<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
--------------
[_] 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 0-11103
-------
CENTOCOR, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2117202
- -------------------------------------- -----------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
200 Great Valley Parkway Malvern, Pennsylvania 19355-1307
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
610-651-6000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Shares of Common Stock outstanding at April 30, 1995 were 58,221,847.
<PAGE>
Part I: Financial Information
- -----------------------------
Item 1: Financial Statements
CENTOCOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1995 1994
- ----------------------------------- ------------ -------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents (Notes 4 and 6) $26,422 $78,925
Short-term investments (Notes 4 and 6) 146,858 102,663
Accounts and contracts receivable 18,774 11,842
Interest receivable 1,910 1,082
Inventory (Note 5) 21,129 16,682
Prepaid expenses 2,420 2,722
Other current assets 1,388 1,041
-------- --------
218,901 214,957
Fixed assets (Note 6):
Land and buildings 73,645 71,137
Equipment, furniture, fixtures and
improvements 66,805 60,671
-------- --------
140,450 131,808
Less accumulated depreciation (68,465) (61,768)
-------- --------
71,985 70,040
Long-term investments (Note 4) 8,664 2,919
Intangible and other assets 18,537 17,999
-------- --------
Total assets $318,087 $305,915
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
CENTOCOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT'D.)
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1995 1994
======================================= ============ ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
<S> <C> <C>
Accounts payable $5,264 $6,383
Accrued expenses 28,331 26,378
Unearned revenues 517 1,407
Notes payable (Note 6) 7,792 6,897
Current portion of
long-term debt (Note 6) 28,290 26,182
---------- --------
70,194 67,247
Long-term debt (Note 6) 231,640 231,640
Other liabilities 1,398 1,240
Minority interest 1,205 510
Shareholders' equity (Note 2):
Preferred Stock, $.01 par value,
10,000 shares authorized, none issued - -
Common Stock, $.01 par value,
100,000 shares authorized and
58,117 and 57,081 issued and
outstanding at March 31, 1995
and December 31, 1994, respectively 581 571
Additional paid-in capital 765,973 750,175
Deficit (759,949) (751,707)
Unrealized loss on marketable
securities (167) -
Cumulative foreign currency
translation adjustments 7,212 6,239
---------- --------
13,650 5,278
---------- --------
Total liabilities and
shareholders' equity $318,087 $305,915
========== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
CENTOCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
================================================================================
For the three months ended March 31, 1995 1994
================================================================================
<S> <C> <C>
Revenues:
Sales $19,319 $9,829
Contracts (including related
party revenues of $1,652
in 1994) (Note 7) 4,676 5,444
------- --------
23,995 15,273
Costs and expenses:
Cost of sales 8,625 3,630
Research and development (including contract
revenue-related expenses of $1,572 in 1994) 13,501 14,389
Marketing, general and administrative (including
contract revenue-related expenses of $343
in 1994) 7,494 6,818
Charge for acquired research and
development (Note 8) - 36,966
------- --------
29,620 61,803
Other income (expense):
Interest income 2,785 1,108
Interest expense (4,964) (4,960)
Other (438) (255)
------- --------
(2,617) (4,107)
Net loss ($8,242) ($50,637)
======= ========
Net loss per share ($0.14) ($1.13)
======= ========
Weighted average number of shares
outstanding 57,769 44,783
======= ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
CENTOCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unuadited)
<TABLE>
<CAPTION>
================================================================================
For the three months ended March 31, 1995 1994
================================================================================
<S> <C> <C>
Cash flows used for operating activities:
Net loss ($8,242) ($50,637)
Adjustments to reconcile net loss to net cash
used for operating activities:
Charge for acquired research and development - 36,966
Net loss on long-term investments - 512
Depreciation and amortization 4,454 5,064
Amortization of deferred income (1,657) (1,738)
Other 696 1
Changes in assets and liabilities:
Accounts and contracts receivable (6,317) 3,800
Interest receivable (775) 55
Inventory (3,182) (1,353)
Prepaid expenses (271) (451)
Other current assets (225) (28)
Intangible and other assets (322) (818)
Accounts payable (1,422) (3,395)
Unearned revenue 158 238
Accrued expenses and other liabilities 915 (3,085)
Other long-term liabilities 194 565
------- --------
Net cash used for operating activities (15,996) (14,304)
Cash flows from (used for) investing activities:
Net (purchases) sales of investments (50,302) 5,534
Net purchases of fixed assets (1,654) (1,391)
Acquisition of Tocor II - 3,991
------- --------
Net cash from (used for) investing activities (51,956) 8,134
Cash flows from (used for) financing activities:
Net proceeds from issuance of Common Stock 15,173 2,065
Reduction of long-term debt and notes payable (275) (249)
------- --------
Net cash from financing activities 14,898 1,816
Effect of foreign currency translation 551 6
------- --------
Net (decrease) in cash and cash equivalents (52,503) (4,348)
Beginning cash and cash equivalents 78,925 46,210
------- --------
Ending cash and cash equivalents $26,422 $41,862
======= ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
Centocor, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
--------------------------------------------------------------------------
Note 1
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles applicable to interim
periods. These financial statements do not include all disclosures required for
annual financial statements and should be read in conjunction with the more
complete disclosures contained in Centocor, Inc.'s ("Centocor" or "the Company")
audited financial statements in the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
The statements reflect, in the opinion of management, all adjustments of a
normal and recurring nature necessary to present fairly the Company's
consolidated financial position at March 31, 1995 and December 31, 1994 and the
consolidated results of operations and the consolidated cash flows for the three
months ended March 31, 1995 and 1994. The results of operations and the cash
flows for the three months ended March 31, 1995 are not necessarily indicative
of the results to be expected for the entire year.
