Form 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2009
OR
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o |
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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. 0-50772
INHIBITEX, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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74-2708737 |
(State or other jurisdiction of
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(I.R.S. Employer Identification No.) |
incorporation or organization) |
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9005 Westside Parkway |
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Alpharetta, Georgia
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30009 |
(Address of principal executive
offices)
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(Zip Code) |
(678) 746-1100
(Registrants telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such
files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
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Large Accelerated Filer o
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Accelerated Filer o
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Non-Accelerated Filer o
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Smaller Reporting Company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o No þ
As of August 6, 2009, 43,547,136 shares of the Registrants Common Stock were outstanding.
PART I
FINANCIAL INFORMATION
INHIBITEX, INC.
CONSOLIDATED BALANCE SHEETS
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June 30, |
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December 31, |
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2009 |
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2008 |
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(unaudited) |
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ASSETS
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Current assets: |
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Cash and cash equivalents |
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$ |
6,409,993 |
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$ |
11,507,137 |
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Short-term investments |
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18,118,372 |
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21,634,880 |
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Prepaid expenses and other current assets |
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770,434 |
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621,797 |
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Accounts receivable |
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93,722 |
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108,558 |
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Total current assets |
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25,392,521 |
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33,872,372 |
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Property and equipment, net |
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1,951,215 |
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2,328,707 |
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Other assets |
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33,190 |
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31,876 |
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Total assets |
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$ |
27,376,926 |
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$ |
36,232,955 |
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities: |
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Accounts payable |
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$ |
1,147,982 |
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$ |
1,276,215 |
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Accrued expenses |
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1,154,549 |
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1,001,047 |
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Current portion of notes payable |
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78,125 |
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312,500 |
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Current portion of capital lease obligations |
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196,014 |
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254,291 |
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Current portion of deferred revenue |
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191,667 |
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441,667 |
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Other current liabilities |
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200,865 |
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224,922 |
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Total current liabilities |
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2,969,202 |
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3,510,642 |
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Long-term liabilities: |
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Notes payable, net of current portion |
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546,875 |
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390,625 |
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Capital lease obligations, net of current portion |
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287,198 |
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387,892 |
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Deferred revenue, net of current portion |
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162,500 |
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237,500 |
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Other liabilities, net of current portion |
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1,196,805 |
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1,279,994 |
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Total long-term liabilities |
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2,193,378 |
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2,296,011 |
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Total liabilities |
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5,162,580 |
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5,806,653 |
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Stockholders equity: |
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Preferred stock, $.001 par value; 5,000,000
shares authorized at June 30, 2009 and
December 31, 2008; none issued and outstanding |
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Common stock, $.001 par value; 150,000,000 and
75,000,000 shares authorized at June 30, 2009
and December 31, 2008, respectively; 43,534,387
and 43,380,570 shares issued and outstanding at
June 30, 2009 and December 31, 2008,
respectively |
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43,534 |
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43,381 |
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Warrants |
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13,623,228 |
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13,742,630 |
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Accumulated other comprehensive income |
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22,010 |
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111,450 |
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Additional paid-in capital |
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244,246,731 |
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243,825,057 |
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Accumulated deficit |
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(235,721,157 |
) |
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(227,296,216 |
) |
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Total stockholders equity |
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22,214,346 |
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30,426,302 |
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Total liabilities and stockholders equity |
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$ |
27,376,926 |
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$ |
36,232,955 |
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The accompanying notes are an integral part of these financial statements.
3
INHIBITEX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2009 |
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2008 |
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2009 |
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2008 |
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Revenue: |
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License fees and milestones |
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$ |
37,500 |
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$ |
412,500 |
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$ |
75,000 |
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$ |
825,000 |
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Collaborative research and
development |
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250,000 |
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375,000 |
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500,000 |
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750,000 |
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Total revenue |
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287,500 |
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787,500 |
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575,000 |
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1,575,000 |
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Operating expense: |
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Research and development |
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3,680,548 |
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2,108,102 |
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7,177,608 |
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5,514,149 |
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General and administrative |
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937,354 |
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1,222,339 |
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2,008,844 |
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2,563,907 |
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Total operating expense |
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4,617,902 |
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3,330,441 |
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9,186,452 |
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8,078,056 |
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Loss from operations |
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(4,330,402 |
) |
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(2,542,941 |
) |
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(8,611,452 |
) |
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(6,503,056 |
) |
Other income, net |
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46,223 |
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3,054 |
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38,072 |
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14,480 |
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Interest income, net |
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54,921 |
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331,012 |
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148,439 |
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831,902 |
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Net loss |
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$ |
(4,229,258 |
) |
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$ |
(2,208,875 |
) |
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$ |
(8,424,941 |
) |
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$ |
(5,656,674 |
) |
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Basic and diluted net loss per share |
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$ |
(0.10 |
) |
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$ |
(0.05 |
) |
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$ |
(0.19 |
) |
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$ |
(0.13 |
) |
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Weighted average shares used to
compute basic and diluted net loss
per share |
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43,524,715 |
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42,909,471 |
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43,476,613 |
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42,850,270 |
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The accompanying notes are an integral part of these financial statements.
4
INHIBITEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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Six Months Ended |
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June 30, |
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2009 |
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2008 |
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Cash flows from operating activities: |
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Net loss |
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$ |
(8,424,941 |
) |
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$ |
(5,656,674 |
) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
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Depreciation and amortization |
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379,900 |
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480,486 |
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Share-based compensation |
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300,317 |
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|
855,653 |
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Gain on sale of equipment |
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(39,805 |
) |
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(17,689 |
) |
Amortization of investment premium or discount |
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(28,738 |
) |
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(445,121 |
) |
Changes in operating assets and liabilities: |
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Prepaid expenses and other assets |
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(149,951 |
) |
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218,355 |
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Accounts receivable |
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14,836 |
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|
(142,344 |
) |
Accounts payable and other liabilities |
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(235,479 |
) |
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(135,309 |
) |
Accrued expenses |
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153,502 |
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(3,176,505 |
) |
Deferred revenue |
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(325,000 |
) |
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|
425,000 |
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Net cash used in operating activities |
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(8,355,359 |
) |
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(7,594,148 |
) |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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(2,408 |
) |
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(445,550 |
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Proceeds from sale of property and equipment |
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39,805 |
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|
23,480 |
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Purchases of investments |
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(11,484,194 |
) |
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(25,033,175 |
) |
Proceeds from maturities and sales of investments |
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14,940,000 |
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33,100,077 |
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Cash paid in connection with acquisition |
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(94,761 |
) |
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Net cash provided by investing activities |
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3,493,203 |
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7,550,071 |
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Cash flows from financing activities: |
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Payments on promissory notes and capital leases |
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(237,096 |
) |
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(534,999 |
) |
Repurchase of common stock |
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(3,213 |
) |
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(77,877 |
) |
Proceeds from the issuance of common stock |
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5,321 |
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|
11,452 |
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Net cash used in financing activities |
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(234,988 |
) |
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(601,424 |
) |
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Decrease in cash and cash equivalents |
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(5,097,144 |
) |
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(645,501 |
) |
Cash and cash equivalents at beginning of period |
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|
11,507,137 |
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14,178,143 |
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Cash and cash equivalents at end of period |
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$ |
6,409,993 |
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$ |
13,532,642 |
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Supplemental cash flow information: |
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Interest paid |
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$ |
35,668 |
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$ |
30,715 |
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The accompanying notes are an integral part of these financial statements.
