SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM 10-K/A
(Amendment No. 1)
(Mark one)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended March 31, 1998
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 No. 0-15360
BIOJECT MEDICAL TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Oregon 93-1099680
(State of other jurisdiction of (I.R.S. identification no.)
incorporation or organization)
7620 SW Bridgeport Road
Portland, Oregon 97224
(Address of principal executive offices) (Zip code)
(Registrant's telephone number, including areas code) (503) 639-7221
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Common Stock, no par value
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of voting stock held by non-affiliates of the
registrant, as of May 31, 1998: $40,833,088
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of May 29, 1998: Common Stock, no par value, 27,218,758 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement for the 1998 Annual
Shareholders' Meeting are incorporated by reference into Part III.
Table of Contents
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Item 6. Selected Consolidated Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 8. Consolidated Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
PART I
ITEM 1. BUSINESS
FORWARD-LOOKING STATEMENTS
Certain statements in this Report 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, or industry results, to be materially different from any future
results, performance, or achievements expressed or implied by such
forward-looking statements. Such risks, uncertainties and factors include, among
others, those described under "Business -- Risk Factors."
GENERAL
Bioject Medical Technologies Inc. ("Bioject" or the "Company") develops,
manufactures and markets a jet injection system for needle-free drug delivery.
Using this technology to administer injections virtually eliminates the risk of
contaminated needlestick injuries and resulting blood-borne pathogen
transmission, a major concern throughout the healthcare industry. The Company
manufactures and markets a professional jet injection system, the Biojector(R)
2000, which allows healthcare professionals to inject medications through the
skin, both intramuscularly and subcutaneously, without a needle. The Biojector
2000 system consists of two components: a hand-held, reusable jet-injector (the
"Biojector 2000"); and a sterile, single-use disposable syringe ("Biojector
syringe"). The system is capable of delivering variable-dose needle-free
injections up to 1 ml. Additionally, the Company has developed and is awaiting
regulatory clearance to begin selling the B4000 jet-injection system for
self-delivery of various medications up to 1 ml. for use by non-professionals.
The Company is also developing systems for Hoffmann-La Roche to use with certain
of their products pursuant to an agreement signed January 10, 1995. On March 23,
1998 the Company entered into a transaction with Vitajet Corporation ("Vitajet")
whereby the Company acquired, along with certain other assets, the rights to the
Vitajet(R), a spring-powered self-injection device which currently has
regulatory clearance for administering injections of insulin. See "Research and
Product Development." In October 1997, the Company entered into a joint
development agreement with Elan Corporation, plc ("Elan") for the license of
certain blood glucose monitoring technology from Elan and the development and
commercialization of that technology by a newly formed subsidiary of the
Company. See "See Research and Product Development." Subsequent to year end, in
July 1998, the Company entered into an agreement with Merck & Co. ("Merck")
which provides Merck the rights to use the Biojector 2000 jet injection system
with selected Merck vaccines. Also subsequent to year end, in July 1998, the
Company and GeneMedicine, Inc. ("GeneMedicine") entered into a collaborative
research agreement involving GeneMedicine's technology and the Company's
needle-free injection technology. See "See Research and Product Development."
The Company intends to operate as two distinct business segments: the
jet-injection business and the blood glucose monitoring business.
Needle-Free Injection Business.
Currently, medications are administered using various methods, each of which has
advantages and limitations. The leading drug delivery techniques include oral
ingestion, intravenous infusion, subcutaneous and intramuscular injection,
inhalation and transdermal diffusion "patch." Many drugs are effective only when
administered by injection. Published data indicates more than 1.7 billion
needle-syringes sold annually in the U.S. The Company believes that
approximately 80% of these syringes are used for subcutaneous or intramuscular
injections up to 1 ml.
Injections using traditional needle-syringes suffer from many shortcomings
including (i) the risk of needlestick injuries, (ii) the risk of penetrating a
patient's vein and (iii) patients' aversion to needles and discomfort. The most
important of these, the contaminated needlestick injury, occurs when a needle
that has been exposed to a patient's blood accidentally penetrates a healthcare
worker's skin. Contaminated needles can transmit deadly blood-borne pathogens
including such viruses as HIV and hepatitis B. Published data estimates the
total number of reported needlestick injuries in the U.S. at between 370,000 and
800,000 annually.
In recent years, with the growing awareness of blood-borne pathogen
transmission, safety has become a critical concern for hospitals and healthcare
professionals as well as patients. As a result, pressures on the healthcare
industry to eliminate the risk of contaminated needlestick injuries have
increased. For example, the U.S. Occupational Safety and Health Administration
("OSHA") issued regulations, effective in 1992, which require healthcare
institutions to treat all blood and other body fluids as infectious. These
regulations require the implementation of "engineering and work practice
controls" to "isolate or remove the blood-borne pathogens hazard from the
workplace." Among the required controls are special handling and disposal of
contaminated "sharps" in biohazardous "sharps" containers and follow-up testing
for victims of needlestick injuries. These regulations have significantly
increased the cost of using needle-syringes.
The costs resulting from needlestick injuries vary widely. Uncontaminated
needlesticks involve relatively little cost, while investigating and following
up contaminated needlestick injuries are much more expensive. Investigation
typically includes identifying the source of contamination, testing the source
for blood-borne pathogens and repeatedly testing the needlestick victim over an
extended period. Some healthcare providers are requiring additional measures,
including presuming that all needlestick injuries involve contaminated needles
unless proven otherwise and, under certain circumstances, administering
prophylactic treatment such as zidovudine (AZT) or other drugs. The costs
associated with treating needlestick injuries that result in infection by
life-threatening pathogens, such as HIV or hepatitis B, are dramatically higher.
In an effort to protect healthcare workers from needlestick injuries, many
healthcare facilities have adopted more expensive, alternative technologies. One
such technology is an intravenous ("IV") port that permits the injection of
medication directly into the IV line without requiring the use of a sharp needle
for each administration. Another is the "safety syringe," generally a disposable
needle-syringe with a plastic sheath mechanism intended to cover the needle
after use. Despite many efforts to reduce the risk of needlestick injuries, such
injuries remain a major health concern.
The Company's long-term goal is to establish its needle-free injection systems
as the preferred drug delivery method for all medications administered by
intramuscular or subcutaneous injection. The Company currently markets the
Biojector 2000 system to public health and flu immunization clinics, has
developed and is awaiting regulatory clearance of a gas-powered self-injection
device for the delivery of various medications by non-professionals in the home
and is developing application-specific devices to be marketed by
Hoffman-LaRoche. In a transaction with Vitajet Corporation, the Company has
acquired the Vitajet spring-powered self-injection system. In addition,
subsequent to year end, the Company entered into two agreements: i) one with
Merck & Co. which provides Merck the rights to use the Biojector 2000 jet
injection system with selected Merck vaccines; and ii) another with
GeneMedicine, Inc. which is a collaborative research agreement involving
GeneMedicine's technology and the Company's needle-free injection technology.
See "Research and Product Development." The Company is also seeking
relationships with pharmaceutical and biotechnology companies to market its
Biojector 2000 and self injector products for specific applications and to
develop other application-specific devices and companion syringes.
Blood Glucose Monitoring Business.
Diabetes mellitus is a disorder of carbohydrate metabolism that affects an
estimated 16.5 million Americans and 125 million people worldwide, half of whom
remain undiagnosed. Insulin facilitates the uptake of circulating blood glucose
into tissues, a fundamental process of metabolism. A lack of, or resistance to
the hormone insulin characterizes the disease. Incidence of the disease, which
can originate from many factors, is rising, particularly in developing countries
as non-Caucasian populations begin to adopt western diet and culture.
Type I diabetics are individuals dependent on external administration of insulin
who must frequently measure their blood glucose level and, depending on the
results, administer injections of insulin or consume a carbohydrate-rich snack.
Fluctuation of a person's blood glucose level outside a normal range, which may
occur in the time interval between measurements, frequently causes serious
health complications and even death. Using currently available blood glucose
monitoring systems to check their blood glucose level, diabetic patients must
lance their finger with a disposable lancet, draw a drop of blood, and place the
blood on a reagent strip which is then read by an electronic reader which
displays the results. Many patients find this procedure painful and
inconvenient, and as a result, many diabetics do not measure their blood glucose
with sufficient frequency.
The Company has licensed and intends to develop a convenient, easy to use,
continuous blood glucose monitoring system which will permit diabetics to better
monitor and thereby better regulate their blood glucose levels so as to diminish
or eliminate the long-term complications of this disorder.
THE COMPANY
The Company's needle-free jet injection operations are conducted by Bioject
Inc., an Oregon corporation, which is a wholly owned subsidiary of Bioject
Medical Technologies Inc., an Oregon corporation. The Company's blood glucose
monitoring system development operations are conducted by a subsidiary, Bioject
JV Subsidiary Inc., an Oregon corporation.
Although Bioject Inc. commenced operations in 1985, the Company was formed in
December 1992 for the sole purpose of acquiring all the capital stock of Bioject
Medical Systems Ltd., a company organized under the laws of British Columbia,
Canada, in a stock-for-stock exchange in order to establish a U.S. domestic
corporation as the publicly traded parent company for Bioject Inc. and Bioject
Medical Systems Ltd. Bioject Medical Systems Ltd. was terminated in fiscal 1997.
Bioject JV Subsidiary Inc. ("JV or JV Sub") was formed in October 1997 for the
purpose of developing and commercializing the blood glucose monitoring
technology. All references to the Company herein are to Bioject Medical
Technologies Inc. and its subsidiaries, unless the context requires otherwise.
The Company's executive offices and operations are located at 7620 SW Bridgeport
Road, Portland, Oregon 97224, and its telephone number is (503) 639-7221.
"Biojector," "Bioject," "Vitajet" and "Medivax" are registered trademarks of the
Company.
DESCRIPTION OF THE COMPANY'S PRODUCTS
Needle-free Injection Business.
The Company's current product, the Biojector 2000 system, is a refinement of jet
injection technology that enables healthcare professionals to reliably deliver
measured variable doses of medication through the skin, either intramuscularly
or subcutaneously, without a needle. Giving an injection with a Biojector 2000
system is easy and straightforward. The healthcare worker checks the CO2
pressure on the easy-to-read gauge at the rear of the injector, draws medication
up into a disposable plastic syringe, inserts the syringe into the power
injector, presses the syringe tip against the appropriate disinfected surface on
the patient's skin, and then presses an actuator thereby injecting the
medication. Medication is expelled rapidly through a precision molded, small
diameter orifice in a thin stream at a velocity sufficient to penetrate the skin
and force the medication into the tissue at the desired level. The Biojector
2000 system consists of two components: a hand-held, reusable jet injector; and
a sterile, single-use, disposable plastic syringe capable of delivering variable
doses of medication up to 1 ml.
The first component, the Biojector 2000, is a portable hand-held unit which is
approximately the size of a flashlight and is designed both for easy use by
healthcare professionals, as well as to be attractive and non-threatening to
patients. As described in the June 7, 1993 issue of BUSINESSWEEK, the Biojector
2000 won the 1993 Gold Industrial Design Excellence Award given by the
Industrial Designers Society of America for its aesthetically pleasing and
ergonomic design. In July 1994, the Biojector 2000 also received the Alliance of
Children's Hospitals Seal of Approval. The Biojector 2000 injector uses
disposable CO2 cartridges as a power source. The CO2 cartridges, which are
purchased by the Company from an outside supplier, give an average of ten
injections before requiring replacement. The CO2 gas provides consistent,
reliable pressure on the plunger of the disposable syringe, thereby propelling
the medication into the tissue. The CO2 propellant does not come into contact
with either the patient or the medication.
The second component, the Biojector single-use disposable syringe, is provided
in a sterile, peel-open package and consists of a plastic, needle- free,
variable dose syringe containing a plunger, accompanied by a disposable plastic
vial adapter which is used to fill the syringe. (If requested by a customer, the
product can also be supplied with a needle which is used as an alternative to
the vial adapter for filling the syringe.) The body of the syringe is
transparent and has graduated markings to aid filling by healthcare workers.
There are five different Biojector syringes, each of which is intended for a
different injection depth or body type. The syringes are molded using the
Company's patented manufacturing process. The healthcare worker selects the
syringe appropriate for the intended type of injection. One syringe size is for
subcutaneous injections, while the others are designed for intramuscular
injections, depending on the patient's body characteristics.
The Vitajet is also made-up of two components, a portable injector unit and a
disposable syringe. It is smaller and lower in cost than other products in the
Company's needle-free offering. The method of operation and drug delivery is
similar to the Biojector, except that the Vitajet is powered by a spring rather
than by CO2. It is designed for self-injection and was acquired to fill a gap in
the Company's product line for a low-cost, home use, needle-free device.
Vitajet's current regulatory labeling limits its use to the injection of
insulin. The Company believes that the product has the potential to achieve
regulatory labeling for additional subcutaneous injections. See "Forward Looking
Statements" and "Risk Factors Government Regulation."
The current suggested retail list price for the Biojector 2000 professional jet
injector is $995, and the suggested retail list price for Biojector syringes is
$1.00 a piece. CO2 cartridges are sold for a suggested retail price of $0.50 per
cartridge and average ten injections per cartridge. Discounts are offered for
volume purchases. The current suggested retail price for the Vitajet 3
needle-free injector is $399. A three month supply (13-count) of Vitajet
syringes is sold for a suggested retail price of $60.
The Company has other products in development which are intended to address
other markets or to enhance the Biojector 2000 system. See "Research and Product
Development."
Blood Glucose Monitoring Business.
The Company is currently in the development phase of its continuous blood
glucose monitoring product and currently has no products on the market in the
blood glucose monitoring business segment. See "Research and Product
Development."
MARKETING AND COMPETITION
Needle-free Injection Business.
Currently, the traditional needle-syringe is the primary method by which
intramuscular and subcutaneous injections are administered.
During the last 20 years, there have been many attempts to develop portable
one-shot jet injection hypodermic devices. Some of the problems which have
arisen in the attempts to develop such devices include: (a) inadequate injection
power; (b) little or no control of pressure and depth of penetration; (c)
complexity of design, with related difficulties in cost and performance; (d)
difficulties in use, including filling and cleaning; and (e) the necessity for
sterilization between uses.
In recent years, several spring-driven needle-free injectors have been developed
and marketed primarily for the injection of insulin. Each of these devices
requires regular cleaning as well as filling from a separate medication bottle
or vial. Current prices for such injectors range from approximately $400 to $600
per injector. The Company believes that market acceptance of these devices has
been limited due to a combination of the cost of the devices coupled with the
difficulties of their use.
Also in recent years, various versions of a "safety syringe" have been designed
and marketed. Most versions of the safety syringe generally involve, as their
basic design, a standard or modified needle-syringe with a plastic guard or
sheathing surrounding the needle. Such covering is usually retracted or removed
in order to give an injection. Although the intent of the safety syringe is to
reduce or eliminate needlestick injuries, the syringes require manipulation
after injection and, therefore, still pose the risk of needlestick injury. They
are also bulky and add to contaminated waste disposal problems.
The Company is currently focusing it marketing efforts for the Biojector system
in two primary directions. The first of these marketing efforts continues the
Company's historical strategy of marketing directly to the end-user of the
product by gaining acceptance of the Biojector system as a safe, reliable
alternative to the needle-syringe and safety syringe. These efforts build on the
Company's established presence in the U.S. public health clinic and flu
immunization markets. The Company is also focusing its direct marketing on
creating arrangements to market the Biojector 2000 system to the home healthcare
market and the U.S. military.
The second area of marketing emphasis focuses on creating licensing and supply
arrangements with leading pharmaceutical and biotechnical companies for whose
products the Biojector technology provides either better medical efficacy or a
higher degree of market acceptance. Sales through this channel would be to the
pharmaceutical or biotechnology company whose salesforce would then sell that
company's own products along with the Biojector system to the end user.
Development of an injection system for specific applications which is
anticipated to be marketed by Hoffmann-La Roche is an example of such an
arrangement. Other opportunities include the possibility of pre-filled Biojector
syringes which, if developed, could be filled and marketed by the pharmaceutical
or biotechnology company whose product is involved.
Pursuing both of these marketing strategies, the Company plans eventually to
expand into international markets.
To lead its direct sales and marketing efforts, The Company currently employs a
national sales manager who manages a staff of two full-time nurse trainers, 5 to
8 per diem part-time nurse trainers and a half-time U.S. military sales
representative. Bioject's direct sales efforts have resulted in the signing of
public health agreements for the state of North Carolina, the New York City
Middle Schools, and the health departments in the states of New Mexico, Oklahoma
and Illinois. The Company expects to sign additional agreements with other
public health agencies. In addition, the Company works closely on a national
basis with the Visiting Nurses Associations for use of the Biojector 2000 system
for flu immunization. The Company intends to leverage its success in these
immunization programs to attract pharmaceutical company strategic partners to
assist it in gaining access to the physician office and other specialized
markets where the benefits of jet injection drug delivery will enhance
distribution of their injectable medications.
In August 1994, Bioject signed an agreement with Homecare Management, Inc.
("HMI"), granting HMI exclusive rights to purchase Bioject's Needle-Free
Injection Management System, the Biojector 2000, for use in the home healthcare
market. Sales to HMI commenced in August 1994. In return for HMI's commitment to
purchase a minimum of 8,000 Biojector units over the ensuing two years, the
Company granted volume pricing discounts to HMI. Throughout the term of the
contract the selling price of Biojectors to HMI exceeded their standard cost.
During fiscal 1995 and 1996, the Company sold approximately 2,100 and 4,300
Biojectors to HMI for total sales revenue including syringes of $1.1 million and
$2.2 million, respectively. HMI had not placed the great majority of these
Biojectors with patients pending completion of negotiations with pharmaceutical
companies for certain pricing concessions for medication to be administered with
the Biojectors. In January 1996, HMI requested that further shipments under the
contract be suspended. In February 1996, the Company learned from HMI's press
releases that HMI expected to default under its loan, to take significant
write-offs for accounts receivable and inventories, planned operational
consolidations, and would restate certain prior period financial statements. In
fiscal 1997, the Company agreed to repurchase certain of the Biojector
inventories (including up to 6,000 devices) which HMI had on hand for a total of
$660,000 including $322,000 of forgiveness of accounts receivable and payment of
$338,000 in two installments, one-half of which was paid in July 1996 and with
the balance remaining outstanding. The Company was under no obligation to
repurchase these inventories, and the repurchase was at a substantial discount
to the original selling price to HMI.
The sale of new technologies to hospitals, large clinics and other large
institutions is typically a lengthy process. Introduction of new technologies to
a hospital or other large institution typically involves screening by several
individuals and committees within the institution, including new product
evaluation committees, infection control officers, medical staff and business
office personnel. Therefore, in order to shorten the sales cycle, the Company
has focused its primary direct sales strategy on the public health and flu
immunization markets where there are fewer and more concentrated decision
makers.
The medical equipment market is highly competitive, and competition is likely to
intensify. Many of the Company's existing and potential competitors have been in
business longer than the Company and have substantially greater technical,
financial, marketing, sales and customer support resources. The Company believes
the primary competition for the Biojector 2000 system and other jet injectors it
may develop is the traditional disposable needle- syringe and the safety
syringe. Leading suppliers of needle-syringes include: Becton-Dickinson & Co.,
Sherwood Medical Co., a subsidiary of American Home Products Corp., and Terumo
Corp. of Japan. Manufacturers of traditional needle-syringes compete primarily
on price, which generally ranges from approximately $0.17 to $0.15 per unit.
Manufacturers of safety syringes compete on features, quality and price. Safety
syringes generally are priced in a range of $0.25 to $0.45 per unit.
The Company expects to compete with traditional needle-syringes and safety
syringes based on healthcare worker safety, ease of use, reduced cost of
disposal, patient comfort, and reduced cost of compliance with OSHA regulations,
but not on purchase price. However, the Company believes that when all indirect
costs (including disposal of syringes and testing, treatment and workers'
compensation expense related to needlestick injuries) are considered, the
Biojector 2000 system will compete effectively. See "Forward Looking Statements"
and "Risk Factors."
