##### 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 September 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
 o þ




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MYOGEN, INC.
FORM 10-Q
 INDEX
 PageNumberPART I. Financial Information
    
    
    3ITEM 1. Consolidated Financial Statements (unaudited)
    
    
    3Consolidated Balance Sheets
As of September 30, 2005 and December 31, 2004
    
    
    3Consolidated Statements of Operations
For the Three Months and Nine Months Ended September 30, 2005
and 2004 and the Cumulative Period from June 10, 1996
(Inception) to September 30, 2005
    
    
    4Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2005 and 2004 and the
Cumulative Period from June 10, 1996 (Inception) to September 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
    
    
    45ITEM 4. Controls and Procedures
    
    
    46PART II. Other Information
    
    
    47ITEM 1. Legal Proceedings
    
    
    47ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    47ITEM 3. Defaults Upon Senior Securities
    
    
    47ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    47ITEM 5. Other Information
    
    
    47ITEM 6. Exhibits
    
    
    47SIGNATURES
    
    
    48EXHIBIT INDEX
    
    
    49Certification of Principal Executive OfficerCertification of Principal Financial OfficerSection 1350 Certifications
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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)
 September 30,
    
    
    December 31,2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    164,268,946
    
    
    $
    71,258,294Short-term investments
    
    
    23,425,687
    
    
    
    48,330,819Accrued interest receivable
    
    
    242,118
    
    
    
    290,972Trade accounts receivable
    
    
    699,126
    
    
    
    946,177Research and development contract amounts due
within one year
    
    
    
    
    
    
    300,000Inventories
    
    
    218,214
    
    
    
    258,120Prepaid expenses and other current assets
    
    
    853,295
    
    
    
    1,679,340Total current assets
    
    
    189,707,386
    
    
    
    123,063,722Long-term investments
    
    
    6,003,029
    
    
    
    Property and equipment, net
    
    
    2,589,850
    
    
    
    2,503,579Other assets
    
    
    27,299
    
    
    
    35,421Total assets
    
    $
    198,327,564
    
    
    $
    125,602,722LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    12,779,823
    
    
    $
    10,681,667Accrued liabilities
    
    
    1,462,274
    
    
    
    1,941,083Current portion of deferred revenue
    
    
    1,272,531
    
    
    
    1,823,188Current portion of deferred rent
    
    
    66,206
    
    
    
    59,456Current portion of capital lease obligations
    
    
    69,579
    
    
    
    59,924Current portion of notes payable, net of discount
    
    
    645,661
    
    
    
    1,821,806Total current liabilities
    
    
    16,296,074
    
    
    
    16,387,124Deferred revenue, net of current portion
    
    
    1,952,408
    
    
    
    1,398,753Deferred rent, net of current portion
    
    
    167,399
    
    
    
    217,616Capital lease obligations, net of current portion
    
    
    55,088
    
    
    
    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 September 30, 2005 and December 31,
2004, no shares issued or outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value; 100,000,000
shares authorized and 41,403,726 and 35,731,581
shares issued and outstanding as of September 30,
2005 and December 31, 2004, respectively
    
    
    41,404
    
    
    
    35,732Additional paid-in-capital
    
    
    409,872,187
    
    
    
    286,017,266Deferred stock-based compensation
    
    
    (6,144,368
    )
    
    
    (2,534,535
    )Accumulated other comprehensive loss
    
    
    (64,171
    )
    
    
    (42,203
    )Deficit accumulated during the development stage
    
    
    (223,848,457
    )
    
    
    (176,161,859
    )Total stockholders equity
    
    
    179,856,595
    
    
    
    107,314,401Total liabilities and stockholders equity
    
    $
    198,327,564
    
    
    $
    125,602,722
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MYOGEN, INC.
(A Development Stage Enterprise)
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 CumulativePeriod fromFor the Three Months Ended
    
    
    For the Nine Months Ended
    
    
    June 10, 1996September 30,
    
    
    September 30,
    
    
    (Inception) to2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    September 30, 2005Revenues:Product sales
    
