-----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, Ja5Tmg3BLdSWNwfF+/4oSaBhzSlPQ7qbNrNHlP7jwDXDDS8MEucxVRL1V7q9mui+ +D7pZs/JTJVhAZagvgPQ7A== /in/edgar/work/20000814/0000914121-00-000651/0000914121-00-000651.txt : 20000921 0000914121-00-000651.hdr.sgml : 20000921 ACCESSION NUMBER: 0000914121-00-000651 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OXIGENE INC CENTRAL INDEX KEY: 0000908259 STANDARD INDUSTRIAL CLASSIFICATION: [2836 ] IRS NUMBER: 133679168 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21990 FILM NUMBER: 698150 BUSINESS ADDRESS: STREET 1: ONE COPLEY PLACE STREET 2: SUITE 602 CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 2124310001 MAIL ADDRESS: STREET 1: ONE COPLEY PLACE, SUITE 602 STREET 2: SUITE 602 CITY: BOSTON STATE: MA ZIP: 02116 10-Q 1 0001.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, DC 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 June 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ______ to ______ Commission File Number: 0-21990 OXiGENE, INC. (Exact name of Registrant as specified in its charter) DELAWARE 13-3679168 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) ONE COPLEY PLACE, SUITE 602 BOSTON, MA 02116 (Address of principal executive offices, including zip code) (617) 536-9500 (Telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share Warrant to Purchase One Share of Common Stock 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 [ ] As of August 11, 2000 there were 11,311,093 shares of the Registrant's Common Stock issued and outstanding. OXiGENE, INC. This Quarterly Report on Form 10-Q contains historical information and forward-looking statements. Statements looking forward in time are included in this Form 10-Q pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. They involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to be materially different from any future performance suggested herein. In the context of forward-looking information provided in this Form 10-Q and in other reports, please refer to the discussion of risk factors detailed in, as well as the other information contained in, the Company's filings with the Securities and Exchange Commission during the past 12 months. INDEX PAGE NO. ----- -------- PART I. FINANCIAL INFORMATION 1 Item 1. Financial Statements 1 Condensed Consolidated Balance Sheets 2 Condensed Consolidated Statement of Operations 3 Condensed Consolidated Statements of Cash Flows 4 Notes to Condensed Consolidated Financial 5 Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Quantitative and Qualitative Disclosures about 9 Market Risks 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 10 Securityholders Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 12 ii PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The accompanying unaudited condensed consolidated financial statements have been prepared by OXiGENE, Inc. (OXiGENE or the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the Company's opinion, these financial statements contain all adjustments necessary to present fairly the financial position of OXiGENE, Inc. as of June 30, 2000 and December 31, 1999, the results of operations for the three months and six months ended June 30, 2000 and June 30, 1999 and the cash flows for the six months ended June 30, 2000 and June 30, 1999. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1999. The results of operations for the period ended June 30, 2000 are not necessarily indicative of the results of operations and cash flows for any subsequent interim period or for the full year. 1 OXIGENE, INC. Condensed Consolidated Balance Sheets (All amounts, except share amounts, in thousands of dollars) June 30, December 31, 2000 1999 ---- ---- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 31,143 $ 30,448 Short-term investments 2,267 0 Accounts receivable - sublicense agreement 0 9,250 Prepaid expenses 336 339 Interest receivable 391 207 Other 22 770 -------- -------- Total current assets 34,159 41,014 Furniture, fixtures and equipment, at cost 314 221 Accumulated depreciation (139) (114) -------- -------- Net property and equipment 175 107 License agreements, net of accumulated amortization 1,410 1,459 Investment in joint venture 1,000 0 Deposits 153 80 -------- -------- Total assets $ 36,897 $ 42,660 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Amount payable for license agreement - current $ 271 $ 225 Accounts payable and accrued expenses 757 1,578 Other payables 358 824 -------- -------- Total current liabilities 1,386 2,627 Amount payable under license agreement - non- current 803 952 Deferred licensing revenue 7,711 7,978 Stockholders'equity Common stock, $0,01 par value: Authorized shares - 60,000,000 shares Issued and outstanding 11,311,093 at June 30, 2000 11,261,268 at December 31, 1999 113 113 Note receivable (2,351) (2,289) Additional paid-in capital 81,206 81,556 Accumulated deficit (51,685) (47,414) Deferred compensation (456) (1,336) Foreign currency translation adjustment 170 473 -------- -------- Total stockholders' equity 26,997 31,103 -------- -------- Total liabilities and stockholders' equity $ 36,897 $ 42,660 ======== ======== The accompanying notes are an integral part of this statement. 