SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
--------------------
[x] QUARTERLY REPORT PURSUANT SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 1997
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File No. 0-18728
INTERNEURON PHARMACEUTICALS, INC.
(exact name of registrant as specified in its charter)
Delaware 04-3047911
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
One Ledgemont Center, 99 Hayden Avenue 02173
Lexington, Massachusetts (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (617) 861-8444
(Former name, former address and former fiscal year, if changed since last
report):Not Applicable
Indicate by check 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 periods 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 class of
common stock, as of the latest practicable date.
Class Outstanding at May 13, 1997:
Common Stock $.001 par value 41,043,708 shares, excluding
182,585 treasury shares
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INTERNEURON PHARMACEUTICALS, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1997
and September 30, 1996......................................................................... 3
Consolidated Statements of Operations for the Three and Six Months ended
March 31, 1997 and 1996.........................................................................4
Consolidated Statements of Cash Flows for the Six Months ended
March 31, 1997 and 1996.........................................................................5
Notes to Unaudited Consolidated Financial Statements............................................6
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 a Vote of
Security Holders.............................................................21
Item 6. Exhibits and Reports on Form 8-K.............................................21
SIGNATURES.......................................................................................................23
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INTERNEURON PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollar amounts in thousands except per share data)
March 31, September 30,
1997 1996
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 93,414 $145,901
Marketable securities 29,471 17,068
Accounts receivable 1,926 4,338
Inventories 6,356 8,376
Prepaids and other current assets 5,961 1,324
----------- ------------
Total current assets 137,128 177,007
Marketable securities 37,475 6,639
Property and equipment, net 3,024 2,689
Other assets 165 103
------------ -------------
$177,792 $186,438
======== =========
LIABILITIES
Current liabilities:
Accounts payable $ 2,249 $ 2,575
Accrued expenses 16,268 11,604
Deferred revenue 5,694 6,921
Current portion of capital lease obligations 931 661
---------- -------------
Total current liabilities 25,142 21,761
Long-term portion of capital lease obligations 1,194 526
Other long-term liabilities 19 16
Minority interest 19,016 19,373
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, authorized 5,000,000 shares: Series B, 239,425
shares issued and outstanding at March 31, 1997 and September 30, 1996
(liquidation preference at
March 31, 1997 $3,041) 3,000 3,000
Series C, 5,000 shares issued and outstanding at March 31, 1997
and September 30, 1996 (liquidation preference at
March 31, 1997 $504) 500 500
Common stock, $.001 par value, 80,000,000 shares authorized:
41,226,293 issued and 41,015,969 shares issued and outstanding at
March 31, 1997 and September 30, 1996, respectively 41 41
Additional paid-in capital 249,020 247,999
Accumulated deficit (117,559) (106,778)
Unrealized losses on marketable securities (218) -
Treasury stock, at cost, 128,835 shares at March 31, 1997 and no
shares at September 30, 1996 (2,363) -
------------ --------------
Total stockholders' equity 132,421 144,762
--------- ---------
$177,792 $186,438
======== ========
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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INTERNEURON PHARMACEUTICALS, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
For the three and six months ended March 31, 1997 and 1996
(Unaudited)
(Amounts in thousands except per share data)
For the three months ended March 31, For the six months ended March 31,
------------------------------------ ----------------------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
Product revenue $ 17,477 $ - $ 31,188 $ -
Contract and license fees 2,297 905 6,278 6,249
---------- --------- -------- ---------
Total revenues 19,774 905 37,466 6,249
Costs and expenses:
Cost of product revenue 11,999 - 21,903 -
Research and development 9,966 3,599 17,484 6,726
Selling, general and administrative 5,827 4,170 11,344 6,881
Purchase of in-process research
and development 2,261 6,084 2,261 8,234
--------- -------- --------- ---------
Total costs and expenses 30,053 13,853 52,992 21,841
Net loss from operations (10,279) (12,948) (15,526) (15,592)
Investment income, net 2,008 555 4,597 989
Minority interest 421 432 148 (542)
--------- --------- ---------- ----------
Net loss $(7,850) $(11,961) $(10,781) $(15,145)
======== ========= ========= =========
Net loss per common share $ ( 0.19) $ ( 0.34) $ ( 0.26) $ (0.44)
========= ========== =========== ===========
Weighted average common
shares outstanding 41,098 35,308 41,059 34,411
======= ======== ======= ========
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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INTERNEURON PHARMACEUTICALS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the six months ended March 31, 1997 and 1996
(Unaudited)
(Dollar amounts in thousands)
Six months ended March 31,
--------------------------
1997 1996
---- ----
Cash flows from operating activities:
Net loss $ (10,781) $ (15,145)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 646 381
Gain on disposal of fixed assets - (6)
Minority interest in net income/loss of
consolidated subsidiaries (148) 542
Purchase of in-process research and development 1,861 8,098
Noncash compensation 176 896
Change in assets and liabilities:
Accounts receivable 2,412 (908)
Inventories 2,020 (3,629)
Prepaids and other current assets (4,637) (281)
Other assets (62) 97
Accounts payable (326) 937
Deferred revenue (1,227) 1,942
Accrued expenses and other liabilities 4,452 (559)
--------------- ----------------
Net cash (used) by operating activities (5,614) (7,635)
-------------- --------------
Cash flows from investing activities:
Capital expenditures (726) (141)
Purchase of marketable securities (53,600) (36,233)
Proceeds from maturities and sales of
marketable securities 10,143 21,789
Purchases of Intercardia stock (2,436) -
Proceeds from disposal of fixed assets - 40
----------------- ---------------
Net cash (used) by investing activities (46,619) (14,545)
------------- ----------------
Cash flows from financing activities:
Net proceeds from issuance of common and treasury stock 1,101 13,608
Net proceeds from issuance of stock by subsidiaries 276 30,362
Purchase of treasury stock (2,315) -
Proceeds from sale/leaseback 1,050 132
Principal payments of capital lease obligations (366) (244)
--------------- ----------------
Net cash (used) provided by financing activities (254) 43,858
--------------- ---------------
Net change in cash and cash equivalents (52,487) 21,678
Cash and cash equivalents at beginning of period 145,901 16,781
------------- --------------
Cash and cash equivalents at end of period $ 93,414 $ 38,459
=========== -------------
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
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INTERNEURON PHARMACEUTICALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of Presentation:
The consolidated financial statements included herein have been prepared
by Interneuron Pharmaceuticals, Inc. without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of management,
the accompanying unaudited consolidated financial statements include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the consolidated financial position, results of operations and
cash flows of the Company. The unaudited consolidated financial statements
included herein should be read in conjunction with the audited consolidated
financial statements and the notes thereto included in the Company's Form 10-K
for the fiscal year ended September 30, 1996.
