-----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, JNGej4/v3DuC2Xir3sVmrMpbQjgiw6m5SWIDQvImmmEDg36CTeag8UbaSvjhMX/w 2VYO44Wp+A3iv6Rvt7omag== 0000912057-00-024108.txt : 20000516 0000912057-00-024108.hdr.sgml : 20000516 ACCESSION NUMBER: 0000912057-00-024108 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: BIO TECHNOLOGY GENERAL CORP CENTRAL INDEX KEY: 0000722104 STANDARD INDUSTRIAL CLASSIFICATION: MEDICINAL CHEMICALS & BOTANICAL PRODUCTS [2833] IRS NUMBER: 133033811 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15313 FILM NUMBER: 630793 BUSINESS ADDRESS: STREET 1: 70 WOOD AVE S CITY: ISELIN STATE: NJ ZIP: 08830 BUSINESS PHONE: 9086328800 MAIL ADDRESS: STREET 1: 70 WOOD AVENUE SOUTH CITY: ISELIN STATE: NJ ZIP: 08830 10-Q 1 10- FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [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 Commission File Number 0-15313 BIO-TECHNOLOGY GENERAL CORP. (Exact name of registrant as specified in its charter) Delaware 13-3033811 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 70 Wood Avenue South, Iselin, New Jersey 08830 (Address of principal executive offices) (732) 632-8800 (Registrant's telephone number, including area code) Former address: Not Applicable - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Common Stock, par value $.01 per share, outstanding as of May 5, 2000: 54,412,340 1 INDEX
PAGE ---- Part I. Financial Information Item 1. Financial Statements: Consolidated Balance Sheets at March 31, 2000 and December 31, 1999.............................................3 Consolidated Statements of Operations for the three months ended March 31, 2000 and 1999..........................................................4 Consolidated Statement of Changes in Stockholders' Equity for the three months ended March 31, 2000......................................................5 Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and 1999..........................................................6 Notes to Consolidated Financial Statements.........................................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................................................8 Part II. Other Information Item 5. Other Information.................................................................15 Item 6. Exhibits and Reports on Form 8-K..................................................15
2 PART I. FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS (In thousands)
March 31, 2000 December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $ 32,537 $ 18,703 Short-term investments 68,473 68,547 Accounts receivable 27,959 37,504 Inventories 9,336 8,624 Deferred income taxes 4,289 4,286 Prepaid expenses and other current assets 1,776 220 -------- -------- Total current assets 144,370 137,884 Account receivable 2,443 2,443 Severance pay funded 2,460 2,369 Property and equipment, net 20,000 18,938 Other assets 3,060 3,011 -------- -------- Total assets $172,333 $164,645 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term bank loans $ 433 $ 20 Accounts payable 4,723 7,257 Other current liabilities 12,900 11,151 -------- -------- Total current liabilities 18,056 18,428 -------- -------- Long-term liabilities 4,635 4,333 -------- -------- Stockholders' equity: Preferred stock - $.01 par value; 4,000,000 shares authorized; no shares issued -- -- Common stock - $.01 par value; 150,000,000 shares authorized; issued: 54,301,000 (53,280,000 at December 31, 1999) 543 533 Capital in excess of par value 175,035 168,743 Deficit (21,049) (22,534) Less - treasury stock at cost, 83,000 shares (340) (340) Accumulated other comprehensive income (4,547) (4,518) -------- -------- Total stockholders' equity 149,642 141,884 -------- -------- Total liabilities and stockholders' equity $172,333 $164,645 ======== ========
The accompanying notes are an integral part of these consolidated balance sheets. 3 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands except per share data)
Three Months Ended March 31, - ---------------------------------------------------------------------------------------------------- 2000 1999 -------- -------- - ---------------------------------------------------------------------------------------------------- Revenues: Product sales $ 12,507 $ 15,867 Contract fees 2,475 2,906 Royalties 635 36 Other revenues 432 461 Interest income 1,351 958 -------- -------- 17,400 20,228 -------- -------- Expenses: Research and development 5,397 4,618 Cost of product sales 2,336 2,254 General and administrative 3,446 2,664 Marketing and sales 3,256 4,559 Commissions and royalties 654 321 Interest and finance 30 3 -------- -------- 15,119 14,419 -------- -------- Income before income taxes 2,281 5,809 Income taxes 796 1,803 -------- -------- Net income $ 1,485 $ 4,006 ======== ======== Earnings per common share: Basic $0.03 $0.08 ======== ======== Diluted $0.03 $0.08 ======== ======== Weighted average number of common and common equivalent shares: Basic 53,748 51,940 ======== ======== Diluted 57,373 52,652 ======== ========