The Company is aware of other portable needle-free injectors on the market today
which are generally focused on subcutaneous self-injection applications of 0.5
ml. or less and compete with the Vitajet. However the Company is not aware of
any competing products with features and benefits comparable to the Biojector
2000 system. The Biojector is suitable for both intramuscular and subcutaneous
injections of up to 1 ml. in the professional and home injection markets.
Manufacturers of needle-syringes, as well as other companies, may develop new
products that compete directly or indirectly with the Company's products. There
can be no assurance that the Company will be able to compete successfully in
this market. See "Risk Factors - Competition,- "Dependence on Two Technologies."
A variety of new technologies (for example, transdermal patches) are being
developed as alternatives to injection for drug delivery. While the Company does
not believe such technologies have significantly affected the use of injection
for drug delivery to-date, there can be no assurance that they will not do so in
the future.
Blood Glucose Monitoring Business.
The diabetic blood glucose monitoring market is currently dominated by four
companies: LifeScan, a subsidiary of Johnson and Johnson, Boehringer Mannheim,
Miles Laboratories, a subsidiary of Bayer, and MediSense, a subsidiary of Abbott
Laboratories. All of these companies have in vitro blood glucose monitoring
systems which use blood test strips and an electronic reader.
Emerging technologies for less invasive monitoring of blood glucose have been in
development for many years. There are three broad modalities of blood glucose
analysis: Near infrared spectroscopy (near-IR), measurement of interstitial
fluid ("ISF"), the liquid between cells of the skin, and transdermal
technologies, where a patch applied to the skin causes diffusion of bodily
fluids to the skin surface from which levels of blood glucose can be measured.
There have been several recent attempts to introduce noninvasive in vivo blood
glucose sensors, based on near-IR spectroscopy. These instruments are currently
large and costly (around $10,000), as well as difficult to calibrate. Though
some are billed as "portable," they are impractical for ambulatory use.
Two companies, TCPI and Cygnus Therapeutics, are developing systems for
measuring the blood glucose concentration with patch membrane technologies.
Through application of an electrical current through the skin, interstitial
fluid is brought to the skin's surface, where it is captured by a patch from
which the glucose element can be measured. In the case of the TCPI device, the
patch is then removed from the skin and placed into a reader for glucose
measurement. The Cygnus device has a reader and membrane integrated in a
wristwatch which takes periodic readings and averages them to determine blood
glucose levels.
The Company has not yet fully developed and commercialized its continuous blood
glucose monitoring technology. However, based on the expected design and
performance of its continuous blood glucose monitoring device, the Company
expects to compete effectively based on the following anticipated key benefits:
To patients:
- - Real-time measurement of blood glucose concentration leading to better, more
reliable monitoring of the blood sugar level with the resulting opportunity to
reduce the near and long-term medical complications of diabetes.
- - Superior Information: Continuous availability of blood glucose levels in a
convenient and pain free format.
- - Lightweight and discreet.
- - Convenience: Anticipated once-per-day application to provide continuous
results all day without further activation by the patient.
To third party payors:
- - Real-time measurement of blood glucose concentration leading to a better,
steadier regulation of the blood sugar level, translating to a potential
reduction of diabetic complications and their associated cost.
- - Freedom from the pain and inconvenience of frequent blood tests leading to
better patient compliance, which translates to better blood glucose control,
fewer long term complications, and lower costs.
To healthcare providers:
- - Superior Information: Real-time measurement of blood glucose concentration
leads to steadier regulation of the blood sugar levels, superior provider
capabilities, and improved patient care.
- - Continuous monitoring via once-a-day application greatly reducing the labor
requirements associated with patient-nurse interactions required by the static
tests currently employed to monitor patients' blood glucose levels.
PATENTS AND PROPRIETARY RIGHTS
Needle-free Injection Business.
The Company believes that technology incorporated in its currently marketed
injection device and single-dose disposable plastic syringes as well as the
technology of products under development in both the jet injection and blood
glucose monitoring business segments coupled with the technology and ease of use
of the products acquired in the Vitajet acquisition give it significant
advantages over the manufacturers of other jet injection systems and over
prospective competitors seeking to develop similar systems. The Company attempts
to protect its technology through a combination of trade secrets,
confidentiality agreements and procedures and patent prosecution.
The Company has three U.S. patents which were issued with respect to jet
injection technology incorporated in earlier versions of its jet injection
systems and which expire from July 2007 to November 2008. Seven additional U.S.
patents have been issued which protect developments incorporated in the
Biojector 2000 system. These patents incorporate a number of claims including
claims regarding the jet injection system's design, method of operation, certain
aspects of the syringe design and the method of manufacturing the syringe
orifice. The Company has also been granted a patent relating a drug vial
adapter. The Company has made additional patent filings regarding pre-filled
syringe technologies and adapters for drug vial access. The Company also
generally files patent applications in Canada, Europe and Japan at the times and
under the circumstances it deems filing to be appropriate under the procedures
in place in each jurisdiction. There can be no assurance that any patents
applied for will be granted or that patents held by the Company will be valid or
sufficiently broad to protect the Company's technology or provide a significant
competitive advantage. See "Risk Factors." The Company also relies on trade
secrets and proprietary know-how that it seeks to protect through
confidentiality agreements with its employees, consultants, suppliers and
others. There can be no assurance that these agreements will not be breached,
that the Company would have adequate remedies for any breach, or that the
Company's trade secrets will not otherwise become known to or be developed
independently by competitors. In addition, the laws of foreign countries may not
protect the Company's proprietary rights to its technology, including patent
rights, to the same extent as the laws of the U.S.
Although the Company believes that it has independently developed its technology
and attempts to assure that its products do not infringe the proprietary rights
of others, if infringement were alleged and proved, there can be no assurance
that the Company could obtain necessary licenses on terms and conditions that
would not have an adverse affect on the Company. The Company is not aware of any
asserted claim that the Biojector 2000, Vitajet or any product under development
violates the proprietary rights of any person.
If a dispute arises concerning the Company's technology, litigation that could
result in substantial cost to and diversion of effort by the Company might be
necessary to enforce the Company's patents, to protect the Company's trade
secrets or know-how or to determine the scope of the proprietary rights of
others. Adverse findings in any proceeding could subject the Company to
significant liabilities to third parties, require the Company to seek licenses
from third parties or otherwise adversely affect the Company's ability to
manufacture and sell its products.
Blood Glucose Monitoring Business.
The continuous blood glucose monitoring system concept and proprietary aspects
of the design are covered by various patents. Corresponding patent applications
have been filed with the PCT, designating all member countries, including the
United States, E.U. and Japan, as well as in Taiwan and South Africa. Additional
patent applications will be filed in the course of the blood glucose monitoring
technology development program. These applications will cover new, innovative
aspects and refinements of the product.
GOVERNMENTAL REGULATION
Needle-free Injection and Blood Glucose Monitoring Businesses.
The Company's products and manufacturing operations are subject to extensive
government regulations, both in the U.S. and abroad. In the U.S., the Food and
Drug Administration ("FDA") administers the Federal Food, Drug and Cosmetic Act
(the "FD&C") and has adopted regulations, including those governing the
introduction of new medical devices, the observation of certain standards and
practices with respect to the manufacturing and labeling of medical devices, the
maintenance of certain records and the reporting of device-related deaths,
serious injuries, and certain malfunctions to the FDA. Manufacturing facilities
and certain Company records are also subject to FDA inspections. The FDA has
broad discretion in enforcing the FD&C and the regulations thereunder, and
noncompliance can result in a variety of regulatory steps ranging from warning
letters, product detentions, device alerts or field corrections to mandatory
recalls, seizures, injunctive actions and civil or criminal penalties.
The FD&C provides that, unless exempted by regulation, medical devices may not
be commercially distributed in the U.S. unless they have been cleared or
approved by the FDA. The FD&C provides two basic review procedures for
pre-market clearance or approval of medical devices. Certain products qualify
for a submission authorized by Section 510(k) of the FD&C, wherein the
manufacturer provides the FDA with a premarket notification ("510(k)
notification") of the manufacturer's intention to commence marketing the
product. The manufacturer must, among other things, establish in the 510(k)
notification that the product to be marketed is substantially equivalent to
another legally marketed product, (i.e., that it has the same intended use and
that it as safe and effective as a legally marketed device and does not raise
questions of safety and effectiveness that are different from those associated
with the legally marketed device). Marketing may commence when the FDA issues a
letter finding substantial equivalence to such a legally marketed device. The
FDA may require, in connection with the 510(k) submission, that it be provided
with animal and/or human test results. If a medical device does not qualify for
the 510(k) procedure, the manufacturer must file a premarket approval ("PMA")
application. A PMA must show that the device is safe and effective and is
generally a much more complex submission than a 510(k) notification typically
requiring more extensive prefiling testing and a longer FDA review process.
A 510(k) notification is required when a device is being introduced into the
market for the first time. A 510(k) notification is also required when the
manufacturer makes a change or modification to an already marketed device that
could significantly affect safety or effectiveness, or where there is a major
change or modification in the intended use of the device. When any change or
modification is made in a device or its intended use, the manufacturer is
expected to make the initial determination as to whether the change or
modification is of a kind that would necessitate the filing of a new 510(k)
notification. The FDA's regulations provide only limited guidance in making this
determination.
In April 1987, the Company received 510(k) marketing clearance from the FDA
allowing the Company to market a hand-held CO2-powered jet injection system.
Although the Biojector 2000 system incorporates changes from the system with
respect to which the Company's 1987 510(k) marketing clearance was received and
expands its intended use, the Company made the determination that these were not
major changes or modifications in intended use or changes in the device that
could significantly affect the safety or effectiveness of the device and that,
accordingly, the 1987 510(k) clearance permitted the Company to market the
Biojector 2000 system in the U.S. In June 1994, the Company received clearance
from the FDA under 510(k) to market a version of its Biojector 2000 system in a
configuration targeted at high volume injection applications. In October 1996,
the Company received 510(k) clearance for a non-needle disposable vial access
device. In March 1997, the Company received additional 510(k) clearance for
certain enhancements to its Biojector 2000 system. The Company currently has
applications pending before the FDA for 510(k) clearance of the B2020 1.5ml jet
injector and the B4000 self-injector. There can be no assurance that the FDA
will concur with the Company's determination that the products can be qualified
by means of a 510(k) submission.
The continuous blood glucose monitoring system will be designed to meet
international standards of product safety, reliability and biocompatibility. In
the U.S., while the Company believes that the FDA, based on an earlier clearance
of a "Biostator Monitor", sold by Miles Laboratories, will allow the continuous
blood glucose monitoring system to be sold under a 510(k) pre-market
notification, a final determination has not been made in this regard and there
can be no assurance that the FDA will allow the use of a 510(k) pre-market
notification. See "Risk Factors - Governmental Regulation." European regulatory
clearance will be in accordance with the essential requirements set out in the
new Medical Device Directives, which will come into law in June 1998.
The Company continues to seek arrangements with pharmaceutical companies to
develop pre-filled Biojector syringe applications to permit the pharmaceutical
companies to market their products packaged in Biojector prefilled containers.
See "Research and Product Development." Before pre-filled Biojector syringes may
be distributed for use in the U.S., certain FDA-mandated stability tests may be
required of those pharmaceutical companies. Pre-filled syringes involve drugs
packaged as a component of a medical device. It is current FDA policy that such
pre-filled syringes, which are considered to be combination products, are
evaluated by the FDA as drugs rather than medical devices. Marketing of
pre-filled syringes by pharmaceutical companies will require prior clearance via
a new or amended Drug Application ("NDA") or an Abbreviated New Drug Application
("ANDA"). An NDA is a complex submission required to establish that a drug will
be safe and effective for its intended uses. An ANDA is a less detailed process
which does not require, among other things, that the applicant provide complete
reports of preclinical and clinical studies of safety and efficacy as are
required for NDAs. Assuming that the drugs used in the pre-filled syringes have
previously been approved by the FDA for injection, the FDA will likely require
that ANDAs, rather than NDAs, be submitted. The Company believes that if a drug
to be used in the Company's pre-filled syringe were already the subject of an
approved NDA or ANDA for intramuscular or subcutaneous injection, the main issue
affecting clearance for use in the pre-filled syringe would be the adequacy of
the syringe to store the drug, to assure its stability until used and to safely
deliver the proper dose. See "Forward Looking Statements" and "Risk Factors
Government Regulation."
The FDA also regulates the Company's quality control and manufacturing
procedures by requiring the Company and its contract manufacturers to
demonstrate compliance with current Good Manufacturing Practice ("GMP")
Regulations. These regulations require, among other things, that (i) the
manufacturing process must be regulated and controlled by the use of written
procedures and (ii) the ability to produce devices which meet the manufacturer's
specifications must be validated by extensive and detailed testing of every
aspect of the process. They also require investigation of any deficiencies in
the manufacturing process or in the products produced and detailed
record-keeping. Further, the FDA's interpretation and enforcement of these
requirements has been increasingly strict in recent years and seems likely to be
even more stringent in the future. Failure to adhere to GMP requirements would
cause the products produced to be considered in violation of the Act and subject
to enforcement action. The FDA monitors compliance with these requirements by
requiring manufacturers to register with the FDA, and by subjecting them to
periodic FDA inspections of manufacturing facilities. If the inspector observes
conditions that might be violated, the manufacturer must correct those
conditions or explain them satisfactorily, or face potential regulatory action
that might include physical removal of the product from the marketplace.
The FDA's Medical Device Reporting Regulation requires that the Company provide
information to the FDA on the occurrence of any death or serious injuries
alleged to have been associated with the use of the Company's products, as well
as any product malfunction that would likely cause or contribute to a death or
serious injury if the malfunction were to recur. In addition, FDA regulations
prohibit a device from being marketed for unapproved or uncleared indications.
If the FDA believes that the company is not in compliance with these
regulations, it can institute proceedings to detain or seize products, issue a
recall, seek injunctive relief or assess civil and criminal penalties against
such company.
The use and manufacture of the Company's products are subject to OSHA and other
federal, state and local laws and regulations relating to such matters as safe
working conditions for healthcare workers and Company employees, manufacturing
practices, environmental protection and disposal of hazardous or potentially
hazardous substances and the policies of hospitals and clinics relating to
compliance therewith. There can be no assurance that the Company will not be
required to incur significant costs to comply with such laws, regulations or
policies in the future, or that such laws, regulations or policies will not
increase the costs or restrictions related to the use of the Company's products
or otherwise have a materially adverse effect upon the Company's ability to do
business. See "Risk Factors."
Laws and regulations regarding the manufacture, sale and use of medical devices
are subject to change and depend heavily on administrative interpretations.
There can be no assurance that future changes in regulations or interpretations
made by the FDA, OSHA or other regulatory bodies, will not adversely affect the
Company.
Sales of medical devices outside of the United States are subject to foreign
regulatory requirements. The requirements for obtaining premarket clearance by a
foreign country may differ from those required for FDA clearance. Devices having
an effective 510(k) clearance or PMA may be exported without further FDA
authorization. FDA authorization is generally required in order to export other
medical devices.
RESEARCH AND PRODUCT DEVELOPMENT
Needle-free Injection Business.
Research and development efforts are focused on enhancing the Company's current
product offerings and on developing both new jet injection technology and new
products. The Company continues to use clinical, magnetic resonance imaging and
tissue studies to determine the reliability and performance of new and existing
products. As of March 31, 1998, the Company's research and product development
staff, including clinical and regulatory staff members, consisted of 7
employees. During fiscal 1996, 1997 and 1998, the Company spent $1.9 million,
$1.6 million, and $884,000, respectively, on research and development.
In March 1994, the Company entered into an agreement with Schering AG, Germany
("Schering"), for the development of a self-injection device for delivery of
Betaseron (R) to multiple sclerosis patients. During fiscal 1995 through 1997,
the Company developed prototypes to Schering specifications which were accepted
by Schering. During fiscal 1997, the Company entered into a supply agreement
with Schering and commenced activities related to full production of the self
injector. Schering loaned the Company a total of $1.6 million to purchase molds
and tooling for production of the product. In January 1997, the Company received
notice that its contract with Schering would be cancelled. Under provisions of
the contract, Schering had the option of canceling the agreement if the FDA
required extensive clinical studies beyond an originally planned safety study.
Schering received a review letter from the FDA which would have required
Schering to conduct additional material clinical studies in order to use
non-traditional delivery mechanisms with its Betaseron (R) product. Under terms
of the contract, Schering was required to convert its $1.6 million note due from
Bioject into approximately 460,000 shares of Bioject common stock at a
conversion price of $3.50 per share. In addition, $106,000 of accrued interest
was converted into approximately 27,000 shares of Bioject common stock at a
conversion price of $3.50 per share. The Company retained ownership of the molds
and tooling. The B4000 self-injector, which was developed as a result of the
Schering agreement, is currently awaiting regulatory clearance prior to
marketing. See "Risk Factors - Governmental Regulation."
In January 1995, the Company signed a joint development agreement with
Hoffmann-La Roche ("Roche") to develop proprietary drug delivery systems for
Roche products. The agreement provides for Bioject to develop, manufacture and
sell Biojector jet injection drug delivery systems designed to Roche
specifications. In return, Bioject has granted Roche exclusive worldwide rights
to distribute these systems and their components for use with certain Roche
products. Hoffmann-La Roche Inc. is the United States affiliate of the
multinational group of companies headed by Roche Holding of Basel, Switzerland,
one of the world's leading, research-intensive healthcare companies.
As of 1995 fiscal year end, the Company had commenced design of a prototype
device and had agreed with Roche on product specifications. During fiscal 1996,
the Company developed and delivered to Roche preproduction prototypes for
testing and developed the clinical preproduction prototypes which were delivered
to Roche in April 1996. As of fiscal 1997 year end, the Company and Roche were
finalizing their submission to obtain regulatory clearance to market the
product. As of the end of fiscal 1998, the Company had submitted its component
of the proprietary drug delivery system for regulatory clearance.
In February 1995, Hoffmann-La Roche paid a one-time licensing fee totaling
$500,000. The agreement provides that it will pay specified product development
fees on an agreed upon schedule of which $400,000 was recognized in fiscal 1996,
$500,000 was recognized in fiscal 1997 and $500,000 was recognized in fiscal
1998.
In March, 1998 the Company acquired the assets of Vitajet Corporation in a
stock-for-assets exchange. The Company paid 100,000 shares of its common stock
for certain molds, tooling, patent rights and customer lists, the value of which
totaled $134,400 at the date of acquisition. In addition to shares already paid,
the Company is obligated to issue 60,000 shares of its common stock in each of
the three years subsequent to the acquisition if certain development milestones
are met. Up to an additional 90,000 shares is also payable subject to the
Company realizing specified, aggregate levels of incremental revenue during the
three years subsequent to the Vitajet acquisition as a result of sales of
products acquired from or developed by Vitajet
Subsequent to year end, in July 1998, the Company entered into an agreement with
Merck, a worldwide leader in the development, manufacture and sale of a broad
range of human and animal health products and services. The agreement provides
Merck the rights to use the Biojector 2000 jet injection system with selected
Merck vaccines. The Company believes that this agreement is the first step in
establishing a long-term relationship between the two companies whereby Merck
will use the Company's needle-free technology in connection with certain of its
vaccines. There can be no assurance that such long-term relationship will be
established. See "Forward Looking Statements."
