1
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 .
----------- ---------
Commission File Number
000-29815
ALLOS THERAPEUTICS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 54-1655029
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7000 NORTH BROADWAY, SUITE 400
DENVER, COLORADO 80221
(303) 426-6262
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of March 31, 2001, there were 22,957,251 shares of the Registrant's
Common Stock outstanding, par value $0.001 per share.
This quarterly report on Form 10-Q consists of 12 pages.
2
ALLOS THERAPEUTICS, INC.
FORM 10-Q
INDEX
PAGE
NUMBER
------
PART I. Financial Information
ITEM 1. Financial Statements........................................................ 3
Balance Sheets --
as of March 31, 2001 (unaudited) and December 31, 2000.................. 3
Statements of Operations (unaudited) --
for the three months ended March 31, 2001 and 2000 and the period from
inception (September 1, 1992) through March 31, 2001.................... 4
Statements of Cash Flows (unaudited) --
for the three months ended March 31, 2001 and 2000 and the period from
inception (September 1, 1992) through March 31, 2001.................... 5
Notes to Financial Statements (unaudited)................................... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................. 7
PART II. Other Information................................................................... 11
ITEM 1. Legal Proceedings........................................................... 11
ITEM 2. Changes in Securities and Use of Proceeds................................... 11
ITEM 3. Defaults Upon Senior Securities............................................. 11
ITEM 4. Submission of Matters to a Vote of Security Holders......................... 11
ITEM 5. Other Information........................................................... 11
ITEM 6. Exhibits and Reports on Form 8-K............................................ 11
SIGNATURES.................................................................................... 12
Page 2 of 12
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALLOS THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
MARCH 31, DECEMBER 31,
ASSETS 2001 2000
------------- -------------
(UNAUDITED)
Current assets:
Cash and cash equivalents $ 783,376 $ 1,565,693
Short-term investments 56,907,445 60,211,791
Prepaid expenses - research 273,737 134,777
Prepaid expenses - other 34,425 95,040
Other assets 5,710 3,294
------------- -------------
Total current assets 58,004,693 62,010,595
------------- -------------
Long-term marketable securities 24,741,782 23,905,763
Property and equipment (net of accumulated depreciation of $485,714 and
$444,408, respectively) 364,519 326,266
Other assets 16,530 16,530
------------- -------------
Total assets $ 83,127,524 $ 86,259,154
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - related parties $ 64,809 $ 97,889
Accrued expenses - research 2,438,639 2,043,246
Accounts payable - trade 287,583 212,015
Accrued compensation and employee benefits 297,808 426,052
Current portion of capital lease obligations 53,141 61,506
------------- -------------
Total current liabilities 3,141,980 2,840,708
Long-term portion of capital lease obligations 281 7,814
------------- -------------
Total liabilities 3,142,261 2,848,522
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized at March 31,
2001, no shares issued or outstanding -- --
Common stock, $0.001 par value; 75,000,000 shares authorized at March 31,
2001 and December 31, 2000; 22,957,251 and 22,954,876 shares issued and
outstanding at March 31, 2001 and December 31, 2000, respectively 22,957 22,955
Additional paid-in capital common stock 156,677,093 156,602,391
Accumulated deficit (71,088,512) (66,709,620)
Deferred compensation related to grant of options (5,626,275) (6,505,094)
------------- -------------
Total stockholders' equity 79,985,263 83,410,632
------------- -------------
Total liabilities and stockholders' equity $ 83,127,524 $ 86,259,154
============= =============
The accompanying notes are an integral part of these financial statements.
