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 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 Number: 0-21990
OXiGENE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3679168
(State or other jurisdiction of (IRS Employer
incorporation or organization) 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:
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 June 30, 1997, there were 9,912,105 shares of the Registrant's Common
Stock issued and outstanding.
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 the
Company's Annual Report on Form 10-K, 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 1
Item 1. Financial Statements 1
Consolidated Balance Sheets 2
Consolidated Statement of Operations 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
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
Securityholders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
ii
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying consolidated financial statements have been prepared by
OXiGENE, Inc. ("OXiGENE" or 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 June 30, 1997 and December
31, 1996, the results of operations for the three-month and six-month periods
ended June 30, 1997 and June 30, 1996, and the cash flows for the six month
periods ended June 30, 1997 and June 30, 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 June 30, 1997 are not necessarily
indicative of the results of operations and cash flows for any subsequent
interim period or for the full year.
1
OXiGENE, INC.
(A development stage company)
Condensed Consolidated Balance Sheets
(All amounts in thousands)
June 30, 1997 December 31, 1996
================= =================
(Unaudited)
Assets
Current assets:
Cash and cash equivalents 42,206 40,517
Prepaid expenses 397 195
Interest receivable 420 280
Other 57 77
----------------- ----------------
Total current assets 43,080 41,069
Furniture, fixtures and equipment,
at cost 218 143
Accumulated depreciation (70) (53)
----------------- ----------------
Net property and equipment 148 90
Deposits 80 10
----------------- ----------------
Total assets 43,308 41,169
================= ================
Liabilities and stockholders' equity
Current Liabilities:
Accounts payable and accrued expenses 893 231
Other payables 22 419
----------------- ----------------
Total current liabilities 915 650
Stockholders' equity
Common stock $0.01 par value:
Authorized shares - 60,000,000 shares
Issued and outstanding
9,912,105 at June 30, 1997
9,052,343 at December 31, 1996 99 90
Additional paid-in capital 63,848 57,674
Deficit accumulated during the
development stage (21,462) (17,358)
Foreign currency translation adjustment (92) 113
----------------- ----------------
Total stockholders' equity 42,393 40,519
----------------- ----------------
Total liabilities and stockholders' equity 43,308 41,169
================= ================
The accompanying notes are an integral part of this statement
OXiGENE, INC.
(A development stage company)
Condensed Consolidated Statement of Operations
(All amounts in thousands, except per share data)
(unaudited)
Period from
February 22, 1988
Three months ended Six months ended (Inception)
June 30, June 30, through
1997 1996 1997 1996 June 30, 1997
======= ======= ======= ======= ================
Revenue
Interest income 552 125 1,083 254 2,514
Research 31
------- ------- ------- ------- -------
Total revenue 552 125 1,083 254 2,545
Operating expenses
Research and development 2,368 1,460 4,100 2,689 15,993
General and administrative 611 563 1,086 976 8,014
------- ------- ------- ------- -------
Total operating expenses 2,979 2,023 5,186 3,665 24,007
------- ------- ------- ------- -------
Net loss (2,427) (1,898) (4,103) (3,411) (21,462)
======= ======= ======= ======== =======
Net loss per common
share (0.25) (0.27) (0.43) (0.49)
Weighted average number
of common shares
outstanding 9,760 6,971 9,470 6,971
The accompanying notes are an integral part of this statement
OXiGENE, Inc.
(A development stage company)
Condensed Consolidated Statements of Cash Flows
(All amounts in thousands)
(Unaudited)
Period from
February 22, 1988
Six Months ended (Inception)
June 30, through
1997 1996 June 30, 1997
------- ------- -------------
Operating activities
Net Loss (4,103) (3,411) (21,462)
Adjustment to reconcile net loss to
net cash used in operating activities:
Depreciation 21 6 82
Compensation related to issuance of
warrants, options and stock
appreciation rights 711 1,008 2,417
Other 21
Changes in operating assets and
liabilities:
Prepaid expenses and other current
assets (188) 93 (740)
Accounts payable and accrued expenses 167 375 793
------ ------ ------
Net cash used in operating activities (3,392) (1,929) (18,889)
Financing activities
Proceeds frodm issuance of common stock
and capital contribution 5,471 1,763 61,530
------ ------ ------
Net cash provided by financing activities 5,471 1,763 61,530
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 (88) (11) (250)
------ ------ ------
Net cash used in investing activities (158) 491 (342)
Effect of exchange rate on changes in cash (232) (22) (93)
------ ------ -------
Net increase in cash and cash equivalents 1,689 303 42,206
Cash and cash equivalents at beginning
of period 40,517 10,407
------ ------ ------
Cash and cash equivalents at end of period 42,206 10,710 42,206
====== ====== ======
The accompanying notes are an integral part of this statement
OXiGENE, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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 six-month period ended June 30, 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,
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 calculating primary earnings per share, the dilutive effect
of stock options will be excluded. Statement No. 128 will not have a material
impact on the Company's net loss per share for the six months ended June 30,
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.
