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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File No. 0-20111
ARONEX PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 76-0196535
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
3400 Research Forest Drive, The Woodlands, Texas 77381-4223
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (281) 367-1666
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Class Outstanding at June 30, 1997
----- ----------------------------
Common Stock, $.001 par value 14,687,394 shares
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ARONEX PHARMACEUTICALS, INC.
Quarterly Period June 30, 1997
INDEX
Page
FACTORS AFFECTING FORWARD LOOKING STATEMENTS.............................. 3
PART I. Financial Information
Item 1 Financial Statements............................................... 3
Balance Sheets - December 31, 1996 and June 30, 1997 (unaudited)... 4
Statements of Operations:
Six Months Ended June 30, 1996 and June 30, 1997
(unaudited) and for the Period from Inception (June 13, 1986)
through June 30, 1997 (unaudited)................................ 5
Statements of Cash Flows:
Six Months Ended June 30, 1996 and June 30, 1997
(unaudited) and for the Period from Inception (June 13, 1986)
through June 30, 1997 (unaudited)................................ 6
Notes to Financial Statements - June 30, 1997...................... 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 9
PART II. Other Information
Item 4 Submission of Matters to Vote of Security Holders ................. 12
Item 6 Exhibits and Reports on Form 8-K................................... 13
SIGNATURES .............................................................. 14
-2-
FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The words
"anticipate," "believe," "expect," "estimate," "project" and similar expressions
are intended to identify forward-looking statements. Such statements are subject
to certain risks, uncertainties and assumptions. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, believed,
expected, estimated or projected. For additional discussion of such risks,
uncertainties and assumptions, see "Item 1. Business - Manufacturing," "- Sales
and Marketing," "Patents, Proprietary Rights and Licenses," "- Government
Regulation," "- Competition" and "- Additional Business Risks" included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996, and
"Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "- Liquidity and Capital Resources" included elsewhere in
this report.
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
The following unaudited financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made herein are adequate to make the
information presented not misleading. These financial statements should be read
in conjunction with the financial statements for the year ended December 31,
1996 included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, filed pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
The information presented in the accompanying financial statements is
unaudited, but in the opinion of management, reflects all adjustments (which
include only normal recurring adjustments) necessary to present fairly such
information.
- 3-
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
BALANCE SHEETS
(All amounts in thousands, except share data)
ASSETS
June 30,
December 31, 1997
1996 (Unaudited)
----------- ---------
Current Assets:
Cash and cash equivalents....................... $ 4,179 $ 6,233
Short-term investments.......................... 30,414 25,468
Accounts receivable - affiliates................ 78 --
Prepaid expenses and other assets............... 663 841
----------- ---------
Total current assets......................... 35,334 32,542
Long-term investments............................. 6,795 3,765
Furniture, equipment and leasehold improvements,
net ........................................... 2,152 1,742
Other assets...................................... -- 147
----------- ---------
Total assets................................. $ 44,281 $ 38,196
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses........... $ 1,191 $ 1,153
Accrued payroll................................. 126 101
Advance payable to Genzyme...................... 2,000 2,000
Current portion of other notes payable.......... 325 298
Current portion of obligations under capital
leases ....................................... 16 16
----------- ---------
Total current liabilities.................... 3,658 3,568
Long-term obligations:
Other notes payable, net of current portion..... 121 --
Obligations under capital leases, net of
current portion ............................... 25 18
----------- ---------
Total long-term obligations.................. 146 18
Commitments and contingencies
Stockholders' equity:
Preferred stock $.001 par value, 5,000,000
shares authorized, none issued and
outstanding.... ............................... -- --
Common stock $.001 par value, 30,000,000 shares
authorized, 14,597,247 and 14,687,394 shares
issued and outstanding, respectively........... 15 15
Additional paid-in capital...................... 93,742 93,699
Common stock warrants........................... 968 968
Treasury stock.................................. (11) (11)
Deferred compensation........................... (1,949) (1,448)
Unrealized loss on investments.................. (75) (106)
Deficit accumulated during development stage.... (52,213) (58,507)
----------- ---------
Total stockholders' equity................... 40,477 34,610
----------- ---------
Total liabilities and stockholders' equity...... $ 44,281 $ 38,196
=========== =========
The accompanying notes are an integral part of these financial statements.
