1
UNITED STATES 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 June 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 0-15190
ONCOGENE SCIENCE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3159796
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
106 Charles Lindbergh Blvd., Uniondale, New York 11553
(Address of principal executive offices) (Zip Code)
516-222-0023
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
At July 31, 1995 the registrant had outstanding 17,257,642 shares of common
stock .$01 par value.
Total Pages: 11
2
ONCOGENE SCIENCE, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION - UNAUDITED
Consolidated Balance Sheets - June 30, 1995 and September 30, 1994 3
Consolidated Statements of Operations - Three months ended June 30, 1995 and 1994 4
Consolidated Statements of Operations - Nine months ended June 30, 1995 and 1994 5
Consolidated Statements of Cash Flows - Nine months ended June 30, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION 10
SIGNATURES 11
* * * *
3
ITEM 1. FINANCIAL STATEMENTS
ONCOGENE SCIENCE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30 September 30,
Assets 1995 1994
------ ----------- -------------
Current Assets:
Cash and cash equivalents $ 1,752,700 $ 322,308
Short-term investments 19,124,900 17,835,583
Accounts receivable, including
trade receivables of $894,058 and
$956,747 at June, 30 1995 and
September 30, 1994, respectively 1,731,800 3,032,839
Inventory 1,619,824 1,744,663
Accrued interest receivable 164,843 147,222
Grants receivable 204,150 659,621
Prepaid expenses 566,558 445,464
----------- -----------
Total current assets 25,164,775 24,187,700
Property, equipment and leasehold
improvements - net 6,186,101 6,554,237
Other receivable 573,180 425,520
Loans to officers and employees 75,466 85,516
Other assets 109,036 118,068
Intangible assets - net 9,360,598 10,669,859
----------- -----------
$41,469,156 $42,040,900
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 1,333,464 $ 2,522,171
Current portion of unearned revenue 370,042 457,384
----------- -----------
Total current liabilities 1,703,506 2,979,555
Other Liabilities:
Long-term portion of unearned revenue 180,158 216,588
Post-retirement benefits other
than pension 292,509 188,443
----------- -----------
Total liabilities 2,176,173 3,384,586
----------- -----------
Stockholders' equity:
Common stock, $.01 par value;
50,000,000 shares authorized,
17,479,663 and 16,564,715 shares
issued at June 30, 1995 and
September 30, 1994, respectively 174,797 165,647
Additional paid-in capital 66,203,427 61,199,670
Accumulated deficit (26,663,415) (21,870,671)
Cumulative foreign currency
translation adjustment (86,267) (41,773)
Unrealized holding loss on
short-term investments (193,000) (654,000)
---------- -----------
39,435,542 38,798,873
Less: Treasury stock, at cost
222,521 shares at March 31, 1995
and September 30, 1994 (142,559) (142,559)
----------- -----------
Total stockholders' equity 39,292,983 38,656,314
----------- -----------
Commitments and contingencies
$41,469,156 $42,040,900
=========== ===========
See accompanying notes to consolidated financial statements.
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ONCOGENE SCIENCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
June 30,
--------------------------------
1995 1994
----------- -----------
Revenues:
Collaborative program revenues,
principally from related parties $ 2,323,131 $ 2,250,880
Sales 1,251,641 1,272,404
Other research revenue 259,378 557,253
----------- -----------
3,834,150 4,080,537
----------- -----------
Expenses:
Research and development 3,387,094 3,162,807
Production 380,422 354,644
Selling, general and administrative 1,771,942 1,901,693
Amortization of intangibles 436,420 436,291
----------- -----------
5,975,878 5,855,435
----------- -----------
Loss from operations (2,141,728) (1,774,898)
Other income (expense):
Interest income 253,673 246,630
Other expense (44,933) (27,911)
----------- -----------
Net loss $(1,932,988) $(1,556,179)
=========== ===========
Weighted average number of shares
of common stock outstanding 16,995,531 16,336,661
=========== ===========
Net loss per weighted share of
common stock outstanding $ (.11) $ (.10)
=========== ===========
See accompanying notes to consolidated financial statements.
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ONCOGENE SCIENCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended
June 30,
-------------------------------
1995 1994
----------- -----------
Revenues:
Collaborative program revenues,
principally from related parties $ 7,102,909 $ 6,669,388
Sales 3,849,229 3,684,360
Other research revenue 1,359,076 1,638,586
----------- -----------
12,311,214 11,992,334
----------- -----------
Expenses:
Research and development 9,812,630 8,551,136
Production 1,179,674 1,026,194
Selling, general and administrative 5,472,808 5,447,596
Amortization of intangibles 1,309,261 1,308,872
----------- -----------
17,774,373 16,333,798
----------- -----------
Loss from operations (5,463,159) (4,341,464)
Other income (expense):
Interest income 695,564 639,651
Other expense (25,149) (95,765)
----------- -----------
Net loss $(4,792,744) $(3,797,578)
=========== ===========
Weighted average number of shares
of common stock outstanding 16,560,456 16,333,811
=========== ===========
Net loss per weighted share of
common stock outstanding $ (.29) $ (.23)
=========== ===========
See accompanying notes to consolidated financial statements.
