
and restrictions as to the drug's use, or upon the conduct of further studies,
and is subject to continuous review. The FDA may also require us to conduct
additional post-approval studies. These post-approval studies may include
carcinogenicity studies in animals or further human clinical trials. The later
discovery of previously unknown problems with the product, manufacturer or
manufacturing facility may result in criminal prosecution, civil penalties,
recall or seizure of products, or total or partial suspension of production, as
well as other regulatory action against our product candidates or us. If
approvals are withdrawn for a product, or if a product is seized or recalled,
we would be unable to sell that product and our revenues would suffer.
We and our contract manufacturers are required to comply with the applicable
FDA current Good Manufacturing Practices regulations, which include
requirements relating to quality control and quality
11
assurance, as well as the corresponding maintenance of records and
documentation. Further, manufacturing facilities must be approved by the FDA
before they can be used to manufacture our product candidates, and are subject
to additional FDA inspection. We, or our third-party manufacturers, may not be
able to comply with cGMP regulations or other FDA regulatory requirements,
resulting in a delay or an inability to manufacture the products.
Labeling and promotional activities are subject to scrutiny by the FDA and
state regulatory agencies and, in some circumstances, the Federal Trade
Commission. FDA enforcement policy prohibits the marketing of approved products
for unapproved, or off-label, uses. These regulations and the FDA's
interpretation of them may impair our ability to effectively market products
for which we gain approval. Failure to comply with these requirements can
result in regulatory enforcement action by the FDA. Further, we may not obtain
the labeling claims we believe are necessary or desirable for the promotion of
our product candidates.
We need to conduct preclinical, toxicology, genotoxicity and carcinogenicity
studies and clinical trials of all of our product candidates. Any unanticipated
costs or delays in these studies or trials, or the need to conduct additional
studies or trials, could reduce our revenues and profitability.
Generally, we must demonstrate the efficacy and safety of our product
candidates before approval to market can be obtained from the FDA. Our product
candidates are in various stages of clinical development. Depending upon the
stage at which a product candidate is in the development process, we will need
to complete preclinical, toxicology, genotoxicity and carcinogenicity studies,
as well as clinical trials, on these product candidates before we submit
marketing applications in the United States and abroad. These studies and
trials can be very costly and time-consuming. In addition, we rely on third
parties to perform significant aspects of our studies and clinical trials,
introducing additional sources of risk into our development programs. Results
from preclinical testing and early clinical trials are not necessarily
predictive of results obtained in later clinical trials involving large scale
testing of patients in comparison to control groups.
The completion of clinical trials depends upon many factors, including the
rate of enrollment of patients. If we are unable to recruit sufficient clinical
patients during the appropriate period, we may need to delay our clinical
trials and incur significant additional costs. In addition, the FDA or
Institutional Review Boards may require us to conduct additional trials or
delay, restrict or discontinue our clinical trials on various grounds,
including a finding that the subjects or patients are being exposed to an
unacceptable health risk. Even though we have completed all planned Phase 3
pivotal clinical trials for MT 100 and even if we complete our current clinical
trials for MT 100 and our other product candidates, we may be required to
conduct additional clinical trials and studies to submit an NDA to the FDA.
Once submitted, an NDA would require FDA approval before we could distribute or
commercialize the product described in the application.
Even if we determine that data from our clinical trials, toxicology,
genotoxicity and carcinogenicity studies are positive, we cannot assure you
that the FDA, after completing its analysis, will not determine that the trials
or studies should have been conducted or analyzed differently, and thus reach a
different conclusion from that reached by us, or request that further trials,
studies or analysis be conducted. For example, the FDA may require data in
certain subpopulations, such as pediatric use, or may require long-term
carcinogenicity studies, prior to NDA approval, unless we can obtain a waiver
to delay such studies.
Our costs associated with our human clinical trials vary based on a number
of factors, including:
. the order and timing of clinical indications pursued;
. the extent of development and financial support from collaborative
parties, if any;
. the need to conduct additional clinical trials or studies;
. the number of patients required for enrollment;
12
. the difficulty of obtaining sufficient patient populations and
clinicians;
. the difficulty of obtaining clinical supplies of our product candidates;
and
. governmental and regulatory delays.
Even if we obtain positive preclinical or clinical study results initially,
future clinical trial results may not be similarly positive.
We depend on collaborations with third parties, which may reduce our product
revenues or restrict our ability to commercialize products.
