Back to GetFilings.com
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
---- Quarterly report pursuant to Section 13 or 15(d) of the Securities
| X | Exchange Act of 1934 for the quarterly period ended March 31, 2003.
----
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 No. 0-19222
GENELABS TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
California 94-3010150
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
505 Penobscot Drive, Redwood City, California 94063
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (650) 369-9500
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 an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [x] No [ ]
There were 61,493,104 shares of the Registrant's Common Stock issued and
outstanding on May 2, 2003.
================================================================================
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains or incorporates by
reference certain forward-looking statements within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended, referred to as the
Exchange Act, including those identified by the words "may," "will,"
"anticipates," "intends," "believes," "expects," "plans," "potential" and
similar expressions. These forward-looking statements include, among others,
statements regarding:
o estimates relating to our cash resources and our ability to obtain
additional funding for our business plans;
o our ability to complete the divestment of our diagnostics business or
to successfully renegotiate the terms of a collaboration on a timely
basis, if at all;
o estimates relating to the timing and completion of our pending
clinical trials;
o the results of our confirmatory clinical trial of Prestara(TM);
o potential FDA actions with respect to our NDA for Prestara, including
whether or not the Prestara NDA ultimately will receive marketing
approval;
o if the NDA for Prestara is ultimately approved, our plans and ability
to successfully commercialize Prestara for systemic lupus
erythematosus;
o our ability to secure a European partner for Prestara;
o our ability to obtain approval of Prestara in Europe;
o our ability to secure and defend intellectual property rights
important to our business; and
o the potential success of our research efforts, including our ability
to identify compounds for preclinical development.
All statements in this Quarterly Report on Form 10-Q that are not
historical are forward-looking statements and are subject to risks and
uncertainties, including those set forth in the Business Risks section at the
end of Item 2, and actual results could differ materially from those expressed
or implied in these statements. All forward-looking statements included in
this Quarterly Report on Form 10-Q are made as of the date hereof. We assume
no obligation to update any such forward-looking statement for subsequent
events or any reason why actual results might differ, except as required by
the Exchange Act.
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
GENELABS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31,
2003 2002
------------------ -------------------
(Unaudited)
ASSETS
Current assets:
Cash, cash equivalents and short-term investments:
Cash and cash equivalents $ 1,664 $ 3,035
Short-term investments - 3,535
------------------ -------------------
Total cash, cash equivalents and short-term investments 1,664 6,570
Net assets of diagnostics subsidiary held for sale 417 417
Other current assets 452 512
------------------ -------------------
Total current assets 2,533 7,499
Property and equipment, net 1,220 1,306
Long-term investments 960 960
------------------ -------------------
$ 4,713 $ 9,765
================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities $ 1,468 $ 1,853
Accrued compensation and related expenses 1,072 912
Unearned contract revenue 2,050 2,050
------------------ -------------------
Total current liabilities 4,590 4,815
Accrued compensation 71 186
Unearned contract revenue 1,538 2,050
------------------ -------------------
Total liabilities 6,199 7,051
------------------ -------------------
Shareholders' equity/(deficit):
Common stock 187,264 187,264
Accumulated deficit (188,750) (184,550)
------------------ -------------------
Total shareholders' equity/(deficit) (1,486) 2,714
------------------ -------------------
$ 4,713 $ 9,765
================== ===================
See notes to condensed consolidated financial statements.
GENELABS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
For the three months ended
March 31,
---------------------------------------------
2003 2002
------------------- -------------------
Contract revenue $ 727 $ 1,031
------------------- -------------------
Operating expenses:
Research and development 3,557 3,380
General and administrative 1,391 1,366
------------------- -------------------
Total operating expenses 4,948 4,746
------------------- -------------------
Operating loss (4,221) (3,715)
Interest income, net 21 72
------------------- -------------------
Loss from continuing operations (4,200) (3,643)
Income from discontinued operations of diagnostics subsidiary - 76
------------------- -------------------
Net loss $ (4,200) $ (3,567)
=================== ===================
Loss per share from continuing operations $ (0.08) $ (0.07)
=================== ===================
Net loss per share $ (0.08) $ (0.07)
=================== ===================
Weighted average shares outstanding 53,393 49,848
=================== ===================
See notes to condensed consolidated financial statements.
GENELABS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(increase/(decrease) in cash and cash equivalents)
(in thousands)
(Unaudited)
For the three months ended
March 31,
----------------------------------------
2003 2002
--------------- -----------------
Cash flows from operating activities:
Net loss $ (4,200) $ (3,567)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization expense 135 185
Income from discontinued operations of diagnostics
subsidiary - (76)
Changes in assets and liabilities:
Other current assets 60 95
Accounts payable, accrued liabilities, accrued
compensation and long-term obligations (340) (527)
Unearned contract revenue (512) (750)
--------------- -----------------
Net cash used in operating activities (4,857) (4,640)
--------------- -----------------
Cash flows from investing activities:
Proceeds from sales and maturities of short-term investments 3,535 488
Purchases of short-term investments - (152)
Capital expenditures (49) (136)
--------------- -----------------
Net cash provided by investing activities 3,486 200
--------------- -----------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net - 9
--------------- -----------------
Net decrease in cash and cash equivalents (1,371) (4,431)
Cash and cash equivalents, beginning of the period 3,035 8,626
--------------- -----------------
Cash and cash equivalents, end of the period $ 1,664 $ 4,195
=============== =================
See notes to condensed consolidated financial statements.
GENELABS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share data)
(Unaudited)
March 31, 2003
1. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements include the accounts of Genelabs Technologies, Inc. and its wholly
owned subsidiaries, Accelerated Clinical Research Organization, Inc., Genelabs
Diagnostic, Inc. and Genelabs Europe B.V. Genelabs Technologies, Inc. and its
subsidiaries are collectively referred to as Genelabs or the Company. All
intercompany accounts and transactions have been eliminated. The Company
operates in one business segment, the discovery and development of
pharmaceutical products. Genelabs accounts for its diagnostics operation,
Genelabs Diagnostics Pte. Ltd. (GLD), as a discontinued operation.