5
INHIBITEX, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Operations
Inhibitex, Inc. (Inhibitex or the Company) was incorporated in the state of Delaware in May
1994. Inhibitex is a biopharmaceutical company focused on the development of differentiated
anti-infective products to treat serious infections.
The Company is currently targeting its development efforts on small molecule, oral antiviral
therapies to treat shingles (herpes zoster) and infections caused by hepatitis C virus (HCV).
Currently available antiviral therapies for these infections have various limitations or
shortcomings, such as sub-optimal potency, diminishing efficacy due to the emergence of
drug-resistant viruses, toxic and adverse side effects, complex dosing schedules and inconvenient
routes of administration. The Company believes that its antiviral product candidates have the
potential to be differentiated from existing therapies by addressing a number of these limitations
and other unmet needs in their respective, intended indications.
The Company has not received regulatory approval for any of its product candidates, and the Company
does not have any commercialization capabilities; therefore, it is possible that the Company may
never successfully derive significant collaboration revenues or any commercial revenues from any of
its existing or future product candidates or preclinical development programs.
The Company plans to continue to finance its operations with its existing cash, cash equivalents
and short-term investments, or through future equity and/or debt financings; with proceeds from
potential future collaborations or partnerships; or through other financing vehicles. The Companys
ability to continue its operations is dependent, in the near-term, upon managing its cash
resources, the successful development of its product candidates, entering into collaboration or
partnership agreements, executing future financings and ultimately, upon the approval of its
products for sale and achieving positive cash flow from operations. There can be no assurance that
additional funds will be available on terms acceptable to the Company, or that the Company will
ever generate significant revenue and become profitable.
2. Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States for interim financial
information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. They do not
include all information and notes required by generally accepted accounting principles for complete
financial statements. However, except as disclosed herein, there has been no material change in the
information disclosed in the notes to the consolidated financial statements included in the Annual
Report on Form 10-K for the year ended December 31, 2008.
The Company evaluated all events or transactions that occurred after the balance sheet date of
June 30, 2009 through August 12, 2009, the date it issued these financial statements. See Note
8-Notes Payable.
The Companys significant accounting policies have not changed since December 31, 2008, except as
outlined below:
Recent Accounting Pronouncements.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard (SFAS) No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157
establishes a common definition for fair value to be applied to United States generally accepted
accounting principles (U.S. GAAP) requiring use of fair value, establishes a framework for
measuring fair value, and expands disclosure about such fair value measurements. SFAS No. 157 is
effective for financial assets and financial liabilities for fiscal years beginning after November
15, 2007. Issued in February 2008, FASB Staff Position (FSP) No. 157-1 Application of FASB
Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair
Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 removed
leasing transactions accounted for under Statement 13 and related guidance from the scope of SFAS
No. 157. FSP No. 157-2 Partial Deferral of the Effective Date of Statement 157 (FSP 157-2)
deferred the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial
liabilities to fiscal years beginning after November 15, 2008. The implementation of SFAS No. 157
for nonfinancial assets and nonfinancial liabilities, effective January 1, 2009, did not have a
material impact on the Companys consolidated financial position and results of operations. See
Note 7 for additional information and disclosure for financial and nonfinancial assets and
liabilities.
6
In April 2009, the FASB issued FSP FAS No. 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments (FSP FAS 115-2 and FAS 124-2). FSP FAS 115-2 and FAS 124-2
changes the method for determining whether an other-than-temporary impairment exists for debt
securities and the amount of the impairment to be recorded in earnings. FSP FAS 115-2 and FAS
124-2, was effective for interim and annual periods ending after June 15, 2009. The implementation
of this standard did not have an impact on the Companys consolidated financial position or results
of operations.
In April 2009, the FASB issued FSP FAS 107-1, APB 28-1, Interim Disclosures About Fair Value of
Financial Instruments (FSP FAS 107-1, APB 28-1). FSP FAS 107-1, APB 28-1 requires fair value
disclosures in both interim as well as annual financial statements in order to provide more timely
information about the effects of current market conditions on financial instruments. FSP FAS 107-1,
APB 28-1 was effective for interim and annual periods ending after June 15, 2009. The
implementation of this standard did not have a material impact on the Companys consolidated
financial position or results of operations. See Note 7 for additional information and disclosure
for financial assets.
In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS No. 165). SFAS No. 165
establishes general standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available to be issued. SFAS
No. 165 was effective for interim or annual financial periods ending after June 15, 2009. The
implementation of this standard did not have an impact on the Companys consolidated financial
position or results of operations.
In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards
CodificationTM and the Hierarchy of Generally Accepted Accounting Principles a
replacement of FASB Statement No. 162 (SFAS No. 168). SFAS No. 168 provides for the FASB
Accounting Standards CodificationTM (the Codification) to become the single official
source of authoritative, nongovernmental U.S. GAAP. The Codification did not change GAAP but
reorganizes the literature. SFAS No. 168 is effective for interim and annual periods ending after
September 15, 2009. The implementation of this standard will not have an impact on the Companys
consolidated financial position or results of operations.
3. Net Loss Per Share
Basic and diluted net loss per share have been computed based on net loss and the weighted-average
number of common shares outstanding during the applicable period. For diluted net loss per share,
common stock equivalents (common shares issuable upon the exercise of stock options and warrants)
are excluded from the calculation of diluted net loss per share if their effect is antidilutive.
The Company has excluded all options and warrants to purchase common stock, as such potential
shares are antidilutive.
The following table sets forth the computation of historical basic and diluted net loss per share:
|
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|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available for common stockholders |
|
$ |
(4,229,258 |
) |
|
$ |
(2,208,875) |
|
|
$ |
(8,424,941 |
) |
|
$ |
(5,656,674 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding used to
compute basic earnings per share |
|
|
43,524,715 |
|
|
|
42,909,471 |
|
|
|
43,476,613 |
|
|
|
42,850,270 |
|
Dilutive effect of: |
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Stock options |
|
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|
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|
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Warrants |
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute diluted earnings per share |
|
|
43,524,715 |
|
|
|
42,909,471 |
|
|
|
43,476,613 |
|
|
|
42,850,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net loss per share |
|
$ |
(0.10 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.19 |
) |
|
$ |
(0.13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per share |
|
$ |
(0.10 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.19 |
) |
|
$ |
(0.13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of antidilutive stock options excluded from
computation |
|
|
4,650,250 |
|
|
|
5,398,310 |
|
|
|
4,650,250 |
|
|
|
5,398,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of antidilutive warrants excluded from
computation |
|
|
8,001,401 |
|
|
|
8,535,097 |
|
|
|
8,001,401 |
|
|
|
8,535,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
4. Stockholders Equity
Common Stock . In June 2009, the Companys stockholders approved an amendment to the Companys
Eighth Amended and Restated Certificate of Incorporation to increase the Companys authorized
common stock, $0.001 par value per share, from 75,000,000 shares to 150,000,000 shares.