The accompanying notes are an integral part of these consolidated statements. 4 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (in thousands)
Common Stock Accumulated -------------- Capital in Other Total Par Excess of Treasury Comprehensive Stockholders' Shares Value Par Value Deficit Stock Income Equity (Loss) - ---------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1999 53,280 $533 $168,743 $(22,534) $(340) $(4,518) $141,884 Comprehensive income: Net income for three months ended March 31, 2000 1,485 1,485 Unrealized loss on marketable securities, net (29) (29) -------- Total comprehensive income: 1,456 -------- Issuance of common stock 70 1 380 381 Exercise of stock options 951 9 5,912 5,921 ------ ---- -------- -------- ----- ------- -------- Balance, March 31, 2000 54,301 $543 $175,035 $(21,049) $(340) $(4,547) $149,642 ====== ==== ======== ======== ===== ======= ========
The accompanying notes are an integral part of this consolidated statement. 5 CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Three Months Ended March 31, ------------------------- 2000 1999 ---- ---- - ------------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income $ 1,485 $ 4,006 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 728 825 Provision for severance pay 302 144 Loss on sales of short-term investments 260 16 Gain on sales of fixed assets (12) (7) Deferred income taxes 733 1,455 Common stock as payment for services 15 15 Changes in: receivables 9,545 19,636 inventories (712) (1,150) prepaid expenses and other current assets (1,559) (116) accounts payable (3,267) (380) other assets (251) 20 other current liabilities 2,162 148 ------- --------- Net cash provided by operating activities 9,429 24,612 ------- --------- Cash flows from investing activities: Short-term investments (6,662) (31,386) Capital expenditures (1,616) (588) Severance pay funded (91) (53) Proceeds from sales of fixed assets 40 30 Proceeds from sales of short- term investments 6,447 5,026 ------- --------- Net cash used in investing activities (1,882) (26,971) ------- --------- Cash flows from financing activities: Proceeds from issuance of common stock upon exercise of options 6,287 669 ------- --------- Net increase (decrease) in cash and cash equivalents 13,834 (1,690) Cash and cash equivalents at beginning of year 18,703 9,431 ------- --------- Cash and cash equivalents at end of period $32,537 $ 7,741 ======= ========= SUPPLEMENTARY INFORMATION Other information: Income tax paid $ -- $ 344
The accompanying notes are an integral part of these consolidated statements. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1: STATEMENT ON ADJUSTMENTS In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting of only normal recurring accruals, considered necessary for a fair presentation. Due to fluctuations in quarterly revenues earned, operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. The accounting policies continue unchanged from December 31, 1999. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three months ended March 31, 2000 compared with three months ended March 31, 1999 STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q CONCERNING THE COMPANY'S BUSINESS OUTLOOK OR FUTURE ECONOMIC PERFORMANCE; ANTICIPATED PROFITABILITY, REVENUES, EXPENSES OR OTHER FINANCIAL ITEMS; INTRODUCTIONS AND ADVANCEMENTS IN DEVELOPMENT OF PRODUCTS, AND PLANS AND OBJECTIVES RELATED THERETO; AND STATEMENTS CONCERNING ASSUMPTIONS MADE OR EXPECTATIONS AS TO ANY FUTURE EVENTS, CONDITIONS, PERFORMANCE OR OTHER MATTERS, ARE "FORWARD-LOOKING STATEMENTS" AS THAT TERM IS DEFINED UNDER THE FEDERAL SECURITIES LAWS. FORWARD- LOOKING STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE STATED IN SUCH STATEMENTS. SUCH RISKS, UNCERTAINTIES AND FACTORS INCLUDE, BUT ARE NOT LIMITED TO, CHANGES AND DELAYS IN PRODUCT DEVELOPMENT PLANS AND SCHEDULES, CHANGES AND DELAYS IN PRODUCT APPROVAL AND INTRODUCTION, CUSTOMER ACCEPTANCE OF NEW PRODUCTS, CHANGES IN PRICING OR OTHER ACTIONS BY COMPETITORS, PATENTS OWNED BY THE COMPANY AND ITS COMPETITORS, CHANGES IN HEALTHCARE REIMBURSEMENT, RISK OF OPERATIONS IN ISRAEL, RISK OF PRODUCT LIABILITY, GOVERNMENTAL REGULATION, DEPENDENCE ON THIRD PARTIES TO MANUFACTURE PRODUCTS AND COMMERCIALIZE PRODUCTS, GENERAL ECONOMIC CONDITIONS, AS WELL AS OTHER RISKS DETAILED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999. OVERVIEW The Company is engaged in the research, development, manufacture and marketing of biopharmaceutical products. Through a combination of internal research and development, acquisitions, collaborative relationships and licensing arrangements, BTG has developed a portfolio of therapeutic products, including seven products that have received regulatory approval for sale, of which five are currently being marketed. The Company seeks both broad markets for its products as well as specialized markets where it can seek Orphan Drug status and potential marketing exclusivity. The Company was founded in 1980 to develop, manufacture and market novel therapeutic products. The Company's overall administration, licensing, human clinical studies, marketing activities, quality assurance and regulatory affairs are primarily coordinated at the Company's headquarters in Iselin, New Jersey. Pre-clinical studies, research and development activities and manufacturing of the Company's genetically engineered and fermentation products are primarily carried out through its wholly owned subsidiary in Rehovot, Israel. RESULTS OF OPERATIONS The following tables set forth for the fiscal periods indicated the percentage of revenues represented by certain items reflected on the Company's statement of operations. 8