Our ability to develop, manufacture, commercialize and obtain regulatory
approval of our existing and any future product candidates depends upon our
ability to enter into and maintain contractual and collaborative arrangements
with others. We have and intend in the future to retain contract manufacturers
and clinical trial investigators. In addition, the identification of new
compounds or product candidates for development may require us to enter into
licensing or other collaborative agreements with others, including
pharmaceutical companies and research institutions. We currently intend to
market and commercialize our products through others, which will require us to
enter into sales, marketing and distribution arrangements with third parties.
These arrangements may reduce our product revenues.
Our third party contractual or collaborative arrangements may require us to
grant rights, including marketing rights, to one or more parties. These
arrangements may also contain covenants restricting our product development or
business efforts in the future, or other terms that are burdensome to us, and
may involve the acquisition of our equity securities. Collaborative agreements
for the acquisition of new compounds or product candidates may require us to
pay license fees, make milestone payments and/or pay royalties.
We cannot be sure that we will be able to maintain our existing or future
collaborative or contractual arrangements, or that we will be able to enter
into future arrangements with third parties on terms acceptable to us, or at
all. If we fail to maintain our existing arrangements or to establish new
arrangements when and as necessary, we could be required to undertake these
activities at our own expense, which would significantly increase our capital
requirements and may delay the development, manufacture and commercialization
of our product candidates.
We are subject to a number of risks associated with our dependence on
contractual and collaborative arrangements with others:
. We may not have day-to-day control over the activities of our
contractors or collaborators.
. Third parties may not fulfill their obligations to us.
. We may not realize the contemplated or expected benefits from
collaborative or other arrangements.
. Business combinations and changes in the contractual or collaborative
party's business strategy may adversely affect its willingness or
ability to complete its obligations to us.
. The contractor or collaborative party may have the right to terminate
its arrangements with us on limited or no notice and for reasons outside
of our control.
. The contractual or collaborative party may develop or have rights to
competing products or product candidates and withdraw support or cease
to perform work on our products.
. Disagreements may arise regarding breach of the arrangement, ownership
of proprietary rights, clinical results or regulatory approvals.
These factors could lead to delays in the development or commercialization
of our product candidates, and disagreements with our contractors or
collaborators could require or result in litigation or arbitration, which
13
would be time-consuming and expensive. Our ultimate success may depend upon the
success and performance on the part of these third parties. If we fail to
maintain these relationships or establish new relationships as required,
development and commercialization of our product candidates will be delayed.
We currently depend and will in the future depend on third parties to
manufacture our product candidates. If these manufacturers fail to meet our
requirements or any regulatory requirements, the product development and
commercialization of our product candidates will be delayed.
We do not have, and have no plans to develop, the internal capability to
manufacture either clinical trial or commercial quantities of products that we
may develop or are under development. We rely upon third party manufacturers to
supply us with our product candidates. We also need supply contracts to sell
our products commercially. There is no guarantee that manufacturers that enter
into commercial supply contracts with us will be financially viable entities
going forward. If we do not have the necessary commercial supply contracts, or
if our current manufacturer is unable to satisfy our requirements or meet any
regulatory requirements, and we are required to find an alternative source of
supply, there may be additional costs and delays in product development and
commercialization of our product candidates or we may be required to comply
with additional regulatory requirements.
If we are unable to build sales, marketing and distribution capabilities or
enter into agreements with third parties to perform these functions, we will
not be able to commercialize any of our drug candidates.
We currently intend to enter into agreements with third parties to market
and sell any of our product candidates approved by the FDA for commercial sale.
We may not be able to enter into marketing and sales agreements with others on
terms acceptable to us, if at all. To the extent that we enter into marketing
and sales agreements with others, our revenues, if any, may be affected by the
sales and marketing efforts of others. We may also retain the right, where
possible, to co-promote our products in conjunction with our collaborative
parties. If we are unable to enter into third-party sales and marketing
agreements, or if we are exercising our rights to co-promote a product, then we
will be required to develop internal marketing and sales capabilities. We may
not successfully establish marketing and sales capabilities or have sufficient
resources to do so.
If our competitors develop and commercialize products faster than we do or
if their products are superior to ours, our commercial opportunities will be
reduced or eliminated.
