SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
--------------------
[x] QUARTERLY REPORT PURSUANT SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 1995
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File No. 0-18728
INTERNEURON PHARMACEUTICALS, INC.
(exact name of registrant as specified in its charter)
Delaware 04-3047911
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
One Ledgemont Center, 99 Hayden Avenue 02173
Lexington, Massachusetts (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (617) 861-8444
(Former name, former address and former fiscal year, if changed since last
report): Not Applicable
Indicate by check 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 periods 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 class of
common stock, as of the latest practicable date.
Class Outstanding at August 11, 1995:
Common Stock $.001 par value 31,843,674 shares
C:\BTPM_NY_\46\0032906.02
8/14/95
INTERNEURON PHARMACEUTICALS, INC.
INDEX TO FORM 10-Q
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1995
and September 30, 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the Three and Nine Months
ended June 30, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the Nine Months ended
June 30, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . 14
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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INTERNEURON PHARMACEUTICALS, INC.
CONSOLIDATED
BALANCE SHEETS
(unaudited)
June 30, September 30,
1995 1994
ASSETS -------- --------------
Current assets:
Cash and cash equivalents $10,468,260 $11,262,563
Marketable securities 12,262,826 4,356,860
Prepaid and other current assets 374,980 294,455
Accounts receivable 205,013 31,762
------------ -------------
Total current assets 23,311,079 15,945,640
Restricted cash 125,000 125,000
Property and equipment, net 1,640,514 1,894,464
Notes receivable 324,782 313,022
---------- ---------
$25,401,375 $18,278,126
LIABILITIES
Current liabilities:
Accounts payable $ 684,741 $1,116,956
Accrued expenses 7,696,234 5,897,097
Current portion of capital lease obligations 430,982 354,976
---------- -----------
Total current liabilities 8,811,957 7,369,029
Long-term portion of capital lease obligations 774,622 1,025,201
Other long-term liabilities 148,653 106,566
Minority interest 5,776,587 --
STOCKHOLDERS' EQUITY
Preferred stock; $.001 par value, authorized 5,000,000 shares:
Series B, 239,425 shares issued and outstanding at June 30, 1995 and
September 30, 1994, respectively (liquidation preference at June 30, 1995
$3,078,931); 240 240
Series C, 5,000 shares issued and outstanding at June 30, 1995 and
September 30, 1994, respectively (liquidation preference at June 30, 1995
$510,325); 5 5
Common stock, par value $.001; 60,000,000 shares authorized;
31,668,614 and 29,016,367 shares issued and outstanding at June 30,
1995 and September 30, 1994, respectively 31,669 29,016
Additional paid-in capital 83,815,134 70,559,447
Accumulated deficit (73,957,492) (60,811,378)
------------ ------------
Total stockholders' equity 9,889,556 9,777,330
-------------- --------------
$25,401,375 $18,278,126
------------ ------------
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
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INTERNEURON PHARMACEUTICALS, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended June 30, For the nine months ended June 30,
1995 1994 1995 1994
---- ---- ---- ----
Revenues:
Contract and license fees $ 2,714,633 $ 100,000 $ 2,817,966 $ 100,809
Investment income 255,840 78,291 657,153 276,182
Other income -- -- 25,849 --
----------- ------------ -------------- -------------
2,970,473 178,291 3,500,968 376,991
Costs and expenses:
Research and development 3,972,378 5,445,604 11,250,853 12,642,909
General and administrative 2,087,688 2,649,760 5,589,906 6,743,679
--------- --------- --------- ---------
Total costs and expenses 6,060,066 8,095,364 16,840,759 19,386,588
Net loss from operations (3,089,593) (7,917,073) (13,339,791) (19,009,597)
Minority Interest 107,506 -- 193,677 --
------------ ------------- -------------- -----------
Net loss ($2,982,087) ($7,917,073) ($13,146,114) ($19,009,597)
============= ============= ============== =============
Net loss per common share ($0.10) ($0.28) ($0.44) ($0.69)
============= ============= ============== =============
Weighted average common shares
outstanding 30,805,696 28,733,459 30,081,243 27,551,979
------------- ------------- ------------ ------------
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
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INTERNEURON PHARMACEUTICALS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the nine months ended June 30,
1995 1994
------------ --------
Cash used in operating activities:
Net loss ($13,146,114) ($19,009,597)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation & amortization 564,231 482,535
Gain on disposal of fixed assets (28,893) --
Amortization of bond premium -- 10,073
Minority interest in net loss of consolidated
subsidiaries (193,677) --
Noncash license fee expense -- 480,000
Noncash compensation 25,000 --
Change in assets and liabilities:
Prepaids and other assets (80,525) 753,359
Accounts and notes receivable (185,011) (188,339)
Accounts payable (432,215) 269,649
Accrued expenses and other liabilities 1,815,571 1,728,995
-------------- ------------
Net cash (used) by operating activities (11,661,633) (15,473,325)
-------------- ------------
Cash flows from investing activities:
Capital expenditures (322,601) (1,041,397)
Purchase of marketable securities (13,010,000) (52,040,109)
Proceeds from maturities and sales of
marketable securities 5,104,034 60,259,561
Proceeds from sale of fixed assets 41,214 --