The Company's consolidated financial statements have been prepared on
a going concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of business for
the foreseeable future.
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. It is possible that actual amounts will differ from those
estimates.
Genelabs is a biopharmaceutical company focused on discovery and
development of novel pharmaceutical products to improve human health. We have
built drug discovery and clinical development capabilities that can support
various research and development projects. We are currently concentrating our
capabilities on three core programs: developing a late-stage product for
lupus, discovering novel antimicrobial lead compounds, and discovering novel
lead compounds that selectively inhibit replication of the hepatitis C virus.
These financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP 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 months ended March 31, 2003 are not necessarily
indicative of the results that may be expected for the year ending December
31, 2003.
These unaudited condensed consolidated financial statements are meant
to be read in conjunction with the audited consolidated financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2002.
2. Comprehensive Loss
During the three months ended March 31, 2003 and 2002, the Company's
comprehensive loss amounted to $4,200 and $3,567, respectively.
3. Stock-Based Compensation
The Company grants employee stock options at an exercise price equal
to the fair market value of the shares at the date of grant. The Company
accounts for employee stock-based compensation using the intrinsic value
method and, accordingly, recognizes no compensation expense for stock options
granted to employees. The following table presents information showing the
effects to the reported net loss and net loss per share if Genelabs had
accounted for employee stock-based compensation using the fair-value method:
2003 2002
---------------- ----------------
Net loss as reported $ (4,200) $ (3,567)
Stock-based employee compensation cost:
Included in net loss as reported - -
Amount that would have been included in
net loss if we had accounted for all stock-
based employee compensation at its
theoretical (Black-Scholes) fair value (461) (665)
---------------- ----------------
Pro forma net loss as if the fair value method
had been applied to all awards $ (4,661) $ (4,232)
================ ================
Net loss per share as reported $ (0.08) $ (0.07)
Stock-based employee compensation cost:
Included in net loss per share as reported - -
Amount that would have been included in
net loss per share if we had accounted for
all stock-based employee compensation at
its theoretical (Black-Scholes) fair value (0.01) (0.01)
---------------- ----------------
Pro forma net loss per share as if the fair
value method had been applied to all
awards $ (0.09) $ (0.08)
================ ================
4. Restructuring Charges
In February 2003, Genelabs reduced its workforce by approximately 20%, or 20
employees. The workforce reductions occurred in the drug discovery research
and general and administrative areas. Genelabs did not make any reductions to
its drug development staff working on its investigational drug Prestara(tm)
for systemic lupus erythematosus. Termination and other costs associated with
the reduction in workforce totaled $0.3 million, of which $0.1 million was
accrued and unpaid at March 31, 2003.
5. Subsequent Events
On May 2, 2003, Genelabs completed the sale of 8.1 million shares of
its common stock at a price of $1.00 per share for gross proceeds of $8.1
million. In connection with the sale, Genelabs also issued warrants to
purchase an additional 2.43 million shares of Genelabs common stock at an
exercise price of $1.50 per share. Net proceeds from the placement are
estimated to be approximately $7.3 million.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Genelabs Technologies, Inc., referred to as Genelabs or the Company,
is a biopharmaceutical company pioneering the discovery and development of
novel pharmaceutical products to improve human health. Genelabs is pursuing
regulatory approval of Prestara(TM), its investigational drug for women with
systemic lupus erythematosus, a disease for which no new drug has been
approved in the past 40 years and for which current therapies are not
adequate. We are also pursuing the discovery of novel antimicrobial and
antiviral compounds for treatment of infections that are not well treated with
currently available drugs. We believe that these high-risk, potentially high
reward programs focus our research and development expertise in areas where we
have the opportunity to be scientific pioneers and, if successful, we believe
that these programs will yield products that will address diseases for which
current therapies are inadequate. At the same time, our established
capabilities can be utilized as we diversify our research and development
programs.
We have built drug discovery and clinical development capabilities
that can support various research and development projects. We are
concentrating our capabilities on three core programs:
o developing our late-stage product for lupus, Prestara(TM);
o discovering follow-on compounds to our preclinical antifungal drug
candidate; and
o discovering novel lead compounds that selectively inhibit replication
of the hepatitis C virus, or HCV.
At May 15, 2003, Genelabs had cash, cash equivalents and short-term
investment balances totaling approximately $6.5 million. Genelabs estimates
that its current cash resources, including the resources from the private
placement, are adequate to provide liquidity only through September 2003.
Accordingly, Genelabs' auditors have included a going concern qualification in
their opinion in the Genelabs Annual Report on Form 10-K for 2002, because
there is substantial doubt about the Company's ability to continue as a going
concern due to its historical negative cash flow and because the Company does
not currently have sufficient committed capital to meet its projected
operating needs for at least the next twelve months. In the event that
Genelabs is unable to raise additional funds, Genelabs may be required to
commence bankruptcy or similar proceedings, which could result in no value to
the holders of the Genelabs common stock. Alternatively, Genelabs may be
required to license or sell is rights in Prestara(TM) in a manner that could
be adverse to Genelabs and its stockholders.
Results of Operations - First Quarter 2003 compared to First Quarter 2002
- -------------------------------------------------------------------------
Genelabs' net loss was $4.2 million for the three months ended March
31, 2003 compared to a net loss of $3.6 million for the same period in 2002.
