================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
COMMISSION FILE NUMBER: 000-30111
LEXICON GENETICS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0474169
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
8800 TECHNOLOGY FOREST PLACE
THE WOODLANDS, TEXAS 77381
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES AND ZIP CODE)
(281) 863-3000
(REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one)
Large accelerated filer Accelerated filer X Non-accelerated filer
--- --- ---
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes No X
--- ---
As of May 5, 2006, 64,624,015 shares of the registrant's common stock, par
value $0.001 per share, were outstanding.
================================================================================
LEXICON GENETICS INCORPORATED
TABLE OF CONTENTS
PAGE
----
FACTORS AFFECTING FORWARD-LOOKING STATEMENTS............................. 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 2006 (unaudited) and
December 31, 2005............................................. 3
Consolidated Statements of Operations (unaudited) - Three Months
Ended March 31, 2006 and 2005................................. 4
Consolidated Statements of Cash Flows (unaudited) - Three Months
Ended March 31, 2006 and 2005................................. 5
Notes to Consolidated Financial Statements (unaudited)........... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk....... 20
Item 4. Controls and Procedures.......................................... 20
PART II - OTHER INFORMATION
Item 6. Exhibits......................................................... 21
SIGNATURES............................................................... 22
The Lexicon name and logo, LexVision(R) and OmniBank(R) are registered
trademarks and Genome5000(TM) and e-Biology(TM) are trademarks of Lexicon
Genetics Incorporated.
----------
FACTORS AFFECTING FORWARD LOOKING STATEMENTS
This quarterly report on Form 10-Q contains forward-looking statements.
These statements relate to future events or our future financial performance. We
have attempted to identify forward-looking statements by terminology including
"anticipate," "believe," "can," "continue," "could," "estimate," "expect,"
"intend," "may," "plan," "potential," "predict," "should" or "will" or the
negative of these terms or other comparable terminology. These statements are
only predictions and involve known and unknown risks, uncertainties and other
factors, including the risks outlined under "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Risk Factors," that
may cause our or our industry's actual results, levels of activity, performance
or achievements to be materially different from any future results, levels or
activity, performance or achievements expressed or implied by these
forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are not under any duty to update any
of the forward-looking statements after the date of this quarterly report on
Form 10-Q to conform these statements to actual results, unless required by law.
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEXICON GENETICS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE)
AS OF AS OF
MARCH 31, DECEMBER
2006 31, 2005
----------- ---------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents ............................................... $ 21,858 $ 21,970
Short-term investments, including restricted investments of $430 ........ 65,126 77,725
Accounts receivable, net of allowance for doubtful accounts of $45 ...... 2,158 2,586
Other receivables ....................................................... -- 22
Prepaid expenses and other current assets ............................... 3,438 3,744
--------- ---------
Total current assets ................................................. 92,580 106,047
Property and equipment, net of accumulated depreciation
and amortization of $49,206 and $47,926, respectively ................... 83,775 85,265
Goodwill ................................................................... 25,798 25,798
Intangible assets, net of amortization of $5,660 and $5,360, respectively .. 340 640
Other assets ............................................................... 808 964
--------- ---------
Total assets ......................................................... $ 203,301 $ 218,714
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................ $ 3,589 $ 6,883
Accrued liabilities ..................................................... 6,857 6,787
Current portion of deferred revenue ..................................... 40,274 39,042
Current portion of long-term debt ....................................... 4,767 4,751
--------- ---------
Total current liabilities ............................................ 55,487 57,463
Deferred revenue, net of current portion ................................... 38,175 42,540
Long-term debt ............................................................. 31,982 32,189
Other long-term liabilities ................................................ 725 720
--------- ---------
Total liabilities .................................................... 126,369 132,912
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 5,000 shares authorized;
no shares issued and outstanding ..................................... -- --
Common stock, $.001 par value; 120,000 shares authorized;
64,607 and 64,554 shares issued and outstanding ...................... 65 64
Additional paid-in capital .............................................. 385,180 383,222
Deferred stock compensation ............................................. -- (2)
Accumulated deficit ..................................................... (308,261) (297,430)
Accumulated other comprehensive loss .................................... (52) (52)
--------- ---------
Total stockholders' equity ........................................... 76,932 85,802
--------- ---------
Total liabilities and stockholders' equity ........................... $ 203,301 $ 218,714
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
3
LEXICON GENETICS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-------------------
2006 2005
-------- --------
Revenues:
Collaborative research ............................. $ 19,306 $ 8,883
Subscription and license fees ...................... 1,649 5,042
-------- --------
Total revenues .................................. 20,955 13,925
Operating expenses:
Research and development, including stock-based
compensation of $1,149 and ($11), respectively .. 26,672 22,760
General and administrative, including stock-based
compensation of $692 and $0, respectively ....... 5,303 4,432
-------- --------
Total operating expenses ........................ 31,975 27,192
-------- --------
Loss from operations .................................. (11,020) (13,267)
Interest income ....................................... 1,003 491
Interest expense ...................................... (807) (805)
Other income, net ..................................... (7) 315
-------- --------
Net loss .............................................. $(10,831) $(13,266)
======== ========
Net loss per common share, basic and diluted .......... $ (0.17) $ (0.21)
Shares used in computing net loss per common share,
basic and diluted .................................. 64,566 63,525
The accompanying notes are an integral part of these consolidated financial
statements.
