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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

OR

Commission File Number: 0-19410

POINT THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Registrant’s Telephone Number, Including Area Code:    (617) 933-2130

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.    x  Yes    ¨  No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    ¨  Yes    x  No

As of May 8, 2003, there were 9,275,755 shares of the Registrant’s Common Stock, $0.01 par value per share, outstanding.

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POINT THERAPEUTICS, INC. AND SUBSIDIARIES

(A Development Stage Company)

QUARTERLY REPORT ON FORM 10-Q

INDEX

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

POINT THERAPEUTICS, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

(unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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POINT THERAPEUTICS, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

The accompanying notes are an integral part of these consolidated financial statements.

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POINT THERAPEUTICS, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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POINT THERAPEUTICS, INC. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2003

(unaudited)

Point Therapeutics, Inc. (the “Company”) is developing small molecule drugs for the treatment of certain hematopoietic disorders and for a variety of cancerous tumors. PT-100, the Company’s lead product candidate, has the potential to treat a number of different hematopoietic disorders as well as certain cancerous tumors.

The Company was originally incorporated in December 1993 as a Delaware corporation under the name Hemacor Inc. The Company changed its name to HemaSure Inc. in February of 1994. From 1994 to May 2001, the Company developed and supplied innovative blood filtration technologies. On May 28, 2001, the Company sold substantially all of its non-cash assets to Whatman Biosciences, Inc. a Massachusetts corporation and a subsidiary of Whatman Plc (“Whatman”), a leader in separations technology. The Company changed its name from Hemasure, Inc. to HMSR Inc. upon the sale to Whatman. From May 2001 until the merger on March 15, 2002 (described below) with Point Massachusetts, the Company’s operations consisted primarily of investigating various strategic business combinations.

On November 15, 2001, HMSR and PT Acquisition Corp., a wholly-owned subsidiary of HMSR formed for the purpose of consummating a merger transaction, entered into the Agreement and Plan of Merger (the “Merger Agreement”) with Point Therapeutics, Inc., a privately-held Massachusetts corporation (“Point Massachusetts”). At that time, HMSR paid Point Massachusetts a $500,000 lock-up fee. The lock-up fee was included when determining the final stock conversion ratio between Point Massachusetts and HMSR, as described below.

On March 15, 2002, HMSR stockholders approved a 1-for-10 reverse split of HMSR’s common stock and a name change from HMSR Inc. to Point Therapeutics, Inc. The stockholders of Point Massachusetts also approved on March 15, 2002 the Merger Agreement previously entered into by both parties. In accordance with the terms of the Merger Agreement, immediately prior to the effective time of the merger, and after taking into account the 1-for-10 reverse split with respect to HMSR’s common stock prior to the merger, each share of Point Massachusetts common stock outstanding immediately prior to the effective time of the merger (including all shares of Point Massachusetts preferred stock converted prior to the effective time) was converted into the right to receive 4.16168 shares of the HMSR’s common stock. This ratio also took into account the $500,000 HMSR deposit paid on November 15, 2001. In addition, all outstanding options and warrants of Point Massachusetts were converted at the same conversion rate of 4.16168.

As a result of the merger, HMSR acquired all of the outstanding shares of Point Massachusetts capital stock. For accounting purposes, the acquisition has been treated as the acquisition of HMSR by Point Massachusetts with Point Massachusetts as the acquiror. The historical financial statements of the Company presented prior to March 15, 2002 are those of Point Massachusetts. Point Massachusetts’ capital structure has been restated to reflect all stock issuances as if the merger had taken place prior to all periods presented. In addition, if the merger with HMSR had occurred at the beginning of the periods presented, the effect of the inclusion of HMSR’s operating results on the financial statements presented would not be material.

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Unaudited Interim Financial Statements

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States and applicable Securities and Exchange Commission (“SEC”) regulations for interim financial information. These financial statements are unaudited and, in the opinion of management, include all adjustments necessary to present fairly the balance sheets, statements of operations, and statements of cash flows for the periods presented in accordance with accounting principles generally accepted in the United States. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to SEC rules and regulations. It is presumed that users of this interim financial information have read or have access to the audited financial statements and footnote disclosure of Point Therapeutics Massachusetts, Inc. for the year ended December 31, 2002, contained in a Form 10-K/A filed with the Securities and Exchange Commission on April 30, 2003. Operating results for the quarter ended March 31, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Net Loss Per Share

Basic and diluted net loss per common share amounts are presented in conformity with Statement of Financial Accounting Standards No. (“SFAS”) 128, “Earnings per Share”, for all periods presented. In accordance with SFAS 128, basic and diluted net loss per common share amounts have been computed using the weighted-average number of shares of common stock outstanding for the three-month periods ended March 31, 2003 and 2002. Potentially dilutive securities, consisting of stock options and warrants, have been excluded from the diluted earnings per share calculations since their effect is antidilutive.