The Company recorded contract revenues of $0.7 million in the first
quarter of 2003, $0.5 million of which represents the recognition into income
of a previously received up-front license payment from Watson Pharmaceuticals,
Inc. This up-front license payment from Watson is being deferred and
recognized as revenue over the term Genelabs' management estimates that it has
significant obligations to Watson, which extends to the submission of a
complete response to the approvable letter from the U.S. Food and Drug
Administration, or FDA, and the FDA reaching a final decision regarding
approval of the New Drug Application, or NDA. The date upon which we may
receive a final FDA decision on approval will vary based on, among other
things, the time period necessary for the enrollment of a sufficient number of
patients in the clinical trial, the results of the trial, and the length of
time the FDA will take to review the data submitted after the conclusion of
the trial. Based on management's estimates, Genelabs currently believes it
could take until December 2004 for an FDA decision on the NDA. Therefore, the
up-front payment from Watson is being amortized into revenue on a straight
line-basis through December 2004.
The contract revenues of $0.7 million in the first quarter 2003
compares to $1.0 million for the first quarter of 2002. The decrease in
contract revenue in the first quarter of 2003 compared to the first quarter of
2002 was primarily due to our lengthening the amortization period for the
up-front payment received from Watson from a period ending March 2004 to a
period ending December 2004 upon the FDA's clarification of issues in the
approvable letter we received in August 2002. The lengthening of the
amortization period began in the third quarter 2002, and reduced contract
revenue by $0.2 million in the first quarter of 2003 compared to the first
quarter of 2002.
Operating expenses were $4.9 million in the first quarter of 2003
compared to $4.7 million in the first quarter of 2002. Research and
development expenses represented 72% of operating expenses in the 2003 period
compared to 71% of operating expenses for the same period in 2002. Research
and development expenses were $3.6 million for the three months ended March
31, 2003 compared to $3.4 million for the three months ended March 31, 2002.
Costs increased for the development of Prestara as an investigational drug for
lupus because Genelabs initiated and began enrolling patients in a
confirmatory Phase III clinical trial. General and administrative expenses
were $1.4 million in both the first quarter of 2003 and the first quarter of
2002.
During the first quarter of 2003 Genelabs reduced its workforce by
approximately 20%, or 20 employees. The workforce reductions occurred in the
drug discovery research and general and administrative areas. Termination and
other costs associated with the reduction in workforce and recorded in the
first quarter of 2003 totaled $0.3 million.
Liquidity and Capital Resources
- -------------------------------
On May 15, 2003, after giving effect to a private placement completed on
May 2, 2003, Genelabs had cash, cash equivalents and short-term investment
balances totaling approximately $6.5 million. At March 31, 2003, the Company
had cash, cash equivalents and short-term investment balances totaling $1.7
million compared to $6.6 million at December 31, 2002. The decrease in cash,
cash equivalents and short-term investments during the first quarter was
primarily attributable to $4.9 million cash used in operations. The cash used
in operations funded our development of Prestara for lupus, the continued work
on our hepatitis C virus drug discovery program, and work towards the
discovery of follow-on compounds to our antifungal preclinical drug candidate.
On April 15, 2003, Genelabs had $1.0 million in cash and short-term
investments. Due to the low level of cash, in order to conserve short-term
cash resources, from April 21, 2003 through May 2, 2003, Genelabs furloughed a
majority of its employees. This furlough program ended when Genelabs closed
the private placement noted above on May 2, 2003, selling 8.1 million shares
of its common stock and warrants to purchase an additional 2.43 million shares
of common stock for gross proceeds of $8.1 million. Net proceeds from the
placement are estimated to be approximately $7.3 million, which management
expects to fund its operations to the end of September 2003.
The ability of the Company to continue as a going concern is dependent
upon its ability to achieve profitable operations and to obtain additional
capital. The Company is aggressively seeking funding in order to satisfy its
projected cash needs. The Company is pursuing the close of the sale of its
diagnostics operation and also renegotiating the terms of a key collaboration,
which, if completed, the company expects would provide additional cash
resources to the Company. The Company may be unable to complete either of
these transactions as currently contemplated or at all. Genelabs is also
evaluating the sale of non-core assets and exploring potential partnerships as
additional ways to fund operations. However, the Company will continue to rely
on outside sources of financing to meet its capital needs. The outcome of
these matters cannot be predicted at this time. Further, there can be no
assurance, assuming the Company successfully raises additional funds, that the
Company will achieve positive cash flow. If the Company is not able to secure
additional funding, Genelabs will be required to scale back its research and
development programs, preclinical studies and clinical trials, and general,
and administrative activities and may not be able to continue in business.
These condensed consolidated financial statements do not include any
adjustments to the specific amounts and classifications of assets and
liabilities, which might be necessary should the Company be unable to continue
in business. The following are illustrations of potential impediments to our
ability to successfully secure additional funds:
o our stock price and market capitalization are low, therefore there are
limited funds we can raise through equity financings;
o our ability to successfully complete an additional equity financing
will be more difficult over the next six months due to potential
integration issues with the May 2, 2003 sale of common stock and
warrants, and will be further impacted should we become unable to meet
Nasdaq's listing requirements;
o our ability to find a European marketing partner for Prestara would be
negatively impacted if we receive indications that the European Agency
for the Evaluation of Medicinal Products, or EMEA, review of our
Marketing Authorization Application, or MAA, is unlikely to result in
approval of our application; and
o our research programs are in an early stage, therefore there are fewer
opportunities to enter into collaborations with other companies and
up-front payments for early-stage pharmaceutical research
collaborations are generally smaller for projects that are further
from potential marketability.
