<PAGE>
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 June 30, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-27150
PATHOGENESIS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 91-1542150
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
201 Elliott Avenue West
Seattle, Washington 98119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (206) 467-8100
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 $.001 per share
---------------------------------------
(Title of class)
Preferred Stock Purchase Rights
-------------------------------
(Title of class)
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 [ ]
At June 30, 1997, the number of shares outstanding of the registrant's Common
Stock, par value $.001 per share, was 16,094,522 shares.
<PAGE>
PATHOGENESIS CORPORATION
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
---------- ----------
ASSETS
Current assets
Cash and cash equivalents $ 5,015,149 $ 14,785,818
Investment securities 94,183,019 45,901,978
Interest receivable 757,448 298,437
Inventory 750,126 -
Other current assets 949,511 823,092
---------- ----------
Total current assets 101,655,253 61,809,325
---------- ----------
Restricted securities 675,000 675,000
---------- ----------
Property and equipment, at cost:
Leasehold improvements 7,434,845 6,766,935
Furniture and equipment 7,664,967 5,967,110
---------- ----------
15,099,812 12,734,045
Less accumulated depreciation and amortization 6,268,107 5,320,039
---------- ----------
Net property and equipment 8,831,705 7,414,006
---------- ----------
Other assets, net 125,086 100,370
---------- ----------
Total assets $111,287,044 $ 69,998,701
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $859,219 $812,259
Compensation and benefits 812,786 774,258
Clinical development costs 960,865 818,629
Other accrued expenses 515,726 569,068
---------- ----------
Total current liabilities 3,148,596 2,974,214
---------- ----------
Long-term liability - 98,273
Stockholders' equity:
Preferred stock $.01 par value.
Authorized 1,000,000 shares; issued and
outstanding none - -
Common stock $.001 par value.
Authorized 60,000,000 shares; 16,094,522
shares and 13,930,760 shares issued and
outstanding at June 30, 1997 and
December 31, 1996 respectively. 16,095 13,931
Additional paid-in capital 190,131,745 134,727,920
Deferred compensation (1,494,398) -
Unrealized loss on investment securities (47,158) (30,204)
Deficit accumulated during the
development stage (80,467,836) (67,785,433)
---------- ----------
Total stockholders' equity 108,138,448 66,926,214
---------- ----------
Total liabilities and stockholders' equity $111,287,044 $ 69,998,701
========== ==========
<PAGE>
PATHOGENESIS CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
December 10,
1991
Three Months Ended Six Months Ended (Incorporation)
June 30, June 30, Through
----------------------- ------------------------ June 30,
1997 1996 1997 1996 1997
----------- --------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Revenue:
Grants and royalties $ 162,173 $ 122,304 $ 248,411 $ 122,304 $ 688,291
Operating expenses:
Research and development 6,194,417 5,006,197 12,017,129 9,497,155 70,118,667
General and administrative 2,014,358 1,090,202 3,355,004 1,923,507 20,732,529
----------- ----------- ------------ ----------- --------------
Total operating expenses 8,208,775 6,096,399 15,372,133 11,420,662 90,851,196
----------- ----------- ------------ ----------- --------------
Operating loss (8,046,602) (5,974,095) (15,123,722) (11,298,358) (90,162,905)
----------- ----------- ------------ ----------- --------------
Other income (expense):
Investment income, net 1,612,587 800,940 2,494,640 1,347,228 9,969,687
Other expense (22,500) (14,800) (53,321) (27,242) (274,618)
----------- ----------- ------------ ----------- -------------
Net other income 1,590,087 786,140 2,441,319 1,319,986 9,695,069
=========== =========== ============ =========== =============
Net loss $(6,456,515) $(5,187,955) $(12,682,403) $(9,978,372) $ (80,467,836)
=========== =========== ============ =========== =============
Net loss per common share $ (0.40) $ (0.41) $ (0.83) $ (0.84)
=========== =========== ============ ==========
Weighted average common shares
outstanding $ 16,078,995 $12,757,392 $ 15,236,151 $11,816,125
=========== =========== ============ ============
</TABLE>
<PAGE>
PATHOGENESIS CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DEFICIT
NUMBER OF ACCUMULATED
COMMON PRICE ADDITIONAL UNREALIZED DURING THE TOTAL
SHARES PER COMMON PAID-IN DEFERRED LOSS ON DEVELOPMENT STOCKHOLDERS'
DATE DESCRIPTION OUTSTANDING SHARE STOCK CAPITAL COMPENSATION INVESTMENTS STAGE EQUITY
---- ----------- ----------- ----- ----- ---------- ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Feb to
Mar 1992 Shares issued for cash 1,870,000 $ 0.08 1,870 147,730 149,600
June to
Dec 1992 Shares issued for cash
net of issue costs of
