-----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, KSqY9PnobemVZCBh5cxj/oF48CDknQ6XTfmMqOjm33puHwWDODH004SDk8/UvXtk c6TZBvkLGhH/85QM0266fg== 0000726512-97-000009.txt : 19970515 0000726512-97-000009.hdr.sgml : 19970515 ACCESSION NUMBER: 0000726512-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970330 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCIOS INC CENTRAL INDEX KEY: 0000726512 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 953701481 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11749 FILM NUMBER: 97604620 BUSINESS ADDRESS: STREET 1: 2450 BAYSHORE PKWY CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 BUSINESS PHONE: 4159661550 MAIL ADDRESS: STREET 1: 2450 BAYSHORE PARKWAY CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 FORMER COMPANY: FORMER CONFORMED NAME: SCIOS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CALIFORNIA BIOTECHNOLOGY INC DATE OF NAME CHANGE: 19920302 10-Q 1 FORM 10-Q FOR QUARTER ENDED 3-31-97 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ___________ Commission file number: 0-11749 Scios Inc. (Exact name of Registrant as specified in its charter) Delaware 95-3701481 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Scios Inc. 2450 Bayshore Parkway Mountain View, CA 94043x (Address of principal executive offices) (Zip code) (415) 966-1550 (Registrant's telephone number including area code) 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 registrant's classes of common stock, as of the latest practicable date. Title Outstanding Common Stock, $.001 par value 36,510,923 SCIOS INC. AND SUBSIDIARIES Part I. Financial Information Item 1. Financial Statements SCIOS INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except share data)
March 31, December 31, 1997 1996 ------------- ----------- ASSETS (Unaudited) Current assets: Cash and cash equivalents $32,292 $1,587 Marketable securities 10,387 6,888 Accounts receivable 3,506 4,808 Prepaid expenses 748 786 ------------- ----------- Total current assets 46,933 14,069 Marketable securities, non-current 38,881 53,695 Investment in affiliate 6,328 6,939 Property and equipment, net 36,520 36,839 Other assets 2,265 2,419 ------------- ----------- TOTAL ASSETS $130,927 $113,961 ------------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable to banks $3,000 $3,000 Accounts payable 892 2,507 Other accrued liabilities 6,522 10,011 Deferred contract revenue 8,666 3,666 Current portion of long-term debt and capital leases 781 723 ------------- ----------- Total current liabilities 19,861 19,907 Long-term debt and capital leases 30,146 349 Minority interests -- 77 Stockholders' equity: Preferred stock; $.001 par value; 20,000,000 shares authorized; issued and outstanding: 12,632 and 16,053, respectively (liquidation preference of $12,000 and $15,250, respectively) -- -- Common stock; $.001 par value; 150,000,000 shares authorized; issued and outstanding: 36,510,923 and 36,506,297, respectively 37 37 Additional paid-in capital 404,485 404,456 Treasury stock (3,340) (2,991) Notes receivable from stockholders (13) (13) Unrealized losses on securities (326) (70) Accumulated deficit (319,923) (307,791) ------------- ----------- Total stockholders' equity 80,920 93,628 ------------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $130,927 $113,961 ------------- -----------
See notes to consolidated financial statements. SCIOS INC. AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except share data)
Three months ended March 31, 1997 1996 -------------- -------------- (Unaudited) Revenues: Product sales $6,159 $8,642 Co-promotion commissions 1,696 1,043 Research & development contracts 474 1,799 -------------- -------------- 8,329 11,484 -------------- -------------- Costs and expenses: Cost of goods sold 3,854 5,173 Research and development 10,880 8,666 Marketing, general and administration 5,326 4,419 Profit distribution to third parties 567 994 -------------- -------------- 20,627 19,252 -------------- -------------- Loss from operations (12,298) (7,768) Other income: Investment income 657 943 Realized gains (losses) on securities (105) 81 Other income, net 148 56 -------------- -------------- 700 1,080 Equity in net loss of affiliates (611) (729) Minority interests 77 -- -------------- -------------- Net loss ($12,132) ($7,417) -------------- -------------- Net loss per common share ($0.34) ($0.21) -------------- -------------- Weighted average number of common shares outstanding 35,831,662 35,890,504 -------------- --------------
See notes to consolidated financial statements. SCIOS INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands)
