SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934
For Quarter Ended December 31, 2001
Commission File Number 0-23252
IGEN INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 94-2852543
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(State or other jurisdiction (IRS Employer
incorporation or organization) Identification No.)
16020 INDUSTRIAL DRIVE, GAITHERSBURG, MD 20877
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(Address of principal executive offices) (Zip Code)
301-869-9800
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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 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 _______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 1, 2002
----- -------------------------------
Common Stock, $0.001 par value 21,953,605
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1: CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets - December 31, 2001 and March 31, 2001 3
Consolidated Statements of Operations - For the three and nine months
ended December 31, 2001 and 2000 4
Consolidated Statements of Cash Flows - For the nine months ended
December 31, 2001 and 2000 5
Notes to Consolidated Financial Statements 6
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 16
Item 3: QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK 23
PART II OTHER INFORMATION
Item 1: LEGAL PROCEEDINGS 24
Item 2: CHANGES IN SECURITIES AND USE OF PROCEEDS 24
Item 6: EXHIBITS AND REPORTS ON FORM 8-K 25
SIGNATURES
IGEN INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
December 31, 2001 March 31,2001
----------------- -------------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 5,884 $ 4,872
Short term investments 43,433 10,217
Accounts receivable, net 9,114 5,863
Inventory 3,898 4,995
Other current assets 1,765 1,834
--------- ---------
Total current assets 64,094 27,781
--------- ---------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS: 21,456 18,106
Accumulated depreciation and amortization (12,804) (10,021)
--------- ---------
Equipment and leasehold improvements, net 8,652 8,085
--------- ---------
NONCURRENT ASSETS:
Investment in and advances to affiliate 2,354 -
Restricted cash 2,864 2,120
Other 1,001 1,147
--------- ---------
Total noncurrent assets 6,219 3,267
--------- ---------
TOTAL $ 78,965 $ 39,133
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 13,914 $ 13,170
Note payable 4,971 4,668
Deferred revenue 614 794
Obligations under capital leases 57 53
--------- ---------
Total current liabilities 19,556 18,685
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NONCURRENT LIABILITIES:
Subordinated convertible debentures 29,581 28,229
Note payable 19,374 23,142
Convertible preferred stock dividend payable 2,983 5,121
Other noncurrent liabilities 12 329
--------- ---------
Total noncurrent liabilities 51,950 56,821
--------- ---------
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock, $0.001 par value, 10,000,000 shares authorized,
Issuable in Series: Series A, 600,000 shares designated, none issued; Series
B, 25,000 designated, 8,500 and 18,200 shares issued and outstanding-
liquidation value of $8,500 and $18,200 plus accrued and unpaid dividends 1 1
Common stock: $0.001 par value, 50,000,000 shares authorized: 21,679,000 and
17,261,400 shares issued and outstanding 22 17
Additional paid-in capital 201,889 124,816
Stock notes receivable (3,710) (3,710)
Accumulated deficit (190,743) (157,497)
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Total stockholders' equity (deficit) 7,459 (36,373)
--------- ---------
TOTAL $ 78,965 $ 39,133
========= =========
See notes to consolidated financial statements
IGEN INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
2001 2000 2001 2000
-------- -------- -------- --------
REVENUES:
Royalty income $ 5,458 $ 4,219 $ 16,554 $ 11,883
Product sales 4,516 4,081 10,932 8,506
Contract fees 450 200 593 2,255
-------- -------- -------- --------
10,424 8,500 28,079 22,644
-------- -------- -------- --------
OPERATING COSTS AND EXPENSES:
Product costs 1,409 1,278 3,406 2,848
Research and development 6,397 7,640 20,756 19,931
Selling, general and administrative 5,902 4,090 17,543 12,105
Litigation costs-net 900 3,300 8,812 7,221
-------- -------- -------- --------
14,608 16,308 50,517 42,105
-------- -------- -------- --------
LOSS FROM OPERATIONS (4,184) (7,808) (22,388) (19,461)
OTHER EXPENSE-NET (1,287) (1,240) (3,807) (3,481)
EQUITY IN LOSS OF AFFILIATE (3,756) - (7,001) -
-------- -------- -------- --------
LOSS BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE (9,227) (9,048) (33,246) (22,942)
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE - (6,995) - (6,995)
-------- -------- -------- --------
NET LOSS (9,227) (16,043) (33,246) (29,937)
PREFERRED DIVIDENDS (349) (526) (1,179) (1,566)
-------- -------- -------- --------
NET LOSS ATTRIBUTED TO COMMON
SHAREHOLDERS $ (9,576) $(16,569) $(34,425) $(31,503)
======== ======== ======== ========
BASIC AND DILUTED NET LOSS
PER COMMON SHARE:
Loss before cumulative effect of accounting
change $ (0.48) $ (0.60) $ (1.80) $ (1.56)
Cumulative effect of accounting change - (0.44) - (0.44)
-------- -------- -------- --------
BASIC AND DILUTED NET LOSS PER
COMMON SHARE $ (0.48) $ (1.04) $ (1.80) $ (2.00)
======== ======== ======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING-BASIC AND DILUTED 20,105 15,861 19,146 15,714
======== ======== ======== ========
See notes to consolidated financial statements
IGEN INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
NINE MONTHS ENDED
DECEMBER 31,
2001 2000
-------- --------
OPERATING ACTIVITIES:
Net loss $(33,246) $(29,937)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization 3,133 2,761
Amortization of detachable warrant and stock options 1,148 1,062
Beneficial conversion feature of subordinated debentures - 6,995
Changes in assets and liabilities:
Increase in accounts receivable (3,251) (2,588)
Decrease (increase) in inventory 1,097 (1,011)
Decrease in other current assets 69 246
(Decrease) increase in deferred revenue (453) 461
Increase in accounts payable and accrued expenses 1,619 2,294
-------- --------
Net cash used for operating activities (29,884) (19,717)
-------- --------
INVESTING ACTIVITIES:
Expenditures for equipment and leasehold improvements (4,250) (4,214)
Investments in and advances to affiliate (1,454) -
Purchase of short-term investments (67,403) (5,367)
