-----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, OJvSfWlVrqzUPW3A6XJehAzC7LOhHkl9OD9fTsa3fF7QjpWRqFt+C1uo6qV0ZsCZ HaZmf7z0tMvorG/U0A11LQ== /in/edgar/work/20000811/0000725058-00-000014/0000725058-00-000014.txt : 20000921 0000725058-00-000014.hdr.sgml : 20000921 ACCESSION NUMBER: 0000725058-00-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CYTOGEN CORP CENTRAL INDEX KEY: 0000725058 STANDARD INDUSTRIAL CLASSIFICATION: [2835 ] IRS NUMBER: 222322400 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14879 FILM NUMBER: 694358 BUSINESS ADDRESS: STREET 1: 600 COLLEGE RD EAST CN 5308 CITY: PRINCETON STATE: NJ ZIP: 08540 BUSINESS PHONE: 6099878200 MAIL ADDRESS: STREET 1: 600 COLLEGE RD EAST CN 5308 STREET 2: 600 COLLEGE RD EAST CN 5308 CITY: PRINCETON STATE: NJ ZIP: 08540 10-Q 1 0001.txt 2ND QUARTER 2000 10-Q SECURITIES AND EXCHANGE COMMISSION Conformed Washington, D.C. 20549 Copy FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 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 333-02015 CYTOGEN Corporation ------------------- (Exact name of Registrant as specified in its charter) Delaware 22-2322400 - ------------------------------- ---------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 600 College Road East, CN 5308, Princeton, NJ 08540-5308 -------------------------------------------------------- (Address of Principal Executive Offices and Zip Code) Registrant's telephone number, including area code (609) 750-8200 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: Class Outstanding at July 28, 2000 - ---------------------------- ---------------------------- Common Stock, $.01 par value 72,897,625 PART I - FINANCIAL INFORMATION - ------------------------------- Item I - Consolidated Financial Statements CYTOGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (All amounts in thousands, except share data) (Unaudited)
June 30, December 31, 2000 1999 ------------ ------------ ASSETS: Current Assets: Cash and cash equivalents ............................................ $ 10,463 $ 10,801 Short-term investments ............................................... -- 1,593 Accounts receivable, net ............................................. 2,384 2,150 Inventories .......................................................... 810 685 Other current assets ................................................. 1,326 465 --------- --------- Total current assets .............................................. 14,983 15,694 Property and Equipment, net .............................................. 2,085 1,997 Other Assets ............................................................. 871 914 --------- --------- $ 17,939 $ 18,605 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities: Current portion of long-term liabilities ............................. $ 153 $ 162 Accounts payable and accrued liabilities ............................. 5,372 5,478 --------- --------- Total current liabilities ....................................... 5,525 5,640 --------- --------- Long-Term Liabilities .................................................... 2,453 2,416 --------- --------- Stockholders' Equity: Preferred stock, $.01 par value, 5,400,000 shares authorized - Series C Junior Participating Preferred Stock, $.01 par value, 200,000 shares authorized, none issued and outstanding ............ -- -- Common stock, $.01 par value, 250,000,000 shares authorized, 72,839,000 and 70,527,000 shares issued and outstanding in 2000 and 1999, respectively .................................... 728 705 Additional paid-in capital ........................................... 316,121 311,209 Deferred compensation ................................................ (1,057) (82) Accumulated deficit .................................................. (305,831) (301,283) --------- --------- Total stockholders' equity ........................................ 9,961 10,549 --------- --------- $ 17,939 $ 18,605 ========= =========
The accompanying notes are an integral part of these statements. 2 CYTOGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (All amounts in thousands, except per share data) (Unaudited)
Three Months Six Months Ended June 30, Ended June 30, -------------------- -------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Revenues: Product related: ProstaScint ............................................... $ 1,492 $ 1,661 $ 3,187 $ 3,253 OncoScint ................................................. 130 157 307 321 -------- -------- -------- -------- Total product sales ................................ 1,622 1,818 3,494 3,574 Quadramet royalties ....................................... 508 262 1,006 461 -------- -------- -------- -------- Total product related .............................. 2,130 2,080 4,500 4,035 License and contract ......................................... 90 2,370 148 2,739 -------- -------- -------- -------- Total revenues ..................................... 2,220 4,450 4,648 6,774 -------- -------- -------- -------- Operating Expenses: Cost of product and contract manufacturing revenues ............................ 981 1,170 1,911 2,274 Research and development ..................................... 1,540 981 3,032 2,038 Acquisition of technology rights ............................. -- 1,214 -- 1,214 Selling and marketing ........................................ 1,323 1,082 2,453 2,028 General and administrative ................................... 1,107 981 2,054 1,892 -------- -------- -------- -------- Total operating expenses ........................... 4,951 5,428 9,450 9,446 -------- -------- -------- -------- Operating loss ..................................... (2,731) (978) (4,802) (2,672) Gain on sale of laboratory and manufacturing facilities ..................................... -- -- -- 3,298 Interest income ............................................... 195 56 363 151 Interest expense ............................................... (51) (42) (109) (84) -------- -------- -------- -------- Net (loss) income .............................................. $ (2,587) $ (964) $ (4,548) $ 693 ======== ======== ======== ======== Basic and diluted net (loss) income per share .................................................... $ (0.04) $ (0.01) $ (0.06) $ 0.01 ======== ======== ======== ======== Basic weighted average common shares outstanding .................................... 72,779 65,632 72,130 64,884 ======== ======== ======== ======== Diluted weighted average common shares outstanding .................................... 72,779 65,632 72,130 65,042 ======== ======== ======== ========
The accompanying notes are an integral part of these statements. 3 CYTOGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (All amounts in thousands) (Unaudited)
