-----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, VkypMx4JzoJxGB7Qh89uQw9tjPFj1GEIqT1d9M7Y99070M3MxKnaxNGYbGlkO7mH 6C4x1w5CG7ZNKuaOKq1Fbg== 0000891618-96-002775.txt : 19961118 0000891618-96-002775.hdr.sgml : 19961118 ACCESSION NUMBER: 0000891618-96-002775 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANGSTAT MEDICAL CORP CENTRAL INDEX KEY: 0000913610 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 943076069 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22890 FILM NUMBER: 96664420 BUSINESS ADDRESS: STREET 1: 1505 ADAMS DR CITY: MENLO PARK STATE: CA ZIP: 94025 BUSINESS PHONE: 4153280300 MAIL ADDRESS: STREET 1: 1505 ADAMS DR CITY: MENLO PARK STATE: CA ZIP: 94025 10-Q 1 FORM 10-Q 1 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 September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-22890 SANGSTAT MEDICAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-3076-069 (State of incorporation) (IRS Employer Identification No.) 1505 Adams Drive Menlo Park, CA 94025 (Address of principal executive office, Zip Code) Registrant's telephone number, including area code: 415-328-0300 None (Former name, former address and former fiscal year, if changed since last report) 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 Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of September 30, 1996. CLASS NUMBER OF SHARES ----- ---------------- Common Stock 13,106,125 -1- 2 SANGSTAT MEDICAL CORPORATION FORM 10-Q INDEX PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PAGE CONDENSED CONSOLIDATED BALANCE SHEETS..........................3 September 30, 1996 and December 31, 1995 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS................4 Three and Nine Months Ended September 30, 1996 and 1995 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS................5 Nine Months Ended September 30, 1996 and 1995 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS...........6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................7-9 PART II. OTHER INFORMATION OTHER INFORMATION..........................................................10 SIGNATURES.................................................................11 -2- 3 SANGSTAT MEDICAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1996 December 31, 1995 ------------------ ----------------- ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 19,343,204 $ 4,609,186 Short-term Investments 25,327,732 4,612,565 Accounts Receivable 432,689 406,153 Other Receivables 375,777 170,118 Inventories 779,244 766,124 Prepaid Expenses 199,927 73,531 ------------ ------------ Total Current Assets 46,458,573 10,637,677 PROPERTY AND EQUIPMENT -- NET 997,872 528,962 OTHER ASSETS 384,373 393,238 ------------ ------------ TOTAL $ 47,840,818 $ 11,559,877 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 899,591 $ 1,041,389 Accrued Liabilities 675,349 652,742 Capital Lease Obligations -- Current 133,834 238,651 Notes Payable -- Current 193,168 254,249 ------------ ------------ Total Current Liabilities 1,901,942 2,187,031 ------------ ------------ CAPITAL LEASE OBLIGATIONS 498,015 286,558 ------------ ------------ NOTES PAYABLE 939,754 804,811 ------------ ------------ Common Stock 81,564,711 36,275,765 Accumulated Deficit (37,238,606) (28,051,991) Accumulated Translation Adjustment 18,585 46,811 Unrealized Gain on Short-Term Investment 156,417 10,892 ------------ ------------ Total Stockholders' Equity 44,501,107 8,281,477 ------------ ------------ TOTAL $ 47,840,818 $ 11,559,877 ============ ============
-3- 4 SANGSTAT MEDICAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended September 30, September 30, --------------------------- --------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Revenues: Net Product Sales $ 639,675 $ 581,725 $ 1,732,263 $ 1,855,931 Collaborative Agreement 0 0 0 1,125,000 ------------ ------------ ------------ ------------ Total Revenues 639,675 581,725 1,732,263 2,980,931 ------------ ------------ ------------ ------------ Operating Expenses Cost of Sales and Manufacturing 729,777 617,268 2,018,416 1,932,417 Research and Development 2,132,472 1,657,968 6,187,703 4,582,333 Selling, General & Administrative 1,827,942 907,270 4,168,592 2,688,685 ------------ ------------ ------------ ------------ Total Operating Expenses 4,690,191 3,182,506 12,374,711 9,203,435 ------------ ------------ ------------ ------------ Loss from Operations (4,050,516) (2,600,781) (10,642,448) (6,222,504) Other Income (Expense) Interest Income 614,536 183,596 1,552,462 645,530 Interest & Other Expense (29,935) (33,347) (96,629) (101,569) ------------ ------------ ------------ ------------ Other Income, Net 584,601 150,249 1,455,833 543,961 ------------ ------------ ------------ ------------ Net Loss $ (3,465,915) $ (2,450,532) $ (9,186,615) $ (5,678,543) ============ ============ ============ ============ Net Loss per Common Share $ (0.26) $ (0.26) $ (0.76) $ (0.61) ============ ============ ============ ============ Common Shares used in Computing per Share Amounts 13,098,852 9,586,657 12,166,640 9,306,312 ============ ============ ============ ============