Also subsequent to year end, in July 1998, the Company entered into a
collaborative research agreement with GeneMedicine, a developer of gene
medicines and genetic vaccine technologies for treatment or prevention of a wide
range of diseases. This collaboration involves the continued refinement of the
Biojector 2000 jet injection system coupled with GeneMedicine's unique
gene-based delivery platforms to create a combined product that will enhance the
delivery and activity of plasmid-based genetic vaccines. The agreement
contemplates that combined products developed as a result of the research
collaboration will be marketed to third party corporate partners for
commercialization and sale rather than being commercialized or sold by either
Bioject or GeneMedicine. There can be no assurance that the collaborative
alliance will result in marketable products. Further, should marketable products
be developed as a result of the collaborative alliance, there can be no
assurance that the companies will be successful either at locating appropriate
third party corporate partners or at entering into the necessary agreements with
those partners to commercialize and sell the products so developed. See "Forward
Looking Statements." Additionally, should such products be developed, there can
be no assurance that they will receive the required governmental clearance. See
"Governmental Regulation."
In addition to activities described above, the Company is seeking arrangements
with pharmaceutical and biotechnology companies for the use of pre-filled
syringes to eliminate the filling and measuring procedures associated with
traditional injection of medications. Before pre-filled Biojector syringes may
be distributed for use in the U.S., these companies must commit to the packaging
and distribution of their products in this manner and to the time and financial
resources necessary for FDA review and clearance. This process could be lengthy.
See "Business - Governmental Regulation." There can be no assurance that such
companies will commit efforts to develop pre-filled packaging and pursue
regulatory clearance or that regulatory clearance of pre-filled Biojector
syringes will be obtained.
The Company intends to continue research and development efforts designed to
further its understanding of the physics and physiology of jet injection. These
efforts will include further clinical studies to demonstrate efficacy of jet
injection and to evaluate new products and enhancements to the Company's
existing products. To advance these studies, in April 1994 the Company formed a
Department of Clinical Affairs research group, which initiates and coordinates
these studies.
Blood Glucose Monitoring Business.
In October 1997, the Company signed a joint development agreement with Elan
Corporation, plc ("Elan") to license from Elan certain continuous blood glucose
monitoring technology (the "License") and then to commercialize that technology
for manufacture and world-wide distribution. To date, the Company has continued
testing and development of a clinical prototype. Subsequent to year end, in
April 1998, a small, human clinical study with a prototype of the device was
conducted. The prototype device was used to monitor the blood glucose levels of
six diabetes patients for fifteen continuous hours. The system tracked the
patients' actual blood glucose levels against whole blood reference samples with
significant levels of accuracy. The Company is planning further preliminary
clinical studies as development of the product continues. Based on the results
of these studies, the Company will then plan and conduct comprehensive clinical
trials of the monitoring system which are intended to support its applications
to the FDA to market the product in the United States. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
MANUFACTURING
Needle-free Injection Business.
The Company assembles the Biojector 2000 and related syringes from components
purchased from outside suppliers. Prior to introduction of the Biojector 2000
system in 1993, the Company had not engaged in manufacturing on a commercial
scale. However, in connection with that introduction, the Company increased its
manufacturing capabilities and built inventories to support anticipated product
sales.
Throughout fiscal 1994 and 1995, the Company's manufacturing processes were
primarily manual. These processes did not permit the Company to produce its
products at costs which would allow it to operate profitably. During fiscal
1996, the Company implemented a plan to increase manufacturing capacity and
refine production methods to meet anticipated future demand and to reduce
product costs. For the Biojector 2000, cost reduction efforts included
converting from a two-piece to a one-piece housing, converting to continuous
process manufacturing and implementing volume purchasing programs from
suppliers. For the Biojector syringes, these efforts included increasing
supplier mold capacity and automating final assembly and packaging. See "Risk
Factors - Limited Manufacturing Experience, Need to Reduce Unit Cost."
During fiscal 1998, the Company, having a sufficient inventory of jet injectors
on-hand as a result of the repurchase of product from HMI, focused its
manufacturing efforts on refining the manufacturing processes and efficiencies
of the syringe manufacturing line. See "Marketing and Competition - Needle-Free
Injection Business."
In order to succeed at expanding manufacturing capacity and reducing unit
production cost, the Company must attract and retain qualified assembly workers
and must establish and maintain relationships with suppliers that can deliver
large quantities of components that meet applicable quality standards in a
timely and reliable manner at acceptable prices.
Blood Glucose Monitoring Business.
At present, the Company has no manufacturing operation related to the blood
glucose monitoring system. When approved for sale, the Company intends to
manufacture the device in its own facilities, the location of which has not yet
been determined.
EMPLOYEES
As of March 31, 1998, the Company had 33 full-time employees with 4 employees
engaged in research and product development, 2 in sales and marketing, 2 in
technical product support, 13 in manufacturing and 12 in administration. The
Company engages a limited number of part-time consultants who assist with
research and development, sales and marketing and investor relations activities.
The Company also employs temporary contract workers primarily for assembly
operations, the number of which varies, depending upon production requirements.
As of March 31, 1998, there were 4 consultants, 5 to 8 per diem nurses and 1
contract/temporary worker employed by the Company. None of the Company's
employees is represented by a labor union.
PRODUCT LIABILITY
The Company believes that its products reliably inject medications both
subcutaneously and intramuscularly when used in accordance with product
guidelines. The Company's current insurance policies provide coverage at least
equal to an aggregate limit of $11 million with respect to certain product
liability claims. The Company has not experienced any product liability claims
to date. There can be no assurance, however, that the Company will not become
subject to such claims, that the Company's current insurance would cover such
claims, or that insurance will continue to be available to the Company in the
future. The Company's business may be adversely affected by product liability
claims.
RISK FACTORS
Investment in the securities of the Company involves a high degree of risk. In
addition to the other information in this annual report, the following factors
should be considered carefully in evaluating the Company and its business. The
Company cautions the reader that this list of factors may not be exhaustive.
Uncertainty of Market Acceptance. The Company's success will depend upon market
acceptance of its jet injection drug delivery system, the Biojector 2000 system,
the blood glucose monitoring system and, to a lesser extent, other products
under development. Currently, the dominant technology used for intramuscular and
subcutaneous injections is the hollow-needle syringe. Needle-syringes, while low
in cost, have limitations, particularly relating to contaminated needlestick
injuries. Use of the Biojector 2000 system for intramuscular and subcutaneous
injections virtually eliminates the associated risk of these injuries; however,
the cost per injection is significantly higher. There can be no assurance that
the Biojector 2000 system will compete successfully. A previous jet injection
system manufactured by the Company did not achieve market acceptance and is no
longer being marketed. The Biojector 2000 was introduced in January 1993. To
date, the major portion of sales have been to HMI, which units were not placed
in service and which the Company has repurchased at a substantial discount to
the original selling price after the cancellation of its agreement with HMI.
Failure of the Biojector 2000 system to gain market acceptance would have a
material adverse effect on the Company's financial condition and results of
operations.
Uncertainty of New Product Development. The Company's joint venture with Elan,
JV Sub, intends to develop certain technology licensed from Elan and to create
an ambulatory monitoring system which permits the continuous monitoring of blood
glucose levels in persons with diabetes. The system is in the early stages of
development, and there can be no assurance that JV Sub will be successful in
developing a product or that any such product can be manufactured or marketed in
a commercially viable manner. It also is likely that significant additional
levels of funding will be required to complete development of the technology,
which will likely require the future issuance of debt or equity securities by
either the Company or JV Sub. Further, there can be no assurance that, should a
blood glucose monitoring system be developed, such system would receive the
requisite governmental clearance. See "Governmental Regulation."
The Company's collaborative research agreement with GeneMedicine involves the
continued refinement of the Biojector 2000 jet injection system coupled with
GeneMedicine's unique gene-based delivery platforms to create a combined product
that will enhance the delivery and activity of plasmid-based genetic vaccines.
The agreement contemplates that combined products developed as a result of the
research collaboration will be marketed to third party corporate partners for
commercialization and sale rather than being commercialized or sold by either
Bioject or GeneMedicine. See "Research and Product Development - Needle-free
Injection Business." There can be no assurance that the collaborative alliance
will result in marketable products. Further, should such marketable products be
developed, there can be no assurance that the companies will be successful
either at locating appropriate third party corporate partners or at entering
into the necessary agreements with those partners to commercialize or sell the
products so developed. See "Forward Looking Statements." Additionally there can
be no assurance, should such products be developed, that such products would
receive the required governmental clearance. See "Governmental Regulation."
History of Losses; Uncertain Profitability. Since its formation in 1985, the
Company has incurred significant annual operating losses and negative cash flow.
At March 31, 1998, the Company had an accumulated deficit of $50.9 million, $12
million of which related to the fiscal 1998 write-off, after minority interest,
of in-process research and development acquired in connection with the
acquisition of blood glucose monitoring technology from Elan. Historically, the
Company's revenues have been derived primarily from licensing and technology
fees and from limited product sales, which were principally sales to dealers for
the stocking of inventories and to HMI. More recently, the Company has sold its
products to end-users, primarily to public health clinics for vaccinations and
to nursing organizations for flu immunizations. The Company has not attained
profitability at these sales levels. There can be no assurance that the Company
will be able to generate significant revenues or achieve profitability. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Possible Termination of the License. Pursuant to the terms of the License, the
License may be terminated under certain conditions. In the event that 15% of JV
Sub's equity is acquired by any one of a number of specified companies
identified by Elan as actual or potential competitors, or any other entity to
which Elan does not consent, which consent shall not be unreasonably withheld in
the case of such other unspecified companies, the License may be immediately
terminated at Elan's option. Further, the License itself is contingent, on a
country-by-country basis, on JV Sub's diligently seeking and obtaining
regulatory marketing clearance for licensed products and on JV Sub's timely
commercial launch of the licensed products in countries where such clearance has
been obtained. Termination of the License may have a material adverse effect on
the Company's financial condition and results of operations.
Need for Additional Financing. The Company's revenues from operations have not
been sufficient to satisfy its cash requirements and it has relied on the
proceeds of sales of equity securities to fund its operations. The Elan
transaction involves significant future financial commitments by the Company to
fund the development and marketing activities of JV Sub, as well as significant
payment obligations, totaling $15.5 million, by JV Sub to Elan as product
development milestones are met. These payment obligations are in addition to the
Company's cash requirements relating to current activities involving the
Company's jet injection technology. The Company plans to fund its cash
requirements through revenues, debt and sales of equity securities, and
anticipates that JV Sub will fund its activities through debt and sales of
equity securities to the Company and Elan or to third parties. There can be no
assurance that financing sufficient to fund either the Company's jet injection
business activities or blood glucose monitoring business activities will be
obtained on favorable terms or at all. Failure to obtain adequate financing
would have a material adverse impact on the Company's business and could result
in defaults on the Company's or JV Sub's obligations relating to the Elan
Transactions, loss of JV Sub's rights to the technology under the License,
dilution of the Company's interest in JV Sub or the need to curtail operations
of the Company or JV Sub due to inadequate cash resources or other adverse
consequences. The sale of equity securities on unfavorable terms to meet the
Company's obligations could result in material dilution to the existing
shareholders.
Effects of Convertible Preferred Stock. The Company's Common Stock is subject to
the rights and preferences of the Series A and B Convertible Preferred Stock,
which has a liquidation preference of $12.405 million plus accrued and unpaid
dividends. Further, the Series A and B Convertible Preferred Stock is
convertible to Common Stock at a conversion price of $1.50 per share at any
time. At the end of seven years, unless earlier converted by the holders or
redeemed by the Company, the shares Series A and B Convertible Preferred Stock
and accrued but unpaid dividends convert automatically into Common Stock at the
conversion price equal to the lesser of $1.50 per share or 80% of the then
prevailing market price of Common Stock. Accordingly, conversion of Series A and
B Convertible Preferred Stock to Common Stock could result in issuances of
significant amounts of Common Stock at prices lower than prevailing market
prices at the time of conversion. Should the Company issue Series C Convertible
Preferred Stock or other similar series of Preferred Stock to Elan to enable the
Company to fund capital contributions to JV Sub, the aggregate amount of
Preferred Stock liquidation preferences and Common Stock issuable upon
conversion of Preferred Stock would increase.
Limited Manufacturing Experience; Need to Reduce Unit Cost. The Company has
limited experience manufacturing its products in commercially viable quantities.
The Company has increased its production capacity for the Biojector 2000 system
through automation of, and changes in, production methods. The current cost per
injection of the Biojector 2000 system is substantially higher than that of
traditional needle-syringes, its principal competition. A key element of the
Company's business strategy has been to reduce the overall manufacturing cost
through automating production and packaging. There can be no assurance that the
Company will be able to develop and implement effective high volume production
or achieve necessary unit cost reductions. Failure to do either would adversely
affect the Company's financial condition and results of operations. While the
Company believes that its experience manufacturing the Biojector enhances the
probability of its success in manufacturing the Vitajet, the Company has no
experience manufacturing the Vitajet and as of March 31, 1998 has not installed
a manufacturing line to produce the Vitajet. There can be no assurance that the
Company will be able to successfully manufacture the Vitajet at a unit cost that
will allow the product to be sold profitably. Failure to do so would adversely
affect the Company's financial condition and results of operation. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Manufacturing."
Governmental Regulation. The Company's products and manufacturing operations are
subject to extensive government regulation, both in the U.S. and abroad. In the
U.S., the development, manufacture, marketing and promotion of medical devices
are regulated by the Food and Drug Administration ("FDA") under the Federal
Food, Drug, and Cosmetic Act ("FD&C"). In 1987, the Company received clearance
from the FDA under Section 510(k) of the FD&C to market a hand-held CO2-powered
jet injection system. The FD&C provides that new premarket notifications under
Section 510(k) of the FD&C are required to be filed when, among other things,
there is a major change or modification in the intended use of a device or a
change or modification to a legally marketed device that could significantly
affect its safety or effectiveness. A device manufacturer is expected to make
the initial determination as to whether the change to its device or its intended
use is of a kind that would necessitate the filing of a new 510(k) notification.
Although the Biojector 2000 system incorporates changes from the system with
respect to which the Company's 1987 510(k) marketing clearance was received and
expands its intended use, the Company made the determination that these were not
major changes or modifications in intended use or changes in the device that
could significantly affect the safety or effectiveness of the device.
Accordingly, the Company further concluded that the 1987 510(k) clearance
permitted the Company to market the Biojector 2000 system in the U.S. In June
1994, the Company received clearance from the FDA under 510(k) to market a
version of its Biojector 2000 system in a configuration targeted at high volume
injection applications. In October 1996, the Company received 510(k) clearance
for a needle-free disposable vial access device. In March 1997, the Company
received additional 510(k) clearance for certain enhancements to its Biojector
2000 system. The Company currently has applications pending before the FDA for
510(k) clearance of the B2020 1.5ml jet injector and the B4000 self-injector.
There can be no assurance that the FDA will concur with the Company's
determination that the products can be qualified by means of a 510(k)
submission.
Future changes to manufacturing procedures could necessitate the filing of a new
510(k) notification. Also, future products, product enhancements or changes, or
changes in product use may require clearance under Section 510(k), or they may
require FDA premarket approval ("PMA") or other regulatory clearances. PMAs and
regulatory clearances other than 510(k) clearance generally involve more
extensive prefiling testing than a 510(k) clearance and a longer FDA review
process. Under current FDA policy, applications involving prefilled syringes
would be evaluated by the FDA as drugs rather than devices, requiring FDA new
drug applications ("NDAS") or ANDAs. Depending on the circumstances, drug
regulation can be much more extensive and time consuming than device regulation.
See "Governmental Regulation."
No clearances from the FDA have been obtained for the marketing of products that
may be developed based on the blood glucose monitoring technology licensed from
Elan. The Company is researching and has not finally determined which FDA
clearances will be required with respect to any products developed based on this
technology. The Company anticipates that extensive testing and FDA review will
be required of any such product, and there can be no assurance that FDA
clearance will be obtained in a timely manner or at all.
FDA regulatory processes are time consuming and expensive. There can be no
assurance that product applications submitted by the Company will be cleared or
approved by the FDA. In addition, the Company's products must be manufactured in
compliance with Good Manufacturing Practices ("GMP") as specified in regulations
under the FDA Act. The FDA has broad discretion in enforcing the FDA Act, and
noncompliance with the Act could result in a variety of regulatory actions
ranging from product detentions, device alerts or field corrections, to
mandatory recalls, seizures, injunctive actions, and civil or criminal
penalties.
Distribution of the Company's products in countries other than the U.S. may be
subject to regulation in those countries. An application was made to the Japan
Ministry of Health and Welfare to obtain necessary approvals to market the
Biojector 2000 system in Japan which was not carried to completion by the
Company's then current Japanese distributor. See "Governmental Regulations."
Uncertainty in Healthcare Industry. The healthcare industry is subject to
changing political, economic and regulatory influences that may affect the
procurement practices and operations of healthcare facilities. During the past
several years, the healthcare industry has been subject to increased government
regulation of reimbursement rates and capital expenditures. Among other things,
third party payors are increasingly attempting to contain or reduce healthcare
costs by limiting both coverage and levels of reimbursement for healthcare
products and procedures. Because the price of the Biojector 2000 system exceeds
the price of needle injection systems, cost control policies of third party
payors, including government agencies, may adversely affect use of the Biojector
2000 system.
Dependence on Third-Party Relationships. The Company is dependent on third
parties for distribution of the Biojector 2000 system to certain market
segments, for the manufacture of component parts, and for assistance with the
development and distribution of future application-specific systems.
The Company's current manufacturing processes for the Biojector 2000 jet
injector and disposable syringes as well as manufacturing processes anticipated
to produce the Vitajet consist primarily of assembling component parts supplied
by outside suppliers. Certain of these components are currently obtained from
single sources, with some components requiring significant production lead
times. In the past, the Company has experienced delays in the delivery of
certain components, although to-date no such delays have had a material adverse
effect on the Company's operations. There can be no assurance that the Company
will not experience delays in the future, or that such delays would not have a
material adverse effect on the Company's financial condition and result of
operations. See "Manufacturing."
The Company has entered into agreements with certain major pharmaceutical
companies for development and distribution of jet injection systems, for use of
the Company's jet injection systems, in conjunction with the pharmaceutical
companies' products and for the development and commercialization of a
continuous blood glucose monitoring system. These companies have the right to
terminate these agreements at certain phases as defined in the agreements. There
can be no assurance that these companies' interest and participation in the
projects will continue. Failure to receive additional funding from these
companies under certain of the agreements or termination of these agreements
could adversely affect the development and production of the products involved
and, correspondingly, the Company's financial condition and results of
operations.
Ability to Manage Growth. If the Company's products achieve market acceptance,
the Company expects to achieve rapid growth. This growth strategy will require
expanded customer services and support, increased personnel throughout the
Company, expanded operational and financial systems, and the implementation of
new and expanded control procedures. There can be no assurance that the Company
will be able to attract qualified personnel or successfully manage expanded
operations. As the Company expands, it may from time to time experience
constraints that would adversely affect its ability to satisfy customer demand
in a timely fashion. Failure to manage growth effectively could adversely affect
the Company's financial condition and results of operations.
Competition. The medical equipment market is highly competitive and competition
is likely to intensify. The Company's products compete primarily with
traditional needle-syringes, "safety syringes" and also with other alternative
drug delivery systems. While the Company believes its products provide a
superior drug delivery method, there can be no assurance that the Company will
be able to compete successfully with existing drug delivery products. Many of
the Company's competitors have longer operating histories as well as
substantially greater financial, technical, marketing and customer support
resources than the Company. There can be no assurance that one or more of these
competitors will not develop an alternative drug delivery system that competes
more directly with the Company's products, or that the Company's products would
be able to compete successfully with such a product. Further, should JV Sub
develop an ambulatory blood glucose monitoring system which obtains all
necessary regulatory clearances, there can be no assurance that either the
Company's or JV Sub's competitors will not develop other competing systems, or
that JV Sub's system would be able to compete successfully with other systems or
products.
