UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) |
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended DecemberMarch 31, 20022003
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 0-26642
MYRIAD GENETICS, INC. | ||
(Exact name of registrant as specified in its charter) | ||
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Delaware |
| 87-0494517 |
(State or other jurisdiction |
| (I.R.S. Employer Identification No.) |
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320 Wakara Way, Salt Lake City, UT |
| 84108 |
(Address of principal executive offices) |
| (Zip Code) |
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Registrant’s telephone number, including area code: (801) 584-3600 |
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 ý No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý (Not an accelerated filer due to fiscal year end June 30, 2003)
As of February 7,May 1, 2003 the registrant had 27,011,54827,019,508 shares of $0.01 par value common stock outstanding.
MYRIAD GENETICS, INC.
INDEX TO FORM 10-Q
PART I - Financial Information | |||
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Item 1. | Financial Statements: | ||
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| Condensed Consolidated Balance Sheets as of | ||
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| Notes to Condensed Unaudited Consolidated Financial Statements | ||
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||
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2
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| (Unaudited) |
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(in thousands, except per share amounts) | Dec. 31, 2002 |
| June 30, 2002 |
| (Unaudited) |
| June 30, 2002 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
| $ | 97,027 |
| $ | 61,067 |
|
| $ | 80,421 |
| $ | 61,067 |
|
Marketable investment securities |
| 13,404 |
| 12,008 |
|
| 12,833 |
| 12,008 |
| ||||
Prepaid expenses |
| 7,174 |
| 4,827 |
|
| 5,904 |
| 4,827 |
| ||||
Trade accounts receivable, less allowance for doubtful accounts of $675 at Dec. 31, 2002 and $505 at June 30, 2002 |
| 9,339 |
| 7,233 |
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Trade accounts receivable, less allowance for doubtful accounts of $795 at Mar. 31, 2003 and $505 at June 30, 2002 |
| 11,706 |
| 7,233 |
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Other receivables |
| 6,618 |
| 220 |
|
| 10,246 |
| 220 |
| ||||
Related party receivables |
| 98 |
| ¾ |
|
| 119 |
| ¾ |
| ||||
Total current assets |
| 133,660 |
| 85,355 |
|
| 121,229 |
| 85,355 |
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Equipment and leasehold improvements: |
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Equipment |
| 29,748 |
| 26,409 |
|
| 30,397 |
| 26,409 |
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Leasehold improvements |
| 7,374 |
| 5,384 |
|
| 7,469 |
| 5,384 |
| ||||
|
| 37,122 |
| 31,793 |
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| 37,866 |
| 31,793 |
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Less accumulated depreciation and amortization |
| 18,503 |
| 16,360 |
|
| 19,580 |
| 16,360 |
| ||||
Net equipment and leasehold improvements |
| 18,619 |
| 15,433 |
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| 18,286 |
| 15,433 |
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Long-term marketable investment securities |
| 38,680 |
| 51,168 |
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| 37,301 |
| 51,168 |
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Other assets |
| 6,151 |
| 5,434 |
|
| 6,101 |
| 5,434 |
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| $ | 197,110 |
| $ | 157,390 |
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| $ | 182,917 |
| $ | 157,390 |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
| $ | 11,609 |
| $ | 9,462 |
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| $ | 4,653 |
| $ | 9,462 |
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Related party payable |
| ¾ |
| 1,038 |
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| ¾ |
| 1,038 |
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Accrued liabilities |
| 4,137 |
| 3,591 |
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| 4,342 |
| 3,591 |
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Deferred revenue |
| 5,923 |
| 14,430 |
|
| 3,924 |
| 14,430 |
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Total current liabilities |
| 21,669 |
| 28,521 |
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| 12,919 |
| 28,521 |
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Stockholders’ equity: |
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Preferred stock, $0.01 par value. 5,000 shares authorized, no shares issued and outstanding |
| ¾ |
| ¾ |
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| ¾ |
| ¾ |
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Common stock, $0.01 par value, 60,000 shares authorized; issued and outstanding 27,010 at Dec. 31, 2002 and 23,817 at June 30, 2002 |
| 270 |
| 238 |
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Common stock, $0.01 par value, 60,000 shares authorized; issued and outstanding 27,015 at Mar. 31, 2003 and 23,817 at June 30, 2002 |
| 270 |
| 238 |
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Additional paid-in capital |
| 260,577 |
| 202,149 |
|
| 260,591 |
| 202,149 |
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Accumulated other comprehensive income |
| 631 |
| 308 |
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| 707 |
| 308 |
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Accumulated deficit |
| (86,037 | ) | (73,826 | ) |
| (91,570 | ) | (73,826 | ) | ||||
Total stockholders’ equity |
| 175,441 |
| 128,869 |
|
| 169,998 |
| 128,869 |
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| $ | 197,110 |
| $ | 157,390 |
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| $ | 182,917 |
| $ | 157,390 |
|
See accompanying notes to condensed consolidated financial statements.
