##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
 For the quarterly period ended June 30, 2005
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the transition period from to .
 Commission File Number  000-50438
 Myogen, Inc.
  Delaware
(State or other jurisdiction of
incorporation or organization)
    
    84-1348020
(I.R.S. Employer
Identification No.)
 7575 West 103rd Avenue, Suite 102
Westminster, CO 80021
(303) 410-6666
  þ o
  þ o




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##### Table of Contents



MYOGEN, INC.
FORM 10-Q
 INDEX
 PageNumberPART I. Financial Information
    
    
    3ITEM 1. Consolidated Financial Statements (unaudited)
    
    
    3Consolidated Balance Sheets
As of June 30, 2005 and December 31, 2004
    
    
    3Consolidated Statements of Operations
For the Three Months and Six Months Ended June 30, 2005 and
2004 and the Cumulative Period from June 10, 1996 (Inception)
to June 30, 2005
    
    
    4Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2005 and 2004 and the
Cumulative Period from June 10, 1996 (Inception) to June 30,
2005
    
    
    5Notes to Consolidated Financial Statements
    
    
    6ITEM 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    12ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    42ITEM 4. Controls and Procedures
    
    
    43PART II. Other Information
    
    
    44ITEM 1. Legal Proceedings
    
    
    44ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    44ITEM 3. Defaults Upon Senior Securities
    
    
    44ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    44ITEM
5. Other Information
    
    
    45ITEM 6. Exhibits
    
    
    45SIGNATURES
    
    
    46EXHIBIT INDEX
    
    
    47Certification of Principal Executive OfficerCertification of Principal Financial OfficerSection 1350 Certification
 2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 MYOGEN, INC.
(A Development Stage Enterprise)
 
 CONSOLIDATED BALANCE SHEETS
(Unaudited)
 June 30,
    
    December 31,2005
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    51,600,642
    
    
    $
    71,258,294Short-term investments
    
    
    32,278,832
    
    
    
    48,330,819Accrued interest receivable
    
    
    269,566
    
    
    
    290,972Trade accounts receivable
    
    
    900,573
    
    
    
    946,177Research and development contract amounts due
within one year
    
    
    1,300,000
    
    
    
    300,000Inventories
    
    
    311,158
    
    
    
    258,120Prepaid expenses and other current assets
    
    
    2,547,971
    
    
    
    1,679,340Total current assets
    
    
    89,208,742
    
    
    
    123,063,722Long-term investments
    
    
    4,552,386
    
    
    
    Property and equipment, net
    
    
    2,644,976
    
    
    
    2,503,579Other assets
    
    
    27,299
    
    
    
    35,421Total assets
    
    $
    96,433,403
    
    
    $
    125,602,722LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    21,938,161
    
    
    $
    10,681,667Accrued liabilities
    
    
    883,831
    
    
    
    1,941,083Current portion of deferred revenue
    
    
    1,186,954
    
    
    
    1,823,188Current portion of deferred rent
    
    
    63,956
    
    
    
    59,456Current portion of capital lease obligations
    
    
    69,204
    
    
    
    59,924Current portion of notes payable, net of discount
    
    
    1,106,952
    
    
    
    1,821,806Total current liabilities
    
    
    25,249,058
    
    
    
    16,387,124Deferred revenue, net of current portion
    
    
    2,249,146
    
    
    
    1,398,753Deferred rent, net of current portion
    
    
    184,138
    
    
    
    217,616Capital lease obligations, net of current portion
    
    
    72,163
    
    
    
    112,728Notes payable, net of current portion and discount
    
    
    
    
    
    
    172,100Commitments and contingencies (See Note 9)Stockholders equity:Preferred Stock, $0.001 par value; 5,000,000 shares
authorized at June 30, 2005 and December 31, 2004, no
shares issued or outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value; 100,000,000
shares authorized and 35,781,247 and 35,731,581
shares issued and outstanding as of June 30, 2005 and
December 31, 2004, respectively
    
    
    35,781
    
    
    
    35,732Additional paid-in-capital
    
    
    286,240,368
    
    
    
    286,017,266Deferred stock-based compensation
    
    
    (1,573,589
    )
    
    
    (2,534,535
    )Accumulated other comprehensive loss
    
    
    (41,193
    )
    
    
    (42,203
    )Deficit accumulated during the development stage
    
    
    (215,982,469
    )
    
    
    (176,161,859
    )Total stockholders equity
    
    
    68,678,898
    
    
    
    107,314,401Total liabilities and stockholders equity
    
    $
    96,433,403
    
    
    $
    125,602,722
  3




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##### Table of Contents



MYOGEN,
INC. 
 (A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 CumulativePeriod fromFor the Three Months Ended
    
