SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ______ to ______
Commission File Number: 0-21990
OXiGENE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3679168
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
ONE COPLEY PLACE, SUITE 602
BOSTON, MA 02116
(Address of principal executive offices, including zip code)
(617) 536-9500
(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
Warrant to Purchase One Share of Common Stock
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of May 11, 2000 there were 11,311,093 shares of the Registrant's Common Stock
issued and outstanding.
OXiGENE, INC.
This Quarterly Report on Form 10-Q contains historical information and
forward-looking statements. Statements looking forward in time are included in
this Form 10-Q pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. They involve known and unknown risks
and uncertainties that may cause the Company's actual results in future periods
to be materially different from any future performance suggested herein. In the
context of forward-looking information provided in this Form 10-Q and in other
reports, please refer to the discussion of risk factors detailed in, as well as
the other information contained in, the Company's filings with the Securities
and Exchange Commission during the past 12 months.
INDEX PAGE NO.
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PART I. FINANCIAL INFORMATION 1
Item 1. Financial Statements 1
Condensed Consolidated Balance Sheets 2
Condensed Consolidated Statement of Operations 3
Condensed Consolidated Statements of Cash Flows 4
Notes to Condensed Consolidated Financial 5
Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures about 9
Market Risks
PART II. OTHER INFORMATION 10
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of 10
Securityholders
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
ii
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have been
prepared by OXiGENE, Inc. (OXiGENE or the Company) without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. In the
Company's opinion, these financial statements contain all adjustments necessary
to present fairly the financial position of OXiGENE, Inc. as of March 31, 2000
and December 31, 1999, the results of operations for the three months ended
March 31, 2000 and March 31, 1999 and the cash flows for the three months ended
March 31, 2000 and March 31, 1999. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1999. The
results of operations for the period ended March 31, 2000 are not necessarily
indicative of the results of operations and cash flows for any subsequent
interim period or for the full year.
1
OXIGENE, INC.
Condensed Consolidated Balance Sheets
(All amounts, except share amounts, in thousands of dollars)
March 31, December 31,
2000 1999
-------- --------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 37,481 $ 30,448
Accounts receivable - sublicense agreement 0 9,250
Prepaid expenses 456 339
Interest receivable 352 207
Other 57 770
-------- --------
Total current assets 38,346 41,014
Furniture, fixtures and equipment, at cost 225 221
Accumulated depreciation (123) (114)
-------- --------
Net property and equipment 102 107
License agreements, net of accumulated
amortization 1,435 1,459
Deposits 153 80
-------- --------
Total assets $ 40,036 $ 42,660
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Amount payable for license agreement -
current $ 225 $ 225
Accounts payable and accrued expenses 1,238 1,578
Other payables 571 824
-------- --------
Total current liabilities 2,034 2,627
Amount payable under license agreement - non-
current 977 952
Deferred licensing revenue 7,845 7,978
Stockholders' equity
Common stock, $0,01 par value:
Authorized shares - 60,000,000 shares
Issued and outstanding
11,309,534 at March 31, 2000
11,261,268 at December 31, 1999 113 113
Note receivable (2,320) (2,289)
Additional paid-in capital 81,584 81,556
Accumulated deficit (50,189) (47,414)
Deferred compensation (427) (1,336)
Foreign currency translation adjustment 419 473
-------- --------
Total stockholders' equity 29,180 31,103
-------- --------
Total liabilities and stockholders' equity $ 40,036 $ 42,660
======== ========
The accompanying notes are an integral part of this statement.
2
OXIGENE, INC.
Condensed Consolidated Statements of Operations
(All amounts in thousands, except per share date)
(Unaudited)
Three months ended March 31,
2000 1999
---- ----
REVENUE
Licensing revenue 483 0
Interest income 449 375
Total revenue 932 375
-------- --------
OPERATING EXPENSES
Costs relating to licensing 347 0
revenue
Amortization of license
agreement 25 0
Research and development 2,477 1,450
General and administrative 878 778
Interest expense 25 0
-- -
Total operating expenses 3,752 2,228
-------- --------
NET LOSS $(2,820) $(1,853)
======== ========
NET LOSS PER COMMON SHARE $ (0.25) $ (0.18)
======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 11,282 10,207
======== ========
3
OXIGENE, INC.