Six Months Ended June 30, --------------------------- 2000 1999 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income ................................................. $ (4,548) $ 693 -------- -------- Adjustments to reconcile net (loss) income to cash used in operating activities: Depreciation and amortization .............................. 472 519 Imputed interest ........................................... (29) (8) Stock option and warrant grants ............................ 129 142 Stock based compensation ................................... 72 -- Acquisition of technology rights ........................... -- 1,214 Write down of assets ....................................... -- 53 Gain on sale of laboratory and manufacturing facilities .... -- (3,298) Gain on sale of equipment .................................. (148) -- Changes in assets and liabilites: Accounts receivable, net ................................ (190) (1,627) Inventories ............................................. (125) 74 Other assets ............................................ (818) (23) Accounts payable and accrued liabilities ................ (121) (3,600) Other liabilities ....................................... 76 71 -------- -------- Total adjustments ............................. (682) (6,483) -------- -------- Net cash used in operating activities ...................... (5,230) (5,790) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Net cash acquired from Prostagen, Inc. ............................ -- 550 Net proceeds from sale of equipment ............................... 148 -- Net proceeds from sale of laboratory and manufacturing facilities.. -- 3,584 Purchases of property and equipment ............................... (597) (93) -------- -------- Net cash (used for) provided by investing activities ....... (449) 4,041 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock ............................ 3,759 4,840 Redemption of short-term investments .............................. 1,593 -- Payment of long-term liabilities .................................. (11) (774) -------- -------- Net cash provided by financing activities .................. 5,341 4,066 -------- -------- Net (decrease) increase in cash and cash equivalents .............. (338) 2,317 Cash and cash equivalents, beginning of period .................... 10,801 3,015 -------- -------- Cash and cash equivalents, end of period .......................... $ 10,463 $ 5,332 ======== ========
The accompanying notes are an integral part of these statements. 4 CYTOGEN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The Company Cytogen Corporation ("Cytogen" or "the Company" which includes the Company and its subsidiaries) is an established biopharmaceutical company with two principal lines of business, proteomics and oncology. The Company is extending its expertise in antibodies and molecular recognition to the development of new products and a proteomics-driven drug discovery platform. The Company has established a pipeline of product candidates based upon its proprietary antibody and prostate specific membrane antigen, or PSMA, technologies. The Company, with Progenics Pharmaceuticals, Inc. has formed a joint venture focusing on the development of cancer in vivo immunotherapies based on PSMA technology. Cytogen's cancer management franchise currently comprises three marketed FDA-approved products: ProstaScint(R), used to image the extent and spread of prostate cancer; OncoScint CR/OV(R), a diagnostic imaging agent for colorectal and ovarian cancer; and Quadramet(R), for the relief of cancer-related bone pain. The Company's wholly owned subsidiary, AxCell Biosciences Corporation ("AxCell"), is developing a proprietary protein pathway database as a drug discovery and development tool for the pharmaceutical and biotechnology industries. Basis of Consolidation The consolidated financial statements include the accounts of Cytogen and its wholly- owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Basis of Presentation The consolidated financial statements of Cytogen Corporation are unaudited and include all adjustments which in the opinion of management are necessary to present fairly the financial condition and results of operations as of and for the periods set forth in the Consolidated Balance Sheets, Consolidated Statements of Operations and Consolidated Statements of Cash Flows. All such accounting adjustments are of a normal, recurring nature. The consolidated financial statements do not include all of the information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission, which includes financial statements as of and for the year ended December 31, 1999. The results of the Company's operations for any interim period are not necessarily indicative of the results of the Company's operations for any other interim period or for a full year. 5 CYTOGEN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash in banks and all highly-liquid investments with a maturity of three months or less at the time of purchase. Net Income (Loss) Per Share Basic net income (loss) per share is based upon the weighted average common shares outstanding during each period. Diluted net income per share for the six months ended June 30, 1999 is based upon the weighted average common stock outstanding and common stock equivalents which represent the incremental common shares that would have been outstanding under certain employee stock options and warrants, upon assumed exercise of dilutive stock options and warrants. Diluted net loss per share is the same as basic net loss per share, as the inclusion of common stock equivalents would be antidilutive. 2. SALES OF CYTOGEN COMMON STOCK: During the six months ended June 30, 2000, the Company sold 1.0 million shares of Cytogen common stock to Berlex Laboratories ("Berlex") for $1.0 million or $1.00 per share upon an exercise of a warrant, and approximately 1.3 million additional shares of Cytogen common stock for total proceeds of $2.7 million at an average price of $2.06 per share upon the exercises of employee stock options and other warrants. 3. RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS: In December 1999, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101). The bulletin draws on existing accounting rules and provides specific guidance on how those accounting rules should be applied, and specifically addresses revenue recognition for non-refundable technology access fees in the biotechnology industry. SAB 101 is effective for fiscal quarters beginning after September 30, 2000. The Company is evaluating SAB 101 and the effect it may have on the Company's financial position or results of operations. 