    For the Six Months Ended
    
    June 10, 1996June 30,
    
    June 30,
    
    (Inception) to2005
    
    2004
    
    2005
    
    2004
    
    June 30, 2005Revenues:Product sales
    
    $
    751,926
    
    
    $
    899,831
    
    
    $
    1,660,779
    
    
    $
    1,751,478
    
    
    $
    12,402,176Research and development contracts
    
    
    1,580,044
    
    
    
    1,663,667
    
    
    
    3,285,842
    
    
    
    3,003,295
    
    
    
    10,902,6442,331,970
    
    
    
    2,563,498
    
    
    
    4,946,621
    
    
    
    4,754,773
    
    
    
    23,304,820Costs and expenses:Cost of product sold
    
    
    272,525
    
    
    
    277,574
    
    
    
    580,640
    
    
    
    548,704
    
    
    
    4,344,439Research and
development
(excluding
stock-based
compensation expense
of $265,981,
$535,183, $530,028,
$1,151,131 and
$5,356,817,
respectively)
    
    
    20,691,213
    
    
    
    12,461,672
    
    
    
    38,096,618
    
    
    
    27,086,108
    
    
    
    180,939,999Selling, general and
administrative
(excluding
stock-based
compensation expense
of $252,122,
$586,839, $504,012,
$1,182,745 and
$4,550,344,
respectively)
    
    
    2,985,300
    
    
    
    2,046,850
    
    
    
    6,229,068
    
    
    
    4,282,128
    
    
    
    33,327,247Stock-based
compensation expense
    
    
    518,103
    
    
    
    1,122,022
    
    
    
    1,034,040
    
    
    
    2,333,876
    
    
    
    9,907,16124,467,141
    
    
    
    15,908,118
    
    
    
    45,940,366
    
    
    
    34,250,816
    
    
    
    228,518,846Loss from operations
    
    
    (22,135,171
    )
    
    
    (13,344,620
    )
    
    
    (40,993,745
    )
    
    
    (29,496,043
    )
    
    
    (205,214,026
    )Interest income (expense), net
    
    
    610,766
    
    
    
    136,762
    
    
    
    1,173,584
    
    
    
    308,640
    
    
    
    4,394,850Loss before income taxes
    
    
    (21,524,405
    )
    
    
    (13,207,858
    )
    
    
    (39,820,161
    )
    
    
    (29,187,403
    )
    
    
    (200,819,176
    )Income taxes
    
    
    (5,170
    )
    
    
    2,511
    
    
    
    449
    
    
    
    9,387
    
    
    
    83,631Net loss
    
    
    (21,519,235
    )
    
    
    (13,210,369
    )
    
    
    (39,820,610
    )
    
    
    (29,196,790
    )
    
    
    (200,902,807
    )Accretion of mandatorily redeemable
convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,499,556
    )Deemed dividend related to beneficial
conversion feature of preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,935,388
    )Net loss attributable to common
stockholders
    
    $
    (21,519,235
    )
    
    $
    (13,210,369
    )
    
    $
    (39,820,610
    )
    
    $
    (29,196,790
    )
    
    $
    (273,337,751
    )Basic and diluted net loss per common
share
    
    $
    (0.60
    )
    
    $
    (0.50
    )
    
    $
    (1.11
    )
    
    $
    (1.10
    )Weighted average common shares outstanding
    
    
    35,767,018
    
    
    
    26,490,954
    
    
    
    35,762,163
    
    
    
    26,476,058
  4




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MYOGEN, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 CumulativePeriod FromFor the Six Months Ended
    
    June 10, 1996June 30,
    
    (Inception) to2005
    
    2004
    
    June 30, 2005Cash Flows From Operating Activities:Net loss
    
    $
    (39,820,610
    )
    
    $
    (29,196,790
    )
    
    $
    (200,902,807
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    460,733
    
    
    
    239,328
    
    
    
    2,089,964Amortization of deferred stock-based compensation
    
    
    1,034,040
    
    
    
    2,333,876
    
    
    
    9,907,161Amortization of debt discount
    
    
    68,808
    
    
    
    68,808
    
    
    
    354,852Amortization of investment (discount) premium
    
    
    (59,892
    )
    
    
    454,147
    
    
    
    761,262Stock exchanged for license
    
    
    
    
    
    
    
    
    
    
    1,163,229Loss on disposal of property and equipment
    
    
    21,333
    
    
    
    363
    
    
    
    56,005Changes in operating assets and liabilities:Trade accounts receivable
    
    
    (94,908
    )
    
    
    (40,766
    )
    
    
    (159,250
    )Research and development contract amounts
    
    
    (1,000,000
    )
    
    
    (622,000
    )
    
    
    (300,000
    )Inventories
    
    
    (53,038
    )
    
