SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For Quarter Ended September 30, 2001
Commission File Number 0-23252
IGEN INTERNATIONAL, INC.
---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 94-2852543
---------------------------------------------------------------------
(State or other jurisdiction (IRS Employer
incorporation or organization) Identification No.)
16020 INDUSTRIAL DRIVE, GAITHERSBURG, MD 20877
---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
301-869-9800
---------------------------------------------------------------------
(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 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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT OCTOBER 23, 2001
----- -------------------------------
Common Stock, $0.001 par value 19,894,112
1
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
INDEX
PAGE
----
PART I FINANCIAL INFORMATION
Item 1: CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets - September 30, 2001 and March 31, 2001 3
Consolidated Statements of Operations - For the three and six months ended
September 30, 2001 and 2000 4
Consolidated Statements of Cash Flows - For the six months ended
September 30, 2001 and 2000 5
Notes to Consolidated Financial Statements 6
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 16
Item 3: QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK 23
PART II OTHER INFORMATION
Item 1: LEGAL PROCEEDINGS 24
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 24
Item 6: EXHIBITS AND REPORTS ON FORM 8-K 25
SIGNATURES 26
2
IGEN INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 30, 2001 MARCH 31, 2001
------------------ --------------
ASSETS (Unaudited)
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 6,441 $ 4,872
Short term investments 15,312 10,217
Accounts receivable, net 7,895 5,863
Inventory 4,691 4,995
Other current assets 1,566 1,834
--------- ---------
Total current assets 35,905 27,781
--------- ---------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS 20,013 18,106
Accumulated depreciation and amortization (11,685) (10,021)
--------- ---------
Equipment and leasehold improvements, net 8,328 8,085
--------- ---------
NONCURRENT ASSETS:
Investment in and advances to affiliate 3,365 --
Restricted cash 2,645 2,120
Other 1,070 1,147
--------- ---------
Total noncurrent assets 7,080 3,267
--------- ---------
TOTAL $ 51,313 $ 39,133
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
- -------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 12,337 $ 13,170
Note payable 4,868 4,668
Deferred revenue 713 794
Obligations under capital leases 55 53
--------- ---------
Total current liabilities 17,973 18,685
--------- ---------
NONCURRENT LIABILITIES:
Subordinated convertible debentures 29,130 28,229
Note payable 20,657 23,142
Convertible preferred stock dividend payable 5,951 5,121
Deferred revenue -- 273
Obligations under capital leases 27 56
--------- ---------
Total noncurrent liabilities 55,765 56,821
--------- ---------
STOCKHOLDERS' DEFICIT:
Convertible preferred stock, $0.001 par value, 10,000,000 shares authorized,
Issuable in Series: Series A, 600,000 shares designated, none issued; Series B,
25,000 designated, 18,220 shares issued and outstanding-liquidation value
of 18,220 plus accrued and unpaid dividends 1 1
Common stock: $.001 par value, 50,000,000 shares authorized: 19,595,200 and
17,261,400 shares issued and outstanding 20 17
Additional paid-in capital 163,823 124,816
Stock notes receivable (3,710) (3,710)
Deferred compensation (1,043) --
Accumulated deficit (181,516) (157,497)
--------- ---------
Total stockholders' deficit (22,425) (36,373)
--------- ---------
TOTAL $ 51,313 $ 39,133
========= =========
See notes to consolidated financial statements.
3
IGEN INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 2000 2001 2000
---- ---- ---- ----
REVENUES:
Royalty income $ 5,772 $ 3,804 $ 11,096 $ 7,664
Product sales 3,624 2,461 6,416 4,425
Contract fees -- 305 143 2,055
-------- -------- -------- --------
9,396 6,570 17,655 14,144
-------- -------- -------- --------
OPERATING COSTS AND EXPENSES:
Product costs 1,256 976 1,997 1,570
Research and development 6,044 6,535 14,359 12,291
Selling, general and administrative 6,074 4,199 11,640 8,017
Litigation costs 3,658 2,502 7,913 3,921
-------- -------- -------- --------
17,032 14,212 35,909 25,799
-------- -------- -------- --------
LOSS FROM OPERATIONS (7,636) (7,642) (18,254) (11,655)
INTEREST EXPENSE-NET (1,222) (1,121) (2,520) (2,241)
EQUITY IN LOSS OF AFFILIATE (3,245) -- (3,245) --
-------- -------- -------- --------
NET LOSS (12,103) (8,763) (24,019) (13,896)
PREFERRED DIVIDENDS (412) (544) (830) (1,086)
-------- -------- -------- --------
NET LOSS ATTRIBUTED TO COMMON
SHAREHOLDERS $(12,515) $ (9,307) $(24,849) $(14,982)
======== ======== ======== ========
BASIC AND DILUTED NET LOSS PER
COMMON SHARE $ (0.64) $ (0.59) $ (1.33) $ (0.96)
======== ======== ======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING -BASIC AND DILUTED 19,428 15,715 18,659 15,648
======== ======== ======== ========
See notes to consolidated financial statements.
