each respective institution participating in the study. The IBC will consider,
among other things, safety risks to institutional personnel, community ethical issues, and potential liability of the institution. An IBC may require
changes in a protocol, and we cannot assure you that any IBC will permit any given study to be initiated or completed.
Clinical trials typically are conducted in three
sequential phases, but the phases may overlap. Phase I typically involves the initial introduction of the drug into patients primarily to test for
safety or adverse effects, dosage tolerance, absorption, distribution, metabolism, excretion and clinical pharmacology. Phase II typically involves
studies in a limited patient population to further identify possible adverse effects and safety risks, determine the efficacy of the drug for specific
targeted indications, and determine dosage tolerance and optimal dosage.
When a drug appears to be effective and to have an
acceptable safety profile in Phase II evaluations, Phase III trials can be undertaken to further evaluate clinical efficacy and to further test for
safety within an expanded patient population, typically at geographically dispersed clinical study sites. Phase III studies conducted to seek marketing
approval by the FDA are generally referred to as pivotal studies.
The FDA is known to view gene therapy as a
relatively new technology, with little data regarding long-term safety. As a result, the FDA may require long-term monitoring of all patients that
participate in each phase of our clinical trials. The FDA may also require us to undertake post-marketing clinical studies, sometimes referred to as
phase IV clinical trials, which could require extensive patient monitoring and record keeping and may result in restricted marketing of our products
for an extended period of time.
Marketing Applications
After the completion of all three clinical trial
phases, if the data indicate that the product is safe and effective, a BLA or NDA is filed with the FDA for approval of the manufacture, marketing,
sale, and commercial shipment and distribution of the tested product. The marketing application must contain all of the information on the product
gathered to date, including data from the clinical trials, and must be in the appropriate format.
Once a BLA or NDA submission is accepted for review
by the FDA, the Federal Food, Drug and Cosmetic Act allows the FDA 180 days in which to review it and respond to the applicant. The review process can
be significantly extended by FDA requests for additional information or clarification of information already provided in the submission, or the FDA may
refuse to file the application. The FDA may also choose to refer the application to an appropriate advisory committee, typically a panel of clinicians,
for review, evaluation and a recommendation as to whether the application should be approved. However, the FDA is not bound by the recommendations of
any advisory committee.
If the FDA is satisfied that all regulatory criteria
are met, it will issue an approval letter, authorizing commercial marketing for the product for certain indications. Such product approvals may be
withdrawn if compliance with regulatory standards is not maintained or if problems occur following initial marketing. If the FDA is not satisfied that
all regulatory criteria are met, it may refuse to accept a BLA submission or issue a refusal to file letter, it may refuse to approve a BLA submission,
or it may issue a not-approvable letter.
For clinical investigation and marketing outside the
United States, we are also subject to foreign regulatory requirements governing clinical trials and marketing approval for pharmaceutical products. In
Europe, for instance, the approval process for the commencement of clinical trials varies from country to country, and Canada has its own set of
requirements as well. The foreign regulatory approval process includes all of the risks associated with FDA approval set forth above.
Other Regulations
In addition to regulations enforced by the FDA, in
the U.S. we are also subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control
Act, the Resource Conservation and Recovery Act, and other federal, state and local regulations. Our research and development activities involve the
controlled use of hazardous materials, chemicals, biological materials, and various radioactive compounds. Although we believe that our safety
procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, we could be held liable
for any damages that result from accidental contamination or injury and this liability could exceed our resources.
Our clinical trials may also involve subjects that
reside outside of the U.S. which can involve subsequent monitoring of the subjects’ responses at clinical sites outside the U.S. where other
regulations apply.
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Orphan Drug Status
In accordance with the Orphan Drug Act, the FDA may
grant Orphan Drug status to certain drugs intended to treat a “rare disease or condition” defined as a disease or condition which affects
fewer than 200,000 people in the United States, or which affects more than 200,000 people for which the cost of developing and marketing the drug will
not be recovered from sales of the drug in the United States. An approved Orphan Drug may provide certain benefits including exclusive marketing rights
in the United States to the first drug approved for the disease for seven years following marketing approval and federal income tax credits for certain
clinical trial expenses.
In July 2001, we announced that we were notified by
the FDA that Coagulin-B, our AAV vector product for treating hemophilia B, whether delivered via intramuscular injection or intravenously to the liver,
qualified for Orphan Drug designation. We also believe that some of our other potential products may qualify for Orphan Drug status as well, but we
cannot assure you that these products will receive FDA approval or that Coagulin-B or our other potential products will receive any benefit under the
Orphan Drug Act. In addition, there is no assurance that potential benefits provided by the Orphan Drug Act will not be significantly limited by future
amendment by the United States Congress and/or reinterpretation by the FDA.
Employees
As of March 1, 2004, Avigen had 95 full-time
employees, including 26 with Ph.D. degrees and 5 with M.D. degrees. Approximately 76 employees are involved in our research and development activities,
including research, preclinical development, process development, clinical affairs, regulatory affairs, clinical manufacturing, and quality assurance
and quality control, and 19 employees are involved in general administration, finance, legal, and business development activities. We also rely on a
number of temporary staff positions and third-party consultants to supplement our workforce. None of our employees are represented by a collective
bargaining agreement nor have we ever experienced a work stoppage. We believe that our relationship with our employees is good.
Available Information and Website Address
Our website address is www.avigen.com;
however, information found on our website is not incorporated by reference into this Annual Report on Form 10-K. We file electronically with the
Securities and Exchange Commission our annual reports on Form 10-K, quarterly interim reports on Form 10-Q, current reports on Form 8-K, and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. We make available on or through our
website, free of charge, copies of these reports as soon as reasonably practicable after we electronically file or furnish it to the SEC. You can also
request copies of such documents by contacting our Investor Relations Department at (510) 748-7150 or sending an email to
ir@avigen.com.
RISK FACTORS
This section briefly discusses certain risks that
should be considered by stockholders and prospective investors in Avigen. Many of these risks are discussed in other contexts in other sections of this
report.
We expect to continue to operate at a loss and we may never achieve
profitability
Since our inception in 1992, we have not been
profitable, and we cannot be certain that we will ever achieve or sustain profitability. To date, we have been engaged in research and development
activities and have not generated any revenues from product sales. As of December 31, 2003, we had an accumulated deficit of $132.7 million. Developing
our products will require significant additional research and development, preclinical testing and clinical trials, as well as regulatory approval. We
expect these activities, together with our general and administrative expenses, to result in operating losses for the foreseeable future. Our ability
to achieve profitability will depend, in part, on our ability to successfully complete development of our proposed products, obtain required regulatory
approvals and manufacture and market our approved products directly or through business partners.
Our clinical trials to date for Coagulin-B for the treatment of hemophilia B
have been conducted with a small number of patients over a short period of time, and the results reported may not be indicative of future results in a
larger number of patients or have lasting effects
Our current Coagulin-B clinical trial studies are
based upon the evaluations of very small groups of patients and any reported progress or results may not be indicative of subsequent progress or
results achieved from larger populations. As our Coagulin-B clinical trial is still in a very early stage, we do not yet know if any favorable
results
17
achieved will have a lasting effect. Further, we have experienced difficulties in
obtaining positive results in humans reflective of the positive results we obtained in animal models. If a larger population of patients does not
experience positive results, or any favorable results do not demonstrate a lasting effect, this product candidate may not receive approval from the FDA
for further studies or commercialization. If we are not able to proceed with, or decide to abandon our Coagulin-B development program, our business
prospects may be substantially impaired.
The success of our technology in animal models does not guarantee that the same
results will be replicated in humans
Even though our product candidates have shown
successful results in mouse, dog, and non-human primate models, animals are different than humans and results in animal models may not be replicated in
our clinical trials with humans. For example, while the results of our gene therapy treatment for hemophilia B were favorable and demonstrated
sustained long-term expression in both dogs and mice for multiple years, one human subject who demonstrated therapeutic levels of circulating factor IX
when given a comparable dose size to that used in the successful animal studies was not able to sustain steady factor IX expression beyond five weeks.
In addition, this human subject experienced a mild, temporary elevation of two liver enzymes, which was not seen in any of the animal models. Further,
we have experienced an immune system response to Coagulin-B that we did not observe in the animal models, which we have not yet been able to, and may
not be able to, adequately address. Consequently, you should not rely on the results in any of our animal models as being predictive of the results
that we will see in our clinical trials with humans.
Adverse events in the field of gene therapy may negatively impact regulatory
approval or public perception of our potential products
The commercial success of our potential products
will depend in part on public acceptance of the use of gene therapy for the prevention or treatment of human diseases. Public attitudes may be
influenced by claims that gene therapy is unsafe, and consequently our products may not gain the acceptance of the public or the medical community.
Negative public reaction to gene therapy in general could result in greater government regulation and stricter labeling requirements of gene therapy
products, including any of our products, and could cause a decrease in the demand for any products we may develop.
Our stock price is also influenced by public
perception. For example, in January 2003, a report of serious adverse events in a retroviral trial for infants diagnosed with severe combined
immunodeficiency (SCID) in France and subsequent FDA actions putting related trials on hold in the United States had a significant impact on the public
perception and stock price of all companies involved in gene therapy. Avigen’s stock declined despite the fact that we do not work with
retroviruses or with infants diagnosed with SCID and our clinical trial was not affected by the FDA’s actions in this case.
Other potential adverse events in the field of gene
therapy may occur in the future that could result in greater governmental regulation of our potential products and potential regulatory delays relating
to the testing or approval of our potential products.
AAV technology is new and developing rapidly; there is limited clinical data and
new information may arise which may cause delays in designing our protocols, submitting applications that satisfy all necessary regulatory review
requirements, and ultimately completing the clinical trials of our products
Clinical trials are governed by regulations enforced
by the FDA. Our technology is fairly new, and we have limited historical data from preclinical studies or clinical trials that are often necessary to
satisfy the FDA’s regulatory review process. In addition, as new information about the technology becomes available, it may change perceptions of
previously accepted data, which could require additional periods of time to review and interpret these data. For example, while animals in preclinical
studies do not appear to develop antibodies to AAV vectors or any expressed protein, further clinical testing is required to confirm to what extent our
product candidates might cause human patients to develop antibodies to these potential products or the proteins produced by these potential products.
Such antibodies could make our product ineffective or lead to unwanted side effects. In addition, as previously discussed, one human subject in our
clinical trial experienced a mild, temporary elevation of two liver enzymes, which was not seen in any of the animal models, and was not able to
sustain steady factor IX expression beyond
18
five weeks. Consequently, we may encounter deficiencies in the design or
application stages while developing our clinical trial studies, or in the subsequent implementation stages of such studies, which could cause us or the
FDA to delay, suspend or terminate our trials at any time.
Because our product candidates are in an early state of development, there is a
high risk that they may never be commercialized
All of our product candidates are in early stages of
development. We do not have any product candidates that have received regulatory approval for commercial sale, and we face the risk that none of our
product candidates will ever receive regulatory approval. We have one product candidate in clinical trials, Coagulin-B for the treatment of hemophilia
B. This product candidate is only in phase I of the clinical trial process. We have applied for an IND for our second product candidate, AV201 for the
treatment of Parkinson’s disease, and are currently responding to requests from the FDA for additional information. We are not aware of any other
gene therapy products of other companies that have received regulatory approval for commercial sale in the United States, and do not expect any of our
prospective products, including Coagulin-B and AV201, to be commercially available for at least several years. As results of future stages of our
clinical trials become available and are evaluated, we may decide at any time to discontinue any further development of one or more of our product
candidates.
The testing of our potential products relies heavily on the voluntary
participation of patients in our clinical trials, which is not within our control, and could substantially delay or prevent us from completing
development of such products
The development of our potential products is
dependent upon collecting sufficient data from human clinical trials to demonstrate safe and effective results. We have experienced delays in enrolling
patients in our clinical trials for Coagulin-B, and we may experience similar difficulties in the future. Any delay or failure to recruit sufficient
numbers of patients to satisfy the level of data required to be collected under our clinical trial protocols could prevent us from developing any
products we may target.
Our potential products must undergo rigorous clinical testing and regulatory
approvals, which could substantially delay or prevent us from marketing any products
Prior to marketing in the United States, any product
developed by us must undergo rigorous preclinical testing and clinical trials as well as an extensive regulatory approval process implemented by the
FDA. This process is lengthy, complex and expensive, and approval is never certain. Positive results from preclinical studies and early clinical trials
do not ensure positive results will be demonstrated in clinical trials designed to permit application for regulatory approval.
Potential problems we may encounter in the
implementation stages of our studies include the chance that we may not be able to conduct clinical trials at preferred sites, obtain sufficient test
subjects or begin or successfully complete clinical trials in a timely fashion, if at all. Furthermore, the FDA may temporarily suspend clinical trials
at any time if it believes the subjects participating in trials are being exposed to unacceptable health risks, if it finds deficiencies in the
clinical trial process or conduct of the investigation, or to better analyze data surrounding any unexpected developments. For example, progress in our
current Coagulin-B clinical trial has been interrupted twice to better analyze data from unexpected observations. These included the identification of
vector fragments in the seminal fluid of two early patients beyond an expected timeframe and the development reported in December 2002 of a temporary
elevation in the levels of two liver enzymes in one patient treated with a higher dose.
Because of the risks and uncertainties in
biopharmaceutical development, our products could take a significantly longer time to gain regulatory approval than we expect or may never gain FDA
approval. If we do not receive these necessary approvals from the FDA, we will not be able to generate substantial revenues that would be necessary to
become profitable.
We may not be successful in obtaining required foreign regulatory approvals,
which would prevent us from marketing our products internationally
We cannot be certain that we will obtain any
regulatory approvals in other countries. In order to market our products outside of the United States, we must comply with numerous and varying foreign
regulatory requirements implemented by foreign regulatory authorities. The approval procedure varies among countries and can involve
19
additional testing. The time required to obtain approval may differ from that
required to obtain FDA approval. The foreign regulatory approval process includes all of the risks associated with obtaining FDA approval set forth
above, and approval by the FDA does not ensure approval by the regulatory authorities of any other country.
Our success is dependent upon our ability to effectively protect our patents and
proprietary rights, which we may not be able to do
Our success will depend to a significant degree on
our ability to obtain patents and licenses to patent rights, preserve trade secrets, and to operate without infringing on the proprietary rights of
others. If we are not successful in these endeavors, our business will be substantially impaired.
To date, we have filed a number of patent
applications in the United States relating to technologies we have developed or co-developed. In addition, we have acquired exclusive and non-exclusive
licenses to certain issued patents and pending patent applications. We cannot guarantee that patents will issue from these applications or that any
patent will issue on technology arising from additional research or, if patents do issue, that claims allowed will be sufficient to protect our
technologies.
The patent application process takes several years
and entails considerable expense. The failure to obtain patent protection on the technologies underlying our proposed products may have a material
adverse effect on our competitive position and business prospects. Important legal issues remain to be resolved as to the scope of patent protection
for biotechnology products, and we expect that administrative proceedings, litigation or both may be necessary to determine the validity and scope of
our and others’ biotechnology patents. These proceedings or litigation may require a significant commitment of our resources in the
future.
If patents can be obtained, we cannot assure you
that any of these patents will provide us with any competitive advantage. For example, others may independently develop similar technologies or
duplicate any technology developed by us, and patents may be invalidated or held unenforceable in litigation.
In addition, several of our patents and patent
applications are co-owned with co-inventors or institutions. To date, we have negotiated exclusive licenses for many of our co-owned technologies.
However, if we cannot negotiate exclusive rights to other co-owned technology, each co-inventor may have rights to independently make, use, offer to
sell or sell the patented technology. Commercialization, assignment or licensing of the technology by a co-owner could harm our
business.
We also rely on a combination of trade secret and
copyright laws, employee and third-party nondisclosure agreements and other protective measures to protect intellectual property rights pertaining to
our products and technologies. We cannot be certain that these measures will provide meaningful protection of our trade secrets, know-how or other
proprietary information. In addition, the laws of certain foreign countries do not protect our intellectual property rights to the same extent as do
the laws of the United States. We cannot assure you that we will be able to protect our intellectual property successfully.
Other persons may assert rights to our proprietary technology, which could be
costly to contest or settle
Third parties may assert patent or other
intellectual property infringement claims against us with respect to our products, technologies, or other matters. Any claims against us, with or
without merit, as well as claims initiated by us against third parties, can be time-consuming and expensive to defend or prosecute and resolve. There
may be third-party patents and other intellectual property relevant to our products and technology which are not known to us. We have not been accused
of infringing any third party’s patent rights or other intellectual property, but we cannot assure you that litigation asserting claims will not
be initiated, that we would prevail in any litigation, or that we would be able to obtain any necessary licenses on reasonable terms, if at all. If our
competitors prepare and file patent applications in the United States that claim technology also claimed by us, we may have to participate in
interference proceedings declared by the Patent and Trademark Office to determine priority of invention, which could result in substantial cost to us,
even if the outcome is favorable to us. In addition, to the extent outside collaborators apply technological information developed independently by
them or by others to our product development programs or apply our technologies to other projects, disputes may arise as to the ownership of
proprietary rights to these technologies.
20
We may be required to obtain rights to proprietary genes and other technologies
to further develop our business, which may not be available or may be costly
We currently investigate and use certain gene
sequences or proteins encoded by those sequences, including the factor VIII and IL-10 genes, and manufacturing processes that are or may become
patented by others. As a result, we may be required to obtain licenses to these gene sequences or proteins or other technology in order to test, use or
market products. We may not be able to obtain these licenses on terms favorable to us, if at all. In connection with our efforts to obtain rights to
these gene sequences or proteins or other technology, we may find it necessary to convey rights to our technology to others. Some of our products may
require the use of multiple proprietary technologies. Consequently, we may be required to make cumulative royalty payments to several third parties.
These cumulative royalties could become commercially prohibitive. We may not be able to successfully negotiate these royalty adjustments to a cost
effective level, if at all.
If we do not achieve certain milestones, we may not be able to retain certain
licenses to our intellectual property
We have entered into license agreements with third
parties for technologies related to our gene therapy product development programs. Some of these license agreements provide for the achievement of
development milestones. If we fail to achieve these milestones or to obtain extensions, the licensor may terminate these license agreements with
relatively short notice to us. Termination of any of our license agreements could harm our business.
If we are able to bring our potential products to market, we continue to face a
number of risks including our inexperience in marketing or selling our potential products, the acceptance of our products by physicians and insurers,
our ability to price our products effectively and to obtain adequate reimbursement for sales of our products.
Even if we are able to develop our potential
products and obtain necessary regulatory approvals, we have no experience in marketing or selling any of our proposed products. We intend to enter into
distribution and marketing agreements with other companies for our products and do not anticipate establishing our own sales and marketing capabilities
for any of our potential products in the foreseeable future. For example, we have entered into an exclusive worldwide marketing and distribution
agreement with Bayer Corporation for our Coagulin-B proposed product. However, if Bayer Corporation does not perform under this agreement, we would
need to identify an alternative marketing and distribution partner, or market this product ourselves, and we may not be able to establish adequate
marketing capabilities for this product. Similarly, we may not be able to develop adequate marketing capabilities for our other potential products,
either on our own or through other third parties.
Our success is dependent on acceptance of our
products. We cannot assure you that our products will achieve significant market acceptance among patients, physicians or third-party payors, even if
we obtain necessary regulatory and reimbursement approvals. Failure to achieve significant market acceptance will harm our business. In addition, we
cannot assure you that these products will be considered cost-effective and that reimbursement to the consumer will be available or will be sufficient
to allow us to sell our products on a profitable basis. In both the United States and elsewhere, sales of medical products and treatments are
dependent, in part, on the availability of reimbursement to the consumer from third-party payors, such as government and private insurance plans.
Third-party payors are increasingly challenging the prices charged for medical products and services. We cannot predict whether any legislative or
regulatory proposals will be adopted or the effect that such potential proposals or managed care efforts may have on our business.
We expect that we will face intense competition, which may limit our ability to
become profitable
Our competitors may develop more effective or more
affordable products, or commercialize products earlier than we do, which would limit the prices that we could charge for the products that we are able
to market, and prevent us from becoming profitable. We expect increased competition from fully integrated pharmaceutical companies and more established
biotechnology companies. Most of these companies have significantly greater financial resources and expertise than we do in research and development,
preclinical studies, clinical trials, obtaining regulatory approvals, manufacturing, and marketing and distribution.
Smaller companies may also prove to be significant
competitors, particularly through collaborative arrangements with large pharmaceutical companies. Academic institutions, government agencies and other
public
21
and private research organizations also conduct research, seek patent protection
and establish collaborative arrangements for product development and marketing. In addition, these companies and institutions compete with us in
recruiting and retaining highly qualified scientific and management personnel.
We are aware that other companies are conducting
preclinical studies and clinical trials for viral and non-viral gene therapy products that could compete with products we are developing. See
“Item 1. Business—Competition” for a more detailed discussion of the competition we face.
We have limited experience in manufacturing our potential products at a
commercial scale, which raises uncertainty about our ability to manufacture our potential products cost-effectively
Even if we are able to develop our potential
products and obtain necessary regulatory approvals, we have limited experience in manufacturing any of our proposed products on a commercial basis. If
we are unable to manufacture our products in a cost-effective manner, we are not likely to become profitable. We have not yet received a license from
the FDA for our manufacturing facilities, and cannot apply for one until we submit our product for commercial approval. Even if we do receive a
manufacturing license, we may fail to maintain adequate compliance with the FDA’s regulations concerning current good manufacturing practices
(cGMP), in which case the license, and our authorization to manufacture product, could be revoked.