Dependence on Two Technologies. The Company's strategy has been to focus its
development and marketing efforts on its jet injection technology. The strategy
of its Joint Venture with Elan is to focus on development and commercialization
of a continuous blood glucose monitoring system. Focus on these two technologies
leaves the Company vulnerable to competing products and alternative drug
delivery systems, as well as to alternative methods to monitor blood glucose
levels in diabetics. The Company believes that healthcare providers' desire to
minimize the use of the traditional needle-syringe has stimulated development of
a variety of alternative drug delivery systems such as "safety syringes," jet
injection systems and transdermal diffusion "patches." In addition,
pharmaceutical companies frequently attempt to develop drugs for oral delivery
instead of injection. The Company also believes that there will be high market
demand for a minimally invasive blood glucose monitoring system such as that
being developed by the Company and that the size of that market will likely
attract significant competition to the Company's blood glucose monitoring
product.
While the Company believes that for the foreseeable future there will continue
to be a significant need for injections, there can be no assurance that
alternative drug delivery methods will not be developed which are preferable to
injection. Further, there can be no assurance that alternative blood glucose
monitoring systems will not be developed which are preferable to that to be
developed by the Company.
Patents and Proprietary Rights. The Company relies on a combination of trade
secrets, confidentiality agreements and procedures, and patents to protect its
proprietary technologies. The Company has been granted a number of patents in
the United States and several patents in certain other countries covering
certain technology embodied in its current jet injection system and certain
manufacturing processes. Additional patent applications are pending in the U.S.
and certain foreign countries. There can be no assurance that the claims
contained in any patent application will be allowed, or that any patent will
provide adequate protection for the Company's products and technology. In the
absence of patent protection, the Company may be vulnerable to competitors who
attempt to copy the Company's products or gain access to its trade secrets and
know-how. In addition, the laws of foreign countries may not protect the
Company's proprietary rights to this technology to the same extent as the laws
of the U.S. The Company believes that it has independently developed its
technology, attempts to ensure that its products do not infringe the proprietary
rights of others and the Company knows of no such infringement claims. However,
any such claims could have a material adverse affect on the Company's financial
condition and results of operations.
Product Liability. Producers of medical devices may face substantial liability
for damages in the event of product failure or if it is alleged the product
caused harm. The Company currently maintains product liability insurance and,
to-date, has not experienced any product liability claims. There can be no
assurance, however, that the Company will not be subject to such claims, that
the Company's current insurance would cover such claims, or that adequate
insurance will continue to be available on acceptable terms to the Company in
the future. The Company's business could be adversely affected by product
liability claims.
Dependence upon Key Employees. The Company's success depends on the retention of
its executive officers and other key employees. Competition exists for qualified
personnel and the Company's success will depend, in part, on attracting and
retaining such personnel. Failure in these efforts could have a material adverse
effect on the Company's business, financial condition or results of operations.
Shares Eligible For Future SaleIn December 1996, the Company completed a private
placement of 3,434,493 units (each unit representing one share of common stock
and a warrant to purchase one share of common stock). The Company also granted a
warrant to its placement agent in the private placement to purchase 156,000
shares of common stock. The shares issued in the private placement and the
underlying shares issuable upon exercise of the warrants were registered for
resale on a Form S-3 registration statement. In June and July 1997, the Company
completed a private placement of 2,906,977 units, each unit consisting of one
share of Common Stock and one warrant to purchase one-half share of Common
Stock. In May 1997, in return for services provided, the Company granted to Amy
Factor a warrant to purchase 25,000 shares of Common Stock. The shares issued in
the private placement and the underlying shares issuable upon exercise of the
warrants were registered for resale on a Form S-3 registration statement. In
connection with the Elan transactions in October 1997, Elan purchased 2,727,273
shares of Common Stock and was granted a five year warrant to purchase 1.75
million shares of common stock. In January, 1998, the shares issued to Elan as
well as the 487,390 shares issued to Schering (see "Research and Product
Development - Needle-free Injection Business") were registered for resale on a
Form S-3 registration statement. In October, 1997, the Company granted warrants
to purchase 350,000 shares of stock to Robert Gonnelli in connection with his
guarantee of an equity investment in the Company. In February, 1998, the Company
granted Raphael, L.L.C., a management consulting company which introduced Elan
to the Company, a warrant to purchase 100,000 shares of Common Stock. See
"Recent Developments." Subsequent to year-end, in June 1998, the Company granted
warrants to purchase 130,243 shares of stock to Robert Gonnelli in return for
services to the Company. Also subsequent to year-end, the warrants issued in the
June and July 1997 private placement were exercised, in exchange for which the
Company issued 147,850 new warrants. Sales of substantial numbers of common
stock in the public market, or the availability of such shares for sale, could
adversely affect the market price for the common stock and make it more
difficult for the Company to raise funds through equity offerings in the future.
Possible Adverse Effects on Trading Market. The Common Stock is quoted on the
NASDAQ National Market. There are a number of continuing requirements that must
be met in order for the Common Stock to remain eligible for quotation on the
NASDAQ National Market or the NASDAQ SmallCap Market. In August 1997, NASDAQ
approved changes to its quantitative and qualitative standards for issuers
listing on NASDAQ. Among the changes are the elimination of the alternative test
for issuers failing to meet the minimum bid price of $1.00 and an increase in
the quantitative standards for both the NASDAQ National Market and the NASDAQ
SmallCap Market. The failure to meet the maintenance criteria in the future
could result in the delisting of the Company's Common Stock from NASDAQ. In such
event, trading, if any, in the Common Stock may then continue to be conducted in
the non- NASDAQ over-the-counter market. As a result, an investor may find it
more difficult to dispose of or to obtain accurate quotations as to the market
value of the Company's Common Stock. In addition, if the Common Stock were
delisted from trading on NASDAQ and the trading price of the Common Stock were
less than $5.00 per share, trading in the Common Stock would also be subject to
the requirements of certain rules promulgated under the Exchange Act, which
require additional disclosure by broker-dealers in connection with any trades
involving a stock defined as a penny stock. The additional burdens imposed upon
broker-dealers may discourage broker-dealers from effecting transactions in
penny stocks, which could reduce the liquidity of the shares of Common Stock and
thereby have a material adverse effect on the trading market for the securities.
Possible Volatility of Stock Price. The market for the Company's Common Stock
and for the securities of other early-stage, small market-capitalization
companies has been highly volatile in recent years. The Company believes that
factors such as quarter-to-quarter fluctuations in financial results, new
product introductions by the Company or its competition, public announcements,
changing regulatory environments, sales of Common Stock by certain existing
shareholders and substantial product orders could contribute to the volatility
of the price of the Company's Common Stock, causing it to fluctuate
dramatically. General economic trends such as recessionary cycles and changing
interest rates may also adversely affect the market price of the Company's
Common Stock.
Item 2. PROPERTIES
The Company's principal offices are located in Portland, Oregon in approximately
23,000 square feet of leased office and manufacturing space under a lease which
expires in September 2002. The monthly minimum lease obligation for this
facility is approximately $15,000. These facilities include the Company's sales
and administration offices and equipment, research and engineering facilities, a
clean room assembly area, assembly line, testing facilities and a warehouse
area.
The Company leases additional warehouse space totaling approximately 5,000
square feet for finished goods storage and shipments to customers. This lease,
which also expires in September 2002, has minimum monthly lease obligations
totaling $2,000.
The Company believes its current facilities will be sufficient to support its
operations for the next 2-3 fiscal years. As the Company requires additional
space to accommodate growth in its sales and manufacturing activities, it is the
Company's intention to lease additional facilities adjacent to or near its
present operations. The Company believes that, if necessary, it will be able to
obtain facilities at rates and under terms comparable to those of the current
leases.
Item 3. LEGAL PROCEEDINGS
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Special Meeting of Stockholders of Bioject Medical Technologies, Inc. was
convened at 1:00 p.m., on February 20, 1998, at the Company's headquarters, 7620
S.W. Bridgeport Road, Portland, Oregon.
There were 25,368,342 shares of Common Stock issued and outstanding on the
record date, December 23, 1997.
Of the total shares outstanding on the record date, there were 16,325,537 shares
present at the meeting in person or by proxy, which is 64.35% of the Common
Stock entitled to vote, thereby constituting a quorum.
All of the proposals as set forth in the proxy statement for the Special Meeting
were approved. The voting recorded is as follows:
Proposal #1: The proposal to approve the exchange of a promissory note in
the original principal amount of $12.015 million issued by the
Company to Elan for approximately 832,000 shares of the
Company's Series A and Series B Convertible Preferred Stock
received the following votes:
FOR AGAINST ABSTAIN
---------- ------- -------
15,964,575 214,940 146,022
Proposal #2: The proposal to approve the issuance of the Company's Series
C Convertible Preferred Stock or other similar convertible
preferred stock to Elan in connection with future funding of
blood glucose monitoring research and development received the
following votes:
FOR AGAINST ABSTAIN
---------- ------- -------
15,961,959 216,291 147,287
Proposal #3: The proposal to approve the issuance to Raphael, LLC, of a
warrant to purchase 100,000 shares of the Company's Common Stock
received the following votes:
FOR AGAINST ABSTAIN
---------- ------- -------
15,696,136 452,669 176,732
As a result of the passage of Proposal #1, the exchange of debt for Series A and
Series B convertible preferred stock was completed effective March 2, 1998.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded on the NASDAQ National Market under the
Symbol "BJCT." The following table sets forth the high and low closing sale
prices of the Company's Common Stock on the NASDAQ National Market.
High Low
----- -----
Fiscal year Ended March 31, 1996:
First Quarter 3.00 1.44
Second Quarter 2.97 1.19
Third Quarter 2.81 1.81
Fourth Quarter 1.94 1.25
Fiscal Year Ended March 31, 1997:
First Quarter 1.41 1.28
Second Quarter 1.03 0.97
Third Quarter 0.78 0.75
Fourth Quarter 0.78 0.63
Fiscal Year Ended March 31, 1998:
First Quarter .94 .47
Second Quarter 1.03 .59
Third Quarter 1.57 1.19
Fourth Quarter 1.50 1.09
The closing sale price on May 29, 1998, as reported on the NASDAQ National
Market, was $1.688 per share.
The Company has declared no dividends during its history and has no intention of
declaring a dividend in the foreseeable future. As of May 29, 1998 the number of
shareholders of record of the Company's Common Stock was 1,386.
In October 1997, in connection with a joint development agreement entered into
with Elan, the Company issued a promissory note to Elan with a principal amount
of $12.015 million. Upon receiving shareholder approval to convert the note into
the Company's preferred stock, on March 2, 1998, a total of 692,694 shares of
Series A Convertible Preferred Stock and 134,333 shares of Series B Convertible
Preferred Stock were issued to Elan (the "Elan Issuance").
On March 23, 1998, the Company acquired the assets of Vitajet Corporation in a
stock-for assets exchange (the "Vitajet Issuance"). The Company issued 100,000
shares of its common stock in exchange for certain molds, tooling, patent rights
and customer lists, the value of which totaled approximately $134,000 at the
date of acquisition. The Company is obligated to issue an additional 60,000
shares in each of the next three years if certain development milestones are
met. Up to an additional 90,000 shares are also payable subject to the Company
realizing specified, aggregate levels of incremental revenue over the next three
years.
In April 1998, warrants issued in June 1997 were exercised in exchange for the
Company's commitment to issue additional warrants to purchase 147,850 shares of
the Company's Common Stock (the "Series N Warrants"). The Series N Warrants have
an exercise price of $1.348 per share and expire on March 31, 2003. The Company
relied upon Rule 506 of Regulation D of the Securities Act for the issuance of
the Series N Warrants. The Company relied upon representations and warranties of
the warrantholders in addition to its own information.
The Elan Issuance and Vitajet Issuance were completed pursuant to an exemption
from registration under Section 4(2) of the Securities Act. In relying upon such
exemption (i) the Company did not engage in any "general solicitation," (ii) the
purchasers represented and the Company reasonably believed that the purchasers
had knowledge and experience in financial and business matters such that they
were capable of evaluating the merits and risks of the prospective investment,
(iii) the purchasers were provided access to all necessary and adequate
information to enable the purchasers to evaluate the financial risk inherent in
making an investment, (iv) the offers were part of an agreement to establish a
joint venture in Elan's case and part of an acquisition agreement in Vitajet's
case and as such was made only to Elan and Vitajet, respectively, and (v) the
purchasers represented that they were acquiring the shares for themselves and
not for distribution.
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
FINANCIAL DATA
The statement of operations and balance sheet data set forth below for the five
fiscal years in the period ended March 31, 1998 have been derived from the
consolidated financial statements of the Company. The selected consolidated
financial data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
with the detailed consolidated financial statements and notes thereto included
elsewhere in this Report.
SUMMARY FINANCIAL INFORMATION
(in thousands, except per share data)
YEAR ENDED MARCH 31,
1998* 1997 1996 1995 1994
------ ------ ------ ------ ------
Statement of Operations Data:
Revenues $ 1,935 $ 2,235 $ 4,209 $ 2,924 $ 1,463
Operating expenses 21,157 6,637 9,851 9,008 6,110
Net loss (16,630)* (4,296) (5,431) (5,656) (4,395)
Net loss per share (0.72) (0.26) (0.39) (0.43) (0.39)
Shares used in per
share calculation 23,151 16,705 14,074 13,167 11,230
AS OF MARCH 31,
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
Balance Sheet Data:
Working capital $ 3,019 $ 2,858 $ 4,327 $ 6,404 $12,593
Total assets 6,978 7,088 7,519 9,498 13,836
Long-term debt -- -- -- -- --
Shareholders' equity 5,975 5,766 6,027 7,964 13,377
*In fiscal 1998, the Company acquired certain blood glucose monitoring
technology from Elan for an up-front licensing fee of $15 million which was
required to be expensed in the year paid. As a result, the 1998 net loss
includes a $12 million, net of minority interest, one-time charge for acquired
in-process research and development.
The Company has declared no dividends during its history and has no intention of
declaring a dividend in the foreseeable future.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Operating losses have resulted in an accumulated deficit of approximately $50.9
million as of March 31, 1998. In fiscal 1996, the Company incurred significantly
increased costs associated with the production and sale of the Biojector 2000
system, including sales and marketing efforts, manufacturing ramp-up and
inventory build-up. In September 1997, the Company acquired rights to certain
continuous blood glucose monitoring technology from Elan Corporation for an
initial payment of $15 million and future milestone payments totaling $15.5
million and royalties on future product sales. In fiscal 1998, the $15 million
up front payment was expensed as acquired in-process research and development.
In March 1998, the Company acquired the rights to the Vitajet self-injector,
along with certain other assets, in a stock-for-assets transaction with Vitajet
Corporation. The Company's ability to achieve and sustain profitability will
depend in part upon customer acceptance of the Biojector 2000 system and the
continuous blood glucose monitoring system, sustained product performance,
implementing additional product cost reductions, successful commercial
development of the blood glucose monitoring system, and attaining revenues
sufficient to support profitable operations.
In August 1994, Bioject signed an agreement with Health Management, Inc. (HMI),
granting HMI exclusive rights to purchase Bioject's Needle-Free Injection
Management System (R), the Biojector 2000, for use in the home healthcare
market. In return for HMI's commitment to purchase a minimum of 8,000 Biojector
units over the ensuing two years, the Company granted volume pricing discounts
to HMI. During the term of the contract, the selling price of Biojectors to HMI
exceeded their standard cost. During fiscal 1996, the Company sold approximately
4,300 Biojectors to HMI for total sales revenue including syringes of $2.2
million. HMI did not place the great majority of these Biojectors with patients,
pending completion of negotiations with pharmaceutical companies for certain
pricing concessions for medication to be administered with the Biojectors. In
January 1996 HMI requested that Bioject suspend shipments to HMI. In February
1996, the Company learned from HMI's press releases that HMI expected to default
on its debts, anticipated taking significant write-offs relating to accounts
receivable and inventories, planned operational consolidations, and would
restate certain prior period financial statements. In fiscal 1997, although not
obligated to do so, the Company agreed to repurchase certain of the HMI
inventories, including up to 6,000 Biojector units, for cash and forgiveness of
accounts receivable totaling $660,000. The repurchase of these inventories was
at a substantial discount to the original selling price to HMI.
In March 1994, the Company entered into an agreement with Schering AG, Germany,
for the development of a self-injection device (the "Self-Injector") for
delivery of Betaseron (R) to multiple sclerosis patients. During fiscal 1996,
the Company delivered the preproduction clinical prototypes to Schering and
worked on finalizing the production prototype design. During fiscal 1997, the
Company entered into a supply agreement with Schering AG and commenced
activities related to full production of the self-injector. Schering loaned the
Company a total of $1.6 million to purchase molds and tooling to produce the
product.
In January 1997, the Company received notice that its contract with Schering AG
would be cancelled. Under provisions of the contract, Schering AG had the option
of canceling the agreement if the FDA required extensive clinical studies beyond
an originally planned safety study. Schering AG received a review letter from
the FDA which would have required Schering to conduct additional, material
clinical studies in order to use non-traditional delivery mechanisms with its
Betaseron (R) product. Under terms of the contract, Schering was required to
convert its $1.6 million note due from Bioject plus accrued interest into
approximately 487,000 shares of Bioject common stock at a conversion price of
$3.50 per share. In addition, Schering was obligated to pay Bioject for the cost
of product ordered through the date of cancellation of the contract, which
payment was made in June 1997.
In January 1995, the Company signed a joint development agreement with
Hoffmann-La Roche to develop proprietary drug delivery systems for Roche
products. The agreement provides for Bioject to develop, manufacture and sell
Biojector jet injection drug delivery systems designed to Roche specifications.
In return, Bioject has granted Roche exclusive worldwide rights to distribute
these systems and their components for use with certain Roche products.
Hoffmann-La Roche Inc. is the United States affiliate of the multinational group
of companies headed by Roche Holding of Basel, Switzerland, one of the world's
leading research-intensive healthcare companies. As of the 1995 fiscal year end,
the Company had commenced design of a prototype device and had agreed with Roche
on product specifications. During fiscal 1996, the Company developed and
delivered to Roche preproduction prototypes for testing and developed the
clinical preproduction prototypes which were delivered to Roche in April 1996.
As of March 31, 1998, the Company and Hoffmann-LaRoche were finalizing their
submission to obtain regulatory clearance to market the product. Hoffmann-
LaRoche is also gathering marketing information which the Company anticipates
will lead to the signing of a supply agreement between the Company and
Hoffman-LaRoche.
In September 1997, the Company and Elan Corporation signed a licensing and joint
development agreement for the development and commercialization by the Company
of certain continuous blood glucose monitoring technology licensed from Elan.
Under terms of the agreement, the Company borrowed $12.015 million from Elan
(subsequently converted to Series A and B convertible preferred stock) and Elan
invested $2.985 million in a new subsidiary of the Company created for the
purpose of developing the technology. The Company's new subsidiary, owned 80.1%
by the Company and 19.9% by Elan, paid Elan $15 million for rights to the
technology and has committed to pay an additional $15.5 million to Elan as
future milestones are achieved as well as royalties on future sales of the
product. The new subsidiary will develop the blood glucose monitoring technology
and will seek regulatory clearance for the sale of such product. Such regulatory
clearance is expected in the next 3-4 years with estimated development costs for
the monitoring technology, exclusive of milestone payments, estimated to total
at least $10 million. As part of the agreement, in October 1997, Elan acquired
2.7 million shares of common stock and 1.75 million warrants to purchase the
Company's common stock at $2.50 per share for $3 million. In addition, Elan
agreed to partially fund development of the blood glucose monitoring technology
up to a total of $4 million through the purchase of the Company's Series C
convertible preferred stock and through direct purchase of additional stock in
JV Sub to a maximum of $1 million. Elan also agreed to fund development of the
Company's pre-filled jet injection technology through a grant of up to $500,000.
In March 1998, in a transaction with Vitajet Corporation, the Company paid
100,000 shares of its common stock for certain molds, tooling, patent rights and
customer lists, the value of which totaled $134,400 at the date of acquisition.
In addition to shares already paid, the Company is obligated to issue 60,000
shares of its common stock each year in each of the three years subsequent to
the acquisition if certain development milestones are met. Up to an additional
90,000 shares are also payable subject to the Company realizing specified,
aggregate levels of incremental revenue during the three years subsequent to the
Vitajet acquisition as a result of sales of products acquired from or developed
by Vitajet.