    $
    738,337
    
    
    $
    783,235
    
    
    $
    2,399,116
    
    
    $
    2,534,713
    
    
    $
    13,140,513Research and development contracts
    
    
    1,779,065
    
    
    
    1,666,667
    
    
    
    5,064,907
    
    
    
    4,669,962
    
    
    
    12,681,7102,517,402
    
    
    
    2,449,902
    
    
    
    7,464,023
    
    
    
    7,204,675
    
    
    
    25,822,223Costs and expenses:Cost of product sold
    
    
    235,406
    
    
    
    239,917
    
    
    
    816,046
    
    
    
    788,621
    
    
    
    4,579,845Research and
development
(excluding
stock-based
compensation expense
of $406,965,
$470,155, $936,993,
$1,621,286 and $5,763,782,
respectively)
    
    
    6,030,698
    
    
    
    12,334,697
    
    
    
    44,127,316
    
    
    
    39,420,805
    
    
    
    186,970,697Selling, general and
administrative
(excluding
stock-based
compensation
expense
of $860,337,
$473,161, $1,364,349,
$1,655,906 and $5,410,681,
respectively)
    
    
    3,475,977
    
    
    
    2,085,914
    
    
    
    9,705,045
    
    
    
    6,368,042
    
    
    
    36,803,224Stock-based
compensation expense
    
    
    1,267,302
    
    
    
    943,316
    
    
    
    2,301,342
    
    
    
    3,277,192
    
    
    
    11,174,46311,009,383
    
    
    
    15,603,844
    
    
    
    56,949,749
    
    
    
    49,854,660
    
    
    
    239,528,229Loss from operations
    
    
    (8,491,981
    )
    
    
    (13,153,942
    )
    
    
    (49,485,726
    )
    
    
    (42,649,985
    )
    
    
    (213,706,006
    )Interest income (expense), net
    
    
    644,611
    
    
    
    156,412
    
    
    
    1,818,195
    
    
    
    465,052
    
    
    
    5,039,461Loss before income taxes
    
    
    (7,847,370
    )
    
    
    (12,997,530
    )
    
    
    (47,667,531
    )
    
    
    (42,184,933
    )
    
    
    (208,666,545
    )Income taxes
    
    
    18,619
    
    
    
    5,034
    
    
    
    19,068
    
    
    
    14,421
    
    
    
    102,250Net loss
    
    
    (7,865,989
    )
    
    
    (13,002,564
    )
    
    
    (47,686,599
    )
    
    
    (42,199,354
    )
    
    
    (208,768,795
    )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
    
    $
    (7,865,989)
    
    
    $
    (13,002,564
    )
    
    $
    (47,686,599
    )
    
    $
    (42,199,354
    )
    
    $
    (281,203,739
    )Basic and diluted net loss per common
share
    
    $
    (0.22
    )
    
    $
    (0.49
    )
    
    $
    (1.32
    )
    
    $
    (1.59
    )Weighted average common shares outstanding
    
    
    36,479,355
    
    
    
    26,623,208
    
    
    
    36,006,524
    
    
    
    26,525,466
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MYOGEN, INC.
(A Development Stage Enterprise)
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 CumulativePeriod FromFor the Nine Months Ended
    
    
    June 10, 1996September 30,
    
    
    (Inception) to2005
    
    
    2004
    
    
    September 30, 2005Cash Flows From Operating Activities:Net loss
    
    $
    (47,686,599
    )
    
    $
    (42,199,354
    )
    
    $
    (208,768,795
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation and amortization
    
    
    700,762
    
    
    
    405,420
    
    
    
    2,329,993Amortization of deferred stock-based compensation
    
    
    2,301,342
    
    
    
    3,277,192
    
    
    
    11,174,463Amortization of debt discount
    
    
    103,211
    
    
    
    103,211
    
    
    
    389,256Amortization of investment (discount) premium
    
    
    (164,980
    )
    
    
    562,741
    
    
    
    656,174Stock 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
    
    
    104,002
    
    
    