Common Stock Warrants. For the six months ended June 30, 2009, a total of 21,462 warrants expired
with an average exercise price of $9.26. The total Black-Scholes value of those warrants was
$119,402, and such amount was reclassified from warrants to additional paid-in capital. As of
June 30, 2009, and 2008, there were 8,001,401 and 8,535,097 warrants outstanding, respectively. The
weighted average exercise price as of June 30, 2009 and 2008 was $2.85 and $3.53, respectively. As
of June 30, 2009, all of the outstanding warrants are exercisable and expire from September 10,
2009 to September 26, 2018.
5. Share-Based Award Plans
For the three months ended June 30, 2009 and 2008, the Company recorded share-based compensation
expense related to grants from this plan of $121,943 and $395,171, respectively, or $0.00 and $0.01
basic and fully diluted per share. For the six months ended June 30, 2009 and 2008, the Company
recorded share-based compensation expense related to grants from this plan of $300,317 and
$855,653, respectively, or $0.01 and $0.02 basic and fully diluted per share. No income tax
benefit was recognized in the statements of operations and no share-based compensation expense was
capitalized as part of any assets for the three and six months ended June 30, 2009 and 2008.
Stock Options
The fair value of each stock option award was estimated at its respective date of grant using
the Black-Scholes method with the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Weighted average risk-free interest rate |
|
|
|
|
|
|
3.03 |
% |
|
|
1.87 |
% |
|
|
2.65 |
% |
Dividend yield |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected weighted average volatility |
|
|
|
|
|
|
.68 |
|
|
|
.69 |
|
|
|
.68 |
|
Expected weighted average life of options (years) |
|
|
|
|
|
|
4.0 |
|
|
|
4.0 |
|
|
|
4.0 |
|
Weighted average fair value of options granted |
|
|
|
|
|
$ |
0.34 |
|
|
$ |
0.17 |
|
|
$ |
0.45 |
|
The risk-free rate interest rate is based on the expected life of the option and the corresponding
United States (U.S.) Treasury bond, which in most cases is the U.S. five year Treasury bond. The
expected term of stock options granted is derived from actual and expected option behavior and
represents the period of time that options granted are expected to be outstanding. The Company uses
historical data to estimate option exercise patterns and future employee terminations to determine
expected life and forfeitures. Expected volatility is based on the historical volatility of the
Companys publicly traded common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
Weighted-Average |
|
|
Aggregate Intrinsic |
|
|
|
Number of |
|
|
Exercise Price |
|
|
Remaining Contractual |
|
|
Value |
|
|
|
Stock Options |
|
|
Per Option |
|
|
Term |
|
|
($000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31,
2008 |
|
|
4,820,459 |
|
|
$ |
2.33 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
70,500 |
|
|
|
0.32 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or
expired |
|
|
(240,709 |
) |
|
|
3.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30,
2009 |
|
|
4,650,250 |
|
|
$ |
2.25 |
|
|
|
5.8 |
|
|
$ |
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average fair value of stock options granted during the six month period ended June 30,
2009 was $0.17. As of June 30, 2009 there was $972,160 of unrecognized share-based compensation
expense related to unvested stock option awards, not discounted for future forfeitures. This
balance is expected to be recognized over a weighted-average period of 2.2 years.
8
6. Comprehensive Loss
The components of comprehensive loss for the three and six months ended June 30, 2009 and 2008 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(4,229,258 |
) |
|
$ |
(2,208,875 |
) |
|
$ |
(8,424,941 |
) |
|
$ |
(5,656,674 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net
unrealized losses on
investments |
|
$ |
(32,679 |
) |
|
$ |
(149,836 |
) |
|
$ |
(89,440 |
) |
|
$ |
(100,128 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss |
|
$ |
(4,261,937 |
) |
|
$ |
(2,358,711 |
) |
|
$ |
(8,514,381 |
) |
|
$ |
(5,756,802 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Fair Value Measurements
The Company adopted SFAS No. 157 related to financial assets and liabilities effective January 1,
2008 and nonfinancial assets and nonfinancial liabilities effective January 1, 2009. SFAS No. 157
establishes a fair value hierarchy which requires an entity to maximize the use of observable
inputs, where available, and minimize the use of unobservable inputs when measuring fair value. The
standard describes three levels of inputs that may be used to measure fair value:
|
|
|
|
|
|
|
Level 1
|
|
Quoted prices in active markets for identical assets or liabilities. |
|
|
|
|
|
|
|
Level 2
|
|
Observable inputs other than Level 1 prices, such as quoted prices
for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full
term of the assets or liabilities. |
|
|
|
|
|
|
|
Level 3
|
|
Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
or liabilities. |
The following table sets forth the financial assets and liabilities that were measured at fair
value on a recurring basis at June 30, 2009, by level within the fair value hierarchy. The Company
did not have any nonfinancial assets or nonfinancial liabilities that were measured at fair value
at June 30, 2009. As required by SFAS No. 157, assets and liabilities measured at fair value are
classified in their entirety based on the lowest level of input that is significant to the fair
value measurement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted prices in |
|
|
|
|
|
|
|
|
|
|
|
|
|
active markets for |
|
|
Significant other |
|
|
Significant |
|
|
|
|
|
|
|
identical assets |
|
|
observable inputs |
|
|
unobservable inputs |
|
|
|
Total |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Cash equivalents |
|
$ |
5,655,709 |
|
|
$ |
5,655,709 |
|
|
$ |
|
|
|
$ |
|
|
Short-term investments available-for-sale |
|
|
18,118,372 |
|
|
|
252,607 |
|
|
|
17,865,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
23,774,081 |
|
|
$ |
5,908,316 |
|
|
$ |
17,865,765 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents consist primarily of money market funds and commercial paper issued under
U.S. government liquidity programs with original maturity dates of three months or less.
Short-term investments consist of U.S. agency securities and U.S. Treasury securities classified as
available-for-sale and have maturities greater than 90 days, but less than 365 days from the date
of acquisition.
The Companys cash, cash equivalents and short-term investments are generally held in a variety of
interest-bearing instruments, generally consisting of U.S. agency securities, U.S. Treasury
securities, commercial paper issued under government liquidity programs, and money market accounts.
