Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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 1-10546
MOLECULAR BIOSYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3078632
(State of Incorporation) (I.R.S. Identification No.)
10030 Barnes Canyon Road
San Diego, California 92121
(619) 452-0681
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
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.
X Yes No
The number of shares outstanding of the issuer's common stock, $.01 par value,
as of October 24, 1997 was 17,802,187 shares.
<PAGE>
INDEX PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (unaudited)
1. Consolidated Balance Sheets 3
March 31, 1997 (audited) and September 30, 1997
2. Consolidated Statements of Operations 4
Three Months Ended September 30, 1996 and 1997
Six Months Ended September 30, 1996 and 1997
3. Consolidated Statements of Cash Flows 5
Six Months Ended September 30, 1996 and 1997
4. Notes to 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 2 - Changes in Securities 13
Item 3 - Defaults Upon Senior Securities 13
Item 4 - Submission of Matters to a Vote of Securities Holders 13
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 13
(a) Exhibits
(b) Reports on Form 8-K
Signatures 14
<PAGE>
<TABLE>
<CAPTION>
MOLECULAR BIOSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September 30,
March 31, 1997
1997 (Unaudited)
------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 587 $ 103
Marketable securities, available-for-sale 40,827 29,644
Accounts and notes receivable 902 898
License rights 8,500 8,500
Inventories 342 943
Prepaid expenses and other assets 249 77
------------- -------------
Total current assets 51,407 40,165
------------- -------------
Property and equipment, at cost:
Building and improvements 14,544 14,544
Equipment, furniture and fixtures 4,567 4,562
Construction in progress 511 1,024
------------- -------------
19,622 20,130
Less: Accumulated depreciation and amortization 6,434 6,926
------------- -------------
Total property and equipment 13,188 13,204
------------- -------------
Other assets:
Patents and license rights, net of amortization
$1,114 and $1,186, respectively 341 268
Certificate of deposit, pledged 3,000 3,000
Other assets, net 2,223 2,206
------------- -------------
Total other assets 5,564 5,474
------------- -------------
$ 70,159 $ 58,843
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,267 $ 1,267
Accounts payable and accrued liabilities 4,684 5,521
Compensation accruals 1,613 1,163
------------- -------------
Total current liabilities 7,564 7,951
------------- -------------
Long-term debt, net of current portion 7,349 6,718
Other noncurrent liabilities 3,500 1,500
Commitments and contingencies (Note 2)
Stockholders' equity:
Common Stock, $.01 par value, 40,000,000 shares
authorized, 17,745,897 and 17,788,987 shares
issued and outstanding, respectively 177 178
Additional paid-in capital 127,483 127,764
Accumulated deficit (75,469) (84,889)
Unrealized loss on available-for-sale securities (82) (16)
Less 40,470 shares of treasury stock, at cost (363) (363)
------------- -------------
Total stockholders' equity 51,746 42,674
------------- -------------
$ 70,159 $ 58,843
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MOLECULAR BIOSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended
September 30, September 30,
1996 1997 1996 1997
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
Revenues under collaborative agreements $ 1,159 $ 1,345 $ 2,159 $ 2,595
Product and royalty revenues 32 81 210 305
License fees 25 - 25 -
----------- ------------- ------------ -------------
1,216 1,426 2,394 2,900
----------- ------------- ------------ -------------
Operating expenses:
Research and development costs 2,328 2,680 4,964 4,865
Costs of products sold 1,339 970 2,629 2,481
Selling, general and administrative expenses 1,798 2,751 3,563 5,791
----------- ------------- ------------ -------------
5,465 6,401 11,156 13,137
----------- ------------- ------------ -------------
Loss from operations (4,249) (4,975) (8,762) (10,237)
Interest expense (214) (186) (413) (377)
Interest income 770 540 1,098 1,194
----------- ------------- ------------ -------------
Net loss $ (3,693) $ (4,621) $ (8,077) $ (9,420)
=========== ============= ============ =============
Loss per common share $ (0.21) $ (0.26) $ (0.50) $ (0.53)
=========== ============= ============ =============
Weighted average common shares outstanding 17,560 17,768 16,181 17,760
=========== ============= ============ =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MOLECULAR BIOSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; dollars in thousands)
Six Months Ended
September 30,
1996 1997
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (8,077) $ (9,420)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 729 618
Loss on disposals of property and equipment - 3
Changes in operating assets and liabilities:
Receivables 93 (87)
Inventories 219 (602)
Prepaid expenses and other assets 26 263
Accounts payable and accrued liabilities 3,442 837
Deferred contract revenues 1,090 -
Compensation accruals (61) (450)
------------ -------------
Cash used in operating activities (2,539) (8,838)
------------ -------------
Cash flows from investing activities:
Purchases of property and equipment (511) (566)
Proceeds from sale of property and equipment - 2
Additions to patents and license rights (15) -
Purchase of license rights from Shionogi (8,500) (2,000)
Decrease in other assets 14 17
(Increase) decrease in marketable securities (34,477) 11,250
------------ -------------
Cash provided by (used in) investing activities (43,489) 8,703
------------ -------------
Cash flows from financing activities:
Net proceeds from public offering of Common Stock 34,098 -
Net proceeds from sale of Common Stock - -
Net proceeds from stock options exercised 996 281
Principal payments on long-term debt (627) (630)
------------ -------------
Cash provided by financing activities 34,467 (349)
------------ -------------
Increase (decrease) in cash and cash equivalents (11,561) (484)
Cash and cash equivalents, beginning of period 12,542 587
------------ -------------
Cash and cash equivalents, end of period $ 981 $ 103
============ =============
Supplemental cash flow disclosures:
Interest income received $ 874 $ 1,285
============ =============
Interest paid $ 410 $ 374
============ =============
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Basis of Presentation-
These interim Consolidated Financial Statements of Molecular Biosystems,
Inc. and Subsidiaries (the "Company") should be read in conjunction with
the Consolidated Financial Statements of the Company and related Notes
filed with the Company's Annual Report on Form 10-K for the year ended
March 31, 1997.