Note 2
Commitments and Contingencies
Liquidity and Capital Resources
-------------------------------
The Company has incurred significant operating expenses attempting to
develop pharmaceutical products. The Company's product sales through 1994 were
almost exclusively generated by in-vitro diagnostic products. Consequently,
excluding the impact of significant contract revenues through collaborative
alliances with pharmaceutical companies and financing activities, the Company
has experienced substantial net cash outflows.
The Company's future financial condition is highly dependent upon the
reduction of the Company's rate of net cash outflows and, ultimately, upon the
achievement of significant and sustained levels of pharmaceutical product sales.
The Company commenced the commercial sale of two pharmaceutical products -
ReoPro(TM) in January 1995 and Panorex(R) in February 1995. During the year
ending December 31, 1995, sales of those two products alone are not expected to
generate sufficient revenue to enable the Company to avoid a net cash outflow
for the year. Under the Company's collaborative strategy of entering into
alliances with established pharmaceutical companies, the Company generally
shares sales revenues from products covered by such arrangements with its
partners. There can be no assurance that those products, in conjunction with the
Company's pharmaceutical product candidates under development and in-vitro
diagnostic products, will achieve a level of sales sufficient to generate
positive cash flow from operations for the Company, given the current and
currently anticipated future scope of the Company's operations.
6
<PAGE>
Centocor, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
--------------------------------------------------------------------------
The level of future sales of both diagnostic and pharmaceutical products will be
dependent upon several factors including, but not limited to, the timing and
extent of future regulatory approvals of the Company's products, approval and
commercialization of competitive products and the degree of acceptance of the
Company's products in the marketplace. There can be no assurance that FDA or
other regulatory approvals expanding the authorized use of ReoPro(TM) and
Panorex(R) or permitting the commercial sale of any of the Company's product
candidates under development will be obtained. Failure to obtain additional
timely FDA or other regulatory approvals for the use of ReoPro(TM) and
Panorex(R) or other product candidates will have a material adverse effect on
the Company.
The Company expects that it will need to secure significant additional
funding in the future from collaborative arrangements with pharmaceutical
companies or from the capital markets until significant and sustained levels of
pharmaceutical sales are achieved. There can be no assurance that significant
additional funding will be available to the Company or that the Company can
obtain additional collaborations with established pharmaceutical companies and
receive payments for product rights and/or the achievement of milestones under
such collaborative agreements. Even if the Company obtains such funding, there
can be no assurance that such funding will be sufficient to produce positive
cash flows from operations.
Legal Proceedings
- -----------------
On December 23, 1993, a purported class action captioned Peter Cordaro v.
Hubert J.P. Schoemaker, Stelios Papadopoulos, Marc Feldmann, David Golden,
Centocor, Inc., and Tocor II, Inc. ("Tocor II") was filed in the Court of Common
Pleas of the Commonwealth of Pennsylvania, in and for Chester County. The
complaint alleges that the defendants breached their fiduciary duties to Tocor
II Unitholders by, among other things, making an offer to exchange shares of the
Company's Common Stock for Tocor II Units, recommending acceptance of the
exchange offer, and failing to maximize shareholder value. The complaint
sought, among other relief, an injunction against consummation of the exchange
offer, the establishment of a "truly independent" special committee and the
retention of a financial advisor to consider the exchange offer, and an award of
damages (including rescissionary damages), costs and plaintiff's counsel fees.
No injunction was, in fact, sought, and the exchange offer was made and
consummated. The defendants filed a motion to dismiss the complaint on the
ground that the Pennsylvania court should not exercise jurisdiction over a
matter relating to the internal affairs of a foreign corporation. On February
27, 1995, this motion was denied without prejudice to its subsequent renewal.
The Company believes that the allegations set forth in the complaint are without
merit and intends to vigorously defend the suit.
In January 1993, following suspension of the Company's CHESS trial of
Centoxin(TM) ("HA-1A(R)"), purported security holders of the Company and/or
Tocor II filed complaints in the United States District Court for the Eastern
District of Pennsylvania against the Company, Tocor II, and
7
<PAGE>
Centocor, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
--------------------------------------------------------------------------
certain present and former directors and/or officers of the Company and/or Tocor
II, and Eli Lilly and Company ("Lilly"). The cases were consolidated pursuant to
an order, and a Consolidated Class Action Complaint captioned In Re Centocor
Securities Litigation II, No. 93-CV-0236 was filed in May 1993, based on alleged
violations of securities laws and alleged breaches of common law duties. All
claims against all defendants, except the Company and two of its
officers/directors and a former director, were voluntarily dismissed when that
Complaint was filed. In November 1994, a Corrected Consolidated Amended Class
Action complaint was filed in which a number of the original plaintiffs were
dropped ("the Complaint"). The Complaint alleges that defendants knowingly or
recklessly omitted certain material facts and made false and misleading
statements of material facts about Centoxin(TM) and the CHESS trial in violation
of Sections 10(b) and 20 of the Securities Exchange Act of 1934 and Rule 10b-5
thereunder, and also alleges violations of the common law of negligent
misrepresentation. The action has been conditionally certified as a class action
on behalf of persons who purchased common stock and convertible subordinated
debentures of the Company from April 21, 1992 through January 15, 1993 and who
were allegedly damaged thereby. The Complaint seeks compensatory damages in
unspecified amounts, counsel fees, interest, costs of suit, and such other
relief that the court deems appropriate. Defendants have answered the Complaint
and denied all material allegations therein. Discovery is in progress. The
Company believes that the allegations set forth in the Complaint are without
merit and intends to vigorously defend the suit.