Subsequent to year end, in July 1998, the Company entered into an agreement with
Merck, a worldwide leader in the development manufacture and sale of a broad
range of human and animal health products and services. The agreement provides
Merck the rights to use the Biojector 2000 jet injection system with selected
Merck vaccines. See "Research and Development - Needle-free Injection Business"
and "Risk Factors - Uncertainty of New Product Development." The Company
believes that this agreement is the first step in establishing a long-term
relationship between the two companies whereby Merck will use the Company's
needle-free technology in connection with certain of its vaccines. See "Forward
Looking Statements."
Also subsequent to year end, in July 1998, the Company entered into a
collaborative research agreement with GeneMedicine, a developer of gene
medicines and genetic vaccine technologies for treatment or prevention of a wide
range of diseases. The agreement involves the continued refinement of the
Biojector 2000 jet injection system coupled with GeneMedicine's unique
gene-based delivery platforms to create a combined product that will enhance the
delivery and activity of plasmid-based genetic vaccines. The agreement
contemplates that combined products developed as a result of the research
collaboration will be marketed to third party corporate partners for
commercialization and sale rather than being commercialized or sold by either
Bioject or GeneMedicine See "Forward Looking Statements", "Research and
Development - Needle-free Injection Business" and "Risk Factors - Uncertainty of
New Product Development."
During fiscal 1996, the Company implemented a plan to increase manufacturing
capacity and refine production methods to meet anticipated future demand and to
reduce product costs. For the Biojector 2000, cost reduction efforts included
converting from a two piece to a one piece housing, converting to continuous
process manufacturing and implementing volume purchasing programs from
suppliers. For the Biojector syringes, these efforts included increasing
supplier mold capacity and automating final assembly and packaging. During
fiscal 1997, the Company's manufacturing activities focused on retesting the
devices repurchased from HMI to ensure their continuing compliance with new
product standards and elective upgrade of certain of these units to current
version configuration. Also during fiscal 1997 manufacturing focused on
finalizing product engineering and on planning for, designing and installing
manufacturing lines for the new self injector device in advance of the launch of
that product. During fiscal 1998, having a sufficient inventory of jet injectors
on-hand as a result of the repurchase of product from HMI, the Company focused
its manufacturing efforts on refining manufacturing processes and efficiencies
of the disposable syringe manufacturing line.
The Company's revenues to date have not been sufficient to cover operating
expenses. However, the Company believes that if its products achieve market
acceptance and the volume of sales increases, and its product costs are reduced,
its costs of goods as a percentage of sales will decrease and eventually the
Company will generate net income. See "Forward Looking Statements" and "Business
- - Risk Factors." The level of sales required to generate net income will be
affected by a number of factors including the pricing of the Company's products,
its ability to attain efficiencies that can be attained through volume and
automated manufacturing, and the impact of inflation on the Company's
manufacturing and other operating costs. There can be no assurance that the
Company will be able to successfully implement its manufacturing cost reduction
program or sell its products at prices or in volumes sufficient to achieve
profitability or offset increases in its costs should they occur.
Revenues and results of operations have fluctuated and can be expected to
continue to fluctuate significantly from quarter to quarter and from year to
year. Various factors may affect quarterly and yearly operating results
including (i) length of time to close product sales, (ii) customer budget
cycles, (iii) implementation of cost reduction measures, (iv) uncertainties and
changes in purchasing due to third party payor policies and proposals relating
to national healthcare reform, (v) timing and amount of payments under
technology development agreements, (vi) timing and cost of development of the
continuous blood glucose monitoring technology, and (vii) timing of new product
introductions by the Company and its competition.
In the future, the Company may incur a non-cash charge to compensation expense
in connection with the issuance of 100,000 shares of Common Stock to the
Company's Chief Executive Officer and 15,000 shares of common stock to the
Company's Chief Financial Officer. Under terms of their employment agreements,
each will receive the shares of common stock when the Company first achieves two
consecutive quarters of positive earnings per share. Upon issuance of such
shares the Company will record a non-cash charge to compensation at the fair
market value of the stock on the last day of the quarter in which the shares are
earned.
During the next fiscal year, the Company will continue to focus its efforts on
expanding sales of existing products, commencing manufacture and sale of the
Vitajet, commencing manufacture and sale of the B4000 Self-Injector if
regulatory clearance is obtained, reducing the cost of its products, continuing
development and cooperation in pursuing regulatory clearance of a 1.5 ml.
injector for Hoffmann-La Roche, developing the blood glucose monitoring
technology, pursuing product licensing and development opportunities under the
Merck and GeneMedicine agreements, pursuing additional alliances with
pharmaceutical companies and conserving its fiscal resources. The Company does
not expect to report net income from operations in fiscal 1999. See "Forward
Looking Statements" and "Risk Factors."
RESULTS OF OPERATIONS
Product sales decreased from to $3.1 million in fiscal 1996 to $1.3 in fiscal
1997 and increased to $1.4 million in fiscal 1998. Sales in fiscal 1996
consisted of $2.3 million of sales to HMI with the remainder primarily to public
health and flu immunization clinics. Sales in fiscal 1997 and 1998, consisted
primarily of sales to public health and flu immunization clinics.
License and technology fees ranged from $1.2 million in fiscal 1996, to $966,000
in fiscal 1997 and $500,000 in fiscal 1998. The fiscal 1996 and 1997 fees
consisted principally of product development revenues recognized for work
performed under the Schering and Hoffmann-La Roche agreements. The fiscal 1998
fees consisted of revenues for work on the Hoffmann-La Roche project.
Manufacturing expense consists of the costs of product sold and manufacturing
overhead expense related to excess manufacturing capacity. The total of these
costs varied from $4.8 million in fiscal 1996, to $1.9 million in fiscal 1997
and $1.7 million in fiscal 1998 due in part to changes in sales and, therefore,
to changes in the total costs of product sold. The decrease in expense from
fiscal 1996 to 1997 and from fiscal 1997 to fiscal 1998 reflects reductions in
the cost of materials and labor for injectors and syringes as well as reductions
in fixed and variable manufacturing overhead expense. Manufacturing overhead
totaled $1.67 million, $1.17 million and $981,000 in fiscal 1996, 1997 and 1998,
respectively.
Research and development expense decreased from $1.9 million in fiscal 1996 to
$1.6 million in fiscal 1997 and to $884,000 in fiscal 1998 (exclusive of
acquired in-process research and development). Fiscal 1996 expenditures related
entirely to work performed under the Schering and Hoffmann-La Roche agreements.
Fiscal 1997 expenditures related to final design and transfer to manufacturing
of the Schering device and additional development work on the Hoffmann-LaRoche
system. Fiscal 1998 expenditures related to further development of the B4000
Self Injector and to pursuing regulatory clearance for the vial adapter product.
See "Risk Factors - Governmental Regulation."
Selling, general and administrative expense totaled, $3.2 million in fiscal 1996
and 1997, and $3.5 million in fiscal 1998. During fiscal 1996 through 1998,
sales and marketing expense remained constant at $1.6 million per year. General
and administrative expense totaled $1.6 million in fiscal 1996 and 1997 and
increased to $1.9 million in fiscal 1998 primarily due to consulting fees and
certain travel expenditures.
As of September 30, 1997, the Company recorded an expense of $15 million related
to acquired in-process research and development expenditures. Such expense
relates to the blood glucose monitoring technology that has not yet established
technological feasibility and at present has no alternate future uses.
Accounting rules require that such costs be charged to expense as incurred. The
Company believes that these research and development efforts will result in
commercially viable products within the next three to four years at an
additional cost to the Company of at least $10 million, exclusive of additional
milestone payments totaling $15.5 million to Elan.
Interest expense in fiscal 1998 relates to the $12.015 million debt due to Elan
for the period from October 15, 1997 through March 2, 1998 when the note and
accrued interest was converted to Series A and Series B convertible preferred
stock.
Other income consists of earnings on available cash balances. Other income
varied as a result of changes in cash balances and interest rates from year to
year.
The reduction in net loss in fiscal 1998 resulting from minority interest
allocations reflects the portion of the joint venture subsidiary loss allocable
to Elan Corporation as a result of its 19.9% ownership in the subsidiary.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception in 1985, the Company has financed its operations, working
capital needs and capital expenditures primarily from private placements of
securities, exercises of stock options, proceeds received from its initial
public offering in 1986, proceeds received from a public offering of Common
Stock in November 1993, licensing and technology revenues and more recently from
sales of products. Net proceeds received upon issuance of securities from
inception through March 31, 1998 totaled approximately $56.9 million.
The Company has no long-term debt.
Cash, cash equivalents and marketable securities totaled $2.1 million at March
31, 1997 and $1.9 million at March 31, 1998. The decrease resulted from
operating losses and capital expenditures offset in part by net proceeds from a
private placement of common stock and warrants in June and July 1997 and October
1997 and the issuance of Series A and B convertible preferred stock in March
1998.
Inventories increased from $1.7 million at March 31, 1997 to $1.9 million at
March 31, 1998 due to the build-up of syringe inventories to support anticipated
future product sales.
The Company has fixed commitments for facilities rent and equipment leases which
total approximately $250,000 for fiscal 1999.
The Company expended approximately $1.6 million for capital equipment in fiscal
1997. Substantially all of these expenditures related to preparation of
manufacturing for the Schering product launch. These assets continue to be
carried at their cost on the Company's balance sheet because the product is
suitable for other home injection applications which the Company is pursuing.
The Company expended approximately $380,000 on capital equipment additions in
fiscal 1998 approximately $270,000 of which related to Biojector 2000 units
transferred from inventories to property and equipment to support the Company's
flu season device rental program.
The Company has assessed the impact of the Year 2000 issue and has determined
that costs to upgrade its information and operating systems are not expected to
be material.
The Company believes that its current cash position, together with cash totaling
approximately $2.4 million, received from the exercise of warrants and stock
options in April through July 1998, combined with revenues, other cash receipts,
proceeds from issuance of the Company's Series C preferred stock and proceeds
from the purchase by Elan of additional stock in JV Sub will be sufficient to
fund the Company's operations through the end of fiscal 1999. In addition, the
Company has identified a number of potential financing sources and is pursuing
them aggressively. See "Forward Looking Statements." Even if the Company is
successful in raising additional financing, unforeseen costs and expenses or
lower than anticipated cash receipts from product sales or research and
development activities could accelerate or increase the financing requirements.
The Company has been successful in raising additional financing in the past and
believes that sufficient funds will be available to fund future operations. See
"Forward Looking Statements." However, there can be no assurance that the
Company's efforts will be successful, and there can be no assurance that such
financing will be available on terms which are not significantly dilutive to
existing shareholders. Failure to obtain needed additional capital on terms
acceptable to the Company, or at all, would significantly restrict the Company's
operations and ability to continue product development and growth and materially
adversely affect the Company's business. The Company has no banking line of
credit or other established source of borrowing.
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS TO FINANCIAL STATEMENTS
Report of Independent Public Accountants
Consolidated Balance Sheets at March 31, 1998 and 1997
Consolidated Statements of Operations for the years ended
March 31, 1998, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the years
ended March 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended
March 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
Supplementary Data (none required)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Bioject Medical Technologies Inc:
We have audited the accompanying consolidated balance sheets of Bioject Medical
Technologies Inc. (an Oregon corporation) and subsidiaries as of March 31, 1998
and 1997, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended March 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bioject Medical Technologies
Inc. and subsidiaries, as of March 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1998, in conformity with generally accepted accounting principles.
/S/ ARTHUR ANDERSEN LLP
Portland, Oregon
April 30, 1998 (except with respect to the matter discussed in Note 8 for which
the date is July 20, 1998)
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31,
1998 1997
------------ ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,900,839 $ 2,116,478
Accounts receivable, net of allowance for
doubtful accounts of $83,000 and $27,500,
respectively 153,721 311,856
Inventories 1,891,970 1,706,456
Other current assets 75,292 45,222
------------ -----------
Total current assets 4,021,822 4,180,012
------------ -----------
PROPERTY AND EQUIPMENT, at cost:
Machinery and equipment 2,241,904 1,923,174
Production molds 1,945,267 1,878,858
Furniture and fixtures 158,477 176,897
Leasehold improvements 94,115 80,447
------------ -----------
4,439,763 4,059,376
Less - accumulated depreciation (1,947,006) (1,462,338)
------------ -----------
2,492,757 2,597,038
OTHER ASSETS 463,031 310,981
------------ ----------
$6,977,610 $ 7,088,031
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 497,180 $ 659,973
Accrued payroll 218,424 213,130
Other accrued liabilities 277,122 199,384
Deferred revenue 10,000 250,000
------------ -----------
Total current liabilities 1,002,726 1,322,487
------------ -----------
COMMITMENTS (Note 6)
SHAREHOLDERS' EQUITY:
Preferred stock, 10,000,000 shares
authorized; issued and outstanding
Series A Convertible-692,694 shares,
$15 stated value 7,826,157 -
Series B Convertible -134,333 shares,
$15 stated value 1,491,289 -
Common stock, no par, 100,000,000 shares
authorized; issued and outstanding 25,503,038
and 19,540,413 shares at March 31, 1998 and
1997, respectively 47,557,297 40,035,736
Accumulated deficit (50,899,859) (34,270,192)
------------ -----------
Total shareholders' equity 5,974,884 5,765,544
------------ -----------
$6,977,610 7,088,031
============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended March 31,
1998 1997 1996
----------- ---------- ----------
REVENUES:
Net sales of products $1,435,107 $1,269,882 $3,059,018
Licensing/technology fees 500,000 965,500 1,150,000
----------- ---------- ----------
1,935,107 2,235,382 4,209,018
----------- ---------- ----------
OPERATING EXPENSES:
Manufacturing 1,749,064 1,862,922 4,797,218
Research and development 883,632 1,596,708 1,885,303
Selling, general and administrative 3,524,615 3,177,228 3,168,618
Acquired in-process research &
development 15,000,000 - -
---------- ---------- ----------
Total operating expenses 21,157,311 6,636,858 9,851,139
---------- ---------- ----------
Operating loss (19,222,204) (4,401,476) (5,642,121)
Interest expense (390,411) - -
Other income 109,983 105,149 211,049
----------- ----------- ----------
LOSS BEFORE TAXES (19,502,632) (4,296,327) (5,431,072)
PROVISION FOR INCOME TAXES - - -
----------- ----------- -----------
NET LOSS BEFORE MINORITY INTEREST (19,502,632) (4,296,327) (5,431,072)
MINORITY INTEREST ALLOCATION 2,985,000 - -
------------ ----------- ----------
NET LOSS (16,517,632) (4,296,327) (5,431,072)
PREFERRED STOCK DIVIDEND 112,035 - -
----------- ----------- -----------
NET LOSS ALLOCABLE
TO COMMON SHAREHOLDERS $(16,629,667) $(4,296,327) $(5,431,072)
=========== =========== ============
BASIC AND DILUTED NET LOSS PER
COMMON SHARE $ (0.72) $ (0.26) $ (0.39)
============ =========== ===========
SHARES USED IN PER SHARE CALCULATION 23,151,135 16,705,274 14,074,349
============ =========== ===========
The accompanying notes are an integral part
of these consolidated financial statements
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
PREFERRED STOCK COMMON STOCK
---------------- ------------------- Accumulated
Series A Series B Shares Amount Deficit Total
-------- ---------- ------- -------- --------- --------
Shares Amount Shares Amount
------ ------- ------ ------ ------- -------- -------- --------
BALANCES, MARCH 31, 1995 - $ - - $ - 13,259,074 $32,507,095 $(24,542,793) $7,964,302
Issuance of common stock in
exchange for services - - - - 23,149 39,962 - 39,962
Issuance of common stock and
warrants in a private placement
in November and December 1995 - - - - 2,303,009 3,454,101 - 3,454,101
Net loss applicable
to common shareholders - - - - - - (5,431,072) (5,431,072)
------- ------- ------ ------ ----------- ----------- ---------- ----------
BALANCES, MARCH 31, 1996 - - - - 15,585,232 36,001,158 (29,973,865) 6,027,293
Issuance of common stock in
exchange for services - - - - 33,298 159,350 - 159,350
Issuance of common stock
and warrants in a private
placement in December 1996 - - - - 3,434,493 2,163,000 - 2,163,000
Issuance of stock to Schering AG
in exchange for debt - - - - 487,390 1,712,228 - 1,712,228
Net loss applicable to
common shareholders - - - - - - (4,296,327) (4,296,327)
------- ------- ------ ------- ----------- ---------- ----------- -----------
BALANCES, MARCH 31, 1997 - - - - 19,540,413 40,035,736 (34,270,192) 5,765,544
Issuance of common stock in
exchange for services - - - - 49,646 94,936 - 94,936
Issuance of common stock
and warrants in a private
placement in June and
July 1997 - - - - 2,906,977 1,225,000 - 1,225,000
Issuance of common stock
and warrants in a private
placement in October 1997 - - - - 2,727,273 2,800,000 - 2,800,000
Issuance of common stock pursuant
to stock option exercises - - - - 136,098 154,869 - 154,869
Issuance of common stock under
401(k) matching plan - - - - 42,631 31,006 - 31,006
Issuance of warrants in
exchange for services - - - - - 81,350 - 81,350
Issuance of common stock
in acquisition of assets - - - - 100,000 134,400 - 134,400
Issuance of preferred stock
in exchange for debt, net
of expenses 692,694 10,220,411 134,333 1,985,000 - - - 12,205,411
Adjustment for inherent
dividend - (2,500,000) - (500,000) - 3,000,000 - -
Preferred stock dividend - 105,746 - 6,289 - - - 112,035
Net loss applicable to
common shareholders - - - - - - (16,629,667)(16,629,667)
--------- ---------- --------- ---------- ----------- --------- ------------ -----------
BALANCES, MARCH 31, 1998 692,694 $7,826,157 134,333 $1,491,289 25,503,038 $47,557,297 $(50,899,859) $5,974,884
========= ========== ========= ========= ========== ========== ============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended March 31,
1998 1997 1996
------------ ----------- -----------
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss applicable to
common shareholders $(16,629,667) $(4,296,327) $(5,431,072)
Adjustments to net loss:
Depreciation and amortization 514,668 443,700 520,714
Contributed capital for services 207,292 159,350 39,962
Acquired in-process R&D, net of
minority interest 12,015,000 - -
Preferred stock dividends 112,035 - -
Interest paid in preferred stock 390,411 - -
Net changes in assets
and liabilities:
Accounts receivable 158,135 113,003 305,864
Inventories (455,514) (450,511) (147,237)
Other current assets (30,070) 492 6,435
Accounts payable (162,793) 109,799 (257,704)
Accrued payroll 5,294 54,905 (92,512)
Other accrued liabilities 77,738 (17,540) (102,080)
Deferred revenue (240,000) (316,000) 410,000
--------- ---------- -----------
Net Cash Used in Operating Activities (4,037,471) (4,199,129) (4,747,630)
----------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Securities purchased - - (1,977,856)
Securities sold - 993,056 4,974,268
Property and equipment (110,387) (1,617,052) (597,100)
Other assets (47,650) (33,876) (64,916)
Acquisition of blood glucose
monitoring technology (15,000,000) - -
------------ ----------- -----------
Net Cash Provided By (Used In)
Investing Activities (15,158,037) (657,872) 2,334,396
---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from common stock 4,179,869 2,163,000 3,454,101
Borrowing from long-term debt
subsequently converted to common stock - 1,712,228 -
Issuance of preferred stock 12,015,000
Minority interest capital
contribution to subsidiary 2,985,000
Preferred stock issuance costs (200,000) - -
----------- ---------- -----------
Net Cash Provided by Financing
Activities 18,979,869 3,875,228 3,454,101
--------- ---------- -----------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) in cash
and cash equivalents (215,639) (981,773) 1,040,867
Cash and cash equivalents at
beginning of year 2,116,478 3,098,251 2,057,384
--------- ---------- -----------
Cash and cash equivalents at
end of year $1,900,839 $2,116,478 $3,098,251
========== ========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ - $ - $ -
Cash paid for income taxes - - -
Purchase of goodwill for stock 134,400 - -
------- -------- -------
$134,400 $ - $ -
======== ========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY:
The consolidated financial statements of Bioject Medical Technologies Inc. (the
"Company" or "Bioject"), include the accounts of Bioject Medical Technologies
Inc. ("BMT"), an Oregon Corporation, and its wholly owned subsidiary, Bioject
Inc., an Oregon Corporation ("BI"), and its 80.1% owned subsidiary, Bioject JV
Subsidiary Inc. ("JV"), an Oregon corporation. All significant intercompany
transactions have been eliminated. Although Bioject Inc. commenced operations in
1985, the Company was formed in December 1992 for the purpose of acquiring all
of the capital stock of Bioject Medical Systems Ltd., a Company organized under
the laws of British Columbia, Canada, in a stock-for-stock exchange in order to
establish a U.S. domestic corporation as the publicly traded parent company of
Bioject Inc. and Bioject Medical Systems Ltd. Bioject Medical Systems Ltd. was
terminated in fiscal 1997. Bioject JV Subsidiary Inc. was formed in October 1997
in connection with a joint venture arrangement with Elan Corporation, plc
("Elan"). All references to the Company include Bioject Medical Technologies
Inc. and its subsidiaries, unless the context requires otherwise.
