<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 1997, 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 0-12943
CYPRESS BIOSCIENCE, INC.
(Exact Name of Registrant as specified in its charter)
DELAWARE 22-2389839
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4350 EXECUTIVE DRIVE, SUITE 325, SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices) (zip code)
(619) 452-2323
(Registrant's telephone number including area code)
----------------------------------
Indicate by check (X) 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
----- -----
AT NOVEMBER 1, 1997, 34,636,067 SHARES OF COMMON STOCK OF THE REGISTRANT
WERE OUTSTANDING.
This filing, without exhibits, contains 15.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
----
<S> <C>
Item 1 - Condensed Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996 ..................... 3
Condensed Consolidated Statements of Operations for the quarter
and nine months ended September 30, 1997 and 1996............. 4
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 1997 and 1996................. 5
Notes to Condensed Consolidated Financial Statements ................ 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 9
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings .................................................... 13
Item 6 - Exhibits and Reports on Form 8-K ..................................... 14
Signatures .................................................................... 15
</TABLE>
2
<PAGE> 3
CYPRESS BIOSCIENCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,544,198 $ 8,045,508
Short-term investments 1,923,076 2,890,160
Accounts receivable:
Trade 371,508 344,041
Other 152,631 150,954
Inventories 787,752 973,767
Prepaid expenses 125,270 171,231
------------- ------------
Total current assets 5,904,435 12,575,661
Property and equipment, net 2,106,621 2,351,928
Convertible debenture issuance costs, net 27,663 33,487
============= ============
Total assets $ 8,038,719 $ 14,961,076
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 645,913 $ 999,442
Accrued compensation 331,744 485,751
Accrued liabilities 1,220,812 902,090
Current portion of capital lease obligations 6,637 27,208
------------- ------------
Total current liabilities 2,205,106 2,414,491
Convertible debentures 400,000 400,000
Capital lease obligations, less current portion 8,843 12,020
Commitments and contingencies
Stockholders' equity:
Common stock, $.02 par value; authorized 60,000,000 shares;
issued and outstanding, 34,636,067 and 34,573,111 shares at
September 30, 1997 and December 31, 1996, respectively 692,721 691,462
Additional paid-in capital 70,205,463 70,062,301
Deferred compensation (763,086) (1,313,276)
Accumulated deficit (64,710,328) (57,305,922)
------------- ------------
Total stockholders' equity 5,424,770 12,134,565
============= ============
Total liabilities and stockholders' equity $ 8,038,719 $ 14,961,076
============= ============
</TABLE>
See accompanying notes.
Note: The balance sheet at December 31, 1996, has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles.
3
<PAGE> 4
CYPRESS BIOSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------- ----------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Product sales $ 658,335 $ 671,816 $ 2,207,631 $ 1,277,549
Grant income 85,293 -- 179,197 --
-------------- -------------- -------------- --------------
743,628 671,816 2,386,828 1,277,549
-------------- -------------- -------------- --------------
Costs and expenses:
Production costs 354,024 377,056 1,316,045 837,192
Sales and marketing 262,754 268,417 1,015,696 429,417
Research and development 1,844,672 1,049,615 5,430,987 2,140,659
General and administrative 1,095,729 835,278 2,300,604 2,641,048
Restructuring expense -- 6,479 -- 460,090
Debt conversion expense -- -- -- 183,688
-------------- -------------- -------------- --------------
3,557,179 2,536,845 10,063,332 6,692,094
-------------- -------------- -------------- --------------
Loss from operations (2,813,551) (1,865,029) (7,676,504) (5,414,545)
Other income (expense):
Interest income 91,021 95,277 296,186 343,632
Interest expense (7,813) (12,237) (24,088) (45,835)
-------------- -------------- -------------- --------------
83,208 83,040 272,098 297,797
-------------- -------------- -------------- --------------
Net loss $ (2,730,343) $ (1,781,989) $ (7,404,406) $ (5,116,748)
============== ============== ============== ==============
Net loss per share $ (0.08) $ (0.06) $ (0.21) $ (0.19)
============== ============== ============== ==============
Shares used in computing net loss
per share 34,630,850 28,760,966 34,592,569 27,649,052
============== ============== ============== ==============
</TABLE>
See accompanying notes.