The unaudited consolidated financial statements include the accounts of
Interneuron Pharmaceuticals, Inc. ("Interneuron" or the "Company") and its
subsidiaries (the "Subsidiaries"), Progenitor, Inc. ("Progenitor"), Transcell
Technologies, Inc. ("Transcell"), Intercardia, Inc. ("Intercardia"), and
InterNutria, Inc. ("InterNutria"). All significant intercompany activity has
been eliminated.
The Company will adopt Statement of Financial Accounting Standards No. 128,
Earnings Per Share ("SFAS 128") in the quarter ending December 31, 1997. SFAS
128 requires the Company to change its method of computing, presenting and
disclosing earnings per share information. Upon adoption, all prior period data
presented will be restated to conform to the provisions of SFAS 128.
Management has not determined the effect of adopting SFAS 128.
B. Significant Accounting Policies:
Certain prior year amounts have been reclassified to conform with fiscal
1997 classifications.
C. Inventories:
Inventories consisted of: March 31, September 30,
1997 1996
------------ ----------
Raw materials $4,168,000 $5,420,000
Finished goods 2,188,000 2,956,000
------------ ----------
$6,356,000 $8,376,000
========== ==========
Raw materials consisted primarily of dexfenfluramine drug substance and
finished goods consisted primarily of finished and packaged Redux(TM) capsules.
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D. Subsidiaries:
In December 1996, Progenitor entered into an agreement with Amgen, Inc.
("Amgen") (the "Amgen Agreement"), granting Amgen certain exclusive rights for
the development and commercialization of products using Progenitor's leptin
receptor technology. Amgen paid Progenitor a $500,000 initial license fee in
January 1997, which was reflected in contract and license fee revenue in the six
month period ended March 31, 1997. Progenitor may also receive from Amgen
certain development and regulatory milestone payments and potential royalties on
sales. Amgen also agreed to purchase Progenitor common stock in the event of a
Progenitor initial public offering.
In December 1996, Intercardia executed an agreement with BASF Pharma/Knoll
AG ("Knoll") ("the Knoll Collaboration") to provide for the development,
manufacture and marketing of bucindolol in all countries with the exception of
the United States and Japan (the "Territory"). The Knoll Collaboration relates
to both the twice-daily bucindolol formulation and the once-daily bucindolol
formulation currently under development. Under the terms of the Knoll
Collaboration, Knoll made in December 1996 a $2,143,000 payment to CPEC, Inc.
("CPEC", Intercardia's majority-owned subsidiary, of which Interneuron owns the
minority portion) which was recognized as contract and license fee revenue in
the six month period ended March 31, 1997, and a $1,000,000 payment to CPEC in
January 1997 which was recognized as contract and license fee revenue in the
three and six month periods ended March 31, 1997. Knoll will make future
payments to CPEC upon the achievement of product approval and sales milestones.
Knoll and Intercardia will share the development and marketing costs of
bucindolol in the Territory. In general, Knoll shall pay approximately 60% of
the development and marketing costs prior to product launch and Intercardia
shall pay approximately 40% of such costs, subject to certain maximum dollar
limitations. CPEC will be entitled to a royalty equal to 40% of net profits, as
defined in the Knoll Collaboration, and would be responsible for, and pay to
Knoll, 40% of any net loss, as defined.
In February 1997, Progenitor announced an agreement to acquire Mercator,
Inc. ("Mercator") a privately-held genomics company, subject to certain
conditions, including completion of an initial public offering by Progenitor for
approximately $22,000,000, payable in Progenitor common stock, plus the
assumption of Mercator liabilities. Progenitor also agreed to provide Mercator
with an interim operating line of credit through July 1997 of up to $6,600,000,
funding for which will be provided by Interneuron. At March 31, 1997, advances
under this line of credit totaled approximately $1,300,000 and are reflected in
prepaids and other current assets.
In March 1997, Progenitor filed registration statements with the Securities
and Exchange Commission relating to a proposed initial public offering of
2,750,000 shares of Progenitor common stock (plus up to an additional 412,500
shares to cover over-allotments) and the proposed acquisition by Progenitor of
Mercator. Based on the proposed terms of the offering and the acquisition,
assuming the completion of the offering and the Mercator acquisition on the
filed terms, Interneuron will own approximately 43% of Progenitor's outstanding
common stock without giving effect to any exercise of the over-allotment option
or any options or warrants, and subject to change based upon the timing of the
offering, the offering price, the number of Progenitor shares
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issued in connection with the Mercator acquisition and the amount of
Progenitor's indebtedness to Interneuron. In connection with the acquisition,
Progenitor will incur non-recurring charges to operations currently estimated to
aggregate approximately $30,000,000, a portion of which are non-cash charges
related to the purchase of in-process research and development subject to
increase based upon several factors including the timing of the transactions and
unanticipated costs. Due to market conditions and other factors, there is no
assurance that Progenitor's initial public offering or acquisition of Mercator
will be completed, in which case Progenitor will incur charges to operations for
amounts expended in connection with the two proposed transactions, including
funds advanced under the line of credit. Interneuron will record a portion of
these charges based on its ownership interest in Progenitor.
E. Other:
In February 1997, the Company announced that its Board of Directors had
authorized it to purchase from time to time through open-market transactions up
to 200,000 shares of the common stock of Intercardia. As of March 31, 1997, the
Company had purchased 104,400 shares of Intercardia common stock for an
aggregate purchase price of approximately $2,436,000, of which approximately
$1,861,000 was recorded as purchase of in-process research and development in
the three and six month periods ended March 31, 1997. As a result of these
purchases, the Company's ownership of Intercardia increased from 59.6% at
September 30, 1996 to 61.0% at March 31, 1997 based upon the number of
outstanding shares of Intercardia at such dates.
At the Company's annual meeting of stockholders, on March 5, 1997, the
Company's stockholders approved an increase to the number of authorized shares
of Common Stock from 60,000,000 to 80,000,000.