Sale and maturities of short-term investments 34,187 34,939
-------- --------
Net cash (used for) provided by investing activities (38,920) 25,358
-------- --------
FINANCING ACTIVITIES:
Issuance of common stock-net 77,382 158
Payments on notes payable (3,465) (1,084)
Preferred dividends paid (3,317) (1,179)
Payments on capital lease obligations (40) (57)
Restricted cash (744) (488)
-------- --------
Net cash provided by (used for) financing activities 69,816 (2,650)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,012 2,991
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,872 3,172
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,884 $ 6,163
======== ========
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING
AND FINANCIAL ACTIVITIES:
Accrued unpaid dividends $ 1,179 $ 1,566
======== ========
Common stock issued to pay accrued interest $ 875 $ -
======== ========
Common stock issued in exchange for notes receivable $ - $ 3,710
======== ========
Equipment and leasehold improvement contributed to affiliate $ 900 $ -
======== ========
See notes to consolidated financial statements
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information. These financial statements should be
read together with the audited financial statements and notes for the year ended
March 31, 2001 contained in the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements have been condensed or
omitted. In the opinion of the Company's management, the financial statements
reflect all adjustments necessary to present fairly the results of operations
for the three and nine-month periods ended December 31, 2001 and 2000, the
Company's financial position at December 31, 2001 and the cash flows for the
nine-month periods ended December 31, 2001 and 2000. The results of operations
for the interim period are not necessarily indicative of the results of the
entire year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents and Short-Term Investments - Includes cash in banks, money
market funds, securities of the U.S. Treasury, and certificates of deposit with
original maturities of three months or less. The Company has classified its
short-term investments consisting of U.S. Government Obligations and Corporate
Debt-Securities as "available for sale". These available for sale securities are
accounted for at their fair value and unrealized gains and losses on these
securities, if any, are reported as a separate component of stockholders'
equity. The Company uses specific identification on computing realized gains and
losses on sale of investments.
Concentration of Credit Risk - The Company has invested its excess cash
generally in securities of the U.S. Treasury, money market funds, certificates
of deposit and corporate bonds. The Company invests its excess cash in
accordance with a policy objective that seeks to ensure both liquidity and
safety of principal. The policy limits investments to certain types of
instruments issued by institutions with strong investment grade credit ratings
and places restrictions on their terms and concentrations by type and issuer.
The Company has not experienced any losses on its investments due to credit
risk.
Restricted Cash - The Company has a debt service reserve of $1.7 million at
December 31, 2001 that is restricted in use and held in trust as collateral(see
Note 4). In conjunction with the Roche Diagnostics (Roche) litigation, the
Company has escrowed a total of $1.1 million related to Physician's Office
Laboratory sales (see Note 8).
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Inventory is recorded at the lower of cost or market using the first-in,
first-out method and consists of the following (in thousands):
December 31, 2001 March 31, 2001
----------------- --------------
Finished goods $ 945 $1,028
Work in process 1,681 1,912
Raw materials 1,272 2,055
------ ------
Total $3,898 $4,995
====== ======
Equipment and Leasehold Improvements are carried at cost. Depreciation is
computed over the estimated useful lives of the assets, generally three to five
years, using accelerated methods, except for leasehold improvements, which are
amortized on a straight-line basis over the lesser of the life of the lease or
the asset's useful life.
Evaluation of Long-lived Assets - The Company evaluates the potential impairment
of long-lived assets based upon projections of undiscounted cash flows whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be fully recoverable. Management believes no impairment of these assets
exists as of December 31 and March 31, 2001, respectively.
Comprehensive Income - The Company has no significant elements of comprehensive
income other than net loss.
Revenue Recognition - The Company derives revenue principally from three
sources: product sales, royalty income and contract fees. Product sales revenue
is generally recognized when contractual obligations have been satisfied, title
and risk of loss have been transferred to the customer and collection of the
resulting receivable is reasonably assured. The Company accrues a provision for
estimated sales returns and other allowances and deferrals, as a reduction of
revenue at the time of revenue recognition. Royalty income is recorded when
earned based on information provided by licensees. Revenue from services
performed under contracts is recognized over the term of underlying customer
contract or at the end of the contract, when obligations have been satisfied.
For services performed on a time and material basis, revenue is recognized upon
performance. Amounts received in advance of performance under contracts or
commercialization agreements are recorded as deferred revenue until earned.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Loss Per Share - The Company uses Statement of Financial Accounting Standard
(SFAS) No. 128 "Earnings per Share" for the calculation of basic and diluted
earnings per share. The Company's loss has been adjusted by dividends
accumulated on the Company's Series B Convertible Preferred Stock.
Reclassifications - Certain prior period amounts have been reclassified to
conform to the current period presentation.
New Accounting Standards - In June 2001, the FASB issued SFAS No. 143
"Accounting for Asset Retirement Obligations". SFAS 143 addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. SFAS 143
is effective for fiscal years beginning after June 15, 2002. The Company is in
the process of evaluating the impact of implementing SFAS 143.