Our product candidates will have to compete with existing and any newly
developed migraine therapies. There are also likely to be numerous competitors
developing new products to treat migraine and the other diseases and conditions
for which we may seek to develop products in the future, which could render our
product candidates or technologies obsolete or non-competitive. Our primary
competitors will likely include large pharmaceutical companies, biotechnology
companies, universities and public and private research institutions. We face,
and will continue to face, intense competition from other companies for
securing collaborations with pharmaceutical companies, establishing
relationships with academic and research institutions, and acquiring licenses
to proprietary technology. These competitors, either alone or with
collaborative parties, may succeed with technologies or products that are more
effective than any of our current or future technologies or products. Many of
our actual or potential competitors, either alone or together with
collaborative parties, have substantially greater financial resources, and
almost all of our competitors have larger numbers of scientific and
administrative personnel than we do. Many of these competitors, either alone or
together with their collaborative parties, also have significantly greater
experience than we do in:
. developing product candidates;
. undertaking preclinical testing and human clinical trials;
. obtaining FDA and other regulatory approvals of product candidates; and
. manufacturing and marketing products.
14
Accordingly, our actual or potential competitors may succeed in obtaining
patent protection, receiving FDA approval or commercializing products before we
do. Our competitors may also develop products or technologies that are superior
to those that we are developing, and render our product candidates or
technologies obsolete or non-competitive. If we cannot successfully compete
with new or existing products, our marketing and sales will suffer and we may
not ever be profitable.
If we are unable to protect our patents or proprietary rights, or if we are
unable to operate our business without infringing the patents and proprietary
rights of others, we may be unable to develop our product candidates or compete
effectively.
The pharmaceutical industry places considerable importance on obtaining
patent and trade secret protection for new technologies, products and
processes. Our success will depend, in part, on our ability, and the ability of
our licensors, to obtain and to keep protection for our products and
technologies under the patent laws of the United States and other countries, so
that we can stop others from using our inventions. Our success also will depend
on our ability to prevent others from using our trade secrets. In addition, we
must operate in a way that does not infringe, or violate, the patent, trade
secret and other intellectual property rights of other parties.
We cannot know how much protection, if any, our patents will provide or
whether our patent applications will issue as patents. The breadth of claims
that will be allowed in patent applications cannot be predicted and neither the
validity nor enforceability of claims in issued patents can be assured. If, for
any reason, we are unable to obtain and enforce valid claims covering our
products and technology, we may be unable to prevent competitors from using the
same or similar technology or to prevent competitors from marketing identical
products. In addition, due to the extensive time needed to develop and test our
products, any patents that we obtain may expire in a short time after
commercialization. This would reduce or eliminate any advantages that such
patents may give us.
We may need to license rights to third party patents and intellectual
property to continue the development and marketing of our product candidates.
If we are unable to acquire such rights on acceptable terms, our development
activities may be blocked and we may be unable to bring our product candidates
to market.
We may enter into litigation to defend ourselves against claims of
infringement, assert claims that a third party is infringing one or more of our
patents, protect our trade secrets or know-how, or determine the scope and
validity of other's patent or proprietary rights. As a result of such
litigation, our patent claims may be found to be invalid, unenforceable or not
of sufficient scope to cover the activities of an alleged infringer. If we are
found to infringe the patent rights of others, then we may be forced to pay
damages sufficient to irreparably harm the Company and/or be prevented from
continuing our product development and marketing activities. Regardless of its
eventual outcome, any lawsuit that we enter into may consume time and resources
that will impair our ability to develop and market our product candidates.
We have entered into confidentiality agreements with our employees,
consultants, advisors and collaborators. However, these parties may not honor
these agreements and, as a result, we may not be able to protect our rights to
unpatented trade secrets and know-how. Others may independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to our trade secrets and know-how. Also, many of our scientific and
management personnel were previously employed by competing companies. As a
result, such companies may allege trade secret violations and similar claims
against us.
If we fail to acquire, develop and commercialize additional products or
product candidates, or fail to successfully promote or market approved
products, we may never achieve profitability.
As part of our business strategy, we plan to identify and acquire product
candidates or approved products in areas in which we possess particular
knowledge. Because we do not directly engage in basic research or drug
discovery, we must rely upon third parties to sell or license product
opportunities to us. Other companies, including some with substantially greater
financial, marketing and sales resources, are competing with us to
15
acquire such products. We may not be able to acquire rights to additional
products on acceptable terms, if at all. In addition, we may acquire new
products with different marketing strategies, distribution channels and bases
of competition than those of our current products. Therefore, we may not be
able to compete favorably in those product categories.