THREE MONTHS ENDED MARCH 31, ----------------------- 2000 1999 ---- ---- Revenues: Product sales 71.9% 78.4% Contract fees 14.2 14.4 Royalties 3.6 0.2 Other revenues 2.5 2.3 Interest income 7.8 4.7 ----- ----- Total 100.0% 100.0% ===== ===== Expenses: Research and development 31.0 22.8 Cost of product sales 13.4 11.1 General and administrative 19.8 13.2 Marketing and sales 18.7 22.6 Commissions and royalties 3.8 1.6 Interest and finance 0.2 0.0 ----- ----- Total 86.9 71.3 ----- ----- Income before income taxes 13.1 28.7 Income taxes 4.6 8.9 ----- ----- Net income 8.5% 19.8% ===== =====
The Company has historically derived its revenues from product sales as well as from collaborative arrangements with third parties, under which the Company may earn up-front contract fees, may receive funding for additional research (including funding from the Chief Scientist of the State of Israel), is reimbursed for producing certain experimental materials, may be entitled to certain milestone payments, may sell product at specified prices, and may receive royalties on sales of product. The Company anticipates that product sales will constitute the majority of its revenues in the future. Revenues have in the past displayed and will in the immediate future continue to display significant variations due to changes in demand for its products, new product introductions by the Company and its competitors, the obtaining of new research and development contracts and licensing arrangements, the completion or termination of such contracts and 9 arrangements, the timing and amounts of milestone payments, and the timing of regulatory approvals of products. The following table summarizes the Company's sales of its commercialized products as a percentage of total product sales for the periods indicated:
THREE MONTHS ENDED MARCH 31, ------------------------ 2000 1999 ---- ---- Oxandrin 40.1% 42.4% Bio-Tropin 31.7 31.7 BioLon 14.7 14.6 Delatestryl 12.7 9.9 Other 0.8 1.4 ----- ----- Total 100.0% 100.0% ===== =====
The Company believes that its product mix will change significantly as it continues to focus on: (i) increasing market penetration of its existing products; (ii) expanding into new markets; and (iii) commercializing additional products. As previously announced, in April 1999 Gentiva Health Services, Inc. ("Gentiva"), BTG's distributor for Oxandrin, began to reduce its purchases of Oxandrin in order to reduce the amount of Oxandrin inventory it carried as a result of a slowing in the rate of increase of Oxandrin prescriptions. The Company expects during 2000 to introduce Oxandrin to address involuntary weight loss in patients with pressure ulcers and wounds. Successful penetration of this new market could lead to a more rapid rate of Oxandrin prescription growth. The following table summarizes the Company's U.S. and international product sales as a percentage of total product sales for the period indicated:
THREE MONTHS ENDED MARCH 31, ------------------------ 2000 1999 ---- ---- United States 53.2% 51.9% International 46.8 48.1 ----- ----- Total 100.0% 100.0% ===== =====
10 COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999 REVENUES. Total revenues decreased 14% in the first quarter of 2000 to $17,400,000 from $20,228,000 in the first quarter of 1999. Product sales decreased by $3,360,000, or 21%, in the first quarter of 2000 from the comparable prior period. Oxandrin sales to Gentiva Health Services Inc. ("Gentiva"), the Company's wholesale and retail distributor of Oxandrin in the United States, decreased $1,721,000, or 26%, in the first quarter of 2000 compared to the first quarter of 1999 despite the fact that end user sales were approximately $9.6 million in the three months ended March 31, 2000 as compared to approximately $8.2 million in the comparable period in 1999. The decrease in sales to Gentiva was primarily due to Gentiva's change in policy in April 1999 to reduce the amount of Oxandrin inventory it carries. Product sales of hGH and BioLon decreased $1,072,000, and $480,000, or 21% and 21%, respectively. The decrease in sales of hGH was primarily the result of the timing of purchases by BTG's distribution partners. Contract fees are primarily generated from licensing and distribution arrangements. Contract fees represented approximately 14.2% of total