UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-15006
AVANT IMMUNOTHERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE NO. 13-3191702
(State of Incorporation) (I.R.S. Employer Identification No.)
119 FOURTH AVENUE, NEEDHAM, MASSACHUSETTS 02494-2725
(Address of principal executive offices)
(781) 433-0771
(Registrant's telephone number, including area code)
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 .
--- ---
State the number of shares outstanding of each of the registrant's classes of
common equity, as of the latest practicable date:
SHARES OUTSTANDING AS
CLASS OF NOVEMBER 3, 2000
Common Stock, $.001 par value 55,017,044
1
Exhibit index located on page 16
2
AVANT IMMUNOTHERAPEUTICS, INC.
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
PAGE
PART I -- FINANCIAL INFORMATION
Consolidated Balance Sheet at September 30, 2000 and December 31, 1999...........................4
Consolidated Statement of Operations for the Three Months Ended
September 30, 2000 and 1999.................................................................5
Consolidated Statement of Operations for the Nine Months Ended
September 30, 2000 and 1999.................................................................6
Consolidated Statement of Cash Flows for the Nine Months Ended
September 30, 2000 and 1999.................................................................7
Notes to Consolidated Financial Statements.......................................................8
Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................................11
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits..............................................................................15
(b) Reports on Form 8-K...................................................................15
Signatures......................................................................................16
Index to Exhibits...............................................................................17
3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AVANT IMMUNOTHERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
2000 1999
- -----------------------------------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and Cash Equivalents $ 48,505,000 $ 13,619,000
Current Portion Lease Receivable 431,700 431,700
Prepaid Expenses and Other Current Assets 629,700 439,000
- -----------------------------------------------------------------------------------------------------------
Total Current Assets 49,566,400 14,489,700
- -----------------------------------------------------------------------------------------------------------
Property and Equipment, Net 990,400 1,256,800
Restricted Cash -- 217,000
Long-Term Lease Receivable 71,900 395,700
Other Assets 3,225,100 3,523,500
- -----------------------------------------------------------------------------------------------------------
Total Assets $ 53,853,800 $ 19,882,700
- -----------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 722,400 $ 575,300
Accrued Expenses 1,460,600 1,331,500
Current Portion Deferred Revenue 615,400 --
Current Portion Lease Payable 293,700 293,700
- -----------------------------------------------------------------------------------------------------------
Total Current Liabilities 3,092,100 2,200,500
- -----------------------------------------------------------------------------------------------------------
Long-Term Deferred Revenue 2,615,400 --
Long-Term Lease Payable 45,500 269,200
Stockholders' Equity:
Common Stock, $.001 Par Value; 75,000,000 Shares
Authorized; 54,986,000 Issued and Outstanding at
September 30, 2000 and 48,127,400 Issued and
Outstanding at December 31, 1999 55,000 48,100
Additional Paid-In Capital 189,872,100 150,710,300
Accumulated Deficit $(141,826,300) (133,345,400)
- -----------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 48,100,800 17,413,000
- -----------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 53,853,800 $ 19,882,700
===========================================================================================================
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
4
AVANT IMMUNOTHERAPEUTICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
(UNAUDITED)
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
- -------------------------------------------------------------------------------------------------------------
OPERATING REVENUE:
Product Development and
Licensing Agreements $ 153,900 $ 297,700
- -------------------------------------------------------------------------------------------------------------
OPERATING EXPENSE:
Research and Development 3,292,700 1,731,200
General and Administrative 1,050,500 916,100
Amortization of Goodwill 137,300 318,900
- -------------------------------------------------------------------------------------------------------------
Total Operating Expenses 4,480,500 2,966,200
- -------------------------------------------------------------------------------------------------------------
Operating Loss (4,326,600) (2,668,500)
Interest Income 693,000 116,500
- -------------------------------------------------------------------------------------------------------------
