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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Quarter 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: 0-27596
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CONCEPTUS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3170244
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1021 Howard Avenue
San Carlos, CA 94070
(Address of principal executive offices)
Registrant's telephone number, including area code: (650) 802-7240
___________________
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 at least the past 90 days.
Yes X No ___
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As of March 31, 2001, 11,765,891 shares of the registrant's Common Stock
were outstanding.
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CONCEPTUS, INC.
FORM 10-Q for the Quarter Ended March 31, 2001
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
a) Consolidated balance sheets at March 31, 2001 and December 31, 2000 3
b) Consolidated statements of operations for the three month periods ended March
31, 2001 and March 31, 2000 4
c) Consolidated statements of cash flows for the three month periods ended March
31, 2001 and March 31, 2000 5
d) Notes to consolidated financial statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
Part II. Other Information 11
2
PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements
Conceptus, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
March 31, 2001 December 31, 2000
-------------- -----------------
(Unaudited) (Note 1)
Assets
Current assets:
Cash and cash equivalents $ 2,229 $ 4,621
Short-term investments 4,651 7,872
Inventories 444 67
Other current assets 299 59
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Total current assets 7,623 12,619
Property and equipment, net 1,136 1,153
Other assets 409 334
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Total assets $ 9,168 $ 14,106
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Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 1,032 $ 983
Clinical trial accruals 1,551 1,910
Accrued compensation 373 987
Other accrued liabilities 252 267
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Total current liabilities 3,208 4,147
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Commitments
Stockholders' equity:
Common stock, $0.003 par value, 30,000,000 shares authorized,
11,765,891 and 11,701,733 shares issued and outstanding at
March 31, 2001 and December 31, 2000, respectively 77,164 77,107
Accumulated deficit (71,204) (67,148)
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Total stockholders' equity 5,960 9,959
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$ 9,168 $ 14,106
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See accompanying notes
3
Conceptus, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
March 31,
-------------------------------
2001 2000
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Operating expenses:
Research and development $ 2,189 $ 1,568
Selling, general and administrative 2,054 822
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Total operating expenses 4,243 2,390
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Operating loss (4,243) (2,390)
Recovery of legal defense costs - 453
Interest and other income, net 187 178
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Net loss $ (4,056) $ (1,759)
========= =========
Basic and diluted net loss per share $ (0.35) $ (0.18)
========= =========
Shares used in computing basic and diluted
net loss per share 11,723 9,680
========= =========
See accompanying notes
4
Conceptus, Inc.
Consolidated Statements of Cash Flows
(Decrease) Increase in Cash and Cash Equivalents
(Unaudited)
(In thousands)
Three Months Ended
March 31,
--------------------------------
2001 2000
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Cash flows from operating activities
Net loss $ (4,056) $ (1,759)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 162 135
Changes in operating assets and liabilities
Accounts receivable - (5)
Inventory (377) -
Other current assets (240) (80)
Other assets (75) (5)
Accounts payable 49 265
Clinical trial accruals (359) 9
Accrued compensation (614) (33)
Other accrued liabilities (15) (74)
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Net cash used in operating activities (5,525) (1,547)
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Cash flows from investing activities
Maturities of investments 3,221 3,993
Capital expenditures (145) (101)
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Net cash provided by investing activities 3,076 3,892
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Cash flows from financing activities
Proceeds from issuance of common stock 57 15
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Net cash provided by financing activities 57 15
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Net (decrease) increase in cash and cash equivalents (2,392) 2,360
Cash and cash equivalents at beginning of period 4,621 3,494
---------- ----------
Cash and cash equivalents at end of period $ 2,229 $ 5,854
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See accompanying notes
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Generally Accepted Accounting Principles for interim
financial information and with the instruction to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by Generally Accepted Accounting Principles for complete
financial statements. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, consider necessary for a fair presentation
have been included.
The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by Generally Accepted Accounting Principles for complete
financial statements. This financial data should be reviewed in conjunction with
the audited financial statements and notes thereto included in the Company's
Form 10-K for the year ended December 31, 2000. The results of operations for
the three months ended March 31, 2001 may not necessarily be indicative of the
operating results for the full 2001 fiscal year.
2. Inventories
Inventories are stated at the lower of cost or market. Cost is based on
actual costs computed on a first-in, first-out basis. The components of
inventories consist of the following:
March 31, 2001 December 31, 2000
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Raw materials $193 $31
Work in process 179 8
Finished products 72 28
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Total $444 $67
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3. Litigation Cost Recovery
In March 2000, the Company received $453,000 from its Directors' and
Officers' liability insurance policy for recovery of legal defense costs in
connection with a sexual harassment lawsuit filed against the Company in
December 1997. The payment was recorded as other income.