3
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) |
| (Unaudited) | |||||||||||
Three Months Ended |
| Six Months Ended | |||||||||||
(in thousands, except per share amounts) |
| Dec. 31, 2002 |
| Dec. 31, 2001 |
| Dec. 31, 2002 |
| Dec. 31, 2001 |
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Revenues: |
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Research revenue |
| $ | 8,406 |
| $ | 7,107 |
| $ | 15,420 |
| $ | 14,780 |
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Related party research revenue |
| 462 |
| ¾ |
| 1,094 |
| ¾ |
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Total research revenue |
| 8,868 |
| 7,107 |
| 16,514 |
| 14,780 |
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Predictive medicine revenue |
| 8,151 |
| 6,368 |
| 16,015 |
| 11,886 |
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Total revenues |
| 17,019 |
| 13,475 |
| 32,529 |
| 26,666 |
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Costs and expenses: |
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Predictive medicine cost of revenue |
| 2,995 |
| 2,565 |
| 5,916 |
| 4,837 |
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Research and development expense |
| 12,218 |
| 8,612 |
| 23,164 |
| 16,874 |
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Selling, general and administrative expense |
| 9,295 |
| 6,081 |
| 17,011 |
| 11,705 |
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Total costs and expenses |
| 24,508 |
| 17,258 |
| 46,091 |
| 33,416 |
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Operating loss |
| (7,489 | ) | (3,783 | ) | (13,562 | ) | (6,750 | ) | ||||
Other income (expense): |
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Interest income |
| 725 |
| 1,419 |
| 1,567 |
| 3,350 |
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Other |
| (5 | ) | 29 |
| 34 |
| 5 |
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Loss before taxes |
| (6,769 | ) | (2,335 | ) | (11,961 | ) | (3,395 | ) | ||||
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Income taxes |
| 125 |
| 125 |
| 250 |
| 250 |
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Net loss |
| $ | (6,894 | ) | $ | (2,460 | ) | $ | (12,211 | ) | $ | (3,645 | ) |
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Basic and diluted loss per share |
| $ | (0.27 | ) | $ | (0.10 | ) | $ | (0.50 | ) | $ | (0.15 | ) |
Basic and diluted weighted average shares outstanding |
| 25,081 |
| 23,608 |
| 24,454 |
| 23,545 |
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| (Unaudited) |
| (Unaudited) |
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| Three Months Ended |
| Nine Months Ended |
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(in thousands, except per share amounts) |
| Mar. 31, 2003 |
| Mar. 31, 2002 |
| Mar. 31, 2003 |
| Mar. 31, 2002 |
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Revenues: |
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Predictive medicine revenue |
| $ | 9,314 |
| $ | 7,255 |
| $ | 25,329 |
| $ | 19,141 |
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Research revenue |
| 6,432 |
| 5,803 |
| 21,852 |
| 20,583 |
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Related party research revenue |
| 342 |
| ¾ |
| 1,436 |
| ¾ |
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Total research revenue |
| 6,774 |
| 5,803 |
| 23,288 |
| 20,583 |
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Total revenues |
| 16,088 |
| 13,058 |
| 48,617 |
| 39,724 |
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Costs and expenses: |
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Predictive medicine cost of revenue |
| 3,361 |
| 2,848 |
| 9,277 |
| 7,685 |
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Research and development expense |
| 11,053 |
| 8,740 |
| 34,217 |
| 25,614 |
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Selling, general and administrative expense |
| 7,785 |
| 5,912 |
| 24,795 |
| 17,617 |
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Total costs and expenses |
| 22,199 |
| 17,500 |
| 68,289 |
| 50,916 |
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Operating loss |
| (6,111 | ) | (4,442 | ) | (19,672 | ) | (11,192 | ) | ||||
Other income (expense): |
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Interest income |
| 701 |
| 1,077 |
| 2,268 |
| 4,426 |
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Other |
| 1 |
| (6 | ) | 35 |
| ¾ |
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Loss before taxes |
| (5,409 | ) | (3,371 | ) | (17,369 | ) | (6,766 | ) | ||||
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Income taxes |
| 125 |
| 125 |
| 375 |
| 375 |
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Net loss |
| $ | (5,534 | ) | $ | (3,496 | ) | $ | (17,744 | ) | $ | (7,141 | ) |
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Basic and diluted loss per share |
| $ | (0.20 | ) | $ | (0.15 | ) | $ | (0.70 | ) | $ | (0.30 | ) |
Basic and diluted weighted average shares outstanding |
| 27,012 |
| 23,763 |
| 25,294 |
| 23,617 |
|
See accompanying notes to condensed consolidated financial statements.
4
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| Six Months Ended |
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| (Unaudited) |
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| Dec. 31, 2002 |
| Dec. 31, 2001 |
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| Nine Months Ended |
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(dollars in thousands) |
| (Unaudited) |
|
| Mar. 31, 2003 |
| Mar. 31, 2002 |
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Cash flows from operating activities: |
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Net loss |
| $ | (12,211 | ) | $ | (3,645 | ) |
| $ | (17,744 | ) | $ | (7,141 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
| 2,675 |
| 2,067 |
|
| 3,969 |
| 3,275 |
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Gain on disposition of assets |
| (34 | ) | (5 | ) |
| (35 | ) | ¾ |
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Bad debt expense |
| 170 |
| 70 |
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| 290 |
| 200 |
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Changes in operating assets: |
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Trade receivables |
| (2,276 | ) | (1,405 | ) |
| (4,763 | ) | (3,718 | ) | |||||
Other receivables |
| (6,398 | ) | (126 | ) |
| (10,026 | ) | 106 |
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Related party receivables |
| (98 | ) | 1,278 |
|
| (119 | ) | 1,291 |
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Prepaid expenses |
| (2,347 | ) | 685 |
|
| (1,077 | ) | (32 | ) | |||||
Other assets |
| ¾ |
| (66 | ) |
| ¾ |
| (958 | ) | |||||
Accounts payable |
| 2,147 |
| (2,914 | ) |
| (4,809 | ) | (4,350 | ) | |||||
Accrued liabilities |
| 546 |
| 780 |
|
| 751 |
| (3 | ) | |||||
Related party payable |
| (1,038 | ) | ¾ |
|
| (1,038 | ) | ¾ |
| |||||
Deferred revenue |
| (8,507 | ) | (10,092 | ) |
| (10,506 | ) | (9,298 | ) | |||||
Net cash used in operating activities |
| (27,371 | ) | (13,373 | ) |
| (45,107 | ) | (20,628 | ) | |||||
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Cash flows from investing activities: |
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Capital expenditures |
| (5,477 | ) | (1,898 | ) |
| (6,387 | ) | (2,617 | ) | |||||
Proceeds from sale of investments in other companies |
| ¾ |
| 630 |
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| ¾ |
| 630 |
| |||||
Increase in other assets |
| (1,100 | ) | ¾ |
|
| (1,100 | ) | ¾ |
| |||||
Purchases of marketable investment securities |
| (17,753 | ) | (34,122 | ) |
| (23,123 | ) | (43,981 | ) | |||||
Proceeds from sales and maturities of marketable investment securities |
| 29,201 |
| 63,365 |
|
| 36,597 |
| 86,386 |
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Net cash provided by investing activities |
| 4,871 |
| 27,975 |
|
| 5,987 |
| 40,418 |
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Cash flows from financing activities: |
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Net proceeds from issuance of common stock |
| 58,460 |
| 2,668 |
|
| 58,474 |
| 2,841 |
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Net cash provided by financing activities |
| 58,460 |
| 2,668 |
|
| 58,474 |
| 2,841 |
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Net increase in cash and cash equivalents |
| 35,960 |
| 17,270 |
|
| 19,354 |
| 22,631 |
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Cash and cash equivalents at beginning of period |
| 61,067 |
| 35,937 |
|
| 61,067 |
| 35,937 |
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Cash and cash equivalents at end of period |
| 97,027 |
| 53,207 |
|
| $ | 80,421 |
| $ | 58,568 |
|
See accompanying notes to condensed consolidated financial statements.
