<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 JUNE 30, 1998
---------------
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: 0-10736
-------
MGI PHARMA, INC.
----------------
(Exact name of registrant as specified in its charter)
Minnesota 41-1364647
- ------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. employer identification
incorporation or organization) number)
Suite 300E, Opus Center
9900 Bren Road East (612) 935-7335
Minnetonka, Minnesota 55343
- ------------------------------- --------------------------------
(Address of principal executive (Registrant's telephone number,
offices and zip code) 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 par value 14,450,426 shares
- ------------------------------- --------------------------------
(Class) (Outstanding at August 11, 1998)
<PAGE>
MGI PHARMA, INC.
FORM 10-Q INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets - June 30, 1998
and December 31, 1997
Statements of Operations - Three Months and
Six Months Ended June 30, 1998 and 1997
Statements of Cash Flows - Six Months
Ended June 30, 1998 and 1997
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
MGI PHARMA, INC.
BALANCE SHEETS
(unaudited)
June 30, December 31,
1998 1997
------------ ------------
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 4,007,799 $ 7,057,091
Short-term investments 10,505,095 7,998,832
Receivables, less allowances of
$97,155 and $84,215 1,696,785 1,073,993
Inventories 627,779 838,058
Prepaid expenses 147,954 184,280
----------- -----------
Total current assets 16,985,412 17,152,254
Equipment and furniture, at cost
less accumulated depreciation of
$933,092 and $808,720 646,331 618,862
Other assets 460,385 419,904
----------- -----------
Total assets $18,092,128 $18,191,020
=========== ===========
(Continued)
<PAGE>
BALANCE SHEETS
(Unaudited)
Page 2
June 30, December 31,
1998 1997
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 248,169 $ 384,428
Accrued expenses 1,903,191 2,331,016
Deferred revenue -- 450,000
Other current liabilities 9,002 6,255
------------ ------------
Total current liabilities 2,160,362 3,171,699
------------ ------------
Stockholders' equity:
Common stock, $.01 par value,
30,000,000 authorized shares,
14,444,409 and 14,195,563
Issued shares 144,444 141,956
Additional paid-in capital 90,254,878 89,222,575
Notes receivable from officers (56,999) (102,575)
Accumulated deficit (74,410,557) (74,242,635)
------------ ------------
Total stockholders' equity 15,931,766 15,019,321
------------ ------------
Total liabilities and
stockholders' equity $ 18,092,128 $ 18,191,020
============ ============
- ------------------------------------
See accompanying notes to financial statements.
<PAGE>
MGI PHARMA, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Sales $ 3,260,293 $ 1,997,401 $ 5,889,245 $ 4,187,791
Promotion 125,000 -- 500,000 --
Licensing 643,610 520,306 1,214,770 975,235
Interest and other 200,498 233,912 387,143 467,780
----------- ----------- ----------- -----------
4,229,401 2,751,619 7,991,158 5,630,806
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of sales 293,364 154,381 500,505 391,433
Selling, general and
administrative 2,649,550 2,036,426 5,063,805 4,152,767
Research
and development 1,357,362 1,383,592 2,594,770 2,445,189
----------- ----------- ----------- -----------
4,300,276 3,574,399 8,159,080 6,989,389
----------- ----------- ----------- -----------
Net loss $ (70,875) $ (822,780) $ (167,922) $(1,358,583)
=========== =========== =========== ===========
Net loss per
common share (a) $(0.00) $(0.06) $(0.01) $(0.10)
Weighted average number
of common shares
outstanding 14,325,735 14,099,459 14,268,708 14,094,447
</TABLE>
(a) Basic and diluted per share amounts are identical as the effect of potential
common shares is antidilutive.
See accompanying notes to financial statements.
<PAGE>
MGI PHARMA, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------
1998 1997
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ($167,922) ($1,358,583)
Adjustments for non-cash items:
Depreciation 124,372 75,994
Benefit plan contribution 65,937 66,864
Change in operating assets and liabilities:
Receivables (622,792) 90,479
Inventories 210,279 178,370
Prepaid expenses 36,326 (158,321)
Accounts payable and accrued expenses (568,262) (1,693,012)
Deferred revenue (450,000) --
Other current liabilities 2,747 96
----------- ------------
Net cash used in operating activities (1,369,315) (2,798,113)
----------- ------------
INVESTING ACTIVITIES:
Purchase of investments (9,300,497) (8,726,614)
Maturity of investments 6,794,234 10,491,936
Purchase of equipment and furniture (151,841) (406,191)
Payments on notes receivable 45,576 2,358
Other (40,481) 1,564
----------- ------------
Net cash provided by (used in) investing
activities (2,653,009) 1,363,053
----------- ------------
FINANCING ACTIVITIES:
Issuance of shares under stock
plans 973,032 105,119
----------- ------------
Net cash provided by financing
activities 973,032 105,119
----------- ------------
Decrease in cash and cash equivalents (3,049,292) (1,329,941)
Cash and cash equivalents at
beginning of period 7,057,091 8,220,569
----------- ------------
Cash and cash equivalents at
end of period $ 4,007,799 $ 6,890,628
=========== ============
</TABLE>
__________________________________
See accompanying notes to financial statements.
<PAGE>
MGI PHARMA, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
---------------------
MGI PHARMA, INC. (MGI or the company) is a pharmaceutical company that acquires,
develops and markets differentiated specialty pharmaceutical and medical
products for therapeutic markets of unmet need. MGI's current product portfolio
is comprised of products that address special needs in the fields of oncology
and rheumatology, however, the company plans to expand its scope as it grows its
business. The company markets its products to physicians throughout the United
States, with sales made to pharmaceutical wholesalers for distribution to the
ultimate consumers of company products. Sales of Salagen(R) Tablets account for
the majority of company sales. The company is commercializing its products
outside the United States through various alliances, and has agreements with
several international pharmaceutical companies to commercialize Salagen(R)
Tablets outside the U.S., including the major markets of Europe, Japan and
Canada. Current product development efforts include clinical and preclinical
studies for MGI 114, the lead compound in a family of promising anti-cancer
analogs, and continued clinical support of INFeD(R) and Salagen(R) Tablets.
Exclusive Japanese rights to MGI 114 and the other acylfulvene analogs were
granted to Dainippon Pharmaceutical Co., Ltd. under a cooperative development
and commercialization agreement in 1995.
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal, recurring
adjustments) considered necessary for fair presentation have been included.
Interim results may not be indicative of annual results. For further
information, refer to the financial statements and footnotes included in the
company's report on Form 10-K for the year ended December 31, 1997.
<PAGE>
(2) Loss Per Common Share
---------------------
For each period presented, basic and diluted loss per share amounts are
identical, as the effect of potential common shares is antidilutive.
(3) Short-Term Investments
----------------------
Because the company has the intent and ability to hold its investments to
maturity, they are considered held-to-maturity investments. As such, they are
stated at amortized cost, which approximates estimated fair value. Held-to-
maturity investments at June 30, 1998 and December 31, 1997 are summarized in
the following table:
1998 1997
----------- -----------
Commercial paper $ 7,392,514 $5,035,698
European certificates of deposit 2,087,590 2,091,522
Medium-term notes 1,024,991 871,612
----------- ----------
$10,505,095 $7,998,832
=========== ==========
(4) Inventories
-----------
Inventories at June 30, 1998 and December 31, 1997 are summarized as follows:
1998 1997
-------- --------
Raw materials and supplies $ 18,140 $ 12,436
Work in process 327,531 662,337
Finished products 282,108 163,285
-------- --------
$627,779 $838,058
======== ========
Inventories are stated at the lower of cost or market. Cost is determined on a
first-in, first-out basis.
(5) Accrued Expenses
----------------
Accrued expenses at June 30, 1998, and December 31, 1997, are summarized in the
following table:
1998 1997
---------- ---------
Product development commitments $ 384,856 $368,248
Product return accrual 341,523 305,044
Bonuses 336,105 489,000
Medicaid accrual 112,472 110,526
Inventory in process 110,000 194,843
Retirement plan contribution 98,163 177,249
Other accrued expenses 520,072 686,106
---------- ----------
$1,903,191 $2,331,016
========== ==========
<PAGE>
(6) Promotion Revenue
-----------------
In March 1998, the company amended its promotion agreement with Schein
Pharmaceutical, Inc. for the promotion of INFeD(R) (iron dextran injection).
Under the terms of this amendment, a minimum promotion fee was set at $125,000
per quarter from July 1, 1997, to December 31, 1998.
