-----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, L6CIGr528IUads83NkxIEmYaRb9S/ZzYVkhqnCHbyL7iT0Q5ohtQIjBeuvbyfwQL dbJ1XHTf5aWluiXjV9Ge5w== 0000950117-98-001080.txt : 19980518 0000950117-98-001080.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950117-98-001080 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALGOS PHARMACEUTICAL CORP CENTRAL INDEX KEY: 0000924862 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 223142274 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-28844 FILM NUMBER: 98625714 BUSINESS ADDRESS: STREET 1: 4900 ROUTE 33 CITY: NEPTUNE STATE: NJ ZIP: 07753 BUSINESS PHONE: 9089385959 10-Q 1 ALGOS PHARMACEUTICAL CORPORATION 10Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 1998 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 000-28844 ALGOS PHARMACEUTICAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 22-3142274 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1333 Campus Parkway, Neptune, New Jersey, 07753-6804 (Address of principal executive offices) 732-938-5959 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 ____ The aggregate number of shares of the Registrant's common stock outstanding on April 13, 1998 was 15,999,551. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ALGOS PHARMACEUTICAL CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) BALANCE SHEETS (UNAUDITED)
December 31 March 31 1997 1998 ---- ---- ASSETS Current assets: Cash and cash equivalents $20,246,152 $10,220,788 Marketable securities, current 17,922,359 27,985,589 Interest receivable 484,789 412,013 Prepaid expenses and other current assets 315,679 300,856 ------------- ------------- Total current assets 38,968,979 38,919,246 Marketable securities, noncurrent 3,004,580 Restricted cash 150,000 150,000 Property and equipment, net 146,328 201,014 Other assets 90,591 60,924 ------------- ------------- Total assets $42,360,478 $39,331,184 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,861,976 $ 2,336,231 Other current liabilities 739,415 418,450 ------------- ------------- Total current liabilities 2,601,391 2,754,681 ------------- ------------- Commitments Stockholders' equity: Common stock, $.01 par value, 50,000,000 shares authorized, 15,951,701 and 15,999,551 shares issued and outstanding, respectively 159,517 159,996 Additional paid-in-capital 56,151,504 56,464,151 Unearned compensation expense (753,707) (851,615) Deficit accumulated during the development stage (15,798,227) (19,196,029) ------------- ------------- Total stockholders' equity 39,759,087 36,576,503 ------------- ------------- Total liabilities and stockholders' equity $42,360,478 $39,331,184 ============= =============
The accompanying notes are an integral part of these financial statements. 1 ALGOS PHARMACEUTICAL CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF OPERATIONS (UNAUDITED)
Cumulative For the three months from inception ended March 31, to March 31, -------------------------- 1997 1998 1998 ---- ---- ---- Revenues $ - $ - $ 3,311,000 ------------ ----------- ----------- Operating expenses: Research and development 3,165,360 3,220,459 18,797,090 General and administrative 616,736 741,532 7,854,782 ---------- ----------- ---------- Total operating expenses 3,782,096 3,961,991 26,651,872 ---------- ----------- ---------- Loss from operations (3,782,096) (3,961,991) (23,340,872) Interest income 557,318 564,189 4,144,843 ------------ ------------ ------------ Net loss $(3,224,778) $(3,397,802) $(19,196,029) ============ ============ ============ Net loss per common share, basic and diluted $ (0.20) $ (0.21) ============ ============ Weighted average common shares outstanding 15,780,288 15,955,367 ============ ============
The accompanying notes are an integral part of these financiaol statements 2 ALGOS PHARMACEUTICAL CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the three months ended Cumulative from inception to March 31, March 31, ---------------------------- 1997 1998 1998 ---- ---- ---- Cash flows from operating activities $ (2,507,672) $ (3,011,963) $(15,248,780) Cash flows from investing activities: Investment in marketable securities (14,739,426) (15,035,672) (52,849,120 Redemption of marketable securities 7,968,575 24,784,647 Purchases of property and equipment (1,532) (69,430) (378,441) ------------- ------------- --------------- Net cash used in investing activities (14,740,958) (7,136,527) (28,442,914) ------------- ------------- --------------- Cash flows from financing activities: Proceeds from issuance of preferred stock 6,659,015 Proceeds from issuance of common stock 31,000 123,126 47,253,466 ------------- ------------- --------------- Net cash provided by financing activities 31,000 123,126 53,912,481 ------------- ------------- --------------- Net increase (decrease) in cash and cash equivalents (17,217,630) (10,025,364) 10,220,788 Cash and cash equivalents, beginning of period 48,575,719 20,246,152 - ------------- ------------- --------------- Cash and cash equivalents, end of period $31,358,089 $10,220,788 $10,220,788 ============= ============= ===============