2 OXIGENE, INC. Condensed Consolidated Statements of Operations (All amounts in thousands, except per share date) (Unaudited) Three months ended Six months ended June 30, June 30, 2000 1999 2000 1999 ---- ---- ---- ---- REVENUE Licensing revenue 380 0 863 0 Unrealized gain on short term investment 267 0 267 0 Interest income 529 337 978 712 -------- -------- -------- -------- Total revenue 1,176 337 2,108 712 OPERATING EXPENSES Costs relating to 249 0 596 0 licensing revenue Amortization of license 24 0 49 0 agreement Research and development 1,780 2,056 4,257 3,506 General and administrative 586 725 1,464 1,503 Interest expense 32 0 57 0 -------- -------- -------- -------- Total operating expenses 2,671 2,781 6,423 5,009 NET LOSS $ (1,495) $ (2,444) $ (4,315) $ (4,297) ======== ======== ======== ======== NET LOSS PER COMMON SHARE $ (0.13) $ (0.24) $ (0.38) $ (0.42) ======== ======== ======== ======== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 11,310 10,232 11,296 10,220 ======== ======== ======== ======== 3 OXIGENE, INC. Condensed Consolidated Statements of Cash Flows (All amounts in thousands) (Unaudited) Six months ended June 30, 2000 1999 ---- ---- OPERATING ACTIVITIES Net loss (4,315) (4,297) Adjustment to reconcile net loss to cash (used in) provided by operating activities: Unrealized gain on short-term investment (267) 0 Depreciation 28 33 Compensation related to issuance of warrants, options and stock appreciation rights 110 151 Amortization of licensing revenue (267) 0 Amortization of licensing agreement 49 0 Changes in operating assets and liabilities: Accounts receivable - license agreement 9,250 0 Prepaid expenses and other current assets 560 140 Accounts payable and accrued expenses (1,268) (394) -------- -------- Net cash provided by (used in) operating activities 3,880 (4,367) FINANCING ACTIVITIES Proceeds from issuance of common stock and capital contribution 357 98 -------- -------- Net cash provided by financing activities 357 98 INVESTING ACTIVITIES Investment in joint venture (1,000) 0 Short term investment (2,000) 0 Amounts paid for license agreement (102) 0 Deposits (74) 0 Purchase of furniture, fixture and equipment (97) (11) -------- -------- Net cash used in investing activities (3,273) (11) Effect of exchange rate on changes in cash (269) 26 Net decrease/increase in cash and cash equivalents 695 (4,254) Cash and cash equivalents at beginning of period 30,448 31,757 -------- -------- Cash and cash equivalents at end of period $ 31,143 $ 27,503 ======== ======== 4 OXIGENE, INC. Notes to Condensed Consolidated Financial Statements June 30, 2000 1. SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. 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, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months and six months ended June 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1999. PRINCIPLES OF CONSOLIDATION The condensed consolidated financial statements include the accounts of the Company and its wholly-owned Swedish subsidiary, OXiGENE Europe AB. Intercompany balances and transactions have been eliminated. CASH AND CASH EQUIVALENTS The Company considers all highly liquid financial instruments with a maturity of three months or less when purchased to be cash equivalents. NET LOSS PER SHARE Net loss per share is based upon the Company's aggregate net loss divided by weighted average number of shares of Common Stock outstanding during the respective periods. All options and warrants were antidilutive and, accordingly, have been excluded from the calculation of weighted average shares. COMPREHENSIVE INCOME During the six months ended June 30, 2000 and 1999, total comprehensive loss amounted to $4,618,000, and $4,245,000, respectively. 5 2. STOCKHOLDERS' EQUITY During the six months ended June 30, 2000, the Company issued 49,825 shares of Common Stock upon exercise of previously granted options, warrants and appreciation rights ("SARs"), with proceeds to the Company of approximately $357,000. The market value of the Company's Common Stock at June 30, 2000 was lower than the market price of the Company's Common Stock at December 31, 1999. Accordingly, the charge related to SARs that previously recorded for financial reporting purpose was reduced by approximately $280,000 for the six months ended June 30, 2000. Because upon exercise SARs are satisfied only by the distribution of shares of Common Stock, the charge was debited to additional paid-in capital. During the six months ended June 30, 2000, the Company recorded stock-based compensation expense of approximately $241,000 in connection with options issued to non-employees in the prior years. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS DESCRIPTION OF BUSINESS OXiGENE is an international biopharmaceutical company engaged principally in research into and the development of products for use in the treatment of cancer. Historically, the Company's activities have been directed primarily towards products designed to complement and enhance the clinical efficacy of radiation and chemotherapy, which are the most common and traditional forms of non-surgical cancer treatment. Recently, however, the Company has begun to investigate certain of its developmental stage products for applications as direct cancer treatment agents, anti-inflammatory agents or in the treatment of fungal or other infectious diseases, as well as for DNA repair measurement and stimulation. OXiGENE has devoted substantially all of its efforts and resources to research and development conducted on its own behalf and through strategic collaborations with clinical institutions and other organizations, particularly the University of Lund in Lund, Sweden. Consequently, OXiGENE believes that its research and development expenditures have been somewhat lower than those of other comparable development-stage companies. On December 15, 1999, the Company entered into a Research Collaboration and License Agreement with Bristol-Myers Squibb Company ("BMS"), to sub-license the rights to certain patent rights and other know-how and technology to which the Company had an exclusive license (the "Sub-License Agreement"). Pursuant to the terms of the Sub-License Agreement, BMS will pay a non-refundable license fee, reimburse certain expenses incurred by the Company and fund future research to be performed by the Company based on a research program determined by a joint development committee. In addition, BMS will pay additional amounts upon certain milestones being reached and royalties on future net sales of products. On May 17, 2000 the Company entered into a joint venture agreement with Techniclone Corporation ("Techniclone"), forming Arcus Therapeutics LLC ("Arcus") to develop and commercialize vascular targeting agent ("VTA") technologies. Under the terms of the agreement, Techniclone will supply its intellectual property to the joint venture, and OXiGENE will provide its next generation tubulin-binding compounds and, based on the development success of the joint venture, will be required to spend up to $20 million to fund the development expenses of Arcus. Any further funding of the joint venture thereafter would be shared by the partners on an equal basis. In addition, the Company has paid Techniclone an upfront licensing fee of $1 million in cash and purchased $2 million, or 585,009 shares, of Techniclone's common stock. Techniclone has filed a registration statement covering the resale of such shares under the Securities Act of 1933 by OXiGENE; however, there can be no assurances that such registration statement will be declared effective, or that OXiGENE will be able to sell such shares on favorable terms, if at all. Additionally, under the terms of the joint venture agreement, any sublicensing fees generated within the joint venture will be allocated 75% to Techniclone and 25% to the Company until Techniclone has received $10 million in sublicense fee revenues. Thereafter, the joint venture partners will share licensing fees on an equal basis. The Company will also be required to pay Techniclone $1 million in cash and purchase an additional $1 million in Techniclone common stock upon the filing of an Investigational New Drug Application for the first clinical candidate developed by Arcus. Furthermore, Techniclone and OXiGENE will share equally any royalty income or profit from the joint venture. OXiGENE has generated a cumulative net loss of approximately $51.7 million for the period from its inception through June 30, 2000. OXiGENE expects to incur significant additional operating losses over at least the next several years, principally as a result of its continuing clinical trials and anticipated research and development expenditures. The principal source of OXiGENE's working capital has been the proceeds of private and public equity financing and the exercise of warrants and stock options, and, prior to entering into the Sub-License Agreement, the Company had no material amount of licensing or other fee income. As of June 30, 2000, OXiGENE had no long-term debt or loans payable. RESULTS OF OPERATIONS - THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999 REVENUE THREE MONTHS ENDED JUNE 30, 2000 AND 1999 During the three months ended June 30, 2000 and 1999, the Company had licensing revenue of $0.4 million and $0 respectively, and approximately $0.5 million and $0.3 million in interest