-----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, WTrGkophUt3H67CtSvatduqBBzdXVff46YlABwrNYXYiGrdTfKpW2lsybSrxtx6X Xoo40jgT6nOAR2CFBhAkjQ== 0000913610-97-000004.txt : 19971119 0000913610-97-000004.hdr.sgml : 19971119 ACCESSION NUMBER: 0000913610-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 DATE AS OF CHANGE: 19971118 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANGSTAT MEDICAL CORP CENTRAL INDEX KEY: 0000913610 STANDARD INDUSTRIAL CLASSIFICATION: 2836 IRS NUMBER: 943076069 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22890 FILM NUMBER: 97722297 BUSINESS ADDRESS: STREET 1: 1505 ADAMS DR CITY: MENLO PARK STATE: CA ZIP: 94025 BUSINESS PHONE: 6503280300 MAIL ADDRESS: STREET 1: 1505 ADAMS DR CITY: MENLO PARK STATE: CA ZIP: 94025 10-Q 1 FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 1997 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, 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: 650-328-0300 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, 1997. CLASS NUMBER OF SHARES ----- ---------------- Common Stock 15,956,855 Part 1. Financial Information Item 1. Financial Statements SANGSTAT MEDICAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1997 1996 ------------- ------------- (unaudited) (1) ASSETS CURRENT ASSETS: Cash and cash equivalents $69,099,789 $19,818,940 Short-term investments 33,163,727 21,501,961 Accounts receivable 909,775 399,437 Other receivables 1,494,183 483,252 Inventories 3,413,695 802,137 Prepaid expenses 232,309 413,181 ------------- ------------- Total current assets 108,313,478 43,418,908 PROPERTY AND EQUIPMENT -- Net 2,049,530 993,995 OTHER ASSETS 556,518 337,213 ------------- ------------- TOTAL $110,919,526 $44,750,116 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $4,643,147 $1,094,104 Accrued liabilities 950,366 875,602 Capital lease obligations - current portion 351,320 262,339 Notes payable -- current portion 146,411 462,743 ------------- ------------- Total current liabilities 6,091,244 2,694,788 CAPITAL LEASE OBLIGATIONS 1,091,716 296,715 NOTES PAYABLE 736,860 803,631 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, 15,956,855 shares; 1996, 13,129,560 shares 159,009,170 81,657,314 Accumulated deficit (56,004,521) (40,825,827) Accumulated translation adjustment (14,036) 20,634 Unrealized gain on short-term investments 9,093 102,861 ------------- ------------- Total stockholders' equity 102,999,706 40,954,982 ------------- ------------- TOTAL $110,919,526 $44,750,116 ============= =============
(1) Derived from the Company's audited consolidated financial statements. See notes to consolidated financial statements. SANGSTAT MEDICAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Nine months ended September 30, September 30, 1997 1996 1997 1996 ------------- ------------- ------------- ------------- Total Revenues $1,126,791 $639,675 $2,528,840 $1,732,263 Operating Expenses: Cost of Sales and Manufacturing 852,294 729,777 2,345,150 2,018,416 Research and Development 4,481,168 2,132,472 12,150,598 6,187,703 Selling, General & Administrative 2,944,711 1,827,942 7,416,847 4,168,592 ------------- ------------- ------------- ------------- Total Operating Expenses 8,278,173 4,690,191 21,912,595 12,374,711 ------------- ------------- ------------- ------------- Loss from Operations (7,151,382) (4,050,516) (19,383,755) (10,642,448) Other Income (Expense): Interest Income 2,001,745 614,536 4,332,919 1,552,462 Interest & Other Expense (52,319) (29,935) (127,858) (96,629) ------------- ------------- ------------- ------------- Other Income, Net 1,949,426 584,601 4,205,061 1,455,833 ------------- ------------- ------------- ------------- Net Loss ($5,201,956) ($3,465,915) ($15,178,694) ($9,186,615) ============= ============= ============= ============= Net loss per Common Share ($0.33) ($0.26) ($1.00) ($0.76) ============= ============= ============= ============= Weighted Average Shares 15,925,534 13,098,852 15,170,198 12,166,640 ============= ============= ============= =============
See notes to consolidated financial statements. SANGSTAT MEDICAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, ---------------------------- 1997 1996 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ($15,178,694) ($9,186,615) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 424,365 286,323 Changes in assets and liabilities: Accounts receivable (521,231) (27,141) Other receivables (1,019,946) (208,010) Inventories (2,615,556) (13,631) Prepaid expenses 178,614 (127,902) Accounts payable 3,576,924 (131,123) Accrued liabilites 102,282 31,856 ------------- ------------- Net cash used in operating activities (15,053,242) (9,376,243) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Sale of common stock and options 77,351,856 45,288,946 Note payable borrowings -- 133,904 Note payable repayments (351,216) (307,722) Repayment of capital lease obligations (260,477) (238,685) ------------- ------------- Net cash provided by financing activities 76,740,163 44,876,443 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (343,355) (144,356) Maturities of short-term investments 7,436,722 10,294,309 Purchase of short-term investments (19,192,255) (30,861,139) Other assets (271,926) (14,114) ------------- ------------- Net cash used in investing activities (12,370,814) (20,725,300) ------------- ------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (35,258) (40,882) ------------- ------------- NET INCREASE IN CASH AND EQUIVALENTS 49,280,849 14,734,018 CASH AND EQUIVALENTS, BEGINNING OF PERIOD 19,818,940 4,609,186 ------------- ------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $69,099,789 $19,343,204 ============= ============= NONCASH INVESTING AND FINANCING ACTIVITIES: Property acquired under capital leases $1,144,459 $345,325 Property acquired under notes payable -- 268,322 Unrealized gain (loss) on investments (93,768) 145,525 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - Cash paid during the period for interest $150,209 $115,686 ============= =============
