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Fiscal 2012 compared to Fiscal 2011 General and Administrative Expenses decreased $1.1 million, or
6.5%, during fiscal 2012 compared to fiscal 2011. The decrease was primarily for lower compensation-
related costs following the reduction in force during June 2011 as well as a reduction in stock
compensation expense related to the termination of our former CEO. Partially offsetting these decreases
were additional costs incurred to hire our new CEO and search fees for our new board member.
Additionally, we spent approximately $275 thousand less on business-related tax expenses.
Fiscal 2011 compared to Fiscal 2010 General and Administrative Expenses decreased $860 thousand,
or 5.0%, in fiscal 2011 compared to fiscal 2010 primarily as a result of a $760 thousand decrease in stock
compensation expense from fully vested options as well as a $575 thousand decrease in the estimated
liability for our fiscal 2011 performance bonus compared to the prior year. We also incurred approximately
$400 thousand additional expense during fiscal 2011 to obtain and protect our patents.
Other Income (Expense)
Below is a summary of our Other Income (Expense) (dollars in thousands):
Years Ended June 30,
Change 2012 vs. 2011
Change 2011 vs. 2010
2012
2011
2010
$
%
$
%
Realized gains on auction rate
securities, net
$
-
$
1,891 $
1,305
$
(1,891)
(100.0%)
$
586
44.9%
Loss on prepayment of long-term
debt, net
(942)
(6,340)
-
5,398
(85.1%)
(6,340)
-
Interest income
32
406
864
(374)
(92.1%)
(458)
(53.0%)
Interest expense
(11,624)
(15,507)
(15,749)
3,883
(25.0%)
242
(1.5%)
Total other income (expense), net
$ (12,534) $ (19,550) $ (13,580) $
7,016
(35.9%)
$
(5,970)
44.0%
Summaries of the gains recorded related to our ARS are reported in
Note 3 Marketable Securities to the
accompanying financial statements.
Loss on prepayment of long-term debt, net decreased $5.4 million in fiscal 2012 compared to the prior
year. The fiscal 2012 loss was for a proportional write down of the debt discount and debt issuance costs
related to a $4.2 million payment to Deerfield. The fiscal 2011 loss resulted from the May 2011 Deerfield
debt modification. A summary of the loss on prepayment of long-term debt, net related to the modification
of the Deerfield credit facilities in May 2011 and Interest Expense are reported in
Note 8 Long-term Debt
of the accompanying financial statements.
Liquidity and Capital Resources
We have incurred operating losses and an accumulated deficit as a result of ongoing research and
development spending since inception. As of June 30, 2012, we had an accumulated deficit of
$570.7 million. We had net losses of $23.6 million, $56.3 million and $77.6 million for the years ended
June 30, 2012, 2011 and 2010, respectively.
We have historically funded our operations from up-front fees and license and milestone payments
received under our collaboration and out-licensing transactions, from the issuance and sale of equity
securities and through debt provided by our credit facilities. For example, we received net proceeds of
approximately $56.1 million in February 2012 from an underwritten public offering of our common stock
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and have received $174 million in the last 32 months through the date of filing this Annual Report,
including the following payments under our collaborations:
In December 2009, we received a $60 million up-front payment from Amgen Inc. under a
Collaboration and License Agreement.
In April 2010, we received $45 million in up-front and milestone payments under a License
Agreement with Novartis Pharmaceutical International Ltd.
In December 2010, we received a $10 million milestone payment under a License Agreement with
Celgene Corporation.
In May 2011, we received a $10 million milestone payment under a License Agreement with
Novartis Pharmaceutical International Ltd.
In September 2011, we received a $28 million milestone payment under a License Agreement with
Genentech, Inc.
In June 2012, we received an $8.5 million milestone payment from Amgen following achievement
of a pre-defined patient enrollment milestone in a Phase 2 trial.
Until we can generate sufficient levels of cash from operations, which we do not expect to achieve in the
foreseeable future, we will continue to utilize existing cash, cash equivalents and marketable securities,
and will continue to depend on funds provided from the sources mentioned above, which may not be
available or forthcoming.
During fiscal 2013, we expect to begin paying our share of the combined development costs since
inception of the MEK162 program, as discussed in
Note 9 Deferred Revenue Novartis International
Pharmaceutical Ltd. As of June 30, 2012, we have reported a $9.2 million payable in the accompanying
Balance Sheet as co-development liability for this obligation.
Management believes that the cash, cash equivalents and marketable securities as of June 30, 2012 will
enable us to continue to fund operations in the normal course of business for at least the next 12 months.
Because sufficient funds may not be available to us when needed from existing collaborations, we expect
that we will be required to continue to fund our operations in part through the sale of debt or equity
securities and through licensing select programs that include up-front and/or milestone payments.
Our ability to successfully raise sufficient funds through the sale of debt or equity securities when needed
is subject to many risks and uncertainties and, even if we are successful, future equity issuances would
result in dilution to our existing stockholders. We also may not successfully consummate new
collaborations that provide for additional up-front fees or milestone payments or we may not earn
milestone payments under such collaborations when anticipated or at all. Our ability to realize milestone
or royalty payments under existing collaboration agreements and to enter into new partnering
arrangements that generate additional revenue through up-front fees and milestone or royalty payments
is subject to a number of risks, many of which are beyond our control and include the following:
The drug development process is risky and highly uncertain and we may not be successful in
generating proof-of-concept data to create partnering opportunities and, even if we are, we or our
collaborators may not be successful in commercializing drug candidates we create;
We may fail to select the best drug from our wholly-owned pipeline to advance and invest in
registration, or Phase 3 studies;
Our collaborators have substantial control and discretion over the timing and continued
development and marketing of drug candidates we create and, therefore, we may not receive
milestone, royalty or other payments when anticipated or at all;
The drug candidates we develop may not obtain regulatory approval;
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