Three months ended March 31, 1997 1996 ------------ ----------- (Unaudited) Cash flows from operating activities: Net loss ($12,132) ($7,417) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 1,345 1,121 Deferred contract revenue 5,000 (584) Other 534 729 Change in assets and liabilities: Accounts receivable 1,302 661 Accounts payable (1,615) (2,622) Other accrued liabilities (3,489) (1,216) Other 192 714 ------------ ----------- Net cash used by operating activities (8,863) (8,614) ------------ ----------- Cash flows from investing activities: Payments for property and equipment, net (1,026) (542) Sales/maturities of marketable securities 89,091 40,910 Purchases of marketable securities (78,032) (31,269) ------------ ----------- Net cash provided by investing activities 10,033 9,099 ------------ ----------- Cash flows from financing activities: Purchase of treasury stock (349) (1,338) Issuance of notes payable 30,000 -- Other (116) (159) ------------ ----------- Net cash provided (used) by financing activities 29,535 (1,497) ------------ ----------- Net increase (decrease) in cash and cash equivalents 30,705 (1,012) Cash and cash equivalents at beginning of period 1,587 2,847 ------------ ----------- Cash and cash equivalents at end of period $ 32,292 $ 1,835 ------------ ----------- Supplemental cash flow data: Cash paid during the period for interest ($134) ($160) Supplemental disclosure of non-cash investing and financing: Change in net unrealized losses on securities (256) (833) Investment in affiliate ($611) $ 4,708
See notes to consolidated financial statements. SCIOS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (unaudited) 1. Basis of Presentation and Accounting Policies The unaudited consolidated financial statements of Scios Inc. ("Scios" or the "Company") reflect, in the opinion of management, all adjustments, consisting only of normal and recurring adjustments, necessary to present fairly the Company's consolidated financial position at March 31, 1997 and the Company's consolidated results of operations and cashflows for the three-month periods ended March 31, 1997 and 1996. Interim-period results are not necessarily indicative of results of operations or cash flows for a full-year period. These financial statements and the notes accompanying them should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 1996. Investors are encouraged to review the Form 10-K for a broader discussion of the Company's business and the opportunities and risks inherent in the Company's business. Copies of the 10-K are available from the Company on request. The year-end balance sheet data were derived from audited financial statements, but do not include all disclosures required by generally accepted accounting principles. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share" ("SFAS No. 128") which specifies the computation, presentation and disclosure requirements for earnings per share. SFAS No. 128 will become effective for the Company's 1997 fiscal year. The impact of adopting SFAS No. 128 is not expected to have a material impact on the Company's financial condition or results of operations. 2. Litigation In September 1996, the United States District Court for the Northern District of California dismissed with prejudice a lawsuit that had been filed by certain stockholders in May 1995 against the Company and Richard L. Casey, its chairman and chief executive officer, on behalf of the individual plaintiffs and other purchasers of the Company's stock during the period from October 6, 1993 to May 2, 1995. The action alleged violations of federal securities laws, claiming that the defendants issued a series of false and misleading statements, including filings with the Securities and Exchange Commission, regarding the Company and clinical trials involving AURICULIN(R) anaritide ("AURICULIN"). The plaintiffs have filed notice that they will appeal the District Court's ruling in favor of the Company. The ultimate outcome of this action cannot presently be determined. Accordingly, no provision for any liability or loss that may result from adjudication or settlement thereof has been made in the accompanying consolidated financial statements. 3. Subsequent Events On April 2, 1997, the Company announced that it had suspended development of AURICULIN based upon the results of an interim analysis of data from an ongoing 250 patient Phase III study in oliguric acute renal failure. The study was suspended due to the low probability that a positive outcome could be obtained with respect to its primary clinical endpoint, dialysis-free survival. AURICULIN was under development in collaboration with Genentech, Inc. ("Genentech"). Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation The following discussion contains forward-looking statements about plans, objectives, future results and intentions of Scios. These forward-looking statements are based on the current expectations of the Company, and the Company assumes no obligation to update this information. Realization of these plans and results involves risks and uncertainties, and the Company's actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below, as well as those discussed in the Company's Form 10-K for the year ended December 31, 1996. Operating Results The net loss for the quarter ended March 31, 1997 was $12.1 million compared to a net loss of $7.4 million in the corresponding quarter of 1996. The increase in net loss was primarily due to