In October 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment of
Long-Lived Assets" which supersedes SFAS No 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of" and the
accounting and reporting provisions of APB No 30, "Reporting the Results of
Operations, Reporting and Effects of Disposal of a Segment of a Business and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions" for
the disposal for a segment of business. This statement is effective for fiscal
years beginning after December 15, 2001. SFAS No 144 retains many of the
provisions of SFAS No. 121 but addresses certain implementation issues
associated with that Statement. The Company is currently evaluating the impact
of implementing SFAS 144.
3. EQUITY FINANCING
During the period from February to October 2001, the Company sold 3 million
shares of common stock for approximately $55.4 million (including 1,999,025
shares for $42.9 million during the nine-months ended December 31, 2001), to
Acqua Wellington North American Equities Fund LLC (Acqua) pursuant to an equity
financing facility agreement. All shares of common stock sold to Acqua were
registered under a shelf-registration statement and were sold at a 4.75-6%
discount to the market at the time of sale. There were no commissions, warrants
or other direct costs associated with these sales.
In December 2001, the Company entered into stock purchase and sale agreements
with certain institutional investors for the private placement of the Company's
common stock. Under the terms of these agreements, the Company sold 1,062,947
shares of its common stock for an aggregate sale price of $ 31.3 million.
Pursuant to these agreements, these shares were subsequently registered for
resale on a shelf-registration statement filed with the U.S. Securities and
Exchange Commission. There were no commissions, warrants or other significant
direct costs associated with these sales.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
4. NOTE PAYABLE
In March 1999, the Company entered into a debt financing with John Hancock
Mutual Life Insurance Company under a Note Purchase Agreement (Note) from which
the Company received $30 million. The seven year, 8.5% Senior Secured Notes
mature in 2006 with principal and interest installments of $1.7 million due
quarterly through March 2006. The Company is required to make note principal and
interest payments of $6.9 million in each fiscal year through 2006.
Collateral for the debt is represented by royalty payments and rights of the
Company to receive monies due pursuant to the Company's license agreement with
Roche. Additional collateral is represented by a Restricted Cash account, which
had a balance of $1.7 million at December 31, 2001. Covenants within the Note
include compliance with annual and quarterly Royalty Payment Coverage Ratios,
which are tied to royalty payments and debt service.
5. SUBORDINATED CONVERTIBLE DEBENTURES
In January 2000, the Company completed a placement of $35 million principal
amount of Subordinated Convertible Debentures. The 5% debentures, if not
converted, mature January 2005 with semi-annual interest payments to be made in
cash or an equivalent value of common stock. The debentures are immediately
convertible into 1,129,032 shares of the Company's common stock, which
represents a $31 per share conversion price.
As part of this financing, the Company also issued detachable warrants to
purchase 282,258 shares of common stock with an exercise price of $31 per share.
Using the Black-Scholes model and the relative fair value of the warrants and
the debentures at the time of issuance, these warrants were valued at
approximately $7 million. The detachable warrant value has been recorded as a
reduction of the face value of the convertible debentures. Costs associated with
placing the debentures totaling $1.9 million were deferred and have been netted
against the recorded convertible debenture balance. The convertible debenture
discount consisting of the warrant value and debt issuance costs is being
amortized over the five-year life of the debentures.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
6. INVESTMENT IN AFFILIATE
During August 2001, the Company entered into agreements with Meso Scale
Technologies, LLC. ("MST") continuing Meso Scale Diagnostics, LLC. ("MSD"),
a joint venture formed solely by the Company and MST in 1995. MSD was formed
for the development and commercialization of products utilizing a proprietary
combination of MST's multi-array technology together with ORIGEN and other
technologies owned by the Company. MST is a company established and wholly-owned
by the son of IGEN's Chief Executive Officer.
Under the amended agreements that were negotiated by an independent committee of
the Company's Board of Directors, the Company holds a 31% voting equity interest
in MSD, and is entitled to a preferred return on $28.6 million of the funds
previously invested in MSD and on additional funds it invests. MST owns the
remaining 69% of the voting equity interest in MSD. The Company agreed, subject
to certain conditions, to fund the joint venture through its term, which runs to
November 2003. The funding commitment for calender year 2002 is $21.5 million,
subject to a permitted variance of fifteen percent. Thereafter, the funding
commitment would be determined on the basis of an annual budget to be approved
by a committee of the Company's Board of Directors. This funding commitment may
be satisfied in part through in-kind contributions of scientific and
administrative personnel and shared facilities.
MST and MSD have the right to terminate the joint venture prior to November 2003
under certain circumstances, including a change in control of the Company, as
defined. Upon termination, expiration or non-renewal of the joint venture
agreement, MSD and MST jointly have the right to repurchase the Company's
interest in MSD based on a fair market value analysis, subject to certain
discounts.
In addition, if the Company ceases to fund the joint venture, under certain
circumstances, it must provide MSD with transitional funding for an additional
six months. Under most circumstances, significant MSD governance matters require
the approval of both the Company and MST.