Net Loss $(3,633,600) $(2,552,000)
=============================================================================================================
Basic and Diluted Net Loss Per Common Share $ (0.07) $ (0.06)
=============================================================================================================
Weighted Average Common Shares Outstanding 54,143,700 43,134,600
=============================================================================================================
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
5
AVANT IMMUNOTHERAPEUTICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED
(UNAUDITED)
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
- ------------------------------------------------------------------------------------------------------------
OPERATING REVENUE:
Product Development and
Licensing Agreements $ 461,600 $ 1,483,500
- ------------------------------------------------------------------------------------------------------------
OPERATING EXPENSE:
Research and Development 7,072,700 5,350,800
General and Administrative 3,194,800 3,079,100
Legal Settlements (500,000) --
Amortization of Goodwill 411,900 1,138,500
- ------------------------------------------------------------------------------------------------------------
Total Operating Expenses 10,179,400 9,568,400
- ------------------------------------------------------------------------------------------------------------
Operating Loss (9,717,800) (8,084,900)
Interest Income 1,236,900 434,900
- ------------------------------------------------------------------------------------------------------------
Net Loss $(8,480,900) $(7,650,000)
============================================================================================================
Basic and Diluted Net Loss Per Common Share $ (0.17) $ (0.18)
============================================================================================================
Weighted Average Common Shares Outstanding 51,347,300 42,732,400
============================================================================================================
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6
AVANT IMMUNOTHERAPEUTICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED
(UNAUDITED)
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(8,480,900) $(7,650,000)
Adjustments to Reconcile Net Loss to Net Cash
Used by Operating Activities:
Depreciation and Amortization 919,800 1,692,900
Changes in Assets and Liabilities:
Prepaid Expenses and Other Current Assets (190,700) (11,200)
Accounts Payable and Accrued Expenses 276,200 (533,500)
Deferred Revenue 3,230,800 (750,000)
Lease Receivable 323,800 287,700
Lease Payable (223,700) (211,900)
- -----------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (4,144,700) (7,176,000)
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Property and Equipment (125,300) (580,400)
Redemption of Marketable Securities -- 4,903,100
Decrease in Restricted Cash 217,000 100,000
Increase in Patents and Licenses (229,700) (208,700)
- -----------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Investing Activities (138,000) 4,214,000
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the Exercise of Stock Options 2,066,500 28,100
Proceeds from the Exercise of Warrants 313,600 --
Net Proceeds from Stock Issuance 36,788,600 9,845,400
- -----------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 39,168,700 9,873,500
- -----------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 34,886,000 6,911,500
Cash and Cash Equivalents at Beginning of Period 13,619,000 8,937,200
- -----------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $48,505,000 $15,848,700
===========================================================================================================
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
7
AVANT IMMUNOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(1) NATURE OF BUSINESS
AVANT Immunotherapeutics, Inc. ("AVANT") is a biopharmaceutical company
engaged in the discovery, development and commercialization of products that
harness the human immune response to prevent and treat disease. Our lead
therapeutic program is focused on compounds that inhibit the inappropriate
activity of the complement cascade, a vital part of the body's immune defense
system. AVANT is also developing on its own a proprietary therapeutic vaccine
for the management of atherosclerosis and Therapore-TM-, a novel system for the
delivery of immunotherapeutics for chronic viral infections and certain cancers.
AVANT and its collaborators are developing vaccines using the proprietary
adjuvants, Adjumer-Registered Trademark- and Micromer-Registered Trademark-, for
the prevention of respiratory syncytial virus (RSV), Lyme disease and several
other vaccine targets. Through additional collaboration, we are also developing
an oral human rotavirus vaccine and an oral cholera vaccine.
The unaudited consolidated financial statements include the accounts of
AVANT Immunotherapeutics, Inc. and its wholly owned subsidiary, Polmerix, Inc.
All intercompany transactions have been eliminated.
