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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-21937
CERUS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 68-0262011
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
2525 STANWELL DR., SUITE 300
CONCORD, CALIFORNIA 94520
(Address of principal executive offices, including zip code)
(510) 603-9071
(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 October 31, 1997 there were 8,952,632 shares of the Registrant's
Common Stock outstanding.
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CERUS CORPORATION
QUARTERLY REPORT ON FORM 10-Q
THREE MONTHS ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets -
September 30, 1997 and December 31, 1996 3
Condensed Statements of Operations -
Three and nine months ended September 30, 1997 and 1996 4
Condensed Statements of Cash Flows -
Nine months ended September 30, 1997 and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
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PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
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SIGNATURES 15
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</TABLE>
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PART I: FINANCIAL INFORMATION
ITEM I: FINANCIAL STATEMENTS
CERUS CORPORATION
CONDENSED BALANCE SHEETS
UNAUDITED
(in Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------- -------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $20,116 $ 6,002
Accounts receivable from related party 3,904 326
Other current assets 291 206
------- -------
Total current assets 24,311 6,534
Furniture and equipment, net of depreciation 1,118 1,184
Deferred financing costs -- 969
Other assets 117 125
------- -------
Total assets $25,546 $ 8,812
======= =======
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 451 $ 391
Accrued expenses 3,108 2,414
Deferred revenue -- 982
Current portion of capital lease obligations 66 94
------- -------
Total current liabilities 3,625 3,881
Capital lease obligations, less current portion 56 92
Total stockholders' equity 21,865 4,839
------- -------
Total liabilities and stockholders' equity $25,546 $ 8,812
======= =======
</TABLE>
See notes to condensed financial statements
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CERUS CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
(in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Licenses, milestones and development
funding from a related party $ 3,123 $ 364 $ 4,969 $ 2,469
Government grants 144 97 453 598
-------- -------- -------- --------
Total revenue 3,267 461 5,422 3,067
Operating expenses:
Research and development 4,664 2,938 14,175 8,920
General and administrative 792 611 2,356 1,620
-------- -------- -------- --------
Total operating expenses 5,456 3,549 16,531 10,540
-------- -------- -------- --------
Loss from operations (2,189) (3,088) (11,109) (7,473)
Interest income, net 308 128 924 356
-------- -------- -------- --------
Net loss $ (1,881) $ (2,960) $(10,185) $ (7,117)
======== ======== ======== ========
Net loss per share $ (0.21) $ (1.08) $ (1.22) $ (2.61)
======== ======== ======== ========
Shares used in computing net loss per share 8,916 2,729 8,328 2,729
======== ======== ======== ========
</TABLE>
See notes to condensed financial statements
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CERUS CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
(in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
-------- --------
<S> <C> <C>
Net loss $(10,185) $ (7,117)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 431 354
Amortization of deferred compensation 135 153
Changes in operating assets and liabilities:
Accounts receivable from related party (3,578) --
Other current assets (85) (31)
Other assets 8 28
Accounts payable and accrued expenses 754 1,546
Deferred revenue (982) (862)
-------- --------
Net cash used in operating activities (13,502) (5,929)
Investing activities:
Purchases of furniture and equipment (365) (134)
-------- --------
Net cash used in investing activities (365) (134)
Financing activities:
Net proceeds from sale of preferred stock -- 5,904
Proceeds from issuance of common stock 27,012 253
Deferred financing costs 969 (152)
Payments on notes receivable from shareholders 64 4
Payments on capital lease obligations (64) (129)
-------- --------
Net cash provided by financing activities 27,981 5,880
-------- --------
Net increase (decrease) in cash and cash equivalents 14,114 (183)
Cash and cash equivalents, beginning of period 6,002 9,659
-------- --------
Cash and cash equivalents, end of period $ 20,116 $ 9,476
======== ========
Supplemental disclosure of non cash financing activities:
Deferred compensation related to stock option grants $ -- $ 530
======== ========
Capital Lease Obligations Incurred $ -- $ 227
======== ========
</TABLE>
See notes to condensed financial statements
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CERUS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and pursuant to the instructions to Form 10-Q and Article 10 of
Regulation S-X. 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 accrual adjustments, considered necessary for a fair
presentation have been included. Operating results for the three and nine month
periods ended September 30, 1997 are not necessarily indicative of the results
that may be expected for any future period.