In May 1993, the Company was served with a complaint filed earlier in the
United States District Court for the Southern District of California at San
Diego. The plaintiff, who allegedly had purchased shares of Corvas
International, Inc. ("Corvas") in its initial public offering on January 30,
1992, brought suit against Corvas and certain of its directors, the Company, and
one of the Company's directors and a former director (the "Centocor
defendants"), on behalf of similarly situated investors. The complaint alleges
the defendants violated the federal securities laws by disclosing to Corvas'
investors that Centocor and Corvas had entered into a "strategic alliance" to
develop one of Corvas' products, but failing to disclose that the Company
allegedly would not be able to perform on that agreement because of events
relating to Centoxin(TM) (HA-1A(R)). The Complaint sought to proceed as a class
action on behalf of all those who purchased Corvas common stock during the
period from January 30, 1992 through January 15, 1993. A motion to dismiss the
complaint in its entirety as to the Centocor defendants was filed in early June
1993. Corvas and its directors had also filed a motion to dismiss. In
September 1993, the Court dismissed a number of plaintiff's claims including
claims relating to the period after April 14, 1992 and, in effect, the claim
brought against the Company under Section 10(b) of the Securities Exchange Act
of 1934. As to the remaining claims, the Court conditionally certified a class
of all purchasers of Corvas common stock during the period January 30, 1992
through April 14, 1992. An agreement has been reached by all parties which, if
approved by the Court, would lead to the settlement and dismissal of this
action. The Company would contribute to the settlement 600,000 shares of the
stock of Corvas
8
<PAGE>
Centocor, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
--------------------------------------------------------------------------
which it holds.
In October 1992, the Company was served with a complaint filed by the Velos
Group, a Maryland partnership ("Velos"), in the United States District Court for
the District of Maryland. The complaint alleges, principally, that the Company
breached certain provisions of a license agreement between Velos and the Company
pursuant to which the Company has exclusive rights to U.S. Patent No. 5,057,598,
which includes claims relating to monoclonal antibodies used in treating
manifestations of Gram-negative bacterial infections. The complaint seeks
declaratory relief, monetary relief in excess of $100,000,000, and requests that
the Company place in escrow one-half of the amounts received by the Company
pursuant to its agreements with Lilly. The complaint does not seek to terminate
or rescind any of the Company's rights under the license agreement. The Company
answered the complaint and asserted affirmative defenses and counterclaims on
January 7, 1993, but the counterclaims and certain affirmative defenses were
dismissed with leave to replead on June 22, 1993. On July 28, 1993, the Court
permitted plaintiff to file an amended complaint that updated some of the claims
in the original complaint but otherwise reasserted the basic factual allegations
and, with one minor exception, relied upon the same legal theories. On August
27, 1993, the Company filed its Answer, Affirmative Defenses and Counterclaim
for Damages and Equitable Relief, to the amended complaint (the "Amended
Answer"). In the Amended Answer, the Company again denied all of the
allegations made by Velos and stated certain affirmative defenses and
counterclaims against Velos with respect to the license agreement, based on
theories of (I) failure of consideration, (ii) fraud in the inducement, and
(iii) unilateral mistake as to facts, which mistake was induced by the
fraudulent misrepresentation of Velos. On September 22, 1993, plaintiff moved
to dismiss the Company's counterclaims and to strike certain of the Company's
affirmative defenses. On February 6, 1995, the motion was denied. Discovery
has now been resumed and trial is fixed for January 1996. The Company believes
that the allegations of Velos are without merit and intends to vigorously defend
the suit.
The Company has been informed by PaineWebber Development Corporation
("PaineWebber"), which acted as the sales agent for the limited partnership
interests in Centocor Partners II, L.P. ("CPII") and Centocor Partners III, L.P.
("CPIII") and which also manages partnerships which hold limited partnership
interests in CPII and CPIII, that it has retained counsel to represent the
partnerships which it manages. Counsel are investigating possible claims which
the limited partners may have for additional royalties in connection with the
funds received by Centocor in the transactions with Lilly in July 1992 and June
1993 relating to HA-1A(R) and ReoPro(TM). PaineWebber has stated that the fact
that counsel have been retained for these purposes does not constitute a
representation that either partnership has a claim or that any claim will be
brought.
While it is not possible to predict accurately or determine the eventual
outcome of these matters, the Company believes that the foregoing proceedings
and investigations will not have a
9
<PAGE>
Centocor, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
--------------------------------------------------------------------------
material adverse effect on the financial position of the Company.
Partnerships
- ------------
The Company has licensed certain technology related to ReoPro(TM) and a
certain cardiovascular imaging product to CPIII and performs research and
development with respect to such technology on CPIII's behalf. CPIII holds the
rights to the licensed technology and results of the research and development
efforts related thereto. The Company has the option to acquire such rights
through its option to purchase the limited partnership interests in CPIII. The
Company's option to purchase the limited partnership interests in CPIII is
exercisable upon the earlier of (a) each limited partner having received
distributions related to sales of the CPIII products equal to $15,000 per full
limited partnership interest and the expiration of at least 24 months after the
first commercial sale of a CPIII product or (b) the expiration of at least 48
months after the first commercial sale of a CPIII product; but, in any event,
not prior to the expiration of the then applicable long-term capital gains
holding period after the expenditure by the Company of all funds paid to it
pursuant to the Development Agreement with CPIII. The Company commenced
commercial sales of ReoPro(TM) in January 1995. If the Company elects to
exercise its option to purchase the limited partnership interests in CPIII, the
Company must make an advance payment of approximately $13,598,000 in cash or, at
the Company's election, approximately $15,229,000 in the Company's Common Stock,
and future payments generally of six percent of sales of products developed by
CPIII. The Company and CPIII have formed a joint venture for the purpose of
commercializing ReoPro(TM). Joint venture profits, if any, are allocated 75
percent to the Company and 25 percent to CPIII. The Company consolidates the
results of the joint venture's operations and records the profits allocable to
CPIII as a royalty expense, a component of cost of sales. The joint venture will
terminate upon the occurrence of certain events including the exercise or
expiration of the purchase option.