5
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared by Myriad Genetics, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying financial statements contain all adjustments (consisting of normal and recurring accruals) necessary to present fairly all financial statements. The financial statements herein should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2002, included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2002. Operating results for the sixthree and nine month periodperiods ended DecemberMarch 31, 20022003 may not necessarily be indicative of the results to be expected for any other interim period or for the full year.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(2) Comprehensive Loss (Unaudited)
The components of the Company’sCompany's comprehensive loss are as follows (in thousands):
|
| Three Months Ended Mar. 31, |
| Nine Months Ended Mar. 31, |
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| Three Months Ended Dec. 31, |
| Six Months Ended Dec. 31, |
|
| 2003 |
| 2002 |
| 2003 |
| 2002 |
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|
| 2002 |
| 2001 |
| 2002 |
| 2001 |
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Net loss |
| $ | (6,894 | ) | $ | (2,460 | ) | $ | (12,211 | ) | $ | (3,645 | ) |
| $ | (5,534 | ) | $ | (3,496 | ) | $ | (17,744 | ) | $ | (7,141 | ) |
Unrealized gain (loss) on available-for-sale securities |
| 71 |
| (472 | ) | 323 |
| (17 | ) |
| 76 |
| (506 | ) | 399 |
| (524 | ) | ||||||||
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Comprehensive loss |
| $ | (6,823 | ) | $ | (2,392 | ) | $ | (11,888 | ) | $ | (3,662 | ) |
| $ | (5,458 | ) | $ | (4,002 | ) | $ | (17,345 | ) | $ | (7,665 | ) |
(3) Net Loss Per Common Share
Loss per common share is computed based on the weighted-average number of common shares and, as appropriate, dilutive potential common shares outstanding during the period. Stock options and warrants are considered to be potential common shares.
Basic loss per common share is the amount of loss for the period available to each share of common stock outstanding during the reporting period. Diluted loss per share is the amount of loss for the period available to each share of common stock outstanding during the reporting period and to each share that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the period.
In calculating loss per common share the net loss and the weighted average common shares outstanding were the same for both the basic and diluted calculation.
6
As of DecemberMarch 31, 20022003 and 2001,2002, there were antidilutive potential common shares of 4,536,9524,989,937 and 3,903,262,4,213,852, respectively. Accordingly, these potential common shares were not included in the computation of diluted loss per share for the periods presented, but may be dilutive to future basic and diluted earnings per share.
(4) Segment and Related Information
The Company’s business units have been aggregated into two reportable segments: (i) research and (ii) predictive medicine. The research segment is focused on the discovery and sequencing of genes related to major common diseases, marketing of subscriptions to proprietary database information, and the development of therapeutic products for the treatment and prevention of major diseases. The predictive medicine segment provides testing to determine predisposition to common diseases.
The accounting policies of the segments are the same as those described in the basis of presentation (note 1). The Company evaluates segment performance based on results from operations before interest income and expense and other income and expense. The Company’s assets are not identifiable by segment.
(in thousands) |
| Research |
| Predictive |
| Total |
|
| Research |
| Predictive |
| Total |
| ||||||
Three months ended Dec. 31, 2002: |
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Three months ended Mar. 31, 2003: |
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Revenues |
| $ | 8,868 |
| $ | 8,151 |
| $ | 17,019 |
|
| $ | 6,774 |
| $ | 9,314 |
| $ | 16,088 |
|
Depreciation and amortization |
| 829 |
| 550 |
| 1,379 |
|
| 878 |
| 417 |
| 1,295 |
| ||||||
Segment operating loss |
| 4,946 |
| 2,543 |
| 7,489 |
| |||||||||||||
Segment operating gain/(loss) |
| (6,547 | ) | 436 |
| (6,111 | ) | |||||||||||||
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Three months ended Dec. 31, 2001: |
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Three months ended Mar. 31, 2002: |
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Revenues |
| 7,107 |
| 6,368 |
| 13,475 |
|
| 5,803 |
| 7,255 |
| 13,058 |
| ||||||
Depreciation and amortization |
| 717 |
| 308 |
| 1,025 |
|
| 726 |
| 483 |
| 1,209 |
| ||||||
Segment operating loss |
| 3,076 |
| 707 |
| 3,783 |
| |||||||||||||
Segment operating gain/(loss) |
| (3,480 | ) | (962 | ) | (4,442 | ) | |||||||||||||
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|
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| ||||||
Six months ended Dec. 31, 2002: |
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|
|
| |||||||||||||
Nine months ended Mar. 31, 2003: |
|
|
|
|
|
|
| |||||||||||||
Revenues |
| 16,514 |
| 16,015 |
| 32,529 |
|
| 23,288 |
| 25,329 |
| 48,617 |
| ||||||
Depreciation and amortization |
| 1,612 |
| 1,063 |
| 2,675 |
|
| 2,490 |
| 1,479 |
| 3,969 |
| ||||||
Segment operating loss |
| 9,546 |
| 4,016 |
| 13,562 |
| |||||||||||||
Segment operating gain/(loss) |
| (16,092 | ) | (3,580 | ) | (19,672 | ) | |||||||||||||
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| ||||||
Six months ended Dec. 31, 2001: |
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|
|
| |||||||||||||
Nine months ended Mar. 31, 2002: |
|
|
|
|
|
|
| |||||||||||||
Revenues |
| 14,780 |
| 11,886 |
| 26,666 |
|
| 20,583 |
| 19,141 |
| 39,724 |
| ||||||
Depreciation and amortization |
| 1,432 |
| 635 |
| 2,067 |
|
| 2,157 |
| 1,118 |
| 3,275 |
| ||||||
Segment operating loss |
| 4,631 |
| 2,119 |
| 6,750 |
| |||||||||||||
Segment operating gain/(loss) |
| (8,113 | ) | (3,079 | ) | (11,192 | ) |
7
|
| Three Months Ended Dec. 31, |
| Six Months Ended Dec. 31, |
|
| Three Months Ended Mar. 31, |
| Nine Months Ended Mar. 31, |
| |||||||||||||||||
(in thousands) |
| 2002 |
| 2001 |
| 2002 |
| 2001 |
|
| 2003 |
| 2002 |
| 2003 |
| 2002 |
| |||||||||
Total operating loss for reportable segments |
| $ | (7,489 | ) | $ | (3,783 | ) | $ | (13,562 | ) | $ | (6,750 | ) |
