<PAGE>
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 March 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to___________.
Commission File Number 0-21863
EPIX MEDICAL, INC.
------------------
(Exact name of Registrant as Specified in its Charter)
DELAWARE 04-3030815
- ----------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
71 ROGERS STREET
CAMBRIDGE, MASSACHUSETTS 02142
- ----------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 250-6000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE PER SHARE
--------------------------------------
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
As of May 3, 1999, 11,478,447 shares of the registrant's Common Stock, $.01
par value per share, were issued and outstanding.
<PAGE>
EPIX MEDICAL, INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (Unaudited)
Balance Sheets--March 31, 1999 and December 31, 1998 3
Statements of Operations--Three Months Ended March 31, 1999 and 1998 4
Statements of Cash Flows--Three Months Ended March 31, 1999 and 1998 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
2
<PAGE>
EPIX MEDICAL, INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------------- ---------------------
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 2,765,028 $ 369,454
Available-for-sale marketable securities 22,619,774 28,731,747
Prepaid expenses and other current assets 713,537 517,701
----------------- -----------------
Total current assets 26,098,339 29,618,902
Property and equipment, net 2,748,490 2,861,277
Notes receivable from officer 340,955 335,888
Other assets 91,122 87,152
----------------- -----------------
Total assets $ 29,278,906 $ 32,903,219
----------------- -----------------
----------------- -----------------
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable and accrued expenses $ 2,846,249 $ 2,681,137
Contract advances 611,038 611,038
Current portion of capital lease obligations 413,448 384,976
Current portion of note payable 360,629 349,009
----------------- -----------------
Total current liabilities 4,231,364 4,026,160
Capital lease obligations, less current portion 626,022 602,407
Note payable, less current portion 677,013 771,647
Common stock, $.01 par value, 15,000,000 shares authorized; 11,468,447 114,684 114,584
and 11,458,401 shares issued and outstanding at
March 31, 1999 and December 31, 1998, respectively
Additional paid-in capital 55,844,199 55,839,411
Loan to stock option holder (124,779) (123,119)
Accumulated deficit (32,140,001) (28,415,324)
Comprehensive income: Unrealized gains on available-for-sale 50,404 87,453
marketable securities
----------------- -----------------
Total stockholders' equity 23,744,507 27,503,005
----------------- -----------------
Total liabilities and stockholders' equity $ 29,278,906 $ 32,903,219
----------------- -----------------
----------------- -----------------
</TABLE>
See accompanying notes.
3
<PAGE>
EPIX MEDICAL, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
---------------------- -------------------
<S> <C> <C>
Revenues $ 287,267 $ 423,825
Operating expenses:
Research and development 3,286,491 2,889,824
General and administrative 1,041,955 843,340
--------------- ---------------
Total operating expenses 4,328,446 3,733,164
--------------- ---------------
Operating loss (4,041,179) (3,309,339)
Interest income 370,893 453,131
Interest expense (54,393) (12,653)
--------------- ---------------
Net loss $(3,724,679) $(2,868,861)
--------------- ---------------
--------------- ---------------
Weighted average shares
Basic and diluted 11,464,242 11,261,757
Loss per common share
Basic and diluted $(0.32) $(0.25)
</TABLE>
See accompanying notes.
