SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996 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 0-12081
CAMBRIDGE BIOTECH CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2726626
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
365 Plantation Street, Worcester, MA 01605
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 797-5777
_____________________________________________________________________
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes No X
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each issuer's classes of
common stock, as of the latest practicable date.
26,065,017 shares of Common Stock Outstanding as of May 9, 1996
CAMBRIDGE BIOTECH CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets as of March 31, 1996
and December 31, 1995
Consolidated Statement of Operations for three month
period ended March 31, 1996 and 1995
Consolidated Statement of Cash Flows for three month
period ended March 31, 1996 and 1995
Notes to Consolidated Interim Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNA SIGNATURES
- -----------------------------------------------------------------------------
Item 1. Consolidated Financial Statements
Cambridge Biotech Corporation
(Debtor-In-Possession)
Consolidated Balance Sheets
(Unaudited)
(In Thousands)
Assets 3/31/96 12/31/95
-------- --------
Current Assets:
Cash and cash equivalents $8,797 $ 6,856
Marketable Securities 0 216
Accounts receivable
-trade (net of allowance
for doubtful accounts) 3,655 2,638
Other receivables 131 126
Inventories 4,492 4,368
Prepaid expenses & other
current assets 674 695
------ ------
Total Current Assets 17,749 14,899
Investments 0 0
Property, plant, and equipment,
net 6,324 6,986
Patents and purchased
technology, net 820 1,055
Other assets 105 105
------ ------
Total Assets $24,998 $23,045
====== =======
Liabilities & Shareholders'
Equity
Current Liabilities:
Accounts payable $ 798 850
Accrued royalties 646 1,192
Accrued professional fees 830 753
Accrued incentive
compensation 1,247 1,458
Accrued Restructuring Costs 217 257
Accrued expenses 2,285 2,001
Deferred revenue 3,038 411
----- -----
Total Current Liabilities 9,061 6,922
Deferred Revenue 1,952 2,288
Liabilities subject to
Chapter 11 proceedings 9,889 9,880
----- -----
Total Liabilities 20,902 19,090
Minority Interest 9 9
Shareholders'Equity
Preferred Stock, par value
$.01 per share authorized,
5,000,000 shares, none issued 0 0
Common stock, par value
$.01 per share authorized,
40,000,000 shares, issued
26,057,006 shares 261 261
Additional paid in
capital 120,382 120,382
Unearned compensation (138) (138)
Deficit (116,418) (116,559)
------- -------
Total Shareholders'Equity 4,087 3,946
----- -----
Total Liabilities and
Shareholder's Equity $24,998 $23,045
====== ========
The accompanying notes are an integral part of these financial statements.
- -----------------------------------------------------------------------------
Cambridge Biotech Corporation
(Debtor-In-Possession)
Consolidated Statement of Operations
(Unaudited)
(In Thousands, except per share amount)
Three Months Ended March 31
1996 1995
Revenue: ---- ----
Product sales $5,589 $4,210
Research & development 1,346 1,208
Royalties 452 430
----- -----
7,387 5,848
Cost and expenses:
Cost of sales 3,721 4,159
Research & development 1,410 1,679
Sales, general &
administrative 2,063 2,616
----- -----
7,194 8,454
Other:
Interest and other income
net of interest expense 93 69
----- ------
Income/(loss) from
operations before
reorganization items
and income tax benefit 286 (2,537)
Reorganization items:
Professional fees (256) (273)
Interest earned on
accumulated cash
resulting from Chapter
11 proceedings 114 108
----- -----
Total reorganization items (142) (165)
Income/(loss) from ----- -----
operations before income
tax benefit 144 (2,702)
Income tax benefit/(expense) (2) (1)
----- -------
Income/(loss) before minority interest 142 (2,703)
Minority Interest (1) (2)
----- -------
Net Income (Loss) $ 141 ($2,705)
======== =========
Net Income/(loss) per weighted average
number of common shares:
$ 0.01 ($0.10)
====== ==========
Weighted average number of
common shares outstanding 26,057 26,057
======== =========
The accompanying notes are an integral part of these financial statements.