    
    44,656
    
    
    
    (311,158
    )Prepaid expenses, accrued interest and other assets
    
    
    (786,893
    )
    
    
    253,095
    
    
    
    (2,861,781
    )Accounts payable
    
    
    11,587,048
    
    
    
    1,505,338
    
    
    
    21,604,495Deferred revenue
    
    
    214,158
    
    
    
    (833,334
    )
    
    
    2,436,100Accrued liabilities
    
    
    (1,332,724
    )
    
    
    (376,983
    )
    
    
    394,248Net cash used in operating activities
    
    
    (29,761,945
    )
    
    
    (26,170,262
    )
    
    
    (165,767,680
    )Cash Flows From Investing Activities:Acquisitions of property and equipment
    
    
    (597,514
    )

    
    
    (928,295
    )
    
    
    (4,753,823
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    
    
    
    
    332,473Purchases of investments
    
    
    (20,271,259
    )
    
    
    (60,684,872
    )
    
    
    (455,084,828
    )Proceeds from maturities of short-term investments
    
    
    31,861,709
    
    
    
    58,209,420
    
    
    
    417,639,804Net cash provided by (used in)
investing activities
    
    
    10,992,936
    
    
    
    (3,403,747
    )
    
    
    (41,866,374
    )Cash Flows From Financing Activities:Proceeds from issuance of mandatorily redeemable convertible preferred stock, net of issuance costs
    
    
    
    
    
    
    
    
    
    
    127,151,604Proceeds from issuance of common stock, net of issuance costs
    
    
    150,057
    
    
    
    65,774
    
    
    
    130,895,451Proceeds from notes payable
    
    
    
    
    
    
    
    
    
    
    5,250,000Payments on notes payable
    
    
    (955,761
    )
    
    
    (866,713
    )
    
    
    (4,074,241
    )Proceeds from related party note
    
    
    
    
    
    
    
    
    
    
    370,275Repayments of related party note
    
    
    
    
    
    
    
    
    
    
    (289,887
    )Payments on capital leases
    
    
    (33,094
    )
    
    
    (20,445
    )
    
    
    (139,391
    )Net cash (used in) provided by
financing activities
    
    
    (838,798
    )
    
    
    (821,384
    )
    
    
    259,163,811Effect of exchange rates on cash
    
    
    (49,845
    )
    
    
    (10,441
    )
    
    
    70,885Net (decrease) increase in cash and cash equivalents
    
    
    (19,657,652
    )
    
    
    (30,405,834
    )
    
    
    51,600,642Cash and cash equivalents, beginning of period
    
    
    71,258,294
    
    
    
    44,337,721
    
    
    
    Cash and cash equivalents, end of period
    
    $
    51,600,642
    
    
    $
    13,931,887
    
    
    $
    51,600,642Supplemental Disclosure of Non-Cash Financing Activities:Acquisition of property and equipment under capital leases
    
    $
    905
    
    
    
    8,881
    
    
    $
    276,297Common stock issued in exchange for notes receivable
    
    
    
    
    
    
    
    
    
    
    81,362Convertible preferred stock issued in exchange for license
    
    
    
    
    
    
    
    
    
    
    1,163,229Mandatorily redeemable convertible preferred stock issued in lieu of cash commission on issuance of
Series D mandatorily redeemable convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    928,961Conversion of Series B convertible preferred stock for common stock upon initial public offering
    
    
    
    
    
    
    
    
    
    
    804Conversion of mandatorily redeemable preferred stock for common stock upon initial public offering
    
    
    
    
    
    
    
    
    
    
    159,688,153Deferred research and development contract revenue due within one year
    
    
    
    
    
    
    
    
    
    
    1,000,000
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MYOGEN, INC.
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1: Basis of Presentation
  Accounting and Reporting by Development
Stage Enterprises.
 Note 2: Liquidity
    Note 3: Stock-Based Compensation
 Accounting For Stock Issued to
Employees Accounting for Stock-Based Compensation Accounting for Equity Instruments That Are Issued
to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.
 6




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Cumulative PeriodFrom June 10,Three Months Ended
    
    Six Months Ended
    
    1996 (Inception) toJune 30,
    
    June 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004
    
    2005Net loss
attributable to
common
stockholders, as
reported
    
    $
    (21,519,235
    )
    
    $
    (13,210,369
    )
    
    $
    (39,820,610
    )
    
    $
    (29,196,790
    )
    
    $
    (273,337,751
    )Add: Total
stock-based
employee
compensation
expense included in
reported net loss
    
    
    490,494
    
    
    
    1,122,216
    
    
    
    984,875
    
    
    
    2,281,889
    
    
    
    8,592,512Deduct: Total
stock-based
employee
compensation
expense determined
under fair value
based method
    