In conjunction with the amended agreements and the progress made by MSD in the
development of its products, the Company has determined that future
contributions to MSD would be made based on the future investment benefit to be
obtained by the Company. Therefore, the Company's share of MSD losses for the
quarter and nine-months ended December 31, 2001 totaling $3.8 million and $7
million, respectively, were recorded as Equity in Loss of Affiliate. Prior to
July 1, 2001, the Company accounted for its equity investments in MSD as
research and development funding and accordingly, recorded all MSD investments
as research and development expenses as incurred. At December 31, 2001, the
Company's Investment in Affiliate totaled $2.4 million, which represents
contributions to MSD, net of Equity on Loss of Affiliate, since the effective
date of the amended agreements.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
7. STOCK NOTES RECEIVABLE
In connection with the exercise of stock options by officers in July 2000, the
Company granted loans in the principal amounts of $3.7 million, maturing in July
2007. The loans are 6.62% simple interest (paid annually), full recourse loans
against all assets of the borrowers, collateralized by the pledge of 180,000
shares of the Company's common stock owned by the borrowers.
8. LITIGATION
Roche
- -----
In 1997, the Company filed a lawsuit against Roche Diagnostics GmbH (formerly
Boehringer Mannheim GmbH) in the Southern Division of the United States District
Court for the District of Maryland. The lawsuit arises out of a 1992 License and
Technology Development Agreement (the "Agreement"), under which the Company
licensed to Roche certain rights to develop and commercialize diagnostic
products based on the Company's ORIGEN technology.
In its lawsuit, the Company alleged that Roche failed to perform certain
material obligations under the Agreement, including development and
commercialization of ORIGEN technology according to the contractual timetable;
exploitation of the license to the extent contemplated by the parties; phase out
of certain non-royalty-bearing product lines; exploitation of ORIGEN technology
only within Roche's licensed fields; proper treatment of intellectual property
rights regarding ORIGEN technology; maintenance of records essential to the
computation of royalties; and proper computation and payment of royalties. In
August 2000, the Company filed an Amended Complaint in the lawsuit asserting
additional breach of contract claims and a claim for unfair competition.
On January 10, 2002, a jury issued its verdict in this litigation and found
Roche liable to the Company for $105 million in compensatory damages and $400
million in punitive damages. The jury also confirmed the Company's rights to
improvements under the license agreement, which includes Roche's Elecsys(R)
1010, 2010 and E170 lines of clinical diagnostic immunoassay analyzers, the
tests developed for use on those systems, and Roche's nucleic acid amplification
technology called PCR.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
The jury further concluded that Roche: violated its duty to the Company of good
faith and fair dealing; engaged in unfair competition against the Company; and
materially breached the license agreement. The jury's finding of material breach
would permit the Company to terminate the agreement with Roche. Finally, the
jury found in the Company's favor and against Roche on all of Roche's
counterclaims, except for one in which the Company was ordered to pay $500,000.
The jury's decisions, including the Company's right to terminate the license
agreement, would be effective once affirmed on appeal. During an appeal process,
Roche continues to be obligated to pay royalties to the Company under the
license. The Company has notified Roche that the license agreement will
terminate upon the appellate court affirming the Company's right to do so.
In September 1998, a subsidiary of Ares-Serono ("Serono") filed a patent
infringement claim against the Company, Roche and Organon Teknika in the U.S.
District Court for the District of Delaware. The action claimed that Serono's
patent "A Method of Assay Employing a Magnetic Electrode" was being infringed by
the Company and its licensees. Subsequently, F. Hoffman LaRoche, Ltd., a member
of the Roche family of companies, acquired the patent from Serono and continued
in Serono's place to assert the infringement claim against the Company and
Organon Teknika. A trial was held in Delaware on this matter during February
2001. During November 2001, the Company settled this patent infringement action.
Under the terms of the settlement, Roche dismissed with prejudice all claims
against the Company, paid the Company $5.7 million as reimbursement for legal
fees incurred in the litigation and granted the Company a fully paid-up,
perpetual, worldwide, non-exclusive license (with the right to grant
sublicenses) to the patent in suit.
Hitachi
- -------
In December 1997, IGEN International K.K., a Japanese subsidiary of the Company,
filed a lawsuit in Tokyo District Court against Hitachi Ltd. ("Hitachi"). The
lawsuit seeks to enjoin Hitachi from infringing a license registration (known in
Japan as a "senyo-jisshi-ken") held by IGEN K.K. and Eisai Co., Ltd., a company
to which IGEN has licensed ORIGEN technology rights. The lawsuit requests
injunctive relief preventing Hitachi from manufacturing, using or selling the
Elecsys 2010, which incorporates the Company's patented ORIGEN technology, in
Japan. Hitachi is the sole manufacturer for Roche of the Elecsys 2010
immunoassay instrument. Roche is licensed to market the Elecsys 2010 worldwide,
except in Japan, to central hospital laboratories and clinical reference
laboratories. A hearing is scheduled in this litigation for May 2002 and a
decision of the court may be issued thereafter.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Other Matters
- -------------
In February 2001, Brown Simpson Strategic Growth Fund L.P., Brown Simpson
Strategic Growth Fund, Ltd. and Brown Simpson Partners I (collectively "Brown
Simpson")initiated a shareholder derivative lawsuit for and on behalf of the
shareholders of the Company in the Circuit Court for Montgomery County,
Maryland against four of the Company's current directors, two former directors,
three executive officers and the Company as a nominal defendant. In the
complaint, Brown Simpson, stating that it holds 100 shares of the Company's
common stock, alleges breach of fiduciary duties by the named individual
defendants in connection with transactions between the Company and other
entities in which certain directors and officers are alleged to have an
nterest, including the Meso Scale Diagnostics, LLC. joint venture.
