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, 2001
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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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of May 10, 2001 there were 11,373,593 shares of the Registrant's Common Stock
issued and outstanding.
OXiGENE, INC.
Cautionary Factors that may Affect Future Results
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Our disclosure and analysis in this report contain "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. These include statements, among others, related 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 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 intellectual property developed through
our joint venture with Peregrine Pharmaceuticals (formerly Techniclone
Corporation), forming ARCUS Therapeutics, LLC.
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 in our reports to
the Securities and Exchange Commission including our 10-Q, 8-K and 10-K reports.
Our filings list 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.
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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
Notes to Condensed Consolidated Financial Statements..............5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................7
Item 3. Quantitative and Qualitative Disclosures about Market Risk.........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
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) 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. 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, 2001 and December
31, 2000, the results of operations for the three months ended March 31, 2001
and March 31, 2000 and the cash flows for the three months ended March 31, 2001
and March 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, 2000. The results of operations for the
period ended March 31, 2001 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)
March 31, December 31,
2001 2000
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(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 24,525 $ 27,063
Available-for-sale security 859 549
Prepaid expenses 432 287
Interest receivable 234 277
Other 71 61
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Total current assets 26,121 28,237
Furniture, fixtures and equipment, at cost 941 827
Accumulated depreciation (209) (173)
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Net property and equipment 732 654
License agreements, net of accumulated
amortization 2,162 2,236
Deposits 84 102
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Total assets $ 29,099 $ 31,229
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Amount payable for license agreement -
current $ 268 $ 251
Accrued expenses:
Research and development expenses 361 687
Other accrued expenses 426 499
Other payables 552 494
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Total current liabilities 1,607 1,931
Amount payable under license agreement -
noncurrent 707 707
Deferred licensing revenue 7,312 7,445
Stockholders' equity
Common stock, $0.01 par value:
Authorized shares - 60,000,000 shares
Issued and outstanding - 11,373,593
at March 31, 2001 and
December 31, 2000 114 114
Common stock issuable - 42,000
shares at March 31, 2001 and
December 31, 2000 375 370
Additional paid-in capital 82,098 81,984
Accumulated deficit (58,645) (56,502)
Accumulated other comprehensive loss (568) (973)
Notes receivable (3,657) (3,609)
Deferred compensation (244) (238)
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Total stockholders' equity 19,473 21,146
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Total liabilities and stockholders' equity $ 29,099 $ 31,229
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The accompanying notes are an integral part of these statements.
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OXIGENE, INC.
Condensed Consolidated Statements of Operations
(All amounts in thousands, except per share date)
(Unaudited)
Three months ended March 31,
2001 2000
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REVENUES
Licensing revenue $ 757 $ 483
Interest income 352 449
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Total revenues 1,109 932
EXPENSES
Costs relating to licensing revenue 624 347
Amortization of license agreement 74 25
Research and development 1,251 2,477
General and administrative 1,187 878
Write-down of available-for-sale security 99 --
Interest expense 17 25
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Total expenses 3,252 3,752
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NET LOSS $ (2,143) $ (2,820)
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NET LOSS PER COMMON SHARE $ (0.19) $ (0.25)
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 11,226 11,282
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The accompanying notes are an integral part of these statements.
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OXIGENE, INC.