9
The Company has had no realized gains or losses from the sale of investments for the six months
ended June 30, 2009. The following table shows the unrealized gains and losses and fair values for
those investments as of June 30, 2009 and December 31, 2008
aggregated by major security type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
Unrealized |
|
|
|
|
June 30, 2009 |
|
At Cost |
|
|
Gains |
|
|
(Losses) |
|
|
At Fair Value |
|
Certificates of deposit and money
market funds |
|
$ |
5,655,709 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
5,655,709 |
|
Commercial paper |
|
|
2,246,869 |
|
|
|
2,423 |
|
|
|
|
|
|
|
2,249,292 |
|
Corporate debt notes |
|
|
701,994 |
|
|
|
245 |
|
|
|
(51 |
) |
|
|
702,188 |
|
Debt securities of U.S. government
agencies |
|
|
14,894,957 |
|
|
|
20,108 |
|
|
|
(780 |
) |
|
|
14,914,285 |
|
US Treasury securities |
|
|
252,542 |
|
|
|
65 |
|
|
|
|
|
|
|
252,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
23,752,071 |
|
|
$ |
22,841 |
|
|
$ |
(831 |
) |
|
$ |
23,774,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
Unrealized |
|
|
|
|
December 31, 2008 |
|
At Cost |
|
|
Gains |
|
|
(Losses) |
|
|
At Fair Value |
|
Certificates of deposit and money
market funds |
|
$ |
11,603,992 |
|
|
$ |
|
|
|
$ |
(386 |
) |
|
$ |
11,603,606 |
|
Commercial paper |
|
|
845,999 |
|
|
|
1,551 |
|
|
|
|
|
|
|
847,550 |
|
Corporate debt notes |
|
|
9,122,672 |
|
|
|
30,488 |
|
|
|
(8,117 |
) |
|
|
9,145,043 |
|
Debt securities of U.S. government
agencies |
|
|
10,458,387 |
|
|
|
88,584 |
|
|
|
(791 |
) |
|
|
10,546,180 |
|
US Treasury securities |
|
|
754,641 |
|
|
|
157 |
|
|
|
(36 |
) |
|
|
754,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
32,785,691 |
|
|
$ |
120,780 |
|
|
$ |
(9,330 |
) |
|
$ |
32,897,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2009, the Company had investments in an unrealized loss position. The Company
has determined that the unrealized losses on these investments at June 30, 2009 are temporary in
nature.
All available-for-sale securities held at June 30, 2009 will mature within one year.
8. Notes Payable
Notes Payable. On August 3, 2009, the Company entered into a second amendment to its interest free
loan agreement with a local development authority for laboratory-related leasehold improvements at
the Companys research and headquarters facility; whereas, the Company will make one payment of
$78,125 on January 1, 2010, and beginning January 1, 2011, and continuing on the first day of each
successive quarter make eight equal installments of $60,764, with a final payment $60,763 payable
on January 1, 2013. As of June 30, 2009 and December 31, 2008, $625,000 and $703,125 were
outstanding under this note payable, respectively.
Future minimum payments due under notes payable as of June 30, 2009 are as follows:
|
|
|
|
|
Year Ending December 31, |
|
|
|
|
2009 |
|
$ |
|
|
2010 |
|
|
78,125 |
|
2011 |
|
|
243,056 |
|
2012 |
|
|
243,056 |
|
2013 |
|
|
60,763 |
|
|
|
|
|
Total future payments |
|
$ |
625,000 |
|
|
|
|
|
10
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANICAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking
statements involve known and unknown risks, uncertainties and other factors that may cause actual
results, performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking statements. In some cases,
you can identify forward-looking statements by terms such as may, will, should, could,
would, expect, plan, intend, anticipate, believe, estimate, project, predict,
forecast, potential, likely or possible, as well as the negative of such expressions, and
similar expressions intended to identify forward-looking statements. These forward-looking
statements include, without limitation, statements relating to:
|
|
The anticipated completion of the FV-100 Phase II trial in shingles patients around the middle of 2010; |
|
|
|
our plans and timing to file an investigational new drug application for INX-189 in the first half of next year. |
|
|
|
the number of months that our current cash, cash equivalents and short-term investments will allow us to operate; |
|
|
|
our future financing requirements, the factors that may influence the timing and amount of these requirements,
and our ability to fund them; |
|
|
|
potential future revenue from collaborative research agreements, partnerships, license agreements, product
related revenue or materials transfer agreements; |
|
|
|
our product candidates may have the potential to address a number of current therapeutic limitations, such as
inadequate potency, diminishing efficacy due to the emergence of drug-resistant viruses, toxic or adverse side
effects, complex dosing schedules, and inconvenient routes of administration and other unmet needs in their
intended indications; and |
|
|
|
and anticipated future and increased net losses from operations. |
These statements reflect our current views with respect to future events and are based on
assumptions and subject to risks and uncertainties including, without limitation: not obtaining
regulatory approval on a timely basis, or at all, to advance the development of an HCV clinical
candidate into clinical trials; either we, the FDA, or an investigational review board suspending
or terminating the clinical development of FV-100 for lack of safety, manufacturing issues or other
clinical reasons; FV-100 not demonstrating sufficient efficacy in reducing the incidence and
severity of shingles-related symptoms, including acute pain and PHN, to be clinically relevant or
commercially viable; the results of ongoing or future preclinical studies of the INX-189 not
supporting its further development; Wyeth not terminating our license and collaborative research
agreements; our maintaining sufficient resources, including executive management and key employees;
our ability to successfully develop current and future product candidates either in collaboration
with a partner or independently and through the regulatory process; our ongoing or future
preclinical studies or clinical trials not demonstrating an appropriate safety and/or efficacy
profile of our product candidates; our ability to secure and use third-party clinical and
preclinical research and data management organizations and manufacturers not fulfilling their
contractual obligations or otherwise performing satisfactorily in the future; manufacturing and
maintaining sufficient quantities of preclinical and clinical trial material on hand to complete
our preclinical studies or clinical trials on a timely basis; failure to obtain regulatory approval
to commence or continue our clinical trials or to market our product candidates; our ability to
protect and maintain our proprietary intellectual property rights from unauthorized use by others
or not infringe on the intellectual property rights of others; our collaborators failing to fulfill
their obligations under our agreements with them in the future; our ability to attract suitable
organizations to collaborate on the development and commercialization of our product candidates;
the condition of the financial equity and debt markets and our ability to raise sufficient funding
in such markets; our ability to manage our current cash reserves as planned; changes in general
economic business or competitive conditions; and other statements contained elsewhere in this
Quarterly Report on Form 10-Q (including the Risk Factors section herein) and risk factors
described in or referred to in greater detail in the Risk Factors section of Form 10-K for the
year ended December 31, 2008 and in the Risk Factors section of Form 10-Q for March 31, 2009.