-4- 5 SANGSTAT MEDICAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, -------------------------------- 1996 1995 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (9,186,615) $ (5,678,543) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 286,323 259,718 Changes in assets and liabilities Accounts receivable (27,141) (151,480) Other receivables (208,010) (134,463) Inventories (13,631) (348,350) Prepaid expenses (127,902) (38,692) Accounts payable (131,123) 131,727 Accrued liabilites 31,856 (240,587) ------------ ------------ Net cash used in operating activities (9,376,243) (6,200,670) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Sale of Common stock and warrants 45,288,946 5,548,400 Note payable borrowings 133,904 252,033 Note payable repayments (307,722) (281,444) Repayment of capital lease obligations (238,685) (185,157) ------------ ------------ Net cash provided by financing activities 44,876,443 5,333,832 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (144,356) (2,569) Maturities of short-term investments 10,294,309 14,982,433 Purchase of short-term investments (30,861,139) (19,645,283) Deposits and other assets (14,114) 196,413 ------------ ------------ Net cash used in investing activities (20,725,300) (4,469,006) ------------ ------------ EFFECT OF EXCHANGE RATE CHANGES ON CASH (40,882) (46,328) ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 14,734,018 (5,382,172) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,609,186 9,828,928 ------------ ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $ 19,343,204 $ 4,446,756 ============ ============ NONCASH INVESTING AND FINANCING ACTIVITIES: Property acquired under capital leases $ 345,325 $ 239,645 Property acquired under notes payable $ 268,322 $ 0 ============ ============ Unrealized gain on short-term investments $ 145,525 $ 64,190 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - - Cash paid during the period for interest $ 115,686 $ 113,118 ============ ============
-5- 6 SANGSTAT MEDICAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Basis of Presentation The consolidated financial statements include the accounts of SangStat Medical Corporation and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated. While the quarterly financial information in this filing is unaudited, the financial statements presented reflect all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for a fair presentation of the results of operations for the interim periods covered and of the financial condition of the Company at the dates of the interim balance sheets. These results for interim periods are not necessarily indicative of the results expected for the entire year. The information included in this report should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's 1995 Annual Report to Stockholders. Per Share Information Net loss per common share is computed using the weighted average number of common shares outstanding during the period. Options and warrants granted by the Company have been excluded in the calculation of common shares outstanding since they would serve to reduce the net loss per share. Inventories Inventories, valued at the lower of cost (first-in, first-out) or market, consist of:
September 30, December 31, 1996 1995 ------------- ------------ Raw materials $472,798 $432,549 Work-in-progress 210,816 213,863 Finished goods 95,630 119,712 -------- -------- Total $779,244 $766,124 ======== ========
-6- 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS -- THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 Net product sales increased by 10% to $640,000 for the quarter ended September 30, 1996 from $582,000 in the corresponding quarter in 1995. This primarily reflects continuing demand for THYMOGLOBULIN(R) under Canada's Emergency Drug Release (EDR) Program and increased sales of PRA-STAT(R) and CROSS-STAT(R). Effective July 1, 1996, SangStat reacquired exclusive commercial rights for these two monitoring products from Baxter Healthcare Corporation and since this date, SangStat has been marketing these monitoring products through its own sales staff in the U.S. and Europe. Net product