The accompanying notes are an integral part of these financial statements. 3 ALGOS PHARMACEUTICAL CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The financial statements presented herein 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 and are unaudited. In the opinion of management, the financial statements reflect all adjustments (which consist of normal recurring accruals and adjustments) necessary for a fair statement of the financial position and results of the interim periods presented. 2. ACCOUNTING POLICIES In the first quarter of 1998, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income", which establishes standards for determining and reporting comprehensive income and its components. Comprehensive income represents the change in net assets of a business enterprise as a result of nonowner transactions. The adoption of the standard did not have an impact on the Company's financial statements. 3. LOSS PER SHARE Since the Company incurred net losses in all periods presented, outstanding options and warrants to purchase an aggregate of 1,015,915 and 1,060,455 shares of Common Stock at March 31, 1997 and 1998, respectively, and 100,000 shares of convertible Series B Preferred Stock which were outstanding at March 31, 1997 were not included in diluted per share calculations, as their effect would be antidilutive. 4. OTHER CURRENT LIABILITIES Other current liabilities consist of the following:
December 31 March 31 1997 1998 Accrued research expenses $392,618 $325,418 Accrued compensation 346,797 93,032 ------------- -------------- $739,415 $418,450 ============= ==============
4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. General Algos, a development stage company, is engaged primarily in the development and commercialization of proprietary pharmaceutical products. Since its formation in January 1992, the Company has devoted a substantial amount of its efforts to licensing technology, recruiting key management and staff, developing products, filing patents and other regulatory applications and raising capital. The Company has incurred losses since its inception and expects to incur losses in the future. The Company expects that its product development expenses will increase as the drugs that the Company currently has under development move into advanced clinical trials and as additional drugs are developed. In January 1998, the Company initiated the filing of a sequential NDA for its most developmentally advanced drug, MorphiDex. Upon completion of an NDA, the Company may incur significant costs associated with the possible commercialization of MorphiDex prior to the first commercial sale of the product, including inventory, the establishment of a sales force, initial promotional activities and other administrative expenses. Results of Operations Three months ended March 31, 1997 and 1998 Research and development: In the three months ended March 31, 1998, research and development expenses were $3.2 million, an increase of approximately $55,000 or 2%, from 1997. In 1998, expenses increased due to large-scale, advanced clinical trials of MorphiDex and the expansion of the Company's development staff since the first quarter of the prior year. The effect of these increases was largely offset by reduced expenses related to bioavailability studies and the costs of manufacturing small-scale regulatory test batches of MorphiDex, which occurred in the first quarter of 1997. General and administrative: In the three months ended March 31, 1998, general and administrative expenses were $741,000, an increase of $125,000 or 20%, from 1997. Increases related to the general expansion of the Company's business, including preliminary activities related to possible future commercialization of products, were offset by lower professional fees. Interest income: Interest income increased 1% in the three months ended March 31, 1998 to $564,000. The effect of lower average cash and securities balances was offset by higher rates of return on invested funds. Liquidity and Capital Resources As a result of its drug development efforts, the Company has experienced net cash outflows from operations since its inception in 1992. In the three months ended March 31, 1998, cash outflows from operations amounted to approximately $3.0 million compared to $2.5 million in the first quarter of 1997, primarily as a result of its increased development spending on MorphiDex. The Company has entered into several research and development commitments, primarily related to its development of MorphiDex and HydrocoDex. The Company expects that its product development expenses will 5 increase as the drugs that the Company currently has under development move into advanced clinical trials and as additional drugs are developed. In addition, the Company will incur increased expenses as a result of the planned expansion of its research and development staff, including the cost of relocating to larger office facilities. The Company's funding requirements will depend on a number of factors including the results of its development efforts, the timing and costs of obtaining required