-----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, ASo1oKOKQeHbNvfGAIZQDDGTCLKtooPWLRQhWcNEJL9qaPQTtTYe33XadH+jmrKX 8xSVt6TN2MkHcgjAO2Nxlg== 0000950135-96-004772.txt : 19961113 0000950135-96-004772.hdr.sgml : 19961113 ACCESSION NUMBER: 0000950135-96-004772 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMBRIDGE NEUROSCIENCE INC CENTRAL INDEX KEY: 0000874384 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 133319074 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19193 FILM NUMBER: 96658313 BUSINESS ADDRESS: STREET 1: ONE KENDALL SQ BUILD 700 CITY: CAMBRIDGE STATE: MA ZIP: 02139 BUSINESS PHONE: 6172250600 MAIL ADDRESS: STREET 1: ONE KENDALL SQ STREET 2: BLDG 700 CITY: CAMBRIDGE STATE: MA ZIP: 02139 FORMER COMPANY: FORMER CONFORMED NAME: CAMBRIDGE NEUROSCIENCE RESEARCH INC DATE OF NAME CHANGE: 19600201 10-Q 1 CAMBRIDGE NEUROSCIENCE, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended: SEPTEMBER 30, 1996 Commission File No. 0-19193 CAMBRIDGE NEUROSCIENCE, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-3319074 (State or other jurisdiction of (I.R.S. Employer I.D. No.) incorporation or organization) ONE KENDALL SQUARE, BUILDING 700 CAMBRIDGE, MA 02139 (Address of principal executive offices including zip code) 617-225-0600 (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 --- At October 31, 1996, 14,817,300 shares of Common Stock, par value $.001 per share, were issued and outstanding. 2 CAMBRIDGE NEUROSCIENCE, INC. INDEX PAGE PART I - FINANCIAL INFORMATION NUMBER - ------------------------------ ------ ITEM 1 - FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets at September 30, 1996 and December 31, 1995 3 Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 1996 and 1995 4 - 5 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1996 and 1995 6 Notes to Condensed Consolidated Financial Statements 7 - 8 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8 - 11 PART II - OTHER INFORMATION ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 11 SIGNATURES 12 2 3 CAMBRIDGE NEUROSCIENCE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 1996 1995 ------------- ------------ ASSETS (unaudited) CURRENT ASSETS Cash and cash equivalents $ 27,336,831 $ 21,937,450 Prepaid expenses and other current assets 537,113 506,721 ------------- ------------ TOTAL CURRENT ASSETS 27,873,944 22,444,171 Equipment, Furniture and Fixtures, net 1,294,832 1,876,473 ------------- ------------ $ 29,168,776 $ 24,320,644 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable and accrued expenses $ 2,667,972 $ 3,797,308 Research and development advances 5,918,942 995,205 ------------- ------------ TOTAL CURRENT LIABILITIES 8,586,914 4,792,513 STOCKHOLDERS' EQUITY Preferred stock, par value $.01, 10,000,000 shares authorized; none issued -- -- Common stock, par value $.001, 30,000,000 shares authorized; 14,813,682 shares issued and outstanding at September 30, 1996; 13,539,214 at December 31, 1995 14,814 13,539 Additional paid-in capital 106,125,324 96,169,488 Accumulated deficit (85,558,276) (76,654,896) ------------- ------------ TOTAL STOCKHOLDERS' EQUITY 20,581,862 19,528,131 ------------- ------------ $ 29,168,776 $ 24,320,644 ============= ============
The accompanying notes are an integral part of the consolidated financial statements. 3 4 CAMBRIDGE NEUROSCIENCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, -------------------------------- 1996 1995 -------------- ------------ Revenues Research and development, net $ 150,834 $ 1,278,977 Operating expenses Research and development 3,381,880 3,676,276 General and administrative 634,721 578,761 ------------ ------------ 4,016,601 4,255,037 ------------ ------------ Loss from operations (3,865,767) (2,976,060) Interest income 281,995 202,109 ------------ ------------ Net loss $ (3,583,772) $ (2,773,951) ============ ============ Net loss per common share $ (0.26) $ (0.23) ============ ============ Number of shares outstanding for purposes of computing net loss per share 13,914,984 12,068,753 ============ ============
The accompanying notes are an integral part of the consolidated financial statements. 4 5 CAMBRIDGE NEUROSCIENCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- 1996 1995 ------------ ------------ Revenues Research and development, net $ 1,897,135 $ 6,968,644 Government grants -- 63,400 ------------ ------------ 1,897,135 7,032,044 Operating expenses Research and development 9,747,856 10,411,694 General and administrative 1,874,568 1,685,229 ------------ ------------ 11,622,424 12,096,923 ------------ ------------ Loss from operations (9,725,289) (5,064,879) Interest income 821,909 498,670 ------------ ------------ Net loss $ (8,903,380) $ (4,566,209) ============ ============ Net loss per common share $ (0.65) $ (0.39) ============ ============ Number of shares outstanding for purposes of computing net loss per share 13,674,170 11,677,152 ============ ============
