UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
/ / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
-----------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-27854
BONE CARE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 2834 39-1527471
(State of (Primary Standard Industry) (IRS Employer
Incorporation) Classification Code Number Identification No.)
One Science Court
Madison, Wisconsin 53711
(Address, including zip code of
Registrant's principal executive offices)
608-236-2500
(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
----- -----
As of January 31, 1999, 10,150,802 shares of the registrant's Common Stock, no
par value, were outstanding.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
FORM 10-Q
For the quarterly period ended December 31, 1998
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial statements
Consolidated Balance Sheets
December 31, 1998, and June 30, 1998 . . . . . . .. . . . . . . .3
Consolidated Statements of Operations
Three and Six Months Ended December 31, 1998
and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
Six Months Ended December 31, 1998
and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk . . . 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . .10
Item 2. Changes in Securities and Use of Proceeds. . . . . . . . . . . .10
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . .10
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . .11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . .11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Balance Sheets
- -------------------------------------------------------------------------------
Assets
- -------------------------------------------------------------------------------
December 31, June 30,
1998 1998
(Unaudited) (Audited)
- -------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $10,757,700 $3,484,374
Inventory 928,269 229,500
Other current assets 140,885 50,162
- -------------------------------------------------------------------------------
Total current assets 11,826,854 3,764,036
Property, plant and equipment--at cost:
Leasehold improvements 72,105 72,105
Furniture and fixtures 101,019 57,122
Machinery and other equipment 552,282 490,915
- -------------------------------------------------------------------------------
725,406 620,142
Less accumulated depreciation 401,104 310,054
- -------------------------------------------------------------------------------
324,302 310,088
Patent fees, net of accumulated amortization
of $569,462 at December 31, 1998, and $491,462
at June 30, 1998 779,251 738,808
Excess of cost over fair value of net assets
acquired, net of accumulated amortization
of $777,132 at December 31, 1998, and
$732,408 at June 30, 1998 582,785 627,509
Other non-current assets 56,449 372,835
- -------------------------------------------------------------------------------
$13,569,641 $5,813,276
===============================================================================
See accompanying notes to consolidated financial statements.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Balance Sheets
- -------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
- -------------------------------------------------------------------------------
December 31, June 30,
1998 1998
(Unaudited) (Audited)
- -------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 375,290 $ 59,585
Accrued liabilities:
Accrued clinical study and
research costs 457,726 481,005
Compensation payable 111,456 32,741
Other 66,353 117,964
- -------------------------------------------------------------------------------
Total current liabilities 1,010,825 691,295
Shareholders' equity:
Preferred stock--authorized 2,000,000
shares of $.001 par value; none issued
Common stock--authorized 28,000,000 shares
of no par value; issued and outstanding
10,147,802 shares at December 31, 1998
and 8,808,956 at June 30, 1998 11,393,883 11,393,883
Additional paid-in capital 14,047,432 3,748,328
- -------------------------------------------------------------------------------
25,441,315 15,142,211
Accumulated deficit (12,882,499) (10,020,230)
- -------------------------------------------------------------------------------
12,558,816 5,121,981
- -------------------------------------------------------------------------------
$13,569,641 $5,813,276
===============================================================================
See accompanying notes to consolidated financial statements.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
- -------------------------------------------------------------------------------
Three months ended Six months ended
-------------------- ---------------------
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
- -------------------------------------------------------------------------------
REVENUES $ - $ - $ - $ -
- -------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of sales - - - -
Research and development 788,236 973,273 1,673,943 1,975,790
Marketing, general and
administrative 780,609 233,699 1,502,146 350,999
- -------------------------------------------------------------------------------
1,568,845 1,206,972 3,176,089 2,326,789
- -------------------------------------------------------------------------------
Loss from operations (1,568,845) (1,206,972) (3,176,089) (2,326,789)
- -------------------------------------------------------------------------------
Interest Income 128,031 97,854 313,820 209,193
- -------------------------------------------------------------------------------
NET LOSS $(1,440,814)$(1,109,118) $(2,862,269)$(2,117,596)