lower revenue from product sales and research and development contracts combined with higher research and development expenses. Total revenues for the three months ended March 31, 1997 declined to $8.3 million from $11.5 million in the corresponding period of 1996. Product sales from psychiatric products under license from SmithKline Beecham Corporation (the "SB Products") declined to $6.2 million from $8.6 million for the three months ended March 31, 1997 and 1996, respectively. The sales decline was the result of competition from new market entrants and generic drugs to the SB Products. Gross margins decreased to 37% for the quarter ending March 31, 1997 from 40% in the prior year period as a result of an increase in product returns. The increase in co-promotion commissions from 1996 to 1997 resulted from higher revenue recognition based on sales growth of HALDOL(R) Decanoate ("HALDOL"), a product co-promoted with Ortho-McNeil Pharmaceutical, an affiliate of Johnson and Johnson, and on sales of EFFEXOR(R) (venlafaxine HCl) ("EFFEXOR"), a product co-promoted with Wyeth-Ayerst Laboratories, a division of American Home Products Corporation. Contract revenues for the three months ended March 31, 1997 decreased $1.3 million from the corresponding period in 1996 due to receipt of a one-time licensing payment in 1996 and the cessation of funding for Alzheimer's research under a contract that ended in December 1996. Total costs and expenses for the three months ended March 31, 1997 were $20.6 million versus $19.3 million for the same period in 1996. Spending for research and development increased to $10.9 million in 1997 from $8.7 million in 1996 as a result of higher staffing levels and clinical trials costs to support expanded product development activities. Expenses for marketing, general and administration increased to $5.3 million from $4.4 million for the three-month periods ended March 31, 1997 and 1996, respectively, because of higher staffing levels. The first quarter decrease from 1996 to 1997 in cost of goods and profit distribution to third parties was the result of the lower SB Product sales. Other income decreased to $0.7 million in the quarter ended March 31, 1997 from $1.1 million in the comparable quarter of 1996. The decrease was principally due to a net loss on sales of securities in 1997 versus a net gain for the same period in 1996 and on a decline in interest income from the Company's marketable securities. The equity in the net loss of affiliates of $0.6 million in 1997 and $0.7 million in 1996 is the Company's proportional share of losses of Guilford Pharmaceuticals Inc. ("Guilford"), an affiliate of the Company which completed an initial public offering in 1994. The Company's proportional share of Guilford was 10% and 12% on March 31, 1997 and 1996, respectively. The Company's proportional share of Guilford declined further as a result of Guilford's issuance of additional common stock in April 1997. The ability of the Company to achieve profitability will depend principally upon whether or not the Company is successful in developing and commercializing its own products and on its ability to complete agreements with third parties that result in additional revenue. In the case of AURICULIN, the Company was unsuccessful in its development efforts. The Company recently announced termination of its clinical development of AURICULIN based on the results of an interim analysis of data from an ongoing 250-patient Phase III study in oliguric acute renal failure and the low probability that a positive outcome could be obtained with respect to its primary clinical endpoint, dialysis-free survival. The Company's success in commercializing its other products, including its lead products, NATRECOR(R) BNP ("NATRECOR") and FIBLAST(R) trafermin ("FIBLAST"), will depend on numerous factors, including: whether or not the Company can demonstrate safety and efficacy of the products in development; the time taken to complete clinical trials and regulatory submissions; the timing and scope of regulatory approvals; the Company's ability to secure a cost-effective commercial scale drug supply; and the level of market acceptance of approved products. In the case of NATRECOR, the Company expects to announce important clinical data in the second half of 1997. Such data will be an important consideration in determining whether to proceed with development for the current indication. The Company's ability to raise additional revenue through third parties will be dependent on: its success in marketing and selling the SB Products, HALDOL, EFFEXOR and any additional third-party product rights which it may acquire; the disposition of various patent proceedings related to the protection of the Company's potential products; the perceived value of the Company's current product portfolio and research programs to outside parties; and the success of third parties, such as Kaken Pharmaceutical Co., Ltd. ("Kaken") in Japan, in developing and commercializing the Company's products. There can be no assurance that