$744,966 4,308,500 10.00 4,309 42,335,725 42,340,034
November
1992 Repurchase of common
stock through
forgiveness of note
receivable (25,000) 10.00 (25) (249,975) (250,000)
Repurchase of common
stock for cash (46,875) 0.08 (47) (3,703) (3,750)
Net loss for the period
ended December 31, 1992 (2,930,285) (2,930,285)
----------------------------------------------------------------------------------------------
Balances at December 31,
1992 6,106,625 6,107 42,229,776 - (2,930,285) 39,305,599
October
1993 Shares issued in payment
of license fees 50,000 10.00 50 499,950 500,000
Net loss for the year
ended December 31, 1993 (10,804,878) (10,804,878)
----------------------------------------------------------------------------------------------
Balances at December 31,
1993 6,156,625 6,157 42,729,726 - (13,735,163) 29,000,721
March
1994 Shares issued for cash
net of issue costs of
$1,251,739 1,690,677 12.00 1,690 19,093,694 19,095,384
Unrealized loss on
investment securities (172,809) (172,809)
Net loss for the year
ended December 31,
1994 (14,762,117) (14,762,117)
----------------------------------------------------------------------------------------------
Balances at December 31,
1994 7,847,302 7,847 61,823,421 - (172,809) (28,497,280) 33,161,179
March
1995 Shares issued in payment
of license fees 50,000 12.00 50 599,950 600,000
April to
Aug 1995 Exercise of stock options
for cash 413 10.00 1 4,124 4,125
November
1995 Shares issued for cash
net of issue costs of
$2,904,274 3,000,000 10.00 3,000 27,092,726 27,095,726
Unrealized gain on
investment securities 211,267 211,267
Net loss for the year
ended December 31, 1995 (18,023,923) (18,023,923)
-----------------------------------------------------------------------------------------------
Balances at December 31,
1995 10,897,715 10,898 89,520,221 - 38,458 (46,521,203) 43,048,374
Redemption of fractional
shares (48) 12.00 (0) (576) (576)
February
1996 Shares issued in payment
of license fees 6,250 10.00 6 62,494 62,500
February
1996 Repurchase of common
stock for cash (45,000) 0.08 (45) (3,555) (3,600)
May 1996 Shares issued for cash
net of issue costs of
$3,213,410 2,875,000 16.25 2,875 43,502,465 43,505,340
Shares issued from cash
and cashless exercise
of options and warrants 196,843 10.82 197 1,646,871 1,647,068
Unrealized loss on
investment securities (68,662) (68,662)
Net loss for the year
ended December 31,
1996 (21,264,230) (21,264,230)
------------------------------------------------------------------------------------------------
Balances at December 31,
1996 13,930,760 13,931 134,727,920 - (30,204) (67,785,433) 66,926,214
Jan to
June
1997 Exercise of stock
options for cash 63,762 10.46 64 667,019 667,083
March
1997 Shares issued for cash
net of issue costs of
$3,555,118 2,100,000 27.00 2,100 53,142,782 53,144,882
June
1997 Compensation from
stock options 1,594,024 (1,494,398) 99,626
Unrealized loss on
investment
securities (16,954) (16,954)
Net loss for the
period ended
June 30, 1997 (12,682,403) (12,682,403)
------------------------------------------------------------------------------------------------
Balances at June 30,
1997 16,094,522 $ 16,095 190,131,745 (1,494,398) (47,158) (80,467,836) 108,138,448
============ ========================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PATHOGENESIS CORPORATION
(A development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 10,
1991
(Incorporation)
Six Months Ended Through
June 30, June 30,
1997 1996 1997
---------- ---------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(12,682,403) $ (9,978,372) $ (80,467,836)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 956,284 789,955 6,391,847
Amortization of investment premiums (discounts) 33,082 (321,846) 372,349
Amortization of deferred compensation 99,626 - 99,626
Common stock issued in payment of license fees - - 1,159,000
Loss on sale of furniture and equipment 8,321 315 71,495
Change in certain assets and liabilities:
Interest receivable (459,011) 499,974 (757,448)
Inventory (750,126) - (750,126)
Other current assets (126,419) 228,015 (949,511)
Other assets, net (24,716) 2,580 (125,086)
Accounts payable 46,960 (785,704) 859,219
Compensation and benefits 38,528 (382,763) 872,786
Clinical development costs 142,236 567,204 960,865
Other accrued expenses (53,342) 251,774 515,726
Long-term liability (98,273) (153,803) -
------------ ------------- --------------
Net cash used in operating activities (12,869,252) (9,282,671) (71,747,093)
------------ ------------- --------------
Cash flows from investing activities:
Purchases of investment securities (83,806,802) (53,314,351) (334,811,274)
Sales of investment securities 35,475,726 30,420,032 239,533,749
Purchases of property and equipment (2,384,304) (263,461) (15,397,147)
Proceeds from sale of furniture and equipment 2,000 100 42,100
Issuance of note - - (250,000)
------------ ------------- --------------
