<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 2000 Commission File No. 000-29089
ANTIGENICS INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 06-1562417
(State of Incorporation) (I.R.S. Employer Identification Number)
630 FIFTH STREET, SUITE 2100, NEW YORK , NEW YORK, 10111
(Address of Principal Executive Offices)
(212) 332-4774
(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 [_]
Number of shares outstanding of the registrant's Common Stock as of May 10,
2000:
Common Stock, par value $.01 24,777,845 shares outstanding
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ANTIGENICS INC.
QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
----
<S> <C>
Item 1 - Unaudited Financial Statements
Balance Sheets (Unaudited)
December 31, 1999 and March 31, 2000........................ 2
Statements of Operations (Unaudited)
For the Three months ended March 31, 1999 and 2000 and
for the period from March 31, 1994 (date of inception)
to March 31, 2000........................................... 3
Statements of Stockholders' Equity (Unaudited)
For the Three Months ended March 31, 2000 and for the
period from March 31, 1994 (date of inception) to
March 31, 2000.............................................. 4
Statements of Cash Flows (Unaudited)
For the Three months ended March 31, 1999 and 2000 and
for the period from March 31, 1994 (date of inception)
to March 31, 2000........................................... 5
Notes to Unaudited Financial Statements.......................... 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 8
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk................................................. 11
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings............................................. 12
Item 2 - 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(a) - Exhibits................................................... 12
Item 6(b) - Reports on Form 8-K........................................ 12
Signatures ............................................................ 13
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1 - Unaudited Financial Statements
ANTIGENICS INC.
(a development stage company)
Balance Sheets
December 31, 1999 and
March 31, 2000
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, 2000
1999 (UNAUDITED)
------------ -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 46,417,942 109,388,844
Prepaid expenses 103,204 493,064
Deferred public offering costs 559,417 --
Due from related party 240 --
Other assets 591,134 625,694
------------ -------------
Total current assets 47,671,937 110,507,602
Plant and equipment, net 8,034,598 8,067,952
Other assets 297,646 448,522
------------ -------------
Total assets $ 56,004,181 119,024,076
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 424,673 1,055,351
Accrued liabilities 933,440 696,243
Due to related party -- 7,079
Current portion, long-term debt 812,702 842,654
------------ -------------
Total current liabilities 2,170,815 2,601,327
Long-term debt 2,155,005 1,932,510
Commitments and contingencies
Stockholders' Equity:
Preferred stock, par value $0.01 per share; 1,000,000 shares
authorized; no shares issued and outstanding -- --
Common stock, par value $0.01 per share; 100,000,000 shares authorized;
20,715,942 and 24,777,246 shares issued and
outstanding at December 31, 1999 and March 31, 2000, respectively 207,159 247,772
Additional paid-in capital 89,747,036 157,966,997
Deferred compensation (659,081) (1,744,581)
Deficit accumulated during development stage (37,616,753) (41,979,949)
------------ -------------
Total stockholders' equity 51,678,361 114,490,239
------------ -------------
Total liabilities and stockholders' equity $ 56,004,181 $ 119,024,076
============ =============
</TABLE>
See accompanying notes to unaudited financial statements.
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<PAGE> 4
ANTIGENICS INC.
(a development stage company)
Statements of Operations
For the three months ended March 31, 1999 and 2000, and for the period from
March 31, 1994 (date of inception) to March 31, 2000
(unaudited)
<TABLE>
<CAPTION>
MARCH 31,
1994
(date of
Three months ended March 31, inception) to
--------------------------------- March 31,
1999 2000 2000
------------ ----------- -----------
<S> <C> <C> <C>
Revenue $ -- -- --
Expenses:
Research and development:
Related party (8,250) (13,268) (85,898)
Other (2,490,609) (3,354,599) (25,796,423)
------------ ----------- -----------
(2,498,859) (3,367,867) (25,882,321)
General and administrative:
Related party (44,227) (75,185) (1,344,740)
Other (1,224,658) (1,626,685) (16,246,991)
------------ ----------- -----------
(1,268,885) (1,701,870) (17,591,731)
Depreciation and amortization (79,361) (359,793) (2,061,551)
------------ ----------- -----------
Operating loss (3,847,105) (5,429,530) (45,535,603)
Other income/(expense):
Non-operating income -- -- 259,988
Interest expense (35,632) (105,781) (397,178)
Interest income 252,625 1,172,115 3,692,844
------------ ----------- -----------
Net loss $ (3,630,112) (4,363,196) (41,979,949)
============ =========== ===========
Net loss per share,
basic and diluted $ (0.20) (0.19)
============ ===========
Weighted average number of shares outstanding,
basic and diluted 17,902,617 22,990,922
============ ===========
</TABLE>
See accompanying notes to unaudited financial statements.