    
    (1,450,489
    )
    
    
    (1,558,056
    )
    
    
    (2,732,170
    )
    
    
    (2,950,823
    )
    
    
    (13,138,521
    )Pro forma net loss
    
    $
    (22,479,230
    )
    
    $
    (13,646,209
    )
    
    $
    (41,567,905
    )
    
    $
    (29,865,724
    )
    
    $
    (277,883,760
    )Pro forma basic and
diluted net loss
per common share
    
    $
    (0.63
    )
    
    $
    (0.52
    )
    
    $
    (1.16
    )
    
    $
    (1.13
    )Basic and diluted
net loss per common
share, as reported
    
    $
    (0.60
    )
    
    $
    (0.50
    )
    
    $
    (1.11
    )
    
    $
    (1.10
    )
  Note 4: Inventory Components
 June 30,
    
    December 31,2005
    
    2004Finished products
    
    $
    277,271
    
    
    $
    211,770Raw materials
    
    
    33,887
    
    
    
    46,350Total inventories
    
    $
    311,158
    
    
    $
    258,120
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Note 5: Comprehensive Loss
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net loss
    
    $
    (21,519,235
    )
    
    $
    (13,210,369
    )
    
    $
    (39,820,610
    )
    
    $
    (29,196,790
    )Change in unrealized gain (loss)
on investments available for
sale
    
    
    53,431
    
    
    
    (63,438
    )
    
    
    30,169
    
    
    
    (51,035
    )Foreign currency translation
adjustment
    
    
    (18,407
    )
    
    
    (1,383
    )
    
    
    (29,158
    )
    
    
    (5,733
    )Total comprehensive loss
    
    $
    (21,484,211
    )
    
    $
    (13,275,190
    )
    
    $
    (39,819,599
    )
    
    $
    (29,253,558
    )
 Note 6: Revenue Recognition
 Revenue
Recognition in Financial Statements Revenue Arrangements with
Multiple Deliverables
 Product Sales
  Research and development contracts
    8




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Note 7: Net Loss Per Common Share
   Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Common stock related to options
    
    
    1,345,272
    
    
    
    1,981,101
    
    
    
    1,461,168
    
    
    
    2,181,372Warrants
    
    
    1,253
    
    
    
    6,463
    
    
    
    2,948
    
    
    
    13,991Total
    
    
    1,346,525
    
    
    
    1,987,564
    
    
    
    1,464,116
    
    
    
    2,195,363
 Note 8: Accounts Payable
  June 30,
    
    December 31,2005
    
    2004Trade
    
    $
    208,795
    
    
    $
    171,311Research and development
    
    
    21,552,223
    
    
    
    10,290,083Related party
    
    
    177,143
    
    
    
    220,273$
    21,938,161
    
    
    $
    10,681,667
 Note 9: Commitments and Contingencies
  9




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Accounting for
Contingencies.
  Note 10: Geographic Information
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Product sales:Netherlands
    
    $
    276,970
    
    
    $
    245,393
    
    
    $
    639,872
    
    
    $
    487,616Germany
    
    
    259,136
    
    
    
    201,680
    
    
    
    520,799
    
    
    
    391,351United Kingdom
    
    
    152,500
    
    
    
    232,027
    
    
    
    354,410
    
    
    
    379,756France
    
    
    51,693
    
    
    
    87,205
    
    
    
    122,346
    
    
    
    167,472Italy
    
    
    
    
    
    
    120,990
    
    
    
    
    
    
    
    300,871Other
    
    
    11,627
    
    
    
    12,536
    
    
    
    23,352
    
    
    
    24,412$
    751,926
    
    
    $
    899,831
    
    
    $
    1,660,779
    
    
    $
    1,751,478
 June 30,
    
    December 31,2005
    
    2004Property and equipment, net:United States
    
    $
    2,605,711
    
    
    $
    2,451,999Europe
    
    
    39,265
    
    
    
    51,580$
    2,644,976
    
    
    $
    2,503,579
 Note 11: Recent Accounting Pronouncements
      10




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11




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    the development of ambrisentan and darusentan, including projected development and
clinical trial timelines;
    
    expected trends and projections relating to revenue from our collaboration with
Novartis, sales of Perfan® I.V. and expense line items; and
    
    expectations regarding our financial condition and liquidity, including the adequacy of
our existing capital resources.
  Overview
   Selective Oral Endothelin Receptor Antagonists: Ambrisentan and Darusentan
  12




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Ambrisentan
    Darusentan
 Seventh Report of the Joint National Committee on
Prevention, Detection, Evaluation and Treatment of High Blood Pressure
   13




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Discovery Research Program
 in vivo in vitro
 ESSENTIAL Trial Results
  Financial Overview
    14




