<PAGE> 1
FORM 10-0
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
--------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
-------- -------
Commission file number 0-26872
GELTEX PHARMACEUTICALS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3136767
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
303 Bear Hill Road
Waltham, Massachusetts 02154
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
617-290-5888
-------------------------------
(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 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
--- ---
The number of shares outstanding of each of the issuer's classes of common stock
as of the latest practicable date:
Class Outstanding at April 30, 1996
----- -----------------------------
Common Stock, $.01 par value 10,612,317
THIS IS PAGE 1 OF 12 PAGES. THE EXHIBIT INDEX IS ON PAGE 11.
<PAGE> 2
GELTEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page No.
--------
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
Condensed Balance Sheets as of March 31, 1996
and December 31, 1995 .................................................... 3
Condensed Statements of Operations for the three
months ended March 31, 1996 and 1995, and for the
period from November 15, 1991 (date
of inception) through March 31, 1996 ..................................... 4
Condensed Statements of Cash Flows for the three
months ended March 31, 1996 and 1995, and for the
period from November 15, 1991 (date
of inception) through March 31, 1996 ..................................... 5
Notes to Condensed Financial Statements .................................. 6
ITEM 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations ............................. 8
PART II OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K .......................................... 9
SIGNATURES ........................................................................................... 10
EXHIBIT INDEX ........................................................................................ 11
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GELTEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
CONDENSED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................... $ 7,365,381 $ 12,179,988
Marketable securities ........................................ 21,957,581 20,995,110
Prepaid expenses and other current assets .................... 688,185 572,864
------------ ------------
Total current assets ........................................... 30,011,147 33,747,962
Long-term receivables .......................................... 20,000 20,000
Property and equipment, net .................................... 1,973,484 1,948,788
Intangible assets, net ......................................... 301,867 276,527
------------ ------------
$ 32,306,498 $ 35,993,277
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Account payable and accrued expenses ......................... $ 530,790 $ 1,388,416
Current portion of capital lease obligations ................. 535,863 535,293
------------ ------------
Total current liabilities ...................................... 1,066,653 1,923,709
Long-term obligations, less current portion .................... 288,152 419,569
Stockholders' equity:
Undesignated Preferred Stock, $.01 par value; 5,000,000 shares
authorized, none issued or outstanding ..................... -- --
Common Stock, $.01 par value, 20,000,000, and 10,000,000
shares authorized; 10,597,317 and 10,535,065 shares issued
and outstanding at March 31, 1996 and December 31, 1995,
respectively ............................................... 105,973 105,350
Additional paid-in capital ................................... 44,004,558 44,000,986
Deferred compensation ........................................ (53,401) (55,825)
Deficit accumulated during the development stage ............. (13,115,890) (10,482,102)
Unrealized gain on available-for-sale securities ............. 10,453 81,590
------------ ------------
Total stockholders' equity ..................................... 30,951,693 33,649,999
------------ ------------
$ 32,306,498 $ 35,993,277
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 4
GELTEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
For the Period
November 15,
Three Months 1991 (date
Ended March 31, of inception)
-------------------- through
1996 1995 March 31, 1996
---- ---- --------------
<S> <C> <C> <C>
Revenue:
License fee and research revenue $ -- $ -- $ 3,750,000
Research grant ................. 149,822 -- 307,232
----------- ----------- ------------
Total revenue ................... 149,822 -- 4,057,232
Costs and expenses:
Research and development ....... 2,564,563 962,407 13,815,005
General and administrative ..... 568,533 391,917 4,621,588
----------- ----------- ------------
Total costs and expenses ........ 3,133,096 1,354,324 18,436,593
----------- ----------- ------------
Loss from operations ............ (2,983,274) (1,354,324) (14,379,361)
Interest income ................. 371,637 180,326 1,436,537
Interest expense ................ (22,151) (27,596) (173,066)
----------- ----------- ------------
Net loss ........................ $(2,633,788) $(1,201,594) $(13,115,890)
=========== =========== ============
Net loss per share .............. $ (.25) $ (. 15)
=========== ===========
Shares used in computing
net loss per share ............. 10,575,000 7,988,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 5
GELTEX PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY)
<TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
For the Period
November 15,
Three Months 1991 (date
Ended March 31, of inception)
--------------------- through
1996 1995 March 31 , 1996
---- ---- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss ................................................................... $ (2,633,788) $ (1,201,594) $(13,115,890)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization .......................................... 229,477 174,439 1,149,946
Issuance of Common Stock as compensation ............................... -- -- 5,000
Changes in operating assets and liabilities:
Prepaid expenses and other current assets .......................... (115,321) (85,413) (688,185)
Long-term receivables .............................................. -- -- (20,000)
Accounts payable and accrued expenses .............................. $ (857,626) (673,537) 530,790
------------ ------------ ------------
Net cash used in operating activities .................................. (3,377,258) (1,786,105) (12,138,339)
INVESTING ACTIVITIES