(7) Stock Incentive Plans
---------------------
Under stock incentive plans, designated persons (including officers, directors
and employees) are granted rights to acquire company common stock. These rights
include stock options and other equity rights. At June 30, 1998, 3,101,834
shares of common stock remain reserved for issuance, of which 853,645 remain
available for grant. Options to purchase 2,248,189 shares of common stock were
outstanding, of which 1,127,079 were exercisable. Options outstanding had a
weighted average exercise price of $6.22 per share.
Loans to officers were made to facilitate the purchase of company stock. The
loans are full recourse, unsecured obligations. At June 30, 1998, $56,999 of
principal remains outstanding, which is payable upon demand.
(8) Stockholders' Equity
--------------------
Changes in selected stockholders' equity accounts were as follows:
<TABLE>
<CAPTION>
Notes
Common stock Additional receivable
--------------------- paid-in from
Shares Par value capital officers
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 1997:
Balance at December 31, 1996 14,081,574 $140,816 $88,789,495 $(104,933)
Exercise of stock options 5,675 57 24,715 --
Employee retirement savings
plan contribution 12,859 128 55,803 --
Employee stock purchase plan 26,962 270 80,078 --
Note payments -- -- -- 2,358
---------- -------- ----------- ---------
Balance at June 30, 1997 14,127,070 $141,271 $88,950,091 $(102,575)
========== ======== =========== =========
SIX MONTHS ENDED JUNE 30, 1998:
Balance at December 31, 1997 14,195,563 $141,956 $89,222,575 $(102,575)
Exercise of stock options 217,192 2,172 902,476 --
Employee retirement savings
plan contribution 11,541 115 61,644 --
Employee stock purchase plan 20,113 201 68,183 --
Note payments -- -- -- 45,576
---------- -------- ----------- ---------
Balance at June 30, 1998 14,444,409 $144,444 $90,254,878 $ (56,999)
========== ======== =========== =========
</TABLE>
<PAGE>
(9) Subsequent Event
----------------
On July 14, 1998, the company's board of directors adopted a shareholder rights
plan declaring a dividend of one right for each share of common stock held as of
the close of business on July 27, 1998. The rights may be exercised by
shareholders (other than a potential acquirer) only following an acquisition or
the announcement of a tender offer by the acquirer, without prior approval by
the company's board of directors, of 15 percent or more of the common stock.
After a potential acquirer purchases at least 15 percent of the outstanding
common stock, shareholders may exercise the rights to purchase shares of common
stock, or in some cases cash, property or other security of the company or
shares of the acquirer's common stock, at a 50 percent discount from the market
price.
The rights are redeemable for $.01 per right at any time prior to a potential
acquirer purchasing 15 percent or more of the outstanding common stock. The
rights expire on July 14, 2008.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
- --------
MGI PHARMA, INC. (MGI or the company) is a pharmaceutical company that acquires,
develops and markets differentiated specialty pharmaceutical and medical
products for therapeutic markets of unmet need. MGI's current product portfolio
is comprised of products that address special needs in the fields of oncology
and rheumatology, however, the company plans to expand its scope as it grows its
business. The company markets its products to physicians throughout the United
States, with sales made to pharmaceutical wholesalers for distribution to the
ultimate consumers of company products. Sales of Salagen(R) Tablets account for
the majority of company sales. The company is commercializing its products
outside the United States through various alliances, and has agreements with
several international pharmaceutical companies to commercialize Salagen(R)
Tablets outside the U.S., including the major markets of Europe, Japan and
Canada. Current product development efforts include clinical and preclinical
studies for MGI 114, the lead compound in a family of promising anti-cancer
analogs, and continued clinical support of INFeD(R) and Salagen(R) Tablets.
Exclusive Japanese rights to MGI 114 and the other acylfulvene analogs were
granted to Dainippon Pharmaceutical Co., Ltd. under a cooperative development
and commercialization agreement in 1995.
Results of Operations
- ---------------------
The company's net loss of $70,875 in the 1998 second quarter compares with a net
loss of $822,780 in the 1997 second quarter. The 1998 first half net loss of
$167,922 compares with the 1997 first half net loss of $1,358,583. The smaller
1998 net losses were due to increases in total revenues of 54% and 42% for the
quarter and first half, respectively, compared to increases in total costs and
expenses of 20% and 17% for the quarter and first half, respectively.
Sales revenue increased 63% from $1,997,401 in the 1997 second quarter to
$3,260,293 in the 1998 second quarter, and increased 41% from $4,187,791 in the
1997 first half to $5,889,245 in the 1998 first half. The increases reflect
increased sales of Salagen(R) Tablets resulting from broader demand following
the April 1 marketing launch of Salagen(R) Tablets for the treatment of
Sjogren's syndrome symptoms, a second indication for the drug that was approved
by the U.S. FDA in February 1998. Sales revenues increased 24% from the 1998
first quarter to the 1998 second quarter. Future MGI sales revenues may
<PAGE>
fluctuate from quarter to quarter, due to periodic adjustments in wholesale
buying patterns.
Cost of sales increased 90% from $154,381 in the 1997 second quarter to $293,364
in the 1998 second quarter, and increased 28% from $391,433 in the 1997 first
half to $500,505 in the 1998 first half. The increases are primarily due to
increased sales in 1998. Management believes that cost of sales as a percent of
sales of approximately 10% should continue for its current products.
In March 1998, the company amended its promotion agreement with Schein
Pharmaceutical, Inc. for the promotion of INFeD(R) (iron dextran injection).
Under the terms of this amendment, a minimum promotion fee was set at $125,000
per quarter from July 1, 1997, to December 31, 1998, resulting in the
recognition of $500,000 of promotion revenue through the end of the second
quarter of 1998.
Licensing revenue increased 24% from $520,306 in the 1997 second quarter to
$643,610 in the 1998 second quarter, and increased 25% from $975,235 in the 1997
first half to $1,214,770 in the 1998 first half. The increases are primarily due
to increased royalties from international Salagen(R) Tablets activities and a
scheduled increase in quarterly payments from Dainippon. Future licensing
revenues will likely fluctuate between years and from one quarter to the next
depending on the achievement of milestones by the company's partners, their
level of recurring royalty generating activities, and the timing of initiating
additional licensing relationships.
Interest and other income decreased 14% from $233,912 in the 1997 second quarter
to $200,498 in the 1998 second quarter, and decreased 17% from $467,780 in the
1997 first half to $387,143 in the 1998 first half. The decreases are due to a
lower average amount of funds available for investment and a decrease in the
yield on investments. Until the company achieves and maintains positive cash
flow, funds available for investments will continue to decline. Interest income
would correspondingly decline, assuming yields remain constant.
Selling, general and administrative expenses increased 30% from $2,036,426 in
the 1997 second quarter to $2,649,550 in the 1998 second quarter, and increased
22% from $4,152,767 in the 1997 first half to $5,063,805 in the 1998 first half.
The increases result from increased selling and promotion costs in conjunction
with the April 1, 1998 launch of Salagen( Tablets as a treatment for Sjogren's
syndrome symptoms.
Research and development expense decreased 2% from $1,383,592 in the 1997 second
quarter to $1,357,362 in the 1998 second quarter, but increased 6% from
$2,445,189 in the 1997 first half to $2,594,770 in the 1998 first half. The
essentially flat spending from 1997 to 1998 reflects the changing nature of
development efforts across time
<PAGE>
periods, including increased spending for the development of MGI 114, the lead
acylfulvene analog, and decreased spending for Salagen( Tablets following the
February 1997 submission of a supplemental New Drug Application (sNDA) to the
U.S. Food and Drug Administration. Research and development spending is
expected to increase in the second half of 1998 as MGI 114 begins to move into
the next stage of clinical development.
Liquidity and Capital Resources
- -------------------------------
At June 30, 1998, the company had cash and cash equivalents and investments of
$14,512,894 and working capital of $14,825,050 compared to $15,055,923 and
$13,980,555, respectively, at December 31, 1997. During the six month period
ended June 30, 1998, the company used cash of $1,369,315 to fund its operating
activities, and received cash of $973,032 from its financing activities.
Cash in excess of current operating needs is invested in marketable securities
in accordance with the company's investment policy. This policy emphasizes
principal preservation, so it requires strong issuer credit ratings and limits
the amount of credit exposure from any one issuer or industry.
Substantial amounts of capital are required for pharmaceutical development and
commercialization efforts. For continued development and commercialization of
MGI 114, Salagen(R) Tablets and prospective products acquired from the company's
product acquisition strategy, the company plans to utilize cash provided from
the growth in sales of Salagen(R) Tablets, collaborative arrangements and
existing liquid assets. If these sources of capital are insufficient, the
company will seek other sources of funding, including additional equity or debt
issuances, or it will manage the pace of developing its product candidates.