In March 1997, the Company announced that its Board of Directors had
authorized it to repurchase from time to time through open-market transactions
up to 1,500,000 shares of the Company's Common Stock. As of March 31, 1997, the
Company had repurchased 142,500 shares for an aggregate purchase price of
approximately $2,619,000, of which 13,665 shares were reissued pursuant to
employee stock option and stock purchase plans. Such repurchases and re-
issuances are recorded as treasury stock transactions.
At March 31, 1997, the Company had outstanding a Standby Letter of Credit
for $800,000 to secure certain facility and laboratory build-out costs being
incurred by a subsidiary as part of a lease for its headquarters. This Standby
Letter of Credit is collateralized by a certificate of deposit and expires the
sooner of September 15, 1997 or receipt by the subsidiary's landlord of payment
of the build-out costs.
F. Subsequent Event:
On May 9, 1997, the Company purchased in private transactions from Swiss
Bank Corporation, London Branch ("SBC") capped call options on Interneuron
Common Stock. These call options give Interneuron the right to purchase from SBC
up to a total of 1,240,000 shares of Interneuron Common Stock at a strike price
of $17.75. The call options are exercisable only at their maturities, which are
September 24, 1997, March 9, 1998, May 21, 1998 and August 24, 1998 each with
respect to 310,000 shares, and are subject to caps of $26.00, $34.00, $38.00 and
$40.00, respectively, which limit the economic benefit to the Company of these
call options. The call options which the Company purchased are expected to be
settled, if exercised, with cash in an amount equal to the difference between
the strike price and the market price, subject to caps which will limit the
total amount of cash the Company could receive or increase the strike prices in
the case of stock settlement when the market price of the Company's Common Stock
exceeds the applicable cap price.
-8-
In exchange for the purchases of these call options, in lieu of cash
purchase prices, the Company sold to SBC call options entitling SBC to purchase
from the Company at a strike price of $40.30 per share, an aggregate of
2,000,000 shares of Interneuron Common Stock, 1,000,000 shares on each of May 21
and May 24, 1999. The Company will have the right to settle these call options
with cash or stock, subject to certain conditions. If exercised, the Company
expects to settle the call options that it sold through issuances by the Company
to SBC of up to an aggregate of 2,000,000 authorized and unissued shares of
Common Stock, subject to the effectiveness of a registration statement covering
the resale of these shares. The sale or potential sale of such shares could have
an adverse effect on the market price of the Company's Common Stock.
SBC has advised that it has engaged, and may engage, in transactions,
including buying and selling shares of the Company's Common Stock, to offset its
risk relating to the options. Purchases and sales could affect the market price
of the Company's Common Stock.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations:
Statements in this Form 10-Q that are not descriptions of historical facts
are forward-looking statements that are subject to risks and uncertainties.
Actual results could differ materially from those currently anticipated due to a
number of factors, including those set forth in the Company's filings under the
Securities Act of 1933 and under the Securities Exchange Act of 1934 "Risk
Factors" and elsewhere, including, in particular risks relating to the
commercialization of Redux, such as marketing and revenue fluctuations, safety,
regulatory, competition patent, product liability, supply and other risks;
uncertainties relating to clinical trials; manufacturing and supply risks; the
early stage of products under development; risks related to contractual
obligations; risks relating to product launches and managing growth; government
regulation, patent risks, dependence on third parties and competition.
The following discussion should be read in conjunction with the Company's
unaudited consolidated financial statements and notes thereto appearing
elsewhere in this report and audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1996. Unless the context indicates otherwise, all references
to the Company include Interneuron and its Subsidiaries.
Redux
On April 29, 1996, the Company's first pharmaceutical product, Redux
(dexfenfluramine hydrochloride capsules) C-IV received clearance by the U.S.
Food and Drug Administration ("FDA") for marketing as a twice-daily prescription
therapy to treat obesity. The approved indication is for the management of
obesity, including weight loss and maintenance of weight loss in patients on a
reduced calorie diet who have a body mass index ("BMI") of greater than or equal
to 30 kg/m2 or greater than or equal to 27 kg/m2 in the presence of other risk
factors, such as hypertension, diabetes and elevated cholesterol. Under license
and co-promotion agreements, Redux is being marketed in the U.S. by Wyeth-Ayerst
Laboratories ("Wyeth-Ayerst"), a division
-9-
of American Home Products Corp. ("AHP") and co-promoted by the Company.
The Company's revenues relating to Redux are currently primarily derived
from: (1) royalties paid by AHP to the Company based on the net sales of Redux
capsules by AHP to distributors; (2) sales of Redux capsules to AHP; and (3)
financial support of the Company's sales force provided by AHP.
The Company's license agreement with AHP provides for royalties to the
Company consisting of (i) "base" royalties equal to 11.5% of AHP's net sales,
(an amount equal to the total royalties required to be paid by the Company to
Les Laboratoires Servier ("Servier"), and (ii) "additional" royalties based on
net sales of Redux by AHP. The percentage of "additional" royalties varies
depending upon (x) the status of Redux as a scheduled or descheduled drug and
(y) whether or not the Company supplies the finished capsules of Redux to AHP.
At March 31, 1997, Redux was scheduled as a controlled substance and the Company
manufactures the finished dosage formulation of the drug. In April 1997, the
Drug Enforcement Agency ("DEA") published a recommendation for the removal of
fenfluramine and its isomers including dexfenfluramine from Schedule IV and all
other controls of the Controlled Substances Act. If after a comment period the
DEA were to issue a final rule consistent with its proposal, then Redux would no
longer carry the C-IV designation and would no longer be subject to such DEA
controls. Certain states will deschedule the drug automatically upon federal
descheduling while other states have varying proceedures for descheduling.
The following sets forth the applicable "additional" royalties payable to
the Company based on annual net sales, on an annual contract basis commencing in
May of each contract year, assuming the Company is supplying finished capsules
of Redux, based on the status of dexfenfluramine as a scheduled or descheduled
drug:
Scheduled
---------
First $50,000,000 5.0%
Next $100,000,000 8.0%
Over $150,000,000 10.0%
Descheduled
-----------
First $150,000,000 8.0%
Next $ 50,000,000 10.0%
Over $200,000,000 11.0%
Royalty rates are subject to a 50% reduction if generic drug competition
exceeds a 10% market share in two consecutive quarters. The Company recognizes
royalty revenue and associated expense in the fiscal quarter when AHP reports to
Interneuron AHP's shipments to distributors. Accordingly, royalty revenue is
reported by the Company in the quarter following actual shipments by AHP.