------------ ------------
Net cash provided (used) by investing activities (8,187,353) 7,178,055
------------ ------------
Cash flows from financing activities:
Net proceeds from financing activities 19,229,255 14,731,435
Proceeds from sale/leaseback 140,461 636,021
Principal payments of capital lease obligations (315,033) --
------------ -----------
Net cash provided by financing activities 19,054,683 15,367,456
------------ -----------
Net change in cash and cash equivalents (794,303) 7,072,186
Cash and cash equivalents at beginning of period 11,262,563 6,225,320
------------ ------------
Cash and cash equivalents at end of period $10,468,260 $13,297,506
----------- -----------
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
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INTERNEURON PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-----
A. BASIS OF PRESENTATION:
The consolidated financial statements included herein have been prepared by
Interneuron Pharmaceuticals, Inc. without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of management,
the accompanying unaudited consolidated financial statements include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the consolidated financial position, results of operations and
cash flows of the Company. The consolidated financial statements included herein
should be read in conjunction with the audited consolidated financial statements
and the notes thereto included in the Company's Form 10K for the fiscal year
ended September 30, 1994.
The consolidated financial statements include the accounts of Interneuron
Pharmaceuticals, Inc. (the "Company") and its subsidiaries. All significant
intercompany activity has been eliminated.
B. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES:
The Company and its subsidiaries invest available cash in short-term bank
deposits, money market funds, commercial paper and U.S. Government securities
which are carried at the lower of cost or market. Cash and cash equivalents
includes investments with maturities of three months or less at date of
purchase. Marketable securities consists of investments purchased with
maturities greater than three months. In fiscal 1995, the Company and its
subsidiaries adopted Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115").
SFAS 115 requires that, except for debt securities classified as
"held-to-maturity" securities, investments in debt and equity securities be
reported at fair value. Debt securities classified as "held-to-maturity"
securities are reported at amortized cost. The Company and its subsidiaries have
classified all investments as "held-to-maturity" at June 30, 1995.
C. INCOME TAXES:
At June 30, 1995, the Company and its subsidiaries had net operating loss
carryforwards, for tax reporting purposes, of approximately $74 million
available to reduce future federal income taxes. The use of these net operating
loss carryforwards may be subject to limitation under the change in stock
ownership rules of the Internal Revenue Code and may not be fully available for
use on a consolidated basis.
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INTERNEURON PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----
D. STOCKHOLDERS' EQUITY:
During the nine months ended June 30, 1995, the Company and its
subsidiaries raised approximately $19,229,000 of equity capital, net of related
issuance costs, through several financing arrangements. The Company's
subsidiaries issued convertible preferred stock through private placements which
resulted in net proceeds of approximately $7,133,000. In connection with certain
of the subsidiaries' issuance of convertible preferred stock, the Company issued
213,125 warrants to purchase shares of the Company's Common Stock exercisable at
$4.625 per share, (the "Warrants"), until June 30, 1998. Additionally, investors
in the private placements have the ability on June 30, 1998 to cause the Company
to purchase from them certain amounts of the convertible preferred stock deemed
to be illiquid (the "Put Protection Rights"), but in no circumstance for an
amount greater than that initially paid. The Company received $1,162,000 from
these proceeds as consideration for its issuance of the Warrants and the Put
Protection Rights. The Company may pay cash or issue its Common Stock to settle
any obligations arising from the Put Protection Rights and intends to choose
settlement through issuance of its Common Stock. If all Put Protection Rights
are exercised in full at a time when Interneuron's Common Stock were valued at
$2.00 per share or less, based upon the number of shares of preferred stock sold
during the nine months ended June 30, 1995, the Company could be required to
issue up to an aggregate of approximately 4,095,000 shares of Common Stock.
Investors also received registration rights relating to the shares underlying
the Warrants and Put Protection Rights. In connection with these private
placements, the Company issued to designees of the Placement Agent, which is an
affiliate of the Company, warrants to purchase approximately 22,000 shares of
Interneuron Common Stock at $4.625 per share.
The amount of Minority Interest reflected in the Consolidated Balance Sheet
at June 30, 1995 reflects the gross proceeds of the subsidiaries' private
placements net of offering costs of $958,000 and net of the $1,162,000 paid to
the Company for its issuance of the Warrants and Put Protection Rights, less a
proportionate share of the subsidiaries' net loss for the periods subsequent to
issuance. Of the $1,162,000 the Company received for its issuance of the
Warrants and Put Protection Rights, the Company loaned approximately $814,000 to
certain subsidiaries on a long-term basis pursuant to convertible debentures.