Any of our future products, including MT 100, may not be accepted by the
market, which would limit the commercial opportunities for our products.
Even if our product candidates perform successfully in clinical trials and
are approved by the FDA and other regulatory authorities, our future products,
including MT 100, may not achieve market acceptance and may not generate the
revenues that we anticipate. The degree of market acceptance will depend upon a
number of factors, including:
. the receipt and timing of regulatory approvals;
. the availability of third-party reimbursement;
. the indications for which the product is approved;
. the rate of adoption by health care providers;
. the rate of product acceptance by target patient populations;
. the price of the product relative to alternative therapies;
. the availability of alternative therapies;
. the extent of marketing efforts by us and third-party distributors and
agents;
. the publicity regarding our products or similar products; and
. the extent and severity of side effects as compared to alternative
therapies.
If we do not receive adequate third-party reimbursements for any of our
future products, our revenues and profitability will be reduced.
Our ability to commercialize our product candidates successfully will
depend, in part, on the extent to which reimbursement for the costs of such
products and related treatments will be available from government health
administration authorities, such as Medicare and Medicaid in the United States,
private health insurers and other organizations. Significant uncertainty exists
as to the reimbursement status of a newly approved health care product,
particularly for indications for which there is no current effective treatment
or for which medical care is typically not sought. Adequate third-party
coverage may not be available to enable us to maintain price levels sufficient
to realize an appropriate return on our investment in product research and
development. If adequate coverage and reimbursement levels are not provided by
government and third-party payors for use of our products, our products may
fail to achieve market acceptance.
Our future revenues, profitability and access to capital will be affected by
the continuing efforts of governmental and private third-party payors to
contain or reduce the costs of health care through various means. We expect
that a number of federal, state and foreign proposals will seek to control the
cost of drugs through governmental regulation. We are unsure of the form that
any health care reform legislation may take or what actions federal, state,
foreign and private payors may take in response to the proposed reforms.
Therefore, we cannot predict the effect of any implemented reform on our
business.
If product liability lawsuits are successfully brought against us, we may
incur substantial liabilities and may be required to limit commercialization of
our product candidates.
The testing and marketing of pharmaceutical products entails an inherent
risk of product liability. Product liability claims might be brought against us
by consumers, health care providers, pharmaceutical companies or
16
others selling our future products. If we cannot successfully defend ourselves
against such claims, we may incur substantial liabilities or be required to
limit the commercialization of our product candidates. We have obtained limited
product liability insurance coverage only for our human clinical trials.
However, insurance coverage is becoming increasingly expensive, and no
assurance can be given that we will be able to maintain insurance coverage at a
reasonable cost or in sufficient amounts to protect us against losses due to
liability. We may not be able to obtain commercially reasonable product
liability insurance for any products approved for marketing. If a plaintiff
brings a successful product liability claim against us in excess of our
insurance coverage, if any, we may incur substantial liabilities and our
business may fail.
We may need substantial additional funding and may not have access to
capital. If we are unable to raise capital when needed, we may need to delay,
reduce or eliminate our product development or commercialization efforts.
We may need to raise additional funds to execute our business strategy. We
have incurred losses from operations since inception and we expect to incur
additional operating losses. In particular, we believe that we will require
additional capital to fund the acquisition of new product candidates. Our
actual capital requirements will depend upon numerous factors, including:
. the progress of our research and development programs;
. the progress of preclinical studies and clinical testing;
. the time and cost involved in obtaining regulatory approvals;
. the costs of filing, prosecuting, defending and enforcing any patent
claims and other intellectual property rights;
. the effect of competing technological and market developments;
. the effect of changes and developments in our collaborative, licensing
and other relationships; and
. the terms and timing of any new collaborative, licensing and other
arrangements that we may establish.
We may be unable to raise sufficient funds to execute our business strategy.
In addition, we may not be able to find sufficient debt or equity funding on
acceptable terms. If we cannot, we may need to delay, reduce or eliminate
research and development programs. The sale by us of additional equity
securities or the expectation that we will sell additional equity securities
may have an adverse effect on the price of our common stock. In addition,
collaborative arrangements may require us to grant product development programs
or licenses to third parties for products that we might otherwise seek to
develop or commercialize ourselves.
