SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the Quarterly
Period Ended September 30, 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.
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(Exact name of Registrant as specified in its charter)
Delaware 13-3679168
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
321 Arsenal Street
Watertown, MA 02472
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(Address of principal executive offices, including zip code)
(617) 673-7800
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One Copley Place, Suite 602
Boston, MA 02116
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(Former address of principal executive offices, including zip 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 November 13, 2000 there were 11,375,593 shares of the Registrant's Common
Stock issued and outstanding.
OXiGENE, INC.
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
Our disclosure and analysis in this report contain some "forward-looking
statements". Forward-looking statements give our current expectations or
forecasts of future events. You can identify these statements by the fact that
they do not relate strictly to historic or current facts. They use words such as
"anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and
other words and terms of similar meaning in connection with any discussion of
future operating or financial performance. In particular, these include
statements relating to future actions, prospective products or product
approvals, future performance or results of current and anticipated products,
sales efforts, expenses, and the outcome of contingencies, such as financial
results.
From time to time, we also may provide oral or written forward-looking
statements in other materials we release to the public. Any or all of our
forward-looking statements in this report and in any other written and oral
statements we make may turn out to be wrong. They can be affected by inaccurate
assumptions we might make or by known or unknown risks and uncertainties.
Consequently, no forward-looking statement can be guaranteed. Actual results may
vary materially. Among the uncertainties is the fact that OXiGENE may require
additional capital in the future and we may not be able to raise such capital
or, if needed and obtained, the nature or terms on which we are able to raise
such capital. Other factors that may cause differences include, but are not
limited to the availability of necessary funds and the ability to raise capital
when needed and on reasonable terms, conducting successful clinical trials,
developing the necessary manufacturing processes, gaining all necessary
regulatory approvals and protecting the join venture's intellectual property.
We undertake no obligation to publicly update forward-looking statements,
whether as a result of new information, future events or otherwise. You are
advised, however, to consult any further disclosures we make on related subjects
in our 10-Q, 8-K and 10-K reports to the Securities and Exchange Commission. Our
filings listed various important factors that could cause actual results to
differ materially from expected and historic results. We note these factors for
investors as permitted by the Private Securities Litigation Reform Act of 1995.
You should understand that it is not possible to predict or identify all such
factors. Consequently, you should not consider any such list to be a complete
set of all potential risks or uncertainties.
INDEX
Page No.
PART I - FINANCIAL INFORMATION...............................................1
Item 1. Financial Statements.............................................1
Condensed Consolidated Balance Sheets..........................2
Condensed Consolidated Statements of Operations................3
Condensed Consolidated Statements of Cash Flows................4
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Notes to Condensed Consolidated Financial Statements...........5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................6
Item 3. Quantitative and Qualitative Disclosures about Market Risks.....10
PART II - OTHER INFORMATION.................................................11
Item 1. Legal Proceedings...............................................11
Item 2. Changes in Securities...........................................11
Item 3. Defaults Upon Senior Securities.................................11
Item 4. Submission of Matters to a Vote of Security Holders.............11
Item 5. Other Information...............................................11
Item 6. Exhibits and Reports on Form 8-K................................11
SIGNATURES..................................................................12
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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 September 30,
2000 and December 31, 1999, the results of operations for the three months and
nine months ended September 30, 2000 and 1999 and the cash flows for the nine
months ended September 30, 2000 and 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 September 30, 2000 are not
necessarily indicative of the results of operations and cash flows for any
subsequent interim period or for the full year.
OXIGENE, INC.
Condensed Consolidated Balance Sheets
(All amounts, except share amounts, in thousands of dollars)
September December 31,
30, 2000 1999
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(unaudited)
ASSETS
Current assets:
Cash and cash equivalents ....................... $ 29,259 $ 30,448
Available-for-sale investments .................. 1,426 --
Accounts receivable - sublicense agreement ...... -- 9,250
Prepaid expenses ................................ 217 339
Interest receivable ............................. 486 207
Other ........................................... 20 770
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Total current assets .............................. 31,408 41,014
Furniture, fixtures and equipment, at cost ...... 324 221
Accumulated depreciation ........................ (130) (114)
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Net property and equipment ........................ 194 107
License agreements, net of accumulated
amortization .................................... 2,311 1,459
Deposits .......................................... 102 80
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Total assets ...................................... $ 34,015 $ 42,660
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Amount payable for license agreement - current .. $ 271 $ 225
Accounts payable and accrued expenses ........... 882 1,578
Other payables .................................. 337 824
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Total current liabilities ......................... 1,490 2,627
Amount payable under license agreement -
non-current ..................................... 825 952
Deferred licensing revenue ........................ 7,578 7,978
Stockholders' equity Common stock, $0.01 par value:
Authorized shares - 60,000,000
shares Issued and outstanding
11,375,593 at September 30, 2000
11,261,268 at December 31, 1999 ................ 114 113
Note receivable ................................. (3,092) (2,289)
Additional paid-in capital ...................... 82,268 81,556
Accumulated deficit ............................. (54,418) (47,414)
Deferred compensation ........................... (560) (1,336)
Accumulated other comprehensive (loss) income ... (190) 473
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Total stockholders' equity ........................ 24,122 31,103
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Total liabilities and stockholders' equity ........ $ 34,015 $ 42,660
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The accompanying notes are an integral part of this statement.