The Company has entered into indemnity agreements with CPIII and the former
limited partners of Centecor Cardiovascular Imaging Partners, L.P. ("CCIP") and
CPII pursuant to which the Company would be obligated, under certain
circumstances, to compensate these parties for the fair market value of their
respective interests under any license agreements with the Company relating to
their respective products which are lost through the exercise by the United
States Government of any of its rights relating to the licensed technology. The
amount of any such loss would be determined annually by independent appraisal.
Royalties
- ---------
The Company is required to make certain future payments to the former
limited partners of CCIP and CPII based on sales of products developed by each
of the respective partnerships. Upon any exercise by the Company of its option
to acquire the limited partnership interests in CPIII, the
10
<PAGE>
Centocor, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
---------------------------------------------------------------------------
Company would be required to make future payments to the former limited partners
of CPIII, including payments based on any sales of ReoPro(TM). As discussed
above, until such option is exercised, CPIII's allocable profits are reported as
royalty expense. Additionally, pursuant to its agreements with Lilly, the
Company may be required to make royalty payments on sales of ReoPro(TM).
The Company has entered into agreements to support research at certain
research institutions. These agreements, which grant the Company licenses
and/or options to license certain technology resulting from the research,
generally require the Company to pay royalties to such institutions on the sales
of any products that utilize the licensed technology. Further, the Company has
licenses under certain patents, patent applications and technology and pays the
licensors or their licensees royalties under such agreements.
All royalties are reflected in cost of sales as incurred. Royalty costs
represent a significant percentage of sales.
Product Liability
- -----------------
The testing and marketing of medical products entails an inherent risk of
product liability. The Company maintains limited product liability insurance
coverage. Such insurance is difficult and expensive to obtain. The Company's
business may be adversely affected by a successful product liability claim in
excess of its insurance coverage.
Under various contractual agreements, the Company has agreed to indemnify
third parties against certain losses, including losses arising from product
liability and patent infringement claims pertaining to the Company's products.
Note 3
Collaborative Arrangements
Relationship with Lilly
- -----------------------
Under a Sales and Distribution Agreement, the Company is principally
responsible for developing and manufacturing HA-1A(R) and ReoPro(TM). Lilly is
principally responsible for the marketing, sale and distribution of HA-1A(R) and
ReoPro(TM).
Under agreements with Lilly, the Company and Lilly share equally in the
profits from ReoPro(TM) and the Company may be required to pay Lilly royalties
on sales of ReoPro(TM). The Company may be required to make a payment to Lilly
of $50 million through December 31, 1995,
11
<PAGE>
Centocor, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
---------------------------------------------------------------------------
or decreasing amounts through December 31, 1999, in the event of any change in
control of the Company or in the event of any governmental action or
determination which results in the Sales and Distribution Agreement not being in
full force and effect in all material respects in major jurisdictions, excluding
the United States, and the subsequent termination of the Sales and Distribution
Agreement by Lilly based solely on such events.
Relationship with Glaxo/Wellcome plc.
- -------------------------------------
The Company entered into an alliance agreement with Glaxo/Wellcome plc.
(previously "Wellcome plc.") for the development and marketing of certain of the
Company's monoclonal antibody-based cancer therapeutic products, including
Panorex(R). Under the alliance agreement, the Company and Glaxo/Wellcome share
revenues from the sale of the products, including Panorex(R). Centocor is
principally responsible for the manufacture of Panorex(R) and for securing
regulatory approvals for Panorex(R). Glaxo/Wellcome is principally responsible
for the clinical development, marketing, sale and distribution of such drugs,
including Panorex(R), on a worldwide basis.
Note 4
Cash Equivalents and Investments
The Company's equity investments classified as available for sale are
carried at the lower of estimated fair value or adjusted cost. The Company's
investments in U.S. treasury securities and corporate bonds which the Company
has the ability and intent to hold to maturity are carried at amortized cost.
At March 31, 1995, securities classified as available for sale and held to
maturity are summarized below (in thousands):
12
<PAGE>
Centocor, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Estimated Estimated
Adjusted Unrealized Unrealized Carrying
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Investments available for sale:
Equity securities $ 3,001 $ - $(167) $ 2,834
===== ====== ==== ======
Estimated Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
----- ----- ------ -----
Investments held to maturity:
Securities and obligations of
the U.S. Treasury and other
U.S. government agencies $103,447 $ 128 $(294) $103,281
Certificates of deposit 29,012 - - 29,012
Corporate bonds and
commercial paper 35,813 13 (60) 35,766
------- ------- ------ -------
$168,272 $ 141 $(354) $168,059
======= ======= ====== =======
</TABLE>
At March 31, 1995, these securities were classified as follows (in thousands):
<TABLE>
<S> <C>
Cash equivalents $ 15,584
Short-term investments 146,858
Long-term investments 8,664
----------
$171,106
==========
</TABLE>
The Company has agreed to maintain investments of $27,700,000 as of March
31, 1995 at certain banks as collateral for loans from those banks. See Note 6.
13
<PAGE>
Centocor, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
---------------------------------------------------------------------------
Note 5
Inventory
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
-------- -----------
<S> <C> <C>
Raw materials $ 6,120 $ 3,564
Work in process 12,352 8,973
Finished goods 2,657 4,145
------- -------
$21,129 $16,682
======= =======
</TABLE>
Inventories have various expiration dates. The Company continually
evaluates the extent of inventory reserves considered necessary based upon the
future regulatory and commercial status of such products. There can be no
assurance that reserves for inventories will not be required in the future.