These interim Consolidated Financial Statements of the Company have not
been audited by independent public accountants. However, in the opinion of
the Company, all adjustments required for a fair presentation of the
financial position of the Company as of September 30, 1997, and the results
of its operations for the six-months ended September 30, 1996 and 1997, and
its cash flows for the six-months ended September 30, 1996 and 1997, have
been made. The results of operations for these interim periods are not
necessarily indicative of the operating results for the full year.
(2) Commitments and Contingencies-
In April 1997, separate lawsuits were filed by Bracco Diagnostics, Inc.
("Bracco"), DuPont Merck Pharmaceutical Co. ("DuPont Merck"), ImaRx
Pharmaceutical Corp. ("ImaRx") and Sonus Pharmaceuticals, Inc. ("Sonus")
against the United States Food and Drug Administration (the "FDA") seeking
a preliminary and permanent injunction to prevent the FDA from approving
the Company's pre-market approval application ("PMA") for the Company's
second-generation ultrasound imaging agent, OPTISON(TM), until the FDA
resolved the merits of citizen petitions that the plaintiffs previously
filed with the FDA. These petitions requested the FDA to regulate all
ultrasound imaging contrast agents either as drugs (as the plaintiffs'
contrast agents under development are currently classified) or as medical
devices (as both the Company's ALBUNEXa and OPTISON(TM) were then
classified.) The lawsuits (the "FDA Cases") alleged that the FDA acted in
an arbitrary and capricious manner in its review of the parties' ultrasound
contrast agents and requested the FDA to review all ultrasound contrast
agents in a consistent manner.
In response, the United States District Court entered an order enjoining
the FDA from continuing any approval or review procedures relating to the
Company's PMA for OPTISON(TM) until ten days after the FDA ruled on the
plaintiffs' citizen petitions. In February 1997, the FDA's advisory
Radiological Devices Panel had recommended approval of the Company's PMA
for OPTISON(TM) as a device.
On July 29, 1997, the FDA ruled that OPTISON(TM) is properly classifiable
as a drug under the applicable sections of the Food and Drug Act and FDA
regulations and transferred review of the Company's PMA for OPTISON(TM)
from the Center for Devices and Radiological Health ("CDRH") to the Center
for Drug Evaluation and Research ("CDER"). (It left the classification of
ALBUNEXa unchanged.) However, the FDA further ruled that (1) the PMA for
OPTISON(TM) will "immediately be deemed a submitted and filed NDA [New Drug
Application]"; (2) CDER will not repeat the review of those portions of the
PMA on which CDER has already completed substantial work; and (3) CDER will
rely, as appropriate, on the "extensive analyses" already done by CDRH, the
advisory panel's comments and recommendations, and "any conclusions already
reached by CDRH officials regarding the data and information in the PMA."
The ruling notes that the Company will be expected to supplement the NDA
with patent information, drug labeling, and "other information needed to
support the approval of an NDA," but it further notes that the FDA expects
"that the redesignation of [OPTISON(TM)] can be accomplished without a
significant interruption in the pre-market review process." On August 5,
1997, the United States District Court lifted its stay on the FDA approval
process for OPTISON(TM). The Company does not know, however, when FDA
approval will be obtained (if at all) or what additional information (if
any) it will be required to provide to the FDA in connection with its
review of OPTISON(TM).