The Company commenced operations in 1985 for the purpose of developing,
manufacturing and distributing a new drug delivery system. Since its formation,
the Company has been engaged principally in organizational, financing, research
and development, and marketing activities. In the last quarter of fiscal 1993,
the Company launched U.S. distribution of its Biojector 2000 system primarily to
the hospital and large clinic market. The Company's products and manufacturing
operations are subject to extensive government regulation, both in the U.S. and
abroad. In the U.S., the development, manufacture, marketing and promotion of
medical devices is regulated by the Food and Drug Administration ("FDA") under
the Federal Food, Drug, and Cosmetic Act ("FFDCA"). In 1987, the Company
received clearance from the FDA under Section 510(k) of the FFDCA to market a
hand-held CO2-powered jet injection system. In June 1994, the Company received
clearance from the FDA under 510(k) to market a version of its Biojector 2000
system in a configuration targeted at high volume injection applications. In
October 1996, the Company received 510(k) clearance for a non-needle disposable
vial access device. In March 1997, the Company received additional 510(k)
clearance for certain enhancements to its Biojector 2000 system. On September
30, 1997, the Company entered into a joint venture agreement with Elan for the
development and commercialization of certain blood glucose monitoring technology
which the Company licensed from Elan (see Note 2 regarding "Accounting
Policies-Research and Development and Licensing/Technology Revenues"). Such
technology is also subject to government regulation in the U.S. by the FDA and
abroad by various agencies.
Since its inception the Company has incurred operating losses and at March 31,
1998 has an accumulated deficit of approximately $51 million. The Company's
revenues to date have been derived primarily from licensing and technology fees
for the jet injection technology and more recently from sales of the Biojector
2000 system and Biojector syringes to public health clinics, flu immunization
clinics and physicians offices. Future revenues will depend upon acceptance and
use by healthcare providers of the Company's jet injection technology and
successful development, regulatory clearance and market acceptance of its blood
glucose monitoring technology. Uncertainties over government regulation and
competition in the healthcare industry may impact healthcare provider
expenditures and third party payer reimbursements and, accordingly, the Company
cannot predict what impact, if any, subsequent healthcare reforms and industry
trends might have on its business. In the future the Company is likely to
require substantial additional financing. Failure to obtain such financing on
favorable terms could adversely affect the Company's business.
The Company's revenues to date have not been sufficient to cover operating
expenses. However, the Company believes that if its products achieve market
acceptance and the volume of sales increase, and its product costs are reduced,
its cost of goods as a percentage of sales will decrease and eventually the
Company will generate net income. The level of sales required to generate net
income will be affected by a number of factors including the pricing of the
Company's products, its ability to attain efficiencies that can be attained
through volume and automated manufacturing, and the impact of inflation on the
Company's manufacturing and other operating costs. There can be no assurance
that the Company will be able to successfully implement further manufacturing
cost reductions or sell its products at prices or in volumes sufficient to
achieve profitability or offset increase in its costs should they occur.
The Company believes that its current cash position, combined with revenues,
other cash receipts, proceeds from the exercise of stock warrants and options,
proceeds from the issuance of the Company's Series C preferred stock and
proceeds from the purchase by Elan of additional stock in JV, will be sufficient
to fund the Company's operations through the end of fiscal 1999. In addition,
the Company has identified a number of potential financing sources and is
pursuing them aggressively. Even if the Company is successful in raising
additional financing, unforeseen costs and expenses or lower than anticipated
cash receipts from product sales or research and development activities could
accelerate or increase the financing requirements. The Company has been
successful in raising additional financing in the past and believes that
sufficient funds will be available to fund future operations. However, there can
be no assurance that the Company's efforts will be successful, and there can be
no assurance that such financing will be available on terms which are not
significantly dilutive to existing shareholders. Failure to obtain needed
additional capital on terms acceptable to the Company, or at all, would
significantly restrict the Company's operations and ability to continue product
development and growth and materially adversely affect the Company's business.
2. ACCOUNTING POLICIES:
CASH EQUIVALENTS
The Company considers cash equivalents to consist of short-term, highly liquid
investments with an original maturity of less than three months.
SECURITIES AVAILABLE FOR SALE
The Company accounts for its investments in marketable securities in accordance
with Financial Accounting Standards Board Statement No. 115, Accounting for
Certain Investments in Debt and Equity Securities (SFAS 115) as securities
available for sale. There were no significant realized gains or losses in fiscal
1998, 1997, and 1996.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined in a
manner which approximates the first-in, first out (FIFO) method. Costs utilized
for inventory valuation purposes include labor, materials and manufacturing
overhead. Net inventories consist of the following:
March 31,
1998 1997
---------- ----------
Raw Materials $ 754,715 $ 815,868
Work in Process 9,763 9,763
Finished Goods 1,127,492 880,825
---------- ----------
$1,891,970 $1,706,456
========== ==========
PROPERTY AND EQUIPMENT
For financial statement purposes, depreciation expense on property and equipment
is computed on the straight-line method using the following lives:
Furniture and Fixtures............................5 years
Machinery and Equipment...........................7 years
Computer Equipment................................3 years
Production Molds..................................5 years
Leasehold improvements are amortized on the straight-line method over the
shorter of the remaining term of the related lease or the estimated useful lives
of the assets.
Included in machinery and equipment and production molds are molds, tooling and
production fixtures constructed or acquired by the Company under a supply
agreement with Schering AG for the manufacture and sale of a needle-free
self-injection system. The construction of these assets commenced in May and
June 1996 and continued until January 1997 when they were ready for their
intended use. Schering loaned the Company $1.6 million to fund acquisition of
the assets, and therefore, in accordance with SFAS 34, the Company has
capitalized $106,000 of interest incurred on this debt.
OTHER ASSETS
Other assets include costs incurred for the application of patents, totaling
$503,344 and $455,694 at March 31, 1998 and 1997, respectively. These costs are
amortized on a straight-line basis over 17 years. Accumulated amortization
totaled $174,713 and $144,713 at March 31, 1998 and 1997, respectively.
Amortization expense for the years ended March 31, 1998, 1997 and 1996 totaled
$30,000, $30,000, and $20,000 respectively.
Also included in other assets is the cost of assets acquired from Vitajet
Corporation in a stock for assets exchange. In March 1998 the Company paid
100,000 shares of its common stock for certain molds, tooling, patent rights and
customer lists, the value of which totaled $134,400 at the date of acquisition
and is being amortized over 15 years. In addition to shares already paid, the
Company is obligated to issue 60,000 shares of its common stock each year in
each of the three years, subsequent to the acquisition if certain development
milestones are met. Up to an additional 90,000 shares is also payable subject to
the Company realizing specified, aggregate levels of incremental revenue during
the three years subsequent to the Vitajet acquisition as a result of sales of
products acquired from or developed by Vitajet
ACCOUNTING FOR LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets To Be Disposed Of"(SFAS 121), which requires the Company to review for
impairment of its long-lived assets and certain identifiable intangibles
whenever events or changes in circumstances indicate that the carrying amount of
an asset might not be recoverable. In certain situations, an impairment loss
would be recognized. SFAS 121 became effective for the Company's year ended
March 31, 1997. The Company continues to study the implications of SFAS 121 and,
based on its evaluation, does not believe that an adjustment to the carrying
value of its long-lived assets is necessary.
REVENUE RECOGNITION FOR PRODUCT SALES
The Company records revenue from sales of its products upon shipment. In fiscal
1998, 1997 and 1996, sales to one customer (different for each period presented)
accounted for 12%, 17% and 75%, respectively, of net sales of products. At March
31, 1998, 1997 and 1996 accounts receivable from one customer (different for
each period presented) accounted for 19%, 62%, and 67%, respectively, of total
accounts receivable.
RESEARCH AND DEVELOPMENT AND LICENSING/TECHNOLOGY REVENUES Licensing fees are
recognized as revenue when due and payable. All licensing fee arrangements have
been on a non-refundable basis and impose no future performance requirements or
other obligations on the Company. Product development revenue is deferred upon
receipt and is recognized as revenue as qualifying expenditures are incurred.
Expenditures for research and development are charged to expense as incurred.
SCHERING AG. In March 1994, the Company entered into a joint development
agreement with Schering AG, a major pharmaceutical manufacturer, for the
development of an application-specific self injection system (the
"Self-Injector"). Under terms of the agreement, the Company received a $500,000
licensing fee in April 1994 and received partial funding of product development
expenses on an agreed schedule. In fiscal 1995, the Company received a total of
$1.1 million from Schering, consisting of $500,000 in licensing fees, which were
recognized as revenue during fiscal 1995, and $600,000 of Phase I product
development revenues, $444,000 of which were recognized as revenue in fiscal
1995. In fiscal 1996, the Company received an additional $660,000 and a total of
$751,000 was recognized as revenue. In fiscal 1997, the Company received final
product development payments totaling $349,500 and recognized revenue of
$414,500. During fiscal 1997, the Company entered into a supply agreement with
Schering and commenced activities related to preparing for production of the
Self Injector. Schering loaned the Company a total of $1.6 million to purchase
molds and tooling to produce the product. In January 1997, the Company received
notice that its contract with Schering would be cancelled. Under provisions of
the contract, Schering had the option of canceling the agreement if the FDA
required extensive clinical studies beyond an originally planned safety study.
Schering received a review letter from the FDA which would have required
Schering to conduct additional material clinical studies in order to use
non-traditional delivery mechanisms with its Betaseron (R) product. Under terms
of the contract, Schering was required to convert its $1.6 million note due from
Bioject into approximately 460,000 shares of Bioject common stock at a
conversion price of $3.50 per share. In addition, $106,000 of accrued interest
was converted into approximately 27,000 shares of Bioject common stock at a
conversion price of $3.50 per share. Additionally, Schering was obligated to pay
Bioject for the cost of product ordered through the date of cancellation of the
contract.
HOFFMANN-LA ROCHE. In January 1995, the Company entered into a joint development
agreement with Hoffmann-La Roche, a major pharmaceutical manufacturer, for the
development of application-specific products. The Company received a licensing
fee totaling $500,000 which was recognized as revenue in fiscal 1995. The
Company is also receiving specified product development fees on an agreed
schedule. In fiscal 1996, the Company received $900,000, of which $399,000 was
recognized as revenue. In fiscal 1997, the Company received $250,000 in product
development fees and recognized revenue of $501,000. In fiscal 1998, the Company
received $250,000 in product development fees and recognized revenues of
$500,000.
ELAN CORPORATION. On September 30, 1997, the Company signed a binding letter
agreement (the "Agreement") with Elan Corporation, plc ("Elan") the goals of
which included the development and commercialization of Elan's blood glucose
monitoring technology and a collaborative arrangement to further develop the
Company's jet injection technology. Among various terms, all of which were
determined in arms-length negotiation, the Agreement provides for:
- - Investment by Elan of $3 million in Bioject in exchange for approximately 2.7
million shares of common stock and a five year warrant to purchase 1.75
million shares of common stock at $2.50 per share.
- - Formation of JV which is owned 80.1% by Bioject and 19.9% by Elan to further
develop and commercialize the blood glucose monitoring technology.
- - Payment of a $15 million up front fee and future milestone payments totaling
$15.5 million and royalties on net sales in exchange for North American rights
to Elan's blood glucose monitoring technology.
- - The loan of $12.015 million to Bioject on a long-term promissory note bearing
interest at 9% per annum through December 31, 1997 and 12% thereafter for the
purpose of Bioject's investment in the new subsidiary's common stock.
- - The investment by Elan of $2.985 million in JV's common stock.
- - The commitment by Elan to further develop the blood glucose monitoring
technology until the earlier of human clinical trials, March 31, 1998 or $2.5
million is expended by Elan.
- - The submission to Bioject's shareholders of a proposal to approve the exchange
of the long-term promissory note for $10 million plus accrued interest for the
Company's Series A Convertible Preferred Stock and $2.015 million for Series B
Convertible Preferred Stock, with the Series A Convertible Preferred Stock
accruing dividends at the rate of 9% per annum (compounded semi-annually) and
the Series B Convertible Preferred Stock accruing no mandatory dividends.
- - The submission to Bioject's shareholders of a proposal to approve the issuance
of up to $4 million of Bioject's Series C Convertible Preferred Stock to Elan
to provide Bioject with funds to contribute toward JV's additional development
funding needs.
- - The agreement by Elan to extend the license on a worldwide basis if the
shareholders approve the exchange of the $12.015 million promissory note for
convertible preferred stock.
- - The agreement by Elan to provide a grant of $500,000 toward development of
Bioject's jet injection technology in a pre-filled application.
Final closing agreements were signed among the Company, Elan and the Company's
new subsidiary on October 15, 1997. On that date the $3 million investment in
the Company was made by Elan and approximately 2.7 million shares of common
stock and a warrant to purchase 1.75 million shares at $2.50 per share were
issued. Elan loaned Bioject $12.015 million which Bioject transferred to the new
subsidiary in exchange for 801,000 shares of the subsidiary's common stock. Elan
invested $2.985 million in the new subsidiary in exchange for 199,000 shares of
the subsidiary's common stock. The new subsidiary paid $15 million to Elan as
its initial payment on the licensing agreement.
On February 20, 1998, the Company's shareholders approved the exchange of the
long-term promissory note plus accrued interest for Series A and Series B
Convertible Preferred Stock and the issuance to Elan of Series C Convertible
Preferred Stock or other similar convertible preferred stock to fund JV
development work. Accordingly, on March 2, 1998, a total of 692,694 shares of
Series A Convertible Preferred Stock and 134,333 shares of Series B Convertible
Preferred Stock were issued to Elan and the promissory note was cancelled.
The Company believes that the license is likely to run for most of the useful
life of the products that may be commercialized under it. The license itself is
contingent, on a country-by-country basis, on JV's diligently seeking and
obtaining regulatory marketing clearance for licensed products and on JV's
timely commercial launch of the licensed products in countries where such
clearance has been obtained. In addition, in the event that a significant
percentage of JV's equity is acquired by any one of a number of specified
companies identified by Elan as actual or potential competitors, or any other
entity to which Elan does not consent (which consent shall not be unreasonably
withheld in the case of such other, unspecified companies), the license may be
immediately terminated at the option of Elan.
As of September 30, 1997, the Company recorded an expense of $15 million related
to acquired in-process research and development expenditures. Such expense
relates to the blood glucose monitoring technology that has not yet established
technological feasibility and at present has no alternate future uses.
Accounting rules require that such costs be charged to expense as incurred. The
Company believes that these research and development efforts will result in
commercially viable products within the next three to four years at an
additional cost to the Company of at least $10 million, exclusive of additional
milestone payments totaling $15.5 million due to Elan.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, Accounting For Income Taxes (SFAS 109). Under the
liability method specified by SFAS 109, deferred tax assets and liabilities are
determined based on the temporary differences between the financial statement
and tax bases of assets and liabilities as measured by the enacted tax rates for
the years in which the taxes are expected to be paid. At March 31, 1998, the
Company had total deferred tax assets of approximately $20 million, consisting
principally of available net operating loss carryforwards. No benefit for these
operating losses has been reflected in the accompanying financial statements as
they do not satisfy the recognition criteria set forth in SFAS 109. Total
deferred tax liabilities were insignificant as of March 31, 1998.
As of March 31, 1998, BMT has net operating loss carryforwards of approximately
$668,000 available to reduce future federal taxable income, which expire in 2008
through 2013. BI has net operating loss carryforwards of approximately $38.9
million available to reduce future federal taxable income, which expire in 2001
through 2013. JV has net operating loss carryforwards of approximately $12.6
million available to reduce future federal taxable income, which expire in 2013.
Approximately $3.0 million of BI's carryforwards were generated as a result of
deductions related to exercises of stock options. When utilized, this portion of
BI's carryforwards, as tax effected, will be accounted for as a direct increase
to contributed capital rather than as a reduction of that year's provision for
income taxes. The principal differences between net operating loss carryforwards
for tax purposes and the accumulated deficit result from capitalization of
certain start-up costs and deductions related to the exercise of stock options
for income tax purposes.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' expenses to conform
to the current year's presentation.
NET LOSS PER SHARE
Beginning with Fiscal 1998, basic earnings per shares (EPS) and diluted EPS are
computed using the methods required by Statement of Financial Accounting
Standard No. 128, Earnings per Share (SFAS 128). Under SFAS 128, basic EPS is
calculated using the weighted average number of common shares outstanding for
the period. The computation of diluted earnings per share includes the effects
of stock options, warrants and convertible preferred stock, if such effect is
dilutive. Prior period amounts have been restated to conform with the
presentation requirements of SFAS 128. For the periods presented, the Company
has been in a loss position and, accordingly there is no difference between
basic EPS and diluted EPS since the common stock equivalents and the effect of
convertible preferred stock under the "if-converted" method would be
antidilutive. All earnings per share amounts in the following table are
presented to conform to the SFAS 128 requirement:
Year ended March 31,
1998 1997 1996
------------ ------------ ------------
Net loss ($16,629,667) ($ 4,296,327) ($ 5,431,072)
Weighted average number
of shares of common stock and
common stock equivalents
outstanding:
Weighted average number of
common shares outstanding
for computing basic earnings
per share 23,151,135 16,705,274 14,074,349
Dilutive effect of warrants
and stock options after
applications of the
treasury stock method * * *
------------ ------------ ------------
Weighted average number of
common shares outstanding
for computing diluted earnings
per share 23,151,135 16,705,274 14,074,349
============ ============ ============
Net loss per share -
basic and diluted ($ 0.72) ($ 0.26) ($ 0.39)
============ ============ ============
*The following common stock equivalents are excluded from earnings per share
calculations as their effect would have been antidilutive:
Year ended March 31, 1998 1997 1996
Warrants and stock options 11,578,490 7,962,146 4,139,034
Convertible preferred stock 8,270,270
---------- ---------- ---------
19,848,760 7,962,146 4,139,034
========== ========== =========
3. SEGMENT INFORMATION
The Company has adopted the segment reporting requirements of SFAS No.131,
Disclosures about Segments of an Enterprise and Related Information. At present,
the Company has two reportable segments which offer different products and are
managed separately because each business requires different technology and
marketing strategies. The following sets forth the unaudited results of
operations of the Company for its two segments of operations - jet injection
technology and blood glucose monitoring technology (in thousands):
Jet Injection Blood glucose Monitoring
Year Ended Year Ended
March 31, March 31,
---------------- ----------------
1998 1997 1998 1997
-------- -------- -------- -------
REVENUES $ 1,935 $ 2,235 $ -- $--
EXPENSES:
Manufacturing 1,749 1,863 -- --
R&D 884 1,596 -- --
Selling, general
& administrative 3,427 3,177 97 --
Acquired in-process R&D -- -- 15,000 --
-------- -------- -------- -----
6,060 6,636 15,097 --
-------- -------- -------- -----
Operating loss (4,125) (4,401) (15,097) --
Interest expense (390) -- -- --
Other income 109 105 -- --
-------- -------- -------- -----
(4,406) (15,097) --
MINORITY
INTEREST ALLOCATION -- -- 2,985 --
-------- -------- -------- -----
NET LOSS (4,406) (4,296) (12,112) --
LESS - PREFERRED STOCK
DIVIDENDS (112) -- -- --
-------- -------- -------- -----
NET LOSS ALLOCABLE TO
COMMON SHAREHOLDERS $ (4,518) $ (4,296) $(12,112) $--
======== ======== ======== ======
At March 31, 1998, no significant assets exist related to the blood glucose
monitoring technology other than the acquired in-process research and
development which, as discussed in Note 2 above, was required to be written off
at acquisition. Accordingly, the accompanying consolidated balance sheets
effectively represent the assets of the jet injection business segment. In the
future, certain proceeds from the sale of equity or issuance of debt by JV may
be restricted to JV operations only. To the extent that they meet certain
reporting requirements, the separate assets, liabilities and equity of the
parent and its subsidiary will be appropriately disclosed.
