-----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, DxGrWHaBT2OyUiXyq1oMRdfK03JUcm036lOK1XwEG+pYqOuevESgKN3P2S1nTZ39 iHlaTsXSkAVVRF0tqLWJ8Q== 0000891618-97-002368.txt : 19970520 0000891618-97-002368.hdr.sgml : 19970520 ACCESSION NUMBER: 0000891618-97-002368 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 97609722 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 FOR THE QUARTER ENDING 3-31-97 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 March 31, 1997 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 March 31, 1997.
CLASS NUMBER OF SHARES ----- ---------------- Common Stock 15,768,780
-1- 2 SANGSTAT MEDICAL CORPORATION FORM 10-Q INDEX PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE ---- CONDENSED CONSOLIDATED BALANCE SHEETS........................3 March 31, 1997 and December 31, 1996 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS..............4 Three Months Ended March 31, 1997 and 1996 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS..............5 Three Months Ended March 31, 1997 and 1996 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.........6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............7-10 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................11 SIGNATURES...........................................................11
-2- 3 SANGSTAT MEDICAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31, 1997 1996 ---------------- ---------------- (unaudited) (1) ASSETS CURRENT ASSETS: Cash and cash equivalents $84,877,790 $19,818,940 Short-term investments 25,070,301 21,501,961 Accounts receivable 386,921 399,437 Other receivables 661,383 483,252 Inventories 835,517 802,137 Prepaid expenses 335,614 413,181 ---------------- ---------------- Total current assets 112,167,526 43,418,908 PROPERTY AND EQUIPMENT -- Net 1,001,505 993,995 OTHER ASSETS 494,836 337,213 ---------------- ---------------- TOTAL $113,663,867 $44,750,116 ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $1,183,730 $1,094,104 Accrued liabilities 893,459 875,602 Capital lease obligations -- current portion 248,210 262,339 Notes payable -- current portion 328,535 462,743 ---------------- ---------------- Total current liabilities 2,653,934 2,694,788 ---------------- ---------------- CAPITAL LEASE OBLIGATIONS 277,192 296,715 ---------------- ---------------- NOTES PAYABLE 777,425 803,631 ---------------- ---------------- STOCKHOLDERS' EQUITY: Convertible preferred stock, $.001 par value, 5,000,000 shares authorized; none outstanding -- -- Common stock, $.001 par value, 25,000,000 shares authorized; outstanding: 1997, 155,339,377 81,657,314 15,768,780 shares; 1996, 13,129,560 shares Accumulated deficit (45,358,156) (40,825,827) Accumulated translation adjustment 21,478 20,634 Unrealized gain (loss) on short-term investments (47,383) 102,861 ---------------- ---------------- Total stockholders' equity 109,955,316 40,954,982 ---------------- ---------------- TOTAL $113,663,867 $44,750,116 ================ ================
(1) Derived from the Company's audited consolidated financial statements. -3- 4 SANGSTAT MEDICAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended March 31, --------------------------------- 1997 1996 --------------- -------------- NET PRODUCT SALES $690,499 $711,345 --------------- -------------- COSTS AND OPERATING EXPENSES: Cost of sales and manufacturing 702,348 695,138 Research and development 3,383,507 2,229,436 Selling, general & administrative 1,825,777 1,002,703 --------------- -------------- Total operating expenses 5,911,632 3,927,277 --------------- -------------- Loss from operations (5,221,133) (3,215,932) --------------- -------------- OTHER INCOME (EXPENSE) Interest Income 721,829 203,300 Interest expense (33,025) (30,353) --------------- -------------- Other income, net 688,804 172,947 --------------- -------------- Net Loss ($4,532,329) ($3,042,985) =============== ============== NET LOSS PER WEIGHTED AVERAGE SHARE ($0.33) ($0.29) =============== ============== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 13,669,318 10,326,182 =============== ==============