In connection with these private placements of the Company's subsidiaries,
the Company converted the indebtedness owed to the Company by the subsidiaries
into convertible preferred stock of the subsidiaries. As a result of the private
placements and the debt conversion, the Company's percentage of ownership in
Progenitor, Transcell and Intercardia changed from 77%, 80% and 100% at
September 30, 1994, respectively, to 78%, 77% and 88% at June 30, 1995,
respectively.
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INTERNEURON PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----
In addition, during the nine months ended June 30, 1995, (i) the Company
sold 1,475,000 shares of its Common Stock and a warrant to purchase 500,000
shares of the Company's Common Stock at $10.00 per share through private
placements resulting in net proceeds of approximately $8,722,000; (ii) 154,800
of the outstanding Unit Purchase Options were exercised, along with all
underlying Class A Warrants, resulting in the issuance of 930,000 shares of the
Company's Common Stock and proceeds of approximately $2,325,000; and (iii)
196,447 Class B warrants were exercised resulting in the issuance of 196,447
shares of the Company's Common Stock and proceeds of approximately $933,000. The
proceeds from these financing transactions, along with the $1,162,000 which the
Company received for its issuance of the Warrants and Put Protection Rights, and
proceeds from other equity transactions, resulted in a $13,258,000 increase in
the Company's equity capital.
In May 1995 the Company extended the expiration date of its Class B
Warrants to March 15, 1996 from the previously extended expiration date of June
30, 1995. Each Class B Warrant entitles the registered holder to purchase one
share of Interneuron's Common Stock at a price of $4.75 through March 15, 1996,
subject to earlier redemption, at the Company's option, under certain
circumstances. The total number of outstanding Interneuron Class B Warrants is
approximately 2.46 million as of June 30, 1995.
The Company and its subsidiaries continue to seek additional financing and
collaborative arrangements.
F. SUBSEQUENT EVENTS
Subsequent to June 30, 1995, the Company issued 150,000 shares of its
Common Stock through a private placement and received net proceeds of
approximately $1,200,000 and also issued warrants to purchase 8,000 shares of
Common Stock. In addition, the private placements for certain subsidiaries
terminated on June 30, 1995 and, in connection with the final closing, the
subsidiaries issued additional shares of convertible preferred stock, received
net proceeds of approximately $82,000 subsequent to June 30, 1995 and the
Company issued warrants to purchase 5,000 shares of the Company's Common Stock
and Put Protection Rights.
E. AGREEMENTS
During the three months ended June 30, 1995, the Company's subsidiary,
Progenitor, Inc., entered into several agreements. In April 1995, Progenitor,
entered into an agreement with Chiron Corporation to collaborate in the
development and commercialization of Progenitor's proprietary gene therapy
technology. Progenitor received an initial payment of $2,500,000 and is
committed to share up to $750,000 of certain start-up manufacturing costs at
Chiron during calendar year 1995. These amounts have been reflected as contract
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revenue and research and development expense, respectively, in the Statements of
Operations for the three and nine months ended June 30, 1995. Progenitor will
receive an additional $500,000 payment in January 1996, which will be recognized
as contract revenue when received.
Additionally, in June 1995, Progenitor finalized its award of a grant of
approximately $2,000,000 from the National Institute of Standards and Technology
through the Advanced Technology Program of the U.S. Department of Commerce. The
grant, to be paid over three years and subject to certain conditions, will
support research based upon Progenitor's proprietary cell-based technologies
that may lead to treatments for cardiovascular disease. Contract revenue will be
recognized commensurate with efforts expended.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
report. Unless the context indicates otherwise, all references to the Company
include Interneuron Pharmaceuticals, Inc. ("Interneuron") and its subsidiaries
Progenitor, Inc., Transcell Technologies, Inc., Intercardia, Inc.
and InterNutria, Inc. (the "Subsidiaries").
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, the Company had cash, cash equivalents and marketable
securities of $22,731,000. The Company funds its activities primarily from
equity financings and certain corporate collaborations. During the nine month
period ended June 30, 1995, the Company raised approximately $19,229,000 net of
related offering costs, through several financing arrangements. Of this amount,
approximately $7,133,000 was raised through private placements of convertible
preferred stock of the Subsidiaries. In connection with certain of these private
placements, Interneuron issued to the investors (i) three-year warrants to
purchase an aggregate of 213,125 shares of Common Stock (the "Warrants") and
(ii) rights to sell varying amounts of investors' convertible preferred stock in
the Subsidiaries to Interneuron (the "Put Protection Rights") in exchange for
shares of Interneuron Common Stock in the event certain conditions are not met
by June 30, 1998. Approximately $12,096,000 was received from private placements
of an aggregate of 1,475,000 shares of Interneuron's Common Stock and 500,000
warrants, the exercise of 154,800 Unit Purchase Options and the underlying Class
A Warrants, and the exercise of Class B Warrants. Interneuron will be required
to file registration statements under the Securities Act of 1933 commencing in
the first half of fiscal 1996 covering the resale of certain securities sold in
these financings.
