-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, jRvhHSFTDqmljftGML7AaLwAnCysWpOFysQlOwoZyA1YPb3YemTqQvsLyVZd7iyk p+X8uT3Dt/ROUhcyBHL9KA== 0000898430-95-000287.txt : 19950615 0000898430-95-000287.hdr.sgml : 19950615 ACCESSION NUMBER: 0000898430-95-000287 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19950310 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCE PHARMACEUTICAL CORP CENTRAL INDEX KEY: 0000736994 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 141644018 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-12950 FILM NUMBER: 95520030 BUSINESS ADDRESS: STREET 1: 3040 SCIENCE PARK RD CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6195584300 MAIL ADDRESS: STREET 1: 3040 SCIENCE PARK ROAD CITY: SAN DIEGO STATE: CA ZIP: 92121 FORMER COMPANY: FORMER CONFORMED NAME: OTISVILLE BIOPHARM INC DATE OF NAME CHANGE: 19890310 FORMER COMPANY: FORMER CONFORMED NAME: OTISVILLE BIOTECH INC DATE OF NAME CHANGE: 19861216 10-Q/A 1 FORM 10-Q/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A (MARK ONE) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) - ------------ OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1994 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 0-12900 ALLIANCE PHARMACEUTICAL CORP. (Exact name of Registrant as specified in its charter) New York 14-1644018 - ------------------------------------ ---------------------------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 3040 Science Park Road San Diego, California 92121 - ------------------------------------ ---------------------------------------- (Address of principal Zip Code executive offices) Registrant's telephone number, including area code: 619-558-4300 ---------------------------------------- Indicate by a check 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 filing requirements for the past 90 days. Yes X No --------------------------- ______________________ As of November 2, 1994, Registrant had 21,405,787 shares of its Common Stock, $.01 par value, outstanding. ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES ---------------------------------------------- INDEX -----
Page No. -------- PART I - FINANCIAL INFORMATION PART I, item 1 and item 2 are hereby amended in their entirety to read as follows: Item 1. Financial Statements Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Operations 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7
2 PART I. FINANCIAL INFORMATION: Item 1. Financial Statements ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES - ---------------------------------------------- CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, June 30, 1994 1994 ----------------- ----------------- Assets (Unaudited) (Note) ------ Current assets: Cash and cash equivalents $ 4,344,000 $ 1,902,000 Short-term investments 25,094,000 19,154,000 Inventories and other current assets 1,884,000 1,349,000 ----------------- ----------------- Total current assets 31,322,000 22,405,000 Property, plant and equipment - net 10,046,000 10,165,000 Purchased technology - net 16,742,000 17,033,000 Other assets - net 1,780,000 3,529,000 ----------------- ----------------- $ 59,890,000 $ 53,132,000 ================= ================= Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Accounts payable $ 2,462,000 $ 1,074,000 Accrued expenses 1,408,000 1,885,000 ----------------- ----------------- Total current liabilities 3,870,000 2,959,000 Other 324,000 348,000 Stockholders' equity: Preferred stock - $.01 par value; 5,000,000 shares authorized; 1,500,000 and 0 shares outstanding at September 30, 1994 and June 30, 1994 respectively 15,000 Common stock - $.01 par value; 30,000,000 shares authorized; 21,372,787 and 21,372,054 outstanding at September 30, 1994 and June 30, 1994 respectively 214,000 214,000 Additional paid-in capital 222,942,000 208,954,000 Accumulated deficit (167,475,000) (159,343,000) ----------------- ----------------- Total stockholders' equity 55,696,000 49,825,000 ----------------- ----------------- $ 59,890,000 $ 53,132,000 ================= =================
Note: The balance sheet at June 30, 1994 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See Notes to Condensed Consolidated Financial Statements. 3 ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES ---------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended September 30, 1994 1993 -------------- -------------- (Unaudited) Revenues: Product revenue $ 58,000 $ 129,000 License and research revenue 5,125,000 24,000 -------------- -------------- 5,183,000 153,000 Operating expenses: Research and development (including 11,566,000 6,894,000 charge of $1,686,000 for disposition of product rights) General and administrative 2,052,000 1,577,000 -------------- -------------- 13,618,000 8,471,000 -------------- -------------- Loss from operations (8,435,000) (8,318,000) Investment income and other 303,000 477,000 -------------- -------------- Net loss $ (8,132,000) $ (7,841,000) ============== ============== Net loss per share $ (0.38) $ (0.41) ============== ============== Weighted average number of shares outstanding 21,373,000 19,009,000 ============== ==============