4
IGEN INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
SIX MONTHS ENDED
SEPTEMBER 30,
2001 2000
-------------- -------------
OPERATING ACTIVITIES:
Net loss $(24,019) $(13,896)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization 2,013 2,133
Amortization of detachable warrant and stock options 732 350
Changes in assets and liabilities:
Increase in accounts receivable (2,032) (456)
Decrease (increase) in inventory 304 (2,002)
Decrease (increase) in other current assets 197 (23)
Decrease in deferred revenue (354) (274)
Increase in accounts payable and accrued expenses 42 2,284
-------- --------
Net cash used for operating activities (23,117) (11,884)
-------- --------
INVESTING ACTIVITIES:
Expenditures for equipment and leasehold improvements (2,807) (2,882)
Investment in and advances to affiliate (2,465) --
Purchase of short-term investments (31,292) (5,367)
Sale and maturities of short-term investments 26,197 26,146
-------- --------
Net cash (used for) provided by investing activities (10,367) 17,897
-------- --------
FINANCING ACTIVITIES:
Issuance of common stock-net 37,890 148
Payments on notes payable (2,285) --
Payments on capital lease obligations (27) (47)
Restricted cash (525) (321)
-------- --------
Net cash provided by (used for) financing activities 35,053 (220)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,569 5,793
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,872 3,172
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,441 $ 8,965
======== ========
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING
AND FINANCIAL ACTIVITIES:
Accrued unpaid dividends $ 830 $ 1,033
======== ========
Common stock issued to pay accrued interest $ 875 $ --
======== ========
Common stock issued in exchange for notes receivable $ -- $ 3,710
======== ========
Equipment and leasehold improvement contributed to affiliate $ 900 $ --
======== ========
See notes to consolidated financial statements.
5
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information. These financial statements should be
read together with the audited financial statements and notes for the year ended
March 31, 2001 contained in the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements have been condensed or
omitted. In the opinion of the Company's management, the financial statements
reflect all adjustments necessary to present fairly the results of operations
for the three and six month periods ended September 30, 2001 and 2000, the
Company's financial position at September 30, 2001 and the cash flows for the
six month period ended September 30, 2001 and 2000. The results of operations
for the interim period are not necessarily indicative of the results of the
entire year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - Include cash in banks, money
market funds, securities of the U.S. Treasury, and certificates of deposit with
original maturities of three months or less. The Company has classified its
short-term investments consisting of U.S. Government Obligations and Corporate
Debt-Securities as "available for sale". These available for sale securities are
accounted for at their fair value and unrealized gains and losses on these
securities, if any, are reported as a separate component of stockholders'
equity. The Company uses specific identification on computing realized gains and
losses on sale of investments.
CONCENTRATION OF CREDIT RISK - The Company has invested its excess cash
generally in securities of the U.S. Treasury, money market funds, certificates
of deposit and corporate bonds. The Company invests its excess cash in
accordance with a policy objective that seeks to ensure both liquidity and
safety of principal. The policy limits investments to certain types of
instruments issued by institutions with strong investment grade credit ratings
and places restrictions on their terms and concentrations by type and issuer.
The Company has not experienced any losses on its investments due to credit
risk.
RESTRICTED CASH - The Company has a debt service reserve of $1.7 million at
September 30, 2001 that is restricted in use and held in trust as collateral
(see Note 4). In conjunction with the Roche Diagnostics (Roche) litigation, the
Company has escrowed a total of $924,000 related to Physician's Office
Laboratory sales (see Note 8).
6
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INVENTORY is recorded at the lower of cost or market using the first-in,
first-out method and consists of the following (in thousands):
SEPTEMBER 30, 2001 MARCH 31, 2001
------------------ --------------
Finished goods $ 760 $1,028
Work in process 1,903 1,912
Raw materials 2,028 2,055
------ ------
Total $4,691 $4,995
====== ======
EQUIPMENT AND LEASEHOLD IMPROVEMENTS are carried at cost. Depreciation is
computed over the estimated useful lives of the assets, generally three to five
years, using accelerated methods, except for leasehold improvements, which are
amortized on a straight-line basis over the lesser of the life of the lease or
the asset's useful life.
EVALUATION OF LONG-LIVED ASSETS - The Company evaluates the potential impairment
of long-lived assets based upon projections of undiscounted cash flows whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be fully recoverable. Management believes no impairment of these assets
exists as of September 30 and March 31, 2001, respectively.
COMPREHENSIVE INCOME - The Company has no significant elements of comprehensive
income other than net loss.
7
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
REVENUE RECOGNITION - Product sales revenue is recorded as products are shipped
and title is transferred. Royalty income is recorded when earned based on
information provided by licensees. Service contract revenue is deferred at the
time of sale and is recognized ratably over the period of performance. Contract
license fees, milestone payments and service fees in connection with research
and development contracts or commercialization agreements are recognized when
they are earned in accordance with the applicable performance requirements and
contract terms. Amounts received in advance of performance under contracts or
commercialization agreements are recorded as deferred revenue until earned.
LOSS PER SHARE - The Company uses Statement of Financial Accounting Standard
(SFAS) No. 128 "Earnings per Share" for the calculation of basic and diluted
earnings per share. The Company's loss has been adjusted by dividends
accumulated on the Company's Series B Convertible Preferred Stock.
NEW ACCOUNTING STANDARDS - In June 2001, the FASB issued SFAS No 143 "Accounting
for Asset Retirement Obligations". SFAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS 143 is effective for
fiscal years beginning after June 15, 2002. The Company is in the process of
evaluating the impact of implementing SFAS 143.
In October 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment of
Long-Lived Assets" which supersede SFAS No 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" and the
accounting and reporting provisions of APB No 30, "Reporting the Results of
Operations, Reporting and Effects of Disposal of a Segment of a Business and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions" for
the disposal for a segment of business. This statement is effective for fiscal
years beginning December 15, 2001. SFAS No 144 retains many of the provisions of
SFAS No 121 but address certain implementation issues associated with that
Statement. The Company is currently evaluating the impact of implementing
SFAS 144.