Stock-Based Compensation

The Company has elected to follow Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees (“APB No. 25”), in accounting for its stock based employee compensation plans using the intrinsic value method, rather than the alternative fair value accounting method provided for under SFAS No. 123, Accounting for Stock Based Compensation (“SFAS No. 123”), as SFAS No. 123 requires the use of option valuation models that were not developed for use in valuing employee stock options. Under APB No. 25, when the exercise price of options granted to employees under these plans equals the market price of the underlying stock on the date of grant, no compensation expense is required.

The reconciliation of net loss and net loss per share, as reported, to pro forma net loss and net loss per share giving effect to employee stock-based compensation accounted for using the fair value accounting method, is as follows:

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The weighted-average per share fair value of options granted during the three months ended March 31, 2003 and 2002 was $0.65 and $3.00, respectively.

The fair value of stock options and common shares issued pursuant to the stock option and stock purchase plans at the date of grant were estimated using the Black-Scholes model with the following weighted-average assumptions:

On March 5, 2003, Whatman sold the non-cash assets it had previously purchased from Hemasure to Pall Corporation. In connection with that sale, the ongoing patent litigation among Pall Corporation, Whatman and the Company was settled, and the litigation was dismissed, with prejudice, in the United States District Court in the Eastern District of New York and in the District of Colorado. From March 15, 2002, the effective date of the merger of the Company and Point Massachusetts, through March 5, 2003, the effective date of the sale of the Whatman assets to Pall Corporation, $96,150 of net royalties was accrued and is payable to the Company. As of March 31, 2003, the Company has recognized $96,150 of license revenue and the related accounts receivable.

In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.” The primary objective of the Interpretation is to provide guidance on the identification of, and financial reporting for, entities over which control is achieved through means other than voting rights. Such entities are known as variable-interest entities (VIEs). Although the FASB’s initial focus was on special-purpose entities (SPEs), the final guidance applies to a wide range of entities. FIN 46 applies to new entities that are created after the effective date, as well as applies to existing entities. The FIN is effective to preexisting entities as of the beginning of the first interim period beginning after June 15, 2003, and to any new entities beginning February 1, 2003. Once it goes into effect, FIN 46 will be the guidance that determines (1) whether consolidation is required under the “controlling financial interest” model of Accounting Research Bulletin No. 51 (ARB 51), Consolidated Financial Statements, or other existing authoritative guidance, or, alternatively, (2) whether the variable-interest model under FIN 46 should be used to account for existing and new entities. The Company does not expect FIN 46 to have a material impact on the consolidated financial statements.

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Cautionary Factors with Respect to Forward-Looking Statements

Readers are cautioned that certain statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations that are not related to historical results are “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995. This information includes statements on the prospects for our drug development activities and results of operations based on our current expectations, such as statements regarding certain milestones with respect to our clinical program and our product candidates. Forward-looking statements are statements that are not historical facts, and can be identified by, among other things, the use of forward-looking language, such as “believe,” “expect,” “may,” “will,” “should,” “seeks,” “plans,” “schedule to,” “anticipates” or “intends” or the negative of those terms, or other variations of those terms of comparable language, or by discussions of strategy or intentions. A number of important factors could cause actual results to differ materially from those projected or suggested in the forward looking statement, including, but not limited to, the ability of the Company to (i) successfully develop products, (ii) obtain the necessary governmental approvals, (iii) effectively commercialize any products developed before its competitors and (iv) obtain and enforce intellectual property rights, as well as the risk factors described in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002 as filed with the Securities and Exchange Commission on April 30, 2003 and from time to time in the Company’s other reports filed with the Securities and Exchange Commission.