We depend on key personnel and may not be able to retain these employees or
recruit additional qualified personnel, which would harm our research and
development efforts.
We are highly dependent on the efforts of our key management and scientific
personnel, especially John R. Plachetka, Pharm.D., our Chairman, President and
Chief Executive Officer. Dr. Plachetka signed an employment agreement with us
on April 1, 1999, as amended and restated on July 25, 2001, for a three-year
term with automatic one-year renewal terms. As of July 25, 2001, we also have
entered into employment agreements with four of our other key management
personnel, each of which provides for a two-year term with automatic one-year
renewal terms. If we lose the services of Dr. Plachetka or the services of any
of our other key personnel, or fail to recruit key scientific personnel, we may
be unable to achieve our business objectives. There is intense competition for
qualified scientific personnel. Since our business is very science-oriented, we
need to continue to attract and retain such people. We may not be able to
continue to attract and retain the qualified personnel necessary for developing
our business. Furthermore, our future success will also depend in part on the
continued service of our other key management personnel.
17
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Our proceeds from our initial public offering and private placements have
been invested in money market funds that invest primarily in short-term,
highly-rated investments, including U.S. Government securities, commercial
paper and certificates of deposit guaranteed by banks. Under our current
policies, we do not use interest rate derivative instruments to manage our
exposure to interest rate changes. Because of the short-term maturities of our
investments, we do not believe that a decrease in market rates would have
significant negative impact on the value of our investment portfolio. Declines
in interest rates will, however, reduce our interest income while increases in
interest rates will increase our interest income.
18
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(f) Use of Proceeds
We raised $78,265,552 of net proceeds in our initial public offering that
was completed in October and November 2000. We have invested the net proceeds
from our initial public offering in money market funds that invest primarily in
short-term, highly-rated investments. During the nine months ended September
30, 2001, these proceeds, as well as proceeds from our earlier private
placements, were used to fund our cash operating expenses and investment
activities, including, among other things, research and development efforts,
employee compensation, the purchase of equipment and the payment of accounts
payable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amended and Restated Executive Employment Agreement with John R. Plachetka dated
July 25, 2001.
10.2 Executive Employment Agreement with Andrew L. Finn dated July 25, 2001.
10.3 Executive Employment Agreement with Kristina M. Adomonis dated July 25, 2001.
10.4 Executive Employment Agreement with Matthew E. Czajkowski dated July 25, 2001.
10.5 Executive Employment Agreement with John E. Barnhardt dated July 25, 2001.
10.6 POZEN Inc. 2001 Long Term Incentive Plan (adopted by Board of Directors, subject to
stockholder approval).
10.7 Certificate of Award dated August 1, 2001 issued to John R. Plachetka pursuant to POZEN Inc.
2001 Long Term Incentive Plan (granted subject to stockholder approval of the Plan).
(b) Reports on Form 8-K
We filed a report on Form 8-K, as amended, on July 2, 2001, under Item 5,
Other Events.
19
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.
POZEN INC.
-----------------------------------------------
(Registrant)
October 30, 2001 /s/ JOHN R. PLACHETKA
-----------------------------------------------
John R. Plachetka, Pharm.D.
Chairman, President and Chief Executive Officer
October 30, 2001 /s/ MATTHEW E. CZAJKOWSKI
-----------------------------------------------
Matthew E. Czajkowski
Chief Financial Officer
(Principal Financial Officer)
October 30, 2001 /s/ JOHN E. BARNHARDT
-----------------------------------------------
John E. Barnhardt
Vice President, Finance and Administration
(Principal Accounting Officer)
20
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
10.1 Amended and Restated Executive Employment Agreement with John R. Plachetka dated July 25, 2001
10.2 Executive Employment Agreement with Andrew L. Finn dated July 25, 2001
10.3 Executive Employment Agreement with Kristina M. Adomonis dated July 25, 2001
10.4 Executive Employment Agreement with Matthew E. Czajkowski dated July 25, 2001
10.5 Executive Employment Agreement with John E. Barnhardt dated July 25, 2001
10.6 POZEN Inc. 2001 Long Term Incentive Plan (adopted by Board of Directors, subject to stockholder
approval)
10.7 Certificate of Award dated August 1, 2001 issued to John R. Plachetka pursuant to POZEN Inc. 2001
Long Term Incentive Plan (granted subject to stockholder approval of the Plan)
21