4. Computation of Net Loss Per Share
Basic net loss per share is computed using the weighted average number of
common shares outstanding during the period. Diluted net loss per share is
computed using the weighted average number of common and dilutive common
equivalent shares outstanding during each period. Under the requirements for
calculating basic net loss per share, the effect of potentially dilutive
securities such as stock options is excluded. Basic and diluted net loss per
share are equivalent for all periods presented due to the Company's net loss
position.
5. Comprehensive Income
During the first quarter of 2001 and 2000, total comprehensive loss
approximates net loss as unrealized gains and losses were immaterial.
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6. Subsequent Event
In April 2001, the Company completed a private placement of approximately
1.64 million shares of newly issued common stock at $7.00 per share, pursuant to
Stock Purchase Agreements dated April 10, 2001. Gross proceeds to the Company
were $11.5 million.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the
unaudited financial statements and notes thereto included in Part I-Item 1 of
this Quarterly Report. In addition, the following discussion contains forward-
looking statements within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended. We wish to alert readers that the risk factors set
forth in our Annual Report on Form 10-K for the year ended December 31, 2000, as
well as other factors, including those set forth in the following discussion,
could in the future affect, and in the past have affected, our actual results
and could cause our results for future periods to differ materially from those
expressed or implied in any forward-looking statements made by us.
Overview
Since inception on September 18, 1992, we have been engaged primarily in
the design, development and marketing of innovative interventional medical
devices for use in reproductive medicine. Our current focus is to develop the
STOPTM (Selective Tubal Occlusion Procedure) non-surgical permanent birth
control device for women. The STOP procedure is designed to be a less invasive,
safer and less costly alternative to female surgical sterilization, more
commonly known as tubal ligation. Based on data from a 1998 United Nations
report, we estimate that 30% of worldwide reproductive couples using
contraception rely on tubal ligation. A survey performed by the Centers for
Disease Control indicates that tubal ligation is the most prevalent form of
birth control in the United States. According to the study, the prevalence
increases with age and number of children, and 35% of women aged 35 - 44 have
had a surgical tubal sterilization. An estimated 700,000 surgical tubal
ligations are performed annually in the U.S., of which 92% are performed in a
hospital or surgi-center and require general anesthesia. Using a minimally
invasive tubal access delivery system, STOP does not require surgical incisions
or general anesthesia, has a rapid recovery time and hence lower total cost when
compared to tubal ligation.
In May 2000, we initiated a pivotal trial of STOP in 13 sites, in the
U.S., Australia and select European countries. The trial is designed to obtain
12-month safety, effectiveness and patient comfort data to support the filing of
a Pre-Market Approval, or PMA application with the FDA. Through the first
quarter of 2001, a total of 465 women have had device placement in both
fallopian tubes. Based on interim analysis as of March 23, 2001, 239 of those
women have completed the three-month follow-exam and 96% of them had blocked
fallopian tubes.
STOP is listed with Australia's Therapeutic Goods Administration, which
allow us to market and sell STOP in Australia. We have established a sales and
marketing division in Australia and we launched a consumer and physician
marketing campaign in March 2001. The market launch in Australia involved
implementing a physician training program, completing reimbursement validation
testing, implementing an awareness program for general practitioners and
gynecologists, and completing a consumer market research program. It is
expected that STOP will be offered in Sydney, Melbourne and Adelaide at up to
six sites by late May 2001.
In February 2001, we received approval to affix the CE Mark to the STOP
device, which indicates that STOP is certified for sale throughout the European
Union, subject to compliance with local regulations. We expect to make our first
commercial sales of STOP in select European markets in 2002, following receipt
of reimbursement approval, in certain countries. We intend to establish
distribution
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partnerships in select European markets and revenues are expected in 2002. In
the U.S. we intend to begin selling STOP following FDA approval expected in
2003.
Through a Phase II study commenced in November 1998, we have tested the
safety and preliminary effectiveness of the STOP device. As of June 30, 2000, a
total of 200 women with proven fertility have had successful placement of the
STOP device in the Phase II study. As of March 20, 2001, we have nearly
completed the first-year follow-up and have accumulated an aggregate of 3,325
months of patient safety, 2,464 months of effectiveness data, and no pregnancies
have been reported among women relying on the STOP device. However, we note that
no method of birth control is 100% effective and pregnancies are expected.