4. PROPOSED ACQUISITION: On July 7, 2000, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Advanced Magnetics, Inc. ("Advanced Magnetics"), a developer of novel diagnostic pharmaceuticals for use in magnetic resonance imaging (MRI), pursuant to which Advanced Magnetics will become a wholly owned subsidiary of the Company. At the effective time of the merger, Advanced Magnetics shareholders will receive $60 million in shares of Cytogen common stock. Each outstanding share of Advanced Magnetics common stock will be 6 CYTOGEN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd) converted into Cytogen common stock at an exchange ratio equal to $8.75 divided by the average closing price of Cytogen common stock for 20 trading days ending 3 trading days prior to the closing of the merger. The number of shares of Cytogen common stock exchanged per share of Advanced Magnetics common stock will not, however, be less than 0.7566 shares or more than 1.0237 shares. In addition, Cytogen will assume all outstanding options to purchase Advanced Magnetics common stock under Advanced Magnetics' employee stock option and stock purchase plans. Consummation of the merger is subject to various conditions including, but not limited to, approval by the stockholders of Advanced Magnetics. The merger is intended to be accounted for as a pooling of interests. As of June 30, 2000, approximately $582,000 of merger transaction costs are included in other current assets and will be charged to the Company's statement of operations upon consummation of the merger. 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion contains historical information as well as forward looking statements that involve a number of risks and uncertainties. Generally, forward looking statements can be identified by the use of phrases like "believe", "expect", "anticipate", "plan", "may", "will", "could", "estimate", "potential", "opportunity" and "project" and similar terms. The Company's actual results could differ materially from the Company's historical results of operations and those discussed in the forward looking statements. Factors that could cause actual results to differ materially, include, but are not limited to those identified in the Company's 1999 Form 10-K under the captions, "Important Factors Regarding Forward Looking Statements" and "Risk Factors". Stockholders are cautioned not to put undue reliance on any forward looking statement. The following discussion and analysis should also be read in conjuction with the Financial Statements and related notes thereto contained elsewhere herein, as well as the Company's 1999 Form 10-K and from time-to-time the Company's other filings with the Securities and Exchange Commission. Overview During this year, the Company terminated the co-marketing arrangement with the Bard Urological Division of the C.R. Bard Company, Inc. ("Bard") to assume sole responsibility for the marketing and sales of the Company's ProstaScint product. The Company has expanded its sales force and believes that the highly trained and dedicated internal sales force will be able to most effectively market the Company's product and build capability for possible future products. The Company, however, has limited experience in direct selling and can not give any assurance as to the impact on sales by assuming selling efforts itself. On July 7, 2000, the Company entered into a Merger Agreement to acquire Advanced Magnetics, Inc., a developer of novel diagnostic pharmaceuticals for use in MRI procedures (see Note 4 to the Consolidated Financial Statements). The proposed transaction represents a strategic step for Cytogen to broaden its oncology franchise, which it intends to leverage through its proteomics business and the development of products using its PSMA technology. This stock-for-stock transaction, which includes the acquisition of products, technology, and cash assets provides the combined company with the following benefits: - - The acquisition broadens Cytogen's medical oncology presence and strengthens its position in the area of cancer staging and detection, in which Cytogen currently markets two products, ProstaScint(R) and OncoScint CR/OV(R). - - Advanced Magnetics' late stage clinical product, Combidex(R), a MRI contrast agent for the detection of lymph node metastases, has produced promising clinical results and creates the potential for an enhanced revenue stream if approved by the U.S. Food and Drug Administration (FDA). The FDA recently issued an approvable letter subject to certain conditions with respect to Combidex, following a priority review. 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) - - The combined company plans to utilize Cytogen's oncology sales and marketing organization for the expected launch of Combidex provided it is able to satisfy the conditions specified for final approval by the FDA. - - At June 30, 2000, Advanced Magnetics had $18.9 million in working capital. The enhanced cash position created by the merger secures development resources and provides leverage to other areas of the combined business, including prostate cancer diagnostics and therapeutics based on PSMA technology and Cytogen's AxCell Biosciences proteomics subsidiary. - - Advanced Magnetics' next-generation imaging agent, Code 7228, is expected to enter Phase II clinical development later this year. Code 7228 is being developed for oncology and magnetic resonance angiography applications. - - Cytogen gains a state-of-the-art manufacturing facility, and a patent portfolio consisting of 25 U.S. patents and additional U.S. and foreign pending patent applications. Consummation of the merger is subject to various conditions including, but not limited to, approval by the stockholders of Advanced Magnetics. Results of Operations Three Months Ended June 30, 2000 and 1999 Revenues. Total revenues for the second quarter of 2000 were $2.2 million compared to $4.5 million for the same period in 1999. The decrease from the prior year period is primarily due to the $1.8 million license fee recorded in 1999 for the licensing of certain applications of PSMA and the discontinuance of contract manufacturing services in 2000. Product related revenues, which included product sales and royalties, accounted for 96% of total revenues in 2000, versus 47% from the comparable period of 1999. License and contract revenues accounted for the remainder of revenues. Product related revenues were $2.1 million for each of the second quarters of 2000 and 1999. ProstaScint accounted for 70% and 80% of product related revenues in the second quarters of 2000 and 1999, respectively, while Quadramet royalties accounted for 24% and 13% of related product revenues, respectively. Sales of ProstaScint were $1.5 million in 2000, $169,000 lower than the $1.7 million recorded in 1999. During this year, the Company assumed sole responsibility for selling and marketing ProstaScint from Bard, its former co-marketing partner. The Company took this step because it believes that a highly trained and dedicated internal sales force will be able to market its products most effectively and to build a marketing capability for anticipated future product acquisitions. No assurance can be given, however, as to the effect on sales of ProstaScint as a result of this action. 