- 4-
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
STATEMENTS OF OPERATIONS
(All amounts in thousands, except loss per share data)
(Unaudited)
Period
from
Inception
(June 13,
Six Months Ended Three Months Ended 1986)
June 30, June 30, through
June 30,
1996 1997 1996 1997 1997
------- ------ ------- ------ -------
Revenues:
Interest income ............ $ 470 $1,123 $ 328 $ 531 $ 4,645
Research and development
grants and contracts ..... 1,008 316 465 30 4,525
------- ------- -------- -------- --------
Total revenues ............... 1,478 1,439 793 561 9,170
------- ------- -------- -------- --------
Expenses:
Research and development ... 4,845 6,652 2,523 3,167 45,794
Purchase of in-process
research and development . 191 -- 191 -- 8,625
General and administrative . 771 931 376 475 12,094
Interest expense and other . 71 150 30 120 1,164
------- ------- -------- -------- --------
Total expenses .............. 5,878 7,733 3,120 3,762 67,677
------- ------- -------- -------- --------
Net loss .................... $(4,400) $(6,294) $ (2,327) $ (3,201) $(58,507)
======= ======= ======== ======== ========
Loss per share .............. $ (0.38) $(0.43) $ (0.19) $(0.22)
===== ===== ===== =====
Weighted average shares used
in computing loss per share 11,527 14,646 12,404 14,671
The accompanying notes are an integral part of these financial statements.
- 5-
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
Period from
Inception
(June 13, 1986)
Six Months Ended through
June 30, June 30,
1996 1997 1997
----------- ------------ --------
Cash flows from operating activities:
Net loss .................................................................. $ (4,400) $ (6,294) $(58,507)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities-
Depreciation and amortization ......................................... 486 475 3,362
Loss on disposal of assets ............................................ -- 107 107
Compensation expense related to stock and stock options ............... 303 315 2,957
Charge for purchase of in-process research and development 191 -- 8,547
Unrealized gain (loss) on investment 8 (31) (106)
Acquisition costs, net of cash received ............................... (26) -- (270)
Loss in affiliate ..................................................... 50 -- 500
Changes in assets and liabilities:
Increase in prepaid expenses and other assets ....................... (443) (178) (656)
Decrease in accounts receivable - affiliates ........................ 172 78 --
Increase (decrease) in accounts payable and accrued
expenses ....................................................... (413) (63) 1,181
Increase (decrease) in deferred revenue ............................. 50 -- (353)
Accrued interest payable converted to stock ........................... -- -- 97
-------- -------- --------
Net cash used in operating activities ........................... (4,022) (5,591) (43,141)
Cash flows from investing activities:
Net sales (purchases) of investments ...................................... (35,523) 7,976 (23,498)
Purchase of furniture, equipment and leasehold improvements ............... (41) (206) (3,975)
Proceeds from sale of assets .............................................. -- 34 34
Increase in other assets .................................................. -- (147) (147)
Investment in affiliate ................................................... -- -- (500)
-------- -------- --------
Net cash provided by (used in) investing activities ............. (35,564) 7,657 (28,086)
Cash flows from financing activities:
Proceeds from notes payable and capital leases ............................ -- -- 4,672
Repayment of notes payable and principal payments under capital
lease obligations ........................................................ (411) (155) (2,341)
Purchase of treasury stock ................................................ -- -- (11)
Proceeds from issuance of stock ........................................... 35,378 143 75,140
-------- -------- --------
Net cash provided by (used in) financing activities ............. 34,967 (12) 77,460
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ........................ (4,619) 2,054 6,233
Cash and cash equivalents at beginning of period ............................ 7,781 4,179 --
-------- -------- --------
Cash and cash equivalents at end of period .................................. $ 3,162 $ 6,233 $ 6,233
======== ======= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest .................................. $ 30 $ 43 $ 891
Supplemental schedule of noncash financing activities:
Conversion of notes payable and accrued interest to common$stoc$ .......... $ -- $ -- $ 3,043
The accompanying notes are an integral part of these financial statements.
- 6-
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
1. Organization and Basis of Presentation
Aronex Pharmaceuticals, Inc. ("Aronex" or the "Company") was incorporated in
Delaware on June 13, 1986 and merged with Triplex Pharmaceutical Corporation
("Triplex") and Oncologix, Inc. ("Oncologix") effective September 11, 1995.