4. 401(K) RETIREMENT BENEFIT PLAN:
The Company has a 401(k) Retirement Benefit Plan for its employees. All
Employees, subject to certain age and length of service requirements, are
eligible to participate. The plan permits certain voluntary employee
contributions to be excluded from the employees' current taxable income under
provisions of the Internal Revenue Code Section 401(k) and regulations
thereunder. Effective January 1, 1996, the Company amended the plan to provide
for voluntary employer matches of employee contributions up to 6% of salary and
for discretionary profit sharing contributions to all employees. Such employer
matches and contributions may be either in cash or Company common stock. For
calendar 1996, the Company agreed to match 25% of employee contributions up to
6% of salary with Company stock. For calendar 1997 and 1998, the Company agreed
to match 37.5% of employee contributions up to 6% of salary with Company stock.
In fiscal 1998, 1997 and 1996, the Company recorded an expense of $21,755,
$25,000 and $4,800, respectively, related to voluntary employer matches under
the 401(k) Plan. The Board of Directors has reserved up to 100,000 shares of
common stock for these voluntary employer matches of which 42,631 shares have
been issued and 30,470 shares have been committed through March 31, 1998.
5. SHAREHOLDERS' EQUITY:
PREFERRED STOCK
The Company has authorized 10 million shares of preferred stock to be issued
from time to time with such designations and preferences and other special
rights and qualifications, limitations and restrictions thereon, as permitted by
law and as fixed from time to time by resolution of the Board of Directors.
During fiscal 1998, as described in note 2 regarding the Elan transactions, the
Company borrowed $12.015 million from Elan for the purpose of investing such
funds in JV. On February 20, 1998, the Company's shareholders approved the
exchange of this debt, plus accrued interest, for Series A and Series B
convertible preferred stock and approved the future issuance of Series C
Convertible Preferred Stock. At March 31, 1998, the Company had preferred stock
authorized and outstanding as follows:
Series A Convertible Preferred Stock. Series A preferred stock accumulates
dividends at 9% per annum, compounded semi-annually, payable in additional
Series A Convertible Preferred Stock. Each original share may be converted at
the holder's election into 10 shares of common stock and may be redeemed at the
Company's election on the third, fourth and fifth anniversaries of issuance if
the Company's common stock is greater than or equal to $2.25 per share by the
payment to the holder of an amount equal to the original issuance price plus
accumulated dividends thereon. If not earlier converted or redeemed, the
original issuance price of the Series A Convertible Stock plus accumulated
dividends thereon must be converted into common stock of the Company on October
15, 2004 at the lesser of $1.50 or 80% of the average of the closing prices of
common stock for the ten trading days ending on October 13, 2004. The Series A
Convertible Preferred Stock has preference in liquidation to the common stock of
the Company. A total of 692,694 shares with an original issuance value of $15.00
per share has been issued.
Series B Convertible Preferred Stock. Series B preferred stock has all of the
rights and preferences of the Series A Convertible Preferred Stock including
optional conversion, optional redemption and mandatory conversion except that it
bears no mandatory dividend but participates in dividends pro rata with the
common shareholders. A total of 134,333 shares of Series B Convertible Preferred
Stock with an original issuance value of $15.00 per share have been issued.
Series C Convertible Stock. Series C preferred stock has all of the rights and
preferences of the Series A Convertible Preferred Stock including optional
conversion, optional redemption and mandatory conversion except that it bears no
mandatory dividend but participates in dividends pro rata with the common
shareholders. Its original issuance price will be equal to market value, if and
when such shares are issued. Proceeds are restricted for use in the JV. There
are no shares issued and outstanding at March 31, 1998.
Inherent dividend. As described above, under certain conditions the Series A and
Series B Convertible Preferred Stock is convertible into common stock of the
Company at a price which represents a 20% discount to its par value of $15.00
per share. The value of this inherent dividend has been recorded as a discount
to preferred stock and an increase to common stock totaling $3 million and is
being accreted as additional preferred stock dividends on a straight-line basis
from March 2, 1998 until mandatory conversion on October 15, 2004.
COMMON STOCK
Holders of common stock are entitled to one vote for each share of record held
on all matters to be voted on by shareholders. No shares have been issued
subject to assessment, and there are no preemptive or conversion rights and no
provision for redemption, purchase or cancellation, surrender or sinking or
purchase funds. Holders of common stock are not entitled to cumulate their
shares in the election of directors. A total of 100,000 shares of common stock
have been reserved by the Board of Directors for issuance to 401(k) plan
participants (see note 4) of which 42,631 shares have been issued and 30,470
shares are committed to be issued through March 31, 1998.
STOCK OPTIONS
Options may be granted to directors, officers and employees of the Company by
the Board of Directors under terms of the Bioject Medical Technologies Inc. 1992
Stock Incentive Plan (the "Plan"), which was approved by the Company's
shareholders on November 20, 1992 and adopted by the Board effective December
17, 1992. Under the terms of the Plan, eligible employees may receive statutory
and nonstatutory stock options, stock bonuses and stock appreciation rights for
purchase of shares of the Company's common stock at prices and vesting as
determined by a committee of the Board. Except for options whose terms were
extended, options granted under a prior plan maintain their previous option
price, vesting and expiration dates. As amended in fiscal 1995, a total of up to
3,000,000 shares of the Company's common stock, including options outstanding at
the date of initial shareholder approval of the Plan, may be granted under the
Plan. Options outstanding at March 31, 1998 expire through April 2006.
In October 1995, the Financial Accounting Standards Board issued Statement No.
123, Accounting for Stock-Based Compensation (SFAS 123), which establishes a
fair value-based method of accounting for stock-based compensation plans and
requires additional disclosures for those companies that elect not to adopt the
new method of accounting. The Company has elected to continue to account for
stock options under APB Opinion No. 25, Accounting for Stock Issued to
Employees. However, as prescribed by SFAS 123 the Company has computed, for pro
forma disclosure purposes, the value of all options granted during fiscal 1998,
1997 and 1996 using the Black-Scholes option pricing model and the following
weighted average assumptions:
Year ended March 31,
1998 1997 1996
-------- -------- --------
Risk-free interest rate 6% 6% 6%
Expected dividend yield 0% 0% 0%
Expected life 1.5 yrs. 1.5 yrs. 1.5 yrs.
Expected volatility 78% 47% 47%
The total value of options granted during fiscal 1998, 1997 and 1996 would be
amortized on a pro forma basis over the vesting period of the options. Options
generally vest equally over three years. If the Company had accounted for these
plans in accordance with SFAS 123, the Company's net loss and net loss per share
would have increased as reflected in the following pro forma amounts (in
thousands of $):
Year ended March 31,
1998 1997 1996
----------- ---------- ----------
Net loss:
As reported $ (16,630) $ (4,296) $ (5,431)
Pro forma $ (16,969) $ (4,480) $ (5,541)
Net loss per share:
As reported $ (0.72) $ (0.26) $ (0.39)
Pro forma $ (0.73) $ (0.27) $ (0.39)
The above determination of proforma expense has been calculated consistent with
SFAS 123 which does not take into consideration limitations on exercisability
and transferability imposed by the Company's Stock Incentive Plan. Further, the
valuation model is heavily weighted to stock price volatility, even with a
declining stock price, which tends to increase calculated value. The actual
value, if any, and, therefore, imputed proforma expense will vary based on the
exercise date and the market price of the related common stock when sold.
Stock option activity is summarized as follows:
Exercise
Shares Price Amount
---------- ------------ -----------
Balances - March 31, 1995 1,543,650 $2.60-5.00 $ 5,906,967
Options granted 1,316,439 1.25-4.50 3,129,177
Options exercised -- -- --
Options canceled or expired (1,161,150) 2.34-5.00 (4,302,332)
---------- ---------- -----------
Balances - March 31, 1996 1,698,939 1.25-4.50 4,733,812
Options granted 705,525 1.00-1.30 830,006
Options exercised --
Options canceled or expired (472,906) 1.00-4.00 (809,880)
---------- ---------- -----------
Balances March 31, 1997 1,931,558 1.00-4.50 4,753,938
Exercise
Shares Price Amount
---------- ------------ -----------
Options granted 2,086,642 .625-1.25 1,506,818
Options exercised (136,098) .75-1.31 (154,869)
Options canceled or expired (1,567,179) 1.00-4.88 (4,179,757)
---------- ---------- -----------
Balances - March 31, 1998 2,314,923 $.625-4.88 $ 1,926,130
========== ========== ===========
The following table sets forth as of March 31, 1998 the number of shares
outstanding, exercise price, weighted average remaining contractual life,
weighted average exercise price, number of exercisable shares and weighted
average exercise price of exercisable options by groups of similar price and
grant date:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
Exercise Outstanding Weighted Average Weighted Exercisable Weighted
Price shares Remaining Average Options Average
at 3/31/98 Contractual Exercise Exercise
Life(Years) Price Price
- ------------ ----------- ----------- -------- --------- --------
$0.625 - 0.99 1,946,140 5.21 $0.71 989,910 $0.73
1.00 - 1.25 289,583 2.48 1.12 251,748 1.12
1.26 - 3.75 44,200 3.71 1.49 24,565 1.45
3.76 - 4.09 35,000 2.00 4.09 35,000 4.09
WARRANTS
Warrant activity is summarized as follows:
Exercise
Shares Price Amount
--------- ------------ ----------
Balances - March 31, 1995 - $ - $ -
Warrants issued in a private
placement expiring Nov. 2000 1,864,343 1.97 - 2.00 3,724,401
Warrants issued in a private
placement expiring Feb. 1998 575,752 2.00 1,151,505
Warrants exercised - - -
Warrants canceled or expired - - -
--------- ------------ ----------
Balances - March 31, 1996 2,440,095 1.97 - 2.00 4,875,906
Warrants issued in a private
placement expiring Dec. 2001 3,590,493 .82 - 1.00 3,562,413
Warrants exercised - - -
Warrants canceled or expired - - -
--------- ------------ ----------
Balances - March 31, 1997 6,030,588 .82 - 2.00 8,438,319
Warrants issued in a private
placement expiring June 2002 1,478,488 .50 - .71 1,044,476
Warrants issued in a private
placement expiring Sep. 2002 450,000 .85 - 1.10 450,000
Warrants issued in a private
placement expiring Oct. 2002 1,750,000 2.50 4,375,000
Warrants issued for services
expiring September 2002 130,243 1.10 143,267
Warrants exercised - - -
Warrants canceled or expired (575,752) 2.00 (1,151,505)
--------- ------------ ----------
Balances - March 31, 1998 9,263,567 $ .50 - 2.50 $13,299,557
========= ============ ==========
Warrants issued for services are accounted for in accordance with SFAS 123,
"Accounting for Stock-Based Compensation," and accordingly, an expense totaling
$81,350 has been recorded in the financial statements for the year ended March
31, 1998. All other warrants have been issued in connection with equity
transactions. Subsequent to year end, the warrants issued in a private placement
which would have expired in June 2002 were exercised in exchange for the
Company's commitment to issue 147,850 new warrants with an expiration date of
March 2003 and as an exercise price of $1.348 per share.
6. COMMITMENTS:
Leases. BI has operating leases for its manufacturing, sales and administrative
facilities and warehouse facilities with options to renew for an additional
five-year term upon expiration. BI also leases office equipment under operating
leases for periods up to five years. At March 31, 1998, future minimum payments
under noncancellable operating leases with terms in excess of one year are as
follows:
Year Ending March 31, Facilities Equipment
---------- ---------
1999 $202,308 $29,250
2000 203,058 9,132
2001 216,888 9,132
2002 204,048 9,132
95,424 5,347
Thereafter
Lease expense for the years ended March 31, 1998, 1997 and 1996 totaled
$255,000, $283,000 and $221,000 respectively.
7. RELATED PARTY TRANSACTION:
On October 22, 1997, Robert Gonnelli was elected Chairman of Bioject's joint
venture subsidiary Board of Directors. From October 1997 through April 1998 he
received no fees for such services but will participate in any future subsidiary
director compensation programs including any subsidiary stock incentive plans.
Effective May 1, 1998, Mr. Gonnelli became interim president of JV and will
receive compensation totaling $15,000 per month.
In addition to his position on the JV Board, Mr. Gonnelli serves as a consultant
to the Company for which he received monthly consulting fees of $8,500 per
month, aggregating to $50,500, in fiscal 1998. He was also issued 350,000 five
year warrants in connection with the private placement completed with Elan and
130,243 warrants for his services related to investor relations and sales
consulting. In fiscal 1999, in addition to his monthly fees through April 30,
1998, the Company has committed to issue up 100,000 warrants for his investor
relations and sales consulting services.
8. SUBSEQUENT EVENT
During April through July 1998, the Company received cash proceeds of
approximately $2.4 million from the exercise of common stock options and common
stock warrants, the exercise of which resulted in the issuance of 2,938,688
shares of the Company's common stock.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
The Company has omitted from Part III the information that will appear in the
Company's definitive proxy statement for its annual meeting of shareholders to
be held on September 10, 1998(the "Proxy Statement"), which will be filed within
120 days after the end of the Company's fiscal year pursuant to Regulation 14A.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated by reference to the
information under the caption "DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT" in the Proxy Statement.
Item 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
information under the caption "EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS" in
the Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
information under the caption "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT" in the Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
information under the caption "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS"
in the Proxy Statement.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) Consolidated Financial Statements and Report of Independent Public
Accountants are included under Item 8, in Part II.
(2) Consolidated Financial Statement Schedules and Report of Independent Public
Accountants on those schedules:
None required
(3) Exhibits: The following exhibits are filed as part of this report. An
asterisk (*) beside the exhibit number indicates the subset of the exhibits
containing each management contract, compensatory plan, or arrangement
required to be identified separately in this report.
Exhibit
Number Exhibit Description
- ------- -----------------------------------------------------------------
3.1 Articles of Incorporation of Bioject Medical Technologies Inc.
incorporated by reference to the same exhibit number of the Company's
Form 10-K for the year ended January 31, 1993.
3.1.1 Articles of Amendment to the Articles of Incorporation of the
Incorporation of the Company incorporation by reference to the Same
exhibit number of the Company's Form 8-K filed March 6, 1998.
3.2 Amended and Restated By-laws of Bioject Medical Technologies Inc.
Incorporated by reference to the same exhibit number of the Company's
Form 10-Q for the quarter ended September 30, 1994.
4.3* Bioject Medical Technologies Inc. 1992 Stock Incentive Plan, as
amended through April 3, 1997. Incorporated by reference to the same
exhibit number of the Company's From 10-Q for the year ended December
31, 1997.
10.4 Lease Agreement dated March 21, 1989 between Spieker-Hosford-
Eddy-Souther #174, Limited Partnership and Bioject Inc. for the
Portland, Oregon facility incorporated by reference to the same
exhibit number of Company's Form 10-K for the year ended January 31,
1989.
10.4.1 Amended Lease Agreement dated June 18, 1992 between Bridgeport Woods
Investors (successors in interest to Spieker-Hosford-Eddy- Souther
#174 Limited Partnership) and Bioject Inc. for the Portland, Oregon
facility incorporated by reference to the same exhibit number of the
Company's Form 10-K for the year ended January 31, 1993.
10.4.2 Lease Agreement dated September 10, 1996 between Bridgeport Woods
Business park and Bioject Inc. for the Portland, Oregon facility.
Incorporated by reference to the same exhibit number of the Company's
Form 10-Q for the period ended September 30, 1996.
10.5 Lease Extension Agreement dated October 4, 1994, between Earl J. Itel
and Loris Itel Trust and Bioject, Inc., for the 6000 sq. ft. Tualatin,
Oregon warehouse. Incorporated by reference to the same exhibit number
of the Company's Form 10-Q/A for the period ended December 31, 1996.
10.7* Executive Employment Contract with Peggy J. Miller, dated January 18,
1993 incorporated by reference to the same exhibit number of the
Company's Form 10-K for the year ended January 31, 1993.
10.8* Executive Employment Contract with J. Michael Redmond, dated February
8, 1996. Incorporated by reference to the same exhibit number of the
Company's Form 10-K for the year ended March 31, 1996.
10.14 Common Stock Purchase Agreement between Eli Lilly and Company and
Bioject Medical Systems Ltd. dated April 29, 1992 incorporated by
reference to the same exhibit number of Company's Form 8, dated May
28, 1992, amending Company's Form 10-K for the year ended January 31,
1992.
10.17 Development and Licensing Agreement between Eli Lilly & Company and
Bioject Inc., dated April 29, 1992 incorporated by reference to the
same exhibit number of Company's Form 8, dated October 9, 1992,
amending Company's Form 10-Q for the quarter ended April 30, 1992.
Confidential treatment has been granted with respect to certain
portions of this exhibit pursuant to an Application for Confidential
Treatment filed with the Commission under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
10.17.1 Amendment to Development and Licensing Agreement between Eli Lilly and
Company and Bioject Inc., effective May 5, 1993 incorporated by
reference to the same exhibit number of Company's Form S-1, No.
33-68846, dated November 1, 1993. Confidential treatment has been
granted with respect to certain portions of this exhibit pursuant to
an Application for Confidential Treatment filed with the Commission
under Rule 406 under the Securities Act of 1933, as amended.
Confidential treatment has been granted with respect to certain
portions of this exhibit pursuant to an Application for Confidential
Treatment filed with the Commission under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
10.23 Development and Licensing Agreement between Schering, AG, Bioject Inc.
and Bioject Medical Technologies Inc. dated March 28, 1994
incorporated by reference to the same exhibit number of the Company's
Form 10-K for the year ended March 31, 1994. Confidential treatment
has been granted with respect to certain portions of this exhibit
pursuant to an Application for Confidential Treatment filed with the
Commission under Rule 24b-2 under the Securities exchange Act of 1934,
as amended.
10.26 Heads of Agreement between Hoffmann-La Roche Inc. and Bioject Inc.
dated January 10, 1995. Confidential treatment has been granted with
respect to certain portions of this exhibit pursuant to an Application
for Confidential Treatment filed with the Commission under Rule 24b-2
under the Securities Exchange Act of 1934 as amended.
10.27* Employment Agreement with James C. O'Shea dated October 3, 1995
incorporated by reference to the same exhibit number of the Company's
Form 10-Q for the quarter ended September 30, 1995.
10.28 Form of Amended and Restated Registration Rights Agreement between
Bioject Medical Technologies Inc. and the participants in the 1995
private placement incorporated by reference to exhibit 4.2 of the
Company's Registration Statement on Form S-3 (No. 33-80679).