Net cash used in investing activities (50,713,380) (23,157,680) (110,882,572)
------------ ------------- --------------
Cash provided by financing activities -
net proceeds from issuance of common stock 53,811,964 43,529,654 187,644,815
------------ ------------- --------------
Net increase (decrease) in cash
and cash equivalents (9,770,669) 11,089,303 5,015,149
Cash and cash equivalents at beginning of period 14,785,818 575,297 -
----------- ------------- --------------
Cash and cash equivalents at end of period $ 5,015,149 $ 11,664,600 $ 5,015,149
=========== ============= ==============
</TABLE>
<PAGE>
PATHOGENESIS CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements and related notes
have been prepared pursuant to Securities and Exchange Commission rules and
regulations for interim financial statements. Accordingly, certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. The accompanying financial
statements and related notes should be read in conjunction with the audited
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
The information furnished reflects, in the opinion of management, all
adjustments necessary for a fair presentation of the results for the interim
periods presented. Interim results are not necessarily indicative of results
for a full year.
(2) DEFERRED COMPENSATION
In January 1997, the Board of Directors adopted the 1997 Stock Option
Plan (the "1997 Plan"). In January and May 1997, an aggregate of 420,045
options were granted pursuant to the 1997 Plan, subject to stockholder
approval. The weighted average grant price was $23.71. The 1997 Plan was
approved by the stockholders on June 25, 1997. The market price of the
Company's Common Stock on that date was $27.50. The excess of the fair market
value at the date of stockholder approval over the exercise price at the date
of grant resulted in deferred compensation of $1,594,024. This is being
amortized over the four-year vesting period of the options.
(3) INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
In July 1997, the Company filed a Certificate of Amendment to its
Amended and Restated Certificate of Incorporation, increasing the number of
authorized shares of the Company's Common Stock from 20,000,000 shares to
60,000,000 shares. Such amendment was approved by the stockholders on June 25,
1997.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Statements in this Quarterly Report on Form 10-Q that are
not historical fact constitute "forward- looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve known and unknown risks,
uncertainties or other factors which may cause actual results,
performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements. Factors that might cause
such a difference include, but are not limited to, uncertainties
related to the Company's absence of products and dependence on TOBI,
government regulation, the development of drug candidates,
competition and pharmaceutical pricing. Further information regarding
such factors are discussed in PathoGenesis' 1996 Annual Report on
Form 10-K, which was filed with the Securities and Exchange
Commission.
RESULTS OF OPERATIONS
Overview
The Company develops novel drugs to treat serious human infectious
diseases where there is a significant need for improved therapy. Since its
incorporation in December 1991, the Company has been engaged in research and
development, clinical trials and administrative activities. The Company's lead
drug candidate, TOBI(TM) (tobramycin for inhalation), is a stable, premixed,
proprietary formulation of the antibiotic tobramycin for delivery by
inhalation. In October 1996, the Company completed its two pivotal Phase III
clinical trials of TOBI for the treatment of chronic Pseudomonas aeruginosa
lung infections in people with cystic fibrosis. The Company filed a New Drug
Application ("NDA") for TOBI in cystic fibrosis patients with the United
States Food and Drug Administration ("FDA") in July 1997. The FDA has agreed
to an expedited review of such NDA; however, there can be no assurance as to
the outcome or timing of the FDA's review of such filing. The Company also
intends to commence Phase II clinical trials of TOBI in patients suffering
from bronchiectasis (a form of severe chronic bronchitis) and tuberculosis
during 1997. The Company's second drug candidate, PA-1648, a derivative of the
antibiotic rifampin, is being developed for the treatment of tuberculosis. The
Company intends to commence Phase II clinical trials of PA-1648 in
tuberculosis patients during 1997.
Financial results for the first six months of 1997 reflect a planned
increase in operating expenses for activities related to advancing potential
products through the development process. Such activities include product
development, clinical trials and marketing activities. The Company expects to
invest in additional clinical, regulatory and product development efforts over
the next few years.