Pursuant to the Company's agreement with AHP, if the potential descheduling of
Redux were to occur within a year of FDA approval, AHP would be required to make
a milestone payment to, and equity investment in, the Company. Due to the timing
of the potential descheduling, the
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Company believes it may not receive the descheduling-related milestone payment
and equity investment from AHP.
Under a copromotion agreement with Wyeth-Ayerst effective June 1, 1996, the
Company's sales force is promoting Redux to selected specialists, in return for
financial support of the sales force and a percentage of resulting revenues less
certain expenses. The copromotion agreement with AHP calls for a reduction of
the Redux sales force costs paid by AHP to Interneuron from 100% during the
first year of the agreement to 50% during the second year of the agreement.
Total maximum payments from AHP will be reduced to approximately $1,650,000 for
the twelve month period beginning June 1997 from approximately $3,300,000 for
the twelve month period which commenced in June 1996. The copromotion agreement
is cancelable by Wyeth-Ayerst under certain conditions. There is no assurance
the Company will meet such conditions which includes a minimum revenue
requirement for which sufficient information is currently not available.
The Company has a manufacturing agreement with Boehringer Ingelheim
Pharmaceuticals, Inc. ("Boehringer") under which Boehringer manufactures and
packages finished capsules of Redux on behalf of the Company for sale to AHP.
This agreement obligates Boehringer to provide, and the Company to purchase,
manufactured Redux capsules to the extent defined in the agreement, through the
current contract expiration date of December 31, 1998. At the expiration or
termination of the agreement, the Company would be obligated to purchase from
Boehringer any unused manufacturing materials, work in process, or finished
product and to assume any unfilled Boehringer purchase commitments that could
not be canceled prior to the expiration or termination of the agreement. If the
Boehringer agreement is not extended, the Company will be required to obtain a
replacement good manufacturing practices ("GMP") qualified manufacturing
facility for Redux. The Company is currently evaluating manufacturing
alternatives. There can be no assurance a replacement manufacturer will be
approved by the FDA in sufficient time to avoid an interruption in the
commercial supply of Redux. The Company recognizes revenue from the sale of
these capsules upon acceptance by AHP, typically 45 days after shipment.
Included in the FDA-approved labeling for Redux are references to certain
risks that may be associated with dexfenfluramine and which were highlighted
during the FDA's review of the drug. One issue relates to whether there is an
association between appetite suppressants, including dexfenfluramine, and the
development of primary pulmonary hypertension ("PPH"), a rare but serious lung
disorder estimated to occur in the general population at one to two cases per
million adults per year. An epidemiologic study conducted in Europe known as
IPPHS (International Primary Pulmonary Hypertension Study) examined risk factors
for PPH and showed that among other factors, weight reduction drugs, including
dexfenfluramine, and obesity itself were associated with a higher risk of PPH.
In the final report of IPPHS, published in the New England Journal of Medicine
(August 29, 1996), the authors estimated yearly occurrence of PPH for patients
taking appetite suppressants for greater than three months duration to be
between 23 and 46 cases per million patients per year. The revised labeling for
Redux discloses this revised estimate.
The FDA-approved labeling for Redux also includes discussion as to whether
dexfenfluramine is associated with certain neurochemical changes in the brain.
Certain studies conducted by third parties related to this issue purport to show
that very high doses of dexfenfluramine cause prolonged serotonin depletion in
certain animals, which some researchers believe is an indication of
neurotoxicity. The Company has presented data relating to the lack of
neurocognitive effects in patients taking Redux to the FDA and believes that, as
demonstrated in human trials, these animal
-11-
studies are clinically irrelevant to humans because of pharmacokinetic
differences between animals and humans and because of the high dosages used in
the animal studies. The Company and Wyeth- Ayerst have agreed with the FDA to
conduct a certain Phase 4, or post-marketing, study of Redux. This study and
related costs are estimated to be approximately $10,000,000 and are expected to
be incurred primarily by Interneuron over an approximately two to three year
period. Wyeth-Ayerst is responsible to pay for 50% of these estimated costs.
The use patent on dexfenfluramine currently expires in mid 2000. In
accordance with the Waxman-Hatch Act, the U.S. Patent and Trademark Office
("PTO") is currently considering an extension of the dexfenfluramine patent to
compensate the Company for a portion of the time dexfenfluramine was being
tested and considered for approval. The PTO has instituted a petition period,
which ends on August 27, 1997, during which it will accept comments regarding
such extension. If such extension is granted by the PTO, the dexfenfluramine
patent will be extended for approximately an additional 3.5 years. Also, the
Company believes it is entitled under the Waxman-Hatch Act to a minimum three
year period of exclusivity from the date of FDA approval, during which
applications for generic versions of the drug may not be approved, although the
Company has applied for a five year period of exclusivity. There can be no
assurance of receipt of such exclusivity or patent extension on a timely
basis or at all.
Redux may be subject to substantial competition. AHP also sells Pondimin to
treat obesity. In May 1997, an FDA advisory panel recommended approval of
Xenical, a Hoffman-La Roche, Inc. drug, for the treatment of obesity. In
addition, other drugs, including sibutramine, for which an NDA has been filed,
and technologies are under regulatory review or development to treat obesity.
Inventories of $6,356,000 at March 31, 1997 consisted primarily of
dexfenfluramine drug substance and finished and packaged capsules of Redux.
Inventories decreased from $8,376,000 at September 30, 1996. Inventory levels
depend to a large extent on sales forecasts provided by AHP, AHP's management of
its inventory levels, production planning by the Company, and production
capabilities of Boehringer. There can be no assurance that Boehringer will be
able to manufacture product in adequate quantities or on a timely basis, or that
AHP's sales forecasts and the Company's production planning will be accurate,
which may result in higher inventory costs to the Company or inadequate or
excessive supplies of the product. In addition, there can be no assurance that
the manufacture of the capsules and their sale to AHP will result in profits to
Interneuron. Because of the relativity limited (less than one year) marketing
experience with Redux, the Company is unable to predict with certainty trends
for Redux sales or AHP and Interneuron inventory balances. Further, there may be
fluctuations in Redux sales which could
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affect inventory balances as a result of many factors, including seasonality,
promotion and advertising, publicity, the introduction of competitive products,
and other factors. AHP pays the Company for certain portions of dexfenfluramine
drug substance prior to its incorporation into the manufacturing process. Such
payments are included in, and are the majority components of, the deferred
revenue balance of $5,694,000 at March 31, 1997.
