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 March 31, 1999
--------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-27854
BONE CARE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 2834 39-1527471
(State of (Primary Standard Industry (IRS Employer
Incorporation) Classification Code Number) Identification No.)
One Science Court
Madison, Wisconsin 53711
(Address, including zip code of
Registrant's principal executive offices)
608-236-2500
(Registrant's telephone number, including area code)
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
------ -----
As of April 30, 1999, 10,150,802 shares of the registrant's Common Stock, no
par value, were outstanding.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
FORM 10-Q
For the quarterly period ended March 31, 1999
TABLE OF CONTENTS
------------------
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial statements
Consolidated Balance Sheets
March 31, 1999, and June 30, 1998. . . . . . . . . . . . . . . . .3
Consolidated Statements of Operations
Three and Nine Months Ended March 31, 1999
and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Consolidated Statements of Cash Flows
Nine Months Ended March 31, 1999
and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Notes to Consolidated Financial Statements . . . . . . . . . . . .7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . .8
Item 3. Quantitative and Qualitative Disclosures about Market Risk . . . .9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities and Use of Proceeds. . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . 10
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ------
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Balance Sheets
- -------------------------------------------------------------------------------
Assets
- -------------------------------------------------------------------------------
March 31, June 30,
1999 1998
(Unaudited) (Audited)
- -------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $8,464,406 $3,484,374
Inventory 1,142,896 229,500
Other current assets 120,154 50,162
- -------------------------------------------------------------------------------
Total current assets 9,727,456 3,764,036
Property, plant and equipment--at cost:
Leasehold improvements 97,319 72,105
Furniture and fixtures 101,144 57,122
Machinery and other equipment 576,429 490,915
- -------------------------------------------------------------------------------
774,892 620,142
Less accumulated depreciation 444,304 310,054
- -------------------------------------------------------------------------------
330,588 310,088
Patent fees, net of accumulated amortization
of $608,462 at March 31, 1999, and $491,462
at June 30, 1998 802,053 738,808
Excess of cost over fair value of net assets
acquired, net of accumulated amortization
of $799,494 at March 31, 1999, and
$732,408 at June 30, 1998 560,423 627,509
Other non-current assets 47,041 372,835
- -------------------------------------------------------------------------------
$11,467,561 $5,813,276
===============================================================================
See accompanying notes to consolidated financial statements.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Balance Sheets
- -------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
- -------------------------------------------------------------------------------
March 31, June 30,
1999 1998
(Unaudited) (Audited)
- -------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 195,278 $ 59,585
Accrued liabilities:
Accrued clinical study and
research costs 273,271 481,005
Compensation payable 75,274 32,741
Other 44,222 117,964
- -------------------------------------------------------------------------------
Total current liabilities 588,045 691,295
Shareholders' equity:
Preferred stock--authorized 2,000,000
shares of $.001 par value; none issued - -
Common stock--authorized 28,000,000 shares
of no par value; issued and outstanding
10,150,802 shares at March 31, 1999
and 8,808,956 at June 30, 1998 11,393,883 11,393,883
Additional paid-in capital 14,069,932 3,748,328
- -------------------------------------------------------------------------------
25,463,815 15,142,211
Accumulated deficit (14,584,299) (10,020,230)
- -------------------------------------------------------------------------------
10,879,516 5,121,981
- -------------------------------------------------------------------------------
$11,467,561 $5,813,276
===============================================================================
See accompanying notes to consolidated financial statements.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
- -----------------------------------------------------------------------------
Three months ended Nine months ended
------------------ -----------------
March 31, March 31, March 31, March 31,
1999 1998 1999 1998
- -------------------------------------------------------------------------------
REVENUES $ - $ - $ - $ -
- -------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of sales
Research and development 1,063,851 1,085,993 2,737,794 3,061,783
Marketing, general and
administrative 761,421 237,377 2,263,567 588,376
- -------------------------------------------------------------------------------
1,825,272 1,323,370 5,001,361 3,650,159
- -------------------------------------------------------------------------------
Loss from operations (1,825,272) (1,323,370) (5,001,361) (3,650,159)
Interest Income 123,472 75,990 437,292 285,183
- -------------------------------------------------------------------------------
NET LOSS $(1,701,800) $(1,247,380) $(4,564,069)$(3,364,976)
===============================================================================
Net loss per common
share - basic $(0.17) $(0.14) $(0.46) $(0.39)
===============================================================================
Weighted average number of
common shares 10,149,869 8,759,724 10,024,394 8,734,845
===============================================================================
See accompanying notes to consolidated financial statements.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
- -------------------------------------------------------------------------------
Nine months ended
------------------
March 31, March 31,
1999 1998
- -------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $(4,564,069) $ (3,364,976)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 318,336 202,525
Changes in assets and liabilities:
Inventory (913,396) 18,173
Other current assets (69,992) -
Accounts payable 135,693 259,147
Accrued liabilities (238,943) 56,511
Other 28,224 (134,312)
- --------------------------------------------------------------------------
Net cash used in operating activities $(5,304,147) $ (2,962,932)
- --------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (154,750) (206,850)
Patent fees (180,245) (269,506)
- --------------------------------------------------------------------------
Net cash used in investing activities $ (334,995) $ (476,356)
- --------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from exercise of stock options 51,670 119,817
Net proceeds from issuance of common stock 10,567,504 (203,155)
- --------------------------------------------------------------------------
Net cash provided by (used in) financing
activities $10,619,174 $ (83,338)
- --------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 4,980,032 (3,522,626)
Cash and cash equivalents at
beginning of period 3,484,374 8,531,714
- --------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 8,464,406 $ 5,009,088
==========================================================================
See accompanying notes to consolidated financial statements.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION
The consolidated financial statements presented herein have been prepared by
Bone Care International, Inc. (the "Company"), without audit except for balance
sheet information at June 30, 1998, pursuant to the rules of the Securities and
Exchange Commission for quarterly reports on Form 10-Q and do not include all
of the information and note disclosures required by generally accepted
accounting principles for annual financial statements. These statements should
be read in conjunction with the consolidated financial statements and notes
thereto for the year ended June 30, 1998, included in the Company's Form 10-K
as filed with the Securities and Exchange Commission on September 30, 1998.