| $ | (6,111 | ) | $ | (4,442 | ) | $ | (19,672 | ) | $ | (11,192 | ) | |
Interest income |
| 725 |
| 1,419 |
| 1,567 |
| 3,350 |
|
| 701 |
| 1,077 |
| 2,268 |
| 4,426 |
| |||||||||
Other |
| (5 | ) | 29 |
| 34 |
| 5 |
|
| 1 |
| (6 | ) | 35 |
| ¾ |
| |||||||||
Income taxes |
| (125 | ) | (125 | ) | (250 | ) | (250 | ) |
| (125 | ) | (125 | ) | (375 | ) | (375 | ) | |||||||||
Net loss |
| $ | (6,894 | ) | $ | (2,460 | ) | $ | (12,211 | ) | $ | (3,645 | ) |
| $ | (5,534 | ) | $ | (3,496 | ) | $ | (17,744 | ) | $ | (7,141 | ) |
(5) Related Party Transactions
On July 1, 2002 Myriad Proteomics, Inc., which is 49 percent owned by the Company, contracted with the Company for the performance of certain high throughput sequencing services. For the three months ended DecemberMarch 31, 20022003 the Company recorded approximately $462,000$342,000 of revenues under this agreement with Myriad Proteomics for sequencing performed, which were recorded as related party research revenue in the accompanying condensed consolidated statements of operations.
(6) Financing Transaction
On November 26, 2002, the Company received net proceeds of $57.2 million from an underwritten offering of 3 million shares of its common stock in a public offering. The shares were offered under a shelf registration statement filed by the Company with the Securities and Exchange Commission, which was declared effective November 21, 2001.
(7)Recent Accounting PronouncementsStock-Based Compensation
FASB StatementPrior to 1992, the Company granted nonqualified stock options to directors, employees, and other key individuals providing services to the Company. In 1992, the Company adopted the “1992 Employee, Director, and Consultant Fixed Stock Option Plan” (subsequently renamed the 2002 Amended and Restated Employee, Director and Consultant Stock Option Plan). The Company accounts for these plans under the recognition and measurement principles of APB Opinion No. 148 amends25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company will adopt the interim provisions of Statement 148 during the quarter ended March 31, 2003. The Company does not expect the adoption of the Statement 148 to have a material impact on the Company’s financial position, results of operations or cash flows.
In October 2002, the Emerging Issues Task Force issued EITF 00-21 Revenue Arrangements with Multiple Deliverables. This Issue addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. In some arrangements, the different revenue-generating activities (deliverables) are sufficiently separable, and there exists sufficient evidence of their fair values to separately account for some or all of the deliverables (that is, there are separate units of accounting). In other arrangements, some or all of the deliverables are not independently functional, or there is not sufficient evidence of their fair values to account for them separately. This Issue addresses when and, if so, how an arrangement involving multiple deliverables should be divided into separate units of accounting. This Issue does not change otherwise applicable revenue recognition criteria. The Company will adopt the provisions of this Issue for all arrangements entered into after June 30, 2003. The Company does not expect the adoption of EITF 00-21 to have a material impact on the Company’s financial position, results of operations or cash flows.
|
| Three Months Ended Mar. 31, |
| Nine Months Ended Mar. 31, |
| ||||||||
(in thousands, except per share amounts) |
| 2003 |
| 2002 |
| 2003 |
| 2002 |
| ||||
Net loss, as reported |
| $ | (5,534 | ) | $ | (3,496 | ) | $ | (17,744 | ) | $ | (7,141 | ) |
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax related effects |
| (6,363 | ) | (4,638 | ) | (19,156 | ) | (15,585 | ) | ||||
Pro forma net loss |
| $ | (11,897 | ) | $ | (8,134 | ) | $ | (36,900 | ) | $ | (22,726 | ) |
|
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| ||||
Earnings per share: |
|
|
|
|
|
|
|
|
| ||||
Basic and diluted – as reported |
| $ | (0.20 | ) | $ | (0.15 | ) | $ | (0.70 | ) | $ | (0.30 | ) |
Basic and diluted – pro forma |
| $ | (0.44 | ) | $ | (0.34 | ) | $ | (1.46 | ) | $ | (0.96 | ) |
8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
We are a leading biopharmaceutical company focused on the development and marketing of novel therapeutic and predictive medicine products. We have developed a number of proprietary proteomic technologies that permit us to identify genes, their related proteins and the biological pathways they form. We use this information to better understand the role proteins play in the onset and progression of human disease. We operate two wholly owned subsidiaries, Myriad Pharmaceuticals, Inc. and Myriad Genetic Laboratories, Inc., to commercialize our therapeutic and predictive medicine discoveries. Myriad Pharmaceuticals, Inc. develops and intends to market novel therapeutic products. Myriad Genetic Laboratories, Inc. focuses on the development and marketing of predictive medicine products that assess an individual’s risk of developing a specific disease.
Myriad researchers have made important discoveries in the fields of cancer, viral diseases, such as AIDS,depression, and acute thrombosis.obesity. These discoveries point to novel disease pathways and have pavedthat may pave the way for the development of new drugs. Additionally, ourWe have developed a pipeline of drug targets offerscandidates that may offer therapeutic opportunities for the treatment of diseases such as cancer, HIV, heart disease, rheumatoid arthritis, and Alzheimer’s disease and other central nervous system disorders. We have established an extensive portfolio of drug candidates that are under development at Myriad. Fifteen of these drug candidates are in pre-clinical testing.disease. FlurizanÔ (MPC-7869), our lead therapeutic product candidate for the treatment of prostate cancer, is currently in a large, multi-center human clinical trial. We have also submitted an Investigational New Drug (IND) application for the evaluation of MPC-7869 for the treatment of Alzheimer’s disease. Under this IND, the Phase 1 study will evaluate the effects of MPC-7869 on healthy older volunteers and is currently in progress at sites at the Mayo Clinic and the University of California, San Diego. We intend to independently develop and, subject to regulatory approval, market our therapeutic products, particularly in the area of cancer and infectious diseases.
