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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1998 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ___ to ___.
Commission file number 0-26862
DEPOTECH CORPORATION
(Exact name of Registrant as specified in its charter)
CALIFORNIA 33-0387911
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification No.)
Organization)
10450 SCIENCE CENTER DRIVE
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices, zip code)
(619) 625-2424
(Registrant's telephone number)
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
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock: No par value, 14,521,542 shares as of April 30, 1998
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DEPOTECH CORPORATION
TABLE OF CONTENTS
PAGE
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Balance Sheets as of
March 31, 1998 (Unaudited) and December 31, 1997.......... 1
Condensed Statements of Operations
for the Three Months ended
March 31, 1998 and 1997 (Unaudited)....................... 2
Condensed Statements of Cash Flows
for the Three Months ended
March 31, 1998 and 1997 (Unaudited)....................... 3
Notes to Condensed Financial Statements................... 4
Item 2 Management's Discussion and Analysis
of Financial Condition and Results of Operations.......... 5
Item 3 Quantitative and Qualitative Disclosures About Market
Risk...................................................... 21
PART II OTHER INFORMATION
Item 1 Legal Proceedings........................................ 22
Item 6 Exhibits and Reports on Form 8-K......................... 22
Signatures....................................................... 23
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DEPOTECH CORPORATION
CONDENSED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1998 1997
------------- -------------
ASSETS (Unaudited) (Note)
Current assets:
Cash and cash equivalents $ 2,405,389 $ 6,194,153
Short-term investments 18,808,393 21,166,402
Accounts receivable from collaborations 1,474,496 1,361,837
Other current assets 1,180,586 1,141,210
------------- -------------
Total current assets 23,868,864 29,863,602
Property and equipment, net 27,445,146 26,948,328
Deposits and other assets 921,983 857,756
============= =============
Total assets $ 52,235,993 $ 57,669,686
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities $ 3,040,526 $ 3,250,460
Current portion of obligations under capital leases 2,003,689 2,037,416
Current portion of note payable 2,837,591 2,509,467
------------- -------------
Total current liabilities 7,881,806 7,797,343
Obligations under capital leases, less current portion 1,592,382 2,089,931
Note payable, less current portion 7,116,265 6,901,982
Deferred rent 2,529,177 2,313,133
Other long-term liabilities 436,558 494,506
Shareholders' equity:
Common stock, no par value; 30,000,000 shares authorized,
14,430,594 and 14,237,216 shares issued and outstanding at
March 31, 1998 and December 31, 1997, respectively 102,372,226 101,970,346
Deferred compensation related to stock options, net (417,230) (109,472)
Unrealized (loss) gain on short-term investments (14,733) 15,784
Accumulated deficit (69,260,458) (63,803,867)
------------- -------------
Total shareholders' equity 32,679,805 38,072,791
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Total liabilities and shareholders' equity $ 52,235,993 $ 57,669,686
============= =============
See accompanying notes to condensed financial statements.
Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date, but does not include all of the
disclosures required by generally accepted accounting principles.
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DEPOTECH CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
MARCH 31,
------------------------------
1998 1997
------------ ------------
(UNAUDITED)
Contract revenue $ 1,214,733 $ 1,171,810
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Total revenue 1,214,733 1,171,810
Costs and expenses:
Research and development 5,411,138 4,382,903
General and administrative 1,260,783 933,595
------------ ------------
Total costs and expenses 6,671,921 5,316,498
------------ ------------
Loss from operations (5,457,188) (4,144,688)
Interest income 360,078 453,793
Interest expense (359,481) (219,949)
------------ ------------
Net loss $ (5,456,591) $ (3,910,844)
============ ============
Basic and diluted net loss per share $ (0.38) $ (0.30)
============ ============
Shares used in computing
basic and diluted net loss per share 14,363,523 13,032,336
============ ============
See accompanying notes to condensed financial statements.
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DEPOTECH CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31,
------------------------------
1998 1997
------------ ------------
(Unaudited)
OPERATING ACTIVITIES
Net cash used by operating activities $ (5,056,189) $ (4,823,206)
INVESTING ACTIVITIES
Purchases of short-term investments (3,041,443) (22,093,588)
Proceeds from sale of short-term investments 5,368,935 11,215,866
Purchases of property and equipment (1,114,831) (1,685,767)
Restricted cash (25,847) (37,119)
------------ ------------
Net cash provided (used) by investing activities 1,186,814 (12,600,608)
FINANCING ACTIVITIES
Repayments on capital lease obligations (531,276) (499,791)
Repayments on note payable (562,494) (137,706)
Proceeds from note payable 1,104,901 1,575,604
Proceeds from issuance of common stock, net 69,480 19,096,268
------------ ------------
Net cash provided by financing activities 80,611 20,034,375
------------ ------------
Net (decrease) increase in cash and cash equivalents (3,788,764) 2,610,561
Cash and cash equivalents at beginning of period 6,194,153 1,966,626
------------ ------------
Cash and cash equivalents at end of period 2,405,389 4,577,187
Short-term investments at end of period 18,808,393 27,031,227
------------ ------------
Cash, cash equivalents and short-term investments at end of period $ 21,213,782 $ 31,608,414
============ ============
SUPPLEMENTAL INFORMATION
Interest paid $ 359,481 $ 219,949
============ ============
See accompanying notes to condensed financial statements.
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DEPOTECH CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation and Significant Accounting Policies
The interim unaudited condensed financial statements contained herein
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. These interim unaudited condensed financial
statements should be read in conjunction with the Company's December 31, 1997
audited financial statements. In management's opinion, the unaudited information
includes all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial position, results of
operations and cash flows for the periods presented. Interim results are not
necessarily indicative of results to be expected for the full year. Certain
prior year amounts have been reclassified to conform with the current year
presentation.
2. Net Loss Per Share
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("FAS 128"), which replaced
the calculation of primary and fully diluted net loss per share with basic and
diluted net loss per share. Basic net loss per share is calculated using the
weighted-average number of common shares outstanding.