See Notes to Condensed Consolidated Financial Statements. 4 ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES ---------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended September 30, 1994 1993 -------------- -------------- (Unaudited) Operating activities: Net loss $ (8,132,000) $ (7,841,000) -------------- -------------- Adjustments to reconcile net loss to net cash used in operations: Depreciation and amortization 748,000 724,000 Disposition of product rights 1,686,000 Changes in assets and liabilities: Inventories and other (553,000) 473,000 Accounts payable and accrued expenses and other 887,000 338,000 -------------- -------------- Net adjustments 2,768,000 1,535,000 -------------- -------------- Net cash used in operating activities (5,364,000) (6,306,000) -------------- -------------- Financing activities: Issuance of common stock, preferred stock and warrants 14,580,000 (1,000) -------------- -------------- Net cash provided by (used in) financing activities 14,580,000 (1,000) -------------- -------------- Investing activities: Short-term investments (6,517,000) 8,569,000 Property, plant and equipment (257,000) (386,000) -------------- -------------- Net cash (used in) provided by investing activities (6,774,000) 8,183,000 -------------- -------------- Increase in cash and cash equivalents 2,442,000 1,876,000 Cash and cash equivalents at beginning of period 1,902,000 5,316,000 -------------- -------------- Cash and cash equivalents at end of period $ 4,344,000 $ 7,192,000 ============== ==============
See Notes to Condensed Consolidated Financial Statements. 5 ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES ---------------------------------------------- NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization ------------ Alliance Pharmaceutical Corp. ("Alliance") and its subsidiaries (collectively, the "Company") are engaged in the development, manufacturing and early-stage marketing of medical and pharmaceutical products. Principles of Consolidation --------------------------- The consolidated financial statements include the accounts of Alliance and its wholly owned subsidiaries, BioPulmonics, Inc. and Rosanin Corporation, and its majority owned subsidiaries, Astral, Inc., and Applications et Transferts de Technologies Avancees. All significant intercompany accounts and transactions have been eliminated. Certain amounts in 1994 have been reclassified to conform to the current year's presentation. Interim Condensed Financial Statements -------------------------------------- The condensed consolidated balance sheet as of September 30, 1994, the condensed consolidated statements of operations for the three months ended September 30, 1994 and 1993, the condensed consolidated statements of cash flows for the three months ended September 30, 1994 and 1993 are unaudited. In the opinion of management, such unaudited financial statements include all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results for the periods presented. Interim results are not necessarily indicative of the results to be expected for the full year. The financial statements should be read in conjunction with the Company's consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended June 30, 1994. Cash, Cash Equivalents and Short-Term Investments ------------------------------------------------- Effective July 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 115 ("FASB No. 115"), Accounting for Certain Investments in Debt and Equity Securities. Management determines the appropriate classification of short-term investments at the time of purchase and re-evaluates such designation as of each balance sheet date. As of September 30, 1994, the Company classified its short-term investments as available-for-sale. Available-for-sale investments are stated at fair value, with unrealized gains and losses (if any) carried as a component of stockholders' equity. Application of FASB No. 115 did not materially affect stockholders' equity as of September 30, 1994. Purchased Technology -------------------- The purchased technology was acquired by virtue of the merger of Fluoromed Pharmaceutical, Inc. into a subsidiary of the Company in fiscal 1989. The technology acquired is the Company's core perfluorochemical ("PFC") technology and was valued based on an analysis of the present value of future earnings anticipated from this technology at that time. The Company identified alternative future uses for the PFC technology, including Oxygent (temporary blood substitute) and LiquiVent (intrapulmonary oxygen carrier) products. The PFC technology is the basis for the Company's main drug development programs and is being amortized over a 20 year life. Amortization of purchased technology is included in research and development expense. Accumulated amortization was $6,193,000 and $6,484,000 at June 30, 1994 and September 30, 1994, respectively. The carrying value of purchased technology is reviewed periodically based on the projected cash flows to be received from license fees, milestone payments, royalties and other product revenues. If such cash flows are less than the carrying value of the purchased technology, the difference will be charged to expense. Net Loss Per Share ------------------ Net loss per share is based on the weighted average number of shares outstanding during the respective periods and does not include common stock equivalents since their effect on the net loss per share would be anti- dilutive. 