Results of Operations
Total revenues increased substantially in the three and six month periods
ended March 31, 1997 over the same periods in the prior fiscal year primarily as
a result of the launch of Redux in June 1996. Total revenues of $19,774,000 in
the three month period ended March 31, 1997 consisted of $17,477,000 of product
revenue and $2,297,000 of contract and license fees, and total revenues of
$37,466,000 in the six month period ended March 31, 1997 consisted of
$31,188,000 of product revenue and $6,278,000 of contract and license fees.
Product revenue of $17,477,000 in the three month period ended March 31,
1997 consists primarily of royalty revenue of approximately $10,200,000 based on
AHP's net sales of Redux and approximately $7,100,000 of revenue from the
Company's sale of Redux capsules to AHP. Product revenue of $31,188,000 in the
six month period ended March 31, 1997 consists primarily of royalty revenue of
approximately $17,000,000 based on AHP's net sales of Redux and approximately
$13,900,000 of revenue from the Company's sale of Redux capsules to AHP. The
Company recognizes Redux royalty revenue when net sales are reported to the
Company by AHP, which occurs in the quarter after AHP shipments of Redux to
distributors. The Company did not report any product revenue in the comparable
fiscal 1996 periods.
Contract and license fee revenue increased $1,392,000, or 154%, from
$905,000 for the three month period ended March 31, 1996 to $2,297,000 for the
three month period ended March 31, 1997 and was $6,278,000 for the six month
period ended March 31, 1997, essentially unchanged from $6,249,000 for the six
month period ended March 31, 1996. The increase in the 1997 three month period
reflects primarily CPEC's contract payment from Knoll and the Company's revenue
from Wyeth-Ayerst supporting the Interneuron Redux sales force pursuant to the
Copromotion Agreement with Wyeth-Ayerst. Contract and license fee revenue in the
six month period ended March 31, 1996 consisted primarily of $5,000,000 CPEC
received pursuant to its agreement with Astra Merck for the development of
bucindolol and in the six month period ended March 31, 1997 consisted primarily
of CPEC's contract payments from Knoll and the Company's revenue from
Wyeth-Ayerst supporting the Interneuron Redux sales force pursuant to the
Copromotion Agreement with Wyeth-Ayerst.
Total costs and expenses increased $16,200,000, or 117%, from $13,853,000
for the three month period ended March 31,1996 to $30,053,000 for the three
month period ended March 31, 1997 and $31,151,000, or 143%, from $21,841,000 for
the six month period ended March 31, 1996 to $52,992,000 for the six month
period ended March 31, 1997. Cost of product revenue, which did not exist in the
fiscal 1996 periods, comprised approximately 74% and 70%, respectively, of the
three and six month period increases in total costs and expenses. The three and
six month periods ended March 31, 1997 included expense for the purchase of
in-process research and development of $2,261,000 resulting primarily from the
Company's open market purchases of Intercardia common stock (see Note E of Notes
to Unaudited Consolidated Financial Statements). The three
-13-
and six month periods ended March 31, 1996 included expense for the purchase of
in-process research and development of $6,084,000 from the Company's acquisition
of the remaining 20% of CPEC which was not owned by Intercardia in exchange for
the issuance of Interneuron Common Stock, and the six month period ended March
31, 1996 included expense of $2,150,000 for InterNutria's acquisition of
technology and know-how related to PMS Escape which is being paid by the
issuance of Interneuron Common Stock.
Research and development expenses increased $6,367,000, or 177%, from
$3,599,000 for the three month period ended March 31,1996 to $9,966,000 for the
three month period ended March 31, 1997 and $10,758,000, or 160%, from
$6,726,000 for the six month period ended March 31, 1996 to $17,484,000 for the
six month period ended March 31, 1997. Increases in the 1997 three and six month
periods reflect expenses relating to two pivotal Phase 3 citicoline trials, the
pivotal Phase 2/3 pagoclone clinical trial initiated in the first quarter of
fiscal 1997, Intercardia's expenses relating to once-a-day and tablet
formulations of bucindolol, certain post-approval clinical expenses relating to
Redux and additional staffing and related expenses at the Company and the
Subsidiaries. Research and development expenses include only a relatively small
amount for bucindolol, as a substantial portion of the non-government sponsored
development expenses for bucindolol have been assumed, and are being paid, by
Astra Merck.
Selling, general and administrative expenses increased $1,657,000, or 40%,
from $4,170,000 for the three month period ended March 31,1996 to $5,827,000 for
the three month period ended March 31, 1997 and $4,463,000, or 65%, from
$6,881,000 for the six month period ended March 31, 1996 to $11,344,000 for the
six month period ended March 31, 1997. These increases are primarily due to
costs relating to the Company's Redux sales force, increased personnel costs,
additional staffing, consultants and insurance relating to the Company's growth
and promotional expenses incurred for regional test launches of PMS Escape(TM)
and Melzone(TM). Partially offsetting these increases was a non-recurring
expense recorded in the three month period ended March 31, 1996 for severance
and related charges incurred by Transcell relating to certain management
changes.
Investment income, net of interest expense, increased substantially over
the three and six month periods herein reported due to significantly higher
invested balances of cash, cash equivalents and marketable securities resulting
primarily from funds received from public offerings in fiscal 1996 by
Interneuron and Intercardia.
The Company from time to time explores various technology, product or
company acquisitions and/or financing opportunities and is currently engaged in
discussions relating to such opportunities. Any such initiatives may involve the
issuance of shares of Interneuron's Common Stock and/or financial commitments to
fund product development, either of which may adversely affect the Company's
consolidated financial condition or results of operations.
Liquidity and Capital Resources
Cash, Cash Equivalents and Marketable Securities:
At March 31, 1997, the Company had cash, cash equivalents and marketable
securities aggregating $160,360,000, compared to $169,608,000 at September 30,
1996. Approximately $4,600,000 of this decrease is the result of the Company's
open-market purchases of Intercardia
-14-
and Interneuron Common Stock (see Note E of Notes to Unaudited Consolidated
Financial Statements).