3. EQUITY FINANCING AGREEMENT
During February 2001, the Company entered into an agreement with Acqua
Wellington North American Equities Fund LLC (Acqua) for an equity financing
facility covering the sale of up to $60 million of common stock over the
subsequent 28 months. All shares of common stock sold to Acqua have been
registered under a shelf-registration statement covering up to 3 million shares
of common stock and were sold at a 4.75-6% discount to the market at the time of
the sale. There are no commissions, warrants or other direct costs associated
with these sales.
8
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Under this facility, the Company sold 2,701,700 shares to Acqua for
approximately $47.3 million through September 30, 2001, including 1,700,700
shares for $34.8 million during six months ended September 30, 2001. Subsequent
to September 30, 2001, the Company sold the remaining 298,300 shares available
under the shelf registration statement for $8.1 million.
4. NOTE PAYABLE
In March 1999, the Company entered into a debt financing with John Hancock
Mutual Life Insurance Company under a Note Purchase Agreement (Note) from which
the Company received $30 million. The seven year, 8.5% Senior Secured Notes
mature in 2006 with principal and interest installments of $1.7 million due
quarterly through March 2006. The Company is required to make note principal and
interest payments of $6.9 million in each fiscal year through 2006.
Collateral for the debt is represented by royalty payments and rights of the
Company to receive monies due pursuant to the Company's license agreement with
Roche. Additional collateral is represented by a Restricted Cash account, which
had a balance of $1.7 million at September 30, 2001. Covenants within the Note
include compliance with annual and quarterly Royalty Payment Coverage Ratios
which are tied to royalty payments and debt service.
5. SUBORDINATED CONVERTIBLE DEBENTURES
In January 2000, the Company completed a placement of $35 million principal
amount of Subordinated Convertible Debentures. The 5% debentures, if not
converted, mature January 2005 with semi-annual interest payments to be made in
cash or an equivalent value of common stock. The debentures are immediately
convertible into 1,129,032 shares of the Company's common stock, which
represents a $31 per share conversion price.
As part of this financing, the Company also issued detachable warrants to
purchase 282,258 shares of common stock with an exercise price of $31 per share.
Using the Black-Scholes model and the relative fair value of the warrants and
the debentures at the time of issuance, these warrants were valued at
approximately $7 million. The detachable warrant value has been recorded as a
reduction of the face value of the convertible debentures. Costs associated with
placing the debentures totaling $1.9 million were deferred and have been netted
against the recorded convertible debenture balance. The convertible debenture
discount consisting of the warrant value and debt issuance costs is being
amortized over the five-year life of the debentures.
9
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
6. INVESTMENT IN AFFILIATE
During August 2001, the Company entered into agreements with Meso Scale
Technologies, LLC. (MST) continuing Meso Scale Diagnostics, LLC. (MSD), a joint
venture formed solely by the Company and MST in 1995. MSD was formed for the
development and commercialization of products utilizing a proprietary
combination of MST's multi-array technology together with ORIGEN and other
technologies owned by the Company. MST is a company established by the son of
IGEN's Chief Executive Officer.
Under the amended agreements, the Company holds a 31% voting equity interest in
MSD, and is entitled to a preferred return on $21 million of the funds
previously invested in MSD and on additional funds it invests. At September 30,
2001, the investment entitled to a preferred return totaled $25.8 million. The
Company agreed, subject to certain conditions, to fund the joint venture through
its term, which runs to November 2003. The funding commitment through August
2002 is $19.5 million. Thereafter, the funding commitment would be determined on
the basis of an annual budget to be approved by a committee of the Company's
Board of Directors.
MST and MSD have the right to terminate the joint venture prior to November 2003
under certain circumstances, including a change in control of the Company, as
defined. Upon termination, expiration or non-renewal of the joint venture
agreement, MSD and MST jointly have the right to repurchase the Company's
interest in MSD based on a fair market value analysis, subject to certain
discounts.
In addition, if the Company ceases to fund the joint venture, under certain
circumstances, it must provide MSD with transitional funding for an additional
six months. Under most circumstances, significant MSD governance matters require
the approval of both the Company and MST.
In conjunction with the amended agreements and the progress made by MSD in the
development of its products, the Company has determined that future
contributions to MSD would be made based on the future investment benefit to be
obtained by the Company. Therefore, the Company's share of MSD losses for the
quarter ended September 30, 2001 totaling $3.2 million are recorded as Equity in
Loss of Affiliate. Prior to July 1, 2001, the Company accounted for its equity
investments in MSD as research and development funding and accordingly, recorded
all MSD investments as research and development expenses as incurred. At
September 30, 2001, the Company's Investment in Affiliate totaled $3.4 million,
which represents contributions to MSD during the quarter ended September 30,
2001.
10
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
7. STOCK NOTES RECEIVABLE
In connection with the exercise of stock options by officers in July 2000, the
Company granted loans in the principal amounts of $3.7 million, maturing in July
2007. The loans are 6.62% simple interest (paid annually), full recourse loans
against all assets of the borrowers, collateralized by the pledge of 180,000
shares of the Company's common stock owned by the borrowers.