revenues in the first quarter of 2000 compared to 14.4% in the first quarter of 1999. Of the contract fees earned in the first quarter of 2000, $1,475,000, $450,000 and $250,000, or 60%, 18% and 10% of total contract fees, respectively, was earned in respect of the Company's Hepatitis-B- Vaccine, Oxandrin and BioLon products, respectively. Of the contract fees earned in the first quarter of 1999, $2,596,000, or 89% of total contract fees, was earned in respect of Insulin and $175,000, or 6% of total contract fees, was earned in respect of the Company's Vitamin D Silkis product. Royalties were $635,000 in the first quarter of 2000, as compared to $36,000 in the same quarter last year. These revenues consist of royalties from the licensee of the Company's Mircette product. Other revenues are primarily generated from partial research and development funding by the Chief Scientist of the State of Israel. Interest income increased $393,000, or 41%, over the comparable prior period, primarily as a result of increased cash balances (including short-term investments) resulting mainly from cash flow from operations and exercise of options subsequent to March 31, 1999. RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense increased 17% in the first quarter of 2000 to $5,397,000 from $4,618,000 in the first quarter of 1999. The increase in research and development expenses resulted mainly from the increase in research and development personnel and other expenses associated with these additional personnel. COST OF PRODUCT SALES. Cost of product sales increased $82,000, or 4%, in the first quarter of 2000 to $2,336,000 from $2,254,000 in the first quarter of 1999. Cost of product sales as a percentage of product sales increased to 18.7% as compared to 14.2% in the comparable period last year. Cost of product sales increased, both in absolute terms and as a percentage of revenues, primarily as a result of the unfavorable mix of product and higher manufacturing costs of BioLon. Oxandrin and human growth hormone have a relatively low cost of manufacture as a percentage of product sales, while BioLon has the highest cost to manufacture as a percentage of product sales. Cost of product sales as a percentage of product sales also increased as a result of fixed production costs, primarily overhead, being spread over a smaller amount of product sales. Cost of product sales as a percentage of product sales varies from year to year and quarter to quarter depending on the quantity and mix of products sold. GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense increased 29% in the first quarter of 2000 to $3,446,000 versus $2,664,000 in the comparable prior period. As a percentage of revenues, general and administrative expense increased to approximately 19.8% of revenues in the first quarter of 2000 versus 13.2% of revenues in the comparable prior year period. The increase in general and 11 administrative expense derived mainly from legal fees resulting from the reactivation in the fourth quarter of 1998 of the Company's declaratory judgment action against Genentech in respect of the Company's hGH in the United States and additional personnel as a result of the Company's growth. MARKETING AND SALES EXPENSE. Marketing and sales expense decreased 29% in the first quarter of 2000 to $3,256,000 from $4,559,000 for the prior year period. As a percentage of revenues, marketing and sales expense decreased to approximately 18.7% from 22.6% for the first quarter of 1999. These expenses primarily related to the sales and marketing force in the United States that the Company established to promote distribution of Oxandrin in the United States. The decrease was primarily due to the timing of marketing, advertising, promotional and market research activities. COMMISSIONS AND ROYALTIES. Commissions and royalties were $654,000 in the first quarter of 2000, as compared to $321,000 in the first quarter of 1999. These expenses consist primarily of royalties to entities from which the Company licensed certain of its products and to the Chief Scientist. INCOME TAXES. Provision for income taxes for the three months ended March 31, 2000 was $796,000, representing approximately 34.9% of income before income taxes as compared to $1,803,000, or 31.0% of income before income taxes, in the first quarter of 1999. The increase in the effective tax rate in the first quarter of 2000 compared to the first quarter of 1999 was primarily due to the substantial reduction of certain tax credits available in prior years. The Company's consolidated tax rate differs from the statutory rate because of Israeli tax benefits, tax credits and similar items which reduce the tax rate. EARNINGS PER COMMON SHARE. The Company had approximately 1.8 million and 4.7 million additional basic and diluted weighted average shares outstanding, respectively, for the three month period ended March 31, 2000, as compared to the same period in 1999. The increased number of basic shares was primarily the result of the issuance, subsequent to March 31, 1999, of shares upon the exercise of options. The increase in the number of diluted shares was the result of the increased number of shares outstanding, as well as more outstanding options being considered common equivalent shares because their exercise price was below the average fair market value of the Common Stock for the first quarter of 2000, which average fair market value was higher than in the first quarter of 1999. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital at March 31, 2000 was $126,314,000 as compared to $119,456,000 at December 31, 1999. The cash flows of the Company have fluctuated significantly due to the impact of net income, capital spending, working capital requirements, the issuance of Common Stock and other financing activities. The Company expects that cash flow in the near future will be primarily determined by the levels of net income and financings, if any, undertaken by the Company. Net cash increased (decreased) by $13,834,000 and ($1,690,000) in the three months ended March 31, 2000 and 1999, respectively. Net cash provided by operating activities was $9,429,000 and $24,612,000 in the three months ended March 31, 2000 and 1999, respectively. Net income was $1,485,000 and $4,006,000 in the same periods, respectively. In the three months ended March 31, 2000 net cash provided by operating activities was greater than net income mainly due to changes in receivables of $9,545,000, primarily as a result of the payment by Teva Pharmaceutical Industries Ltd. of a $10 million contract fee accrued in September 1999, an increase in other current liabilities of $2,162,000, depreciation and amortization of $728,000 and deferred income taxes of $733,000, partially offset by a decrease in accounts payable and an increase in prepaid expenses and other current assets and inventory in the amounts of $3,267,000, $1,559,000 and $712,000, respectively. In the three months ended March 31, 1999, net cash provided by operating activities was greater than net income primarily because of changes in receivables of $19,636,000, deferred income taxes 12 of $1,455,000 and depreciation and amortization of $825,000 partially offset by changes in prepaid expenses and other current assets of $1,150,000. The decrease in 1999 in accounts receivable is primarily attributable to the decrease in accounts receivable-other consisting of proceeds due from the exercise of warrants that expired on December 31, 1998, which proceeds were received in January 1999. Net cash used in investing activities was $1,882,000 and $26,971,000 in the three months ended March 31, 2000 and 1999, respectively. Net cash used in investing activities included capital expenditures of $1,616,000 and $588,000 in these periods, respectively, primarily for the new manufacturing facility in Israel in 2000 and primarily for laboratory and manufacturing equipment in 1999. The remainder of the net cash used in investing activities was primarily for purchases and sales of short-term investments. Net cash provided by financing activities was $6,287,000 and $699,000 in the three months ended March 31, 2000 and 1999, respectively, which are net proceeds from issuances of Common Stock as a result of exercise of stock options. In April 1999, the Company purchased a manufacturing facility in Israel for approximately $6,250,000. The Company will initially locate its production activities for BIO-HEP-B and FIBRIMAGE at this new facility, and will thereafter move the remainder of its production activities to this facility. The Company expects the initial production facility will be ready by early 2001. The Company expects it will cost approximately $38,000,000 to complete the production facility (excluding the cost of purchasing the facility), of which approximately $11,000,000 had been expended through March 31, 2000. The Company maintains its funds in money market funds, commercial paper and other liquid debt instruments. The Company manages its Israeli operations with the objective of protecting against any material net financial loss in U.S. dollars from the impact of Israeli inflation and currency devaluations on its non-U.S. dollar assets and liabilities. The cost of the Company's operations in Israel, as expressed in dollars, is influenced by the extent to which any increase in the rate of inflation in Israel is not offset (or is offset on a lagging basis) by a devaluation of the Israeli Shekel in relation to the U.S. dollar. The rate of inflation (as measured by the consumer price index) was approximately 9% in 1998 and 1% in 1999, while the Shekel was devalued by approximately 18% and 0%, respectively. In the three months ended March 31, 2000 the consumer price index decreased at the rate of approximately 1% while the Shekel's value in relation to the U.S. dollar increased by approximately 3%. As a result, for those expenses linked to the Israeli Shekel, such as salaries and rent, this resulted in corresponding decreases in these costs in U.S. dollars