<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-28310
SIBIA Neurosciences, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-3616229
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
505 Coast Boulevard South, Suite 300, La Jolla, CA 92037
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(619) 452-5892
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(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
requirement for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 31, 1998
----- -------------------------------
Common Stock, $.001 par value 9,484,040
<PAGE> 2
SIBIA Neurosciences, Inc.
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Financial Statements
Condensed Balance Sheet as of September 30, 1998 (Unaudited)
and December 31, 1997........................................... 3
Condensed Statement of Operations and Comprehensive Loss
(Unaudited) for the Three Months and Nine Months Ended
September 30, 1998 and 1997.................................... 4
Condensed Statement of Cash Flows (Unaudited) for the Nine
Months Ended September 30, 1998 and 1997........................ 5
Notes to Financial Statements (Unaudited)......................... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 8
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk......... 11
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.................................................. 12
ITEM 2. Changes in Securities and Use of Proceeds.......................... 12
ITEM 3. Defaults Upon Senior Securities.................................... 12
ITEM 4. Submission of Matters to a Vote of Security Holders................ 12
ITEM 5. Other Information.................................................. 12
ITEM 6. Exhibits and Reports on Form 8-K................................... 13
SIGNATURE................................................................... 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Financial Statements
SIBIA NEUROSCIENCES, INC.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents .................... $ 4,397,000 $ 4,972,000
Investment securities ........................ 17,751,000 28,375,000
Contracts and accounts receivable ............ 217,000 588,000
Prepaid expenses and other current assets .... 788,000 550,000
------------ ------------
Total current assets ................. 23,153,000 34,485,000
Property and equipment, net .................... 1,969,000 1,599,000
Other assets ................................... 810,000 96,000
------------ ------------
$ 25,932,000 $ 36,180,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................. $ 3,102,000 $ 1,611,000
Accrued liabilities .......................... 1,675,000 1,660,000
------------ ------------
Total ................................ 4,777,000 3,271,000
Long-term capital lease obligations ............ 932,000 695,000
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred Stock, $.001 par value; 5,000,000
shares authorized; no shares issued or
outstanding at September 30, 1998 and
December 31, 1997...........................
Common Stock, $.001 par value; 25,000,000
shares authorized; 9,465,907 and
9,338,744 shares issued and outstanding
at September 30, 1998 and December 31, 1997,
respectively ............................... 9,000 9,000
Additional paid-in capital ................... 60,097,000 59,946,000
Deferred compensation ........................ (320,000) (580,000)
Notes receivable from stockholders ........... (83,000) (87,000)
Accumulated other comprehensive income ....... 506,000 2,212,000
Accumulated deficit .......................... (39,986,000) (29,286,000)
------------ ------------
Total stockholders' equity ........... 20,223,000 32,214,000
------------ ------------
$ 25,932,000 $ 36,180,000
============ ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
SIBIA NEUROSCIENCES, INC.
CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Contract ........................... $ 1,728,000 $ 2,053,000 $ 5,538,000 $ 5,942,000
License and royalty ................ 25,000 50,000 110,000 3,110,000
----------- ------------ ------------ ------------
Total revenue (Note 3) ......... 1,753,000 2,103,000 5,648,000 9,052,000
----------- ------------ ------------ ------------
Operating expenses:
Research and development ........... 4,311,000 4,090,000 13,621,000 12,160,000
General and administrative ......... 1,975,000 1,073,000 5,052,000 3,715,000
----------- ------------ ------------ ------------
Total operating expenses ....... 6,286,000 5,163,000 18,673,000 15,875,000
----------- ------------ ------------ ------------
(4,533,000) (3,060,000) (13,025,000) (6,823,000)
Other income (expense):
Interest income .................... 358,000 579,000 1,234,000 1,747,000
Interest expense ................... (22,000) (14,000) (69,000) (43,000)
Gain on sale of investment ......... 1,160,000
Other .............................. 4,000
----------- ------------ ------------ ------------
336,000 565,000 2,325,000 1,708,000
----------- ------------ ------------ ------------
Net loss ............................. (4,197,000) (2,495,000) (10,700,000) (5,115,000)
Other comprehensive income -
unrealized holding gains (losses)
arising during period .............. 22,000 653,000 (546,000) 2,236,000
Less: reclassification adjustment
for gains included in net loss ..... (1,160,000)
----------- ------------ ------------ ------------
Comprehensive income (loss) .......... $(4,175,000) $ (1,842,000) $(12,406,000) $ (2,879,000)
=========== ============ ============ ============
Basic and diluted net loss per
common share ....................... $ (0.44) $ (0.27) $ (1.14) $ (0.55)
=========== ============ ============ ============
Shares used in computing basic and
diluted net loss per common share .. 9,442,663 9,256,339 9,399,971 9,224,416
=========== ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
SIBIA NEUROSCIENCES, INC.