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ALLOS THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
CUMULATIVE
PERIOD FROM
SEPTEMBER 1,
1992 (DATE OF
THREE MONTHS ENDED INCEPTION)
MARCH 31, THROUGH
---------------------------- MARCH 31,
2001 2000 2001
------------ ------------ -------------
Operating expenses:
Research and development $ 2,781,784 $ 3,846,617 $ 36,464,174
Clinical manufacturing 1,014,829 344,978 9,380,210
General and administrative 2,135,434 7,400,506 23,081,415
------------ ------------ ------------
Total operating expenses 5,932,047 11,592,101 68,925,799
Loss from operations (5,932,047) (11,592,101) (68,925,799)
Interest and other income, net 1,553,155 115,353 7,450,262
------------ ------------ ------------
Net loss (4,378,892) (11,476,748) (61,475,537)
Dividend related to beneficial conversion
feature of preferred stock -- -- (9,612,975)
------------ ------------ ------------
Net loss attributable to common stockholders $ (4,378,892) $(11,476,748) $(71,088,512)
============ ============ ============
Net loss per common share:
Basic and diluted $ (0.19) $ (3.51)
============ ============
Weighted average common shares - basic
and diluted 22,959,975 3,270,720
============ ============
The accompanying notes are an integral part of these financial statements.
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ALLOS THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
CUMULATIVE PERIOD
FROM SEPTEMBER 1,
THREE MONTHS ENDED 1992 (DATE OF
MARCH 31, INCEPTION) THROUGH
------------------------------ MARCH 31,
2001 2000 2001
------------- ------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (4,378,892) $ (11,476,748) $ (61,475,537)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 41,306 32,086 515,509
Stock-based compensation expense 952,475 9,625,110 18,209,434
Other -- -- 52,406
Changes in operating assets and liabilities:
(Increase) in prepaids and other assets (80,762) (412,768) (330,403)
(Increase) in interest receivable on short-term
investments (135,670) (180,912) (1,702,960)
Increase (decrease) in accounts payable - related
parties 395,393 (3,245) 2,438,640
Increase (decrease) in accrued expenses - research (33,080) (64,916) 64,809
Increase in accounts payable - trade 75,568 894,815 287,583
Increase (decrease) in accrued compensation and
employee benefits (128,244) (86,314) 297,808
------------- ------------- -------------
Net cash used in operating activities (3,291,906) (1,672,892) (41,642,711)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (79,559) (18,209) (590,838)
Purchase of marketable securities (15,190,761) (20,447,522) (161,122,426)
Proceeds from maturities of marketable securities 17,794,759 2,932,250 81,176,159
Payments received on notes receivable -- -- 49,687
------------- ------------- -------------
Net cash provided by (used in) investing
activities 2,524,439 (17,533,481) (80,487,418)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under capital leases (15,898) (23,145) (368,666)
Proceeds from sale leaseback -- -- 120,492
Proceeds from stockholder loan -- -- 12,000
Repayment of stockholder loan -- -- (12,000)
Proceeds from issuance of convertible preferred
stock, net of issuance costs -- (2,503) 40,285,809
Proceeds from issuance of common stock, net of
issuance costs 1,048 82,752,393 82,875,870
------------- ------------- -------------
Net cash provided by (used in) financing
activities (14,850) 82,726,745 122,913,505
------------- ------------- -------------
Net increase (decrease) in cash (782,317) 63,520,372 783,376
Cash and cash equivalents, beginning of period 1,565,693 2,597,884 --
------------- ------------- -------------
Cash and cash equivalents, end of period $ 783,376 $ 66,118,256 $ 783,376
============= ============= =============
SUPPLEMENTAL SCHEDULE OF NONCASH OPERATING
AND FINANCING ACTIVITIES
Cash paid for interest 190,761 -- 370,933
Issuance of stock in exchange for license agreement -- -- 40,000
Capital lease obligations incurred for acquisition of
property and equipment -- -- 422,088
Issuance of stock in exchange for notes receivable -- -- 139,687
The accompanying notes are an integral part of these financial statements.
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ALLOS THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Allos Therapeutics,
Inc., referred to herein as we, us or our, have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC"). 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 such rules and regulations. However, we believe
that the disclosures are adequate to make the information presented not
misleading. The unaudited financial statements included herein have been
prepared on the same basis as the annual financial statements and reflect all
adjustments, which include only normal recurring adjustments necessary for a
fair presentation in accordance with generally accepted accounting principles in
the United States of America. The results for the three-month period ended March
31, 2001 are not necessarily indicative of the results expected for the full
fiscal year. These financial statements should be read in conjunction with our
Annual Report on Form 10-K for the year ended December 31, 2000. Stockholders
are encouraged to review the Form 10-K for a broader discussion of our business
and the opportunities and risks inherent in such business.