4
<PAGE>
EPIX MEDICAL, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
1999 1998
------------------------ ------------------------
<S> <C> <C>
Operating activities:
Net loss $(3,724,679) $(2,868,861)
Adjustments to reconcile net loss to cash used by operating
activities:
Depreciation and amortization 250,774 155,476
Loss on sale of fixed assets 18,500 -
Change in operating assets and liabilities:
Prepaid expenses, other current assets, notes (204,873) 26,301
receivable from officer and other assets
Contract advances - 34,569
Accounts payable and accrued expenses 165,112 (195,290)
------------------------ ------------------------
Net cash used by operating activities (3,495,166) (2,847,805)
Investing activities:
Purchase of fixed assets (21,224) (226,986)
Proceeds from sale of fixed assets 19,500 -
Purchases of marketable securities (34,167,988) (221,849,239)
Proceeds from sales or redemptions of marketable securities 40,242,912 224,707,346
------------------------ ------------------------
Net cash provided by investing activities 6,073,200 2,631,121
------------------------ ------------------------
Financing activities:
Repayment of capital lease obligations (102,674) (80,634)
Repayment of Note Payable (83,014) -
Proceeds from issuance of stock options and warrants 3,228 33,221
------------------------ ------------------------
Net cash used by financing activities (182,460) (47,413)
------------------------ ------------------------
Increase (decrease) in cash and cash equivalents 2,395,574 (264,097)
Cash and cash equivalents at beginning of period 369,454 1,455,657
------------------------ ------------------------
Cash and cash equivalents at end of period $ 2,765,028 $ 1,191,560
------------------------ ------------------------
------------------------ ------------------------
Supplemental disclosure of noncash investing and financing
activities:
Fixed assets acquired through lease financing $154,760 $258,387
------------------------ ------------------------
------------------------ ------------------------
Supplemental cash flow information:
Cash paid for interest $54,393 $12,653
------------------------ ------------------------
------------------------ ------------------------
</TABLE>
See accompanying notes.
5
<PAGE>
EPIX MEDICAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1999
(UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and the rules of the Securities
and Exchange Commission (the "Commission"). Accordingly, they do not include all
of the information and footnotes required to be presented for complete financial
statements. The accompanying condensed financial statements reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the results for the
interim periods presented. The results of the interim period ended March 31,
1999 are not necessarily indicative of the results expected for the full fiscal
year.
The condensed financial statements and related disclosures have been
prepared with the assumption that users of the interim financial statements have
read or have access to the audited financial statements for the preceding fiscal
year. Accordingly, these condensed financial statements should be read in
conjunction with the audited financial statements and the related notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998.
2. TRANSITION FROM A DEVELOPMENT STAGE ENTERPRISE TO AN ESTABLISHED OPERATING
ENTERPRISE
During March 1999, the Company met with the Food and Drug Administration
("FDA") to discuss the proposed protocol application to initiate a Phase III
clinical trial for peripheral vascular disease ("PVD"). As a result of this
meeting, the Company now intends to begin this trial in mid-1999.
The Company considers this event as an important milestone and believes that
the progression from Phase II to Phase III for PVD during 1999 warrants the
transition from a development stage enterprise, as defined by Financial
Standards No. 7, "Accounting and Reporting by Development Stage Enterprises"
("SFAS 7") issued by the Financial Accounting Standard Board ("FASB"), to an
established operating enterprise. Consequently, cumulative amounts and other
additional disclosures required by SFAS 7 have not been provided.
3. COMPREHENSIVE INCOME
Financial Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") requires unrealized gains or losses on the Company's available-for-sale
securities to be included in other comprehensive income. Total comprehensive
income (loss) for the quarter ended March 31, 1999 amounted to ($37,049)
compared to ($13,044) in the same period in 1998.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Since commencing operations in 1992, the Company has been engaged principally in
the research and development of its product candidates as well as seeking
various regulatory clearances and patent protection. The Company has had no
revenues from product sales and has incurred losses from inception through March
31, 1999, in the aggregate of approximately $32.1 million. The Company has
received revenues in connection with various licensing and collaboration
agreements. In August 1996, the Company entered into a strategic alliance with
Mallinckrodt Inc. ("Mallinckrodt") pursuant to which it received $6.0 million in
up-front license fees. The agreement provided for an additional $2.0 million
milestone payment, which was received in July 1997. In March 1996, the Company
entered into a strategic alliance with Daiichi Radioisotope Laboratories, Ltd.
("Daiichi"). Under this agreement, the Company received $3.0 million in license
fees and $5.0 million from the sale of shares of the Company's preferred stock,
and was entitled to receive up to $3.3 million in future payments based upon the
Company's achievement of certain product development milestones. The Company
received $900,000 of such milestone payments in July 1997.