    137,895
    
    
    
    39,660Research and development contract amounts
    
    
    300,000
    
    
    
    625,000
    
    
    
    1,000,000Inventories
    
    
    39,906
    
    
    
    363,373
    
    
    
    (218,214
    )Prepaid expenses, accrued interest and other assets
    
    
    932,899
    
    
    
    517,974
    
    
    
    (1,141,990
    )Accounts payable
    
    
    2,439,284
    
    
    
    1,584,947
    
    
    
    12,456,731Deferred revenue
    
    
    2,997
    
    
    
    (1,250,001
    )
    
    
    2,224,938Accrued liabilities
    
    
    (768,575
    )
    
    
    (213,060
    )
    
    
    958,397Net cash used in operating activities
    
    
    (41,674,418
    )
    
    
    (36,084,299
    )
    
    
    (177,680,153
    )Cash Flows From Investing Activities:Acquisitions of property and equipment
    
    
    (782,580
    )
    
    
    (1,350,076
    )
    
    
    (4,938,890
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    
    
    
    
    332,473Purchases of investments
    
    
    (31,985,281
    )
    
    
    (91,717,251
    )
    
    
    (466,798,850
    )Proceeds from maturities of short-term investments
    
    
    51,057,742
    
    
    
    113,639,420
    
    
    
    436,835,838Net cash provided by (used in) investing
activities
    
    
    18,289,881
    
    
    
    20,572,093
    
    
    
    (34,569,429
    )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
    
    
    117,949,418
    
    
    
    57,280,950
    
    
    
    248,694,812Proceeds from notes payable
    
    
    
    
    
    
    
    
    
    
    5,250,000Payments on notes payable
    
    
    (1,451,456
    )
    
    
    (1,316,223
    )
    
    
    (4,569,936
    )Proceeds from related party note
    
    
    
    
    
    
    
    
    
    
    370,275Repayments of related party note
    
    
    
    
    
    
    
    
    
    
    (289,887
    )Payments on capital leases
    
    
    (49,795
    )
    
    
    (32,429
    )
    
    
    (156,092
    )Net cash provided by financing activities
    
    
    116,448,167
    
    
    
    55,932,298
    
    
    
    376,450,776Effect of exchange rates on cash
    
    
    (52,978
    )
    
    
    428
    
    
    
    67,752Net increase in cash and cash equivalents
    
    
    93,010,652
    
    
    
    40,420,520
    
    
    
    164,268,946Cash and cash equivalents, beginning of period
    
    
    71,258,294
    
    
    
    44,337,721
    
    
    
    Cash and cash equivalents, end of period
    
    $
    164,268,946
    
    
    $
    84,758,241
    
    
    $
    164,268,946Supplemental Disclosure of Non-Cash Financing Activities:Acquisition of property and equipment under capital leases
    
    $
    905
    
    
    
    33,220
    
    
    $
    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.
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Cumulative PeriodFrom June 10, 1996Three Months Ended
    
    
    Nine Months Ended
    
    
    (Inception) toSeptember 30,
    
    
    September 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005Net loss
attributable to
common
stockholders, as
reported
    
    $
    (7,865,989
    )
    
    $
    (13,002,564
    )
    
    $
    (47,686,599
    )
    
    $
    (42,199,354
    )
    
    $
    (281,203,739
    )Add: Total
stock-based
employee
compensation
expense included in
reported net loss
    
    
    1,013,494
    
    
    
    890,528
    
    
    
    1,998,369
    
    
    
    3,172,417
    
    
    
    9,606,006Deduct: Total
stock-based
employee
compensation
expense determined
under fair value
based method
    
    
    (942,976
    )
    
    
    (1,493,230
    )
    
    
    (3,675,146
    )
    
    
    (4,444,053
    )
    
    
    (14,081,497
    )Pro forma net loss
    
    $
    (7,795,471
    )
    
    $
    (13,605,266
    )
    
    $
    (49,363,376
    )
    
    $
    (43,470,990
    )
    