9 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) Quadramet royalties for the second quarter of 2000 increased to $508,000 from the $262,000 recorded in the same period of 1999. Quadramet was re-launched by Berlex in March 1999. Although Cytogen believes that Berlex is an advantageous marketing partner, there can be no assurance that Quadramet will achieve greater market acceptance on a timely basis or result in significant revenues for Cytogen. Sales of OncoScint CR/OV for the second quarter of 2000 were $130,000, $27,000 lower than the $157,000 recorded in the same period of 1999. The market for OncoScint CR/OV for colorectal cancer diagnosis has been negatively affected by positron emission tomography or "PET" scans which have shown same or higher sensitivity than OncoScint CR/OV. License and contract revenues for the second quarter of 2000 were $90,000 compared to $2.4 million for the same period of 1999. The decrease from prior year period is due to $1.8 million license fee recorded in 1999 for the licensing of certain applications of PSMA to a joint venture formed by Cytogen and Progenics and the discontinuance of contract manufacturing services in 2000 as a result of the sale of Cytogen's manufacturing facility in 1999. The Company recorded $212,000 of contract manufacturing revenues in the second quarter of 1999. Operating Expenses. Total operating expenses for the second quarter of 2000 were $5.0 million compared to $5.4 million recorded in the same quarter of 1999. The decrease from the prior year period is attributable primarily to the 1999 non-cash charge of $1.2 million relating to the acquisition of the exclusive technology rights to PSMA for immunotherapy through the acquisition of Prostagen, Inc. ("Prostagen"), partially offset by increased spending on the proteomics research program at AxCell and the expansion of Cytogen's in-house sales force to assume sole responsibility of marketing and sales of ProstaScint. Cost of product and contract manufacturing revenues for the second quarter of 2000 were $981,000 compared to $1.2 million recorded in the same period of the prior year. The decrease from the prior year period is due to the termination of contract manufacturing activities in 2000. Research and development expenses for the second quarter of 2000 were $1.5 million compared to $981,000 recorded in the same period of 1999. The increase from the prior year period is due to increased funding for the proteomics program at AxCell and product development efforts relating to PSMA technologies. The Company anticipates that funding for AxCell will continue to increase over the balance of the year. Acquisition of technology rights of $1.2 million in 1999 represents a non-cash charge related to the acquisition of Prostagen. Selling and marketing expenses were $1.3 million for the second quarter of 2000 compared to $1.1 million in the same period of 1999. The current year expenses reflect the Company's efforts to expand its in-house sales force and assume sole responsibility for the selling and marketing of ProstaScint from Bard. 10 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) General and administrative expenses for the second quarter 2000 were $1.1 million compared to $981,000 for the comparable period in 1999. The increase from the prior year period is due to expenses related to stock based compensation for a key employee and additional staffing and related costs. Interest Income/Expense. Interest income for the second quarter of 2000 was $195,000 compared to $56,000 recorded in the same period of 1999. The increase from the prior year period is due to higher average cash balance during 2000. Interest expense for the second quarter of 2000 was $51,000 compared to $42,000 recorded in the same period of 1999. The increase from the prior year period is due to interest expenses associated with various equipment leases. Net Income/Loss. Net loss for the second quarter of 2000 was $2.6 million compared to $1.0 million recorded in the same period of 1999. The net loss per share was $0.04 based on average common shares outstanding of 72.8 million compared to the second quarter of 1999 loss per share of $0.01 based on average common shares outstanding of 65.7 million. Six months ended June 30, 2000 and 1999 Revenues. Total revenues for the first half of 2000 and 1999 were $4.6 million and $6.8 million, respectively. The decrease from the prior year period is due primarily to the $1.8 million licensing fee for PSMA technology and the discontinuance of contract manufacturing services in 2000, partially offset by the increase in 2000 of product related revenues. Product related revenues, which included product sales and royalties, accounted for 97% of total revenues in 2000 versus 60% in the comparable period of 1999. License and contract revenues accounted for the remainder of revenues. Product related revenues for the first half of 2000 and 1999 were $4.5 million and $4.0 million, respectively. ProstaScint accounted for 71% and 81% of product related revenues in the first half of 2000 and 1999, respectively, while revenues from Quadramet accounted for 22% and 11% of product related revenues, respectively. Sales of ProstaScint were $3.2 million in 2000 compared to $3.3 million in 1999. Beginning in July 2000, the Company assumed sole responsibility for the selling and marketing of ProstaScint from Bard. Royalties from Quadramet increased to $1.0 million in the first half of 2000 from $461,000 in the same period of 1999. Quadramet royalties are based on net sales of Quadramet by Berlex. Sales of OncoScint CR/OV were $307,000 in 2000 versus $321,000 in the same period of 1999. The market for OncoScint CR/OV for colorectal cancer diagnosis has been negatively affected by positron emission tomography or "PET" scans which have shown the same or higher sensitivity than OncoScint CR/OV. To date, OncoScint CR/OV has not realized substantial sales. 11 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) License and contract revenues for the first half of 2000 and 1999 were $148,000 and $2.7 million, respectively. The 1999 license fee included $1.8 million of revenue from the licensing of certain applications of PSMA to a joint venture formed by CYTOGEN and Progenics and $501,000 of contract manufacturing revenues. The Company has discontinued contract manufacturing services in 2000. Operating Expenses. Total operating expenses for the first half of 2000 and 1999 were $9.5 million in each period. The current year expenditures principally reflect development efforts in the proteomics programs, PSMA technologies and expansion of Cytogen's in-house sales force. The 1999 expenses included a non-cash charge of $1.2 million related to the acquisition of exclusive technology rights to PSMA for immunotherapy through the acquisition of Prostagen. Cost of product and contract manufacturing revenues for the first half of 2000 were $1.9 million compared to $2.3 million recorded in the same period of