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15




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Results of Operations for the Three Months Ended June 30, 2005 and 2004
 Three Months EndedJune 30,2005
    
    2004(In thousands)Revenues:Product sales
    
    $
    752
    
    
    $
    900Research and development contracts
    
    
    1,580
    
    
    
    1,664$
    2,332
    
    
    $
    2,564
 Revenues
 Product sales
   Research and development contracts revenue
   Costs and Expenses
 Three Months EndedJune 30,2005
    
    2004(In thousands)Costs and expenses:Cost of product sold
    
    $
    273
    
    
    $
    277Research and development (excluding
stock-based compensation)
    
    
    20,691
    
    
    
    12,462Selling, general and administrative
(excluding stock-based compensation
expense)
    
    
    2,985
    
    
    
    2,047Stock-based compensation
    
    
    518
    
    
    
    1,122$

    24,467
    
    
    $
    15,908
 Cost of Product Sold
  16




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Research and Development
  Three Months EndedJune 30,2005
    
    2004(In thousands)DevelopmentEnoximone capsules
    
    $
    11,673
    
    
    $
    5,758Ambrisentan
    
    
    5,504
    
    
    
    4,026Darusentan
    
    
    1,895
    
    
    
    1,463Total development
    
    
    19,072
    
    
    
    11,247License feesEnoximone
    
    
    
    
    
    
    Ambrisentan
    
    
    
    
    
    
    Darusentan
    
    
    
    
    
    
    Other
    
    
    44
    
    
    
    Total license fees
    
    
    44
    
    
    
    Discovery research
    
    
    1,575
    
    
    
    1,215Total research and development
    
    $
    20,691
    
    
    $
    12,462
  
    
    $3.3 million increase related to estimated costs to be incurred by contract research
organizations in connection with closing out the studies associated with the
termination of the development of enoximone capsules;
    
    $2.3 million increase in costs associated with manufacturing, analytical testing,
regulatory compliance, which includes $2.2 million of contract termination costs
studies associated with the termination of the development of enoximone capsules;
    
    $885,000 increase related to the initiation of several Phase 1 enoximone studies;
and
    
    $360,000 increase in the internal costs associated with the management of the
enoximone trials primarily due to an increase in the number of employees.
   
    
    $1.3 million increase in clinical investigator site payments and external contract
costs associated with clinical monitoring and program management efforts as a result of
higher patient enrollment and ongoing patient progress in the two Phase 3 ARIES trials
and the related extension study; and
    
    $300,000 increase related to the initiation of a Phase 2 clinical study of
ambrisentan in patients who have previously discontinued alternative therapy due to
liver function test abnormalities.
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Selling, General and Administrative
  Stock-Based Compensation
  Three Months EndedJune 30,2005
    
    2004(In thousands)Research and development
    
    $
    266
    
    
    $
    535Selling, general and administrative
    
    
    252
    
    
    
    587$
    518
    
    
    $
    1,122
 Interest Income, Net
  18




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Results of Operations for the Six Months Ended June 30, 2005 and 2004
 Revenues
 Six Months EndedJune 30,2005
    

2004(In thousands)Revenues:Product sales
    
    $
    1,661
    
    
    $
    1,752Research and development contracts
    
    
    3,286
    
    
    
    3,003$
    4,947
    
    
    $
    4,755
 Product sales
   Research and development contracts revenue
   Costs and Expenses
 Six Months EndedJune 30,2005
    
    2004(In thousands)Costs and expenses:Cost of product sold
    
    $
    580
    
    
    $
    549Research and development (excluding
stock-based compensation)
    
    
    38,097
    
    
    
    27,086Selling, general and administrative
(excluding stock-based compensation
expense)
    
    
    6,229
    
    
    
    4,282Stock-based compensation
    
    
    1,034
    
    
    
    2,334$
    45,940
    
    
    $
    34,251
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Cost of Product Sold
  Research and Development
  Six Months EndedJune 30,2005
    
    2004(In thousands)DevelopmentEnoximone capsules
    
    $
    21,695
    
    
    $
    12,866Ambrisentan
    
    
    10,042
    
    
    
    7,748Darusentan
    
    
    3,115
    
    
    
    2,704Total development
    
    
    34,852
    
    
    
    23,318License feesEnoximone
    
    
    
    
    
    
    Ambrisentan
    
    
    
    
    
    
    1,500Darusentan
    
    
    
    
    
    
    Other
    
    
    103
    
    
    
    108Total license fees
    
    
    103
    
    
    
    1,608Discovery research
    
    
    3,142
    
    
    
    2,160Total research and development
    
    $
    38,097
    
    
    $
    27,086
  
    
    $3.3 million increase related to estimated costs to be incurred by contract research
organizations in connection with closing out the studies associated with the
termination of the development of enoximone capsules;
    
    $2.5 million increase in costs associated with manufacturing, analytical testing and
regulatory compliance, which includes $2.2 million of contract termination costs
studies associated with the termination of the development of enoximone capsules;
    
    $1.9 million increase in clinical investigator site payments and external contract
costs associated with clinical monitoring and program management efforts as a result of
higher patient enrollment and ongoing patient progress in the ESSENTIAL trials;
    
    $1.2 million increase related to several Phase 1 enoximone studies; and
    
    $595,000 increase in the internal costs associated with the management of the
enoximone trials primarily due to an increase in the number of employees.
   