See notes to consolidated financial statements. 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 sheet. 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 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, 1997 1996 ------------ ------------ Raw materials $1,505,932 $265,537 Work-in-progress 287,415 275,503 Finished goods 1,620,348 261,097 ------------ ------------ Total $3,413,695 $802,137 ============ ============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - Three and Nine Months Ended September 30, 1997 and 1996 Total revenues. Net product sales in third quarter 1997 increased to $1,127,000 from $640,000 in the same quarter of 1996. This increase of $487,000 or 76% reflects an increase of 25% in sales of monitoring products, including PRA- STAT(R) and CROSS-STAT(R), sales of THE TRANSPLANT PHARMACY(TM)(which began in third quarter 1996) and an increase of 18% in therapeutic sales (including THYMOGLOBULIN(R)) in Canada. Net product sales in the first nine months of 1997 increased to $2,529,000 from $1,732,000 in the first nine months of 1996. This increase of $797,000 or 46% similarly reflects an increase of 37% in sales of monitoring products, including PRA-STAT and CROSS-STAT, continuing sales of THE TRANSPLANT PHARMACY and partially offset by an 18% decline in therapeutic sales (including THYMOGLOBULIN) in Canada. The changes in sales of THYMOGLOBULIN in Canada under that country's Emergency Drug Release (EDR) Program reflect compassionate use demand. Cost of sales and manufacturing. Cost of sales and manufacturing expenses were $852,000 in the third quarter of 1997 as compared with $730,000 in the corresponding quarter of 1996. This increase of $122,000 or 17% was due to an 8% increase in cost of sales in Canada and commencement of THE TRANSPLANT PHARMACY, partially offset by a decrease in costs of monitoring products. Cost of sales and manufacturing expenses were $2,345,000 in the first nine months of 1997 as compared with $2,018,000 in the first nine months of 1996. This increase of $327,000 or 16% is a result of a 10% decrease in costs of monitoring products, a 16% decrease in costs of sales in Canada, partially offset by costs of sales for THE TRANSPLANT PHARMACY. Research and development. Research and development expenses increased to $4,481,000 in the third quarter of 1997 from $2,132,000 in the same period in 1996. This increase of $2,349,000 or 110% primarily reflects several clinical trials in transplant patients for CYCLOSPORINE and THYMOGLOBULIN and continuing product development of AZATHIOPRINE, ALLOTRAP(R) peptides and XENOJECT(TM). In July the Company announced the one year follow-up of its pivotal U.S. Phase III trial with THYMOGLOBULIN(R). These data have not yet been reviewed by the U.S. Food and Drug Administration (FDA). A Product License Application (PLA) for THYMOGLOBULIN was submitted to the FDA in January 1997. During the third quarter, SangStat also successfully completed an additional clinical trial with its proprietary CYCLOSPORINE in renal transplant recipients. The results of this trial, conducted at the University of Cincinnati, will be presented at a satellite symposium at the American Society of Nephrology Annual Meeting in November 1997. The Company has a number of additional clinical trials in different transplant recipient populations ongoing and results are planned to be presented at future scientific and regulatory meetings in the future. Research and development expenses also increased to $12,151,000 in the first nine months of 1997 as compared to $6,188,000 in the first nine months of 1996. This increase of $5,963,000 or 96% reflects, in addition to the key events described above for the third quarter of 1997, support of an on going trial utilizing THYMOGLOBULIN for induction therapy to prevent acute rejection in kidney transplant recipients. This is not a registration study but may provide useful data to help assess the potential of this indication for THYMOGLOBULIN. The Company filed applications with the FDA for market clearance of its proprietary CYCLOSPORINE, for prevention of organ transplant rejection, and THYMOGLOBULIN, for treatment of rejection, in November 1996 and January 1997, respectively. Both drugs are now under active review at the FDA. 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 continue to increase in the next few quarters over levels from corresponding quarters of the previous year. Selling, general and administrative. Selling, general and administrative expenses increased to $2,945,000 in the third quarter of 1997 from $1,828,000 in the same quarter of the previous year. This increase of $1,117,000 or 61% is in accordance with the Company's announcement in April 1997 of its plans to expand its sales and marketing staff to further its near term commercialization strategies. In May 1997 R. J. Tesi, M.D., joined the Company as Senior Vice President of Marketing and in August 1997 Martin Rosendale joined the Company as Senior Vice President of U.S. Sales and Services. Selling and marketing expenses for monitoring and therapeutic products increased by $120,000 from the third quarter of 1996, as compared to the same