-----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, PwSH4jOUTJhjqFB+BSWvbkVglN20iKfjfUMOJ8fW/jKQMwd20PmICveTeljeOh6P kyF+xZ+tD1NHFxVlnAKyew== 0000950110-98-000600.txt : 19980515 0000950110-98-000600.hdr.sgml : 19980515 ACCESSION NUMBER: 0000950110-98-000600 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NASD 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: 98619817 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 FORM 10-Q ================================================================================ 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, 1998 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 April 24, 1998 48,250,768 ================================================================================ INDEX Page ---- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS: Consolidated Balance Sheets at March 31, 1998 and December 31, 1997......................... 3 Consolidated Statements of Operations for the three months ended March 31, 1998 and 1997...................................... 4 Consolidated Statement of Changes in Stockholders' Equity for the three months ended March 31, 1998.................................. 5 Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and 1997...................................... 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 6. EXHIBITS AND REPORTS ON FORM 8-K............................... 15 -2- BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES PART I. FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS (In thousands) March 31, December 31, 1998 1997 ----------- ------------ (Unaudited) ASSETS Current Assets: Cash and cash equivalents .......................... $ 3,290 $ 9,329 Short-term investments ............................. 36,319 26,178 Accounts receivable and other ...................... 33,184 27,540 Inventories ........................................ 5,972 5,401 Deferred income taxes .............................. 6,573 8,000 Prepaid expenses and other current assets .......... 478 403 -------- ------- Total current assets ............................. 85,816 76,851 Deferred income taxes ................................ 2,148 2,148 Severance pay funded ................................. 2,445 2,435 Property and equipment, net .......................... 7,412 7,545 Intangibles, net ..................................... 2,374 2,590 Patents, net ......................................... 495 551 Other assets ......................................... 3,302 3,293 -------- ------- Total assets ..................................... $103,992 $95,413 ======== ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term bank loans .............................. $ 320 $ 362 Accounts payable ................................... 1,258 1,645 Other current liabilities .......................... 7,798 6,573 -------- ------- Total current liabilities ........................ 9,376 8,580 -------- ------- Long-term liabilities ................................ 3,977 3,975 -------- ------- 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: 48,231,000 (47,304,000 at December 31, 1997) ............................... 482 473 Capital in excess of par value ..................... 141,005 136,662 Deficit ............................................ (50,770) (54,135) Less -- treasury stock at cost, 83,000 shares ...... (340) (340) Accumulated other comprehensive income ............. 262 198 -------- ------- Total stockholders' equity ....................... 90,639 82,858 -------- ------- Total liabilities and stockholders' equity ....... $103,992 $95,413 ======== ======= The accompanying notes are an integral part of these consolidated balance sheets. -3- BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands except per share data) Three Months Ended March 31, --------------------- 1998 1997 ------- ------- Revenues: Product sales .................................... $15,736 $14,379 Contract fees .................................... 1,004 116 Other revenues ................................... 150 -- Interest income .................................. 550 270 ------- ------- 17,440 14,765 ------- ------- Expenses: Research and development ......................... 5,256 3,940 Cost of product sales ............................ 2,518 2,269 General and administrative ....................... 2,052 1,936 Marketing and sales .............................. 2,647 1,886 Commissions and royalties ........................ 126 53 Interest and finance ............................. 21 94 ------- ------- 12,620 10,178 ------- ------- Income before income taxes ......................... 4,820 4,587 Income taxes ....................................... 1,455 1,192 ------- ------- Net income ......................................... $ 3,365 $ 3,395 ======= ======= Earnings per common share: Basic ............................................ $ 0.07 $ 0.07 ======= ======= Diluted .......................................... $ 0.07 $ 0.07 ======= ======= Weighted average number of common and common equivalent shares: Basic ............................................ 47,318 46,284 ======= ======= Diluted .......................................... 50,941 52,138 ======= ======= The accompanying notes are an integral part of these consolidated statements. -4- BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES 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 ------ ---------- --------- --------- -------- ------------- ------------- Balance, December 31, 1997 ............ 47,304 $ 473 $136,662 $(54,135) $(340) $198 $82,858 Issuance of common stock .............. 2 15 15 Exercise of stock options ............. 160 2 574 576 Exercise of warrants .................. 765 7 3,754 3,761 Unrealized gain on marketable securities, net ...................... 64 64 Net income for three months ended March 31, 1998 ................ 3,365 3,365 ------ ------ -------- -------- ----- ---- ------- Balance, March 31, 1998 ............... 48,231 $ 482 $141,005 $(50,770) $(340) $262 $90,639 ====== ====== ======== ======== ===== ==== ======= The accompanying notes are an integral part of this consolidated statement.