3. New Accounting Standards
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130") and
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("FAS 131"). Comprehensive loss is not
materially different from the net loss disclosed on the statements of operations
and the Company operates in one business segment.
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4. Chiron Collaboration
In March 1994, the Company entered into a collaboration agreement ("the
Collaboration Agreement") with Chiron Corporation ("Chiron") to develop and
commercialize sustained-release formulations of DepoCyt(TM) and certain Chiron
proprietary products using the Company's drug delivery technology. Under the
agreement, Chiron purchased 400,000 shares of the Company's Series C preferred
stock for $6.25 per share, or an aggregate consideration of $2.5 million, and a
warrant to purchase 365,000 shares of Series C preferred stock at an exercise
price of $6.25 per share for $1.0 million. The warrant was terminated and
converted into a marketing rights fee to the Company upon the achievement of a
development milestone in January 1995.
In June 1997, DepoTech reacquired rights to DepoCyt in Canada and Europe
from Chiron for aggregate cash payments of up to $13.7 million. Chiron will
retain exclusive marketing rights to DepoCyt in the United States. An initial
$2.0 million cash payment was paid by DepoTech to Chiron and expensed in 1997.
If, prior to December 31, 1998, the U.S. Food and Drug Administration ("FDA")
issues a letter or other notification to DepoTech indicating that DepoCyt is
approvable or approved, the remaining balance of $11.7 million shall be payable
no later than December 31, 1998. If no FDA notification is received prior to
December 31, 1998, the remaining amount shall be payable no later than six
months from the earlier of U.S. or European Union regulatory notification that
the application to market or sell DepoCyt is approvable or approved. If all
applications for regulatory approval to sell DepoCyt in the U.S. and European
Union are permanently withdrawn, DepoTech shall be relieved of any obligation to
pay the remaining $11.7 million. Therefore, such amount will be recorded upon
the receipt of the required notification.
Reimbursable clinical and manufacturing scale up costs for DepoCyt
incurred by the Company totaled $10.4 million through March 31, 1998 and $8.7
million through March 31, 1997.
The Collaboration Agreement also provides for the joint development of
DepoFoam formulations of certain compounds proprietary to Chiron ("Chiron
Products"). The agreement provides that Chiron will pay the Company for its
feasibility efforts. Chiron must fund one feasibility program for a Chiron
Product per year or lose its option to develop DepoFoam formulations of
additional Chiron proprietary compounds. Through April 1997, the Company had
completed feasibility studies on four Chiron proprietary compounds. No further
feasibility studies on Chiron Products will be performed under the Collaboration
Agreement.
Both the Company and Chiron have the ability to terminate a portion or
all of the collaboration at certain intervals and with advance notice.
5. Pharmacia & Upjohn Agreement
In July 1997, DepoTech entered into a Marketing and Distribution
Agreement with Pharmacia & Upjohn S.p.A ("P&U"), an affiliate of Pharmacia &
Upjohn Inc., for rights to market and sell DepoCyt in countries outside the
United States. P&U will generally be
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responsible for submitting regulatory filings, labeling, packaging,
distribution, marketing and sales of DepoCyt in this territory. The Company will
manufacture DepoCyt and receive a share of the net sales of DepoCyt sold by P&U.
The Company received a cash payment of $2.0 million upon execution of the
agreement and may receive additional payments of up to $17.0 million upon
achievement of certain regulatory milestones. The agreement also provides for
reimbursement by P&U of certain clinical trial expenses and regulatory fees
incurred by the Company. Cumulative reimbursable costs incurred by the Company
under this agreement totaled $1.6 million as of March 31, 1998.
Both the Company and P&U have the ability to terminate a portion or all
of the collaboration at certain intervals and with advance notice.
6. Contingencies
In April 1998, a class action suit was filed against the Company and
two of its former officers in the United States District Court for the Southern
District of California. The lawsuit alleges violations of the federal
securities laws and purports to seek unspecified monetary damages on behalf of
a class of shareholders who purchased DepoTech common stock during the period
April 1, 1996 through December 18, 1997. The Company believes that the lawsuit
is without merit and intends to defend it vigorously.
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Since its inception in October 1989, DepoTech Corporation ("DepoTech" or
the "Company") has devoted substantially all of its resources to the development
of its potential products. To date, the Company has not received any revenues
from the sale of products. The Company has funded its development programs
primarily from equity-derived working capital and through strategic alliances
with other companies. The Company has been unprofitable since its inception and
expects to incur additional operating losses over at least the next two years.
As of March 31, 1998, the Company's accumulated deficit was approximately $69.3
million.
The following discussion is qualified in its entirety by the more
detailed information and the Condensed Financial Statements and Notes thereto
appearing elsewhere in this Quarterly Report, including the information under
"Risks and Uncertainties." This Quarterly Report may contain, in addition to
historical information, forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from the
results discussed in such forward-looking statements. Factors that could cause
or contribute to such differences include those discussed under "Risks and
Uncertainties."
RESULTS OF OPERATIONS
The Company had total revenues of $1.2 million for the three months
ended March 31, 1998 and 1997. Total revenues in 1998 were principally generated
by the Company's collaborative agreements with Chiron Corporation ("Chiron") and
Pharmacia & Upjohn S.p.A., an affiliate of Pharmacia & Upjohn, Inc. ("P&U").
Total revenues for the three months ended March 31, 1997 were principally
generated by the Company's collaborative agreement with Chiron. Total revenues
were primarily derived from reimbursement of certain clinical trial and
manufacturing scale-up expenses for the Company's lead product, DepoCyt(TM), an
anti-cancer drug, under the collaborative agreements. In addition, Chiron
reimbursed DepoTech for 100% of certain pre-clinical and feasibility studies
performed on their behalf. Further, DepoTech is reimbursed for conducting
feasibility studies for various pharmaceutical companies. Revenues may fluctuate
from period to period depending on the level of clinical and process development
activity for projects under collaborative agreements and the achievement of
future milestones.