There may be events in the future that we are unable to predict accurately, or over which we have
no control. You should read this Form 10-Q and the documents that we reference herein and have been
filed or incorporated by reference as exhibits completely and with the understanding that our
actual future results may be materially different from what we expect. Our business, financial
condition, results of operations, and prospects may change. We may not update these forward-looking
statements, even though our situation may change in the future, unless we have obligations under
the federal securities laws to update and disclose material developments related to previously
disclosed information. We qualify all of the information presented in this Form 10-Q, and
particularly our forward-looking statements, by these cautionary statements.
11
Inhibitex®,
MSCRAMM®
and Aurexis® are
registered trademarks of Inhibitex, Inc. MSCRAMM is an acronym for Microbial Surface Components
Recognizing Adhesive Matrix Molecules.
The following discussion should be read in conjunction with the financial statements and the notes
thereto included in Item 1 of this Quarterly Report on Form 10-Q.
Overview
We are a biopharmaceutical company focused on the development of differentiated anti-infective
products to treat serious infections. We are currently targeting our efforts and resources on the
development of small molecule antiviral compounds, and in particular, oral therapies to treat
shingles (herpes zoster) and infections caused by hepatitis C virus, (HCV). Many currently
available antiviral therapies have various limitations and shortcomings, such as sub-optimal
potency, diminishing efficacy due to the emergence of drug-resistant viruses, toxic or adverse side
effects, complex dosing schedules, and inconvenient routes of administration. We believe that our
product candidates have the potential to address a number of these limitations and other unmet
needs in their intended indications.
Our lead product candidate, FV-100, is an orally available nucleoside analogue prodrug being
developed for the treatment of shingles (herpes zoster), which is caused by varicella zoster virus,
(VZV). We recently initiated a Phase II clinical trial of FV-100. Our preclinical pipeline
includes INX-189, the lead compound from our series of nucleotide polymerase inhibitors, which we
refer to as protides, which we are developing to treat infections caused by HCV, and we have also
licensed to Wyeth the rights to use certain intellectual property for its use in the development of
staphylococcal vaccines.
We foresee completing our Phase II clinical trial of FV-100 around the middle of 2010. We are also
engaged in various preclinical toxicological studies with respect to INX-189. We currently plan on
filing an investigational new drug application, (IND) for INX-189 in the first half of next year.
We have neither received regulatory approval for any of our product candidates, nor do we have
any commercialization capabilities; therefore, it is possible that we may never successfully
derive significant collaboration revenues or any product revenues from any of our existing or
future preclinical development programs or product candidates. We expect to incur losses for
the foreseeable future as we intend to support the development of our antiviral programs.
Recent Developments
FV-100 In May 2009, we initiated a Phase II clinical trial of FV-100, our anti-viral compound in
clinical development for the treatment of shingles (herpes zoster). The Phase II clinical trial is
a well-controlled, double-blind randomized study comparing two once-a-day doses of FV-100 to an
active control (valacyclovir). In addition to further evaluating its safety in patients, the key
objective of the trial is to evaluate the potential therapeutic benefit of FV-100 in reducing the
(i) severity and duration of acute shingles-related pain; (ii) incidence of post herpetic neuralgia
(PHN); and (iii) time to lesion healing.
HCV Nucleoside Polymerase Inhibitors In May 2009, we announced that we had selected INX-189 as
a lead compound from our series of proprietary HCV nucleotide polymerase inhibitors for further
evaluation in advanced preclinical studies. We presented preclinical data from its HCV program
at the 44th Annual Meeting of the European Association for the Study of the Liver, (EASL), in
Copenhagen, Denmark in April 2009 and at the 22nd Annual International Conference on
Antiviral Research, (ICAR) in Miami, Florida in May 2009.
NASDAQ Listing Transfer On July 13, 2009, we received written notification that NASDAQ had
suspended enforcement of its minimum bid price and market valuation requirement for all listed
companies until August 3, 2009. Based upon NASDAQs action , we have until October 22, 2009 to
regain compliance with NASDAQs minimum bid price requirement.
Critical Accounting Policies
Managements Discussion and Analysis of Results of Operations discusses our financial statements,
which have been prepared in accordance with U.S. generally accepted accounting principles. The
preparation of these financial statements requires us to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.
12
We base our estimates and judgments on historical experience, current economic and industry
conditions and on various other factors that are believed to be reasonable under the circumstances.
This forms the basis for making judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions. We believe the following critical accounting policies require
significant judgment and estimates:
|
|
Revenue Recognition |
|
|
|
Accrued Expenses |
There has been no change in these critical accounting policies used to create the underlying
accounting assumptions and estimates used in 2009.
We have adopted Financial Accounting Standards Board (FASB) SFAS No. 157, Fair Value
Measurements", FASB Staff Position (FSP) FSP FAS No. 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments, FSP FAS 107-1, APB 28-1, Interim Disclosures
About Fair Value of Financial Instruments (FSP FAS 107-1, APB 28-1) and SFAS No. 165,
"Subsequent Events (SFAS No. 165), none of which had a material impact on our consolidated
financial position or results of operations.
Results of Operations
Three Months Ended June 30, 2009 and 2008
Summary. We reported a net loss of $4.2 million for the three months ended June 30, 2009, as
compared to a net loss of $2.2 million in the same quarter in 2008. Basic and diluted net loss
per share was $0.10 for the three months ended June 30, 2009, as compared to basic and diluted
net loss of $0.05 for the same quarter in 2008. The increase in net loss and net loss per share
in the second quarter of 2009 was the result of higher research and development expense, lower
revenues from collaborative license and development agreements and a decrease in net interest
income, offset in part by a reduction in general and administrative expense. We expect to incur
losses for the foreseeable future as we intend to continue to support the development of our
antiviral programs.
Revenue. Revenue decreased to $0.3 million for the three months ended June 30, 2009 from $0.8
million in the same quarter in 2008. This decrease of $0.5 million, or 63%, was the result of
certain upfront license fees received by the Company in 2007 and 2008 being fully amortized to
revenue as of the end of 2008 and to a lesser extent, lower periodic research-associated support
fees received by the Company.
Research and Development Expense. Research and development expense increased to $3.7 million during
the three months ended June 30, 2009 from $2.1 million in the same quarter in 2008. This increase
of $1.6 million, or 76%, was primarily due to a $1.4 million reduction in direct clinical,
preclinical and manufacturing expense in the second quarter of 2008 resulting from a favorable
settlement of a prior arbitration award against us and an increase in other direct clinical,
preclinical and manufacturing expenses of $0.3 million in 2009 incurred in connection with the
clinical development of FV-100 and the preclinical development of our HCV program, offset in part
by a $0.1 million decrease in depreciation and facility related expenses in 2009. Direct clinical,
preclinical and manufacturing costs increased due to a $0.4 million increase in expenses for FV-100
primarily related to our Phase II trial including material and increase in expenses for our HCV
program for preclinical studies and material, offset in part by $0.1 million reduction in expenses
for our other programs. Depreciation and facility related expense decreased primarily due to lower
depreciation expense.