The accompanying notes are an integral part of the consolidated financial statements. 5 6 CAMBRIDGE NEUROSCIENCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- 1996 1995 ------------ ------------ OPERATING ACTIVITIES Net loss $ (8,903,380) $ (4,566,209) Expenses not requiring cash: Depreciation and amortization 780,000 884,800 Common stock issued pursuant to an employee benefit plan 131,809 103,097 ------------ ------------ (7,991,571) (3,578,312) Changes in current assets and liabilities: Prepaid expenses and other current assets (30,392) (88,781) Accounts payable and accrued expenses (1,129,336) (18,601) Research and development advances 4,923,737 922,925 ------------ ------------ 3,764,009 815,543 ------------ ------------ Cash used for operating activities (4,227,562) (2,762,769) INVESTING ACTIVITIES Purchase of equipment, furniture and fixtures, net of disposals (198,359) (232,080) ------------ ------------ Cash used for investing activities (198,359) (232,080) FINANCING ACTIVITIES Sales of common stock, net of offering costs and repurchases 9,825,302 10,064,919 ------------ ------------ Cash provided by financing activities 9,825,302 10,064,919 ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 5,399,381 7,070,070 Cash and cash equivalents at beginning of period 21,937,450 6,268,757 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 27,336,831 $ 13,338,827 ============ ============
The accompanying notes are an integral part of the consolidated financial statements. 6 7 CAMBRIDGE NEUROSCIENCE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements as of September 30, 1996 and for the three and nine month periods ended September 30, 1996 and 1995 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial condition, results of operations and cash flows for the periods presented. The results of operations for the interim period ended September 30, 1996 are not necessarily indicative of the results expected for the full fiscal year. The financial statements presented as of December 31, 1995 are derived from the audited financial statements and footnotes included in the Company's Annual Report on Form 10-K (file number 0-19193). Cambridge NeuroScience, Inc. (the "Company") is engaged in the development of proprietary pharmaceuticals to prevent, reduce or reverse damage caused by severe disorders and injuries of the nervous system. 2. RECLASSIFICATIONS Certain prior year balances have been reclassified to conform to the 1996 presentation. 3. LOSS PER COMMON SHARE Net loss per common share is based on the weighted-average number of common shares outstanding during each of the periods. Common equivalent shares from stock options are excluded as their effect is antidilutive. 4. RESEARCH AND DEVELOPMENT REVENUE, NET Under the Company's agreement with Boehringer Ingelheim GmbH ("BI"), the Company is obligated to fund approximately 25% of the development expenses for CERESTAT(1) in the United States and Europe. Research and development revenue represents reimbursement of the excess of the Company's expenditures over its obligation pursuant to the agreement. The Company accounts for research and development revenue using the percentage of completion method, based on the relationship between estimated costs incurred to date compared with total estimated costs for the year. Total estimated costs for the year are reviewed quarterly and revenue earned in the current period is adjusted for the impact of revisions to the estimated reimbursable costs. Therefore, revenue earned may fluctuate on a quarterly basis. Payments received in advance of research and development performed are designated as research and development advances. 7 8 CAMBRIDGE NEUROSCIENCE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 5. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS The Company has adopted Statement of Financial Accounting Standards No. 121 ("SFAS 121"), Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. SFAS 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The adoption of SFAS 121 had no impact on the financial position or results of operations of the Company as no indicators of impairment currently exist. The Company has elected to adopt the disclosure provisions only of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, and will continue to follow APB 25 and related interpretations in accounting for its employee stock plans. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 Revenues Research and development revenue, net, was $151,000 in the third quarter of 1996, compared to $1.3 million in the same period in 1995. The collaboration agreement with BI generally provides that BI will fund 75% of the total development costs incurred by both parties. Revenue recognized represents the excess of the Company's expenditures over its obligation under the agreement (see Note 4 to the Condensed Consolidated Financial Statements). The decrease in revenue in the third quarter of 1996 compared to 1995 reflects a change in the relative spending of the parties to the agreement, primarily relating to the commencement of a pivotal stroke trial by BI, and will continue to fluctuate on a quarterly basis. Operating Expenses Total operating expenses for the three month period ended September 30, 1996 were $4.0 million, compared to $4.3 million in the same period in 1995. Research and development expenses decreased by $294,000, or 8%, to $3.4 million, compared to $3.7 million in 1995. This reflects a decrease in nonclinical studies associated with the Company's lead product candidate, CERESTAT, offset in part by an increase in costs associated with higher headcount, primarily to support development activities. The Company expects to incur increasing costs associated with these clinical trials, as patient enrollment accelerates. General and administrative expenses increased $56,000, or 10%, to $635,000 in the third quarter of 1996, compared to $579,000 in the same period in 1995. This increase reflects an increase in headcount and associated costs, primarily in support of the Company's business development activities. 