income, respectively, as well as an unrealized gain on short term investment of $0.3 million and $0, respectively. SIX MONTHS ENDED JUNE 30, 2000 AND 1999 For the six months ended June 30, 2000 and 1999, the Company had licensing revenue of $0.9 million and $0 respectively, and approximately $1.0 million and $0.7 million in interest income, respectively, as well as an unrealized gain on short term investment of $0.3 million and $0, respectively. OPERATING EXPENSES THREE MONTHS ENDED JUNE 30, 2000 AND 1999 Operating expenses for the three months ended June 30, 2000 amounted to approximately $2.7 million, compared to $2.8 million for the comparable 1999 period. Research and development expenses decreased to $1.8 million, from $2.1 million for the comparable 1999 period. General and administrative expenses for the three months ended June 30, 2000 decreased to approximately $0.6 million from $0.7 million for the comparable 1999 period. SIX MONTHS ENDED JUNE 30, 2000 AND 1999 Operating expenses for the six months ended June 30, 2000 and 1999, were approximately $6.4 million and $5.0 million, respectively. The increase in operating expenses is primarily attributable to the Combretastatin technology. Research and development expenses for the six-month period ended June 30, 2000 increased to approximately $4.3 million from approximately $3.5 million for the comparable 1999 period. SARs previously granted by the Company to certain clinical investigators and consultants affect the research and development expenses with a charge for financial reporting in reporting periods, when the market value per share of Common Stock increases. Because the market value of the Company's Common Stock at June 30, 2000 was lower than the market value on December 31, 1999, and the market value of the Company's Common Stock at June 30, 1999 was less than the market value on December 31, 1998, the charge previously recorded for financial reporting purposes decreased for the six months ended June 30, 2000, and for the six months ended June 30, 1999 by approximately $0.3 million and $0.1 million, respectively. Without giving effect to such credit, research and development expenses for the six months ended June 30, 2000 increased by approximately 1.0 million, compared to the comparable 1999 period. Generally, the Company makes payments to its clinical investigators if and when certain predetermined milestones in its clinical trials are reached, rather than on a fixed quarterly or monthly basis. As a result of the foregoing and the existence of outstanding SARs, research and development expenses have fluctuated, and are expected to continue to fluctuate, from quarter to quarter. General and administrative expenses for the six-month period ended June 30, 2000 amounted to approximately $1.5 million compared to $1.5 million for the comparable 1999 period. 7 LIQUIDITY AND CAPITAL RESOURCES OXiGENE has experienced net losses and negative cash flow from operations each year since its inception and, as of June 30, 2000, had an accumulated deficit of approximately $51.7 million. The Company expects to incur substantial additional expenses, resulting in significant losses, over at least the next several years due to, among other factors, its continuing clinical trials and anticipated research and development activities. To date, the Company has financed its operations principally through net proceeds it has received from private and public equity financing. The Company had cash and cash equivalents of approximately $31.1 million at June 30, 2000, compared to approximately $30.4 million at December 31, 1999. The increase in cash and cash equivalents was primarily attributable to proceeds received upon signing the licensing agreement with BMS and the exercise of certain warrants and stock options, and (with regard to per share information), the redemption of approximately 706,314 unexercised warrants and the expiration of any unexercised warrants relating to the redemption call of December 2, 1999. Net proceeds from the warrants totaled approximately $10.1 million. During the six months ended June 30, 2000, the Company received approximately $0.4 million upon the exercise of outstanding options, warrants and SARs. OXiGENE's policy is to contain its fixed expenditures by maintaining a relatively small number of employees and relying as much as possible on outside services for its research, development, preclinical testing and clinical trials. The Company maintains small offices in Stockholm, Sweden (executive offices and investor relations), and in Boston, Massachusetts (for drug development and clinical trials). The Company makes quarterly payments to the University of Lund, Lund, Sweden, for pre-clinical research and clinical trials. The Company has an agreement with ILEX (TM) Oncology Inc., a contract research organization in San Antonio, Texas ("ILEX"), pursuant