Aronex is a development stage company which has devoted substantially all of its
efforts to research and product development and has not yet generated any
significant revenues, nor is there any assurance of significant future revenues.
In addition, the Company expects to continue to incur losses for the foreseeable
future and there can be no assurance that the Company will complete the
transition from a development stage company to successful operations. The
research and development activities engaged in by the Company involve a high
degree of risk and uncertainty. The ability of the Company to successfully
develop, manufacture and market its proprietary products is dependent upon many
factors. These factors include, but are not limited to, the need for additional
financing, attracting and retaining key personnel and consultants, and
successfully developing manufacturing, sales and marketing operations. The
Company's ability to develop these operations may be impacted by uncertainties
related to patents and proprietary technologies, technological change and
obsolescence, product development, competition, government regulations and
approvals, health care reform and product liability exposure. Additionally, the
Company is reliant upon collaborative arrangements for research, contractual
agreements with corporate partners, and its exclusive license agreements with
M.D. Anderson Cancer Center ("MD Anderson") and an affiliate of Baylor College
of Medicine ("Baylor"). Further, during the period required to develop these
products, the Company will require additional funds which may not be available
to it. The Company expects that its existing cash resources will be sufficient
to fund its cash requirements through mid-1999. Accordingly, there can be no
assurance of the Company's future success.
The balance sheet at June 30, 1997 and the related statements of operations
and cash flows for the six month period ending June 30, 1997 and 1996 and the
period from inception (June 13, 1986) through June 30, 1997 are unaudited. These
interim financial statements should be read in conjunction with the December 31,
1996 financial statements and related notes. The unaudited interim financial
statements reflect all adjustments which are, in the opinion of management,
necessary for a fair statement of results for the interim periods presented and
all such adjustments are of a normal recurring nature. Interim results are not
necessarily indicative of results for a full year.
2. Accounting Policies
In January 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per share" ("SFAS 128").
Management believes that this statement will have no material effect on its
financial statements.
3. Cash, Cash Equivalents and Investments
Cash and cash equivalents include money market accounts and investments with
an original maturity of less than three months. At June 30, 1997, all short-term
investments are held to maturity securities consisting of high-grade commercial
paper and U. S. Government backed securities with a carrying value of
$25,468,000, which approximates fair market value and cost. Long-term
investments include (i) held to maturity securities consisting of high-grade
commercial paper that mature over one to two years with a carrying value of
$2,000,000, which approximates fair market value and cost, and (ii) available
for sale securities which are U.S. mortgage backed securities with various
maturity dates over the next several years that have an amortized cost of
$1,871,000, a fair market value of $1,765,000 and a gross unrealized loss of
$106,000 at June 30, 1997. The Company currently has no trading securities.
-7-
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. Federal Income Taxes
At December 31, 1996, the Company had net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $66.9 million.
The Tax Reform Act of 1986 provided a limitation on the use of NOL and tax
credit carryforwards following certain ownership changes that could limit the
Company's ability to utilize these NOLs and tax credits. Accordingly, the
Company's ability to utilize its NOLs and tax credit carryforwards to reduce
future taxable income and tax liabilities may be limited. As a result of the
1995 mergers with Triplex and Oncologix a change in control as defined by
federal income tax law occurred, causing the use of these carryforwards to be
limited and possibly eliminated. Additionally because U.S. tax laws limit the
time during which NOLs and the tax credit carryforwards may be applied against
future taxable income and tax liabilities, the Company may not be able to take
full advantage of its NOLs and tax credit carryforwards for federal income tax
purposes. The carryforwards will begin to expire in 2001 if not otherwise used.
A valuation allowance has been established to offset the Company's deferred tax
assets as the Company has had losses since inception. The Company has not made
any income tax payments since inception.
5. Reverse Stock Split
At a special Meeting of Stockholders held on May 24,1996, the stockholders of
the Company approved a one-for-two reverse split of the Common Stock (the
"Reverse Split"). The Reverse Split became effective with the filing of an
amendment to the Company's Certificate of Incorporation on July 1, 1996. The
accompanying financial statements have been restated to give effect to the
Reverse Split.
6. Building Lease
In April 1997, the Company signed a lease for a new building with its current
landlord, under which, the Company has committed to lease 30,000 square feet for
ten years at approximately $2.00 per square foot per month and to pay certain
construction costs. The Company expects to occupy this lease space late in 1997
or early in 1998.