- -----------------------------------------------------------------------------
Cambridge Biotech Corporation
(Debtor-In-Possession)
Consolidated Statement of Cash Flows
For the three months ended March 31, 1996 and 1995
(Unaudited)
(In Thousands) 1996 1995
---- ----
Cash Flows From Operating
Activities:
Net Income/(Loss) $ 141 ($2,705)
Adjustments to reconcile net income/
(loss) to net cash used in
operating activities:
Depreciation and
amortization 1,043 1,199
Provision for doubtful accounts 15 2
Compensation expense
recognized 0 24
Loss on sale of
marketable securities 11 0
Minority interest 0 3
Loss on disposition and
write down of investments 0 1
Changes in assets and
liabilities:
Accounts and other
receivables (1,037) (183)
Inventories (124) 223
Deferred revenue 2,292 (1,068)
Prepaid and other
current assets 22 (363)
Accounts payable and
other accrued expenses (439) 1,198
Accrued restructuring
charges (40) (6)
Other noncurrent assets
and liabilities 0 (1)
--------- -----------
Net cash provided/(used) by operating
activities 1,884 (1,676)
Cash Flows From Investing
Activities:
Proceeds from sale of
marketable securities 205 0
Purchases of property,
plant, and equipment (62) (143)
Patents & purchased
technology (85) (24)
-------- ---------
Net cash provided/(used)
by investing activities 58 (167)
Cash Flows from Financing
Activities:
Payment on long-term
obligations (1) (1)
--------- ----------
Net cash provided/(used)
by financing activities (1) (1)
--------- ---------
Net increase(decrease) in cash
and cash equivalents 1,941 (1,844)
Cash and cash equivalents at
the beginning of the year 6,856 8,538
--------- ---------
Cash and cash equivalents at
the end of the period $8,797 $6,694
========= =========
Supplemental disclosures:
Income taxes paid $7 $0
========= ==========
The accompanying notes are an integral part of these financial statements.
- -----------------------------------------------------------------------------
CAMBRIDGE BIOTECH CORPORATION
NOTES TO UNAUDITED, CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Basis of Presentation:
The accompanying consolidated interim financial statements are unaudited
and have been prepared on a basis substantially consistent with the audited
financial statements. Certain information and footnote disclosures
normally included in the Company's annual financial statements have been
condensed or omitted pursuant to the Securities and Exchange Commission's
rules and regulations. The consolidated interim financial statements, in
the opinion of management, reflect all adjustments (including normal
recurring accruals) necessary for a fair presentation of the results for
the interim periods.
The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the fiscal
year. These consolidated interim financial statements should be read
in conjunction with the audited financial statements for the year ended
December 31, 1995, which are contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1995, filed with
the Securities and Exchange Commission.
2. Inventories:
-----------
Inventories consist of the following: (000'S)
3/31/96 12/31/95
------- --------
Finished goods $ 761 $ 681
Work in process 2,874 2,887
Raw materials & supplies 857 800
------- -------
$4,492 $ 4,368
======= =======
- ----------------------------------------------------------------------------
3. Subsequent Events
-----------------
As of April 4, 1996, the Company entered into an agreement to sell its
retroviral diagnostic business to bioMerieux Vitek, Inc. (bioMerieux),
for $6.5 million in cash. The transaction, which is subject to approval
of the Bankruptcy Court, is included as part of CBC's plan of reorganization
filed under Chapter 11 of the U.S. Bankruptcy Code. Under the agreement,
bioMerieux will acquire, through the acquisition of the stock of CBC,
CBC's retroviral intellectual property, which includes patents and
licenses to manufacture and sell diagnostic screening and confirmatory
tests for HIV-1, HIV-2, HTLV-II and HTLV-II and Lyme disease. bio-
Merieux will also acquire CBC's diagnostic manufacturing operations in
Rockville, Maryland, and will enter into a long-term lease from CBC for
CBC's Rockville manufacturing facilities. The transaction is expected
to close upon confirmation of the reorganization plan by the Bankruptcy
Court.
On April 10, 1996, CBC filed a plan of reorganization under Chapter 11
of the U.S. Bankruptcy Code. The disclosure statement describing the
plan is subject to approval by the Bankruptcy Court. The plan requires
approval of CBC's creditors and shareholders and confirmation by the
Bankruptcy Court. The proposed reoganization plan will establish a new
company, Aquila Biopharmaceuticals, Inc.(Aquila), engaged in the
development and commercialization of products that stimulate the immune
system for treating infectious diseases and cancer. CBC will transfer to
Aquila all of its assets, liabilities and intellectual property except for
the diagnostic business. The plan anticipates that the enterics
(intestinal diseases) and human Lyme EIA diagnostic business will be sold
to Carter-Wallace (See following paragraph), and CBC will then be sold to
bioMerieux.