The following table summarizes the components of our research and development expense for the three
months ended June 30, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(In millions) |
|
Direct clinical,
preclinical and
manufacturing-related
expenses |
|
$ |
1.5 |
|
|
$ |
(0.2 |
) |
Salaries, benefits and
share-based
compensation
expense |
|
|
1.0 |
|
|
|
1.0 |
|
License fees,
patent-related legal
fees and other
expense |
|
|
0.7 |
|
|
|
0.7 |
|
Depreciation and
facility related
expenses |
|
|
0.5 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
Total research and
development
expense |
|
$ |
3.7 |
|
|
$ |
2.1 |
|
|
|
|
|
|
|
|
13
General and Administrative Expense. General and administrative expense decreased to $0.9 million
for the three months ended June 30, 2009 from $1.2 million in the same quarter in 2008. This
decrease of $0.3 million was primarily related to a decrease in salaries, benefits and share-based
compensation and professional and legal fees. Salaries, benefits and share-based compensation
expense decreased due to a decrease in other personnel-related expenses and share-based
compensation. Professional and legal fees decreased due to lower legal fees.
The following table summarizes the components of our general and administrative expense for the
three months ended June 30, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(In millions) |
|
Salaries, benefits and
share-based compensation
expense |
|
$ |
0.4 |
|
|
$ |
0.6 |
|
Professional and legal
fees |
|
|
0.2 |
|
|
|
0.3 |
|
Other
expenses |
|
|
0.2 |
|
|
|
0.2 |
|
Depreciation and facility related
expenses |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
Total general and
administrative
expense |
|
$ |
0.9 |
|
|
$ |
1.2 |
|
|
|
|
|
|
|
|
Interest Income, net. Net interest income decreased to $0.1 million for the three months ended
June 30, 2009 from $0.3 million in the same quarter in 2008. This decrease was the result of lower
prevailing interest rates and lower cash balances as compared to the same period in 2008.
Six Months Ended June 30, 2009 and 2008
Summary. We reported a net loss of $8.4 million for the six months ended June 30, 2009, as
compared to a net loss of $5.7 million for the same period in 2008. Basic and diluted net loss
per share was $0.19 for the six months ended June 30, 2009, as compared to basic and diluted net
loss of $0.13 per share for the same period in 2008. The increase in net loss and net loss per
share for the six months ended June 30, 2009, as compared to the same period of 2008, was the
result of an increase in research and development expense, a decrease in revenues from
collaborative license and development agreements and lower net interest income, offset in part
by a reduction in general and administrative expenses. We expect to incur losses for the
foreseeable future as we intend to continue to support the development of our antiviral
programs.
Revenue. Revenue decreased to $0.6 million for the six months ended June 30, 2009 from $1.6
million for the same period in 2008. This decrease of $1.0 million, or 63%, was the result of
certain upfront license fees received by the Company in 2007 and 2008 being fully amortized to
revenue as of the end of 2008 and to a lesser extent, lower periodic research-associated support
fees received by the Company.
Research and Development Expense. Research and development expense increased to $7.2 million during
the six months ended June 30, 2009, from $5.5 million for the same period in 2008. This increase of
$1.7 million, or 31%, was primarily the result of a $1.4 million reduction in direct clinical,
preclinical and manufacturing expense in the second quarter of 2008 resulting from a favorable
settlement of a prior arbitration award against us, as well as an increase of $0.7 million in
other direct clinical, preclinical and manufacturing expense, offset in part by a decrease of $0.2
million in salaries, benefits and share-based compensation expenses and a decrease of $0.2 million
in depreciation and facility related expenses. Direct clinical, preclinical and manufacturing
costs increased due to a $1.0 million increase in expenses primarily related to our Phase I and
Phase II trials for FV-100, including clinical trial materials, and to a lesser extent, expenses
for preclinical studies related to our HCV program, offset in part by $0.3 million reduction in
expenses for our other programs. Salaries, benefits, and share-based compensation decreased
primarily due to lower share-based compensation expenses and lower recruiting and relocation fees.
Depreciation and facility related expenses decreased primarily due to lower depreciation expense.
14
The following table summarizes the components of our research and development expense for the six
months ended June 30, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(In millions) |
|
Direct clinical,
preclinical and
manufacturing-related
expenses |
|
$ |
3.0 |
|
|
$ |
0.9 |
|
Salaries, benefits and
share-based compensation
expense |
|
|
2.0 |
|
|
|
2.2 |
|
License fees, patent-related
legal fees and other
expenses |
|
|
1.3 |
|
|
|
1.3 |
|
Depreciation and facility
related
expenses |
|
|
0.9 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
Total research and
development
expense |
|
$ |
7.2 |
|
|
$ |
5.5 |
|
|
|
|
|
|
|
|
General and Administrative Expense. General and administrative expense decreased to $2.0 million
during the six months ended June 30, 2009, from $2.6 million for the same period in 2008. This
decrease of $0.6 million, or 23%, was due to a $0.4 million decrease in salaries, benefits and
share-based compensation, a $0.1 million decrease in professional and legal fees and a $0.1 million
decrease in other expenses. Salaries, benefits and share-based compensation expense decreased due
to a decrease in share-based compensation and other personnel-related expenses. Professional and
legal fees decreased due to lower legal fees. Other expenses decreased due to a decrease in
insurance premiums and various other expenses.
The following table summarizes the components of our general and administrative expense for the six
months ended June 30, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(In millions) |
|
Salaries, benefits and
share-based compensation
expense |
|
$ |
0.9 |
|
|
$ |
1.3 |
|
Professional and legal
fees |
|
|
0.5 |
|
|
|
0.6 |
|
Other
expenses |
|
|
0.5 |
|
|
|
0.6 |
|
Depreciation and facility-related
expenses |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
Total general and
administrative
expense |
|
$ |
2.0 |
|
|
$ |
2.6 |
|
|
|
|
|
|
|
|
Interest Income, net. Net interest income decreased to $0.1 million for the six months ended
June 30, 2009 from $0.8 million for the comparable period in 2008. This decrease was the result of
lower prevailing interest rates and lower cash balances as compared to the same period in 2008.
Liquidity and Capital Resources
Since our inception in May 1994 through June 30, 2009, we have funded our operations principally
with $214.4 million in gross proceeds raised from a series of five private equity financings, our
IPO in June 2004, and two private placements of public equity (PIPE) financings.
For the six months ended June 30, 2009, cash, cash equivalents and short-term investments decreased
by $8.6 million, from $33.1 million to $24.5 million. This decrease was primarily the result of net
cash used for operating activities and to a lesser extent, the repayment of capital lease
obligations and notes payable.