-5- BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Three Months Ended March 31, --------------------- 1998 1997 -------- -------- Cash flows from operating activities: Net income ................................................. $ 3,365 $ 3,395 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ........................... 714 776 Provision for severance pay ............................. 2 7 Gain on sales of short-term investments ................. (35) (2) Deferred income taxes ................................... 1,427 1,192 Common stock as payment for services .................... 15 15 Changes in: receivables ................................. (5,644) (2,308) inventories ................................. (571) 606 prepaid expenses and other current assets ... (75) (322) accounts payable ............................ (387) (2,163) other assets ................................ (9) (240) other current liabilities ................... 1,184 604 -------- -------- Net cash (used in) provided by operating activities ........ (14) 1,560 -------- -------- Cash flows from investing activities: Short-term investments ..................................... (11,417) (514) Capital expenditures ....................................... (310) (669) Severance pay funded ....................................... (10) (37) Proceeds from sales of short- term investments ......................................... 1,375 497 -------- -------- Net cash used in investing activities ...................... (10,362) (723) -------- -------- Cash flows from financing activities: Proceeds from issuance of common stock ..................... 4,337 4,191 -------- -------- Net (decrease) increase in cash and cash equivalents ......... (6,039) 5,028 Cash and cash equivalents at beginning of year ............... 9,329 7,005 -------- -------- Cash and cash equivalents at end of period ................... $ 3,290 $ 12,033 ======== ======== SUPPLEMENTARY INFORMATION Non-cash investing and financing activities: Conversions of convertible debt ............................ $ -- $ 138 Other information: Interest paid .............................................. $ -- $ 6 Income tax paid ............................................ $ 25 $ -- The accompanying notes are an integral part of these consolidated statements.
-6- BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES 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, 1997. 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, 1997. NOTE 2: COMPREHENSIVE INCOME Effective March 31, 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive Income," which establishes standards for reporting and display of comprehensive income and its components (revenue, expenses, gains, and losses) in a full set of general-purpose financial statements. For the quarters ended March 31, 1998 and 1997, total comprehensive income was approximately $3,429,000 and $3,395,000, respectively. Other comprehensive income consists of unrealized gains on marketable securities. -7- BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three months ended March 31, 1998 compared with three months ended March 31, 1997 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, 1997. 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 five products that have received regulatory approval for sale, of which four 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 products are primarily carried out through its wholly owned subsidiary in Rehovot, Israel. RESULTS OF OPERATIONS Overview 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- BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES Three Months Ended March 31, -------------------- 1998 1997 ------ ------ Revenues: Product sales ....................................... 90.2% 97.4% Contract fees ....................................... 5.8 0.8 Other revenues ...................................... 0.9 -- Interest income ..................................... 3.1 1.8 ----- ----- Total ........................................ 100.0% 100.0% ===== ===== Expenses: Research and development ............................ 30.1 26.7 Cost of product sales ............................... 14.5 15.4 General and administrative .......................... 11.8 13.1 Marketing and sales ................................. 15.2 12.8 Commissions and royalties ........................... 0.7 0.3 Interest and finance ................................ 0.1 0.6 ----- ----- Total ........................................ 72.4 68.9 ----- ----- Income before income taxes ............................ 27.6 31.1 Income taxes .......................................... 8.3 8.1 ----- ----- Net income ............................................ 19.3% 23.0% ===== ===== 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 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: -9- BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES Three Months Ended March 31, -------------------- 1998 1997 ------ ------ Oxandrin............................................ 59.3% 38.0% Bio-Tropin.......................................... 27.4 47.1 BioLon.............................................. 9.5 13.4 Other............................................... 3.8 1.5 ------ ------ 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. 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, -------------------- 1998 1997 ------ ------ United States...................................... 60.5% 36.9% International...................................... 39.5 63.1 ------ ------ Total....................................... 