the prior year. The decrease from the prior year period is due to decreased contract manufacturing costs associated with discontinuance of contract manufacturing activities in 2000 Research and development expenses for the first half of 2000 were $3.0 million compared to $2.0 million recorded in the same period of 1999. The increase from the prior year period is due to increased funding for the proteomics program at AxCell, the product development efforts related to the PSMA technologies and costs associated with the transfer of manufacturing technology to a new vendor who, if approved by the FDA, will manufacture Cytogen's ProstaScint and OncoScint products. The Company anticipates that funding for AxCell will continue to increase over the balance of the year and costs to transfer manufacturing technology will continue at their current level. Acquisition of technology rights of $1.2 million in 1999 represents a non-cash charge related to the acquisition of Prostagen. Selling and marketing expenses were $2.5 million for the first half of 2000 compared to $2.0 million in the same period of 1999. The current year expenses reflect the Company's efforts to expand its in-house sales force. During this year, Cytogen assumed sole responsibility for the selling and marketing of ProstaScint. General and administrative expenses for the first half of 2000 were $2.1 million compared to $1.9 million for the comparable period in 1999. The increase from the prior year is due to expenses related to stock based compensation for a key employee, additional staffing and related costs. Gain on sale of laboratory and manufacturing facilities. The Company recorded a gain of $3.3 million in the first quarter of 1999 from a sale of the Company's laboratory and manufacturing facilities. 12 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) Interest Income/Expense. Interest income for the first half of 2000 was $363,000 compared to $151,000 in the same period of 1999. The increase from the prior year period is due to higher average cash balance during 2000. Interest expense for the first half of 2000 was $109,000 compared to $84,000 recorded in the same period of 1999. The increase from the prior year period is due to interest expenses associated with various equipment leases. Net Income/Loss. Net loss for the first half of 2000 was $4.5 million compared to a net income of $693,000 recorded in the same period of 1999. The 1999 net income resulted from a $3.3 million gain from the sale of the manufacturing and laboratory facilities. The 2000 net loss per share was $0.06 based on average common shares outstanding of 72.1 million compared to the first half of 1999 income per share of $0.01 based on average common shares outstanding of 64.9 million for basic and 65.0 million for diluted Liquidity and Capital Resources The Company's cash, cash equivalents and short-term investments were $10.5 million as of June 30, 2000, compared to $12.4 million as of December 31, 1999. The cash used for operating activities for the first half of 2000 was $5.2 million versus $5.8 million in the same period of 1999. The decrease from the prior year period is due primarily to the 1999 final payment of $1.0 million to The Dupont Pharmaceuticals Company for the Quadramet manufacturing commitment. Historically, the Company's primary sources of cash have been proceeds from the issuance and sale of its stock through public offerings and private placements, product related revenues, revenues from contract manufacturing and research services, fees paid under license agreements and interest earned on cash and short term investments. In February 2000, the Company received $1.0 million from Berlex Laboratories for the exercise of a warrant to purchase 1,000,000 shares of Cytogen common stock at $1.00 per share. Also in the first half of 2000, the Company sold approximately 1.3 million shares of Cytogen common stock for total proceeds of $2.7 million at an average price of $2.06 per share upon the exercises of employee stock options and other warrants. The Company expects to significantly increase the funding of AxCell for the proteomics program in 2000. The operating requirement for AxCell will be funded by Cytogen's existing cash balance. The capital requirement for AxCell may be funded by a $1.4 million line-of-credit agreement entered into in February 2000 between the Company and Finova Capital Corporation ("Finova Facility"). Through November 2000, the Company may draw on the Finova Facility to finance the acquisition of computers and equipment. Borrowings under the Finova Facility will have a fixed term of 42 months at an interest rate equal to 8.65% plus the Index Rate and will be collateralized by the newly purchased equipment. 13 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) The Company's capital and operating requirements may change depending upon various factors, including: (i) whether the Company and its strategic partners achieve success in manufacturing, marketing and commercialization of its products; (ii) the amount of resources which the Company devotes to clinical evaluations and the expansion of marketing and sales capabilities; (iii) results of clinical trials and research and development activities; and (iv) competitive and technological developments, in particular the Company may expend funds for development of its proteomics and PSMA technologies. The Company's financial objectives are to meet its capital and operating requirements through revenues from existing products, license and research contracts, and control of spending. To achieve its strategic objectives, the Company may enter into research and development partnerships and acquire, in-license and develop other technologies, products or services. Certain of these strategies may require payments by the Company in either cash or stock in addition to the costs associated with developing and marketing a product or technology. However, the Company believes that, if successful, such strategies may increase long-term revenues. There can be no assurance as to the success of such strategies or that resulting funds will be sufficient to meet cash requirements until product revenues are sufficient to cover operating expenses. To fund these strategic and operating activities, the Company may sell equity and debt securities as market conditions permit or enter into credit facilities. The Company has incurred negative cash flows from operations since its inception, and has expended, and expects to continue to expend in the future, substantial funds to implement its planned product development efforts, including acquisition of products and complementary technologies, research and development, clinical studies and regulatory activities, and to further its marketing and sales programs. The Company expects that its existing capital resources will be adequate to fund the Company's operations at least through the middle of 