SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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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, 1998
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
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OXiGENE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3679168
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
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:
Title of Class
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 March 31, 1998, there were 10,197,765 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.
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INDEX PAGE NO.
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements 1
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Consolidated Balance Sheets 2
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Consolidated Statement of Operations 3
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Consolidated Statements of Cash Flows 4
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Notes to Consolidated Financial Statements 5
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Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
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Item 3. Quantitative and Qualitative Disclosures About
Market Risk 7
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PART II. OTHER INFORMATION 10
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Item 1. Legal Proceedings 10
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Item 2. Changes in Securities 10
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Item 3. Defaults Upon Senior Securities 10
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Item 4. Submission of Matters to a Vote
of Securityholders 10
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Item 5. Other Information 10
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Item 6. Exhibits and Reports on Form 8-K 10
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SIGNATURES 11
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying consolidated financial statements have been prepared by
OXiGENE, Inc. (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, 1998 and December 31,
1997, the results of operations for the three months ended March 31, 1998 and
March 31, 1997, and the cash flows for the three month periods ended March 31,
1998 and March 31, 1997. 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, 1997. The results of
operations for the period ended March 31, 1998 are not necessarily indicative of
the results of operations and cash flows for any subsequent interim period or
for the full year.
OXiGENE, Inc.
(A development stage company)
Condensed Consolidated Balance Sheets
(All amounts in thousands)
March 31, December 31,
1998 1997
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Assets
Current assets:
Cash and cash equivalents 38,640 40,137
Prepaid expenses 303 342
Interest receivable 266 300
Other 67 61
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Total current assets 39,276 40,840
Furniture, fixtures and
equipment, at cost 461 358
Accumulated depreciation (146) (126)
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Net property and equipment 315 232
Deposits 80 80
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Total Assets 39,761 41,152
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Liabilities and stockholders' equity
Current Liabilities:
Accounts payable and accrued
expenses 1,367 779
Other payables 55 172
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Total current liabilities 1,422 951
Stockholders' equity
Common stock $0.01 par value:
Authorized shares - 60,000,000 shares
Issued and outstanding
10,197,765 at March 31, 1998
10,185,765 at December 31, 1997 102 102
Additional paid-in capital 65,284 65,349
Deficit accumulated during the
development stage (27,340) (25,469)
Foreign currency translation adjustment 203 219
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Total stockholders' equity 38,249 40,201
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Total liabilities and stockholders' equity
39,671 41,152
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The accompanying notes are an integral part of this statement
OXiGENE, Inc.
(A development stage company)
Condensed Consolidated Statements of Operations
(All amounts in thousands, except per share data)
(Unaudited))
Period from
February 22. 1988
(inception)
Three months ended March 31, through
1998 1997 March 31, 1998
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Revenue
Interest income 547 531 4,196
Research income 31
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Total revenue 547 531 4,227
Operating expenses
Research and development: 1,756 1,732 20,930
General and administrative 662 475 10,637
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Total operating expenses 2,418 2,207 31,567
Net loss (1,871) (1,676) (27,340)
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Net loss per common share (0.18) (0.18)
Weighted average number of
common shares outstanding 10,194 9,180
The accompanying notes are an integral part of this statement
OXiGENE, Inc.
(A development stage company)
Condensed Consolidated Statements of Cash Flows
(All amounts in thousands)
(Unaudited)
Period from
February 22, 1988
Three months (inception)
ended March 31, through
1998 1997 March 31, 1998
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Operating activities
Net Loss (1,871) (1,676) (27,340)
Adjustment to reconcile net loss to net cash
used in operating activities:
Depreciation 22 7 162
Compensation related to issuance of warrants,
options and stock appreciation rights (130) 544 1,333
Other 21
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 64 292 (660)
Accounts payable and accrued expenses 479 668 1,473
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Net cash used in operating activities (1,436) (165) (25,011)
Financing activities
Proceeds from issuance of common stock
and capital contributions 66 2,708 64,055
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Net cash provided by financing activities 66 2,708 64,055
Investing activities
Purchases of securities available-for-sale (3,368)
Proceeds from sale of securities available-for-sale 3,356
Deposits (70) (80)
Purchase of furniture, fixture and equipment (107) (16) (502)
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Net cash used in investing activities (107) (86) (594)
Effect of exchange rate on changes in cash (20) (233) 190
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Net increase (decrease) in cash and cash equivalents (1,497) 2,224 38,640
Cash and cash equivalents at beginning of period 40,137 40,517
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Cash and cash equivalents at end of period 38,640 42,741 38,640
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The accompanying notes are an integral part of this statement
OXiGENE, INC.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
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, 1998
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. 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, 1997.
