UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 5, 2003
EXELIXIS, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-30235 04-3257395
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(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Incorporation) Identification No.)
170 Harbor Way
P.O. Box 511
South San Francisco, California 94083
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(Address of principal executive offices, and including zip code)
(650) 837-7000
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(Registrant's telephone number, including area code)
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Item 12. Results of Operations and Financial Condition.
On November 5, 2003, Exelixis, Inc. issued a press release announcing financial
results for the quarter ended September 30, 2003. A copy of such press release
is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
The information in this report, including the exhibit hereto, shall not be
deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934, as amended, or otherwise subject to the liabilities of that section or
Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The
information contained herein and in the accompanying exhibit shall not be
incorporated by reference into any filing with the U.S. Securities and Exchange
Commission made by Exelixis, whether made before or after the date hereof,
regardless of any general incorporation language in such filing.
The information furnished in this report, including the exhibit hereto, shall
not be deemed to constitute an admission that such information or exhibit is
required to be furnished by Regulation FD or that the information or exhibit in
this report contains material information that is not otherwise publicly
available.
Use of Non-GAAP Financial Information
Exelixis provides certain net loss information in the press release to
illustrate the company's results from operations excluding discontinued
operations, gain on insurance settlement, restructuring charges and certain
non-cash charges, including (a) stock-based compensation expense and (b)
amortization of purchased intangibles related to business combinations.
Exelixis' management believes that the presentation of these non-GAAP results is
a useful measure of the company's results from continuing operations, excluding
the restructuring charges, non-cash charges and gain on insurance settlement,
which, in management's view, are not necessarily reflective of, or directly
attributable to, operations. These non-GAAP results are not in accordance with,
or an alternative for, generally accepted accounting principles and may be
different from non-GAAP measures used by other companies.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 5, 2003
Exelixis, Inc.
/s/ Kristine M. Ball
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Kristine M. Ball
Interim Chief Financial Officer
(Principal Financial and Accounting Officer)
News Release
Contact: Jane M. Green, Ph.D.
Vice President, Corporate Communications
Exelixis, Inc.
(650) 837-7579
jmgreen@exelixis.com
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EXELIXIS ANNOUNCES THIRD QUARTER
2003 FINANCIAL RESULTS
SOUTH SAN FRANCISCO, Calif. - November 5, 2003 - Exelixis, Inc. (Nasdaq: EXEL)
today reported financial results for the quarter ended September 30, 2003.
For the quarter ended September 30, 2003, the company reported a net loss of
approximately $25.0 million, or $0.35 per share, under generally accepted
accounting principles (GAAP), compared to a net loss of $22.9 million, or $0.41
per share, under GAAP for the quarter ended September 30, 2002. Excluding
restructuring expense and non-cash charges for stock compensation and
amortization of intangibles, the company reported a non-GAAP net loss of
approximately $24.1 million, or $0.34 per share for the quarter ended September
30, 2003. For the quarter ended September 30, 2002, the comparable non-GAAP net
loss was approximately $22.1 million, or $0.39 per share. A reconciliation of
GAAP net loss to non-GAAP net loss is set forth at the end of this press
release.
At September 30, 2003, cash, cash equivalents, short-term investments and
restricted cash totaled approximately $218.6 million compared to $222.0 million
at December 31, 2002. The cash balance as of September 30, 2003 included $74.6
million of net proceeds from the Company's follow-on public offering of common
stock, including the underwriters' partial exercise of the over-allotment
option, completed in July 2003.
For the quarter ended September 30, 2003, total revenues were approximately
$12.4 million, compared to $10.4 million for the same period of 2002. The
increase in the third quarter of 2003 compared to the third quarter of 2002 was
driven primarily by revenue from our October 2002 corporate collaboration with
SmithKlineBeecham Corporation (GlaxoSmithKline) partially offset by the May 2003
conclusion of our collaboration with Protein Design Labs.