10.29 Form of Amended and Restated Series "A" Common Stock Purchase Warrant
incorporated by reference to exhibit 4.3 of the Company's Registration
Statement on Form S-3 (No. 33-80679).
10.30 Form of Series "B" Common Stock Purchase Warrant incorporated by
reference to exhibit 4.4. of the Company's Registration Statement on
Form S-3 (No. 33-80679).
10.31 Form of Amended and Restated Series "C" Common Stock Purchase Warrant
incorporated by reference to exhibit 4.5 of the Company's Registration
Statement on Form S-3 (No. 33-80679). Confidential treatment has been
granted with respect to certain portions of this exhibit pursuant to
an Application for Confidential Treatment filed with the Commission
under Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
10.32 Supply Agreement dated June 26, 1996 between Bioject Inc. and Schering
Aktiengesellschaft. Incorporated by reference to the same exhibit
number of the Company's Form 8-K/A dated June 26, 1996. Confidential
treatment has been granted with respect to certain portions of this
exhibit pursuant to an Application for Confidential Treatment filed
with the Commission under Rule 24b-2 under the Securities exchange Act
of 1934, as amended.
10.32.1 Security Agreement dated June 26, 1996 between Bioject Inc. and
Schering Aktiengesellschaft. Incorporated by reference to the same
exhibit number of the Company's Form 10-Q for the period ended June
30, 1996.
10.33 Form of Series "D" Common Stock Purchase Warrant. Incorporated by
reference to exhibit 4.6 of the Company's form 8-K dated December 11,
1996.
10.34 Form of Series "E" Common Stock Purchase Warrant. Incorporated by
reference to exhibit 4.7 of the Company's Form 8-K dated December 11,
1996.
10.35 Form of Registration Rights Agreement between Bioject Medical
Technologies Inc. and the participants in the 1996 private placement.
Incorporated by reference to exhibit 4.8 of the Company's Form 8-K
dated December 11, 1996.
10.36 Form of Series "F" Common Stock Purchase Warrant.
10.37 Form of Series "G" Common Stock Purchase Warrant.
10.38 Form of Registration Rights Agreement between Bioject Medical
Technologies Inc. and the participants in the 1997 private placement.
Incorporated by reference to the same exhibit number of the Company's
Form 10-K for the year ended March 31, 1997.
10.39 Agreement between Elan Corporation, plc, Elan International Services,
Ltd. and Bioject Medical Technologies, Inc. dated September 30, 1997.
Incorporated by reference to the same exhibit number of the Company's
Form 8-K filed October 3, 1997. Confidential treatment has been
requested with respect to certain portions of this exhibit pursuant to
an Application for Confidential Treatment filed with the Commission
under Rule 24b-2(b) under the Securities Exchange Act of 1934, as
amended.
10.40 License Agreement between Elan Corporation, plc and Bioject JV
Subsidiary Inc. dated October 15, 1997. Incorporated by reference to
the same exhibit number of the Company's Form 8-K/A filed January 22,
1998. Confidential treatment has been granted with respect to certain
portions of this exhibit pursuant to an application for Confidential
Treatment filed with the Commission under Rule 24b-2(b) under the
Securities Exchange Act of 1934, as amended.
10.40.1 Amendment to License Agreement between Elan Corporation, plc and
Bioject JV Subsidiary Inc. dated October 15, 1997 incorporated by
reference to the same exhibit number of the Company's Form 8-K filed
on November 3, 1997.
10.41 Securities Purchase Agreement between Elan International Services,
Ltd. and Bioject Medical Technologies Inc. dated October 15, 1997.
10.41.1 Amendment to Securities Purchase Agreement between Elan International
Services, Ltd. and Bioject Medical Technologies Inc. dated October 15,
1997 incorporated by reference to the same exhibit number of the
Company's Form 8-K filed on November 3, 1997.
10.42 Bioject Medical Technologies Inc. Registration Rights Agreement
between Elan International Services, Ltd. and Bioject Medical
Technologies Inc. dated October 15, 1997. Incorporated by reference to
the same exhibit number of the Company's Form 8-K filed October 31,
1997.
10.43 Series K Warrant to Purchase Shares of Common Stock dated October 15,
1997. Incorporated by reference to the same exhibit number of the
Company's Form 8-K filed October 31, 1997.
10.44 Promissory Note dated October 15, 1997 in favor of Elan International
Services, Ltd. Incorporated by reference to the same exhibit number of
the Company's Form 8-K filed on November 3, 1997.
10.45 Newco Subscription and Stockholders Agreement between Elan
International Services, Ltd., Bioject Medical Technologies Inc. and
Bioject JV Subsidiary Inc. dated October 15, 1997. Incorporated by
Reference to the same exhibit number of the Company's Form 8-K/A filed
January 22, 1998.
10.45.1 Amendment to Newco Subscription and Stockholders Agreement between
Elan International Services, Ltd., Bioject Medical Technologies Inc.
and Bioject JV Subsidiary Inc. dated October 15, 1997 incorporated by
reference to the same exhibit number of the Company's Form 8-K filed
on November 3, 1997.
10.46 Bioject JV Subsidiary Inc. Registration Rights Agreement between Elan
International Services, Ltd. and Bioject JV Subsidiary Inc. dated
October 15, 1997. Incorporated by reference to the same exhibit number
of the Company's Form 8-K filed November 3, 1997.
10.47 Form of Series "H" Common Stock Purchase Warrant.
10.48 Form of Series "I" Common Stock Purchase Warrant.
10.49 Form of Series "J" Common Stock Purchase Warrant.
10.50 Form of Series "L" Common Stock Purchase Warrant.
10.51 Form of Series "M" Common Stock Purchase Warrant.
10.52 Form of Series "N" Common Stock Purchase Warrant.
10.53 Asset Purchase Agreement among Bioject Medical Technologies, Inc.
Vitajet Corporation and Sergio Landau and Mara C. Landau dated March
23, 1998.
10.54* Executive Employment Agreement dated April 17, 1998 between Bioject
Medical Technologies Inc., Bioject Inc., and Michael A. Temple.
10.55* Form of Termination Agreement between Bioject Technologies, Inc. and
Peggy Miller.
10.56 Form of Massachussetts Biotechnology Research Park, Three Biotech
Park, Space Lease dated April 20, 1998.
10.57 Amendment to Massachusetts Biotechnology Research Park Space Lease.
10.58 Restated 1992 Stock Incentive Plan.
10.59 Supply and Option Agreement between Merck & Co., Inc. and Bioject
Medical Technolgies, Inc., effective as of June 8, 1998. Confidential
treatment has been requested with respect to certain portions of this
exhibit pursuant to an Application for Confidential Treatment filed
with the Commission under Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
10.60 Collaborative Alliance Agreement between GeneMedicine, Inc. and
Bioject, Inc., made as of June 26, 1998. Confidential treatment has
been requested with respect to certain portions of this exhibit
pursuant to an Application for Confidential Treatment filed with the
Commission under Rule 24b-2 under the Securities Exchange Act of 1934,
as amended.
21 List of Subsidiaries
23 Consent of Independent Public Accountants
27 Financial Data Schedule
(b) Forms 8K filed since last report:
Form 8-K/A (Amendment No. 1) filed on January 22, 1998 amending Form
8-K originally filed on January 14, 1997 regarding a private placement
in December 1996.
Form 8-K filed on January 22, 1998 regarding amendments to Exhibit
10.40, Exhibit 10.41 and Exhibit 10.45 and filing such amendments as
Exhibit 10.40.1, Exhibit 10.41.1 and Exhibit 10.45.1.
8-K/A (Amendment No. 2) filed on January 22, 1998 which refiled
Exhibit 10.40 and Exhibit 10.45. Confidential Treatment was granted
with regard to portions of Exhibit 10.40.
Form 8-K filed on March 6, 1998 regarding results of Special Meeting
Of Shareholders held on February 20, 1998.
Form 8-K filed on March 27, 1998 for the purpose of filing as an
exhibit the press release announcing the resignation of the Chief
Financial Officer.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Bioject Medical Technologies Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized:
BIOJECT MEDICAL TECHNOLOGIES INC.
(Registrant)
By: /S/ JAMES C. O'SHEA
James C. O'Shea
Chairman of the Board, President
and Chief Executive Officer
INDEX TO EXHIBITS
Exhibit
Number Exhibit Description
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3.1 Articles of Incorporation of Bioject Medical Technologies Inc.
incorporated by reference to the same exhibit number of the Company's
Form 10-K for the year ended January 31, 1993.
3.1.1 Articles of Amendment to the Articles of Incorporation of the
Incorporation of the Company incorporation by reference to the Same
exhibit number of the Company's Form 8-K filed March 6, 1998.
3.2 mended and Restated By-laws of Bioject Medical Technologies Inc.
Incorporated by reference to the same exhibit number of the Company's
Form 10-Q for the quarter ended September 30, 1994.
4.3* Bioject Medical Technologies Inc. 1992 Stock Incentive Plan, as
amended through April 3, 1997. Incorporated by reference to the same
exhibit number of the Company's From 10-Q for the year ended December
31, 1997.
10.4 Lease Agreement dated March 21, 1989 between Spieker-Hosford-
Eddy-Souther #174, Limited Partnership and Bioject Inc. for the
Portland, Oregon facility incorporated by reference to the same
exhibit number of Company's Form 10-K for the year ended January 31,
1989.
10.4.1 Amended Lease Agreement dated June 18, 1992 between Bridgeport Woods
Investors (successors in interest to Spieker-Hosford-Eddy- Souther
#174 Limited Partnership) and Bioject Inc. for the Portland, Oregon
facility incorporated by reference to the same exhibit number of the
Company's Form 10-K for the year ended January 31, 1993.
10.4.2 Lease Agreement dated September 10, 1996 between Bridgeport Woods
Business park and Bioject Inc. for the Portland, Oregon facility.
Incorporated by reference to the same exhibit number of the Company's
Form 10-Q for the period ended September 30, 1996.
10.5 Lease Extension Agreement dated October 4, 1994, between Earl J. Itel
and Loris Itel Trust and Bioject, Inc., for the 6000 sq. ft. Tualatin,
Oregon warehouse. Incorporated by reference to the same exhibit number
of the Company's Form 10-Q/A for the period ended December 31, 1996.
10.7* Executive Employment Contract with Peggy J. Miller, dated January 18,
1993 incorporated by reference to the same exhibit number of the
Company's Form 10-K for the year ended January 31, 1993.
10.8* Executive Employment Contract with J. Michael Redmond, dated February
8, 1996. Incorporated by reference to the same exhibit number of the
Company's Form 10-K for the year ended March 31, 1996.
10.14 Common Stock Purchase Agreement between Eli Lilly and Company and
Bioject Medical Systems Ltd. dated April 29, 1992 incorporated by
reference to the same exhibit number of Company's Form 8, dated May
28, 1992, amending Company's Form 10-K for the year ended January 31,
1992.
10.17 Development and Licensing Agreement between Eli Lilly & Company and
Bioject Inc., dated April 29, 1992 incorporated by reference to the
same exhibit number of Company's Form 8, dated October 9, 1992,
amending Company's Form 10-Q for the quarter ended April 30, 1992.
Confidential treatment has been granted with respect to certain
portions of this exhibit pursuant to an Application for Confidential
Treatment filed with the Commission under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
10.17.1 Amendment to Development and Licensing Agreement between Eli Lilly and
Company and Bioject Inc., effective May 5, 1993 incorporated by
reference to the same exhibit number of Company's Form S-1, No.
33-68846, dated November 1, 1993. Confidential treatment has been
granted with respect to certain portions of this exhibit pursuant to
an Application for Confidential Treatment filed with the Commission
under Rule 406 under the Securities Act of 1933, as amended.
Confidential treatment has been granted with respect to certain
portions of this exhibit pursuant to an Application for Confidential
Treatment filed with the Commission under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
10.23 Development and Licensing Agreement between Schering, AG, Bioject Inc.
and Bioject Medical Technologies Inc. dated March 28, 1994
incorporated by reference to the same exhibit number of the Company's
Form 10-K for the year ended March 31, 1994. Confidential treatment
has been granted with respect to certain portions of this exhibit
pursuant to an Application for Confidential Treatment filed with the
Commission under Rule 24b-2 under the Securities exchange Act of 1934,
as amended.
10.26 Heads of Agreement between Hoffmann-La Roche Inc. and Bioject Inc.
dated January 10, 1995. Confidential treatment has been granted with
respect to certain portions of this exhibit pursuant to an Application
for Confidential Treatment filed with the Commission under Rule 24b-2
under the Securities Exchange Act of 1934 as amended.
10.27* Employment Agreement with James C. O'Shea dated October 3, 1995
incorporated by reference to the same exhibit number of the Company's
Form 10-Q for the quarter ended September 30, 1995.
10.28 Form of Amended and Restated Registration Rights Agreement between
Bioject Medical Technologies Inc. and the participants in the 1995
private placement incorporated by reference to exhibit 4.2 of the
Company's Registration Statement on Form S-3 (No. 33-80679).
10.29 Form of Amended and Restated Series "A" Common Stock Purchase Warrant
incorporated by reference to exhibit 4.3 of the Company's Registration
Statement on Form S-3 (No. 33-80679).
10.30 Form of Series "B" Common Stock Purchase Warrant incorporated by
reference to exhibit 4.4. of the Company's Registration Statement on
Form S-3 (No. 33-80679).
10.31 Form of Amended and Restated Series "C" Common Stock Purchase Warrant
incorporated by reference to exhibit 4.5 of the Company's Registration
Statement on Form S-3 (No. 33-80679). Confidential treatment has been
granted with respect to certain portions of this exhibit pursuant to
an Application for Confidential Treatment filed with the Commission
under Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
10.32 Supply Agreement dated June 26, 1996 between Bioject Inc. and Schering
Aktiengesellschaft. Incorporated by reference to the same exhibit
number of the Company's Form 8-K/A dated June 26, 1996. Confidential
treatment has been granted with respect to certain portions of this
exhibit pursuant to an Application for Confidential Treatment filed
with the Commission under Rule 24b-2 under the Securities exchange Act
of 1934, as amended.
10.32.1 Security Agreement dated June 26, 1996 between Bioject Inc. and
Schering Aktiengesellschaft. Incorporated by reference to the same
exhibit number of the Company's Form 10-Q for the period ended June
30, 1996.
10.33 Form of Series "D" Common Stock Purchase Warrant. Incorporated by
reference to exhibit 4.6 of the Company's form 8-K dated December 11,
1996.
10.34 Form of Series "E" Common Stock Purchase Warrant. Incorporated by
reference to exhibit 4.7 of the Company's Form 8-K dated December 11,
1996.
10.35 Form of Registration Rights Agreement between Bioject Medical
Technologies Inc. and the participants in the 1996 private placement.
Incorporated by reference to exhibit 4.8 of the Company's Form 8-K
dated December 11, 1996.
10.36 Form of Series "F" Common Stock Purchase Warrant.
10.37 Form of Series "G" Common Stock Purchase Warrant.
10.38 Form of Registration Rights Agreement between Bioject Medical
Technologies Inc. and the participants in the 1997 private placement.
Incorporated by reference to the same exhibit number of the Company's
Form 10-K for the year ended March 31, 1997.
10.39 Agreement between Elan Corporation, plc, Elan International Services,
Ltd. and Bioject Medical Technologies, Inc. dated September 30, 1997.
Incorporated by reference to the same exhibit number of the Company's
Form 8-K filed October 3, 1997. Confidential treatment has been
requested with respect to certain portions of this exhibit pursuant to
an Application for Confidential Treatment filed with the Commission
under Rule 24b-2(b) under the Securities Exchange Act of 1934, as
amended.
10.40 License Agreement between Elan Corporation, plc and Bioject JV
Subsidiary Inc. dated October 15, 1997. Incorporated by reference to
the same exhibit number of the Company's Form 8-K/A filed January 22,
1998. Confidential treatment has been granted with respect to certain
portions of this exhibit pursuant to an application for Confidential
Treatment filed with the Commission under Rule 24b-2(b) under the
Securities Exchange Act of 1934, as amended.
10.40.1 Amendment to License Agreement between Elan Corporation, plc and
Bioject JV Subsidiary Inc. dated October 15, 1997 incorporated by
reference to the same exhibit number of the Company's Form 8-K filed
on November 3, 1997.
10.41 Securities Purchase Agreement between Elan International Services,
Ltd. and Bioject Medical Technologies Inc. dated October 15, 1997.
10.41.1 Amendment to Securities Purchase Agreement between Elan International
Services, Ltd. and Bioject Medical Technologies Inc. dated October 15,
1997 incorporated by reference to the same exhibit number of the
Company's Form 8-K filed on November 3, 1997.
10.42 Bioject Medical Technologies Inc. Registration Rights Agreement
between Elan International Services, Ltd. and Bioject Medical
Technologies Inc. dated October 15, 1997. Incorporated by reference to
the same exhibit number of the Company's Form 8-K filed October 31,
1997.
10.43 Series K Warrant to Purchase Shares of Common Stock dated October 15,
1997. Incorporated by reference to the same exhibit number of the
Company's Form 8-K filed October 31, 1997.
10.44 Promissory Note dated October 15, 1997 in favor of Elan International
Services, Ltd. Incorporated by reference to the same exhibit number of
the Company's Form 8-K filed on November 3, 1997.
10.45 Newco Subscription and Stockholders Agreement between Elan
International Services, Ltd., Bioject Medical Technologies Inc. and
Bioject JV Subsidiary Inc. dated October 15, 1997. Incorporated by
Reference to the same exhibit number of the Company's Form 8-K/A filed
January 22, 1998.
10.45.1 Amendment to Newco Subscription and Stockholders Agreement between
Elan International Services, Ltd., Bioject Medical Technologies Inc.
and Bioject JV Subsidiary Inc. dated October 15, 1997 incorporated by
reference to the same exhibit number of the Company's Form 8-K filed
on November 3, 1997.
10.46 Bioject JV Subsidiary Inc. Registration Rights Agreement between Elan
International Services, Ltd. and Bioject JV Subsidiary Inc. dated
October 15, 1997. Incorporated by reference to the same exhibit number
of the Company's Form 8-K filed November 3, 1997.
10.47 Form of Series "H" Common Stock Purchase Warrant.
10.48 Form of Series "I" Common Stock Purchase Warrant.
10.49 Form of Series "J" Common Stock Purchase Warrant.
10.50 Form of Series "L" Common Stock Purchase Warrant.
10.51 Form of Series "M" Common Stock Purchase Warrant.
10.52 Form of Series "N" Common Stock Purchase Warrant.
10.53 Asset Purchase Agreement among Bioject Medical Technologies, Inc.
Vitajet Corporation and Serio Landau and Mara C. Landau dated March
23, 1998.
10.54* Executive Employment Agreement dated April 17, 1998 between Bioject
Medical Technologies Inc., Bioject Inc., and Michael A. Temple.
10.55* Form of Termination Agreement between Bioject Technologies, Inc. and
Peggy Miller.
10.56 Form of Massachussetts Biotechnology Research Park, Three Biotech
Park, Space Lease dated April 20, 1998.
10.57 Amendment to Massachusetts Biotechnology Research Park Space Lease.
10.58 Restated 1992 Stock Incentive Plan 10.59 Supply and Option Agreement
between Merck & Co., Inc. and Bioject Medical Technolgies, Inc.,
effective as of June 8, 1998. Confidential treatment has been
requested with respect to certain portions of this exhibit pursuant to
an Application for Confidential Treatment filed with the Commission
under Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
10.60 Collaborative Alliance Agreement between GeneMedicine, Inc. and
Bioject, Inc., made as of June 26, 1998. Confidential treatment has
been requested with respect to certain portions of this exhibit
pursuant to an Application for Confidential Treatment filed with the
Commission under Rule 24b-2 under the Securities Exchange Act of 1934,
as amended.
21 List of Subsidiaries
23 Consent of Independent Public Accountants
27 Financial Data Schedule