4
LEXICON GENETICS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-------------------
2006 2005
-------- --------
Cash flows from operating activities:
Net loss ..................................................................... $(10,831) $(13,266)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ............................................. 2,682 2,585
Amortization of intangible assets, other than goodwill .................... 300 300
Stock-based compensation .................................................. 1,841 (11)
Loss on disposal of property and equipment ................................ -- 10
Changes in operating assets and liabilities:
Decrease in accounts receivable ........................................ 450 4,650
Decrease in prepaid expenses and other current assets .................. 306 1,709
Decrease in other assets ............................................... 156 47
Decrease in accounts payable and other liabilities ..................... (3,219) (5,309)
Decrease in deferred revenue ........................................... (3,133) (4,390)
-------- --------
Net cash used in operating activities ............................... (11,448) (13,675)
Cash flows from investing activities:
Purchases of property and equipment .......................................... (1,192) (3,133)
Proceeds from disposal of property and equipment ............................. -- 85
Purchases of investments ..................................................... (27,590) (29,226)
Maturities of investments .................................................... 40,189 44,208
-------- --------
Net cash provided by investing activities .............................. 11,407 11,934
Cash flows from financing activities:
Proceeds from issuance of common stock ....................................... 120 116
Repayment of debt borrowings ................................................. (191) (178)
-------- --------
Net cash used in financing activities .................................. (71) (62)
-------- --------
Net decrease in cash and cash equivalents ....................................... (112) (1,803)
Cash and cash equivalents at beginning of period ................................ 21,970 14,612
-------- --------
Cash and cash equivalents at end of period ...................................... $ 21,858 $ 12,809
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest ....................................................... $ 679 $ 692
Supplemental disclosure of non-cash investing and financing activities:
Unrealized loss on investments ............................................... $ -- $ (33)
Reversal of deferred stock compensation, in connection
with stock options ........................................................ $ -- $ 24
Retirement of property and equipment ......................................... $ 1,402 $ 1,976
The accompanying notes are an integral part of these consolidated financial
statements.
5
LEXICON GENETICS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Lexicon
Genetics Incorporated (Lexicon or the Company) have been prepared in accordance
with generally accepted accounting principles for interim financial information
and pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). 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 of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended March 31, 2006 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2006.
The accompanying consolidated financial statements include the accounts of
Lexicon and its subsidiaries. Intercompany transactions and balances are
eliminated in consolidation.
For further information, refer to the financial statements and footnotes
thereto included in Lexicon's annual report on Form 10-K for the year ended
December 31, 2005, as filed with the SEC.
2. NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of shares
of common stock outstanding during the applicable period. Shares associated with
stock options and warrants are not included because they are antidilutive. There
are no differences between basic and diluted net loss per share for all periods
presented.
3. STOCK-BASED COMPENSATION
On January 1, 2006, Lexicon adopted Statement of Financial Accounting
Standards Board No. 123 (Revised), "Share-Based Payment," SFAS No. 123(R). This
statement requires companies to recognize compensation expense in the statement
of operations for share-based payments, including stock options issued to
employees, based on their fair values on the date of the grant, with the
compensation expense recognized over the period in which an employee is required
to provide service in exchange for the stock award. The Company adopted this
statement using the modified prospective transition method, which applies the
compensation expense recognition provisions to new awards and to any awards
modified, repurchased or canceled after the January 1, 2006 adoption date.
Additionally, for any unvested awards outstanding at the adoption date, the
Company will recognize compensation expense over the remaining vesting period.
Stock-based compensation expense is recognized on a straight-line basis. The
adoption of SFAS No. 123(R) resulted in stock-based compensation expense of $1.8
million, or $0.03 per share, for the three months ended March 31, 2006. There is
no impact on cash flows from operating activities or financing activities. As of
March 31, 2006, stock-based compensation cost for all outstanding unvested
options was $16.6 million, which is expected to be recognized over a
weighted-average period of 1.4 years.
Prior to the adoption of SFAS No. 123(R), Lexicon's stock-based
compensation plans were accounted for under the recognition and measurement
provisions of Accounting Principles Board Opinion
6
No. 25, "Accounting for Stock Issued to Employees, and Related Interpretations,"
APB No. 25. Under the intrinsic value method described in APB No. 25, no
compensation expense was recorded because the exercise price of the employee
stock options equaled the market price of the underlying stock on the date of
grant.
Lexicon records expense for options issued to non-employee consultants at
fair value and re-measures the fair value at each reporting date. Lexicon
reversed stock-based compensation expense of $11,000 related to non-employee
consultants during the three-month period ended March 31, 2005.
The following table illustrates the effect on net loss and net loss per
share if the fair value recognition provisions of SFAS No. 123, "Accounting for
Stock Based Compensation," had been applied to all outstanding and unvested
awards in the period:
THREE MONTHS ENDED
MARCH 31, 2005
------------------
Net loss, as reported: ............................... $(13,266)
Add: Stock-based compensation
expense included in reported net loss ............. (11)
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards .................................... (3,130)
--------
Pro forma net loss ................................... $(16,407)
========
Net loss per common share, basic and diluted
As reported ....................................... $ (0.21)
Pro forma ......................................... $ (0.26)
Valuation Assumptions
The fair value of stock options is estimated at the date of grant using the
Black-Scholes method. The Black-Scholes option-pricing model requires the input
of subjective assumptions. Because the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options. For purposes of determining the fair value of stock options
granted subsequent to the adoption of SFAS No. 123(R), the Company segregated
its options into two homogeneous groups, based on exercise and post-vesting
employment termination behaviors, resulting in a change in the assumptions used
for expected option lives and forfeitures. Expected volatility is based on the
historical volatility in the Company's stock price. The following
weighted-average assumptions were used for options granted in the three-month
periods ended March 31, 2006 and 2005, respectively:
RISK-FREE
EXPECTED INTEREST EXPECTED ESTIMATED DIVIDEND
VOLATILITY RATE TERM FORFEITURES RATE
---------- --------- -------- ----------- --------
March 31, 2006:
Employees....................................... 69% 4.6% 7 18% 0%
Officers and non-employee directors............. 69% 4.6% 9 3% 0%
March 31, 2005:
Employees, officers and non-employee directors.. 72% 4.2% 7 3% 0%
7
Stock Option Plans
2000 Equity Incentive Plan: In September 1995, Lexicon adopted the 1995
Stock Option Plan, which was subsequently amended and restated in February 2000
as the 2000 Equity Incentive Plan (the "Equity Incentive Plan"). The Equity
Incentive Plan provides for the grant of incentive stock options to employees
and nonstatutory stock options to employees, directors and consultants of the
Company. The Equity Incentive Plan also permits the grant of stock bonuses and
restricted stock purchase awards. Incentive stock options have an exercise price
of 100% or more of the fair market value of our common stock on the date of
grant. Nonstatutory stock options may have an exercise price as low as 85% of
fair market value on the date of grant. The purchase price of other stock awards
may not be less than 85% of fair market value. However, the plan administrator
may award bonuses in consideration of past services without a purchase payment.