In March 2001, a second shareholder derivative lawsuit was filed by Laurence
Paskowitz in the Circuit Court for Montgomery County, Maryland, for and on
behalf of the shareholders of the Company. The lawsuit names as defendants all
of the Company's existing officers and directors, two former directors and the
Company as a nominal defendant. The allegations and the relief sought in this
complaint are substantially the same as those set forth in the complaint filed
by Brown Simpson. The Complaint was later amended to add direct calaims against
the defendants and to seek class action certification for those direct claims.
Both lawsuits seek principally the following: that the defendants hold in trust
and be required to account for and restore to the Company damages that IGEN has
allegedly sustained by reason of the allegations and relief relating to board
and management composition. The Paskowitz complaint also seeks damages for a
class of IGEN shareholders for the direct claims against the individual
defendants. The complaints do not include any claims against the Company.
In 2000, the Board of Directors established an Independent Committee to evaluate
substantially similar issues as those raised in both shareholder complaints and
delegated the exclusive power and authority to the Committee to review and
investigate the matters identified in the derivative actions and to determine
what measures or actions, if any, should be undertaken on behalf of the Company
in response. The Committee was also authorized to address any other issues
raised as a result of the Committee's investigation and to effect any such
measures or actions on behalf of the Company with full power and authority of
the Board, subject only to the requirements of Delaware law and the Company's
governing documents.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
On August 24, 2001, the Independent Committee issued a report summarizing its
findings. In its report, the Independent Committee concluded that the actions
undertaken by the Committee completely address the demands made in the
complaints as they relate to the derivate actions, including those claims
directed at the MSD joint venture. The Committee found that it is not in the
best interest of the Company's stockholders to pursue any of the shareholders
demands and urged the Court to dismiss the derivative claims in the lawsuits.
The Company and the individual defendants have filed motions to dismiss or, in
the alternative, for summary judgment in both lawsuits. A hearing took place in
December 2001 to address the Company's motion. Immediately prior to the hearing
date, the Brown Simpson plaintiffs amended their complaint by adding a new
plaintiff and by alleging the new plaintiff has been a shareholder of the
Company since 1994.
At the December hearing, the Circuit Court held that: (i)the claims of Brown
Simpson plaintiffs that were holders of convertible securities and not owners
of the common stock are dismissed; (ii)any claims asserted by the Brown Simpson
plaintiffs relating to transactions that took place prior to November 15, 2000
are barred; (iii) any claims asserted by the Paskowitz plantiff relating to
transactions that took place prior to April 15, 2000 are barred; (iv)all direct
claims asserted by Paskowitz would be dismissed. The Circuit Court did not
address the claims asserted by the newly introduced plaintiff.
All of the claims asserted by the Brown Simpson plaintiffs relate to
transactions that took place prior to November 15, 2000. All of the claims
(except one relating to loans to executive officers for the exercise of stock
options) asserted by Paskowitz relate to transactions that took place prior to
April 15, 2000.
The Court granted the plaintiffs leave until February 1, 2002 to amend their
complaints. None of the plaintiffs filed an amended complaint by that date
and the Company has filed a renewed motion to dismiss and for summary judgment
of all remaining claims based, in part, on the prior rulings of the Circuit
Court. The Circuit Court has scheduled a new hearing for March 2002 to address
the Company's pending motion to dismiss and for summary judgment.
The Company believes that the claims are wholly without merit and that
meritorious defenses are available. The Company intends to vigorously contest
and defend against these claims and to assert all of its legal rights in this
matter, including all counterclaims. The lawsuits are not expected to have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
The Company is involved, from time to time, in various other legal proceedings
arising in the ordinary course of business. In the opinion of management, based
on review with legal counsel, the Company does not believe that any such legal
proceedings will have a material adverse impact on its financial position,
results of operations or cash flows.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
We have devoted substantial resources to the research and development of our
proprietary technologies, primarily the ORIGEN(R) technology for the clinical
diagnostic, life science and industrial markets. We currently derive a majority
of our revenue from royalties received from licensees that develop and market
certain ORIGEN-based systems. We also generate sales of our own products,
particularly the M-Series(TM) System and related consumable reagents. We may
selectively pursue additional strategic alliances, which could result in
additional license fees or contract revenues. Since inception, we have incurred
significant losses and, as of December 31, 2001, we had an accumulated deficit
of $190 million. We expect to continue to incur substantial research and
development, manufacturing and general and administrative costs associated with
our operations. As a result, we will need to generate higher revenue to achieve
profitability.
In addition to historical information, this document contains forward-looking
statements within the meaning of the "safe-harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Reference is made in particular to
statements regarding the potential market and market growth for diagnostic
products, potential impact of competitive products, the Company's expectations
regarding the level of anticipated royalty and revenue growth in the future, the
potential market for products in development, financing plans, the outcome of
litigation, the Company's plans and objectives for future operations,
assumptions underlying such plans and objectives, the need for and availability
of additional capital and other forward-looking statements included in this
document. The words "may", "should", "could", "will", "expect", "intend",
"estimate", "anticipate", "believe", "plan" and similar expressions have been
used in this document to identify forward-looking statements. We have based
these forward-looking statements on our current views with respect to future
events and financial performance. Such statements are based on management's
current expectations and are subject to a number of risks and uncertainties,
which could cause actual results to differ materially from those, described in
the forward-looking statements. In particular, careful consideration should be
given to the cautionary statements in the "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and to the risks and
uncertainties detailed in the Company's Annual Report on Form 10-K for the year
ended March 31, 2001 and in the final prospectus dated February 7, 2002,
previously filed with the Securities and Exchange Commission. The Company
disclaims any intent or obligation to update these forward-looking statements.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
RESULTS OF OPERATIONS
THE QUARTER AND NINE MONTHS IN REVIEW
REVENUE. Total revenue for the quarter and nine-months ended December 31, 2001
were $10.4 million and $28.1 million, respectively. This represents increases of
$1.9 million (23%) and $5.4 million (24%), respectively, when compared with the
same prior year periods. The growth in revenue was due to increases in royalty
income and product sales.