regulatory approvals, the development of competing technologies, the amount of resources required for the establishment of marketing and distribution capabilities, the execution of licensing or other collaborative research agreements on terms acceptable to the Company, and the cost of prosecuting and defending patents. The Company currently expects that its cash and equivalents at March 31, 1998 will be sufficient to fund its operations for the development of products currently in clinical trials, based upon the Company's currently anticipated schedule of clinical trials. If, however, additional trials are necessary or advisable or if additional products are developed, the Company may require additional funds to complete such trials and, in the event that revenue and income from successful product introductions or other internally generated funds are insufficient for such efforts, the Company will need to raise additional funds by incurring debt, issuing additional equity or through collaborative or license arrangements. This Management's Discussion and Analysis of Financial condition and Results of Operations contains "forward-looking" statements, within the meaning of Section 27A of Securities Act of 1993, as amended and Section 21E of the Securities Exchange Act of 1934, that are based on management's beliefs and assumptions, current expectations, estimates and projections. Statements that are not historical facts, including statements which are preceded by, followed by, or that include the words "believes;" "anticipates;' "plans;" "expects;" or similar expressions and statements about the Company's development schedule and future use of funds are forward-looking statements. Many of the factors that will determine the Company's future results are beyond the ability of the Company to control or predict. These statements are subject to risks and uncertainties and, therefore, actual results may differ materially. The reader should not rely on any forward-looking statement. The Company undertakes no obligations to update any forward-looking statements whether as a result of new information, future events or otherwise. Important factors that may affect future results include, but are not limited to: uncertainty associated with pre-clinical studies and clinical trials and regulatory approval; the effect of economic conditions; impact of competitive products and pricing; product development; changes in laws and regulations; customer demand; possible future litigation; availability of future financing; and uncertainty of market acceptance of new products. Readers should evaluate any statement in light of these important factors. See "Risk Factors" in the Company's Annual Report on Form 10-K. 6 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibits:
Exhibit No. Title - ------ ------------------------------------------------------------------------------------- 3.1 Form of Amended and Restated Certificate of Incorporation of Algos Pharmaceutical Corporation(1) 3.2 Form of Amended and Restated By-laws of Algos Pharmaceutical Corporation(1) 4.1 Form of Stock Certificate of Common Stock(1) 5.1 Opinion of Latham & Watkins as to the validity of the Common Stock(1) 10.1.1 Employment Agreement with Respect to John W. Lyle(4) 10.1.3 Employment Agreement with Respect to Frank S. Caruso(1) 10.2.1 1994 Stock Option Plan(1) 10.2.2 Form of 1996 Stock Option Plan(1) 10.2.3 Form of 1996 Non-Employee Director Stock Option Plan(2) 10.3.1 Algos Pharmaceutical Corporation Stockholders' Agreement(1) 10.4.1 License Agreement with The Medical College of Virginia(1) 'D''D' 10.4.2 License Agreement with McNeil(1) 'D''D' 10.4.3 Registration Rights Agreement with The Medical College of Virginia(1) 10.5 Lease Agreement with Commercial Realty & Resources Corp.(3) 21 Subsidiaries of the Registrant(1) 27 Financial Data Schedule 99 Risk Factors(4)
(1) Incorporated by reference to the Registrant's registration statement on Form S-1 declared effective on September 25, 1996. (2) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996. (3) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1997. (4) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997. 'D''D' Portions of this Exhibit have received confidential treatment pursuant to Rule 406(b) under the Securities Act. Reports on Form 8K: None 7 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. ALGOS PHARMACEUTICAL CORPORATION Date May 15, 1998 /s/ John W. Lyle __________________ ________________________________________ John W. Lyle President and Chief Executive Officer Date May 15, 1998 /s/ Gary R. Anthony ___________________ ________________________________________ Gary R. Anthony Chief Financial Officer and Principal Accounting Officer 8 STATEMENT OF DIFFERENCES The dagger symbol shall be expressed as...........................'D' EX-27 2 EXHIBIT 27
5 3-MOS DEC-31-1998 JAN-1-1998 MAR-31-1998 10,220,778 27,985,589 412,013 0 0 38,919,246 201,014 0 39,331,184 2,754,681 0 159,996 0 0 36,416,507 39,331,184 0 0 0 0 3,961,991 0 0 (3,397,802) 0 0 0 0 0 (3,397,802) (0.21) (0.21)
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