Shares may be subject to a repurchase option in the discretion of the plan
administrator. Generally, stock options have a maximum term of 10 years, and
options vest in increments over four years from the date of grant, although
options may be granted with different vesting terms from time to time. Upon
employee termination, unexercised options will expire at the end of three
months. As of March 31, 2006, an aggregate of 20,500,000 shares of common stock
had been reserved for issuance, options to purchase 15,689,998 shares were
outstanding, and 3,570,701 shares had been issued upon the exercise of stock
options issued under the Equity Incentive Plan.
2000 Non-Employee Directors' Stock Option Plan: In February 2000, Lexicon
adopted the 2000 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan") to provide for the automatic grant of options to purchase shares of
common stock to non-employee directors of the Company. Under the Directors'
Plan, non-employee directors first elected after the closing of the Company's
initial public offering receive an initial option to purchase 30,000 shares of
common stock. In addition, on the day following each of the Company's annual
meetings of stockholders, beginning with the annual meeting in 2001, each
non-employee director who has been a director for at least six months was
automatically granted an option to purchase 6,000 shares of common stock.
Beginning with the annual meeting in 2005, the annual grant was increased to an
option to purchase 10,000 shares of common stock. Initial option grants become
vested and exercisable over a period of five years and annual option grants
become vested over a period of 12 months from the date of grant. Options granted
under the Directors' Plan have an exercise price equal to the fair market value
of the Company's common stock on the date of grant and term of ten years from
the date of grant. As of March 31, 2006, an aggregate of 600,000 shares of
common stock had been reserved for issuance, options to purchase 268,000 shares
were outstanding, and no options had been exercised under the Directors' Plan.
Coelacanth Corporation 1999 Stock Option Plan: Lexicon assumed the
Coelacanth Corporation 1999 Stock Option Plan (the "Coelacanth Plan") and the
outstanding stock options under the plan in connection with our July 2001
acquisition of Coelacanth Corporation. The Company will not grant any further
options under the Coelacanth Plan. As outstanding options under the plan expire
or terminate, the number of shares authorized for issuance under the Coelacanth
Plan will be correspondingly reduced. As of March 31, 2006, an aggregate of
122,649 shares of common stock had been reserved for issuance, options to
purchase 73,676 shares of common stock were outstanding, and 27,045 shares of
common stock had been issued upon the exercise of stock options issued under the
Coelacanth Plan.
8
Stock Option Activity
The following is a summary of option activity under Lexicon's stock option
plans for the first quarter of 2006:
WEIGHTED
WEIGHTED AVERAGE
AVERAGE REMAINING AGGREGATE
EXERCISE CONTRACTUAL INTRINSIC
OPTIONS PRICE TERM VALUE
---------- -------- ----------- ----------
(IN (IN
THOUSANDS) THOUSANDS)
Outstanding at December 31, 2005.. 13,802 $6.36
Granted........................... 2,395 4.01
Exercised......................... (53) 2.26
Canceled.......................... (112) 6.46
------
Outstanding at March 31, 2006..... 16,032 6.02 6.1 $21,047
======
Exercisable at March 31, 2006..... 10,939 $6.48 4.8 $16,600
======
The weighted-average grant date fair value of options granted during the
three-month periods ended March 31, 2006 and 2005 was $2.95 and $4.08,
respectively. The total intrinsic value of options exercised during the
three-month periods ended March 31, 2006 and 2005 were $146,000 and $271,000,
respectively. As of March 31, 2006, 1,571,301 shares of common stock were
available for grant under Lexicon's stock option plans.
Stock Options Outstanding
The following table summarizes information about stock options outstanding
at March 31, 2006:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------- ----------------------
OUTSTANDING WEIGHTED AVERAGE WEIGHTED EXERCISABLE WEIGHTED
AS OF REMAINING AVERAGE AS OF AVERAGE
RANGE OF MARCH 31, CONTRACTUAL EXERCISE MARCH 31, EXERCISE
EXERCISE PRICE 2006 LIFE (IN YEARS) PRICE 2006 PRICE
-------------- ----------- ---------------- -------- ----------- --------
(IN (IN
THOUSANDS) THOUSANDS)
$ 1.67 - 2.50 4,727 3.0 $ 2.40 4,727 $ 2.40
3.16 - 4.72 3,882 8.8 4.00 1,045 3.96
4.76 - 7.12 2,557 8.4 5.81 956 5.84
7.15 - 10.55 3,004 6.6 8.55 2,349 8.82
10.87 - 16.00 1,369 4.9 12.62 1,369 12.62
16.63 - 22.06 363 4.0 19.71 363 19.71
25.25 - 31.63 28 4.6 26.23 28 26.23
38.00 - 38.50 102 4.4 38.49 102 38.49
------ ------
16,032 6.1 $ 6.02 10,939 $ 6.48
====== ======
4. DEBT OBLIGATIONS
Genentech Loan: On December 31, 2002, Lexicon borrowed $4.0 million under a
note agreement with Genentech, Inc. The proceeds of the loan are to be used to
fund research efforts under the alliance agreement with Genentech. On November
30, 2005, the note agreement was amended to extend the maturity date of the loan
by one year to December 31, 2006. No other terms of the note agreement were
changed. The Company may repay the note, at any time up to the maturity date, at
its option, in cash, in shares of common stock valued at the then-current market
price, or in a combination of cash and shares, subject to certain limitations.