4
<PAGE> 5
CYPRESS BIOSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (7,404,406) $ (5,116,748)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 352,482 132,647
Amortization of deferred compensation 542,970 337,651
Debt conversion expense -- 183,688
Loss (gain) on disposal of property and equipment 1,094 (11,110)
Common stock issued to 401(k) plan 88,597 57,935
Common stock issued for services and expenses -- 29,203
Accounts receivable allowance -- 29,145
Changes in operating assets and liabilities, net 39,562 (2,067,897)
-------------- --------------
Net cash used by operating activities (6,379,701) (6,425,486)
INVESTING ACTIVITIES
Purchase of equipment (105,630) (842,243)
Proceeds from sale of fixed assets 3,185 36,735
Short-term investments 967,084 --
-------------- --------------
Net cash provided by (used by) investing activities 864,639 (805,508)
FINANCING ACTIVITIES
Net proceeds from issuance of common stock 37,500 12,099,380
Proceeds from issuance of convertible debentures -- 500,000
Payment of notes payable and capital lease obligation (23,748) (18,706)
Debt issuance costs -- (71,919)
-------------- --------------
Net cash provided by financing activities 13,752 12,508,755
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (5,501,310) 5,277,761
Cash and cash equivalents at beginning of period 8,045,508 1,009,878
============== ==============
Cash and cash equivalents at end of period $ 2,544,198 $ 6,287,639
============== ==============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Stock issued for debt conversion $ -- $ 2,351,607
============== ==============
</TABLE>
See accompanying notes.
5
<PAGE> 6
CYPRESS BIOSCIENCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. FORMATION AND BUSINESS OF THE COMPANY
The accompanying consolidated financial statements have been prepared
by Cypress Bioscience, Inc. (the "Company") without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (the "SEC"). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the SEC. The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All intercompany accounts and transactions have been
eliminated. In the opinion of the Company's management, all adjustments
necessary for a fair presentation of the accompanying unaudited financial
statements are reflected herein. All such adjustments are normal and recurring
in nature. Interim results are not necessarily indicative of results for the
full year. For more complete financial information, these consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements included in the Company's 1996 Annual Report on Form 10-K filed with
the SEC.
The Company researches, develops, manufactures and markets medical
devices and therapeutics for the treatment of certain types of immune system
disorders and is engaged in the development of novel therapeutic agents for the
treatment of blood platelet disorders. The Company's first product, the
PROSORBA(R) column, a medical device, treats a patient's defective immune system
so that it can more effectively respond to certain diseases. Through its
acquisition of PRP, Inc. in November 1996, the Company acquired rights to
Cyplex(TM) platelet alternative, previously known as Infusible Platelet
Membranes ("IPM"), which is positioned to become an alternative to traditional
platelet transfusions.
The Company commenced business activities in January 1982. The U.S.
Food and Drug Administration ("FDA") approved the PROSORBA(R) column for
commercial sale in December 1987 for the treatment of patients with Idiopathic
Thrombocytopenic Purpura ("ITP"), an immune-mediated bleeding disorder. The
Company continues to devote most of its efforts to obtaining FDA marketing
approval for the use of the PROSORBA(R) column for the treatment of additional
autoimmune diseases as well as to the continued development of Cyplex(TM)
platelet alternative. The Company is currently conducting a Phase III pivotal
clinical trial using the PROSORBA(R) column for therapy for rheumatoid arthritis
as a follow-on to a pilot clinical trial completed in September 1995.
Clinical trials for certain platelet disorders are being planned for 1998.
