SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended September 30, 2001
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 0-19117
IMMULOGIC PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3397957
- --------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12 Alfred Street, Suite 300, Woburn, MA 01801
- ----------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 933-1772
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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 requirement for the past 90 days.
Yes __X__ No ____
Number of shares of $.01 par value common stock outstanding as of
October 26, 2001 - 20,550,773
IMMULOGIC PHARMACEUTICAL CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION Page No.
Item 1. Unaudited, Condensed Consolidated Financial Statements
and Notes
Unaudited, Condensed Consolidated Statements of Net Assets in
Liquidation As of September 30, 2001 and December 31, 2000 3
Unaudited, Condensed Consolidated Statements of Changes in Net
Assets in Liquidation for the Three and Nine Months Ended
September 30, 2001 and 2000 4
Notes to Unaudited, Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosure About Market Risk 9
PART II. OTHER INFORMATION
Item 6. Reports on Form 8-K 10
SIGNATURES 11
2
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
IMMULOGIC PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION (UNAUDITED)
(in thousands)
September 30, December 31,
2001 2000
---- ----
ASSETS
Cash and cash equivalents $1,192 $1,009
Milestones and royalties 1,500 1,500
Landlord receivable 607 856
Other assets 51 84
------ ------
Total assets $3,350 $3,449
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LIABILITIES
Estimated costs to be incurred during liquidation period $ 362 $ 650
Accounts payable and accrued expenses - 107
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Total liabilities 362 757
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NET ASSETS IN LIQUIDATION $2,988 $2,692
====== ======
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
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IMMULOGIC PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN NET ASSETS IN LIQUIDATION
(UNAUDITED)
(in thousands)
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2001 2000 2001 2000
---- ---- ---- ----
Net assets in liquidation, beginning of
period $2,988 $ 18,586 $2,692 $ 16,901
Cash distribution to shareholders - (9,659) - (9,659)
Cash received on cash and cash equivalents (9) (20) (33) (161)
Cash received from landlord (163) (109) (543) (435)
Net cash received upon sale of Cantab stock - (928) - (9,273)
Net change in other assets - (34) - 48
Other net changes in cash and cash equivalents 36 977 183 9,261
Other cash receipts - - (21) -
Payment of estimated costs to be
incurred during the liquidation period
and accrued expenses 136 180 415 626
CHANGES IN LIQUIDATION BASIS ACCOUNTING
ESTIMATES:
Decrease in net realizable value of
Cantab stock - (3,051) - (1,636)
Increase in Landlord receivable - - 295 -
Decrease in estimated costs to be
incurred during the liquidation period - - - 190
Increase in investment income receivable - - - 80
---------------------------------------------------------
Net assets in liquidation, end of period $2,988 $ 5,942 $2,988 $ 5,942
=========================================================
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
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IMMULOGIC PHARMACEUTICAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(unaudited)
ORGANIZATION AND ACCOUNTING POLICIES
On March 23 1999, the Board of Directors of ImmuLogic Pharmaceutical Corporation
(the "Company") approved a plan to liquidate and dissolve the Company (the
"Plan"). The Plan was approved by the stockholders of the Company on August 25,
1999. The key features of the Plan are (1) the conclusion of all business
activities, other than those in execution of the Plan; (2) the sale or
disposition of all of the Company's assets; (3) the satisfaction of all
outstanding liabilities; (4) the payment of liquidating distributions to
stockholders in complete redemption of the Common Stock; and (5) the
authorization of the filing of Certificate of Dissolution with the State of
Delaware. As a result of the adoption of the Plan and the imminent nature of the
liquidation, the Company adopted the liquidation basis of accounting effective
July 1, 1999, whereby assets are valued at their estimated net realizable values
and liabilities are valued at their estimated settlement amounts. The valuation
of assets and liabilities requires many estimates and assumptions by management
and there are substantial uncertainties in carrying out the provisions of the
Plan. The amount and timing of future liquidating distributions will depend upon
a variety of factors including, but not limited to, the actual proceeds from the
sale of any of the Company's assets, the ultimate settlement amounts of the
Company's liabilities and obligations, actual costs incurred in connection with
carrying out the Plan, including management fees and administrative costs during
the remaining liquidation period, and the timing of the liquidation and
dissolution.
The Company has returned a total of $51.45 million (or $2.50 per share) to its
stockholders since September 1, 1999. Future distributions to stockholders would
be made by the Board of Directors of the Company as the Company's net assets are
converted to cash. The actual amount and timing of future distributions cannot
be predicted at this time. The Company intends to distribute pro rata to its
stockholders, in cash or in-kind, or sell or otherwise dispose of, all of its
property and net assets. The liquidation should be concluded prior to August 27,
2002 by a final liquidating distribution either directly to the stockholders or
to one or more liquidating trusts. Details regarding the plan to liquidate and
dissolve the Company can be found in the Company's 1999 Proxy Statement filed
with the Securities and Exchange Commission and mailed to stockholders on July
15, 1999.