Note 6
Debt
Notes Payable
Notes payable at March 31, 1995 and December 31, 1994 consists of
$7,792,000 and $6,897,000, respectively, of borrowings under short-term notes at
an interest rate of 5.57 percent per annum at March 31, 1995, payable in Dutch
guilders no later than September 28, 1995. These borrowings are secured by
investments at the lending bank of $7,700,000 (see "Loan Covenants").
14
<PAGE>
Centocor, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- -------------------------------------------------------------------------------
Long-term debt
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---------- -------------
<S> <C> <C>
7-1/4 percent Notes $106,640 $106,640
6-3/4 percent Debentures 125,000 125,000
Mortgage Debt 16,718 15,941
Long-term Note 11,572 10,241
-------- --------
259,930 257,822
Current Portion (28,290) (26,182)
-------- --------
$231,640 $231,640
======== ========
</TABLE>
7-1/4 Percent Notes
On January 28, 1991, the Company issued $106,645,000 principal amount of
7-1/4 percent Convertible Subordinated Notes (the "7-1/4 percent Notes") due
February 1, 2001. The 7-1/4 percent Notes are convertible by the holders into
approximately 3,843,000 shares of the Company's Common Stock at a conversion
price of $27.75 per share at any time prior to redemption or maturity. The 7-1/4
percent Notes are subordinated in right of payment to senior indebtedness at
March 31, 1995 of $36,082,000 and all future senior indebtedness of the Company,
and rank pari passu with the 6-3/4 percent Debentures described below. The 7-1/4
percent Notes are redeemable by the Company for cash in whole or in part until
February 1, 2001 at amounts ranging up to 104 percent of the principal amount of
the 7-1/4 percent Notes. The Company may be required to redeem the 7-1/4 percent
Notes at their principal amount at the option of the holders of the 7-1/4
percent Notes in certain limited circumstances, including a change in control of
the Company.
6-3/4 Percent Debentures
On October 16, 1991, the Company issued $125,000,000 principal amount of
6-3/4 percent Convertible Subordinated Debentures (the "6-3/4 percent
Debentures") due October 16, 2001. The 6-3/4 percent Debentures are convertible
by the holders into approximately 2,049,000 shares of the Company's Common Stock
at a conversion price of $61.00 per share at any time prior to redemption or
maturity. The 6-3/4 percent Debentures are subordinated in right of payment to
senior indebtedness at March 31, 1995 of $36,082,000 and all future senior
indebtedness of the Company, and rank pari passu with the 7-1/4 percent Notes.
The 6-3/4 percent Debentures are redeemable by the Company for cash in whole or
in part until October 16, 2001 at amounts ranging
15
<PAGE>
Centocor, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
---------------------------------------------------------------------------
up to 104 percent of the principal amount of the 6-3/4 percent Debentures. The
Company may be required to redeem the 6-3/4 percent Debentures at their
principal amount at the option of the holders of the 6-3/4 percent Debentures in
certain limited circumstances, including a change in control of the Company.
Mortgage Debt
Mortgage loans have been used to finance a portion of the acquisition and
expansion of certain of the Company's facilities in the United States and The
Netherlands. These loans are generally secured by the related land and
buildings. In the United States, the Company has such a loan outstanding with a
balance of approximately $6,442,000 at March 31, 1995 which bears interest at an
annual rate of 10 percent through its maturity date of May 1, 1995. A
Netherlands loan, with an outstanding balance of approximately $6,218,000 at
March 31, 1995, is payable in Dutch guilders, bears interest at an annual rate
of 8-1/4 percent through its final maturity date of September 30, 2011, and is
secured by certain equipment, inventories, and accounts receivable. At March
31, 1995, both of these loans are classified as short-term (see "Loan
Covenants").
Long-term Note
The Company borrowed $11,572,000 under a 9-1/2 percent long-term note which
is payable in Dutch guilders. This loan is secured by the same assets as the
Netherlands loan discussed above. At March 31, 1995, this loan is classified as
short-term (see "Loan Covenants").
Loan Covenants
Agreements covering $21,847,000 of the Company's outstanding debt balances
contain certain financial and non-financial covenants, including the maintenance
of minimum equity and cash balances and compliance with certain financial
ratios. The Company has obtained waivers of certain of such covenants on the
condition that it maintains certain investments at the lending bank, which at
March 31, 1995 totaled $20,000,000. There can be no assurance that the Company
will be able to continue to collateralize such loans and, accordingly, the
Company has classified $21,847,000 of debt as short-term. Additionally,
$7,792,000 of the Company's short-term debt is secured by investments at the
lending bank of $7,700,000. If cash flows continue to be negative, the
Company's ability to service its debt may be impaired.
16
<PAGE>
Centocor, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- -------------------------------------------------------------------------------
Note 7
Contract Revenues
Lilly Related
-------------
Pursuant to the Company's agreements with Lilly, the Company recognized
revenues of $3,000,000 and $3,500,000 for the three months ended March 31, 1995
and 1994, respectively, related to ReoPro(TM) milestones. Lilly may make certain
future payments based on the achievement of certain milestones related to
ReoPro(TM).
Related Party Research & Development
------------------------------------
For the three months ended March 31, 1994, the Company conducted research
and development under a contract with Tocor II. Under the contract, the Company
received reimbursement of its costs plus a management fee. Such revenues were
recorded net of amortization of deferred costs resulting from the issuance of
warrants to Tocor II Unitholders. See Note 8 for a discussion of an exchange
offer which resulted in the termination of the research and development contract
and services agreement.