6
<PAGE> 7
2. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Raw materials and components $ 220,017 $ 214,632
Work in process 433,455 700,815
Finished goods 134,280 58,320
------------------ -----------------
$ 787,752 $ 973,767
================== =================
</TABLE>
3. PER SHARE INFORMATION
The computation of net loss per share is based on the weighted average
number of shares of common stock outstanding for each period. Common stock
equivalents related to options, warrants and convertible debentures have not
been considered in the calculation of net loss per share inasmuch as their
effect would have been antidilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating basic earnings per share,
the dilutive effect of stock options will be excluded. The adoption of Statement
No. 128 will not have any effect as the Company had incurred losses for the
quarters presented.
4. COMMITMENTS AND CONTINGENCIES
The Company has settled a patent infringement claim filed against the
Company on February 6, 1997, in the United States District Court for the Western
District of Washington alleging that the manufacture, use and sale of the
Company's PROSORBA(R) column infringes a patent issued to Dr. Meir Strahilevitz
(the "Strahilevitz Patent"). Pursuant to the terms of the settlement, the
Company was granted a nonexclusive license permitting the Company to use the
Strahilevitz Patent in connection with the manufacture, use and sale of its
PROSORBA(R) column for the treatment of Idiopathic Thrombocytopenic Purpura
("ITP") and Rheumatoid Arthritis. In exchange for such license, the Company has
agreed to pay Dr. Strahilevitz a license fee and royalty payments during the
life of the Strahilevitz Patent. The settlement of the claim did not and will
not have a material impact on the Company's business, financial position or
results of operations.
7
<PAGE> 8
5. RESTRUCTURING EXPENSE
The Company has incurred approximately $1.3 million of capital
expenditures through September 30, 1997 in connection with the consolidation of
its two Washington manufacturing facilities. That consolidation was completed in
April 1997 with the Company receiving FDA GMP approval of the facility.
6. SUBSEQUENT EVENT
In October 1997, the Company sold approximately 3,851,000 shares of
common stock for $1.50 per share in a private placement. The shares were
registered for resale under the Securities Act of 1933, as amended in November
1997. The net proceeds to the Company were approximately $5,550,000, or $1.44
per share, after total costs of approximately $227,000.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the following
discussion contains forward-looking statements within the meaning of Section 21E
of the Exchange Act that involve risks and uncertainties. The Company's actual
results could differ materially from those discussed below and elsewhere in this
Report. Factors that could cause or contribute to such differences include,
without limitation, those discussed in this section, as well as other sections
of this report, and those discussed in the Company's Form 10-K for the year
ended December 31, 1996.
RESULTS OF OPERATIONS
Revenues associated with shipments of the Company's PROSORBA(R) column
were $658,000 and $2.2 million, respectively, for the quarter and nine months
ended September 30, 1997, compared to $672,000 and $1.3 million for the same
periods, respectively, in 1996. The significant increase in sales for the nine
months ended September 30, 1997 is a result of the Company regaining from Baxter
Healthcare Corporation ("Baxter") the distribution rights to the PROSORBA(R)
column in May 1996 and initiating direct sales and marketing efforts thereafter.
Although the Company's direct sales and marketing efforts have proven more
effective than those under the Baxter distribution agreement, idiopathic
thrombocytopenic purpura ("ITP") remains a small, niche market. In 1996, the
Company initiated a Phase IV marketing study for use of the PROSORBA(R) column
in the treatment of ITP in an effort to generate more rigorous clinical data
than has been available to date. The Company believes that such data is a
prerequisite for increasing the usage of the PROSORBA(R) column in the treatment
of ITP. Increased competition for patients from other ITP studies has caused
enrollment to date in this study to be below original expectations. The
increased competition and delay in enrollment has caused the Company to
re-evaluate its potential ability to complete the study in a timely and cost
effective manner. In light of the more promising opportunities in the rheumatoid
arthritis market, as discussed below, the Company has therefore determined that
continued investment in the ITP market is not the best use of its resources. As
a result, the ITP trial will be terminated during the fourth quarter of 1997.
