FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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 0-16132
CELGENE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2711928
- ------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7 Powder Horn Drive, Warren, New Jersey 07059
- ---------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 908-271-1001
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
--- ---
At October 31, 1995, 8,567,215 shares of Common Stock, par
value $.01 per share, were issued and outstanding.
1
CELGENE CORPORATION
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
Page No.
Item 1 Unaudited Condensed Financial Statements
Balance Sheets as of September 30, 1995
and December 31, 1994 3
Statements of Operations -
Three-Month Periods Ended September 30,
1995 and 1994 4
Statements of Operations -
Nine-Month Periods Ended September 30,
1995 and 1994 5
Statements of Cash Flows -
Nine-Month Periods Ended
September 30, 1995 and 1994 6
Notes to Unaudited Condensed
Financial Statements 7
Item 2 Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
PART II - OTHER INFORMATION 12
Signatures 13
2
PART I - FINANCIAL INFORMATION
Item 1 - Condensed Financial Statements
CELGENE CORPORATION
BALANCE SHEETS
(Unaudited)
ASSETS
------
September 30 December 31
1995 1994
---- ----
Current assets:
Cash and cash equivalents $ 448,529 $ 292,925
Marketable securities available
for sale 13,783,705 8,207,161
Accounts receivable 259,803 623,084
Other current assets 637,307 428,844
----------- -----------
Total current assets 15,129,344 9,552,014
Plant and equipment, net 1,385,450 1,954,666
Other assets 41,250 41,250
Deferred debt costs 806,132 --
----------- ------------
$ 17,362,176 $ 11,547,930
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 460,960 $ 439,189
Accrued expenses 1,214,641 1,104,675
----------- -----------
Total current liabilities 1,675,601 1,543,864
Convertible debentures 8,860,564 --
Convertible debentures-accrued
interest 199,363 --
----------- ---------
Total liabilities 10,735,528 --
----------- ---------
Stockholders' equity:
Preferred stock, par value $.01
per share. Authorized 5,000,000
shares; issued none -- --
Common stock, par value $.01 per share. Authorized 20,000,000 shares;
issued and outstanding 8,156,045 shares at September 30, 1995
and 7,862,689 shares at December 31, 1994, respectively 81,560 78,627
Additional paid-in capital 73,914,950 70,684,768
Unamortized deferred compensation -
restricted stock (9,635) (19,174)
Accumulated deficit (67,238,835) (60,472,877)
Net unrealized loss on marketable
securities available for sale (121,392) (267,278)
Total stockholders' equity 6,626,648 10,004,066
----------- -----------
$ 17,362,176 $ 11,547,930
============ ============
3
CELGENE CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three-Month Period Ended September 30,
--------------------------------------
1995 1994
---- ----
Revenues:
Sales of chemical
intermediates $ 147,015 $ 422,195
Research contracts 145,000 213,000
Investment income 120,326 123,325
---------- ----------
412,341 758,520
---------- ----------
Expenses:
Cost of goods sold 165,518 292,375
Research and development 1,702,704 1,845,054
Selling, general and
administrative 674,296 744,161
Interest 232,185 -
---------- ----------
2,774,703 2,881,590
---------- ----------
Net loss ($2,362,362) ($2,123,070)
========== ==========
Net loss per share
of common stock ($.30) ($.27)
==== ====
Weighted average number
of shares of common stock
outstanding 7,918,000 7,858,000
========== ==========
4
CELGENE CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Nine-Month Period Ended September 30,
-------------------------------------
1995 1994
---- ----
Revenues:
Sales of chemical
intermediates $ 389,153 $ 1,416,636
Research contracts 385,000 258,000
Investment income 309,066 396,792
---------- ----------
1,083,219 2,071,428
---------- ----------
Expenses:
Cost of goods sold 529,444 813,473
Research and development 5,048,998 4,811,383
Selling, general and
administrative 2,038,550 2,488,068
Interest 232,185 --
---------- ----------
7,849,177 8,112,924
---------- ----------
Loss from continuing
operations ( 6,765,958) ( 6,041,496)
Discontinued operations
Loss from operations -- ( 1,497,088)
Loss on disposal -- ( 839,000)
---------- ----------
Loss from discontinued
operation -- ( 2,336,088)
---------- ----------
Net loss ($6,765,958) ($8,377,584)
========== ==========
Per share of common stock
Loss from continuing
operations ($.86) ($.77)
Loss from discontinued
operation -- ( .30)
---- ----
Net loss ($.86) ($1.07)
==== =====
Weighted average number
of shares of common stock
outstanding 7,881,000 7,848,000
========== ==========
5
CELGENE CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine-Month Period Ended September 30,
-------------------------------------
1995 1994
---- ----
Cash flows from operating activities:
- -------------------------------------
Loss from continuing operations ($6,765,958) ($6,041,496)
Adjustments to reconcile loss from continuing
operations to net cash used in operating
activities:
Depreciation and amortization 669,659 501,527