For the three months ended March 31, 1994, revenues related to the Tocor II
research program were $1,652,000. Expenses incurred, including general and
administrative expenses for the three months ended March 31, 1994 were
$1,915,000.
Note 8
Charge for Acquired Research and Development
In February 1994, the Company initiated the exchange offer pursuant to
which the Company offered to exchange 3.2 shares of its Common Stock for each of
the 2,250,000 outstanding Tocor II Units tendered. Each Unit consisted of one
share of callable common stock of Tocor II, one callable warrant to purchase one
share of Centocor Common Stock and one Series T warrant to purchase one share of
Centocor Common Stock (the "Warrants"). The exchange offer expired at the close
of business on March 11, 1994, at which time the Company accepted all of the 94
percent of the Tocor II Units tendered in exchange for approximately 6,793,000
shares of its Common Stock, thereby increasing shareholders equity by
$81,607,000. The transaction was accounted for as a purchase and the Company
allocated the excess of the consideration paid over the net assets of Tocor II
to the value of the acquired research and development. The Company recorded a
charge to earnings in the first quarter of 1994 of $36,966,000 representing
principally the cost allocated to the acquired research and development. In
connection with the transaction, the Company acquired $50,124,000 of cash and
short-term investments and warrants with a value of $8,492,000 which
17
<PAGE>
were retired. The unaudited comparative statement of operations data excluding
the charge for acquired research and development, assuming the exchange offer
was consummated as of January 1, 1993, would have been as follows (in thousands
except per share amounts):
<TABLE>
<CAPTION>
Statements of For the three months ended
Operations Data March 31, 1994
--------------- --------------
<S> <C>
Revenues $ 13,621
Loss $(14,942)
Loss per share $ (0.29)
</TABLE>
Effective March 30, 1994, each remaining share of Tocor II callable Common
Stock ("Tocor II Shares") was converted into 2.88 shares of the Company's Common
Stock through a merger of Tocor II into a wholly-owned subsidiary of the
Company. Pursuant to the terms of the merger, holders of Tocor II Shares at the
time of the merger were required to surrender the certificates representing
Tocor II Shares to an exchange agent in exchange for certificates representing
Common Stock of the Company. Through March 31, 1995, stock certificates
representing 221,000 shares of the Company's Common Stock had been delivered by
the exchange agent in connection with the merger. If all of the remaining Tocor
II Shares are surrendered to the exchange agent, stock certificates representing
an additional 146,000 shares of the Company's Common Stock will be delivered.
Shares of the Company's Common Stock into which the Tocor II Shares were
converted by the merger are not classified as issued and outstanding until the
delivery by the exchange agent of the stock certificate representing such
shares. Warrants not tendered as part of Units in the exchange offer remain
outstanding.
Note 9
Income Taxes
The Company recorded a charge for acquired research and development of
$36,966,000 in 1994, which was not deductible for U.S. tax purposes. At March
31, 1995, the tax effect of the Company's net tax loss carryforward was
$176,691,000 with expiration dates ranging from 2005 to 2010. Additionally, at
March 31, 1995, the Company had research and development tax credits and other
tax credits of $5,424,000 substantially all with expiration dates ranging from
1999 to 2008.
Realization of net deferred tax assets related to these items is dependent
on future earnings, which are uncertain. Accordingly, a valuation reserve was
recorded by the Company and, therefore, the Company had no net deferred tax
assets at March 31, 1995.
Note 10
Supplemental Information on Cash Flows
Interest paid for the three months ended March 31, 1995 and 1994 was
$4,657,000 and $4,831,000, respectively.
Income tax payments for the three months ended March 31, 1995 were $9,000.
No income tax payments were made for the three months ended March 31, 1994.
18
<PAGE>
Centocor, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
---------------------------------------------------------------------------
Cash used for the purchases of investments as well as the cash received
upon the maturities and sales of investments were as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended March 31, 1995 1994
---------- ---------
<S> <C> <C>
Purchases $(76,602) $(22,786)
Maturities and sales 26,300 28,320
-------- --------
$(50,302) $ 5,534
======== ========
</TABLE>
During the first quarter of 1994, the Company acquired cash and short-term
investments of $50,124,000 in connection with an exchange offer more fully
described in Note 8.
19
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
---------------------------------------------------------------------------
Financial Condition
LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred significant operating expenses attempting to
develop pharmaceutical products. The Company's product sales through 1994 were
almost exclusively generated by in-vitro diagnostic products. Consequently,
excluding the impact of significant contract revenues through collaborative
alliances with pharmaceutical companies and financing activities, the Company
has experienced substantial net cash outflows.
The Company's future financial condition is highly dependent upon the
reduction of the Company's rate of net cash outflows and, ultimately, upon the
achievement of significant and sustained levels of pharmaceutical product sales.
The Company commenced the commercial sale of two pharmaceutical products -
ReoPro(TM) in January 1995 and Panorex(R) in February 1995. During the year
ending December 31, 1995, sales of those two products alone are not expected to
generate sufficient revenue to enable the Company to avoid a net cash outflow
for the year. Under the Company's collaborative strategy of entering into
alliances with established pharmaceutical companies, the Company generally
shares sales revenues from products covered by such arrangements with its
partners. There can be no assurance that those products, in conjunction with the
Company's pharmaceutical product candidates under development and in-vitro
diagnostic products, will achieve a level of sales sufficient to generate
positive cash flow from operations for the Company, given the current and
currently anticipated future scope of the Company's operations. The level of
future sales of both diagnostic and pharmaceutical products will be dependent
upon several factors including, but not limited to, the timing and extent of
future regulatory approvals of the Company's products, approval and
commercialization of competitive products and the degree of acceptance of the
Company's products in the marketplace. There can be no assurance that FDA or
other regulatory approvals expanding the authorized use of ReoPro(TM) and
Panorex(R) or permitting the commercial sale of any of the Company's product
candidates under development will be obtained. Failure to obtain additional
timely FDA or other regulatory approvals for the use of ReoPro(TM) and
Panorex(R) or other product candidates will have a material adverse effect on
the Company.