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss .............................................. $(10,700,000) $ (5,115,000)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization ....................... 644,000 479,000
Compensation from issuance of common stock
options ........................................... 205,000 294,000
Gain on disposal of property ........................ (4,000)
Gain on sale of investment .......................... (1,160,000)
Net amortization of premium and discount on
investment securities ............................. (41,000) (96,000)
Increase (decrease) in cash resulting from changes in:
Contract and accounts receivable .................... 371,000 (518,000)
Prepaid expenses and other assets ................... (952,000) 286,000
Accounts payable and accrued liabilities ............ 1,483,000 785,000
Deferred revenue .................................... (431,000)
------------ ------------
Net cash provided (used) by operating activities .. (10,150,000) (4,320,000)
------------ ------------
Cash flows from investing activities:
Purchase of investment securities available-for-sale .. (7,232,000) (11,920,000)
Maturities and sales of investment securities
available-for-sale ................................... 17,307,000 17,681,000
Principal payments received on investment securities
available-for-sale .................................. 44,000 18,000
Proceeds from disposal of property and equipment ...... 4,000
Acquisition of property and equipment ................. (205,000) (88,000)
------------ ------------
Net cash provided (used) by investing activities .. 9,914,000 5,695,000
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of stock ....................... 206,000 195,000
Proceeds from payment on notes receivable ............. 4,000 553,000
Principal payments on capital lease obligations ....... (549,000) (395,000)
------------ ------------
Net cash provided (used) by financing activities .. (339,000) 353,000
Net increase (decrease) in cash and cash equivalents .... (575,000) 1,728,000
Cash and cash equivalents at beginning of period ........ 4,972,000 1,412,000
------------ ------------
Cash and cash equivalents at end of period .............. $ 4,397,000 $ 3,140,000
============ ============
Supplemental Information:
Equipment under capital leases ........................ $ 809,000 $ 436,000
============ ============
Unrealized gain/(loss) on investment securities ....... $ (546,000) $ 2,236,000
============ ============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
SIBIA Neurosciences, Inc.
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of SIBIA Neurosciences, Inc.
("SIBIA" or the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
rules and regulations of the Securities and Exchange Commission ("SEC").
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine-month periods ended September 30, 1998
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. For further information, refer to the financial
statements and footnotes thereto for the year ended December 31, 1997, included
in the Company's Form 10-K filed with the SEC.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosures as of the date of the financial statements. Actual results
could differ from such estimates.
2. NET LOSS PER COMMON SHARE
The Company adopted Statement of Financial Accounting Standards No. 128 ("SFAS
128"), "Earnings Per Share" ("EPS"), for fiscal 1997 and retroactively restated
all prior periods as required. Basic net income per common share is computed by
dividing income available to holders of Common Stock by the weighted average
number of shares of Common Stock outstanding. Diluted EPS is computed similarly
to basic EPS, except that the weighted average number of shares of Common Stock
outstanding are increased to include the number of additional shares of Common
Stock that would have been outstanding if dilutive potential common shares had
been issued. For all periods presented, both basic and diluted loss per common
share are computed based on the weighted average number of shares of Common
Stock outstanding during the period. Stock options could potentially dilute
basic earnings per share in the future but were excluded from the computation of
diluted loss per share as their effect is antidilutive for the periods
presented.
3. RELATED PARTY TRANSACTIONS
Total revenue for the quarter and nine months ended September 30, 1998 included
$778,000, and $2,304,000, respectively, from a collaborative partner that is a
related party. For the corresponding periods in 1997, total revenue included
$870,000 and $2,755,000, respectively, from a collaborative partner that is a
related party.