8 9 CAMBRIDGE NEUROSCIENCE, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED Interest Income Interest income for the third quarter 1996 was $282,000, compared to $202,000 in 1995. This increase is due to an increase in cash available for investment as a result of the two stock offerings in the fourth quarter of 1995 and a second equity investment by BI in September 1996. Net Loss Per Share The net loss for the third quarter of 1996 was $3.6 million, or $0.26 per share, compared to $2.8 million, or $0.23 per share, in 1995. The increase in net loss is due to a decrease in research and development revenue, as noted above. Offsetting this increase in part, is the increase in weighted average shares outstanding as a result of the stock offerings in the fourth quarter of 1995 as well as the equity purchase by BI in the beginning of September 1996. NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 Revenues Research and development revenue, net, was $1.9 million in the nine months ended September 30, 1996, compared to $7.0 million in the same period in 1995. Research and development revenue in 1995 included $4.7 million, representing an up-front reimbursement of previously incurred CERESTAT costs, which was received upon the signing of the BI collaboration agreement in March 1995. Of the total research and development revenue, revenue relating to current period spending was $1.9 million in 1996, compared to $2.3 million in 1995. This decrease of $400,000 is due to the fact that spending by BI is increasing as a percentage of the total amount spent by both companies. Operating Expenses Operating expenses decreased $475,000, or 4%, to $11.6 million for the nine months ended September 30, 1996, compared to $12.1 million for the same period in 1995. Research and development expenses decreased $664,000, or 6%, to $9.7 million, compared to $10.4 million in 1995, primarily as a result of a decrease in nonclinical development costs associated with CERESTAT. Offsetting this decrease in part, was an increase in nonclinical study costs associated with another of the Company's product programs as well as an increase in costs associated with higher headcount, primarily in support of development activities. General and administrative expenses increased by $189,000, or 11%, due to an increase in costs associated with higher headcount, primarily in support of the Company's business development activities. Interest Income Interest income for the nine month period ended September 30, 1996 was $822,000, compared to $499,000 in the same period in 1995. This increase reflects the higher cash balances available for investment primarily as a result of the two stock offerings in the fourth quarter of 1995 and a second equity investment by BI in September 1996. 9 10 CAMBRIDGE NEUROSCIENCE, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED Net Loss Per Share The net loss for the nine month period ended September 30, 1996 was $8.9 million, or $0.65 per share, compared to $4.6 million, or $0.39 per share, in the same period in 1995. This increase in net loss per share is due primarily to the decrease in research and development revenue, offset by an increase in weighted average shares outstanding as a result of the stock offerings in the fourth quarter of 1995 and the second equity investment by BI in September 1996. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents were $27.3 million at September 30, 1996, compared to $21.9 million at December 31, 1995. Pursuant to the terms of the collaboration agreement and in connection with the commencement of the pivotal stroke trial by BI, the Company received a milestone payment in September 1996 of $10.0 million, before related costs of $300,000, in exchange for 1,237,624 shares of the Company's common stock. Additionally, in 1996 the Company received $6.8 million in advances against reimbursable expenses pursuant to the BI collaboration. In the nine month period ended September 30, 1996, the Company used $11.0 million for operating purposes. The Company and BI began two large clinical trials in 1996. These trials are expected to involve approximately 1,600 patients and are expected to result in an increase in the Company's consumption of capital. The cost of both trials will be shared by the partners in accordance with the terms of the collaboration agreement. The Company's obligation relative to this sharing of