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<PAGE> 5
ANTIGENICS INC.
(a development stage company)
Statements of Stockholders' Equity
For the three months ended March 31, 2000 and
the period from March 31, 1994 (date of inception)
to March 31, 2000
(unaudited)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------
ADDITIONAL SUBSCRIPTION
PAID- NOTES
NUMBER OF SHARES PAR VALUE IN CAPITAL RECEIVABLE
---------------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at March 31, 1994 -- $ -- --
Net loss -- -- --
Issuance of common stock to founders during 1994,
for cash, $.03 per share 11,216,590 112,166 287,844 --
----------- ----------- ------------ -----------
Balance at December 31, 1994 11,216,590 112,166 287,844 --
Net loss -- -- --
Issuance of common stock in connection with the
recapitalization in December 1995, $1.45 per share 1,032,202 10,322 1,489,678 (150,000)
Grant of common stock 1,513,896 15,139 2,184,861 --
----------- ----------- ------------ -----------
Balance at December 31, 1995 13,762,688 137,627 3,962,383 (150,000)
Net loss -- -- --
Deferred compensation on stock options -- -- 781,200 --
Grant and recognition of stock options -- -- 1,116,815 --
Payment of subscription notes receivable -- -- -- 150,000
Issuance of common stock in private placement from
March 13, 1996 to December 31, 1996, $6.50 per share 1,636,383 16,364 10,583,636 (250,000)
----------- ----------- ------------ -----------
Balance at December 31, 1996 15,399,071 153,991 16,444,034 (250,000)
Net loss -- -- --
Payment of subscription notes receivable -- -- 250,000
Deferred compensation on stock options -- -- 144,004 --
Grant and recognition of stock options -- -- 62,815 --
Issuance of common stock in private placement from
September 8, 1997 to December 31, 1997, $11.17 per share 660,953 6,609 7,378,391 --
----------- ----------- ------------ -----------
Balance at December 31, 1997 16,060,024 160,600 24,029,244 --
Net loss -- -- -- --
Deferred compensation on stock options -- -- 493,701 --
Grant and recognition of stock options -- -- 838,654 --
Exercise of stock options 38,536 385 249,615 --
Issuance of common stock in private placement from
January 1, 1998 to December 31, 1998, $11.17 per share 1,797,063 17,971 20,059,014 (2,102,000)
----------- ----------- ------------ -----------
Balance at December 31, 1998 17,895,623 178,956 45,670,228 (2,102,000)
Net loss -- -- -- --
Payment of subscription notes receivable -- -- -- 2,102,000
Deferred compensation on stock options -- -- 354,009 --
Grant and recognition of stock options -- -- 4,718,582 --
Exercise of stock options 1,720 17 83 --
Issuance of common stock in private placement in
January 1999, $11.17 per share 9,806 98 109,902 --
Issuance of common stock and warrants in private
placement on November 31, 1999, $13.96 per share
(net of issuance costs of $293,000) 2,808,793 28,088 38,894,232 --
----------- ----------- ------------ -----------
Balance at December 31, 1999 20,715,942 207,159 89,747,036 --
Net loss -- -- -- --
Deferred compensation on stock options -- -- 1,213,214 --
Grant and recognition of stock options and warrants -- -- 741,694 --
Exercise of stock options and warrants 36,304 363 76,142 --
Issuance of common stock in IPO on February 9,
2000, $18 per share (net of issuance costs of