The Company currently has no sources of revenue from any of its drug
candidates, has incurred losses since its inception and had an accumulated
deficit through June 30, 1997 of $80,467,836. The Company expects that
operating losses will continue and increase for at least the next year as its
research and development, clinical testing and marketing activities expand.
The Company's results of operations may vary significantly from period to
period depending on several factors, such as the timing of certain expenses
and the progress of the Company's research and development efforts.
In May 1997, the Company formed a European subsidiary, PathoGenesis
Limited. This new subsidiary is based outside London in Brentford, Middlesex.
PathoGenesis Limited initially will focus on the clinical development and
regulatory approval of TOBI in Europe for the treatment of chronic lung
infections in people with cystic fibrosis.
In June 1997, the Board of Directors, pursuant to a shareholder
rights plan approved by the Board, declared a dividend of one Preferred Stock
Purchase Right (the "Right(s)") for each outstanding share of the Company's
Common Stock. The dividend is payable as of July 10, 1997, to stockholders of
record on that date. Each Right entitles the registered holder to purchase
from the Company one one-thousandth of a share of a new series of preferred
shares of the Company, designated as Series A Junior Preferred Stock at a
price of $250 per one one-thousandth of a share, subject to certain
adjustments.
7
<PAGE>
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
Revenue from grants and royalties in the second quarter increased by
$39,869 to $162,173 in 1997 from $122,304 for the comparable period in 1996.
Revenues in the second quarter of 1997 represented income received from a
two-year competitive grant from the FDA and royalties from sales of a
proprietary combinatorial chemistry system invented by the Company.
Research and development expense for the second quarter increased by
$1,188,220 to $6,194,417 in 1997 from $5,006,197 for the comparable period in
1996. Such increase was due primarily to increases in personnel and
professional costs relating to clinical development and NDA preparation
activity. General and administrative expense for the second quarter increased
by $924,156 to $2,014,358 in 1997 from $1,090,202 for the comparable period in
1996. This increase was due to higher personnel and professional costs
relating to marketing, finance and investor relations. The Company expects
general and administrative expense to increase in future periods as the
Company begins to implement a selling and marketing program and expands its
staff and facilities.
Other income primarily represents investment income from the
Company's investment securities. In the second quarter, investment income, net
increased by $811,647 to $1,612,587 in 1997 from $800,940 for the comparable
period in 1996. Such increase was due primarily to higher average invested
cash balances.
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Revenue from grants and royalties for the first six months increased
by $126,107 to $248,411 in 1997 from $122,304 for the comparable period in
1996. Revenues for the first six months of 1997 represented income received
from a two-year competitive grant from the FDA and royalties from sales of a
proprietary combinatorial chemistry system invented by the Company.
Research and development expense for the first six months increased
by $2,519,974 to $12,017,129 in 1997 from $9,497,155 for the comparable period
in 1996. Such increase was due primarily to increases in personnel and
professional costs relating to clinical development and NDA preparation
activity. General and administrative expense for the first six months
increased by $1,431,497 to $3,355,004 in 1997 from $1,923,507 for the
comparable period in 1996. This increase was due to higher personnel and
professional costs relating to marketing, finance and investor relations. The
Company expects general and administrative expense to increase in future
periods as the Company begins to implement a selling and marketing program and
expands its staff and facilities.
Other income primarily represents investment income from the
Company's investment securities. In the first six months, investment income,
net increased by $1,147,412 to $2,494,640 in 1997 from $1,347,228 for the
comparable period in 1996. Such increase was due primarily to higher average
invested cash balances.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily by
the issuance of equity securities. Through June 30, 1997, the Company has
raised $61,331,268 from private sales of Common Stock and $123,745,948 from
public offerings of Common Stock. Through June 30, 1997, the Company has
earned net interest and investment income of $9,969,687 from investments.
The Company's combined cash, cash equivalents and investment
securities totaled $99,198,168 at June 30, 1997, an increase of $38,510,372
from the balance at December 31, 1996. This increase was due primarily to the
net proceeds to the Company from the public offering of 2,100,000 shares of
Common Stock in March 1997. The primary uses of cash during the quarter ended
June 30, 1997, were to finance the Company's operations and working capital
requirements. From the Company's inception through June 30, 1997, the Company
purchased approximately $15.4 million of property and equipment.
The Company plans to continue its policy of investing excess funds in
government securities and investment grade, interest-bearing securities
primarily with a maturity of one-and-one-half years or less.