These financial statements and notes should be read in conjunction with the
Company's audited financial statements and notes thereto for the year ended
December 31, 1996 included in the Company's Prospectus dated January 30, 1997.
NOTE 2 - STOCKHOLDERS' EQUITY
In January 1997, the Company effected a 1.47-for-one stock split of its
outstanding shares of Common Stock.
In February 1997, the Company received net proceeds (after deduction of offering
costs) of $21.1 million from its initial public offering of 2,000,000 shares of
Common Stock. In conjunction with the initial public offering, the Company sold
an additional 496,878 shares of its Common Stock to Baxter Healthcare
Corporation for an aggregate purchase price of approximately $5.5 million.
Additionally, at the time of the initial public offering, warrants to purchase
47,605 shares of Common Stock were exercised. The aggregate exercise price paid
to the Company was approximately $183,000.
NOTE 3 - LOSS PER SHARE INFORMATION
Net Loss Per Share
Net loss per share is computed using the weighted average number of common and
dilutive common equivalent shares outstanding during the period, giving
retroactive effect to the January 1997 1.47-for-one stock split for the three
and nine month periods ended September 30, 1996. Common equivalent shares
consist of the incremental common shares issuable upon conversion of the
convertible Preferred Stock (using the if-converted method), Common Stock
options and warrants, when their effect is dilutive. In addition, pursuant to
SEC Staff Accounting Bulletins and Staff policy, such computations include the
effect of all dilutive and antidilutive common and common equivalent shares
issued at prices below the Company's January 30, 1997 initial public offering
price during the 12 months prior to the offering as if they were outstanding
through January 30, 1997, determined using the treasury stock method and the per
share initial public offering price.
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CERUS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Continued)
Net loss per share and shares used in computing net loss per share calculated on
the above basis are as follows (shares in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net loss per share $(0.21) $(1.08) $(1.22) $(2.61)
====== ====== ====== ======
Weighted average shares of common
stock outstanding 8,916 1,418 8,328 1,418
Shares related to Staff Accounting Bulletins -- 1,311 -- 1,311
------ ------ ------ ------
Shares used in net loss per share calculation 8,916 2,729 8,328 2,729
====== ====== ====== ======
</TABLE>
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share," which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact is not expected to result in a
material change in the net loss per share for the three and nine month periods
ended September 30, 1997 and September 30, 1996 as the Company incurred net
losses in those periods and, accordingly, the calculation of earnings per share
for those periods excluded common equivalent shares, as their effect was
antidilutive.
Pro Forma Net Loss Per Share
Pro forma net loss per share has been computed using the weighted average number
of common and dilutive common equivalent shares outstanding during the period
(as described above), giving retroactive effect to the January 1997 1.47-for-one
stock split for the three and nine month periods ended September 30, 1996 and
also giving effect, even if antidilutive, to common equivalent shares from
convertible Preferred Stock that automatically converted upon the closing of the
Company's initial public offering (using the if-converted method). Pro forma per
share information calculated on the this basis is as follows (shares in
thousands):
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CERUS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Continued)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
------------------ ------------------
<S> <C> <C>
Pro forma net loss per share $(0.45) $(1.08)
====== ======
Shares used in computing net loss per share 2,729 2,729
Adjustment to reflect the effect of the assumed
conversion of convertible preferred
stock from the date of issuance 3,852 3,852
------ ------
Shares used in computing pro forma net loss per share 6,581 6,581
====== ======
</TABLE>
NOTE 4 - SUBSEQUENT EVENTS
Equity Investment from Baxter
An April 1996 agreement between Baxter and Cerus provides for Baxter to make
three investments of $5.0 million each in the Common Stock of the Company, at
120% of the market price at the time of each investment, subject to the
achievement of certain milestones. In September 1997, Cerus achieved the first
of these milestones and, on October 31,1997, Baxter purchased 217,202 shares of
Common Stock for an aggregate purchase price of approximately $5.0 million.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's financial statements and accompanying notes included herein and the
Company's 1996 audited financial statements and notes thereto included in the
Company's prospectus dated January 30, 1997 ("Prospectus").
This discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ significantly from
those discussed here as a result of certain factors, including those set forth
below and in the Prospectus.