(2) INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements for the
three months and nine months ended September 30, 2000 and 1999 include the
consolidated accounts of AVANT and have been prepared in accordance with
generally accepted accounting principles and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. In the opinion of management, the information
contained herein reflects all adjustments, consisting solely of normal recurring
adjustments, that are necessary to present fairly the financial positions at
September 30, 2000 and December 31, 1999, the results of operations for the
quarters and nine months ended September 30, 2000 and 1999, and the cash flows
for the nine months ended September 30, 2000 and 1999. The results of operations
for the quarter and nine months ended September 30, 2000 are not necessarily
indicative of results for any future interim period or for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted, although we believe that the disclosures included
are adequate to make the information presented not misleading. The unaudited
consolidated financial statements and the notes included herein should be read
in conjunction with footnotes contained in AVANT's Annual Report on Form 10-K
for the year ended December 31, 1999.
(3) NEW ACCOUNTING PRONOUNCEMENTS
During April 2000, the Financial Accounting Standards Board issued
Financial Interpretation ("FIN") No. 44, "Accounting for Certain Transactions
Involving Stock Compensation - an Interpretation of Accounting Principles Board
("APB") No. 25. Among other issues, FIN 44 clarifies (a) the definition of an
employee, (b) criteria for determining whether a stock award plan qualifies as
non-compensatory, and (c) the accounting consequences of various award
modifications. This interpretation became effective July 1, 2000. We evaluated
the effects of FIN 44 on our financial position and results of operations and
have determined any such effects to be immaterial.
8
During September 2000, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101B, an amendment to SAB 101, "Revenue
Recognition in Financial Statements." SAB 101B defers the required
implementation of SAB 101 until the fiscal quarter ended December 31, 2000. We
do not expect SAB 101 to have any impact on our financial position and results
of operations.
(4) PROPERTY AND EQUIPMENT
Property and equipment includes the following:
September 30, December 31,
2000 1999
-------------------------------------------
Laboratory Equipment $ 2,631,300 $ 2,595,400
Office Furniture and Equipment 1,245,800 1,176,800
Leasehold Improvements 958,500 938,100
-------------------------------------------
Property and Equipment, Total 4,835,600 4,710,300
Less Accumulated Depreciation and Amortization (3,845,200) (3,453,500)
-------------------------------------------
$ 990,400 $ 1,256,800
===========================================
(5) OTHER ASSETS
Other assets include the following:
September 30, December 31,
2000 1999
--------------------------------------------
Capitalized Patent Costs $2,331,000 $2,101,300
Accumulated Amortization (831,500) (715,300)
--------------------------------------------
Capitalized Patent Costs, Net 1,499,500 1,386,000
Goodwill and Other Intangible Assets, Net of
Accumulated Amortization of $2,234,100
and $1,822,200 at September 30, 2000 and
December 31, 1999, respectively 1,601,600 2,013,500
Other Non Current Assets 124,000 124,000
--------------------------------------------
$3,225,100 $3,523,500
============================================
(6) COMMON STOCK
In July 1999, Novartis exercised its option to license TP10 for use in
the field of transplantation. The decision to license TP10 resulted in a $6
million payment by Novartis which was received by AVANT in January 2000. The
payment included an equity investment of $2,307,700 for 1,439,496 shares of our
common stock at $1.60 per share and a license fee of $3,692,300. We are
amortizing the license fee over twenty-four quarters, the projected development
period for the licensed field.
On July 17, 2000, AVANT completed a private placement of approximately
4,650,000 shares of common stock to institutional investors at $7.85 per share.
Net proceeds from the offering totaled approximately $34,594,400.
9
(7) NET INCOME (LOSS) PER SHARE
Consistent with SFAS 128, basic earnings (loss) per share amounts are
based on the weighted average number of shares of common stock outstanding
during the period. Diluted earnings (loss) per share amounts are based on the
weighted average number of shares of common stock and the potential common stock
outstanding during the period. We have excluded all of the potential common
stock shares from the calculation of diluted weighted average share amounts for
the three-month and nine-month periods ended September 30, 2000 and 1999 as its
inclusion would have been anti-dilutive.