The Company anticipates that its existing capital resources should be
sufficient to meet its operating expenses and capital requirements through at
least the next 24 months. Until such time as the Company can generate
sufficient
8
<PAGE>
levels of cash from operations, the Company will have to continue to finance
future cash needs through some or all of the sources previously used or
through other means. The Company does not expect to generate a positive
internal cash flow for at least the next two years due to the expected
increase of spending for research and clinical development programs and the
expected cost of commercializing its first products. The Company may need to
arrange additional financing for the future operation of its business,
including the commercialization of its drug candidates currently under
development. There can be no assurances that such additional financing can be
obtained, and if obtained, at reasonable terms.
In February 1997, the Financial Accounting Standards Board issued
Financial Accounting Standard No. 128, "Earnings Per Share." This statement
will change the computation, presentation and disclosure requirements for
earnings per share ("EPS"). The statement will be effective for interim and
annual reporting periods ending after December 15, 1997. This statement will
replace "primary" EPS with "basic" EPS, the principal difference being the
exclusion of common stock equivalents in the computation of basic EPS. In
addition, this statement will require the dual presentation of basic and
diluted EPS on the face of the consolidated statement of operations. EPS
computed pursuant to this statement is not expected to be materially different
from the historical net loss per share previously presented.
9
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings None.
Item 2. Changes in Securities None.
Item 3. Defaults Upon Senior Securities None.
Item 4. Submission of Matters to a Vote of Security-Holders
On June 25, 1997, the Company held its Annual Meeting of
Stockholders. The holders of 16,049,885 shares of Common Stock of the
Company were entitled to vote at the meeting and the holders of
14,272,040 shares of Common Stock, or 88.9% of shares entitled to
vote at the meeting, were represented by proxy. The following actions
took place:
1. The holders of 14,162,753 shares of Common Stock voted for the
election of Wilbur H. Gantz to continue to serve as a director of the
Company and the holders of 109,287 shares abstained from voting. The
holders of 14,162,753 shares of Common Stock voted for the election
of Lawrence C. Hoff to continue to serve as a director of the Company
and the holders of 109,287 shares abstained from voting. The holders
of 14,162,753 shares of Common Stock voted for the election of Edward
J. Mathias to continue to serve as a director of the Company and the
holders of 109,287 shares abstained from voting. No stockholders
voted against any of the nominees.
2. The stockholders approved a proposal to amend Article FOURTH of
the Company's Amended and Restated Certificate of Incorporation to
increase the number of shares of Common Stock which the Company is
authorized to issue from 20,000,000 shares to 60,000,000 shares. The
holders of 11,347,206 shares of Common Stock voted for the proposal,
the holders of 2,895,499 shares of Common Stock voted against the
proposal and the holders of 29,335 shares of Common Stock abstained
from voting.
3. The stockholders approved a proposal to adopt the Company's 1997
Stock Option Plan and to terminate the Company's 1996 Stock Option
Plan for Non-Employee Directors. The holders of 8,205,027 shares of
Common Stock voted for the proposal, the holders of 4,576,326 shares
of Common Stock voted against the proposal and the holders of
1,490,687 shares of Common Stock abstained from voting.
4. Finally, the stockholders ratified the appointment of KPMG Peat
Marwick LLP as the independent accountants for the Company for the
fiscal year ending December 31, 1997. The holders of 14,255,248
shares of Common Stock voted for the ratification, the holders of
4,980 shares of Common Stock voted against the ratification and the
holders of 11,812 shares of Common Stock abstained from voting.
Item 5. Other Information None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Exhibit 27. Financial
Data Schedule.
(b) Reports on Form 8-K The Company filed a
Form 8-K, dated
June 26, 1997, under
Item 5. Other Events.
10
<PAGE>
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.
PATHOGENESIS CORPORATION
Date: August 14, 1997 By: /s/ Wilbur H. Gantz
-------------------
Wilbur H. Gantz
President and Chief Executive
Officer
Date: August 14, 1997 By: /s/ Alan R. Meyer
-------------------
Alan R. Meyer
Senior Vice President and
Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,015,149
<SECURITIES> 94,183,019
<RECEIVABLES> 1,706,959
<ALLOWANCES> 0
<INVENTORY> 750,126
<CURRENT-ASSETS> 101,655,253
<PP&E> 15,099,812
<DEPRECIATION> 6,268,107
<TOTAL-ASSETS> 111,287,044
<CURRENT-LIABILITIES> 3,148,596
<BONDS> 0
0
0
<COMMON> 16,095
<OTHER-SE> 108,122,353
<TOTAL-LIABILITY-AND-EQUITY> 111,287,044
<SALES> 0
<TOTAL-REVENUES> 1,590,087
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,208,775
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,456,515)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,456,515)
<EPS-PRIMARY> (.40)
<EPS-DILUTED> 0
</TABLE>