OVERVIEW
Cerus Corporation is developing systems designed to improve the safety of blood
transfusions by inactivating infectious pathogens in blood components used for
transfusion (platelets, fresh frozen plasma ("FFP") and red blood cells) and
inhibiting the leukocyte (white blood cell) activity that is responsible for
certain adverse immune and other transfusion-related reactions. The Company's
platelet pathogen inactivation system is presently in Phase 2 clinical trials
and its FFP pathogen inactivation system is in Phase 1 clinical trials. The
Company's red blood cell pathogen inactivation system is presently in
preclinical development.
In December 1993, Cerus entered into a development and commercialization
agreement with Baxter Healthcare Corporation ("Baxter") to develop a system for
inactivation of pathogens in platelets used for transfusions. The agreement
provides for Baxter to share costs associated with research and development,
preclinical studies and clinical trials for the system. The agreement also
provides for a sharing of revenue from sales of inactivation system disposables,
after each party is reimbursed for its cost of goods above a specified level.
Under this agreement, the Company received a $1.0 million equity investment from
Baxter and has recognized approximately $13.2 million in revenue for license
fees, milestone payments and development funding from Baxter. At September 30,
1997, the Company had recognized all license fees and milestone payments under
this agreement. In January 1997, the Company and Baxter amended the agreement to
provide that the Company would receive an additional 2.2% of the adjusted
product revenue from the sale of the platelet pathogen inactivation system
disposables in return for payment by the Company to Baxter of $5.5 million in
1997 in four equal quarterly installments for development costs. The current
quarter's results include the third of these quarterly contractual payments of
approximately $1.4 million.
In January and July 1995, Cerus received approximately $2.6 million from Baxter
in connection with interim funding agreements related to the development of
pathogen inactivation systems for FFP and red blood cells. In April 1996, Cerus
entered into a second development and commercialization agreement with Baxter,
principally focused on the FFP and red blood cell pathogen inactivation systems.
The agreement currently provides for Baxter to share costs associated with
research and development, preclinical studies and clinical trials for the
systems. The agreement also provides for the Company and Baxter to share gross
profits from the sale of inactivation system disposables, after deducting from
such gross profits a specified percentage allocation to be retained by the
marketing party for marketing and administration expenses. As of September 30,
1997, the Company has recognized approximately $4.8 million in revenue for
development funding from Baxter and has received $6.0 million in equity
investments from Baxter under this agreement. On October 31, 1997, Baxter made
an additional milestone-based equity investment of $5.0 million following the
Company's receipt of regulatory approval to commence Phase 3 clinical trials in
Europe for the platelet pathogen inactivation system. Two additional $5.0
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million equity investments are provided for in the agreement, subject to the
achievement of certain milestones. Each of the October 31, 1997 investment and
the remaining milestone-based investments are priced at 120% of the market price
of the Company's Common Stock at the time of the investment.
Since its inception in 1991, Cerus has devoted substantially all of its efforts
and resources to the research, development and clinical testing of techniques
and systems for inactivating pathogens in transfusion blood components. The
Company has been unprofitable since inception and, as of September 30, 1997, had
an accumulated deficit of approximately $30.4 million. All of the Company's
planned pathogen inactivation systems are in the research and development stage.
The Company will be required to conduct significant research, development,
testing and regulatory compliance activities on these products that, together
with anticipated general and administrative expenses, are expected to result in
substantial losses at least until commercialization of its products under
development. The Company's ability to achieve a profitable level of operations
in the future will depend on its ability to successfully complete development,
obtain regulatory approvals and achieve market acceptance of its pathogen
inactivation systems. As a result, there can be no assurance that the Company
will ever achieve a profitable level of operations. Further, a significant
portion of the Company's development funding is provided by Baxter under the
aforementioned agreements based on an annual budgeting process. There can be no
assurance that these agreements will not be modified or terminated as provided
for in the agreements.