7. Contingent Stock Rights
In connection with the Triplex merger agreement, the Company issued
contingent rights (the "Triplex Contingent Stock Rights") to the former holders
of Triplex stock and options entitling them to receive additional shares of
Common Stock upon the occurrence of certain events. The Triplex Contingent Stock
Rights entitle the former Triplex stock and option holders to receive shares of
Common Stock with an aggregate fair market value at the time of issuance of $5.0
million (subject to certain adjustments) if the Company either (i) enters into
an agreement on or before September 11, 1997 with respect to the licensing of
ZintevirTM whereby the Company receives at least $5.0 million in cash or an
unconditional binding commitment for at least $5.0 million or (ii) obtains data
from clinical trials of ZintevirTM on or before September 11, 2000 that the
Company's Board of Directors determines to be sufficient to file an NDA. In
addition, the Triplex Contingent Stock Rights entitle the former Triplex stock
and option holders to receive shares of Common Stock with an aggregate fair
market value at the time of issuance of $3.0 million if the Company does not
receive a minimum of $5.0 million in equity milestone payments from Genzyme on
or before September 11, 1997 with respect to the development of AtragenTM. In no
event, however, shall more than 3,500,097 shares of Common Stock (subject to
adjustments in the event of stock splits, stock dividends or reclassification of
the Common Stock) be issued pursuant to the Triplex Contingent Stock Rights. The
Company has not received the minimum equity milestone payments from Genzyme
contemplated by the Triplex Contingent Stock Rights. The Company will be
required to issue shares of Common Stock under such contingent rights with an
aggregate fair market value at the time of issuance of $3,000,000 and will
record a corresponding non-cash research and development expense of $3,000,000
in the third quarter of 1997 if equity milestone payments of $5,000,000 are not
received from Genzyme relating to AtragenTM on or before September 11, 1997.
-8-
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Overview
Since its inception in 1986, Aronex Pharmaceuticals, Inc. ("Aronex" or the
"Company") has primarily devoted its resources to fund research, drug discovery
and development. The Company has been unprofitable to date and expects to incur
substantial operating losses for the next several years as it expends its
resources for product research and development, preclinical and clinical testing
and regulatory compliance. The Company has sustained losses of approximately
$58.5 million through June 30, 1997. The Company has financed its research and
development activities and operations primarily through public and private
offerings of securities. The Company's operating results have fluctuated
significantly during each quarter, and the Company anticipates that such
fluctuations, largely attributable to varying commitments and expenditures for
clinical trials and research and development, will continue for the next several
years.
Three and Six Month Periods Ended June 30, 1996 and 1997
Revenues from research and development grants and contracts were $30,000 and
$465,000 for the three months ended June 30, 1997 and 1996, respectively, a
decrease of $435,000. Research and development grants and contracts were
$316,000 and $1,008,000 for the six months ended June 30, 1997 and 1996,
respectively, a decrease of $692,000. These decreases were due to the following:
(i) no revenues from Hoechst Marion Roussel, Inc. ("Hoechst") in 1997 compared
to $600,000 for the six months ended June 30, 1996, as the agreement terminated
at the end of 1996; (ii) no Small Business Innovative Research ("SBIR") grant
revenue in 1997 compared to $73,000 for the six months ended June 30, 1996, as
there are currently no SBIR grants in 1997 and (iii) a decrease in the
development revenue from Targeted Genetics Incorporated ("Targeted") to $150,000
for the six months ended June 30, 1997 from $335,000 for the corresponding
period in 1996. This three year agreement with Targeted ended in the second
quarter of 1997. The decreases in research and development revenues were
partially offset by $150,000 in revenue received in the first quarter of 1997
from the Company's license agreement with Boehringer Mannheim GmbH.
Interest income was $531,000 and $328,000 for the three months ended June 30,
1997 and 1996, respectively, an increase of $203,000. Interest income was
$1,123,000 and $470,000 for the six months ended June 30, 1997 and 1996,
respectively, an increase of $653,000. These increases were primarily due to an
increase of funds available for investment resulting from cash received from the
completion of a stock offering in May 1996.