10
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: STATEMENTS CONTAINED IN THE FOLLOWING, ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, THAT ARE NOT
HISTORICAL FACTS MAY BE FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO A VARIETY
OF RISKS AND UNCERTAINTIES. THERE ARE A NUMBER OF IMPORTANT FACTORS THAT COULD
CAUSE THE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY
FORWARD-LOOKING STATEMENTS MADE BY AVANT. THESE FACTORS INCLUDE, BUT ARE NOT
LIMITED TO: (i) OUR ABILITY TO SUCCESSFULLY COMPLETE PRODUCT RESEARCH AND
DEVELOPMENT, INCLUDING PRE-CLINICAL AND CLINICAL STUDIES, AND COMMERCIALIZATION;
(ii) OUR ABILITY TO OBTAIN SUBSTANTIAL ADDITIONAL FUNDING; (iii) OUR ABILITY TO
OBTAIN REQUIRED GOVERNMENTAL APPROVALS; (iv) OUR ABILITY TO ATTRACT
MANUFACTURING, SALES, DISTRIBUTION AND MARKETING PARTNERS AND OTHER STRATEGIC
ALLIANCES; AND (v) OUR ABILITY TO DEVELOP AND COMMERCIALIZE OUR PRODUCTS BEFORE
OUR COMPETITORS.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
We are engaged in the discovery, development and commercialization of
products that harness the human immune response to prevent and treat disease.
Our products derive from a broad set of complementary technologies with the
ability to inhibit the complement system, regulate T and B cell activity, and
enable the creation and delivery of preventative and therapeutic vaccines. We
are using these technologies to develop vaccines and immunotherapeutics that
prevent or treat disease caused by infectious organisms, and drugs and treatment
vaccines that modify undesirable activity by the body's own proteins or cells.
ACQUISITION
On August 21, 1998, we acquired Virus Research Institute, Inc. ("VRI"),
a company engaged in the discovery and development of systems for the delivery
of vaccines and immunotherapeutics, and novel vaccines for adults and children.
AVANT issued 14,036,400 shares and warrants to purchase 1,811,200 shares of its
common stock in exchange for all of the outstanding common stock of VRI, on the
basis of 1.55 shares and .20 of a warrant to purchase one share of AVANT's
common stock for each share of VRI common stock. The acquisition has been
accounted for as a purchase. Consequently, the purchase price was allocated to
the acquired assets and assumed liabilities based upon their fair value at the
date of acquisition. The excess of the purchase price over the tangible assets
acquired was assigned to collaborative relationships, work force and goodwill
and is being amortized on a straight line basis over 12 to 60 months. An
allocation of $44,630,000 was made to in-process research and development
("IPR&D") which represented purchased in-process technology which had not yet
reached technological feasibility and had no alternative future use. The amount
was charged as an expense in our financial statements during the third quarter
of 1998.
NEW DEVELOPMENTS
COMPLEMENT INHIBITORS: In 1997, we entered into an agreement with
Novartis relating to the development of TP10 for use in xenotransplantation
(animal organs into humans) and allotransplantation (human organs into humans).
We granted Novartis a two-year option to license TP10 with exclusive worldwide
marketing rights (except Japan) in the fields of xenotransplantation and
allotransplantation. In July 1999, Novartis exercised its option to license TP10
for use in the field of transplantation. In December 1999, the Novartis
agreement was amended to include marketing rights for Japan. The decision to
license TP10 resulted in a $6 million equity investment and license payment by
Novartis which was received by AVANT in January 2000. Under the agreement, we
may receive additional milestone payments of up to $14 million upon attainment
of certain development and regulatory goals. We will also be entitled to
royalties on product sales under the agreement.
We have elected to independently develop and commercialize TP10 for
pediatric cardiac surgery. In September 1999, we initiated an open-label, Phase
I/II trial of TP10 in infants undergoing cardiac
11
surgery for congenital heart defects. The trial evaluated the ability of TP10 to
mitigate the injury to the heart and other organs that occurs when patients are
placed on cardiopulmonary bypass circuits. TP10 was well tolerated in the study
population and results of this Phase I/II trial were presented at the Society of
Cardiovascular Anesthesiologists Annual Meeting in May 2000. In March 2000, we
received orphan drug designation for TP10 in infants undergoing cardiac surgery.