We may lose access to critical materials from single source suppliers, which is
not within our control and could delay us from manufacturing materials needed to support our clinical trials or future commercialization
We obtain materials used in the manufacture of our
clinical products from a number of suppliers, some of whom are our sole qualified source of these materials. We qualify the suppliers of our clinical
materials according to cGMP regulations. If we were to lose access to critical materials from any of these sole-source suppliers, we would be required
to obtain a new source of the materials. It could take us several months to qualify new suppliers before we could use their materials in the
manufacture of our clinical products.
We may be unable to attract and retain the qualified employees, consultants and
advisors we need to be successful
We are highly dependent on key members of our senior
management and scientific staff. The loss of any of these persons could substantially impair our research and development efforts and impede our
ability to develop and commercialize any of our products. Recruiting and retaining qualified scientific, technical and managerial personnel will also
be critical to our success. Biotechnology personnel with these skills are in high demand. As a result, competition for and retention of personnel,
particularly for employees with technical expertise, is intense and the turnover rate for these people can be high.
In addition, we rely on consultants and advisors to
assist us in formulating our research and development strategy. A majority of our scientific advisors are engaged by us on a consulting basis and are
employed on a full-time basis by others. We have limited control over the activities of these scientific collaborators which often limit their
availability to us. Failure of any of these persons to devote sufficient time and resources to our programs could delay our progress and harm our
business. In addition, some of these collaborators may have consulting or other advisory arrangements with other entities that may conflict or compete
with their obligations to us.
We may need to secure additional financing to complete the development and
commercialization of our products
We anticipate that our existing capital resources as
of December 31, 2003, will be adequate to fund our needs for at least the next three to four years. However, we may require additional funding to
complete the research and development activities currently contemplated and to commercialize our products. Our future capital requirements will depend
on many factors, including:
• |
|
continued scientific progress in research and development
programs; |
• |
|
the scope and results of preclinical studies and clinical
trials; |
• |
|
the time and costs involved in obtaining regulatory
approvals; |
• |
|
the costs involved in filing, prosecuting and enforcing patent
claims; |
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• |
|
the costs involved in obtaining licenses to patented
technologies from third-parties that may be needed to commercialize our products; |
• |
|
the cost of manufacturing scale-up; |
• |
|
the cost of commercialization activities; and |
• |
|
other factors which may not be within our control. |
We intend to continue to seek additional funding
through public or private equity or debt financing, when market conditions allow, or through additional collaborative arrangements with corporate
partners. If we raise additional funds by issuing equity securities, there may be further dilution to existing stockholders. We cannot assure our
investors that we will be able to enter into such financing arrangements on acceptable terms or at all. Without such additional funding, we may be
required to delay, reduce the scope of, or eliminate one or more of our research or development programs.
We face the risk of liability claims which may exceed the scope or amount of our
insurance coverage
The manufacture and sale of medical products entail
significant risk of liability claims. We currently carry liability insurance; however, we cannot assure you that this coverage will remain in place or
that this coverage will be adequate to protect us from all liabilities which we might incur in connection with the use of our products in clinical
trials or the future use or sale of our products upon commercialization. In addition, we may require increased liability coverage as additional
products are used in clinical trials and commercialized. This insurance is expensive and may not be available on acceptable terms in the future, if at
all. A successful liability claim or series of claims brought against us in excess of our insurance coverage could harm our business. We must indemnify
certain of our licensors against any liability claims brought against them arising out of products developed by us under these
licenses.
Our use of hazardous materials exposes us to the risk of environmental
liabilities, and we may incur substantial additional costs to comply with environmental laws in connection with the operation of our research and
manufacturing facilities
We use radioactive materials and other hazardous
substances in our research and development and manufacturing operations. As a result, we are potentially subject to substantial liabilities related to
personal injuries or property damages they may cause. In addition, clean up costs associated with radioactivity or other hazardous substances, and
related damages or liabilities could be significant and could harm our business. We are required to comply with increasingly stringent laws and
regulations governing environmental protection and workplace safety which could impose substantial fines and criminal sanctions for violations.
Maintaining compliance with these laws and regulations could require substantial additional capital.
Risks Related to Our Stock
Anti-takeover effects of certain charter provisions and Delaware law may
negatively affect the ability of a potential buyer to purchase some or all of our stock at an otherwise advantageous price, which may limit the price
investors are willing to pay for our common stock
Certain provisions of our charter and Delaware law
may negatively affect the ability of a potential buyer to attempt a takeover of Avigen, which may have a negative effect on the price investors are
willing to pay for our common stock. For example, our board of directors has the authority to issue up to 5,000,000 shares of preferred stock and to
determine the price, rights, preferences, and privileges of those shares without any further vote or action by the stockholders. This would enable the
Board of Directors to establish a shareholder rights plan, commonly referred to as a “poison pill,” which would have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting stock of Avigen. In addition, our board of directors is divided into
three classes, and each year on a rotating basis the directors of one class are elected for a three-year term. This provision could have the effect of
making it less likely that a third party would attempt to obtain control of Avigen through Board representation. Furthermore, certain other provisions
of our restated certificate of incorporation may have the effect of delaying or preventing changes in control or management, which could adversely
affect the market price of our common stock. In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, an
anti-takeover law.
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Our stock price is volatile, and as a result investing in our common stock is
very risky
From January 1, 2002 to March 1, 2004, our stock
price has fluctuated between a range of $11.58 and $2.75 per share. We believe that various factors may cause the market price of our common stock to
continue to fluctuate, perhaps substantially, including announcements of:
• |
|
technological innovations or regulatory approvals; |
• |
|
results of clinical trials; |
• |
|
new products by us or our competitors; |
• |
|
developments or disputes concerning patents or proprietary
rights; |
• |
|
achieving or failing to achieve certain developmental
milestones; |
• |
|
public concern as to the safety of gene therapy, recombinant
biotechnology or traditional pharmaceutical products; |
• |
|
health care or reimbursement policy changes by governments or
insurance companies; |
• |
|
developments in relationships with corporate partners;
or |
• |
|
a change in financial estimates or securities analysts’
recommendations. |
In addition, in recent years, the stock market in
general, and the shares of biotechnology and health care companies in particular, have experienced extreme price fluctuations. These broad market and
industry fluctuations may cause the market price of our common stock to decline dramatically.
Item 2. Properties
We lease approximately 112,500 square feet in two
adjacent buildings of manufacturing, research laboratory and office space in an established commercial neighborhood in Alameda, California. In June
2003, a lease and sublease that accounted for approximately 45,000 square feet in one building expired; however, we had previously negotiated an
extension for the combined space that went into effect in July 2003 and runs for five more years and expires in 2008. We also have a 10-year lease for
67,500 square feet in a second building adjacent to the original facility that was entered into in December 2000. The lease of this second building
will expire in November 2010. We believe that these facilities will be adequate to meet our property needs for at least the next two
years.
Item 3. Legal Proceedings
As of March 1, 2004, we were not involved in any
legal proceedings.
Item 4. Submission of Matters to a Vote of Security
Holders
None.
Executive Officers of the Registrant
Our executive officers and their respective ages and
positions as of March 12, 2004, are as follows:
Name
|
|
|
|
Age
|
|
Position
|
Philip J.
Whitcome, Ph.D. |
|
|
|
55 |
|
Chairman of the Board |
Kenneth G.
Chahine, Ph.D. |
|
|
|
39 |
|
President, Chief Executive Officer and Director |
Thomas J.
Paulson |
|
|
|
57 |
|
Vice
President, Finance, Chief Financial Officer and Secretary |
Glenn Pierce,
Ph.D., M.D. |
|
|
|
48 |
|
Vice
President, Research and Clinical Development |
Dawn McGuire,
M.D. |
|
|
|
50 |
|
Chief
Medical Officer |
All of our officers are elected annually by the
Board of Directors. There is no family relationship between or among any of the officers or directors.
Philip J. Whitcome,
Ph.D., has served as a director of Avigen since December 1992. In April 1995, Dr. Whitcome was elected Chairman of the Board
and from March 1996 to December 1996 he served as acting Chief Financial Officer. From 1988 to 1994, Dr. Whitcome was President and Chief Executive
Officer of Neurogen
24
Corporation, a biopharmaceutical company. From 1981 to 1988, Dr. Whitcome was
employed at Amgen Inc., a biopharmaceutical company, including service as Director of Strategic Planning. Prior to joining Amgen, he served as Manager
of Corporate Development for Medical Products at Bristol-Myers Squibb Company, a pharmaceutical and healthcare products company, and held research and
marketing management positions with the Diagnostics Division of Abbott Laboratories, a pharmaceutical and medical products company. Dr. Whitcome holds
a Ph.D. in Molecular Biology from the University of California at Los Angeles, an M.B.A. from the Wharton School at the University of Pennsylvania and
a B.S. in Physics from Providence College.
Kenneth G. Chahine, Ph.D., was appointed
President, Chief Executive Officer and director of Avigen in March 2004. Dr. Chahine joined Avigen in 1998, was appointed Vice President, Business
Development in January 1999, and was appointed Chief Operating Officer in July 2002. Prior to joining Avigen, Dr. Chahine worked at the patent law firm
of Madson & Metcalf, P.C. in Salt Lake City from 1994 to 1998. Between 1992 and 1993, Dr. Chahine worked as a research scientist at Parke-Davis
Pharmaceuticals, a pharmaceutical company, and held another research scientist post at the University of Utah Department of Human Genetics from 1994
through 1996. Dr. Chahine also served as Western Regional News and Legal Correspondent for Nature Biotechnology from 1996 to 2002. Dr. Chahine holds a
J.D. from the University of Utah and a Ph.D. in Biochemistry and Molecular Biology from the University of Michigan.
Thomas J. Paulson joined Avigen and was
appointed Vice President, Finance, Chief Financial Officer and Secretary of Avigen effective September 20, 1996. Prior to joining Avigen, Mr. Paulson
was president of Paulson Associates, a biotechnology consulting firm. From its inception in 1989 until 1994, Mr. Paulson was Chief Financial Officer of
Neurogen Corporation, a pharmaceutical company. From 1986 to 1989, he was Director of Finance at CibaCorning Diagnostics, Gilford Systems, a
diagnostics instrument company. From 1984 to 1986, Mr. Paulson served as financial director at Quidel Corporation, a biotechnology company. From 1971
to 1984, Mr. Paulson held various financial management positions at Abbott Laboratories, a pharmaceutical and medical products company. Mr. Paulson
holds an M.B.A. from the University of Chicago Graduate School of Business and a B.B.A. in Accounting from Loyola University in
Chicago.
Glenn Pierce, Ph.D., M.D., joined Avigen and
was appointed Vice President, Research and Clinical Development in November 2002. Before joining Avigen, Dr. Pierce was Vice President, Therapeutic
Product Development at Selective Genetics, a gene therapy company he helped found in 1998, which focuses on tissue regeneration, from 1998 to November
2002. From 1994 to 1998, he served as Vice President, Preclinical Development at Prizm Pharmaceuticals, a pharmaceutical company. Prior to that, Dr.
Pierce held a number of positions at Amgen Inc., a biopharmaceutical company, and was instrumental in the development of Amgen’s neurobiology
program. Dr. Pierce holds numerous patents in various areas of drug delivery, tissue engineering, medical devices and viral vectors. He has published
more than 100 papers in scientific and medical journals in related areas. He has served three terms as the president of the National Hemophilia
Foundation (NHF) in 1992, 1993, and in 2002. He initiated the NHF’s first gene therapy committee and founded the NHF’s annual gene therapy
workshop in 1996. He earned both his M.D. and a Ph.D. in Immunology and Experimental Pathology at Case Western Reserve University, prior to doing a
residency and fellowship at Washington University in St. Louis.
Dawn McGuire, M.D., has served as our Chief
Medical Officer since January 2004. Dr. McGuire has provided leadership in both pharmaceutical and biotechnical corporate settings, most recently as
Chief Scientific Officer of Eunoe, Incorporated (previously CSFluids, Inc.), a medical device company. She was President and Chief Executive Officer of
CSFluids from 1999 to 2002. From 1999 to 2000, Dr. McGuire also served as Vice President, Medical Affairs Worldwide at Collagen Corporation, a
healthcare products company. From 1997 to 1999, Dr. McGuire served as Vice President, Clinical Research and Medical Affairs at Elan Pharmaceuticals and
was responsible for, among other programs, the development through FDA submission of ziconotide (Prialt™). Dr. McGuire is a board-certified
neurologist and has led clinical development programs in neuropathic pain, Alzheimer’s disease, AIDS dementia, Lou Gehrig’s disease, Multiple
Sclerosis, and stroke. She is the co-author of over 40 scientific articles, book chapters and invited reviews in neurotherapeutics. Since 2000, Dr.
McGuire has served as a Scientific Reviewer and Study Section Member of the National Institute of Neurological Disorders and Stroke. Dr. McGuire
received her B.A. with high honors from Princeton University, her M.D. from Columbia University College of Physicians and Surgeons, and trained in
Neurology at the University of California, San Francisco, followed by an NIH-funded postdoctoral fellowship in clinical trial design and experimental
therapeutics.
25
PART II
| Item 5. |
|
Market for Registrants Common Equity, Related Stockholder
Matters, and Issuer Purchases of Equity Securities |
Shares of Avigen’s common stock commenced
trading on the NASDAQ National Market on May 22, 1996, under the symbol “AVGN”. As of March 1, 2004, there were approximately 155 holders of
record of our common stock.
We have never paid cash dividends and do not
anticipate paying cash dividends in the foreseeable future.
The following table sets forth, for fiscal periods
indicated, the range of high and low sales prices available for the years ended December 31, 2002 and 2003.
Year ended December 31, 2002
|
|
|
|
High
|
|
Low
|
Quarter End
3/31/02 |
|
|
|
$ |
11.90 |
|
|
$ |
7.61 |
|
Quarter End
6/30/02 |
|
|
|
$ |
11.37 |
|
|
$ |
6.95 |
|
Quarter End
9/30/02 |
|
|
|
$ |
9.54 |
|
|
$ |
6.45 |
|
Quarter End
12/31/02 |
|
|
|
$ |
10.33 |
|
|
$ |
5.22 |
|
Year ended December 31, 2003
|
|
|
|
High
|
|
Low
|
Quarter End
3/31/03 |
|
|
|
$ |
6.07 |
|
|
$ |
2.92 |
|
Quarter End
6/30/03 |
|
|
|
$ |
4.70 |
|
|
$ |
2.75 |
|
Quarter End
9/30/03 |
|
|
|
$ |
5.73 |
|
|
$ |
3.33 |
|
Quarter End
12/31/03 |
|
|
|
$ |
7.40 |
|
|
$ |
5.48 |
|
During the quarter ended December 31, 2003, we
issued a total of 77,858 shares of our common stock upon the exercise of warrants previously sold in private placements. The purchases of these
shares were as follows:
Purchaser
|
|
|
|
Exercise
Date
|
|
Number of
Shares
|
|
Exercise
Price
|
|
Aggregate
Purchase Price
|
Joseph
DiBenedetto, Jr. |
|
|
|
|
11/6/03 |
|
|
|
2,040 |
|
|
$ |
6.09 |
|
|
$ |
12,424 |
|
Allan
Fishbein, M.D. |
|
|
|
|
11/26/03 |
|
|
|
5,211 |
|
|
|
4.76 |
|
|
|
24,804 |
|
Richard
Gaston |
|
|
|
|
12/5/03 |
|
|
|
5,211 |
|
|
|
4.76 |
|
|
|
24,804 |
|
Marc &
Ingrid Gelman |
|
|
|
|
12/8/03 |
|
|
|
2,605 |
|
|
|
4.76 |
|
|
|
12,400 |
|
Union
d’etudes et d’investissements |
|
|
|
|
12/8/03 |
|
|
|
5,120 |
|
|
|
5.36 |
|
|
|
27,443 |
|
Veron
International Ltd |
|
|
|
|
12/9/03 |
|
|
|
31,270 |
|
|
|
4.76 |
|
|
|
148,845 |
|
John &
Sandra Leland Trust |
|
|
|
|
12/11/03 |
|
|
|
2,605 |
|
|
|
4.76 |
|
|
|
12,400 |
|
Virginia
Leung |
|
|
|
|
12/11/03 |
|
|
|
2,605 |
|
|
|
4.76 |
|
|
|
12,400 |
|
Hofung
Holdings Ltd |
|
|
|
|
12/12/03 |
|
|
|
10,423 |
|
|
|
4.76 |
|
|
|
49,613 |
|
Nai-Ping
Leung |
|
|
|
|
12/12/03 |
|
|
|
2,605 |
|
|
|
4.76 |
|
|
|
12,400 |
|
Lewis
Pell |
|
|
|
|
12/17/03 |
|
|
|
8,163 |
|
|
|
6.09 |
|
|
|
49,713 |
|
|
|
|
|
|
|
|
|
|
77,858 |
|
|
|
|
|
|
$ |
387,226 |
|
These shares were issued in reliance on Section 4(2)
under the Securities Act, in that they were issued to the original purchasers of the warrants. These purchasers represented, in connection with the
original purchase of the warrants, that they were accredited investors as defined in the Regulation D under the Securities Act.
26
Item 6. Selected Financial Data
The following tables should be read in conjunction
with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of this report and the
financial statements and related notes included in Item 8 of this report.
|
|
|
|
Year
Ended
December 31,
|
|
(1)
Six Months
Ended
December 31,
2001
|
|
Fiscal
Years Ended June 30,
|
|
October
22, 1992
(Inception) to
December 31,
2003
|
(in
thousands, except per share data)
|
|
|
|
2003
|
|
2002
|
|
2001
|
|
|
2001
|
|
2000
|
|
1999
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Statement
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
$ |
463 |
|
|
$ |
57 |
|
|
$ |
94 |
|
|
$ |
8 |
|
|
$ |
116 |
|
|
$ |
58 |
|
|
$ |
185 |
|
|
$ |
1,250 |
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development |
|
|
|
|
21,805 |
|
|
|
24,809 |
|
|
|
22,333 |
|
|
|
11,465 |
|
|
|
17,041 |
|
|
|
7,953 |
|
|
|
6,490 |
|
|
|
108,161 |
|
|
General
and administrative |
|
|
|
|
7,399 |
|
|
|
8,146 |
|
|
|
7,559 |
|
|
|
3,957 |
|
|
|
6,761 |
|
|
|
4,516 |
|
|
|
3,445 |
|
|
|
43,823 |
|
In-license
fees |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,034 |
|
|
|
— |
|
|
|
5,034 |
|
|
|
|
|
|
29,204 |
|
|
|
32,955 |
|
|
|
29,892 |
|
|
|
15,422 |
|
|
|
23,802 |
|
|
|
17,503 |
|
|
|
9,935 |
|
|
|
157,018 |
|
Loss
from operations |
|
|
|
|
(28,741 |
) |
|
|
(32,898 |
) |
|
|
(29,798 |
) |
|
|
(15,414 |
) |
|
|
(23,686 |
) |
|
|
(17,445 |
) |
|
|
(9,750 |
) |
|
|
(155,768 |
) |
Interest
expense |
|
|
|
|
(250 |
) |
|
|
(278 |
) |
|
|
(347 |
) |
|
|
(204 |
) |
|
|
(180 |
) |
|
|
(129 |
) |
|
|
(178 |
) |
|
|
(2,171 |
) |
Interest
income |
|
|
|
|
3,282 |
|
|
|
5,569 |
|
|
|
9,364 |
|
|
|
4,316 |
|
|
|
7,907 |
|
|
|
2,548 |
|
|
|
326 |
|
|
|
25,405 |
|
Other
expense, net |
|
|
|
|
(65 |
) |
|
|
(132 |
) |
|
|
(68 |
) |
|
|
(17 |
) |
|
|
(55 |
) |
|
|
(13 |
) |
|
|
(9 |
) |
|
|
(122 |
) |
Net
loss |
|
|
|
$ |
(25,774 |
) |
|
$ |
(27,739 |
) |
|
$ |
(20,849 |
) |
|
$ |
(11,319 |
) |
|
$ |
(16,014 |
) |
|
$ |
(15,039 |
) |
|
$ |
(9,611 |
) |
|
$ |
(132,656 |
) |
Net
loss per share |
|
|
|
$ |
(1.28 |
) |
|
$ |
(1.38 |
) |
|
$ |
(1.05 |
) |
|
$ |
(0.57 |
) |
|
$ |
(0.85 |
) |
|
$ |
(1.03 |
) |
|
$ |
(0.99 |
) |
|
|
|
|
|
|
|
|
December 31,
|
|
June 30,
|
|
(in thousands)
|
|
|
|
2003
|
|
2002
|
|
2001 (1)
|
|
2001
|
|
2000
|
|
1999
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash
equivalents, available-for-sale securities, and restricted investments |
|
|
|
$ |
98,878 |
|
|
$ |
119,224 |
|
|
$ |
148,254 |
|
|
$ |
157,737 |
|
|
$ |
77,953 |
|
|
$ |
14,881 |
|
Working
capital |
|
|
|
|
86,051 |
|
|
|
107,398 |
|
|
|
137,486 |
|
|
|
151,341 |
|
|
|
72,732 |
|
|
|
13,471 |
|
Total
assets |
|
|
|
|
116,595 |
|
|
|
140,686 |
|
|
|
168,409 |
|
|
|
174,946 |
|
|
|
85,287 |
|
|
|
16,183 |
|
Long-term
obligations |
|
|
|
|
10,592 |
|
|
|
8,852 |
|
|
|
8,558 |
|
|
|
5,391 |
|
|
|
4,113 |
|
|
|
265 |
|
Deficit
accumulated during development stage |
|
|
|
|
(132,656 |
) |
|
|
(106,882 |
) |
|
|
(79,143 |
) |
|
|
(67,823 |
) |
|
|
(51,810 |
) |
|
|
(36,771 |
) |
Stockholders’ equity |
|
|
|
|
103,886 |
|
|
|
130,057 |
|
|
|
157,350 |
|
|
|
167,182 |
|
|
|
79,013 |
|
|
|
14,323 |
|
(1) |
|
We changed our fiscal year end from June 30 to December 31,
effective December 31, 2001. |
27
| Item 7. |
|
Management’s Discussion and Analysis of Financial
Condition and Results of Operations |
This Management’s Discussion and Analysis of
Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Avigen’s actual results
may differ significantly from the results discussed in the forward-looking statements. Factors that might cause or contribute to such differences
include, but are not limited to, those discussed herein and in “Risk Factors” under Item 1.