100.0% 100.0% ====== ====== Comparison of Three Months Ended March 31, 1998 and March 31, 1997 Revenues. Total revenues increased 18% in the first quarter of 1998 to $17,440,000 from $14,765,000 in the first quarter of 1997. Product sales increased $1,357,000, or 9%, in the first quarter of 1998 from the comparable prior period, primarily driven by increased sales of Oxandrin in the United States partially offset by decreased sales of human growth hormone ("hGH") and BioLon to BTG's distributors. Oxandrin sales increased $3,876,000, or 71%, primarily as a result of the Company's increased marketing efforts and growing awareness of the product. Product sales of hGH and BioLon decreased $2,462,000 and $427,000, or 36% and 22%, respectively. The decrease in sales of hGH and BioLon reflect quarterly variations in purchasing based on the operational needs of the Company's customers. Contract fees and other revenues are primarily generated from licensing and distribution arrangements and partial research and development funding by the Chief Scientist of the State of Israel. Contract fees represented approximately 6% of total revenues in the first quarter of 1998 compared to 1% in the first quarter of 1997. Of the contract fees earned in the three months ended March 31, 1998, $500,000, or 50% of total contract fees, was earned in respect of the license of distribution rights for BioLon in the United States and $400,000, or 40% of total contract fees, was earned in respect of the Company's hepatitis-B vaccine. Of the contract fees earned in the three months ended March 31, 1997, $66,000, or 57% of total contract fees, was earned in respect of BioLon. Interest income increased $280,000, or 104%, over the comparable prior period primarily as a result of increased cash balances -10- BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES (including short-term investments) resulting mainly from cash flow from operations subsequent to March 31, 1997 and higher yield achieved on the Company's short-term investments. Research and Development Expense. Research and development expense increased 33% in the first quarter of 1998 to $5,256,000 from $3,940,000 in the first quarter of 1997. The increase was primarily attributable to expenses associated with the Company's Phase III clinical trials, principally for its superoxide dismutase product and new dosage formulations for Oxandrin, and post-approval Phase IV clinical studies to provide additional clinical support for the use of Oxandrin to treat disease- related weight loss conditions other than AIDS-related weight loss. Cost of Product Sales. Cost of product sales increased $249,000, or 11%, in the first quarter of 1998 to $2,518,000 from $2,269,000 in the first quarter of 1997. Cost of product sales as a percentage of product sales for the first quarter of 1998 remained approximately the same as the comparable period last year - 16%. Oxandrin has 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 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 6% in the first quarter of 1998 to $2,052,000 versus $1,936,000 in the comparable prior period. As a percentage of revenues, general and administrative expense decreased to approximately 12% of revenues in the first quarter of 1998 versus 13% of revenues in the comparable prior year period as a result of the growth in revenues. Marketing and Sales Expense. Marketing and sales expense increased 40% in the first quarter of 1998 to $2,647,000 from $1,886,000 for the prior year period. As a percentage of revenues, marketing and sales expense increased to approximately 15% from 13% for the first quarter of 1997. 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 increase was primarily due to additional marketing and sales expenses, primarily resulting from increased personnel and increased advertising, promotional and market research activities, arising from the growth of the Company's product sales. Commissions and Royalties. Commissions and royalties were $126,000 in the first quarter of 1998, as compared to $53,000 in the first quarter of 1997. 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, 1998 was $1,455,000, representing approximately 30% of income before income taxes as compared to $1,192,000, or 26% of income before income taxes, in the first quarter of 1997. The Company's consolidated tax rate differs from the statutory rate because of Israeli tax benefits, research and experimental tax credits and similar items which reduce the tax rate. Net Income. The Company had approximately 1,034,000 million additional basic weighted average shares outstanding for the three month period ended March 31, 1998, as compared to the same period in 1997. The Company had approximately 1,197,000 less diluted weighted average shares outstanding, primarily as a result of the decrease in the price of the Common Stock (which resulted in less outstanding options being considered common equivalent shares because their exercise price was above the average fair market value of the Common Stock for the first quarter of 1998). -11- BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES The Company's working capital at March 31, 1998 was $76,440,000 as compared to $68,271,000 at December 31, 1997. The major portion of the Company's revenues is derived from product sales. In addition, the Company derives revenue from collaborative arrangements, under which the Company may earn up-front contract fees, may receive funding for additional research, 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. Revenues have in the past displayed and will in the immediate future continue to display variations due to changes in demand for its products, introductions of new products by competitors, the obtaining of new research and development contracts and licensing arrangements, the completion or termination of such contracts and arrangements, the timing and amounts of milestone payments and the timing of regulatory approvals of products. The cash flows of the Company have fluctuated significantly due to the impact of net income and losses, 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 $5,028,000 and $(6,039,000) in the three