Overview

Point is a development stage enterprise in the business of developing small molecule drugs for the treatment of certain hematopoietic disorders and a variety of cancerous tumors. PT-100, the Company’s lead product candidate, has the potential to treat a number of different hematopoietic disorders as well as certain cancerous tumors. PT-100 is currently being evaluated in a Phase I/II clinical study where cancer patients undergoing chemotherapy are treated with PT-100 as an adjunct therapy for the treatment of neutropenia. The Company is also developing PT-100 as a potential therapy to inhibit the growth of a variety of cancerous tumors. Point has completed the preclinical research on the anti-tumor effects of PT-100 in combination with Rituxan^® and the Company filed an amendment in February 2003 to its IND with the FDA in order to initiate a clinical program to test the safety and efficacy of PT-100 in combination with Rituxan^®. Point expects to initiate a human clinical study in 2003 to assess the safety and efficacy of this combination therapy, initially in patients with non-Hodgkin’s lymphoma.

Besides the hematopoeitic and anti-tumor applications described above, the Company is also exploring a number of different applications for PT-100 and its clinical analogues on a pre-clinical basis. In addition, the Company from time to time evaluates new technology opportunities to broaden its portfolio of potential products, including in-licensing opportunities, collaboration arrangements as well as more expansive corporate relationships, such as mergers and acquisitions.

To date, the Company has generated no revenues from product sales and has depended upon equity financings, interest earned on invested funds, and collaboration payments received from pharmaceutical companies to provide the working capital required to pursue its intended business activities. The Company has a net accumulated deficit of $18,671,000 through March 31, 2003. The accumulated deficit has resulted principally from the Company’s efforts to develop drug candidates and the associated administrative costs required to support these efforts. The Company expects to incur significant additional operating losses over the next several years due to its ongoing developmental and clinical efforts. The Company’s potential for future profitability is dependent on its ability to effectively develop its current pharmaceutical product candidate, PT-100, and to license and develop new pharmaceutical compounds.

The Company was originally incorporated in December 1993 as a Delaware corporation under the name Hemacor Inc. The Company changed its name to HemaSure Inc. in February of 1994. From 1994 to May 2001, the Company developed and supplied innovative blood filtration technologies. On May 28, 2001, the Company sold substantially all of its non-cash assets to Whatman. The Company changed its name from Hemasure, Inc. to HMSR Inc. upon the sale to Whatman. From May 2001 until the merger on March 15, 2002 (described below) with Point Massachusetts, the Company’s operations consisted primarily of investigating various strategic business combinations.

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On November 15, 2001, HMSR and PT Acquisition Corp., a wholly-owned subsidiary of HMSR formed for the purpose of consummating a merger transaction, entered into the Agreement and Plan of Merger (the “Merger Agreement”) with Point Therapeutics, Inc., a privately-held Massachusetts corporation (“Point Massachusetts”). At that time, HMSR paid Point Massachusetts a $500,000 lock-up fee. The lock-up fee was included when determining the final stock conversion ratio between Point Massachusetts and HMSR, as described below.

On March 15, 2002, the Company’s stockholders approved a 1-for-10 reverse split of the Company’s common stock and a name change of the Company from HMSR Inc. to Point Therapeutics, Inc. The stockholders of Point Massachusetts also approved on March 15, 2002 the Merger Agreement previously entered into by both parties. In accordance with the terms of the Merger Agreement, immediately prior to the effective time of the merger, and after taking into account the 1-for-10 reverse split with respect to the Company’s common stock prior to the merger, each share of Point Massachusetts common stock outstanding immediately prior to the effective time of the merger (including all shares of Point Massachusetts preferred stock converted prior to the effective time) was converted into the right to receive 4.16168 shares of the Company’s common stock. This ratio also took into account the $500,000 HMSR Inc. lock-up fee paid on November 15, 2001. In addition, all outstanding options and warrants of Point Massachusetts were converted at the same conversion rate of 4.16168.

As a result of the merger, the Company acquired all of the outstanding shares of Point Massachusetts capital stock. For accounting purposes, the acquisition has been treated as the acquisition of HMSR Inc. by Point Massachusetts with Point Massachusetts as the acquiror. The historical financial statements of the Company presented prior to March 15, 2002 are those of Point Massachusetts. Point Massachusetts’ capital structure has been restated to reflect all stock issuances as if the merger had taken place prior to all periods presented. In addition, if the merger with HMSR Inc. had occurred at the beginning of the periods presented, the effect of the inclusion of HMSR Inc. operating results on the financial statements presented would not be material.

