-----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, JXx27TU/H7X4KDwPKlCQ7Xvd3bJn0CwgKXhHDcdTepqHPYEbp0CzHzX8f5fhuG6y VFDA4QitvhzZd09E1Frqvg== 0001047469-98-019937.txt : 19980515 0001047469-98-019937.hdr.sgml : 19980515 ACCESSION NUMBER: 0001047469-98-019937 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: METRA BIOSYSTEMS INC CENTRAL INDEX KEY: 0000888999 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 330408436 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26234 FILM NUMBER: 98619241 BUSINESS ADDRESS: STREET 1: 265 N WHISMAN RD CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 BUSINESS PHONE: 4159039100 MAIL ADDRESS: STREET 1: 265 NORTH WHISMAN RD CITY: MOUNTAIN VIEW STATE: CA ZIP: 940433911 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------ FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 METRA BIOSYSTEMS, INC. (Exact Name of Registrant as specified in its charter) 0-26234 Commission File Number CALIFORNIA 33-0408436 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 265 NORTH WHISMAN ROAD, MOUNTAIN VIEW, CA 94043-3911 (Address of Registrant's principal executive offices) (650) 903-9100 (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. [ X ] Yes [ ] No. The number of shares of the Registrant's common stock outstanding as of April 30, 1998 was 12,662,797. METRA BIOSYSTEMS, INC. AND SUBSIDIARIES INDEX PAGE NO. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets At March 31, 1998 and June 30, 1997 3 Condensed Consolidated Statements of Operations For The Three and Nine Months ended March 31, 1998 and 1997 4 Condensed Consolidated Statements of Cash Flows For The Nine Months ended March 31, 1998 and 1997 5 Notes to Condensed Consolidated Financial Statements 6-7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7-9 PART II. OTHER INFORMATION 10 ITEM 1. LEGAL PROCEEDINGS 10 ITEM 2. CHANGES IN SECURITIES 10 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 10 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS 10 ITEM 5. OTHER INFORMATION 10 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10 SIGNATURE 11 2 PART I. FINANCIAL INFORMATION ITEM 1. - FINANCIAL STATEMENTS METRA BIOSYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
ASSETS MARCH 31, JUNE 30, 1998 1997 --------- --------- (Unaudited) (1) Current assets: Cash and cash equivalents $ 7,580 $ 11,709 Short-term investments 11,113 18,876 Accounts receivable, net 1,629 1,576 Interest receivable 436 503 Inventories 1,248 1,446 Prepaid expenses and other current assets 1,464 736 --------- --------- Total current assets 23,470 34,846 Property and equipment, net 3,547 4,182 Long-term investments 10,659 8,555 Other assets 495 185 --------- --------- $ 38,171 $ 47,768 --------- --------- --------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 862 $ 1,068 Accrued expenses 2,098 2,483 Current portion of capital lease obligations 614 566 --------- --------- Total current liabilities 3,574 4,117 Long-term portion of capital lease obligations 1,107 1,574 Shareholders' equity: Preferred stock -- -- Common stock and additional paid-in capital 95,261 95,192 Accumulated deficit and other equity (61,771) (53,115) --------- --------- Total shareholders' equity 33,490 42,077 --------- --------- $ 38,171 $ 47,768 --------- --------- --------- ---------
(1) Derived from audited consolidated financial statements at June 30, 1997 See accompanying notes to condensed consolidated financial statements. 3 METRA BIOSYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
Three Months Ended Nine Months Ended MARCH 31, MARCH 31, ------------------ ------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Revenues: Product sales $ 1,722 $ 1,710 $ 4,920 $ 4,392 Partner revenue 826 62 1,030 274 -------- -------- -------- -------- Total revenues 2,548 1,772 5,950 4,666 Operating expenses: Cost of product sales 1,191 741 2,652 3,023 Research and development 1,560 945 4,409 4,341 Sales and marketing 2,235 1,738 7,250 7,147 General and administrative 598 687 1,900 2,771 -------- -------- -------- -------- Total operating expenses 5,584 4,111 16,211 17,282 -------- -------- -------- -------- Loss from operations (3,036) (2,339) (10,261) (12,616) Interest and other income, net 698 500 1,624 1,705 -------- -------- -------- -------- Net loss $ (2,338) $ (1,839) $ (8,637) $(10,911) -------- -------- -------- -------- -------- -------- -------- -------- Basic and diluted net loss per share $ (0.18) $ (0.15) $ (0.68) $ (0.87) -------- -------- -------- -------- -------- -------- -------- -------- Shares used to compute basic and diluted net loss per share 12,662 12,615 12,646 12,607 -------- -------- -------- -------- -------- -------- -------- --------