Research and development expenses for the first quarter ended March 31,
1998 increased to $5.4 million compared to $4.4 million for the same period in
1997. Factors contributing to this increase include expanded efforts in clinical
trials, manufacturing scale-up and preclinical development of potential
DepoFoam(TM) products. A non-randomized Phase IV clinical trial of DepoCyt in
solid tumor patients is continuing, as are randomized trials of DepoCyt in
leukemia and lymphoma patients. DepoTech is also conducting a dose-finding study
of DepoCyt in pediatric patients. In addition, clinical trials and manufacturing
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scale-up of DepoMorphine(TM) sustained-release encapsulated morphine sulfate to
treat acute post-surgical pain are underway. Further, the Company is evaluating
the feasibility of developing several early stage compounds for corporate
partners. Research and development expenses are expected to continue to increase
during 1998.
General and administrative expenses for the first quarter of 1998
increased to $1.3 million from $0.9 million for the same period in 1997. The
increase was primarily due to expansion in administrative staffing. In addition,
the Company reduced its workforce in February 1998. Included in general and
administrative expenses in the first quarter of 1998 is $0.1 million of
severance and outplacement expenses associated with the workforce reduction.
Interest income was $0.4 million for the three months ended March 31,
1998 compared to $0.5 million for the same period in 1997. Interest expense
increased to $0.4 million for the three months ended March 31, 1998 from $0.2
million for the comparable period in 1997. The increase in interest expense was
due to a higher balance outstanding for the note payable.
LIQUIDITY AND CAPITAL RESOURCES
From its inception through March 31, 1998, DepoTech has financed its
operations primarily through public and private placements of equity securities,
which provided aggregate net proceeds of approximately $101.9 million, and
through capital equipment leases and notes payable.
Chiron and DepoTech had been jointly developing DepoCyt in the U.S.,
Canada and Europe since March 1994. In June 1997, DepoTech reacquired rights to
DepoCyt in Canada and Europe from Chiron for aggregate cash payments of up to
$13.7 million, of which $2.0 million was paid to Chiron in December 1997. Chiron
will retain exclusive marketing rights to DepoCyt in the U.S. If, prior to
December 31, 1998, the U.S. Food and Drug Administration ("FDA") issues a letter
or other notification to DepoTech indicating that DepoCyt is approvable or
approved, the remaining balance of $11.7 million shall be payable no later than
December 31, 1998. If no FDA notification is received prior to December 31,
1998, the remaining amount shall be payable no later than six months from the
earlier of U.S. or European Union regulatory notification that the application
to market or sell DepoCyt is approvable or approved. If all applications for
regulatory approval to sell DepoCyt in the U.S. and European Union are
permanently withdrawn, DepoTech shall be relieved of any obligation to pay the
remaining $11.7 million.
In July 1997, DepoTech entered into a Marketing and Distribution
Agreement with P&U for rights to market and sell DepoCyt in countries outside
the U.S. P&U will be responsible for submitting regulatory filings, labeling,
packaging, distribution, marketing and sales of DepoCyt in this territory. The
Company will manufacture DepoCyt and receive a share of the net sales of DepoCyt
sold by P&U. The Company received a cash payment of $2.0 million upon execution
of the agreement and may receive additional payments of up to $17.0 million upon
achievement of certain regulatory milestones. The agreement also provides for
P&U to reimburse the Company for certain clinical trial expenses and regulatory
fees incurred by the Company. Future
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milestone payments, if any, totaling up to the obligation to Chiron of $11.7
million will be set aside in a restricted cash account for payment to Chiron for
the repurchase of DepoCyt rights.
As of March 31, 1998, the Company had cash, cash equivalents and
short-term investments of $21.2 million as compared to $27.4 million at December
31, 1997. The decrease of $6.2 million in cash, cash equivalents and short-term
investments was due primarily to net cash used to fund operations of $5.1
million and repayment of capital lease obligations and note payable totaling
$1.1 million. Working capital decreased to $16.0 million as of March 31, 1998
compared to $22.1 million as of December 31, 1997.
The Company has financed its capital expenditures through capital leases
and bank credit lines. At March 31, 1998, the Company has capital lease
obligations and a note payable associated with capital expenditures totaling
$13.5 million of which principal payments of $4.8 million is payable over the
next twelve months. All borrowings are secured by the capital equipment
financed. The terms of the Company's loan agreement with a bank contains a
covenant requiring the Company to maintain certain cash balances. At March 31,
1998, the company was in compliance with the terms of the covenant. The Company
is required to post some form of cash collateral if the covenant is violated.
The Company leases its headquarters which house most of its administrative,
research, clinical and manufacturing activities. The minimum rental commitment
for this facility ranges from $2.5 million to $4.3 million per year over the
next 18 years, based upon pre-established annual rent increases.
In April 1998, a class action suit was filed against the Company and
two of its former officers alleging violations of the federal securities laws
and purporting to seek unspecified monetary damages on behalf of a class of
shareholders. The Company believes that the lawsuit is without merit and
intends to defend it vigorously.
The Year 2000 Issue is the result of computer programs written in the
past that use two digits rather than four to define the applicable year. As a
result, these computer programs may not properly recognize calendar dates
beginning in the Year 2000. This problem may cause systems to fail or
miscalculate causing disruptions of operations, including a temporary inability
to process transactions or engage in similar normal business activities.
The Company believes that the total internal Year 2000 Issue costs will
be minimal and that the Year 2000 conversion requirements will be achieved
through routine upgrades to its software programs. The Company expects to
complete these upgrades by the end of 1998. These costs and the expected
completion date are based on management's best estimates and there can be no
assurance that these estimates will be achieved and actual results could differ
materially from those anticipated. The Company has also initiated communications
with all of its significant suppliers to determine the extent to which the
Company's systems are vulnerable to those third parties' failure to remediate
their own Year 2000 Issues. There can be no assurance that the systems of other
companies on which the Company's systems rely will be timely converted and will
not have an adverse effect on the Company's systems.