As of May 1, 1996, CBC entered into an agreement to sell its enterics
(intestinal diseases) and human Lyme EIA diagnostic business to Carter-
Wallace for $4.5 million in cash. Under the agreement, which is subject
to approval of the Bankrupcty Court, Carter-Wallace will acquire four
diagnostic tests for intestinal pathogens and a diagnostic test for
Lyme disease. The transaction also includes a six-month contract for CBC
to manufacture the products for Carter-Wallace at its manufacturing
facility in Worcester, Massachusetts.
- -----------------------------------------------------------------------------
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
- -----
The Company filed for protection under Chapter 11 of the United States
Bankruptcy Code ("Chapter 11") on July 7, 1994 and is managing its assets
and operating its businesses as a debtor in possession pursuant to a
voluntary petition filed in the United States Bankruptcy Court for the
District of Massachusetts, Western Division. Since the Chapter 11 filing,
management has spent considerable time reviewing the Company's strategic
direction, as well as specific products and programs. It has sold or
disposed of certain assets and operations of the Company which did not fit
within the business plan for reorganizing the Company. The Company has
entered into agreements for the sale of its retrovirus and enterics
diagnostic businesses (see also footnote 3, subsequent events, in Notes
to Unaudited, Consolidated Interim Financial Statements). Both sales must
be approved by the Bankruptcy Court. The sale of the retrovirus business
is also subject to confirmation of the Company's plan of reorganization by
the Bankruptcy Court.
Results of Operations
- ---------------------
Three Months Ended March 31, 1996 and 1995
Revenues were $7,387,000 in the three months ended March 31, 1996 compared
to $5,848,000 in the same period in 1995, (a 26% increase).
Product sales increased to $5,589,000 in the first quarter of 1996 from
$4,210,000 for the same period in 1995 (a 33% increase). The increase is
primarily attributable to growth in the Company's European diagnostics sales
and increases in certain antigen product sales, as well as increased sales by
the Company's consolidated subsidiary, Cambridge Affilated Corporation
("CAC"), in the first quarter of 1996 compared to the same period in 1995.
Product sales of the diagnostics division represented $4,319,000 ( or 77%
of product sales) in the first quarter of 1996 compared to $3,579,000 (85%)
for the same period in 1995. CAC had product sales of $766,000 in the first
quarter of 1996 compared to $587,000 for the same period in 1995.
Research and Development ("R&D") revenues were $1,346,000 in the
first quarter of 1996 as compared to $1,208,000 for the same period in 1995.
The 11% increase is primarily due to revenue recorded on CBC's Mastitus
project.
Royalty revenue slightly increased to $452,000 in the first quarter of 1996
from $430,000 for the same period in 1995.
Cost of products sold as a percentage of product sales was 66% for the
three months ended March 31, 1996 compared to 99% for the same period
in 1995. Favorable product mix changes in 1996 compared to historical
averages and the 1995 margin, and production difficulties on certain
products in the first quarter of 1995 that resulted in significantly greater
costs, are the primary reasons for the more favorable margin in 1996.
Research and development expenses decreased to $1,410,000 in the first
quarter of 1996 from $1,679,000 for the same period in 1995 due to
certain product development costs, contract obligations, and employee
stay incentives recorded in 1995.
Selling, general and administrative expenses decreased to $2,063,000
in the first quarter of 1996 from $2,617,000 for the same period in
1995 primarily due to employee stay incentives recorded in the first quarter
of 1995 and a decrease in legal costs.
Chapter 11 related professional fees and interest earned on accumulated
cash were $256,000 and $114,000, respectively for the three months ended
March 31, 1996, compared to $273,000 and $108,000 for the same period in 1995.
As a result of the above, the Company had income of $141,000 or $0.01 per
share in the first quarter of 1996, as compared to a loss of $2,705,000 or
$0.10 per share for the same period in 1995.
- -----------------------------------------------------------------------------
Liquidity and Capital Resources
- -------------------------------
The Company's ability to fund its long term operations beyond 1996 is
dependent on several factors, including the sale of the Company's diagnostics
businesses, the confirmation of a/the Company's reorganization, and the
Company's ability to attract funding through additional public or private
financing or collaborative arrangements. There can be no assurance that
adequate operating funds will be generated through the sale of the
diagnostics business or that additional funding can be obtained on
acceptable terms.
Cash and cash equivalents were $8,797,000 at March 31, 1996 compared to
$6,856,000 at December 31, 1995 with the increase due primarily to the
receipt of the 1996 license payment from a large pharmaceutical partner.