See accompanying notes to condensed consolidated financial statements. 4 METRA BIOSYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED MARCH 31, ------------------------ 1998 1997 --------- --------- Net cash used in operating activities $ (9,091) $ (10,644) Cash flows from investing activities: Purchases of investment securities (16,951) (18,284) Maturities and sales of investment securities 22,580 25,891 Purchases of property and equipment (316) (883) Repayment of notes receivable from shareholders --- 50 --------- --------- Net cash provided by investing activities 5,313 6,774 Cash flows from financing activities: Proceeds from capital leases --- 848 Repayments of capital leases (420) (349) Proceeds from issuance of common stock 69 70 --------- --------- Net cash provided by (used in) financing activities (351) 569 --------- --------- Net increase (decrease) in cash and cash equivalents (4,129) (3,301) Cash and cash equivalents at beginning of period 11,709 19,217 --------- --------- Cash and cash equivalents at end of period $ 7,580 $ 15,916 --------- --------- --------- --------- Supplemental disclosure of cash flow information: Cash paid for interest $ 156 $ 154
See accompanying notes to condensed consolidated financial statements. 5 METRA BIOSYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998 AND 1997 (UNAUDITED) 1. INTERIM FINANCIAL INFORMATION (a) THE COMPANY Metra Biosystems, Inc. ("Metra" or the "Company"), a California corporation, is engaged in the development and commercialization of diagnostic products for the detection and management of metabolic bone and joint diseases. (b) BASIS OF PRESENTATION The accompanying interim condensed consolidated financial statements of the Company have been prepared in conformity with generally accepted accounting principles, consistent in all material respects with those applied in the Annual Report on Form 10-K for the year ended June 30, 1997. The interim financial information is unaudited, but reflects all normal adjustments which are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented. The interim financial statements should be read in connection with the financial statements in the Company's Annual Report on Form 10-K for the year ended June 30, 1997. 2. INVENTORIES Inventories consist of the following (net of reserves):
March 31, June 30, 1998 1997 ------ ------ (in thousands) Raw materials $ 322 $ 224 Work in process 210 95 Finished goods 716 1,127 ------ ------ $1,248 $1,446 ------ ------ ------ ------
3. NET LOSS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share," (SFAS 128") which was adopted by the Company for the three and nine month periods ended March 31, 1998. Earnings per share for the three and nine month periods ended March 31, 1997 have been restated in accordance with SFAS 128. Under the new requirements for calculating basic earnings per share, the dilutive effect of stock options and warrants is excluded. Basic earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per common share incorporates the incremental shares issuable upon the assumed exercise of stock options and warrants, if dilutive. Shares from stock options and warrants have been excluded from the computation of diluted earnings per share for all periods presented, as their effect is anti-dilutive. 4. OTHER AGREEMENTS In April 1997, the Company entered into a Co-Promotion Agreement with Berlex Laboratories, Inc. ("Berlex"). The Company paid Berlex approximately $3.0 million in December 1997 for promotional activities performed by Berlex over the first year of the promotional agreement, starting on July 1, 1997. The $3.0 million is being recognized as an expense ratably over the initial one-year term. During the quarter ended March 31, 1998, $750,000 of this payment was recognized as expense. In connection with this agreement, the Company issued Berlex warrants to acquire 413,233 shares of common stock at an exercise price of $4.84 per share. The warrant has a four-year term. The Company is amortizing $506,000 over the initial one-year service period, which amount represents the estimated value of the 6 warrants at the time of issuance. During the quarter ended March 31, 1998, the Company amortized $127,000 in connection with the issuance of the warrants. In addition, the Company will pay Berlex additional commissions based upon increased sales of the Company's products to the extent such sales are above previously