2. LICENSE AGREEMENT In August 1994, the Company executed a license agreement with Ortho Biotech, Inc. and The R.W. Johnson Pharmaceutical Research Institute, a division of Ortho Pharmaceutical Corporation (collectively referred to as "Ortho"), which provides Ortho with worldwide marketing and, at its election, manufacturing rights to the Company's injectable perfluorochemical emulsions capable of transporting oxygen for therapeutic use. Ortho will pay to Alliance a royalty based upon its sales of the product after commercialization. In addition, Ortho paid to Alliance an initial license fee of $4.0 million and will make other payments based on the achievement of certain milestones. Ortho will also be responsible for substantially all the remaining costs of developing the products. In conjunction with the license agreement, Johnson & Johnson Development Corp. purchased 1.5 million shares of Alliance convertible preferred stock for $15.0 million and obtained a warrant to purchase 300,000 shares of Alliance common stock at $15 per share during the next three years. As a result of the Ortho license agreement, the Company expensed capitalized product rights of $1.7 million (see Results of Operations). 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (References to years are to the Company's fiscal years ended June 30.) Alliance has devoted substantial resources to research and development related to its pharmaceutical products based upon perfluorochemical ("PFC") and emulsion technologies. The Company has been unprofitable since inception and expects to incur operating losses for at least the next several years due to continued requirements for research and development, preclinical testing and clinical trials, regulatory activities, commercial manufacturing start-up, and the establishment of a sales and marketing organization and/or arrangements therefor. The amount of net losses and the time required by the Company to achieve profitability are highly uncertain. There can be no assurance that the Company will be able to achieve profitability at all or on a sustained basis. Liquidity and Capital Resources Through September 1994, the Company financed its activities primarily from public and private sales of equity and funding from marketing and related agreements with corporate partners. In August 1994, the Company and Ortho Biotech, Inc. ("Ortho") entered into a worldwide exclusive license agreement ("License Agreement") for injectable PFC emulsions capable of transporting oxygen for therapeutic use, including Oxygent(TM). Pursuant to the License Agreement, license and research revenues are expected to increase in 1995 from 1994. Under the License Agreement, Ortho paid to Alliance an initial fee of $4.0 million and will make other payments upon the achievement of certain milestones. Ortho is responsible for substantially all the remaining costs of developing the products and will pay Alliance a royalty based upon sales of products after commercialization. In conjunction with the License Agreement, Johnson & Johnson Development Corp. ("J&JDC") purchased 1.5 million shares of Alliance convertible preferred stock for $15.0 million and obtained a warrant to purchase 300,000 shares of Alliance common stock at $15 per share during the next three years. In January 1994, the Company completed a private placement of 2.2 million shares of common stock, resulting in net proceeds to the Company of $15.2 million. The Company has financed substantially all of its office and research facilities and related leasehold improvements under operating lease arrangements. The Company had net working capital of $27.5 million at September 30, 1994, compared to $19.4 million at June 30, 1994. The Company's cash, cash equivalents, and short-term investments increased to $29.4 million at September 30, 1994, from $21.1 million at June 30, 1994. The increase was primarily the result of $15.0 million received from the sale of convertible preferred stock to J&JDC and from $4.0 million of license revenue attributable to the License Agreement. These cash increases were partially offset by cash used in operations. Capital expenditures for 1995 are expected to be comparable to those incurred during 1994. The Company's operations to date have consumed substantial amounts of cash, and are expected to continue to do so over the foreseeable future. In September 1993, Alliance's previously inactive subsidiary, Astral, Inc. ("Astral"), entered into licensing and research agreements with the University of Pennsylvania ("Penn"), whereby Astral agreed to make certain payments to Penn, and Penn and certain investigators received an initial 15% ownership interest in Astral. Alliance also sublicensed to Astral certain technology for which it had previously funded research. During 1994, Alliance provided approximately $1.1 million to Astral for its research activities. For the three months ended September 30, 1994, Alliance provided approximately $350,000 to Astral for its research activities. The Company intends to consider other technologies that may be available to Astral or other subsidiaries for licensing and research agreements with other research institutions. The Company intends to seek outside sources of funding for the operations of Astral or any such other subsidiaries. There can be no assurance that such funding will be available on favorable terms, if at all. If new license and research agreements