In the opinion of management, the information included herein reflects
all adjustments (consisting of normal, recurring adjustments) necessary for
a fair presentation of results for these interim periods. The results of
operations for the interim periods ended March 31, 1999, are not necessarily
indicative of the results to be expected for the entire fiscal year ending
June 30, 1999.
(2) COMMON STOCK
In July 1998, the Company completed a directed public offering of 1,326,000
shares of common stock at a price of $8.00 per share. The Company received
proceeds of approximately $10.568 million from the sale, net of offering
expenses. Certain directors of the Company purchased 276,000 of the shares
sold.
(3) NET LOSS PER SHARE
Basic loss per share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period.
Diluted per share data is not presented as the effect of potentially issuable
common shares would be antidilutive.
Item 2. Management Discussion and Analysis of Financial Condition and
- ------ Results of Operations
Results of Operations
- ---------------------
Research and development expenses decreased to $1,063,851 in the three
months ended March 31, 1999, from $1,085,993 in the three months ended March
31, 1998 and to $2,737,794 in the nine months ended March 31, 1999 from
$3,061,783 in the nine months ended March 31, 1998. Prior year research and
development expenses included synthesis and formulation research costs to
commercially produce Hectorol (trademark). These efforts were substantially
completed during the six months ended December 31, 1998. The resulting reduced
research and development expenses were largely offset by increased regulatory
filing and compliance expenses.
Marketing, general and administrative expenses increased $524,044 to
$761,421 in the three months ended March 31, 1999, from $237,377 in the three
months ended March 31, 1998. In the nine months ended March 31, 1999,
marketing, general and administrative expenses increased $1,675,191 to
$2,263,567 from $588,376 in the nine months ended March 31, 1998.
Substantially all of the increases were attributable to pre-marketing
activities relating to the expected launch of Hectorol.
Interest income increased $47,482 to $123,472 in the three months ended
March 31, 1999 from $75,990 in the three months ended March 31, 1998. Interest
income increased $152,109 to $437,292 in the nine months ended March 31, 1999
from $285,183 in the nine months ended March 31, 1998. Increased cash balances
resulted from receipt of the net proceeds from the common stock offering
completed during July 1998. The increases in interest income were due to higher
average cash balances during the periods subsequent to the common stock
offering.
Liquidity and Capital Resources
- -------------------------------
In July 1998, the company completed a directed public offering of 1,326,000
shares of common stock at a price of $8.00 per share. In July 1998, the Company
received proceeds of approximately $10.568 million from the sale, net of
offering expenses. Prior to June 30, 1998, approximately $298,000 of offering
expenses were incurred. Certain directors of the Company purchased 276,000 of
the shares sold.
The Company requires substantial funds for its research and development
programs, preclinical and clinical testing, operating expenses, regulatory
processes and manufacturing and marketing programs. The Company's capital
requirements depend on numerous factors, including the progress of its
research and development programs; the progress of preclinical and clinical
testing; the time and cost involved in obtaining regulatory approvals; the cost
of filing, prosecuting, defending and enforcing any patent claims and other
intellectual property rights; competing technological and market developments;
changes and development in the company's existing licensing relationships and
the terms of any new collaborative, licencing, co-promotion or distribution
arrangements that the Company may establish; the progress of commercialization
and marketing activities; the cost of manufacturing preclinical and clinical
products; and other factors not within the Company's control. The Company
believes that the current level of cash and cash equivalents should be
sufficient to fund its operations through at least March 2000.
Cash and equivalents were $8,464,406 at March 31, 1999 and $3,484,374
at June 30, 1998. The increase was primarily due to the receipt of net
proceeds of $10,567,504 from the July 1998 common stock offering. During
the nine months ended March 31, 1999 and 1998, cash used in operating and
investing activities aggregated $5,639,142 and $3,439,288, respectively.