Overview
We are focused on developing pharmaceutical products
that provide improved treatments for serious and chronic hematological and neurological diseases. Since our inception, we have devoted substantially
all of our resources to research and development activities, including the development of our proprietary gene delivery platform technology based on
adeno-associated virus vectors, known as “AAV vectors”, and the development and clinical testing of DNA-based treatments for targeted
hematological and neurological diseases. Our research and development activities to date are supported by a broad base of proprietary intellectual
property that we have assembled covering methods of transferring genes into cells, high-yield processes to manufacture contaminant-free AAV vectors,
specific genes of interest, specific disease indications, and other proprietary technologies and processes. In addition, we have built the
manufacturing capacity necessary to produce clinical-grade AAV vectors and our other DNA-based treatments at volumes we believe will support the
commercial needs of our current product candidates.
We currently have one development product in phase I
clinical trials, Coagulin-B for the treatment of hemophilia B. We have also submitted an IND to the FDA to initiate a phase I dose-escalation clinical
trial for a second development product, AV201, for the treatment of Parkinson’s disease, and are currently responding to a request for more
information from the FDA. The pace of clinical progress for both development products has been impacted by factors that were unpredictable, including a
lengthy and complex regulatory review process by the FDA and the timeliness of recruiting and screening volunteers and coordinating the treatment of a
sufficient number of qualified patients in our trials. These and other factors will continue to have a significant effect on the timing and financial
cost of the development of our products.
We are a development stage company and have
primarily supported the financial needs of our research and development activities since our inception through public offerings and private placements
of our equity securities and will continue to seek additional future funding through similar financings, when market conditions allow. We have not
received any revenue from the sale of our products in development, and we do not anticipate generating revenue from the sale of products in the
foreseeable future. We expect our source of revenue, if any, for the next several years to consist of payments under collaborative arrangements with
third parties, government grants, and license fees. We have incurred losses since our inception and expect to incur substantial losses over the next
several years due to lack of any substantial revenue and the continuation of our ongoing and planned research and development efforts, including
preclinical studies and clinical trials. There can be no assurance that we will successfully develop, commercialize, manufacture, or market our product
candidates or ever achieve or sustain product revenues for profitability. At December 31, 2003 we had an accumulated deficit of $132.7 million and
cash, cash equivalents, available-for-sale securities, and restricted investments of approximately $98.9 million. We believe that our capital resources
at December 31, 2003 will be adequate to fund our current operating needs over the next three to four years.
In August 2001, we changed our fiscal year end from
June 30 to December 31, beginning with the six months ended December 31, 2001.
Critical Accounting Policies and Significant Judgments and
Estimates
Our management’s discussion and analysis of our
financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as
the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments related to revenue
recognition, valuation of investments in financial instruments, impairment of property and equipment, and research and development expenses. We base
our estimates on historical experience and on various other factors that we believe are reasonable under the
28
circumstances, the results of which form the basis for making judgments about the
carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
While our significant accounting policies are more
fully described under Note 1 in the Notes to our Financial Statements, we believe the following accounting policies are critical to the process of
making significant judgments and estimates in the preparation of our financial statements.
Revenue recognition
We recognize revenue associated with up-front
license, technology access and research and development funding payments under collaborative agreements ratably over the relevant periods specified in
the agreements, generally the development phase. This development phase can be defined as a specified period of time, however, in certain cases, the
collaborative agreement specifies a development phase that culminates with milestone objectives but does not have a fixed date and requires us to
estimate the time period over which to recognize this revenue. Our estimated time periods are based on management’s estimate of the time required
to achieve a particular development milestone considering level of effort and stage of development. If our estimate of the development-phase time
period increases, the amount of revenue we recognize related to up-front license and technology access fees for a given period will
decrease.
We recognize non-refundable product license fees,
including fees associated with research license agreements, for which we have no further performance obligations, and no continuing involvement
requirements, on the earlier of the dates on when the payments are received or when collection is assured.
Valuation of investments in financial instruments
We carry investments in financial instruments at
fair value with unrealized gains and losses included in accumulated other comprehensive income or loss in stockholders’ equity. Our investment
portfolio does not include equity securities or derivative financial instruments that could subject us to material market risk; however, we do invest
in corporate obligations that subject us to varying levels of credit risk. We consider an impairment of a financial instrument to be
other-than-temporary if the fair value of the financial instrument has declined below its carrying value for a period in excess of six consecutive
months or if the decline is due to a significant adverse event, such that the carrying amount of the investment may not be fully recoverable. We
write-down an other-than-temporary decline in fair value of a financial instrument with a charge in net loss. The determination of whether a decline in
fair value is other-than-temporary requires significant judgment, and could have a material impact on our balance sheet and results of operations. Our
management reviews the securities within our portfolio for other-than-temporary declines in value with our investment advisor on a regular basis. We
have not had any write-downs for other-than-temporary declines in the fair value of our financial instruments since our inception. At December 31,
2003, the carrying value of our financial instruments was $84.6 million in available-for-sale securities and $11.9 million in restricted
investments.
Impairment of property and equipment
We have invested significant amounts on construction
for improvements to our research and development facilities, with the largest portion of our spending made to modify manufacturing facilities that are
intended to comply with requirements of government mandated manufacturing rules for pharmaceutical production. These assets could be subject to
write-down for impairment in the event that our facilities are deemed to fail to comply with these government mandated policies and procedures or if
the products for which the manufacturing facilities have been constructed do not receive regulatory approval. These assets could also be subject to
write-down to the extent that facilities could be idled due to the adoption of operating efficiencies for an other-than-temporary period, resulting in
excess capacity. The determination of whether an impairment in use is other-than-temporary requires significant judgment, and could have a material
effect on our balance sheet and our results of operations. We have not had any write-downs for impairments in the fair value of our property and
equipment since our inception. At December 31, 2003, the carrying value of our property and equipment was $15.6 million.
Research and development expenses
Our research and development expenses include
salaries and benefits costs, fees for contractors and consultants, fees to collaborators for preclinical research studies, patient treatment costs
related to clinical trials and related clinical manufacturing costs, license fees for use of third-party intellectual property rights, and an
allocation of
29
facilities and overhead costs. Research and development expenses consist of costs
incurred for drug and product development, manufacturing, clinical activities, discovery research, screening and identification of drug candidates, and
preclinical studies. All such costs are charged to research and development expenses as incurred, with the costs of materials and other supplies
charged to research and development expense upon receipt.
Clinical development costs are a significant
component of research and development expenses. We accrue costs for clinical trial activities performed by third parties based upon estimates of the
percentage of work completed over the life of the individual study in accordance with agreements established with the clinical trial sites. We
determine our estimates through discussion with internal clinical personnel and outside service providers as to the progress or stage of completion of
trials or services and the agreed upon fee to be paid for such services. These estimates may or may not match the actual services performed by the
organizations as determined by patient enrollment levels and related activities. We monitor clinical trial activities to the extent possible; however,
if we underestimated activity levels associated with various studies at a given point in time, we could record significant research and development
expenses in future periods.
Results of Operations
As a result of the change from a June 30 fiscal year
to a calendar year effective December 31, 2001, which resulted in a six-month transition period, it is difficult to compare our results of operations,
or any of the components of our results of operations, between the full years ended December 31, 2003 and 2002, and the six-month transition period
ended December 31, 2001. Therefore, in order to best understand the trends in our results of operations, primarily expenses, over the most recent
reporting periods, we have included analyses of variances between the twelve-month periods ended December 31, 2003, 2002, and 2001 using an unaudited
twelve-month period ended December 31, 2001.
Revenue
(In thousands, except percentages)
|
|
|
|
2003
|
|
2002
|
|
2001
|
Revenue |
|
|
|
$ |
463 |
|
|
$ |
57 |
|
|
$ |
94 |
|
Percentage
increase over prior period |
|
|
|
|
712 |
% |
|
|
(39 |
%) |
|
|
|
|
In 2003, revenue primarily consisted of the
recognition of $375,000 of deferred revenue from the $2.5 million payment received from Bayer in March 2003. This payment from Bayer is being
recognized ratably over the estimated development period of our hemophilia B product candidate, which was estimated at five years from the date of the
payment, resulting in revenue recognition of $125,000 per quarter beginning with the second quarter of 2003. Research license fees totaled $79,000,
$38,000, and $8,000, respectively, in 2003, 2002, and 2001. Research license agreements allow the licensee to make or use products using our patented
AAV technologies for research purposes only, and do not allow for the use of our technologies in products for commercial sale. These licenses usually
include initiation fees and annual maintenance fees. Royalty revenue totaled $9,000, $19,000, and $500, respectively, in 2003, 2002 and 2001, all of
which were attributed to a single royalty license that was entered into in July 2000, which allows for the development, manufacture, use and commercial
sale of products using our patented AAV technologies. Revenues in 2001 included grant revenue of $86,000, consisting of reimbursements under a grant
from the National Institutes of Health (NIH), which expired on March 31, 2001. We do not expect to earn significant revenues from, or to be party to,
any new NIH grants for the foreseeable future.
In the event that we enter a phase II/III clinical
trial with our Coagulin-B product, we expect to earn additional revenues in connection with our collaboration agreement with Bayer, including a
milestone payment for initiating a phase II/III clinical trial and reimbursements for the costs of manufacturing AAV vector used in the clinical
trials. Under the terms of the agreement, Bayer will also pay for third-party costs of the clinical trials. However, we cannot be certain when or if we
will enter a phase II/III clinical trial. We do not expect to earn any other significant revenues for the foreseeable future.
Research and Development
Expenses
Our research and development expenses can be divided
into two primary functions, costs to support research and preclinical development and costs to support preparation for and implementation of human
clinical trials. Research and preclinical development costs include activities associated with general research and exploration,
30
animal studies, production of vector for use by external collaborators in general
research and exploration, and development of processes to translate research achievements into commercial scale capabilities. Clinical development
costs include activities associated with preparing for regulatory approvals, maintaining regulated and controlled processes, manufacturing vector for
use in human clinical trials, and supporting patient enrollment and patient administration within clinical trials.
During the second-half of 2002, we took strategic
steps to focus the work of our research and development organizations on the clinical development of our lead product programs. This included a
reduction in staff and the implementation of other operational efficiencies without limiting our production capabilities. Our research and development
staff count grew from approximately 80 at the beginning of 2001 to approximately 130 at December 31, 2001, and continued to rise to a peak of
approximately 145 in September 2002. The impact of the workforce reduction in October 2002 reduced that staff level to 90 at December 31, 2002. At
December 31, 2003, our staff count dedicated to research and development activities totaled 79.
During 2003, our research and preclinical
development expenses included activities for our development programs for hemophilia, Parkinson’s disease, neuropathic pain, and other
neurological targets, and our clinical development expenses included activities to support our development programs for Coagulin-B and AV201. During
2002, our research and preclinical development expenses were focused on our development programs for hemophilia and Parkinson’s disease, and other
cardiac and neurological targets, and our clinical development expenses were focused on our development programs for Coagulin-B and AV201. During 2001,
our research and preclinical development expenses were primarily focused on our development programs for hemophilia and Parkinson’s disease, and
our clinical development expenses were focused on our development programs for Coagulin-B.
We estimate that the costs associated with these two
categories approximate the following (in thousands):
|
|
|
|
Year Ended
December 31,
2003
|
|
Year Ended
December 31,
2002
|
|
(Unaudited)
Twelve Months
Ended
December 31,
2001
|
Research and
preclinical development |
|
|
|
$ |
13,614 |
|
|
$ |
14,266 |
|
|
$ |
12,050 |
|
Clinical
development |
|
|
|
|
8,191 |
|
|
|
10,543 |
|
|
|
10,283 |
|
Total research
and development expenses |
|
|
|
$ |
21,805 |
|
|
$ |
24,809 |
|
|
$ |
22,333 |
|
Because a significant percentage of our research and
development resources are dedicated to activities that focus on fundamental platform technologies that may be used in many different product
applications, including production and administration techniques, the majority of our costs are not directly attributed to individual development
programs. Decisions regarding our project management and resource allocation are primarily based on interpretations of scientific data, rather than
cost allocations. Our estimates of costs between research and preclinical development and clinical development are primarily based on staffing roles
within our research and development departments. As such, costs allocated to specific projects may not necessarily reflect the actual costs of those
efforts and, therefore, we do not generally evaluate actual costs-incurred information on a project-by-project basis. In addition, we are unable to
estimate the future costs to completion for any specific projects.
Comparison of the Years Ended December 31, 2003
and 2002. The decrease of $652,000 in our research and preclinical development expenses for 2003, compared to 2002, was primarily due to
changes in costs for the following:
• |
|
lower materials expenses of $1.1 million, reflecting the impact
of decreased consumption of materials to produce our AAV vectors and support our on-going research which resulted from our lower staff levels in 2003
when compared to the staff level for most of 2002 and the benefits of operating efficiencies we have implemented over the last two years, |
• |
|
lower personnel-related expenses of $670,000, primarily
reflecting the impact of our lower staff levels in 2003 after the workforce reduction that occurred in October 2002, and |
• |
|
lower consulting expenses of $157,000, reflecting decreased
involvement by third-party service providers to support our in-house research, |
31
partially offset by:
· |
|
higher expenditures for services from third-party collaborators
associated with our preclinical animal studies of $659,000, primarily related to our work with Parkinson’s disease, |
· |
|
higher depreciation expenses of $253,000, reflecting the
full-year impact of newly constructed facilities that were placed in service in the second half of 2002 for general and animal research,
and |
· |
|
higher other facilities-related expenses of $211,000, related to
the rise in costs under the new building lease that went into effect in 2003 and generally higher maintenance costs. |
The decrease of $2.4 million in our clinical
development expenses for 2003, compared to 2002, was primarily due to changes in costs for the following:
· |
|
lower personnel-related expenses of $1.3 million, primarily
reflecting the impact of our lower staff levels in 2003 after the workforce reduction in October 2002, |
· |
|
lower materials expenses of $986,000 reflecting lower levels of
material consumed for the production of clinical grade material due to the delayed needs of our Coagulin-B clinical trial, as well as general benefits
from manufacturing efficiencies adopted over the last two years for the production of our AAV vectors, |
· |
|
lower expenditures of $509,000 to third-party collaborators associated with
treating and monitoring subjects in our clinical trial, reflecting the delay in treating Coagulin-B patients in 2003, and |
· |
|
lower consulting and validation services expenses of $716,000,
primarily in connection with regulatory and quality assurance process improvements and validation of new cGMP facilities that were completed in
2002, |
partially offset by,
· |
|
higher license origination fees of $578,000, |
· |
|
higher depreciation expenses of $307,000, reflecting the
full-year impact of newly constructed facilities that were placed in service in the second half of 2002 for cGMP manufacturing, and |
· |
|
higher other facilities-related expenses of $254,000, related to
the rise in costs under the new building lease that went into effect in 2003 and generally higher maintenance costs. |
Comparison of the Year Ended December 31, 2002
and Unaudited Twelve-Month Period Ended December 31, 2001. The increase of $2.2 million in our research and preclinical development
expenses for 2002, compared to 2001, was primarily due to changes in costs for the following:
· |
|
higher expenditures for services from third-party collaborators
associated with our preclinical animal studies of $950,000, primarily related to our work with Parkinson’s disease, |
· |
|
higher personnel-related expenses of $830,000, reflecting rising
staff levels throughout most of 2002, and |
· |
|
higher depreciation and amortization expenses of $640,000,
reflecting the impact of new facilities placed in service during the year, |
partially offset by,
· |
|
lower other overall costs of $200,000. |
The increase of $260,000 in our clinical development
expenses for 2002, compared to 2001, was primarily due to changes in costs for the following:
32
• |
|
higher expenditures to third-party collaborators associated with
treating and monitoring subjects in our Coagulin-B clinical trial of $520,000, reflecting the increase in the number of patients treated in 2002
compared to 2001, |
• |
|
higher depreciation and other facilities-related expenses of
$290,000, due to new facilities placed in service in 2002, |
• |
|
higher validation services of $320,000, in connection with the
validation of new cGMP facilities that were completed in 2002, and |
• |
|
higher personnel-related expenses of $285,000, reflecting rising
staff levels throughout most of 2002, |
partially offset by,
• |
|
lower materials expenses of $490,000, reflecting the benefit of
manufacturing efficiencies adopted in 2002 for the production of our AAV vectors, |
• |
|
lower recruiting and other related costs of $360,000,
and |
• |
|
lower license milestone payments of $320,000. |
Total research and development expenses in 2003 were
lower than management expected due to delays in treating new patients in our Coagulin-B clinical trial. We recognize that regulatory approvals and
patient scheduling and coordination will continue to be factors that could cause delays in the progress in our clinical trials; however, we do expect
to expand our clinical trial activities in 2004 as we move forward with our hemophilia B clinical trial and, assuming we obtain final regulatory
approval of our IND application for AV201 from the FDA, as we begin to enroll patients in a new Parkinson’s disease clinical trial. As a result,
we expect our total research and development spending to rise in 2004 above our 2003 levels as we conduct our clinical trial activities and to the
extent we enhance our manufacturing capabilities and expand our research and development programs for additional hematological and neurological
diseases.
General and Administrative
Expenses
(In thousands, except percentages)
|
|
|
|
2003
|
|
2002
|
|
2001
|
General and
administrative expenses |
|
|
|
$ |
7,399 |
|
|
$ |
8,146 |
|
|
$ |
7,559 |
|
Percentage
increase over prior period |
|
|
|
|
(9 |
%) |
|
|
8 |
% |
|
|
|
|
The decrease in general and administrative expenses
between 2003 and 2002 was primarily related to lower personnel-related costs of approximately $510,000 reflecting lower staff levels as a result of the
October 2002 workforce reduction, lower depreciation and facilities-related expenses related to the reduction in allocation of space for our
non-research and development activities of approximately $440,000, and lower litigation-related legal fees of approximately $110,000 as a result of the settlement of our lawsuit
with RCT. These decreases were partially offset by higher patent-related legal fees of approximately $200,000 and higher expenses for other
professional services and information services of approximately $160,000.
The increase in general and administrative expenses
between 2002 and 2001 was primarily due to approximately $430,000 in higher personnel-related costs due to the increase in headcount in 2002 prior to
our October 2002 staff workforce reduction, $230,000 in higher legal fees related to the RCT litigation, $210,000 in higher corporate expenses,
including insurance and information services, and $235,000 in higher depreciation and overhead expenses. These higher costs were partially offset by a
$515,000 decline in other corporate expenses, primarily for professional services, due to the fact that in 2001 we had two audits and prepared and
filed two annual reports as a result of the change of our fiscal year end from June 30 to December 31 in that year.
We expect our general and administrative expenses
for 2004 to remain steady or increase slightly from 2003 levels.
33
Interest Income
(In thousands, except percentages)
|
|
|
|
2003
|
|
2002
|
|
2001
|
Interest
income |
|
|
|
$ |
3,282 |
|
|
$ |
5,569 |
|
|
$ |
9,364 |
|
Percentage
increase over prior period |
|
|
|
|
(41 |
%) |
|
|
(40 |
%) |
|
|
|
|
Almost all of our interest income is generated from
our investments in high-grade marketable securities of government and corporate debt. The declines in interest income between 2003 and 2002 and between
2002 and 2001, were primarily due to the general decline in market interest rates between those periods and the decrease in outstanding
interest-bearing cash and securities balances due to resources having been used to fund our on-going operations and finance construction of additional
research and development facilities.
Adoption of Recently Issued Accounting Standards
In January 2003, the FASB issued FASB Interpretation
No. 46, or FIN 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.” FIN 46 requires certain variable
interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of
a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated
financial support from other parties. In December 2003, the FASB issued FIN 46R, a revision to FIN 46. FIN 46R provides a broad deferral of the latest
date by which all public entities must apply FIN 46 to certain variable interest entities to the first reporting period ending after March 15, 2004. We
do not expect the adoption of FIN 46 to have a material impact on our financial position, cash flows or results of operations.