    $
    (285,679,230
    )Pro forma basic and
diluted net loss
per common share
    
    $
    (0.21
    )
    
    $
    (0.51
    )
    
    $
    (1.37
    )
    
    $
    (1.64
    )Basic and diluted
net loss per common
share, as reported
    
    $
    (0.22
    )
    
    $
    (0.49
    )
    
    $
    (1.32
    )
    
    $
    (1.59
    )
  Note 4: Inventory Components
 September 30,
    
    
    December 31,2005
    
    
    2004Finished products
    
    $
    184,327
    
    
    $
    211,770Raw materials
    
    
    33,887
    
    
    
    46,350Total inventories
    
    $
    218,214
    
    
    $
    258,120
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Note 5: Comprehensive Loss
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss
    
    $
    (7,865,989
    )
    
    $
    (13,002,564
    )
    
    $
    (47,686,599
    )
    
    $
    (42,199,354
    )Change in unrealized gain (loss)
on investments available for
sale
    
    
    (21,961
    )
    
    
    26,742
    
    
    
    8,208
    
    
    
    (24,293
    )Foreign currency translation
adjustment
    
    
    (1,017
    )
    
    
    4,118
    
    
    
    (30,175
    )
    
    
    (1,615
    )Total comprehensive loss
    
    $
    (7,888,967
    )
    
    $
    (12,971,704
    )
    
    $
    (47,708,566
    )
    
    $
    (42,225,262
    )
 Note 6: Revenue Recognition
 Revenue
Recognition in Financial Statements Revenue Arrangements with
Multiple Deliverables
 Product Sales
  Research and development contracts
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Note 7: Net Loss Per Common Share
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Common stock related to options
    
    
    2,567,442
    
    
    
    1,391,683
    
    
    
    1,948,974
    
    
    
    2,125,530Warrants
    
    
    976,968
    
    
    
    
    
    
    
    469,968
    
    
    
    9,131Total
    
    
    3,544,410
    
    
    
    1,391,683
    
    
    
    2,418,942
    
    
    
    2,134,661
 Note 8: Accounts Payable
  September 30,
    
    
    December 31,2005
    
    
    2004Trade
    
    $
    226,365
    
    
    $
    171,311Research and development
    
    
    12,403,014
    
    
    
    10,290,083Related party
    
    
    150,444
    
    
    
    220,273$
    12,779,823
    
    
    $
    10,681,667
 Note 9: Commitments and Contingencies
  9




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Accounting for
Contingencies.
  Note 10: Geographic Information
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Product sales:Netherlands
    
    $
    288,172
    
    
    $
    221,424
    
    
    $
    928,044
    
    
    $
    709,040Germany
    
    
    197,879
    
    
    
    218,698
    
    
    
    718,678
    
    
    
    610,049United Kingdom
    
    
    159,829
    
    
    
    163,416
    
    
    
    514,239
    
    
    
    543,172France
    
    
    72,581
    
    
    
    73,159
    
    
    
    194,927
    
    
    
    240,631Italy
    
    
    
    
    
    
    94,362
    
    
    
    
    
    
    
    395,233Other
    
    
    19,876
    
    
    
    12,176
    
    
    
    43,228
    
    
    
    36,588$
    738,337
    
    
    $
    783,235
    
    
    $
    2,399,116
    
    
    $
    2,534,713
 September 30,
    
    
    December 31,2005
    
    
    2004Property and equipment, net:United States
    
    $
    2,548,623
    
    
    $
    2,451,999Europe
    
    
    41,227
    
    
    
    51,580$
    2,589,850
    
    
    $
    2,503,579
 Note 11: Recent Accounting Pronouncements
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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
    12