    
    $2.3 million increase in clinical investigator site payments and external contract
costs associated with clinical monitoring and program management efforts as a result of
higher patient enrollment and ongoing patient progress in the two Phase 3 ARIES trials
and the related extension study;
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
    
    $335,000 increase related to the initiation of a Phase 2 clinical study of
ambrisentan in patients who have previously discontinued alternative therapy due to
liver function test abnormalities; and
    
    $125,000 increase in internal expenses associated with the management of the
ambrisentan trials primarily due to an increase in the number of employees.
       Selling, General and Administrative
  Stock-Based Compensation
  Six Months EndedJune 30,2005
    
    2004(In thousands)Research and development
    
    $
    530
    
    
    $
    1,151Selling, general and administrative
    
    
    504
    
    
    
    1,183$
    1,034
    
    
    $
    2,334
 21




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Interest Income, Net
  Liquidity and Capital Resources
        22




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Critical Accounting Policies
   
    
    revenue recognition;
    
    accounting for research and development expenses;
    
    estimating the value of our equity instruments for use in deferred stock-based
compensation calculations; and
    
    accounting for income taxes.
 Revenue Recognition
 Revenue
Recognition in Financial Statements Revenue Arrangements with
Multiple Deliverables,
 Product Sales.
 Research and development contracts.
 23




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Accounting for research and development expenses




Valuation of equity instruments




24




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Accounting for Stock Appreciation Rights and Other Variable
Stock Option or Award Plans, an Interpretation of APB Opinions No. 15 and 25


Accounting for income taxes




Recent Accounting Pronouncements
















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RISK FACTORS
 Our business faces significant risks. These risks include those described below and may
include additional risks of which we are not currently aware or which we currently do not believe
material. If any of the events or circumstances described in the following risks actually occurs,
our business, financial condition or results of operations could be materially adversely affected
and such events or circumstances could cause our actual results to differ materially from the
results contemplated by the forward-looking statements contained in this report. These risks should
be read in conjunction with the other information set forth in this report as well as in our annual
report on Form 10-K for the year ended December 31, 2004 and in our other periodic reports on Form
10-Q and current reports on Form 8-K.
 Risks Related to Our Business
 We are at an early stage of development as a company and we do not have, and may never have, any
products that generate significant revenues.
  
    
    our product candidates may not prove to be safe or effective in clinical trials;
    
    we may not be able to obtain regulatory approvals for our product candidates or
approvals may be narrower than we seek;
    
    we may not have adequate financial or other resources to complete the development and
commercialization of our product candidates; or
    
    any products that are approved may not be accepted in the marketplace.
  We have a history of operating losses and we may never become profitable.
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If we fail to obtain additional financing, we may be unable to complete the development and
commercialization of our product candidates or continue our research and development programs.
  
    
    seek collaborators for our product candidates at an earlier stage than otherwise would
be desirable and on terms that are less favorable than might otherwise be available; and
    
    relinquish, license or otherwise dispose of rights to technologies, product candidates
or products that we would otherwise seek to develop or commercialize ourselves on terms
that are less favorable than might otherwise be available.
 We may experience delays in our clinical trials that could adversely affect our financial
position and our commercial prospects.
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Adverse events in our clinical trials may force us to stop development of our product candidates
or prevent regulatory approval of our product candidates.
  Our applications for regulatory approval could be delayed or denied due to problems with studies
conducted before we in-licensed the product candidates.
  If our product candidates do not meet safety or efficacy endpoints in clinical evaluations, they
will not receive regulatory approval and we will be unable to market them.
      
    
    a product candidate may not be safe or effective;
    
    the manufacturing processes or facilities we have selected may not meet the applicable
requirements; and
    
    changes in their approval policies or adoption of new regulations may require
additional work.
 