Critical Accounting Policies and Significant Judgments and Estimates

Critical accounting policies

In December of 2001, the Securities and Exchange Commission (“SEC”) requested that all registrants list their most “critical accounting policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of our financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our significant accounting policies are fully described in Note 3 to our consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q.

Revenue recognition

Revenue is deemed earned when all of the following have occurred: all obligations of the Company relating to the revenue have been met and the earning process is complete; the monies received or receivable are not refundable, irrespective of research results; and there are neither future obligations nor future milestones to be met by the Company with respect to such revenue incurred.

Revenues from corporate collaborations are earned based upon research expenses incurred and milestones achieved. Non-refundable payments upon initiation of contracts are deferred and amortized over the period which the company is obligated to participate on a continuing and substantial basis in the research and development activities outlined in each contract. Amounts received in advance of reimbursable expenses are recorded as deferred revenue until the related expenses are incurred. Milestone payments are recognized as revenue in the period in which the parties agree that the milestone has been achieved.

For the three-months ended March 31, 2003, the Company recognized $96,000 of license revenue related to royalties payable to Point as successor to HMSR following the merger. The Company generated no revenues during the quarter ended March 31, 2002. Royalty revenue is recognized upon the sale of the related products, provided the royalty amounts are fixed or determinable and collection of the related receivable is reasonably assured.

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Clinical trial accrual

The Company accrues the estimated cost of patient recruitment and related supporting functions for its clinical trial as patients are enrolled in the trial. These costs consist primarily of payments made to the clinical centers, investigators and patients for participating in the Company’s clinical trial. As actual or expected costs become known, they may differ from estimated costs previously accrued for and this clinical trial accrual would be adjusted accordingly.

Significant judgments and estimates

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires that we make estimates and assumptions that affect the reported amounts and disclosure of certain assets and liabilities at our balance sheet date. Such estimates include the carrying value of property and equipment and the value of certain liabilities. Actual results may differ from such estimates.

Results of Operations

Three-months Ended March 31, 2003 and March 31, 2002

Revenues

The Company recorded license revenue in the first quarter ended March 31, 2003 totaling $96,000, representing royalties payable to Point as successor to HMSR following the merger. The Company generated no revenues during the quarter ended March 31, 2002.

Operating expenses

Research and development expenses increased 60.9% to $1,487,000 for the three-month period ended March 31, 2002 from $924,000 for the three-month period ended March 31, 2002. The increase was primarily due to costs associated with the hiring of additional employees in the clinical and regulatory area to support the Company’s PT-100 clinical program and preclinical research and development efforts in the Company’s hematopoietic and anti-tumor programs.

Since inception, the Company has incurred $18,850,000 in expenses on research and development activities. Almost all of the Company’s research and development efforts have been focused on the pre-clinical and clinical development of PT-100 for hematopoietic disorders and for the treatment of cancer. The Company has no other material research and development programs and thus the $18,850,000 disclosed for research and development in the Company’s financial statements has primarily been directed towards developing PT-100. PT-100 is currently in early-stage clinical trials for its first indication, to treat neutropenia, and in late stage preclinical development to study PT-100’s ability to inhibit the growth of certain cancerous tumors. The Company cannot predict whether the results of further testing will be successful or will result in FDA approvals. Thus, due to the uncertainties inherent in clinical testing and the regulatory process, the Company is not able to estimate at this time when PT-100 may be commercially available for any application, if at all, nor the costs associated with completing the clinical trial process.

General and administrative expenses decreased 28.6% to $496,000 for the three-month period ended March 31, 2003 from $695,000 for the three-month period ended March 31, 2002. The decrease was primarily due to costs incurred during the first quarter of 2002 associated with the merger between Point Massachusetts and HMSR.

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Interest income, net

Interest income, net for the three-month period ended March 31, 2003 was $25,000 compared to $30,000 for the same period in 2002, a decrease of $5,000 or 20.0%. The decrease in interest income for the three-month period resulted from lower interest rates earned on the invested cash balance in 2003 as compared to the same period in 2002, offset in part by a higher invested cash balance compared to the same period in 2002.

Net loss

As a result of the foregoing, the Company incurred a net loss of $1,862,000, or $0.20 per share, for the three-month period ended March 31, 2003 compared to a net loss of $1,588,000, or $0.21 per share, for the three-month period ended March 31, 2002.