Condensed Consolidated Statements of Cash Flows
(All amounts in thousands)
(Unaudited)
Three months ended
March 31,
2000 1999
-------- --------
OPERATING ACTIVITIES
Net loss (2,820) (1,853)
Adjustment to reconcile net loss to net cash
used in operating activities:
Depreciation 10 19
Compensation related to issuance of
warrants,options and stock
appreciation rights 535 (40)
Amortization of licensing revenue (133) 0
Amortization of licensing agreement 24 0
Changes in operating assets and
liabilities:
Accounts receivable - license
agreement 9,250 0
Prepaid expenses and other current
assets 445 36
Accounts payable and accrued
expenses (584) 20
-------- --------
Net cash used in operating activities 6,727 (1,818)
FINANCING ACTIVITIES
Proceeds from issuance of common stock and
capital contribution 371 0
Net cash provided by financing activities 371 0
INVESTING ACTIVITIES
Amounts paid for license agreement 25 0
Deposits (74) 0
Purchase of furniture, fixture and equipment (5) (13)
-------- --------
Net cash used in investing activities (54) (13)
Effect of exchange rate on changes in cash (11) 13
-------- --------
Net decrease/increase in cash and cash
equivalents 7,033 (1,818)
Cash and cash equivalents at beginning of
period 30,448 31,756
-------- --------
Cash and cash equivalents at end of period $ 37,481 $ 29,938
======== ========
4
OXIGENE, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2000
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1999.
PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned Swedish subsidiary, OXiGENE Europe AB. Intercompany
balances and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid financial instruments with a maturity of
three months or less when purchased to be cash equivalents.
NET LOSS PER SHARE
Net loss per share is based upon the Company's aggregate net loss divided by
weighted average number of shares of Common Stock outstanding during the
respective periods. All options and warrants were antidilutive and, accordingly,
have been excluded from the calculation of weighted average shares.
COMPREHENSIVE INCOME
During the three months ended March 31, 2000 and 1999, total comprehensive loss
amounted to $2,874,000, and $1,816,000, respectively.
5
OXIGENE, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2000
2. STOCKHOLDER'S EQUITY
During the three month period ended March 31, 2000 the Company issued 41,657
shares of Common Stock upon exercise of previously granted options, with
proceeds to the Company of approximately $371,000. In addition, 6,609 shares
were issued upon exercise of stock appreciation rights ("SARs").
The market value of the Company's Common Stock at March 31, 2000 was higher
than the market price of the Company's Common Stock at December 31, 1999.
Accordingly, the charge related to SARs that previously recorded for financial
reporting purpose was increased by approximately $116,000 for the three months
ended March 31, 2000. Because upon exercise SARs are satisfied only by the
distribution of shares of Common Stock, the charge was credited to additional
paid-in capital.
During the three months ended March 31, 2000, the Company recorded stock-based
compensation expense of approximately $271,000 in connection with options issued
to non-employees in the prior years.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DESCRIPTION OF BUSINESS
OXiGENE is an international biopharmaceutical company engaged principally
in research into and the development of products for use in the treatment of
cancer. Historically, the Company's activities have been directed primarily
towards products designed to complement and enhance the clinical efficacy of
radiation and chemotherapy, which are the most common and traditional forms of
non-surgical cancer treatment. Recently, however, the Company has begun to
investigate certain of its developmental stage products for applications as
direct cancer treatment agents, anti-inflammatory agents or in the treatment of
fungal or other infectious diseases, as well as for DNA repair measurement and
stimulation.
OXiGENE has devoted substantially all of its efforts and resources to
research and development conducted on its own behalf and through strategic
collaborations with clinical institutions and other organizations, particularly
the University of Lund in Lund, Sweden. Consequently, OXiGENE believes that its
research and development expenditures have been somewhat lower than those of
other comparable development-stage companies.