We also have developed and commercialized a number of innovative predictive medicine products; including BRACAnalysisÒ, which is used to assess a woman’s risk of developing breast and ovarian cancer, and COLARISÒ and COLARIS APÔ, which are used to determine a person’s risk of developing colon cancer. WeIn the United States we market these products using our own internal sales force in the United States and we have entered into an agreement with Laboratory Corporation of America Holdings to be our exclusive sales and distribution partner to market our products to primary care and other internal medicine physicians. We have also entered into marketing collaborations with other organizations in Australia, Austria, Brazil, Canada, Germany, Japan, New Zealand, and Switzerland. Revenues from these proprietary products were $8.2$9.3 million for the three months ended DecemberMarch 31, 2002,2003, an increase of 28% or $1.8$2.1 million over the same three months of 2001.2002.
We believe that the future of medicine lies in the creation of new classes of drugs that prevent disease from occurring or progressing and that treat the cause, not just the symptoms, of disease. In addition, we believe that advances in the emerging field of predictive medicine will improve our ability to determine which patients are subject to a greater risk of developing these diseases and who therefore should receive these new preventive medicines.
We have devoted substantially all of our resources to maintaining our research and development programs, undertaking drug discovery and development, and operating our predictive medicine business. Our revenues have consisted primarily of sales of predictive medicine products, and research payments, received pursuant to collaborative agreements, upfront fees, and milestone payments. We have yet to attain profitability and, for the three and sixnine months ended DecemberMarch 31, 2002,2003, we had net losses of $6.9$5.5 million and $12.2$17.7 million, respectively. As of DecemberMarch 31, 20022003 we had an accumulated deficit of $86.0$91.6 million.
We have formed strategic alliances with 12 major pharmaceutical or multinational companies including Abbott Laboratories, Bayer Corporation, E.I. du Pont de Nemours and Company (DuPont), Eli Lilly and Company, Hitachi Ltd., Hoffmann-LaRoche Inc., Novartis Corporation, Oracle Corporation, Pharmacia Corporation, Schering AG, Schering-Plough Corporation, and Torrey Mesa Research Institute, a subsidiary of Syngenta. We intend to enter into additional collaborative relationships to discover genes,
9
proteins, protein networks, and drug targets associated with common diseases as well as to continue to fund internal research projects. However, we may be unable to enter into additional collaborative relationships on terms acceptable to us.
We expect to incur losses for at least the next several years, primarily due to expansion of our drug discovery and development efforts, expansion of our research and development programs, launch of new predictive medicine products, and expansion of our facilities. Additionally, we expect to incur substantial sales, marketing and other expenses in connection with building our pharmaceutical and predictive
9
medicine businesses. We expect that losses will fluctuate from quarter to quarter and that such fluctuations may be substantial.
Critical Accounting Policies
Critical accounting policies are those policies which are both important to the portrayal of a company’s financial condition and results and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies are as follows:
• revenue recognition;
• investments in privately-held companies; and
• investment in Myriad Proteomics, Inc.;
Revenue Recognition. We apply the provisions of Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 101, Revenue Recognition (SAB 101) to all our revenue transactions. In applying the principles of SAB 101 to our research and technology licensing agreements we consider the terms and conditions of each agreement separately to arrive at a proportional performance methodology of recognizing revenue. Such methodologies involve recognizing revenue in accordance with the percentage-of-completion method of accounting and following the guidance in Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts, as well as other proportional performance methodologies as considered appropriate. Percent complete is estimated based on costs incurred relative to total estimated contract costs. We make adjustments, if necessary, to the estimates used in the percentage-of-completion method of accounting as work progresses and we gain experience. Our estimates of total contract costs include assumptions, such as estimated research hours to complete, materials costs, and other direct and indirect costs. Actual results may vary significantly from our estimates. Revenues related to up-front payments and technology license fees when continuing involvement or research services are required of us are recognized over the period of performance.
Predictive medicine revenues include revenues from the sale of predictive medicine products and related marketing agreements. Predictive medicine revenue is recognized upon completion of the test and communication of results. Up-front payments related to marketing agreements are recognized ratably over the life of the agreement.
Investments in Privately-Held Companies. We review the valuation of our investments in privately-held biotechnology and pharmaceutical companies for possible impairment as changes in facts and circumstances indicate that impairment should be assessed. The amount of impairment, if any, and valuation of these investments are based on our estimates and, in certain circumstances, the completion of independent, third-party appraisals of the investments. Inherent in these estimates and appraisals are assumptions such as the comparability of the investee to similar publicly traded companies, the value of the investee’s underlying research and development efforts, the likelihood that the investee’s current research projects will result in a marketable product, and the investee’s expected future cash flows. Accordingly, the amount recognized by us upon ultimate liquidation of these investments may vary significantly from the estimated fair values at DecemberMarch 31, 2002.2003.
10
Investment In Myriad Proteomics. In April 2001, we announced the formation of a new alliance with Hitachi, Ltd., Friedli Corporate Finance A.G., and Oracle Corporation to map the human proteome.Corporation. The newly formed entity, Myriad Proteomics, Inc., intends to develop and market its proprietary proteomic information and targets to pharmaceutical and biotechnology companies for therapeutic and diagnostic product development. We have entered into an agreement with Myriad Proteomics to perform certain high throughput sequencing services.
10
Recent Accounting Pronouncements
During January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities.” This interpretation establishes new guidelines for consolidating entities in which a parent company may not have majority voting control, but bears residual economic risks or is entitled to receive a majority of the entity’s residual returns, or both. As a result, certain subsidiaries that were previously not consolidated under the provisions of Accounting Research Bulletin No. 51 may now require consolidation with the parent company. This interpretation applies in the first year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. We are currently evaluating the provisions of this interpretation.