2. REVENUE RECOGNITION
We have not generated any revenue to date and our activities have consisted
primarily of developing products, raising capital and recruiting personnel.
Accordingly, we are considered to be in the development stage at March 31, 2001
as defined in Statement of Financial Accounting Standards No. 7, "Accounting and
Reporting by Development Stage Enterprises".
3. NET LOSS PER COMMON SHARE
Basic earnings per common share is computed using the weighted average
number of common shares outstanding during the period. Diluted earnings per
common share is computed using the weighted average number of common and
potential common shares outstanding during the period. Potential common shares
consist of stock options and warrants and have been excluded from the
computation of diluted earnings per common share because their effect was
anti-dilutive.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations, as well as information contained elsewhere in this
report, contains statements that constitute "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"intend," "anticipate," "believe," "estimate," "plan," "could," "should" and
"continue" or similar words. Actual results could differ materially from those
anticipated in these forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those mentioned
in the discussion below and those described in the "Risk Factors" discussion of
our Annual Report on Form 10-K for the year ended December 21, 2000 filed with
the Securities and Exchange Commission. As a result, you should not place undue
reliance on these forward-looking statements. We do not intend to update or
revise these forward-looking statements to reflect future events or
developments.
OVERVIEW
We are a pharmaceutical company focused on developing and commercializing
innovative small molecule drugs initially for improving cancer treatments. Our
lead product candidate is RSR13. RSR13 is a synthetic small molecule that
increases the release of oxygen from hemoglobin, the oxygen carrying protein
contained within red blood cells. We believe RSR13 can be used to improve
existing treatments for cancer and treat many diseases attributed to or
aggravated by tissue oxygen deprivation.
To date, we have devoted substantially all of our resources to research and
clinical development. We have not derived any commercial revenues from product
sales, and we do not expect to generate product revenues for at least the next
several years. We have incurred significant operating losses since our inception
in 1992 and, as of March 31, 2001, had an accumulated deficit of $71,088,512.
There can be no assurance if or when we will become profitable. We expect to
continue to incur significant operating losses over the next several years as we
continue to incur increasing research and development costs, in addition to
costs related to clinical trials and manufacturing activities. We expect that
losses will fluctuate from quarter to quarter and that such fluctuations may be
significant. Achieving profitability depends upon our ability, alone or with
others, to successfully complete the development of our product candidates,
obtain required regulatory clearances and successfully manufacture and market
our future products.
RESULTS OF OPERATIONS
Expenses
Research and Development
Research and development expenses were $2,782,000 for the three months
ended March 31, 2001 compared to $3,847,000 for the three months ended March 31,
2000, which represents a $1,065,000, or 28% decrease. Excluding the impact of
non-cash charges (see "Non-cash Charges" below for discussion of deferred stock
compensation expense and stock compensation expense allocated to research and
development), research and development expenses increased $1,472,000, or 142%.
This increase was primarily due to higher clinical trial costs resulting from
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the commencement of our Phase III oncology study and increased non-clinical
studies and personnel costs to support the Phase III trial.
Clinical Manufacturing
Clinical manufacturing expenses include the cost of manufacturing RSR13 for
use in clinical trials and costs associated with the scale-up of manufacturing
to support commercial requirements. Clinical manufacturing expenses were
$1,015,000 for the three months ended March 31, 2001 compared to $345,000 for
the three months ended March 31, 2000, which represents a $670,000 or 194%
increase. The increase is attributable to higher RSR13 requirements resulting
from our Phase III oncology trial and optimizing manufacturing processes.