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Selective Oral Endothelin Receptor Antagonists: Ambrisentan and Darusentan
    Ambrisentan
     
    
    a statistically significant, clinically meaningful, and durable increase in
exercise capacity (the primary efficacy parameter) in all four ambrisentan dose groups;
    
    an improvement in all secondary endpoints and cardiopulmonary hemodynamics;
    
    ambrisentan appears to be generally well tolerated in patients who have received it;
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
    
    among the study patients also taking anticoagulant therapy, there are no
apparent interactions with the anticoagulant and no anticoagulant dose adjustments were
required;
    
    a low incidence and severity of potential liver toxicity as assessed by liver
function tests;
    
    an apparent survival benefit to patients treated with ambrisentan alone or in
combination with other drugs when compared with predicted survival based on the National
Institutes of Health Registry formula; and
    
    patients with less severe symptoms (Class II disease) appear to achieve a
benefit in exercise capacity comparable to that achieved by patients with more severe
symptoms (Class III disease). Clinical trial results of other compounds tested for PAH
indicate that certain compounds are comparatively less effective in patients with early
stages of the disease, a limitation referred to as a ceiling effect.
   Darusentan
 Seventh Report of the Joint National Committee
on Prevention, Detection, Evaluation and Treatment of High Blood Pressure
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Discovery Research Program
   ESSENTIAL Trial Results
  Financial Overview
    15




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Results of Operations for the Three Months Ended September 30, 2005 and 2004
 Three Months EndedSeptember 30,2005
    
    
    2004(In thousands)Revenues:Product sales
    
    $
    738
    
    
    $
    783Research and development contracts
    
    
    1,779
    
    
    
    1,667$
    2,517
    
    
    $
    2,450
 Revenues
 Product sales
   Research and development contracts revenue
   Costs and Expenses
 Three Months EndedSeptember 30,2005
    
    
    2004(In thousands)Costs and expenses:Cost of product sold
    
    $
    235
    
    
    $
    240Research and development (excluding
stock-based compensation)
    
    
    6,031
    
    
    
    12,335Selling, general and administrative
(excluding stock-based compensation
expense)
    
    
    3,476
    
    
    
    2,086Stock-based compensation
    
    
    1,267
    
    
    
    943$
    11,009
    
    
    $
    15,604
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Cost of Product Sold
  Research and Development
  Three Months EndedSeptember 30,2005
    
    
    2004(In thousands)DevelopmentEnoximone capsules
    
    $
    (3,244
    )
    
    $
    6,213Ambrisentan
    
    
    4,585
    
    
    
    3,997Darusentan
    
    
    2,928
    
    
    
    749Total development
    
    
    4,269
    
    
    
    10,959License feesEnoximone
    
    
    
    
    
    
    Ambrisentan
    
    
    
    
    
    
    Darusentan
    
    
    
    
    
    
    Other
    
    
    3
    
    
    
    Total license fees
    
    
    3
    
    
    
    Discovery research
    
    
    1,759
    
    
    
    1,376Total research and development
    
    $
    6,031
    
    
    $
    12,335
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Selling, General and Administrative
  Stock-Based Compensation
  Three Months EndedSeptember 30,2005
    
    
    2004(In thousands)Research and development
    
    $
    407
    
    
    $
    470Selling, general and administrative
    
    
    860
    
    
    
    473$
    1,267
    
    
    $
    943
 Interest Income, Net
  Results of Operations for the Nine Months Ended September 30, 2005 and 2004
 Revenues
 Nine Months EndedSeptember 30,2005
    
    
    2004(In thousands)Revenues:Product sales
    
    $
    2,399
    
    
    $
    2,535Research and development contracts
    
    
    5,065
    
    
    
    4,670$
    7,464
    
    
    $
    7,205
 Product sales
   Research and development contracts revenue
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Costs and Expenses
 Nine Months EndedSeptember 30,2005
    
    
    2004(In thousands)Costs and expenses:Cost of product sold
    
    $
    816
    
    
    $
    789Research and development (excluding
stock-based compensation)
    
    
    44,127
    
    
    
    39,421Selling, general and administrative
(excluding stock-based compensation
expense)
    
    
    9,705
    
    
    
    6,368Stock-based compensation
    
    
    2,301
    
    
    
    3,277$
    56,949
    
    
    $
    49,855
 Cost of Product Sold
  Research and Development
  Nine Months EndedSeptember 30,2005
    