costs is generally 25% of total costs incurred by both parties, excluding development costs for Japan which will be borne solely by BI. Any costs incurred in excess of one party's contractual obligation will be reimbursed by the other party. The cash reimbursement and the revenue earned are subject to each party's relative expenditures and therefore may fluctuate on a quarterly basis. The agreement provides that BI will advance cash to the Company on a quarterly basis in the event that it is expected that the Company will spend more than obligated under the agreement (25% of total amount spent by both parties). Due to the uncertainty associated with the annual estimate of spending by both companies and the timing of the relative spending, the amount and timing of advances from BI is uncertain. It is expected that as more patients enroll in these trials, total costs and the costs borne by the Company will increase. The Company expects to incur significant expenses related to these trials for the remainder of 1996 and in 1997 and thereafter, subject to the cost sharing arrangement discussed above. The Company believes that the existing cash and cash equivalents available at September 30, 1996 will be sufficient to maintain operations at least through the third quarter of 1997. The BI collaboration also provides that the Company may receive up to an additional $18 million in cash upon the achievement of certain milestones. However, there can be no assurance as to when or if these milestones will be achieved. 10 11 CAMBRIDGE NEUROSCIENCE, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED The Company's primary expenditures are expected to be in the areas of research and development, general and administrative expenses, and capital expenditures. The Company will require substantial additional funds for its research and product development programs, pursuing regulatory clearances, establishing production, sales and marketing capabilities and other operating expenses. Despite the potential future milestone payments under the BI agreements, adequate funds for these purposes may not be available when needed on terms acceptable to the Company. Insufficient funds may require the Company to delay, scale back or eliminate certain of its research and product development programs or to license third parties to commercialize products or technologies that the Company might otherwise undertake itself. The Company does not believe that inflation has had a material impact on its results of operations. The discussion contained in this section as well as elsewhere in this Quarterly Report on Form 10-Q may contain forward-looking statements based on the current expectations of the Company's management. There are certain important factors that could cause results to differ from those anticipated by the statements made herein, including, but not limited to: the continued funding of the Company's development program for CERESTAT by BI pursuant to the BI collaboration agreement; the rate of enrollment of patients in the Company's current and future clinical trials; the Company's ability to establish and maintain collaborative arrangements with third parties; technical risks associated with the development of new products; and the competitive environment of the biotechnology industry. Readers are cautioned not to place undue reliance on these forward looking statements which speak only as of the date hereof. (1) CERESTAT is a registered trademark of Boehringer Ingelheim International GmbH. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27 Financial Data Schedule for the interim year-to-date period ended September 30, 1996 (for electronic filing only) (b) Reports on Form 8-K July 16, 1996: News release announcing the initiation of a pivotal trial of CERESTAT in stroke patients. August 22, 1996: News release announcing the additional $10 million equity investment by Boehringer Ingelheim. 11 12 CAMBRIDGE NEUROSCIENCE, INC. 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. CAMBRIDGE NEUROSCIENCE, INC. Date November 7, 1996 /s/ Elkan R. Gamzu ---------------------- ----------------------------------------- Elkan R. Gamzu President and Chief Executive Officer (Principal Executive Officer) Date November 7, 1996 /s/ Harry W. Wilcox, III ---------------------- ----------------------------------------- Harry W. Wilcox, III Senior Vice President, Finance and Business Development (Principal Financial and Accounting Officer) 12 13 CAMBRIDGE NEUROSCIENCE, INC. EXHIBIT INDEX Exhibit Number Description Page - ------ ----------- ---- 27.1 Financial Data Schedule for the interim year-to-date period ended 14 September 30, 1996 (for electronic filing only) 13 EX-27 2 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE QUARTERLY REPORT ON FORM 10-Q FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS. 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 27,336,831 0 0 0 0 27,873,944 6,836,470 (5,541,638) 29,168,776 8,586,914 0 0 0 14,814 20,567,048 29,168,776 0 1,897,135 0 11,622,424 0 0 0 (8,903,380) 0 (8,903,380) 0 0 0 (8,903,380) (0.65) (0.65)
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