established levels. After the first promotional year, the future continuance of the promotional agreement is, in part, dependent upon the achievement of certain milestones and the mutual consent of both parties. In January 1998, the Company acquired worldwide rights to the technology for its Chondrex immunoassay from NovaDx International Inc. ("NovaDx") including all available sub-licensing rights. The Company also obtained rights to diagnostic applications of NovaDx's proteomics-based technology for products in the osteoporosis and arthritis fields of use. The Company made an equity investment in NovaDx for these rights. NovaDx will receive milestone payments, and in addition will receive royalties and sub-licensing fees. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company's principal sources of revenue are product sales and partner revenues. Product sales are principally derived from sales of the Company's biochemical tests for research and clinical use. Partner revenues result from certain collaborative relationships and primarily consist of milestone payments, licensing fees and royalties received from these partners, and revenues from sales to these partners of proprietary reagents for use with the test formats of these partners. The Company commenced its clinical marketing efforts in the United States upon receiving 510(k) clearance for several of its key products in late 1995, and does not anticipate significant revenues from clinical sales of its products in the United States unless and until the results of its medical education efforts are realized. Achieving increased sales growth and improved product margins depends upon increased awareness and acceptance of the Company's products among clinicians, the success of the Company's programs with pharmaceutical partners, adequate levels of third-party reimbursement for clinical use of its diagnostic tests, the Company's ability to successfully launch new products, continued sales growth of the Company's manual test formats, and successful market penetration of automated test formats by the Company's diagnostic partners to the extent that this substantially increases market demand versus conversion of existing manual kit business. There can be no assurance the Company can successfully achieve any of the above items in a timely manner, or at all, and failure to do so could have a material adverse effect on the Company's business, financial condition and results of operations. RESULTS OF OPERATIONS THREE AND NINE MONTHS ENDED MARCH 31, 1998 AND 1997 REVENUES Product sales for the three months and nine months ended March 31, 1998 increased to $1,722,000 and $4,920,000, as compared to product sales of $1,710,000 and $4,392,000 in the comparable periods of the prior fiscal year. While the three month period showed a slight increase, the nine month period ending March 31, 1998 increased approximately 12% as compared to the same period of the prior fiscal year due to increased demand for the Company's products domestically and in Europe. International and domestic product sales for the quarter were 80% and 20%, respectively, for both the current and prior year. Partner revenues for the three months and nine months ended March 31, 1998 were $826,000 and $1,030,000 as compared to $62,000 and $274,000 in the corresponding periods of the prior fiscal year. Included in the three and nine month periods ended March 31, 1998 were $750,000 and $815,000, respectively, of revenue from corporate partners related to the achievement of milestones. Royalties received from the Company's licensing and other strategic partners for the three and nine month periods were $51,000 and $120,000, respectively. These royalties are generated through the sales of automated tests incorporating the Company's technology. There were no royalties in the corresponding periods 7 of the prior year. The Company believes that partner revenue will fluctuate in the future due to the nature and timing of partner milestone and license fees. OPERATING EXPENSES Product costs were $1,191,000 for the third quarter and $2,652,000 for the first nine months of fiscal 1998, as compared to $741,000 and $3,023,000 in the corresponding periods of fiscal 1997. The product margin for the third quarter and first nine months of fiscal 1998 was 31% and 46%, respectively, compared to 57% and 31% in the corresponding periods of fiscal 1997. The decrease in product margins during the current quarter was primarily due to lower production volumes. For the nine month period, the increase in product margins are