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OXIGENE, INC.
Condensed Consolidated Statements of Operations
(All amounts in thousands, except per share date)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
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REVENUE
Licensing revenue.............. $ 384 $ - $ 1,247 $ -
Interest income................ 499 312 1,477 1,024
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Total revenue.................. 883 312 2,724 1,024
OPERATING EXPENSES
Costs relating to licensing
revenue...................... 250 - 846 -
Amortization of license
agreement.................... 99 - 148 -
Research and development....... 2,048 2,992 6,305 6,498
General and administrative..... 885 559 2,349 2,062
Unrealized loss on short-term
investment 267 - - -
Interest expense............... 23 - 80 -
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Total operating expenses....... 3,572 3,551 9,728 8,560
NET LOSS....................... $ (2,689) $ (3,239) $ (7,004) (7,536)
========= ========= ========= ===========
NET LOSS PER COMMON SHARE...... $ (0.24) $ (0.32) $ (0.62) $ (0.74)
========= ========= ========= ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING.... 11,322 10,262 11,305 10,233
========= ========= ========= ===========
The accompanying notes are an integral part of this statement.
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OXIGENE, INC.
Condensed Consolidated Statements of Cash Flows
(All amounts in thousands)
(Unaudited)
Nine months ended
September 30,
2000 1999
OPERATING ACTIVITIES
Net loss $ (7,004) $ (7,536)
Adjustment to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation 40 32
Abandonment of furniture, fixtures and
equipment 4 77
Compensation related to issuance of
warrants, options and stock appreciation
rights 282 408
Amortization of licensing revenue (400) -
Amortization of licensing agreement 148 -
Changes in operating assets and liabilities:
Accounts receivable - sub-license
agreement 9,250 -
Prepaid expenses and other current assets 592 169
Accounts and other payables and accrued
expenses (1,152) (1,095)
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Net cash provided by (used in) operating
activities 1,760 (7,945)
FINANCING ACTIVITIES
Proceeds from issuance of common stock and
capital contribution 357 98
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Net cash provided by financing activities 357 98
INVESTING ACTIVITIES
Short-term investment (2,000) -
Amounts paid for license agreement (1,080) -
Deposits (22) -
Purchase of furniture, fixture and equipment (138) (18)
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Net cash used in investing activities (3,240) (18)
Effect of exchange rate on changes in cash (66) (51)
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Net decrease in cash and cash equivalents (1,189) (7,916)
Cash and cash equivalents at beginning of
period 30,448 31,757
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Cash and cash equivalents at end of period $ 29,259 $ 23,841
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The accompanying notes are an integral part of this statement.
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OXIGENE, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 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 months and nine months ended September
30, 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 nine months ended September 30, 2000 and 1999, total comprehensive
loss amounted to $7,677,000 and $7,570,000, respectively.
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2. Stockholders' Equity
During the nine months ended September 30, 2000, the Company issued 114,325
shares of Common Stock upon exercise of previously granted options, warrants and
stock appreciation rights ("SARs"), with cash proceeds to the Company of
approximately $357,000.
The market value of the Company's Common Stock at September 30, 2000 was lower
than the market price of the Company's Common Stock at December 31, 1999.
Accordingly, the charge related to SARs that was previously recorded for
financial reporting purpose was reduced by approximately $271,000 for the nine
months ended September 30, 2000. Because upon exercise SARs are satisfied only
by the distribution of shares of Common Stock, the charge was debited to
additional paid-in capital. During the nine months ended September 30, 2000, the
Company recorded a stock-based compensation expense of approximately $405,000 in
connection with options issued to non-employees in the current and prior years.
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 paid a non-refundable license fee, will
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.
On May 17, 2000 the Company entered into a joint venture agreement with
Techniclone Corporation ("Techniclone"), forming Arcus Therapeutics LLC
("Arcus") to develop and commercialize vascular targeting agent ("VTA")
technologies. Arcus retains patent protection
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over VTA technologies used in the treatment of solid tumors by disrupting the
function of the tumor blood vessels. Under the terms of the agreement,
Techniclone will supply its intellectual property to the joint venture, and
OXiGENE will provide its next generation tubulin-binding compounds and, based on
the development success of the joint venture, will be required to spend up to
$20 million to fund the development expenses of Arcus. Any further funding of
the joint venture thereafter would be shared by the partners on an equal basis.