$6,220,839) 4,025,000 40,250 66,188,911 --
----------- ----------- ------------ -----------
Balance at March 31, 2000 24,777,246 $ 247,772 157,966,997 --
=========== =========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DURING
DEFERRED DEVELOPMENT
COMPENSATION STAGE TOTAL
----------- ----------- ------------
<S> <C> <C> <C>
Balance at March 31, 1994 -- -- --
Net loss -- (183,440) (183,440)
Issuance of common stock to founders during 1994,
for cash, $.03 per share -- -- 400,010
----------- ----------- ------------
Balance at December 31, 1994 -- (183,440) 216,570
Net loss -- (3,226,579) (3,226,579)
Issuance of common stock in connection with the
recapitalization in December 1995, $1.45 per share -- -- 1,350,000
Grant of common stock -- -- 2,200,000
----------- ----------- ------------
Balance at December 31, 1995 -- (3,410,019) 539,991
Net loss -- (3,345,898) (3,345,898)
Deferred compensation on stock options (781,200) -- --
Grant and recognition of stock options 347,200 -- 1,464,015
Payment of subscription notes receivable -- -- 150,000
Issuance of common stock in private placement from
March 13, 1996 to December 31, 1996, $6.50 per share -- -- 10,350,000
----------- ----------- ------------
Balance at December 31, 1996 (434,000) (6,755,917) 9,158,108
Net loss -- (3,832,527) (3,832,527)
Payment of subscription notes receivable -- -- 250,000
Deferred compensation on stock options (144,004) -- --
Grant and recognition of stock options 188,373 -- 251,188
Issuance of common stock in private placement from
September 8, 1997 to December 31, 1997, $11.17 per share -- -- 7,385,000
----------- ----------- ------------
Balance at December 31, 1997 (389,631) (10,588,444) 13,211,769
Net loss -- (8,904,032) (8,904,032)
Deferred compensation on stock options (493,701) -- --
Grant and recognition of stock options 269,787 -- 1,108,441
Exercise of stock options -- -- 250,000
Issuance of common stock in private placement from
January 1, 1998 to December 31, 1998, $11.17 per share -- -- 17,974,985
----------- ----------- ------------
Balance at December 31, 1998 (613,545) (19,492,476) 23,641,163
Net loss -- (18,124,277) (18,124,277)
Payment of subscription notes receivable -- -- 2,102,000
Deferred compensation on stock options (354,009) -- --
Grant and recognition of stock options 308,473 -- 5,027,055
Exercise of stock options -- -- 100
Issuance of common stock in private placement in
January 1999, $11.17 per share -- -- 110,000
Issuance of common stock and warrants in private
placement on November 31, 1999, $13.96 per share
(net of issuance costs of $293,000) -- -- 38,922,320
----------- ----------- ------------
Balance at December 31, 1999 (659,081) (37,616,753) 51,678,361
Net loss -- (4,363,196) (4,363,196)
Deferred compensation on stock options (1,213,214) -- --
Grant and recognition of stock options and warrants 127,714 -- 869,408
Exercise of stock options and warrants -- -- 76,505
Issuance of common stock in IPO on February 9,
2000, $18 per share (net of issuance costs of
$ 6,220,839) -- -- 66,229,161
----------- ----------- ------------
Balance at March 31, 2000 (1,744,581) (41,979,949) 114,490,239
=========== =========== ============
</TABLE>
See accompanying notes to unaudited financial statements.
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<PAGE> 6
ANTIGENICS INC.