Royalty income was $5.5 million and $16.6 million during the quarter and nine-
months ended December 31, 2001, an increase of 29% and 39%, respectively, over
the same prior year periods. Royalties from Roche represent approximately $5.2
million (95%) and $15.7 million (95%) of the total royalty income for the
current quarter and nine-month period, respectively, compared to $4 million
(94%) and $11.2 million (94%) in the comparable prior year periods. These
increases were attributable to higher Roche sales of its Elecsys product line,
which is based on IGEN's ORIGEN technology that was licensed to Roche under a
1992 license agreement. The Company is involved in litigation with Roche arising
out of this agreement. One of the disputes in the litigation relates to Roche's
computation of royalties to which the Company believes it is entitled under the
agreement. See Note 8 of Notes to Consolidated Financial Statements.
Product sales were $4.5 million and $10.9 million, respectively, during the
quarter and first nine-months of the current year, which represent increases of
11% and 29%, respectively, over the prior year's product sales of $4.1 million
and $8.5 million, for the same respective periods. This growth in product sales
was led by increased shipments of the M-SERIES line of instrumentation and
consumable products, as well as revenue generated from the sale of clinical
diagnostic tests to physician office laboratory (POL) customers in the United
States. We began serving these POL customers in June 2000 when Roche transferred
the customers in order to comply with a court ordered preliminary injunction.
Contract fees were $450,000 in the current quarter and $593,000 for the first
nine-months of the current year. This compares to $200,000 and $2.3 million,
respectively, for the same prior year periods. The current year fees related
primarily to work completed in conjunction with the development of assays for
Roche. The prior year's contract fees were primarily from a non-recurring amount
received in connection with our alliance with Bayer Diagnostics.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
OPERATING COSTS AND EXPENSES. Product costs were $1.4 million (31% of product
sales) and $3.4 million (31% of product sales) for the quarter and nine-months
ended December 31, 2001. This compares with product costs of $1.3 million (31%
of product sales) and $2.8 million (34% of product sales) for the quarter and
nine-months ended December 31, 2000. The higher prior year product costs are
attributable to the M-SERIES retrofit program instituted during the quarter
ended September 30, 2000, which upgraded the M-8 analyzers in the field with new
software and hardware components.
Research and development expenses were $6.4 million and $20.8 million for the
quarter and first nine-months of the current year. This represents a decrease of
approximately $1.2 million from the $7.6 million incurred in the same quarter
last year while increasing $825,000 when compared to the same nine-month period
last year. For the quarter ended December 31, 2001, the decrease is attributable
to contributions of $3.8 million related to the amended (August, 2001) Meso
Scale Diagnostics ("MSD") joint venture being classified as Equity in Loss of
Affiliate (see "Equity in Loss of Affiliate" below). In periods prior to June
30, 2001, contributions to MSD were classified as a research and development
cost. Including all MSD related costs, research and development expense would
have increased by $2.5 million (33%) and $7.8 million (39%) in the current
quarter and first nine-months of the current year when compared with the same
prior year periods. These increases were due to ongoing development costs and
product enhancements associated with the M-SERIES family of products,
development of new assays for the life science market, R&D of new systems and
technologies, including hospital point-of-care products and costs associated
with MSD.
Selling, general and administrative expenses were $5.9 million and $17.5 million
in the third quarter and first nine-months of fiscal 2002, which represent
increases of $1.8 million (44%) and $5.4 million (45%) over the same prior year
periods. These increases were primarily attributable to higher selling,
marketing and customer support costs as well as legal and other expenses
associated with the amendment and extension of the MSD joint venture.
Costs related to our litigation with Roche were offset by a settlement payment
the Company received during the current quarter from Roche. Under the terms of
the settlement, Roche dismissed, with prejudice, all claims against the Company,
reimbursed the Company for the legal fees the Company incurred in defending this
Delaware litigation which total approximately $5.7 million and granted the
Company a fully paid-up, perpetual, worldwide, non-exclusive license (with the
right to sublicense) under the patent in suit. Absent this settlement, costs
related to our litigation with Roche increased to $6.6 million and $14.5 million
for the quarter and nine-months ended December 31, 2001 from $3.3 million and
$7.2 million in the same prior year periods. The increases are attributable to
expanded activities in several areas, including pre-trial motions and the
preparation and conduct of the trial that began on October 23, 2001 and was
concluded on January 10, 2002. The increased litigation costs also included
financial and legal advisory fees associated with settlement discussions with
Roche.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
OTHER EXPENSE. Other expense, net of interest income was $1.3 million for the
quarters ended December 31, 2001 and 2000. In the first nine-months of the
current year, other expense increased to $3.8 million from $3.5 million in the
same prior year period due to lower cash balances (and lower interest income)
during the first quarter of the current year.
EQUITY IN LOSS OF AFFILIATE. During August 2001, the Company entered into
agreements with Meso Scale Technologies, LLC. ("MST") continuing Meso Scale
Diagnostics, LLC. ("MSD"), a joint venture formed solely by the Company and MST
in 1995. MSD was formed for the development and commercialization of products
utilizing a proprietary combination of MST's multi-array technology together
with ORIGEN and other technologies owned by the Company. In conjunction with the
amended agreements and the progress made by MSD in the development of its
products, the Company has determined that future contributions to MSD would be
made based on the future investment benefit to be obtained by the Company.
