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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A2
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarterly period ended January 31, 1997.
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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 No. 0-27756
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ALEXION PHARMACEUTICALS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3648318
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25 Science Park, Suite 360, New Haven, Connecticut 06511
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(Address of principal executive offices) (Zip Code)
(203) 776-1790
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(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.
Yes X No
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The number of shares of Common Stock, $0.0001 par value, outstanding as of
March 5, 1997, was 7,361,721 shares.
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PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
A. The Section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Results of Operations," is amended and
restated in its entirety to read as follows:
Three Months Ended January 31, 1997
Compared with Three Months Ended January 31, 1996
The Company contract research and license revenues increased to $1,438,000
for the three months ended January 31, 1997 from $616,000 for the same period
ended January 31, 1996. The increase was due primarily to the receipt of an
upfront license fee from GTI/Novartis in the amount of $850,000. Contract
research revenues represent principally revenues from the Company's
collaborative research and development agreements with US Surgical, pursuant to
which the Company recognized revenue of approximately $407,000 during the three
months ended January 31, 1997, and GTI/Novartis; revenues from the Company's
research grants from the National Institutes of Health ("NIH"), pursuant to
which the Company recognized revenue of approximately $38,000 during the three
months ended January 31, 1997; and funding received from the Commerce
Department's National Institute of Standards and Technology ("NIST"), pursuant
to which the Company recognized revenue of approximately $110,000 during the
three months ended January 31, 1997.
Research and development expenses increased to $1,921,000 for the three
months ended January 31, 1997 from $1,362,000 for the three months ended January
31, 1996. The increase resulted principally from incurred costs related to the
clinical trials of the Company's lead C5 Inhibitor, 5G1.1-SC, manufacturing
validation costs, expanded preclinical development and manufacturing process
development costs for the Company's recombinant product candidates, and
increased external research related to preclinical development of the Company's
xenotransplant products.
General and administrative related expenses increased to $758,000 for the
three months ended January 31, 1997 from $396,000 for the same period ended
January 31, 1996. This increase was due primarily to external professional fees
which accounted for approximately $299,000, representing patent and legal fees,
investor and shareholder relations fees, business development fees and
recruiting fees. The approximately $63,000 balance of the increase was
attributable to increased insurance costs
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incurred as a public company and to increased travel and administrative expenses
related to the Company's increased clinical and regulatory activities and
presentations at scientific conferences.
The Company earned other income, net, of $205,000 for the three months
ended January 31, 1997 as compared to other income, net, of $9,000 for the three
months ended January 31, 1996. This other income, net, resulted principally from
greater interest income from higher cash balances available for investment and
decreased interest expense associated with maturing notes payable and maturing
capital equipment leases used to finance the purchase of certain equipment.
As a result of the above factors, the Company incurred a net loss of
$1,036,000 for the three months ended January 31, 1997 as compared to a net loss
of $1,133,000 for the same three month period in 1996.
Six Months Ended January 31, 1997
Compared with Six Months Ended January 31, 1996
The Company earned contract research and license revenues increased to
$2,249,000 for the six months ended January 31, 1997 from $1,070,000 for the six
months ended January 31, 1996. The majority of the increase was due to the
receipt of an upfront license fee from GTI/Novartis in the amount of $850,000.
During the six months ended January 31, 1997 and 1996, the Company expended
$3,895,000 and $2,772,000, respectively on research and development activities.
The increase of 41% or $1,123,000 resulted principally from costs incurred
related to the clinical trials of the Company's lead C5 Inhibitor, 5G1.1-SC,
manufacturing validation costs, expanded preclinical development and
manufacturing process development costs for the Company's recombinant product
candidates, and increased external research related to preclinical development
of the Company's xenotransplant products.
General and administrative related expenses increased to $1,407,000 for the
six months ended January 31, 1997 from $750,000 for the same period ended
January 31, 1996. This increase was due primarily to external professional fees
which accounted for approximately $425,000, representing patent and legal fees,
investor and shareholder relations fees, business development fees and
recruiting fees. The approximately $232,000 balance of the increase was
attributable to increased insurance costs incurred as a public company and to
increased travel and administrative expenses related to the Company's increased
clinical and regulatory activities and presentations at scientific conferences.
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Other income, net was $440,000 for the six months ended January 31, 1997 as
compared to other income, net of $32,000 for same period a year ago. This other
income, net was due primarily to greater interest income from higher cash
balances available for investment.
As a result of the above factors, the Company's net loss increased to
$2,642,000 from $2,419,000 for the six months ended January 31, 1997 and 1996,
respectively.