In May 2003, the FASB issued SFAS No. 150,
“Accounting For Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” which establishes standards for
how an issuer of financial instruments classifies and measures certain financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope as a liability (or in some circumstances, as an asset) if, at
inception, the monetary value of the obligation is based solely or predominantly on: (a) a fixed monetary amount known at inception, (b) variations in
something other than the fair value of the issuer’s equity shares or (c) variations inversely related to changes in the fair value of the
issuer’s equity shares. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have an impact on our
financial statements.
Deferred Income Tax Assets
In accordance with FAS 109, “Accounting for
Income Taxes,” which is described in the Notes to our Financial Statements, we have calculated a deferred tax asset based on the potential
future tax benefit we may be able to realize in future periods as a result of the significant tax losses experienced since our inception. However, the
value of such deferred tax asset must be calculated using the tax rates expected to apply to the taxable income in the years in which such income
occurs. Since we have no history of earnings, and cannot reliably predict when we might create taxable income, if at all, we have recorded a valuation
allowance for the full amount of our calculated deferred tax asset.
Liquidity and Capital Resources
Since our inception in 1992, cash expenditures have
significantly exceeded our revenue. We have funded our operations primarily through public offerings and private placements of our equity securities.
Subsequent to our initial public offering in May 1996, through December 2000 we raised $171.0 million from private placements and public offerings of
our common stock and warrants to purchase our common stock. Pursuant to our collaboration agreement for Coagulin-B with Bayer Corporation, we received
net proceeds of $15.0 million from the sale of our common stock to Bayer AG in February 2001 and we received $2.5 million in research support from
Bayer Corporation in March 2003. Also, during the three years ended December 31, 2003, we raised an additional $2.5 million as a result of exercises of
previously issued warrants and options to purchase our common stock. The timing of and amounts realized from the exercise of these warrants and options
are determined by the decisions of the respective warrant and option holders, and are not controlled by us. Therefore, funds raised from exercises of
stock options and warrants in past periods should not be considered an indication of additional funds to be raised in the future
periods.
34
In addition to funding our operations through sales
of our common stock, we have attempted to contain costs and reduce cash flow requirements by renting scientific equipment and facilities, contracting
with third parties to conduct research and development and using consultants, where appropriate. We expect to incur additional future expenses,
resulting in significant additional losses, as we continue to expand our research and development activities and undertake additional preclinical
studies and clinical trials of our gene therapy product candidates. We also expect to incur substantial additional expenses relating to the filing,
prosecution, maintenance, defense and enforcement of patent and other intellectual property claims.
At December 31, 2003, we had cash, cash equivalents,
available-for-sale securities, and restricted investments, of approximately $98.9 million, compared to approximately $119.2 million at December 31,
2002 and $148.3 million at December 31, 2001. At December 31, 2003, 2002 and 2001, $11.9 million, $11.5 million, and $10.0 million, respectively, was
pledged to secure certain long-term liabilities. At December 31, 2003, these long-term liabilities include $10.0 million for our line of credit, $1.5
million for equipment operating leases, and approximately $428,000 for letters of credit that we entered into in May 2003 which serve as security
deposits on our building lease. Our restricted investments are reported as a long-term asset and would not be considered a current source of additional
liquidity.
The following are contractual commitments at
December 31, 2003 associated with debt obligations, lease obligations, and contractual commitments to fund third-party research (in
thousands):
|
|
|
|
Payments Due by Period
|
|
Contractual Commitment
|
|
|
|
Total
|
|
Less than
1 year
|
|
1-3 years
|
|
3-5 years
|
|
After 5
years
|
Revolving
line of credit |
|
|
|
$ |
8,000 |
|
|
$ |
— |
|
|
$ |
8,000 |
|
|
$ |
— |
|
|
$ |
— |
|
Operating
leases |
|
|
|
|
15,045 |
|
|
|
2,503 |
|
|
|
5,241 |
|
|
|
4,550 |
|
|
|
2,751 |
|
Research
funding for third-parties |
|
|
|
|
1,089 |
|
|
|
1,089 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
|
$ |
24,134 |
|
|
$ |
3,592 |
|
|
$ |
13,241 |
|
|
$ |
4,550 |
|
|
$ |
2,751 |
|
In June 2002, we amended the terms of our $10
million revolving line of credit which had been put in place with Wells Fargo Bank in June 2000 to provide support for construction related activities.
Under the terms of the amendment, the expiration date of the borrowing was extended from June 1, 2003 to June 1, 2005, thereby deferring the timetable
to repay the principal borrowed for two years. The debt instrument bears interest at a floating rate based on the London Inter-Bank Offered Rate, which
is reset in three-month increments after the date of each drawdown, until such expiration. As of December 31, 2003 and 2002, the average annual rate of
interest charged on the borrowing was approximately 2.75% and 3.11%, respectively. Also under the terms of this agreement, we pledged a portion of our
portfolio of available for sale securities as collateral and have identified the amount of the pledged securities as restricted investments on our
balance sheets. The amount of the pledged securities is equal to the amount of utilized borrowing capacity on the line of credit. At December 31, 2003,
we had borrowed $8 million from the line of credit and had reserved the remaining $2 million in borrowing capacity to secure a letter of credit in
connection with the property lease entered into in November 2000. As a result, at December 31, 2003, we have no more borrowing capacity under this
facility. As collateral for the revolving line of credit, our restricted investments would not be considered a current source of additional liquidity.
The total amount of restricted investments at December 31, 2003, including the portion of our investment portfolio that is pledged as collateral for
this line of credit and other securities that have been pledged to secure equipment operating leases and other letters of credit, was $11.9
million.
Our current office and facility includes
approximately 112,500 square feet of space. Of this, approximately 45,000 square feet of space is leased through May 2008 and approximately 67,500
square feet of space is leased through November 2010. Payments scheduled under these lease commitments are included in the table above under operating
leases.
We enter into commitments to fund collaborative
research and clinical work performed by third parties. While these contracts are cancelable by either party, we expect the research studies and
clinical work to be completed as defined in the terms of the agreements, and all amounts paid when due. Payments scheduled to be made under these
contracts are included in the table above under research funding for third-parties.
For the years ended December 31, 2003 and 2002, net
cash used in operating activities was $19.3 million and $24.2 million, respectively. The change in cash used in operating activities between 2003 and
2002 was primarily
35
due to the reduction in our net loss due to the decrease in research and
development costs, as a result of our adoption of operating efficiencies and the impact of our October 2002 workforce reduction discussed above, and
the receipt of a $2.5 million payment from Bayer Corporation in March 2003, which was recorded as deferred revenue.
For the years ended December 31, 2002 and June 30,
2001, net cash used in operating activities was $24.2 million and $15.2 million, respectively. The change in cash used in operating activities between
these two comparable periods was primarily due to the increase in our net loss as a result of the increase in our research and development costs due to
increased staff and expanded product development programs, partially offset by a decrease in accrued interest and an increase in accounts payable and
other liabilities.
During the six-month period ended December 31, 2001
and unaudited six-month period ended December 31, 2000, net cash used in operating activities was $8.3 million and $7.4 million, respectively. The
change in cash used in operating activities between the comparable six-month periods was primarily due to the increase in our net loss as a result of
the increase in our research and development costs due to increased staff and expanded product development programs, partially offset by a decrease in
accrued interest and an increase in accounts payable and other liabilities.
For the year ended December 31, 2003, net cash
provided by investing and financing activities was $13.1 million and $718,000, respectively. The cash provided by investing activities consisted of
maturities, net of purchases, of available-for-sale securities of $14.1 million, which we used to fund our operating activities, offset in part by
purchases of property and equipment of $555,000 and increases in restricted investments of $428,000. The cash provided by financing activities
consisted of proceeds from the exercise of stock options and warrants during the year.
For the year ended December 31, 2002, net cash
provided by investing and financing activities was $18.0 million and $860,000, respectively. The cash provided by investing activities consisted of
maturities, net of purchases, of available-for-sale securities of $24.6 million, which we used to fund our operating activities, offset in part by
purchases of property and equipment of $5.0 million and increases in restricted investments of $1.5 million. The cash provided by financing activities
consisted of proceeds from the exercise of stock options and warrants during the year.
During the six-month transition period ended
December 31, 2001, approximately $12.3 million and $3.1 million, were provided by investing and financing activities, respectively. The cash provided
by investing activities consisted of maturities, net of purchases, of available for sale securities, which we used to fund our operating activities,
offset in part by purchases of property and equipment of $5.5 million and increases in restricted investments of $3.0 million. The cash provided by
financing activities primarily consisted of additional borrowings from our revolving line of credit to provide funding for construction related
activities.
For the year ended June 30, 2001, approximately
$103.5 million was provided by financing activities and $95.6 million was used by investing activities. The cash provided by financing activities,
which was used in investing activities and to fund our operating activities, primarily consisted of proceeds from the issuance of common stock during a
public offering in November 2000 and in connection to our collaboration agreement with Bayer in March 2001. The cash used by investing activities
consisted of purchases, net of maturities, of available for sale securities of $82.9 million, purchases of property and equipment of $9.7 million and
increases in restricted investments of $3.0 million.
We believe we will continue to require substantial
additional funding in order to complete the research and development activities currently contemplated and to commercialize our proposed products. We
believe that our capital resources at December 31, 2003 will be adequate to fund our current operating needs over the next three to four years.
However, this forward-looking statement is based upon our current plans and assumptions regarding our future operating and capital requirements, which
may change. Our future operating and capital requirements will depend on many factors, including:
• |
|
continued scientific progress in research and development
programs; |
• |
|
the scope and results of preclinical studies and clinical
trials; |
• |
|
the time and costs involved in obtaining regulatory
approvals; |
• |
|
the costs involved in filing, prosecuting and enforcing patents
claims and other intellectual property rights; |
• |
|
competing technological developments; |
36
• |
|
the cost of manufacturing scale-up; |
• |
|
the costs of commercialization activities; and |
• |
|
other factors which may not be within our control. |
We intend to continue to seek additional funding
through public or private equity or debt financing, when market conditions allow, or through additional collaborative arrangements with corporate
partners. If we raise additional funds by issuing equity securities, there may be further dilution to existing stockholders. We cannot assure our
investors that we will be able to enter into such financing arrangements on acceptable terms or at all. Without such additional funding, we may be
required to delay, reduce the scope of, or eliminate one or more of our research or development programs.
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk
Our exposure to market rate risk for changes in
interest rates relates primarily to our investment portfolio and our long-term debt. We do not hold derivative financial investments, derivative
commodity investments or other financial investments or engage in foreign currency hedging or other transactions that exposes us to other market risks.
None of our investments are held for trading purposes. Our investment objectives are focused on preservation of principal and liquidity. By policy, we
manage our exposure to market risks by limiting investments to high quality issuers and highly liquid instruments with effective maturities of less
than three years, and an average aggregate portfolio duration of approximately one year. Our entire portfolio is classified as available-for-sale and,
as of December 31, 2003, consisted of approximately 93% fixed-rate securities and 7% variable-rate securities. This compares to approximately 84%
fixed-rate securities and 16% variable-rate securities at December 31, 2002.
We have evaluated the risk associated with our
portfolios of investments in marketable securities and have deemed this market risk to be immaterial. If market interest rates were to increase by 100
basis points, or 1%, from their December 31, 2003 levels, we estimate that the fair value of our securities portfolio would decline by approximately
$1.1 million. Our estimated exposure at December 31, 2003 is lower than our estimated $1.3 million exposure at December 31, 2002 due to the reduction
in size of our overall portfolio. The modeling technique used measures duration risk sensitivity to estimate the potential change in fair value arising
from an immediate hypothetical shift in market rates and quantifies the ending fair market value including principal and accrued
interest.
Our long-term debt includes a $10.0 million
revolving line of credit due June 1, 2005, of which we have drawn down $8.0 million in cash that will need to be repaid. Interest charged on the
borrowing is based on LIBOR and is reset in three-month increments based on the date of each original drawdown. As of December 31, 2003, the average
annual rate of interest charged on the borrowing was approximately 2.75%.
37
Item 8. Financial Statements and Supplementary
Data
INDEX TO FINANCIAL STATEMENTS
The following financial statements are filed as part
of this Report on Form 10-K. Condensed supplementary data for each of the quarters in the years ended December 31, 2003 and 2002 are set forth under
Note 12 of our financial statements.
|
|
|
|
Page
|
Report of
Ernst & Young LLP, Independent Auditors |
|
|
|
39 |
Balance
Sheets |
|
|
|
40 |
Statements of
Operations |
|
|
|
41 |
Statements of
Stockholders’ Equity |
|
|
|
42 |
Statements of
Cash Flows |
|
|
|
48 |
Notes to
Financial Statements |
|
|
|
50 |
38
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders of Avigen, Inc.
We have audited the accompanying balance sheets of
Avigen, Inc. (a development stage company) as of December 31, 2003 and 2002, and the related statements of operations, stockholders’ equity and
cash flows for the years ended December 31, 2003 and 2002, the six months ended December 31, 2001, the fiscal year ended June 30, 2001 and for the
period from inception (October 22, 1992) through December 31, 2003. These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the financial position of Avigen, Inc. at December 31, 2003 and 2002, and the results of its operations
and its cash flows for the years ended December 31, 2003 and 2002, the six months ended December 31, 2001, the fiscal year ended June 30, 2001 and for
the period from inception (October 22, 1992) through December 31, 2003, in conformity with accounting principles generally accepted in the United
States.
/s/ ERNST & YOUNG LLP
Palo Alto, California
January 30, 2004
39
AVIGEN, INC.
(a development stage company)
BALANCE
SHEETS
(in thousands, except share and per share information)
|
|
|
|
December
31,
|
|
|
|
|
|
2003
|
|
2002
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
|
|
$ |
2,384 |
|
|
$ |
7,879 |
|
Available-for-sale securities |
|
|
|
|
84,566 |
|
|
|
99,845 |
|
Accrued
interest |
|
|
|
|
774 |
|
|
|
993 |
|
Prepaid
expenses and other current assets |
|
|
|
|
444 |
|
|
|
458 |
|
Total
current assets |
|
|
|
|
88,168 |
|
|
|
109,175 |
|
Restricted
investments |
|
|
|
|
11,928 |
|
|
|
11,500 |
|
Property
and equipment, net |
|
|
|
|
15,641 |
|
|
|
18,726 |
|
Deposits
and other assets |
|
|
|
|
858 |
|
|
|
1,285 |
|
Total
assets |
|
|
|
$ |
116,595 |
|
|
$ |
140,686 |
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and other accrued liabilities |
|
|
|
$ |
1,140 |
|
|
$ |
1,156 |
|
Accrued
compensation and related expenses |
|
|
|
|
477 |
|
|
|
621 |
|
Deferred
revenue—current |
|
|
|
|
500 |
|
|
|
— |
|
Total
current liabilities |
|
|
|
|
2,117 |
|
|
|
1,777 |
|
Long-term
loan payable |
|
|
|
|
8,000 |
|
|
|
8,000 |
|
Deferred
rent |
|
|
|
|
967 |
|
|
|
852 |
|
Deferred
revenue |
|
|
|
|
1,625 |
|
|
|
— |
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value, 5,000,000 shares authorized, none issued and
outstanding, in 2003 and 2002 |
|
|
|
|
— |
|
|
|
— |
|
Common
stock, $0.001 par value, 50,000,000 shares authorized at December 31,
2003 and 2002, and 20,276,394 and 20,100,546 shares issued and outstanding
at December 31, 2003 and 2002, respectively |
|
|
|
|
20 |
|
|
|
20 |
|
Additional
paid-in capital |
|
|
|
|
236,120 |
|
|
|
235,337 |
|
Accumulated
other comprehensive income |
|
|
|
|
402 |
|
|
|
1,582 |
|
Deficit
accumulated during development stage |
|
|
|
|
(132,656 |
) |
|
|
(106,882 |
) |
Total
stockholders’ equity |
|
|
|
|
103,886 |
|
|
|
130,057 |
|
Total
liabilities and stockholders’ equity |
|
|
|
$ |
116,595 |
|
|
$ |
140,686 |
|
See accompanying notes.
40
AVIGEN, INC.
(a development stage company)
STATEMENTS OF
OPERATIONS
(in thousands, except for share and per share information)
|
|
|
|
Year
Ended
December 31,
|
|
Six
Months Ended
December 31,
|
|
Year
Ended
June 30,
|
|
Period
from
October 22,
1992
(inception)
Through
December 31,
2003
|
|
|
|
|
|
2003
|
|
2002
|
|
2001
|
|
2000
|
|
2001
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
Revenue |
|
|
|
$ |
463 |
|
|
$ |
57 |
|
|
$ |
8 |
|
|
$ |
30 |
|
|
$ |
116 |
|
|
$ |
1,250 |
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development |
|
|
|
|
21,805 |
|
|
|
24,809 |
|
|
|
11,465 |
|
|
|
6,173 |
|
|
|
17,041 |
|
|
|
108,161 |
|
General
and administrative |
|
|
|
|
7,399 |
|
|
|
8,146 |
|
|
|
3,957 |
|
|
|
3,159 |
|
|
|
6,761 |
|
|
|
43,823 |
|
In-license
fees |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,034 |
|
Total
operating expenses |
|
|
|
|
29,204 |
|
|
|
32,955 |
|
|
|
15,422 |
|
|
|
9,332 |
|
|
|
23,802 |
|
|
|
157,018 |
|
Loss
from operations |
|
|
|
|
(28,741 |
) |
|
|
(32,898 |
) |
|
|
(15,414 |
) |
|
|
(9,302 |
) |
|
|
(23,686 |
) |
|
|
(155,768 |
) |
Interest
expense |
|
|
|
|
(250 |
) |
|
|
(278 |
) |
|
|
(204 |
) |
|
|
(38 |
) |
|
|
(180 |
) |
|
|
(2,171 |
) |
Interest
income |
|
|
|
|
3,282 |
|
|
|
5,569 |
|
|
|
4,316 |
|
|
|
2,860 |
|
|
|
7,907 |
|
|
|
25,405 |
|
Other
expense, net |
|
|
|
|
(65 |
) |
|
|
(132 |
) |
|
|
(17 |
) |
|
|
(4 |
) |
|
|
(55 |
) |
|
|
(122 |
) |
Net
loss |
|
|
|
$ |
(25,774 |
) |
|
$ |
(27,739 |
) |
|
$ |
(11,319 |
) |
|
$ |
(6,484 |
) |
|
$ |
(16,014 |
) |
|
$ |
(132,656 |
) |
Basic
and diluted net loss per
common share |
|
|
|
$ |
(1.28 |
) |
|
$ |
(1.38 |
) |
|
$ |
(0.57 |
) |
|
$ |
(0.37 |
) |
|
$ |
(0.85 |
) |
|
|
|
|
Shares
used in basic and diluted net loss per common share calculation |
|
|
|
|
20,149,214 |
|
|
|
20,080,998 |
|
|
|
19,959,941 |
|
|
|
17,745,484 |
|
|
|
18,730,437 |
|
|
|
|
|
See accompanying notes.
41
AVIGEN, INC.
(a development stage company)
STATEMENTS OF
STOCKHOLDERS’ EQUITY
Period from October 22, 1992 (inception) through December 31, 2003
(in thousands, except for share
information)
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Class
B
Convertible
Common Stock
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Gain (Loss)
|
|
Deficit
Accumulated
During the
Development
Stage
|
|
Total
Stockholders’
Equity
|
Balance
at October 22, 1992 (inception) |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Issuance
of common stock at $.004 per share in November and December 1992 |
|
|
— |
|
|
|
— |
|
|
|
896,062 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
Issuance
of common stock at $.554 per share from January to June 1993 for services
rendered |
|
|
— |
|
|
|
— |
|
|
|
20,316 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11 |
|
|
|
— |
|
|
|
— |
|
|
|
11 |
|
Issuance
of common stock at $.004 to $.222 per share from November 1992 to March
1993 for cash |
|
|
— |
|
|
|
— |
|
|
|
1,003,406 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
54 |
|
|
|
— |
|
|
|
— |
|
|
|
55 |
|
Issuance
of Class B common stock at $.004 per share in December 1992 for cash |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
90,293 |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
Issuance
of Series A preferred stock at $4.43 per share from March to June 1993
for cash (net of issuance costs of $410,900) |
|
|
678,865 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,595 |
|
|
|
— |
|
|
|
— |
|
|
|
2,596 |
|
Issuance
of Series A preferred stock at $3.85 per share in March 1993 for cancellation
of note payable and accrued interest |
|
|
68,991 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
266 |
|
|
|
— |
|
|
|
— |
|
|
|
266 |
|
Issuance
of common stock at $.004 per share in November 1993 pursuant to antidilution
rights |
|
|
— |
|
|
|
— |
|
|
|
22,869 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
Issuance
of Series A preferred stock at $4.43 per share from July to November 1993
for cash and receivable (net of issuance costs of $187,205) |
|
|
418,284 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,665 |
|
|
|
— |
|
|
|
— |
|
|
|
1,665 |
|
Issuance
of Series B preferred stock at $5.54 per share in March 1994 for cash
(net of issuance costs of $34,968) |
|
|
128,031 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
674 |
|
|
|
— |
|
|
|
— |
|
|
|
674 |
|
Issuance
of Series C preferred stock at $4.87 per share from July 1994 to June
1995 for cash and receivables (net of issuance costs of $259,620) |
|
|
739,655 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,344 |
|
|
|
— |
|
|
|
— |
|
|
|
3,345 |
|
Issuance
of Series C preferred stock at $4.87 per share in June 1995 for cancellation
of notes payable |
|
|
35,500 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
173 |
|
|
|
— |
|
|
|
— |
|
|
|
173 |
|
Net
loss and comprehensive loss from inception to June 30, 1995 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,608 |
) |
|
|
(8,608 |
) |
Balance
at June 30, 1995 |
|
|
2,069,326 |
|
|
|
2 |
|
|
|
1,942,653 |
|
|
|
2 |
|
|
|
90,293 |
|
|
|
— |
|
|
|
8,788 |
|
|
|
— |
|
|
|
(8,608 |
) |
|
|
184 |
|
See accompanying notes.