sales for the first nine months of 1996 were $1,732,000 compared to $1,856,000 in the first nine months of 1995. This primarily reflects a decrease in revenues for certain contract manufacturing, OEM and other products for research use. As expected, no collaborative agreement milestone payments were received from Baxter in 1996, reflecting completion of the final milestones for PRA-STAT and CROSS-STAT in 1995. The final payments of $1,125,000 in the first six months of 1995 represented the completion of $10.0 million received by SangStat for milestones, license fees and equity in 1993 through 1995 under its collaborative agreement with Baxter. Cost of sales and manufacturing expenses increased to $730,000 and $2,018,000 for the quarter and nine months ended September 30, 1996 from $617,000 and $1,932,000 in the corresponding periods of 1995, respectively. These increases primarily reflect increases in monitoring product manufacturing costs, partially offset by lower cost of goods sold in Canada. The Company's monitoring products business does not currently generate a profit, because certain sales are made on a cost recovery basis and the Company has not yet achieved a scale of production which allows it to cover fixed manufacturing costs. Sales of these monitoring products however, partially offset fixed costs and serve as a prototype for the manufacture of further products as well as to further the Company's reputation and presence in the industry. Notwithstanding these losses, the Company's strategy is to obtain regulatory approval for certain of these and other monitoring products and to produce and sell these products on a commercially profitable basis. The Company accordingly obtained FDA 510(k) market clearance for its PRA-STAT(R) product in September 1994, and obtained 510(k) approval for CROSS-STAT(R) in May 1995. Research, development and regulatory expenses increased to $2,132,000 in the third quarter of 1996 from $1,658,000 in the same quarter in 1995 and also increased to $6,188,000 in the first nine months of 1996 from $4,582,000 in the first nine months of 1995. These increases reflect expenses incurred to attain several significant clinical development achievements. In August, the Company completed its pivotal Phase III clinical trial for THYMOGLOBULIN(R) and the results of this trial were announced in early October. A preliminary intent-to-treat analysis of the data (primary endpoint) indicated that the observed overall success rate in the reversal of acute kidney rejection by THYMOGLOBULIN(R) was significantly higher than for ATGAM(R) (87.8% vs 76.3%). Based on the results of this trial (not yet reviewed by the FDA), SangStat expects to file the Product License Application (PLA) for THYMOGLOBULIN in the U.S. by year end. -7- 8 In September the Company announced the positive results of its pivotal bioequivalance trials showing that SangStat's proprietary CYCLOSPORINE formulation is bioequivalent to branded cyclosporine, as defined by FDA policy for generic drugs. Based on these results, SangStat intends to file for marketing clearance with the FDA by year end, earlier than previously forecasted. Cyclosporine is the leading immunosuppressive drug used in human organ transplantation to prevent graft rejection. SangStat is continuing a second Phase II dose-finding safety and surrogate end-point trial for its proprietary peptide ALLOTRAP(R) 2702 and has also begun bioequivalence trials for its generic AZATHIOPRINE product. Also in September, SangStat launched The Transplant Pharmacy(TM), a comprehensive pharmacotherapy management program intended to address the chronic care needs of the transplant recipient. This new program will promote medication compliance, measure clinical and economic outcomes, provide feedback directly to clinicians, and dispense all needed medications by mail from SangStat's central pharmacy to transplant recipients enrolled in the program. The program is being piloted at a select number of transplant centers. Selling, general and administrative expenses increased to $1,828,000 in the third quarter of 1996 from $907,000 for the same quarter of the previous year and also increased to $4,169,000 in the first nine months of 1996 from $2,689,000 in the first nine months of 1995. This primarily reflects expenses for the addition of a sales staff in both the U.S. and Europe for the Company's monitoring products, establishment of a pharmacy, increased activities in investor relations and expanded general administrative activities. Interest income increased in the third quarter of 1996 to $615,000 from $184,000 in the same quarter of the previous year, and