Research and development expenses were $3,167,000 and $2,523,000 for the
three months ended June 30, 1997 and 1996, respectively, an increase of
$644,000. Research and development expenses were $6,652,000 and $4,845,000 for
the six months ended June 30, 1997 and 1996, respectively, an increase of
$1,807,000. These increases were primarily due to an increase of $756,000 in
medical affairs and pharmaceutical development salaries and payroll costs,
including costs relating to the hiring of a Vice President of Pharmaceutical
Development and Operations and a Senior Vice President of Medical Affairs and
Chief Medical Officer, an increase of $789,000 in drug manufacturing costs
relating mainly to NyotranTM and ZintevirTM and an increase of $406,000 in
outside pharmacology studies relating mainly to NyotranTM and AtragenTM. The
increases were partially offset by a decrease of $287,000 in research expenses
in the second quarter of 1997 as the majority of the Company's internal research
efforts were eliminated in the second quarter of 1997. The Company's decision to
eliminate such research efforts was related in part to the termination of
research funding from Hoechst.
-9-
In-process research and development represents costs incurred during the six
month period ended June 30, 1996 related to the 1995 mergers of Triplex
Pharmaceutical Corporation ("Triplex") and Oncologix, Inc.("Oncologix") with
subsidiaries of the Company, and consists of the settlement of a lawsuit that
had been filed by certain common stockholders of Oncologix. In connection with
the Triplex merger, the Company issued contingent rights to the former holders
of Triplex stock and options entitling them to receive additional shares of
Common Stock upon the occurrence of certain events. The Company will be required
to issue shares of Common Stock under such contingent rights with an aggregate
fair market value at the time of issuance of $3,000,000 and will record a
corresponding non-cash research and development expense of $3,000,000 in the
third quarter of 1997 if equity milestone payments of $5,000,000 are not
received from Genzyme relating to AtragenTM on or before September 11, 1997. See
Note 7 of Notes to Finanacial Statements.
General and administrative expenses were $475,000 and $376,000 for the three
months ended June 30, 1997 and 1996, respectively, an increase of $99,000.
General and administrative expenses were $931,000 and $771,000 for the six
months ended June 30, 1997 and 1996, respectively, an increase of $160,000.
These increases were primarily due to an increase of $106,000 in salaries and
payroll costs, which includes several new positions and a related increase in
operating costs.
Interest expense and other was $120,000 and $30,000 for the three months
ended June 30, 1997 and 1996, respectively, an increase of $90,000. Interest
expense and other was $150,000 and $71,000 for the six months ended June 30,
1997 and 1996, respectively, an increase of $71,000. These increases in interest
expense and other resulted primarily from a loss on disposal of assets of
$107,000 in the quarter ended June 30, 1997 that relates to the disposition of
equipment and leasehold improvements that had been used in research activities
that have been eliminated. These increases were partially offset by a decrease
in interest expense as the amount of outstanding debt which resulted from
obtaining laboratory equipment through leases and promissory notes payable has
decreased.
Net loss was $3,201,000 and $2,327,000 for the three months ended June 30,
1997 and 1996, respectively, an increase of $874,000. Net loss for the six
months ended June 30, 1997 and 1996, respectively, was $6,294,000 and
$4,400,000, an increase of $1,894,000. These increases were primarily due to the
increase in research and development expenses.
Liquidity and Capital Resources
Since its inception, the Company's primary source of cash has been from
financing activities, which have consisted primarily of sales of equity
securities. The Company has raised an aggregate of approximately $75 million
from the sale of equity securities from its inception through June 30, 1997. In
July 1992, the Company raised net proceeds of approximately $10.7 million in the
initial public offering of its Common Stock. In September 1993, the Company
entered into a collaborative agreement with Genzyme relating to the development
and commercialization of AtrogenTM, in connection with which the Company
received net proceeds of approximately $4.5 million from the sale of Common
Stock to Genzyme. In November 1993 and May 1996, the Company raised net proceeds
of approximately $11.5 and $32.1 million, respectively, in public offerings of
Common Stock. From October 1995 through June 30, 1997, the Company received
aggregate net proceeds of approximately $6.5 million from the exercise of
certain warrants issued in its 1995 merger with Oncologix, Inc. From its
inception until June 30, 1997, the Company also received an aggregate of $4.5
million cash from collaborative arrangements and SBIR grants. In September 1995,
the Company's cash and securities held to maturity increased by approximately
$6.7 million as a result of its 1995 merger with Triplex Pharmaceutical
Corporation.