-4- 5 SANGSTAT MEDICAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, ---------------------------------- 1997 1996 --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ($4,532,329) ($3,042,985) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 111,940 84,590 Changes in assets and liabilities: Accounts receivable 4,986 34,474 Other receivables (184,123) (118,907) Inventories (35,380) (107,855) Prepaid expenses 76,070 (237,258) Accounts payable 105,560 96,429 Accrued liabilites 35,809 15,317 -------------- -------------- Net cash used in operating activities (4,417,467) (3,276,195) -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Sale of common stock and options 73,682,063 45,070,735 Note payable borrowings -- 127,980 Note payable repayments (138,849) (101,912) Repayment of capital lease obligations (86,787) (76,138) -------------- -------------- Net cash provided by financing activities 73,456,427 45,020,665 -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (71,549) (16,615) Maturities of short-term investments 10,183,426 3,956,293 Purchase of short-term investments (13,902,010) (9,467,862) Other assets (193,646) 9,982 -------------- -------------- Net cash used in investing activities (3,983,779) (5,518,202) -------------- -------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 3,669 (51,387) -------------- -------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 65,058,850 36,174,881 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 19,818,940 4,609,186 -------------- -------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $84,877,790 $40,784,067 ============== ============== NONCASH INVESTING AND FINANCING ACTIVITIES: Property acquired under capital leases $53,134 $58,886 ============== ============== Unrealized gain (loss) on short-term investments ($150,244) $14,706 ============== ============== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -- Cash paid during the period for interest $69,513 $61,697 ============== ==============
-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 for the entire year. The information included in this report should be read in conjunction with the Company's audited financial statements and notes thereto included in the Company's 1996 Annual Report to Shareholders. Per Share Information Net loss per common share is computed using the weighted average number of common shares outstanding during the period. Common equivalent shares, including stock 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:
March 31, December 31, 1997 1996 --------- --------- Raw materials $ 331,736 $ 265,537 Work-in-progress 326,013 275,503 Finished goods 177,768 261,097 --------- --------- Total $ 835,517 $ 802,137 ========= =========
Public Offering In March and April 1997, the Company completed a public offering, including the underwriters' over-allotment of a total of 2.73 million shares with gross proceeds of $81,900,000. -6- 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 1997 AND 1996 Total revenues. Net product sales were $690,000 in the first quarter of 1997 as compared with $711,000 in the first quarter of 1996. This decrease of $21,000 or 3% was primarily due to a 35% decline in revenues for THYMOGLOBULIN(R) in Canada under that country's emergency drug release program, which reflects variations in compassionate use demand, partially offset by a 10% increase in sales of PRA-STAT(R) and CROSS-STAT(R) and sales of THE TRANSPLANT PHARMACY. Cost of sales and manufacturing. Cost of sales and manufacturing expenses were $702,000 for the quarter ended March 31, 1997 as compared with $695,000 in the corresponding quarter of 1996. This increase of $7,000 or 1% primarily reflects declines of cost of sales for both monitoring products and THYMOGLOBULIN and more than offset by cost of sales of THE TRANSPLANT PHARMACY. The Company's monitoring products business does not currently generate a profit, because the Company has not achieved a scale of production which allows it to cover fixed manufacturing costs. Research and development. Research and development expenses increased to $3,384,000 in the first quarter of 1997 from $2,229,000 in the same period in 1996. This increase of $1,154,000 or 52% mainly reflects expenses for completion of several key regulatory and clinical development milestones and initiation of new clinical projects for THYMOGLOBULIN, CYCLOSPORINE and AZATHIOPRINE. In January 1997, the Company's submission of a market approval application (AADA) for its proprietary CYCLOSPORINE to the U.S. Food and Drug Administration (FDA) was accepted and is now under review at the FDA. In addition to the CYCLOSPORINE pivotal bioequivalence trials submitted to the FDA in the AADA, the Company also completed several further bioequivalence trials with CYCLOSPORINE versus Novartis' Neoral. These trials were not requested by the FDA but were conducted to provide additional clinical data for opinion leader support. The Company also initiated the design of several clinical protocols for Investigator Review Board (IRB) submission of clinical trials for conversion of renal, heart and liver transplant recipients on Novartis' Neoral to SangStat's CYCLOSPORINE. These trials also were not requested by the FDA and are not deemed necessary for approval of the Company's CYCLOSPORINE AADA under review by the FDA. Instead, these trials are designed to provide information on the pharmacokinetics, safety and efficacy of conversion from Neoral to SangStat's CYCLOSPORINE. In January 1997, a Product License Application (PLA) was filed with the FDA for approval of THYMOGLOBULIN for the treatment of acute rejection episodes in renal transplant recipients. Subsequently, this PLA submission was accepted and is now under review at the FDA. The Company is continuing a trial for THYMOGLOBULIN for induction therapy to prevent acute rejection in kidney transplant recipients. The Company also initiated the design of a trial to investigate the efficacy and safety of THYMOGLOBULIN in treating graft versus host disease in bone marrow transplant recipients. These trials were not requested by the FDA but are being conducted to help facilitate market acceptance and the assessment of future activities for expanded labeling for THYMOGLOBULIN. The Company announced in April 1997 that it is planning to expand its clinical trial programs and in accordance with these plans, the Company expects research and development expenses to increase in the next few quarters. Selling, general and administrative. Selling, general and administrative expenses increased to $1,826,000 in the first quarter of 1997 from $1,003,000 in the same quarter of the previous year. This increase of $823,000 or 82% primarily reflects that in connection with the Company's reacquisition of marketing rights to its monitoring products, PRA-STAT and CROSS-STAT, from -7- 8 Baxter Healthcare Corporation in 1996, the Company established its own sales staffs in the United States and Europe. As a result, sales and marketing expenses for monitoring products increased by $419,000 from the first quarter of 1996 to the same quarter in 1997. Selling, general and administrative expenses further increased by $404,000 as the result of the establishment of a pilot facility for THE TRANSPLANT PHARMACY, as well as expanded therapeutics sales, patent and other general and administrative activities. The Company announced in April, 1997 that, it is planning to expand its sales and marketing team to further its near term product commercialization strategies. The Company is preparing to build its sales and marketing team now that market approval applications for THYMOGLOBULIN and CYCLOSPORINE have been submitted and accepted for review by the FDA. The Company is currently hiring its senior sales and marketing management to prepare for the anticipated market launches of these two drugs, subject to FDA approval. In the next few months, the Company expects to commence hiring of its acute care sales force so that, in the event of market approvals, the Company will be ready to launch its products. Accordingly, the Company expects selling, general and administrative expenses to increase in the next several quarters. Other income and expenses. Interest income increased by $518,000 to $722,000 in the first quarter of 1997 from $203,000 in the same quarter of the previous year. This increase is due to the increase in the average cash balance available for investment as a result of the Company's sale of equity securities in a public offering in March 1997. Interest and other expense for capital lease obligations and long term notes increased to $33,000 in the first quarter of 1997 from $30,000 in the first quarter of 1996. Net loss. The Company's net loss was $4,532,000 or $0.33 per share in the first quarter of 1997, compared with a net loss of $3,043,000 or $0.29 per share in the first quarter of 1996. LIQUIDITY AND CAPITAL RESOURCES During the quarters ended March 31, 1997 and 1996, the net cash used in operating activities was approximately $4,417,000 and $3,276,000, respectively. The increase in net cash used in operating activities in these periods is due substantially to the increased amount of net loss incurred in each of these quarters. As of March 31, 1997, the Company had cash, cash equivalents and short-term investments of $109,948,000 and total assets of $113,664,000. Net cash provided by financing activities totaled $73,456,000 and $45,021,000 in the quarters ended March 31, 1997 and 1996, respectively. Such amounts were substantially comprised of proceeds received from the sale of Common Stock in the Company's public offerings in March 1997 and March 1996, respectively, offset in part by net repayments of notes payable and capital lease obligations. Net cash used in investing activities totaled $3,984,000 and $5,518,000 in the quarters ended March 31, 1997 and 1996, respectively, and resulted substantially from the Company's net purchases of short-term investments. The Company expects to incur significant costs related to, among other things, continued clinical and preclinical testing, regulatory approval activities and research and development programs in the future and establishment of larger sales staffs in the United States and Europe. If and when the Company receives FDA approval of its therapeutic drug candidates, the Company expects to have additional working capital requirements for expansion of sales, increased inventory levels and payment of certain license obligations. If the Company receives FDA approval for THYMOGLOBULIN, it would be obligated to make a final -8- 9 milestone payment under a related license agreement totaling $1.5 million. 