Results of Operations for the Three Months Ended DecemberMarch 31, 20022003 and 20012002
Total research revenues for the three months ended December 31, 2002 were $8.9 million compared to $7.1 million for the same three months in 2001. Related party research revenues included in total research revenues for the three months ended December 31, 2002 were $0.5 million. Related party research revenue is comprised of certain scientific outsourcing services performed for Myriad Proteomics, Inc., which is 49% owned by us. Research revenue is comprised of research payments received pursuant to collaborative agreements, amortization of upfront fees and milestone payments. This 25% increase in total research revenue is primarily attributable to revenue recognized from our DuPont and Abbott Laboratories collaborations, including a $1 million milestone recognized and received from Abbott Laboratories for the discovery of a gene involved in depression. Research revenue from our research collaboration agreements is generally recognized as related costs are incurred. Consequently, as these programs progress and costs increase or decrease, revenues increase or decrease proportionately.
Predictive medicine revenues for the three months ended DecemberMarch 31, 20022003 were $8.2$9.3 million an increase of 28% or $1.8compared to $7.3 million overfor the same three months in 2001.2002, an increase of 28%. Predictive medicine revenue is comprised of sales of predictive medicine products and marketing fees from our predictive medicine product marketing partners. Increased sales and marketing efforts and wider acceptance of our products by the medical community have resulted in increased revenues for the three months ended DecemberMarch 31, 2002.2003. However, there can be no assurance that predictive medicine revenues will continue to increase at historical rates.
Total research revenues for the three months ended March 31, 2003 were $6.8 million compared to $5.8 million for the same three months in 2002. Related party research revenues included in total research revenues for the three months ended March 31, 2003 were $0.3 million. Related party research revenue is comprised of certain scientific outsourcing services performed for Myriad Proteomics, Inc., which is 49% owned by us. Research revenue is comprised of research payments received pursuant to collaborative agreements, amortization of upfront fees and milestone payments. This 17% increase in total research revenue is primarily attributable to revenue recognized from our DuPont and Abbott Laboratories collaborations. Research revenue from our research collaboration agreements is generally recognized as related costs are incurred. Consequently, as these programs progress and costs increase or decrease, revenues increase or decrease proportionately.
Predictive medicine cost of revenue for the three months ended DecemberMarch 31, 20022003 was $3.0$3.4 million compared to $2.6$2.8 million for the same three months in 2001.2002. This increase of 17%18% in predictive medicine cost of revenue is primarily due to the 28% increase in predictive medicine revenue for the three months ended DecemberMarch 31, 20022003 compared to same three months in 2001.2002. Gross margin percent for the three months ended DecemberMarch 31, 20022003 was 63%64% compared to 60%61% for the same three months in 2001.2002. This improvement in gross margin percent resulted from technology improvements and gains in efficiencies in the operations of our predictive medicine business.
Research and development expenses for the three months ended DecemberMarch 31, 20022003 were $12.2$11.1 million compared to $8.6$8.7 million for the same three months in 2001.2002. This increase of 42%26% was primarily due to increased costs associated with our ongoing clinical trials in prostate cancer and Alzheimer’s disease, other drug development programs, and increased research efforts associated with our Dupont and Abbott Laboratories collaborations.
Selling, general and administrative expenses for the three months ended DecemberMarch 31, 20022003 were $9.3$7.8 million compared to $6.1$5.9 million for the same three months in 2001.2002. Selling, general and administrative expenses consist primarily of salaries, commissions and related personnel costs for sales, marketing, executive, legal, finance, accounting, human resources and business development personnel, allocated facilities expenses and other corporate expenses. This increase of 53%32% was primarily attributable to marketing costs related to our direct-to-consumer campaign and general increases in personnel and costs related to
11
the support our predictive medicine business. We anticipate that increased marketing efforts will enable us to increase awareness of our predictive medicine business.business and drug development efforts. We expect our selling, general and administrative expenses will continue to fluctuate
11
depending on the number and scope of new product launches and our drug discovery and drug development efforts.
Cash, cash equivalents, and marketable investment securities increased $15.1$4.9 million or 11%4% from $134.0$125.7 million at DecemberMarch 31, 20012002 to $149.1$130.6 million at DecemberMarch 31, 2002.2003. This increase in cash, cash equivalents, and marketable investment securities is primarily attributable to the public offering of $57.2 million (net proceeds) of our common stock in November 2002. This increase was partially offset by capital expenditures for research equipment, leasehold improvements for our new research facilities, increased expenditures for our internal drug development programs and other expenditures incurred in the ordinary course of business. As a result of declining interest rates, interest income for the three months ended DecemberMarch 31, 20022003 was $0.7 million compared to $1.4$1.1 million for the same three months in 2001,2002, a decrease of 49%35%.
Results of Operations for the SixNine Months Ended DecemberMarch 31, 2003 and 2002
Predictive medicine revenues for the nine months ended March 31, 2003 were $25.3 million compared to $19.1 million for the same nine months in 2002, an increase of 32%. Predictive medicine revenue is comprised of sales of predictive medicine products and 2001marketing fees from our predictive medicine product marketing partners. Increased sales and marketing efforts and wider acceptance of our products by the medical community have resulted in increased revenues for the nine months ended March 31, 2003. However, there can be no assurance that predictive medicine revenues will continue to increase at historical rates.
Total research revenues for the sixnine months ended DecemberMarch 31, 20022003 were $16.5$23.3 million compared to $14.8$20.6 million for the same sixnine months in 2001.2002. Related party research revenues included in total research revenues for the sixnine months ended DecemberMarch 31, 20022003 were $1.1$1.4 million. Related party research revenue is comprised of certain scientific outsourcing services performed for Myriad Proteomics, Inc., which is 49% owned by us. Research revenue is comprised of research payments received pursuant to collaborative agreements, amortization of upfront fees and milestone payments. This increase of 12%13% in total research revenue is primarily attributable to revenue recognized from our DuPont and Abbott Laboratories collaborations, including a $1 million milestone recognized and received from Abbott Laboratories for the discovery of a gene involved in depression. Research revenue from our research collaboration agreements is generally recognized as related costs are incurred. Consequently, as these programs progress and costs increase or decrease, revenues increase or decrease proportionately.
Predictive medicine revenues for the six months ended December 31, 2002 were $16.0 million, an increase of 35% or $4.1 million over the same six months in 2001. Predictive medicine revenue is comprised of sales of predictive medicine products and marketing fees from our predictive medicine product marketing partners. Increased sales and marketing efforts and wider acceptance of our products by the medical community have resulted in increased revenues for the six months ended December 31, 2002. However, there can be no assurance that predictive medicine revenues will continue to increase at historical rates.
