-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bn6N6JiDsmDZgOFMmlyJYBzhJB2T6nEbuf56i3+0QExSWrU1vOYigCziwfdtOvsS sCUaCEL/mQUF2iJVEa3HjA== 0001072993-00-000410.txt : 20000516 0001072993-00-000410.hdr.sgml : 20000516 ACCESSION NUMBER: 0001072993-00-000410 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CYPRESS BIOSCIENCE INC CENTRAL INDEX KEY: 0000716054 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 222389839 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12943 FILM NUMBER: 632881 BUSINESS ADDRESS: STREET 1: 4350 EXECUTIVE DRIVE,SUITE 325 CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 2062989400 MAIL ADDRESS: STREET 1: 401 QUEEN ANNE AVE NORTH CITY: SEATTLE STATE: WA ZIP: 98109 FORMER COMPANY: FORMER CONFORMED NAME: IMRE CORP DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2000, or [_] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________________ to _________________ Commission File Number 0-12943 CYPRESS BIOSCIENCE, INC. (Exact Name of Registrant as specified in its charter) DELAWARE 22-2389839 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4350 Executive Drive, Suite 325, San Diego, California 92121 (Address of principal executive offices) (zip code) (858) 452-2323 (Registrant's telephone number including area code) ------------------- Indicate by check (X) whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] At May 10, 2000, 48,686,120 shares of Common Stock of the Registrant were outstanding. This filing, without exhibits, contains 13 pages. ================================================================================ TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page ---- ITEM 1 - Consolidated Balance Sheets as of March 31, 2000 (unaudited) and December 31, 1999 .............................. 3 Consolidated Statements of Operations for the three months ended March 31, 2000 and 1999 (unaudited)............................................ 4 Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and 1999 (unaudited)......................... 5 Notes to Consolidated Financial Statements (unaudited)............................ 6 ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations........................................... 8 ITEM 3 - Quantitative and Quantitative Disclosures About Market Risk....................... 11 PART II - OTHER INFORMATION ITEM 1 - Legal Proceedings ................................................................. 12 ITEM 6 - Exhibits and Reports on Form 8-K .................................................. 12 Signatures ................................................................................. 13
2 CYPRESS BIOSCIENCE, INC. CONSOLIDATED BALANCE SHEETS
March 31, December 31, 2000 1999 ------------ ------------ (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 13,309,065 $ 11,569,966 Accounts receivable from agreement with Fresenius 367,722 387,474 Prepaid expenses 154,112 389,180 Debt acquisition cost 135,060 144,654 ------------ ------------ Total current assets 13,965,959 12,491,274 Property and equipment, net 201,946 226,042 Other assets 26,170 20,360 Deferred financing costs 64,987 93,796 ------------ ------------ Total assets $ 14,259,062 $ 12,831,472 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 907,307 $ 952,932 Accrued compensation 134,499 135,211 Accrued liabilities 486,421 478,477 Current portion of convertible debentures 275,000 - Current portion of long-term obligations 1,161,610 850,108 ------------ ------------ Total current liabilities 2,964,837 2,416,728 Convertible debentures - 400,000 Long-term obligations, net of current portion 1,944,821 2,269,891 Stockholders' equity: Common stock, $.02 par value; 75,000,000 shares authorized, 48,644,490 and 46,314,110 shares issued and outstanding at March 31, 2000 and December 31, 1999, respectively 972,890 926,282 Additional paid-in capital 99,148,490 94,609,138 Accumulated deficit (90,771,976) (87,790,567) ------------ ------------ Total stockholders' equity 9,349,404 7,744,853 ------------ ------------ Total liabilities and stockholders' equity $ 14,259,062 $ 12,831,472 ============ ============
See accompanying notes. Note: The balance sheet at December 31, 1999 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles. 3 CYPRESS BIOSCIENCE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, 2000 1999 ------------ ------------ REVENUE: Product sales $ - $ 588,120 Revenue from Fresenius agreement 566,867 - ------------ ------------ Total revenue 566,867 588,120 COSTS AND EXPENSES: Production costs 63,709 519,485 Sales and marketing 1,922,608 1,086,248 Research and development 847,100 681,293 General and administrative 731,836 1,443,711 ------------ ------------ Total costs and expenses 3,565,253 3,730,737 OTHER INCOME (EXPENSE): Interest income 153,701 52,316 Interest expense (136,724) (11,891) ------------ ------------ 16,977 40,425 ------------ ------------ Net loss $ (2,981,409) $ (3,102,192) ============ ============ Net loss per share (basic and diluted) $ (0.06) $ (0.07) ============ ============ Shares used in computing net loss per share (basic and diluted) 47,598,257 42,364,408 ============ ============