The note accrues interest at an annual rate of 8%, compounded quarterly. The
$4.0 million note has been classified as a current liability on the accompanying
consolidated balance sheet as of December 31, 2005 and March 31, 2006.
9
Mortgage Loan: In April 2004, Lexicon purchased its facilities in The
Woodlands, Texas that were previously subject to a synthetic lease. The Company
repaid the $54.8 million funded under the synthetic lease with proceeds from a
$34.0 million third-party mortgage financing and $20.8 million in cash. The
mortgage loan has a ten-year term with a 20-year amortization and bears interest
at a fixed rate of 8.23%. As a result of the refinancing, all restrictions on
the cash and investments that had secured the obligations under the synthetic
lease were eliminated.
5. COMMITMENTS AND CONTINGENCIES
In May 2002, Lexicon's subsidiary Lexicon Pharmaceuticals (New Jersey),
Inc. leased a 76,000 square-foot laboratory and office space in Hopewell, New
Jersey under an agreement which expires in June 2013. The lease provides for an
escalating yearly rent payment of $1.3 million in the first year, $2.1 million
in years two and three, $2.2 million in years four to six, $2.3 million in years
seven to nine and $2.4 million in years ten and eleven. Lexicon is the guarantor
of the obligations of its subsidiary under the lease. The Company is required to
maintain restricted investments to collateralize the Hopewell lease. As of March
31, 2006, the Company had $430,000 in restricted investments to collateralize a
standby letter of credit for this lease.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
We are a biopharmaceutical company focused on discovering and developing
breakthrough treatments for human disease. We are using gene knockout technology
to systematically discover the physiological functions of genes in living
mammals, or in vivo. We generate our gene function discoveries using knockout
mice - mice whose DNA has been altered to disrupt, or "knock out," the function
of the altered gene. Our patented gene trapping and gene targeting technologies
enable us to rapidly generate these knockout mice by altering the DNA of genes
in a special variety of mouse cells, called embryonic stem cells, which can be
cloned and used to generate mice with the altered gene. We employ an integrated
platform of advanced medical technologies to systematically discover and
validate which genes, when knocked out, result in a favorable medical profile
with pharmaceutical utility. We then pursue those genes and the proteins they
encode as potential targets for therapeutic intervention in our drug discovery
programs.
We employ internal resources and drug discovery alliances to discover
potential small molecule, antibody and protein drugs for in vivo-validated drug
targets that we consider to have high pharmaceutical value. We use our own
sophisticated libraries of drug-like chemical compounds and an industrialized
medicinal chemistry platform to identify small molecule drug candidates for our
in vivo-validated drug targets. We have established alliances with Bristol-Myers
Squibb Company to discover and develop novel small molecule drugs in the
neuroscience field; with Genentech, Inc. for the discovery of therapeutic
proteins and antibody targets and the development of antibody and protein drugs
based on those targets; with N.V. Organon for the discovery of another group of
therapeutic proteins and antibody targets and the development and
commercialization of antibody and protein drugs based on those targets; and with
Takeda Pharmaceutical Company Limited to discover new drugs for the treatment of
high blood pressure. In addition, we have established collaborations and license
agreements with other leading pharmaceutical and biotechnology companies under
which we receive fees and, in some cases, are eligible to receive milestone and
royalty payments, for access to some of our technologies and discoveries for use
in their own drug discovery efforts.
We derive substantially all of our revenues from drug discovery alliances,
target validation collaborations for the development and, in some cases,
analysis of the physiological effects of genes altered in knockout mice,
government grants and contracts, and technology licenses. To date, we have
generated a substantial portion of our revenues from a limited number of
sources.
Our operating results and, in particular, our ability to generate
additional revenues are dependent on many factors, including our success in
establishing collaborations, alliances and technology licenses, expirations of
our collaborations and alliances, the success rate of our discovery efforts
leading to opportunities for new collaborations, alliances and licenses, as well
as milestone payments and royalties, the timing and willingness of collaborators
to commercialize products which may result in royalties, and general and
industry-specific economic conditions which may affect research and development
expenditures. Our future revenues from collaborations, alliances and government
grants and contracts are uncertain because our existing agreements have fixed
terms or relate to specific projects of limited duration. Our future revenues
from technology licenses are uncertain because they depend, in large part, on
securing new agreements. Subject to limited exceptions, we do not intend to
offer subscriptions to our databases or make our compound libraries available
for purchase in the future. Our ability to secure future revenue-generating
agreements will depend upon our ability to address the needs of our potential
future collaborators, granting agencies and licensees, and to negotiate
agreements that we believe are in our long-term best interests. We may determine
that our interests are better served by retaining rights to
11
our discoveries and advancing our therapeutic programs to a later stage, which
could limit our near-term revenues. Because of these and other factors, our
operating results have fluctuated in the past and are likely to do so in the
future, and we do not believe that period-to-period comparisons of our operating
results are a good indication of our future performance.