On July 31, 1997, the Company and its marketing partner Mallinckrodt
Medical Inc., ("Mallinckrodt") filed suit (the "MBI Case") in United States
District Court for the District of Columbia against four potential
competitors - Sonus, Nycomed Imaging AS ("Nycomed"), ImaRx and its
marketing partner DuPont Merck, and Bracco International BV - seeking
declarations that certain of their ultrasound contrast agent patents are
invalid. On the same day, the Company and Mallinckrodt filed counterclaims
in the FDA Cases seeking the same relief as in the MBI Case. The court
subsequently ruled that these counterclaims were moot in the light of the
mootness of the FDA Cases following the FDA's reclassification ruling and
dismissed the counterclaims.
The complaint filed by the Company and Mallinckrodt in the MBI Case
alleges that each of the defendants' patents is invalid on a variety of
independent grounds under the U.S. patent laws. In addition to requesting
that all of the patents in question be declared invalid, the complaint
requests a declaration that, contrary to defendants' contentions, the
Company and Mallinckrodt do not infringe the patents, and asks that
defendants be enjoined from proceeding against the Company and Mallinckrodt
for infringement until the status of defendants' patents has been
determined by the court or the U.S. Patent and Trademark Office ("PTO").
The complaint alleges that each defendant has claimed or is likely to claim
that its patent or patents cover OPTISON(TM) and will attempt to prevent
its commercialization. All of the defendents except Nycomed have filed
motions to dismiss the complaint on jurisdictional grounds. These motions
are pending.
Beginning in July 1997, the Company received the first of five notices
from the PTO granting the Company's petitions for reexamination which it
had filed respecting five patents held by three potential competitors,
Sonus, Nycomed and Imarx. Each of the patents currently in the
reexamination process is related to the use of perfluorocarbon gases in
ultrasound contrast agents and is included among the patents respecting
which the Company is seeking a declaration of invalidity in the MBI Case.
The Company has obtained a copy of, but has not yet been served with, a
complaint filed by Sonus alleging that the manufacture and sale of
OPTISON(TM) by the Company and Mallinckrodt will infringe two patents owned
by Sonus. These patents are the same patents for which the PTO has granted
the Company's petitions for reexamination, and are among the patents
respecting which the Company is seeking a declaration of invalidity in the
MBI Case. The complaint by Sonus was filed in the United States District
Court for the Western District of Washington State after the Company and
Mallinckrodt filed the MBI Case in the United States District Court for the
District of Columbia.
Litigation or administrative proceedings relating to these matters could
result in a substantial cost to the Company; and given the complexity of
the legal and factual issues, the inherent vicissitudes and uncertainty of
litigation, and other factors, there can be no assurance of a favorable
outcome. An unfavorable outcome could have a material adverse effect on the
Company's business, financial condition and results of operations.
Moreover, there can be no assurance that, in the event of an unfavorable
outcome, the Company would be able to obtain a license to any proprietary
rights that may be necessary to commercialize OPTISON(TM), either on
acceptable terms or at all. If the Company were required to obtain a
license necessary to commercialize OPTISON(TM), the Company's failure or
inability to do so would have a material adverse effect on the Company's
business, financial condition and results of operations.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following management discussion and analysis should be read in
conjunction with (1) the current Consolidated Financial Statements and (2) the
Company's Consolidated Financial Statements and related Notes and Management's
Discussion and Analysis of Financial Condition and Results of Operations in its
Annual Report on Form 10-K for the year ended March 31, 1997.
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, regulatory approval,
research and development activities and similar matters. A variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
include the expense and uncertain outcome of the litigation described under the
caption "Recent Events"; difficulties and delays with respect to the performance
of clinical trials; delays by regulatory authorities; manufacturing problems;
difficulties and delays with respect to marketing and sales activities; and
general uncertainties accompanying the development and introduction of new
products.
Recent Events
In April 1997, separate lawsuits were filed by Bracco Diagnostics, Inc.
("Bracco"), DuPont Merck Pharmaceutical Co. ("DuPont Merck"), ImaRx
Pharmaceutical Corp. ("ImaRx") and Sonus Pharmaceuticals, Inc. ("Sonus") against
the United States Food and Drug Administration (the "FDA") seeking a preliminary
and permanent injunction to prevent the FDA from approving the Company's
pre-market approval application ("PMA") for the Company's second-generation
ultrasound imaging agent, OPTISON(TM), until the FDA resolved the merits of
citizen petitions that the plaintiffs previously filed with the FDA. These
petitions requested the FDA to regulate all ultrasound imaging contrast agents
either as drugs (as the plaintiffs' contrast agents under development are
currently classified) or as medical devices (as both the Company's ALBUNEX(R)
and OPTISON(TM) were then classified.) The lawsuits (the "FDA Cases") alleged
that the FDA acted in an arbitrary and capricious manner in its review of the
parties' ultrasound contrast agents and requested the FDA to review all
ultrasound contrast agents in a consistent manner.