Purchase of marketable securities .......................................... (2,040,120) (1,947,914) (34,253,280)
Proceeds from sale and maturities of
marketable securities .................................................... 992,890 1,954,292 12,292,530
Purchase of intangible assets .............................................. (63,675) (21,689) (473,433)
Purchase of property and equipment, net .................................... (199,792) (170,819) (1,920,055)
------------ ------------ ------------
Net cash used in investing activities ...................................... (1,310,697) (186,130) (24,354,238)
FINANCING ACTIVITIES
Sale of Common Stock and warrants, net of
issuance costs ............................................................ 4,195 -- 26,359,965
Sale of Preferred Stock, net of issuance costs ............................. -- -- 17,480,688
Proceeds from notes payable ................................................ -- -- 735,000
Payments on notes payable and capital lease obligations .................... (130,847) (55,630) (717,695)
------------ ------------ ------------
Net cash provided by (used in) financing activities ........................ (126,652) (55,630) 43,857,958
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents ........................... (4,814,607) (2,027,865) 7,365,381
Cash and cash equivalents at beginning of period ........................... 12,179,988 6,560,110 --
------------ ------------ ------------
Cash and cash equivalents at end of period ................................. $ 7,365,381 $ 4,532,245 $ 7,365,381
============ ============ ============
Schedule of noncash investing and financing activities:
Purchase of intangible assets for Common Stock ......................... $ 2,700
Issuance of Preferred Stock to cancel notes payable .................... $ 185,000
Property and equipment acquired under capital leases ................... $ 992,000
</TABLE>
The accompanying notes are an integral part of the financial statements
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<PAGE> 6
GELTEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements for the three
months ended March 31, 1996 and 1995 and for the period November 15, 1991 (date
of inception) through March 31, 1996 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.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, the accompanying condensed financial statements
include all adjustments, consisting of normal recurring accruals, necessary for
a fair presentation of the financial condition, results of operations and cash
flows for the periods presented. The results of operations for the interim
period ended March 31, 1996 are not necessarily indicative of the results to be
expected for the year ended December 31, 1996.
These financial statements should be read in conjunction with the audited
financial statements and notes thereto for the fiscal year ended December 31,
1995 included in the Company's Annual Report on Form 10-K (File Number 0-26872)
as filed with the Securities and Exchange Commission.
2. SUBSEQUENT EVENT - Public OFFERING OF COMMON STOCK
On May 7, 1996, the Company completed a public offering of 2,500,000 shares
of its Common Stock, $.01 par value per share, at $22.75 per share, resulting in
approximately $53.2 million of net proceeds to the Company after deducting
offering costs.
3. NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of
outstanding shares of Common Stock and Common Stock equivalents, assuming
conversion of Series A, B and C Convertible Preferred Stock into common shares
as of their original date of issuance, which occurred upon the completion of the
Company's initial public offering in November 1995, and the exercise of stock
options and warrants (using the treasury stock method). Common Stock equivalent
shares are excluded from the computation if their effect is anti-dilutive;
however, pursuant to the requirements of the Securities and Exchange Commission,
common equivalent shares relating to stock options (using the treasury stock
method and the initial public offering price) issued during the twelve months
prior to the initial public offering are included for all periods presented
prior to June 30, 1995 whether or not they are anti-dilutive.
4. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
ACCOUNTING FOR IMPAIRMENT OF LONG. LIVED ASSETS
On January 1, 1996, the Company adopted Financial Accounting Standards
Board Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," which established criteria for the
recognition and measurement of impairment loss associated with long-lived
assets. Adoption of this standard had no impact on the Company's financial
position or results of operations.
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<PAGE> 7
GELTEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
4. Adoption of New ACCOUNTING PRONOUNCEMENTS -- (CONTINUED)
Stock Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its stock-based compensation plans, rather
than the alternative fair value accounting provided for under Financial
Accounting Standards Board Statement No.123, "Accounting for Stock-Based
Compensation." Under APB 25, for those options granted in which the exercise
price equals or exceeds the market price of the underlying stock on the date of
grant, no compensation expense is recognized.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 and 1995
The Company earned revenues of $150,000 during the three months ended March
31, 1996. These revenues were earned under the Company's $2.0 million grant from
the United States Department of Commerce's Advanced Technology Program. No
revenues were earned during the three months ended March 31, 1995.
The Company's total operating expenses for the three months ended March 31,
1996 were $3.1 million, as compared to $1.4 million during the three months
ended March 31, 1995. Research and development expenses increased to $2.6
million for the three months ended March 31, 1996 from $1.0 million for the
three months ended March 31, 1995 due primarily to increased third party
expenses associated with the development of CholestaGel(R) and RenaGel(TM)
(including production of clinical trial material, toxicology studies, clinical
trial expenses and process development expense) and increases in research and
development personnel costs. General and administrative expenses increased to
$569,000 for the three months ended March 31, 1996 from $392,000 for the three
months ended March 31, 1995 due primarily to increased business development
expenses and increased administrative personnel.