The Company expects continued operating losses for the next several years as it
incurs expenses to support research and development and to obtain regulatory
approvals.
The Company's initial product candidate, AngioMARK (MS-325), is currently the
Company's only product candidate undergoing human clinical trials. The Company
filed an investigational new drug ("IND") application for AngioMARK in July
1996. The Company initiated a Phase I clinical trial in 1996 and a Phase I dose
escalation study in 1997, both of which have been completed. The Company
completed a Phase II clinical trial in June 1998 to test the safety and
preliminary efficacy of AngioMARK-enhanced magnetic resonance angiography
("MRA") for the evaluation of PVD and is currently conducting a Phase II
feasibility trial to test the safety and feasibility of AngioMARK-enhanced MRA
for the evaluation of coronary artery disease ("CAD"). In December 1998, the
Company filed a proposed protocol application with the FDA to initiate a
Phase III clinical trial of PVD. During March 1999, the Company met with the FDA
to discuss the proposed protocol application to initiate a Phase III clinical
trial for PVD. As a result of this meeting, the Company now intends to initiate
a Phase III clinical trial for PVD in mid-1999. In addition, in January 1998,
the Company initiated a Phase II clinical trial to test the safety and
feasibility of AngioMARK for detecting breast cancer.
The Company anticipates fluctuation in its quarterly results of operations due
to several factors, including: the timing of fees and milestone payments
received from strategic partners; the formation of new strategic alliances by
the Company; the timing of expenditures in connection with research and
development activities; the timing of product introductions and associated
launch, marketing and sales activities; and the timing and extent of product
acceptance for different indications and geographical areas of the world.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1999 AND 1998
REVENUES. First quarter revenues were approximately $287,000 and $424,000 in
1999 and 1998, respectively, and in both periods included revenues derived from
product development contracts.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for the
three months ended March 31, 1999 were $3.3 million as compared to $2.9 million
for the three months ended March 31, 1998. The increased research and
development expenses were primarily due to increased costs for personnel and
additional resources to support the Company's research in the area of thrombus
imaging and the enhancement of its core technology.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the
three months ended March 31, 1999 were $1.0 million as compared to $843,000 for
the corresponding period of 1998. The increase was primarily due to higher legal
costs associated with ongoing patent activities.
INTEREST INCOME AND EXPENSE. Other income, consisting mainly of interest income,
decreased approximately $124,000 in 1999 as compared to 1998 mainly due to lower
average levels of invested cash during the first quarter of 1999. Cash, cash
equivalents and marketable securities at March 31, 1999 totaled $25.4 million.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations from inception through March 31, 1999
primarily with $14.3 million in net proceeds from the Company's initial public
offering completed in February 1997, $22.9 million from a follow-on public
offering of common stock in November 1997, $18.4 million from private sales of
equity securities, $18.0 million received from third parties in connection with
collaboration and license arrangements, $2.6 million of equipment lease
financing and $4.2 million in interest income.
The Company's principal source of liquidity consists of cash, cash equivalents
and marketable securities, which totaled $25.4 million at March 31, 1999, as
compared to $29.1 million at December 31, 1998.
The Company is eligible to receive additional payments of $2.4 million from
Daiichi upon the attainment of certain future AngioMARK development milestones.
Daiichi is responsible for funding development of AngioMARK in Japan. Under the
Company's agreement with Mallinckrodt, Mallinckrodt and the Company generally
will share equally in future development costs of AngioMARK up to a specified
maximum amount.
During the quarter ended March 31, 1999, the Company used approximately $3.5
million of cash for operating activities. The Company expects that its cash
needs for operations will increase significantly in future periods due to
planned clinical trials and other expenses associated with the development of
AngioMARK and new research and development programs.