The Company's operations to date have consumed substantial amounts of
cash, which is expected to continue over the foreseeable future. The amount of
net losses and the time required for the Company to achieve profitability are
highly uncertain. There can be no assurance that the Company will be able to
achieve profitability at all or on a sustained basis. DepoTech anticipates that
its existing available cash, cash equivalents and short-term
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investments, committed future contract revenue, projected funding from equipment
financing and interest income will be adequate to satisfy its capital
requirements and fund operating losses through 1998. The development and
commercialization of the Company's potential products will require substantial
funds to conduct research and development and preclinical and clinical testing
of products and to manufacture and commercialize any products that are approved
for commercial sale. The Company's future capital requirements will depend on
many factors, including, without limitation, the time and costs involved in
obtaining regulatory approvals, continued scientific progress in its products
and process development programs and changes in existing collaborative programs.
The Company anticipates that it will be required to raise additional capital in
the near-term in order to continue to conduct its operations. Such capital may
be raised through public or private financings, as well as collaborative
arrangements, borrowings and other available sources. There can be no assurance
that additional funding, if necessary, will be available on favorable terms if
at all. If adequate funds are not available, the Company will be required to
curtail operations significantly or to obtain funds through entering into
arrangements with collaborative partners or others that may require the Company
to relinquish rights to certain of its technologies, potential products or
potential markets that the Company would not otherwise relinquish. The failure
to receive additional funding would have a material adverse effect on the
Company.
RISKS AND UNCERTAINTIES
This Quarterly Report may contain, in addition to historical
information, forward-looking statements that involve risk and uncertainties. The
Company's actual results could differ materially from the results discussed in
such forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below as well as those discussed elsewhere
in this Quarterly Report.
Early Stage Company. DepoTech's products are at an early stage of
development, and, to date, only three of the Company's DepoFoam formulations,
DepoCyt, DepoMorphine and DepoAmikacin, have been subject to any human clinical
testing. The Company's potential products will require extensive research,
formulation, development, preclinical and clinical testing, and may involve a
lengthy regulatory approval process prior to commercialization. There can be no
assurance that DepoCyt, DepoMorphine, DepoAmikacin or any of the Company's other
products or potential products, will prove safe and effective in clinical
trials, meet applicable regulatory standards, be capable of being produced in
commercial quantities at acceptable cost or be successfully commercialized. In
addition, there can be no assurance that preclinical or clinical testing will
accurately predict safety or efficacy in broader human use, or that delays in
the regulatory approval process will not arise, delaying approval longer than
currently expected by the Company. Even if all of the Company's products prove
to be safe and effective and are approved for marketing by the FDA and other
regulatory authorities, there can be no assurance that health care providers,
payors and patients will accept the Company's products. Any failure of the
Company to achieve technical feasibility, demonstrate safety, achieve clinical
efficacy, obtain regulatory approval or, together with its partners,
successfully market products would have a material adverse effect on the
Company.
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Government Regulation; Uncertainty of Obtaining Regulatory Approval.
DepoTech's research and development activities are, and its future business will
be, subject to significant regulation by governmental authorities in the United
States, primarily by the U.S. Food and Drug Administration ("FDA").
Pharmaceutical products intended for therapeutic use in humans are governed
principally by the Federal Food, Drug, and Cosmetic Act, as amended, and by the
FDA regulations in the United States and by comparable laws and regulations in
foreign countries. DepoTech is also subject to regulation under the food and
drug statutes and regulations of the State of California.
In April 1997, the Company completed a New Drug Application ("NDA") for
DepoCyt for the treatment of NM from solid tumors. As with all drugs subject to
accelerated approval, the FDA requested that the Company conduct a Phase IV
clinical trial on DepoCyt which is in process. In December 1997, the Oncologic
Drugs Advisory Committee ("ODAC") declined to recommend approval of DepoCyt for
use in patients with NM from solid tumors. In April 1998, DepoTech submitted, to
the FDA, an amendment to the NDA which provided data from a Phase IV clinical
trial of NM from solid tumors and interim data from a Phase III study of NM from
lymphomas. Submission of the amendment approximately doubled the number of
patients treated with DepoCyt under review, and extended the review time for an
FDA decision by three months, to July 28, 1998. The final decision regarding the
approval of new therapeutics resides with FDA officials subsequent to any
recommendation of ODAC. The Company has been notified by the FDA's District
Office that they are recommending approval for commercial manufacturing of
DepoCyt. However, this does not imply FDA product approval of DepoCyt which
currently remains subject to FDA review as described above.
There can be no assurance that the data from the Phase III clinical
trial reported to date will be sufficient to gain FDA approval, that additional
results from the still ongoing arms of the pivotal Phase III trial for NM from
lymphomas and leukemia will be positive and/or confirm earlier results or that
the Phase IV, pediatric, European and other clinical trials of DepoCyt will
generate positive results. There can be no assurance that these results and data
will meet the requirements for regulatory approvals necessary to commercialize
DepoCyt in the United States or otherwise. Any of these occurrences could have a
material adverse effect on the Company and its ability to fund the further
development and commercialization of DepoCyt and its other products.
The clinical testing and FDA review process for new drugs or biologics
requires substantial time, effort and expense. There can be no assurance that
any approval will be granted to the Company on a timely basis, if at all. The
FDA may refuse to approve a product for commercial sale or shipment if
applicable statutory and/or regulatory criteria are not satisfied, or may
require additional testing or information. There can be no assurance that such
additional testing or the provision of such information, if required, will not
have a material adverse effect on the Company. Also, the regulatory process can
be modified by Congress or the FDA in a manner that could materially affect the
Company.
In 1988, the FDA issued regulations intended to expedite the
development, evaluation and marketing of new therapeutic products to treat
life-threatening and severely
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debilitating illnesses for which no satisfactory alternative therapies exist.
These regulations provide for early consultation between the sponsor and the FDA
in the design of both preclinical studies and clinical trials. At the present
time, DepoCyt is being developed under such an accelerated program. There can be
no assurance, however, that any future products the Company may develop will be
eligible for evaluation by the FDA under the 1988 regulations. In addition,
there can be no assurance that DepoCyt or any future products (if eligible) will
be approved for marketing at all or, if approved for marketing, will be approved
for marketing sooner than would be traditionally expected. Regulatory approval
granted under these regulations may be restricted by the FDA as necessary to
ensure the safe use of the drug. In addition, post-marketing clinical studies,
sometimes called Phase IV studies, will be required for products approved under
this provision.