Interneuron could be required to issue up to an aggregate of approximately
4,095,000 shares of Common Stock under certain circumstances if the Put
Protection Rights were exercised in full if Interneuron's Common Stock is valued
at $2.00 per share or less. Based upon the market price of Interneuron's Common
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Stock on August 1, 1995 of $11.625 per share, a full exercise of all Put
Protection Rights would cause an issuance of approximately 705,000 shares of
Interneuron's Common Stock. The Company is continuing to seek additional funds
through equity financings and corporate collaborations, although there can be no
assurance any additional funds will be obtained. If the Company is not
successful in raising additional funds during fiscal 1996, it will become
necessary to reduce certain planned research and development efforts and certain
other expenses.
In April 1995, Progenitor, Inc. entered into an agreement with Chiron
Corporation ("Chiron") to collaborate on the development and commercialization
of certain of Progenitor's proprietary gene therapy technology and to grant
Chiron exclusive, worldwide manufacturing and marketing rights in certain areas.
Progenitor received an initial payment of $2,500,000 and is committed to share
up to $750,000 of certain start-up manufacturing costs at Chiron during calendar
year 1995. The agreement provides for Progenitor to receive an additional
$500,000 payment in January 1996, as well as later stage milestone payments and
royalties based upon sales. In June 1995, Progenitor also finalized its award of
an approximately $2,000,000 grant to be paid over three years and subject to
certain conditions, to support research based upon Progenitor's proprietary
cell-based technologies.
Consolidated cash, cash equivalents and marketable securities increased
$7,112,000 from $15,619,000 at September 30, 1994 to $22,731,000 at June 30,
1995. This increase primarily reflects net proceeds from financing activities
and the Chiron Agreement exceeding net cash used by operations for the nine
months ended June 30, 1995.
In May 1993, Interneuron submitted a New Drug Application ("NDA") to the
United States Food and Drug Administration ("FDA") for dexfenfluramine, a
prescription drug for the treatment of obesity. In February 1995, Interneuron
received an action letter from the FDA identifying technical and safety issues
that will need to be resolved before the NDA can be approved. Interneuron
responded formally to this non-approvable letter in May 1995 and submitted data
addressing these issues. Interneuron's NDA for dexfenfluramine is scheduled for
review by an FDA advisory committee on September 28, 1995. There can be no
assurance that the FDA advisory committee will recommend dexfenfluramine for
approval or, if approval is obtained, as to what marketing or post-approval
studies may be required by the FDA.
The data submitted to the FDA includes the results of an
epidemiologic study conducted in Europe which is being reviewed by several
European drug regulatory agencies and which examined risk factors for primary
pulmonary hypertension, a rare but serious disease. The study showed that among
other factors, weight reduction drugs, systemic hypertension and obesity were
associated with a higher risk of primary pulmonary hypertension. The Company is
unable to predict whether the FDA will require additional clinical or other
testing to further determine dexfenfluramine's association with the risk of
developing primary pulmonary hypertension or with other risks such as long-term
neurochemical changes in the brain. Therefore the Company is unable to predict
the extent of additional expenditures which may be required to pursue FDA
approval of dexfenfluramine.
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The FDA has twice convened an advisory committee to discuss proposed
guidances relating to the development of drugs for the treatment of obesity. The
guidances have not been finalized and the Company is unable to predict whether
any of the guidances which are issued by the FDA will apply to Interneuron's NDA
for dexfenfluramine. The Company is therefore not able to determine the impact,
if any, such guidances may have on the NDA. While the NDA is broadly compatible
with the proposed guidances in terms of structure, duration and end-points of
clinical trials, certain of such guidances, if applicable to Interneuron and in
the event they require the conduct of clinical trials that vary from those
included in the NDA or restrict product claims, may adversely affect the
approvability of the NDA or the marketability of the drug if approval is
obtained.
In November 1992 Interneuron entered into an agreement granting American
Cyanamid Company a sublicense to market dexfenfluramine in the U.S. for the
treatment of obesity. The Company had licensed U.S. rights from Les Laboratoires
Servier ("Servier"). As a result of the acquisition of American Cyanamid by
American Home Products Corp., Servier has the right to withdraw its consent to
the sublicense. An agreement relating to this consent is in the process of being
finalized. In the event such consent is not provided by Servier, Interneuron
would seek to enter into a new sublicense for marketing dexfenfluramine. There
can be no assurance that any new sublicense can be obtained on terms favorable
to Interneuron.