Longer-term, if we succeed in securing sufficient capital to allow us
to complete the clinical trial for Prestara, Genelabs' liquidity and capital
resources will potentially be materially impacted by FDA actions with respect
to our NDA for Prestara. If Prestara is approved for marketing in the U.S.,
Genelabs may receive a one-time milestone payment of up to $45 million from
Watson. Receipt of a milestone payment from Watson would materially improve
Genelabs' liquidity and capital resources. However, Genelabs believes that the
most important impact of the Watson collaboration for Genelabs' long-term
liquidity and capital resources is the significant royalties Genelabs is
entitled to receive on net sales of Prestara. During the first three quarters
after product launch, a separate royalty schedule applies to support the
product launch.
Since Genelabs' inception, the Company has operated at a loss and has
funded operations primarily through public and private offerings of equity
securities and, to a lesser extent, contract revenues. We expect to incur
substantial additional costs, including research costs for drug discovery and
development costs for Prestara. The amount of additional costs in our business
plans will depend on numerous factors including any FDA actions, progress of
our research and development programs and the status of corporate partnership
agreements.
Additional funds for our research and development activities may not
be available on acceptable terms, if at all. The unavailability of additional
funds could delay or prevent the development, approval or marketing of some or
all of our products and technologies, which would have a material adverse
effect on our business, financial condition and results of operations.
Business Risks
- --------------
The following section summarizes business risks which management
believes are particularly relevant at this time. It is not possible to
comprehensively address all risks that exist, but the following risks should
be considered, in addition to other information that is included in our Annual
Report on Form 10-K, which shareholders and prospective investors are
encouraged to review.
RISKS RELATED TO GENELABS
IF WE CANNOT OBTAIN ADDITIONAL FUNDS, WE WILL NOT BE ABLE TO CARRY OUT OUR
BUSINESS PLANS.
At May 15, 2003, Genelabs had cash, cash equivalents and short-term
investment balances totaling approximately $6.5 million. Genelabs estimates
that its current cash resources, including the resources from the private
placement, are adequate to provide liquidity only through September 2003.
Accordingly, Genelabs' auditors have included a going concern qualification in
their opinion in the Genelabs Annual Report on Form 10-K for 2002, because
there is substantial doubt about the Company's ability to continue as a going
concern due to its historical negative cash flow and because the Company does
not currently have sufficient committed capital to meet its projected
operating needs for at least the next twelve months. In the event that
Genelabs is unable to raise additional funds, Genelabs may be required to
commence bankruptcy or similar proceedings, which could result in no value to
the holders of the Genelabs common stock. Alternatively, Genelabs may be
required to license or sell is rights in Prestara(TM) in a manner that could
be adverse to Genelabs and its stockholders.
Though we plan to seek additional funds, which may include the sale
of equity, sale of long-term investments, establishment of corporate
partnerships, funding under government grants, licensing of our clinical data
or intellectual property, royalty-sharing and/or other arrangements, it is
possible that none of these efforts to seek additional funds will be
successful. The sale of additional equity would dilute existing shareholders.
If we do not sell equity, we may have to seek other sources of capital, such
as strategic alliances, which may require us to grant third parties rights to
our intellectual property assets, or by adversely renegotiating the terms of
our existing collaboration. We may also need to change our operating plans.
Longer-term, we plan to fund our operations principally from royalties on
sales of Prestara by marketing partners. However, Prestara may never receive
FDA approval, and, if it does, we may never generate revenue from sales of
Prestara. Although we are currently seeking to enter into licensing agreements
for the marketing rights to Prestara in Europe and Japan, we may fail to enter
into such license agreements on acceptable terms, if at all. We also may be
unable to find buyers willing to purchase our equity or to license our
products or technology on commercially favorable terms, if at all. The
unavailability of additional funds would harm our business by delaying or
preventing the development, testing, regulatory approval, manufacturing or
marketing of our products and technologies.
The following are illustrations of potential impediments to our
ability to successfully secure additional funds:
o our stock price and market capitalization are low, therefore there are
limited funds we can raise through equity financings;
o our ability to successfully complete an additional equity financing
will be more difficult over the next six months due to potential
integration issues with the May 2, 2003 sale of common stock and
warrants, and will be further impacted should we become unable to meet
Nasdaq's listing requirements;
o our ability to find a European marketing partner for Prestara would be
negatively impacted if we receive indications that the EMEA's review
of our MAA is unlikely to result in approval of our application; and
o our research programs are in an early stage, therefore there are fewer
opportunities to enter into collaborations with other companies and
up-front payments for early-stage pharmaceutical research
collaborations are generally smaller for projects that are further
from potential marketability.
FDA actions with respect to our NDA for Prestara will have a material
impact on our ability to secure funding, the amount and terms of funding
available and our ability to successfully secure such funding. If Prestara is
ultimately approved for marketing in the U.S., Genelabs may receive a
milestone payment of up to $45 million and significant royalties on Watson's
net sales of Prestara. However, the FDA may never approve Prestara and even if
they do we may never receive a milestone payment or royalties on net sales.
Additional funds for our research and development activities may not
be available on acceptable terms, if at all. The unavailability of additional
funds could delay or prevent the development, approval or marketing of some or
all of our products and technologies, which would have a material adverse
effect on our business, financial condition and results of operations.
IF THE RESULTS OF OUR CONFIRMATORY CLINICAL TRIAL OF PRESTARA(TM), GENELABS'
DRUG CANDIDATE FOR SYSTEMIC LUPUS ERYTHEMATOSUS, ARE NOT POSITIVE, THE FDA
WILL NOT APPROVE PRESTARA AND OUR BUSINESS PROSPECTS WILL SUFFER BECAUSE THE
U.S. ROYALTIES FOR PRESTARA ARE THE MOST SIGNIFICANT NEAR-TERM SOURCE OF
POTENTIAL REVENUE.