Under the Orphan Drug Act, the FDA may grant orphan drug designation to
drugs intended to treat a "rare disease or condition," which generally is a
disease or condition that affects populations of fewer than 200,000 individuals
in the United States. Under current law, orphan drug designation confers United
States marketing exclusivity upon the first company to receive FDA approval to
market such designated drug for the designated indication for a period of seven
years following approval of the NDA, subject to certain limitations. Orphan drug
designation does not convey any advantage in, or shorten the duration of, the
regulatory approval process. In June 1993, the Company obtained an orphan drug
designation for DepoCyt from the FDA to treat NM. There can be no assurance that
the Company will receive the first FDA approval to market DepoCyt to treat NM,
and thus, receive market exclusivity for DepoCyt to treat NM arising from
leukemia, lymphoma or solid tumor metastases. There can be no assurance that the
scope of protection or the level of marketing exclusivity that is currently
afforded by orphan drug designation and marketing approval will remain in effect
in the future.
For marketing outside the United States, the Company will be subject to
foreign regulatory requirements governing human clinical trials, manufacturing
and marketing approval for drugs and biologics in such foreign jurisdictions. In
January 1998, the Company's marketing partner, P&U, submitted a Marketing
Authorization Application for DepoCyt to the European Medicines Evaluation
Agency. The requirements relating to the conduct of clinical trials,
manufacturing, product licensing, pricing and reimbursement vary widely from
country to country and there can be no assurance that the Company or any of its
partners will meet and sustain any such requirements.
Future Capital Needs. The development and commercialization of the
Company's products will require substantial funds to conduct research and
development and preclinical and clinical testing of products and to manufacture
and commercialize any products that are approved for commercial sale. The
Company has a contractual commitment arising from the Chiron collaboration to
fund 50% of the sales and marketing expenses incurred for DepoCyt in the United
States. In June 1997, DepoTech reacquired rights to DepoCyt in Canada and Europe
from Chiron for aggregate cash payments of up to $13.7 million, of which $2.0
million was expensed and paid to Chiron in December 1997. If prior to December
31, 1998, the FDA issues a letter or other notification to DepoTech indicating
that DepoCyt is approvable or approved, the remaining balance of
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$11.7 million shall be payable no later than December 31, 1998. If no FDA
notification is received prior to December 31, 1998, the remaining amount shall
be payable no later than six month from the earlier of U.S. or European Union
regulatory notification that the application to market or sell DepoCyt is
approvable or approved. If all applications for regulatory approval to sell
DepoCyt in the U.S. and European Union are permanently withdrawn, DepoTech shall
be relieved of any obligation to pay the remaining $11.7 million.
The Company leases its headquarters housing most of its administrative,
research and clinical and manufacturing activities. The minimum rental
commitment for this facility ranges from approximately $2.5 million to $4.3
million per year, over 18 years, with a future minimum rental commitment, based
upon pre-established annual rent increases. In addition, the company has
financed its capital expenditures through capital leases and bank credit lines.
At March 31, 1998, the Company has capital lease obligations and notes payable
associated with capital expenditures totaling $13.5 million of which principal
payments of $4.8 million is payable over the next twelve months. All borrowings
are secured by the capital equipment financed. The terms of the Company's loan
agreement with a bank contains a covenant requiring the Company to maintain
certain cash balances. At March 31, 1998, the company was in compliance with the
terms of the covenant. The Company is required to post some form of cash
collateral if the covenant is violated. There can be no assurance that the
Company will be able to successfully reach agreement with the lender regarding
the amount of cash collateral required.
The Company's additional future capital requirements will depend on many
factors, including continued scientific progress in its products and process
development programs, progress with preclinical testing and clinical trials, the
time and costs involved in obtaining regulatory approvals, the costs involved in
filing patents, competing technological and market developments, changes in
existing collaborative relationships, the ability of the Company to establish
development arrangements, the cost of establishing effective sales and marketing
arrangements. To date, the Company has not received any revenues from product
sales. The Company anticipates that its existing available cash, cash
equivalents and short-term investments, committed future contract revenue,
projected funding from equipment and other financing and interest income will be
adequate to satisfy its capital requirements and fund operations through 1998.
Uncertainty of Additional Funding. The Company anticipates that it will
be required to raise additional capital in the near-term in order to continue to
conduct its operations. Such capital may be raised through public or private
financings, as well as collaborative arrangements, borrowings and other
available sources. There can be no assurance that additional funding, if
necessary, will be available on favorable terms if at all. If adequate funds are
not available, the Company will be required to curtail operations significantly
or to obtain funds through entering into arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain
of its technologies, potential products or potential markets that the Company
would not otherwise relinquish. The failure to receive additional funding would
have a material adverse effect on the Company.
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Limited Manufacturing Experience, Risk of Scale-Up. The Company has no
experience manufacturing products for commercial purposes. The Company's
manufacturing operations will need to meet ongoing commercial requirements for
all markets in which products have been approved. The Company has been notified
by the FDA's District Office that they are recommending approval for commercial
manufacturing of DepoCyt. However, this does not imply FDA product approval of
DepoCyt which currently remains subject to FDA review. The manufacturing
operations for DepoCyt may require passing preapproval inspection by regulatory
agencies for countries in which there are regulatory filings to market DepoCyt.
For all other products, the Company will need to significantly scale-up its
current manufacturing operations and comply with cGMPs and other regulations
prescribed by various regulatory agencies in the United States and other
countries to achieve the prescribed quality and required levels of production of
such products and to obtain marketing approval. Failure by the Company to
successfully scale-up its manufacturing operations or to comply with cGMPs and
other regulations would have a material adverse impact on the Company, including
the loss of manufacturing rights under the Chiron Agreement and the P&U
Agreement.