On December 15, 1999, the Company entered into a Research Collaboration
and License Agreement with Bristol-Myers Squibb Company ("BMS"), to sub-license
the rights to certain patent rights and other know-how and technology to which
the Company had an exclusive license (the "Sub-License Agreement"). Pursuant to
the terms of the Sub-License Agreement, BMS will pay a non-refundable license
fee, reimburse certain expenses incurred by the Company and fund future research
to be performed by the Company based on a research program determined by a joint
development committee. In addition, BMS will pay additional amounts upon certain
milestones being reached and royalties on future net sales of products.
OXiGENE has generated a cumulative net loss of approximately $50.2 million
for the period from its inception through March 31, 2000. OXiGENE expects to
incur significant additional operating losses over at least the next several
years, principally as a result of its continuing clinical trials and anticipated
research and development expenditures. The principal source of OXiGENE's working
capital has been the proceeds of private and public equity financing and the
exercise of warrants and stock options, and, prior to entering into the
Sub-License Agreement, the Company had no material amount of licensing or other
fee income. As of March 31, 2000, OXiGENE had no long-term debt or loans
payable.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2000 AND 1999
During the three-month periods ended March 31, 2000 and 1999, the Company
had licensing revenue of $0.5 million and $0, respectively, and approximately
$0.4 million and $0.4 million in interest income, respectively. Operating
expenses for those periods were approximately $3.8 million and $2.2 million,
respectively. The increase in operating expenses is primarily attributable to
the Combretastatin technology. Research and development expenses for the
three-month period ended March 31, 2000 increased to approximately $2.5 million
from approximately $1.5 million for the comparable 1999 period. SARs previously
granted by the Company to certain clinical investigators and consultants affect
the research and development expenses with a charge for financial reporting in
reporting periods when the market value per share of Common Stock increases.
Because the market value of the Company's Common Stock at March 31, 2000 was
greater than the market value on December 31, 1999, and the market value of the
Company's Common Stock at March 31, 1999 was less than the market value on
December 31, 1998, the charge previously recorded for financial reporting
purposes was increased for the three months ended March 31, 2000 and was reduced
for the three months ended March 31, 1999 by approximately $0.1 million and $0.2
million, respectively. Without giving effect to such credit, research and
development expenses for the three months ended March 31, 2000 increased by
approximately $0.8 million, compared to the comparable 1999 period. Generally,
the Company makes payments to its clinical investigators if and when certain
predetermined milestones in its clinical trials are reached, rather than on a
fixed quarterly or monthly basis. As a result of the foregoing and the existence
of outstanding SARs, research and
7
development expenses have fluctuated, and are expected to continue to fluctuate,
from quarter to quarter. General and administrative expenses for the three-month
period ended March 31, 2000 amounted to approximately $0.9 million compared to
$0.8 million for the comparable 1999 period.
LIQUIDITY AND CAPITAL RESOURCES
OXiGENE has experienced net losses and negative cash flow from operations
each year since its inception and, as of March 31, 2000, had an accumulated
deficit of approximately $50.2 million. The Company expects to incur substantial
additional expenses, resulting in significant losses, over at least the next
several years due to, among other factors, its continuing clinical trials and
anticipated research and development activities. To date, the Company has
financed its operations principally through net proceeds it has received from
private and public equity financing.
The Company had cash and cash equivalents of approximately $37.5 million
at March 31, 2000, compared to approximately $30.4 million at December 31, 1999.
The increase in cash and cash equivalents was primarily attributable to proceeds
received upon signing the licensing agreement with BMS and the exercise of
certain warrants and stock options, and (with respect to per share information)
the redemption of approximately 706,314 unexercised warrants and the expiration
of any unexercised warrants relating to the redemption call of December 2, 1999.
Net proceeds from the warrants totaled approximately $10.1 million.
