SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 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 Number 0-21990
OXiGENE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3679168
(State or other jurisdiction of incorporation or organization) (IRS Employer
Identification No.)
110 East 59th Street
New York, NY 10022
(Address of principal executive offices, including zip code)
(212) 421-0001
(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section
12(g) of the Act:
Title of Class
Common Stock, par value $.01 per share
Warrant to Purchase One Share of Common Stock
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 [ ]
As of March 31, 1997, there were 9.331,091 shares of the Registrant's Common
Stock issued and outstanding.
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OXiGENE, INC.
This Quarterly Report on Form 10-Q contains historical information and
forward-looking statements. Statements looking forward in time are included in
this Form 10-Q pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. They involve known and unknown risks
and uncertainties that may cause the Company's actual results in future periods
to be materially different from any future performance suggested herein. In the
context of forward-looking information provided in this Form 10-Q and in other
reports, please refer to the discussion of risk factors detailed in, as well as
the other information contained in, the Company's filings with the Securities
and Exchange Commission during the past 12 months.
INDEX PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 1
Consolidated Balance Sheets 2
Consolidated Statement of Operations 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial 5
Statements
Item 2. Management's Discussion and Analysis 7
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION 10
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of 10
Securityholders
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying consolidated financial statements have been prepared
by OXiGENE, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the Company's opinion,
these financial statements contain all adjustments necessary to present fairly
the financial position of OXiGENE, Inc as of March 31, 1997 and December 31,
1996, the results of operations for the three months ended March 31, 1997 and
March 31, 1996, and the cash flows for the three month periods ended March 31,
1997 and March 31, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1996. The results of
operations for the period ended March 31, 1997 are not necessarily indicative of
the results of operations and cash flows for any subsequent interim period or
for the full year.
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OxiGENE, Inc.
(A development stage company)
Condensed Consolidated Balance Sheets
(All amounts in thousands)
March 31, 1997 December 31, 1996
------------------ -----------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents 42,741 40,517
Prepaid expenses 207 195
Interest receivable 156 280
Other 42 77
------------------ ----------------
Total current assets 43,146 41,069
Furniture, fixtures and equipment, at cost 148 143
Accumulated depreciation (57) (53)
------------------ ----------------
Net property and equipment 91 90
Deposits 80 10
------------------ -----------------
Total Assets 43,317 41,169
================== =================
Liabilities and stockholders' equity
Current Liabilities:
Accounts payable and accrued expenses 722 231
Other payables 707 419
------------------ -------------------------
Total current liabilities 1,429 650
Stockholders' equity
Common stock $0.01 par value:
Authorized shares - 60,000,000 shares
Issued and outstanding
9,331,091 at March 31, 1997
9,052,343 at December 31, 1996 93 90
Additional paid-in capital 60,923 57,674
Deficit accumulated during the development stage (19,034) (17,358)
Foreign currency translation adjustment (94) 113
------------------ -------------------------
Total stockholders' equity 41,888 40,519
------------------ -------------------------
Total liabilities and stockholders' equity 43,317 41,169
================== =========================
The accompanying notes are an integral part of this statement
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OxiGENE, Inc.
(A development stage company)
Condensed Consolidated Statements of Operations
(All amounts in thousands, except per share data)
(Unaudited)
Period from
February 22, 1988
(Inception)
Three months ended through
March 31, March 31,
1997 1996 1997
------------ -------------- ----------------------
Revenue
Interest income 531 129 1,962
Research income 31
------------ -------------- ----------------------
Total revenue 531 129 1,993
Operating expenses
Research and development: 1,732 1,229 13,624
General and administrative 475 413 7,403
------------ -------------- ----------------------
Total operating expenses 2,207 1,642 21,027
------------ -------------- ----------------------
Net loss (1,676) (1,513) (19,034)
============ ============== ======================
Net loss per common share (0.18) (0.22)
Weighted average number of
common shares outstanding 9,180 6,881
The accompanying notes are an integral part of this statement
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OxiGENE, Inc.