Reclassification
Certain 1996 amounts have been reclassified to conform to the current
period's presentation.
5
2. Stockholder's Equity
During the six-month period ended June 30, 1997, the Company issued 859,762
shares of Common Stock upon exercise of previously granted warrants, options and
stock appreciation rights ("SARs"), with proceeds to the Company of
approximately $5.5 million.
During the six-month period ended June 30, 1997, the Company recorded a
charge for financial reporting purposes of approximately $0.7 million because
the market value of the Company's Common Stock exceeded the exercise prices of
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.
6
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 $21.5
million for the period from its inception through June 30, 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
June 30, 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 - Six Months Ended June 30, 1997 and 1996
During the six-month periods ended June 30, 1997 and 1996, the Company had
no revenues, except for approximately $1.1 million and $0.3 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, which was completed
in November 1996, as well as cash received upon exercise of options and warrants
in the first six month of 1997. See "--Liquidity and Capital Resources."
Operating expenses for those periods were approximately $5.2 million and $3.7
million, respectively. Research and development expenses for the six-month
period ended June 30, 1997 increased to approximately $4.1 million from
approximately $2.7 million for the comparable 1996 period. Research and
development expenses include a charge for financial reporting purposes of
approximately $0.7 million and $1.0 million for the six-month period ended June
30, 1997 and 1996, respectively. This charge was recorded because the market
value per share of Common Stock on June 30, 1997 ($34.75) 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 $1.7 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 and administrative expenses for the six-month
period ended June 30, 1997 increased to approximately $1.1 million from
approximately $1.0 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.
7
Liquidity and Capital Resources
OXiGENE has experienced net losses and negative cash flow from operations
each year since its inception and, as of June 30, 1997, had a deficit during the
development stage of approximately $21.5 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 $42.2 million at
June 30, 1997, compared to approximately $40.5 million at December 31, 1996. The
increase in cash and cash equivalents in the first six months of 1997 is
primarily attributable to the issuance, upon exercise of outstanding options and
warrants, of 859,762 shares of Common Stock, with proceeds to the Company of
approximately $5.5 million. A portion of these proceeds was used to finance
operations during the six months ended June 30, 1997.
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 addition, in May
1997, the Company opened 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
that is expected to enter into clinical testing in the third quarter of 1997, in
accordance with current U.S. Good Laboratory Practice Standards. Through June
30, 1997, the Company has paid ILEX approximately $1.6 million, of which
approximately $0.7 was paid in the six-month period ended June 30 1997. As
research and development and clinical testing with respect to Oxi-104 continues,
the Company expects that the amounts payable to ILEX from time to time will
increase significantly.
8
The Company anticipates that its cash and cash equivalents as of June 30,
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 June 30, 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).
9
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
On May 30, 1997, the Company held its Annual Meeting of Stockholders (the
"Meeting") in Stockholm, Sweden. At the Meeting, all nominees for director,
Professor Marvin Caruthers, Michael Ionata, Dr. Bjorn Nordenvall, Dr. Ronald W.
Pero and Dr. Claus Moller, were elected. There were 7,940,816 (or approximately
99.4%) votes cast in favor, and 46,900 (or approximately 0.5%) votes cast
against the election of each of the aforementioned nominees for director.
The Company's stockholders ratified the appointment of Ernst & Young LLP as
the Company's independent auditors for the year ending December 31, 1997, with
7,987,041 votes (or approximately 100.0%) cast in favor, 600 votes against, and
75 abstentions.
No other proposal were submitted to the Company's stockholders for approval
at the Meeting.
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 second quarter of 1997.
10
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: August 12, 1997 /s/ Bo Haglund
-----------------------------
Bo Haglund
Chief Financial Officer
(Principal Financial Officer)
11
OXiGENE, INC.
Quarterly Report on Form 10-Q
for the Fiscal Quarter Ended June 30, 1996
Exhibits
Exhibit
Number Description
- ------- -----------
27.1 Financial data schedule.
12