Amortization of deferred compensation 9,539 36,261
Interest on convertible debentures 232,185
Increase (decrease) in accounts payable
and accrued expenses 131,737 (241,855)
(Increase) decrease in accounts receivable 363,281 (223,789)
Increase in other assets (208,463) (283,609)
----------- -----------
Net cash used in continuing operations (5,568,020) (6,252,961)
----------- -----------
Net cash used in discontinued operation - (1,736,054)
----------- -----------
Net cash used in operating activities (5,568,020) (7,989,015)
----------- -----------
Cash flows from investing activities:
- -------------------------------------
Continuing operations:
Capital expenditures (15,533) (198,964)
Proceeds from sales and maturities
of marketable securities available
for sale 7,576,076 18,381,249
Purchases of marketable securities
available for sale (13,006,734) (10,854,533)
----------- -----------
Net cash (used in) provided by
investing activities (5,446,191) 7,327,752
----------- -----------
Cash flows from financing activities:
- ------------------------------------
Net proceeds from sale of common stock 147,245 155,612
Net proceeds from issuance of
convertible debentures 11,022,570 --
----------- -----------
11,169,815 155,612
----------- -----------
Net increase (decrease) in cash and cash
equivalents 155,604 (505,651)
Cash and cash equivalents at
beginning of period 292,925 789,847
----------- -----------
Cash and cash equivalents at end of period $448,529 $284,196
=========== ===========
Net increase (decrease) in cash and
cash equivalents $155,604 ($505,651)
Increase (decrease) in marketable securities
available for sale 5,430,658 (7,526,716)
----------- -----------
Net increase (decrease) in cash and cash
equivalents and marketable securities
available for sale $5,586,262 ($8,032,367)
=========== ============
Non-cash investing activity:
- ---------------------------
Net change gain (loss) in net unrealized
loss on securities available for sale $145,886 ($146,891)
=========== ============
Non-cash financing activities:
- -----------------------------
Issuance of common stock upon the
conversion of convertible debentures and
accrued interest thereon, net $1,796,936 --
=========== ===========
Issuance of warrants for services
rendered in connection with the issuance
of convertible debentures $94,500 --
=========== ===========
6
CELGENE CORPORATION
Notes to Unaudited Condensed Financial Statements
September 30, 1995
1. Basis of Presentation
The unaudited financial statements have been prepared from the books and
records of Celgene Corporation (the 'Company') in accordance with
generally accepted accounting principles for interim financial
information pursuant to Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have
been included. Interim results may not be indicative of the results that
may be expected for the year.
Where appropriate prior period financial information has been
reclassified to conform to the 1995 presentation.
2. Stock Options
On June 16, 1995, the stockholders of the Company approved the 1995
Non-Employee Directors' Incentive Plan, which provides for the granting
of non-qualified stock options to purchase an aggregate of not more than
250,000 shares of common stock (subject to adjustment under certain
circumstances) to directors of the Company who are not officers or
employees of the Company ('Non-Employee Directors'). Each new
Non-Employee Director, upon the date of his election or appointment,
receives an option to purchase 20,000 shares of common stock.
Additionally, upon the date of each annual meeting of stockholders, each
continuing Non-Employee Director receives an option to purchase 10,000
shares of common stock (or a pro rata portion thereof if he has served
less than one year), except that at the 1995 annual meeting of
stockholders the Non-Employee Directors received an option to purchase
6,000 shares of common stock. On April 5, 1995, each Non-Employee
Director was granted, under this plan, a non-qualified option to purchase
20,000 shares of common stock, subject to stockholder approval which was
received on June 16, 1995.
The shares subject to each option grant of 20,000 shares vest in four
equal annual installments commencing on the first anniversary of the date
of grant. The shares subject to an annual meeting option grant vest in
full on the date of the first annual meeting of stockholders held
following the date of grant.
All options are granted at fair market value and expire 10 years after
the date of grant. This plan terminates in 2005 and no additional options
or restricted stock awards may be granted under the Company's 1992
Non-Employee Directors' Stock Option Plan.
7
CELGENE CORPORATION
Notes to Unaudited Condensed Financial Statements -- (continued)
3. Convertible Debentures
In the third quarter ended September 30, 1995, the Company issued and sold in a
private placement offering, 8% convertible debentures due July 31, 1997 in the
aggregate principal amount of $12,000,000, and received net proceeds, after
offering costs, of $11,022,570. Such debentures are convertible into common
stock of the Company at the option of either the holders thereof or the Company.