42
AVIGEN, INC.
(a development stage company)
STATEMENTS OF
STOCKHOLDERS’ EQUITY (Continued)
Period from October 22, 1992 (inception) through December 31, 2003
(in thousands, except for
share information)
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Class
B
Convertible
Common Stock
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Gain (Loss)
|
|
Deficit
Accumulated
During the
Development
Stage
|
|
Total
Stockholders’
Equity
|
Issuance
of Series C preferred stock at $4.87 per share in July 1995 for cash (net
of issuance costs of $26,000) |
|
|
41,042 |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
174 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
174 |
|
Issuance
of Series D preferred stock at $7.09 per share from October 1995 to February
1996 for cash (net of issuance costs of $25,279) |
|
|
205,351 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,430 |
|
|
|
— |
|
|
|
— |
|
|
|
1,430 |
|
Issuance
of Series D preferred stock at $7.09 per share in March 1996 in settlement
of accounts payable |
|
|
22,574 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
160 |
|
|
|
— |
|
|
|
— |
|
|
|
160 |
|
Issuance
of common stock at $.004 per share in March 1996 pursuant to antidilution
rights |
|
|
— |
|
|
|
— |
|
|
|
17,630 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
Issuance
of stock options in February 1996 in settlement of certain accrued liabilities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
137 |
|
|
|
— |
|
|
|
— |
|
|
|
137 |
|
Conversion
of Class B common stock to common stock |
|
|
— |
|
|
|
— |
|
|
|
231,304 |
|
|
|
1 |
|
|
|
(90,293 |
) |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance
of warrants to purchase common stock in connection with 1996 bridge financing
in March 1996 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
300 |
|
|
|
— |
|
|
|
— |
|
|
|
300 |
|
Conversion
of preferred stock to common stock in May 1996 |
|
|
(2,338,293 |
) |
|
|
(2 |
) |
|
|
2,355,753 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
Issuance
of common stock at $8.00 per share in connection with the May 1996 initial
public offering (net of issuance costs of $798,414 and underwriting discount
of $1,500,000) |
|
|
— |
|
|
|
— |
|
|
|
2,500,000 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
17,699 |
|
|
|
— |
|
|
|
— |
|
|
|
17,701 |
|
Proceeds
from exercise of options at $0.44 per share in June 1996 |
|
|
— |
|
|
|
— |
|
|
|
6,178 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
Repurchase
of common stock |
|
|
— |
|
|
|
— |
|
|
|
(18,325 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
Deferred
compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
164 |
|
|
|
— |
|
|
|
— |
|
|
|
164 |
|
Amortization
of deferred compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(128 |
) |
|
|
— |
|
|
|
— |
|
|
|
(128 |
) |
Net
loss and comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,097 |
) |
|
|
(4,097 |
) |
Balance
at June 30, 1996 |
|
|
— |
|
|
|
— |
|
|
|
7,035,193 |
|
|
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
28,725 |
|
|
|
— |
|
|
|
(12,705 |
) |
|
|
16,027 |
|
See accompanying notes.
43
AVIGEN, INC.
(a development stage company)
STATEMENTS OF
STOCKHOLDERS’ EQUITY (Continued)
Period from October 22, 1992 (inception) through December 31, 2003
(in thousands, except for
share information)
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Class
B
Convertible
Common Stock
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Gain (Loss)
|
|
Deficit
Accumulated
During the
Development
Stage
|
|
Total
Stockholders’
Equity
|
Issuance
of common stock at $8.00 per share in July 1996 in connection with the
exercise of underwriters’ over-allotment option (net of underwriting
discount of $150,000) |
|
|
— |
|
|
$ |
— |
|
|
|
250,000 |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
1,850 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,850 |
|
Proceeds
from exercise of options at $0.44 to $0.71 per share |
|
|
— |
|
|
|
— |
|
|
|
3,387 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
Amortization
of deferred compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
41 |
|
|
|
— |
|
|
|
— |
|
|
|
41 |
|
Net
loss and comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,578 |
) |
|
|
(5,578 |
) |
Balance
at June 30, 1997 |
|
|
— |
|
|
|
— |
|
|
|
7,288,580 |
|
|
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
30,617 |
|
|
|
— |
|
|
|
(18,283 |
) |
|
|
12,341 |
|
Proceeds
from exercise of options at $0.44 to $0.71 per share |
|
|
— |
|
|
|
— |
|
|
|
17,278 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10 |
|
|
|
— |
|
|
|
— |
|
|
|
10 |
|
Amortization
of deferred compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
41 |
|
|
|
— |
|
|
|
— |
|
|
|
41 |
|
Compensation
expense related to options granted for services |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
68 |
|
|
|
— |
|
|
|
— |
|
|
|
68 |
|
Net
loss and comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,877 |
) |
|
|
(8,877 |
) |
Balance
at June 30, 1998 |
|
|
— |
|
|
|
— |
|
|
|
7,305,858 |
|
|
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
30,736 |
|
|
|
— |
|
|
|
(27,160 |
) |
|
|
3,583 |
|
Proceeds
from exercise of options at $0.44 to $4.31 per share |
|
|
— |
|
|
|
— |
|
|
|
181,045 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
222 |
|
|
|
— |
|
|
|
— |
|
|
|
222 |
|
Amortization
of deferred compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
41 |
|
|
|
— |
|
|
|
— |
|
|
|
41 |
|
Issuance
of common stock at $2.25–$2.94 per share and warrants in August to
September 1998 in connection with a Private Placement (net of issuance
cost of $233,584) |
|
|
— |
|
|
|
— |
|
|
|
1,306,505 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
2,734 |
|
|
|
— |
|
|
|
— |
|
|
|
2,735 |
|
Issuance
of common stock at $3.81–$4.88 per share and warrants in December
1998 in connection with a Private Placement (net of issuance cost of $438,183) |
|
|
— |
|
|
|
— |
|
|
|
1,367,280 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
5,195 |
|
|
|
— |
|
|
|
— |
|
|
|
5,197 |
|
Issuance
of common stock at $5.50–$6.00 per share and warrants in February
to April 1999 in connection with a Private Placement (net of issuance
cost of $1,033,225) |
|
|
— |
|
|
|
— |
|
|
|
2,198,210 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
12,154 |
|
|
|
— |
|
|
|
— |
|
|
|
12,156 |
|
Net
loss and comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,611 |
) |
|
|
(9,611 |
) |
Balance
at June 30, 1999 |
|
|
— |
|
|
|
— |
|
|
|
12,358,898 |
|
|
|
12 |
|
|
|
— |
|
|
|
— |
|
|
|
51,082 |
|
|
|
— |
|
|
|
(36,771 |
) |
|
|
14,323 |
|
See accompanying notes.
44
AVIGEN, INC.
(a development stage company)
STATEMENTS OF
STOCKHOLDERS’ EQUITY (Continued)
Period from October 22, 1992 (inception) through December 31, 2003
(in thousands, except for
share information)
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Class
B
Convertible
Common Stock
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Gain (Loss)
|
|
Deficit
Accumulated
During the
Development
Stage
|
|
Total
Stockholders’
Equity
|
Proceeds
from exercise of options at $0.44 to $15.50 |
|
|
— |
|
|
$ |
— |
|
|
|
440,259 |
|
|
$ |
1 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
1,533 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,534 |
|
Proceeds
from exercise of warrants at $2.81 to $31.95 |
|
|
— |
|
|
|
— |
|
|
|
1,017,215 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
8,427 |
|
|
|
— |
|
|
|
— |
|
|
|
8,428 |
|
Amortization
of deferred compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
Compensation
expense related to options granted for services |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
89 |
|
|
|
— |
|
|
|
— |
|
|
|
89 |
|
Warrants
granted for patent licenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,182 |
|
|
|
— |
|
|
|
— |
|
|
|
3,182 |
|
Warrants
granted for building lease |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,738 |
|
|
|
— |
|
|
|
— |
|
|
|
1,738 |
|
Issuance
of common stock at $16.19 to $25.56 per share and warrants in October
and November 1999 in connection with a Private Placement (net of issuance
cost of $2,804,255) |
|
|
— |
|
|
|
— |
|
|
|
2,033,895 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
37,220 |
|
|
|
— |
|
|
|
— |
|
|
|
37,222 |
|
Issuance
of common stock at $26 per share in April and May 2000 in connection with
a Public Offering (net of issuance cost of $2,288,966) |
|
|
— |
|
|
|
— |
|
|
|
1,150,000 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
27,610 |
|
|
|
— |
|
|
|
— |
|
|
|
27,611 |
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(15,039 |
) |
|
|
(15,039 |
) |
Net
unrealized loss on available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(80 |
) |
|
|
— |
|
|
|
(80 |
) |
Comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,119 |
) |
Balance
at June 30, 2000 |
|
|
— |
|
|
|
— |
|
|
|
17,000,267 |
|
|
|
17 |
|
|
|
— |
|
|
|
— |
|
|
|
130,886 |
|
|
|
(80 |
) |
|
|
(51,810 |
) |
|
|
79,013 |
|
See accompanying notes.
45
AVIGEN, INC.
(a development stage company)
STATEMENTS OF
STOCKHOLDERS’ EQUITY (Continued)
Period from October 22, 1992 (inception) through December 31, 2003
(in thousands, except for
share information)
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Class
B
Convertible
Common Stock
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Gain (Loss)
|
|
Deficit
Accumulated
During the
Development
Stage
|
|
Total
Stockholders’
Equity
|
Proceeds
from exercise of options at $0.44 to $34.00 per share |
|
|
— |
|
|
$ |
— |
|
|
|
165,700 |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
869 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
869 |
|
Proceeds
from exercise of warrants at $2.18 to $23.43 |
|
|
— |
|
|
|
— |
|
|
|
174,255 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
771 |
|
|
|
— |
|
|
|
— |
|
|
|
772 |
|
Compensation
expense related to options granted for services |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
336 |
|
|
|
— |
|
|
|
— |
|
|
|
336 |
|
Issuance
of common stock at $37.50 to $45.06 per share in November 2000 Public
Offering (net of issuance cost of $4,622,188) |
|
|
— |
|
|
|
— |
|
|
|
2,291,239 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
86,084 |
|
|
|
— |
|
|
|
— |
|
|
|
86,086 |
|
Issuance
of common stock at $47.82 per share in February 2001 pursuant to a collaboration
agreement |
|
|
— |
|
|
|
— |
|
|
|
313,636 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,000 |
|
|
|
— |
|
|
|
— |
|
|
|
15,000 |
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(16,014 |
) |
|
|
(16,014 |
) |
Net
unrealized gain on available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,120 |
|
|
|
— |
|
|
|
1,120 |
|
Comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,894 |
) |
Balance
at June 30, 2001 |
|
|
— |
|
|
|
— |
|
|
|
19,945,097 |
|
|
|
20 |
|
|
|
— |
|
|
|
— |
|
|
|
233,946 |
|
|
|
1,040 |
|
|
|
(67,824 |
) |
|
|
167,182 |
|
Proceeds
from exercise of options at $2.13 to $6.75 per share |
|
|
— |
|
|
|
— |
|
|
|
11,282 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
60 |
|
|
|
— |
|
|
|
— |
|
|
|
60 |
|
Proceeds
from exercise of warrants $7.50 per share |
|
|
— |
|
|
|
— |
|
|
|
9,955 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
75 |
|
|
|
— |
|
|
|
— |
|
|
|
75 |
|
Compensation
expense related to options granted for services |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
179 |
|
|
|
— |
|
|
|
— |
|
|
|
179 |
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11,319 |
) |
|
|
(11,319 |
) |
Net
unrealized gain on available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,173 |
|
|
|
— |
|
|
|
1,173 |
|
Comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,146 |
) |
Balance
at December 31, 2001 |
|
|
— |
|
|
|
— |
|
|
|
19,966,334 |
|
|
|
20 |
|
|
|
— |
|
|
|
— |
|
|
|
234,260 |
|
|
|
2,213 |
|
|
|
(79,143 |
) |
|
|
157,350 |
|
Proceeds
from exercise of options at $1.875 to $8.525 per share |
|
|
— |
|
|
|
— |
|
|
|
34,627 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
113 |
|
|
|
— |
|
|
|
— |
|
|
|
113 |
|
Proceeds
from exercise of warrants at $7.50 per share |
|
|
— |
|
|
|
— |
|
|
|
99,585 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
747 |
|
|
|
— |
|
|
|
— |
|
|
|
747 |
|
Compensation
expense related to options granted for services |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
217 |
|
|
|
— |
|
|
|
— |
|
|
|
217 |
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(27,739 |
) |
|
|
(27,739 |
) |
Net
unrealized loss on available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(631 |
) |
|
|
— |
|
|
|
(631 |
) |
Comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,370 |
) |
Balance
at December 31, 2002 |
|
|
— |
|
|
|
— |
|
|
|
20,100,546 |
|
|
|
20 |
|
|
|
— |
|
|
|
— |
|
|
|
235,337 |
|
|
|
1,582 |
|
|
|
(106,882 |
) |
|
|
130,057 |
|
See accompanying notes.
46
AVIGEN, INC.
(a development stage company)
STATEMENTS OF
STOCKHOLDERS’ EQUITY (Continued)
Period from October 22, 1992 (inception) through December 31, 2003
(in thousands, except for
share information)
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Class
B
Convertible
Common Stock
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Gain (Loss)
|
|
Deficit
Accumulated
During the
Development
Stage
|
|
Total
Stockholders’
Equity
|
Proceeds
from exercise of options at $2.12 to $6.50 per share |
|
|
— |
|
|
|
— |
|
|
|
63,746 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
242 |
|
|
|
— |
|
|
|
— |
|
|
|
242 |
|
Proceeds
from exercise of warrants at $2.47 to $6.09 per share |
|
|
— |
|
|
|
— |
|
|
|
112,102 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
476 |
|
|
|
— |
|
|
|
— |
|
|
|
476 |
|
Compensation
expense related to options granted for services |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
65 |
|
|
|
— |
|
|
|
— |
|
|
|
65 |
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(25,774 |
) |
|
|
(25,774 |
) |
Net
unrealized loss on available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,180 |
) |
|
|
— |
|
|
|
(1,180 |
) |
Comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,954 |
) |
Balance
at December 31, 2003 |
|
|
— |
|
|
$ |
— |
|
|
|
20,276,394 |
|
|
$ |
20 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
236,120 |
|
|
$ |
402 |
|
|
$ |
(132,656 |
) |
|
$ |
103,886 |
|
See accompanying notes
See accompanying notes.
47
AVIGEN, INC.
(a development stage company)
STATEMENTS OF
CASH FLOWS
(in thousands)
|
|
|
|
Year Ended
December 31,
|
|
Six Months Ended
December 31,
|
|
|
|
|
|
2003
|
|
2002
|
|
2001
|
|
2000
|
|
Year Ended
June 30,
2001
|
|
Period from
October 22,
1992
(inception)
Through
December 31,
2003
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
|
$ |
(25,774 |
) |
|
$ |
(27,739 |
) |
|
$ |
(11,319 |
) |
|
$ |
(6,484 |
) |
|
$ |
(16,014 |
) |
|
$ |
(132,656 |
) |
Adjustments to
reconcile net loss to net cash
used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization |
|
|
|
|
3,640 |
|
|
|
3,136 |
|
|
|
1,167 |
|
|
|
309 |
|
|
|
1,203 |
|
|
|
12,367 |
|
Amortization
of deferred compensation |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
164 |
|
Non-cash rent
expense for warrants issued
in connection with the extension of the
building lease |
|
|
|
|
217 |
|
|
|
217 |
|
|
|
109 |
|
|
|
124 |
|
|
|
217 |
|
|
|
832 |
|
Amortization
of deferred rent |
|
|
|
|
115 |
|
|
|
294 |
|
|
|
167 |
|
|
|
— |
|
|
|
278 |
|
|
|
854 |
|
Non-cash
compensation expense for common stock, warrants, and stock options issued for services |
|
|
|
|
65 |
|
|
|
217 |
|
|
|
179 |
|
|
|
209 |
|
|
|
336 |
|
|
|
1,475 |
|
Warrants
issued for patent license |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,182 |
|
Changes in
operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
interest |
|
|
|
|
219 |
|
|
|
342 |
|
|
|
1,066 |
|
|
|
(1,104 |
) |
|
|
(1,462 |
) |
|
|
(590 |
) |
Prepaid
expenses and other current assets |
|
|
|
|
14 |
|
|
|
(60 |
) |
|
|
178 |
|
|
|
— |
|
|
|
(575 |
) |
|
|
(628 |
) |
Deposits and
other assets |
|
|
|
|
210 |
|
|
|
107 |
|
|
|
26 |
|
|
|
60 |
|
|
|
408 |
|
|
|
(26 |
) |
Accounts
payable, other accrued liabilities and accrued compensation and related expenses |
|
|
|
|
(160 |
) |
|
|
(724 |
) |
|
|
128 |
|
|
|
(468 |
) |
|
|
449 |
|
|
|
2,029 |
|
Deferred
revenue |
|
|
|
|
2,125 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,125 |
|
Net cash used
in operating activities |
|
|
|
|
(19,329 |
) |
|
|
(24,210 |
) |
|
|
(8,299 |
) |
|
|
(7,354 |
) |
|
|
(15,160 |
) |
|
|
(110,872 |
) |
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
property and equipment |
|
|
|
|
(555 |
) |
|
|
(5,049 |
) |
|
|
(5,492 |
) |
|
|
(4,540 |
) |
|
|
(9,666 |
) |
|
|
(27,711 |
) |
Increase in
restricted investments |
|
|
|
|
(428 |
) |
|
|
(1,500 |
) |
|
|
(3,000 |
) |
|
|
(3,000 |
) |
|
|
(3,000 |
) |
|
|
(11,928 |
) |
Purchases of
available-for-sale securities |
|
|
|
|
(84,834 |
) |
|
|
(82,242 |
) |
|
|
(60,817 |
) |
|
|
(64,704 |
) |
|
|
(177,757 |
) |
|
|
(625,415 |
) |
Maturities of
available-for-sale securities |
|
|
|
|
98,933 |
|
|
|
106,809 |
|
|
|
81,592 |
|
|
|
37,051 |
|
|
|
94,825 |
|
|
|
541,253 |
|
Net cash
provided by (used in) investing
activities |
|
|
|
|
13,116 |
|
|
|
18,018 |
|
|
|
12,283 |
|
|
|
(35,193 |
) |
|
|
(95,598 |
) |
|
|
(123,801 |
) |
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
long-term obligations |
|
|
|
|
— |
|
|
|
— |
|
|
|
3,000 |
|
|
|
1,000 |
|
|
|
1,000 |
|
|
|
10,133 |
|
Repayment of
long-term obligations |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,710 |
) |
Proceeds from
bridge financing |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,937 |
|
Repayment of
bridge financing |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,131 |
) |
Payments on
capital lease obligations |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(193 |
) |
|
|
(237 |
) |
|
|
(2,154 |
) |
Proceeds from
sale-leaseback of equipment |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,927 |
|
Proceeds from
issuance of preferred stock, net
of issuance costs |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,885 |
|
Proceeds from
warrants and options exercised |
|
|
|
|
718 |
|
|
|
860 |
|
|
|
135 |
|
|
|
859 |
|
|
|
1,640 |
|
|
|
13,551 |
|
Proceeds from
issuance of common stock, net
of issuance costs and repurchases |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
86,099 |
|
|
|
101,086 |
|
|
|
205,619 |
|
Net cash
provided by financing activities |
|
|
|
|
718 |
|
|
|
860 |
|
|
|
3,135 |
|
|
|
87,765 |
|
|
|
103,489 |
|
|
|
237,057 |
|
See accompanying notes.
48
AVIGEN, INC.