Condensed Consolidated Statements of Cash Flows
(All amounts in thousands)
(Unaudited)
Three months ended March 31,
2001 2000
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OPERATING ACTIVITIES
Net loss $(2,143) $(2,820)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Write-down of available-for-sale security 99 --
Depreciation 43 10
Compensation related to issuance of warrants,
options and stock appreciation rights 66 535
Amortization of licensing revenue (133) (133)
Amortization of licensing agreement 74 24
Changes in operating assets and liabilities:
Accounts receivable - license agreement -- 9,250
Prepaid expenses and other current assets (129) 445
Amounts payable for license agreement 17 25
Accounts payable and accrued expenses (301) (584)
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Net cash (used in) provided by operating activities (2,407) 6,752
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FINANCING ACTIVITIES
Proceeds from issuance of common stock and
capital contribution -- 371
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Net cash provided by financing activities -- 371
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INVESTING ACTIVITIES
Deposits 18 (74)
Purchase of furniture, fixture and equipment (125) (5)
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Net cash provided by (used in) investing activities (107) (79)
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Effect of exchange rate on changes in cash (24) (11)
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Net decrease/increase in cash and cash equivalents (2,538) 7,033
Cash and cash equivalents at beginning of period 27,063 30,448
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Cash and cash equivalents at end of period $24,525 $37,481
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The accompanying notes are an integral part of these statements.
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OXIGENE, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2001
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 ended March 31, 2001 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001. 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, 2000.
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 the
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, 2001 and 2000, total comprehensive loss
amounted to $1,738,000 and $2,874,000, respectively.
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OXIGENE, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2001
2. STOCKHOLDER'S EQUITY
The market value of the Company's Common Stock at March 31, 2001 was lower than
the exercise price of issued SAR's. Accordingly, there was no financial
reporting impact for the three months ended March 31, 2001. During the three
months ended March 31, 2001, the Company recorded stock-based compensation
expense of approximately $66,000 in connection with options issued to
non-employees in the prior years.
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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. The Company's activities initially were 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's efforts have
focused on developing products for application as direct cancer treatment
agents, particularly vascular targeting agents ("VTA"). Additionally, the
Company is investigating certain of its developmental stage products for
anti-inflammatory agents and other applications such as ocular
neo-vascularization and skin disorders.
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 (Lund, Sweden), Baylor University (Waco, Texas), the Danish Cancer
Society (Aarhus, Denmark), the Gray Laboratory Cancer Research Trust (Middlesex,
United Kingdom) and Arizona State University (Tempe, Arizona). Consequently,
OXiGENE believes that its research and development expenditures have been
somewhat lower than those of other comparable 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
Peregrine Pharmaceuticals ("Peregrine") (formerly Techniclone Corporation),
forming ARCUS Therapeutics, LLC ("ARCUS") to develop and commercialize VTA
technologies. ARCUS retains patent protection over VTA technologies used in the
treatment of solid tumors by disrupting the function of the tumor vessels. Under
the terms of the agreement, Peregrine will supply its intellectual property to
the joint venture, and OXiGENE will provide licenses with respect to its next
generation tubulin-binding compounds for use in conjunction with a Peregrine
antibody 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 Peregrine an
upfront licensing fee of $1 million in cash and purchased $2 million, or 585,009
shares, of Peregrine's common stock. Peregrine 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 assurance
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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 Peregrine and
25% to the Company until Peregrine has reached $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 Peregrine $1 million in
cash and purchase an additional $1 million in Peregrine common stock upon the
filing of an Investigational New Drug application for the first clinical
candidate developed by ARCUS. Furthermore, Peregrine and OXiGENE will share
equally any royalty income or profit from the joint venture.
In June 1999, the Company entered into a research collaboration agreement with
Active Biotech of Sweden to explore the use of OXiGENE's benzamide and
nicotinamide technology (the benzamide technology also being the platform
technology for Declopramide) in the treatment of inflammatory diseases. Under
the agreement, Active Biotech will evaluate the technology's potential as a
treatment for inflammatory diseases. Active Biotech will conduct research with
an option to jointly develop anti-inflammatory drug candidates with OXiGENE upon
successful completion of the initial research.
OXiGENE has generated a cumulative net loss of approximately $58.6 million for
the period from its inception through March 31, 2001. 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, 2001, OXiGENE had no long-term debt or loans payable
except for certain liabilities under the licensing agreement.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2001 AND 2000
REVENUES
During the three-month periods ended March 31, 2001 and 2000, the Company had
licensing revenue of $0.8 million and $0.5 million, respectively, and
approximately $0.4 million and $0.4 million in interest income, respectively.