The company has considered the effect of Year 2000 computer processing issues on
its internal computer systems and applications, and its external relationships.
The Year 2000 issue results from computer programs using two digits rather than
four digits to define the applicable year. Due to recent and ongoing upgrading
of these information systems for other business purposes, Year 2000 issues are
not expected to have a material affect on the company's business, financial
position, or results of operations.
Cautionary Statement
- --------------------
This Form 10-Q contains forward-looking statements within the meaning of federal
securities laws. These statements include statements regarding intent, belief,
or current expectations of the Company and its management. These forward-
looking statements are not guarantees
<PAGE>
of future performance and involve a number of risks and uncertainties that may
cause the Company's actual results to differ materially from the results
discussed in these statements. Factors that might cause such differences
include, but are not limited to, dependence on sales of Salagen(R) Tablets,
level of clinical success with MGI 114, dependence on a license acquisition
strategy, uncertainty of strategic alliances, and other risks and uncertainties
detailed from time to time in the Company's filings with the Securities and
Exchange Commission, including Exhibit 99 to this Form 10-Q.
<PAGE>
MGI PHARMA, INC.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
The Company held its Annual Meeting of Shareholders on May 12, 1998 and
sufficient favorable votes were cast to approve all management proposals as
follows:
* Election of management's entire slate of seven directors by the
following vote tallies:
For Withhold
---------- --------
Charles N. Blitzer 11,870,410 66,348
Andrew J. Ferrara 11,870,210 66,548
Joseph S. Frelinghuysen 11,870,410 66,348
Michael E. Hanson 11,870,210 66,548
Hugh E. Miller 11,870,410 66,348
Timothy G. Rothwell 11,825,110 111,648
Lee J. Schroeder 11,870,410 66,348
* Approval of amendments to the Company's Amended and Restated
Employee Stock Purchase Plan by a vote of 11,404,655 for, 475,674
against, and 56,429 abstaining.
* Ratification of independent auditors by a vote of 11,687,745 for,
214,343 against, and 34,670 abstaining.
<PAGE>
Item 5. Other Information
- --------------------------
A. BYLAW AMENDMENTS
----------------
On July 14, 1998, the Board of Directors amended the Company's Bylaws to
include provisions governing the introduction of proposals and nomination
of persons for election as a director of the Company. As amended the Bylaws
provide that any shareholder desiring to introduce a proposal or to
nominate a person for director at a regular meeting of the shareholders
must (i) have been a shareholder of record at the time of giving of notice
as provided for in the bylaws, (ii) be entitled to vote at the meeting and
(iii) have given prior notice of the matter, which must otherwise be a
proper matter for shareholder action, in the manner provided for in the
Bylaws. The amended Bylaws also provide that, if a shareholder desires to
introduce a proposal or to nominate a person for director at a regular
meeting of the shareholders, written notice of such business must be
received by the Company not less than 120 days before the date that is one
year after the date of the Company's proxy statement for the prior year's
regular meeting. If the Company does not receive timely notice, the
business may be excluded from consideration at the meeting. This advance
notice provision supersedes the statutory notice period in revised Rule
14a- 4(c)(1) of the federal proxy rules which addresses the discretionary
proxy voting authority of the Board of Directors in connection with such
shareholder business. The foregoing description of the amended Bylaws is
qualified in its entirety by reference to the full text of the Company's
Bylaws, as amended, filed as Exhibit 3.1 hereto and incorporated by
reference herein.
Based on the Bylaws, as amended, if a shareholder desires to make a
proposal or nominate a person for election as a director at the 1999 Annual
Meeting of Shareholders (and such business is not the subject of a
shareholder proposal timely submitted for inclusion in the proxy
statement), written notice of such business containing the information
required under the Company's Bylaws must be received by the Company at its
principal executive office on or before December 7, 1998.
B. CAUTIONARY STATEMENTS
---------------------
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the company is hereby filing cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in forward looking statements of the
company made by, or on behalf of the company. See Exhibit 99 to this
report.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
A. LISTING OF EXHIBITS
-------------------
3.1 Restated Bylaws
4.1 Specimen Stock Certificate
4.2 Rights Agreement, dated as of July 14, 1998, between the company and
Norwest Bank Minnesota, N.A., as rights agent (including the form of
Right Certificate attached as Exhibit B thereto)(Incorporated by
reference to Exhibit 1 to the company's Registration Statement on Form
8-A, filed July 15, 1998).
11 Computation of Net Loss Per Common Share
27 Financial Data Schedule
99 Cautionary Statements
B. REPORTS ON FORM 8-K
-------------------
There were no reports on Form 8-K filed during the three months ended June
30, 1998.
<PAGE>
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.
MGI PHARMA, INC.
Date: August 12, 1998 By: /s/William C. Brown
-------------------------------
William C. Brown, Vice President,
Finance (principal financial and
accounting officer)
<PAGE>
MGI PHARMA, INC.
Quarterly Report on Form 10-Q
for the
Quarter Ended June 30, 1998
EXHIBIT INDEX
-------------
Exhibit
Number Description
------ -----------
3.1 Restated Bylaws
4.1 Specimen Stock Certificate
4.2 Rights Agreement, dated as of July 14, 1998, between the company and
Norwest Bank Minnesota, N.A., as rights agent (including the form of
Right Certificate attached as Exhibit B thereto)(Incorporated by
reference to Exhibit 1 to the company's Registration Statement on Form
8-A, filed July 15, 1998).
11 Computation of Net Loss per Common Share
27 Financial Data Schedule
99 Cautionary Statements
<PAGE>
Exhibit 3.1
RESTATED BYLAWS
OF
MGI PHARMA, INC.
AS AMENDED ON JULY 14, 1998
ARTICLE I.
OFFICES, CORPORATE SEAL
Section 1.01. Offices. The address of the registered office of the
corporation and the name of its registered agent, if any, at the address of the
registered office shall be set forth in the Articles of Incorporation or in the
latest statement filed with the Secretary of State. The corporation may have
such other offices, within or without the State of Minnesota, as the Board of
Directors shall, from time to time, determine. The principal executive office of
the corporation is the place in the State of Minnesota where the chief executive
officer of this corporation has an office.
Section 1.02. Corporate Seal. The corporate seal shall be circular in form
and shall have inscribed thereon the name of the corporation and the word
"Minnesota" and the words "Corporate Seal."
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 2.01. Annual Meetings. (a) The annual meeting of shareholders shall
be held on such date as the Board of Directors shall by resolution establish.
(b) At the annual meeting the shareholders, voting as provided in the
Articles of Incorporation, shall, subject to the provisions of Section 3.02,
designate the number of directors to constitute the Board of Directors (subject
to the authority of the Board of Directors thereafter to increase the number of
directors as permitted by law and the provisions of Section 3.02), shall elect
directors, and shall transact such other business as may properly come before
them.
Section 2.02. Special Meetings. Special meetings of the shareholders may be
held at any time and for any proper purpose and may be called by the Chief
Executive Officer, the Chief Financial Officer, two or more directors or by a
shareholder or shareholders holding 10% or more of the voting power of all
shares entitled to vote, except that a special meeting called by a shareholder
or shareholders for the purpose of considering any action to directly or
indirectly facilitate or effect a business combination, including any action to
change or otherwise affect the composition of the Board of Directors for that
purpose, must be called by a shareholder or shareholders holding 25% or more of
the voting power of all shares entitled to vote. A shareholder or shareholders
holding the requisite percentage of the voting power may demand a special
meeting of the shareholders by written notice given to the Chief Executive
Officer or Chief Financial Officer of the corporation stating the purposes of
the meeting. Within 30 days after
<PAGE>
receipt of such a demand by one of those officers, the Board of Directors shall
cause a special meeting of shareholders to be called and held on notice not
later than 90 days after receipt of the demand, at the expense of the
corporation. Special meetings shall be held on the date and at the time and
place fixed by the Chief Executive Officer, the Chief Financial Officer or the
Board of Directors, except that a special meeting called by or at demand of a
shareholder or shareholders shall be held in the county where the principal
executive office is located. The business transacted at a special meeting shall
be limited to the purposes stated in the notice of the meeting.
Section 2.03. Record Date. The Board of Directors shall fix a date
not more than 60 days preceding the date of any meeting of shareholders as the
date for the determination of the shareholders entitled to notice of, and to
vote at, such meeting. When a record date is so fixed, only shareholders as of
that date are entitled to notice of and permitted to vote at that meeting of
shareholders.