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Even if our products meet safety and efficacy endpoints in clinical trials, regulatory
authorities may not approve them, or we may face post-approval problems that require withdrawal
of our products from the market.
    Abnormal elevations of liver function test results have been reported as complications in trials
of endothelin receptor antagonists.
  Endothelin receptor antagonists, including ambrisentan and darusentan, have demonstrated toxicity
in animals.
  29




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Market acceptance of our product candidates is uncertain.
    If we become subject to product liability claims, the damages may exceed our insurance.
   30




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
    
    decreased demand for our products and product candidates;
    
    injury to our reputation;
    
    withdrawal of clinical trial participants;
    
    costs of related litigation;
    
    substantial monetary awards to patients and others;
    
    loss of revenues; and
    
    the inability to commercialize our products and product candidates.
  If we are unable to develop adequate sales, marketing or distribution capabilities or enter
into agreements with third parties to perform some of these functions, we will not be able to
commercialize our products effectively.
  Since we will rely on third-party manufacturers, we may be unable to control the availability or
cost of producing our products.
  31




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Our third-party manufacturers and their manufacturing facilities and processes are subject to
regulatory approval, which may delay or disrupt our development and commercialization efforts.
  Due to our reliance on contract research organizations and other third parties to conduct
clinical trials, we are unable to directly control the timing, conduct and expense of our
clinical trials.
  If we do not find development and commercialization collaborators for our product candidates, we
may have to reduce or delay our rate of product development and commercialization and increase
our expenditures.
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
    
    collaborators may not pursue further development and commercialization of compounds
resulting from collaborations or may elect not to renew research and development programs;
    
    collaborators may delay clinical trials, underfund a clinical trial program, stop a
clinical trial or abandon a product candidate, repeat or conduct new clinical trials or
require the development of a new formulation of a product candidate for clinical testing;
    
    a collaborator with marketing and distribution rights to one or more of our products
may not commit enough resources to the marketing and distribution of our products,
limiting our potential revenues from the commercialization of these products; and
    
    disputes may arise delaying or terminating the research, development or
commercialization of our product candidates, or resulting in significant legal
proceedings.
 Even if we receive regulatory approval for our product candidates, we will be subject to ongoing
regulatory obligations and review.
  Our success depends on retention of our President and Chief Executive Officer and other key
personnel.
   If our discovery research program is not successful, we may be unable to develop additional
product candidates.
  33




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Our operations may be impaired unless we can successfully manage our growth.
  If we engage in any acquisition, we will incur a variety of costs, and we may never realize the
anticipated benefits of the acquisition.
  Our attempts to increase future sales of Perfan I.V. may be unsuccessful.
  34




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Our corporate compliance program cannot guarantee that we are in compliance with all potentially
applicable regulations.
    Our operations involve hazardous materials, and compliance with environmental laws and
regulations is expensive.
  35




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Changes in the economic, political, legal and business environments in foreign countries in which
we do business could limit or disrupt our current and future international sales and operations.
  
    
    economic problems that disrupt foreign healthcare payment systems;
    
    the imposition of governmental controls and changes in regulatory requirements;
    
    less favorable intellectual property or other applicable laws;
    
    the inability to obtain any necessary foreign regulatory approvals of products in a
timely manner;
    
    import and export license requirements;
    
    economic weakness, including inflation, or political instability in particular foreign
economies and markets;
    
    business interruptions resulting from geo-political actions, including war and terrorism;
    
    difficulties complying with foreign tax, employment, immigration and labor laws;
    
    unexpected changes in tariffs, trade barriers and regulatory requirements;
    
    difficulties in staffing and managing international operations; and
    
    slower collection experience outside the United States.
 Currency fluctuations may negatively affect our financial condition.
  Risks Related to Our Industry
 Our competitors may develop and market drugs that are less expensive, more effective or safer
than our product candidates.
  36




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The status of reimbursement from third-party payors for newly approved health care drugs is
uncertain and failure to obtain adequate reimbursement could limit our ability to generate
revenue.
  
    
    government and health administration authorities;
    
    private health insurers;
    
    managed care programs; and
    
    other third-party payors.
  Health care reform measures could adversely affect our business.
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Changes in or interpretations of accounting rules and regulations, including recently enacted
changes relating to the expensing of stock options, could result in unfavorable accounting
charges or require us to change our compensation policies.
    Risks Related to Our Intellectual Property
 We rely on compounds and technology licensed from third parties and termination of any of those
licenses would result in the loss of significant rights.
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If we are unable to protect our proprietary technology, we may not be able to compete
effectively.
     We may be accused of infringing on the proprietary rights of third parties, which could impair
our ability to successfully commercialize our product candidates.
  39