Clinical Studies:
The Company is incurring substantial expenditures for product development
and clinical trials. In particular, the Company is performing two additional
pivotal Phase 3 clinical trials of citicoline (along with other supportive
trials), for treatment of ischemic stroke, one of which is expected to be
completed during the third quarter of fiscal 1997 (the "Fiscal 1997 Phase 3
Trial") and one of which is expected to extend into fiscal 1998 (the "Fiscal
1998 Phase 3 Trial"). There can be no assurance the Fiscal 1997 Phase 3 Trial or
the Fiscal 1998 Phase 3 Trial will confirm the results of the initial completed
pivotal Phase 3 trial on citicoline. Depending upon the results of the Fiscal
1997 Phase 3 Trial the Company may file an NDA for citicoline to treat ischemic
stroke within approximately six months after completion of the analysis of the
data. The Fiscal 1998 Phase 3 Trial may be used to support product labeling
requirements. Assuming the Company files an NDA after completion of the Fiscal
1997 Phase 3 Trial, the costs of all currently known clinical trials and related
studies and the preparation of the NDA are estimated, based upon current trial
protocols, to aggregate approximately $17,500,000, of which approximately
$4,400,000 has been paid through March 31, 1997. The Company is unable to
predict with certainty the costs of any related or additional clinical studies
which will depend upon the results of the ongoing trials and upon FDA
requirements. If the Company does not file an NDA after completion of the Fiscal
1997 Phase 3 Trial, it may conduct additional trials which would increase the
total estimated costs relating to the development of citicoline.
The Company is currently evaluating the marketing strategy for citicoline.
The Company is considering sole marketing of the product to office-based and
hospital-based physicians but has also commenced negotiations with certain major
pharmaceutical companies regarding the co-promotion of the product to market
segments requiring extensive sales force coverage. In the event the Company
markets citicoline directly, significant additional funds would be required for
manufacturing, distribution, marketing and selling efforts. The Company is
dependent upon third party suppliers of citicoline for manufacturing in
accordance with the Company's and applicable regulatory requirements and is
subject to an agreement requiring the Company to purchase citicoline for
commercial purposes at fixed prices, subject to certain conditions. There can be
no assurance the Company will establish or maintain marketing or manufacturing
capabilities required to successfully commercialize citicoline.
The Company is also incurring substantial costs to develop pagoclone for
which a Phase 2/3 trial commenced in November 1996. The Company designates a
trial as Phase 2/3 if it is a well-controlled trial which the Company may choose
to utilize, depending upon results, as a pivotal or supporting trial in an NDA
submission. The Company has estimated the total costs of certain clinical
studies, license fees to Rhone-Poulenc Rorer Pharmaceuticals, Inc., and NDA
preparation for pagoclone to be approximately $33,000,000, which will be
incurred over the next several years. The Company is unable to predict with
certainty the costs of any related or additional studies which may be required
by the FDA. Further, in the event the Company markets pagoclone directly,
significant additional funds would be required for manufacturing, distribution
and selling efforts.
-15-
In December 1996, the Company entered into an agreement with Algos
Pharmaceutical Corporation to collaborate in the development and
commercialization of LidodexNS(TM), which combines two drugs that are currently
marketed for other indications. This combination product is in pre-clinical
development for the acute intra-nasal treatment of migraine headaches. The
development of this and other products, including those which may be acquired by
the Company in the future will require substantial additional funds.
There can be no assurance that results of ongoing current preclinical or
clinical trials will be successful, that additional trials will not be required,
that any drug under development will receive FDA approval in a timely manner or
at all, or that such drug could be successfully manufactured in accordance with
good manufacturing practice regulations or marketed in a timely manner, or at
all, any of which could materially adversely affect the Company.
Analysis of Cash Flows:
Cash used by operating activities during the six months ended March 31,
1997 of $5,614,000 consisted primarily of a net loss of $10,781,000 and changes
in assets and liabilities as follows:
(i) a decrease in accounts receivable of $2,412,000 from $4,338,000 at
September 30, 1996 to $1,926,000 at March 31, 1997 primarily resulting from
collections from AHP and reduced billings to AHP .
(ii) a decrease in inventories of $2,020,000 from $8,376,000 at September
30, 1996 to $6,356,000 at March 31, 1997, reflecting a reduction in production
of Redux capsules and their sale to AHP.
(iii) an increase of $4,637,000 in prepaid and other current assets from
$1,324,000 at September 30, 1996 to $5,961,000 at March 31, 1997 primarily due
to Progenitor's approximately $1,700,000 of prepaid and accrued costs relating
to its proposed initial public offering and Mercator acquisition and
approximately $1,300,000 advanced by Progenitor to Mercator under a line of
credit arrangement.
(iv) an increase of $4,452,000 in accrued expenses and other liabilities
primarily due to increased accruals relating to research and development
contracts, Progenitor's accrual of initial public offering and Mercator
acquisition costs, and accrued Redux inventory purchases. Accrued expenses
consist primarily of obligations related to clinical trials and sponsored
research, consultants and other service providers, compensation and other items.
Cash used by investing activities during the six months ended March 31,
1997 of $46,619,000 consisted primarily of purchases of marketable securities
(investments purchased with maturities greater than three months) of $53,600,000
resulting mainly from funds available from maturities of securities classified
as cash equivalents and the Company's $2,436,000 purchase of Intercardia stock.
Cash used by financing activities during the six months ended March 31,
1997 of $254,000 consisted of $2,315,000 used to purchase treasury stock which
was partially offset by inflows of $1,101,000 from issuances common and treasury
stock and $1,050,000 from proceeds from sales
-16-
and leasebacks of fixed assets.
Other:
In February 1997, Interneuron announced that its Board of Directors had
authorized it to purchase from time to time up to 200,000 shares of the common
stock of Intercardia. As of March 31, 1997, the Company had purchased 104,400
shares of Intercardia common stock for an aggregate purchase price of
approximately $2,436,000, of which approximately $1,861,000 was recorded as
purchase of in-process research and development in the three and six month
periods ended March 31, 1997. As a result of these purchases, the Company's
ownership of Intercardia increased from 59.6% at September 30, 1996 to 61.0% at
March 31, 1997 based upon the number of outstanding shares of Intercardia at
such dates.
In March 1997, the Company announced that its Board of Directors had
authorized it to repurchase from time to time through open-market transactions
up to 1,500,000 shares of the Company's Common Stock. As of March 31, 1997, the
Company had repurchased 142,500 shares for an aggregate purchase price of
approximately $2,619,000, of which 13,665 shares were re-issued pursuant to
employee stock option and stock purchase plans. Such repurchases and
re-issuances are recorded as treasury stock transactions.