The Section entitled "Liquidity and Capital Resources" under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," is amended and restated in its entirety to read as follows:
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations and capital
expenditures primarily through private placements and its initial public
offering of equity securities resulting in aggregate net proceeds of
approximately $41.7 million. The Company has financed the purchase of certain
equipment through $1.2 million of secured notes payable to a financing
institution and $378,000 of capital lease obligations. Through January 1997, the
Company has received approximately $3.9 million in research and development
support and license fees under its collaborations with US Surgical and
GTI/Novartis. The Company has also received $711,000 from its SBIR grants from
the NIH and $516,000 under the ATP from NIST, respectively, through January
1997.
The proceeds of the Company's initial public offering, private placements,
notes payable and capital leases, and the cash generated from the corporate
collaborations and SBIR and ATP grants have been used to fund operating
activities of approximately $23.5 million and investments of approximately $2.6
million in equipment and approximately $973,000 in licensed technology rights
and patents through January 31, 1997. During the six months ended January 31,
1997 and January 31, 1996, the Company's capital expenditures totaled $434,000
and $142,000, respectively, primarily for the acquisition of laboratory and
manufacturing scale-up equipment. As of January 31, 1997, the Company had cash,
cash equivalents and marketable securities of approximately $15.4 million.
The Company leases its administrative and research and development
facilities under three operating leases expiring in June 1998, December 1997,
and March 1999, respectively, each with an option for up to an additional three
years.
The Company anticipates that its existing available capital resources and
interest earned on available cash and marketable securities
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should be sufficient to fund its operating expenses and capital requirements as
currently planned for at least the next twelve months. While the Company
currently has no material commitments for capital expenditures, the Company's
future capital requirements will depend on many factors, including the progress
of the Company's research and development programs, progress in clinical trials,
the time and costs involved in obtaining regulatory approvals, the costs
involved in obtaining and enforcing patents and any necessary licenses, the
ability of the Company to establish development and commercialization
relationships, and the costs of manufacturing scale-up.
Primarily as a result of $2.61 million of operating losses, the Company
used $2.73 million of cash in its operating activities during the six months
ended January 31, 1997. These funds were provided by (i) cash flows from
investing activities generated principally from the net proceeds of maturing
marketable securities of $2.36 million, offset by purchases of equipment of
$434,000 and (ii) the use of $856,000 of cash balances which were on hand at
July 31, 1996. At January 31, 1997, approximately $8.64 million of cash is held
in short-term highly liquid investments with original maturities of less than
three months.
The Company expects to incur substantial additional costs, including costs
associated with research, preclinical and clinical testing, manufacturing
process development, contract manufacturing, and additional capital expenditures
associated with facility expansion and manufacturing requirements in order to
commercialize its products currently under development. The Company will need to
raise substantial additional funds through additional financings including
public or private equity offerings and collaborative research and development
arrangements with corporate partners. There can be no assurance that funds will
be available on terms acceptable to the Company, if at all, or that discussions
with potential collaborative partners will result in any agreements. The
unavailability of additional financing could require the Company to delay, scale
back or eliminate certain of its research and product development programs or to
license third parties to commercialize products or technologies that the Company
would otherwise undertake itself, any of which could have a material adverse
effect on the Company.
PART II - OTHER INFORMATION
A new "Item 4 - Submission of Matters to a Vote of Security Holders" is
added which shall read in its entirety as follows:
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on December 13, 1996,
the stockholders voted to amend the Company's 1992 Stock Option Plan to (i)
increase the aggregate number of shares of Common Stock which may be issued
thereunder from 1,320,000 shares to 1,800,000 shares and (ii) limit the maximum
option grant which may be made to an employee in any calendar year to 200,000
shares. The vote was 4,346,690 shares for, 105,399 shares against or withheld
and 1,034,747 abstentions and broker non-votes.
In addition, at the Annual Meeting of Stockholders held on December 13,
1996, the following directors were nominated and elected by the votes indicated:
John H. Fried: 5,485,786 For, 1,050 Against or Withheld, 0 Abstaining
Leonard Bell, M.D.: 5,485,786 For, 1,050 Against or Withheld, 0 Abstaining
Timothy F. Howe: 5,485,786 For, 1,050 Against or Withheld, 0 Abstaining
Max Link, Ph.D.: 5,485,786 For, 1,050 Against or Withheld, 0 Abstaining
Joseph A. Madri,
Ph.D., M.D.: 5,485,786 For, 1,050 Against or Withheld, 0 Abstaining
Leonard Marks, Jr.: 5,485,586 For, 1,250 Against or Withheld, 0 Abstaining
Eileen M. More: 5,485,786 For, 1,050 Against or Withheld, 0 Abstaining
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ALEXION PHARMACEUTICALS, INC.
By: /s/ LEONARD BELL, M.D.
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Leonard Bell, M.D.
President, Chief Executive Officer,
Secretary and Treasurer
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