The Company estimates that existing cash, cash equivalents and marketable
securities, will be sufficient to fund its operations through the first quarter
of 2000. The Company believes that it will need to raise additional funds for
research, development and other expenses, through equity or debt financings,
strategic alliances or otherwise, prior to commercialization of any of its
product candidates. The Company cannot guarantee that additional financing will
be available on terms acceptable to the Company, or at all. The Company's future
liquidity and capital requirements will depend on numerous factors, including
the following: the progress and scope of clinical trials; the timing and costs
of filing future regulatory submissions; the timing and costs required to
receive both United States and foreign governmental approvals; the cost of
filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights; the extent to which the Company's products gain
market acceptance; the timing and costs of product introductions; the extent of
the Company's ongoing research and development programs; the costs of training
physicians to become proficient with the use of the Company's products; and, if
necessary, once regulatory approvals are received, the costs of developing
marketing and distribution capabilities.
Because of anticipated spending to support development of AngioMARK and new
research programs, the Company does not expect positive cash flow from operating
activities for any future quarterly or annual period prior to commercialization
of AngioMARK. The Company anticipates continued investments in fixed assets,
including equipment and facilities expansion to support new and continuing
research and development programs. In July 1997, the Company reached an
agreement that will enable it to lease its current principal scientific
facilities through December 31, 2002. In April 1999, the Company secured an
additional option to extend the term of the lease for an additional three or
five year period. The Company also has a short-term lease for nearby office
space, which expires in December 1999 but can be extended by the Company for up
to three years.
The Company has incurred tax losses to date and therefore has not paid
significant federal or state income taxes since inception. At December 31, 1998,
the Company had loss carryforwards of approximately $26.0 million available to
offset future taxable income. These amounts expire at various times through
2018. As a result of ownership changes resulting from sales of equity
securities, the Company's ability to use the loss carryforwards is subject to
limitations as defined in Sections 382 and 383 of the Internal Revenue Code of
1986, as amended (the "Code"). The Company currently estimates that the annual
limitation on its use of net operating losses through May 31, 1996 will be
approximately $900,000. Pursuant to Sections 382 and 383 of the Code, the change
in ownership resulting from public equity offerings in 1997 and any other future
ownership changes may further limit utilization of losses and credits in any one
year. The Company also is eligible for research and development tax credits that
can be carried forward to offset federal taxable income. The annual limitation
and the timing of attaining profitability may result in the expiration of net
operating loss and tax credit carryforwards before utilization.
The company does not believe that inflation has had a material impact on its
operations.
8
<PAGE>
YEAR 2000
The Year 2000 issue results from computer programs and systems that were created
to accept only two digit dates. Such systems may not be able to distinguish 20th
century dates from 21st century dates. This could result in miscalculations and
system failures that could inhibit the Company's ability to engage in normal
business activities.
THE COMPANY'S STATE OF READINESS AND RISK
The Company conducted both internal and external reviews to address the Year
2000 issue. Internally, the Company reviewed information technology ("IT")
systems, and non-IT systems such as scientific instruments and other electronic
devices that could be affected by this issue. Externally, the Company contacted
all of its significant external business partners (including vendors, suppliers
and strategic partners) to determine the extent to which the Company is
vulnerable to their failures and to ascertain Year 2000 compliance and risk. The
inventory and assessment of IT systems, scientific instruments, and material
third parties has been completed. The Company will utilize both internal and
external resources to reprogram, or replace, and test the software and systems
for Year 2000 modifications. The Company expects to complete remediation efforts
by the end of the second quarter of 1999 and to complete the validation phase by
the end of the third quarter of 1999. If any of the Company's business partners
do not, or if the Company itself does not, successfully deal with the Year 2000
issue, the Company could experience delays in its receipt of funding, materials
and other resources which could adversely affect the conduct of its research and
development operations. The severity of these possible problems would depend on
the nature of the problem and how quickly it could be corrected or an
alternative implemented, which is unknown at this time. Although the Company
expects to have obtained Year 2000 compliance before the Year 2000, the
inability of the Company or its business partners to remedy the Year 2000 issue
could have a significant impact on the Company's business, financial position or
results of operations.