The accompanying financial statements, notes and discussions should be read in
conjunction with the consolidated financial statements, related notes and
discussions contained in the Company's annual report on Form 10-K for the year
ended December 31, 2000.
The interim financial information contained herein is unaudited; however, in the
opinion of management, all adjustments necessary for the fair presentation of
such financial information have been included.
The results for the interim period are not necessarily indicative of the results
to be expected for the year ending December 31, 2001.
LIQUIDATION BASIS OF ACCOUNTING
MILESTONES & ROYALTIES
The Company could receive up to a maximum of $11 million in milestone payments
contingent upon the successful development to the end of Phase II clinical
trials of the Nicotine and Cocaine Programs. The Company sold these programs in
1998 to Cantab Pharmaceuticals plc (Cantab). In the second quarter of 2001,
Cantab was acquired by Xenova Group plc (Xenova). The Company would receive the
following payments for successful completion of the Phases (as defined in the
agreement relating to the sale of the programs to Cantab) as follows:
Cocaine........................... Phase II $2 million
Nicotine.......................... Phase I $3 million
Nicotine.......................... Phase II $6 million
5
The Company could potentially also receive a share of the net royalties Xenova
may receive from vaccine sales proportionate to the level of worldwide product
sales achieved. While the Company will attempt to monetize these potential
royalty streams, the Company does not anticipate receiving significant value for
them and thus has not recorded any net realizable value for the royalty stream.
The Company estimates that the range of value to be received from these
milestones and royalties to be $0 to $11 million based on the contract terms.
The Company has an estimated receivable of $1.5 million at September 30, 2001
with respect to these milestones and royalties as the estimated net realizable
value for the purpose of the liquidation basis accounting, which assumes the
settlement of these milestones. The estimate recorded for the milestones has not
changed since December 31, 2000 because no significant factors have indicated
that a change in their net realizable value is appropriate at this time. The
Company will continue to evaluate the net realizable value based upon the
progress of the science and the future intentions of Xenova regarding these
projects.
LANDLORD RECEIVABLE
In February 1998, the Company entered into a phased sublease agreement with
Anadys Pharmaceuticals, Inc. (formerly Scriptgen Pharmaceuticals, Inc.) for the
Company's 85,000 square foot headquarters and research and development facility
located in Waltham, Massachusetts. The entire facility was subleased to Anadys
effective August 1, 1999. Under the terms of the sublease, Anadys has assumed
the Company's obligation under the lease in addition to reimbursing the Company
for a portion of the Company's leasehold improvements. The Company negotiated
with the landlord and Anadys an arrangement which eliminated the Company's
liability for the lease in the event that Anadys were to default on its sublease
obligations. In consideration for such arrangement, the Company expects to
receive approximately $55,000 per month through August 2002 or an aggregate of
approximately $705,000. If Anadys were to default on its lease agreement or if
the Company sold its interest in the lease, the Company would receive less than
the $705,000 remaining to be paid. As of September 30, 2001, the Company has
recorded $607,000 as the net realizable value of this receivable for purposes of
liquidation basis accounting. This total was determined based on the December
31, 2000 balance of $856,000, less $544,000 in payments received in the first
nine months of the year, plus an increase in the change in the estimate of the
net realizable value of $295,000 for purposes of liquidation accounting. The
change in estimate of $295,000 was recorded during the quarter ending June 30,
2001.
LIABILITIES
At September 30, 2001, the Company estimates that there are approximately
$362,000 of costs to be incurred during the remaining liquidation period through
August 27, 2002 as compared to $650,000 of costs remaining as of December 31,
2000. The decrease of $288,000 resulted from payments made during the first nine
months of 2001.
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
Since its inception, the Company had focused on the research and clinical
development of products to treat allergies, autoimmune diseases, and vaccines
for the management of drugs of abuse.
On February 5, 1999, the Company announced that its Board of Directors had
decided to conclude the business activities of the Company as soon as
practicable. On March 23 1999, the Board of Directors approved a plan to
liquidate and dissolve the Company (the "Plan"). The Plan was approved by the
stockholders of the Company on August 25, 1999. The key features of the Plan are
(1) the conclusion of all business activities, other than those in execution of
the Plan; (2) the sale or disposition of all of the Company's assets; (3) the
satisfaction of all outstanding liabilities; (4) the payment of liquidating
distributions to stockholders in complete redemption of the Common Stock; and
(5) the authorization of the filing of Certificate of Dissolution with the State
of Delaware. As a result of the adoption of the Plan and the imminent nature of
the liquidation, the Company adopted the liquidation basis of accounting
effective July 1, 1999, whereby assets are valued at their estimated net
realizable values and liabilities are valued at their estimated settlement
amounts. The valuation of assets and liabilities requires many estimates and
assumptions by management and there are substantial uncertainties in carrying
out the provisions of the Plan. The amount and timing of future liquidating
distributions will depend upon a variety of factors including, but not limited
to, the actual proceeds from the sale of any of the Company's assets, the
ultimate settlement amounts of the Company's liabilities and obligations, actual
costs incurred in connection with carrying out the Plan, including management
fees and administrative costs during the liquidation period, and the timing of
the liquidation and dissolution.