8. LITIGATION
ROCHE
In 1997, the Company filed a lawsuit against Roche Diagnostics GmbH (formerly
Boehringer Mannheim GmbH) in the Southern Division of the United States District
Court for the District of Maryland. The lawsuit arises out of a 1992 License and
Technology Development Agreement (the "Agreement"), under which the Company
licensed to Roche certain rights to develop and commercialize diagnostic
products based on the Company's ORIGEN technology.
In its lawsuit, the Company alleges that Roche has failed to perform certain
material obligations under the Agreement, including development and
commercialization of ORIGEN technology according to the contractual timetable;
exploitation of the license to the extent contemplated by the parties; phase out
of certain non-royalty-bearing product lines; exploitation of ORIGEN technology
only within Roche's licensed fields; proper treatment of intellectual property
rights regarding ORIGEN technology; maintenance of records essential to the
computation of royalties; and proper computation and payment of royalties. On
August 18, 2000, the Company filed an Amended Complaint in the lawsuit asserting
additional breach of contract claims and a claim for unfair competition.
In its lawsuit, the Company seeks compensatory and punitive damages as well as
injunctive and declaratory relief, including a judicial determination of its
entitlement to terminate the Agreement. The Company voluntarily has agreed not
to terminate the Agreement unless and until the Court determines its entitlement
to do so. The trial commenced on October 23, 2001.
11
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
In April 2001, the Court granted judgment in the Company's favor on one count of
the Company's Amended Complaint, ruling that Roche breached the Agreement by
taking unsubstantiated "rental surcharge" deductions against reported sales of
royalty-bearing products. On August 10, 2001, the Court granted two additional
summary judgment motions filed by the Company ruling that Roche breached the
Agreement by settling a patent infringement suit with a third party without the
Company's consent and by failing to cease development of a competing product
line. The Court also accepted the Company's legal positions in two separate
counts in the Complaint relating to allegations that Roche sold products outside
the licensed field and that it failed to ensure that its affiliates comply with
the Agreement. In accepting the Company's legal position, the Court ruled that
Roche`s field is limited solely to hospitals (with certain exceptions), clinical
reference laboratories, and blood banks.
During 1998, the Court issued a preliminary injunction enjoining Roche from
marketing, selling, or distributing its Elecsys products to physicians' offices
and physicians' office laboratories, which are outside of Roche's licensed field
of use. The Court also ordered Roche to refer all physicians' offices and
physicians' office laboratory customers to the Company for future reagent supply
needs and to place all revenues derived from these unauthorized sales in escrow
pending the outcome of the litigation. In May 2000, the Company and Roche signed
an agreement under which Roche transferred to the Company all of its physician
office laboratory customers in the United States. This transfer involved
approximately 60 diagnostic systems in U.S. physicians' offices. In addition to
these systems, the Company continues to believe that Roche has placed other
ORIGEN-based systems outside of its licensed market and the Company is pursuing
those allegations in the litigation with Roche.
Roche had filed a counterclaim against the Company. Most of Roche's
counterclaims were dismissed by the Court. The remaining counterclaim for breach
of contract allegations relate principally to the relationship between the
Company and, Eisai, Co., Ltd. Eisai has held a license in Japan to ORIGEN
technology since 1990, which is more than two years before Roche signed the
Agreement with the Company. Roche is alleging that the Company breached the
Agreement by permitting Eisai to market certain ORIGEN-based products in Japan
in violation of Roche's rights.
During fiscal 2000, the Company had received notice from Roche that Roche was
reducing royalty payments due to the Company through a "rental surcharge"
deduction that Roche contends it is entitled to take from royalty-bearing sales
revenues. Additionally, Roche had issued a "debit note" claiming that the
Company owed Roche $2.6 million in royalties previously paid to the Company as a
result of a retroactive application of the rental surcharge deduction back to
1997. In April 2001, the Court ruled that Roche's implementation of the rental
surcharge deduction breached the Agreement.
12
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
In May 2001, Roche notified the Company that it was canceling the debit note
pursuant to the Court's ruling and Roche subsequently modified its calculation
of royalties. The Company believes Roche's royalty calculations continue to be
inconsistent with the Agreement and the Court's previous ruling.
This litigation against Roche may have a material adverse effect upon the
Company regardless of whether the outcome is favorable or not.
In September 1998, a subsidiary of Ares-Serono ("Serono") filed a patent
infringement claim against the Company, Roche and Organon Teknika in the U.S.
District Court in Delaware. The action claims that Serono's patent "A Method of
Assay Employing a Magnetic Electrode" is being infringed by the Company and its
licensees. Subsequently, F. Hoffman LaRoche, Ltd., a member of the Roche family
of companies, acquired the patent from Serono and continued in Serono's place to
assert the infringement claim against the Company and Organon Teknika. A trial
was held in Delaware on this matter during February 2001. There has been no
decision rendered by the Court. The Company does not believe it infringes the
patent, believes the patent to be invalid and unenforceable and intends to
continue to vigorously defend against the claim. There can be no assurance that
this litigation will not have a material adverse affect on the Company or its
business. The Company, believes that, should the Court find the patent valid and
infringed, such ruling would not have a material adverse effect on the Company's
claims against Roche pending before the U.S. District Court in Maryland.
In September 2001, Roche notified the Company that it desired to settle the
litigation in Delaware and offered to dismiss with prejudice all claims against
the Company and to reimburse the Company for the legal fees it incurred in
defending this action, which total approximately $5.7 million. The Company has
advised Roche's counsel that Roche's settlement proposal is acceptable to the
Company, subject to certain implementation details. The settlement agreement has
not been finalized and signed by all of the parties.