Since our inception, we have incurred significant losses and, as of March
31, 2006, we had an accumulated deficit of $308.3 million. Our losses have
resulted principally from costs incurred in research and development, general
and administrative costs associated with our operations, and non-cash
stock-based compensation expenses associated with stock options granted to
employees and consultants prior to our April 2000 initial public offering.
Research and development expenses consist primarily of salaries and related
personnel costs, material costs, facility costs, depreciation on property and
equipment, legal expenses resulting from intellectual property prosecution and
other expenses related to our drug discovery programs, the development and
analysis of knockout mice and our other target validation research efforts, and
the development of compound libraries. General and administrative expenses
consist primarily of salaries and related expenses for executive and
administrative personnel, professional fees and other corporate expenses,
including information technology, facilities costs and general legal activities.
In connection with the expansion of our drug discovery programs and our target
validation research efforts, we expect to incur increasing research and
development and general and administrative costs. As a result, we will need to
generate significantly higher revenues to achieve profitability.
CRITICAL ACCOUNTING POLICIES
Revenue Recognition
We recognize revenues when persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered, the price is fixed and
determinable, and collectibility is reasonably assured. Payments received in
advance under these arrangements are recorded as deferred revenue until earned.
Upfront fees under our drug discovery alliances are recognized as revenue
on a straight-line basis over the estimated period of service, generally the
contractual research term, to the extent they are non-refundable. Research
funding under these alliances is recognized as services are performed to the
extent they are non-refundable, either on a straight-line basis over the
estimated service period, generally the contractual research term, or as
contract research costs are incurred. Milestone-based fees are recognized upon
completion of specified milestones according to contract terms. Fees for access
to our databases and other target validation resources are recognized ratably
over the subscription or access period. Payments received under target
validation collaborations and government grants and contracts are recognized as
revenue as we perform our obligations related to such research to the extent
such fees are non-refundable. Non-refundable technology license fees are
recognized as revenue upon the grant of the license, when performance is
complete and there is no continuing involvement.
Revenues recognized from multiple element contracts are allocated to each
element of the arrangement based on the relative fair value of the elements. The
determination of fair value of each element is based on objective evidence. When
revenues for an element are specifically tied to a separate earnings process,
revenue is recognized when the specific performance obligation associated with
the element is completed. When revenues for an element are not specifically tied
to a separate earnings process, they are recognized ratably over the term of the
agreement.
A change in our revenue recognition policy or changes in the terms of
contracts under which we recognize revenues could have an impact on the amount
and timing of our recognition of revenues.
12
Research and Development Expenses
Research and development expenses consist of costs incurred for
company-sponsored as well as collaborative research and development activities.
These costs include direct and research-related overhead expenses and are
expensed as incurred. Patent costs and technology license fees for technologies
that are utilized in research and development and have no alternative future use
are expensed when incurred.
We have advanced two of our drug discovery programs, LX-6171 and LX-1031,
into preclinical development in preparation for regulatory filings for the
commencement of clinical trials. For any potential drug, the drug development
process takes many years to complete. The cost and length of time varies due to
many factors, including the type, complexity and intended use of the product
candidate. We estimate that drug development activities are typically completed
over the following periods:
ESTIMATED
PHASE COMPLETION PERIOD
----------------------- -----------------
Preclinical development 1-2 years
Phase 1 clinical trials 1-2 years
Phase 2 clinical trials 1-2 years
Phase 3 clinical trials 2-4 years
We expect research and development costs to increase in the future as our
drug discovery programs advance in preclinical development and clinical trials.
Due to the variability in the length of time necessary for drug development, the
uncertainties related to the cost of these activities and ultimate ability to
obtain governmental approval for commercialization, accurate and meaningful
estimates of the ultimate costs to bring our potential product candidates to
market are not available.
We record our research and development costs by type or category, rather
than by project. Significant categories of costs include personnel, facilities
and equipment costs, laboratory supplies and third-party and other services. In
addition, a significant portion of our research and development expenses is not
tracked by project as it benefits multiple projects. Consequently, fully-loaded
research and development cost summaries by project are not available.
Stock-based Compensation Expense
On January 1, 2006, we adopted Statement of Financial Accounting Standards
Board No. 123 (Revised), "Share-Based Payment," or SFAS No. 123(R). This
statement requires companies to recognize compensation expense in the statement
of operations for share-based payments, including stock options issued to
employees, based on their fair values on the date of the grant, with the
compensation expense recognized over the period in which an employee is required
to provide service in exchange for the stock award. We adopted this statement
using the modified prospective transition method, which applies the compensation
expense recognition provisions to new awards and to any awards modified,
repurchased or canceled after the January 1, 2006 adoption date. Additionally,
for any unvested awards outstanding at the adoption date, we will recognize
compensation expense over the remaining vesting period. Stock-based compensation
expense is recognized on a straight-line basis. The adoption of SFAS No. 123(R)
resulted in stock-based compensation expense of $1.8 million, or $0.03 per
share, for the three months ended March 31, 2006. There is no impact on cash
flows from operating activities or financing activities. As of March 31, 2006,
stock-based compensation cost for all outstanding unvested options was $16.6
million, which is expected to be recognized over a weighted-average period of
1.4 years.
13
Prior to the adoption of SFAS No. 123(R), our stock-based compensation
plans were accounted for under the recognition and measurement provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees, and Related Interpretations," APB No. 25. Under the intrinsic value
method described in APB No. 25, no compensation expense was recorded because the
exercise price of the employee stock options equaled the market price of the
underlying stock on the date of grant.
We record expense for options issued to non-employee consultants at
fair-value and re-measure the fair value at each reporting date. We reversed
stock-based compensation expense of $11,000 related to non-employee consultants
during the three-month period ended March 31, 2005.