(a development stage company)
Statements of Cash Flows
For the three months ended March 31, 1999 and 2000 and
for the period from March 31, 1994 (date of inception)
to March 31, 2000
(unaudited)
<TABLE>
<CAPTION>
MARCH 31,
1994
(DATE OF
INCEPTION) TO
MARCH 31, MARCH 31,
-----------------------------
1999 2000 2000
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,630,112) (4,363,196) (41,979,949)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 79,361 359,793 2,061,551
Stock options, warrants and Predecessor Company stock options 1,085,562 869,408 8,720,107
Common stock grant -- -- 2,200,000
Changes in operating assets and liabilities:
Other assets (30,156) (185,436) (1,074,216)
Prepaid assets (45,512) (389,860) (493,064)
Organization costs -- -- (32,934)
Accounts payable 291,812 630,678 1,055,351
Accrued liabilities 39,244 (237,197) 696,243
Due to/from related party, net (33,418) 7,319 7,079
------------ ------------ ------------
Net cash used in operating activities (2,243,219) (3,308,491) (28,839,832)
------------ ------------ ------------
Cash flows from investing activities:
Purchase of plant and equipment (2,908,451) (393,147) (10,128,511)
Proceeds from the sale of plant and equipment -- -- 31,942
------------ ------------ ------------
Net cash used in investing activities (2,908,451) (393,147) (10,096,569)
------------ ------------ ------------
Cash flows from financing activities:
Net proceeds from sale of equity 110,000 66,788,578 145,223,476
Subscriptions receivable 2,102,000 -- --
Exercise of stock options and warrants -- 76,505 326,605
Proceeds from long-term debt 260,071 -- 3,480,542
Payments of long-term debt (52,000) (192,543) (705,378)
------------ ------------ ------------
Net cash provided by financing
activities 2,420,071 66,672,540 148,325,245
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents (2,731,599) 62,970,902 109,388,844
Cash and cash equivalents at beginning
of period 22,168,049 46,417,942 --
------------ ------------ ------------
Cash and cash equivalents at end of period $ 19,436,450 109,388,844 109,388,844
============ ============ ============
Supplemental cash flow information:
Interest paid $ 35,632 105,781 397,178
============ ============ ============
</TABLE>
See accompanying notes to unaudited financial statements.
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<PAGE> 7
ANTIGENICS INC.
(a development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2000
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Antigenics Inc. (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
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 annual financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included.
Operating results for the three-month period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. For further information, refer to the consolidated financial
statements and footnotes thereto for the year ended December 31, 1999 included
in the Company's registration statement on Form S-1 filed with the Securities
and Exchange Commission on February 4, 2000.
NOTE B - INITIAL PUBLIC OFFERING
On February 9, 2000, the Company completed an initial public offering (the
"IPO") of 4,025,000 shares of common stock at $18 per share. Gross proceeds to
the Company before deduction of offering expenses of approximately $6,221,000
were $72,450,000. Concurrent with the completion of the IPO, the Company was
converted from a limited liability company to a corporation. All members of the
limited liability company exchanged their respective member interests for shares
of common stock in the corporation. The financial statements have been
retroactively adjusted to reflect the conversion from a limited liability
company to a corporation and the exchange of each unit of members' equity into
172.0336 shares of common stock.
NOTE C - INCOME TAXES
Prior to converting to a corporation, as a limited liability company, no
federal, state or local income taxes were levied on the Company. Each member of
the Company was individually responsible for reporting their share of the
Company's net income or loss on their personal tax returns. As a result, the
Company will not be able to offset future taxable income, if any, against losses
incurred prior to the conversion to a corporation.
Given the Company's history of incurring operating losses, management believes
that it is more likely than not that any deferred tax assets, net of deferred
tax liabilities, will not be realized. Therefore, there is no income tax benefit
in the accompanying financial statements because of a loss before income taxes
and the need to recognize a valuation allowance on net deferred tax assets.
Income taxes are accounted for under the asset and liability method. Beginning
February 9, 2000, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis.
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<PAGE> 8
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be reversed or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Deferred tax assets are recorded when
they more likely than not are able to be realized.
NOTE D - EARNINGS PER SHARE
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share," requires the calculation and presentation of "Basic" and "Diluted"
earnings per share. Basic earnings per share is calculated by dividing net loss
by the weighted average number of common shares outstanding. Diluted earnings
per share is calculated by dividing net loss by the weighted average common
shares outstanding plus the dilutive effect of outstanding stock options and
stock warrants. Because Antigenics reports a net loss, diluted earnings per
share is the same as basic earnings per share because the effect of outstanding
stock options and stock warrants being added to weighted average shares
outstanding would reduce the net loss per share. Therefore, outstanding stock
options and stock warrants are not included in the calculation.