In March 1991, Interneuron filed a petition with the Drug Enforcement
Administration ("DEA") to remove dexfenfluramine from the schedules of the
Controlled Substances Act. Future milestone payments from Interneuron's
sublicensee and the level of royalties can be adversely impacted in the event
such a petition is not successful. The Company expects to present data on
September 29, 1995 to the Drug Abuse Advisory Committee, an advisory committee
to the FDA, for its determination as to whether dexfenfluramine should be
removed from the federal schedules.
The Company expects to incur substantial research and development expenses
for several products for the foreseeable future. In particular, it is performing
Phase II/III clinical trials in the U.S. for citicoline to treat ischemic
stroke. The costs of the current clinical trial, not including internal costs,
are expected to exceed $3,500,000 (of which approximately $1,500,000 has been
paid through June 30, 1995) including payments to the contract research
organization managing the trial and other consultants. This clinical trial is
expected to extend into fiscal 1996. Additional clinical trials, which could
commence in 1996, may be required prior to submission of an NDA. Additional
external funding may be required for these clinical trials, the preparation and
submission of a NDA and for additional testing, if needed.
Intercardia, Inc. is contractually committed to provide certain support to
a Phase II/III clinical trial for bucindolol, a drug for congestive heart
failure, which commenced in April 1995 and which is sponsored by the National
Institutes of Health and The Department of Veterans Affairs. In connection with
its obligation to the trial, Intercardia is expected to expend approximately
$1,500,000 in fiscal 1995, of which approximately $600,000 has been paid through
June 30, 1995. These expenditures are related to Intercardia's $2,000,000
contractual commitment to the trial, its requirement to supply bucindolol for
the trial and other support services.
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In May 1995, Interneuron extended the expiration date of its Class B
Warrants to the close of business on March 15, 1996 from the previously extended
expiration date of June 30, 1995. Each Class B Warrant entitles the registered
holder to purchase one share of Interneuron's Common Stock at a price of $4.75
through March 15, 1996, subject to earlier redemption at Interneuron's option,
under certain circumstances. The total number of outstanding Interneuron Class B
Warrants was approximately 2.46 million as of June 30, 1995. Exercise of all
outstanding Class B Warrants would result in proceeds to the Company of
approximately $11,700,000.
In the third quarter of fiscal 1995, Interneuron established a
wholly-owned subsidiary, InterNutria, Inc., to license or acquire and
commercialize a variety of products, which may include Company products,
primarily in the nutritional or food related fields.
The Company has operating and capital lease commitments of approximately
$350,000 pertaining to the balance of fiscal 1995. As of August 1, 1995, the
Company was a party to various consulting agreements and employment agreements
with officers containing minimum aggregate annual payments of approximately
$1,850,000. Certain employment agreements are subject to additional bonuses and
annual increases as may be determined by the Company's Board of Directors.
RESULTS OF OPERATIONS
For the three and nine month periods ended June 30, 1995, revenues
increased $2,792,000 and $3,124,000, respectively, to $2,970,000 and $3,501,000,
respectively. These increases were primarily due to the receipt of $2,500,000 by
Progenitor under its license agreement with Chiron. The Company had minimal
contract and license fee income in the three and nine month periods ended June
30, 1994. Also contributing to the increases in the 1995 periods were
substantial increases in investment income resulting primarily from higher
invested balances as well as higher prevailing interest rates. The Company may
continue to experience significant fluctuations in revenues from the timing of
license fees, contract income and milestone payments.
Total costs and expenses decreased $2,035,000, or 25%, to $6,060,000 for
the three month period ended June 30, 1995 and $2,546,000, or 13%, to
$16,841,000 for the nine month period ended June 30, 1995. These decreases are
the result of a general reduction in spending and prioritizing resources.
Research and development expenses decreased $ 1,474,000, or 27%, to $
3,972,000 for the three month period ended June 30, 1995 from $5,446,000 for the
three month period ended June 30, 1994 and decreased $ 1,392,000, or 11%, to $
11,251,000 for the nine month period ended June 30, 1995 from $12,643,000 for
the nine month period ended June 30, 1994. Substantial initial expenses for the
Phase III clinical trial for citicoline incurred in the third quarter of fiscal
1994 caused a relative reduction in such costs in the third quarter of fiscal
1995. Also ontributing to these reductions were reduced spending on certain
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product development by the Company and decreased research and development
spending by Transcell and Progenitor. Partially offsetting these decreases was a
$750,000 charge for Progenitor's obligation to fund certain manufacturing costs
at Chiron and increased funding by Intercardia of a Phase II/III clinical trial
for bucindolol. Additionally, the nine month period ended June 30, 1994 included
an initial license payment by Interneuron to Rhone-Poulanc Rorer for the
acquisition of pagaclone, a drug for anxiety, and a non-recurring charge
pertaining to the issuance of warrants to a licensor of the Company. The level
of future research and development expenses will be dependent upon the ability
to obtain required funding and the results of the Company's development
activities and regulatory actions.