The holders of the convertible debentures may convert the debentures into common
stock of the Company at a conversion price that varies and is based upon the
market price (as defined) of the common stock on the date of conversion.
The Company may require the conversion of the convertible debentures commencing
October 15, 1995 through July 30, 1997 at a conversion price which varies and is
based upon the market price of the common stock on the date of conversion. The
Company also has the right to redeem any convertible debenture after it has
received a notice of conversion with respect to such debenture. The redemption
price is the greater of 115% of the principal and accrued interest of the
redeemed debenture or an amount which is based on the appreciation of the common
stock from the date of issuance of the debentures.
The conversion price of the convertible debentures is subject to adjustment
under certain circumstances.
As of September 30, 1995, convertible debentures in the aggregate principal
amount of $2,150,000, plus accrued interest, were converted into a total of
271,695 shares of common stock.
Subsequent to September 30, 1995, an additional aggregate principal amount of
$3,150,000, plus accrued interest, were converted into a total of 411,170 shares
of common stock.
8
PART I - FINANCIAL INFORMATION
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
In August 1995, the Company issued and sold in a private placement
offering, an aggregate principal amount of $12,000,000 of 8% convertible
debentures due July 31, 1997, and received net proceeds, after offering costs,
of $11,022,570. (See Note 3 to the Unaudited Condensed Financial Statements)
On September 30, 1995, the Company had available working capital of
approximately $13,454,000, consisting principally of cash, cash equivalents, and
marketable securities available for sale, which represents an increase of
approximately $5,446,000, or 68%, from December 31, 1994 primarily due to
proceeds from the sale of the convertible debentures, partially offset by
operating losses.
In August 1992, the Company entered into a two-year research and
development agreement with the Rockefeller University. In July 1994, this
agreement was extended for an additional two years. Under terms of the contract
extension, the Company is committed to an annual fee to Rockefeller University
of $504,000 paid semiannually in April and October.
Recently, the U.S. FDA approved the Company's request to recover costs
of providing its Synovir(TM) drug to AIDS patients eligible for entry into the
Company's expanded trial for cachexia, a severe wasting condition. The cost per
patient for a twelve-week supply will be $550. At present, the Company cannot
estimate the impact that the potential recovery of costs will have on the
Company's operation.
The Company believes that its current resources and income derived from
investments plus revenues from chiral product sales, research contracts, and
potential recoveries under the FDA approved Synovir cost recovery program will
be sufficient to meet the Company's capital requirements for at least one year.
However, in order to fund the Company's operation beyond such one-year period
the Company is seeking to obtain additional funds. The Company expects to incur
substantial expenditures to further its immunotherapeutic program. Management
recognizes that in the upcoming year the Company must generate additional
resources or consider modifications to its immunotherapeutic program or other
reductions in operating costs to enable it to continue operations with available
resources. Management's plans include consideration of the sale of additional
securities under appropriate market conditions, alliances or other partnership
agreements with entities interested in and resources to support the Company's
immunotherapeutic or chiral programs, or other business transactions which would
generate sufficient resources to assure continuation of the Company's operations
and research programs.
9
The Company continues to retain investment banking counsel to advise it
on the possible sale of securities as well as to introduce and assist in the
evaluation of potential merger and partnering opportunities. Management expects
that these efforts will result in the introduction of other parties with
interests and resources which may be compatible with that of the Company.
However, no assurances can be given that the Company will be successful in
raising additional capital or entering into a business alliance. Further, there
can be no assurance, assuming the Company successfully raises additional funds
or enters into a business alliance, that the Company will achieve profitability
or positive cash flow. If the Company in the upcoming year is unable to obtain
adequate additional financing or enter into such business alliance, management
will be required to curtail the Company's immunotherapeutic program and to
curtail certain other of its operations.
Nine-month period ended September 30, 1995 vs.
Nine-month period ended September 30, 1994
- ------------------------------------------
Revenues for the nine-month period ended September 30, 1995 were
approximately $1,083,000, which was a decrease of approximately $988,000, or
48%, over the comparable period in 1994. Chiral intermediate revenues decreased
$1,027,000 to $389,000, or 72%, for the nine-month period ended September 30,
1995 as compared to the comparable 1994 period. This decrease in chiral
intermediate revenues was due primarily to the sporadic nature of orders from
the Company's small customer base. Chiral research contract revenues for the
first nine months were $385,000, which was an increase of $127,000, or 49%, over
the first nine months of 1994. This increase in contract revenues was due to the
Company entering into research contracts for new compounds and for expanding
development of existing compounds. Revenue backlog at September 30, 1995, for
1995 sales, for chiral intermediates and research contracts decreased $86,000,
or 16%, to $438,000 as compared to the September 30, 1994 backlog. The Company
is negotiating with new and existing customers for additional chiral
intermediate and research contract orders; however, there is no assurance that
these efforts will be successful. Investment income decreased, $88,000, or 22%,
to $309,000 in the nine months of 1995 as compared to the nine months of 1994
due to the decrease in funds available for investment during the first half of
1995.