Genelabs has focused its development efforts to date on conducting
clinical trials for an investigational new drug, Prestara, also referred to as
GL701, Aslera(TM) and Anastar(TM), for the treatment of women with systemic
lupus erythematosus, or lupus. Lupus is a severe, chronic and debilitating
autoimmune disease that can affect the musculoskeletal and nervous systems,
lungs, heart, kidneys, skin and joints. Prestara is a pharmaceutical
formulation containing highly purified prasterone, the synthetic equivalent of
dehydroepiandrosterone or DHEA, a naturally occurring hormone.
Before our North American partner Watson Pharmaceuticals, Inc. can
market Prestara in the United States, the FDA must approve the Prestara New
Drug Application, or NDA, submitted by Genelabs. In 2000, we submitted the NDA
for Prestara to the FDA and in 2002 received an approvable letter which, among
other things, requires us to conduct an additional clinical trial to confirm
the positive effect of Prestara we previously noted on the bone mineral
density of women with lupus who are receiving treatment with glucocorticoids.
Genelabs' business plans depend on FDA approval of Prestara in the United
States, and if the clinical trial currently underway does not confirm our
previous findings or if significant and new safety issues emerge, the FDA will
not approve our new drug application in a timely manner, if at all, and our
business would suffer because 1) we would not be entitled to a milestone
payment from Watson and 2) royalties we are entitled to receive from Prestara
sales in the United States are our most significant near-term source of
potential revenue. Our enrollment targets are subject to change from time to
time and may be adversely affected by our limited resources.
IF WE ARE UNABLE TO FIND A EUROPEAN MARKETING PARTNER FOR PRESTARA OUR
BUSINESS PROSPECTS WILL SUFFER BECAUSE WE DO NOT HAVE CAPABILITIES TO MARKET
PRESTARA IN EUROPE OURSELVES AND WE WOULD LOSE A SIGNIFICANT NEAR-TERM SOURCE
OF REVENUE.
Because we have limited sales, marketing and distribution
capabilities and no established presence in Europe, our business plans include
licensing the European marketing rights to Prestara to a larger pharmaceutical
or biotechnology company with established marketing capabilities. If we are
unable to find a European marketing partner, we would not be able to launch
Prestara in Europe in a timely manner, if at all, even if it is approved. Our
business would suffer because we would not be able to generate revenue from
Prestara in Europe.
IF THE FDA AND THE EMEA DO NOT APPROVE PRESTARA(TM) FOR MARKETING, OUR
BUSINESS PROSPECTS WILL SUFFER BECAUSE PRESTARA IS OUR ONLY NEAR-TERM SOURCE
OF POTENTIAL REVENUE.
Before our North American partner, Watson, and any potential European
partner can market Prestara in their respective territories, appropriate
regulatory agencies must review and approve applications seeking to market the
investigational drug which have been submitted by Genelabs. Our business plans
depend on approval of Prestara in both the United States and in Europe. If the
regulatory agencies do not approve one or both of our applications in a timely
manner, our business would suffer because we have no other near-term source of
potential revenue.
If the regulatory agencies determine that Prestara can only be
approved with significant additional requirements and we determine that it is
not feasible for us to satisfy one or more of the requirements requested, we
could be forced to abandon the development of Prestara. We cannot predict
whether the regulatory agencies will require the submission of additional data
in order to approve our applications, what these requirements may be, whether
we will be successful in responding to requests from these agencies for
additional requirements or whether there will be additional substantial
obstacles to, or delays in, our development of Prestara for lupus.
Similar regulatory requirements exist in Japan and elsewhere in the
world. Genelabs has not conducted any clinical trials for Prestara for lupus
in other countries. We plan to enter into collaborations or licensing
agreements for commercializing Prestara in other areas with pharmaceutical
companies that have resources greater than Genelabs. If we do not enter into
these agreements, we may not be able to sell, or might face delays related to
commercial introduction of, Prestara in these other territories, because we
lack the necessary resources.
IF PRESTARA IS APPROVED IN THE UNITED STATES OR EUROPE BUT DOES NOT GAIN
SUFFICIENT MARKET ACCEPTANCE, OUR BUSINESS WILL SUFFER BECAUSE WE WOULD NOT
RECEIVE ANTICIPATED ROYALTIES TO FUND FUTURE OPERATIONS.
A number of factors may affect the market acceptance of Prestara for
lupus, even if it is approved, including:
o availability and level of reimbursement by insurance companies or
government programs such as Medicaid;
o the price of Prestara relative to other drugs for lupus treatment;
o the perception by patients, physicians and other members of the health
care community of the effectiveness and safety of Prestara for the
treatment of lupus;
o the effectiveness of sales and marketing efforts by our licensees;
o side effects;
o competition from other prescription and over-the-counter products; and
o unfavorable publicity concerning Prestara or other drugs on the
market.
In addition, if regulatory authorities fail to restrict the sale of
dietary supplement DHEA products, which do not require a prescription, the
market may not accept Prestara. A number of dietary supplement manufacturers
market products containing DHEA as dietary supplements in the United States.
Prestara contains highly purified prasterone, the synthetic equivalent of
DHEA, as the active ingredient. The body produces DHEA, an androgenic hormone
or steroid hormone that develops and maintains masculine characteristics,
which is not a component of the diet. While we have consistently maintained
that a governmental entity should regulate DHEA as a drug and as a controlled
substance, neither the FDA nor the Drug Enforcement Agency, or DEA, has taken
any specific action to date to limit or regulate the sale of dietary
supplement DHEA. The FDA and DEA may not wish to, or may be unable to,
regulate DHEA in the future. We have submitted documentation to the FDA
requesting clarification of DHEA's status as a drug and removal from the
market as a dietary supplement. We have also submitted documentation to the
DEA requesting clarification of DHEA's status as an anabolic steroid, a
steroid that promotes the storage of protein and growth of tissue. Anabolic
steroids are scheduled as controlled substances. If the FDA restricts the
marketing of DHEA as a dietary supplement or the DEA agrees that DHEA is an
anabolic steroid, DHEA may no longer be publicly available as a dietary
supplement. In the event that Prestara receives FDA approval, the concurrent
sale of these dietary supplement products could significantly adversely affect
or significantly limit the market for or the selling price of Prestara.