6
<PAGE> 7
4. COMMITMENTS AND CONTINGENCIES
The Company is involved in certain litigation with Cadus Pharmaceutical
Corporation. See further discussion of this matter at Item 1 in Part II of this
Form 10-Q.
5. ADOPTION OF NEW ACCOUNTING STANDARD
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
pronouncement, which is required to be adopted effective January 1, 1998,
requires the presentation of a statement of comprehensive income. Comprehensive
income is defined as the change in equity of a business enterprise during a
period resulting from transactions and other events and circumstances from
nonowner sources. Comprehensive income (loss) for the Company, in addition to
net loss, includes unrealized gains and losses on marketable securities
available for sale, currently recorded in stockholders' equity.
6. RECLASSIFICATIONS
Certain reclassifications have been made to the fiscal 1997 amounts to conform
to the presentation used in fiscal 1998.
7
<PAGE> 8
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
OVERVIEW
Except for the historical information contained herein, the discussion in this
report contains forward-looking statements that involve risks and uncertainties.
The Company's actual results may differ significantly from those discussed in
this report. Factors that might cause or contribute to such differences include,
without limitation, those discussed in this Item 2, as well as those discussed
in the Company's Form 10-K for the year ended December 31, 1997 under the
headings "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
SIBIA, incorporated in Delaware in 1981, was established by The Salk Institute
for Biological Studies. Through 1990, SIBIA successfully developed several
proprietary life-sciences technologies in collaboration with corporate partners.
In 1987, SIBIA initiated research in the neuroscience field and in 1991 shifted
its focus completely to the development of novel therapeutics to treat nervous
system disorders.
The Company has no products available for sale and does not expect to have any
products resulting from its research efforts, including its collaborations with
others, commercially available for at least several years, if at all. Except for
1995, the Company has incurred net losses every year since shifting its area of
therapeutic focus to the central nervous system in 1991. The Company is
continuing to incur losses and expects to incur increasing operating losses over
the next several years as the Company's research and development efforts expand.
The Company expects that its revenue and other income for the next several years
will fluctuate significantly from quarter to quarter and will be limited to
payments under its collaborative relationships, license fees, interest income
and other miscellaneous income.
RESULTS OF OPERATIONS
Revenue
The Company had total revenue of $1,753,000 for the third quarter of 1998 and
$5,648,000 for the nine-month period ended September 30, 1998, compared with
$2,103,000 and $9,052,000, respectively, for the same periods in 1997. The
decrease in the comparable three-month periods was due primarily to the
completion in October 1997 of the research support phase of SIBIA's
collaboration with Eli Lilly & Company ("Eli Lilly"). The decrease in the
comparable nine-month periods was due primarily to a one-time license fee of
$3,000,000 recognized in 1997 related to the Company's agreement with Meiji
Seika Kaisha, Ltd, ("Meiji") for the development of SIB-1508Y, SIBIA's lead
compound for Parkinson's disease and the completion of the research support
phase of the Eli Lilly collaboration.
Expenses
Research and development expenses increased to $4,311,000 for the third quarter
of 1998 and $13,621,000 for the nine-month period ended September 30, 1998 from
$4,090,000 and
8
<PAGE> 9
$12,160,000, respectively, for the same periods in 1997. The increase in
research and development expenses for the comparable three-month periods was due
primarily to expanded drug discovery programs for chronic pain, apoptosis,
psychiatric disorders and neuroprotection. The increase for the comparable
nine-month periods was due primarily to expanded drug discovery programs and a
net increase in expenses related to clinical trials of SIB-1508Y, currently in
Phase 2 clinical studies for Parkinson's disease, and SIB-1553A, currently in
Phase 1 studies for Alzheimer's disease. The Company expects research and
development expenditures to increase for the foreseeable future in support of
continued drug discovery and development efforts.
General and administrative expenses increased to $1,975,000 for the third
quarter of 1998 and $5,052,000 for the nine-month period ended September 30,
1998 from $1,073,000 and $3,715,000, respectively for the same periods in 1997.
The increase in general and administrative expenses in the comparable three and
nine-month periods was due primarily to increased legal fees related to patent
litigation. The Company expects continued increases in general and
administrative costs related to current litigation, until such litigation is
resolved, and support of future increases in research and development
expenditures.