See accompanying notes. 4 CYPRESS BIOSCIENCE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, 2000 1999 ----------- ----------- OPERATING ACTIVITIES Net loss $(2,981,409) $(3,102,192) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 28,112 127,256 Amortization of deferred compensation - 227,994 Changes in operating assets and liabilities, net 218,483 229,090 ----------- ----------- Net cash used by operating activities (2,734,814) (2,517,852) INVESTING ACTIVITIES Purchase of equipment (4,016) (64,119) ----------- ----------- Net cash used by investing activities (4,016) (64,119) FINANCING ACTIVITIES Payment of notes payable (12,087) (4,029) Deferred financing costs 38,403 - Proceeds from exercise of stock options and warrants 4,453,094 898,189 Proceeds from notes payable - 4,050,000 Proceeds from private placement of common stock and warrants - 1,500,000 Payment of capital lease obligations (1,481) (2,193) ----------- ----------- Net cash provided by financing activities 4,477,929 6,441,967 INCREASE IN CASH AND CASH EQUIVALENTS 1,739,099 3,859,996 Cash and cash equivalents at beginning of period 11,569,966 5,619,568 ----------- ----------- Cash and cash equivalents at end of period $13,309,065 $ 9,479,564 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid $ 70,963 $ 4,982 =========== ===========
See accompanying notes. 5 CYPRESS BIOSCIENCE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. FORMATION AND BUSINESS OF THE COMPANY The accompanying consolidated financial statements have been prepared by Cypress Bioscience, Inc. (the "Company") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the SEC. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated. In the opinion of the Company's management, all adjustments necessary for a fair presentation of the accompanying unaudited financial statements are reflected herein. All such adjustments are normal and recurring in nature. Interim results are not necessarily indicative of results for the full year. For more complete financial information, these consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's 1999 Annual Report on Form 10-K/A filed with the SEC. The Company markets the PROSORBA(R) column for the treatment of types of rheumatoid arthritis ("RA") and idiopathic thrombocytopenia purpura ("ITP"), which are types of immune disorders, and is engaged in the development of novel therapeutic agents for the treatment of blood platelet disorders. The PROSORBA column absorbs antibodies and circulating immune complexes and modulates the patient's inappropriate immune response to certain diseases. In March 1999, the Food and Drug Administration ("FDA") granted Cypress marketing clearance to distribute the PROSORBA column for the treatment of moderate to severe RA. The Company previously received marketing clearance from the FDA in December 1987 to distribute the PROSORBA column for the treatment of ITP, an immune-mediated bleeding disorder. The Company is also developing Cyplex(TM), a platelet alternative, previously known as Infusible Platelet Membranes, as an alternative to traditional platelet transfusions. 2. FRESENIUS AGREEMENTS In March 1999, Cypress entered into an agreement with Fresenius AG of Bad Homburg, Germany and its U.S. subsidiary, Fresenius Hemotechnology, Inc. ("FHI"). The agreement provides Fresenius with an exclusive license to distribute the PROSORBA column in the U.S., Europe, Latin America, and subject to certain conditions, Japan and certain other countries. Upon signing of the agreement, Cypress received a total of $1.5 million from Fresenius consisting of the purchase of 297,530 shares of Cypress common stock for $1.0 million, and $500,000 for the purchase of three-year warrants to buy 342,466 shares of Cypress common stock at $7.50 per share. In the U.S., Cypress and FHI will jointly market the PROSORBA column. Cypress and FHI will share in clinical trials and sales and marketing expenses in the U.S., subject to certain 6 annual dollar limits. Fresenius will have exclusive distribution rights and responsibility for clinical trials and registration of the product overseas. In the U.S., net profit will be split 50/50 until PROSORBA column revenue reaches a pre-determined sales threshold, after which time Cypress will receive 60% of the profits and Fresenius will receive 40%. Net profits will be split 50/50 outside the U.S. Revenue from the Fresenius agreement for the quarter ended March 31, 2000 consisted of Cypress's pro rata share of sales by Fresenius. Until profits are generated, Cypress will recognize revenue based on the payments from Fresenius, which are generally determined as the ratio of allowable expenses