General and administrative expenses decreased $562,000, or 21%, to
$2,088,000 for the three month period ended June 30, 1995 from $2,650,000 for
the three month period ended June 30, 1994 and decreased $1,154,000, or 17%, to
$5,590,000 for the nine month period ended June 30, 1995 from $6,744,000 for the
nine month period ended June 30, 1994. The fiscal 1994 periods included business
development and prospective financing costs that did not recur in the fiscal
1995 periods. Although the nine month period ended June 30, 1995 reflected lower
recruiting, hiring and severance costs than those incurred in the nine months
ended June 30, 1994, these decreases were partially offset by wage and benefit
costs related to management additions at Intercardia and InterNutria and other
expenses.
As a result of the foregoing, the Company incurred net losses of ($
2,982,000) and ($13,146,000), or ($.10) and ($.44) per share for the three and
nine month periods ended June 30, 1995, respectively, compared to net losses of
($7,917,000) and ($19,010,000), or ($.28) and ($.69) per share for the three and
nine month periods ended June 30, 1994, respectively. Weighted average common
shares increased in the fiscal 1995 periods reflecting additional equity
issuances.
Activities of the Subsidiaries continue to represent a significant
percentage of the Company's consolidated expenses and represented 53% and 38% of
the consolidated expenses in the nine month periods ended June 30, 1995 and
1994, respectively. While the rate of spending by Progenitor and Transcell is
not expected to increase significantly in fiscal 1995, increased spending at
Intercardia and the addition of new subsidiaries are expected to increase the
total amount of expenses pertaining to the subsidiaries.
Consistent with the Company's strategy of establishing separate
subsidiaries and licensing in new products and technology, the Company from time
to time explores various technology or product acquisition and/or financing
opportunities and is currently engaged in discussions relating to such
opportunities. Any such initiatives may involve the issuance of shares of
Interneuron's Common Stock and/or financial commitments to fund product
development, either of which may adversely affect the Company's consolidated
financial condition or results of operations. Interneuron, in certain
circumstances, may be the primary source of fundings for the Subsidiaries.
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PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.4 - Restated Certificate of Incorporation of Registrant (17)
3.5 - By-Laws of Registrant (1)
4.1 - Form of Unit Purchase Option (1)
4.2 - Form of Warrant Agreement (1)
4.4 - Certificate of Designation establishing Series C Preferred Stock (17)
4.5 - Warrant issued to Elan Corporation, plc (19)
4.6 - Form of Registrant Warrant issued in subsidiary private placement (25)
4.7 - Form of Registrant Warrant to be issued to Paramount Capital, Inc.,
D.H. Blair & Co., Inc. or designees (25)
10.5 - Consulting and Non-competition Agreement between the Registrant,
Richard Wurtman, M.D. and Judith Wurtman, Ph.D. (1)
10.6 - Assignment of Invention and Agreement between Richard Wurtman,
M.D., Judith Wurtman and the Registrant (1)
10.7 - Management Agreement between the Registrant
and Lindsay Rosenwald, M.D. (1)
10.9(a)- Restated and Amended 1989 Stock Option Plan (7)
10.10 - Form of Indemnification Agreement (1)
10.11 - Restated Amendment to MIT Option Agreement (1)
Patent and Know-How License Agreement between the
Registrant and Les Laboratoires Servier dated February 7
1990 ("License Agreement") (1)
10.12(b)- Revised Appendix A to License Agreement (1)
10.12(c)- Amendment Agreement between Registrant and Les Laboratoires
Servier, Orsem and Oril, Produits Chimiques dated November
19,1992(3)(12)
10.12(d)- Amendment Agreement dated April 28, 1993 between Registrant and
Les Laboratoires Servier (16)
10.13 - Trademark License Agreement between the Registrant and Orsem
dated February 7, 1990 (1)
10.14 - Supply Agreement between the Registrant and Oril Products
Chimiques dated February 7, 1990 (1)(3)
10.15(a)- Form of Indemnification Agreement between the Registrant and
Alexander M. Haig, Jr. (1)
10.16 - Assignment of Invention by Richard Wurtman, M.D. (1)
10.18 - Option Agreement between the Registrant and Alexander M. Haig, Jr.(1)
10.19 - Option Agreement between the Registrant and Fountainhead Holdings
(Bermuda) Ltd. (1)
10.22(a)- License Agreement dated January 15, 1993, as amended, between the
Registrant and Grupo Ferrer (3)(16)
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10.25 - License Agreement between the Registrant and the Massachusetts
Institute of Technology (4)