The fair value of stock options is estimated at the date of grant using the
Black-Scholes option-pricing model. For purposes of determining the fair value
of stock options granted subsequent to the adoption of SFAS No. 123(R), the
Company segregated its options into two homogeneous groups, based on exercise
and post-vesting employment termination behaviors, resulting in a change in the
assumptions used for expected option lives and forfeitures. Expected volatility
is based on the historical volatility in our stock price. The following
weighted-average assumptions were used for options granted in the three-month
periods ended March 31, 2006 and 2005, respectively:
RISK-FREE
EXPECTED INTEREST EXPECTED ESTIMATED DIVIDEND
VOLATILITY RATE TERM FORFEITURES RATE
---------- --------- -------- ----------- --------
March 31, 2006:
Employees........................................ 69% 4.6% 7 18% 0%
Officers and non-employee directors.............. 69% 4.6% 9 3% 0%
March 31, 2005:
Employees, officers and non-employee directors... 72% 4.2% 7 3% 0%
Goodwill Impairment
Goodwill is not amortized, but is tested at least annually for impairment
at the reporting unit level. We have determined that the reporting unit is the
single operating segment disclosed in our current financial statements.
Impairment is the condition that exists when the carrying amount of goodwill
exceeds its implied fair value. The first step in the impairment process is to
determine the fair value of the reporting unit and then compare it to the
carrying value, including goodwill. We determined that the market capitalization
approach is the most appropriate method of measuring fair value of the reporting
unit. Under this approach, fair value is calculated as the average closing price
of our common stock for the 30 days preceding the date that the annual
impairment test is performed, multiplied by the number of outstanding shares on
that date. A control premium, which is representative of premiums paid in the
marketplace to acquire a controlling interest in a company, is then added to the
market capitalization to determine the fair value of the reporting unit. If the
fair value exceeds the carrying value, no further action is required and no
impairment loss is recognized. Additional impairment assessments may be
performed on an interim basis if we encounter events or changes in circumstances
that would indicate that, more likely than not, the carrying value of goodwill
has been impaired.
14
RESULTS OF OPERATIONS
Three Months Ended March 31, 2006 and 2005
REVENUES
Total revenues and dollar and percentage changes as compared to the
corresponding period in the prior year are as follows (dollar amounts are
presented in millions):
THREE MONTHS ENDED
MARCH 31,
------------------
2006 2005
----- -----
Total revenues........ $21.0 $13.9
Dollar increase....... $ 7.1
Percentage increase... 50%
- Collaborative research - Revenue from collaborative research increased 117%
to $19.3 million, primarily due to the achievement of a performance
milestone under our hypertension drug discovery alliance with Takeda as
well as the recognition of revenues under our alliance with Organon and our
award from the Texas Enterprise Fund.
- Subscription and license fees - Revenue from subscriptions and license fees
decreased 67% to $1.6 million, primarily due to the fact that the
prior-year period included a one-time technology license fee from Deltagen,
Inc.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses and dollar and percentage changes as
compared to the corresponding period in the prior year are as follows (dollar
amounts are presented in millions):
THREE MONTHS ENDED
MARCH 31,
------------------
2006 2005
----- -----
Total research and development expense... $26.7 $22.8
Dollar increase.......................... $ 3.9
Percentage increase...................... 17%
Research and development expenses consist primarily of salaries and other
personnel-related expenses, facility and equipment costs, laboratory supplies,
third-party and other services and stock-based compensation expenses.
- Personnel - Personnel costs increased 11% to $13.1 million, primarily
due to increased personnel to support the expansion of our drug
discovery programs and merit-based pay increases for employees.
Salaries, bonuses, employee benefits, payroll taxes, recruiting and
relocation costs are included in personnel costs.
- Facilities and equipment - Facilities and equipment costs increased 6%
to $5.4 million, primarily due to an increase in utility costs.
- Laboratory supplies - Laboratory supplies expense increased 12% to
$3.5 million, primarily due to research performed in connection with
our award from the Texas Enterprise Fund.
- Third-party and other services - Third-party and other services
increased 41% to $2.0 million, primarily due to an increase in
third-party research costs.
15
- Stock-based compensation - Stock-based compensation expense increased
by $1.2 million, primarily as a result of our adoption of SFAS No.
123(R), "Share-Based Payment," on January 1, 2006.
- Other - Other costs increased by 8% in 2006 to $1.5 million.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses and dollar and percentage changes as
compared to the corresponding period in the prior year are as follows (dollar
amounts are presented in millions):
THREE MONTHS ENDED
MARCH 31,
------------------
2006 2005
---- -----
Total general and administrative expense... $5.3 $4.4
Dollar increase............................ $0.9
Percentage increase........................ 20%
General and administrative expenses consist primarily of personnel costs to
support our research activities, facility and equipment costs, professional fees
such as legal fees, and stock-based compensation expenses.
- Personnel - Personnel costs increased 12% to $3.0 million, primarily
due to increased personnel and merit-based pay increases for
employees. Salaries, bonuses, employee benefits, payroll taxes,
recruiting and relocation costs are included in personnel costs.
- Facilities and equipment - Facilities and equipment costs were $0.8
million, consistent with the prior year.
- Professional fees - Professional fees decreased 19% to $0.3 million,
primarily due to decreased litigation costs.
- Stock-based compensation - Stock-based compensation expense increased
by $0.7 million as a result of our adoption of SFAS No. 123(R),
"Share-Based Payment," on January 1, 2006.
- Other - Other costs decreased 13% to $0.5 million.
INTEREST INCOME, INTEREST EXPENSE AND OTHER INCOME, NET
Interest Income. Interest income increased 104% to $1.0 million in the
three months ended March 31, 2006 from $0.5 million in the corresponding period
in 2005, due to higher average cash balances and higher interest rates.