Research and development expenses for the quarter ended September 30, 2003 were
$32.3 million, including stock compensation expense of $0.1 million, compared to
$28.8 million, including stock compensation expense of $0.4 million, for the
equivalent period of 2002. The increase in the 2003 third quarter from the 2002
third quarter levels was driven primarily by an increase in personnel costs, lab
supplies and activities related to advancing our clinical and preclinical
development programs partially offset by a decrease in outsourcing costs
associated with the expansion of our proprietary compound library.
General and administrative expenses for the quarter ended September 30, 2003
were $4.5 million, including stock compensation expense of $0.1 million,
compared to $4.4 million, including stock compensation of $0.3 million, for the
comparable period in 2002.
"We made solid progress in the third quarter by advancing our preclinical and
clinical programs and fulfilling partner obligations while at the same time
exceeding our financial management goal for the quarter," said George A.
Scangos, Ph.D., president and chief executive officer.
Continued Dr. Scangos: "Our pipeline is advancing extremely well. Plans are
underway to initiate the Phase 3 registration trial of XL119 as a potential
treatment for bile duct tumors in the first half of 2004. We have reached
agreement with the U.S. Food and Drug Administration (FDA) on the Phase 3
program via the FDA's Special Protocol Assessment process. The trial will be a
randomized, well-controlled comparative study of XL119 in several hundred
patients as a single-agent therapy with a survival-based endpoint. We continue
to explore development and commercialization partnering opportunities for this
compound. The Phase I safety trial of XL784 is continuing. We have completed
clinical dosing and the compound continues to look safe. We are assessing the
compound's pharmacokinetic and pharmacodynamic profiles and are also continuing
to explore its therapeutic utility outside of cancer, in cardiac and renal
disease. Our clinical candidates, XL647 and XL999, have each demonstrated potent
antitumor activity in preclinical models and are progressing through toxicology
toward IND status. Behind these two compounds are several additional exciting
programs advancing rapidly into preclinical status."
Concluded Dr. Scangos: "We believe that our gene-to-drug engine is operating in
high gear, and that we are well on our way to meeting our goal of filing
multiple INDs each year. We have an interesting and potentially promising cancer
pipeline, which only becomes more so with time. We remain committed to
fulfilling our partner obligations and seeking to establish additional corporate
partnerships before year-end. We are also committed to managing our costs to
provide adequate resources to expand and exploit the potential of our
development pipeline. Our ability to accomplish our goals this quarter while
still decreasing expenses reflects this commitment."
In the third quarter of 2003, we implemented a worldwide restructuring of our
research and development organization designed to reallocate resources and
enhance the efficiency of our operations. The restructuring plan provides for a
net reduction in force of approximately 5% of our personnel, which is comprised
of an 11% reduction impacting research personnel in South San Francisco and our
Exelixis Deutschland subsidiary in Tubingen, Germany, offset in part by a
planned expansion of the discovery and development groups to increase the number
of lead optimization teams and expand preclinical and clinical development
activities. We expect that the reduction in force will conclude in the first
quarter of 2004, while the expansion will be accomplished by year-end 2004. In
connection with the restructuring plan, we recorded a charge of approximately
$606,000 during the third quarter of 2003 consisting primarily of severance,
retention bonuses and legal and outplacement services fees. Through the first
quarter of 2004, the Company expects to record additional expenses related to
this restructuring plan of approximately $1.5 million.
Outlook
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With respect to financial expectations for the fourth quarter of 2003 compared
to the third quarter, we expect our revenues to increase in the range of 5%-10%,
largely due to delivery of compound libraries to customers and fulfillment of
partner obligations resulting in milestone payments. We expect our operating
expenses, excluding non-cash and restructuring charges, to increase by 5% or
less as we continue to actively manage expenses while focusing our efforts on
advancing preclinical and clinical programs.
