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, 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
OXiGENE, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3679168
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (IRS Employer
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 September 30, 1998, there were 10,204,049 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.
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 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 9
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 Securityholders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying 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 as of September 30, 1998 and December
31, 1997, the results of operations for the three-month and nine-month periods
ended September 30, 1998 and September 30, 1997, and the cash flows for the
nine-month periods ended September 30, 1998 and September 30, 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 September 30,
1998 are not necessarily indicative of the results of operations and cash flows
for any subsequent interim period or for the full year.
September 30, 1998 December 31, 1997
------------------- -------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents 34,839 40,137
Prepaid expenses 174 342
Interest receivable 551 300
Other 134 61
------------------- -------------------------
Total current assets 35,698 40,840
Furniture, fixtures and equipment, at cost 415 358
Accumulated depreciation (185) (126)
------------------- -------------------------
Net property and equipment 230 232
Deposits 80 80
------------------- -------------------------
Total Assets 36,008 41,152
=================== =========================
Liabilities and stockholders' equity Current Liabilities:
Accounts payable and accrued expenses 4,320 779
Other payables 52 172
------------------- -------------------------
Total current liabilities 4,372 951
Stockholders' equity Common stock $0.01 par value:
Authorized shares - 60,000,000 shares
Issued and outstanding
10,204,049 at September 30, 1998
10,185,765 at December 31, 1997 102 102
Additional paid-in capital 64,947 65,349
Deficit accumulated during the development stage (33,549) (25,469)
Foreign currency translation adjustment 136 219
------------------- -------------------------
Total stockholders' equity 31,636 40,201
------------------- -------------------------
Total liabilities and stockholders' equity 36,008 41,152
=================== =========================
Period from
February 22, 1988
(Inception)
Three months ended Nine months ended through
September 30, September 30, September 30,
1998 1997 1998 1997 1998
------------ ----------- ------------ ------------ ------------------------
Revenue
Interest income 497 576 1,559 1,659 5,208
Research 31
------------ ----------- ------------ ------------ ------------------------
Total revenue 497 576 1,559 1,659 5,239
Operating expenses
Research and development 3,331 1,578 7,506 5,678 26,680
General and administrative 569 561 2,133 1,647 12,108
------------ ----------- ------------ ------------ ------------------------
Total operating expenses 3,900 2,139 9,639 7,325 38,788
------------ ----------- ------------ ------------ ------------------------
Net loss (3,403) (1,563) (8,080) (5,666) (33,549)
============ =========== ============ ============ ========================
Net loss per common share (0.33) (0.16) (0.79) (0.59)
Weighted average number of
common shares outstanding 10,204 10,006 10,199 9,648
Period from
February 22, 1988
(Inception)
Nine months ended through
September 30, September 30,
1998 1997 1998
------------ ------------ -----------------------
Operating activities
Net Loss (8,080) (5,666) (33,549)
Adjustment to reconcile net loss to net cash
used in operating activities:
Depreciation 58 43 198
Compensation related to issuance of warrants,
options and stock appreciation rights (512) 255 951
Other 21
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (156) (502) (882)
Accounts payable and accrued expenses 3,392 630 4,388
------------ ------------ -----------------------
Net cash used in operating activities (5,298) (5,240) (28,873)
------------ ------------ -----------------------
Financing activities
Proceeds from issuance of common stock
and capital contribution 110 7,347 64,099
------------ ------------ -----------------------
Net cash provided by financing activities 110 7,347 64,099
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 (56) (166) (451)
------------ ------------ -----------------------
Net cash used in investing activities (56) (236) (543)
Effect of exchange rate on changes in cash (54) (226) 156
------------ ------------ -----------------------
Net increase (decrease) in cash and cash equivalents (5,298) 1,645 34,839
Cash and cash equivalents at beginning of period 40,137 40,517
------------ ------------ -----------------------
Cash and cash equivalents at end of period 34,839 42,162 34,839
============ ============ =======================
OXiGENE, INC.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
1. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated 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 nine-month period ended September 30,
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.
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
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 September 30, 1998 and 1997, total comprehensive loss amounted to
$3,508,000 and $1,561,000, respectively. During the nine months ended September
30, 1998 and 1997, total comprehensive loss amounted to $8,163,000 and
$5,869,000, respectively.
2. Stockholder's Equity
The market value of the Company's Common Stock at September 30, 1998 was
lower than the market price of the Company's Common Stock at December 31, 1997.