The $0.3 million increase in licensing revenue between March 31, 2000 and 2001
is due to the BMS Sub-License Agreement, under which approximately $0.6 million
of research and development expenses in the three months ended March 31, 2001,
compared to $0.3 million in the respective period in 2000, were recoverable and,
accordingly, classified as licensing revenue and costs relating to licensing
revenue.
EXPENSES
Total expenses for the three month periods ended March 31, 2001 and 2000 were
approximately $3.3 million and $3.8 million, respectively. The decrease in total
expenses is primarily attributable to a reduction in R&D spending, which is a
result of BMS absorbing the clinical and development related costs associated
with Combretastatin A4 Prodrug ("CA4P"), partially offset by higher general and
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administrative expenses. Research and development expenses for the three month
period ended March 31, 2001 decreased to approximately $1.3 million from
approximately $2.5 million for the comparable 2000 period. The costs associated
with the Phase I clinical trials for CA4P and Declopramide were significantly
reduced for the three month period ended March 31, 2001 as compared to the same
period in 2000. The Company recorded non-cash charges related to the stock
appreciation rights ("SARs") previously granted by the Company to certain
clinical investigators and consultants and non-qualified stock options ("NQSOs")
granted to certain non-employee consultants and advisory board members. Because
the fair market value of the Company's Common Stock at March 31, 2001 was lower
than the SARs' exercise price, there were no charges related to SARs during the
three months ended March 31, 2001. During the three months ended March 31, 2000,
a $116,000 charge was recorded regarding the SARs. During the three months ended
March 31, 2001 and 2000, the Company recorded approximately $66,000 and
$419,000, respectively, of research and development expenses related to the fair
value of the NQSOs vested during the respective period. Without giving effect to
the charges related to SARs or NQSOs, research and development expenses for the
three months ended March 31, 2001 decreased by approximately $757,000, compared
to the comparable 2000 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 and NQSOs,
research and 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, 2001 amounted to approximately $1.2
million compared to $0.9 million for the comparable 2000 period. The higher
general and administrative expenses related to the transfer of functions from
our Swedish offices to our new corporate headquarters in Watertown,
Massachusetts.
LIQUIDITY AND CAPITAL RESOURCES
OXiGENE has experienced net losses and negative cash flow from operations each
year since its inception, except for the year ended December 31, 2000, and, as
of March 31, 2001, had an accumulated deficit of approximately $58.6 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 and the
exercise of warrants and stock options.
The Company had cash and cash equivalents of approximately $24.5 million at
March 31, 2001, compared to approximately $27.1 million at December 31, 2000.
The decrease in cash and cash equivalents of $2.6 million was primarily
attributable to the funding of the basic research programs associated with the
next generation of tubulin binding vascular targeting agents and costs
associated with ARCUS for the development of antibody VTA's.
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.
In October 2000, the Company announced that the corporate headquarter was moving
to Watertown, MA, from Stockholm and that the Stockholm office will close during
2001. The Company makes quarterly payments to the University of Lund, Lund,
Sweden, and Baylor University Waco, TX, for pre-clinical research.
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The Company anticipates that its cash and cash equivalents as of March 31, 2001,
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, 2001.
TAX MATTERS
As of December 31, 2000, the Company had net operating loss carryforwards of
approximately $76.8 million for U.S. and foreign income tax purposes, of which
$45.9 million expires for U.S. purposes through 2020. 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's cash and cash equivalents are maintained primarily in U.S. dollar
accounts and amounts payable for research and development to research
organizations are contracted in U.S. dollars. Accordingly, the Company's
exposure to foreign currency risk is limited because its transactions are
primarily based in U.S. 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.
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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 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.
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
None
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the first
quarter of 2001.
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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.
(Registrant)
By /s/ Frederick Driscoll
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Frederick Driscoll, President of Operations
and Finance (Principal Financial Officer)
Date: May 15, 2001
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