With respect to guidance for the full year 2003 as compared to 2002, we
anticipate that our expenses, excluding non-cash and restructuring charges, will
increase by 13%-15%, which is a significantly lower rate than our original
guidance, due to rigorous cost control measures that we have implemented
throughout the company. Our revenue guidance of 15%-20% increase remains
reasonable. We are revising our cash burn guidance upward by a modest amount due
to the unpredictable timing of signing potential new collaborations before
year-end. We believe that our 2003 cash burn will be between $88 and $93
million, pending completion of certain anticipated collaborations in the fourth
quarter. Cash burn is the sum of the net cash used in operating activities; plus
purchases of property and equipment, net of proceeds from sale-leaseback of
equipment and bank obligations, plus principal payments on capital lease
obligations, notes payable and bank obligations as derived from our consolidated
statements of cash flows prepared in accordance with generally accepted
accounting principles. Our cash and investments balance at the end of 2003 is
expected to exceed $205 million, not including proceeds of any loans under our
facility with GlaxoSmithKline.
Exelixis, Inc. (Nasdaq: EXEL) is a leading genomics-based drug discovery company
dedicated to the discovery and development of novel therapeutics. The company is
leveraging its fully integrated gene-to-drug platform to fuel the growth of its
proprietary drug pipeline. Exelixis' development pipeline includes: XL119, which
is anticipated to enter a Phase 3 trial as a potential treatment for bile duct
tumors; XL784, an anticancer compound currently in a Phase 1 safety study; XL647
and XL999, anticancer compounds that are potential IND candidates; and multiple
compounds in preclinical development. Exelixis has established broad corporate
alliances with major pharmaceutical and biotechnology companies, including
SmithKlineBeecham Corporation and Bristol-Myers Squibb Company. The company has
also established agricultural research collaborations with Bayer CropScience,
Dow AgroSciences and Renessen LLC. Other partners include Merck & Co., Inc.,
Schering-Plough Research Institute, Inc., Cytokinetics, Inc., Elan
Pharmaceuticals, Inc. and Scios Inc. For more information, please visit the
company's web site at www.exelixis.com.
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Exelixis' management will discuss the company's third quarter 2003 financial
results and outlook during a conference call beginning at 5:00 p.m. U.S. EDT
today, Wednesday, November 5, 2003. To participate in the conference call, log
onto www.exelixis.com and click on the webcast link under the heading "Investor
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Info" to access the live call. A copy of Exelixis' press releases, including
this release, can be found on the company's website at www.exelixis.com under
the heading "Press Room."
This press release contains forward-looking statements, including without
limitation statements related to our Phase 3 registration trial of XL119 and
potential collaborations related to XL119, the prospects for XL784, potential
INDs for XL647 and XL999, potential additional INDs and the matters discussed in
the "Outlook" section. Words such as "goal","believes," "anticipates," "plans,"
"expects," "will" and similar expressions are intended to identify
forward-looking statements. These forward-looking statements are based upon
Exelixis' current expectations. Forward-looking statements involve risks and
uncertainties. Exelixis' actual results and the timing of events could differ
materially from those anticipated in such forward-looking statements as a result
of many factors, including Exelixis' ability to enter into new collaborations,
continue existing collaborations and receive milestones and royalties derived
from future products developed from its research efforts under collaborative
agreements; the rate of growth, if any, in license and contract revenues; the
timing and level of expenses associated with the growth of proprietary programs
and the GlaxoSmithKline collaboration; the ability to successfully identify and
develop compounds against proprietary targets and advance compounds against
those targets into clinical development; the amount and timing of investments in
manufacturing and clinical development of its rebeccamycin analogue, XL119; the
timing of entry , if ever, of XL 119 into a registration clinical program; the
therapeutic and commercial potential for, XL784; and the timing of entry, if
ever, of additional compounds into clinical development. These and other risk
factors are discussed under "Risk Factors" and elsewhere in Exelixis' Annual
Report on Form 10-K for the year ended December 31, 2002, Quarterly Report on
Form 10-Q for the quarter ended September 30, 2003 and other SEC reports.
Exelixis expressly disclaims any obligation or undertaking to release publicly
any updates or revisions to any forward-looking statements contained herein to
reflect any change in its expectations with regard thereto or any change in
events, conditions or circumstances on which any such statements are based.
Exelixis and the Exelixis logo are registered U.S. trademarks.