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 1998. Although the Company has no current contractual obligations relating to capital expenditures, it anticipates that capital expenditures, primarily for its United States operations, will aggregate approximately $1 million during 1997. The Company's future capital requirements will depend on many factors, including its research and development programs, the scope and results of clinical trials, the time and costs involved in obtaining regulatory approvals, the costs involved in obtaining and enforcing patents or any litigation by third parties regarding intellectual property, the status of competitive products, the establishment of sales and marketing capacity or third-party manufacturing arrangements, the establishment of collaborative relationships with other parties, and the costs of manufacturing scale-up and working capital requirements for inventory and financing of accounts receivable. If adequate funds are not available, the Company may be required to delay, scale back or eliminate one or more of its development programs or obtain funds through arrangements with collaborative partners or others that may require the Company to relinquish rights to certain technologies, product candidates or products that the Company would not otherwise relinquish. This document contains forward-looking statements that involve risks and uncertainties. Forward-looking statements may reflect the Company's current views with respect to future events. Actual results may vary materially and adversely from those anticipated, believed, estimated, or otherwise indicated. Important factors common to the FDA drug review and approval process could cause actual results to differ materially with regard to the approvability of SangStat's THYMOGLOBULIN or CYCLOSPORINE. These factors include, without limitation: (1) that data obtained from clinical trials are subject to varying interpretations, and there can be no assurance that the FDA (or an FDA panel of experts) will agree with the Company's assessment of clinical trial results; (2) that there can no assurance that the agency will not issue new guidelines, guidance documents, policies, or regulations or otherwise have new, different or previously unknown requirements that may materially affect the approvability of the product; and (3) that there can be no assurance of FDA approval of the product. Other factors that could cause actual results to differ materially include, without limitation, uncertainty related to the manufacturing of commercial quantities of product on commercially favorable terms, market acceptance and potential litigation. For a discussion of factors that might result in different outcomes, see the Company's Registration Statement on Form S-3 filed on January 24, in particular "Risk Factors" set forth therein, and the Company's annual report on Form 10-K filed with the Securities and Exchange Commission. RECENTLY ISSUED ACCOUNTING STANDARD SFAS 128 In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share." (SFAS 128). The Company is required to adopt SFAS 128 in the fourth quarter of 1997. SFAS 128 establishes the accounting standards for computing and presenting earnings per share. The Company expects that this adoption will not have a material effect on reported earnings (loss) per share. -9- 10 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EDGAR Financial Data Schedule 27.1. (b) No reports on Form 8-K were filed by the Company during the quarter ended March 31, 1997. 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: May 14, 1997 BY: /s/ PHILIPPE POULETTY, M.D. ---------------------------------------- PHILIPPE POULETTY, M.D. CHAIRMAN AND CHIEF EXECUTIVE OFFICER DATE: May 14, 1997 BY: /s/ HENRY N. EDMUNDS, PH.D. ---------------------------------------- HENRY N. EDMUNDS, PH.D. VICE PRESIDENT AND CHIEF FINANCIAL OFFICER -10- 11 EXHIBIT INDEX
Exhibit # Description - --------- ----------- 27 Financial Data Schedule
EX-27.1 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED CONSOLIDATED BALANCE SHEETS OF MARCH 31, 1997/96 AND THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF MARCH 31, 1997/96. 9-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 84,877,790 25,070,301 1,048,304 0 835,517 112,167,526 2,771,697 1,770,192 113,663,867 2,653,934 0 0 0 155,339,377 0 113,663,867 690,499 690,499 702,348 5,911,632 0 0 33,025 (4,532,329) 0 (4,532,329) 0 0 0 (4,532,329) ($0.33) 0
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