Liquidity and Capital Resources

The Company has financed its operations since inception principally through private placements of equity securities and collaboration payments received from pharmaceutical companies. Since the Company’s inception in September 1996, the Company has raised approximately $12,400,000, net of costs of raising capital, in private equity financings and $7,500,000 from licensing and sponsored research collaborations with pharmaceutical companies. In addition, the Company received $14,335,000 as a result of the merger between Point Massachusetts and HMSR, including a $500,000 lock-up fee received upon the signing of the Merger Agreement. The Company has also received $932,000 from interest earned in invested cash balances.

At March 31, 2003, the Company’s cash and cash equivalents decreased $1,913,000 as compared to December 31, 2002. The decrease was primarily due to $1,903,000 used in operations for the three-month period ended March 31, 2003, primarily to fund the clinical program for PT-100 and other research and development initiatives. The Company also increased its investment in office and laboratory equipment by $10,000 from December 31, 2002 to $423,000 at March 31, 2003. The increase resulted from purchases of computers and furniture. The Company currently plans to spend approximately $50,000 during the remainder of 2003 on office and laboratory equipment.

At March 31, 2003, the Company had $10,092,000 in cash and cash equivalents. The Company currently anticipates that its existing capital resources and interest to be received should enable it to maintain current and planned operations into the first quarter of 2004. Over the next year, the Company will be considering all strategic options in order to ensure the continued funding of its operations after 2003 including, but not limited to, raising additional funds through corporate partnerships, the sale of securities in both public and private offerings as the markets allow and merger and acquisition activities and consolidations.

The Company has no off-balance sheet arrangements as of March 31, 2003.

The Company’s expectations regarding its rate of spending and the sufficiency of its cash resources over future periods are forward-looking statements. The Company’s funding requirements are expected to increase over the next several years as the Company continues with the clinical development of PT-100 and initiates human clinical trials for additional clinical indications for PT-100 and additional product candidates. The rate of spending and sufficiency of such resources will be affected by numerous factors including the success of the Company’s clinical trials and the rate of acquisition of new products and technologies. Success in early-stage clinical trials or acquisition of new products and technologies would lead to an increase in working capital requirements. The Company’s actual cash requirements may vary materially from those now planned because of the results of research and development, clinical trials, product testing, relationships with strategic partners, acquisition of new products and technologies, changes in the focus and direction of the Company’s research and development programs, competitive and technological advances, the process of obtaining United States Food and Drug Administration or other regulatory approvals and other factors.

New Accounting Pronouncements

In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.” The primary objective of the Interpretation is to provide guidance on the identification of, and financial reporting for, entities over which control is achieved through means other than voting rights. Such entities are known as variable-interest entities (VIEs). Although the FASB’s initial focus was on special-purpose entities (SPEs), the final guidance applies to a wide range of entities. FIN 46 applies to new entities that are created after the effective date, as well as applies to existing entities. The FIN is effective to preexisting entities as of the beginning of the first interim period beginning after June 15, 2003, and to any new entities beginning February 1, 2003. Once it goes into effect, FIN 46 will be the guidance that determines (1) whether consolidation is required under the “controlling financial interest” model of Accounting Research Bulletin No. 51 (ARB 51), Consolidated Financial Statements, or other existing authoritative guidance, or, alternatively, (2) whether the variable-interest model under FIN 46 should be used to account for existing and new entities. The Company does not expect FIN 46 to have a material impact on the consolidated financial statements.

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Item 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s proceeds from private placements and the merger have been invested in money market funds that invest primarily in short-term, highly-rated investments, including U.S. Government securities, commercial paper and certificates of deposit guaranteed by banks. The Company’s current policies do not use interest rate derivative instruments to manage exposure to interest rate changes. Because of the short-term maturities of the Company’s investments, it does not believe that a decrease in market rates would have a significant negative impact on the value of its investment portfolio. Declines in interest rates will, however, reduce the Company’s interest income while increases in interest rates will increase the Company’s interest income.

Item 4. CONTROLS AND PROCEDURES

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PART II— OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

The Company filed the following Report on Form 8-K during the first quarter of 2003 and through May 15, 2003:

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

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CERTIFICATIONS

I, Donald R. Kiepert, Jr., certify that:

Date: May 15, 2003

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I, Richard N. Small, certify that:

Date: May 15, 2003

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