incurred for production, research and development and sales and marketing by Cypress compared to allowable expenses incurred by Cypress and Fresenius under the agreement. The agreement also included an option for Fresenius to purchase assets used in Cypress' manufacturing facilities in Redmond, Washington. In April 1999, Fresenius exercised its option and acquired the asset related to the PROSORBA column manufacturing function for $5.2 million. During 1999 Cypress recorded a total gain on the sale of approximately $2.5 million recognized from inventory and manufacturing assets. In addition, in March 1999, Fresenius purchased 297,530 shares of the Company's common stock for approximately $1.0 million or $3.361 per share and purchased for $500,000 a three-year warrant to purchase 342,466 shares of common stock with an exercise price of $7.50 per share. 3. INVENTORIES In April 1999, Fresenius acquired the PROSORBA column manufacturing facility. As a result the Company has no inventory as of March 31, 2000 or December 31, 1999. 4. NET LOSS PER SHARE The computation of net loss per share is based on the weighted average number of shares of common stock outstanding for each period. Common stock equivalents related to options, warrants and convertible debentures are excluded, as their effect is antidilutive. 5. EQUITY In March 2000, Cypress received proceeds of approximately $4.5 million from the exercise of options to purchase approximately 2,284,000 shares of common stock. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Except for the historical information contained herein, the following discussion contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties. The Company's actual results could differ materially from those discussed below and elsewhere in this 10Q. Factors that could cause or contribute to such differences include, without limitation, those discussed in this section, as well as other sections of this 10Q, and those discussed in the Company's Annual Report on Form 10-K/A for the year ended December 31, 1999. Company Overview In March 1999, the Company entered into an agreement with Fresenius Hemotechnology Inc. ("FHI"), a U.S. subsidiary of Fresenius AG ("Fresenius") of Bad Homburg, Germany. FHI is a leading provider of apheresis equipment and disposables. The agreement provides Fresenius with an exclusive license to manufacture and distribute the PROSORBA column in the U.S., Europe, Latin America, and subject to certain conditions, Japan and certain other countries. In April 1999, the Company and Fresenius launched the sale of the PROSORBA column for the treatment of moderate to severe rheumatoid arthritis ("RA") in adult patients with long standing disease who have failed or are intolerant to disease-modifying anti-rheumatic drugs ("DMARDs"). The PROSORBA column had been previously approved for idiopathic thrombocytopenia purpura ("ITP"), a rare hematologic disorder. Also in April 1999, Fresenius exercised its option to acquire the PROSORBA column manufacturing facility and related assets, located in Redmond, Washington, for $5.2 million. During 1999 Cypress recorded a total gain on the sale of $2.5 million. Results of Operations Total revenues for the quarter ended March 31, 2000 totaled $567,000 compared to $588,000 in the same period of 1999. The 1999 revenue consists entirely of PROSORBA column sales recorded by the Company. However, as a result of the Fresenius agreement entered into in March 1999, the 2000 revenue consists of $567,000 in revenue from the Fresenius agreement. Sales of the PROSORBA column are booked as revenues by FHT, based on the terms of the partnership agreement. Expenses incurred related to the PROSORBA column are reimbursed to the party incurring such expenses. Profits from the product after expense reimbursement is divided between Cypress and Fresenius with at least 50% of such profits allocated to Cypress. Total PROSORBA column sales for the quarters ended March 31, 2000 and 1999 totaled $1.3 million and $588,000, respectively. The increase of $712,000 in PROSORBA column sales is a result of increased sales of the PROSORBA column for the RA indication, offset in part by decreased sales of the PROSORBA column for idiopathic thrombocytopenia purpura ("ITP") indication. The Company received approval to market the PROSORBA column for RA in March 1999. 