NOTE E - STOCK-BASED COMPENSATION PLANS
EMPLOYEE STOCK PURCHASE PLAN
In connection with the IPO, the board of directors approved an employee stock
purchase plan. The plan is also subject to approval by the stockholders at the
May 2000 stockholders' meeting. Under the plan, employees may purchase shares of
common stock at a discount from fair market value. There are 300,000 shares of
common stock reserved for issuance under the purchase plan. The purchase plan is
intended to qualify as an employee stock purchase plan within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended. Rights to purchase
common stock under the purchase plan are granted at the discretion of the
compensation committee, which determines the frequency and duration of
individual offerings under the plan and the dates when stock may be purchased.
Eligible employees participate voluntarily and may withdraw from any offering at
any time before stock is purchased. Participation terminates automatically upon
termination of employment. The purchase price per share of common stock in an
offering is 85% of the lesser of its fair value at the beginning of the offering
period or on the applicable exercise date and may be paid through payroll
deductions, periodic lump sum payments or a combination of both. The plan
terminates on November 15, 2009. As of March 31, 2000, no shares of common stock
have been issued under the purchase plan.
EQUITY INCENTIVE PLAN
In connection with the IPO, the board of directors approved an employee equity
incentive plan. The Company's equity incentive plan authorizes the grant of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, and non-qualified stock options for the
purchase of an aggregate of 4,800,000 shares (subject to adjustment for stock
splits and similar capital changes) of common stock to employees and, in the
case of non-qualified stock options, to outside advisors and directors of
Antigenics. The board of directors has appointed the compensation committee to
administer the equity plan. The grant of incentive stock options to employees is
subject to approval by the stockholders at the May 18, 2000 stockholders'
meeting.
During the three months ended March 31, 2000, the Company granted approximately
233,000 non-qualified stock options to employees and directors with exercise
prices at or below the fair value of the underlying shares at the date of grant.
These options were granted at a weighted
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<PAGE> 9
average exercise price of $12.55 per share. In addition, the Company granted
approximately 36,000 non-qualified stock options to outside advisors of which
approximately 22,000 options vested immediately and the remainder vest over
periods up five years. These options were granted at a weighted average exercise
price of $14.48 per share.
The Company recorded a charge to operations related to the grants of options to
employees and directors for the three months ended March 31, 1999 and 2000, of
approximately $78,000 and $128,000, respectively. For the three months ended
March 31, 1999 and 2000, the charge to operations related to options granted and
earned by outside advisors totaled approximately $1,036,000 and $742,000,
respectively.
NOTE F - COMMITMENTS
On February 11, 2000, the Company entered into a research agreement with The
University of Texas M.D. Anderson Cancer Center ("MDA") to conduct clinical
studies. The Company is required to pay MDA a total of approximately $358,000
for the clinical study of approximately 35 patients. The first installment was
paid upon signing the agreement.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since our inception in March 1994, our activities have primarily been associated
with the development of our heat shock protein technology and our lead
immunotherapeutic, Oncophage. Our business activities have included:
- establishing manufacturing capabilities;
- product research and development;
- manufacturing immunotherapeutics for clinical trials;
- regulatory and clinical affairs; and
- intellectual property prosecution.
We have incurred significant losses since our inception because we have not
generated any revenues. As of March 31, 2000, we had an accumulated deficit of
approximately $41,980,000. We expect to continue to incur net losses over the
next several years as we complete our Oncophage clinical trials, apply for
regulatory approvals, continue development of our technology
-8-
<PAGE> 10
and expand our operations. We have been dependent on equity and debt financings
to fund our business activities. Our financial results may vary depending on
many factors, including:
- the progress of Oncophage in the regulatory process;
- the acceleration of our other immunotherapeutic candidates into
preclinical and clinical trials;
- our investment in manufacturing process development and in
manufacturing capacity for Oncophage and other product candidates;
- development of a sales and marketing staff and initial sales
activities if Oncophage is approved for commercialization; and
- the progress of our other research and development efforts.
HISTORICAL RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1999
Revenue: We generated no revenue during the three months ended March 31, 2000 or
during the three months ended March 31, 1999.