The net cash provided by operating activities was $1,883,000 for the three
months ended March 31, 1996 as compared to net cash used in operating
activity of $1,676,000 for the same period in 1995. The primary non-cash
items were depreciation and amortization of $1,043,000 and $1,199,000 for
three months ended March 31, 1996 and 1995, respectively. The increase in
deferred revenue in the first quarter of 1996 is primarily the result of the
receipt of an annual license payment from a large pharmaceutical partner
which is recognized evenly over the course of the year. The company received
the 1995 payment in 1994 which is the primary reason for the reduction in
deferred revenue in the first quarter of 1995. The increase in receivables
in the first quarter of 1996 primarily reflects the increase in product sales
during the quarter. Accounts payable and accrued expenses increased in 1995
due to patent related milestone obligations, employee retention bonus, and
timing of expenditures.
The Company's investing activities provided cash of $58,000 for the three
months ended March 31, 1996, compared to using cash of $167,000 for the same
period in 1995. The sale of some marketable securities was the primary reason
for the change in investing activities.
The Company had total working capital of $8,688,000 and current ratio of
1.96 to 1 at March 31, 1996, compared to $7,977,000 and 2.15 to 1 at
December 31, 1995. However, the Company has approximately $9,900,000 in
liabilities subject to Chapter 11 proceedings and if all of these liabilities
were considered current liabilities, the current ratio would have been 0.94
to 1 at March 31, 1996, compared to 0.89 to 1 at December 31, 1995.
- ----------------------------------------------------------------------------
In a Chapter 11 case, substantially all liabilities as of the date of filing
of the petition for reorganization are subject to settlement under a plan
of reorganization to be voted upon by the creditors and equity security
holders and approved by the Bankruptcy Court. The Company continues to
manage its affairs and operate its business as a debtor in possession,
subject to the supervision of the Bankruptcy Court while the case is pending.
In the event a plan of reorganization is approved by the Bankruptcy Court,
continuation of the business after reorganization is dependent upon the
success of future operations and the Company's ability to meet obligations
as they become due. The accompanying financial statements have been prepared
on a going concern basis, which contemplates continuity of operations,
realization of assets and liquidation of liabilities in the ordinary course
of business. As a result of the reorganization proceedings, the Company may
have to sell or otherwise dispose of assets and liquidate or settle
liabilities for amounts other than those reflected in the financial
statements. The financial statements do not give effect to adjustments to
the carrying value of assets, or amounts and reclassification of liabilities
that might be necessary as a consequence of these bankruptcy proceedings.
The appropriateness of using the going concern basis is dependent upon, among
other things, confirmation of a plan of reorganization, success of future
operations, and the ability of the Company to generate sufficient cash
from operations and financing sources to meet its obligations. However,
there can be no assurance that the above events will occur.
- -----------------------------------------------------------------------------
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports of Form 8-K
(a) Financial Data Schedule
(b) Reports on Form 8-K filed in 1996
1. Current report on Form 8-K dated 01/03/96
2. Current report on Form 8-K dated 01/24/96
- -----------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
duly caused this report to be signed on its behalf by undersigned thereunto
duly authorized.
CAMBRIDGE BIOTECH CORPORATION
Date: May 15, 1996
/s/ Alison Taunton-Rigby
------------------------------------
Alison Taunton-Rigby
President and Chief Executive Officer
/s/ Stephen J. DiPalma
------------------------------------
Stephen J. DiPalma
Vice President Finance,
Chief Financial Officer and
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited Consolidated Balance Sheets, the Consolidated Statement of
Operations, and the Consolidated Statement of Cash Flows, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 8,797
<SECURITIES> 0
<RECEIVABLES> 3,963
<ALLOWANCES> (177)
<INVENTORY> 4,492
<CURRENT-ASSETS> 17,749
<PP&E> 25,241
<DEPRECIATION> (18,917)
<TOTAL-ASSETS> 24,998
<CURRENT-LIABILITIES> 9,061
<BONDS> 4,020
0
0
<COMMON> 261
<OTHER-SE> 3,826
<TOTAL-LIABILITY-AND-EQUITY> 24,998
<SALES> 5,589
<TOTAL-REVENUES> 7,387
<CGS> 3,721
<TOTAL-COSTS> 3,721
<OTHER-EXPENSES> 3,473
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> 144
<INCOME-TAX> 2
<INCOME-CONTINUING> 141
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 141
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