OUR OUTSIDE SUPPLIERS AND MANUFACTURERS FOR PRESTARA ARE SUBJECT TO
REGULATION, INCLUDING BY THE FDA, AND IF THEY DO NOT MEET THEIR COMMITMENTS,
WE WOULD HAVE TO FIND SUBSTITUTE SUPPLIERS OR MANUFACTURERS WHICH COULD DELAY
SUPPLY OF PRODUCT TO THE MARKET.
Regulatory requirements applicable to pharmaceutical products tend to
make the substitution of suppliers and manufacturers costly and time
consuming. We rely on a single supplier of prasterone, the active ingredient
in Prestara, and we rely on a single finished product manufacturer for
production of Prestara capsules and for packaging. The disqualification of
these suppliers and manufacturers through their failure to comply with
regulatory requirements could negatively impact our business because of delays
and costs in obtaining and qualifying alternate suppliers. We have no internal
manufacturing capabilities for pharmaceutical products and are entirely
dependent on contract manufacturers and suppliers for the manufacture of
Prestara as a finished product and for its active ingredient.
The FDA requires the existence of at least one qualified manufacturer
before it will approve a drug for commercialization. If we fail to maintain a
relationship with at least one qualified supplier of prasterone and at least
one qualified manufacturer of the Prestara finished pharmaceutical product it
would negatively impact our business because the NDA could not be approved by
the FDA. If our NDA is approved and our supplier or manufacturer fails to meet
and maintain compliance with FDA requirements or if they fail to manufacture
Prestara active ingredient, capsules and packaging as required for our needs,
we may not be able to ship product in a timely manner, if at all. This failure
could negatively impact our relationships with customers and would harm sales
of Prestara. The following could harm our ability to manufacture and market
Prestara:
o the unavailability of adequate quantities of the active ingredient for
commercial sale;
o the loss of a supplier's or manufacturer's regulatory approval;
o the failure of a supplier or manufacturer to meet regulatory agency
pre-approval inspection requirements;
o the failure of a supplier or manufacturer to maintain compliance with
ongoing regulatory agency requirements;
o the inability to develop alternative sources in a timely manner or at
all;
o an interruption in supply of prasterone or finished product; and
o competing demands on the contract manufacturer's capacity, for
example, shifting manufacturing priorities to their own products or
more profitable products for other customers.
WE ARE DEPENDENT ON WATSON PHARMACEUTICALS TO MARKET PRESTARA IN NORTH AMERICA
AND IF PRESTARA IS APPROVED BY THE FDA AND THEY FAIL TO MEET EXPECTED LEVELS
OF SALES OUR BUSINESS WILL SUFFER.
We must rely on Watson to market Prestara in North America. Because
royalties from sales of Prestara would be our primary near-term source of
revenue, successful marketing, promotion and distribution of this product in
the United States are critical to our success. We have limited internal sales,
marketing and distribution capabilities and are entirely dependent on Watson
to promote Prestara. If Prestara is approved by the FDA and Watson fails to
promote Prestara, our business will suffer because we will not receive
anticipated revenue from product sales.
Our ability to market Prestara in Europe will depend upon our ability
to obtain a European partner. Similar to the United States, successful
marketing, promotion and distribution of this product in Europe are important
to our success. As we have limited capabilities and will rely on our potential
future European partner for marketing, promotion and distribution, if they
fail to promote Prestara our business will suffer because we will not receive
anticipated revenue from product sales.
IF WE ARE UNABLE TO OBTAIN PATENTS OR PROTECT OUR INTELLECTUAL PROPERTY
RIGHTS, WE WOULD LOSE COMPETITIVE ADVANTAGE.
Agency or court proceedings could invalidate our current patents, or
patents that issue on pending applications. Our business would suffer if we do
not successfully defend or enforce our patents, which would result in loss of
proprietary protection for our technologies and products. Patent litigation
may be necessary to enforce patents to determine the scope and validity of our
proprietary rights or the proprietary rights of another.
The active ingredient in Prestara is prasterone, more commonly known
as dehydroepiandrosterone, or DHEA. DHEA is a compound that has been in the
public domain for many years. It is not possible to obtain patent protection
for the chemical compound anywhere in the world. Genelabs licensed two United
States patents covering uses of DHEA in treating lupus from Stanford
University in 1993. The Stanford patents expire in 2015 and the license
expires when the patents expire. In addition, we have filed patent
applications covering additional uses for Prestara and various pharmaceutical
formulations and intend to file additional applications as appropriate. We
have filed patent applications covering compounds from our drug discovery
programs; however, no patents are currently issued. A number of patents have
issued covering Genelabs' drug discovery technologies and methods related to
selective regulation of gene expression and the control of viral infections. A
number of patent applications are pending.
If another company successfully brings legal action against us
claiming our activities violate, or infringe, their patents, a court may
require us to pay significant damages and prevent us from using or selling
products or technologies covered by those patents. Others could independently
develop the same or similar discoveries and may have priority over any patent
applications Genelabs has filed on these discoveries. Prosecuting patent
priority proceedings and defending litigation claims can be very expensive and
time-consuming for management. In addition, intellectual property that is
important for advancing our drug discovery efforts or for uses for the active
ingredient in Prestara owned by others might exist that we do not currently
know about now or in the future. We might not obtain licenses to a necessary
product or technology on commercially reasonable terms, or at all, and
therefore, we may not pursue research, development or commercialization of
promising products.
OUR RESEARCH PROGRAMS ARE IN AN EARLY STAGE AND MAY NOT SUCCESSFULLY PRODUCE
COMMERCIAL PRODUCTS.