are added and outside sources of funding are not available, research support to Astral or any such other subsidiaries is expected to increase significantly. The Company continually reviews its product development activities in an effort to allocate its resources to those product candidates that the Company believes have the greatest commercial potential. Factors considered by the Company in determining the products to pursue include projected markets and need, potential for regulatory approval and reimbursement under the existing health care system, as well as anticipated health care reforms, technical feasibility, expected and known product attributes, and estimated costs to bring the product to market. Based on these and other factors, the Company may from time to time reallocate its resources among its product development activities. Additions to products under development or changes in products being pursued can substantially and rapidly change the Company's funding requirements. In December 1993, the Company entered into an agreement with its primary supplier of raw material for certain products. Under the terms of the agreement, the Company is obligated to fund the supplier at defined minimum levels. All costs associated with the contract are charged to expense as incurred. 7 The Company expects to incur substantial additional expenditures associated with product development. The Company may seek additional collaborative research and development relationships with suitable corporate partners for its non-licensed products. There can be no assurance that such relationships, if any, will successfully reduce the Company's funding requirements. Additional equity or debt financing may be required, and there can be no assurance that funds from these sources would be available on favorable terms, if at all. The public has recently focused significant attention on issues of health care reform. If some of the health care reform proposals under consideration become law, potential financial returns from the Company's products could be reduced. The Company's ability to raise additional funds through sales of its securities at attractive prices depends in part on investor perception of the eventual successful commercialization of the Company's products. Consequently, health care reforms which are currently being considered could, if adopted, have an adverse effect on the Company's ability to secure adequate funds and the extent to which the Company may be able to recognize profit from product sales; however, the impact is difficult to predict at this time. If adequate funds are not available, the Company may be required to delay, scale back, or eliminate one or more of its product development programs, or obtain funds through arrangements with collaborative partners or others that may require the Company to relinquish rights to certain of its technologies, product candidates, or products that the Company would not otherwise relinquish. Alliance anticipates that its current capital resources, including expected revenues from the License Agreement, its investments, and product sales, will be adequate to satisfy its capital requirements and fund current and planned operations through 1995. The Company's future capital requirements will depend on many factors, including continued scientific progress in its research and development programs, progress with preclinical testing and clinical trials, the time and cost involved in obtaining regulatory approvals, patent costs, competing technological and market developments, changes in existing collaborative relationships, the ability of the Company to establish development arrangements, the cost of manufacturing scale-up, and the establishment of an effective sales and marketing organization and/or arrangements therefor. While the Company believes that it can produce materials for the initial market launch of its emulsion products at its existing San Diego facility, it may need to expand its commercial manufacturing capability for all of its products in the future. This expansion may occur in stages, each of which would require regulatory approval, and product demand could at times exceed supply capacity. The Company has not selected a site or obtained any regulatory approvals for construction of a commercial production facility for its products. The projected location and completion date of any production facility will depend upon regulatory and development activities and other factors. The Company cannot predict the amount that it will expend for the construction of such a production facility, and there can be no assurance as to when or whether the U.S. Food and Drug Administration will determine that such facility conforms with Good Manufacturing Practices. The License Agreement provides an option to Ortho to elect to manufacture the emulsion products referred to therein, or to require the Company to manufacture such products at a negotiated price. The Company's business is subject to significant risks, including the uncertainties associated with the lengthy regulatory approval process, obtaining and enforcing patents important to the Company's business, and possible competition from other products. Even if the Company's products appear promising at an early stage of development, they may not reach the market for a number of reasons. Such reasons