10.27 - License Agreement dated July 1, 1991 between Whitby Research,
Inc. and the Registrant (6)
10.28 - Letter Agreement between the Registrant and Bobby W. Sandage,
Jr., Ph.D. (7)
10.29 - Amended Lease dated December 12, 1991 for Registrant's offices
in Lexington, Massachusetts (7)
10.29(a) - First Amendment to Lease dated as of October 14, 1994 between
Registrant and Ledgemont Realty Trust (25)
10.30 - License Agreement dated January 1, 1992 between the Trustees of
Princeton University and the Registrant (3)(8)
10.31 - Research Agreement dated as of July 1, 1991 between the Registrant
and the Trustees of Princeton University (3)(8)
10.32 - Consulting Agreement dated as of July 1, 1991 between the
Registrant and Daniel Kahne, Ph.D. (3)(8)
10.33 - License Agreement dated January 28, 1992 between Ohio University,
The Castle Group, Inc. and Scimark Corporation (assigned to
Progenitor, Inc.) (3)(8)
10.34 - Sponsored Research Agreement between Scimark Corporation
(assigned to Progenitor, Inc.) and Ohio University (3)(8)
10.34(a) - Letter Amendment between Progenitor, Inc. and Ohio University
(18)
10.35 - Technology License Contract dated December 18, 1991 between the
Registrant and the Mayo Foundation for Medical Education and
Research (3) (8)
10.36 - Exclusive License Agreement dated February 24, 1992 between the
Registrant and Purdue Research Foundation (9)
10.37 - License Agreement dated as of February 15, 1992 between the
Registrant and Massachusetts Institute of Technology (9)
10.38 - Employment Agreement between Progenitor,Inc. and Glenn Cooper,
M.D. dated September 3, 1992 (13)
10.39 - Employment Agreement between Transcell Technologies, Inc. and
Elizabeth Tallet dated November 11, 1992 and Guarantee by
Registrant (13)
10.40 - Patent and Know-How Sublicense and Supply Agreement between
Registrant and American Cyanamid Company dated November 19,
992 (3)(12)
10.41 - Equity Investment Agreement between Registrant and American
Cyanamid Company dated November 19, 1992 (12)
10.42 - Trademark License Agreement between Registrant and American
Cyanamid Company dated November 19, 1992 (12)
10.43 - Consent Agreement between Registrant and Les Laboratoires Servier
dated November 19,1992 (12)
10.44 - Patent and Know-How License Agreement between Registrant and
Veryfine Products, Inc. dated October 29, 1992 (3) (14)
10.45 - Agreement between Registrant and Parexel International Corporation
dated October 22, 1992 (as of July 21, 1992) (3) (14)
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10.46 - License Agreement dated February 9, 1993 between the Registrant
and Massachusetts Institute of Technology (3)(15)
10.47 - Sublease between Enichem America and Transcell Technologies, Inc.
including guarantee by the Registrant (15)
10.48 - Employment Agreement dated May 21, 1993 between the Registrant
and Glenn L. Cooper, M.D., as amended (17)
10.49 - License Agreement between Registrant and Elan Corporation, plc
dated September 9, 1993 (3)(18)
10.50 - License Agreement between Transcell Technologies, Inc. and
Princeton University dated October 14, 1993 (3)(18)
10.51 - Letter Agreement between the Registrant and Mark S. Butler (18)
10.52 - License Agreement dated February 18, 1994 between Registrant and
Rhone-Poulenc Rorer, S.A. (20)
10.54 - Form of Purchase Agreement dated as of February 24, 1994 (20)
10.54(a) - Form of Amendment to Purchase Agreement (20)
10.55 - Patent License Agreement between Registrant and Massachusetts
Institute of Technology dated March 1, 1994 (20)
10.56 - License Agreement between Progenitor, Inc.and Albert Einstein
College of Medicine of Yeshiva University dated as of February
1,1994 (20)
10.57 - Employment Letter dated February 28, 1994 between the Registrant
and Thomas F. Farb (21)
10.58 - Master Equipment Lease including Schedules and Exhibits between
Phoenix Leasing and Registrant (agreements for Transcell and
Progenitor are substantially identical), with form of continuing
guarantee for each of Transcell and Progenitor (22)
10.59 - Exhibit D to Agreement between Registrant and Parexel International
Corporation dated as of March 15, 1994. (3)(22)
10.60(a) - Acquisition Agreement dated as of May 13, 1994 among the
Registrant, Intercardia, Inc., Cardiovascular Pharmacology
Engineering Consultants, Inc. (CPEC), Myocor, Inc. and the sellers
named therein (23)
10.60(b) - Amendment dated June 15, 1994 to the Acquisition Agreement (23)
10.60(c) - Form of Consulting Agreement between Intercardia, Inc., CPEC and
Myocor, Inc.(23)
10.61 - License Agreement dated December 6, 1991 between Bristol-Myers
Squibb and CPEC, as amended (3)(23)
10.61(a) - Letter Agreement dated November 18, 1994 between CPEC and
Bristol-Myers Squibb (25)
10.62 - Lease Agreement between Thomas R. Eggers and Progenitor, Inc.