Lack of data from that study will make it difficult to effect any appreciable
increase in sales above their current levels until the Company obtains, if and
when it does, FDA approval for sale of the PROSORBA(R) column in rheumatoid
arthritis. The Company hopes to obtain such approval by mid to late 1999,
however, there can be no assurance that such approval will be obtained in the
time expected, if at all.
Consolidated operating expenses increased to $3.6 million and $10.1
million for the quarter and nine months ended September 30, 1997, respectively,
from $2.5 million and $6.7 million for the same periods in 1996. This increase
reflects a significant expansion in the Company's research and development
activities, offset, in part, by a reduction in general and administrative
expenses.
9
<PAGE> 10
During the first half of 1996, production was impacted by both the
termination of the Baxter distribution agreement and the consolidation of the
Company's manufacturing facilities undertaken in connection with the Company's
restructuring. There were very few PROSORBA(R) columns shipped during the first
four months of 1996 as the Company did not resume direct shipments to domestic
customers until May 1996. Production costs of $354,000 and $1.3 million for the
quarter and nine months ended September 30, 1997, respectively, and of $377,000
and $837,000 for the corresponding periods of 1996, respectively, reflect this
unusual activity.
Sales and marketing expenses of $263,000 and $268,000 for the quarters
ended September 30, 1997 and 1996, respectively, remained relatively flat. The
significant increase in such expenses to $1.0 million for the nine months ended
September 30, 1997, from $429,000 for the same period of 1996, is related to the
$930,000 increase in sales during the first three quarters of the year resulting
from the Company's initiation of direct sales and marketing efforts.
For the quarter and nine months ended September 30, 1997, research and
development expenses were approximately $1.8 million and $5.4 million,
respectively. For the same periods in 1996, such expenses were $1.0 million and
$2.1 million, respectively. The significant increase in 1997 is attributable to
the Company's efforts to establish a stronger scientific base for its products.
The majority of these efforts are directed to the Company's ongoing controlled
clinical trial for use of the PROSORBA(R) column in rheumatoid arthritis. The
Company expects further increases in research and development expenses in future
periods as the aforementioned trial continues and with the expected launch of a
Phase II efficacy trial for Cyplex(TM) platelet alternative, previously known as
Infusible Platelet Membranes ("IPM"), scheduled to begin in 1998.
In July 1997, the Company announced that an independent Data Safety and
Monitoring Board ("DSMB") reviewing the interim data from its pivotal trial of
the PROSORBA(R) column in rheumatoid arthritis ("RA") recommended that the trial
be continued. The DSMB had earlier been instructed by the Company to recommend
either the continuation or cessation of the trial based upon pre-determined
stopping rules, including an efficacy threshold and safety profile of the
treatment. Based upon the DSMB's recommendation, Company management, who remain
blinded to the data, will continue the trial of its novel rheumatoid arthritis
therapy.
In the RA trial, patients undergo 12 weekly PROSORBA(R) column
treatments, followed by 12 weeks of observation. Each treatment entails a
two-hour plasmapheresis procedure, either with the PROSORBA(R) column or a
control procedure of plasmapheresis alone. During this 24-week period, the
patient is removed from all other RA-specific therapy. At week 20, the patient's
health is assessed based on the criteria recently adopted by the American
College of Rheumatology ("ACR") and compared to their pre-treatment baseline.
The ACR criteria are a set of measures including patient and physician
assessments of disease activity that have been specifically developed for use in
clinical trials of new therapies for rheumatoid arthritis. Approximately 250
patients were originally scheduled to be enrolled in 12 leading arthritis
centers around the United States. The DSMB reviewed the interim results from the
first 63 patients and recommended that the trial be continued, indicating that
the Company was on track
10
<PAGE> 11
to attain its targeted 20% differential response rate. The DSMB also recommended
that the next interim analysis be conducted when 90 patients have completed the
protocol and that at that time a total of 120 to 130 patients be enrolled. The
Company estimates that this will occur in January 1998. FDA approval for this
indication would expand the use of the PROSORBA(R) column to the treatment of
RA, an estimated $2 billion market.
