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If regulatory approval is received, drugs we develop will remain subject to regulation or may not
gain market acceptance, which could delay or prevent us from generating milestone, royalty
revenue or product revenue from the commercialization of these drugs; and
We cannot control or predict the spending priorities and willingness of pharmaceutical companies
to in-license drugs for further development and commercialization.
Our assessment of our future need for funding and our ability to continue to fund our operations for the
next 12 months is a forward-looking statement that is based on assumptions that may prove to be wrong
and that involve substantial risks and uncertainties. Our actual future capital requirements could vary as a
result of a number of factors, including:
Our ability to enter into agreements to out-license, co-develop our proprietary drug candidates and
the timing of payments under those agreements throughout each candidate's development stage;
The number and scope of our research and development programs;
The progress and success of our preclinical and clinical development activities;
The progress and success of the development efforts of our collaborators;
Our ability to maintain current collaboration agreements;
The costs involved in enforcing patent claims and other intellectual property rights; and/or
The expenses associated with unforeseen litigation, regulatory changes, competition and
technological developments, general economic and market conditions and the extent to which we
acquire or invest in other businesses, products and technologies.
If we are unable to obtain additional funding from these or other sources when needed, or to the extent
needed, it may be necessary to significantly reduce the current rate of spending through further
reductions in staff and delaying, scaling back, or stopping certain research and development programs,
including more costly Phase 2 and Phase 3 clinical trials on our wholly owned programs as these
programs progress into later stage development. Insufficient liquidity may also require us to relinquish
greater rights to product candidates at an earlier stage of development or on less favorable terms to us
and our stockholders than we would otherwise choose in order to obtain up-front license fees needed to
fund operations. These events could prevent us from successfully executing our operating plan and in the
future could raise substantial doubt about our ability to continue as a going concern. Further, as
discussed in
Note 8 Long-term Debt, the entire debt balance of $92.6 million outstanding with Deerfield
Private Design Fund, L.P. and certain of its affiliates (collectively referred to as Deerfield) becomes due
and payable if our total cash, cash equivalents and marketable securities falls below $20 million at the end
of a fiscal quarter. Based on our current forecasts and expectations, which are subject to many factors
outside of our control, we do not anticipate that our cash and cash equivalents and marketable securities
will fall below this level prior to maturity of such debt.
Cash, Cash Equivalents and Marketable Securities
Cash equivalents are short-term, highly liquid financial instruments that are readily convertible to cash
and have maturities of 90 days or less from the date of purchase.
Short-term marketable securities consist primarily of U.S. government agency obligations with maturities
of greater than 90 days when purchased. Long-term marketable securities as of June 30, 2010 consisted
primarily of our investments in ARS, all of which we have sold as of March 31, 2011. See
Note 3
Marketable Securities to the accompanying financial statements for more information regarding our ARS.
Long-term marketable securities as of June 30, 2012 primarily related to our Deferred Compensation
Plan.
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Below is a summary of our cash, cash equivalents and marketable securities (dollars in thousands):
Years Ended June 30,
Change 2012 vs. 2011
Change 2011 vs. 2010
2012
2011
2010
$
%
$
%
Cash and cash equivalents
$ 55,799
$ 48,099
$ 32,846
$
7,700
16.0%
$ 15,253
46.4%
Marketable securities short-term
33,378
15,986
78,664
17,392
108.8%
(62,678)
(79.7%)
Marketable securities long-term
473
623
17,359
(150)
(24.1%)
(16,736)
(96.4%)
Total
$ 89,650
$ 64,708
$128,869
$ 24,942
38.5%
$ (64,161)
(49.8%)
Cash Flow Activities
Below is a summary of our cash flows (dollars in thousands):
Years Ended June 30,
Change 2012 vs. 2011
Change 2011 vs. 2010
2012
2011
2010
$
%
$
%
Cash flows provided by (used in):
Operating activities
$ (33,546) $ (65,962) $ 17,886
$ 32,416
(49.1%)
$ (83,848)
(468.8%)
Investing activities
(18,721)
74,095
(69,391)
(92,816)
(125.3%)
143,486
(206.8%)
Financing activities
59,967
7,120
51,149
52,847
742.2%
(44,029)
(86.1%)
Total
$
7,700 $ 15,253 $
(356) $
(7,553)
(49.5%)
$ 15,609
(4,383.0%)
Fiscal 2012 compared to Fiscal 2011 Net cash used in operating activities in fiscal 2012 was
$33.5 million, compared to $66.0 million in fiscal 2011. In fiscal 2012, we received $36.5 million from
Genentech and Amgen for up-front and milestone payments under our collaboration agreements with
them which decreased our net loss compared to fiscal 2011.
Net cash provided by (used in) investing activities was $(18.7) million and $74.1 million in fiscal 2012 and
2011, respectively. During fiscal 2012, our net cash proceeds from sales of marketable securities
decreased by $95.4 million compared to the prior year.
Net cash provided by financing activities was $60.0 million and $7.1 million for fiscal 2012 and 2011,
respectively. The difference between the periods is primarily attributable to $56.1 million in net proceeds
received from the sale of 23 million shares of our common stock in a public offering during February 2012
and $7.0 million received from the sale of 2.9 million shares of our common stock under our Equity
Distribution Agreement with Piper Jaffray & Co during the current fiscal year. This increase in net cash
provided by financing activities was reduced by the $4.2 million payment of principal under the Deerfield
credit facilities.
Fiscal 2011 compared to Fiscal 2010 Net cash (used in) operating activities in fiscal 2011 was $(65.9)
million, compared to $17.6 million of cash provided by operating activities in fiscal 2010. In fiscal 2010, we
received $105 million from Amgen and Novartis in up-front and initial milestone payments under our
collaboration agreements with them which decreased our net loss compared to fiscal 2011.
Net cash provided by (used in) investing activities was $74.1 million and $(69.1) million in fiscal 2011 and
2010, respectively. During fiscal 2011, we invested approximately $650 thousand more in property and
equipment than we did in the prior year. Additionally, our net cash proceeds from sales of marketable
securities increased by $144 million in fiscal 2011 compared to the prior year, including increased
proceeds related to sales of our ARS in the amount of $9.3 million.
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