We currently expect to initiate controlled Phase IIb trials in this indication
by the end of 2000. These studies will allow us to further define our clinical
endpoints before starting a larger pivotal Phase III study.
We also plan to initiate a Phase II, multi-center trial for adult
cardiac surgery during the fourth quarter of 2000, with an expectation to
possibly partnering this program when additional clinical data are available.
ATHEROSCLEROSIS TREATMENT VACCINE: We are developing a therapeutic
vaccine against endogenous cholesteryl ester transfer protein ("CETP") which may
be useful in reducing risks associated with atherosclerosis. CETP is a key
intermediary in the balance of HDL and LDL. We are developing a vaccine (CETi-1)
to stimulate an immune response against CETP which we believe may improve the
ratio of HDL to LDL cholesterol and reduce the progression of atherosclerosis.
We have conducted preliminary studies of rabbits which have demonstrated the
ability of CETi-1 vaccine to elevate HDL and reduce the development of blood
vessel lesions. In September 1999, we initiated a double-blind placebo
controlled, Phase I clinical trial of our CETi-1 vaccine in adult volunteers.
The object of the study is to demonstrate the safety of single administrations
of the vaccine at four different dosage strengths. Patient enrollment in this
Phase I trial was completed in February 2000 and we expect to announce trial
results in the fourth quarter of 2000. We plan to initiate a Phase II study
around the end of 2000. As clinical data becomes available, we plan to seek a
corporate partner to complete development and to commercialize the vaccine.
ROTAVIRUS VACCINE: Rotavirus is a major cause of diarrhea and vomiting
in infants and children. No vaccine against rotavirus is currently on the
market. In 1997, we licensed our oral rotavirus vaccine to SmithKline Beecham
plc ("SmithKline"). In 1999, after our Phase II study demonstrated 89%
protection in a study involving 215 infants, SmithKline paid us an additional
license fee and assumed full responsibility for funding and performing all
remaining clinical development. SmithKline has initiated Phase I/II bridging
studies in Europe using its newly manufactured rotavirus vaccine, called
Rotarix-TM-, and is now planning to start Phase III safety and efficacy studies
in 2001 after review with health authorities. Assuming product development and
commercialization continues satisfactorily, SmithKline will pay us additional
milestones and a royalty based on sales.
CHOLERA VACCINE: We are developing a single dose, oral cholera vaccine
using a live, genetically attenuated cholera strain. Based on this technology,
developed in academia, we have developed the vaccine through early Phase II
trials. We then negotiated a collaboration agreement under which a Phase IIb
trial will be performed and funded by the Walter Reed Army Institute of Research
("WRAIR") and the National Institutes of Health (the "NIH"). This trial, set to
begin in the fourth quarter of 2000, will test the safety, immunogenecity and
protective capacity of the vaccine against a challenge with live virulent
cholera. We will then determine our commercialization strategy with respect to
the cholera vaccine based on clinical data from the trial.
RESULTS OF OPERATIONS
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2000 AS COMPARED
WITH THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1999
AVANT reported consolidated net loss of $3,633,600, or $.07 per share,
for the third quarter ended September 30, 2000, compared with a net loss of
$2,552,000, or $.06 per share, for the third quarter ended September 30, 1999.
The weighted average common shares outstanding used to calculate net loss per
common share was 54,143,700 in 2000 and 43,134,600 in 1999.
12
OPERATING REVENUE: Total operating revenue decreased $143,800, or
48.3%, to $153,900 for the third quarter of 2000 compared to $297,700 for the
third quarter of 1999. This decrease is due primarily to differences in
amortization between quarterly periods of revenue recognized from license and
option payments received from Novartis in 2000 and 1999, respectively. During
the third quarter of 2000, AVANT recognized revenue from a Novartis license
payment which is being amortized over the projected development period of the
licensed field or twenty-four quarters. During the third quarter of 1999, AVANT
recognized revenue from a Novartis one-year option payment which was amortized
over the option term.