=============================================================================
Net loss per common
share - basic $(0.14) $(0.13) $(0.29) $(0.24)
=============================================================================
Weighted average number of
common shares 10,136,213 8,722,430 9,963,020 8,722,406
=============================================================================
See accompanying notes to consolidated financial statements.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
- -------------------------------------------------------------------------------
Six months ended
----------------
December 31, December 31,
1998 1997
- -------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $(2,862,269) $ (2,117,596)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 213,774 130,223
Changes in assets and liabilities:
Inventory (698,769) 6,146
Other current assets (90,723) -
Accounts payable 315,705 (58,682)
Accrued liabilities 3,825 253,126
Other 18,816 (142,746)
- -------------------------------------------------------------------------------
Net cash used in operating activities $(3,099,641) $ (1,929,529)
- -------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property,
plant and equipment (105,264) (76,169)
Patent fees (118,443) (177,227)
- -------------------------------------------------------------------------------
Net cash used in investing activities $ (223,707) $ (253,396)
- -------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from exercise of stock options 29,170 211
Net proceeds from issuance of common stock 10,567,504 (25,014)
- -------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities $10,596,674 $ (24,803)
- -------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 7,273,326 (2,207,728)
Cash and cash equivalents at
beginning of period 3,484,374 8,531,714
- -------------------------------------------------------------------------------
Cash and cash equivalents at end of period $10,757,700 $ 6,323,986
===============================================================================
See accompanying notes to consolidated financial statements.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION
The consolidated financial statements presented herein have been
prepared by Bone Care International, Inc. (the "Company"), without audit,
except for balance sheet information at June 30, 1998, pursuant to the rules
of the Securities and Exchange Commission for quarterly reports on Form 10-Q
and do not include all of the information and note disclosures required by
generally accepted accounting principles for annual financial statements.
These statements should be read in conjunction with the consolidated
financial statements and notes thereto for the year ended June 30, 1998,
included in the Company's Form 10-K as filed with the Securities and Exchange
Commission on September 28, 1998.
In the opinion of management the information included herein reflects
all adjustments (consisting of normal, recurring adjustments) necessary for
a fair presentation of results for these interim periods. The results of
operations for the interim periods ended December 31, 1998, are not
necessarily indicative of the results to be expected for the entire fiscal
year ending June 30, 1999.
(2) COMMON STOCK
In July 1998, the Company completed a directed public offering of
1,326,000 shares of common stock at a price of $8.00 per share. The Company
received proceeds of approximately $10.568 million from the sale, net of
offering expenses. Certain directors of the Company purchased 276,000 of the
shares sold.
(3) NET LOSS PER SHARE
Basic loss per share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period.
Diluted per share data is not presented as the effect of potentially issuable
common shares would be antidilutive.
Item 2. Management Discussion and Analysis of Financial Condition and
-------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
- ---------------------
Research and development expenses decreased to $788,236 in the
three months ended December 31, 1998, from $973,273 in the three months
ended December 31, 1997 and to $1,673,943 in the six months ended
December 31, 1998 from $1,975,790 in the six months ended December 31,
1997. In the prior year, research and development expenses include
synthesis and formulation research costs to commercially produce
Hectorol(trademarked). The decreases in research and development expenses are
primarily related to the completion of such research.
Marketing, general and administrative expenses increased $546,910
to $780,609 in the three months ended December 31, 1998, from $233,699
in the three months ended December 31, 1997. In the six months ended
December 31, 1998, marketing, general and administrative expenses
increased $1,151,147 to $1,502,146 from $350,999 in the six months ended
December 31, 1997. Substantially all of the increases were attributable
to pre-marketing activities relating to the expected launch of Hectorol.
The Company expects total costs and expenses to continue increasing
in the future due principally to the advancement and expansion of its
clinical development programs and the costs associated with the
successful commercialization of Hectorol.
Interest income increased $30,177 to $128,031 in the three months
ended December 31, 1998 from $97,854 in the three months ended December
31, 1997. Interest income increased $104,627 to $313,820 in the six
months ended December 31, 1998 from $209,193 in the six months ended
December 31, 1999. Increased cash balances resulted from receipt of the
net proceeds from the common stock offering completed during July 1998.