Pharmaceutical discovery research is inherently high-risk because of
the high failure rate of projects. To date, our research has been focused on a
limited number of mechanisms which have not been proven as a viable mechanism
of drug action, such as DNA-binding. Although we have identified a compound
that has met our criteria for advancement to preclinical status, our drug
discovery programs have not produced a compound in which extensive preclinical
development work has begun. Genelabs' product candidates, other than Prestara,
are in an early stage of research. The goal of our research programs is to
discover novel chemical compounds and develop them into drugs. All of our
research projects may fail to produce commercial products.
If Genelabs discovers compounds that have the potential to be drugs,
public information about our research success may lead other companies with
greater resources to focus more efforts in areas similar to ours. Genelabs has
limited human and financial resources. Creation of the type of compounds we
seek to discover requires sophisticated and expensive lab equipment and
facilities, a team of scientists with advanced scientific knowledge in many
disciplines such as chemistry, biochemistry and biology, and time and effort.
Large pharmaceutical companies have access to the latest equipment and have
many more personnel available to focus on solving particular research
problems, including those that Genelabs is investigating. Therefore, even if
our research programs are successful, we have a competitive disadvantage.
WE HAVE INCURRED LOSSES EACH YEAR SINCE OUR INCEPTION AND MAY NOT BE
PROFITABLE IN THE NEAR FUTURE OR AT ALL.
We have incurred losses each year since our inception and have
accumulated approximately $189 million in net losses through March 31, 2003,
including a net loss of $4.2 million in the first quarter of 2003 and $16
million in the year ended December 31, 2002. If the FDA approves Prestara, we
anticipate realizing a net loss at least until Prestara is sufficiently
accepted by the market, and we may never achieve profitability. If the FDA
does not approve Prestara, we may never be profitable and our revenues may
never be sufficient to fund operations.
INDUSTRY RISKS
OUR ACTIVITIES INVOLVE HAZARDOUS MATERIALS AND IMPROPER HANDLING OF THESE
MATERIALS BY OUR EMPLOYEES OR AGENTS COULD EXPOSE US TO SIGNIFICANT LEGAL AND
FINANCIAL PENALTIES.
Our research and development activities involve the controlled use of
hazardous materials, including infectious agents, chemicals and various
radioactive compounds. Our organic chemists use solvents, such as chloroform,
isopropyl alcohol and ethanol, corrosives such as hydrochloric acid and other
highly flammable materials, some of which are pressurized, such as hydrogen.
We use the following radioactive compounds in small quantities under license
from the State of California, including Carbon(14), Cesium(137), Chromium(51),
Hydrogen(3), Iodine(125), Phosphorus(32), Phosphorus(33) and Sulfur(35). Our
biologists use biohazardous materials, such as bacteria, fungi, parasites,
viruses and blood and tissue products. We also handle chemical, medical and
radioactive waste, byproducts of our research, through licensed contractors.
As a consequence, we are subject to numerous environmental and safety laws and
regulations, including those governing laboratory procedures, exposure to
blood-borne pathogens and the handling of biohazardous materials. Federal,
state and local governments may adopt additional laws and regulations
affecting us in the future. We may incur substantial costs to comply with, and
substantial fines or penalties if we violate, current or future laws or
regulations.
Although we believe that our safety procedures for using, handling,
storing and disposing of hazardous materials comply with the standards
prescribed by state and federal regulations, we cannot eliminate the risk of
accidental contamination or injury from these materials. In the event of an
accident, state or federal authorities may curtail our use of these materials
and we could be liable for any civil damages that result, the cost of which
could be substantial. Further, any failure by us to control the use, disposal,
removal or storage of, or to adequately restrict the discharge of, or assist
in the cleanup of, hazardous chemicals or hazardous, infectious or toxic
substances could subject us to significant liabilities, including joint and
several liability under state or federal statutes. While we believe that the
amount of insurance we carry is sufficient for typical risks regarding our
handling of these materials, it may not be sufficient to cover extraordinary
or unanticipated events. Additionally, an accident could damage, or force us
to shut down, our research facilities and operations.
WE MAY NOT BE ABLE TO OBTAIN OR MAINTAIN SUFFICIENT INSURANCE ON COMMERCIALLY
REASONABLE TERMS OR WITH ADEQUATE COVERAGE AGAINST POTENTIAL LIABILITIES IN
ORDER TO PROTECT OURSELVES AGAINST PRODUCT LIABILITY CLAIMS.
Our business exposes us to potential product liability risks that are
inherent in the testing, manufacturing and marketing of human therapeutic
products. We may become subject to product liability claims if someone alleges
that the use of our products, such as Prestara for lupus, if approved, injured
subjects or patients. This risk exists for products tested in human clinical
trials as well as products that are sold commercially. Although we currently
have clinical trial liability insurance, we may not be able to maintain this
type of insurance for any of our clinical trials or in a sufficient amount. In
addition, product liability insurance is becoming increasingly expensive. As a
result, we may not be able to obtain or maintain product liability insurance
in the future on acceptable terms or with adequate coverage against potential
liabilities which could harm our business by requiring us to use our resources
to pay potential claims.
MARKET RISKS
BECAUSE OUR STOCK IS VOLATILE, THE VALUE OF YOUR INVESTMENT IN GENELABS MAY
SUBSTANTIALLY DECREASE.
The market price of our common stock, like the stock prices of many
publicly traded biopharmaceutical companies, has been and will probably
continue to be highly volatile. Between January 1, 2002 and December 31, 2002,
the price of our common stock fluctuated between $0.63 and $3.55 per share.
Between January 1, 2003 and May 15, 2003, the price of our common stock
fluctuated between $1.12 and $1.88 per share. In addition to the factors
discussed in this Risk Factors section, a variety of events can impact the
stock price, including the low percentage of institutional ownership of our
stock, which contributes to lack of stability for the stock price.