Section 2.04. Notice of Meetings. Except as otherwise specified in
Section 2.05 or required by law, notice of each meeting of the shareholders,
given in the manner provided in Minnesota Statutes, Section 302A.0ll,
Subdivision 17, stating the date, time and place and, in the case of a special
meeting, the purpose or purposes, shall be given at least five days and not more
than 60 days prior to the meeting to every holder of shares entitled to vote.
Section 2.05. Quorum; Adjourned Meetings. The holders of a majority
of the shares outstanding and entitled to vote shall constitute a quorum for the
transaction of business at any annual or special meeting. In case a quorum
shall not be present at a meeting, those present shall adjourn to such day as
they shall, by majority vote, agree upon, and a notice of such adjournment shall
be mailed to each shareholder entitled to vote at least 5 days before such
adjourned meeting. If a quorum is present, a meeting may be adjourned from time
to time without notice other than announcement at the meeting. At adjourned
meetings at which a quorum is present, any business may be transacted which
might have been transacted at the meeting as originally noticed. If a quorum is
present, the shareholders may continue to transact business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 2.06. Organization and Conduct of Business. The highest
ranking officer of the corporation who is present shall call to order and act as
chairman of any meeting of the shareholders. In the absence of the Secretary,
the secretary of the meeting shall be such person as the chairman of the meeting
appoints. The chairman of the meeting shall have the right and authority to
prescribe such rules, regulations and procedures and to do all such acts as, in
the judgment of such chairman, are appropriate for conduct of the meeting. To
the extent not prohibited by law, such rules, regulations or procedures may
include, without limitation, establishment of (i) an agenda or order of business
for the meeting and the method by which business may be proposed, (ii) rules and
procedures for maintaining order at the meeting and the safety
<PAGE>
of those present, (iii) limitations on attendance at or participation in the
meeting to shareholders of record of the corporation, their duly authorized
proxies or such other persons as the chairman of the meeting shall determine,
(iv) restrictions on entry to the meeting after the time fixed for the
commencement thereof and (v) limitations on the time allotted to questions or
comments by participants. Any proposed business contained in the notice of a
regular meeting is deemed to be on the agenda and no further motions or other
actions shall be required to bring such proposed business up for consideration.
Unless and to the extent otherwise determined by the chairman of the meeting, it
shall not be necessary to follow Robert's Rules of Order or any other rules of
parliamentary procedure at the meeting of the shareholders. Following completion
of the business of the meeting as determined by the chairman of the meeting, the
chairman of the meeting shall have the exclusive authority to adjourn the
meeting.
Section 2.07. Voting. At each meeting of the shareholders every
shareholder having the right to vote shall be entitled to vote either in person
or by proxy. Unless otherwise provided by the terms of the shares, a
shareholder has one vote for each share held registered in such shareholder's
name on the books of the corporation. A holder of shares entitled to vote may
vote any portion of the shares in any way the shareholder chooses. If a
shareholder votes without designating the proportion or number of shares voted
in a particular way, the shareholder is deemed to have voted all of the shares
in that way. Jointly owned shares may be voted by any joint owner unless the
corporation receives written notice from any one of them denying the authority
of that person to vote the shares. The shareholders shall take action by the
affirmative vote of the holders of the majority of the voting power of the
shares present and entitled to vote, unless otherwise required by statute or the
Articles of Incorporation.
Section 2.08. Waiver of Notice. Notice of any regular or special
meeting may be waived by any shareholder either before, at or after such meeting
orally or in a writing signed by such shareholder or a representative entitled
to vote the shares of such shareholder. Attendance by a shareholder, at any
meeting of shareholders, is a waiver of notice of such meeting, except where the
shareholder objects at the beginning of the meeting to the transaction of
business because the meeting is not lawfully called or convened or the item may
not lawfully be considered at that meeting and the shareholder does not
participate in the consideration of the item at that meeting.
Section 2.09. Written Action. Any action that is required or
permitted to be taken at a meeting of shareholders may be taken without a
meeting if done in writing and signed by all of the shareholders authorized to
vote on that action.
Section 2.10 Proposals. To be properly brought before a regular
meeting of shareholders, business must be (i) specified in the notice of the
meeting, (ii) directed to be brought before the meeting by the Board of
Directors or (iii) proposed at the meeting by a shareholder who (A) was a
shareholder of record at the time of giving of notice
<PAGE>
provided for in these bylaws, (B) is entitled to vote at the meeting and (C)
gives prior notice of the matter, which must otherwise be a proper matter for
shareholder action, in the manner herein provided. For business to be properly
brought before a regular meeting by a shareholder, the shareholder must give
written notice to the Secretary of the corporation so as to be received at the
principal executive offices of the corporation at least 120 days before the date
that is one year after the date of the corporation's proxy statement for the
prior year's regular meeting. Such notice shall set forth (i) the name and
record address of the shareholder and of the beneficial owner, if any, on whose
behalf the proposal will be made, (ii) the class and number of shares of the
corporation owned by the shareholder and beneficially owned by the beneficial
owner, if any, on whose behalf the proposal will be made, (iii) a brief
description of the business desired to be brought before the regular meeting and
the reasons for conducting such business and (iv) any material interest in such
business of the shareholder and the beneficial owner, if any, on whose behalf
the proposal is made. The chairman of the meeting may refuse to acknowledge any
proposed business not made in compliance with the foregoing procedure.
ARTICLE III.
DIRECTORS
Section 3.01. General Powers. The business and affairs of the
corporation shall be managed by or under the direction of the Board of
Directors.
Section 3.02. Number, Qualification and Term of Office. The number of
directors shall be established by resolution of the shareholders (subject to the
authority of the Board of Directors to increase the number of directors as
permitted by law), but shall not be less than three (3). A majority of persons
comprising the Board of Directors shall at all times be persons who are not (i)
employed by this corporation or any corporation controlled by, controlling, or
under common control with this corporation, (ii) engaged in rendering consulting
or professional services for compensation (other than by reason of their
membership on the Board of Directors and other than as this corporation's
independent legal counsel) for this corporation or any corporation controlled
by, controlling, or under common control with this corporation, or (iii) related
to, or directly or indirectly controlled by, any person described in subpart (i)
or (ii). For these purposes, "control" shall be defined to mean direct or
indirect beneficial ownership of over 25% of a corporation's voting stock.
Directors need not be shareholders. Each director shall hold office from the
annual meeting at which such director was elected and until the next annual
meeting of shareholders and until such director's successor shall have been
elected and shall qualify, or until the earlier death, resignation, removal or
disqualification of the director.
Section 3.03. Board Meetings. Meetings of the Board of Directors may
be held from time to time at such time and place as may be designated in the
notice of such meeting or at the place announced if no notice is required.
<PAGE>
Section 3.04. Calling Meetings; Notice. Meetings of the Board of
Directors may be called by the Chief Executive Officer or Chief Financial
Officer by giving at least 24 hours' notice, or by any other director by giving
at least five days' notice, of the date, time and place thereof to each director
by mail, telephone, telegram or in person. If the day or date, time and place
of a Board meeting have been announced at a previous meeting of the Board, no
notice is required. Notice of an adjourned meeting need not be given other than
by announcement at the meeting at which adjournment is taken of the date, time
and place at which the meeting will be reconvened.
Section 3.05. Waiver of Notice. Notice of any meeting of the Board of
Directors may be waived by any director either before, at or after such meeting
orally or in a writing signed by such director. A director, by his attendance
at any meeting of the Board of Directors, shall be deemed to have waived notice
of such meeting, except where the director objects at the beginning of the
meeting to the transaction of business because the meeting is not lawfully
called or convened and does not participate thereafter in the meeting.
Section 3.06. Quorum. A majority of the directors holding office
immediately prior to a meeting of the Board of Directors shall constitute a
quorum for the transaction of business at such meeting.
Section 3.07. Absent Directors. A director may give advance written
consent or opposition to a proposal to be acted on at a meeting of the Board of
Directors. If such director is not present at the meeting, consent or
opposition to a proposal does not constitute presence for purposes of
determining the existence of a quorum, but consent or opposition shall be
counted as a vote in favor of or against the proposal and shall be entered in
the minutes or other record of action at the meeting, if the proposal acted on
at the meeting is substantially the same or has substantially the same effect as
the proposal to which the director has consented or objected.
Section 3.08. Conference Communications. Any or all directors may
participate in any meeting or conference of the Board of Directors, or of any
duly constituted committee thereof, by any means of communication through which
the directors may simultaneously hear each other during such meeting. For the
purposes of establishing a quorum and taking any action, such directors
participating pursuant to this Section 3.08 shall be deemed present in person at
the meeting.