The increases in interest income were due to higher average cash
balances during the periods subsequent to the common stock offering.
Liquidity and Capital Resources
- -------------------------------
In July 1998, the company completed a directed public offering of
1,326,000 shares of common stock at a price of $8.00 per share. In July
1998, the Company received proceeds of approximately $10.568 million
from the sale, net of offering expenses. Prior to June 30, 1998,
approximately $298,000 of offering expenses were incurred. Certain
directors of the Company purchased 276,000 of the shares sold.
The Company will require substantial funds for its research and
development programs, preclinical and clinical testing, operating
expenses, regulatory processes and manufacturing and marketing programs.
The Company's capital requirements will depend on numerous factors,
including the progress of its research and development programs; the
progress of preclinical and clinical testing; the time and cost involved
in obtaining regulatory approvals; the cost of filing, prosecuting,
defending and enforcing any patent claims and other intellectual
property rights; competing technological and market developments;
changes and development in the company's existing licensing
relationships and the terms of any new collaborative, licencing, co-
promotion or distribution arrangements that the Company may establish;
the progress of commercialization and marketing activities; the cost of
manufacturing preclinical and clinical products; and other factors not
within the Company's control. The Company believes that the current
level of cash and cash equivalents should be sufficient to fund its
operations through at least the end of 1999.
Cash and equivalents were $10,757,700 at December 31, 1998 and
$3,484,374 at June 30, 1998. The increase was primarily due to the
receipt of net proceeds of $10,567,504 from the July 1998 common stock
offering. During the six months ended December 31, 1998 and 1997, cash
used in operating and investing activities aggregated $3,323,348 and
$2,182,925, respectively. The increase is attributable to Hectorol
inventory production activity commenced in fiscal 1999 and pre-
marketing activities related to the expected launch of Hectorol.
Year 2000 Compliance
- --------------------
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. To
distinguish transactions occurring prior to January 1, 2000 from those
occurring after December 31, 1999, these date code fields must be able
to accept four-digit.
The Company has reviewed its existing financial and other business
information systems and believes that its computer systems will be able
to manage and manipulate all material data involving the transition from
1999 to 2000 without functional or data abnormality and without
inaccurate results related to such data.
It is possible that third parties such as suppliers or contract
research institutions may not have compliant computer systems or
programs which may not interface properly with the Company's computer
systems or which may otherwise result in a disruption of the Company's
operations.
The Company currently anticipates that the expenses and capital
expenditures associated with its year 2000 compliance program will not
have a material effect on its financial position or results of
operations. Although the Company believes that it will be able to
achieve year 2000 compliance through its efforts, there can be no
assurance that these efforts will be successful. The Company could be
adversely affected if it or third parties fail to successfully achieve
year 2000 compliance. In particular, a disruption to the Company's
commercialization efforts for Hectorol could have a material effect on
the Company's financial position or results or operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
---------------------------------------------------------
The Company believes that presently it does not have a substantive
disclosure with respect to quantitative and qualitative disclosures
about market risk. As the Company's operations expand, the Company will
consider such disclosures.
PART II - OTHER INFORMATION
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Item 1. Legal Proceedings
-----------------
The Company may be a defendant from time to time in
actions arising out of its ordinary course of business
operations. The Company believes that none of the matters
in which it is currently involved, either individually or
in the aggregate, is material to the Company.
Item 2. Changes in Securities
---------------------
In connection with a directed public offering of
1,326,000 shares of common stock (the "Offering") in 1998,
the Company filed a Registration Statement on Form S-1, SEC
File No. 333-43923 ("Registration Statement"), which was
declared effective by the Commission on July 2,1998. The
net proceeds from the Offering to the Company after total
expenses was $10,270,000.
The Company intends to use the net proceeds of the
offering to fund research and development, including
preclinical and clinical activities in support of
regulatory approvals, for commercialization activities
related to Hectorol for treatment of secondary
hyperparathyroidism associated with ESRD and for working
capital and general corporate purposes.