(A development stage company)
Condensed Consolidated Statements of Cash Flows
(All amounts in thousands)
(Unaudited)
Period from
February 22, 1988
(Inception)
Three months ended through
March 31, March 31,
1997 1996 1997
--------------- --------------- ----------------------
Operating activities
Net Loss (1,676) (1,513) (19,034)
Adjustment to reconcile net loss to net cash
used in operating activities:
Depreciation 7 3 68
Compensation related to issuance of warrants,
options and stock appreciation rights 544 591 2,250
Other 21
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 292 40 (259)
Accounts payable and accrued expenses 668 223 1,291
--------------- --------------- ----------------------
Net cash used in operating activities (165) (656) (15,663)
Financing activities
Proceeds from issuance of common stock and capital 2,708 283 58,768
contributions
--------------- --------------- ----------------------
Net cash provided by financing activities 2,708 283 58,768
Investing activities
Purchases of securities available-for-sale (3,368)
Proceeds from sale of securities available-for-sale 502 3,356
Deposits (70) (80)
Purchase of furniture, fixture and equipment (16) (4) (178)
--------------- --------------- ----------------------
Net cash used in investing activities (86) 498 (270)
Effect of exchange rate on changes in cash (233) (3) (94)
--------------- --------------- ----------------------
Net increase in cash and cash equivalents 2,224 122 42,741
Cash and cash equivalents at beginning of period 40,517 10,407
--------------- --------------- ----------------------
Cash and cash equivalents at end of period 42,741 10,529 42,741
=============== =============== ======================
The accompanying notes are an integral part of this statement
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OxiGENE, INC.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
1. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1996.
Cash and Cash Equivalents
The Company considers all highly liquid financial instruments with a
maturity of three months or less when purchased to be cash equivalents.
Net Loss Per Share
Net loss per share is based upon the Company's aggregate net loss
divided by the weighted average number of shares of Common Stock outstanding
during the respective periods. All options and warrants were antidilutive and,
accordingly, have been excluded from the calculation of weighted average shares.
In February 1997, the Financial Accounting Standards Board issued
Statement No.128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for caluclating primary earnings per share,
the dilutive effect of stock options will be excluded. Statement No. 128 will
not have a materials impact on the Company's net loss per share for the three
months ended March 31, 1997 and 1996.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary OXiGENE Europe AB. Intercompany
balances and transactions have been eliminated.
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Reclassification
Certain 1996 amounts have been reclassified to conform to the current
period's presentation.
2. Stockholder's Equity
During the three-month period ended March 31, 1997, the Company issued
278,748 shares of Common Stock upon exercise of previously granted options,
warrants and stock appreciation rights ("SARs"), with proceeds to the Company of
approximately $2.7 million.
During the three-month period ended March 31, 1997, the Company
recorded a charge for financial reporting purposes of approximately $0.5 million
because the market value of the Company's Common Stock exceeded the exercise
prices of the SARs granted by the Company. Because upon exercise SARs are
satisfied only by the distribution of shares of Common Stock, the charge was
credited to additional paid-in capital.
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Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Description of Business
OXiGENE is a development-stage pharmaceutical company engaged in the
research and development of products designed to enhance the clinical efficacy
of radiation and chemotherapy, the most common and traditional forms of
non-surgical cancer treatment. OXiGENE has devoted substantially all of its
efforts and resources to research and development conducted on its own behalf
and through strategic collaborations with clinical institutions and other
organizations, particularly the University of Lund in Lund, Sweden.
Consequently, OXiGENE believes that its research and development expenditures
have been somewhat lower than those of other comparable development-stage
companies. OXiGENE has generated a cumulative net loss of approximately $19.0
million for the period from its inception through March 31, 1997. OXiGENE
expects to incur significant additional operating losses over at least the next
several years, principally as a result of its continuing clinical trials and
anticipated research and development expenditures. The principal source of
OXiGENE's working capital has been the proceeds of private and public equity
financings. As of March 31, 1997, OXiGENE had no long-term debt or loans
payable. Since its inception, the Company has had no material amount of
licensing or other fee income, and does not anticipate any such income for the
foreseeable future.
Results of Operations - Three Months Ended March 31, 1997 and 1996
During the three-month periods ended March 31, 1997 and 1996, the
Company had no revenues, except for approximately $0.5 million and $0.1 million
of interest income, respectively. The increase in interest income is
attributable primarily to the investment of the net proceeds of the Company's
secondary offering in connection with its listing on the Stockholm Stock
Exchange ("SSE"), which was completed in November 1996, as well as cash received
upon exercise of options and warrants throughout the first quarter of 1997. See
"--Liquidity and Capital Resources." Operating expenses for those periods were
approximately $2.2 million and $1.6 million, respectively. Research and
development expenses for the three-month period ended March 31, 1997 increased
to approximately $1.7 million from approximately $1.2 million for the comparable
1996 period. Research and development expenses include a charge for financial
reporting purposes of approximately $0.5 million and $0.6 million for the
three-month period ended March 31, 1997 and 1996, respectively. This charge was
recorded because the market value per share of Common Stock on March 31, 1997
($32.00) exceeded the exercise price of SARs previously granted by the Company
to certain clinical investigators and consultants. Without giving effect to such
charge, research and development expenses increased by approximately $0.6
million compared to the comparable 1996 period. Generally, the Company makes
payments to its clinical investigators if and when certain predetermined
milestones in its clinical trials are reached, rather than on a fixed quarterly
or monthly basis. As a result of the foregoing and the existence of outstanding
SARs, research and development expenses have fluctuated, and are expected to
continue to fluctuate, from quarter to quarter. General
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and administrative expenses for the three-month period ended March 31, 1997
increased to approximately $0.5 million from approximately $0.4 million for the
comparable 1996 period. The increase in general and administrative expenses is
primarily attributable to an increase in the Company's activities, mostly in
Sweden.