dated as of November 1994 with Registrant guaranty (25)
10.63 - Form of Stock Purchase Agreement dated December 15, 1994 (25)
10.64 - Form of Investor Rights Agreement among Progenitor, Transcell,
Registrant and each investor in the subsidiary
private placement (25) 10.64(a) - Form of Investor Rights
Agreement among Intercardia, the Registrant
and each investor in the Intercardia private placement (25)
10.65 - 1994 Long-Term Incentive Plan (25)
10.66 - Guarantee by Lindsay A. Rosenwald, M.D. to Registrant (25)
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10.67 - Employment Agreement between Intercardia and Clayton I. Duncan
with Registrant guarantee (25)
10.67(a) - Amendment to Employment Agreement between Intercardia, Inc.
and Clayton I. Duncan (27)
10.68 - Interneuron Pharmaceuticals, Inc. 1995 Employee Stock Purchase
Plan as amended. (27)
10.69 - Office Lease, dated April 24, 1995 between Intercardia, Inc. and
Highwoods/Forsyth Limited Partnership, with Registrant Guaranty (27)
10.70 - Letter Agreement, dated March 31, 1995 between Progenitor, Inc. and
Chiron Corporation (3) (28)
10.70(a) - License and Collaboration Agreement by and between Progenitor, Inc.,
and Chrion, Corporation dated March 31, 1995 (3) (30)
10.71 - Securities Purchase Agreement dated June 2, 1995 between the
Registrant and Reliance Insurance Company, including Warrant and
exhibits (29)
10.72 - Sponsored Research and License Agreement dated as of May 1, 1995
between Progenitor and Novo Nordisk (3) (30)
10.73 - Form of Stock Purchase Agreement dated as of June 28, 1995
19 - Letter to Stockholders dated May 18, 1994 (24).
20 - News Release dated August 10, 1994 including Rule 135(c) notice (21)
21 - Subsidiaries of the Registrant (25)
23.1 - Amended Consent of Coopers & Lybrand L.L.P. (25)
23.2 - Consent of Coopers & Lybrand L.L.P. (26)
27 - Financial Data Schedule
- ---------------------------
(1) Incorporated by reference to the Registrant's registration statement on
Form S-1 (File No.33-32408) declared effective on March 8, 1990.
(3) Confidential Treatment requested for a portion of this Exhibit.
(4) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended September 30, 1990.
(6) Incorporated by reference to the Registrant's Quarterly report on Form
10-Q for the nine months ended June 30, 1991.
(7) Incorporated by reference to Post-Effective Amendment No. 2 to the
Registrant's registration statement on Form S-1 (File No. 33-32408)
filed December 18, 1991.
(8) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the three months ended December 31, 1991.
(9) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the three months ended March 31, 1992.
(10) Incorporated by reference to Post-Effective Amendment No. 3 to the
Registrant's registration statement on Form S-1 (File No. 33-32408)
filed July 12, 1992.
(11) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the three months ended June 30, 1992.
(12) Incorporated by reference to the Registrant's Form 8-K dated November
30, 1992.
-17-
(13) Incorporated by reference to Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form S-1 (File No. 33-32408)
filed on December 21, 1992.
(14) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended September 30, 1992.
(15) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the three months ended December 31, 1992
(16) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the six months ended March 31, 1993
(17) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the nine months ended June 30, 1993
(18) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended September 30, 1994
(19) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the three months ended December 31, 1993.
(20) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 or Amendment No. 1 (File no. 33-75826)
(21) Incorporated by reference to the Registrant's Form 8-K dated March 31,
1994
(22) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the six months ended March 31, 1994
(23) Incorporated by reference to the Registrant's Form 8-K dated June 20,
1994
(24) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the nine months ended June 30, 1994
(25) Incorporated by reference to the Registrant's Annual Report on Form
10-K/A2 for the fiscal year ended September 30, 1994
(26) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
for the three months ended December 31, 1994
(27) Incorporated by reference to the Registrant's Quarterly Report on From
10-Q for the six months ended March 31, 1995
(28) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q/A for the six months ended March 31, 1995
(29) Incorporated by reference to the Registrant's Quarterly Report on Form
8-K dated June 2, 1995
(30) Incorporated by reference to the Registrant's Quarterly Report on Form
8-K dated May 16, 1995 Exhibit 10.70 (a) supersedes Exhibit 10.70.
(b) Reports on Form 8-K
The Company filed reports on Form 8-K dated May 16, 1995 and June 2,
1995, each reporting information under Item 5.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERNEURON PHARMACEUTICALS, INC.
By: \S\ GLENN L. COOPER
Glenn L. Cooper, M.D., President
and Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 1995
By: \S\ THOMAS F.FARB
Thomas F. Farb, Senior Vice
President, Finance, Chief
Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)
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