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
As of January 1, 1998, the Company adopted Statement 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components. However, the adoption of
Statement 130 has had no impact on the Company's net loss or stockholders'
equity. Statement 130 requires foreign currency translation adjustments, which
prior to the adoption of Statement 130 were reported separately in stockholders'
equity, to be included in other comprehensive income. During the three months
ended March 31, 1998 and 1997, total comprehensive loss amounted to $1,887,000
and $1,570,000, respectively.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary OXiGENE Europe AB. Intercompany balances
and transactions have been eliminated.
2. Stockholder's Equity
During the three month period ended March 31, 1998, the Company issued
12,000 shares of Common Stock upon exercise of previously granted options,
warrants and stock appreciation rights ("SARs"), with proceeds to the Company of
approximately $66,000.
The market value of the Company's Common Stock at March 31, 1998 was lower
than the market price of the Company's Common Stock at December 31, 1997.
Accordingly, the charge related to SARs previously recorded for financial
reporting purposes was reduced by approximately $130,000 for the three months
ended March 31, 1998. Because upon exercise SARs are satisfied only by the
distribution of shares of Common Stock, the charge was debited to additional
paid-in capital.
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Description of Business
OXiGENE is a development-stage pharmaceutical company engaged in the
research and development of products designed to enhance the clinical efficacy
of radiation and chemotherapy, the most common and traditional forms of
non-surgical cancer treatment. 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. OXiGENE has generated a cumulative net loss of approximately $27.3
million for the period from its inception through March 31, 1998. 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
financings. As of March 31, 1998, OXiGENE had no long-term debt or loans
payable. Since its inception, the Company has had no material amount of
licensing or other fee income, and does not anticipate any such income for the
foreseeable future.
Results of Operations - Three Months Ended March 31, 1998 and 1997
During the three-month periods ended March 31, 1998 and 1997, the Company
had no revenues, except for approximately $0.5 million of interest income in
each such three-month period. Operating expenses for those periods were
approximately $2.4 million and $2.2 million, respectively. Research and
development expenses for the three-month period ended March 31, 1998 increased
to approximately $1.8 million from approximately $1.7 million for the comparable
1997 period. Research and development expenses for the three months ended March
31, 1997 included a charge for financial reporting purposes of approximately
$0.5 million. This charge was recorded because the market value per share of
Common Stock on March 31, 1997 exceeded the exercise price of SARs previously
granted by the Company to certain clinical investigators and consultants.
Because the market value of the Company's Common Stock at March 31, 1998 was
less than the market value on December 31, 1997, the charge previously recorded
for financial reporting purposes was reduced by approximately $100,000 for the
three months ended March 31, 1998. Without giving effect to such charge,
research and development expenses increased by approximately $0.7 million
compared to the comparable 1997 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 three-month
period ended March 31, 1998 increased to approximately $0.7 million from
approximately $0.5 million for the comparable 1997 period. The increase in
general and administrative expenses is primarily attributable to an increase in
the Company's activities, including, particularly, in the United States.
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, 1998, had a deficit during
the development stage of approximately $27.3 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 the net proceeds it
has received from private and public equity financings.
The Company had cash and cash equivalents of approximately $38.6 million at
March 31, 1998, compared to approximately $40.1 million at December 31, 1997.
The decrease in cash and cash equivalents in the first quarter is primarily a
result of the cash being used to finance the Company's operating activities.
During the first quarter of 1998, the Company received approximately $0.1
million upon exercise of outstanding options, warrants and SARs, compared to
$2.7 million in the first quarter of 1997.
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 and Lund, Sweden (both
research and clinical trial coordination centers). The Company pays the
University of Lund, Sweden and other hospitals, where applicable, on a per
patient basis for conducting its clinical trials. In August 1997, the Company
expanded its collaboration with Boston Medical Center Corporation, an affiliate
of Boston University Medical Center ("BMCC"). Through March 31, 1998, the
Company has paid BMCC approximately $0.5 million. This amount includes fees
payable to BMCC for clincial trial services related to the testing of Cordycepin
and expenses in connection with the OXiGENE-sponsored research and development
facility at BMCC. Further, 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 for the Company in connection
with the preclinical and clinical testing of compounds under development by the
Company, particularly Oxi-104 and Combretastatin. Through March 31, 1998, the
Company has paid ILEX approximately $2.9 million, of which approximately $0.4
million was paid in the three-month period ended March 31, 1998. The Company
expects that the amounts payable to ILEX from time to time will increase
significantly.
The Company anticipates that its cash and cash equivalents as of March 31,
1998 should be sufficient to satisfy the Company's projected cash requirements
for approximately 30 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 the 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
commercializing 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, 1998.
Tax Matters
As of December 31, 1997, the Company had net operating loss carryforwards
of approximately $50.0 million for U.S. and foreign income tax purposes, of
which $36 million expires for U.S. purposes through 2012. 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
Not Applicable
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal proceedings pending or, to the Company's best
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
None.
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.
No reports on Form 8-K were filed during the first quarter of
1998.
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 14, 1998
-------------- /s/BO HAGLUND
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Bo Haglund
Chief Financial Officer