(a development stage company)
STATEMENTS OF
CASH FLOWS (Continued)
(in thousands)
|
|
|
|
Year Ended
December 31,
|
|
Six Months Ended
December 31,
|
|
|
|
|
|
2003
|
|
2002
|
|
2001
|
|
2000
|
|
Year Ended
June 30,
2001
|
|
Period from
October 22,
1992
(inception)
Through
December 31,
2003
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
Net (decrease)
increase in cash and cash
equivalents |
|
|
|
$ |
(5,495 |
) |
|
$ |
(5,332 |
) |
|
$ |
7,119 |
|
|
$ |
45,218 |
|
|
$ |
(7,269 |
) |
|
$ |
2,384 |
|
Cash and cash
equivalents, beginning
of period |
|
|
|
|
7,879 |
|
|
|
13,211 |
|
|
|
6,092 |
|
|
|
13,361 |
|
|
|
13,361 |
|
|
|
— |
|
Cash and cash
equivalents, end of period |
|
|
|
$ |
2,384 |
|
|
$ |
7,879 |
|
|
$ |
13,211 |
|
|
$ |
58,579 |
|
|
$ |
6,092 |
|
|
$ |
2,384 |
|
|
Supplemental
disclosure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of
preferred stock for cancellation
of accounts payable, notes payable and
accrued Interest |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
499 |
|
Issuance of
stock options for repayment of
certain accrued liabilities |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
137 |
|
Issuance of
warrants in connection with
bridge Financing |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
300 |
|
Issuance of
warrants in connection with
The extension of the building lease |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,738 |
|
Deferred
compensation related to stock
option Grants |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
164 |
|
Purchase of
property and equipment under
capital lease financing |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
226 |
|
Cash paid for
interest |
|
|
|
$ |
250 |
|
|
$ |
278 |
|
|
$ |
204 |
|
|
$ |
38 |
|
|
$ |
180 |
|
|
$ |
1,678 |
|
See accompanying notes.
49
AVIGEN, INC.
(a development stage company)
NOTES TO FINANCIAL
STATEMENTS
1. Summary of Significant Accounting
Policies
Description of Business and Basis of
Presentation
Avigen, Inc. was incorporated on October 22, 1992 in
Delaware and is focused on the development of pharmaceutical products for serious and chronic hematological and neurological diseases. We have
developed gene delivery technologies that are designed to generate the expression of therapeutic proteins within the body when administered to
patients. We are currently enrolling subjects in a phase I clinical trial for Coagulin-B, our gene therapy product candidate for the treatment of
hemophilia B, and have filed an IND application with the FDA for approval to initiate a clinical trial for AV201, our gene therapy product candidate
for Parkinson’s disease. Since our inception, our activities have consisted principally of acquiring product rights, raising capital, establishing
facilities and performing research and development. Accordingly, we are considered to be in the development stage. We operate in a single
segment.
At December 31, 2003, we had an accumulated deficit
of $132.7 million and expect to continue to incur substantial losses over the next several years while we continue in this development stage. We plan
to meet our capital requirements primarily through issuances of equity securities, research and development contract revenue, collaborative agreement
revenue, and in the longer term, revenue from approved product sales. We intend to seek additional funding through public or private equity or debt
financing, when market conditions allow. There can be no assurance that we will be able to enter into financing arrangements on acceptable terms in the
future, if at all.
In August 2001, we changed our fiscal year end from
June 30 to December 31, effective December 31, 2001.
Use of Estimates
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States requires our management to make judgments, assumptions and estimates that
affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ materially from those
estimates.
Cash and Cash Equivalents
We consider all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents. These amounts are recorded at cost, which approximates fair market
value.
Available-for-Sale
Securities
We invest our excess cash balances in marketable
securities, primarily corporate debt securities, federal agency obligations, asset-backed securities, and municipal bonds, with the primary investment
objectives of preservation of principal, a high degree of liquidity, and maximum total return. In accordance with statement of Financial Accounting
Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” we have classified our investments in
marketable securities as available-for-sale. Available-for-sale securities are reported at market value and unrealized holding gains and losses, net of
the related tax effect, if any, are excluded from earnings and are reported in other comprehensive income and as a separate component of
stockholders’ equity until realized. A decline in the market value of a security below its cost that is deemed to be other than temporary is
charged to earnings, and would result in the establishment of a new cost basis for the security.
Our available-for-sale securities consist
principally of obligations with a minimum short-term rating of A1/P1 and a minimum long-term rating of A- and with effective maturities of less than
three years. The cost of securities sold is based on the specific identification method. Interest on securities classified as available for sale is
included in interest income.
Restricted Investments
In June 2000, we initially entered into a financing
arrangement to support construction related activities. Under this arrangement, we have pledged $10.0 million of our portfolio of available-for-sale
securities to secure this long-term obligation.
50
AVIGEN, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
— (Continued)
In January 2002, we also entered into equipment
operating leases for certain research and development equipment. Under the terms of these leases, we have pledged $1.5 million of our portfolio of
available-for-sale securities to secure these equipment operating leases.
In May 2003, we secured two letters of credit to
serve as security deposits in connection with a building lease that became effective July 1, 2003. This building lease was executed in February 2000
and replaced our previous building lease and sublease on the same premises that expired June 30, 2003 under the original terms of the agreements. Under
the terms of these letters of credit, we have pledged $428,000 of our portfolio of available-for-sale securities to secure these letters of
credit.
At December 31, 2003 and 2002, $11.9 million and
$11.5 million, respectively, were classified as restricted investments in long term assets, representing the combined aggregate portion of our
portfolio of available-for-sale securities that were pledged in connection with these long-term liabilities.
Concentration of Credit Risk
Cash, cash equivalents, available-for-sale
securities and restricted investments consist of financial instruments that potentially subject us to concentrations of credit risk to the extent of
the value of the assets recorded on the balance sheet. We believe that we have established guidelines for investment of our excess cash that maintain
safety and liquidity through our policies on diversification among asset classes and issuers, as well as across investment maturities.
Property and Equipment
Property and equipment are stated at cost, less
accumulated depreciation. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the respective
assets, of in the case of leasehold improvements, over the lesser of the estimated useful lives or the remaining lease terms. The estimated useful
lives of our property and equipment range from three to seven years. No impairments of property and equipment were required to be recognized during the
years ended December 31, 2003 and 2002, the six months ended December 31, 2001, and the fiscal year ended June 30, 2001.
Expenses for repairs and maintenance are charged to
operations as incurred. Upon retirement, disposition, or sale, the cost of the property and equipment disposed of and the related accumulated
depreciation are deducted from the accounts, and any resulting gain or loss is credited or charged to operations.
Revenue Recognition
We record revenue associated with up-front license,
technology access, and research and development funding payments under collaboration agreements for the development of our product candidates ratably
over the relevant periods specified in the agreements, generally the development phase. The development phase can be defined as a specified period of
time, however, in certain cases, the collaborative agreement specifies a development phase that culminates with milestone objectives but does not have
a fixed date, which requires us to estimate the development period of those product candidates. The estimate of the development period may be revised
as additional information is received or actual results differ from expectations. In March 2003, we received a $2.5 million payment from Bayer
Corporation under the terms of our collaboration agreement for the development of Coagulin-B, our product candidate for the treatment of hemophilia B.
This amount was recorded as deferred revenue and is being recognized ratably over the estimated development period of five years for this product, or
approximately $125,000 per quarter. In 2003, we recognized $375,000 as revenue in our statements of operations.
We record grant revenue in the period in which the
revenue is earned as defined by the grant agreement. Since our inception, we have recognized approximately $690,000 of grant revenue, which includes
amounts earned pursuant to reimbursements under government grants, of which all have come from the National Institutes of Health.
51
AVIGEN, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
— (Continued)
We record royalty revenue from license agreements as
earned in accordance with the contract terms when third-party results can be reliably determined and collectibility is reasonably assured. We have
recorded approximately $29,000 in royalty revenue in connection with sales from a third party of products that utilize our AAV technologies over the
last three years. These products are sold for research purposes only and were primarily sold within the U.S.
Non-refundable product license fees, including fees
associated with research license agreements, for which we have no further performance obligations, and no continuing involvement requirements, are
recognized on the earlier of when the payments are received or when collection is assured. We have recorded approximately $155,000 in research license
fees since our inception.
Comprehensive Loss
Components of other comprehensive income, including
unrealized gains and losses on available-for-sale investments, were included as part of total comprehensive income. For all periods presented, we have
disclosed comprehensive income in the statement of stockholders’ equity.
Research and Development
Expenses
Research and development costs are charged to
expense in the period incurred and include related salaries and benefits, laboratory materials, clinical trial and related clinical-trial-manufacturing
costs, contract and outside service fees, and facilities and overhead costs. Research and development expenses consist of costs incurred for our
independent, as well as our collaborative, research and development activities.
Clinical development costs are a significant
component of research and development expenses. We accrue costs for clinical trial activities performed by third parties based upon estimates of the
percentage of work completed over the life of the individual study in accordance with agreements established with the clinical trial sites. We
determine our estimates through discussion with internal clinical personnel and outside service providers as to the progress or stage of completion of
trials or services and the agreed upon fee to be paid for such services. These estimates may or may not match the actual services performed by the
organizations as determined by patient enrollment levels and related activities. We monitor clinical trial activities to the extent possible; however,
if we underestimated activity levels associated with various studies at a given point in time, we could record significant research and development
expenses in future periods.
Income Taxes
Income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of existing
assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period of enactment. To
date, we have no history of earnings. Therefore, our net deferred tax asset has been fully offset by a valuation allowance.
Basic and Diluted Net Loss Per Common
Share
Basic net loss per common share is computed by
dividing net loss by the weighted-average number of common shares outstanding during the period. The computation of basic net loss per share for all
periods presented is derived from the information on the face of the statement of operations, and there are no reconciling items in either the
numerator or denominator.
Diluted net loss per common share is computed as
though all potential common shares that are dilutive were outstanding during the period using the treasury stock method, for the purposes of
calculating the weighted-average number of dilutive common shares outstanding during the year. Potential dilutive common shares consist of stock
options and warrants. Securities that could have potentially diluted basic earnings per common share, but were
52
AVIGEN, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
— (Continued)
excluded from the diluted net loss per common share computation because their
inclusion would have been anti-dilutive, were as follows:
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
|
2003
|
|
2002
|
|
Six Months Ended
December 31, 2001
|
|
Year Ended
June 30, 2001
|
Potential
dilutive stock options outstanding |
|
|
|
|
554,852 |
|
|
|
796,010 |
|
|
|
949,077 |
|
|
|
1,351,018 |
|
Potential
dilutive warrants to purchase common stock outstanding |
|
|
|
|
— |
|
|
|
242,086 |
|
|
|
456,599 |
|
|
|
772,866 |
|
Potential
dilutive common shares |
|
|
|
|
554,852 |
|
|
|
1,038,096 |
|
|
|
1,405,676 |
|
|
|
2,123,884 |
|
Outstanding
securities excluded from the potential dilutive common shares
calculation (1) |
|
|
|
|
4,512,838 |
|
|
|
3,477,720 |
|
|
|
3,259,131 |
|
|
|
1,449,496 |
|
(1) |
|
For purposes of computing the potential dilutive common shares,
we have excluded outstanding stock options and warrants to purchase common stock whose exercise prices exceed the average of the closing sale prices of
our common stock as reported on the NASDAQ National Market for the period. |
Impairment of Long-Lived
Assets
We regularly evaluate our long-lived assets for
indicators of possible impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully
recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its
eventual disposition are less than its carrying amount. Impairment, if any, is assessed using discounted cash flows. To date, we have not experienced
any such losses.
Reclassifications
We have reclassified certain prior year amounts to
conform to our current year’s presentation of restricted investments as a long-term asset and the classification of auction-rate securities as
available-for-sale securities instead of cash equivalents. These reclassifications had no impact on our results of operations.
Recently Issued Accounting Standards
In January 2003, the FASB issued FASB Interpretation
No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.” FIN 46 requires certain
variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. In December 2003, the FASB issued FIN 46R, a revision to FIN 46. FIN 46R provides a broad
deferral of the latest date by which all public entities must apply FIN 46 to certain variable interest entities to the first reporting period ending
after March 15, 2004. We do not expect the adoption of FIN 46 to have a material impact on our financial position, cash flows or results of
operations.
In May 2003, the FASB issued Statement No. 150,
“Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” FAS 150 changes the accounting for
certain financial instruments that, under previous guidance, issuers could account for as equity and requires that those instruments be classified as
liabilities (or assets in certain circumstances) in statements of financial position. For public companies, FAS 150 became effective at the beginning
of the first interim period beginning after June 15, 2003. The adoption of FAS 150 did not have a material impact on our financial position, cash
flows, or results of operations.
Stock-Based Compensation
We have elected to continue to follow Accounting
Principles Board Opinion No. 25 (or APB 25), “Accounting for Stock Issued to Employees,” and related interpretations, to account for
stock options granted to our employees
53
AVIGEN, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
— (Continued)
and directors. Under APB 25, using the prescribed intrinsic value method of accounting, no compensation expense
is recognized because the exercise price of the stock options equals the market price of the underlying stock on the date of the option
grant.
The information regarding net loss and loss per
common share as required by FAS 123 has been determined as if we had accounted for our employee stock options under the fair value method prescribed by
FAS 123. The resulting effect on net loss and loss per common share pursuant to FAS 123 is not
likely to be representative of the effects on net loss and loss per common share pursuant to FAS 123 in future years, since future years are likely to
include additional grants and the irregular impact of future years’ vesting.
The following table illustrates the effect on our
net loss and loss per common share if we had applied the fair value recognition provisions of FAS 123 to our stock-based employee
compensation:
|
|
|
|
Year Ended
December 31,
|
|
Six Months
Ended
December 31,
|
|
Year Ended
June 30,
|
|
|
|
|
|
2003
|
|
2002
|
|
2001
|
|
2001
|
Net
loss—as reported |
|
|
|
$ |
(25,774 |
) |
|
$ |
(27,739 |
) |
|
$ |
(11,319 |
) |
|
$ |
(16,014 |
) |
Add:
Stock-based employee compensation included in reported net loss |
|
|
|
|
28 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Less: Total
stock-based employee compensation expense determined under the fair-value-based method for all awards |
|
|
|
|
(9,941 |
) |
|
|
(12,202 |
) |
|
|
(7,282 |
) |
|
|
(10,134 |
) |
Net
loss—pro forma |
|
|
|
$ |
(35,687 |
) |
|
$ |
(49,941 |
) |
|
$ |
(18,601 |
) |
|
$ |
(26,148 |
) |
Net loss per
common share basic and diluted—as reported |
|
|
|
$ |
(1.28 |
) |
|
$ |
(1.38 |
) |
|
$ |
(0.57 |
) |
|
$ |
(0.85 |
) |
Net loss per
common share basic and diluted—pro forma |
|
|
|
$ |
(1.77 |
) |
|
$ |
(1.99 |
) |
|
$ |
(0.93 |
) |
|
$ |
(1.40 |
) |
During
the preparation of our Notes to the Financial Statements for the year ended December 31,
2003, we determined that the calculation of total stock-based employee compensation
expense determined under the fair-value-based method for the year ended December 31,
2002, the six months ended December 31, 2001 and the fiscal year ended June 30, 2001, as
reported in those respective years, inadvertently included data that overstated the
expected volatility used in those calculations. Accordingly, the amounts of the total
stock-based employee compensation expense determined under the fair-value-based method
reported under FAS 123 for the year ended December 31, 2002, the six months ended
December 31, 2001 and the year ended June 30, 2001 presented in the table above, and the
respective volatilities for those periods presented in the table below, have been
revised, resulting in decreases in the previously reported amounts of $2.8 million,
$1.6 million, and $2.2 million, respectively. This revision had no effect on our
previously reported results of operations or financial condition.
For purposes of disclosure pursuant to FAS 123, as
amended by FAS 148, the estimated fair value of our employee stock options is amortized to expense on a straight-line basis over the vesting period of
the options. We use the Black-Scholes option valuation model to estimate the fair value of our options on the date of grant. Options that were granted
during the years ended December 31, 2003 and 2002, the transition period ended December 31, 2001, and the fiscal year ended June 30, 2001 were valued
with the following weighted average assumptions:
54
AVIGEN, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
— (Continued)
|
|
|
|
Year Ended
December 31,
|
|
Six Months
Ended
December 31,
|
|
Year Ended
June 30,
|
|
|
|
|
|
2003
|
|
2002
|
|
2001
|
|
2001
|
Expected
volatility |
|
|
|
|
0.8343 |
|
|
|
1.0459 |
|
|
|
1.0616 |
|
|
|
1.0944 |
|
Risk free
interest rate |
|
|
|
|
2.97 |
% |
|
|
4.00 |
% |
|
|
4.50 |
% |
|
|
5.50 |
% |
Expected life
of options in years |
|
|
|
|
5 |
|
|
|
5 |
|
|
|
5 |
|
|
|
5 |
|
Expected
dividend yield |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
The Black-Scholes option valuation model was
developed for use in estimating the fair value of traded options and warrants that have no vesting restrictions and are fully transferable. In
addition, option valuation models, including Black-Scholes, require the input of highly subjective assumptions, including the expected stock price
volatility. Because our stock options and warrants are not traded, they have characteristics significantly different from those of traded options and
warrants, and because changes in the subjective input assumptions can materially affect the fair value estimate, in our opinion, the existing option
valuation models, including Black-Scholes, do not necessarily provide a reliable single measure of the fair value of our stock options and
warrants.
For equity awards to non-employees, including
lenders, lessors, and consultants, we also apply the Black-Scholes method to determine the fair value of such investments in accordance with FAS 123
and Emerging Issues
Task Force Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in
Conjunction with Selling, Goods, or Services.” The options and warrants granted to non-employees are re-measured as they vest and the
resulting value is recognized as an expense against our net loss over the period during which the services are received or the term of the related
financing.
2. Available-for-Sale Securities
The following is a summary of cash, restricted
investments, and available-for-sale securities as of December 31, 2003 (in thousands):
|
|
|
|
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
Cash |
|
|
|
$ |
2,384 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,384 |
|
Corporate
debt securities |
|
|
|
|
45,474 |
|
|
|
232 |
|
|
|
(25 |
) |
|
|
45,681 |
|
Federal
agency obligations |
|
|
|
|
24,813 |
|
|
|
81 |
|
|
|
(21 |
) |
|
|
24,873 |
|
Asset-backed
and other securities |
|
|
|
|
17,048 |
|
|
|
134 |
|
|
|
(3 |
) |
|
|
17,179 |
|
Short-term
municipals |
|
|
|
|
2,000 |
|
|
|
— |
|
|
|
— |
|
|
|
2,000 |
|
Treasury
obligations |
|
|
|
|
6,757 |
|
|
|
9 |
|
|
|
(5 |
) |
|
|
6,761 |
|
Total |
|
|
|
|
98,476 |
|
|
|
456 |
|
|
|
(54 |
) |
|
|
98,878 |
|
Amounts
reported as:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
|
|
|
2,384 |
|
|
|
— |
|
|
|
— |
|
|
|
2,384 |
|
Restricted
investments |
|
|
|
|
11,928 |
|
|
|
— |
|
|
|
— |
|
|
|
11,928 |
|
Available-for-sale securities |
|
|
|
$ |
84,164 |
|
|
$ |
456 |
|
|
$ |
(54 |
) |
|
$ |
84,566 |
|
The weighted average maturity of our investment
portfolio at December 31, 2003 was 405 days, with $46.3 million carrying an effective maturity of less than twelve months, and $52.5 million carrying
an effective maturity between one and three years.
55
AVIGEN, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
— (Continued)
The following is a summary of cash, restricted
investments, and available-for-sale securities as of December 31, 2002 (in thousands):
|
|
|
|
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
Cash |
|
|
|
$ |
3,578 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3,578 |
|
Corporate
debt securities |
|
|
|
|
47,780 |
|
|
|
437 |
|
|
|
(11 |
) |
|
|
48,206 |
|
Federal
agency obligations |
|
|
|
|
42,977 |
|
|
|
855 |
|
|
|
— |
|
|
|
43,832 |
|
Asset-backed
and other securities |
|
|
|
|
23,307 |
|
|
|
301 |
|
|
|
— |
|
|
|
23,608 |
|
Short-term
municipals |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Treasury
obligations |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
|
|
117,642 |
|
|
|
1,593 |
|
|
|
(11 |
) |
|
|
119,224 |
|
Amounts
reported as: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
|
|
|
7,879 |
|
|
|
— |
|
|
|
— |
|
|
|
7,879 |
|
Restricted
investments |
|
|
|
|
11,500 |
|
|
|
— |
|
|
|
— |
|
|
|
11,500 |
|
Available-for-sale securities |
|
|
|
$ |
98,263 |
|
|
$ |
1,593 |
|
|
$ |
(11 |
) |
|
$ |
99,845 |
|
The weighted average maturity of our investment
portfolio at December 31, 2002 was 421 days, with $56.3 million carrying an effective maturity of less than twelve months, and $62.9 million carrying
an effective maturity between one and three years.
Net realized gains were approximately $444,000 and
$822,000 for the years ended December 31, 2003 and 2002, respectively, and $650,000 for the six-month transition period ended December 31, 2001. Net
realized gains were not material for the year ended June 30, 2001.
3. Property and Equipment
Property and equipment consist of the following (in
thousands):
|
|
|
|
December 31,
|
|
|
|
|
|
2003
|
|
2002
|
Leasehold
improvements |
|
|
|
$ |
18,429 |
|
|
$ |
18,450 |
|
Laboratory
equipment |
|
|
|
|
6,789 |
|
|
|
6,406 |
|
Office furniture
and equipment |
|
|
|
|
2,140 |
|
|
|
2,011 |
|
|
|
|
|
|
27,358 |
|
|
|
26,867 |
|
Less accumulated
depreciation and amortization |
|
|
|
|
(11,717 |
) |
|
|
(8,141 |
) |
Property and
equipment, net |
|
|
|
$ |
15,641 |
|
|
$ |
18,726 |
|
Total depreciation and amortization expense for the
years ended December 31, 2003 and 2002, the six-month transition period ended December 31, 2001, and the year ended June 30, 2001, was $3.6 million,
$3.1 million, $1.2 million, and $1.2 million, respectively.