History of Operating Losses; Uncertainty of Future Profitability. The
Company has incurred an accumulated deficit of $69.3 million through March
31,1998. The Company expects to continue to incur substantial losses over at
least the next two years as the Company's research and development efforts,
clinical testing activities and manufacturing scale-up and sales and marketing
arrangement efforts expand. All of the Company's revenues to date have consisted
of contract revenues, milestone payments and interest income. No revenues have
been generated from product sales. There can be no assurance that the Company
can generate sufficient product or contract revenue to become profitable or
sustain profitability.
Legal Proceedings. In April 1998, a class action suit was filed against
the Company and two of its former officers in the United States District Court
for the Southern District of California. The lawsuit alleges violations of the
federal securities laws and purports to seek unspecified monetary damages on
behalf of a class of shareholders who purchased DepoTech common stock during the
period April 1, 1996 through December 18, 1997. The Company believes that the
lawsuit is without merit and intends to defend against it vigorously. The
pending litigation against the Company and any future litigation against the
company or its employees, regardless of the outcome, may result in substantial
costs and expense to the Company and significant diversions of time and effort
by the Company's personnel. Depending on the amount and timing, an unfavorable
resolution of such litigation could materially affect the Company's business,
future results of operations, cash flow, or financial condition.
Dependence Upon Partners for Development and Commercialization. The
Company does not currently possess all the resources necessary to develop,
complete the FDA approval process for and commercialize any of its potential
therapeutic products. The Company intends to enter into collaborative
arrangements with other companies to fund research, development and clinical
trials, to assist in obtaining regulatory approvals in the United States and
internationally and to commercialize its products. In addition, the Company's
ability to apply its drug delivery technology to a broad range of
pharmaceuticals will depend upon its ability to establish and maintain
collaborative arrangements because the rights to many of the pharmaceuticals
most suited to the Company's drug delivery technology are currently owned by
third parties. While the Company has entered into preliminary collaborations to
test feasibility of its delivery technology with certain compounds and has
entered into collaborations with Chiron and P&U, there can be no assurance that
the Company will be able to enter into additional collaborations to develop
commercial applications of its drug delivery technology. In addition, there can
be no assurance that the Company will be able to enter into or maintain existing
or future collaborations or that such collaborations will be successful. The
failure of the Company to enter into a collaboration with the owner of rights to
a particular formulation or pharmaceutical would preclude the Company from
developing its drug delivery technology with respect to such formulation or
pharmaceutical. The
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failure to enter into or maintain existing or future collaborations would have a
material adverse effect on the Company.
The Company's partners may pursue parallel development of other drug
delivery technologies that may compete with the Company's drug delivery
technology. In addition, definitive agreements negotiated with such partners may
provide that these partners may terminate the collaboration at any time without
significant penalty. Both the Company and Chiron under the Chiron Agreement and
P&U under the P&U Agreement have the ability to terminate a portion or all of
the collaboration at certain intervals and with advance notice. Termination of a
portion or all of the Chiron Agreement and/or P&U Agreement would have a
material adverse effect on the Company. To date the Company has retained the
rights to formulate and manufacture its products and intends in the future
generally to formulate and manufacture pharmaceuticals for partners, however,
certain partners may choose to formulate or manufacture their own formulations,
thereby limiting one or more potential sources of revenue for DepoTech. In
addition, the Company believes that it may be precluded from entering into
arrangements with companies whose products compete with products sold by its
partners. The Company also will have limited or no control over the resources
that any partner may devote to the Company's products, over partners'
development efforts, including the design and conduct of clinical trials, or
over the pricing of products. There can be no assurance that any of the
Company's present or future collaborative partners will perform their
obligations as expected or will devote sufficient resources to the development,
clinical testing or marketing of the Company's potential products. Any parallel
development by a partner of alternate drug delivery technologies, preclusion
from entering into competitive arrangements, failure to obtain timely regulatory
approvals, premature termination of a collaborative agreement or failure by a
partner to devote sufficient resources to the development and commercialization
of the Company's products would have a material adverse effect on the Company.
Reliance on Technology Rights From Research Development Foundation. In
February 1994, the Company entered into an Assignment Agreement with the RDF,
pursuant to which RDF assigned to DepoTech exclusive rights to the RDF
Technology. As consideration for the assignment of the RDF Technology, DepoTech
will pay RDF an earned royalty on gross revenues from the sale by DepoTech or
its collaborators of products incorporating the RDF Technology. The Company's
products, including DepoCyt, may incorporate the RDF Technology. In certain
other circumstances, DepoTech will pay RDF a percentage of the royalties or
other consideration received by DepoTech from licensees (or, if greater, the
amount of royalty DepoTech would have owed had it engaged in the same conduct as
the licensees). In addition, RDF retains the right to terminate the agreement or
to convert the exclusive nature of the rights granted under the agreement into a
nonexclusive license in the event that the Company does not satisfy its
contractual obligations, including making certain minimum annual payments.
Additional termination events include bankruptcy, a material uncured breach of
the agreement by DepoTech or a contest by DepoTech of the patents included in
the RDF Technology. The termination of the Assignment Agreement or the
conversion of its
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exclusive nature to a nonexclusive agreement would have a material adverse
effect on the Company.
Patents and Proprietary Technology. DepoTech relies on a combination of
technical leadership, patent, trade secret, copyright and trademark protection
and nondisclosure agreements to protect its proprietary rights. As of March 2,
1998, the Company owned or had exclusive rights to 10 issued or allowed United
States patents, 10 pending United States patent applications, 45 issued foreign
patents and 53 pending foreign applications on file covering various aspects of
its drug delivery technology. The Company intends to file additional patent
applications in the future. There can be no assurance that the Company will be
issued any additional patents or that, if any patents are issued, they will
provide the Company with significant protection or will not be challenged. Even
if such patents are enforceable, the Company anticipates that any attempt to
enforce its patents would be time consuming and costly. Moreover, the laws of
some foreign countries do not protect the Company's proprietary rights in the
products to the same extent as do the laws of the United States.