Section 3.09. Vacancies: Newly Created Directorships. Subject to the
special voting rights set forth in Article V of the Articles of Incorporation of
this corporation, vacancies in the Board of Directors of this corporation
occurring by reason of death, resignation or otherwise, shall be filled for the
unexpired term by a majority of the remaining directors of the Board although
less than a quorum; newly created directorships resulting from an increase in
the authorized number of directors by action of the Board of Directors as
permitted by Section.3.02 may be filled by a two-thirds (2/3) vote of the
directors
<PAGE>
serving at the time of such increase; and each person so elected shall be a
director until his successor is elected by the shareholders, who may make such
election at their next annual meeting or at any meeting duly called for that
purpose.
Section 3.10. Removal. The entire Board of Directors or any
individual director may be removed from office, with or without cause, by a vote
of the shareholders holding a majority of the shares entitled to vote at an
election of directors except, as otherwise provided by law, where the
shareholders have the right to cumulate their votes. In the event that the
entire Board or any one or more directors be so removed, new directors shall be
elected at the same meeting.
Section 3.11. Committees. A resolution approved by the affirmative
vote of a majority of the Board of Directors may establish committees having the
authority of the Board in the management of the business of the corporation to
the extent provided in the resolution. A committee shall consist of one or more
persons, who need not be directors, appointed by affirmative vote of a majority
of the directors present. Committees are subject to the direction and control
of, and vacancies in the membership thereof shall be filled by, the Board of
Directors, except as provided by Section 3.12 and by Minnesota Statutes, Section
302A.243. A majority of the members of the committee present at a meeting is a
quorum for the transaction of business, unless a larger or smaller proportion or
number is provided in the resolution establishing the committee.
Section 3.12. Committee of Disinterested Persons. Pursuant to the
procedure set forth in Section 3.11, the Board of Directors may establish a
committee composed of two or more disinterested directors or other disinterested
persons to determine whether it is in the best interests of the corporation to
pursue a particular legal right or remedy of the corporation and whether to
cause the dismissal or discontinuance of a particular proceeding that seeks to
assert a right or remedy on behalf of the corporation. The committee, once
established, is not subject to the direction or control of, or termination by,
the Board of Directors. A vacancy on the committee may be filled by a majority
of the remaining committee members. The good faith determinations of the
committee are binding upon the corporation and its directors, officers and
shareholders. The committee terminates when it issues a written report of its
determination to the Board of Directors.
Section 3.13. Audit Committee. The corporation at all times shall
maintain an Audit Committee of the Board of Directors, a majority of the members
of which shall at all times be persons who are not (i) employed by this
corporation or any corporation controlled by, controlling or under common
control with this corporation, (ii) engaged in rendering consulting or
professional services for compensation for this corporation or any corporation
controlled by, controlling or under common control with this corporation (other
than by reason of their membership on the Board of Directors), or (iii) related
to, or directly or indirectly controlled by, any person described in subpart (i)
or
<PAGE>
(ii), and, so long as American Cyanamid Company is the holder of any shares of
this corporation's cumulative preferred stock, one member of which shall be a
person designated by American Cyanamid Company. For purposes of this Section
3.13, "control" shall be defined to mean direct or indirect beneficial ownership
of over 25% of a corporation's voting stock.
Section 3.14. Written Action. An action required or permitted to be
taken at a meeting of the Board of Directors may be taken by a written action
signed, or counterparts of a written action signed in the aggregate, by all of
the directors.
Section 3.15. Nomination of Directors. Nominations of persons for
election as directors may be made at a regular meeting of shareholders (i) by or
at the direction of the Board of Directors or (ii) by any shareholder who (A)
was a shareholder of record at the time of giving of notice provided for in
these bylaws, (B) is entitled to vote at the meeting and (C) gives prior notice
of the nomination in the manner herein provided. For a nomination to be
properly made by a shareholder, the shareholder must give written notice to the
Secretary of the corporation so as to be received at the principal executive
offices of the corporation at least 120 days before the date that is one year
after the date of the corporation's proxy statement for the prior year's regular
meeting. Such notice shall set forth (i) as to the shareholder giving the
notice: (A) the name and record address of the shareholder and of the beneficial
owner, if any, on whose behalf the nomination will be made, and (B) the class
and number of shares of the corporation owned by the shareholder and
beneficially owned by the beneficial owner, if any, on whose behalf the
nomination will be made and (ii) as to each person the shareholder proposes to
nominate: (A) the name, age, business address and residence address of the
person, (B) the principal occupation or employment of the person and (C) the
class and number of shares of the corporation's capital stock beneficially owned
by the person. The chairman of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
ARTICLE IV.
OFFICERS
Section 4.01. Designation. The officers of the corporation shall
consist of a Chairman of the Board (if one is elected by the Board) or Co-
Chairmen of the Board (if two or more are elected by the Board), a President,
one or more Vice Presidents (if desired by the Board), a Chief Executive
Officer, a Chief Operating Officer, a Chief Financial Officer, a Secretary, a
Treasurer and such other officers and agents as may, from time to time, be
elected by the Board of Directors. Any two offices, except those of President
and Vice President, may be held by one person.
Section 4.02. Chairman or Co-Chairman of the Board. The Chairman of
the Board, if one is elected, shall preside at all meetings of the shareholders
and directors and shall have such other duties as may be prescribed, from time
to time, by the Board of Directors. If
<PAGE>
Co-Chairmen of the Board are elected, each such Co-Chairman shall have the power
to preside at all meetings of the shareholders and directors and each such
Co-Chairman shall have other duties as may be prescribed, from time to time, by
the Board of Directors.
Section 4.03. President. In the absence of the Chairman of the Board
or Co-Chairman of the Board, the President shall preside at all meetings of the
shareholders and directors. The President shall have such other duties that
may, from time to time, be prescribed by the Board of Directors or by the Chief
Executive Officer. The President shall report to the Chief Executive Officer.
Section 4.04. Vice President. Each Vice President shall have such
powers and shall perform such duties as may be specified in the Bylaws or
prescribed by the Board of Directors or by the Chief Executive Officer. In the
event of absence or disability of the President, Vice Presidents shall succeed
to his power and duties in the order designated by the Board of Directors. Each
Vice President shall report to such officer of the Corporation as the Chief
Executive Officer may designate.
Section 4.05. Secretary. The Secretary shall be Secretary of and
shall attend all meetings of the shareholders and Board of Directors and shall
record all such proceedings of such meetings in the minute book of the
Corporation. He shall give proper notice of meetings of shareholders and
directors. He shall keep the seal of the corporation and shall affix the same to
any instrument requiring it and may, when necessary, attest the seal by his
signature. He shall perform such other duties as may, from time to time, be
prescribed by the Board of Directors or by the Chief Executive Officer. The
Secretary shall report to the Chief Executive Officer or such other officer as
the Chief Executive Officer may designate.
Section 4.06. Treasurer. The Treasurer shall keep accurate accounts
of all moneys of the corporation received or disbursed. He shall deposit all
moneys, drafts and checks in the name of, and to the credit of, the corporation
in such banks and depositaries as a majority of the whole Board of Directors
shall, from time to time, designate. He shall have power to endorse, for
deposit, all notes, checks and drafts received by the corporation. He shall
disburse the funds of the corporation, as ordered by the Board of Directors, the
Chief Executive Officer or the Chief Financial Officer, making proper vouchers
therefor. He shall render to the Chief Executive, Chief Financial Officer and
the directors, whenever required, an account of all his transactions as
Treasurer and of the financial condition of the corporation, and shall perform
such other duties as may, from time to time, be prescribed by the Board of
Directors or by the Chief Executive Officer. The Treasurer shall report to the
Chief Financial Officer.
Section 4.07. Chief Executive Officer. The Chief Executive Officer
shall have general executive management of the business of the Corporation. He
shall see that all orders and resolutions of the Board of Directors are carried
into effect. He shall be ex officio a member
<PAGE>
of all standing committees. He may execute and deliver, in the name of the
Corporation, any deeds, mortgages, bonds, contracts or other instruments
pertaining to any and all aspects of the business of the Corporation and, in
general, shall perform all duties usually incident to the office of Chief
Executive Officer. He shall have such other duties as may, from time to time, be
prescribed by the Board of Directors.
Section 4.08. Chief Operating Officer. The Chief Operating Officer
shall have general operating management of the business of the Corporation. He
may execute and deliver, in the name of the Corporation, any deeds, mortgages,
bonds, contracts or other instruments pertaining to the day-to-day business of
the Corporation and, in general, shall perform all the duties usually incident
to the office of Chief Operating Officer. He shall have such duties as may,
from time to time, be prescribed by the Board of Directors or by the Chief
Executive Officer. The Chief Operating Officer shall report to the Chief
Executive Officer.