The Company set the 20% differential response rate for continuation of
the RA trial after extensive analysis of the literature and discussion with its
advisors as to what outcomes could lead to a significant product both from a
clinical and commercial perspective. The 20% differential response rate was
viewed by the Company and its clinical advisors as an aggressive threshold for
product performance, and is consistent with the original assumptions used in
designing the trial. Although the Company remains blinded to the distribution of
the treated patients into the two groups, namely placebo and treatment, they
were encouraged by the fact that, as anticipated, 11 of the 63 patients included
in the interim analysis had responded.
General and administrative expenses were $1.1 million and $2.3 million
for the quarter and nine months ended September 30, 1997, respectively. For the
comparable periods in 1996, such expenses were $835,000 and $2.6 million,
respectively. A decline in spending in both 1997 and 1996 was offset by
non-recurring expenses in both years. In 1996 there were non-recurring expenses
associated with the hiring of the Company's new Chief Executive Officer, and
President and Chief Operating Officer, both of who joined the Company in
December 1995, and severance payments paid to the Company's former Chief
Scientific Officer in connection with his resignation in March 1996. Bonuses
paid in the third quarter of 1997 to the Company's Chief Executive Officer, and
President and Chief Operating Officer, in connection with the Company achieving
certain milestones, were also non-recurring.
Interest expense of $8,000 and $24,000 for the quarter and nine months
ended September 30, 1997, respectively, compares to interest expense of $12,000
and $46,000 for the same periods, respectively, in 1996. The decline in interest
expense relates to the September 1995 and March 1996 conversions of the majority
of the Company's outstanding 7% Convertible Debentures.
In January 1996, the Company notified approximately twenty employees,
which was slightly greater than half of its work force, that their positions
were being eliminated immediately as part of the restructuring. Such positions
were from all departments of the Company. Costs related to these elimination's
were approximately $460,000 and were recorded as a restructuring expense in the
nine months ended September 30, 1996.
The Company recorded a non-cash expense of $184,000 as debt conversion
expense in the nine months ended September 30, 1996. Such expense represented
the fair market value of the increased number of shares issued by the Company
under the terms of an exchange offering to holders of the Company's 7%
Convertible Debentures to exchange one share of common stock of the Company for
each $2.25 of outstanding principal (including any accrued and unpaid interest
on such principal) of the 7% Convertible Debentures. Outstanding principal of
$845,000
11
<PAGE> 12
was tendered for exchange, leaving an outstanding principal balance of $400,000
as of both September 30, 1997 and September 30, 1996.
The increase in total operating expenses was only partially offset by
the increase in revenues, thereby resulting in a net loss of approximately $2.7
million and $7.4 million for the quarter and nine monthsended September 30,
1997, respectively, compared to a net loss of approximately $1.8 million and
$5.1 million for the same periods in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital as of September 30, 1997 was $3.7
million, compared to $10.2 million at December 31, 1996. The decrease in working
capital is attributable to the net loss for the nine months ended September 30,
1997.
In October 1997, the Company sold approximately 3,851,000 shares of
common stock for $1.50 per share in a private placement. The shares were
registered for resale under the Securities Act of 1933, as amended in November
1997. The net proceeds to the Company were approximately $5,550,000, or $1.44
per share, after costs of approximately $227,000. These proceeds, combined with
existing resources, should be sufficient to complete the Company's Phase III
pivotal trial in rheumatoid arthritis.
The Company expects to incur operating losses until it can obtain
marketing approval from the FDA for additional disease indications for the
PROSORBA(R) column, or obtain FDA approval for Cyplex(TM) platelet alternative.