The patent positions of pharmaceutical, biotechnology and drug delivery
companies, including DepoTech, are uncertain and involve complex legal and
factual issues. Additionally, the coverage claimed in a patent application can
be significantly reduced before the patent is issued. As a consequence, there
can be no assurance that any of the Company's patent applications will result in
the issuance of patents or, if any patents issue, that they will provide
significant proprietary protection or will not be circumvented or invalidated.
Because patent applications in the United States are maintained in secrecy until
patents issue and publication of discoveries in the scientific or patent
literature often lag behind actual discoveries, the Company cannot be certain
that it was the first inventor of inventions covered by its pending patent
applications or that it was the first to file patent applications for such
inventions. Moreover, the Company may have to participate in interference
proceedings declared by the United States Patent and Trademark Office to
determine priority of invention that could result in substantial cost to the
Company, even if the eventual outcome is favorable to the Company. There can be
no assurance that the Company's patents, if issued, would be held valid by a
court of competent jurisdiction. An adverse outcome of any patent litigation
could subject the Company to significant liabilities to third parties, require
disputed rights to be licensed from or to third parties or require the Company
to cease using the technology in dispute.
There can be no assurance that third parties will not assert
infringement claims against the Company in the future or that any such
assertions will not result in costly litigation or require the Company to obtain
a license to intellectual property rights of such parties. There can be no
assurance that any such licenses would be available on terms acceptable to the
Company, if at all. Furthermore, parties making such claims may be able to
obtain injunctive or other equitable relief that could effectively block the
Company's ability to further develop or commercialize its products in the United
States and abroad and could result in the award of substantial damages. Defense
of any lawsuit or failure to obtain any such license could have a material
adverse affect on the Company. Finally, litigation, regardless of outcome, could
result in substantial cost to and a diversion of efforts by the Company.
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Dependence on Suppliers. The Company currently relies on a limited
number of suppliers to provide the materials used to manufacture its DepoFoam
formulations. Certain of these materials are purchased only from one supplier.
In the event the Company could not obtain adequate quantities of necessary
materials from its existing suppliers, there can be no assurance that the
Company would be able to access alternative sources of supply within a
reasonable period of time or at commercially reasonable rates. Regulatory
requirements applicable to pharmaceutical products tend to make the substitution
of suppliers costly and time-consuming. The unavailability of adequate
commercial quantities, the inability to develop alternative sources, a reduction
or interruption in supply or a significant increase in the price of materials
could have a material adverse effect on the Company's ability to manufacture and
market its products.
Reliance on Manufacturing Process. To date, the Company has relied on a
particular proprietary method of manufacture. There can be no assurance that
this method will be applicable to all pharmaceuticals or biologics the Company
desires to commercialize. Further, the yield of product incorporated into the
delivery system may be highly variable for different therapeutic agents.
Finally, the Company will need to successfully meet any manufacturing challenges
associated with the characteristics of the drug to be encapsulated. The physical
and chemical stability of the DepoFoam formulation may vary with each
therapeutic agent over time and under various storage conditions. There can be
no assurance that the manufacturing process will result in economically viable
yields of product or that it will produce formulations of therapeutic products
sufficiently stable under suitable storage conditions to be commercially useful.
In the event that the Company decides to pursue alternative manufacturing
methods for some or all of its drugs, there can be no assurance that these
methods will prove to be commercially practical or that the Company will have or
be able to acquire rights to use such alternative methods.
Limited Sales and Marketing Capability. Commercialization of the
Company's products is expected to be expensive and time-consuming. In the event
that the Company elects to participate directly in sales and marketing efforts
for the Company's products, the Company will need to build such capability in
the targeted markets. The Company currently has a limited marketing staff. There
can be no assurance that the Company will be able to establish an adequate sales
and marketing capability in any or all targeted markets or that it will be
successful in gaining market acceptance for its products. To the extent the
Company enters into co-promotion or other licensing arrangements, any revenues
received by the Company will be dependent on the efforts of third parties and
there can be no assurance that such efforts will be successful. To the extent
the Company relies on its collaborators, there can be no assurance that any of
these collaborators or their sublicensees will successfully market or distribute
the Company's products or that the Company will be able to establish a
successful direct sales organization, co-promotion or distribution arrangements.
Access to Drugs. The Company's ability to develop and commercialize its
technology will be affected by the Company's or its partners' access to the
drugs that are to be formulated. The Company intends in certain circumstances to
rely on the ability of its
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partners to provide access to the drugs that are to be formulated for use with
DepoFoam. There can be no assurance that the Company's partners will be able to
provide access to drug candidates for formulation in DepoFoam, or that, if such
access is provided, the Company or its partner will not be alleged or determined
to be infringing on third parties' rights and will not be prohibited from using
the drug or be found liable for damages that may not be subject to
indemnification. Any restriction on access or liability for damages would have a
material adverse effect on the Company. See "--Dependence Upon Partners for
Development and Commercialization."
Dependence on Key Personnel. The success of the Company is highly
dependent, in part, on its ability to retain highly qualified personnel,
including senior management and scientific personnel. Competition for such
personnel is intense and the inability to retain additional key employees or the
loss of one or more current key employees could adversely affect the Company.
There can be no assurance that the Company will be successful in retaining
required personnel in the future.
Highly Competitive Industry. The drug delivery, pharmaceutical and
biotechnology industries are highly competitive and rapidly evolving, with
significant developments expected to continue at a rapid pace. The Company's
success will depend upon maintaining a competitive position and developing
products and technologies for efficient and cost-effective drug delivery. The
Company's products will compete with other formulations of drugs and with other
drug delivery systems. There can be no assurance that any of the Company's
products will have advantages that will be significant enough to cause medical
professionals to use them. DepoTech believes that its products will compete on
the basis of quality, efficacy, cost, convenience, safety and patient
compliance. New drugs or further development in alternative drug delivery
methods may provide greater therapeutic benefits for a specific drug or
indication, or may offer comparable performance at lower cost than those offered
by the Company's DepoFoam drug delivery system. The Company is aware of many
other competitors in the field of drug delivery, including competitors
developing injectable or implantable drug delivery systems, oral drug delivery
technologies, passive transdermal systems, electrotransport systems, oral
transmucosal systems and inhalation systems. There can be no assurance that
developments by others will not render the Company's products or technologies
uncompetitive or obsolete. Many of the Company's existing or potential
competitors have substantially greater research and development capabilities,
experience, manufacturing, marketing, financial and managerial resources than
the Company. Furthermore, acquisitions of competing drug delivery companies by
large pharmaceutical companies could enhance competitors' financial, marketing
and other resources. Accordingly, the Company's competitors may succeed in
developing competing technologies, obtaining FDA approval or gaining market
share for products more rapidly than the Company.