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##### Table of Contents




    
    defending a lawsuit, which is very expensive and time consuming;
    
    defending against an interference proceeding in the United States Patent and Trademark
Office, which also can be very expensive and time consuming;
    
    an adverse decision in a lawsuit or in an interference proceeding resulting in the loss
of some or all of our rights to our intellectual property;
    
    paying a large sum for damages if we are found to be infringing;
    
    being prohibited from making, using, selling or offering for sale our product
candidates or our products, if any, until we obtain a license from the patent holder. Such
a license may not be granted to us on satisfactory terms, if at all, and even if we are
granted a license, we may have to pay substantial royalties or grant cross-licenses to our
patents; and
    
    redesigning the manufacturing methods or the use claims of our product candidates so
that they do not infringe on the other partys patent in the event that we are unable to
obtain a license, which, even if possible, could require substantial additional capital,
could necessitate additional regulatory approval, and could delay commercialization.
 Risks Related to Our Stock
 The market price of our common stock has been and may continue to be highly volatile.
  
    
    actual or anticipated results of our clinical trials;
    
    actual or anticipated regulatory approvals of our products or of competing products;
    
    changes in laws or regulations applicable to our products;
    
    changes in the expected or actual timing of our development programs;
    
    actual or anticipated variations in quarterly operating results;
    
    announcements of technological innovations by us, our collaborators or our competitors;
    
    new products or services introduced or announced by us or our competitors;
    
    changes in financial estimates or recommendations by securities analysts;
    
    conditions or trends in the biotechnology and pharmaceutical industries;
    
    changes in the market valuations of similar companies;
    
    announcements by us of significant acquisitions, strategic partnerships, joint ventures
or capital commitments;
    
    additions or departures of key personnel;
 
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
    
    disputes or other developments relating to proprietary rights, including patents,
litigation matters and our ability to obtain patent protection for our technologies;
    
    the loss of a collaborator, including Novartis;
    
    developments concerning our collaborations;
    
    trading volume of our common stock; and
    
    sales of our common stock by us or our stockholders.
  Our principal stockholders and management own a significant percentage of our stock and will be
able to exercise significant influence.
  Issuance of shares in connection with financing transactions or under stock plans and outstanding
warrants will dilute current stockholders.
  Some provisions of our charter documents and Delaware law may have anti-takeover effects that
could discourage, delay or prevent a change of control or management, even if such changes would
be beneficial to our stockholders.
  41




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##### Table of Contents




    
    authorizing the issuance of blank check preferred stock;
    
    limiting the removal of directors by the stockholders to removal for cause;
    
    prohibiting stockholder action by written consent, thereby requiring all stockholder
actions to be taken at a meeting of our stockholders;
    
    eliminating the ability of stockholders to call a special meeting of stockholders; and
    
    establishing advance notice requirements for nominations for election to the Board of
Directors or for proposing matters that can be acted upon at stockholder meetings.
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      42




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ITEM 4. CONTROLS AND PROCEDURES
   43




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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS
    
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   1.
    
    Proposal to elect directors to serve for the ensuing year and until their successors are
elected:
 Director
    
    For
    
    
    Against
    
    
    AbstainJ. William Freytag
    
    
    30,440,401
    
    
    
    
    
    
    
    52,340Michael R. Bristow
    
    
    30,385,221
    
    
    
    
    
    
    
    107,520Kirk K. Calhoun
    
    
    30,473,001
    
    
    
    
    
    
    
    19,740Jerry T. Jackson
    
    
    30,465,525
    
    
    
    
    
    
    
    27,216Daniel J. Mitchell
    
    
    30,474,561
    
    
    
    
    
    
    
    18,180Arnold L. Oronsky
    
    
    30,449,901
    
    
    
    
    
    
    
    42,840Michael J. Valentino
    
    
    30,472,801
    
    
    
    
    
    
    
    19,940Sigrid Van Bladel
    
    
    30,475,541
    
    
    
    
    
    
    
    17,200
 44




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##### Table of Contents



2.
    
    Proposal to ratify the selection by the Audit Committee of the Board of Directors of Ernst &
Young LLP as independent registered public accounting firm of the Company for its fiscal year
ending December 31, 2005: 30,480,756 For, 6,905 Against, 5,080 Abstain.
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 31.1
    
    
    Certification of principal executive officer required by Rule 13a-14(a).31.2
    
    
    Certification of principal financial officer required by Rule 13a-14(a).32.1
    
    
    Section 1350 Certification.
 45




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##### Table of Contents



SIGNATURES
  Date: August 5, 2005
    MYOGEN, INC./s/ Joseph L. TurnerJoseph L. TurnerSenior Vice President, Finance and
Administration and Chief Financial Officer
(Principal Financial and Accounting Officer) 
 46




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##### Table of Contents



Exhibit Index
 Exhibit No.
    
    Description31.1
    
    Certification of principal executive officer required by Rule 13a-14(a).31.2
    
    Certification of principal financial officer required by Rule 13a-14(a).32.1
    
    Section 1350 Certification.
 47