Interest Expense. Interest expense was $0.8 million in the three months
ended March 31, 2006 and 2005.
Other Income, Net. Other income, net decreased 102% to expense of $7,000 in
the three months ended March 31, 2006 from income of $0.3 million in the
corresponding period in 2005. Other income in 2005 included a settlement with a
vendor.
NET LOSS AND NET LOSS PER COMMON SHARE
Net Loss and Net Loss per Common Share. Net loss decreased to $10.8 million
in the three months ended March 31, 2006 from $13.3 million in the corresponding
period in 2005. Net loss per
16
common share decreased to $0.17 in the three months ended March 31, 2006 from
$0.21 in the corresponding period in 2005.
Our quarterly operating results have fluctuated in the past and are likely
to do so in the future, and we believe that quarter-to-quarter comparisons of
our operating results are not a good indication of our future performance.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations from inception primarily through sales of
common and preferred stock, contract and milestone payments to us under our drug
discovery alliance, target validation, database subscription and license
agreements, government grants and contracts, and financing obtained under debt
and lease arrangements. From our inception through March 31, 2006, we had
received net proceeds of $295.5 million from issuances of common and preferred
stock, including $203.2 million of net proceeds from the initial public offering
of our common stock in April 2000 and $50.1 million from our July 2003 common
stock offering. In addition, from our inception through March 31, 2006, we
received $365.7 million in cash payments from drug discovery alliances, target
validation collaborations, database subscription and technology license fees,
sales of compound libraries and reagents, and government grants and contracts,
of which $289.7 million had been recognized as revenues through March 31, 2006.
As of March 31, 2006, we had $87.0 million in cash, cash equivalents and
short-term investments (including $0.4 million of restricted investments), as
compared to $99.7 million (including $0.4 million of restricted investments) as
of December 31, 2005. Cash of $11.4 million was used in operations in the three
months ended March 31, 2006. This consisted primarily of the net loss for the
period of $10.8 million offset by non-cash charges of $2.7 million related to
depreciation expense, $1.8 million related to stock-based compensation expense
and $0.3 million related to amortization of intangible assets other than
goodwill; a $3.1 million decrease in deferred revenue; and changes in other
operating assets and liabilities of $2.3 million. Investing activities provided
cash of $11.4 million in the three months ended March 31, 2006, primarily due to
net maturities of short-term investments of $12.6 million. This was offset by
purchases of property and equipment of $1.2 million. We used cash of $0.1
million in financing activities. This consisted of principal repayments of $0.2
million on the mortgage loan, offset by cash proceeds of $0.1 million from stock
option exercises.
In April 2004, we purchased our facilities in The Woodlands, Texas from the
lessor under our previous synthetic lease agreement. In connection with such
purchase, we repaid the $54.8 million funded under the synthetic lease with
proceeds from a $34.0 million third-party mortgage financing and $20.8 million
in cash. The mortgage loan has a ten-year term with a 20-year amortization and
bears interest at a fixed rate of 8.23%. As a result of the refinancing, all
restrictions on the cash and investments that had secured our obligations under
the synthetic lease were eliminated.
In May 2002, our subsidiary Lexicon Pharmaceuticals (New Jersey), Inc.
signed a ten-year lease for a 76,000 square-foot facility in Hopewell, New
Jersey. The term of the lease extends until June 30, 2013. The lease provides
for an escalating yearly base rent payment of $1.3 million in the first year,
$2.1 million in years two and three, $2.2 million in years four to six, $2.3
million in years seven to nine and $2.4 million in years ten and eleven. We are
the guarantor of the obligations of our subsidiary under the lease.
In December 2002, we borrowed $4.0 million under a note agreement with
Genentech. The proceeds of the loan are to be used to fund research efforts
under our alliance with Genentech for the discovery of therapeutic proteins and
antibody targets. On November 30, 2005, the note agreement was
17
amended to extend the maturity date of the loan by one year to December 31,
2006. No other terms of the note agreement were changed. We may repay the note,
at any time up to the maturity date, at our option, in cash, in shares of our
common stock valued at the then-current market value, or in a combination of
cash and shares, subject to certain limitations. The note accrues interest at an
annual rate of 8%, compounded quarterly.
Our future capital requirements will be substantial and will depend on many
factors, including our ability to obtain alliance, collaboration and technology
license agreements, the amount and timing of payments under such agreements, the
level and timing of our research and development expenditures, market acceptance
of our products, the resources we devote to developing and supporting our
products and other factors. Our capital requirements will also be affected by
any expenditures we make in connection with license agreements and acquisitions
of and investments in complementary technologies and businesses. We expect to
devote substantial capital resources to continue our research and development
efforts, to expand our support and product development activities, and for other
general corporate activities. We believe that our current unrestricted cash and
investment balances and cash and revenues we expect to derive from drug
discovery alliances, target validation collaborations, government grants and
contracts, and technology licenses will be sufficient to fund our operations for
approximately the next two years. During or after this period, if cash generated
by operations is insufficient to satisfy our liquidity requirements, we will
need to sell additional equity or debt securities or obtain additional credit
arrangements. Additional financing may not be available on terms acceptable to
us or at all. The sale of additional equity or convertible debt securities may
result in additional dilution to our stockholders.
DISCLOSURE ABOUT MARKET RISK
We are exposed to limited market and credit risk on our cash equivalents,
which have maturities of three months or less at the time of purchase. We
maintain a short-term investment portfolio which consists of U.S. government
agency debt obligations, investment grade commercial paper, corporate debt
securities and certificates of deposit that mature within twelve months and
auction rate securities that mature greater than twelve months from the time of
purchase, which we believe are subject to limited market and credit risk. We
currently do not hedge interest rate exposure or hold any derivative financial
instruments in our investment portfolio.