Therefore, the Company's share of MSD losses for the quarter and nine-months
ended December 31, 2001 totaled $3.8 million and $7 million, were recorded as
Equity in Loss of Affiliate. Prior to July 1, 2001, the Company accounted for
its equity investments in MSD as research and development funding and
accordingly, recorded all MSD investments as research and development expenses
as incurred.
NET LOSS. The net loss for the current quarter was $9.2 million ($0.48 per
common share, after consideration of the effect of preferred dividends) compared
to a net loss of $16 million ($1.04 per common share, after consideration of the
effect of preferred dividends) in the same prior year quarter. The net loss for
the nine-months ended December 31, 2001 was $33.2 million ($1.80 per common
share, after consideration of the effect of preferred dividends) compared to a
net loss of $29.9 million ($2.00 per common share, after consideration of the
effect of preferred dividends) for the nine-months ended December 31, 2000. The
losses in the prior year comparable periods included a one-time, non-cash charge
of $7 million ($0.44 per share) to record the cumulative effect of an accounting
change which was adopted in accordance with the Financial Accounting Standards
Board's Emerging Issue Task Force.
Results of operations in the future are likely to fluctuate substantially from
quarter to quarter as a result of various factors, which include the volume and
timing of orders for M-SERIES or other products; the timing of instrument
deliveries and installations; variations in revenue recognized from royalties
and other contract revenues; whether POL customers renew contracts; whether
Roche will continue to supply service and assays to POL customers; the mix of
products sold; whether instruments are sold to or placed with customers; the
timing of the introduction of new products; competitors' introduction of new
products; variations in expenses incurred in connection with the operation of
the business, including legal fees, research and development costs and sales and
marketing costs; equity in losses of affiliate; manufacturing capabilities; and
the volume and timing of product returns and warranty claims.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
The Company has experienced significant operating losses each year since
inception and expects those losses to continue. Losses have resulted from a
combination of lower royalty revenue than the Company believes it is entitled to
under the License Agreement with Roche, costs incurred in research and
development, Roche litigation costs, selling costs and other general and
administrative costs. The Company expects to incur additional operating losses
as a result of increases in expenses for manufacturing, marketing and sales
capabilities, research and product development, general and administrative costs
and equity in losses of affiliate, offset in part by lower Roche litigation
costs beginning in the fourth quarter of fiscal 2002. The Company's ability to
become profitable in the future will depend, among other things, on its ability
to expand the commercialization of existing products; introduce new products
into the market; develop marketing, sales and distribution capabilities
cost-effectively; and complete new business arrangements.
LIQUIDITY AND CAPITAL RESOURCES
Through December 31, 2001, the Company has financed operations through the sale
of Preferred and Common Stock, aggregating approximately $178 million; the
placement of a $30 million debt financing with John Hancock Life Insurance
Company in March 1999; and a $35 million private placement of subordinated
convertible debentures in January 2000. Under the Hancock financing, the Company
is obligated to make quarterly principal and interest payments of $1.7 million
through March 2006. Under the subordinated convertible debentures, unless and
until the holders of the debentures convert their debentures into common stock,
the Company will be required to make semi-annual interest payments of $875,000
through January 2005. Interest payments may be made in cash or an equivalent
value of common stock. In addition, the Company has received funds from
collaborative research and licensing agreements, sales of its ORIGEN-based line
of products and royalties from product sales by licensees.
During the period from February to October 2001, the Company sold 3 million
shares of common stock for approximately $55.4 million (including 1,999,025
shares for $42.9 million during the nine-months ended December 31, 2001), to
Acqua Wellington North American Equities Fund LLC ("Acqua") pursuant to an
equity financing facility agreement. All shares of common stock sold to Acqua
were registered under a shelf-registration statement and were sold at a 4.75-6%
discount to the market at the time of sale. There were no commissions, warrants
or other direct costs associated with these sales.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
In December 2001, the Company entered into stock purchase and sale agreements
with certain institutional investors for the private placement of the Company's
common stock. Under the terms of these agreements, the Company sold 1,062,947
shares of its common stock for an aggregate sale price of $31.3 million.
Pursuant to these agreements, these shares were subsequently registered for
resale on a shelf-registration statement filed with the U.S. Securities and
Exchange Commission. There were no commissions, warrants or other significant
direct costs associated with these sales.
As of December 31, 2001, the Company had $49.3 million in cash, cash equivalents
and short-term investments with working capital of $44.5 million.
Cash used in operations increased to $29.9 million for the nine-months ended
December 31, 2001, as compared to $19.7 million for the corresponding prior year
period, primarily due to a higher loss before accounting change.
The Company used approximately $4.3 million and $4.2 million of cash for the
acquisition of equipment and leasehold improvements during the nine-months ended
December 31, 2001 and 2000, respectively. The Company believes material
commitments for capital expenditures may be required in a variety of areas, such
as product development programs. The Company has not, at this time, made
commitments for any such capital expenditure or secured additional sources to
fund such commitments.
For fiscal 2002, future minimum lease payments for which the Company is
obligated under capital lease agreements approximate $66,000 (including
interest) while facility and equipment operating lease commitments approximate
$2.5 million.