Other Income
Other income was $336,000 for the third quarter of 1998 and $2,325,000 for the
nine-month period ended September 30, 1998 compared to $565,000 and $1,708,000,
respectively, for the same periods in 1997. The decrease in other income in the
comparable three-month periods was due primarily to decreased interest income as
a result of lower average cash and investment balances carried in 1998. The
increase in other income in the comparable nine-month periods was due primarily
to the net effect of a gain on the sale of equity securities, which gain was
partially offset by decreased interest income as a result of lower average cash
and investment balances carried in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and investment securities totaled approximately
$22,148,000 at September 30, 1998 as compared to $33,347,000 at December 31,
1997. The primary use of cash and investments was to finance the Company's
continuing operations.
To date, the Company has financed its operations primarily through equity
financings, research contracts (generally conducted on a best efforts basis),
and license and royalty revenues. Since 1991, the Company has received
approximately $41,775,000 in net proceeds from the sale of Convertible Preferred
Stock and Common Stock to investors and collaborative partners and approximately
$53,584,000 in contract, license and royalty revenue. As of September 30, 1998,
the Company had an accumulated deficit of approximately $39,986,000.
The Company is entitled to receive additional payments under its collaborative
agreements in the form of contract revenue, milestone payments, if milestones
are achieved, and royalties, if products are commercialized. The research phase
and ongoing funding related to the Company's collaboration with Novartis AG
concluded in September 1998.
9
<PAGE> 10
The Company leases laboratory and office facilities under an agreement expiring
on December 31, 2001. The average minimum annual payment under the lease is
approximately $1,497,000, before consideration of sublease income. The Company
believes that its present facility will be adequate to conduct its research
activities through December 2001. Management believes that it should be able to
secure additional space at commercially reasonable rates, if necessary. The
Company has an option to extend its lease for an additional five years. Since
1991, the Company has invested $4,852,000 in property and equipment. Included
within this amount is $3,895,000 of equipment under capital leases.
The Company anticipates that the cash, cash equivalents and investment
securities balance of $22,148,000 as of September 30, 1998 will be used to
support continued research and development of its technologies and fund other
general and administrative expenditures and will be sufficient to maintain
operations through 1999. However, the Company expects to incur substantial
research and development expenses including continued increases in personnel
costs and costs related to the continued expansion of its drug discovery
platforms and pre-clinical testing and early stage clinical trials. The
Company's future capital needs will be dependent upon many factors, including
progress in its research and development activities, the magnitude and scope of
these activities, progress with pre-clinical and clinical trials, the cost of
preparing, filing, prosecuting, maintaining, defending and enforcing patent
claims and other intellectual property rights, competing technological and
market developments, changes in or terminations of existing collaborative
arrangements, the establishment of additional licensing and/or collaborative
arrangements, and the cost of manufacturing scale-up and development of
marketing activities, if undertaken by the Company.
The Company believes its drug discovery programs and technologies will lead to
corporate collaboration and licensing opportunities which may generate future
revenues in the form of license fees, milestone payments and/or royalties. The
Company may also seek additional funding through public or private financing.
There can be no assurance that the Company will be successful in its efforts to
collaborate with additional partners or that additional financing from other
sources will be available on favorable terms, if at all. If additional funds are
raised by issuing equity securities, further dilution to then existing
stockholders would result. If adequate funds are not available, the Company may
be required to curtail significantly or eliminate one or more of its research,
discovery or development programs.
Year 2000
As many computer systems and other equipment with embedded chips or processors
use only two digits to represent the year, they may be unable to process
accurately certain data before, during or after the year 2000. As a result,
internal systems of the Company and its suppliers and vendors are at risk for
possible miscalculations or systems failures causing disruptions in their
business operations. This is commonly known as the Year 2000 ("Y2K") issue.
The Company has formed a Y2K Compliance Committee ("Y2K Committee"), with
representation from each major functional area within the organization that has
been charged with implementing the Company's Y2K Compliance Program
("Y2K Program"). The Y2K Program
10
<PAGE> 11
has been designed to identify those issues (both internal and external) that
would cause material interruption to the Company's "business as usual" and
consists of the following phases: (1) identification of all Y2K issues; (2)
assigning priorities to identified items; (3) assessing the Y2K compliance of
items determined to be material to the Company; (4) repairing or replacing
items that are determined to be material to the Company; (5) testing
material items; and (6) designing contingency and business continuation plans.