increased to $1,552,000 from $646,000 for the first nine months of 1996 and 1995, respectively. This reflects interest earned from investment of the cash proceeds from the Company's public offering in March 1996. Interest and other expense for capital lease obligations and long term notes remained essentially unchanged at $30,000 in the third quarter of 1996 compared with $33,000 in the same quarter of the previous year and $97,000 in the first nine months of 1996 compared with $102,000 in the first nine months of 1995. The Company's net loss was $3,466,000 or $0.26 per share in the third quarter of 1996, compared with a net loss of $2,451,000 or $0.26 per share in the third quarter of 1995. The net loss of $9,187,000 or $0.76 per share for the first nine months of 1996 compared with a net loss of $5,679,000 or $0.61 per share for the first nine months of 1995. These changes are primarily the result of higher operating expenses in the third quarter and the first nine months of 1996 as compared with the same periods in 1995. -8- 9 FINANCIAL CONDITION Total assets as of September 30, 1996 were $47,841,000, an increase of $36,281,000 from December 31, 1995. This increase is primarily due to an increase in cash, cash equivalents and short-term investments of $35,449,000, an increase in accounts receivable and other receivables of $232,000 and an increase in prepaid expenses of $126,000. Total liabilities increased slightly by $61,000, a result of increases in capital lease obligations and notes payable of $181,000 and accrued liabilities of $23,000 respectively, partially offset by a decline of accounts payable of $142,000. Stockholders' equity increased by $36,220,000 from year end 1995. This increase consisted primarily of $45,061,000 in net proceeds from the Company's public offering in March 1996, offset partially by the net loss of $9,187,000 for the first nine months of 1996. LIQUIDITY The Company has cash, cash equivalents and short-term investments of $44,671,000 as of September 30, 1996. The Company expects to incur significant costs related to continued research and development programs, preclinical and clinical testing and regulatory approval activities in the years ahead. In addition, in the event the Company receives regulatory approval for any of its therapeutic products, the Company may then need to raise additional funds through additional financings, including private or public equity offerings and collaborative research and development arrangements with corporate partners. There can be no assurance that funds will be raised on favorable terms, if at all, or that discussions with potential collaborative partners will result in any agreements. The Company believes that its existing capital resources, together with product sales and interest income will be sufficient to meet the Company's operating and capital requirements through at least 1997. The Company's future capital requirements will depend on many factors, including but not limited to: continued scientific progress in its research and development programs; progress in clinical trials; the time and costs involved in obtaining regulatory approvals; the costs involved in obtaining and enforcing patents; the ability of the Company to establish development and commercialization relationships; and the costs of manufacturing scale-up. This document contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. For a discussion of factors that might result in different outcomes, see the Company's Registration Statement on Form S-3 filed on February 9, 1996, in particular "Risk Factors" set forth therein, and the Company's annual report on Form 10-K for the year ended December 31, 1995, filed with the Securities and Exchange Commission. -9- 10 PART II. OTHER INFORMATION There is no disclosure required pursuant to the Items in Part II. -10- 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. SANGSTAT MEDICAL CORPORATION (REGISTRANT) DATE: November 12, 1996 BY:__________________________________________ DAVID L. WINTER, M.D. PRESIDENT AND CHIEF OPERATING OFFICER DATE: November 12, 1996 BY:____________________________________________ HENRY N. EDMUNDS, PH.D. VICE PRESIDENT AND CHIEF FINANCIAL OFFICER -11- 12 EXHIBIT INDEX Exhibit 27 - Financial Data Schedule. EX-27 2 FINANCIAL DATA SCHEDULE
5 U.S. DOLLARS 9-MOS DEC-31-1996 JUL-01-1996 SEP-30-1996 1 19,343,204 25,327,732 808,066 0 779,244 46,458,573 2,542,512 1,544,640 47,840,818 1,901,942 0 0 0 81,564,711 0 47,840,818 1,732,263 1,732,263 2,018,416 12,374,711 0 0 96,629 (9,186,615) 0 (9,186,615) 0 0 0 (9,186,615) (0.76) 0
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