Research and Development: Research and development expense increased 34.8% to
$3,368,000 for the three months ended March 31, 2000 from $2,499,000 for the
three months ended March 31, 1999. The increase was primarily due to the
increase in our staff to support our expanded research and development
activities, which increased costs by $728,000. Costs associated with
operating our new manufacturing facility, and other ongoing development
activities increased costs by $194,000 and $86,000, respectively. These
increases were partially offset by the decrease in the non-cash charge for
options granted and earned by outside advisors, directors and employees from
$579,000 for the three months ended March 31, 1999 to $440,000 for the three
months ended March 31, 2000. Research and development expenses consist
primarily of compensation for our employees and outside advisors conducting
research and development work, costs associated with our sponsored research at
the University of Connecticut, costs associated with the operation of our
manufacturing and laboratory facility and the costs to support our Oncophage
clinical trials.
General and Administrative: General and administrative expenses increased 34.1%
to $1,702,000 for the three months ended March 31, 2000 from $1,269,000 for the
three months ended March 31, 1999. The increase was primarily due to the growth
in the number of our employees to support our expanded business operations that
increased costs by $231,000, and increased costs related to operating as a
public company of $115,000. This increase was partially offset by the decrease
in the non-cash charge for options granted and earned by outside advisors,
directors and employees to $429,000 for the three months ended March 31, 2000
from $535,000 for the three months ended March 31, 1999. General and
administrative expenses consisted primarily of personnel compensation, office
expenses and professional fees.
Depreciation and Amortization: Depreciation and amortization expense increased
355.7% to $360,000 for the three months ended March 31, 2000 from $79,000 for
the three months ended March 31, 1999. This increase was due to the depreciation
expense of our new 30,225 square foot manufacturing and laboratory facility and
related equipment placed in service during the second quarter of 1999.
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<PAGE> 11
Interest Income: Interest income increased 363.2% to $1,172,000 for the three
months ended March 31, 2000 from $253,000 for the three months ended March 31,
1999. This increase was principally attributable to a higher average cash and
cash equivalents balance during the three months ended March 31, 2000 as
compared to the three months ended March 31, 1999 as a result of net proceeds of
$38,907,000 from a private equity financing completed in November 1999 and
$66,229,000 from our initial public offering completed in February 2000.
Interest expense: Interest expense increased 194.4% to $106,000 for the three
months ended March 31, 2000 from $36,000 for the three months ended March 31,
1999 due to the increased borrowings under a credit facility to fund the
construction of our manufacturing and laboratory facility.
The Management's Discussion and Analysis of Financial Condition and Results of
Operation contains forward-looking statements reflecting management's current
expectations regarding our future performance. These expectations are based on
certain assumptions regarding the timing of our clinical trials, the efficacy of
products, the availability of capital and other factors relating to our growth.
These expectations may not materialize if product development efforts are
delayed or suspended or if other assumptions prove incorrect. These factors are
more fully discussed in our registration statement on Form S-1 filed with the
Securities and Exchange Commission on February 4, 2000.
LIQUIDITY AND CAPITAL RESOURCES
We have incurred annual operating losses since inception, and at March 31, 2000,
we had incurred an accumulated deficit of $41,980,000. Since our inception, we
have financed our operations primarily through the sale of equity, interest
income earned on cash and cash equivalent balances and debt provided through a
credit line secured by some of our manufacturing and laboratory assets. Most
recently, we have completed an initial public offering that raised net proceeds
of $66,229,000. From our inception through March 31, 2000, we raised aggregate
net proceeds of $145,223,000 through the sale of equity and borrowed $3,481,000
under our $5,000,000 credit facility. We expect that we will fund our capital
expenditures and growing operations over the next two years with current working
capital. Our future capital requirements include, but are not limited to,
supporting our Oncophage clinical trial efforts and continuing our other
research and development programs. Satisfying our long-term liquidity needs will
require the successful commercialization of Oncophage or other products and may
require additional capital.
Our cash and cash equivalents at March 31, 2000, were $109,389,000, an increase
of $62,971,000 from December 31, 1999. During the three months ended March 31,
2000 we used cash primarily to finance operations, including our Oncophage
clinical trials.
Net cash used in operating activities for the three months ended March 31, 1999
and 2000 was $2,243,000 and $3,308,000. The increase resulted from the increase
in the number of our Oncophage clinical trials and general expansion of our
operations.