Through the period ended December 31, 1998, the
Company has used less than $100,000 of the net proceeds for
such purposes. The net proceeds not yet utilized have been
invested in short-term, investment grade, interest-bearing
financial instruments. The use of proceeds from the
Offering does not represent a material change in the use of
proceeds described in the prospectus which is part of the
Registration Statement.
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The 1998 Annual Meeting of Shareholders ("Annual
Meeting") of the Company was held on November 13, 1998.
The total number of shares of the Company's common stock,
no par value per share, outstanding as of October 2, 1998,
the record date of the Annual Meeting, was 10,135,956.
Management of the Company solicited proxies pursuant to
Section 14 of the Securities Exchange Act of 1934, as
amended, and Regulation 14A promulgated thereunder for the
Annual Meeting. Two directors, Richard B. Mazess, Ph.D.
and John Kapoor, Ph.D., were elected to serve until the
2001 Annual Meeting of Shareholders. The directors were
elected by a vote of 9,623,372 votes "FOR"; 2,992 votes
"AGAINST"; and no votes "WITHHELD AUTHORITY". " The
selection of KPMG Peat Marwick LLP as the Company's
independent auditors was also approved. The selection was
approved by a vote of 9,614,872 votes "FOR"; 8,269 votes
"AGAINST"; and 3,223 votes "ABSTAIN".
Item 5. Other Information
-----------------
Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995: Certain statements in this
filing, and elsewhere (such as in other filings by the
Company with the Securities and Exchange Commission, press
releases, presentations by the Company or its management
and oral statements) 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,
and other factors which may cause the 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. Such factors include, among others, the
Company's early stage of development, the Company
dependence on its ability to obtain regulatory approval of
Hectorol, the uncertainty of the Company's future
profitability, the uncertainty of regulatory approvals of
any drugs developed by the Company, the uncertainty of the
Company's patent positions and proprietary rights, the
uncertainty related to pricing and reimbursement of the
Company's products, the intense competition in the
pharmaceutical and biotechnology industries, the Company's
potential need for additional partners or collaborators,
the Company's future capital needs and uncertainty of
additional financing, and the Company's lack of
manufacturing capabilities and limited sales and marketing
experience. Readers should also carefully review the risk
factors set forth in other reports or documents the Company
files from time to time with the Securities and Exchange
Commission, including Part I, Item 1 of the Company's
Annual Report on form 10-K. Given these uncertainties,
readers are cautioned not to place undue reliance on such
forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly
announce any revisions to any of the forward -looking
statements contained herein to reflect future events or
developments.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits furnished:
(11) Statement Re: Computation of Loss Per Share
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company
during the quarter ended December 31, 1998.
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.
BONE CARE INTERNATIONAL, INC.
(Registrant)
Date: February 2, 1999 /s/ Charles W. Bishop
- ------------------------ --------------------------------------
Charles W. Bishop
President and Chief Executive Officer
(Principal Executive Officer)
Date: February 2, 1999 /s/ Dale W. Gutman
- ----------------------- --------------------------------------
Dale W. Gutman
Vice President of Finance
(Principal Financial and
Accounting Officer)
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Exhibit Index
For the Quarterly Period Ended December 31, 1998
No. Description Page
- --- ----------- ----
11 Statement Regarding Computation of Loss Per Share . . . . . . . . . 14
27 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . 15
Exhibit 11
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Statement Regarding Computation of Loss Per Share
(Unaudited)
Three months ended Six Months ended
------------------ ----------------
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
------------ ------------ ------------ ----------
Net loss $(1,440,814) $ (1,109,118) $(2,862,269) $(2,117,596)
=========== =========== =========== ==========
Weighted average number
of common shares 10,136,213 8,722,430 9,963,020 8,722,406
=========== =========== =========== ==========
Net loss per common
share - basic $ (0.14) $ (0.13) $ (0.29) $ (0.24)
======= ======= ======= ======
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<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from Form 10-Q for the three months ended
December 31, 1998, and is qualified in its entirety
by reference to such financial statements.
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<PERIOD-TYPE> 3-MOS
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<PERIOD-END> DEC-31-1998
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0
0
<OTHER-SE> 1,165
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