2002. No assurance can be given that the Company will not consume a significant amount of its available resources before that time. In addition, the Company expects that it will have additional requirements for debt or equity capital, irrespective of whether and when it reaches profitability, for further development of products, product and technology acquisition costs, and working capital. The Company's future capital requirements and the adequacy of available funds will depend on numerous factors, including the successful commercialization of its products, the costs associated with the acquisition of complementary products and technologies, progress in its product development efforts, the magnitude and scope of such efforts, progress with clinical trials, progress with regulatory affairs activities, the cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights, competing technological and market developments, and the expansion of strategic alliances for the sales, marketing, manufacturing and distribution of its products. To the extent that the currently available funds and revenues are insufficient to meet current or planned operating requirements, the Company will be required to obtain additional funds through equity or debt financing, strategic alliances with corporate partners and others, or through other sources. Based on the Company's historical ability to raise capital and current market conditions, the Company believes other financing alternatives are 14 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) available. There can be no assurance that the financing commitments described above or other financial alternatives will be available when needed or at terms commercially acceptable to the Company or that the Company would have adequate authorized unissued shares available for issuance without stockholder approval. If adequate funds are not available, the Company may be required to delay, further scale back or eliminate certain aspects of its operations or attempt to obtain funds through arrangements with collaborative partners or others that may require the Company to relinquish rights to certain of its technologies, product candidates, products or potential markets. If adequate funds are not available, the Company's business, financial condition and results of operations will be materially and adversely affected. ============================== Cautionary Statement The foregoing discussion contains historical information as well as forward looking statements that involve a number of risks and uncertainties. In addition to the risks discussed above, among other factors that could cause actual results to differ materially from expected results are the following: (i) the Company's ability to access the capital markets in the near term and in the future for continued funding of existing projects and for the pursuit of new projects; (ii) the ability to attract and retain personnel needed for business operations and strategic plans; (iii) the timing and results of clinical studies, and regulatory approvals; (iv) market acceptance of the Company's products, including programs designed to facilitate use of the products, such as the Partners in Excellence or PIE Program; (v) demonstration over time of the efficacy and safety of the Company's products; (vi) the degree of competition from existing or new products; (vii) the decision by the majority of public and private insurance carriers on whether to reimburse patients for the Company's products; (viii) the profitability of its products; (ix) the ability to attract, and the ultimate success of, strategic partnering arrangements, collaborations, and acquisition candidates; (x) the ability of the Company and its partners to identify new products as a result of those collaborations that are capable of achieving FDA approval, that are cost-effective alternatives to existing products and that are ultimately accepted by the key users of the product; (xi) the success of the Company's marketing partners in obtaining marketing approvals in Canada and in European countries, in achieving milestones and achieving sales of products resulting in royalties; (xii) the ability of the Company to protect its proprietary technology, trade secrets or know-how under the patent and other intellectual property laws of the United States and other countries; (xiii) failure of the Advanced Magnetics' shareholders to adopt the Merger Agreement providing for the Company's acquisition of Advanced Magnetics; (xiv) the risk that the businesses of the Company and Advanced Magnetics will not be integrated successfully; and (xv) the ability to satisfy the conditions specified by the FDA regarding the final approval of Combidex. 15 PART II - OTHER INFORMATION Item 4 - Submission of Matters to the Vote of Security Holders - ------ On May 16, 2000, the Company held its annual meeting of stockholders to (i) elect directors; (ii) to consider and vote upon a proposal to amend the Company's Restated Certificate of Incorporation to increase the total number of authorized shares of capital stock from 95,000,000 shares, consisting of 89,600,000 shares of common stock and 5,400,000 shares of preferred stock, to 255,400,000 shares, consisting of 250,000,000 shares of common stock and 5,400,000 shares of preferred stock; and (iii) transact such other business as might be brought before the meeting. The following tables set forth information regarding the number of votes cast for, against or withheld, abstentions and broker non-votes, with respect to each matter presented at the meeting. Under the rules of the Nasdaq Stock Market, brokers who hold shares in street name for customers who are beneficial owners of those shares may be prohibited from giving a proxy to vote shares held for such customers on certain matters without specific instructions from such customers (broker non-votes). Under Delaware law, abstentions and broker non-votes are counted as shares represented at the meeting for purposes of determining the presence or absence of a quorum at a stockholders meeting. The election of directors is decided by a plurality of the votes cast. Therefore, votes that are withheld have no effect on the outcome of the vote. Adoption of the remaining proposal required the affirmative vote of a majority of shares cast at the meeting. Therefore, abstentions and broker non-votes have no effect on the vote. (i) Election of Directors:
Against or Broker Nominee For Withheld Abstentions Non-Votes ------- --- ---------- ----------- --------- John E. Bagalay Jr. 64,199,750 1,656,986 N/A N/A Stephen K. Carter 65,421,063 435,673 N/A N/A James A. Grigsby 65,412,373 444,363 N/A N/A Robert F. Hendrickson 65,425,853 430,883 N/A N/A S. Leslie Misrock 65,431,068 425,668 N/A N/A H. Joseph Reiser 64,722,867 1,133,869 N/A N/A
(ii) To consider and vote upon the proposal to amend the Restated Certificate of Incorporation to increase authorized number of shares.