General and Administrative
General and administrative expenses were $2,135,000 for the three months
ended March 31, 2001, compared to $7,401,000 for the three months ended March
31, 2000. Excluding the impact of non-cash charges (see "Non-cash Charges" below
for discussion of deferred stock compensation expense and stock compensation
expense allocated to general and administrative), general and administrative
expenses increased $897,000, or 151%. This increase was a result of an increase
in headcount and additional expenses associated with operating as a public
company.
Non-cash Charges
For the three months ended March 31, 2001 and 2000, we recorded
amortization of deferred stock compensation of $952,000 and $1,918,000,
respectively. The compensation charge resulted from granting certain options to
employees prior to our March 2000 initial public offering with exercise prices
below the fair market value of our common stock on their respective grant dates.
Of the $952,000 recorded for the three months ended March 31, 2001, $645,000
related to general and administrative, $269,000 related to research and
development and the remaining $38,000 related to clinical manufacturing. Of the
$1,918,000 recorded for the quarter ended March 31, 2000, $1,306,000 related to
general and administrative, $571,000 related to research and development and the
remaining $41,000 related to clinical manufacturing.
In the first quarter of 2000, we recorded $7,617,000 in stock compensation
expense in connection with the forgiveness of the 1996 Notes (as defined below).
Of this amount, $5,417,000 related to general and administrative and the
remaining $2,200,000 related to research and development. This compensation
charge was a result of obtaining recourse notes receivable in March 1996 (the
"1996 Notes") from two officers in the amount of $90,000 upon the officers'
exercise of 558,000 stock options. The 1996 Notes accrued interest at 8%
annually with interest and principal originally due March 1998. In December
1997, the maturity dates for the 1996 Notes were extended by two years and
extended by an additional year in January 2000. Upon forgiveness of the notes in
March 2000, we recorded stock compensation expense based upon the difference
between the fair market value of the underlying common stock and option exercise
price. In addition we recorded $120,000 of compensation expense due to the
extinguishment of the notes. Of this amount, $35,000 related to research and
development and the remaining $85,000 related to general and administrative.
Interest and Other Income, Net
Interest income, net of interest expense, was $1,553,000 and $115,000 for
the three months ended March 31, 2001 and 2000, respectively, representing an
increase of $1,438,000, or 1,250%.
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This increase was primarily a result of increased average investment balances
and higher yields on U.S. government securities, high-grade commercial paper and
notes, and money market funds held by us.
LIQUIDITY AND CAPITAL RESOURCES
Our principal source of working capital has been private and public equity
financings as well as grant revenues and interest income.
As of March 31, 2001, we had approximately $82,433,000 in cash, cash
equivalents and investments. Net cash used in operating activities of $3,292,000
during the three months ended March 31, 2001 resulted primarily from the net
loss for the period and a reduction in working capital. Net cash used in
operating activities of $1,673,000 during the three months ended March 31, 2000
resulted primarily from the net loss for the period and an increase in deposits
for future manufacturing runs of bulk drug substance.
Net cash provided by investing activities of $2,524,000 for the three
months ended March 31, 2001, consisted primarily of proceeds from maturities of
investments, net of purchases. Net cash used in investing activities of
$17,553,000 for the three months ended March 31, 2000, consisted primarily of
purchases of investments, net of proceeds.
Net cash used in financing activities of $15,000 for the three months ended
March 31, 2001, primarily resulted from payments under our capital lease
obligations. Net cash provided by financing activities of $82,727,000 for the
three months ended March 31, 2000, primarily resulted from the sale of common
stock which was offset by payments under our capital lease obligations.
Based upon the current status of our product development and
commercialization plans, we believe cash, cash equivalents and investments will
be adequate to satisfy our capital needs through at least the calendar year
2002. However, our actual capital requirements will depend on many factors,
including the status of product development; the time and cost involved in
conducting clinical trials and obtaining regulatory approvals; filing,
prosecuting and enforcing patent claims; competing technological and market
developments; and our ability to market and distribute our future products and
establish new collaborative and licensing arrangements.