related to increased sales by the direct sales operations (Italy, the United Kingdom, and the U.S.), which achieve higher average selling prices than sales to distributors, process improvements in the manufacturing process, and economies of scale associated with the increase in sales volume. The Company believes that the product margin will fluctuate from quarter to quarter and will be dependent upon future sales volume and product mix as well as the Company's ability to continue to achieve efficiencies and improvements in its manufacturing process. Research and development expenses for the three months and nine months ended March 31, 1998 were $1,560,000 and $4,409,000, respectively, as compared to $945,000 and $4,341,000 in the corresponding periods of the prior fiscal year. These increases were primarily due to increased spending related to the development of the Company's portable ultrasound product. The Company believes that research and development expenses will increase through at least the end of fiscal 1998 as the Company supports it ongoing clinical trials and the development of its portable ultrasound product. Sales and marketing expenses were $2,235,000 in the third quarter and $7,250,000 for the first nine months of fiscal 1998, as compared to $1,738,000 and $7,147,000 in the corresponding periods of fiscal 1997. The increase was primarily related to increased expenses related to the Co-Promotion Agreement entered into between the Company and Berlex in April 1997. The costs associated with the Berlex agreement were $877,000 and $2,630,000 for the third quarter and for the first nine months of fiscal 1998, respectively. The Company believes that sales and marketing expenses will remain relatively flat through the remainder of 1998. In addition, commissions are payable to Berlex under the agreement to the extent that sales of the Company's products and royalties received from corporate partners are above previously established levels. General and administrative expenses were $598,000 and $1,900,000 for the three and nine months ended March 31, 1998, as compared to $687,000 and $2,771,000 for the corresponding periods in the prior fiscal year. This represents decreases of 13% and 31% in general and administrative costs, respectively. The Company has undertaken efforts to implement cost reductions in all general and administrative areas and these reductions on a comparative basis were primarily related to reduced personnel costs, legal and consulting fees, and insurance costs. The Company believes that general and administrative expenses should remain relatively flat in subsequent periods. NET INTEREST AND OTHER INCOME Net interest and other income for the third quarter and first nine months of fiscal 1998 was $698,000 and $1,624,000 as compared to $500,000 and $1,705,000 in the corresponding periods of fiscal 1997. The increase for the current quarter as compared to the same quarter the prior year is primarily due to a realized gain on the sale of an equity investment. The reduction in net interest and other income for the nine month period is primarily the result of reduced cash resources available for investment. FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES The Company had cash, cash equivalents, and investment securities of $29.4 million at March 31, 1998. The Company's use of cash in operating activities was $9.1 million in the first nine months of fiscal 1998 compared to cash usage of $10.6 million in the first three quarters of fiscal 1997. This reduction in cash usage is primarily related to 8 reduced operating expenses and the corresponding $2.3 million decrease in net loss in the first nine months of fiscal 1998 as compared to the corresponding periods of fiscal 1997. This was partially offset by a $3,000,000 payment made in the second quarter to fulfill the Company's obligation to Berlex which resulted in a prepaid expense of $750,000 as of March 31, 1998. Net cash proceeds from investing activities was $5.3 million for the nine months ended March 31, 1998 which included the maturity of longer term investment securities which were reinvested as cash and cash equivalents and used to finance operating activities. Net cash used in financing activities in the first three quarters of fiscal 1998 was $351,000 which is related to the payments of the Company's capital leases offset partially by purchases of stock through option exercises and the Company's Employee Stock Purchase Program. Net capital expenditures for the first nine months of fiscal 1998 were $316,000, compared to $883,000 for the corresponding periods of fiscal 1997. This decrease is related to equipment purchases made in fiscal 1997 in support of the scale-up of the Company's manufacturing plant in Mountain View, CA. The Company believes that there is sufficient capacity to meet product demands for the foreseeable future. In April 1997 the Company entered into a Co-Promotion Agreement with Berlex under which the Company paid Berlex a fee of $3,000,000 on December 31, 1997 in consideration of promotional services rendered by Berlex. Future continuance of this promotional agreement into the 1999 fiscal year is dependent upon the mutual consent of both parties and will result in additional fees. The Company will use a portion of its existing cash resources to make such fee payments when and if they come due. The Company's current financial information system is not Year 2000 compliant. The Company plans to upgrade the current system to Year 2000 compliance within the next year. The Company does not expect the expenses related to the system upgrade to have a material effect on its financial position and results of operation. The Company's future capital requirements depend upon, among other things, the pace of market acceptance of the Company's products, the costs of research and development programs, the funding of clinical and regulatory related studies, the expansion of marketing and selling activities, costs involved in filing, prosecuting, enforcing, and defending patent claims, and the time and costs associated with obtaining regulatory approvals for future products. Funds may also be used for investments in, or acquisitions of, complementary businesses, products or technologies, in expanding the Company's manufacturing capacity or in improving its existing facilities. Although the Company believes its current cash, cash equivalents and investment securities will be sufficient to meet the Company's operating expenses and capital requirements into fiscal 1999, the Company's future liquidity and capital requirements will depend on the factors noted above, among others. The Company may, however, seek additional equity or debt financing to fund further expansion of its manufacturing capacity, or to fund other projects or acquisitions. There can be no assurance that if it becomes necessary to raise additional capital, such capital will be available on acceptable terms, if at all. DISCLOSURE PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 THE STATEMENTS CONTAINED IN THE REPORT ON FORM 10-Q THAT ARE NOT PURELY HISTORICAL ARE "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE COMPANY'S FUTURE PRODUCT DEVELOPMENT AND COMMERCIALIZATION, PRODUCT SALES AND OTHER REVENUES, MARKET OPPORTUNITIES AND ACCEPTANCE, BELIEFS, EXPECTATIONS, GOALS, FINANCIAL PERFORMANCE, AND FUTURE STRATEGIES, ALL OF WHICH ARE DEPENDENT ON CERTAIN RISKS AND UNCERTAINTIES THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN THESE OR ANY OTHER FORWARD LOOKING STATEMENTS MADE BY OR ON BEHALF OF THE COMPANY. THESE RISKS AND UNCERTAINTIES INCLUDE THE UNCERTAINTY OF REALIZING INCREASED MARKET AWARENESS AND ACCEPTANCE FOR THE COMPANY'S PRODUCTS, THE SUCCESS OF THE COMPANY'S COLLABORATIVE RELATIONSHIPS, THE UNCERTAINTY OF OBTAINING ADEQUATE LEVELS OF THIRD-PARTY REIMBURSEMENT FOR CLINICAL USE OF THE COMPANY'S PRODUCTS, AND THE UNCERTAINTY AND VARIABILITY OF CONTINUING SALES GROWTH OF THE COMPANY'S PRODUCTS. FOR A MORE DETAILED DISCUSSION OF THESE RISKS, SEE THE RISK FACTORS DISCUSSED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 1997. 9 PART II. - OTHER INFORMATION ITEM 1. - LEGAL PROCEEDINGS None ITEM 2. - CHANGES IN SECURITIES None ITEM 3. - DEFAULTS UPON SENIOR SECURITIES None ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS None ITEM 5. - OTHER INFORMATION Not Applicable ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K Exhibits Description - -------- ----------- 27 Financial Data Schedule 10 SIGNATURE 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. /s/ Kurt E. Amundson May 14, 1998 - -------------------------------------- Kurt E. Amundson Vice President and Chief Financial Officer (duly authorized principal financial and accounting officer) 11 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE METRA BIOSYSTEMS, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1998 1,000 9-MOS JUN-30-1998 JUL-01-1997 MAR-31-1998 7,580 11,113 1,629 0 1,248 23,470 3,547 0 38,171 3,574 0 0 0 13 33,477 38,171 4,920 5,950 2,652 13,559 0 0 0 (8,637) 0 0 0 0 0 (8,637) (0.68) (0.68)
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