The increase is attributable to Hectorol inventory production activity
commenced in fiscal 1999 and pre-marketing activities related to the
expected introduction of Hectorol.
Year 2000 Compliance
- --------------------
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. To distinguish
transactions occurring prior to January 1, 2000 from those occurring after
December 31, 1999, these date code fields must be able to accept four-digit
entries.
The Company has reviewed its existing financial and other business
information systems and believes that its computer systems will be able
to manage and manipulate all material data involving the transition from
1999 to 2000 without functional or data abnormality and without inaccurate
results related to such data.
It is possible that third parties such as suppliers or contract research
institutions may not have compliant computer systems or programs which may not
interface properly with the Company's computer systems or which may otherwise
result in a disruption of the Company's operations.
The Company currently anticipates that the expenses and capital expenditures
associated with its year 2000 compliance program will not have a material
effect on its financial position or results of operations. Although the
Company believes that it will be able to achieve year 2000 compliance through
its efforts, there can be no assurance that these efforts will be successful.
The Company could be adversely affected if it or third parties fail to
successfully achieve year 2000 compliance. In particular, a disruption to the
Company's commercialization efforts for Hectorol could have a material effect
on the Company's financial position or results or operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
- ------
The Company believes that presently it does not have a substantive
disclosure with respect to quantitative and qualitative disclosures about
market risk. As the Company's operations expand, the Company will consider
such disclosures.
PART II - OTHER INFORMATION
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Item 1. Legal Proceedings
-----------------
The Company may be a defendant from time to time in
actions arising out of its ordinary course of business
operations. The Company believes that none of the matters
in which it is currently involved, either individually or
in the aggregate, is material to the Company.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
In connection with a directed public offering of
1,326,000 shares of common stock (the "Offering") in 1998,
the Company filed a Registration Statement on Form S-1, SEC
File No. 333-43923 ("Registration Statement"), which was
declared effective by the Commission on July 22, 1998. The
net proceeds from the Offering to the Company after total
expenses was $10,270,000.
The Company intends to use the net proceeds of the
Offering to fund research and development, including
preclinical and clinical activities in support of
regulatory approvals, for commercialization activities
related to Hectorol for treatment of secondary
hyperparathyroidism associated with ESRD and for working
capital and general corporate purposes.
Through the period ended March 31, 1999, the Company
has used less than $2,200,000 of the net proceeds for such
purposes. The net proceeds not yet utilized have been
invested in short-term, investment grade, interest-bearing
financial instruments. The use of proceeds from the
Offering does not represent a material change in the use of
proceeds described in the prospectus which is part of the
Registration Statement.
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995: Certain statements in this
filing, and elsewhere (such as in other filings by the
Company with the Securities and Exchange Commission, press
releases, presentations by the Company or its management
and oral statements) constitute "forward-looking
statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties,
and other factors which may cause the actual results,
performance or achievements of the Company to be materially
different from any future results, performance, or
achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the
Company's early stage of development, the Company
dependence on its ability to obtain regulatory approval of
Hectorol, the uncertainty of the Company's future
profitability, the uncertainty of regulatory approvals of
any drugs developed by the Company, the uncertainty of the
Company's patent positions and proprietary rights, the
uncertainty related to pricing and reimbursement of the
Company's products, the intense competition in the
pharmaceutical and biotechnology industries, the Company's
potential need for additional partners or collaborators,
the Company's future capital needs and uncertainty of
additional financing, and the Company's lack of
manufacturing capabilities and limited sales and marketing
experience. Readers should also carefully review the risk
factors set forth in other reports or documents the Company
files from time to time with the Securities and Exchange
Commission, including Part I, Item 1 of the Company's
Annual Report on Form 10-K. Given these uncertainties,
readers are cautioned not to place undue reliance on such
forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly
announce any revisions to any of the forward -looking
statements contained herein to reflect future events or
developments.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits furnished:
(10.5) 1996 Stock Option Plan (as amended)
(11) Statement Re: Computation of Loss Per Share
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company
during the quarter ended March 31, 1999.
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.
BONE CARE INTERNATIONAL, INC.
(Registrant)
Date: May 10, 1999 /s/ Charles W. Bishop
- ------------------ --------------------------------
Charles W. Bishop
President and Chief
Executive Officer
(Principal Executive Officer)
Date: May 10, 1999 /s/ Dale W. Gutman
- ------------------ --------------------------------
Dale W. Gutman
Vice President of Finance
(Principal Financial and
Accounting Officer)
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Exhibit Index
For the Quarterly Period Ended March 31, 1999
No. Description Page
- --- ----------- ----
10.5 1996 Stock Option Plan (as amended) . . . . . . . . . . . . . . . 14
11 Statement Regarding Computation of Loss Per Share . . . . . . . . 18
27 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . 19