Against or Broker For Withheld Abstentions Non-Votes --- ---------- ----------- --------- 61,722,482 3,915,256 218,998 N/A
(iii) No other business was transacted at the meeting. 16 Item 5 - Lawrence R. Hoffman became Vice President and Chief Financial - ------ Officer on July 10, 2000. Item 6 - Exhibits and Reports on Form 8-K - ------ (a) Exhibits: 3.1 Restated Certificate of Incorporation of Cytogen Corporation, as amended. Filed herewith. 10.1 Amendment No. 1 Marketing and Co-Promotion Agreement effective as of January 1, 2000 by and between Cytogen Corporation and C.R. Bard, Inc. Filed herewith. 27 Financial Data Schedule (Submitted to SEC only in electronic format) (b) Reports on Form 8-K None 17 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. CYTOGEN CORPORATION Date August 11, 2000 By /s/ Lawrence R. Hoffman -------------------------- -------------------------------------------- Lawrence R. Hoffman Vice President & Chief Financial Officer (Principal Financial and Accounting Officer) 18 EX-3.1 2 0002.txt EXHIBIT 3.1 EXHIBIT 3.1 CERTIFICATE OF AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION OF CYTOGEN CORPORATION CYTOGEN CORPORATION, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY as follows: FIRST: That Article FIFTH of the Restated Certificate of Incorporation, as amended, of the Corporation is hereby amended to read, in its entirety, as follows: "FIFTH: A. Total Capital Stock. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is TWO HUNDRED FIFTY FIVE MILLION FOUR HUNDRED THOUSAND (255,400,000) shares, of which TWO HUNDRED FIFTY MILLION (250,000,000) shall be shares of Common Stock, $0.01 par value per share ("Common Stock"), and FIVE MILLION FOUR HUNDRED THOUSAND (5,400,000) shares shall be Preferred Stock, $0.01 par value per share ("Preferred Stock"). B. Common Stock. Each holder of Common Stock shall be entitled to one vote for each share of Common Stock held on all matters on which holders of Common Stock shall be entitled to vote. C. Preferred Stock. The Board of Directors of the Corporation is authorized to cause the Preferred Stock to be issued in one or more series, with such voting powers, full or limited, or no voting powers, and with such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions providing for the issue of such stock adopted by the Board of Directors. The Board of Directors of the Corporation is expressly authorized to adopt such resolution or resolutions and to issue such stock as may be desirable. D. Residual Rights. All rights accruing to the outstanding shares of the Corporation not expressly provided for to the contrary herein shall be vested in the outstanding shares of Common Stock and Preferred Stock pari passu." SECOND: That the aforesaid amendments were duly adopted by the Board of Directors and by the stockholders of the Corporation in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. ******* IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by its duly elected President on this 14th day of May, 2000. ---- CYTOGEN CORPORATION By: /s/ H. Joseph Reiser H. Joseph Reiser, Ph.D. President and Chief Executive Officer EX-10.1 3 0003.txt EXHIBIT 10.1 EXHIBIT 10.1 AMENDMENT NO.1 MARKETING AND CO-PROMOTION AGREEMENT This AMENDMENT NO.1 MARKETING AND CO-PROMOTION AGREEMENT (the "Amendment") is made this _____day of March, 2000, and effective as of January 1, 2000, by and between C. R. BARD, INC. ("BARD"), a New Jersey corporation with offices at 730 Central Avenue, Murray Hill, New Jersey 07974, and CYTOGEN CORPORATION ("CYTOGEN"), a Delaware corporation with offices at 600 College Road East, Princeton, New Jersey 08540. WHEREAS, CYTOGEN and BARD are parties to that certain Marketing and Co-Promotion Agreement, dated August 1, 1996 (the "Agreement"), pursuant to which CYTOGEN granted BARD certain rights to market Products (as defined in the Agreement) pursuant to the terms and conditions of the Agreement; and WHEREAS, by mutual agreement, the parties now desire to amend the term and the compensation provisions of the Agreement to enable to the parties to terminate the Agreement as of the end of June, 2000. WHEREAS, the parties now desire to amend the Agreement as expressly set forth below. NOW, THEREFORE, in consideration of the premises and the mutual covenants and benefits herein set forth, the parties agree as follows: 1. The parties agree to amend the Agreement as follows: (A) Section 1.32 of the Agreement, entitled "Term," is deleted in its entirety, substituting in lieu thereof the following: 1.32 Term - shall mean the term of the Agreement as provided in Section 10.1 of this Agreement. (B) Article 1 of the Agreement is amended by adding the following terms: 1.43 Amendment - shall mean that certain Amendment No.1, dated on or about March , 2000, by and between the parties hereto, which shall serve as Amendment No.1 to this Agreement, which is incorporated herein by reference. 