OPERATING EXPENSE: Total operating expense increased $1,514,300, or
51.1%, to $4,480,500 for the third quarter of 2000 compared to $2,966,200 for
the third quarter of 1999. The increase in total operating expense is primarily
due to a significant increase in research and development expense partially
offset by the reduction of goodwill amortization by $181,600 in the third
quarter of 2000 compared with the same period last year due to cessation of
goodwill amortization for certain acquired intangible assets having shorter
useful lives. Research and development expense increased $1,561,500, or 90.2%,
to $3,292,700 for the third quarter of 2000 compared to $1,731,200 for the third
quarter of 1999. The increase in research and development expense is primarily
due to increased clinical trials costs and clinical materials costs incurred in
connection with our planned Phase II clinical trials of TP10 in pediatric and
adult cardiac surgery, offset in part by lower consultant and personnel costs
during the 2000 quarter. General and administrative expense increased $134,400,
or 14.7%, to $1,050,500 for the third quarter of 2000 compared to $916,100 for
the third quarter of 1999. The increase is primarily attributed to higher
consultant, investor relations and personnel costs in 2000.
NON-OPERATING INCOME, NET: Non-operating income increased $576,500, or
494.8%, to $693,000 for the third quarter of 2000 compared to $116,500 for the
third quarter of 1999. The increase is primarily due to an increase in interest
income as a result of higher average cash balances and higher interest rates
during the third quarter of 2000 compared to the third quarter of 1999.
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2000 AS COMPARED
WITH THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999
AVANT reported consolidated net loss of $8,480,900, or $.17 per share,
for the nine months ended September 30, 2000, compared with a net loss of
$7,650,000, or $.18 per share, for the nine months ended September 30, 1999. The
weighted average common shares outstanding used to calculate net loss per common
share was 51,347,300 in 2000 and 42,732,400 in 1999.
OPERATING REVENUE: Total operating revenue decreased $1,021,900, or
68.9%, to $461,600 for the first nine months of 2000 compared to $1,483,500 for
the first nine months of 1999. This decrease is due primarily to differences in
amortization of revenue recognized from license, option and milestone payments
from our collaborators between the comparable nine-month periods. During the
first nine months of 2000, AVANT recognized revenue from a Novartis license
payment which is being recognized over the projected development period of the
licensed field or twenty-four quarters. During the first nine months of 1999,
AVANT recognized revenue from a Novartis one-year option payment which was
amortized over the option term and a milestone payment received from SmithKline
Beecham.
OPERATING EXPENSE: Total operating expense increased $611,000, or 6.4%,
to $10,179,400 for the first nine months of 2000 compared to $9,568,400 for the
first nine months of 1999. The increase in total operating expense is primarily
due to a significant increase in research and development expense offset in part
by the receipt of legal settlement payments totaling $500,000 in the first
quarter of 2000 and the reduction of goodwill amortization by $726,600 in the
first nine months of 2000 compared with the same period last year due to the
cessation of goodwill amortization for certain acquired intangible assets having
shorter useful lives. Research and development expense increased $1,721,900, or
32.2%, to $7,072,700 for the first nine months of 2000 compared to $5,350,800
for the first nine months of 1999. The increase in
13
research and development expense is due to increased clinical trials costs and
clinical materials costs incurred in connection with our TP10 and CETi-1
clinical programs, offset in part by lower consultant, laboratory supplies and
personnel costs. General and administrative expense increased $115,700, or 3.8%,
to $3,194,800 for the first nine months of 2000 compared to $3,079,100 for the
first nine months of 1999. The increase is primarily attributed to higher
personnel and investor relations costs offset by decreased legal and consultant
costs for the 2000 period.
NON-OPERATING INCOME, NET: Non-operating income increased $802,000, or
184.4%, to $1,236,900 for the first nine months of 2000 compared to $434,900 for
the first nine months of 1999. The increase is primarily due to an increase in
interest income as a result of higher average cash balances and higher interest
rates during the first nine months of 2000 compared to the first nine months of
1999.
