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 September 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 September 30, 1997, there were 10,080,609 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, as well as
the other information contained in, the Company's filings with the Securities
and Exchange Commission during the past 12 months.
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INDEX PAGE NO.
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PART I. FINANCIAL INFORMATION 1
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Item 1. Financial Statements 1
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Condensed Consolidated Balance Sheets 2
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Condensed Consolidated Statement of Operations 3
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Condensed Consolidated Statements of Cash Flows 4
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Notes to Condensed Consolidated Financial Statements 5
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
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PART II. OTHER INFORMATION 10
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Item 1. Legal Proceedings 10
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Item 2. Changes in Securities 10
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Item 3. Defaults Upon Senior Securities 10
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Item 4. Submission of Matters to a Vote of Securityholders 10
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Item 5. Other Information 10
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Item 6. Exhibits and Reports on Form 8-K 10
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SIGNATURES 11
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1
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 September 30,
1997 and December 31, 1996, the results of operations for the three-month and
nine-month periods ended September 30, 1997 and September 30, 1996, and the cash
flows for the nine-month periods ended September 30, 1997 and September 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
September 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)
September 30, 1997 December 31, 1996
------------------------- -------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents 42,162 40,517
Prepaid expenses 404 195
Interest receivable 566 280
Other 73 77
------------------------- -------------------------
Total current assets 43,205 41,069
Furniture, fixtures and equipment, at cost 299 143
Accumulated depreciation (93) (53)
------------------------- -------------------------
Net property and equipment 206 90
Deposits 80 10
------------------------- -------------------------
Total Assets 43,491 41,169
========================= =========================
Liabilities and stockholders' equity
Current Liabilities:
Accounts payable and accrued expenses 1,214 231
Other payables 25 419
------------------------- -------------------------
Total current liabilities 1,239 650
Stockholders' equity
Common stock $0.01 par value:
Authorized shares - 60,000,000 shares
Issued and outstanding
10,080,609 at September 30, 1997
9,052,343 at December 31, 1996 101 90
Additional paid-in capital 65,265 57,674
Deficit accumulated during the development stage (23,024) (17,358)
Foreign currency translation adjustment (90) 113
------------------------- -------------------------
Total stockholders' equity 42,252 40,519
------------------------- -------------------------
Total liabilities and stockholders' equity 43,491 41,169
========================= =========================
The accompanying notes are an integral part of this statement
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 Nine months ended through
September 30, September 30, September 30,
1997 1996 1997 1996 1997
----------- ------------ ------------ ----------- ------------------------
Revenue
Interest income 576 118 1,659 371 3,090
Research 31
----------- ------------ ------------ ----------- ------------------------
Total revenue 576 118 1,659 371 3,121
Operating expenses
Research and development 1,578 821 5,678 3,510 17,570
General and administrative 561 494 1,647 1,470 8,575
----------- ------------ ------------ ----------- ------------------------
Total operating expenses 2,139 1,315 7,325 4,980 26,145
----------- ------------ ------------ ----------- ------------------------
Net loss (1,563) (1,197) (5,666) (4,609) (23,024)
=========== ============ ============ =========== ========================
Net loss per common share (0.16) (0.16) (0.59) (0.65)
Weighted average number of
common shares outstanding 10,006 7,480 9,648 7,141
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
(Inception)
Nine months ended through
September 30, September 30,
1997 1996 1997
------------ ----------- ------------------------
Operating activities
Net Loss (5,666) (4,609) (23,024)
Adjustment to reconcile net loss to net cash
used in operating activities:
Depreciation 43 12 104
Compensation related to issuance of warrants,
options and stock appreciation rights 255 1,001 1,961
Other 21
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (502) (29) (1,054)
Accounts payable and accrued expenses 630 58 1,253
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Net cash used in operating activities (5,240) (3,567) (20,739)
Financing activities
Proceeds from issuance of common stock
and capital contribution 7,347 5,136 63,407
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Net cash provided by financing activities 7,347 5,136 63,407
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 (166) (41) (327)
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Net cash used in investing activities (236) 461 (419)
Effect of exchange rate on changes in cash (226) (10) (87)
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Net increase in cash and cash equivalents 1,645 2,020 42,162
Cash and cash equivalents at beginning of period 40,517 10,407
------------ ----------- ------------------------
Cash and cash equivalents at end of period 42,162 12,427 42,162
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The accompanying notes are an integral part of this statement
OXiGENE, INC.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated 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 nine-month period
ended September 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, 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 calculating 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
and nine months ended September 30, 1997 and 1996.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of
the Company and its wholly-owned Swedish 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 nine months ended September 30, 1997, the Company issued
1,028,266 shares of Common Stock upon exercise of previously granted warrants,
options and stock appreciation rights ("SARs"), with proceeds to the Company of
approximately $7.3 million.
During the nine months ended September 30, 1997, the Company recorded a
charge for financial reporting purposes of approximately $0.3 million because
the market value of the Company's Common Stock exceeded the exercise prices of
SARs issued by the Company. Because SARs are satisfied, upon exercise, 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 $23.0
million for the period from its inception through September 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 September 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 - Nine Months Ended September 30, 1997 and 1996
During the nine-month periods ended September 30, 1997 and 1996,
the Company had no revenues, except for approximately $1.7 million and $0.4
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 (the "SSE Offering"), which was completed in November 1996, as well as
cash received upon exercise of options and warrants throughout the first nine
months of 1997. See "--Liquidity and Capital Resources." Operating expenses for
those periods were approximately $7.3 million and $5.0 million, respectively.
Research and development expenses for the nine-month period ended September 30,
1997 increased to approximately $5.7 million from approximately $3.5 million for
the comparable 1996 period. The research and development expenses included a
charge for financial reporting purposes of approximately $0.3 million and $1.0
million for the nine months ended September 30, 1997 and 1996, respectively.
This charge was recorded because the market value per share of Common Stock on
September 30, 1997 ($27.25) 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 $2.9 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 nine-month period ended September
30, 1997 increased to approximately $1.6 million from approximately $1.5 million
for the comparable 1996 period. The increase in general and administrative
expenses is primarily attributable to an overall increase in the Company's
activities.
7
Liquidity and Capital Resources
OXiGENE has experienced net losses and negative cash flow from
operations each year since its inception and, as of September 30, 1997, had a
deficit during the development stage of approximately $23.0 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 $42.2
million at September 30, 1997, compared to approximately $40.5 million at
December 31, 1996. The increase in cash and cash equivalents is primarily
attributable to the issuance, upon exercise of outstanding options, warrants and
SARs, of 1,028,266 shares of Common Stock, with proceeds to the Company of
approximately $7.3 million. A portion of these proceeds was used to finance
operations during the nine-month period ended September 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 offices in New York, New York and
Lund, Sweden, both of which are subleased, an office in Stockholm, Sweden, and
recently established an office in Boston, Massachusetts. 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
September 30, 1997, the Company has paid ILEX approximately $2.0 million. As the
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
September 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 September 30, 1997.
8
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, which was
completed in October, 1993, the private placement of 1,666,700 shares of Common
Stock, which was completed in July 1995, or the SSE Offering, which was
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
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 third 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: November 12, 1997 /s/ Bo Haglund
--------------------------------------- ----------------
Bo Haglund
Chief Financial Officer
11
OXiGENE, INC.
Quarterly Report on Form 10-Q
for the Fiscal Quarter Ended September 30, 1997
Exhibits
Exhibit
Number Description
27.1 Financial data schedule.