the Company will be successful in achieving its development and commercialization goals. Liquidity and Capital Resources Combined cash, cash equivalents and marketable securities (both current and non-current) totaled $81.6 million at March 31, 1997, an increase of $19.4 million from December 31, 1996. The increase was attributable to $30.0 million received from the drawdown of a loan from Genentech. The loan is repayable in cash, stock or a combination thereof, at the Company's option, no later than December 30, 2002. Proceeds from the loan were partially offset by $8.9 million used to fund operating activities, $1.0 million in property and equipment spending, $0.3 million for the acquisition of treasury stock and $0.3 million of unrealized losses on marketable securities resulting from a change in market interest rates during the three-month period. Deferred contract revenues for the three months ended March 31, 1997 increased to $8.7 million from $3.7 million in the corresponding period of 1996 due to receipt of a payment from Kaken associated with the future supply of FIBLAST to support commercialization in Japan. The Company has experienced net operating losses since its inception and expects to continue to incur losses for at least the next two years. The Company's ability to achieve and sustain profitability, and therefore the rate of utilization of the Company's current financial resources, will depend upon a number of factors, particularly the success and timeliness of its product development, clinical trial, regulatory approval and product introduction efforts. Other contributing factors will be the Company's success in developing new revenue sources to support research and development programs and its success in marketing and promoting the SB Products, HALDOL, EFFEXOR and any other third-party product rights that may be licensed by the Company. The Company's cash resources of $81.6 million at March 31, 1997, together with revenues from product sales, collaborative agreements and interest income, proceeds from the sale of stock held as equity investments, and any funding from existing or future debt arrangements, will be used to support current and new clinical trials for proprietary products under development, to support commercialization efforts for prospective products and for other general purposes. The Company believes its cash resources will be sufficient to meet its operating and capital requirements for at least the next two years. Key factors which will affect future cash use and the timing of the Company's need to seek additional financing include the results of the Company's partnering efforts and the timing and amounts realized from licensing and partnering activities, the rate of spending required to develop and launch the Company's products, the net contribution from the Company's marketing of current and future products for itself and third parties and changes in the Company's business environment. Over the long term, the Company will need to arrange additional financing for the future operation of its business, including the commercialization of products currently under development, and it will consider collaborative arrangements and additional public or private financings, including additional equity financings. Factors influencing the availability of additional funding include, but are not limited to, the Company's progress in product development, investor perception of the Company's prospects and the general conditions of the financial markets. Part II. Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 11.1: Computation of Net Loss Per Share (b) Reports on Form 8-K: None 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. SCIOS INC. May 6, 1997 By:/s/ Richard L. Casey Date Chairman and CEO May 6, 1997 By:/s/ Kevin McPherson Date Director of Finance (Chief Accounting Officer) EX-11 2 EXHIBIT 11.1 - COMPUTATION OF NET LOSS PER SHARE SCIOS INC. AND SUBSIDIARIES Computation of Net Loss Per Share (Calculated in accordance with the guidelines of item 601 of Regulation S-K. The effect of stock options on loss per share is anti-dilutive)
Three months ended March 31, 1997 1996 ----------------- ----------------- (Unaudited) PRIMARY AND FULLY DILUTED: Average common and common equivalent shares outstanding 35,831,662 35,890,504 ----------------- ----------------- Net gain (loss) ($12,132,000) ($7,417,000) ----------------- ----------------- Net loss per share ($0.34) ($0.21) ----------------- -----------------
EX-27 3 FINACIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the consolidated balance sheet, consolidated statement of operations, and consolidated statement of cash flows included in the Company's Form 10-Q for the period ending March 31, 1997, and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS Dec-31-1997 Jan-01-1997 Mar-31-1997 32,292 49,268 3,506 0 0 46,933 67,263 30,743 130,927 19,861 30,146 0 0 37 80,883 130,927 6,159 8,329 3,854 20,627 (166) 0 0 (12,132) 0 (12,132) 0 0 0 0 (0.34) (0.34)
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