LIQUIDITY AND CAPITAL RESOURCES
AVANT ended the third quarter of 2000 with cash and cash equivalents of
$48,505,000 compared to cash and cash equivalents of $13,619,000 at December 31,
1999. Cash used in operations was $4,144,700 in the first nine months of 2000
compared to $7,176,000 used in operations in the first nine months of 1999.
In July 1999, Novartis exercised its option to license TP10 for use in
the field of transplantation. The decision to license TP10 resulted in a $6
million payment by Novartis which was received by AVANT in January 2000. The
payment included an equity investment of $2,307,700 and a license fee of
$3,692,300.
Also, during the first nine months of 2000, AVANT raised approximately
$2,066,500 and $313,600 in additional equity investment through the exercise of
stock options and warrants, respectively.
On July 17, 2000, AVANT completed a private placement of approximately
4,650,000 shares of common stock which generated net proceeds totaling
approximately $34,594,400.
AVANT believes that cash inflows from existing collaborations, interest
income on invested funds and our current cash and cash equivalents will be
sufficient to meet estimated working capital requirements and fund operations
for the next two years. The working capital requirements of AVANT are dependent
on several factors including, but not limited to, the costs associated with
research and development programs, preclinical and clinical studies and the
scope of collaborative arrangements. During 2000, we may take steps to raise
additional capital including, but not limited to, licensing of technology
programs with existing or new collaborative partners, possible business
combinations, or issuance of common stock via private placement and public
offering.
YEAR 2000
THE STATEMENTS IN THIS SECTION INCLUDE THE "YEAR 2000 READINESS
DISCLOSURE" WITHIN THE MEANING OF THE YEAR 2000 INFORMATION AND READINESS
DISCLOSURE ACT. THIS SECTION CONTAINS CERTAIN STATEMENTS THAT ARE
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED. AVANT'S YEAR 2000 READINESS, AND THE EVENTUAL AFFECTS OF THE YEAR
2000 ON AVANT MAY BE MATERIALLY DIFFERENT THAN CURRENTLY PROJECTED. THIS MAY BE
DUE TO, AMONG OTHER THINGS, THE INABILITY OF AVANT OR OF KEY THIRD PARTIES WITH
WHOM WE HAVE A SIGNIFICANT BUSINESS RELATIONSHIP TO ACHIEVE OR MAINTAIN YEAR
2000 READINESS.
The "Year 2000" issue affects computer systems that have date sensitive
programs that may not properly recognize the year 2000. Systems that do not
properly recognize such information could generate data or cause a system to
fail, resulting in business interruption. Through the first nine months of the
year 2000, AVANT's operations are fully functioning and have not experienced any
significant issues associated with the Year 2000 problem discussed above. Costs
associated with modifications made by AVANT to be Year 2000 compliant were
immaterial. There can be no assurance, however, that a failure by another
company's system to be Year 2000 compliant would not have a material adverse
affect on our business, operating results and financial condition.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In January 1997, the Securities and Exchange Commission issued
Financial Reporting Release No. 48, which expands the disclosure requirements
for certain derivatives and other financial instruments. The Company does not
utilize derivative financial instruments.
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On July 17, 2000, the Company closed a private placement of
approximately 4,650,000 shares of common stock which generated net proceeds
totaling approximately $34,594,400. Such shares were issued to accredited
investors in a transaction that was exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) of such Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
During the quarter ended September 30, 2000, the following
report of Form 8-K was filed:
Form 8-K dated July 19, 2000 reporting the issuance of a press
release by AVANT Immunotherapeutics, Inc. announcing the private
offering of approximately 4,650,000 unregistered securities at
$7.85 per share.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AVANT IMMUNOTHERAPEUTICS, INC.
BY:
Dated: November 9, 2000 /s/ Una S. Ryan
-------------------------------------
Una S. Ryan, Ph. D.
President and Chief Executive Officer
(Principal Executive Officer)
Dated: November 9, 2000 /s/ Avery W. Catlin
-------------------------------------
Avery W. Catlin
Senior Vice President, Treasurer
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
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INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
27.1 Financial Data Schedule.
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