During the three months ended March 31, 2000, the Company received
approximately $0.4 million upon the exercise of outstanding options, warrants
and SARs.
OXiGENE's policy is to contain its fixed expenditures by maintaining a
relatively small number of employees and relying as much as possible on outside
services for its research, development, preclinical testing and clinical trials.
The Company maintains small offices in Stockholm, Sweden (executive offices and
investor relations), and in Boston, Massachusetts (for drug development and
clinical trials). The Company makes quarterly payments to the University of
Lund, Lund, Sweden, for pre-clinical research and clinical trials. The Company
has an agreement with ILEX (TM) Oncology Inc., a contract research organization
in San Antonio, Texas ("ILEX"), pursuant to which ILEX performs contract
research services and clinical trials for the Company in connection with the
preclinical and clinical testing of compounds under development by the Company,
particularly Declopramide and Combretastatin. Through March 31, 2000, the
Company has paid ILEX approximately $8.0 million of which approximately $0.4
million was paid in the three-month period ended March 31, 2000. The amounts
paid to ILEX have fluctuated, and are expected to continue to fluctuate, from
time to time.
8
The Company anticipates that its cash and cash equivalents as of March 31,
2000, should be sufficient to satisfy the Company's projected cash requirements
as of that date for approximately 24 months. However, working capital and
capital requirements may vary materially from those now planned due to numerous
factors including, but not limited to, the progress with preclinical testing and
clinical trials; progress of the Company's research and development programs;
the time and costs required to obtain regulatory approvals; the resources the
Company devotes to manufacturing methods and advanced technologies; the ability
of the Company to obtain collaborative or licensing arrangements; the costs of
filing, prosecuting and, if necessary, enforcing patent claims; the cost of
commercialization activities and arrangements; and the demand for its products
if and when approved. The Company anticipates that it will have to seek
substantial additional private or public financing or enter into collaborative
arrangements with one or more third parties to complete the development of any
products or bring products to market. There can be no assurance that additional
financing will be available on acceptable terms, if at all. The Company had no
material commitments for capital expenditures as of March 31, 2000.
TAX MATTERS
As of December 31, 1999, the Company had net operating loss carry forwards
of approximately $49.0 million for U.S. and foreign income tax purposes, of
which $26.6 million expires for U.S. purposes through 2019. The utilization of
approximately $2.5 million of such U.S. net operating losses is subject to an
annual limitation, pursuant to Section 382 of the U.S. Internal Revenue Code, of
approximately $350,000.
IMPACT OF YEAR 2000
The Company's internal computer information systems are Year 2000
compliant. These systems consist only of standard software from established and
recognized providers. Any new software purchases will be Year 2000 compliant.
The Company has not encountered any significant disruptions to its
computer information systems due to Year 2000 issues. Any future risks related
thereto are therefore primarily dependent upon the computer systems of third
parties. These third parties consist mainly of leading educational institutions
and universities in the United States and Europe, and clinical research
organizations. The Company has reviewed its third party relationships in order
to assess Year 2000 issues and has no reason to believe that these third parties
will encounter any significant systems disruptions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company's cash and cash equivalents are maintained primarily in US
dollar accounts and amounts payable for research and development to research
organizations are contracted in US dollars. Accordingly, the Company's exposure
to foreign currency risk is limited because its transactions are primarily based
in US dollars. The Company does not have any other exposure to market risk. The
Company will develop policies and procedures to manage market risk in the future
as circumstances may require.
9
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material suits or claims pending or, to the best of the
Company's knowledge, threatened against the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
10
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following exhibit is filed as part of this Quarterly Report
on Form 10-Q:
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K during the first quarter of 2000
on March 7, 2000.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OXiGENE, INC.
Date: May 15, 2000 /s/ Bo Haglund
-------------------- -------------------------------------------
Bo Haglund
Chief Financial Officer
12
OXiGENE, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDED MARCH 31, 2000
EXHIBITS
Exhibit
Number Description
- ------ -----------
27.1 Financial data schedule.