In addition to the pivotal and Phase II studies, we are also performing
histology and peri-hysterectomy studies to examine how the cells in the
fallopian tube react to the device and to support the theorized mechanism of the
STOP device in creating a benign tissue in-growth that blocks the fallopian
tube. The tissue in-growth is expected to result in long-term device retention
and pregnancy prevention.
We have a limited history of operations and have experienced significant
operating losses since inception. Operating losses are expected to continue for
at least the next several years as we continue to expend substantial resources
to fund clinical trials in support of regulatory and reimbursement approvals, to
conduct research and product development and to develop appropriate marketing
and distribution systems for our STOP device.
Future revenues and results of operations may fluctuate significantly from
quarter to quarter and will depend upon, among other factors, the progress of
our clinical trials, actions relating to regulatory and reimbursement matters,
the extent to which STOP gains market acceptance, the ability to attract
marketing partners, the rate at which we establish our domestic and
international distribution network, the ability to find third party
manufacturers to support commercial manufacturing and the introduction of
competitive products for diagnosis and treatment of the female reproductive
system.
Results of Operations - Three Months Ended March 31, 2001 and 2000
Research and development ("R&D") expenses increased to $2,189,000 for the
three months ended March 31, 2001, from $1,568,000 for the same period in the
prior year. The 40% increase is primarily due to development and testing of
process improvement to support future larger scale production, and monitoring
and analyses costs related to the ongoing pivotal trial.
Selling, general and administrative ("SG&A") expenses increased to
$2,054,000 for the three months ended March 31, 2001, from $822,000 for the same
period in the prior year. The 150% increase is primarily due to marketing
efforts to support the commercial introduction of STOP in Australia.
In first quarter 2000, the Company received $453,000 from its Directors'
and Officers' insurance policy for legal defense costs reimbursement in
connection with a sexual harassment lawsuit filed against the Company in
December 1997.
We have a limited history of operations. Since our inception in September
1992, we have been engaged primarily in research and development of our T-TAC
and STARRT Falloposcopy systems and the STOP device, and since 1996, the ERA and
FUTURA product lines. In 1998, we suspended efforts on the T-TAC, STARRT, ERA
and FUTURA products and focused our resources solely on the STOP product. We
have generated only limited revenues and have only limited experience in
manufacturing,
9
marketing or selling our products in commercial quantities. We have experienced
significant operating losses since inception and, as of March 31, 2001, had an
accumulated deficit of $71.2 million. We expect our operating losses to continue
for at least the next several years as we continue to expend substantial
resources in research and product development, market development for STOP and
complete our clinical trials. Due to the expense and unpredictable nature of
these activities, there can be no assurance that we will achieve or sustain
profitability in the future.
Liquidity and Capital Resources
At March 31, 2001, cash, cash equivalents and investments were $6.9
million, compared with $12.5 million at December 31, 2000. The decrease is due
to $5.5 million of cash used in operating activities and $145,000 of cash used
for the purchase of capital equipment, partly offset by $57,000 of cash received
from the exercise of stock options.
Our existing capital resources, including proceeds received from the April
2001 private placement, will not be sufficient to fund completion of the pivotal
trial nor to commercialize our STOP device on a wide-scale basis. Our future
liquidity and capital requirements will depend upon numerous factors, including
the progress of our clinical research and product development programs,
execution and implementation of partnering arrangements, the receipt of and the
time required to obtain regulatory clearances and approvals, and the resources
devoted to developing, manufacturing and marketing our products. Accordingly,
we will require additional financing and therefore, may in the future seek to
raise additional funds through bank facilities, debt or equity offerings or
other sources of capital. Any additional equity financing may be dilutive to
stockholders, and debt financing, if available, may involve restrictive
convenants. Additional funding may not be available when needed or on terms
acceptable to us, which would have a material adverse effect on our business,
financial condition and results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our cash balances in excess of short-term operating needs are invested
in highly liquid short-term government securities and high quality commercial
paper. Due to the short-term and high quality nature of these instruments, we
believe these financial instruments are exposed to a low level of interest rate
risk.
10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
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) Exhibits.
None.
(b) Reports on Form 8-K.
On January 12, 2001, the Company filed a current report on Form 8-
K under Item 5 ("Other Events") reporting that it had issued a
press release announcing early attainment of the Company's patient
enrollment goal for its STOP pivotal trial.
On February 20, 2001, the Company filed a current report on
Form 8-K under Item 5 ("Other Events") reporting that it had
issued a press release announcing receipts of approval to affix
the CE Mark to its STOP device.
11
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.
CONCEPTUS, INC.
By: /s/ GLEN K. FURUTA
--------------------------------
Glen K. Furuta
Vice President, Finance and Administration and
Chief Financial Officer
Date: May 10, 2001
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