in 1998, but an increase in these costs in U.S. dollar terms in 1999 and in the first quarter of 2000. To the extent that expenses in Shekels exceed BTG's revenues in Shekels (which to date have consisted primarily of research funding from the Chief Scientist and product sales in Israel), the devaluations of Israeli currency have been and will continue to be a benefit to BTG's financial condition. However, should BTG's revenues in Shekels exceed its expenses in Shekels in any material respect, the devaluation of the Shekel will adversely affect BTG's financial condition. Further, to the extent the devaluation of the Shekel with respect to the U.S. dollar does not substantially offset the increase in the costs of local goods and services in Israel, BTG's financial results will be adversely affected as local expenses measured in U.S. dollars will increase. At March 31, 2000, intangibles, net consist of $758,000 (net of amortization) relating to the repurchase of all rights to hGH previously licensed to The DuPont Merck Pharmaceutical Company, together with all rights to all data generated in pharmacological, toxicological and clinical studies and encompassed in the Investigational New Drug Application and New Drug Application files then pending with the U.S. Food and Drug Administration for the treatment of human growth hormone-deficient children. The Company believes that its remaining cash resources as of March 31, 2000, together with anticipated product sales, scheduled payments to be made to BTG under its current agreements with 13 pharmaceutical partners, the proceeds from sales of equity and continued funding from the Chief Scientist at current levels, will be sufficient to fund the Company's current operations for the foreseeable future. There can, however, be no assurance that product sales will occur as anticipated, that scheduled payments will be made by third parties, that current agreements will not be canceled, that the Chief Scientist will continue to provide funding at current levels, or that unanticipated events requiring the expenditure of funds will not occur. The satisfaction of the Company's future cash requirements will depend in large part on the status of commercialization of the Company's products, the Company's ability to enter into additional research and development and licensing arrangements, and the Company's ability to obtain additional equity investments, if necessary. There can be no assurance that the Company will be able to obtain additional funds or, if such funds are available, that such funding will be on favorable terms. 14 PART II. OTHER INFORMATION Item 5. OTHER INFORMATION In May 2000, the Company entered into an agreement with the Ross Products Division of Abbott Laboratories pursuant to which Ross will co-market Oxandrin in the United States. On May 8, 2000, the United States Court of Appeals for the Federal Circuit denied Genentech, Inc.'s motion for an injunction pending the outcome of its appeal of a district court decision earlier this year in which a Genentech patent relating to a method for producing recombinant human growth hormone was found to be invalid. In addition, the Appellate Court denied Genentech's motion to expedite the appeal proceedings. U.S. rights to BTG's human growth hormone are licensed to Teva Pharmaceutical Industries Ltd., a leading pharmaceutical company with a commitment to provide competitively priced pharmaceuticals in markets worldwide. Teva has indicated that it will be ready to launch the product in the United States during the second half of 2000. The launch timing could, however, be subject to the resolution of a dispute between BTG and Serono Laboratories, Inc. ("Serono") relating to a 1998 co-promotion agreement with respect to Serono's recombinant human growth hormone product, Saizen(R). Serono is contesting BTG's termination of that agreement in 1999 and asserting that a non-compete provision, which BTG maintains will expire in mid-2000 if it is applicable at all, should continue until April 30, 2002. In March 2000, BTG filed a lawsuit in New Jersey to confirm BTG's position on these issues. Serono has filed a motion to dismiss BTG's lawsuit. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS: 27 Financial Data Schedule. (b) REPORTS ON FORM 8-K: None 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BIO-TECHNOLOGY GENERAL CORP. (Registrant) By: /s/ Sim Fass --------------------------------------------- Sim Fass Chairman and Chief Executive Officer, Principal Executive Officer /s/ Yehuda Sternlicht --------------------------------------------- Yehuda Sternlicht Vice President-Finance and Chief Financial Officer, Principal Financial and Accounting Officer Dated: May 11, 2000 16 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-2000 MAR-31-2000 32,537 68,473 27,959 0 9,336 144,370 40,493 20,493 172,333 18,056 0 0 0 543 149,099 172,333 12,507 17,400 2,336 15,089 0 0 30 2,281 796 1,485 0 0 0 1,485 0.03 0.03
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