Interest income increased to $372,000 for the three months ended March 31,
1996 from $180,000 for the three months ended March 31, 1995 due primarily to
increases in cash balances attributable to the Company's sale of equity
securities through its initial public offering in November 1995.
-7-
<PAGE> 8
Liquidity and Capital Resources
As of March 31, 1996, the Company had $29.3 million in cash, cash
equivalents and marketable securities.
The Company leases its administrative and research and development
facilities under a long-term operating lease expiring in 2004 and certain
leasehold improvements and equipment under capital leases expiring in 1997. In
December 1995, the Company obtained a line of credit with a bank for $250,000
for the purchase of new equipment, which bears interest at the prime rate and is
available through June 5, 1996. As of March 31, 1996, no amounts were
outstanding on this line. This line, which is secured by equipment, requires the
Company to maintain minimum cash balances and a minimum net worth and to repay
any outstanding amounts in 33 equal monthly installments. The Company has no
material commitments for capital expenditures as of March 31, 1996.
The Company successfully completed a public offering of 2,500,000 shares of
its Common Stock in May 1996. The Company believes that the net proceeds from
this offering together with the cash and marketable securities balance at March
31, 1996 and the interest income thereon, should be sufficient to fund its
operating expenses and capital requirements as currently planned through 1998.
However, the Company's cash requirements may vary materially from those now
planned because of results of research and development, results of clinical
trials, new relationships with strategic partners, changes in the focus and
direction of the Company's research and development programs, competitive and
technological advances, the FDA regulatory process and other factors. Adequate
funds for these purposes, whether through additional sales of securities or
collaborative or other arrangements with corporate partners or from other
sources, may not be available when needed or on terms acceptable to the Company.
Insufficient funds may require the Company to delay, scale back or eliminate
certain of its research and product development programs or to license third
parties to commercialize products or technologies under terms that the Company
might otherwise find unacceptable.
The discussion contained in this Item as well as elsewhere in this
Quarterly Report on Form 10-Q may contain forward looking statements based on
the current expectations of the Company's management. There are certain factors
that could cause results to differ from those anticipated by the statements made
herein, including, but not limited to: technical risks associated with the
development of new products; continued progress of clinical trials of the
Company's pharmaceuticals; the continued availability of raw material for the
Company's pharmaceuticals; the Company's ability to continue to establish
collaborative arrangements with third parties; and the competitive environment
of the biotechnology and pharmaceutical industries. Readers are cautioned not to
place undue reliance on these forward looking statements which speak only as of
the date hereof.
-8-
<PAGE> 9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
See the Exhibit Index on page 11 hereto.
(b) Reports on Form 8-K.
March 1, 1996: Reporting the adoption of a Shareholder Rights Plan
and the execution of a Rights Agreement in connection therewith.
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<PAGE> 10
GELTEX PHARMACEUTICALS, INC.
FORM 10-Q
March 31 1996
SIGNATURE
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.
GELTEX PHARMACEUTICALS, INC.
DATE: May 13, 1996 BY: /s/Mark Skaletsky
---------------------------
Mark Skaletsky
Duly Authorized Officer and
Principal Financial Officer
-10-
<PAGE> 11
EXHIBIT INDEX
Exhibit Number Description Page
-------------- ----------- ----
11.1 Statement re: computation of per share earnings 12
27 Financial Data Schedule
(filed with electronic submission only)
<PAGE> 1
EXHIBIT 11.1
<TABLE>
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Three Months Ended
March 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Weighted average common shares outstanding ............... 10,575,000 589,000
Effect of Convertible Preferred Stock -- assumed converted
at date of issuance .................................. -- 6,599,000
Effect of Common and Common equivalent Shares issued
by the Company during the twelve month period
immediately preceding the Company's initial public
offering in November 1995, as if they were outstanding
for all periods presented prior to the initial public
offering (using the treasury stock method) ........... -- 800,000
------------ -----------
Shares used in computing net loss per share .............. 10,575,000 7,988,000
Net loss ................................................. $ (2,633,788) $(1,201,594)
============ ===========
Net loss per share ....................................... $ (.25) $ (.15)
============ ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,365
<SECURITIES> 21,958
<RECEIVABLES> 90
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,011
<PP&E> 2,794
<DEPRECIATION> 820
<TOTAL-ASSETS> 32,306
<CURRENT-LIABILITIES> 1,067
<BONDS> 0
<COMMON> 106
0
0
<OTHER-SE> 30,846
<TOTAL-LIABILITY-AND-EQUITY> 32,306
<SALES> 0
<TOTAL-REVENUES> 150
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,133
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22
<INCOME-PRETAX> (2,634)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,634)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,634)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