Section 4.09. Chief Financial Officer. The Chief Financial Officer
shall manage the financial affairs of the Corporation. He shall be responsible
for the preparation and dissemination of all financial reports of the
Corporation and shall be the principal officer of the Corporation to deal with
the Audit Committee of the Board of the Directors. He shall have authority to
borrow funds on behalf of the Corporation and to disburse funds of the
Corporation. He shall perform such other duties as may, from time to time, be
prescribed by the Board of Directors or by the Chief Executive Officer. The
Chief Financial Officer shall report to the Chief Executive Officer.
Section 4.10. Authority and Duties. In addition to the foregoing
authority and duties, all officers of the corporation shall respectively have
such authority and perform such duties in the management of the business of the
corporation as may be determined from time to time by the Board of Directors.
Unless prohibited by a resolution of the Board of Directors, an officer elected
or appointed by the Board may, without specific approval of the Board of
Directors, delegate some or all of the duties and powers of an office to other
persons.
Section 4.11. Removal and Vacancies. Any officer may be removed from
his office by the Board of Directors at any time, with or without cause. Such
removal, however, shall be without prejudice to the contract rights of the
person so removed. If there be a vacancy among the officers of the corporation
by reason of death, resignation or otherwise, such vacancy shall be filled for
the unexpired term by the Board of Directors.
Section 4.12. Compensation. The officers of this corporation shall
receive such compensation for their services as may be determined by or in
accordance with resolutions of the Board of Directors.
<PAGE>
ARTICLE V.
SHARES AND THEIR TRANSFER
Section 5.01. Certificates for Shares. All shares of the corporation
shall be certificated shares. Each holder of shares of the corporation shall be
entitled to a certificate, to be in such form as shall be prescribed by the
Board of Directors, certifying the number of shares of the corporation owned by
such shareholder. The certificates for such shares shall be numbered in the
order in which they shall be issued and shall be signed, in the name of the
corporation, by the President and by the Secretary or an Assistant Secretary or
by such officers as the Board of Directors may designate. If the certificate is
signed by a transfer agent or registrar, such signatures of the corporate
officers may be facsimiles, engraved or printed. Every certificate surrendered
to the corporation for exchange or transfer shall be canceled, and no new
certificate or certificates shall be issued in exchange for any existing
certificate until such existing certificate shall have been so canceled, except
in cases provided for in Section 5.03.
Section 5.02. Transfer of Shares. Transfer of shares on the books of
the corporation may be authorized only by the shareholder named in the
certificate, or the shareholder's legal representative, or the shareholder's
duly authorized attorney-in-fact, and upon surrender of the certificate or the
certificates for such shares. The corporation may treat as the absolute owner
of shares of the corporation, the person or persons in whose name shares are
registered on the books of the corporation. The Board of Directors may appoint
one or more transfer agents and registrars to maintain the share records of the
corporation and to effect share transfers on its behalf.
Section 5.03. Loss of Certificates. As provided by Minnesota Statutes
Section 302A.419, any shareholder claiming a certificate for shares to be lost,
stolen or destroyed shall make an affidavit of that fact in such form as the
Board of Directors shall require and shall, if the Board of Directors so
requires, give the corporation a bond of indemnity in form, in an amount, and
with one or more sureties satisfactory to the Board of Directors, to indemnify
the corporation against any claim which may be made against it on account of the
reissue of such certificate, whereupon a new certificate may be issued in the
same tenor and for the same number of shares as the one allegedly to have been
lost, stolen or destroyed.
ARTICLE VI.
DIVIDENDS, RECORD DATE
Section 6.01. Dividends. The Board of Directors shall have the
authority to declare dividends and other distributions upon shares to the extent
permitted by law.
<PAGE>
Section 6.02. Record Date. The Board of Directors may fix a date not
exceeding 60 days preceding the date fixed for the payment of any dividend as
the record date for the determination of the shareholders entitled to receive
payment of the dividend and, in such case, only shareholders of record on the
date so fixed shall be entitled to receive payment of such dividend.
ARTICLE VII.
CORPORATE RECORDS
Section 7.01. Share Register. The corporation shall keep at the
office of its transfer agent a share register not more than one year old,
containing the names and addresses of the shareholders and the number and
classes of shares held by each shareholder. The corporation shall also keep at
the office of its transfer agent a record of the dates on which certificates or
transaction statements representing shares were issued.
Section 7.02. Other Records. The corporation shall keep at its
principal executive office originals or copies of: (a) records of all
proceedings of shareholders for the last three years; (b) records of all
proceedings of the Board of Directors for the last three years; (c) the Articles
of Incorporation and all amendments currently in effect; (d) the Bylaws and all
amendments currently in effect; (e) financial statements; (f) reports made to
shareholders generally within the last three years; (g) a statement of the names
and usual business addresses of the directors and principal officers; (h) voting
trust agreements described in Minnesota Statutes, Section 302A.453; and (i)
shareholder control agreements described in Minnesota Statutes, Section
302A.457.
ARTICLE VIII.
SECURITIES OF OTHER CORPORATIONS
Section 8.01. Voting Securities Held by the Corporation. The Chief
Executive Officer shall have full power and authority on behalf of the
corporation (a) to attend any meeting of security holders of other corporations
in which the corporation may hold securities and to vote such securities on
behalf of this corporation; (b) to execute any proxy for such meeting on behalf
of the corporation; or (c) to execute a written action in lieu of a meeting of
such other corporation on behalf of this corporation. At such meeting, the
Chief Executive Officer shall possess and may exercise any and all rights and
powers incident to the ownership of such securities that the corporation
possesses. The Board of Directors or the Chief Executive Officer may, from time
to time, confer or delegate such powers to one or more other persons.
Section 8.02. Purchase and Sale of Securities. The Chief Executive
Officer shall have full power and authority on behalf of the corporation to
purchase, sell, transfer or encumber any and all securities of any other
corporation owned by the corporation, and may
<PAGE>
execute and deliver such documents as may be necessary to effectuate such
purchase, sale, transfer or encumbrance. The Board of Directors or the Chief
Executive Officer may, from time to time, confer or delegate such powers to one
or more other persons.
ARTICLE IX.
INDEMNIFICATION OF CERTAIN PERSONS
Section 9.01. The corporation shall indemnify such persons, for such
expenses and liabilities, in such manner, under such circumstances, and to such
extent as permitted by Minnesota Statutes, Section 302A.521, as now enacted or
hereafter amended.
ARTICLE X.
AMENDMENTS
Section 11.01. These Bylaws may be amended at any meeting of the Board
of Directors if notice of such proposed amendment shall have been given in the
notice of such meeting. Such authority in the Board of Directors is subject to
(a) the limitations imposed by Minnesota Statutes, Section 302A.181, as now
enacted or hereafter amended, or other applicable law and (b) the power of the
shareholders to change or repeal such Bylaws by a majority vote of the
shareholders present or represented at any meeting of shareholders called for
such purpose.
<PAGE>
EXHIBIT 4.1
COUNTERSIGNED AND REGISTERED:
NORWEST BANK MINNESOTA, N.A.
TRANSFER AGENT AND REGISTRAR
BY AUTHORIZED SIGNATURE
[MGI PHARMA, INC. LOGO]
A
COMMON STOCK COMMON STOCK
See reverse for
certain definitions
---------------------
| CUSIP 552880 10 6 |
---------------------
MGI PHARMA, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MINNESOTA
THIS CERTIFIES that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR
VALUE OF $.01 PER SHARE, OF
MGI PHARMA, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned and
registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the
facsimile signatures of its duly authorized officers.
Dated:
/s/ Lori-jean Gille /s/ CN Blitzer
SECRETARY PRESIDENT AND
[MGI PHARMA, INC. CHIEF EXECUTIVE OFFICER
CORPORATE SEAL]
<PAGE>
MGI PHARMA, INC.
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in a Rights Agreement between MGI PHARMA, INC. and Norwest
Bank Minnesota, N.A., dated as of July 14, 1998 (the "Rights Agreement"), the
terms of which are hereby incorporated herein by reference and a copy of which
is on file at the principal executive offices of MGI PHARMA, INC. Under
certain circumstances, as set forth in the Rights Agreement, such Rights will
be evidenced by separate certificates and will no longer be evidenced by this
certificate. MGI PHARMA, INC. will mail to the holder of this certificate a
copy of the Rights Agreement without charge after receipt of a written request
therefor. Under certain circumstances, as set forth in the Rights Agreement,
Rights issued to any Person who becomes an Acquiring Person or an Associate or
Affiliate thereof (as defined in the Rights Agreement), or certain transferees
of such Person, may become null and void.
THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND WITHOUT
CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS AND
RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED
BY THE CORPORATION, SO FAR AS THEY HAVE BEEN DETERMINED, AND THE AUTHORITY OF
THE BOARD OF DIRECTORS OF THE CORPORATION TO DETERMINE THE RELATIVE RIGHTS AND
PREFERENCES OF SUBSEQUENT CLASSES OR SERIES.
- -------------------------------------------------------------------------------
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -_____ Custodian ______
(Cust) (Minor)
under Uniform Gifts to Minors
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right Act ____________________
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list.
- -------------------------------------------------------------------------------
For value received ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
---------------------------------------------
- -------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute
and appoint __________________________________________________________ Attorney
to transfer the said shares on the books of the within-named Corporation with
full power of substitution in the premises
Dated -------------------------------------------
-------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE GUARANTEED
<PAGE>
Exhibit 11
COMPUTATION OF NET LOSS PER COMMON SHARE
MGI PHARMA, INC.
(unaudited)
The following information is required in computations of basic and diluted loss
per common share for each period:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
Loss:
Net loss $ (70,875) $ (822,780) $ (167,922) $(1,358,583)
Common shares:
Adjusted weighted
shares
outstanding (a) 14,325,735 14,099,459 14,268,708 14,094,447
Loss per common share:
Net loss $ (0.00) $ (0.06) $ (0.01) $ (0.10)
(a) Basic and diluted loss per share amounts are identical as the effect of
potential common shares is antidilutive.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING BALANCE SHEET OF MGI PHARMA, INC. AS OF JUNE 30, 1998, AND THE
RELATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,007,799
<SECURITIES> 10,505,095
<RECEIVABLES> 1,696,785
<ALLOWANCES> 97,155
<INVENTORY> 627,779
<CURRENT-ASSETS> 16,985,412
<PP&E> 646,331
<DEPRECIATION> 933,092
<TOTAL-ASSETS> 18,092,128
<CURRENT-LIABILITIES> 2,160,362
<BONDS> 0
0
0
<COMMON> 15,931,766
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18,092,128
<SALES> 5,889,245
<TOTAL-REVENUES> 7,991,158
<CGS> 500,505
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,594,770
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (167,922)
<INCOME-TAX> 0
<INCOME-CONTINUING> (167,922)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (167,922)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
<PAGE>
Exhibit 99
MGI PHARMA, INC.
QUARTERLY REPORT ON FORM 10-Q
JUNE 30, 1998
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Private Securities Litigation Reform Act of 1995 provides a new "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information without fear of litigation so long as those statements
are identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in the statement. The company desires to
take advantage of these new "safe harbor" provisions and is filing this Exhibit
99 in order to do so. Accordingly, the company hereby identifies the following
important factors which could cause the company's actual results to differ
materially from any such results which may be projected, forecast, estimated or
budgeted by the company in forward-looking statements made by the company from
time to time in reports, proxy statements, registration statements and other
written communications, or in oral forward-looking statements made from time to
time by the company's officers and agents.
LACK OF PROFITABLE OPERATIONS
The company's revenues have not been sufficient to offset all the expenses
involved in operating a pharmaceutical company including research, development
and production. The company had net losses of $167,922 for the six months ended
June 30, 1998, and $1,784,545 for the year ended 1997. At June 30, 1998 the
company had an accumulated deficit of $74,410,557. If the company is unable to
achieve profitability, its ability to continue its operations will depend upon
its ability to secure additional funds from other sources. Revenue may display
significant variations due to the impact of new contract and licensing
arrangements, the completion or termination of those contracts and arrangements,
and the timing and amounts of milestone payments. The company's profitability
will be dependent on its success in developing, obtaining regulatory approvals
for, and effectively marketing its products. As such, there can be no assurance
as to whether the company will be able to achieve and sustain profitability.
DEPENDENCE ON SALES OF SALAGEN(R) TABLETS
The company derives substantially all of its product revenues from the sale of
Salagen(R) Tablets. For the six months ended June 30, 1998, U.S. sales of
Salagen(R) Tablets were $5,477,817, representing 93% of total product sales for
the period. In 1997, annual U.S. sales Salagen(R) Tablets were $8,557,526
representing 92% of 1997 product sales. Accordingly, any factor adversely
affecting sales of Salagen(R) Tablets could have a material adverse effect on
the company's business, financial condition and results of operations. One such
factor could be the expiration of orphan drug protection for Salagen(R) Tablets
as a treatment for radiation induced xerostomia in head and neck cancer patients
in March 2001. The company anticipates that sales of its other product,
Didronel(R) I.V. Infusion, will continue to represent a minor portion of total
product sales.
<PAGE>
DEPENDENCE ON LICENSE AND ACQUISITION STRATEGY
The company has adopted a license and acquisition strategy to build its product
pipeline and expects to increase its sales over time through a series of
strategic acquisitions of new pharmaceutical and medical product opportunities
that the company can immediately market, or develop and market. The company's
strategy for growth is dependent upon its continued ability to identify and
acquire new products targeted at niche markets that can be promoted through the
company's marketing and distribution channels. Because the company does not
engage in proprietary research of new products, it must rely upon the
willingness of others to sell or license product opportunities to the company.
Other companies, including those with substantially greater financial, marketing
and sales resources, are competing with the company to acquire such products.
There can be no assurance that the company will be able to acquire rights to
additional products on acceptable terms, if at all. The failure of the company
to acquire additional products or to promote or market commercially successful
products would have a material adverse effect on the company's future business,
financial condition and results of operations. Further, the marketing strategy,
distribution channels and levels, and bases of competition with respect to newly
acquired products may be different than those of the company's current products.
There can be no assurance that the company will be able to compete favorably in
those product categories.
UNCERTAINTY OF STRATEGIC ALLIANCES
The company's strategy for the exploitation of international markets for its
products is to enter into strategic alliances with various multinational and
foreign pharmaceutical companies. The company has entered into alliances with
various companies related to the marketing of Salagen(R) Tablets and the
development of the acylfulvene family of compounds, including MGI 114. Revenues
from strategic alliances typically include milestone payments and royalty
payments. Licensing revenue was $1,214,770 for the six months ended June 30,
1998, and $3,090,375 for 1997, comprising 15% and 23%, respectively, of total
revenues in each period. Future licensing revenues will likely fluctuate from
quarter to quarter and year to year depending on the achievement of milestones
by the company's partners, the amount of royalty generating activities, and the
timing of initiating additional licensing relationships. Additionally,
royalties are based on sales in local currencies and, therefore, the U.S. dollar
value of such royalties will fluctuate with currency exchange rates. Although
the company believes that its partners in these alliances have an economic
motivation to perform their contractual responsibilities, the amount and timing
of resources to be devoted to these activities are not within the control of the
company. Moreover, the terms of these alliances generally provide that they may
be terminated prior to their expiration under circumstances that may also be
outside the control of the company. The early termination of one or more of
these strategic alliances could adversely affect the company's business,
financial condition and results of operations. There can also be no assurance
that the company will be able to negotiate additional strategic alliances on
acceptable terms or that such alliances will be successful.
UNCERTAINTY OF ACCESS TO CAPITAL
The company may need to raise additional funds to acquire or license additional
products, to fund operating losses until such time as the company achieves
sustained profitability, to support the marketing and sales of
<PAGE>
additional products, and to obtain necessary working capital. The company may
seek additional funding through public and private financing, including equity
and debt financing. Adequate funds for these purposes, whether through the
financial markets or from other sources, may not be available when needed or on
terms acceptable to the company. Insufficient funds may cause the company to
delay, scale back, or abandon some or all of its product acquisition and
licensing programs or marketing.
DEPENDENCE ON SOLE SUPPLIER
The company relies on Merck KGaA Special and Fine Chemicals Division as its sole
supplier of pilocarpine hydrochloride, the active pharmaceutical ingredient
necessary for the manufacture of Salagen(R) Tablets. The company believes that
Merck KGaA Special and Fine Chemicals Division produces the substantial majority
of the worldwide supply of pharmaceutical grade pilocarpine hydrochloride, and
that there is no other producer of pilocarpine hydrochloride with a significant
portion of the worldwide supply. The processing facility and raw material
requirements for the production of pilocarpine hydrochloride present significant
barriers to entry of new producers in this market. Although the company
believes that it would be able to procure adequate supplies of pilocarpine
hydrochloride on a timely basis from an alternate source, the company has not
qualified an alternate source and disruptions in supplies would have a material
adverse effect on the company's business, financial condition and results of
operations.