To date, the Company has not received any revenue from product sales and it will
not derive revenue from product sales unless and until one or more planned
products receives regulatory approval and achieves market acceptance. The
Company anticipates that its sources of revenue until product sales occur will
be limited to payments under development and commercialization agreements with
Baxter in the area of blood component pathogen inactivation, payments from the
United States government under research grant programs, payments from future
collaboration agreements, if any, and interest income. Under the current
agreements with Baxter, all research, development, preclinical and clinical
costs of the pathogen inactivation projects are shared equally by Cerus and
Baxter. Because more of such research and development is typically performed
internally at Cerus than at Baxter and because Cerus is generally responsible
for engaging third parties to perform certain aspects of these projects, the
Company's research and development expenses have exceeded Baxter's expenses. As
a result, the Company has recognized revenue from Baxter, giving rise to a
receivable due from Baxter and corresponding periodic balancing payments to the
Company. At September 30, 1997, the amount of the Baxter receivable was
approximately $3.9 million. The next balancing payment is scheduled to be
received by the Company from Baxter during the first quarter of 1998 for amounts
owed by Baxter to Cerus at December 31, 1997. Through September 30, 1997, the
Company had recognized approximately $18.0 million in revenue under its
agreements with Baxter, including the license fee and milestone amounts
described above, and approximately $2.9 million under United States government
grants.
RESULTS OF OPERATIONS
The following discussion compares the results of operations for the three and
nine month periods ended September 30, 1997 and September 30, 1996. The
operating results for these periods are not necessarily indicative of operating
results in future periods. The following comparative information should be read
in conjunction with the financial statements and notes, as well as the other
information presented herein.
Revenue. Under the development agreements with Baxter, Cerus shares development
costs equally with Baxter. For this reason, periodic development revenue
recognized by Cerus from Baxter varies with the amount by which Cerus'
development costs exceed Baxter's development costs for the given period.
Development revenue earned under these agreements increased 282% to
approximately $1.4 million for the quarter ended September 30, 1997 from
approximately
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$360,000 for the same quarter in 1996. Development revenue increased 31% to
approximately $3.2 million for the nine month period ended September 30, 1997
from approximately $2.5 million for the same period in 1996. These quarterly and
nine month revenue increases are the net effect of an increase in the Company's
costs associated with the FFP and red blood cell pathogen inactivation systems,
a decrease in the Company's costs associated with the platelet pathogen
inactivation system (see Research and Development Expenses below) and an
increase in Baxter's costs for disposable and instrument development. In
addition, under these agreements, the Company recognized license fee and
milestone revenue from Baxter of $1.7 million based on receiving regulatory
approval to commence phase 3 clinical trials in Europe for the platelet pathogen
inactivation system.
Government grant revenue increased 49% to approximately $150,000 for the quarter
ended September 30, 1997 from approximately $100,000 for the same quarter in
1996 and decreased 24% for the nine month period ended September 30, 1997 to
approximately $450,000 from approximately $600,000 for the same period in 1996,
primarily due to periodic changes in grant-related activity. In general,
grant-related activity is a function of how that activity fits into the overall
development activity at the Company and is not necessarily indicative of future
grant revenue. There can be no assurance that the Company will receive
additional government grants in the future.
Revenue under the agreements with Baxter was 96% of total revenue for the
quarter ended September 30, 1997, compared with 79% for the same quarter in 1996
and was 92% of total revenue for the nine month period ended September 30, 1997,
compared with 80% for the same period in 1996.
Research and Development Expenses. Research and development expenses increased
59% to approximately $4.7 million for the quarter ended September 30, 1997 from
approximately $2.9 million for the same quarter in 1996. Research and
development expenses increased 59% to approximately $14.2 million for the nine
month period ended September 30, 1997 from approximately $8.9 million for the
same period in 1996. These increases are attributable to the following factors:
Payment to Baxter. As described above, the 1993 platelet agreement was
amended to provide for payment by Cerus to Baxter of $5.5 million for
development costs in return for an additional 2.2% share of platelet
pathogen inactivation system adjusted product revenue. The first three
of four equal quarterly payments were made in the first three quarters
of 1997 and account for approximately $1.4 million of the increase in
research and development costs for the third quarter of 1997 over the
same quarter in 1996 and approximately $4.1 million of the increase in
research and development expenses for the nine month period ended
September 30, 1997 over the same period in 1996.