Net cash used in investing activities for the three months ended March 31, 1999
and 2000 was $2,908,000 and $393,000. The investments were primarily for the
purchase of equipment, furniture and fixtures, and in 1999 the construction of
our manufacturing and laboratory facility which was primarily completed during
the second quarter of 1999. During 1999, we partially financed our new
manufacturing and laboratory facility in Woburn, Massachusetts through the
$5,000,000 credit facility discussed below and available cash balances.
Net cash provided by financing activities was $2,420,000 and $66,673,000 for the
three months ended March 31, 1999 and 2000. Since inception, our primary source
of financing has been from equity investments. During the three months ended
March 31, 1999 and 2000, sales of equity and, in 2000, exercises of stock
options and warrants, totaled approximately $2,212,000 and $66,865,000. At March
31, 2000, we had outstanding $2,775,000 under our credit facility, which was
used to finance the construction of our manufacturing and laboratory facility
and to purchase related equipment. Loans that were drawn down on the credit
facility are secured by the specific assets, including leasehold improvements,
which they finance.
OTHER
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting or Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133, as amended, will be
effective for our fiscal year beginning January 1, 2001. The adoption of SFAS
No. 133 is not expected to have a material effect on our financial position or
results of operations.
In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation" (FIN 44). FIN 44 provides
guidance on the accounting for stock-based compensation grants to employees and
directors. The interpretation will be applied prospectively beginning July 1,
2000. We are evaluating FIN 44 and the effect it may have on the financial
statements.
-10-
<PAGE> 12
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, we are exposed to fluctuations in interest
rates as we seek debt financing to make capital expenditures. We do not employ
specific strategies, such as the use of derivative instruments or hedging, to
manage our interest rate exposures. There has been no change since the fiscal
year ended December 31, 1999 with respect to our interest rate exposures or our
approach toward those exposures. Further, we do not expect our market risk
exposures to change in the near term.
-11-
<PAGE> 13
PART II - OTHER INFORMATION
Item 1 - None
Item 2 - Use of Proceeds from Registered Securities
On February 3, 2000 the Securities and Exchange Commission declared our
registration statement on Form S-1 (File No. 333-91747) effective in
connection with the initial public offering of 4,025,000 shares of our
common stock. U.S. Bancorp Piper Jaffray Inc. and FleetBoston
Robertson Stephens Inc. served as managing underwriters of the
offering.
On February 9, 2000, we sold 4,025,000 shares of our common stock
(including the underwriters' overallotment option) at $18 per share to
the underwriters. We received net proceeds from the initial public
offering of approximately $66,229,000 reflecting gross proceeds of
$72,450,000 net of underwriter commissions of approximately $5,071,500
and other offering costs of approximately $1,149,500.
We have used the following net offering proceeds as of March 31, 2000:
approximately $334,000 for fixed asset additions, $65,000 for debt
obligations and $1,854,000 for operations.
The offering has terminated with the sale of all of the securities that
were registered.
Items 3-5 - None
Item 6(a) - Exhibits
EXHIBITS DESCRIPTION
27 Financial Data Schedule
Item 6(b) - Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which this
report is filed.
-12-
<PAGE> 14
ANTIGENICS INC.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
ANTIGENICS INC.
Date: May 15, 2000 /s/ Garo H. Armen
-------------------------------------------------
Garo H. Armen
President and Chief Executive Officer (Principal
Accounting Officer)
-13-
<PAGE> 15
ANTIGENICS INC.
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
27 Financial Data Schedule
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 2000 UNAUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 109,388,844
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 110,507,602
<PP&E> 9,785,402
<DEPRECIATION> 1,717,450
<TOTAL-ASSETS> 119,024,076
<CURRENT-LIABILITIES> 2,601,327
<BONDS> 0
0
0
<COMMON> 247,772
<OTHER-SE> 114,242,467
<TOTAL-LIABILITY-AND-EQUITY> 119,024,076
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,429,530
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105,781
<INCOME-PRETAX> (4,363,196)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,363,196)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,363,196)
<EPS-BASIC> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