HITACHI
In December 1997, IGEN International K.K., a Japanese subsidiary of the Company,
filed a lawsuit in Tokyo District Court against Hitachi Ltd. ("Hitachi"). The
lawsuit seeks to enjoin Hitachi from infringing IGEN K.K.'s license registration
(known in Japan as a "senyo-jisshi-ken") to prevent Hitachi from manufacturing,
using or selling the Elecsys 2010 Instrument, which incorporates the Company's
patented ORIGEN technology, in Japan. Hitachi is the sole manufacturer for Roche
of the Elecsys 2010 immunoassay instrument. Roche is licensed to market the
Elecsys 2010 worldwide, except in Japan, to central hospital laboratories and
clinical reference laboratories. The Company's ORIGEN technology is also
licensed in Japan to Eisai Company, Ltd. The lawsuit requests injunctive relief
against Hitachi.
13
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
OTHER MATTERS
In February, 2001, Brown Simpson Strategic Growth Fund L.P. ("Brown Simpson")
initiated a shareholder derivative lawsuit for and on behalf of the
shareholders of the Company in the Circuit Court for Montgomery County,
Maryland against four of the Company's current directors, two former
directors, three executive officers and the Company as a nominal defendant.
In the complaint, Brown Simpson, stating that it holds 100 shares of the
Company's common stock, alleges breach of fiduciary duties by the named
individual defendants in connection with transactions between the Company and
other entities in which certain directors and officers are alleged to have an
interest, including the Meso Scale Diagnostics, LLC. joint venture.
In March, 2001, a second shareholder derivative lawsuit was filed by Laurence
Paskowitz in the Circuit Court for Montgomery County, Maryland, for and on
behalf of the shareholders of the Company. The lawsuit names as defendants
all of the Company's existing officers and directors, two former directors
and the Company as a nominal defendant. The allegations and the relief sought
in this complaint are substantially the same as those set forth in the
complaint filed by Brown Simpson. The complaint was later amended to seek
class action certification for the assertion of certain direct claims of all
IGEN shareholders against the individual defendants.
Both lawsuits seek principally the following: that the defendants hold in
trust and be required to account for and restore to the Company damages that
IGEN has allegedly sustained by reason of the allegations and relief relating
to board and management composition. The Paskowitz complaint also seeks to
recover damages for IGEN shareholders for the direct claims against the
individual defendants. The complaints do not include any claims against the
Company.
In 2000, the Board of Directors established an Independent Committee to
evaluate substantially similar issues as those raised in both shareholder
complaints and delegated the exclusive power and authority to the Committee
to review and investigate the matters identified in the derivative actions
and to determine what measures or actions, if any, should be undertaken on
behalf of the Company in response. The Committee was also authorized to
address any other issues raised as a result of the Committee's investigation
and to effect any such measures or actions on behalf of the Company with full
power and authority of the Board, subject only to the requirements of
Delaware law and the Company's governing documents.
On August 24, 2001, the Independent Committee issued a report summarizing its
findings. In its report, the Independent Committee concluded that the actions
undertaken by the Committee completely address the demands made in the
complaints as they relate to the derivate actions, including those claims
directed at the MSD joint venture. The Committee found that it is not in the
best interest of the Company's stockholders to pursue any of the shareholders
demands and urged the Court to dismiss the derivative claims in the lawsuits.
14
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
The Company and the individual defendants have filed motions to dismiss or,
in the alternative, for summary judgment in both lawsuits. The Circuit Court
recently stayed both proceedings, including all discovery until mid-December
2001, at which time the Court will consider all pending motions.
The Company believes that the claims are wholly without merit and that
meritorious defenses are available. The Company intends to vigorously contest
and defend against these claims and to assert all of its legal rights in this
matter, including all counterclaims. The lawsuits are not expected to have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
The Company is involved, from time to time, in various other legal proceedings
arising in the ordinary course of business. In the opinion of management, based
on review with legal counsel, the Company does not believe that any such legal
proceedings will have a material adverse impact on our financial position,
results of operations or cash flows.
15
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
We have devoted substantial resources to the research and development of our
proprietary technologies, primarily the ORIGEN(R) technology for the clinical
diagnostic, life science and industrial markets. We currently derive a majority
of our revenue from royalties received from licensees that develop and market
certain ORIGEN-based systems. We also generate sales of our own products,
particularly the M-SERIES(TM) System and related consumable reagents. We may
selectively pursue additional strategic alliances, which could result in
additional license fees or contract revenues. Since inception, we have incurred
significant losses and, as of September 30, 2001, we had an accumulated deficit
of $182 million. We expect to continue to incur substantial research and
development, manufacturing and general and administrative costs associated with
our operations. As a result, we will need to generate higher revenue to achieve
profitability.
In addition to historical information, this document contains forward-looking
statements within the meaning of the "safe-harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Reference is made in particular to
statements regarding the potential market and market growth for diagnostic
products, potential impact of competitive products, the Company's expectations
regarding the level of anticipated royalty and revenue growth in the future, the
potential market for products in development, financing plans, the outcome of
litigation, the Company's plans and objectives for future operations,
assumptions underlying such plans and objectives, the need for and availability
of additional capital and other forward-looking statements included in this
document. The words "may", "should", "could", "will", "expect", "intend",
"estimate", "anticipate", "believe", "plan" and similar expressions have been
used in this document to identify forward-looking statements. We have based
these forward-looking statements on our current views with respect to future
events and financial performance. Such statements are based on management's
current expectations and are subject to a number of risks and uncertainties
which could cause actual results to differ materially from those described in
the forward-looking statements. In particular, careful consideration should be
given to the cautionary statements in the "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and to the risks and
uncertainties detailed in the Company's Annual Report on Form 10-K for the year
ended March 31, 2001 previously filed with the Securities and Exchange
Commission. The Company disclaims any intent or obligation to update these
forward-looking statements.