Accordingly, the charge related to stock appreciation rights ("SARs") that was
previously recorded for financial reporting purposes was reduced by a credit of
approximately $512,000 for the nine months ended September 30, 1998, to reflect
the market value of the unexercised SARs at September 30, 1998.
In July 1998, the Company amended the warrant agreement related to certain
warrants issued in connection with the Company's initial public offering that
were due to expire on August 26, 1998. As amended, on August 26, 1998, the term
of approximately 847,000 warrants to purchase 1.07 shares of the Company's
Common Stock (for an aggregate of approximately 907,000 shares), at $14.35 per
warrant, will be extended through December 31, 1999. In addition, the warrants
as amended will have a redemption feature.
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 $33.5
million for the period from its inception through September 30, 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 September 30, 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 - Nine Months Ended September 30, 1998 and 1997
During the nine-month periods ended September 30, 1998 and 1997, the
Company had no revenues, except for approximately $1.6 million and $1.7 million
of interest income, respectively. The decrease in interest income is
attributable primarily to a decrease in the Company's cash position during the
first nine months of 1998 compared to the comparable 1997 period. Operating
expenses for those periods were approximately $9.6 million and $7.3 million,
respectively. Research and development expenses for the nine-month period ended
September 30, 1998 increased to approximately $7.5 million from approximately
$5.7 million for the comparable 1997 period. The increase in research and
development expenses is attributable primarily to the Company's accelerated drug
development program. For the nine-month period ended September 30, 1997,
research and development expenses included a charge for financial reporting
purposes of approximately $0.3 million. This charge was recorded because the
market value per share of Common Stock on September 30, 1997 exceeded the
exercise price of SARs previously granted by the Company to certain clinical
investigation and consultants. Because the market value of the Company's Common
Stock at September 30, 1998 was less than the market at December 31, 1997, the
charge previously recorded for financial reporting purposes was reduced by
approximately $512,000 for the nine-month period ended September 30, 1998.
Without giving effect to such charge or credit, research and development
expenses increased by approximately $2.6 million. 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-month period ended September 30, 1998 increased to
approximately $2.1 million from approximately $1.6 million for the comparable
1997 period. The increase in general and administrative expenses is primarily
attributable to an overall increase in the Company's activities.
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, 1998, had a deficit
during the development stage of approximately $33.5 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 $34.8 million at
September 30, 1998, compared to approximately $40.1 million at December 31,
1997. The decrease in cash and cash equivalents is primarily a result of the
cash being used to finance the Company's operating activities. During the third
quarter of 1998, no options or warrants were exercised, compared to the exercise
of 168,504 options and warrants in the comparable 1997 period, resulting in net
proceeds to the Company of $1.9 million.
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"). Expenses invoiced in connection
with this collatorative arrangement amounted to approximately $1.3 million
through September 30, 1998. This amount includes fees payable to BMCC for
clinical 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 September 30, 1998, expenses
invoiced in connection with these contract research services amounted to
approximately $5.2 million, of which approximately $2.7 million was invoiced for
services in the nine-month period ended September 30, 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 September
30, 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 September 30, 1998.
Tax Matters
As of December 31, 1997, the Company had net operating loss carry forwards
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.
Year 2000 Compliance
Based on a review of its computer systems, the Company believes those
systems are "Year 2000 compliant." The Company has contracted with a number of
academic institutions and contract research and other organizations for the
performance of research, development, preclinical testing and clinical trial
services. The Company is conducting an inquiry and review of those institutions
and organizations to determine if their computer systems are "Year 2000
compliant." The effect on the Company, if any, if any such institution or
organization is found not to be "Year 2000 compliant," is not presently
determinable and will likely depend on the nature and extent of the work done by
such institution or organization.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
Not applicable.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material 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.
Current Report on Form 8-K, dated September 23, 1998, with respect to press
release announcing pre-clinical data regarding Combretastatin presented at the
17th Annual Meeting of the European Society for Therapeutic Radiology and
Oncology.
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: November 12, 1998 /s/ Bo Haglund
--------------------------------------- ---------------------------
Bo Haglund
Chief Financial Officer
OXiGENE, INC.
Quarterly Report on Form 10-Q
for the Fiscal Quarter Ended September 30, 1998
Exhibits
Exhibit
Number Description
- ------- -----------
27.1 Financial data schedule.