include, but are not limited to, the possibilities that the potential products will be found ineffective during clinical trials, failure to receive necessary regulatory approvals, difficulties in manufacturing on a large scale, failure to obtain market acceptance, or the inability to commercialize because of proprietary rights of third parties. The research, development, and market introduction of new products will require the application of considerable technical and financial resources by Alliance, while revenues generated from such products, assuming they are developed successfully, may not be realized for several years. Other material and unpredictable factors which could affect operating results include, without limitation, the uncertainty of the timing of product approvals and introductions and of sales growth; the ability to obtain necessary raw materials at cost effective prices or at all; the effect of possible technology and/or other business acquisitions or transactions; and the increasing emphasis on controlling health care costs and potential legislation or regulation of health care pricing. The Company and certain of its officers and directors are named as defendants in a lawsuit filed by certain shareholders in September 1992. The Company believes it has meritorious defenses and intends to defend vigorously against the claims brought by the shareholders in the action. The Company believes the eventual outcome of the litigation will not have a material adverse effect on the Company's financial condition. Results of Operations Three Months Ended September 30, 1994 as Compared with Three Months Ended September 30, 1993 The Company's license and research revenue increased to $5.1 million for the three months ended September 30, 1994, compared to $24,000 for the three months ended September 30, 1993. The increase was due to $4.0 million of 8 license and $1.1 million of research revenues derived from the License Agreement. The Company expects research revenue to increase significantly during 1995, compared to 1994. The Company had net product revenue of $58,000 for the three months ended September 30, 1994, compared to $129,000 for the three months ended September 30, 1993. The Company's sales of Imagent(R) GI and Sat Pad(TM) have not been expected to provide significant revenue to the Company, and substantial increases are not anticipated. In September 1994, the Company discontinued promotional activities for Imagent GI. The majority of the Company's products are in the development stage and there can be no assurance as to whether or when it will be able to increase its product revenue significantly. The Company incurred total operating expenses of $13.6 million for the three months ended September 30, 1994. Operating expenses include a $1.4 million charge for purchases of raw material for certain products, $1.8 million for Oxygent costs incurred prior to execution of the License Agreement, $0.5 million for products no longer promoted or developed by Alliance, and a $1.7 million charge for capitalized product rights. The $1.4 million charge for purchases of raw material arises under a December 1993 agreement the Company entered into with its primary supplier. Under terms of the agreement, the Company is obligated to fund the supplier at defined minimum levels. All costs associated with the contract are charged to research and development expense as incurred. In January 1994, the Company regained from Boehringer Ingelheim International GmbH ("BII") all marketing and manufacturing rights to Imagent (diagnostic imaging agents) and Oxygent (temporary blood substitute) products outside of North America. In conjunction with the acquisition of the marketing and manufacturing rights from BII, the Company recorded product rights of $1.8 million. The unamortized portion ($1.7 million) of these product rights was charged to research and development expense when the Company licensed these product rights to Ortho. Research and development expenses increased by 68% to $11.6 million for the three months ended September 30, 1994, compared to $6.9 million for the three months ended September 30, 1993, primarily a result of the increases described above. General and administrative expenses increased to $2.1 million for the three months ended September 30, 1994, compared to $1.6 million for the three months ended September 30, 1993. The increase in general and administrative expenses was primarily due to increased professional fees. Investment income and other was $303,000 for the three months ended September 30, 1994, compared to $477,000 for the three months ended September 30, 1993. Alliance expects to incur substantial operating losses over the next several years due to continuing and increasing expenses associated with its research and development programs. Operating losses may fluctuate from quarter to quarter as a result of differences in the timing of revenues earned and expenses incurred and such fluctuations may be substantial. The Company's historical results are not necessarily indicative of future results. 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. ALLIANCE PHARMACEUTICAL CORP. (Registrant) /s/ Theodore D. Roth --------------------------------- Theodore D. Roth Executive Vice President and Chief Financial Officer Date: March 7, 1994 9 -----END PRIVACY-ENHANCED MESSAGE-----