THE COMPANY'S COSTS OF YEAR 2000 REMEDIATION
While management has not specifically determined the costs of its Year 2000
efforts, the total cost to achieve Year 2000 compliance is currently projected
to be less than $100,000. Such costs will include direct and indirect costs
incurred through monitoring and managing the Year 2000 issue. Direct costs
include potential charges by third-party software and hardware vendors for
product enhancements, costs involved in testing software products for Year 2000
compliance and any resulting costs for developing and implementing contingency
plans for critical software products which are not enhanced. Indirect costs will
principally consist of the time devoted by existing employees in monitoring
software vendor progress, testing enhanced software products and implementing
any necessary contingency plans. The Company believes such costs will not have a
material effect on the Company's business, financial position, or results of
operations.
THE COMPANY'S CONTINGENCY PLANS
At this time the Company has not initiated the formulation of contingency plans.
The determination of the necessity for contingency plans will be made by the end
of the third quarter of 1999. Some risks of the Year 2000 issue, however, are
beyond the control of the Company and its business partners.
FORWARD-LOOKING STATEMENTS
The discussion included in this section as well as elsewhere in the
Quarterly Report on Form 10-Q contains forward-looking statements based on the
current expectations of the Company's management. Such statements are subject to
risks and uncertainties which could cause actual results to differ materially
from those projected. See "Important Factors Regarding Forward-Looking
Statements" attached as Exhibit 99.1 and incorporated herein by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 1998 as
previously filed with the Commission. Readers are cautioned not to place undue
reliance on the forward-looking statements which speak only as of the date
thereof. The Company undertakes no obligation to release publicly the result of
any revisions to these forward-looking statements which may be made to reflect
events or circumstances occurring after the date hereof or to reflect the
occurrence of unanticipated events.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
10.1 First Amendment dated February 8, 1999 to the Short Form Lease
dated as of July 7, 1998 with a commencement date of January 1,
1998 between the Company and the Trustees of The Cambridge East
Trust. Filed herewith.
27.1 Financial Data Schedule for the interim year-to date period ended
March 31, 1999 (for electronic filing only).
99.1 Important Factors Regarding Forward-Looking Statements filed as
Exhibit 99.1 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1998 and incorporated herein by reference.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended March 31, 1999.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
EPIX Medical, Inc.
Date: May 13, 1999 By: /s/ Stephen C. Knight
---------------------
Stephen C. Knight,
Chief Financial Officer and
Senior Vice President, Finance and
Business Development
(Principal Financial Officer and
Accounting Officer)
11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
10.1 First Amendment dated February 8, 1999 to the Short Form Lease
dated as of July 7, 1998 with a commencement date as of January 1,
1998 between the Company and the Trustees of The Cambridge East
Trust. Filed herewith.
27.1 Financial data schedule for the interim year-to-date period ended
March 31, 1999 (for electronic filing only).
99.1 Important Factors Regarding Forward-Looking Statements filed as
Exhibit 99.1 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1998 and incorporated herein by reference.
</TABLE>
12
<PAGE>
Exhibit 10.1
FIRST AMENDMENT
LEASE FROM
TRUSTEES OF THE CAMBRIDGE EAST TRUST
TO
EPIX MEDICAL, INC.
This is the First Amendment made as of February 8, 1999 to the Lease dated
as of July 7, 1998 between the Trustees of The Cambridge East Trust, as
Landlord, and EPIX Medical, Inc., as Tenant, for premises at 63-75 Rogers
Street, Cambridge, Massachusetts (the "Lease").
Whereas, the Landlord and the Tenant wish to provide the Tenant the option
to extend the term of the Lease for either three or five years at 95% of then
fair market rental (but not less than $17.17 per square foot) on the condition
that Tenant's exercise of the option to extend will void the Tenant's present
rights to terminate the term of the Lease.