Platelet Pathogen Inactivation System. Research and development expenses
in the platelet program decreased by approximately $350,000 in the third
quarter of 1997 compared to the same quarter of 1996. The decrease is
due principally to reduced toxicology costs, partially offset by
increased clinical trial costs. Research and development expenses in the
platelet program decreased by approximately $1.5 million in the nine
month period ended September 30, 1997 compared to the same period of
1996. The decrease is due principally to reduced toxicology and compound
formulation / manufacturing costs, partially offset by increased
clinical trial costs. The Company anticipates that research and
development expenses will increase for the platelet pathogen
inactivation system as the Company initiates large-scale clinical trials
in the United States and Europe, anticipated to commence in 1998.
FFP Pathogen Inactivation Systems. Research and development expenses in
the FFP program increased by approximately $100,000 in the third quarter
of 1997 compared to the same quarter of 1996. The increase is due
principally to increased clinical trial costs.
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Research and development expenses in the FFP program increased by
approximately $540,000 in the nine month period ended September 30, 1997
compared to the same period of 1996. The increase is due principally to
increased toxicology and clinical trial costs. The Company anticipates
that research and development expenses will increase for the FFP
pathogen inactivation system as the Company increases its toxicology
studies and initiates large-scale clinical trials.
Red Blood Cell Pathogen Inactivation Systems. Research and development
expenses in the red blood cell program increased by approximately
$480,000 in the third quarter of 1997 and approximately $1.7 million in
the nine month period ended September 30, 1997 compared to the same
periods in 1996. These increases are due principally to increased
manufacturing and toxicology costs.
The Company anticipates that research and development expenses will continue to
increase in the future as it expands its pathogen inactivation system
development efforts and related clinical trials.
General and Administrative Expenses. General and administrative expenses
increased 29% to approximately $790,000 for the quarter ended September 30, 1997
from approximately $610,000 for the same quarter in 1996 and increased 45% to
approximately $2.4 million for the nine month period ended September 30, 1997
from approximately $1.6 million for the same period in 1996. These increases are
primarily attributable to increased personnel levels associated with expansion
of the Company's operations and to increased professional fees and other costs
associated with being a publicly-held company. The Company anticipates that
general and administrative expenses will continue to increase in the future as
additional personnel are added to support its operations.
Interest Income, Net. Interest income increased 135% to approximately $310,000
for the quarter ended September 30, 1997 from approximately $130,000 for the
same quarter in 1996 and increased 153% to approximately $930,000 for the nine
month period ended September 30, 1997 from approximately $360,000 for the same
period in 1996. These increases are due to increased average cash balances
related to proceeds from the Company's initial public offering and the related
private placement to Baxter (see Liquidity and Capital Resources below).
Interest expense remained relatively unchanged from the third quarter and the
nine month period ended September 30, 1997 as compared to the same periods in
1996.
LIQUIDITY AND CAPITAL RESOURCES
In January 1997, the Company completed an initial public offering of 2,000,000
shares of Common Stock, generating net proceeds (after deduction of offering
costs) of approximately $21.1 million. Concurrent with this offering, the
Company sold directly to Baxter an additional 496,878 shares of its Common Stock
for an aggregate purchase price of approximately $5.5 million. In addition to
these financings, the Company's sources of capital to date have consisted of
private placements of preferred and common equity securities, project funding by
Baxter, United States government grants and interest income. To date, the
Company has not received any revenue from product sales and it will not derive
revenue from product sales unless and until one or more planned products
receives regulatory approval and achieves market acceptance. At September 30,
1997, the Company had cash and cash equivalents of approximately $20.1 million.
Net cash used in operating activities was approximately $13.5 million for the
nine month period ended September 30, 1997 compared to $5.9 million for the same
period in 1996, resulting primarily from net losses and an increase in
development funding receivable from Baxter. Net cash used in investing
activities in the nine month period ended September 30, 1997 of approximately
$370,000 resulted from purchases of furniture and laboratory and computer
equipment.
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In October 1997, the Company completed a private placement of 217,202 shares of
Common Stock to Baxter for an aggregate purchase price of approximately $5.0
million.