Liquidity and Capital Resources
OXiGENE has experienced net losses and negative cash flow from
operations each year since its inception and, as of March 31, 1997, had a
deficit during the development stage of approximately $19.0 million. The Company
expects to incur substantial additional expenses, resulting in significant
losses, over at least the next several years due to, among other factors, its
continuing clinical trials and anticipated research and development activities.
To date, the Company has financed its operations principally through the net
proceeds it has received from private and public equity financings.
The Company had cash and cash equivalents of approximately $42.7
million at March 31, 1997, compared to approximately $40.5 million at December
31, 1996. The increase in cash and cash equivalents in the first quarter is
primarily attributable to the issuance, upon exercise of outstanding options,
warrants and SARs, of 278,748 shares of Common Stock, with proceeds to the
Company of approximately $2.7 million. A portion of these proceeds was used to
finance operations during the three months ended March 31, 1997.
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OXiGENE's policy is to contain its fixed expenditures by
maintaining a relatively small number of employees and relying as much as
possible on outside services for its research, development, preclinical testing
and clinical trials. The Company maintains small executive offices in New York
and in Lund, Sweden, and recently established an office in Stockholm, Sweden. In
May 1997, the Company will open a research and clinical trial coordination
center in Boston, Massachusetts. The Company contracts with Cato Research, Ltd.,
Durham, North Carolina, for the coordination of the Company's clinical trials
and retention of its clinical files. The Company pays the University of Lund,
Sweden and other hospitals, where applicable, on a per patient basis for
conducting its clinical trials. Further, in May 1996, in collaboration with
ILEX(TM) Oncology Inc., a contract research organization in San Antonio, Texas
("ILEX"), the Company established a large-scale synthesis of Oxi-104, a new
chemical compound under preclinical testing by the Company, in accordance with
current U.S. Good Laboratory Practice Standards. Through March 31, 1997, the
Company has paid ILEX approximately $1.1 million, of which approximately $0.2
was paid in the three-month period ended March 31, 1997. As research and
development with respect to Oxi-104 continues, the Company expects that the
amounts payable to ILEX from time to time will increase significantly.
The Company anticipates that its cash and cash equivalents as of
March 31, 1997 should be sufficient to satisfy the Company's projected cash
requirements for approximately 30 months. However, working capital and capital
requirements may vary materially from those now planned due to numerous factors
including, but not limited to, the progress with the preclinical testing and
clinical trials; progress of the Company's research and development programs;
the time and costs required to obtain regulatory approvals; the resources the
Company devotes to manufacturing methods and advanced technologies; the ability
of the Company to obtain collaborative or licensing arrangements; the costs of
filing, prosecuting and, if necessary, enforcing patent claims; the cost of
commercializing activities and arrangements; and the demand for its products if
and when approved. The Company anticipates that it will have to seek substantial
additional private or public financing or enter into collaborative arrangements
with one or more third parties to complete the development of any products or
bring products to market. There can be no assurance that additional financing
will be available on acceptable terms, if at all. The Company had no material
commitments for capital expenditures as of March 31, 1997.
Tax Matters
As of December 31, 1996, the Company had, for Federal income tax
purposes, net operating loss carryforwards of approximately $23.0 million.
Pursuant to the Tax Reform Act of 1986, annual utilization of the Company's net
operating loss carryforwards may be limited if a cumulative change in ownership
of the Company's stock of more than 50% (within the meaning of the Internal
Revenue Code) occurs within any three-year period. The Company has made no
determination concerning whether there has been such a cumulative change in
ownership and it is possible that such a change in ownership may be deemed to
have occurred following the Company's initial public offering (completed in
October, 1993), private placement (completed in July 1995) and/or secondary
offering (completed in November 1996).
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal proceedings pending or, to the Company's best
knowledge, threatened against the Company.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following exhibit is filed as part of this Quarterly
Report on Form 10-Q:
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the first quarter
of 1997.
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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.
OXiGENE, INC.
Date: May 13, 1997 --------------------------------------
------------------ Bo Haglund
Chief Financial Officer
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OXiGENE, INC.
Quarterly Report on Form 10-Q
for the Fiscal Quarter Ended March 31, 1997
Exhibits
Exhibit
Number Description
- ------- -----------
27.1 Financial data schedule.
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