Therefore, for valuable consideration the receipt and sufficiency of which
is mutually acknowledged:
1. The following new Section 3.6 is added to the Lease:
Section 3.6 Tenant's Option to Extend. In the event this Lease is in full
force and effect without notice of default to Tenant or, if such notice of
default has been given, Tenant is acting promptly and diligently to cure the
same and applicable grace periods, if any, have not expired, and the original
Tenant (or any successor Tenant to whom the transfer of the tenant's interest
hereunder was stated in Section 8.9 not to constitute an "assignment") holds the
entire tenant's interest hereunder and is in occupancy of the Premises and
engaged in the active conduct of its business, the original Tenant (or any such
successor Tenant) may extend the initial Term as to the entire Premises for one
period of either three (3) or five (5) years, as stated in the notice, from the
Termination Date on the terms and conditions of this Lease (except for Annual
Fixed Rent, which shall be determined as follows), by giving at least nine (9)
months' (but not more than fifteen (15) months) prior written notice thereof to
Landlord, and thereafter all references in this Lease to the Term shall also
include the Term as extended. Any notice which fails to specify whether the
extension is for three (3) or five (5) years, or is given earlier than fifteen
(15) months or later than nine (9) months prior to the end of the initial Term,
shall be entirely void and without legal force or effect.
-1-
<PAGE>
Annual Fixed Rent for the extended Term shall be established as set forth
in Section 6.1.
The following is added to Section 6.1:
Tenant may (but is not obligated to) send Landlord a notice prior to
exercise of the Tenant's right to extend the Term inquiring as to the Annual
Fixed Rent Landlord would be willing to accept for the extended Term (the
"Extended Term Rent Inquiry Notice"). Within the later of (i) thirty (30) days
of receipt of the Extended Term Rent Inquiry Notice or (ii) February 15, 2002,
Landlord shall inform Tenant in writing of such Annual Fixed Rent ("Landlord's
Offered Extended Term Annual Fixed Rent"). If Tenant states in Tenant's notice
exercising Tenant's right to extend the Term that Tenant accepts Landlord's
Offered Extended Term Annual Fixed Rent, then that shall be the Annual Fixed
Rent for the extended Term. The references to Annual Fixed Rent are intended, as
stated elsewhere in this Section 6.1, to mean a base rent which is 95% of fair
market rent.
If Annual Fixed Rent for the First Offer Premises has not been established
in accordance with the preceding paragraph, then Annual Fixed Rent for the
extended Term shall be established by agreement between Landlord and Tenant and
shall be 95% of fair market rent for the Premises (exclusive of Real Estate
Taxes and Operating Expenses) on or about the date the extended Term begins
established as stated below (but in no event shall Annual Fixed Rent for the
extended Term be less than Annual Fixed Rent for the year 2000 as stated in
Section 1 REFERENCE DATA). Fair market rent shall be the highest annual fixed
rent (or schedule or formula of varying rents) which willing tenants would pay
to lease such area for the term in question in a competitive and open market
under terms and conditions substantially the same as those of this Lease with
such area considered free and clear of this Lease and as though then available
for occupancy for any legal use in their then condition. Rent historically paid
under this Lease shall be disregarded in determining fair market rent.
Comparable space shall be considered by the appraisers in unimproved condition
(that is, exclusive of tenant improvements). Specifically, Tenant's improvements
described on the plans and specifications listed in Exhibit -Improvements
attached hereto are to be excluded.
If Landlord and Tenant have not agreed on such Annual Fixed Rent in
writing by August 1,2002, the fair market rate shall be determined by
appraisers, one to be chosen by Landlord, one to be chosen by Tenant and a third
to be selected by the two first chosen if the first two cannot agree; or, at
Landlord's option, by a member of the American Society of Real Estate
Counsellors experienced in first class urban office buildings and from their
determination of fair market rent Landlord and Tenant will impute Annual Fixed
Rent at 95% thereof as aforesaid.