4. Deferred Revenue
In March 2003, we received a $2.5 million payment
from Bayer Corporation under the terms of our collaboration agreement for the development of Coagulin-B, our product candidate for the treatment of
hemophilia B. This amount was recorded as deferred revenue and is being recognized as revenue in our statements of operations ratably over the
estimated development period for this product, which was determined to be five years, or approximately $125,000 per quarter.
5. Loan Payable
In June 2000, we entered
into a financing arrangement for construction related activities. Under this
arrangement, we had the right to borrow up to $10.0 million through June 1,
2003. This revolving line of credit
56
AVIGEN, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
— (Continued)
was amended in June 2002
to extend the expiration date to June 1, 2005, thereby deferring the timetable
to repay the principal borrowed for two additional years. Amounts borrowed
under this arrangement bear interest at the London Inter-Bank Offered Rate
plus 1.5% on the date of each drawdown and this interest rate is subsequently
reset every three months. The weighted average interest rate for all outstanding
drawdowns on this long-term obligation was 2.75% at December 31, 2003 and
3.11% at December 31, 2002. We have pledged a portion of our portfolio of
available-for-sale securities equal to the amount of outstanding borrowings
to secure this long-term obligation, and have identified these pledged assets
as restricted investments on our balance sheets. As of both December 31, 2003
and 2002, we had borrowed $8 million from the line of credit. Payments of
interest only are due monthly through June 1, 2005, at which time a balloon
payment of outstanding principal is due. In November 2000, we reserved $2
million in borrowing capacity from the line of credit to secure a letter of
credit. The letter of credit was established pursuant to the terms required
under a ten-year property lease entered into in November 2000, and was issued
in favor of the property owner. As a result of the cash borrowings and the
establishment of the letter of credit, we did not have any remaining borrowing
capacity under the line of credit at December 31, 2003.
6. Stockholders’ Equity
Common Stock
In August and September 1998, we issued an aggregate
of 1,306,505 shares of our common stock at $2.25 to $2.94 per share to selected institutional investors. The offering was completed through a private
placement. As part of the transaction, we issued warrants to purchase 261,301 shares of our common stock with an exercise price of $2.18 to $3.67 per
share. The exercise price was 125% of the fair market value per share of our underlying stock
on the
corresponding closing day and the warrants carry a five-year term. After deducting
commissions and fees from the gross proceeds of $2,969,000, net proceeds from this
transaction approximated $2,735,000.
In December 1998, we issued 1,367,280 shares of our
common stock at $3.81 to $4.88 per share to selected institutional investors. The offering was completed through a private placement. As part of this
transaction, we issued warrants to purchase 273,456 shares of our common stock with an exercise price ranging from $4.76 to $6.09 per share. The
exercise price was 125% of the fair market value per share of our underlying stock on the corresponding closing day and the warrants carry a five-year
term. After deducting commissions and fees from the gross proceeds of $5,635,000, net proceeds from this transaction approximated
$5,197,000.
In February and April 1999, we issued an aggregate
of 2,198,210 shares of our common stock at $5.50 to $6.00 per share to selected institutional investors. The offering was completed through a private
placement. As part of this transaction, we issued warrants to purchase 439,642 shares of our common stock with an exercise price of $6.87 to $7.50 per
share. The exercise price was 125% of the fair market value per share of the underlying stock on the corresponding closing day and the warrants carry a
five-year term. After deducting commissions and fees from the gross proceeds of $13,189,000, net proceeds from this transaction approximated
$12,156,000.
In October and November 1999, we issued an aggregate
of 2,033,895 shares of our common stock at $16.19 to $25.56 per share to selected institutional investors. The offering was completed through a private
placement. As part of this transaction, we issued warrants to purchase 406,779 shares of our common stock with an exercise price of $20.25 to $31.95
per share. The exercise price was 125% of the fair market value per share of our underlying stock on the corresponding closing day and the warrants
carry a five-year term. After deducting commissions and fees from the gross proceeds of $40,028,000, net proceeds from this transaction approximated
$37,222,000.
In March 2000, we issued a warrant to purchase
40,000 shares of our common stock as partial consideration for the extension of our building lease. The fair value of this warrant at the date of
issuance was approximately $1,738,000. This fair value is being amortized over the life of the lease extension. This warrant was issued with an
exercise price equal to the fair market value per share of our underlying stock at the time of issuance, $56.00, and carries a five-year
term.
57
AVIGEN, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
— (Continued)
Also, in March 2000, we issued a warrant to purchase
50,000 shares of our common stock as partial consideration for the acquisition of certain patent licenses used in our research and development
activities. The fair value of this warrant was approximately $3,182,000 and was fully expensed in the year ended June 30, 2000. This warrant was issued
with an exercise price equal to the fair market value per share of our underlying stock at the time of issuance, $82.00, and carries a five-year
term.
In April and May 2000, we issued an aggregate of
1,150,000 shares of our common stock at $26.00 per share through a public offering. After deducting commissions and fees from the gross proceeds of
$29,900,000, net proceeds from this transaction totaled $27,611,000.
In November 2000, we issued an aggregate of
2,291,239 shares of our common stock between $37.50 and $45.06 per share through a public offering. After deducting combined commissions and fees from
the gross proceeds of $90,706,000, net proceeds from this transaction totaled $86,086,000.
In February 2001, we issued 313,636 shares of common
stock at $47.82 per share to Bayer AG, in connection with a collaboration agreement entered into with Bayer Corporation dated November 17, 2000. Net
proceeds from this transaction totaled $15,000,000.
At December 31, 2003, we had outstanding warrants to
purchase shares of common stock as follows:
Number
Of Shares
|
|
Exercise
Price
|
|
Issue
Date
|
|
Expiration
Date
|
| |
13,324 |
|
|
$ 5.36 |
|
1995 |
|
2005 |
| |
4,514 |
|
|
$ 7.09 |
|
1995 |
|
2005 |
| |
483,794 |
|
|
$ 6.05
– $ 7.50 |
|
1999 |
|
2004 |
| |
244,932 |
|
|
$17.81
– $20.63 |
|
1999 |
|
2004 |
| |
157,540 |
|
|
$23.43
– $27.96 |
|
1999 |
|
2004 |
| |
18,561 |
|
|
$28.12
– $31.95 |
|
1999 |
|
2004 |
| |
40,000 |
|
|
$56.00 |
|
2000 |
|
2005 |
| |
50,000 |
|
|
$82.00 |
|
2000 |
|
2005 |
| |
1,012,665 |
|
|
$ 5.36 – $82.00 |
|
|
|
2004 – 2005 |
Shares Reserved for Future
Issuance
We have reserved shares of our common stock for
future issuance as follows:
|
|
|
|
December 31,
2003
|
Stock options
outstanding |
|
|
|
|
4,362,442 |
|
Stock options
available for grant |
|
|
|
|
4,289,623 |
|
Warrants to
purchase common stock |
|
|
|
|
1,012,665 |
|
Shares
available for Employee Stock Purchase Plan |
|
|
|
|
360,000 |
|
|
|
|
|
|
10,024,730 |
|
7. Stock Options and Stock Purchase Plan
Employee Stock Option Plans
Under the 1993 Stock
Option Plan (the “1993 Plan”), prior to March 1996, incentive and
nonqualified stock options could be granted to our key employees, directors
and consultants to purchase up to 1,500,000 shares of common stock. Under
the 1993 Plan, options could be granted at a price per share not less than
the fair market value at the date of grant. In March 1996, the Board determined
to grant no further options under the 1993 Plan
58
AVIGEN, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
— (Continued)
and adopted the
1996 Equity Incentive Plan. At December 31, 2003, there were options to purchase
approximately 36,000 shares outstanding under the 1993 Plan, with no further shares
available for grant.
The 1996 Equity Incentive Plan (“1996
Plan”) provides for grants of incentive and nonqualified stock options, restricted stock purchase awards, stock bonuses and stock appreciation
rights to our employees, directors and consultants. The Plan originally authorized the grant of options to purchase up to 600,000 shares of common
stock. As a result of a series of amendments which were approved by stockholders, prior to December 31, 2003, there were 3,500,000 shares authorized
for grant under the 1996 Plan. Under the 1996 Plan, incentive stock options may be granted at a price per share not less than the fair market value at
the date of grant, and nonqualified stock options may be granted at a price per share not less than 85% of the fair market value at the date of grant.
Options granted generally have a maximum term of 10 years from the grant date and become exercisable over four years. At December 31, 2003, there were
options to purchase approximately 1,491,000 shares outstanding under the 1996 Plan and approximately 1,331,000 shares available for
grant.
In June 2000, the Board of Directors adopted the
2000 Equity Incentive Plan (“2000 Plan”) which provides for grants of nonqualified stock options, restricted stock purchase awards, and stock
bonuses to our employees, directors and consultants to purchase up to 5,000,000 shares of common stock; provided, however, that generally only up to
40% of the shares subject to grants under the 2000 Plan may be made to our directors and officers. Under
the 2000 Plan, options may be granted at a price per share not less than 85% of the
fair market value at the date of grant. Options granted generally have a maximum term of 10 years from the grant date and become exercisable over four
years. At December 31, 2003, there were options to purchase approximately 2,093,000 shares outstanding under the 2000 Plan and approximately 2,906,000
shares available for grant.
Employee Stock Purchase Plan
In September 1997, we adopted the 1997 Employee
Stock Purchase Plan (“Purchase Plan”). A total of 360,000 shares of our common stock have been reserved for issuance under the Purchase Plan.
As of December 31, 2003, there have been no employee contributions to the Purchase Plan.
Non-employee Stock Options
In July 1995, we granted the Chairman of our Board
of Directors an option to purchase 515,248 shares of our common stock at $0.49 per share, exercisable for 10 years from the date of grant. At December
31, 2003, the option was fully vested; however, no part of this option had been exercised. Such grant was made outside of any of our stock option
plans.
The 1996 Non-Employee Directors’ Stock Option
Plan (the “Directors’ Plan”) provides for automatic grants of options to purchase shares of our common stock to our non-employee
directors. The Plan originally authorized the grant of options to purchase up to 200,000 shares of common stock. The Directors’ Plan was later
amended and approved by stockholders to increase the number of shares available for grant to 300,000 at December 31, 2003. As of December 31, 2003,
nonqualified options to purchase approximately 247,000 shares of common stock between $2.00 and $40.75 per share, exercisable for 10 years from the
date of grant, have been granted under the Directors’ Plan, of which options to purchase 227,000 shares remained outstanding. At December 31,
2003, there were approximately 53,000 shares available for grant under the Directors’ Plan.
59
AVIGEN, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
— (Continued)
The following table summarizes option activity with
regard to all stock options:
|
|
|
|
Outstanding Options
|
|
|
|
|
|
Number of
Shares
|
|
Weighted-Average
Exercise Price per
Share
|
Outstanding at
July 1, 2000 |
|
|
|
|
2,355,313 |
|
|
|
$15.05 |
|
Granted |
|
|
|
|
1,774,076 |
|
|
|
20.27 |
|
Canceled |
|
|
|
|
(58,130 |
) |
|
|
23.54 |
|
Exercised |
|
|
|
|
(165,700 |
) |
|
|
5.25 |
|
Outstanding at
June 30, 2001 |
|
|
|
|
3,905,559 |
|
|
|
17.71 |
|
Granted |
|
|
|
|
175,950 |
|
|
|
12.00 |
|
Canceled |
|
|
|
|
(60,410 |
) |
|
|
16.71 |
|
Exercised |
|
|
|
|
(11,282 |
) |
|
|
5.32 |
|
Outstanding at
December 31, 2001 |
|
|
|
|
4,009,817 |
|
|
|
17.51 |
|
Granted |
|
|
|
|
946,300 |
|
|
|
8.33 |
|
Canceled |
|
|
|
|
(777,002 |
) |
|
|
24.01 |
|
Exercised |
|
|
|
|
(34,627 |
) |
|
|
3.28 |
|
Outstanding at
December 31, 2002 |
|
|
|
|
4,144,488 |
|
|
|
14.31 |
|
Granted |
|
|
|
|
685,800 |
|
|
|
3.73 |
|
Canceled |
|
|
|
|
(404,100 |
) |
|
|
16.21 |
|
Exercised |
|
|
|
|
(63,746 |
) |
|
|
3.81 |
|
Outstanding at
December 31, 2003 |
|
|
|
|
4,362,442 |
|
|
|
12.62 |
|
The following table summarizes information with
regard to total stock options outstanding under all stock option plans at December 31, 2003:
|
|
Options
Outstanding
|
|
Options
Exercisable
|
|
Range of Exercise
Prices
|
|
Number
of Shares
|
|
Weighted-
Average
Remaining
Contractual Life
|
|
Weighted-
Average
Exercise
Price
|
|
Number
of Shares
|
|
Weighted-
Average
Exercise
Price
|
$ 0.44
– $ .49 |
|
|
525,406 |
|
|
|
1.56 |
|
|
$ |
0.49 |
|
|
|
525,406 |
|
|
$ |
0.49 |
|
0.71 – 3.53 |
|
|
736,115 |
|
|
|
8.21 |
|
|
|
3.35 |
|
|
|
200,250 |
|
|
|
2.87 |
|
3.63 – 6.30 |
|
|
581,966 |
|
|
|
6.47 |
|
|
|
5.40 |
|
|
|
394,341 |
|
|
|
5.32 |
|
6.31 – 8.53 |
|
|
550,931 |
|
|
|
8.23 |
|
|
|
8.15 |
|
|
|
228,853 |
|
|
|
7.93 |
|
8.62 – 13.02 |
|
|
188,840 |
|
|
|
7.93 |
|
|
|
10.24 |
|
|
|
99,478 |
|
|
|
10.41 |
|
13.65
– 14.63 |
|
|
844,937 |
|
|
|
7.20 |
|
|
|
14.60 |
|
|
|
541,820 |
|
|
|
14.60 |
|
14.95
– 19.31 |
|
|
99,731 |
|
|
|
6.74 |
|
|
|
17.67 |
|
|
|
77,002 |
|
|
|
17.60 |
|
21.47
– 28.00 |
|
|
92,500 |
|
|
|
6.47 |
|
|
|
25.61 |
|
|
|
80,250 |
|
|
|
25.53 |
|
29.00
– 29.00 |
|
|
219,766 |
|
|
|
6.38 |
|
|
|
29.00 |
|
|
|
188,513 |
|
|
|
29.00 |
|
31.00
– 38.19 |
|
|
466,250 |
|
|
|
6.45 |
|
|
|
37.43 |
|
|
|
398,434 |
|
|
|
.3739 |
|
38.88
– 56.00 |
|
|
56,000 |
|
|
|
6.47 |
|
|
|
44.33 |
|
|
|
53,343 |
|
|
|
44.29 |
|
|
|
|
4,362,442 |
|
|
|
6.60 |
|
|
$ |
12.62 |
|
|
|
2,787,690 |
|
|
$ |
14.28 |
|
The numbers of options exercisable at December 31,
2002, December 31, 2001, and June 30, 2001 were 2,192,689, 1,569,789, and 1,217,656, respectively, with a weighted average exercise price of $13.33,
$12.13, and $9.25, respectively.
In February 2003, in connection with the resignation
of two executives, we modified the vesting and expiration terms, but did not extend the maximum contractual term, of certain stock options. These
modifications resulted in the recognition of $28,000 in non-cash compensation expense during 2003.
60
AVIGEN, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
— (Continued)
8. Employee Profit Sharing/401(k) Plan
In January 1996, we adopted a Tax Deferred Savings
Plan under Section 401(k) of the Internal Revenue Code (the “Plan”) for all full-time employees. Under the Plan, our eligible employees can
contribute amounts to the Plan via payroll withholding, subject to certain limitations. Our matching contributions to the Plan are discretionary and
can only be made in cash. Effective July 1, 2001, we began matching 25% of an employee’s contributions up to $2,500 per Plan year. These matching
contributions vest ratably over a five-year period based on the employee’s initial hire date. Our matching contributions for all employees for the
years ended December 31, 2003 and 2002 and the six-month transition period ended December 31, 2001 were approximately $112,000, $134,000, and $65,000,
respectively.
9. Collaboration Agreement
In November 2000, we entered into a collaboration
agreement with Bayer Corporation (Bayer). Under the terms of the agreement, Bayer, in collaboration with us, will conduct Phase II/III clinical trials
for our product, Coagulin-B, and receive exclusive worldwide marketing and distribution rights to the product. We will file and bear the cost of
regulatory approvals and will be the holder of regulatory licenses worldwide. We will manufacture the product and will receive a share of the gross
revenues from future Coagulin-B sales, as well as a royalty on net sales of the product for our intellectual property. Bayer will also make milestone
payments, pay for third-party costs of the clinical trials, and reimburse us costs of manufacturing AAV vector used in the clinical
trials.
In connection with this collaboration agreement, in
February 2001, we issued to Bayer AG, an affiliate of Bayer, 313,636 shares of common stock at $47.82 per share, resulting in proceeds of $15
million.
In March 2003, under the terms of the collaboration
agreement, we received a $2.5 million payment from Bayer in connection with the ongoing development of Coagulin-B, which is discussed further in Note
1.
AVIGEN, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
— (Continued)
10. Commitments
We lease our laboratory, manufacturing, and office
facilities and certain equipment under multiple non-cancelable operating lease agreements, which expire at various times through November 2010. Under
our two facilities operating leases, we have pledged $2.4 million of our available-for-sale securities to secure letters of credit that serve as
deposits that are required under the terms of the leases. Under multiple equipment operating leases, we have pledged $1.5 million of our
available-for-sale securities as collateral for the leases. These amounts are included in restricted investments on the balance sheet at December 31,
2003 and December 31, 2002. We have the option to purchase the equipment under these operating leases at the greater of their fair value at the end of
the lease or 20% of the original cost.
Future minimum lease payments under non-cancelable
operating leases are as follows (in thousands):
|
|
|
|
Operating Lease
|
Year ending
December 31:
|
|
|
|
|
|
|
2004 |
|
|
|
$ |
2,503 |
|
2005 |
|
|
|
|
2,586 |
|
2006 |
|
|
|
|
2,654 |
|
2007 |
|
|
|
|
2,544 |
|
2008 |
|
|
|
|
2,007 |
|
Thereafter |
|
|
|
|
2,751 |
|
Total
non-cancelable lease payments |
|
|
|
$ |
15,045 |
|
Rent expense for the years ended December 31, 2003
and 2002, the six-month period ended December 31, 2001, and the fiscal year ended June 30, 2001 was $2,441,000, $2,309,000, $1,147,000, and $1,923,000,
respectively.
61
We also enter into commitments to fund collaborative
research and clinical work performed by third parties. While these contracts are cancelable, we expect the research studies and clinical work to be
completed as defined in the terms of the agreements, and all amounts paid when due. At December 31, 2003 the estimated costs related to these
commitments totaled $1,089,000, all of which is expected to be paid within the next twelve to twenty-four months.
11. Income Taxes
Significant components of our deferred tax assets
are as follows (in thousands):
|
|
|
|
December 31,
2003
|
|
December 31,
2002
|
Net operating
loss carryforward |
|
|
|
$ |
44,000 |
|
|
$ |
36,700 |
|
Research and
development credit carryforwards |
|
|
|
|
6,900 |
|
|
|
5,300 |
|
Capitalized
research and development |
|
|
|
|
6,300 |
|
|
|
5,200 |
|
Capitalized
patents |
|
|
|
|
1,000 |
|
|
|
1,300 |
|
Other |
|
|
|
|
1,400 |
|
|
|
600 |
|
Gross deferred
tax assets |
|
|
|
|
59,600 |
|
|
|
49,100 |
|
Unrealized gain
on investment |
|
|
|
|
(100 |
) |
|
|
(600 |
) |
Valuation
allowance |
|
|
|
|
(59,500 |
) |
|
|
(48,500 |
) |
Net deferred tax
assets |
|
|
|
$ |
— |
|
|
$ |
— |
|
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying value of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. Due to our history of losses, a valuation allowance has been provided against the full amount of deferred tax assets due to
the uncertainty of realizing any benefits from these assets. The valuation allowance
increased by $11,000,000, $12,200,000, $4,620,000, and $8,860,000 for the years ended December 31, 2003 and 2002, the six-month transition period ended
December 31, 2001, and the fiscal year ended June 30, 2001, respectively.
Deferred tax assets related to carryforwards at
December 31, 2003 include approximately $1,340,000 associated with stock option activity for which any subsequently recognized benefits will be
credited directly to stockholder’s equity.
At December 31, 2003, we had net operating loss
carryforwards for federal and state income tax purposes of approximately $126,000,000 and $18,600,000, respectively, which expire in 2005 through 2023.
At December 31, 2003, we had research and development credit carryforwards for federal and state income tax purposes of approximately $4,700,000 and
$2,200,000, respectively, which expire in 2009 through 2023.