##
EXELIXIS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
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2003 2002 2003 2002
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Revenues:
Contract and government grants $ 9,310 $ 8,449 $ 28,389 $ 25,268
License 3,129 1,981 9,385 6,601
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Total revenues 12,439 10,430 37,774 31,869
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Operating expenses:
Research and development (1) 32,298 28,845 95,054 84,290
Selling, general and administrative (2) 4,495 4,395 14,364 13,962
Restructuring charge 606 - 606 -
Amortization of intangibles 166 166 499 499
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Total operating expenses 37,565 33,406 110,523 98,751
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Loss from operations (25,126) (22,976) (72,749) (66,882)
Other income (expense):
Interest income 1,096 710 3,364 4,729
Interest expense (907) (724) (2,739) (2,090)
Other income (expense), net (133) 47 741 227
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Total other income (expense) 56 33 1,366 2,866
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Loss from continuing operations before income taxes (25,070) (22,943) (71,383) (64,016)
Provision (benefit) for income taxes (75) - 112 -
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Loss from continuing operations (24,995) (22,943) (71,495) (64,016)
Loss from operations of discontinued segment - - - (1,251)
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Net loss $ (24,995) $ (22,943) $ (71,495) $ (65,267)
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Loss per share from continuing operations $ (0.35) $ (0.41) $ (1.13) $ (1.14)
Loss per share from discontinued operations - - - (0.02)
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Net loss per share, basic and diluted $ (0.35) $ (0.41) $ (1.13) $ (1.16)
================ ================ ================ ================
Shares used in computing basic and
diluted loss per share amounts 70,994 56,483 63,466 56,096
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(1) Includes stock compensation expense of $106 and $364 in the three-month periods ended September 30, 2003 and 2002,
respectively, and $464 and $1,349 in the nine-month periods ended September 30, 2003 and 2002, respectively.
(2) Includes stock compensation expense of $61 and $305 in the three-month periods ended September 30, 2003 and 2002,
respectively, and $280 and $957 in the nine-month periods ended September 30, 2003 and 2002, respectively.
EXELIXIS, INC.
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS (1)
(in thousands, except per share amounts)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
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2003 2002 2003 2002
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GAAP net loss $ (24,995) $ (22,943) $ (71,495) $ (65,267)
Add:
Loss from operations of discontinued segment - - - 1,251
Non-cash charges for amortization of intangibles 166 166 499 499
Non-cash charges for stock compensation expense 167 669 744 2,306
Restructuring charge 606 - 606 -
Gain from insurance settlement
included in other income - - (773) -
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Non-GAAP net loss $ (24,056) $ (22,108) $ (70,419) $ (61,211)
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Non-GAAP net loss per share, basic and diluted $ (0.34) $ (0.39) $ (1.11) $ (1.09)
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Shares used in computing basic and diluted
Non-GAAP net loss per share 70,994 56,483 63,466 56,096
================ ================ ================ ================
(1) These non-GAAP amounts are intended to illustrate the company's results
from operations excluding discontinued operations, gain from insurance
settlement, restructuring charges and certain non-cash charges, including
(a) stock-based compensation expense and (b) amortization of purchased
intangibles related to business combinations. Management of the company
believes the non-GAAP results are a useful measure of the company's results
from continuing operations, excluding restructuring expenses, gain from
insurance settlement and non-cash charges, which, in management's view, are
not necessarily reflective of or directly attributable to operations. These
non-GAAP results are not in accordance with, or an alternative for,
generally accepted accounting principles and may be different from non-GAAP
measures used by other companies.
EXELIXIS, INC.
CONSOLIDATED BALANCE SHEET DATA
(in thousands)
September 30, December 31,
2003 2002 (2)
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(unaudited)
Cash, cash equivalents, short-term investments
and restricted cash of $18.9M and $5.8M, respectively $ 218,565 $ 221,987
Working capital 162,874 173,153
Total assets 336,824 339,113
Stockholders' equity 183,541 175,920
(2) Derived from the audited consolidated financial statements
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