Currently, the Company has completed the identification, assignment and
assessment phases for all material Y2K issues. The repair or replacement,
testing and contingency planning phases are currently underway with various
expected completion dates through mid-1999.
No material costs have been incurred to date in the Company's effort to address
its Y2K issues and the Company does not anticipate the amounts to become
material in the future.
The failure to correct a material Y2K issue could result in an interruption in,
or a failure of the Company's business as usual. Due to the general uncertainty
inherent in the Y2K issue, resulting in part from the uncertainty of the Y2K
readiness of third-party suppliers and service providers, the Company is unable
to determine at this time whether the consequences of Y2K failures will have a
material impact on the Company's results of operations, liquidity and financial
condition. The Company's Y2K program is expected to significantly reduce the
Company's level of uncertainty about the Y2K issue and, in particular, about the
Y2K readiness of its suppliers and service providers. The Company believes that
with the completion of the Y2K program as scheduled, the possibility of
significant interruptions of normal operations will be greatly reduced.
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk
Not applicable.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings:
On July 9, 1996, the Company filed an action for patent infringement against
Cadus Pharmaceutical Corporation ("Cadus") in the United States District Court
for the Southern District of California. The complaint asserts that Cadus' assay
technology infringes the Company's U.S. Patent No. 5,401,629 (the "'629
patent"), entitled "Assay Methods and Compositions Useful for Measuring the
Transduction of an Intracellular Signal." Through the complaint, the Company
seeks damages in an unspecified amount and injunctive relief.
On August 1, 1996, Cadus filed its answer and a counterclaim to the Company's
complaint. The counterclaim asserts claims that the '629 patent and the
Company's U.S. Patent No. 5,436,128, entitled "Assay Methods and Composition for
Detecting and Evaluating the Intracellular Transduction of an Extracellular
Signal," are invalid, unenforceable and not infringed, and further asserts
claims for intentional interference with prospective economic advantage and
unfair competition. The counterclaim seeks declaratory relief and compensatory
and punitive damages.
On August 3, 1998, the United States District Court for the Southern District of
California granted the Company's motion for summary judgment on Cadus'
counterclaim for interference with prospective economic advantage and unfair
competition, thus disposing of Cadus' affirmative claims for relief against the
Company. The trial commenced as of November 3, 1998.
Company management believes that its complaint against Cadus is well-founded and
necessary to protect the value of its intellectual property portfolio. In
addition, management believes that the ultimate resolution of the above matter
will not have a material adverse impact on the Company's financial position,
results of operations or cash flows.
ITEM 2. Changes in Securities and Use of Proceeds:
None.
ITEM 3. Defaults Upon Senior Securities:
None.
ITEM 4. Submission of Matters to a Vote of Security Holders:
None.
ITEM 5. Other Information:
None.
12
<PAGE> 13
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
27.1 Financial Data Schedule. (Exhibit 27 is submitted
as an exhibit in the electronic format of this
Quarterly Report on Form 10-Q submitted to the
Securities and Exchange Commission.)
(b) Reports on Form 8-K
None.
13
<PAGE> 14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
SIBIA Neurosciences, Inc.
Date: November 13, 1998 By: /s/ THOMAS A. REED
----------------- ----------------------------------------
Thomas A. Reed
Vice President, Finance & Administration,
and Chief Financial Officer
(on behalf of the registrant and as the
registrant's principal financial officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 1998 AND UNAUDITED STATEMENT OF
OPERATIONS AND COMPREHENSIVE LOSS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,397,000
<SECURITIES> 17,751,000
<RECEIVABLES> 217,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,153,000
<PP&E> 1,969,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,932,000
<CURRENT-LIABILITIES> 4,777,000
<BONDS> 0
0
0
<COMMON> 9,000
<OTHER-SE> 20,214,000
<TOTAL-LIABILITY-AND-EQUITY> 25,932,000
<SALES> 0
<TOTAL-REVENUES> 5,648,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,673,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,000
<INCOME-PRETAX> (10,700,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,700,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,700,000)
<EPS-PRIMARY> (1.14)
<EPS-DILUTED> (1.14)
</TABLE>