RELIANCE ON THIRD-PARTY MANUFACTURERS
The company does not have manufacturing facilities and is currently relying on
two third-party manufacturers for production of Salagen(R) Tablets. The company
intends to continue to rely on others to manufacture its products, including any
products that it may acquire, and has no plans to establish manufacturing
facilities. Manufacture of the company's products is subject to GMP
regulations, prescribed by the FDA or other standards prescribed by the
appropriate regulatory agency in the country of use. There can be no assurance
that the company's current manufacturers will comply with all applicable
regulatory standards, or that the company would be able to identify an
alternative third-party manufacturer on terms acceptable to the company or on
any terms.
INTENSE COMPETITION; UNCERTAINTY OF TECHNOLOGICAL CHANGE
The manufacture and sale of pharmaceuticals and medical products is highly
competitive. Many of the company's competitors are large, multinational
pharmaceutical companies that have considerably greater financial, sales,
marketing and technical resources than those of the company. Additionally, many
of the company's present and potential competitors have research and development
capabilities that may allow such competitors to develop new or improved products
that may compete with the company's products. The pharmaceutical industry is
characterized by continual product development and technological change. The
company's products could be rendered obsolete or uneconomical by the development
of new products to treat the conditions addressed by the company's products, or
as the result of technological advances affecting the cost of production. There
can be no assurance that the company will be able to compete effectively, that
additional competitors will not enter the market, or that competition will not
have a material adverse effect on the company's business, financial condition
and results of operations.
<PAGE>
PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY
The company's ability to compete effectively with other companies will depend,
in part, on its ability to maintain a proprietary nature for its products. The
company was awarded orphan drug status for Salagen(R) Tablets as a treatment for
xerostomia induced by radiation therapy in head and neck cancer patients. Orphan
designation provides seven years market exclusivity after product registration.
The company holds an exclusive license on two broad-based patents covering
MGI 114 and other analogs in the company's family of acylfulvenes, a new class
of potential anti-cancer compounds.
There can be no assurance that the company will be able to obtain patents for
future products or that current or future issued or licensed patents or know-how
will afford protection against competitors with similar technologies or
processes, or that any such patents will not be infringed upon or designed
around by others. In addition, there can be no assurance that others will not
independently develop proprietary technologies and processes that are the same
as or substantially equivalent to those of the company. The company could also
incur substantial costs in defending itself in suits brought against it based on
such patents or in bringing suits to protect such patents or patents licensed by
the company against infringement. Additionally, the company protects its
proprietary technology and processes in part by confidentiality agreements with
its collaborative partners, employees and consultants. There can be no
assurance that these agreements will not be breached, that the company will have
adequate remedies for any breach, or that the company's trade secrets will not
otherwise become known or independently discovered by competitors.
FLUCTUATIONS IN OPERATING RESULTS
The company's results of operations may vary from period to period due to a
variety of factors including: continuing demand for the company's products, the
introduction of new products, the continued stream of licensing and royalty
revenues, expenditures incurred to acquire or license and promote additional
products, interruptions in or availability of supply by third-party
manufacturers, the introduction of new products by the company or its
competitors, changes in sales and marketing expenditures, and general economic
and industry conditions that affect customer demand. Because the company's
operating expenses are based on anticipated sales levels, variations in the
timing of recognition of revenue could cause significant fluctuations from
period to period and may result in unanticipated earnings shortfalls or losses.
There can be no assurance that the company will be successful in maintaining or
improving its profitability or avoiding losses in any future period.
GOVERNMENT REGULATION
Government regulation in the United States and abroad is a significant factor in
the development, production, and marketing of the company's products. Prior to
marketing, each of the company's products must undergo an extensive testing and
regulatory approval process conducted by the FDA and by comparable agencies in
other countries. The testing and approval process can take several years and
require the expenditure of substantial resources, and there can be no assurance
that any product that the company may develop will be approved by the FDA or any
foreign regulatory authority in a timely manner, if at all. Generally, only a
very small percentage of newly
<PAGE>
discovered pharmaceutical compounds that enter preclinical development are ever
approved for sale.
The company depends on external laboratories and medical institutions to conduct
its preclinical and clinical testing. This research must comply with good
clinical and laboratory practices required by the FDA. The data obtained from
preclinical and clinical testing are subject to varying interpretations that
could delay, limit or prevent regulatory approval. In addition, delays or
rejection may be encountered based upon changes in FDA personnel or policy for
drug approval during the period of development and by changes in the
requirements for regulatory review of each submitted New Drug Application (NDA).
Moreover, even if the FDA approves the marketing application of a product, such
approval may entail commercially unacceptable limitations on the uses, or
"indications," for which a product may be marketed, and further studies may be
required to provide additional data on product safety or effectiveness. The FDA
also requires post-marketing adverse event surveillance programs to monitor the
product's side effects.
An FDA approved product and its manufacturer are subject to continual regulatory
review and the later discovery of previously unknown problems with a product or
manufacturer may result in restrictions or sanctions on such product or
manufacturer, including the withdrawal of such product from the market. Most
changes in the manufacturing procedures used by the company for the company's
approved products and any change in manufacturer will require the approval of
the FDA prior to their implementation, which could have an adverse effect upon
the company's ability to continue the commercialization or sale of a product.
In certain countries, the sales price of a product must also be approved after
marketing approval is granted. No assurance can be given that satisfactory
prices can be obtained in foreign markets even if marketing approval is granted
by foreign regulatory authorities.
UNCERTAINTIES RELATED TO PRICING AND REIMBURSEMENT
The profitability of the company will depend in part on the availability of
adequate reimbursement for the company's products from third-party payors, such
as government entities, private health insurers and managed care organizations.
Third-party payors are increasingly challenging the pricing of medical services
and products. Although third-party reimbursement is not currently an issue for
the company, there can be no assurance that reimbursement will be available in
the future for the company's new or existing products, or that such third-party
reimbursement will be adequate. If adequate reimbursement levels are not
provided by government entities and other third-party payors for the company's
products, the company's business, financial condition and results of operations
would be materially, adversely affected. Further, a number of legislative and
regulatory proposals aimed at changing the nation's health care system have been
proposed in recent years. While the company cannot predict whether any such
proposals will be adopted, or the effect that any such proposal may have on its
business, such proposals, if enacted, could have a material adverse effect on
the company's business, financial condition and results of operations.
<PAGE>
POTENTIAL PRODUCT LIABILITY; LIMITED INSURANCE COVERAGE
The company faces exposure to product liability claims in the event that the use
of its product is alleged to have resulted in adverse effects. Such risk exists
even with respect to those products that are manufactured in regulated and
licensed facilities or otherwise possess regulatory approval for commercial
sale. While the company has taken, and continues to take, what it believes are
appropriate precautions, there can be no assurance that it will avoid
significant product liability exposure. The company currently has product
liability insurance in the amount of $10 million per occurrence and in the
aggregate for the year. Although to date the company has not been the subject of
any product liability claims, there can be no assurance that such insurance will
be sufficient to cover potential claims. Further, there can be no assurance that
adequate insurance coverage will be available in the future on commercially
reasonable terms, if at all, or that a product liability claim would not
materially adversely affect the company's business, financial condition and
results of operations.
RISK OF PRODUCT RECALL
Product recalls may be issued at the discretion of the company, the FDA, the U.
S. Federal Trade Commission or other government agencies having regulatory
authority for product sales, and may occur due to disputed labeling claims,
manufacturing issues, quality defects or other reasons. Although none of the
company's products have been recalled, no assurance can be given that product
recalls will not occur in the future. Any product recall could materially
adversely affect the company's business, financial condition and results of
operations.
DEPENDENCE UPON CERTAIN KEY MANAGEMENT
The future success of the company is dependent upon a number of key management
personnel. The loss of the services of one or more key employees, or the
inability of the company to attract and retain skilled management and marketing
and sales personnel in the future, could have a material adverse effect on the
company's business, financial condition and results of operations.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the company's common stock, like securities of other small
companies, has fluctuated significantly in recent years and is likely to
fluctuate in the future, irregardless of the company's operating performance. In
addition, announcements by the company or others regarding commercial products,
patents or proprietary rights, the progress of clinical trials or government
regulation, public concern as to the safety of drugs, the issuance of securities
analysts' reports and general market conditions may each have a significant
effect on the market price of company common stock. Fluctuations in financial
performance from period to period also may have a significant impact on the
market price of company common stock.