For the nine months ended September 30, 1995, cost of goods sold
decreased $284,000, or 35%, to $529,000 (which includes certain fixed
manufacturing costs) as compared to the nine months of 1994, due to the low
volume of chiral intermediate revenues. Research and development expenses for
the nine-month period ended September 30, 1995 increased $238,000, or 5%, to
$5,049,000 as compared to the same period in 1994, primarily due to an increase
in the Rockefeller University expense and clinical trial expenses for the
immunotherapeutic program. These increased expenses were partially offset by
lower personnel and related expenses for the chiral research group. Selling,
general, and administrative
10
expenses for the nine-month period ended September 30, 1995 decreased $450,000,
or 18%, to $2,038,000 as compared to the 1994 comparable period, primarily due
to the absence in 1995 of any incentive bonus expense, as no cash bonuses are
projected to be paid, and lower personnel and facility expenses. Interest
expense of $232,000 for the nine-month period ended September 30, 1995 relates
to the convertible debentures issued and sold during the third quarter.
Net loss for the nine-month period ended September 30, 1995 was
approximately $6,766,000, which was a decrease of approximately $1,612,000, or
19%, over the comparable period in 1994, due primarily to the cessation of the
Company's biotreatment operation at June 30, 1994. Loss from continuing
operations during the nine-month period ended September 30, 1995 increased
$724,000, or 12%, over the comparable quarter in 1994, primarily due to reduced
chiral intermediates revenues.
Three-month period ended September 30, 1995 vs.
Three-month period ended September 30, 1994
- -------------------------------------------
Revenues for the three-month period ended September 30, 1995 were
approximately $412,000, which was a decrease of approximately $346,000, or 46%,
over the comparable period in 1994. Chiral intermediate revenues decreased
$275,000 to $147,000, or 65%, for the three-month period ended September 30,
1995 as compared to the comparable 1994 period. This decrease in chiral
intermediate revenues was due primarily to the sporadic nature of orders from
the Company's small customer base. Chiral research contract revenues for the
third quarter of 1995 were $145,000 which was an decrease of $68,000, or 32%,
over the third quarter of 1994. Investment income for the three-month period
ended September 30, 1995 was at the same approximate level as the comparable
period in 1994.
For the third quarter ended September 30, 1995, cost of goods sold
decreased $127,000, or 43%, to $166,000 (which includes certain fixed
manufacturing costs) as compared to the third quarter of 1994, due to the low
volume of chiral intermediate revenues. Research and development expenses for
the three-month period ended September 30, 1995 decreased by $142,000, or 8%, to
$1,703,000 as compared to the same period in 1994, primarily due to lower
personnel and related expenses for the chiral research group partially offset by
increased immunotherapeutic clinical trial expenses. Selling, general, and
administrative expenses for the three-month period ended September 30, 1995
decreased $70,000, or 9%, to $674,000 as compared to the 1994 comparable period,
primarily due to lower personnel and facility expenses. Interest expense of
$232,000 for the three-month period ended September 30, 1995 relates to the
convertible debentures issued and sold during the quarter.
Net loss for the three-month period ended September 30, 1995 was
approximately $2,362,000, which was an increase of approximately $239,000, or
12%, over the comparable period in 1994, due primarily to reduced chiral
intermediates revenues.
11
PART II - OTHER INFORMATION
Item 1. - None
Item 2. - None
Item 3. - None
Item 4. - None
Item 5. - None
Item 6. - Exhibits
(a) 27 Financial Data Schedule - Article 5 for third quarter
Form 10-Q.
(b) Reports on Form 8-K
A report on Form 8-K was filed on August 14, 1995, which
reported, pursuant to item 5, the issuance of a press release
announcing the consummation of the private placement of
convertible debentures.
12
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.
CELGENE CORPORATION
DATE November 8, 1995 BY /s/ Richard G. Wright
--------------------- ---------------------
Richard G. Wright
Chairman of the Board and
Chief Executive Officer
DATE November 8, 1995 BY /s/ Robert B. Eastty
--------------------- --------------------
Robert B. Eastty
Controller
(Chief Accounting Officer)
13
Statement of Differences
The trademark symbol shall be expressed as........(TM)