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ONCOGENE SCIENCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
Nine Months Ended
June 30,
------------------------------
1995 1994
------------- ------------
Cash flows from operating activities:
Cash received for goods and services $ 13,796,296 $12,113,898
Cash paid for goods and services (16,260,397) (14,840,283)
Interest received 649,577 541,532
------------ -----------
Net cash used by operating activities (1,814,524) (2,184,853)
------------ -----------
Cash flows from investing activities:
Additions to short-term investments (5,253,317) (5,918,880)
Maturities and sales of short-term investments 4,425,000 8,726,012
Additions to property, equipment
and leasehold improvements (922,296) (1,000,908)
Additional employee loans - (60,258)
Repayment of employee loans - 20,000
Foreign currency translation (17,381) (15,309)
------------ -----------
Net cash provided (used) by investing activities (1,767,994) 1,750,657
------------ -----------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 4,996,541 -
Proceeds from exercise of stock options
and employee stock purchases 16,369 25,218
------------ -----------
Net cash provided by financing activities 5,012,910 25,218
------------ -----------
Net increase(decrease)in cash and
cash equivalents 1,430,392 (408,978)
Cash and cash equivalents at
beginning of period 322,308 822,033
------------ -----------
Cash and cash equivalents at end of period $ 1,752,700 $ 413,055
============ ===========
Reconciliation of net loss to net cash
used by operating activities:
Net loss $ (4,792,743) $(3,797,578)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 980,956 833,118
Amortization of intangibles 1,309,261 1,308,872
Foreign exchange (gain) loss (27,113) 10,731
Decrease in loans to officers and employees 10,050 -
Decrease in accounts receivable 1,301,034 557,643
Increase in interest receivable (17,621) (98,119)
Decrease in grant receivable 455,471 232,453
Increase in other receivable (147,660) (661,529)
Decrease (increase) in inventory 124,839 (129,786)
Increase in other assets (214) -
Increase in prepaid expenses (121,094) (100,637)
Decrease in accounts payable (869,985) (437,077)
Increase in post-retirement benefits liability 104,067 104,062
Decrease in unearned revenue (123,772) (7,006)
------------ -----------
Cash used by operating activities $ (1,814,524) $(2,184,853)
============ ===========
See accompanying notes to unaudited consolidated financial statements.
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ONCOGENE SCIENCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Opinion of Management
In the opinion of Management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the Company's financial position as of
June 30, 1995 and September 30, 1994, and its results of operations for the
three months and nine months ended June 30, 1995 and 1994 and its cash flows
for the nine months ended June 30, 1995 and 1994. Certain reclassifications
have been made to the prior financial statements to conform them to the current
presentation.
It is recommended that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto in the
Company's 1994 Annual Report on Form 10-K.
Results for interim periods are not necessarily indicative of results for the
entire year.
Net loss per share of common stock outstanding is based on the weighted average
number of shares outstanding. Common share equivalents (stock options) are not
included in the computation for the three and nine months ended June 30, 1995
and 1994 since their inclusion would be anti-dilutive.
(2) Stockholder's Equity
On April 19, 1995, the Company entered into an agreement with CIBA-GEIGY
Limited which expands the scope of the Companies' collaborative efforts with
respect to recombinant Human Transforming Growth Factor Beta 3 ("TGF-B3") to
include development of TGF-B3 products for the treatment of oral mucositis and
certain other indications. Pursuant to the agreement, CIBA purchased 909,091
shares of the Company's common stock at $5.50 per share for an aggregate
purchase price of $5,000,000.
(3) Subsequent Event
On June 26, 1995, the Company entered into an agreement to sell certain assets
of its Research Products business to Calbiochem-Novabiochem International,
Inc. for $6 million in cash and other considerations. The closing of the
purchase agreement occurred on August 2, 1995. The sale is expected to result
in a net gain of approximately $3 million.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED JUNE 30, 1995, COMPARED TO THE THREE AND NINE
MONTHS ENDED JUNE 30, 1994.
Revenues for the quarter ended June 30, 1995 decreased by approximately
$246,000 or 6%, as compared to the same period in the previous fiscal year,
while revenues for the nine months ended June 30, 1995 increased by
approximately $319,000 or 3%, as compared to the same period last year.