16
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
RESULTS OF OPERATIONS
THE QUARTER AND SIX MONTHS IN REVIEW
REVENUES. Total revenues for the quarter and six months ended September 30, 2001
were $9.4 million and $17.7 million, respectively. This represents increases of
$2.8 million (43%) and $3.5 million (25%), respectively, when compared with the
same prior year periods. The growth in revenues was due to increases in royalty
income and product sales.
Royalty income was $5.8 million and $11.1 million during the quarter and six
months ended September 30, 2001, an increase of 52% and 45%, respectively, over
the same prior year periods. Royalties from Roche represent approximately $5.4
million (94%) and $10.5 million (95%) of the total royalty income for the
current quarter and six-month period, respectively, compared to $3.6 million
(94%) and $7.2 million (94%) in the comparable prior year periods. These
increases were attributable to higher Roche sales of its Elecsys product line,
which is based on IGEN's ORIGEN technology that was licensed to Roche under a
1992 license agreement. The Company is involved in litigation with Roche arising
out of this agreement. One of the disputes in the litigation relates to Roche's
computation of royalties to which the Company believes it is entitled under the
agreement.
Product sales were $3.6 million and $6.4 million during the quarter and first
six months of the current year, which represent increases of 47% and 45%,
respectively, over the prior year's product sales of $2.5 million and $4.4
million, for the same respective periods. This growth in product sales was led
by the M-SERIES line of instrumentation and consumable products, as well as
revenue generated from the sale of clinical diagnostic tests to physician office
laboratory (POL) customers in the United States. We began serving these POL
customers in June 2000 when Roche transferred the customers in order to comply
with a court ordered preliminary injunction.
There were no contract fees in the current quarter and $143,000 for the first
six months of the current year. This compares to $305,000 and $2.1 million,
respectively, for the same prior year periods. The prior year's contract fees
were primarily from a non-recurring amount received in connection with our
alliance with Bayer Diagnostics.
17
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
OPERATING COSTS AND EXPENSES. Product costs were $1.3 million (35% of product
sales) and $2 million (31% of product sales) for the quarter and six months
ended September 30, 2001. This compares with product costs of $976,000 (40% of
product sales) and $1.6 million (35% of product sales) for the quarter and six
months ended September 30, 2000. The higher prior year product costs are
attributable to the M-SERIES retrofit program instituted during the quarter
ended September 30, 2000, which upgraded the M-8 analyzers in the field with new
software and hardware components.
Research and development expenses were $6 million and $14.4 million for the
quarter and first six months of the current year. This represents a decrease of
approximately $500,000 from the $6.5 million incurred in the same quarter last
year while increasing $2.1 million in the same six-month period last year. For
the quarter ended September 30, 2001, the decrease is attributable to
contributions of $3.2 million related to the amended (August, 2001) Meso Scale
Diagnostics (MSD) joint venture being classified as Equity in Loss of Affiliate
(see "Equity in Loss of Affiliate" below). In all prior periods, contributions
to MSD were classified as a research and development cost. Including all MSD
related costs in the current quarter, research and development expense would
have increased by $2.8 million (42%) and $5.3 million (43%) for the current
quarter and first six months of the current year when compared with the same
prior year periods. This quarterly and year-to-date increase was due to ongoing
development costs and product enhancements associated with the M-SERIES family
of products, development of new assays to meet the expanding needs of the drug
discovery and development market, development of new systems and technologies,
including hospital point-of-care products, and costs associated with MSD.
Selling, general and administrative expenses were $6.1 million and $11.6 million
in the second quarter and first six months of fiscal 2002, which represent
increases of $1.9 million (45%) and $3.6 million (45%) over the same prior year
periods. These increases were primarily attributable to higher selling,
marketing and customer support costs related to expanding the launch of the
M-SERIES system, as well as legal and other expenses associated with the
amendment and extension of the MSD joint venture.
Costs related to our litigation with Roche increased to $3.7 million and $7.9
million for the quarter and six months ended September 30, 2001 from $2.5
million and $3.9 million in the same prior year periods. These increases are
attributable to expanded activities in several areas, including work related to
a court-appointed Special Master's examination of Roche's books and records for
which a report was issued in August, 2001; presentation of motions for summary
judgment; preparation for the trial that began on October 23, 2001; and
financial and legal advisory fees associated with settlement discussions.
18
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
INTEREST AND OTHER EXPENSE. Interest expense, net of interest income, increased
to $1.2 million and $2.5 million, respectively, for the quarter and six months
ended September 30, 2001. These changes are due to lower income from lower
interest rates during the current year periods.
EQUITY IN LOSS OF AFFILIATE. During August 2001, the Company entered into
agreements with Meso Scale Technologies, LLC. (MST) continuing Meso Scale
Diagnostics, LLC. (MSD), a joint venture formed solely by the Company and MST in
1995. MSD was formed for the development and commercialization of products
utilizing a proprietary combination of MST's multi-array technology together
with ORIGEN and other technologies owned by the Company. In conjunction with the
amended agreements and the progress made by MSD in the development of its
products, the Company has determined that future contributions to MSD would be
made based on the future investment benefit to be obtained by the Company.