Predictive medicine cost of revenue for the sixnine months ended DecemberMarch 31, 20022003 was $5.9$9.3 million compared to $4.8$7.7 million for the same sixnine months in 2001.2002. This increase of 22%21% in predictive medicine cost of revenue is primarily due to the 35%32% increase in predictive medicine revenue for the sixnine months ended DecemberMarch 31, 20022003 compared to same sixnine months in 2001.2002. Gross margin percent for the sixnine months ended DecemberMarch 31, 20022003 was 63% compared to 59%60% for the same sixnine months in 2001.2002. This improvement in gross margin percent resulted from technology improvements and gains in efficiencies in the operations of our predictive medicine business.
Research and development expenses for the sixnine months ended DecemberMarch 31, 20022003 were $23.2$34.2 million compared to $16.9$25.6 million for the same sixnine months in 2001.2002. This increase of 37%34% was primarily due to increased costs associated with our ongoing clinical trials in prostate cancer and Alzheimer’s disease, other drug development programs, and increased research efforts associated with our Dupont and Abbott Laboratories collaborations.
Selling, general and administrative expenses for the sixnine months ended DecemberMarch 31, 20022003 were $17.1$24.8 million compared to $11.7$17.6 million for the same sixnine months in 2001.2002. Selling, general and administrative expenses consist primarily of salaries, commissions and related personnel costs for sales, marketing,
12
executive, legal, finance, accounting, human resources and business development personnel, allocated facilities expenses and other corporate expenses. This increase of 45%41% was primarily attributable to marketing costs related to our direct-to-consumer campaign and general increases in personnel and costs related to the support our predictive medicine business. We anticipate that this larger sales force and increased marketing efforts will enable us to increase awareness of our predictive medicine business.business and drug development efforts. We expect our selling, general and administrative expenses will continue to fluctuate depending on the number and scope of new product launches and our drug discovery and drug development efforts.
Cash, cash equivalents, and marketable investment securities increased $15.1$4.9 million or 11%4% from $134.0$125.7 million at DecemberMarch 31, 20012002 to $149.1$130.6 million at DecemberMarch 31, 2002.2003. This increase in cash, cash equivalents, and marketable investment securities is primarily attributable to the public offering of $57.2 million (net proceeds) of our common stock in November 2002. This increase was partially offset by capital expenditures for research equipment, leasehold improvements for our new research facilities, increased expenditures for our internal drug development programs and other expenditures incurred in the ordinary course of business. As a result of declining interest rates, interest income for the sixnine months ended DecemberMarch 31, 20022003 was $1.6$2.3 million compared to $3.4$4.4 million for the same sixnine months in 2001,2002, a decrease of 53%49%.
Liquidity and Capital Resources
Net cash used in operating activities was $27.4$45.1 million during the sixnine months ended DecemberMarch 31, 20022003 compared to $13.4$20.6 million used in operating activities during the same period of the prior fiscal year. Trade receivables increased $2.3$4.8 million between June 30, 2002 and DecemberMarch 31, 2002,2003, primarily due to the 35%32% increase in predictive medicine sales during the same period. Other receivables increased $6.4$10.0 million between June 30, 2002 and DecemberMarch 31, 2002,2003, primarily due to amounts receivable from DuPont for research performed under our research collaboration agreement. Prepaid expenses increased $2.3$1.1 million between June 30, 2002 and DecemberMarch 31, 2002,2003, primarily due to the prepayment of lab supplies purchased at a discount. Accounts payable increaseddecreased by $2.1$4.8 million between June 30, 2002 and DecemberMarch 31, 2002,2003, primarily as a result of the purchasepayments for purchases of equipment and lab supplies. Related party payables decreased $1.0 million between June 30, 2002 and DecemberMarch 31, 20022003 due to payments made for equipment purchased from Myriad Proteomics. Deferred revenue, representing the difference in collaborative payments received and research revenue recognized, decreased by $8.5$10.5 million between June 30, 2002 and DecemberMarch 31, 2002.2003.
Our investing activities provided cash of $4.9$6.0 million in the sixnine months ended DecemberMarch 31, 20022003 and provided cash of $28.0$40.4 million in the sixnine months ended DecemberMarch 31, 2001.2002. Investing activities were comprised primarily of changes to marketable investment securities and capital expenditures for research equipment. Other assets increased $1.1 million between June 30, 2002 and DecemberMarch 31, 20022003 due to the acquisition of intellectual property. During the sixnine months ended DecemberMarch 31, 2002,2003, we shifted a portion of our investments from marketable investment securities to cash and cash equivalents due to changes in interest rates.
Financing activities provided $58.5 million during the sixnine months ended DecemberMarch 31, 2002.2003. On November 26, 2002, we received $57.2 million in net proceeds from an underwritten offering of 3 million shares of our common stock pursuant to our outstanding shelf registration statement on Form S-3 (Registration No. 333-73124). Morgan Stanley & Co. Incorporated served as the sole underwriter of the offering. Following the offering we have approximately $193 million of various types of securities available for sale at our discretion upon filing of a prospectus supplement with the SEC. During the sixnine months ended DecemberMarch 31, 20022003 additional funds were received from the exercise of stock options and warrants.
We believe that with our existing capital resources, we will have adequate funds to maintain our current and planned operations for at least the next two years, although no assurance can be given that changes
13
will not occur that would consume available capital resources before such time. Our future capital requirements will be substantial and will depend on many factors, including:
13
• the progress of our preclinical and clinical activities;
• the progress of our research and development programs;
• the progress of our drug discovery and drug development programs;
• the cost of developing and launching additional predictive medicine products;
• the costs of filing, prosecuting and enforcing patent claims;
• the costs associated with competing technological and market developments;
• the payments received under collaborative agreements and changes in collaborative research relationships;
• the costs associated with potential commercialization of our discoveries, if any, including the development of manufacturing, marketing and sales capabilities; and
• the cost and availability of third-party financing for capital expenditures and administrative and legal expenses.
Because of our significant long-term capital requirements, we intend to raise funds when conditions are favorable, even if we do not have an immediate need for additional capital at such time.
