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, 1999
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 of (IRS Employer Identification No.)
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, 1999, there were 10,207,049 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.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 1
Consolidated Balance Sheets 2
Consolidated Statement of Operations 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosure of
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
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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, 1999 and December 31,
1998, the results of operations for the three months ended March 31, 1999 and
March 31, 1998, and the cash flows for the three month periods ended March 31,
1999 and March 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, 1998. The results of
operations for the period ended March 31, 1999 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,
1999 1998
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(unaudited)
Assets
Current assets:
Cash and cash equivalents 29,938 31,756
Prepaid expenses 488 609
Interest receivable 303 196
Other 151 173
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Total current assets 30,880 32,734
Furniture, fixtures and equipment, at cost 377 372
Accumulated depreciation (182) (167)
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Net property and equipment 195 205
Deposits 80 80
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Total assets 31,155 33,019
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Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses 2,799 2,171
Other payables 21 656
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Total current liabilities 2,820 2,827
Stockholders' equity:
Common stock, $0.01 par value:
Authorized shares - 60,000,000 shares
Issued and outstanding
10,207,049 at March 31, 1999
10,207,049 at December 31, 1998 102 102
Additional paid-in capital 68,566 68,715
Deficit accumulated during the
development stage (38,819) (36,965)
Deferred compensation (1,876) (1,985)
Accumulated other comprehensive income 362 325
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Total stockholders' equity 28,335 30,192
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Total liabilities and stockholders' equity 31,155 33,019
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The accompanying notes are an integral part of this statement.
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OXiGENE, INC.
(A development stage company)
Condensed Consolidated Statements of Operations
(All amounts in thousands, except per share date)
(Unaudited)
Period from
Three months ended February 22, 1998
March 31, inception) through
1999 1998 March 31, 1999
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Revenue
Interest Income 375 547 6,022
Research income 31
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Total revenue 375 547 6,053
Operating expenses
Research and development 1,450 1,756 30,983
General and administrative 778 662 13,889
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Total operating expenses 2,228 2,418 44,872
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Net loss (1,853) (1,871) (38,819)
Net loss per common share (0.18) (0.18)
Weighted average number of common
shares outstanding 10,207 10,194
The accompanying notes are an integral part of this statement.
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OXiGENE, INC.
(A development stage company)
Condensed Consolidated Statements of Cash Flows
(All amounts in thousands)
(Unaudited)
Period from
Three months ended February 22, 1998
March 31, (inception) through
1999 1998 March 31, 1999
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Operating activities
Net loss (1,853) (1,871) (38,819)
Adjustment to reconcile net loss to net cash
used in operating activities:
Loss on securities available-for-sale 12
Depreciation 19 22 221
Abandonment of furniture, fixtures and
equipment 13
Compensation related to issuance of
warrants, options and stock appreciation
rights (40) (130) 2,678
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 36 64 (985)
Accounts payable and accrued expenses 20 479 2,931
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Net cash used in operating activities (1,818) (1,436) (33,949)
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Financing activities
Proceeds from investor 100
Repayment to investor (100)
Proceeds from issuance of common stock and
capital contribution 66 64,062
Other capital contribution 53
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Net cash provided by financing activities 0 66 64,115
Investing activities
Purchase of securities available-for-sale (3,368)
Proceeds from sale of securities
available-for-sale 3,356
Deposits (80)
Purchase of furniture, fixture and equipment (13) (107) (450)
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Net cash used in investing activities (13) (107) (542)
Effect of exchange rate on changes in cash 13 (20) 314
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Net (decrease)/increase in cash and cash
equivalents (1,818) (1,497) 29,938
Cash and cash equivalents at beginning of
period 31,756 40,137
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Cash and cash equivalents at end of period 29,938 38,640 29,938
======= ====== =======
The accompanying notes are an integral part of this statement.
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OXiGENE, INC.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
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, 1999
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1998.
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 Loss
During the three months ended March 31, 1999 and 1998, total
comprehensive loss amounted to $1,816,000 and $1,887,000, respectively.