Collaborative program revenues increased by approximately $72,000 and $434,000
or 3% and 7% respectively for both the quarter and nine month period due to the
commencement of the research program with Hoechst-Roussel Pharmaceuticals in
April 1994, and due to the expansion and extension of the collaborative
research agreement with Wyeth-Ayerst in March 1994. These increases were offset
by decreased funding from Pfizer associated with Pfizer's decreased
participation in the TGF-B3 oral mucositis program in order to focus
exclusively on its collaborative programs with the Company related to the
research and development of anti-cancer drugs. Previously Pfizer had funded
the Company's TGF-B3 oral mucositis program as a supplement to its anti-cancer
collaborative program. Under a collaborative agreement with CIBA-GEIGY,
entered into on April 19, 1995, the Company will fund the development of TGF -
B3 for oral mucositis through the end of Phase I clinical trials and CIBA-GEIGY
will fund its subsequent clinical development. Sales decreased approximately
$21,000 or 2% for the quarter ended June 30, 1995, but increased approximately
$165,000 or 5% for the nine months ended June 30, 1995 when compared to the
same periods in the previous fiscal year. The nine month increase is due to an
increase in the number of units sold including private labeling products sold
to Becton Dickinson primarily in the first quarter. The Company sold its
Research Products business to Calbiochem-Novabiochem International, Inc. on
August 2, 1995. Accordingly, after the fourth quarter of fiscal 1995, sales of
research products will no longer contribute to overall revenues. Other
research revenues decreased approximately $298,000 and $279,000 or 53% and 17%
respectively for the quarter and nine months ended June 30, 1995 as a result of
decreased funding related to the National Cooperative Drug Discovery Group
grant.
The Company's operating expenses increased by approximately $120,000 and
$1,441,000 or 2% and 9%, for the quarter and nine months ended June 30, 1995,
compared to the same periods in the previous fiscal year. Research and
development costs increased approximately $224,000 and $1,261,000 or 7% and 15%
respectively, due principally to the start of the research program with
Hoechst-Roussel and the increase in activities related to the Company's
proprietary programs in the area of medicinal and natural products chemistry
and clinical development of TGF-Beta 3 for oral mucositis. Production expenses
increased by approximately $26,000 and $153,000 or 7% and 15%, for the quarter
and nine months ended June 30, 1995 compared to the same periods in the
previous fiscal year due principally to reduced inventory levels, higher sales
and changes in product mix. Selling, general and administrative expenses
decreased approximately $130,000 or 7% during the three months ended June 30,
1995 and increased $25,000 or less than 1%
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT'D)
for the nine months ended June 30, 1995. The increase for the nine months was a
result of expenses related to the restructuring of the Company's European
subsidiary and employee severance costs. This was offset by savings from the
restructuring which took effect at the beginning of the second quarter and
resulted in the decrease for the third quarter.
Since its commencement in 1991 until the second quarter of fiscal 1995, the
cancer diagnostics collaborative program with Becton Dickinson has focused on
both serum-based and histochemical immunoassays. During the second quarter
Becton Dickinson decided to focus exclusively on histochemical immunoassays.
The Company is continuing the development of serum-based cancer diagnostic
products and is seeking a new collaborative partner in this area.
Interest income increased approximately $7,000 or 3% and $56,000 or 9% for the
quarter and nine months ended June 30, 1995. This increase is due to a change
in the investment portfolio to higher yielding funds and the investment of
additional funds from the proceeds of the sale of common stock to CIBA-GEIGY in
April 1995.
Liquidity and Capital Resources
At June 30, 1995, working capital (representing primarily cash, cash
equivalents and short-term investments) aggregated approximately $23,460,000.
The Company has been, and will continue to be, dependent upon collaborative
research revenues, government research grants, interest income and cash balances
until other products developed from its technology are commercially marketed.
Pursuant to its collaborative agreement with the Company entered into on April
19, 1995, CIBA-GEIGY purchased 909,091 shares of the Company's common stock for
an aggregate purchase price of $5,000,000. The Company sold its Research
Products business to Calbiochem-Novabiochem International, Inc. on August 2,
1995 for $6 million in cash and certain royalties and other considerations.
Management believes that with the funding from its collaborative programs,
government research grants, interest income, and cash balances, the Company's
financial resources are adequate for its current needs. However, the Company's
capital requirements may vary as a result of a number of factors, including
results of the research products business, competitive and technological
developments, and the time and expense required to obtain governmental approval
of products, some of which factors are beyond the Company's control. There can
be no assurance that scheduled payments will be made by third parties, that
current agreements will not be cancelled, that government research grants will
continue to be received at current levels or that unanticipated events
requiring the expenditure of funds will not occur. Further, there can be no
assurance that the Company will be able to obtain any additional required
funds, or, if such funds are available, that such funds will be available on
favorable terms.
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PART II. OTHER INFORMATION
ITEM 6. REPORTS ON FORM 8-K
On April 20, 1995, the Company filed with the Securities and Exchange
Commission a Current Report of Form 8-K regarding the Agreement dated April 19,
1995 it entered into with CIBA-GEIGY Limited (the "Report"). The Report
included only Item 5. Other Events. No financial statements were filed with
the Report.
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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.
ONCOGENE SCIENCE, INC.
---------------------------
(Registrant)
Date 8/14/95 /s/ Gary E. Frashier
------------------- ---------------------------
Gary E. Frashier
President and
Chief Executive Officer
Date 8/14/95 /s/ Robert L. Van Nostrand
------------------- ---------------------------
Robert L. Van Nostrand
Vice President
Finance & Administration
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EXHIBIT INDEX
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Exhibit
No. Description
------- -----------
27 Financial Data Schedule