Effects of Inflation
We do not believe that inflation has had a material impact on our business, sales, or operating results during the periods presented.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We maintain an investment portfolio in accordance with our Investment Policy. The primary objectives of our Investment Policy are to preserve principal, maintain proper liquidity to meet operating needs and maximize yields. Our Investment Policy specifies credit quality standards for our investments and limits the amount of credit exposure to any single issue, issuer or type of investment.
Our investments consist of securities of various types and maturities of three years or less, with a maximum average maturity of 12 months. These securities are classified either as available-for-sale or held-to-maturity. Available-for-sale securities are recorded on the balance sheet at fair market value with unrealized gains or losses reported as part of accumulated other comprehensive loss. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Gains and losses on investment security transactions are reported on the specific-identification method. Dividend and interest income are recognized when earned. A decline in the market value of any available-for-sale or held-to-maturity security below cost that is deemed other than temporary results in a charge to earnings and establishes a new cost basis for the security. Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method.
The securities held in our investment portfolio are subject to interest rate risk. Changes in interest rates affect the fair market value of the marketable investment securities. After a review of our marketable securities as of DecemberMarch 31, 2002,2003, we have determined that in the event of a hypothetical ten percent increase in interest rates, the resulting decrease in fair market value of our marketable investment securities would be insignificant to the consolidated financial statements as a whole.
14
Item 4.Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures. The Company’s principal executive officer and principal financial officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) on FebruaryMay 1, 2003, have concluded that, based on such evaluation, the Company’s disclosure controls and procedures were
14
adequate and effective to ensure that material information relating to the Company, including its consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this Quarterly Report on Form 10-Q was being prepared.
(b) Changes in Internal Controls. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in the Company’s internal controls. Accordingly, no corrective actions were required or undertaken.
Certain Factors That May Affect Future Results of Operations
The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be made directly in this Quarterly Report, and they may also be made a part of this Quarterly Report by reference to other documents filed with the Securities and Exchange Commission, which is known as “incorporation by reference.”
Words such as “may,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance, identify forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, among other things: our inability to further identify, develop and achieve commercial success for new products and technologies; the possibility of delays in the research and development necessary to select drug development candidates and delays in clinical trials; the risk that clinical trials may not result in marketable products; the risk that we may be unable to successfully finance and secure regulatory approval of and market our drug candidates; our dependence upon pharmaceutical and biotechnology collaborations; the levels and timing of payments under our collaborative agreements; uncertainties about our ability to obtain new corporate collaborations and acquire new technologies on satisfactory terms, if at all; the development of competing systems; our ability to protect our proprietary technologies; patent-infringement claims; risks of new, changing and competitive technologies and regulations in the United States and internationally; and other factors discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2002, which has been filed with the Securities and Exchange Commission.
In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report or in any document incorporated by reference might not occur. Stockholders are cautioned not to place undue reliance on the forward-looking statements, which speak only of the date of this Quarterly Report or the date of the document incorporated by reference in this Quarterly Report. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements attributable to the Company or to any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.
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Neither the Company nor any of its subsidiaries is a party to any material legal proceedings.
Item 2. Changes in Securities and Use of Proceeds.
(c) Sales of Unregistered SecuritiesNone.
During the three months ended December 31, 2002 the Company issued a total of 70,600 shares of Common Stock, $0.01 par value per share, to a director of the Company and a consultant pursuant to the exercise of stock options at a weighted average price of $1.75 per share. During the three months ended December 31, 2002 the Company also issued a total of 35,500 shares of Common Stock, $0.01 par value per share, pursuant to the exercise of warrants at a weighted average price of $7.73 per share.
No person acted as an underwriter with respect to the transactions set for above. These transactions were exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) and Regulation S thereunder, or Rule 701, as no public offerings were involved.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
On November 13, 2002, the Company held its Annual Meeting of Shareholders (the “Annual Meeting”). A quorum of 19,852,315 shares of Common Stock of the Company (of a total 23,841,692 outstanding shares, or 83.27%) was represented at the Annual Meeting in person or by proxy, which was held to vote on the following proposals:None.
1. To elect two members to the Board of Directors to serve until the 2005 Annual Meeting and until their successors are duly elected and qualified. Nominees for Directors were Walter Gilbert, Ph.D. and Arthur H. Hayes, Jr., M.D.
2. To consider and act upon a proposal to ratify the appointment of KPMG LLP as the Company’s independent public accountants for the fiscal year ending June 30, 2003.
Each of the proposals was adopted, with the vote totals as follows:
Proposal 1:
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Walter Gilbert, Ph.D. |
| 19,104,098 |
| 748,217 |
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Arthur H. Hayes, Jr., M.D. |
| 19,123,224 |
| 729,091 |
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Immediately following the Annual Meeting, Hugh A. D’Andrade and Dale A. Stringfellow, Ph.D. continued to serve as Directors for terms expiring at the 2003 Annual Meeting, and Peter D. Meldrum, Mark H. Skolnick, Ph.D., and Linda S. Wilson, Ph.D. continued to serve as Directors for terms expiring at the 2004 Annual Meeting, and until their successors are duly elected and qualified.
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Proposal 2:
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None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
99.1 Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
99.2 Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
99.3 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K, on November 26, 2002, to disclose under Item 5 of Form 8-K that it had publicly disseminated a press release announcing that the Company would receive $57.3 million from an underwritten offering of 3 million shares of its common stock pursuant to its outstanding shelf registration on Form S-3 (Registration No. 333-73124). Morgan Stanley & Co. Incorporated served as the sole underwriter of the offering. The Form 8-K also included the underwriting agreement and opinion of legal counsel used in connection with the offering.None.
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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.
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Date: | May 5, 2003 | By: | /s/ Peter D. Meldrum |
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| Peter D. Meldrum | ||||||||
| President and Chief Executive Officer | ||||||||
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Date: | May 5, 2003 | By: | /s/ Jay M. Moyes |
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| Jay M. Moyes | ||||||||
| Vice President of Finance | ||||||||
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CERTIFICATIONS
Chief Executive Officer
I, Peter D. Meldrum, certify that:
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Chief Financial Officer
I, Jay M. Moyes, certify that:
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| Principal financial and chief accounting officer |
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Myriad Genetics, Inc. a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:
The Quarterly Report on Form 10-Q for the six months ended December 31, 2002 (the “Form 10-Q”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
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The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as a separate disclosure document.
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