Therefore, the Company's share of MSD losses for the quarter ended September 30,
2001 totaling $3.2 million are recorded as Equity in Loss of Affiliate. Prior to
July 1, 2001, the Company accounted for its equity investments in MSD as
research and development funding and accordingly, recorded all MSD investments
as research and development expenses as incurred
NET LOSS. The net loss for the current quarter was $12.1 million ($0.64 per
common share, after consideration of the effect of preferred dividends) compared
to a net loss of $8.8 million ($0.59 per common share, after consideration of
the effect of preferred dividends) in the same prior year quarter. The net loss
for the six months ended September 30, 2001 was $24 million ($1.33 per common
share, after consideration of the effect of preferred dividends) compared to a
net loss of $13.9 million ($0.96 per common share, after consideration of the
effect of preferred dividends) for the six months ended September 30, 2000.
Results of operations in the future are likely to fluctuate substantially from
quarter to quarter as a result of various factors, which include the volume and
timing of orders for M-SERIES or other products; the timing of instrument
deliveries and installations; variations in revenue recognized from royalties
and other contract revenues; the mix of products sold; whether instruments are
sold to or placed with customers; the timing of the introduction of new
products; competitors' introduction of new products; variations in expenses
incurred in connection with the operation of the business, including legal fees,
research and development costs and sales and marketing costs; equity in losses
of affiliate; manufacturing capabilities; and the volume and timing of product
returns and warranty claims.
19
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
The Company has experienced significant operating losses each year since
inception and expects those losses to continue. Losses have resulted from a
combination of lower royalty revenue than the Company believes it is entitled to
under the License Agreement with Roche, costs incurred in research and
development, Roche litigation costs, selling costs and other general and
administrative costs. The Company expects to incur additional operating losses
as a result of increases in expenses for manufacturing, marketing and sales
capabilities, research and product development, general and administrative
costs, and equity in losses of affiliate, offset in part by lower Roche
litigation costs beginning in the fourth quarter of fiscal 2002. The Company's
ability to become profitable in the future will depend, among other things, on
its ability to expand the commercialization of existing products; introduce new
products into the market; develop marketing, sales and distribution capabilities
cost-effectively; complete new business arrangements; and resolve the litigation
with Roche.
LIQUIDITY AND CAPITAL RESOURCES
Through September 30, 2001, the Company has financed operations through the sale
of Preferred and Common Stock, aggregating approximately $136 million; the
placement of a $30 million debt financing with John Hancock Life Insurance
Company in March 1999; and a $35 million private placement of subordinated
convertible debentures in January 2000. Under the Hancock financing, the Company
is obligated to make quarterly principal and interest payments of $1.7 million
through March 2006. Under the subordinated convertible debentures, unless and
until the holders of the debentures convert their debentures into common stock,
the Company will be required to make semi-annual interest payments of $875,000
through January 2005. Interest payments may be made in cash or an equivalent
value of common stock. In addition, the Company has received funds from
collaborative research and licensing agreements, sales of its ORIGEN-based line
of products and royalties from product sales by licensees.
During February 2001, the Company entered into an agreement with Acqua
Wellington North American Equities Fund LLC ("Acqua") for an equity financing
facility covering the sale of up to $60 million of the Company's common stock
over the subsequent 28 months. All shares of common stock sold to Acqua are
registered under a shelf-registration statement covering up to 3 million shares
of common stock and were sold at a 4.75-6% discount to the market at the time of
the sale. Under this facility, the Company sold 2,701,700 shares to Acqua for
$47.3 million through September 30, 2001, including 1,700,700 shares for $34.8
million during the six months ended September 30, 2001. Subsequent to September
30, 2001, the Company sold the remaining 298,300 shares available under the
shelf-registration statement for $8.1 million. There are no commissions,
warrants or other direct costs associated with these sales.
20
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
As of September 30, 2001, the Company had $21.8 million in cash, cash
equivalents and short-term investments with working capital of $17.9 million.
Cash used in operations increased to $23.1 million for the six months ended
September 30, 2001, as compared to $11.9 million for the corresponding prior
year period, primarily due to a higher net loss.
The Company used approximately $2.8 million and $2.9 million of cash for the
acquisition of equipment and leasehold improvements during the six months ended
September 30, 2001 and 2000, respectively. The Company believes material
commitments for capital expenditures may be required in a variety of areas, such
as product development programs. The Company has not, at this time, made
commitments for any such capital expenditure or secured additional sources to
fund such commitments.
For fiscal 2002, future minimum lease payments for which the Company is
obligated under capital lease agreements approximate $66,000 (including
interest) while facility and equipment operating lease commitments approximate
$2.5 million.
During August 2001, the Company entered into agreements with MST continuing MSD,
a joint venture formed solely by the Company and MST in 1995. Under the terms of
the joint venture agreement, the Company agreed, subject to certain conditions,
to fund the joint venture through November 2003. This funding commitment may be
satisfied in part through in-kind contributions of scientific and administrative
personnel and shared facilities. The funding commitment through August 2002 is
$19.5 million. Thereafter, the funding commitment would be determined on the
basis of an annual budget to be approved by a committee of the Company's Board
of Directors. Should no budget be approved, the Company would be required to
provide transitional funding for an additional six months, and MSD and MST have
the right to terminate the joint venture, unless the budget calls for funding
that exceeds 110% of the prior twelve months funding and the Board of Directors
makes a reasonable good faith determination for the rejection.