8 Total operating expenses for the quarters ended March 31, 2000 and 1999 totaled $3.6 million and $3.7 million, respectively. Total operating expenses were relatively consistent due to decreases in production costs since Fresenius now manufactures the PROSORBA column, and general and administrative expenses, offset by an increases in sales and marketing, and research and development expenses. Production costs decreased to $64,000 in the first quarter of 2000 from approximately $519,000 for the same period in 1999 primarily due to the Fresenius' acquisition of the PROSORBA column manufacturing facility in April 1999. As a result, the Company did not record product costs associated with manufacturing the PROSORBA column in 2000 as it did during the first quarter of 1999. The production costs incurred in 2000 were a result of royalties paid by the Company based on total PROSORBA column sales. Research and development expenses increased to $847,000 for the quarter ended March 31, 2000 from $681,000 for the same period in 2000. The increase is due to costs incurred for an investigator recruitment meeting, jointly sponsored by Fresenius and Cypress, held in February 2000, and partially offset by the absence of costs associated with the FDA approval process incurred during the first quarter of 1999. General and administrative expenses for the quarter ended March 31, 2000 totaled approximately $732,000, compared to $1.4 million for the same period in 1999. The decrease of $712,000 in general and administrative expenses was due primarily to increased business development activity in 1999 associated with negotiating the Company's agreement with Fresenius. Sales and marketing expenses for the quarter ended March 31, 2000 totaled approximately $1.9 million compared to approximately $1.1 million for the same period in 1999. The increase in 2000 from the same period in 1999 is due to sales and marketing efforts associated with the PROSORBA column for the RA indication. These efforts were launched in April 1999. Liquidity and Capital Resources The Company's cash and cash equivalents at March 31, 2000 totaled $13.3 million, compared to $11.6 million at December 31, 1999. The net increase in cash is due to the proceeds from the exercises of stock options, partially offset by cash used in operations. Working capital at March 31, 2000 totaled $11.0 million. The Company believes its cash and cash equivalents balance on March 31, 2000, together with the revenues the Company anticipates will be received under the Fresenius agreement, are sufficient to fund operations through the year 2000. The Company is actively seeking alternatives in an attempt to increase its cash position. In addition, to the extent the Company decides to develop and/or acquire products other than the PROSORBA column, including Cyplex(TM), it will be required to raise additional capital. The amount of capital required by the Company is dependent upon many factors, including the following: the Company's ability to successfully market the PROSORBA column for the RA indication, results of and the costs associated with the mandatory post approval clinical trials, results of current research and development efforts, the FDA regulatory 9 process, costs of commercialization of products and potential competitive and technological advances and levels of product sales. Because the Company is unable to predict the outcome of the foregoing factors, some of which are beyond the Company's control, the Company is unable to estimate with certainty its mid to long-term capital needs. Although the Company may seek to raise additional capital through a combination of additional equity sources, there is no assurance the Company will be able to raise additional capital through such sources or the funds raised thereby will allow the Company to maintain its current and planned operations. If the Company is unable to obtain additional capital, it will be required to delay, scale back or eliminate some or all of its planned research and development activities related to additional product opportunities. 10 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company invests its excess cash in U.S. government securities and money market funds with strong credit ratings. As a result, the Company's interest income is most sensitive to changes in the general level of U.S. interest rates. The Company does not use derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions in any material fashion. Accordingly, the Company believes that, while the investment-grade securities it holds are subject to changes in the financial standing of the issuer of such securities, the Company is not subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments. 11 PART II Item 1 - Legal Proceedings The Company is not party to any material legal proceedings. Item 6 - Exhibits and Reports on Form 8-K None 27.1 Financial Data Schedule 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Cypress Bioscience, Inc. May 15, 2000 /s/ Jay D. Kranzler -------------------------------------- Chief Executive Officer, Chief Financial Officer and Chairman of the Board (Principal Executive Officer and Principal Financial and Accounting Officer) 13 EX-27 2 ARTICLE 5 FDS
5 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 13,310 0 368 0 0 13,966 589 387 14,259 2,965 275 0 0 973 99,148 14,259 0 567 0 64 3,502 0 137 (2,981) 0 (2,981) 0 0 0 (2,981) (0.06) (0.06)
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