The Company expects that it will need to secure significant additional
funding in the future from collaborative arrangements with pharmaceutical
companies or from the capital markets until significant and sustained levels of
pharmaceutical sales are achieved. There can be no assurance that significant
additional funding will be available to the Company or that the Company can
obtain additional collaborations with established pharmaceutical companies and
receive payments for product rights and/or the achievement of milestones under
such collaborative agreements. Even if the Company obtains such funding, there
can be no assurance that such funding will be sufficient to produce positive
cash flows from operations.
At March 31, 1995, the Company had cash, cash equivalents, and investments
of $181,944,000 including equity investments of $2,834,000. For the three months
ended March 31, 1995, the Company had negative cash flows from operations of
$15,996,000. The Company's total cash flows for the three months ended March 31,
1995 included the receipt of $12,100,000 from the exercise of warrants to
purchase shares of the Company's Common Stock. The extent and timing of future
warrant exercises, if any, are primarily dependent upon the market
20
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
---------------------------------------------------------------------------
price of the Company's Common Stock and general financial market conditions, as
well as the exercise prices and expiration dates of the warrants. The Company's
total cash, cash equivalents and investments decreased by $2,563,000 from
December 31, 1994 principally as a result of cash used for operations and
purchases of fixed assets partially offset by cash received from the exercise of
warrants as discussed above.
Agreements covering $21,847,000 of the Company's outstanding debt balances
contain certain financial and non-financial covenants, including the maintenance
of minimum equity and cash balances and compliance with certain financial
ratios. The Company has obtained waivers of certain of such covenants on the
condition that it maintain certain investments at the lending bank, which at
March 31, 1995 totaled $20,000,000. There can be no assurance that the Company
will be able to continue to collateralize such loans and, accordingly, the
Company has classified $21,847,000 of debt as short-term. Additionally,
$7,792,000 of the Company's short-term debt is secured by investments at the
lending bank of $7,700,000. If cash flows continue to be negative, the
Company's ability to service its debt may be impaired.
See Note 2 to the Company's Consolidated Financial Statements" for a
discussion of litigation and other factors that may affect the Company's future
liquidity and capital resources.
ASSETS
The decrease in the aggregate amount of cash and investments at March 31,
1995 as compared to December 31, 1994 is discussed under Liquidity and Capital
Resources. The increase in the Company's inventory balance at March 31, 1995 as
compared to December 31, 1994 is primarily due to the production of ReoPro(TM)
and Panorex(R) inventories.
Accounts and contracts receivable at March 31, 1995 increased as compared
to December 31, 1994 principally as a result of commercial sales of ReoPro(TM)
commencing in January 1995, and Panorex(R) commencing in February 1995.
Gross fixed assets at March 31, 1995 increased as compared to December 31,
1994 principally due to the investment of $1,654,000 for the purchase of fixed
assets in addition to the impact of foreign exchange rates on fixed assets
denominated in foreign currencies. At the Company's present level of
operations, the Company currently maintains idle facilities and equipment in
Malvern. The Company continually evaluates the future needs for its facilities
and equipment. There can be no assurance that reserves to further reduce the
carrying value of certain fixed assets will not be required in the future.
21
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
---------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity at March 31, 1995 increased as compared to December
31, 1994 principally as a result of the proceeds from the exercise of options
and warrants partially offset by the Company's loss for the three months ended
March 31, 1995. The extent and timing of future warrant and option exercises,
if any, are primarily dependent upon the market price of the Company's Common
Stock and general financial market conditions, as well as the exercise prices
and expiration dates of the warrants and options.
The Company expects that shareholders' equity will decrease in future
periods unless and until the Company is successful in securing additional
capital from collaborative arrangements with pharmaceutical companies or the
capital markets, or significant and sustained levels of pharmaceutical product
sales are achieved. There can be no assurance that significant and sustained
levels of pharmaceutical product sales will be achieved or that any additional
capital will be available to the Company.
Results of Operations
GENERAL
Product sales have not produced sufficient revenues to cover the Company's
operating expenses. The Company has incurred significant operating expenses
attempting to develop products and has incurred significant special charges.
Consequently, the Company has experienced substantial operating losses. With new
product approvals, the Company will focus on increasing sales and has
established a goal of achieving profitability in 1995. For the Company to become
profitable, the following objectives must be achieved: early and strong market
acceptance for both ReoPro(TM) and Panorex(R); growth in the Company's
diagnostic product sales; establishment of a long-term strategic alliance for
CenTNF(TM); and management of the Company's internal cost structure. There can
be no assurance that the Company can achieve these objectives. If the Company
does not achieve these objectives, the Company's goal of profitability will not
be attained in 1995, and the Company will incur an operating loss.
REVENUES
The increase in sales for the three months ended March 31, 1995 as compared
to March 31, 1994 is principally due to the commencement of commercial sales of
two pharmaceutical products -- ReoPro(TM) in January 1995 and Panorex(R) in
February 1995. ReoPro(TM) sales for the period ended March 31, 1995 were
$7,900,000. Panorex(R) sales were $1,300,000 for the period ended March 31,
1995. Diagnostic product sales were $10,100,000 for the three months ended March
31, 1995 as compared to 9,800,000 for the three months ended March 31, 1994.
The level of future sales of both diagnostic and pharmaceutical products will be
dependent upon several factors, including but not limited to the timing and
extent of future regulatory approvals of the Company's products, approval and
commercialization of competitive products and the degree of acceptance of the
Company's products in the marketplace.