The Company is a Delaware corporation and Delaware law requires that the Company
stay in existence as a non-operating entity for three years from August 27,
1999, the date the Company filed a certificate of dissolution in Delaware.
During the dissolution period, the Company will attempt to convert its remaining
net assets to cash as expeditiously as possible.
The Company has returned a total of $51.45 million (or $2.50 per share) to its
stockholders since September 1, 1999. Future distributions to stockholders would
be made by the Board of Directors of the Company as the Company's net assets are
converted to cash. The actual amount and timing of future distributions cannot
be predicted at this time. The Company intends to distribute pro rata to its
stockholders, in cash or in-kind, or sell or otherwise dispose of, all of its
property and net assets. The liquidation should be concluded prior to August 27,
2002 by a final liquidating distribution either directly to the stockholders or
to one or more liquidating trusts. Details regarding the plan to liquidate and
dissolve the Company can be found in the Company's 1999 Proxy Statement filed
with the Securities and Exchange Commission and mailed to stockholders on July
15, 1999.
7
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary objectives are to liquidate its net assets in an efficient
manner that optimizes the values for such assets and to reduce operating costs.
The period of time necessary to liquidate the assets and distribute the proceeds
and the amount of proceeds to be received, are subject to significant business,
economic and competitive uncertainties and contingencies, many of which are
beyond the Company's control.
The Company has returned a total of $51.45 million (or $2.50 per share) to its
stockholders since September 1, 1999.
As of September 30, 2001, the Company had cash and cash equivalents of
$1,192,000 invested primarily in money market funds. This represents an increase
in cash and cash equivalents since December 31, 2000 in the amount of $183,000.
At June 30, 2001 the Company recorded an increase in its estimate of the net
realizable value of the receivable from Anadys Pharmaceuticals, Inc. in the
amount of $295,000. This increase was based on an evaluation on the payment
history of Anadys over the past twelve months, as well as factoring in the time
period remaining on the lease. No adjustment has been made for the quarter
ending September 30, 2001. As of September 30, 2001, the Company has recorded
$607,000 as the estimated net realizable value of this sublease for the purposes
of liquidation basis accounting.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans," expects," "intends",
"estimates", and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could affect the future
activities of the Company, including, without limitation, the factors set forth
below and those set forth under the heading "Future Results" and elsewhere in
the Company's Annual Report on Form 10-K for the year ended December 31, 2000,
as filed with the Securities and Exchange Commission, and the information
contained in this Quarterly Report on Form 10-Q should be read in light of such
factors.
The Company no longer satisfies the requirements for continued listing of its
common stock on the Nasdaq National Market ("NASDAQ"). The Company received a
notice from NASDAQ on October 19, 1999, indicating that the company would be
delisted as of January 22, 2000. The delisting of the company's common stock in
fact occurred on that date. Because NASDAQ has delisted the Company's common
stock, the ability of stockholders to buy and sell shares may be materially
impaired. The Company's common stock is now traded on the NASDAQ
over-the-counter bulletin board.
Any future payments the Company may receive under its agreement with Xenova
(formerly Cantab Pharmaceuticals plc) , and, therefore, any future value which
may be returned to the Company's stockholders with respect to that agreement, is
dependent upon the successful development and commercialization of the products
licensed or sold to such companies, as the case may be. The ability of Xenova to
develop and commercialize its products is subject to all of the risks and
uncertainties inherent in the biotechnology industry, including those associated
with the early stage of development of such products, government regulation,
competition, patents and proprietary rights, manufacturing and marketing,
additional financing requirements and access to capital, product liability and
third-party reimbursement. There can be no assurance that any of these products
will be successfully developed or commercialized or that the Company will
receive any value with respect to them during the liquidation period.
8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's investment policy specifies credit quality standards for the
Company's investments and limits the amount of credit exposure to any single
issue, issuer or type of investment. The Company does not believe that it has
any material exposure to market risk with respect to derivative or other
financial instruments requiring disclosure under this item.
9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K: None.
10
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.
IMMULOGIC PHARMACEUTICAL CORPORATION
------------------------------------
(Registrant)
Date: 11/13/2001 /s/ J. Richard Crowley
--------------- -------------------------------------------
J. Richard Crowley
President, Secretary and Treasurer
(Principal Financial and Accounting Officer)
11