During August 2001, the Company entered into agreements with MST continuing MSD,
a joint venture formed solely by the Company and MST in 1995. Under the terms of
the joint venture agreement, the Company agreed, subject to certain conditions,
to fund the joint venture through November 2003. This funding commitment may be
satisfied in part through in-kind contributions of scientific and administrative
personnel and shared facilities. The funding commitment for calender year 2002
is $21.5 million, subject to permitted variance of fifteen percent. Thereafter,
the funding commitment would be determined on the basis of an annual budget to
be approved by a committee of the Company's Board of Directors. Should no budget
be approved, the Company would be required to provide transitional funding for
an additional six months, and MSD and MST have the right to terminate the joint
venture, unless the budget calls for funding that exceeds 110% of the prior
twelve months funding and the Board of Directors makes a reasonable good faith
determination for the rejection.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
The Company has a substantial amount of indebtedness, and there is a possibility
that the Company may be unable to generate cash or arrange financing sufficient
to pay the principal of, interest on and other amounts due with respect to
indebtedness when due, or in the event any of it is accelerated. In addition,
the Company indebtedness may require that it dedicate a substantial portion of
its expected cash flow from operations to service indebtedness, which would
reduce the amount of expected cash flow available for other purposes, including
working capital and capital expenditures.
The Company needs substantial amounts of money to fund operations. In this
regard, the Company from time to time has discussions with third parties,
including multinational corporations, regarding various business arrangements
including distribution, marketing, research and development, joint venture and
other business agreements, which could provide for substantial up-front fees or
payments. Further, the Company is considering and evaluating the advisability
and feasibility of a variety of financing alternatives, which could be
completed in the near term, including issuance of additional debt or equity
securities. There can be no assurance that the Company will successfully
complete any of the foregoing arrangements and access to funds could be
adversely impacted by many factors, including the results of pending
litigation, the volatility of the price of the Company's common stock,
continuing losses from operations and other factors. The Company believes that
existing capital resources, together with revenue from product sales, royalties
and contract fees will be adequate to fund operations through calendar year
2002. If the Company is unable to raise additional capital, we may have to scale
back, or even eliminate, some programs. Alternatively, the Company may consider
pursuing arrangements with other companies, such as granting licenses or
entering into joint ventures, on terms and conditions that may not be favorable
to it.
Roche has the right to continue to market its Elecsys products within its
licensed field until the Company's right to terminate the Agreements is affirmed
on appeal. In connection with the litigation with Roche, the Company has
notified Roche that the license agreement will terminate upon the appellate
court affirming the Company's right to do so. Termination of the license
agreement would have a material adverse effect on the Company's royalty
revenue unless, and until, the Company entered into a strategic partnership
with another company that is able to develop and commercialize diagnostic
instruments within the field presently licensed to Roche. There can be no
assurance that the Company would be able to enter into such a strategic
partnership on favorable terms, if at all.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
A hearing is scheduled in the Hitachi litigation for May 2002, following which a
decision by the Japanese court may be issued. The Company does not expect that
failure to prevail in the Hitachi litigation by itself would have a material
adverse effect on the Company's revenue or sales, because Hitachi would continue
to manufacture Roche instruments and the Company would continue to earn
royalties in connection with Roche sales. There can be no assurance that the
Hitachi litigation would not have a material adverse effect on the Company's
intellectual property, regardless of whether the outcome of the litigation is
favorable. Success by the Company in the Hitachi litigation could have a
material adverse effect on the Company's royalty revenues from sales of Elecsys
products to the extent that Roche's sales of Elecsys instruments are hindered
because it needs to find a new manufacturer for its instruments or make
arrangements to have Hitachi manufacture the instruments outside of Japan.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information about market risks for the nine-months ending December 31, 2001 does
not differ materially from that discussed under Item 7A of the Company's Annual
Report on Form 10-K for the year ended March 31, 2001.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
PART II OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
The information required under this item is incorporated
herein by reference to Part I, Item 1 - Note 8 of Notes to
Consolidated Financial Statements.
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
In December 2001, the Company entered into purchase agreements with Acqua
Wellington Private Placement Fund, Ltd., Acqua Wellington Opportunity I Limited,
and Brown Simpson Partners I, Ltd. for the private placement of the Company's
common stock. Under the terms of these agreements, the Company sold an aggregate
of 1,062,987 shares of its common stock for an aggregate sales price of $31.3
million. The Company sold the shares of common stock pursuant to an exemption
from the registration requirements of the Securities Act provided by Section
4(2) and/or Regulation D promulgated thereunder, which exemption was supported,
by representations and warranties provided by the institutional investors, the
number of purchasers, the size of the offering, the nature of the investors,
restrictive legends placed on the shares of common stock issued in the
transactions, the absence of general solicitation or advertising, the filing of
appropriate forms with state and federal securities regulatory authorities,
among other things. As required by the purchase agreements, the shares of common
stock were subsequently registered for resale on a shelf-registration statement
filed with the U.S. Securities and Exchange Commission. There were no
commissions, warrants or other direct costs associated with these sales.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Indemnification Agreement, dated as of October 26, 2001
between the Company and Jacob Wohlstadter.Filed herewith. *
10.2 Termination Protection Program. Filed herewith.*
*denotes compensatory plan or arrangement
(b) The Company filed reports on Form 8-K under Item 5, Other
Events on December 19, 2001 and January 11, 2002.
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2001
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.
IGEN International, Inc.
Date: February 13, 2002 /s/ George V. Migausky
----------------- ----------------------
George V. Migausky
Vice President of Finance
Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial Officer)