Contract revenues for the three months ended March 31, 1995 include
$3,000,000 recognized
22
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
---------------------------------------------------------------------------
pursuant to the Company's agreements with Lilly, as compared to $3,500,000 for
the three months ended March 31, 1994. Contract revenues for the three months
ended March 31, 1994 include $1,652,000 recognized pursuant to the Company's
agreement with Tocor II. As a result of the exchange offer which is more fully
described in Note 8 to the Company's Consolidated Financial Statements, the
revenues under the Tocor II research program terminated in 1994. Contract
revenues for the three months ended March 31, 1995 include government subsidy
revenue of $1,600,000 which relates to the completion of certain
manufacturing requirements.
The level of contract revenues in future periods will depend primarily upon
the extent to which the Company enters into other collaborative contractual
arrangements, if any, and the achievement of milestones under current
arrangements.
COSTS AND EXPENSES
Cost of sales increased for the three months ended March 31, 1995 as
compared to the three months ended March 31, 1994 due to the initiation of sales
of ReoPro(TM) and Panorex(R) in the first quarter of 1995. As further described
in Note 2 to the Company's Consolidated Financial Statements, the Company is
required to make certain royalty payments based on sales of products, which
payments are reflected in cost of sales. Royalty costs represent a significant
percentage of sales. The Company expects an increase in cost of sales in 1995 as
compared to 1994, dependent upon the level of sales increase in 1995.
Research and development expenses decreased for the three months ended
March 31, 1995 as compared to the three months ended March 31, 1994 due
principally to a higher allocation of costs to manufacturing activities related
to ReoPro(TM) and Panorex(R) production. The Company expects an increased level
of clinical trial expenses in 1995 as compared to 1994, although the level of
total research and development expenses in 1995 is expected to be lower than in
1994. This decrease is expected to occur as a result of a higher allocation of
costs to manufacturing activities related to ReoPro(TM) and Panorex(R)
production. These costs were previously charged to research and development
expenses in prior periods.
Marketing, general and administrative expenses for the three months ended
March 31, 1995 increased as compared to March 31, 1994 due principally to
increases in facilities, insurance and market development expenses. The Company
expects the levels of marketing, general and administrative expenses to increase
in 1995 as compared to 1994.
OTHER INCOME AND EXPENSES
Interest income increased for the three months ended March 31, 1995 as
compared to the year earlier period due principally to an increase in interest
rates on investments and an increase in the Company's average cash and
investment balances. Interest income in future periods will depend primarily on
the level of the Company's investments and the interest rates obtained on such
investments.
23
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
---------------------------------------------------------------------------
PER SHARE CALCULATIONS
At March 31, 1995, approximately 5,661,221 shares of the Company's Common
Stock were issuable upon exercise of outstanding options and warrants and upon
vesting of restricted stock awards. Options, warrants, and stock awards are
considered Common Stock equivalents for purposes of per share data. The Company
uses the weighted average number of shares outstanding in calculating per share
data. The effect of Common Stock issuable upon the exercise of Common Stock
equivalents is reflected in the per share data calculation only if the effect
would be dilutive. The 3,843,000 shares issuable upon conversion of the 7-1/4
percent Convertible Subordinated Notes and the 2,049,000 shares issuable upon
conversion of the 6-3/4 percent Convertible Subordinated Debentures are not
considered Common Stock equivalents and are not included in the calculation of
primary per share data but are included in the calculation of fully diluted per
share data if their effect is dilutive.
No Common Stock equivalents or shares issuable upon conversion of the 7-1/4
percent Notes and 6-3/4 percent Debentures were included in the per share
calculations for any periods presented since to do so would have been
antidilutive as the Company has recorded net losses in all periods presented.
In future periods, depending upon the market value of the Company's Common Stock
and its results of operations for such periods, the Company may be required to
include its then outstanding Common Stock equivalents as well as shares issuable
upon the conversion of the 7-1/4 percent Notes and the 6-3/4 percent Debentures
in its calculations of per share data for such periods if the effect would be
dilutive.
24
<PAGE>
Part II OTHER INFORMATION
Item 1: Legal Proceedings
See Note 2 to the Company's Consolidated Financial Statements, which
is incorporated herein by reference.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
--------
None.
(B) Reports on Form 8-K
-------------------
The Registrant has filed the following reports on Form 8-K since
the beginning of the quarter ended March 31, 1995:
Date of Report Item Covered
-------------- ------------
December 22, 1994 5, 7
25
<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.
Centocor, Inc.
(Registrant)
Date: May 15, 1995
-------------------
/s/David P. Holveck
------------------------------
David P. Holveck
President and
Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 1995
-------------------
/s/Dominic J. Caruso
------------------------------
Dominic J. Caruso
Vice President, Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Centocor
Inc, Consolidated Balance Sheets and Centocor Inc, Consolidated Statements of
Operation and is qualified in its entirely by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 26,422
<SECURITIES> 146,858
<RECEIVABLES> 20,684
<ALLOWANCES> 0
<INVENTORY> 21,129
<CURRENT-ASSETS> 218,901
<PP&E> 140,450
<DEPRECIATION> 68,465
<TOTAL-ASSETS> 318,087
<CURRENT-LIABILITIES> 70,194
<BONDS> 231,640
<COMMON> 581
0
0
<OTHER-SE> 13,069
<TOTAL-LIABILITY-AND-EQUITY> 318,087
<SALES> 19,319
<TOTAL-REVENUES> 23,995
<CGS> 8,625
<TOTAL-COSTS> 8,625
<OTHER-EXPENSES> 20,995
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,964
<INCOME-PRETAX> (8,242)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,242)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,242)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