    
    2004(In thousands)DevelopmentEnoximone capsules
    
    $
    18,451
    
    
    $
    19,079Ambrisentan
    
    
    14,626
    
    
    
    11,745Darusentan
    
    
    6,044
    
    
    
    3,453Total development
    
    
    39,121
    
    
    
    34,277License feesEnoximone
    
    
    
    
    
    
    Ambrisentan
    
    
    
    
    
    
    1,500Darusentan
    
    
    
    
    
    
    Other
    
    
    106
    
    
    
    108Total license fees
    
    
    106
    
    
    
    1,608Discovery research
    
    
    4,900
    
    
    
    3,536Total research and development
    
    $
    44,127
    
    
    $
    39,421
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
    
    $1.7 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;
    
    $780,000 increase related to the initiation of a Phase 2 clinical study of
ambrisentan in patients who have previously discontinued alternative ERA therapy due to
liver function test abnormalities; and
    
    $630,000 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
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Nine Months EndedSeptember 30,2005
    
    
    2004(In thousands)Research and development
    
    $
    937
    
    
    $
    1,621Selling, general and administrative
    
    
    1,364
    
    
    
    1,656$
    2,301
    
    
    $
    3,277
 Interest Income, Net
  Liquidity and Capital Resources
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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.
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Research and development contracts.
    Accounting for research and development expenses
  24




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Valuation of equity instruments
 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 and effective in clinical trials;
    
    we may not be able to obtain regulatory approvals for our product candidates, or
approvals may take longer than anticipated, 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 our 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.
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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.
  
    
    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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Abnormal elevations of liver function test results have been reported as complications in trials
of ERAs.
  ERAs, including ambrisentan and darusentan, have demonstrated toxicity in animals.
  If approved, our products may be subject to significant restrictions or we may be subject to
stringent post-marketing commitments that could affect our ability to market our products.
   Market size and market acceptance of our product candidates is uncertain.
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If we become subject to product liability claims, the damages may exceed our insurance.
     
    
    decreased demand for our products and product candidates;
    
    negative publicity and injury to our reputation;
    
    withdrawal of clinical trial participants;
    
    costs of related litigation;
 
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
    
    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.
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Our third-party manufacturers and their manufacturing facilities and processes are subject to
regulatory review, 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 product development and commercialization and increase our
expenditures.
   
    
    collaborators may not pursue further development and commercialization of compounds
resulting from collaborations or may elect to terminate or not to renew research and
development programs;
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
    
    collaborators may delay, underfund or stop product development, including clinical
trials 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.
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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.
  If we do not maintain or increase our sales of Perfan I.V. in Europe, our operating losses will
increase.
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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.
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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, including price 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, if at all;
    
    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.
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If approved, our products may face significant price pressures due to competition from similar
products.
   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.
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Health care reform measures could adversely affect our business.
     Failure to obtain regulatory approval in international jurisdictions would prevent us from
marketing our products abroad.
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Ambrisentans orphan drug designation may be challenged by competitors or withdrawn by the FDA or
the EMEA.
    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.
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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.
   If we are unable to protect our proprietary technology, we may not be able to compete
effectively.
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We may be accused of infringing on the proprietary rights of third parties, which could impair
our ability to successfully commercialize our product candidates.
  
    
    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;
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
    
    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;
    
    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;
    
    sales of our common stock by us; and
    
    sales or distributions of our common stock by our stockholders, including distributions
by certain of our principal stockholders to their limited partners, who may in turn sell
their shares.
  Our principal stockholders and management own a significant percentage of our stock and will be
able to exercise significant influence, and sales of their shares could affect our stock price.
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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.
  
    
    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
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ITEM 4. CONTROLS AND PROCEDURES
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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
  
 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.
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SIGNATURES
  Date:  November 8, 2005
    MYOGEN, INC./s/ Joseph L. TurnerJoseph L. TurnerSenior Vice President, Finance and
Administration and Chief Financial Officer
(Principal Financial and Accounting Officer) 
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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.
 49