Product Liability; Availability of Insurance. The design, development
and manufacture of the Company's products involve an inherent risk of product
liability claims and associated adverse publicity. The Company obtained clinical
trial product liability insurance for its human clinical trials and intends to
obtain insurance for future clinical trials of other products under development
and for potential product liability associated with the commercial sale of the
Company's products. There can be no
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assurance, however, that the Company will be able to obtain or maintain
insurance for any of its clinical trials or commercial products. Although the
Company currently maintains general liability insurance, there can be no
assurance that the coverage limits of the Company's insurance policies will be
adequate. Product liability insurance is expensive, difficult to obtain and may
not be available in the future on acceptable terms or at all. A successful claim
brought against the Company in excess of the Company's insurance coverage would
have a material adverse effect upon the Company.
Year 2000 Compliance. Year 2000 Issue is the result of computer programs
written in the past that use two digits rather than four to define the
applicable year. As a result, these computer programs may not properly recognize
calendar dates beginning in the Year 2000. This problem may cause systems to
fail or miscalculate causing disruptions of operations, including a temporary
inability to process transactions or engage in similar normal business
activities.
The Company believes that the total internal Year 2000 Issue costs will
be minimal and that the Year 2000 conversion requirements will be achieved
through routine upgrades to its software programs. The Company expects to
complete these upgrades by the end of 1998. These costs and the expected
completion date are based on management's best estimates and there can be no
assurance that these estimates will be achieved and actual results could differ
materially from those anticipated. The Company has also initiated communications
with all of its significant suppliers to determine the extent to which the
Company's systems are vulnerable to those third parties' failure to remediate
their own Year 2000 Issues. There can be no assurance that the systems of other
companies on which the Company's systems rely will be timely converted and will
not have an adverse effect on the Company's systems.
Hazardous Materials. The Company's research and development involves the
controlled use of hazardous materials, chemicals and various radioactive
compounds. The risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of such an accident, the Company
could be held liable for any damages that result and any such liability could
exceed the resources of the Company. The Company may incur substantial cost to
comply with environmental regulations.
No Dividends. The Company currently intends to retain any future
earnings for use in its business and does not anticipate paying any cash
dividends in the future. Pursuant to a bank credit facility, DepoTech may not,
without the bank's prior written consent pay or declare dividends except for
dividends payable solely in the Company's stock.
Possible Volatility of Stock Price. Factors such as the announcements of
technological innovations or new products by the Company, its competitors and
other third parties, the status of submissions to the FDA or its international
equivalent, as well as variations in the Company's results of operations, market
conditions, analysts' estimates and the stock
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market generally (and stock market perceptions of the pharmaceutical,
biotechnology and/or drug delivery industries specifically) may cause the market
price of the Company's Common Stock to fluctuate significantly. Companies such
as DepoTech have, in recent years, experienced dramatic stock price volatility.
Also, future sales of shares by existing shareholders pursuant to Rule 144 of
the Securities Act of 1933, as amended, or through the exercise of outstanding
registration rights, could have an adverse effect on the price of the Company's
Common Stock.
Possible Anti-Takeover Effect of Certain Charter Provisions. The
Company's Articles of Incorporation includes certain charter provisions which
may discourage certain types of transactions involving an actual or potential
change in control of the Company, including transactions in which shareholders
might otherwise receive a premium for their shares over the current market
prices, and may limit the ability of the shareholders to approve transactions
that they may deem to be in their best interests. The Board of Directors also
has the authority to issue up to 5,000,000 shares of Preferred Stock in one or
more series and to fix the rights, priorities, preferences, qualifications,
limitations and restrictions, including the dividend rates, conversion rights,
voting rights, terms of redemption, terms of sinking funds, liquidation
preferences and the number of shares constituting any series, without any
further vote or action by the shareholders, which could decrease the amount of
earnings and assets available for distribution to holders of Common Stock or
adversely affect the rights and powers, including voting rights, of the holders
of the Common Stock. The issuance of Preferred Stock may have the effect of
delaying or preventing a change in control of the Company and may adversely
affect the rights of the holders of Common Stock.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None
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PART II - OTHER INFORMATION
Item 1 Legal Proceedings.
In April 1998, a class action suit was filed against the Company and two
of its former officers in the United States District Court for the Southern
District of California. The lawsuit alleges violations of the federal securities
laws and purports to seek unspecified monetary damages on behalf of a class of
shareholders who purchased DepoTech common stock during the period April 1, 1996
through December 18, 1997. The Company believes that the lawsuit is without
merit and intends to defend against it vigorously.
Item 2 Change 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
Exhibit
Number
------
10.1 Amended and Restated Consulting Agreement Between DepoTech
Corporation and Stephen B. Howell, M.D. dated March 1, 1998.
10.2 Consulting Agreement Between DepoTech Corporation and Stephen B.
Howell dated March 16, 1998.
10.3 Confidential Separation Agreement Between DepoTech Corporation
and Linda Paradiso, DVM dated January 7, 1998.
10.4 Common Stock Purchase Warrant Agreement Between DepoTech
Corporation and Sanderling Management Company, LLC dated
February 25, 1998.
27.1 Financial Data Schedule
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DEPOTECH CORPORATION
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.
DEPOTECH CORPORATION
/s/ Fred A. Middleton
---------------------------------
Date: May 15, 1998 Fred A. Middleton
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ Dana S. McGowan
---------------------------------
Date: May 15, 1998 Dana S. McGowan
Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)
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