In addition, the Company has paid Techniclone an upfront licensing fee of $1
million in cash and purchased $2 million, or 585,009 shares, of Techniclone's
common stock. Techniclone has filed a registration statement covering the resale
of such shares under the Securities Act of 1933 by OXiGENE which has been
declared effective; however, there can be no assurances that OXiGENE will be
able to sell such shares on favorable terms, if at all. Additionally, under the
terms of the joint venture agreement, any sublicensing fees generated within the
joint venture will be allocated 75% to Techniclone and 25% to the Company until
Techniclone has received $10 million in sublicense fee revenues. Thereafter, the
joint venture partners will share licensing fees on an equal basis. The Company
will also be required to pay Techniclone $1 million in cash and purchase an
additional $1 million in Techniclone common stock upon the filing of an
Investigational New Drug Application for the first clinical candidate developed
by Arcus. Furthermore, Techniclone and OXiGENE will share equally any royalty
income or profit from the joint venture.
OXiGENE has generated a cumulative net loss of approximately $54.4 million for
the period from its inception through September 30, 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 September 30, 2000, OXiGENE had no long-term debt or loans
payable.
RESULTS OF OPERATIONS - THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Revenue
Three Months Ended September 30, 2000 and 1999
During the three months ended September 30, 2000 and 1999, the Company had
licensing revenue of $0.4 million and $0, respectively, and approximately $0.5
million and $0.3 million in interest income, respectively.
Nine Months Ended September 30, 2000 and 1999
For the nine months ended September 30, 2000 and 1999, the Company had licensing
revenue of $1.2 million and $0, respectively, and approximately $1.5 million and
$1.0 million in interest income, respectively.
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Operating Expenses
Three Months Ended September 30, 2000 and 1999
Operating expenses for the three months ended September 30, 2000 and 1999
amounted to approximately $3.6 million. Research and development expenses
decreased to $2.0 million, from $3.0 million for the comparable 1999 period.
General and administrative expenses for the three months ended September 30,
2000 increased to approximately $0.9 million from $0.6 million for the
comparable 1999 period. Further, an unrealized loss on short term investment of
$0.3 million was recorded for the three months ended September 30, 2000. During
the three months ended September 30, 2000, the Company transferred the
Techniclone common stock from the short-term investment category, which was
comprised entirely of the Techniclone common stock, to the available-for-sale
investment category.
Nine Months Ended September 30, 2000 and 1999
Operating expenses for the nine months ended September 30, 2000 and 1999, were
approximately $9.7 million and $8.6 million, respectively. The increase in
operating expenses is primarily attributable to activities connected with the
Combretastatin technology. Research and development expenses for the nine months
ended September 30, 2000 decreased to approximately $6.3 million from
approximately $6.5 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 September 30, 2000 was
lower than the market value on December 31, 1999, and the market value of the
Company's Common Stock at September 30, 1999 was less than the market value on
December 31, 1998, the charge previously recorded for financial reporting
purposes decreased for the nine months ended September 30, 2000, by
approximately $0.3 million. Without giving effect to such credit, research and
development expenses for the nine months ended September 30, 2000 increased by
approximately $0.1 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 development expenses have fluctuated, and are
expected to continue to fluctuate, from quarter to quarter. General and
administrative expenses for the nine months ended September 30, 2000 amounted to
approximately $2.3 million compared to $2.1 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 September 30, 2000, had an accumulated
deficit of approximately $54.4 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.
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The Company had cash and cash equivalents of approximately $29.3 million at
September 30, 2000, compared to approximately $30.4 million at December 31,
1999. This decrease in cash and cash equivalents of only approximately $1.1
million is mainly due to the fact that the Company received proceeds upon
signing the licensing agreement with BMS and the exercise of certain warrants
and stock options, and (with regard 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 nine months ended September 30, 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. 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 September 30, 2000, the Company has paid ILEX
approximately $8.5 million of which approximately $0.9 million was paid in the
nine-month period ended September 30, 2000. The amounts paid to ILEX have
fluctuated, and are expected to continue to fluctuate.
The Company anticipates that its cash and cash equivalents as of September 30,
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 September 30, 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
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losses is subject to an annual limitation, pursuant to Section 382 of the U.S.
Internal Revenue Code, of approximately $350,000.
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 other exposure to market risk. The
Company will develop policies and procedures to manage market risk in the future
as circumstances may require.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material suits or claims pending or, to the best of our knowledge,
threatened against the Company.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27.1 Financial Data Schedule (EDGAR Filing only).
(b) Reports on Form 8-K.
We did not file any reports on Form 8-K during the third
quarter of 2000.
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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.
OXiGENE, INC
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(registrant)
By:
/s/ Bo Haglund
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Bo Haglund
Chief Financial Officer
(Principal Financial and Accounting
Officer.)
Date: November 14, 2000