Our forecast of the period of time through which our financial resources
will be adequate to support our operations is a forward-looking statement that
involves risks and uncertainties, and actual results could vary materially. The
factors described above will impact our future capital requirements and the
adequacy of our available funds. We may be required to raise additional funds
through public or private financings, collaborative relationships or other
arrangements. There can be no assurance that such additional funding, if needed,
will be available on terms attractive to us, or at all. Furthermore, any
additional equity financing may be dilutive to existing stockholders and debt
financing, if available, may involve restrictive covenants. Collaborative
arrangements, if necessary to raise additional funds, may require us to
relinquish rights to certain of our technologies, products or marketing
territories. Our failure to raise capital when needed could have a material
adverse effect on our business, financial condition and results of operations.
MARKET RISK
Our exposure to market risk is principally limited to our cash equivalents
and investments that have maturities of less than two years. We maintain a
non-trading investment portfolio of investment grade, liquid debt securities
that limits the amount of credit exposure to any one issue, issuer or type of
instrument. The securities in our investment portfolio are not leveraged, are
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classified as held-to-maturity and are therefore subject to minimal interest
rate risk. We currently do not hedge interest rate exposure.
RISK FACTORS
In addition to the other information contained in this report, we caution
stockholders and potential investors that the following important factors, among
others, in some cases have affected, and in the future could affect, our actual
results of operations and could cause our actual results to differ materially
from those expressed in any forward-looking statements made by, on, or on behalf
of us. The following information is not intended to limit in any way the
characterization of other statements or information under other captions as
cautionary statements for such purpose. These factors include:
o Delay, difficulty, or failure to obtain regulatory approval or
clearance to market our product candidates; including delays or
difficulties in development because of insufficient proof of safety or
efficacy.
o Our limited experience in conducting and managing clinical trials;
failure to conduct clinical trials in compliance with applicable
regulations and at an acceptable cost.
o The ability to obtain, maintain and enforce intellectual property
rights; the cost of acquiring in-process technology and other
intellectual property rights, either by license, collaboration or
purchase of another entity; the cost of enforcing or defending our
intellectual property rights.
o Failure of third party collaborators to conduct research and
development activities, including drug discovery and clinical testing;
conflicts of interest or priorities that may arise between us and such
third party collaborators.
o Dependence upon third parties to manufacture RSR13 bulk drug substance
and formulated drug product; failure of third parties to manufacture
RSR13 bulk drug substance or formulated drug product in compliance
with regulatory requirements and at an acceptable cost; failure of
third parties to supply sufficient quantities of RSR13 bulk drug
substance or formulated drug product for preclinical, clinical or
commercial purposes; failure to establish alternative sources of
supply of RSR13 bulk drug substance or formulated drug product.
o The ability to create sales, marketing and distribution capabilities
for our product candidates, or enter into agreements with third
parties to perform these functions.
o The ability to obtain acceptable prices or adequate levels of
reimbursement for our products from third party payors, including
government and health administration authorities and private health
insurers.
o Difficulties or high cost of obtaining adequate financing to fund
future research, development and commercialization of product
candidates.
o Competitive or market factors that may limit the use or broad
acceptance of our product candidates.
o The ability to attract and retain highly qualified management and
scientific personnel.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities and Use of Proceeds None
Report of Use of Proceeds from Initial Public
Offering in March 2000:
Aggregate offering price $90,000,000
Expenses incurred in connection
with the offering 7,200,000
-----------
Net offering proceeds to issuer 82,800,000
Working capital 1,800,000
-----------
Investment in marketable securities $81,000,000
===========
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K None
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act") the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: May 2, 2001 ALLOS THERAPEUTICS, INC.
/s/ Stephen J. Hoffman
--------------------------------------
Stephen J. Hoffman, PhD, MD
President and Chief Executive Officer
/s/ Michael E. Hart
--------------------------------------
Michael E. Hart
Chief Financial Officer and Sr. Vice
President, Operations
/s/ Paulette M. Wilson
--------------------------------------
Paulette M. Wilson
Controller
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