-2-
<PAGE>
Landlord and Tenant shall each notify the other of its chosen appraiser
within thirty (30) days after August 1, 2002 and, unless those two appraisers
shall have reached a unanimous decision within seventy-five (75) days from the
end of that thirty (30) day period, they shall within the following fifteen (15)
days select a third appraiser, notify Landlord and Tenant thereof and proceed
forthwith to decision. If Landlord elects to have the determination made by a
member of the American Society of Real Estate Counsellors, Landlord shall notify
Tenant within thirty (30) days after the commencement of such year of the name
of the Counsellor chosen, and neither party shall have any further obligation to
select appraisers. If Tenant notifies Landlord within thirty (30) days of the
date of Landlord's notice that Tenant wants two (2) or, if necessary three (3),
such Counsellors to act, and includes in that notice the name of a second
Counsellor, then Landlord shall so inform the original Counsellor, and those two
Counsellors shall proceed in the manner and on the schedule specified herein for
appraisers, including selecting a third Counsellor failing agreement of the two.
Landlord and Tenant shall each bear the expense of the appraiser/Counsellor
chosen by it and shall bear equally the expense of the third appraiser/
Counsellor (if any) or of the sole Counsellor if he or she acts alone. The
written decision of the sole Counsellor, the unanimous written decision of the
two first appraisers/Counsellors chosen, without selection and participation of
a third, or, if they do not agree, the written decision of a majority of the
three appraisers/Counsellors, as the case may be, shall be conclusive and
binding upon Landlord and Tenant.
Until Annual Fixed Rent for the extended Term is determined, Tenant shall
make payments of Annual Fixed Rent in the amount of Landlord's last offer
subject to retroactive adjustment, without interest, in conformity with and
within thirty (30) days of the determination of Annual Fixed Rent as set forth
in this Section.
The following is added to Section 3.4:
All rights under this Section 3.4 shall become void and of no further
force or effect on the giving of notice under Section 3.6 extending the Term.
2. AGREEMENT MADE ONLY WHEN AMENDMENT SIGNED. This Amendment shall bind Landlord
and Tenant only when executed and delivered by both. This Amendment when signed
by one party and delivered to the other, shall constitute an offer to enter into
the Amendment on the terms set forth herein. No submission of this Amendment,
unsigned by either party to the other, shall constitute an offer.
-3-
<PAGE>
3. Except as previously amended and as amended herein, the Lease is ratified and
confirmed.
LANDLORD: TENANT:
Trustees of The Cambridge East EPIX Medical, Inc.
Trust, as Trustees and not individually
By: Beal and Company, Inc.
Managing Agent
By: /s/ Robert L. Beal By: /s/ Michael D. Webb
----------------------- -----------------------
hereunto duly authorized hereunder duly authorized
Secretary's Certificate
The undersigned hereby certifies (1) that s/he is the duly elected
Secretary / Assistant Secretary of the corporation executing this First
Amendment, (2) that the Tenant's officers / Directors has duly decided as
required by law and the Tenant's governing documents that the Tenant shall enter
into this First Amendment and has duly empowered the person who executed this
First Amendment to do so in the name of and on behalf of the Tenant and (3) that
the Tenant's execution and performance of this Lease as amended by this First
Amendment is consistent with and does not contravene or violate the law and
governing documents Under which Tenant is organized and operated.
/s/ Michael D. Webb
-------------------------------------
Secretary / Assistant Secretary
-4-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF EPIX MEDICAL INC. AS OF MARCH 31, 1999 AND FOR THE THREE MONTH PERIOD
ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001027702
<NAME> EPIX MEDICAL INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,765,028
<SECURITIES> 22,619,774
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,098,339
<PP&E> 5,819,000
<DEPRECIATION> (3,070,510)
<TOTAL-ASSETS> 29,278,906
<CURRENT-LIABILITIES> 4,231,364
<BONDS> 677,013
0
0
<COMMON> 114,684
<OTHER-SE> 23,629,823
<TOTAL-LIABILITY-AND-EQUITY> 29,278,906
<SALES> 0
<TOTAL-REVENUES> 287,267
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,328,446
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,393
<INCOME-PRETAX> (3,724,679)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,724,679)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,724,679)
<EPS-PRIMARY> (0.32)
<EPS-DILUTED> (0.32)
</TABLE>