1 .44 Amendment Effective Date - shall mean January 1, 2000. (C) Section 3.2 of the Agreement, entitled "Right of First Offer," shall be amended by adding the following sentence: The rights and obligations of the parties under this Section 3.2 shall terminate as of the Amendment Effective Date. - Page 1 of 3 - (D) Section 4.4 of the Agreement, entitled "Expansion of Territory," shall be amended by adding the following sentence: The rights and obligations of the parties under this Section 4.4 shall terminate as of the Amendment Effective Date. (E) Section 10.1 of the Agreement, entitled "Term," is hereby deleted in its entirety, substituting in lieu thereof the following: 10.1 Term. This Agreement will commence on the Effective Date and, unless sooner terminated in accordance with the provisions of this Agreement, will continue through and including June 31, 2000. (F) Section 10.6.3 of the Agreement, entitled "Marketing Rights," is deleted in its entirety, substituting in lieu thereof the following: 10.6.3 Marketing Rights. Upon termination of this Agreement, Bard's rights to market and promote the Product shall immediately cease and concurrent with or as soon as practical following such termination, Bard shall deliver to Cytogen all marketing and promotional materials with respect to Product then in the possession of Bard or any of its Affiliates; provided however, for such marketing materials related to Product that contain references to Bard or its Affiliates, Bard shall destroy such marketing materials instead of returning them to Cytogen. Notwithstanding anything to the contrary in this Section, Bard shall be entitled to retain necessary copies of any marketing materials related to Product for archival purposes only. (G) A new Section 10.6.4, entitled "Transition," shall be added to the Agreement and shall state as follows: 10.6.4 Transition. In preparation for termination of the Agreement and assumption of marketing responsibilities by Cytogen, Bard shall: (a) use its reasonable efforts prior to the termination of this Agreement to provide a smooth transition that is transparent to the urologists and nuclear medicine physicians as a result of the termination of this Agreement; (b) within forty-five (45) days of the termination of this Agreement, send to Cytogen a written report identifying at least 250 urologist and providing, where known to Bard, the following information regarding each such urologist: (i) name, (ii) address, (iii) office telephone number, and (iv) Bard's perception of such urologist's opinions of ProstaScint; (c) use its reasonable commercial efforts to honor all outstanding commitments (by way of example only, Product Lunch and Learns, tumor boards, and dinner meetings) scheduled by Bard through August 1, 2000; and -Page 2 of 3- (d) make reasonable efforts to refer to a Cytogen representative all requests for information as to Product received by Bard on or before December 31, 2000. (H) Exhibit "A" of the Agreement is hereby deleted in its entirety, substituting in lieu thereof the Exhibit "A" attached to this Amendment. 2. Other Terms. Except as otherwise provided is this Amendment, all other terms and conditions of the Agreement shall remain in full force and effect. 3. Authorization. Each individual executing this Amendment on behalf of an entity represents and warrants that he or she is duly authorized to execute and deliver this Amendment on behalf of said entity; that this Amendment is binding on said entity, and that this Amendment is not in violation of or inconsistent with or contrary to provisions of any other agreement to which said entity is a party. 4. Counterparts: Copies. This Amendment may be signed in one or more counterparts, each of which will be deemed to be an original and all of which when taken together will constitute the same Amendment. Any copy of this Amendment made by reliable means shall be considered an original of this Amendment. IN WITNESS WHEREOF the undersigned have hereunto set their hand and seal as of the date first above mentioned. C. R. BARD, INC. CYTOGEN CORPORATION By: /s/ Burt Mirsky By: /s/ Donald F. Crane Name: Burt Mirsky Name: Donald F. Crane Title: President, BUD Title: Vice President & General Counsel Date: 04/07/00 Date: 03/14/00 - Page 3 of 3 - Exhibit "A" Commissions ----------- Period Commission Rate - ------ --------------- During the first twelve 15% of total months following the Net Sales Product Launch Date During the Partial Year Period 10% of that portion of Net Sales which are less than or equal to Baseline Sales,1 and 26% of Incremental Sales Commencing with the calendar year following 10% on that portion of the Net the Partial Year Period and continuing Sales which are less than or thereafter, through and including equal to Baseline Sales, December 31, 1999. and 27%-30%2 on Incremental Sales January, 2000 9% of total Net Sales February, 2000 8% of total Net Sales March, 2000 7% of total Net Sales April, 2000 6% of total Net Sales May, 2000 5% of total Net Sales June, 2000 4% of total Net Sales - --------------------- 1. During the Partial Year Period only, Baseline Sales shall mean the amount of Net Sales achieved during the preceding twelve month period multiplied by a fraction, the numerator of which is the number of days in this period and the denominator of which is 365. For example, if the Baseline Sales for the first 12 months following the Product Launch Date was $10 million and the Product Launch Date was January 31, 1997, the Baseline Sales for the Partial Year Period only would be equal to $9,150,000 (10 million x 334/365). 2. During the first calendar year following the Partial Year Period, the Commission Rate for Incremental Sales shall be 27% and it shall increase by one (1) percentage point each year therefore until it reaches the level of 30% at which time it shall remain constant. EX-27 4 0004.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2000 AND THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 10,463,000 0 2,445,000 (61,000) 810,000 1,326,000 8,220,000 (6,135,000) 17,939,000 5,525,000 0 0 0 728,000 9,233,000 17,939,000 3,494,000 4,648,000 1,911,000 4,364,000 5,086,000 0 109,000 (4,548,000) 0 (4,548,000) 0 0 0 (4,548,000) (0.06) (0.06)
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