2. Stockholders' Equity
The market value of the Company's Common Stock at March 31, 1999 was
lower than the market price of the Company's Common Stock at December 31, 1998.
Accordingly, the charge related to SARs that previously was recorded for
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financial reporting purposes was reduced by approximately $149,000 for the three
months ended March 31, 1999. 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 three months ended March 31, 1999, the Company
recorded stock-based compensation expense of approximately $109,000 related to
options issued to non-employees in 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 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 $38.8
million for the period from its inception through March 31, 1999. 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, 1999, 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, 1999 and 1998
During the three-month periods ended March 31, 1999 and 1998, the
Company had no revenues, except for approximately $0.4 million and $0.5 million
of interest income in each such three-month period, respectively. Operating
expenses for those periods were approximately $2.2 million and $2.4 million,
respectively. Research and development expenses for the three-month period ended
March 31, 1999 decreased to approximately $1.5 million from approximately $1.8
million for the comparable 1998 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, 1999 increased to approximately $0.8 million from
approximately $0.7 million for the comparable 1998 period. The increase in
general and administrative expenses is primarily attributable to an increase in
the Company's activities, 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, 1999, had a
deficit during the development stage of approximately $38.8 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 proceeds it
has received from private and public equity financings.
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The Company had cash and cash equivalents of approximately $29.9
million at March 31, 1999, compared to approximately $31.8 million at December
31, 1998. 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 1999, the Company received no proceeds
from the exercise of outstanding options, warrants and SARs, compared to $0.1
million in the first quarter of 1998.
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). In connection with the
termination of certain clinical trials, the Company's Lund office is expected to
close in the third quarter of 1999.
The Company pays the University of Lund, Sweden and other hospitals,
where applicable, on a per patient basis for conducting its clinical trials. The
Company has an agreement with ILEX(TM) Oncology Inc., a contract research
organization in San Antonio, Texas ("ILEX"), pursuant to which ILEX performs
contract research services for the Company in connection with the preclinical
and clinical testing of compounds under development by the Company, particularly
Declopramide and Combretastatin A-4 Prodrug. Through March 31, 1999, the Company
has paid ILEX approximately $5.3 million, of which approximately $400,000 was
paid in the three-month period ended March 31, 1999. 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, 1999 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, 1999.
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Tax Matters
As of December 31, 1998, the Company had net operating loss
carryforwards of approximately $49.0 million for U.S. and foreign income tax
purposes, of which $26.6 million expires for U.S. purposes through 2018. 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
The Company's internal computer information system will be Year 2000
compliant before year end. These systems consist only of standard software from
established and recognized providers. Any new software purchases will be Year
2000 compliant.
The Company's Year 2000 issues and potential business interruptions,
costs, damages or losses related thereto are primarily dependent upon the Year
2000 compliance of third parties. These third parties consist mainly of leading
educational institutions and universities in the US and Europe, and clinical
research organizations. The Company has no reason to believe that these third
parties will not be Year 2000 compliant. However, the Company is in the process
of reviewing its third party relationships in order to assess and address Year
2000 issues with respect to these third parties.
The costs associated with the Company's Year 2000 compliance have been
nominal, and the Company believes that the remaining costs will be minimal and
will not have a material adverse effect on its financial condition or results of
operations.
The Company intends to develop a contingency plan to be able to react
to any Year 2000 problems should they arise.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
The Company's cash and cash equivalents are maintained primarily in US
dollar accounts and amounts payable for research and development to research
organizations are contracted in US dollars. Accordingly, the Company's exposure
to foreign currency risk is limited because its transactions are primarily based
in US dollars. The Company does not have any other exposure to market risk. The
Company will develop policies and procedures to manage market risk in the future
as circumstances may require.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal suits or claims 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 February 16, 1999, with respect
to the press release relating to the discontinuance of the
Company's Neu-Sensamide (TM) project.
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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.
Date: May 14, 1999 /s/ Bo Haglund
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Bo Haglund
Chief Financial Officer
OXiGENE, INC.
Quarterly Report on Form 10-Q
for the Fiscal Quarter Ended March 31, 1999
Exhibits
Exhibit
Number Description
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27.1 Financial data schedule.