The Company's future capital requirements and the adequacy of its available
funds will depend on many factors, including progress of the platelet program
and the related clinical trials; progress of the FFP and red blood cell
programs; achievement of milestones leading to a milestone payment and equity
investments by Baxter; regulatory approval and successful commercialization of
the Company's pathogen inactivation systems; costs related to creating,
maintaining and defending the Company's intellectual property position; and
competitive developments. The Company believes that its available cash balances,
together with anticipated cash flows from existing Baxter and grant
arrangements, will be sufficient to meet its capital requirements for at least
the next twelve months. There can be no assurance that the Company will be able
to meet its capital requirements for this or any other period. In the event that
additional capital is required, the Company may seek to raise that capital
through public or private equity or debt financings or through additional
collaborative arrangements or government grants. Future capital funding
transactions may result in dilution to investors in the Company. There can be no
assurance that such capital will be available on favorable terms, if at all.
ADDITIONAL RISKS
The Company's business is subject to significant additional risks, including,
but not limited to, the risks inherent in its research and development efforts,
including clinical trials; uncertainties associated both with obtaining and
enforcing its patents and with the patent rights of others; the lengthy,
expensive and uncertain process of seeking regulatory approvals; uncertainties
regarding government reforms and of product pricing and reimbursement levels;
technological change and competition; manufacturing uncertainties; and
dependence on Baxter and other third parties.
In addition, the market price of the Company's Common Stock, like that of the
common stock of many other companies in similar industries, is likely to be
highly volatile. Factors such as the announcements of scientific achievements or
new products by the Company or its competitors; governmental regulation; health
care legislation; developments in patent or other proprietary rights of the
Company or its competitors, including litigation; fluctuations in the Company's
operating results; comments made by analysts, including changes in analysts'
estimates of the Company's financial performance; and market conditions for
health care stocks in general could have significant impact on the future price
of the Common Stock. In addition, the stock market has from time to time
experienced extreme price and volume fluctuations, which may be unrelated to the
operating performance of particular companies. There can be no assurance that
fluctuations in the price and volume of the Company's Common Stock will not
occur in the future.
The Company's pathogen inactivation systems are in the research and development
stage and will require additional preclinical and clinical testing prior to
submission of any regulatory application for commercial use. The Company has not
filed a product approval application with the United States Food and Drug
Administration ("FDA") or made corresponding regulatory filings in Europe for
its platelet pathogen inactivation system or for any of its other planned
products. No assurance can be given that such filings will be made or that any
of the Company's development programs will be successfully completed; that any
further Investigational New Drug ("IND") or Investigational Device Exemption
("IDE") applications will become effective or that additional clinical trials
will be allowed by the FDA or other regulatory authorities; that clinical trials
will commence as planned; that required United States or foreign regulatory
approvals will be obtained on a timely basis, if at all; or that any products
for which approval is obtained will be commercially successful.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not Applicable.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On October 31, 1997, the Company sold 217,202 shares of unregistered Common
Stock to Baxter Healthcare Corporation for an aggregate purchase price of $5.0
million. Such sale of Common Stock was exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) thereof, as a transaction not
involving any public offering.
On January 30, 1997, the Company sold 2,000,000 shares of Common Stock in an
initial public offering for which the Company received net proceeds of
$21,070,000. Of such proceeds, the Company has applied $7,740,000 on contracts
and consultants, $3,970,000 on employee salaries and related expenses,
$1,050,000 on supplies and office expenses, $940,000 on professional fees,
$740,000 on the purchase and installation of equipment, $310,000 on travel and
entertainment, $180,000 on insurance, $60,000 on repayment of indebtedness.
Approximately $5,750,000 is invested in cash and cash equivalents.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three month period ended
September 30, 1997.
Page 14
<PAGE> 15
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.
CERUS CORPORATION
Date: November 13, 1997 /s/ Stephen T. Isaacs
-----------------------------------
Stephen T. Isaacs
Chief Executive Officer
(Principal Financial and Accounting
Officer)
Page 15
<PAGE> 16
CERUS CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
No. Description Page
<S> <S> <C>
27.1 Financial Data Schedule ---
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 20,116
<SECURITIES> 0
<RECEIVABLES> 3,904
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,311
<PP&E> 2,706
<DEPRECIATION> 1,588
<TOTAL-ASSETS> 25,546
<CURRENT-LIABILITIES> 3,625
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 25,546
<SALES> 0
<TOTAL-REVENUES> 5,422
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,175
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (10,185)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,185)
<EPS-PRIMARY> (1.22)
<EPS-DILUTED> (1.22)
</TABLE>