months ended March 31, 1997 and 1998, respectively, primarily as a result of increased short-term investments in 1998. Net cash provided by (used in) operating activities was $1,560,000 and $(14,000) in the three months ended March 31, 1997 and 1998, respectively. Net income was $3,395,000 and $3,365,000 in the same periods, respectively. In the three months ended March 31, 1997, net cash provided by operating activities was less than net income primarily because of an increase in accounts receivables and other of $2,308,000 and decrease in accounts payable of $2,163,000, partially offset by an increase in other current liabilities of $604,000, a decrease in inventory of $606,000, deferred income taxes of $1,192,000 and depreciation and amortization of $776,000. In the three months ended March 31, 1998, net cash provided by operating activities was less than net income, primarily because of an increase in accounts receivable and other and inventory of $5,644,000 and $571,000, respectively, and a decrease in accounts payable of $387,000, partially offset by an increase in other current liabilities of $1,184,000, deferred income taxes of $1,427,000 and depreciation and amortization of $714,000. Net cash used in investing activities was $723,000 and $10,362,000 in the three months ended March 31, 1997 and 1998, respectively. Net cash used in investing activities included capital expenditures of $669,000 and $310,000 in these periods, respectively, primarily for laboratory and manufacturing equipment. 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 $4,191,000 and $580,000 in the three months ended March 31, 1997 and 1998, respectively, which are net proceeds from issuances of Common Stock, primarily as a result of exercise of stock options. In the three months ended March 31, 1998, warrants to purchase 763,800 shares were excercised, resulting in net proceeds of $3,761,000. Because the warrants were exercised on March 31, 1998 (their expiration date) by the delivery of cash to the warrant agent for the Company, the Company did not receive the proceeds until April 1998. Accordingly, the net proceeds are reflected in accounts receivable at March 31, 1998. -12- BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES BTG does not currently have any material commitments for capital expenditures. The Company maintains its funds in money market funds, commercial paper and other liquid debt instruments. The Company manages its Israeli operations with the object of protecting against any material net financial loss in U.S. dollars from the impact of Israeli inflation and currency devaluation on its non- U.S. dollar assets and liabilities. The Bank of Israel's monetary policy is to manage the exchange rate while allowing the Consumer Price Index to rise by approximately 11% in 1996, 7% in 1997 and 0.1% in the three month period ended March 31, 1998. In 1996 and 1997 the Shekel was devalued by approximately 4% and 7% against the U.S. dollar, respectively, and was devalued by approximately 2% in the three months ended March 31, 1998. As a result, for those expenses linked to the Israeli Shekel, such as salaries and rent, this resulted in corresponding increases in these costs in U.S. dollars in 1996 and 1997, but a decrease in these costs in U.S. dollars in the three months ended March 31, 1998. To the extent that expenses in Shekels exceed the Company's income in Shekels (which to date have consisted primarily of research and development 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 the Company's financial condition. However, should the Company's income in Shekels exceed its expenses in Shekels in any material respect, the devaluation of the Shekel will adversely affect the Company'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 cost of local goods and services in Israel, the Company's financial results will be adversely affected as local expenses expressed in U.S. dollar terms will increase. There can be no assurance that the government of Israel will continue to devalue the Shekel from time to time to offset the effects of inflation in Israel. At March 31, 1998, intangibles, net consist of (i) $1,624,000 (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 and (ii) $750,000 (net of amortization) relating to the reacquisition of all rights to human growth hormone licensed to Smithkline Beecham. The Company is party to several proceedings relating to patents owned by it or others. The Company cannot predict the costs of such proceedings, and there can be no assurance that such costs will not be significant. Should the Company be unsuccessful in any of these proceedings, it may be unable to commercialize the products which are the subject of such proceedings in certain countries, and may be unable to produce the products in Israel, which could have a material adverse effect on the Company's revenues and results of operations. The Company believes that its remaining cash resources as of March 31, 1998, together with anticipated product sales, scheduled payments to be made to BTG under its current agreements with 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 -13- BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES 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- BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS: None (b) REPORTS ON FORM 8-K: None -15- BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES 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, President 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 13, 1998 -16- EX-27 2 ART. 5 FDS FOR THREE MONTHS ENDED MARCH 31, 1998
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 MAR-31-1998 3,290 36,319 33,184 0 5,972 85,816 24,747 17,335 103,992 9,376 0 0 0 482 90,157 103,992 15,736 17,440 2,518 12,599 0 0 21 4,820 1,455 3,365 0 0 0 3,365 0.07 0.07
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