On May 9, 1997, the Company purchased in private transactions from Swiss
Bank Corporation, London Branch ("SBC") capped call options on Interneuron
Common Stock. These call options give Interneuron the right to purchase from SBC
up to a total of 1,240,000 shares of Interneuron Common Stock at a strike price
of $17.75. The call options are exercisable only at their maturities, which are
September 24, 1997, March 9, 1998, May 21, 1998 and August 24, 1998 each with
respect to 310,000 shares, and are subject to caps of $26.00, $34.00, $38.00 and
$40.00, respectively, which limit the economic benefit to the Company of these
call options. The call options which the Company purchased are expected to be
settled, if exercised, with cash in an amount equal to the difference between
the strike price and the market price, subject to caps which will limit the
total amount of cash the Company could receive or increase the strike prices in
the case of stock settlement when the market price of the Company's Common Stock
exceeds the applicable cap price.
In exchange for the purchases of these call options, in lieu of cash
purchase prices, the Company sold to SBC call options entitling SBC to purchase
from the Company at a strike price of $40.30 per share, an aggregate of
2,000,000 shares of Interneuron Common Stock, 1,000,000 shares on each of May 21
and May 24, 1999. The Company will have the right to settle these call options
with cash or stock, subject to certain conditions. If exercised, the Company
expects to settle the call options that it sold through issuances by the Company
to SBC of up to an aggregate of 2,000,000 authorized and unissued shares of
Common Stock, subject to the effectiveness of a registration statement covering
the resale of these shares. The sale or potential sale of such shares could have
an adverse effect on the market price of the Company's Common Stock.
SBC has advised that it has engaged, and may engage, in transactions,
including buying and selling shares of the Company's Common Stock, to offset its
risk relating to the options. Purchases and sales could affect the market price
of the Company's Common Stock.
In February 1997, the Company entered into a new five year lease for
approximately 42,000 square feet of space in its current facility in Lexington,
MA to accommodate current needs and expected growth. Total aggregate rental
payments under this five year lease is approximately $3,400,000. Additionally,
the Company is expending approximately $1,000,000 of build-out costs for this
space.
The Company's strategy includes evaluation of various technology, product
or company acquisition and/or financing opportunities (including private
placements and initial and follow-on equity offerings) and the Company and
certain of its subsidiaries are currently engaged in
-17-
discussions relating to such opportunities. Any such initiatives may involve the
issuance of securities of Interneuron or its subsidiaries and/or financial
commitments and would result in increased expenses for research and development,
on a consolidated basis.
While the Company believes it has sufficient cash for currently planned
expenditures in fiscal 1997, it may seek additional funds through other equity
and/or debt financings and corporate collaborations to provide working capital
financing and funding for new business opportunities and future growth. In
addition, certain subsidiaries are exploring various financings (including
issuances of securities of the subsidiaries, possibly in combination with
securities of Interneuron, in public offerings or private placements),
collaborations or business combinations. If such efforts are not successful,
certain activities at these subsidiaries may be reduced.
Although Interneuron may acquire additional equity in subsidiaries through
participation in financings, purchases from third parties, including open market
purchases and conversion of intercompany debt, equity financings by a subsidiary
will likely reduce Interneuron's percentage ownership of that subsidiary and
funds held by the subsidiaries will generally not be available to Interneuron.
The Company's goal is for its subsidiaries to establish independent operations
and financing through corporate alliances, third-party financings, mergers or
other business combinations, with Interneuron generally retaining an ongoing
equity interest. The nature of any such transaction is expected to vary
depending on the business and capital needs of each subsidiary and the state of
development of their respective technologies or products.
Subsidiaries:
Interneuron is currently funding operations of Progenitor, Transcell and
InterNutria. Expenses of the Subsidiaries, including those required under
collaboration agreements, constitute a significant part of the Company's overall
expenses. The Subsidiaries' portion of consolidated research and development and
selling, general and administrative expenses in the six month period ended March
31, 1997 was approximately 39%.
Intercardia
Pursuant to the Astra Merck Collaboration, Intercardia has agreed to pay
Astra Merck $10,000,000 in December 1997 and up to $11,000,000 for one-third of
product launch costs for bucindolol incurred beginning when Intercardia files an
NDA with the FDA for the twice-daily formulation of bucindolol and continuing
through the first 12 months subsequent to the first commercial sale of the
formulation. In the event Intercardia elects not to make these payments, the
royalties payable by Astra Merck to Intercardia would be substantially reduced.
There can be no assurance of the success of the Beta-blocker Evaluation of
Survival Trial (the "BEST Study") or that bucindolol will be successfully
commercialized. A substantial portion of the bucindolol development costs are
being assumed and paid by the National Institutes of Health, the Department of
Veterans Affairs, Astra Merck and Knoll.
Pursuant to the Knoll Collaboration (see Note D of Notes to Unaudited
Consolidated Financial Statements), Intercardia is responsible for approximately
40% of the development and marketing costs of bucindolol in the Territory, which
includes all countries other than the United States and Japan, subject to
certain maximum dollar limitations. The Company's portion of development and
-18-
clinical trial costs for the Territory is estimated to be up to $10,000,000.
Intercardia is also responsible for approximately 40% of the once-daily
development costs which relate to development solely for the Territory and
approximately 67% of once-daily development costs which have a worldwide
benefit.
In February 1997, an FDA advisory committee recommended that the FDA
approve the use of carvedilol, a competitive drug being developed by SmithKline
Beecham for the treatment of congestive heart failure. The Company is unable to
predict the final labeling for this product or the impact of this product on
bucindolol, if it is approved by the FDA.
Progenitor
In December 1996, Progenitor entered into an agreement with Amgen, granting
Amgen certain exclusive rights for the development and commercialization of
products using Progenitor's leptin receptor technology. Amgen paid Progenitor a
$500,000 initial license fee in January 1997, which was reflected in contract
and license fee revenue in the six month period ended March 31, 1997. Progenitor
may also receive from Amgen certain development and regulatory milestone
payments and potential royalties on sales. Amgen also agreed to purchase
Progenitor Common Stock in the event of a Progenitor initial public offering.