Net cash used for operating activities was $8.4 million for the six months ended June 30, 2009,
reflecting our net loss for the period of $8.4 million plus an increase of $0.6 million in our net
operating assets and liabilities, offset by non-cash charges of $0.6 million. Our net loss resulted
largely from the cost of funding our clinical trials, preclinical studies, other research and
development activities, and general and administrative expenses, offset in part by the amortization
of deferred revenue from our license and collaboration agreements and net interest income. The
increase of $0.6 million in our net operating assets and liabilities reflects a $0.2 million
increase in prepaid expenses and other assets, a decrease of $0.2 million in accounts payable and
other liabilities, and a $0.3 million decrease in deferred revenue, offset in part by $0.1 million
increase in accrued expenses.
15
Net cash provided from investing activities during the six months ended June 30, 2009 was $3.5
million, which consisted of net proceeds from our short-term investments.
Net cash used in financing activities during the six months ended June 30, 2009 was $0.2 million,
which consisted of scheduled capital leases and notes payable payments.
At June 30, 2009, our cash, cash equivalents, and short-term investments totaled $24.5 million and
our investments had a planned average maturity of less than 12 months. Our cash, cash equivalents
and short-term investments are generally held in a variety of interest-bearing instruments,
generally consisting of U.S. agency securities, U.S. Treasury securities, commercial paper issued
under government liquidity programs, and money market accounts.
Our future funding requirements are difficult to determine and will depend on a number of factors,
including:
|
|
our development plans for our product candidates, including any changes in our strategy; |
|
|
|
the variability, timing and costs associated with conducting clinical trials, the rate of enrollment in
such clinical trials and the results of these clinical trials; |
|
|
|
the variability, timing and costs associated with conducting preclinical studies; |
|
|
|
the cost of manufacturing preclinical and clinical trial materials for our product candidates; |
|
|
|
the cost to obtain and the timing of regulatory approvals required to advance the development of our
product candidates; |
|
|
|
the terms and timing of any collaborative, licensing and other arrangements that we may establish; |
|
|
|
future payments we may receive or make under existing or future license or collaboration agreements, if any; |
|
|
|
the cost to maintain a corporate infrastructure to support being a publicly-traded company; and |
|
|
|
the cost of filing, prosecuting, and enforcing patent and other intellectual property claims. |
Based on our current strategy and operating plan, and considering the potential costs associated
with advancing the development of FV-100 and INX-189 on our planned timelines, we believe that our
existing cash, cash equivalents and short-term investments of $24.5 million as of June 30, 2009,
including planned future proceeds from our existing licensing agreement and collaboration, will
enable us to operate for a period of at least 12 months from date of this filing. Our estimate
assumes that we complete the FV-100 Phase II around the middle of 2010 as planned, and file an IND
for INX-189, our lead HCV nucleotide polymerase inhibitor, in the first half of next year. This
estimate does not include any costs for the further development of any other additional programs,
any significant strategic or financing transaction, or a change in our strategy or operating plans.
We currently do not have any commitments for future funding, nor do we anticipate that we will
generate significant revenue from the sale of any products in the foreseeable future. Therefore, in
order to meet our anticipated liquidity needs beyond 12 months, or possibly sooner in the event we
enter into other transactions or change our strategy or operating plans, we will need to secure
additional funding. Such funding could be raised through the sale of additional common stock or
other equity securities, as well as through proceeds from licensing agreements, strategic
collaborations, forms of debt financing, or any other financing vehicle. Funds from these sources
may not be available to us on acceptable terms in the future, if at all, and our failure to raise
such funds could have a material adverse impact on our future business strategy, plans, financial
condition and results of operations. If adequate funds are not available to us in the future, we
may be required to delay, reduce the scope of, or eliminate one or more of our research and
development programs or delay or curtail our preclinical studies and clinical trials. If additional
capital is not available to us, we may need to obtain funds through license agreements or
collaborative or partner arrangements pursuant to which we will likely relinquish rights to certain
product candidates that we might otherwise choose to develop or commercialize independently, or be
forced to enter into such arrangements earlier than we would prefer, which would likely result in
less favorable transaction terms, and there is no assurance that any license agreements or
collaborative or partner arrangements will be available to us at all. Additional equity financings
may be dilutive to holders of our common stock, and debt financing, if available, may involve
significant payment obligations and restrictive covenants that restrict how we operate our
business. Further, failure to obtain adequate capital on a timely basis may result in our
independent registered public accountant issuing a going concern qualification in the future.
16
|
|
|
ITEM 4T. |
|
CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the reports that we file or submit pursuant to the Securities Exchange
Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commissions rules and forms and that such information is
accumulated and communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, who is currently the same individual, to allow timely decisions regarding
required disclosure. Our management, under the supervision of the Chief Executive Officer/Chief
Financial Officer, carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures as of the end of the period covered by this report. Based on
the evaluation of these disclosure controls and procedures, the Chief Executive Officer/Chief
Financial Officer concluded that our disclosure controls and procedures were effective. It should
be noted that any system of controls, however well designed and operated, can provide only
reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the
design of any control system is based in part upon certain assumptions about the likelihood of
future events. Because of these and other inherent limitations of control systems, there can be no
assurance that any design will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended
June 30, 2009 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
17
PART II
OTHER INFORMATION
You should carefully consider the following discussion of risks, together with the other
information contained in this Form 10-Q. The occurrence of any of the following risks could
materially harm our business, our ability to continue to operate our business, our financial
condition, or our ability to raise additional capital in the future, or ever become profitable. In
that event, the market price of our common stock could decline and you could lose part or all of
your investment. The Risk Factors included in the Companys Annual Report on Form 10-K for the year
ended December 31, 2008 and the Companys Quarterly Reports on Form 10-Q for the period ended March
31, 2009 have not materially changed, except as set forth below.
Risks Relating to our Development of our Product Candidates
All of our product candidates are in the early stages of development and their commercial viability
remains subject to future clinical trials, preclinical studies, regulatory approvals and the risk
generally inherent in these activities. If we are unable to successfully develop our product
candidates, our business will be materially harmed.
In the near-term, our failure to successfully advance the development of one or more of our product
candidates may have a material adverse effect on us. To date, we have not successfully developed
or commercially marketed, distributed or sold any product candidates. The success of our business
depends primarily upon our ability to successfully advance the development of our product
candidates through preclinical and clinical studies, have these candidates approved for sale by the
U.S. Food and drug Administration, or FDA, or regulatory authorities in other countries, and
ultimately, have our product candidates successfully commercialized by us or a strategic
collaborator. In May 2009, we initiated a Phase II trial for FV-100 and anticipate completing this
trial around the middle of 2010. Further, we currently plan on filing of an investigational new
drug application, or IND, for INX-189 in the first half of next year. We cannot assure you that
the results of ongoing preclinical studies or clinical trials and will support or justify the
continued development of one or both of these product candidates.