A clinical trial is currently being conducted using the PROSORBA(R) column for
RA therapy to obtain the necessary clinical data to apply to the FDA to obtain
marketing approval. The Company expects to perform a second interim analysis for
this trial in January 1998. There can be no assurance that the Company will be
able to obtain FDA approval to market the PROSORBA(R) column for disease
indications other than ITP or that sales of the PROSORBA(R) column will increase
significantly, if at all. In addition, there can be no assurance that the
interim data regarding the use of the PROSORBA(R) column for the treatment of RA
will continue to be favorable or that the Company will be able to apply to or
obtain approval from the FDA with respect to the use of the PROSORBA(R) column
for the treatment of RA.
During 1996, the Company implemented a restructuring plan which
included consolidating its manufacturing facilities to one location in the state
of Washington and moving all other operations of the Company to San Diego,
California. The Company has incurred approximately $1.3 million of capital
expenditures through September 30, 1997 to consolidate its two Washington
manufacturing facilities. In April 1997, the Company's Redmond, Washington
facility successfully completed the FDA GMP re-approval process, signifying the
successful completion of the consolidation. The Company believes that its
existing cash, including the October 1997 sale of common stock, and proceeds
from sales of the PROSORBA(R) column will provide the resources necessary to
fund operations, including clinical trials, through 1998.
12
<PAGE> 13
PART II
Item 1 - Legal Proceedings
Reference is made to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
Item 4 - Submissions of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders (the "Annual Meeting") of
the Company was held on October 15, 1997.
(b) Jay D. Kranzler, Ph.D., M.D., and Richard M. Crooks were each
elected as directors to serve until the 2000 annual meeting,
or until such directors' earlier death, resignation or
removal. The Company's Board of Directors is comprised of
those individuals elected this year and the following
directors completing the following terms: Debby Jo Blank, M.D.
and Philip J. O'Reilly whose terms expire in 1999; Jack Vaughn
whose term expires in 1998.
(c) The following sets forth a brief description of each matter
voted upon at the annual Meeting and the results of the voting
on each such matter:
(1) For the election of the nominees as directors:
<TABLE>
<CAPTION>
Withheld Authority
For or Against
------------------ ------------------
<S> <C> <C>
Jay D. Kranzler, Ph.D., M.D 23,224,022 288,470
Richard M. Crooks 23,230,497 281,995
</TABLE>
(2) To approve a form of Indemnity Agreement and to
authorize the Company to enter into individual
Indemnity Agreements with each of its directors and
executive officers.
<TABLE>
<S> <C> <C> <C>
For Against Abstained Non-votes
--------------------- -------------------- -------------------- ---------------------
18,984,453 740,312 240,528 3,547,199
</TABLE>
(3) To ratify the selection of Ernst & Young LLP as the
Company's independent auditors for its fiscal year
ending December 31, 1997:
<TABLE>
<S> <C> <C> <C>
For Against Abstained Non-votes
--------------------- -------------------- -------------------- ---------------------
23,104,105 250,460 157,927 -
</TABLE>
13
<PAGE> 14
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
None
14
<PAGE> 15
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.
Cypress Bioscience, Inc.
Date: November 14, 1997 /s/ Jay D. Kranzler
------------------------------ -----------------------------------
Jay D. Kranzler, M.D., Ph.D.
Chief Executive Officer, Chief
Scientific Officer and Vice Chairman of
the Board
(Principal Executive Officer and
Principal Financial Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,544
<SECURITIES> 1,923
<RECEIVABLES> 725
<ALLOWANCES> 200
<INVENTORY> 788
<CURRENT-ASSETS> 5,905
<PP&E> 3,127
<DEPRECIATION> 1,021
<TOTAL-ASSETS> 8,039
<CURRENT-LIABILITIES> 2,205
<BONDS> 400
<COMMON> 69,813
0
0
<OTHER-SE> 322
<TOTAL-LIABILITY-AND-EQUITY> 8,039
<SALES> 658
<TOTAL-REVENUES> 835
<CGS> 354
<TOTAL-COSTS> 3,203
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> (2,730)
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<INCOME-CONTINUING> (2,730)
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<CHANGES> 0
<NET-INCOME> (2,730)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