-10-
The Company's primary use of cash to date has been in operating activities to
fund research and development, including preclinical studies and clinical
trials, and general and administrative expenses. Cash of $5.6 million and $4.0
million was used in operating activities during the first six months of 1997 and
1996, respectively. The Company had cash, cash-equivalents and short-term and
long-term investments of $35.5 million as of June 30, 1997, consisting primarily
of cash and money market accounts, and United States government securities and
investment grade commercial paper.
The Company has experienced negative cash flows from operations since its
inception and has funded its activities to date primarily from equity
financings. The Company has expended, and will continue to require, substantial
funds to continue research and development, including preclinical studies and
clinical trials of its products, and to commence sales and marketing efforts if
FDA and other regulatory approvals are obtained. The Company expects that its
existing capital resources will be sufficient to fund its capital requirements
through mid-1999. Thereafter, the Company will need to raise substantial
additional capital to fund its operations. The Company's capital requirements
will depend on many factors, including the problems, delays, expenses and
complications frequently encountered by development stage companies; the
progress of the Company's research, development and clinical trial programs; the
extent and terms of any future collaborative research, manufacturing, marketing
or other funding arrangements; the costs and timing of seeking regulatory
approvals of the Company's products; the Company's ability to obtain regulatory
approvals; the success of the Company's sales and marketing programs; costs of
filing, prosecuting and defending and enforcing any patent claims and other
intellectual property rights; and changes in economic, regulatory or competitive
conditions of the Company's planned business. Estimates about the adequacy of
funding for the Company's activities are based on certain assumptions, including
the assumption that testing and regulatory procedures relating to the Company's
products can be conducted at projected costs. There can be no assurance that
changes in the Company's research and development plans, acquisitions, or other
events will not result in accelerated or unexpected expenditures. To satisfy its
capital requirements, the Company may seek to raise additional funds in the
public or private capital markets. The Company's ability to raise additional
funds in the public or private markets will be adversely affected if the results
of its current or future clinical trials are not favorable. The Company may seek
additional funding through corporate collaborations and other financing
vehicles. There can be no assurance that any such funding will be available to
the Company on favorable terms or at all. If adequate funds are not available,
the Company may be required to curtail significantly one or more of its research
or development programs, or it may be required to obtain funds through
arrangements with future collaborative partners or others that may require the
Company to relinquish rights to some or all of its technologies or products. If
the Company is successful in obtaining additional financing, the terms of such
financing may have the effect of diluting or adversely affecting the holdings or
the rights of the holders of the Company's Common Stock.
-11-
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Stockholders of Aronex Pharmaceuticals, Inc. was
held on May 14, 1997 to consider and vote upon the following proposals:
(i) Election of Class II Directors. The following individuals were
nominated and elected as Class II directors, with the following
numbers of shares voted for and against and withheld for each
director:
For Withheld
Geoffrey F. Cox, Ph.D. 12,357,339 1,006,593
Gabriel Lopez-Berestein, M.D. 13,166,801 197,131
For Against Abstain
(ii) Amendment and restatement of
Amended and Restated 1989 Stock
Option Plan 7,696,414 2,492,730 38,669
(iii)Amendment and restatement of
Amended and Restated 1993
Non-Employee Director Stock
Option Plan 10,236,639 513,595 31,494
(iv) Approval of 1997 Employee Stock
Purchase Plan 10,385,171 368,163 28,394
(v) Amendment of Restated Certificate
of Incorporation 10,086,176 46,788 24,052
(vi) Ratification and Selection of
Arthur Andersen LLP as Independent
Public Accountants 13,331,146 14,141 18,645
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Item 6 Exhibits and Reports on Form 8-K
(a)Exhibits
3.1 Restated Certificate of Incorporation, as amended.
10.1 Amended and Restated 1989 Stock Option Plan.
10.2 Amended and Restated 1993 Non-Employee Director Stock Option Plan.
10.3 Lease Agreement dated April 4, 1997 between the Company and The
Woodlands Corporation.
11.1 Statement regarding computation of per share earnings.
27.1 Financial data schedule.
(b)Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ARONEX PHARMACEUTICALS, INC.
Dated: August 12, 1997 By:/S/JAMES M. CHUBB
-----------------
James M. Chubb, Ph.D.
President and Chief Executive Officer
Dated: August 12, 1997 By:/S/TERANCE A. MURNANE
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Terance A. Murnane
Controller
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