Our product candidates must satisfy rigorous regulatory standards of safety and efficacy before
they can be approved for sale. To satisfy these standards, we must engage in expensive and lengthy
preclinical studies and clinical testing and obtain regulatory approval of our product candidates.
Despite our efforts, our product candidates may not:
|
|
offer therapeutic or other benefits over existing, comparable drugs; |
|
|
|
be proven safe and effective in clinical trials; |
|
|
|
have the desired effects (or may include undesirable or unexpected effects); |
|
|
|
meet applicable regulatory standards; |
|
|
|
be capable of being produced in commercial quantities at acceptable costs; or |
|
|
|
be successfully commercialized by us or by collaborators. |
Even if we achieve success in preclinical studies and early-stage clinical trials, there can
be no assurance that later- stage clinical trials will be successful and continue to support the
development of our product candidates. A number of companies in the pharmaceutical and
bio-pharmaceutical industries have experienced significant setbacks and failure in all stages of
development, including late-stage clinical trials, even after achieving promising results in
preclinical testing or early-stage clinical trials. Accordingly, results from completed preclinical
studies and early-stage clinical trials may not be predictive of the results we may obtain in
later-stage trials.
Our product candidates will require significant additional research and development efforts, the
commitment of substantial financial resources and regulatory approvals prior to advancing into
further clinical development or being commercialized by us or collaborators. We cannot be certain
that any of our product candidates will successfully progress through the drug development process
or will result in clinically or commercially viable products. We do not expect any of our product
candidates to be commercialized by us or collaborators for at least several years. If we are unable
to successfully develop our product candidates, our business will be materially harmed.
18
In order to develop our product candidates and support our operations beyond the next 12 months
from the date of this filing, we expect that we will need to raise additional capital. Such capital
may not be available to us on acceptable terms, if at all, which
could materially harm our business and business prospects, and the price of our common stock could
suffer a decline in value.
We anticipate that our existing cash and cash equivalents and short-term investments from the
date of this filing, together with proceeds we expect to receive from existing license and
collaboration agreement will enable us to operate for a period of at least 12 months. We have no
other committed sources of additional capital at this time. We cannot assure you that funds will be
available to us in the future on acceptable terms, if at all. If adequate funds are not available
to us at all or, on terms that we find acceptable we may be required to delay, reduce the scope of,
or eliminate research and development efforts or clinical trials on any or all of our product
candidates. We may also be forced to curtail, restructure, sell, merge, or liquidate our
operations, or obtain funds by entering into arrangements with licensees, collaborators or partners
on unattractive terms, or sell or relinquish rights to certain technologies, product candidates or
our intellectual property that we would not otherwise sell or relinquish in order to continue
operations or the development of our product candidates, assuming any such arrangements are
available at all. Further, failure to obtain adequate capital on a timely basis may result in our
independent registered public accountant issuing a going concern qualification in the future.
The timing and extent of our future financing needs will depend on many factors, some of which are
very difficult to predict and others that are beyond our control, including:
|
|
our ability to successfully advance the development of our product candidates; |
|
|
|
the time and cost to complete the requisite preclinical studies, clinical
trials and receive regulatory approval to advance our product candidates
through the requisite phases of clinical development; |
|
|
|
the amount of future payments, if any, received or made under existing or future license,
collaboration or similar strategic arrangements; and |
|
|
|
the costs associated with protecting or expanding our patent and other intellectual property rights; |
We currently do not meet the standards for continued listing on The NASDAQ Capital Market, and we
cannot provide any assurance that we will meet these standards in the future. If we are delisted
from this exchange, the price of our common stock may substantially decrease.
On July 13, 2009, we received notification from NASDAQ that it had suspended enforcement of the
rules requiring a minimum $1.00 closing bid price or a minimum market value of publicly held shares
until August 3, 2009. As a result of this suspension, we now have until October 22, 2009 to regain
compliance with the minimum bid price rule. As a result of the suspension, if, at any time before
October 22, 2009, the bid price of our common stock closes at $1.00 per share or more for a minimum
of 10 consecutive business days, NASDAQ will provide written notification that we have achieved
compliance with the minimum bid price rule.
If we do not regain compliance with the minimum bid price rule by October 22, 2009, NASDAQ will
provide written notification that our common stock will be delisted. At that time, we may appeal
NASDAQs determination to delist our common stock to a Listing Qualifications Panel. Any delisting
from the NASDAQ Capital Market may adversely affect the trading price of our common stock,
significantly limit its liquidity and impair our ability to raise additional funds in the future.
19
|
|
|
ITEM 4. |
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
We held our Annual Meeting of Stockholders on June 09, 2009, at which the following action was
taken:
Stockholders approved the proposal to elect two class II directors of the Company to hold office
until the 2012 annual meeting and until the election and qualification of their respective
successors. The vote with respect to each of the nominees was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell H. Plumb |
|
For |
|
|
31,897,335 |
|
|
Withheld |
|
|
2,526,775 |
|
Gabriele M. Cerrone |
|
For |
|
|
31,048,477 |
|
|
Withheld |
|
|
3,375,633 |
|
Michael A. Henos, Marc L. Preminger, Christopher McGuigan, M. James Barrett, Russell M. Medford
and A. Keith Willard also serve as directors of the Company and each of their terms continued
after the annual meeting of stockholders.
Stockholders approved an amendment to the Companys Eighth Amended and Restated Certificate of
Incorporation to increase the Companys authorized common stock, $0.001 par value per share from
75,000,000 shares to 150,000,000 shares. The vote with respect to this amendment was as follows:
|
|
|
For |
|
25,959,002 |
Against |
|
8,424,813 |
Abstain |
|
40,293 |
There were no broker non votes with respect to either proposal.
20
The following is a list of exhibits filed as part of this Report:
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
3.3 |
|
|
Certificate of Amendment to the Eight Amended and Restated Certification of Incorporation |
|
|
|
|
|
|
31.1 |
|
|
Section 302 Certification of the Chief Executive Officer and Chief Financial Officer
Required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
32.1 |
|
|
Section 906 Certifications of the Chief Executive Officer and the Chief Financial Officer |
21
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.
|
|
|
|
|
Date: August 12, 2009
|
|
INHIBITEX, INC
|
|
|
|
|
|
|
|
|
|
/s/ Russell H. Plumb |
|
|
|
|
|
|
|
|
|
Russell H. Plumb |
|
|
|
|
President, Chief Executive Officer, |
|
|
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|
Chief Financial Officer and Chief Accounting Officer |
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22
EXHIBIT INDEX
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Exhibit No. |
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Description |
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3.3 |
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Certificate of Amendment to the Eight Amended and Restated Certification of Incorporation |
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31.1 |
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Section 302 Certification of the Chief Executive Officer and Chief Financial Officer as
Required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1 |
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Section 906 Certifications of the Chief Executive Officer and the Chief Financial Officer |
23