We have operated primarily in the United States and substantially all sales
to date have been made in U.S. dollars. Accordingly, we have not had any
material exposure to foreign currency rate fluctuations.
RISK FACTORS
The following risks and uncertainties are important factors that could
cause actual results or events to differ materially from those indicated by
forward-looking statements. The factors described below are not the only ones we
face and additional risks and uncertainties not presently known to us or that we
currently deem immaterial also may impair our business operations.
Risks Related to Our Need for Additional Financing and Our Financial Results
- we will need additional capital in the future and, if it is not
available on reasonable terms, we will be forced to significantly
curtail or cease operations or obtain funds by entering into financing
agreements on unattractive terms
- we have a history of net losses, and we expect to continue to incur
net losses and may not achieve or maintain profitability
18
- our operating results have been and likely will continue to fluctuate,
and we believe that period-to-period comparisons of our operating
results are not a good indication of our future performance
Risks Related to Our Business
- we are an early-stage company, and we may not successfully develop or
commercialize any therapeutics or drug targets that we have identified
- clinical testing of our future drug candidates in humans is an
inherently risky and time-consuming process that may fail to
demonstrate safety and efficacy, which could result in the delay,
limitation or prevention of regulatory approval
- we are dependent upon our collaborations with major pharmaceutical
companies, and if we are unable to achieve milestones under those
collaborations or if our collaborators' efforts fail to yield
pharmaceutical products on a timely basis, our business will suffer
- conflicts with our collaborators could jeopardize the success of our
collaborative agreements and harm our product development efforts
- if we are unable to internally establish drug development and
commercialization capabilities or arrange for the provision of such
functions by third parties, our ability to develop and commercialize
pharmaceutical products would be significantly impaired
- we lack the capability to manufacture materials for preclinical
studies, clinical trials or commercial sales and will rely on third
parties to manufacture our potential products, which may harm or delay
our product development and commercialization efforts
- we face substantial competition in our drug discovery and product
development efforts
- we may engage in future acquisitions, which may be expensive and time
consuming and from which we may not realize anticipated benefits
- if we lose our key personnel or are unable to attract and retain
additional personnel, we may be unable to successfully develop and
commercialize our own products
- any contamination among our knockout mouse population could negatively
affect the reliability of our scientific research or cause us to incur
significant remedial costs
- because all of our target validation operations are located at a
single facility, the occurrence of a disaster could significantly
disrupt our business
- we use hazardous chemicals and radioactive and biological materials in
our business; any disputes relating to improper handling, storage or
disposal of these materials could be time consuming and costly
Risks Related to Our Industry
- our ability to patent our inventions is uncertain because patent laws
and their interpretation are highly uncertain and subject to change
- if we are unable to adequately protect our intellectual property,
third parties may be able to use our technology, which could
negatively impact our ability to compete in the market
19
- we may be involved in patent litigation and other disputes regarding
intellectual property rights and may require licenses from third
parties for our discovery and development and planned
commercialization activities, and we may not prevail in any such
litigation or other dispute or be able to obtain required licenses
- we use intellectual property that we license from third parties, and
if we do not comply with these licenses, we could lose our rights
under them
- we have not sought patent protection outside of the United States for
some of our inventions, and some of our licensed patents only provide
coverage in the United States, and as a result, our international
competitors could be granted foreign patent protection with respect to
our discoveries
- our industry is subject to extensive and uncertain government
regulatory requirements, which could significantly hinder our ability,
or the ability of our collaborators, to obtain, in a timely manner or
at all, regulatory approval of potential therapeutic products, or to
commercialize such products
- if our potential products receive regulatory approval, we or our
collaborators will remain subject to extensive and rigorous ongoing
regulation
- the uncertainty of pharmaceutical pricing and reimbursement may
decrease the commercial potential of any products that we or our
collaborators may develop and affect our ability to raise capital
- we may be sued for product liability
- public perception of ethical and social issues may limit or discourage
the use of our technologies, which could reduce our revenues
For additional discussion of the risks and uncertainties that affect our
business, see "Item 1. Business - Risk Factors" included in our annual report on
Form 10-K for the year ended December 31, 2005, as filed with the Securities and
Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Disclosure about Market Risk" under "Item 2. Management's Discussion
and Analysis of Financial Condition and Results of Operations" for quantitative
and qualitative disclosures about market risk.
ITEM 4. CONTROLS AND PROCEDURES
Our chief executive officer and chief financial officer have concluded that
our disclosure controls and procedures (as defined in rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934) are sufficiently effective
to ensure that the information required to be disclosed by us in the reports we
file under the Securities Exchange Act is gathered, analyzed and disclosed with
adequate timeliness, accuracy and completeness, based on an evaluation of such
controls and procedures as of the end of the period covered by this report.
Subsequent to our evaluation, there were no significant changes in internal
controls or other factors that could significantly affect internal controls,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
20
PART II OTHER INFORMATION
ITEM 6. EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
31.1 -- Certification of CEO Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 -- Certification of CFO Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 -- Certification of CEO and CFO Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
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.
LEXICON GENETICS INCORPORATED
Date: May 9, 2006 By: /s/ Arthur T. Sands
---------------------------------------
Arthur T. Sands, M.D., Ph.D.
President and Chief Executive Officer
Date: May 9, 2006 By: /s/ Julia P. Gregory
---------------------------------------
Julia P. Gregory
Executive Vice President, Corporate
Development and Chief Financial Officer
22
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
31.1 -- Certification of CEO Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 -- Certification of CFO Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 -- Certification of CEO and CFO Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002