In February 1997, Progenitor announced an agreement to acquire Mercator,
Inc. ("Mercator") a privately-held genomics company, subject to certain
conditions, including completion of an initial public offering by Progenitor for
approximately $22,000,000 payable in Progenitor common stock, plus the
assumption of Mercator liabilities. Progenitor also agreed to provide Mercator
with an interim operating line of credit through July 1997 of up to $6,600,000,
funding for which will be provided by Interneuron. At March 31, 1997, advances
under this line of credit totaled approximately $1,300,000 and are reflected in
prepaids and other current assets.
In March 1997, Progenitor filed registration statements with the Securities
and Exchange Commission relating to a proposed initial public offering of
2,750,000 shares of Progenitor common stock (plus up to an additional 412,500
shares to cover over-allotments) and the proposed acquisition by Progenitor of
Mercator. Based on the proposed terms of the offering and the acquisition,
assuming completion of the offering and the Mercator acquisition on the filed
terms, Interneuron will own approximately 43% of Progenitor's outstanding common
stock, without giving effect to any exercise of the over-allotment option or any
options or warrants, and subject to change based upon the timing of the
offering, the offering price, the number of Progenitor shares issued in
connection with the Mercator acquisition and the amount of Progenitor's
indebtedness to Interneuron. In connection with the acquisition, Progenitor will
incur non-recurring charges to operations currently estimated to aggregate
approximately $30,000,000, a portion of which are noncash charges related to the
purchase of in-process research and development, subject to increase based upon
several factors including the timing of the transactions and unanticipated
costs. Due to market conditions and other factors, there is no assurance that
Progenitor's initial public offering or acquisition of Mercator will be
completed, in which case Progenitor will incur charges to operations for amounts
expended in connection with the two proposed transactions, including funds
advanced under the line of credit. Interneuron will record a portion of these
charges based on its ownership interest in Progenitor.
If Progenitor does not complete its initial public offering and acquisition
of Mercator, the $1,300,000 advanced to Mercator under the line of credit and
the approximately $1,700,000 of expenditures relating to the initial public
offering at March 31, 1997, plus additional amounts advanced and expended
subsequent to March 31, 1997, will result in charges to operations.
-19-
Transcell
Transcell has committed to spend approximately $800,000 in fiscal 1997 to
build-out certain newly-leased facilities. At March 31, 1997, the Company had
outstanding a Standby Letter of Credit for $800,000 to secure these build-out
costs. This Standby Letter of Credit is collateralized by a certificate of
deposit and expires the sooner of September 15, 1997 or receipt by the
subsidiary's landlord of payment of the build-out costs.
InterNutria
InterNutria is assessing data from a clinical evaluation of PMS Escape.
Depending upon the results of this assessment, the test launch of PMS Escape and
the availability or allocation of sufficient funds, the Company will determine
whether to commence a commercial launch of PMS Escape, conduct additional
clinical trials or evaluations, or discontinue clinical or marketing efforts.
-20-
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was held on March 5, 1997. At
the meeting (i) all ten director nominees were elected; (ii) the proposed
amendment to the Amended and Restated Certificate of Incorporation of the
Company increasing from 60,000,000 to 80,000,000 the number of authorized shares
of Common Stock was approved and ratified; (iii) the amendment to the Company's
1994 Long-Term Incentive Plan, as amended, increasing from 3,000,000 to
6,000,000 the number of shares of Common Stock reserved for issuance was
approved and ratified; and (iv) the appointment of Coopers & Lybrand L.L.P. as
the independent auditors was ratified.
(i) The following Directors were elected for a one-year term by the votes
indicated:
Lindsay A. Rosenwald, M.D., 38,644,309 for, 312,239 against; Glenn L. Cooper,
M.D., 38,646,840 for, 309,708 against; Harry J. Gray, 38,642,945 for, 313,603
against; Alexander M. Haig, Jr., 38,640,145 for, 316,403 against; Peter Barton
Hutt, 38,005,120 for, 951,428 against; Malcolm Morville, Ph.D., 38,647,040 for,
309,508 against; Robert K. Mueller, 38,642,840 for, 313,708 against; Lee
J.Schroeder, 38,643,940 for, 312,608 against; David B. Sharrock, 38,646,540 for,
310,008 against; Richard Wurtman, M.D., 38,647,040 for, 309,508 against.
(ii) The amendment to the Amended and Restated Certificate of Incorporation of
the Company increasing from 60,000,000 to 80,000,000 the number of authorized
shares of Common Stock was approved and ratified by a vote of 38,106,270 for,
1,185,306 against, and 124,915 abstain.
(iii) The amendment to the Company's 1994 Long-Term Incentive Plan, as amended,
increasing from 3,000,000 to 6,000,000 the number of shares reserved for
issuance, was approved and ratified by a vote of 25,466,836 for, 5,310,408
against, and 151,590 abstain.
(iv) The appointment of Coopers & Lybrand L.L.P. was ratified by a vote of
39,474,226 for, 35,332 against, and 69,211 abstain.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
3.5 - Restated Certificate of Incorporation of Registrant, as amended
10.65(a) - 1994 Long-Term Incentive Plan, as amended (1)
10.89 - Form of ISDA Master Agreement by and between the Registrant and Swiss
Bank Corporation, London Branch, together with Schedules thereto
10.90(a) - Form of Confirmation for Contract A entered into pursuant to ISDA Master
Agreement by and between the Registrant and Swiss Bank Corporation,
London Branch together with appendix thereto.
10.90(b) - Form of Confirmation for Contract B entered into pursuant to ISDA Master
Agreement by and between the Registrant and Swiss Bank Corporation,
London Branch together with appendix thereto.
10.91 - Form of Agreement regarding Registration Rights and Related Obligations to
-21-
be entered into by and between Registrant and Swiss Bank
Corporation, London Branch
27 - Financial Data Schedule
- ----------------
(1) amends and supersedes Exhibit 10.65
(b) Reports on Form 8-K
The Company filed Reports on Form 8-K reporting information under "Item 5"
on January 7, 1997, February 18, 1997, March 14, 1997 and May 6, 1997.
-22-
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.
INTERNEURON PHARMACEUTICALS, INC.
Date: May 14, 1997 By: /s/ Glenn L. Cooper, M.D.,
--------------------------------
Glenn L. Cooper, M.D., President
and Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 1997 By: /s/ Thomas F. Farb
---------------------------------
Thomas F. Farb,
Executive Vice President, Finance
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Date: May 14, 1997 By: /s/ Dale Ritter
---------------------------------
Dale Ritter
Vice President, Corporate Controller
(Principal Accounting Officer)
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