In addition, numerous events occurring outside of our control may
also impact the price of our common stock, including market conditions related
to the biopharmaceutical industry. Other companies have defended themselves
against securities class action lawsuits following periods of volatility in
the market price of their common stock. If a party brings this type of lawsuit
against us, it could result in substantial costs and diversion of management's
time.
BECAUSE WE MAY NOT CONTINUE TO QUALIFY FOR LISTING ON THE NASDAQ QUOTATION
SYSTEM, THE VALUE OF YOUR INVESTMENT IN GENELABS MAY SUBSTANTIALLY DECREASE.
Genelabs may be unable to meet the requirements of the Nasdaq
National Market System in the future. To maintain its listing on the Nasdaq
National Market, Genelabs is required, among other things, to either maintain
stockholders' equity of at least $10 million or a market value of at least $50
million, as well as to maintain a bid price of at least $1.00 per share of
common stock. If Genelabs is unable to meet these requirements, it may be
delisted from the National Market System. If delisted from the Nasdaq National
Market, Genelabs might apply for listing on the Nasdaq SmallCap Market. The
Nasdaq SmallCap Market, however, also has listing requirements, which Genelabs
may fail to meet for initial listing or with which Genelabs may fail to
maintain compliance. Delisting from the National Market System could adversely
affect the trading price of our common stock, and delisting from the Nasdaq
SmallCap Market would significantly limit the liquidity of our common stock
and would adversely affect its trading price.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Genelabs' exposure to market risk for changes in foreign currency
exchange rates relates primarily to the Company's investment in a Taiwan-based
biopharmaceutical company, Genovate Biotechnology Co., Ltd., which is
accounted for at cost, based on the lower of cost or market value method. This
investment is the only item included in the balance sheet caption "Long-term
investments." Genelabs may attempt to divest a portion of this investment, in
which case changes in foreign currency exchange rates would impact the
proceeds received upon sale of these shares. Because the book value of
Genelabs' ownership percentage of Genovate is greater than our carrying cost,
we currently do not believe that any foreign currency exchange rate changes
would impact the value of this investment as reported in the financial
statements unless the value of a Taiwan dollar depreciates by greater than 60%
compared to the U.S. dollar, which, depending on other circumstances, might
require Genelabs to record a non-cash charge to write-down the long-term
investment.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures. The Company's
Chief Executive Officer and Chief Financial Officer have evaluated the
effectiveness of the Company's disclosure controls and procedures (as defined
in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), as of a date within 90 days prior to the filing
date of this Quarterly Report on Form 10-Q (the "Evaluation Date"). Based on
this evaluation, these officers have concluded that, as of the Evaluation
Date, the Company's disclosure controls and procedures are effective in
alerting them on a timely basis to material information relating to the
Company (including its consolidated subsidiaries) required to be included in
the Company's reports filed or submitted under the Exchange Act.
(b) Changes in Internal Controls. Since the Evaluation Date, there
have not been any significant changes in the Company's internal controls or in
other factors that could significantly affect such controls.
(c) Limitations on the Effectiveness of Controls. A control system,
no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the internal control system are
met. Because of the inherent limitations of any internal control system, no
evaluation of controls can provide absolute assurance that all control issues,
if any, within a company have been detected.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
March 31, 2003.
On May 5, 2003, we filed a Current Report on Form 8-K attaching a
press release and a Securities Purchase Agreement for a private placement of
common stock and warrants to purchase common stock.
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.
GENELABS TECHNOLOGIES, INC.
(Registrant)
Principal Executive Officer:
/s/ IRENE A. CHOW
Date: May 15, 2003 ____________________________________
Irene A. Chow
Chairman and Chief Executive Officer
Principal Financial and Accounting Officer:
/s/ MATTHEW M. LOAR
Date: May 15, 2003 ____________________________________
Matthew M. Loar
Chief Financial Officer
CERTIFICATION
I, Irene A. Chow, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Genelabs
Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) Designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses
in internal controls; and
b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003
/s/ IRENE A. CHOW
_____________________________
Irene A. Chow
Chairman and Chief Executive Officer
CERTIFICATION
I, Matthew M. Loar, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Genelabs
Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) Designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses
in internal controls; and
b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003
/s/ MATTHEW M. LOAR
______________________________
Matthew M. Loar
Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number Description
- ----------- ----------------------------------------------------------------
99.1 Certification of CEO pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
99.2 Certification of CFO pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
Exhibit 99.1
Certification of CEO Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Genelabs Technologies,
Inc. (the "Company") on Form 10-Q for the period ended March 31, 2003 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
Irene A. Chow, as Chief Executive Officer of the Company, hereby certifies,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, to the best of her knowledge, that:
(1) The Report fully complies with the requirements of Section
13(a) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and result of operations of the
Company.
/s/ IRENE A. CHOW
_____________________________
Irene A. Chow
Chairman and Chief Executive Officer
May 15, 2003
This certification accompanies this Report pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (the "Act") and shall not, except to the extent
required by the Act, be deemed filed by the Company for purposes of Section 18
of the Securities Exchange Act of 1934, as amended.
Exhibit 99.2
Certification of CFO Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Genelabs Technologies,
Inc. (the "Company") on Form 10-Q for the period ended March 31, 2003 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
Matthew M. Loar, as Chief Financial Officer of the Company, hereby certifies,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:
(1) The Report fully complies with the requirements of Section
13(a) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and result of operations of the
Company.
/s/ MATTHEW M. LOAR
______________________________
Matthew M. Loar
Chief Financial Officer
May 15, 2003
This certification accompanies this Report pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (the "Act") and shall not, except to the extent
required by the Act, be deemed filed by the Company for purposes of Section 18
of the Securities Exchange Act of 1934, as amended.