The Company has a substantial amount of indebtedness, and there is a possibility
that the Company may be unable to generate cash or arrange financing sufficient
to pay the principal of, interest on and other amounts due with respect to
indebtedness when due, or in the event any of it is accelerated. In addition,
the Company indebtedness may require that it dedicate a substantial portion of
its expected cash flow from operations to service indebtedness, which would
reduce the amount of expected cash flow available for other purposes, including
working capital and capital expenditures.
21
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
The Company needs substantial amounts of money to fund operations. In this
regard, it has ongoing discussions with third parties, including multinational
corporations, regarding various business arrangements including distribution,
marketing, research and development, joint venture and other business
agreements, which could provide for substantial up-front fees or payments.
Further, the Company is considering and evaluating the advisability and
feasibility of a variety of financing alternatives, including issuance of
additional debt or equity securities. There can be no assurance that the Company
will successfully complete any of the foregoing arrangements and access to funds
could be adversely impacted by many factors, including the results of pending
litigation, the volatility of the price of the Company's common stock,
continuing losses from operations and other factors. The Company believes that
existing capital resources, together with revenue from product sales, royalties
and contract fees will be adequate to fund operations through fiscal year 2002.
If the Company is unable to raise additional capital, we may have to scale back,
or even eliminate, some programs. Alternatively, the Company may consider
pursuing arrangements with other companies, such as granting licenses or
entering into joint ventures, on terms and conditions that may not be favorable
to it.
The Company is actively engaged with Roche in settlement discussions with
respect to a resolution of the litigations between the parties on mutually
agreeable terms. In September 2001, Roche notified the Company that it desired
to settle the ongoing litigation in Delaware and offered to dismiss with
prejudice all claims against the Company and to reimburse the Company for the
legal fees incurred in defending that lawsuit, which total approximately $5.7
million. The Company has advised Roche's counsel that Roche's settlement
proposal is acceptable to the Company, subject to certain implementation
details. The settlement agreement has not been finalized and signed by all of
the parties. There can be no assurance as to when, or if, the parties will reach
resolution of any of these litigation matters, or that such resolutions will be
favorable terms and conditions.
As it now stands, Roche has the right to continue to market its Elecsys products
within its licensed field during the term of the Agreement unless and until the
Company is determined to have the right to terminate the Agreement and then
determines to terminate the Agreement. If the Company elects to terminate the
Agreement, it would have a material adverse effect on its royalty revenue from
license sales unless and until the Company entered into a strategic partnership
with another company that is able to develop and commercialize diagnostic
instruments within the field presently licensed to Roche. There can be no
assurance, if the Company decided to terminate the Agreement, that it would be
able to enter into such a strategic partnership on terms favorable to it, if at
all.
22
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The Company does not expect that failure to prevail in the Hitachi litigation by
itself would have a material adverse effect on the Company's revenue or sales,
because Hitachi would continue to manufacture Roche instruments and the Company
would continue to earn royalties in connection with Roche sales. There can be no
assurance that the Hitachi litigation would not have a material adverse effect
on the Company's intellectual property, regardless of whether the outcome of the
litigation is favorable or not. Success by the Company in the Hitachi litigation
could have a material adverse effect on the Company's royalty revenues from
sales of Elecsys products to the extent that Roche's sales of Elecsys
instruments are hindered because it needs to find a new manufacturer for its
instruments or make arrangements to have Hitachi manufacture the instruments
outside of Japan.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information about market risks for the three months ending September 30, 2001
does not differ materially from that discussed under Item 7A of the Company's
Annual Report on Form 10-K for the year ended March 31, 2001.
23
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
PART II OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
The information required under this item is incorporated herein
by reference to Part I, Item 1 - Note 8 of Notes to Consolidated
Financial Statements.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders of IGEN International,
Inc. was held on September 13, 2001.
(b) Richard J. Massey and Joop Sistermans were elected to the
Board of Directors at the Annual Meeting. The directors of
the Company whose term of office as directors continued
after the meeting were Samuel J. Wohlstadter, Robert
Salsmans, Anthony Rees and Richard Cass.
(c) The matters voted upon at the meeting and the voting of
shareholders with respect thereto are as follows:
The election of each of Richard J. Massey and Joop
Sistermans to the Board of Directors to hold office for a
three-year term and until his successor is elected and has
qualified, or until such director's earlier death,
resignation or removal. The voting results, with
approximately 16.5 million (85%) of the shares voting, were
as follows:
MASSEY SISTERMANS
------ ----------
For: 15,576,234 16,004,577
Withheld: 925,265 496,922
The Company's received approval to increase the number of
shares available for issuance under the Company's 1994
Stock Option Plan from 1,750,000 shares to 2.5 million
shares. The voting results, with approximately 16.6
million (85%) of the shares voting, were as follows:
For: 15,071,042
Against: 1,370,480
Abstain: 113,977
24
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.15+ 1994 Non-Employee Director's Stock Option Plan as
Amended September 6, 2001. Filed herewith.
(b) Reports on Form 8-K:
The Company filed reports on Form 8-K under Item 5, Other
Events on August 21, 2001 and Form 8-K/A under Item 5, Other
Events on September 5, 2001.
+ Denotes management contract or compensatory plan of
arrangement.
25
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
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.
IGEN International, Inc.
Date: NOVEMBER 14, 2001 /S/ GEORGE V. MIGAUSKY
----------------- ----------------------
George V. Migausky
Vice President of Finance
Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial Officer)
26