quarter in 1997. General and administrative expenses further increased by $997,000 in the third quarter of 1997 as compared to the third quarter of 1996 primarily as the result of the establishment of a pilot facility for THE TRANSPLANT PHARMACY, as well as expanded patent and other general and administrative activities. Selling, general and administrative expenses increased to $7,417,000 in the first nine months of 1997 from $4,169,000 in the first nine months of 1996. This increase of $3,248,000 or 78% from the first nine months of 1996 to the first nine months of 1997 is largely attributable to an increase of $2,038,000 in general administrative expenses, including expenses of THE TRANSPLANT PHARMACY. This reflects an increase of $1,210,000 in selling and marketing expenses for monitoring and therapeutic products. This increase in selling and marketing expenses reflects in part that the Company established its own monitoring products sales staffs in the United States and Europe and expanded its sales and marketing group in Canada in third quarter 1996 in connection with the Company's reacquisition of marketing rights to PRA-STAT and CROSS-STAT from Baxter Healthcare Corporation in July 1996. The Company is building its therapeutic products sales and marketing team in that market approval applications for THYMOGLOBULIN and CYCLOSPORINE have been submitted and accepted for review by the FDA. In the next several quarters, the Company expects to continue to build its therapeutic products sales force so that, in the event of market clearances, the Company will be ready to launch and market 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 $1,387,000 or 226% to $2,002,000 in the third quarter of 1997 from $615,000 in the third quarter of 1996 and also increased by $2,780,000 or 179% to $4,333,000 in the first nine months of 1997 from $1,552,000 in the third quarter of 1996. These increases are 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 and the overallotment completed in April 1997. Interest and other expense for capital lease obligations and long term notes increased by $31,000 or 32% to $128,000 in the first nine months of 1997 from $97,000 in the first nine months of 1996. Net loss. The Company's net loss increased to $5,202,000 or $0.33 per share in the third quarter of 1997, compared with a net loss of $3,466,000 or $0.26 per share in the third quarter of 1996. For the first nine months of 1997, the Company's net loss increased to $15,179,000 or $1.00 per share compared with a net loss of $9,187,000 or $0.76 per share in the first nine months of 1996. Liquidity and Capital Resources During the first nine months of 1997 and 1996, the net cash used in operating activities was approximately $15,053,000 and $9,376,000, 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 periods. As of September 30, 1997, the Company had cash, cash equivalents and short-term investments of $102,264,000 and total assets of $110,920,000. Net cash provided by financing activities totaled $76,740,000 and $44,876,000 for the nine months ended September 30, 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 $12,371,000 and $20,725,000 in the nine months ended September 30, 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 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 be 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 Annual Report, in particular "Risks Associated with CYCLOSPORINE" set forth therein, and the Company's filings on Forms 10-K and 10-Q with the Securities and Exchange Commission. Recently Issued Accounting Standards 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. In June 1997, the Financial Accounting Standards Board adopted Statements of Financial Accounting Standards No. 130 "Reporting Comprehensive Income", which requires that an enterprise report by major components and as a single total, the change in its net assets during the period from nonowner sources; and No. 131 "Disclosures about Segments of an Enterprise and Related Information" which establishes annual and interim reporting standards for an enterprise's business segments and related disclosures about its products, services, geographic areas, and major customers. Adoption of these statements will not impact the Company's consolidated financial position, results of operations or cash flows. Both statements are effective for fiscal years beginning after December 15, 1997, with earlier application permitted. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EDGAR Financial Data Schedule 27.1 (b) There were no reports on Form 8-K filed during the period covered by this report. 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 14, 1997 BY: /S/ PHILIPPE POULETTY, M.D. ------------------------------------ PHILIPPE POULETTY, M.D. CHAIRMAN AND CHIEF EXECUTIVE OFFICER DATE: November 14, 1997 BY: /S/ HENRY N. EDMUNDS, PH.D. ------------------------------------ HENRY N. EDMUNDS, PH.D. VICE PRESIDENT AND CHIEF FINANCIAL OFFICER INDEX TO EXHIBITS EXHIBIT NUMBER EXHIBITS - - -------- -------- 27.1 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED CONSOLIDATED BALANCE SHEET OF SEPTEMBER 30, 1997/1996 AND THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS, SEPTEMBER 30, 1997/1996. 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 69,099,789 33,163,727 2,403,958 0 3,413,695 108,313,478 2,049,530 0 110,919,526 6,091,244 0 0 0 159,009,170 (56,009,464) 110,919,526 2,528,840 2,528,840 2,345,150 2,345,150 19,567,445 0 127,858 (15,178,694) 0 (15,178,694) 0 0 0 (15,178,694) ($1.00) ($1.00)
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