to which ILEX performs contract research services and clinical trials for the Company in connection with the preclinical and clinical testing of compounds under development by the Company, particularly Declopramide and Combretastatin. Through June 30, 2000, the Company has paid ILEX approximately $8.2 million of which approximately $0.6 million was paid in the six-month period ended June 30, 2000. The amounts paid to ILEX have fluctuated, and are expected to continue to fluctuate, from time to time. The Company anticipates that its cash and cash equivalents as of June 30, 2000, should be sufficient to satisfy the Company's projected cash requirements as of that date for approximately 24 months. However, working capital and capital requirements may vary materially from those now planned due to numerous factors including, but not limited to, the progress with preclinical testing and clinical trials; progress of the Company's research and development programs; the time and costs required to obtain regulatory approvals; the resources the Company devotes to manufacturing methods and advanced technologies; the ability of the Company to obtain collaborative or licensing arrangements; the costs of filing, prosecuting and, if necessary, enforcing patent claims; the cost of commercialization activities and arrangements; and the demand for its products if and when approved. The Company anticipates that it will have to seek substantial additional private or public financing or enter into collaborative arrangements with one or more third parties to complete the development of any products or bring products to market. There can be no assurance that additional financing will be available on acceptable terms, if at all. The Company had no material commitments for capital expenditures as of June 30, 2000. TAX MATTERS As of December 31, 1999, the Company had net operating loss carry forwards of approximately $49.0 million for U.S. and foreign income tax purposes, of which $26.6 million expires for U.S. purposes through 2019. The utilization of approximately $2.5 million of such U.S. net operating losses is subject to an annual limitation, pursuant to Section 382 of the U.S. Internal Revenue Code, of approximately $350,000. IMPACT OF YEAR 2000 The Company's internal computer information systems are Year 2000 compliant. These systems consist only of standard software from established and recognized providers. Any new software purchases will be Year 2000 compliant. The Company has not encountered any significant disruptions to its computer information systems due to Year 2000 issues. Any future risks related thereto are therefore primarily dependent upon the computer systems of third parties. These third parties consist mainly of leading educational institutions and universities in the United States and Europe, and clinical research organizations. The Company has reviewed its third party relationships in order to assess Year 2000 issues and has no reason to believe that these third parties will encounter any significant systems disruptions. 8 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company's cash and cash equivalents are maintained primarily in US dollar accounts and amounts payable for research and development to research organizations are contracted in US dollars. Accordingly, the Company's exposure to foreign currency risk is limited because its transactions are primarily based in US dollars. The Company does not have any other exposure to market risk. The Company will develop policies and procedures to manage market risk in the future as circumstances may require. 9 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no material suits or claims pending or, to the best of the Company's knowledge, threatened against the Company. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 10 ITEM 5. OTHER INFORMATION Not applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The following exhibit is filed as part of this Quarterly Report on Form 10-Q: 27.1 Financial Data Schedule (b) Reports on Form 8-K. The Company filed reports on Form 8-K during the second quarter of 2000 on April 6, and May 18, 2000. 11 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. OXiGENE, INC. Date: August 14, 2000 /s/ Bo Haglund ------------------------ ------------------------------------------- Bo Haglund Chief Financial Officer 12 OXiGENE, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE FISCAL QUARTER ENDED MARCH 31, 2000 EXHIBITS Exhibit Number Description - ------ ----------- 27.1 Financial data schedule. EX-27.1 2 0002.txt FINANCIAL DATA SCHEDULE
5 0000908259 OXiGENE, INC. 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 31,143 2,267 0 0 0 34,159 314 (139) 36,897 1,386 0 0 0 113 26,884 36,897 0 2,108 0 0 6,423 0 0 (4,315) 0 (4,315) 0 0 0 (4,315) (0.38) (0.38)
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