Because of the “change in ownership”
provisions of the Internal Revenue Code of 1986, utilization of our tax net operating loss carryforwards and tax credit carryforwards may be subject to
an annual limitation in future periods. As a result of the annual limitation, a portion of these carryforwards may expire before ultimately becoming
available to reduce future income tax liabilities.
62
AVIGEN, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
— (Continued)
12. Condensed Quarterly Financial Information (Unaudited)
|
|
|
|
Year ended December 31, 2003
|
|
(amounts in thousands except per share data)
|
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Total
revenue |
|
|
|
$ |
30 |
|
|
$ |
128 |
|
|
$ |
140 |
|
|
$ |
165 |
|
Net
loss |
|
|
|
|
(5,977 |
) |
|
|
(6,058 |
) |
|
|
(6,909 |
) |
|
|
(6,830 |
) |
Net loss per
share, basic and diluted |
|
|
|
|
(0.30 |
) |
|
|
(0.30 |
) |
|
|
(0.34 |
) |
|
|
(0.34 |
) |
|
|
|
|
Year ended December 31, 2002
|
|
(amounts in thousands except per share data)
|
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Total
revenue |
|
|
|
$ |
— |
|
|
$ |
16 |
|
|
$ |
13 |
|
|
$ |
28 |
|
Net
loss |
|
|
|
|
(6,947 |
) |
|
|
(7,164 |
) |
|
|
(7,110 |
) |
|
|
(6,518 |
) |
Net loss per
share, basic and diluted |
|
|
|
|
(0.35 |
) |
|
|
(0.36 |
) |
|
|
(0.35 |
) |
|
|
(0.32 |
) |
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of disclosure controls and
procedures. Our management, with the participation of our chief executive officer and chief financial officer, has evaluated
our disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2003 and concluded that
they were effective to provide a reasonable assurance that the information required to be disclosed by us in this Annual Report on Form 10-K was
recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and Form
10-K.
Changes in internal
controls. There were no changes in our internal controls over financial reporting during the quarter and year ended December
31, 2003 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
63
PART III
Item 10. Directors and Executive Officers of the
Registrant
The information required by this Item with respect
to Executive Officers may be found under the caption, “Executive Officers of the Registrant” at the end of Part I of this Annual Report on
Form 10-K. The information required by this Item with respect to Directors, including information with respect to audit committee financial experts, is
incorporated herein by reference from the information under the caption, “Proposal 1—Election of Directors” appearing in the definitive
Proxy Statement to be delivered to Avigen’s stockholders in connection with the solicitation of proxies for Avigen’s 2004 Annual Meeting of
Stockholders to be held on May 26, 2004 (the “Proxy Statement”).
Section 16(a) Beneficial Ownership Reporting
Compliance
The information required by this Item with respect
to compliance with Section 16(a) of the Exchange Act is incorporated herein by reference from the section captioned “Section 16(a) Beneficial
Ownership Reporting Compliance” contained in the Proxy Statement.
Code of Business Conduct and
Ethics
The information required by this Item with respect
to our code of ethics is incorporated herein by reference from the section captioned “Proposal 1—Election of Directors—Code of Business
Conduct and Ethics” contained in the Proxy Statement.
Item 11. Executive Compensation
The information required by this Item is set forth
in the Proxy Statement under the captions, “Executive Compensation” and “Compensation Committee Interlocks and Insider
Participation.” Such information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters
The information required by this Item with respect
to security ownership of certain beneficial owners and management is set forth in the Proxy Statement under the caption, “Security Ownership of
Certain Beneficial Owners and Management.” Such information is incorporated herein by reference.
The information required by this Item with respect
to securities authorized for issuance under our equity compensation plans is set forth in the Proxy Statement under the caption “Proposal 2 —
Approval of Avigen’s 1996 Non-Employee Directors’ Stock Option Plan, as amended—Equity Compensation Plan Information.” Such
information is incorporated herein by reference.
Item 13. Certain Relationships and Related
Transactions
The information required by this Item is set forth
in the Proxy Statement under the heading “Executive Compensation—Certain Relationships and Related Transactions.” Such information is
incorporated herein by reference.
Item 14. Principal Accountant Fees and
Services
The information required by this Item is set forth
in the Proxy Statement under the heading “Proposal 3—Ratification of Selection of Independent Auditors.” Such information is
incorporated herein by reference.
Consistent with Section 10A(i)(2) of the Securities
Exchange Act of 1934, as added by Section 202 of the Sarbanes-Oxley Act of 2002, we are responsible for listing the non-audit services approved by our
Audit Committee to be performed by Ernst & Young LLP, our external auditor. Non-audit services are defined as services other than those provided in
connection with an audit or a review of our financial statements. The Audit Committee has approved our recurring engagements of Ernst & Young LLP
for the following non-audit services: (1) preparation of tax returns, and tax advice in preparing for and in connection with such filings; (2) tax
advice in preparing for and in connection with the filing of sales and use tax returns; (3) all work required to be performed by Ernst
&
64
Young LLP in connection with preparing and giving consents required to be given in
connection with our filings with the Securities and Exchange Commission; and (4) advice in preparing for the internal control documentation
requirements of Section 404 of the Sarbanes-Oxley Act of 2002.
PART IV
Item 15. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a) |
|
The following documents are filed as part of this Annual Report
on Form 10-K: |
(1) |
|
Financial Statements: |
|
|
Report of Ernst & Young LLP, Independent Auditors
Balance Sheets
Statements of Operations
Statements of Stockholders’ Equity
Statements of Cash Flows
Notes to Financial
Statements
|
(2) |
|
Financial
Statement Schedules |
Financial statement schedules have been omitted from
this Annual Report on Form 10-K because they are either not applicable or the required information is provided in the financial statements or the notes
thereto.
65
Exhibit
Number
|
|
|
|
Exhibits
|
3.1(1) |
|
|
|
Amended and Restated Certificate of Incorporation |
3.1.1(13) |
|
|
|
Certificate of Amendment to Certificate of Incorporation |
3.2
(1) |
|
|
|
Restated Bylaws of the Registrant |
4.1(1) |
|
|
|
Specimen Common Stock Certificate |
10.1(2, 7) |
|
|
|
Nonstatutory Stock Option Outside of Plans to Philip J. Whitcome. |
10.2(1,2) |
|
|
|
1993
Stock Option Plan |
10.3
(2 ,17) |
|
|
|
1996
Equity Incentive Plan, as amended |
10.4(1, 2) |
|
|
|
Form
of Incentive Stock Option Grant for 1996 Equity Incentive Plan |
10.5(1, 2) |
|
|
|
Form
of Nonstatutory Stock Option Grant for 1996 Equity Incentive Plan |
10.6(2, 14) |
|
|
|
1996
Non-Employee Directors’ Stock Option Plan, as amended |
10.7(2, 4) |
|
|
|
1997
Employee Stock Purchase Plan |
10.8(1, 2) |
|
|
|
Form
of Indemnification Agreement between Avigen and its directors and executive officers. |
10.9(1) |
|
|
|
Form
of Common Stock Warrant |
10.10(2, 5) |
|
|
|
2000
Equity Incentive Plan |
10.11(2, 12) |
|
|
|
Form
of Nonstatutory Stock Option Grant for 2000 Equity Incentive Plan |
10.12(1) |
|
|
|
Form
of Series C Preferred Stock Warrant |
10.13(3) |
|
|
|
Form
of Common Stock and Warrant Purchase Agreement, dated October 29, 1999 |
10.14(2, 15) |
|
|
|
Form
of Incentive Stock Option Grant for 1993 Stock Option Plan |
10.15(2, 15) |
|
|
|
Form
of Nonstatutory Stock Option Grant for 1993 Stock Option Plan |
10.27(1, 2) |
|
|
|
Employment Agreement dated August 10, 1992, between Avigen and John Monahan. |
10.29(2, 6) |
|
|
|
Employment Agreement dated August 14, 1996, between Avigen and Thomas J. Paulson. |
10.32(15) |
|
|
|
Revolving line of credit note signed November 2, 2000 with Wells Fargo Bank. |
10.33(15) |
|
|
|
Letter Agreement to the revolving line of credit note signed November 2, 2000 with Wells Fargo Bank. |
10.36(2, 8) |
|
|
|
Management Transition Plan |
10.37(15) |
|
|
|
Form
of Common Stock Warrant Issued in February 1999 Private Placement. |
10.38(4, 11) |
|
|
|
Factor IX patent and know-how exclusive license agreement between The Children’s Hospital of Philadelphia and Avigen, dated May 20,
1999. |
10.39(9, 11) |
|
|
|
License Agreement between Avigen and the University of Florida Research Foundation, Inc., dated November 13, 1992, and its First Amendment,
dated March 25, 1996. |
10.40(10, 11) |
|
|
|
License Agreement, dated March 3, 2000, by and between BTG International Ltd., a British corporation and Avigen |
10.41(10) |
|
|
|
Property Lease Agreement between ARE-1201 Harbor Bay, LLC and Avigen, dated February 29, 2000 |
10.43(11, 13) |
|
|
|
Agreement between Bayer Corporation and Avigen, dated November 17, 2000 |
66
Exhibit
Number
|
|
|
|
Exhibits
|
10.44(13) |
|
|
|
Subscription and Registration Rights Agreement by and between Bayer AG and Avigen, Inc., dated November 17, 2000. |
10.45(13) |
|
|
|
Office Lease Agreement between Lincoln-RECP Empire OPCO, LLC and Avigen, Inc., dated November 2, 2000. |
10.46(13) |
|
|
|
First
Amendment to Lease Agreement between Lincoln-RECP Empire OPCO, LLC and Avigen, Inc., dated December 1, 2000. |
10.47(13) |
|
|
|
Second Amendment to Lease Agreement between Lincoln-RECP Empire OPCO, LLC and Avigen, Inc., dated February 12, 2001. |
10.48(15) |
|
|
|
Amendment to Agreement between Bayer Corporation and Avigen, dated June 30, 2001. |
10.49(16) |
|
|
|
Revolving line of credit note with Wells Fargo Bank, dated June 1, 2002. |
10.50(16) |
|
|
|
Letter of Agreement to the revolving line of credit note signed June 1, 2002 with Wells Fargo Bank. |
10.51(18) |
|
|
|
License Agreement, dated November 21, 2003, by and between University of Colorado and Avigen |
23.1 |
|
|
|
Consent of Ernst & Young LLP, Independent Auditors |
24.1 |
|
|
|
Power
of Attorney (included on the signature pages hereto) |
31.1 |
|
|
|
Certification required by Rule 13a-14(a) or Rule 15d-14(a) |
31.2 |
|
|
|
Certification required by Rule 13a-14(a) or Rule 15d-14(a) |
32.1(19) |
|
|
|
Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C.
§1350) |
Keys to Exhibits:
| (1) |
|
Filed as an exhibit to the Registrant’s Registration
Statement on Form S-1 (No. 333-03220) and incorporated herein by reference. |
| (2) |
|
Management Contract or Compensation Plan. |
| (3) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Quarterly Report on Form 10-Q for the quarter ended December 31, 1999, as filed with the SEC. |
| (4) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Annual Report on Form 10-K for the year ended June 30, 1999, as filed with the SEC. |
| (5) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Registration Statement on Form S-8 (Registration No. 333-42210) filed with the SEC on July 25, 2000. |
| (6) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Annual Report on Form 10-K for the year ended June 30, 1997, as filed with the SEC. |
| (7) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Registration Statement on Form S-8 (Registration No. 333-12087) filed with the SEC on September 16, 1996. |
| (8) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, as filed with the SEC. |
| (9) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Annual Report on Form 10-K/A for the year ended June 30, 1999, as filed with the SEC. |
| (10) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, as filed with the SEC. |
| (11) |
|
Portions of this exhibit have been omitted pursuant to a grant
of confidential treatment. |
67
| (12) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Annual Report on Form 10-K for the year ended June 30, 2000, as filed with the SEC on September 27, 2000. |
| (13) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000, as filed with the SEC. |
| (14) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Registration Statement on Form S-8 (Registration No. 333-56274) filed with the SEC on February 27, 2001. |
| (15) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Annual Report on Form 10-K for the year ended June 30, 2001, as filed with the SEC on September 27, 2001. |
| (16) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, as filed with the SEC. |
| (17) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Registration Statement on Form S-8 (Registration No. 333-90504) filed with the SEC on June 14, 2002. |
| (18) |
|
Confidential treatment has been requested with respect to
certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission. |
| (19) |
|
This certification accompanies the Form 10-K to which it
relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Avigen under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K),
irrespective of any general incorporation language contained in such filing. |
On October 29, 2003, we filed a current report on
Form 8-K to furnish under Item 12 the announcement of our financial results for the third quarter of fiscal year 2003, which announcement included our
consolidated statements of operations and consolidated balance sheets for the period.
See Item 15(a)(3) above.
(d) |
|
Financial Statement Schedules |
See Item 15(a)(1) above.
68
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d)
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.
| |
AVIGEN,
INC.
|
| |
By: |
/s/
KENNETH G. CHAHINE
Kenneth G. Chahine, Ph.D.
President and Chief Executive Officer |
Dated: March 9, 2003
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person
whose signature appears below constitutes and appoints Kenneth G. Chahine and Philip J. Whitcome, and each or any one of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to
sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
Signature
|
|
Title
|
|
Date
|
/s/
Kenneth G. Chahine
Kenneth G. Chahine, Ph.D. |
|
President, Chief Executive Officer and
Director (Principal Executive Officer) |
|
March
9, 2004 |
| |
|
|
|
|
/s/
Thomas J. Paulson
Thomas J. Paulson |
|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
|
March
9, 2004 |
| |
|
|
|
|
/s/
Philip J. Whitcome
Philip J. Whitcome, Ph.D. |
|
Chairman of the Board |
|
March
9, 2004 |
| |
|
|
|
|
/s/
Zola Horovitz
Zola Horovitz, Ph.D. |
|
Director |
|
March
9, 2004 |
| |
|
|
|
|
/s/
Yuichi Iwaki
Yuichi Iwaki, M.D., Ph.D. |
|
Director |
|
March
9, 2004 |
| |
|
|
|
|
/s/
John K.A. Prendergast
John K.A. Prendergast, Ph.D. |
|
Director |
|
March
9, 2004 |
| |
|
|
|
|
/s/
Daniel Vapnek
Daniel Vapnek, Ph.D. |
|
Director |
|
March
9, 2004 |
69
EXHIBIT INDEX
Exhibit
Number
|
|
|
|
Exhibits
|
3.1(1) |
|
|
|
Amended and Restated Certificate of Incorporation |
3.1.1(13) |
|
|
|
Certificate of Amendment to Certificate of Incorporation |
3.2
(1) |
|
|
|
Restated Bylaws of the Registrant |
4.1(1) |
|
|
|
Specimen Common Stock Certificate |
10.1(2, 7) |
|
|
|
Nonstatutory Stock Option Outside of Plans to Philip J. Whitcome. |
10.2(1, 2) |
|
|
|
1993
Stock Option Plan |
10.3
(2, 17) |
|
|
|
1996
Equity Incentive Plan, as amended |
10.4(1, 2) |
|
|
|
Form
of Incentive Stock Option Grant for 1996 Equity Incentive Plan |
10.5(1, 2) |
|
|
|
Form
of Nonstatutory Stock Option Grant for 1996 Equity Incentive Plan |
10.6(2, 14) |
|
|
|
1996
Non-Employee Directors’ Stock Option Plan, as amended |
10.7(2, 4) |
|
|
|
1997
Employee Stock Purchase Plan |
10.8(1, 2) |
|
|
|
Form
of Indemnification Agreement between Avigen and its directors and executive officers. |
10.9(1) |
|
|
|
Form
of Common Stock Warrant |
10.10(2, 5) |
|
|
|
2000
Equity Incentive Plan |
10.11(2, 12) |
|
|
|
Form
of Nonstatutory Stock Option Grant for 2000 Equity Incentive Plan |
10.12(1) |
|
|
|
Form
of Series C Preferred Stock Warrant |
10.13(3) |
|
|
|
Form
of Common Stock and Warrant Purchase Agreement, dated October 29, 1999 |
10.14(2, 15) |
|
|
|
Form
of Incentive Stock Option Grant for 1993 Stock Option Plan |
10.15(2, 15) |
|
|
|
Form
of Nonstatutory Stock Option Grant for 1993 Stock Option Plan |
10.27(1, 2) |
|
|
|
Employment Agreement dated August 10, 1992, between Avigen and John Monahan. |
10.29(2, 6) |
|
|
|
Employment Agreement dated August 14, 1996, between Avigen and Thomas J. Paulson. |
10.32(15) |
|
|
|
Revolving line of credit note signed November 2, 2000 with Wells Fargo Bank. |
10.33(15) |
|
|
|
Letter Agreement to the revolving line of credit note signed November 2, 2000 with Wells Fargo Bank. |
10.36(2, 8) |
|
|
|
Management Transition Plan |
10.37(15) |
|
|
|
Form
of Common Stock Warrant Issued in February 1999 Private Placement. |
10.38(4, 11) |
|
|
|
Factor IX patent and know-how exclusive license agreement between The Children’s Hospital of Philadelphia and Avigen, dated May 20,
1999. |
10.39(9, 11) |
|
|
|
License Agreement between Avigen and the University of Florida Research Foundation, Inc., dated November 13, 1992, and its First Amendment,
dated March 25, 1996. |
10.40(10, 11) |
|
|
|
License Agreement, dated March 3, 2000, by and between BTG International Ltd., a British corporation and Avigen |
10.41(10) |
|
|
|
Property Lease Agreement between ARE-1201 Harbor Bay, LLC and Avigen, dated February 29, 2000 |
10.43(11, 13) |
|
|
|
Agreement between Bayer Corporation and Avigen, dated November 17, 2000 |
70
Exhibit
Number
|
|
|
|
Exhibits
|
10.44(13) |
|
|
|
Subscription and Registration Rights Agreement by and between Bayer AG and Avigen, Inc., dated November 17, 2000. |
10.45(13) |
|
|
|
Office Lease Agreement between Lincoln-RECP Empire OPCO, LLC and Avigen, Inc., dated November 2, 2000. |
10.46(13) |
|
|
|
First
Amendment to Lease Agreement between Lincoln-RECP Empire OPCO, LLC and Avigen, Inc., dated December 1, 2000. |
10.47(13) |
|
|
|
Second Amendment to Lease Agreement between Lincoln-RECP Empire OPCO, LLC and Avigen, Inc., dated February 12, 2001. |
10.48(15) |
|
|
|
Amendment to Agreement between Bayer Corporation and Avigen, dated June 30, 2001. |
10.49(16) |
|
|
|
Revolving line of credit note with Wells Fargo Bank, dated June 1, 2002. |
10.50(16) |
|
|
|
Letter of Agreement to the revolving line of credit note signed June 1, 2002 with Wells Fargo Bank. |
10.51(18) |
|
|
|
License Agreement, dated November 21, 2003, by and between University of Colorado and Avigen |
23.1 |
|
|
|
Consent of Ernst & Young LLP, Independent Auditors |
24.1 |
|
|
|
Power
of Attorney (included on the signature pages hereto) |
31.1 |
|
|
|
Certification required by Rule 13a-14(a) or Rule 15d-14(a) |
31.2 |
|
|
|
Certification required by Rule 13a-14(a) or Rule 15d-14(a) |
32.1(19) |
|
|
|
Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C.
§1350) |
Keys to Exhibits:
| (1) |
|
Filed as an exhibit to the Registrant’s Registration
Statement on Form S-1 (No. 333-03220) and incorporated herein by reference. |
| (2) |
|
Management Contract or Compensation Plan. |
| (3) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Quarterly Report on Form 10-Q for the quarter ended December 31, 1999, as filed with the SEC. |
| (4) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Annual Report on Form 10-K for the year ended June 30, 1999, as filed with the SEC. |
| (5) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Registration Statement on Form S-8 (Registration No. 333-42210) filed with the SEC on July 25, 2000. |
| (6) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Annual Report on Form 10-K for the year ended June 30, 1997, as filed with the SEC. |
| (7) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Registration Statement on Form S-8 (Registration No. 333-12087) filed with the SEC on September 16, 1996. |
| (8) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, as filed with the SEC. |
| (9) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Annual Report on Form 10-K/A for the year ended June 30, 1999, as filed with the SEC. |
| (10) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, as filed with the SEC. |
| (11) |
|
Portions of this exhibit have been omitted pursuant to a grant
of confidential treatment. |
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| (12) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Annual Report on Form 10-K for the year ended June 30, 2000, as filed with the SEC on September 27, 2000. |
| (13) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000, as filed with the SEC. |
| (14) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Registration Statement on Form S-8 (Registration No. 333-56274) filed with the SEC on February 27, 2001. |
| (15) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Annual Report on Form 10-K for the year ended June 30, 2001, as filed with the SEC on September 27, 2001. |
| (16) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, as filed with the SEC. |
| (17) |
|
Incorporated by reference from such document filed with the SEC
as an exhibit to Avigen’s Registration Statement on Form S-8 (Registration No. 333-90504) filed with the SEC on June 14, 2002. |
| (18) |
|
Confidential treatment has been requested with respect to
certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission. |
| (19) |
|
This certification accompanies the Form 10-K to which it
relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Avigen under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K),
irrespective of any general incorporation language contained in such filing. |
72