In response, the United States District Court entered an order
enjoining the FDA from continuing any approval or review procedures relating to
the Company's PMA for OPTISON(TM) until ten days after the FDA ruled on the
plaintiffs' citizen petitions. In February 1997, the FDA's advisory Radiological
Devices Panel had recommended approval of the Company's PMA for OPTISON(TM) as a
device.
On July 29, 1997, the FDA ruled that OPTISON(TM) is properly
classifiable as a drug under the applicable sections of the Food and Drug Act
and FDA regulations and transferred review of the Company's PMA for OPTISON(TM)
from the Center for Devices and Radiological Health ("CDRH") to the Center for
Drug Evaluation and Research ("CDER"). (It left the classification of ALBUNEX(R)
unchanged.) However, the FDA further ruled that (1) the PMA for OPTISON(TM) will
"immediately be deemed a submitted and filed NDA [New Drug Application]"; (2)
CDER will not repeat the review of those portions of the PMA on which CDER has
already completed substantial work; and (3) CDER will rely, as appropriate, on
the "extensive analyses" already done by CDRH, the advisory panel's comments and
recommendations, and "any conclusions already reached by CDRH officials
regarding the data and information in the PMA." The ruling notes that the
Company will be expected to supplement the NDA with patent information, drug
labeling, and "other information needed to support the approval of an NDA," but
it further notes that the FDA expects "that the redesignation of [OPTISON(TM)]
can be accomplished without a significant interruption in the pre-market review
process." On August 5, 1997, the United States District Court lifted its stay on
the FDA approval process for OPTISON(TM). The Company does not know, however,
when FDA approval will be obtained (if at all) or what additional information
(if any) it will be required to provide to the FDA in connection with its review
of OPTISON(TM).
On July 31, 1997, the Company and its marketing partner Mallinckrodt
Medical Inc., ("Mallinckrodt") filed suit (the "MBI Case") in United States
District Court for the District of Columbia against four potential competitors -
Sonus, Nycomed Imaging AS ("Nycomed"), ImaRx and its marketing partner DuPont
Merck, and Bracco International BV - seeking declarations that certain of their
ultrasound contrast agent patents are invalid. On the same day, the Company and
Mallinckrodt filed counterclaims in the FDA Cases seeking the same relief as in
the MBI Case. The court subsequently ruled that these counterclaims were moot in
the light of the mootness of the FDA Cases following the FDA's reclassification
ruling and dismissed the counterclaims.
The complaint filed by the Company and Mallinckrodt in the MBI Case
alleges that each of the defendants' patents is invalid on a variety of
independent grounds under the U.S. patent laws. In addition to requesting that
all of the patents in question be declared invalid, the complaint requests a
declaration that, contrary to defendants' contentions, the Company and
Mallinckrodt do not infringe the patents, and asks that defendants be enjoined
from proceeding against the Company and Mallinckrodt for infringement until the
status of defendants' patents has been determined by the court or the U.S.
Patent and Trademark Office ("PTO"). The complaint alleges that each defendant
has claimed or is likely to claim that its patent or patents cover OPTISON(TM)
and will attempt to prevent its commercialization. All of the defendents except
Nycomed have filed motions to dismiss the complaint on jurisdictional grounds.
These motions are pending.
Beginning in July 1997, the Company received the first of five notices
from the PTO granting the Company's petitions for reexamination which it had
filed respecting five patents held by three potential competitors, Sonus,
Nycomed and Imarx. Each of the patents currently in the reexamination process is
related to the use of perfluorocarbon gases in ultrasound contrast agents and is
included among the patents respecting which the Company is seeking a declaration
of invalidity in the MBI Case.
The Company has obtained a copy of, but has not yet been served with, a
complaint filed by Sonus alleging that the manufacture and sale of OPTISON(TM)
by the Company and Mallinckrodt will infringe two patents owned by Sonus. These
patents are the same patents for which the PTO has granted the Company's
petitions for reexamination, and are among the patents respecting which the
Company is seeking a declaration of invalidity in the MBI Case. The complaint by
Sonus was filed in the United States District Court for the Western District of
Washington State after the Company and Mallinckrodt filed the MBI Case in the
United States District Court for the District of Columbia.
Litigation or administrative proceedings relating to these matters
could result in a substantial cost to the Company; and given the complexity of
the legal and factual issues, the inherent vicissitudes and uncertainty of
litigation, and other factors, there can be no assurance of a favorable outcome.
An unfavorable outcome could have a material adverse effect on the Company's
business, financial condition and results of operations. Moreover, there can be
no assurance that, in the event of an unfavorable outcome, the Company would be
able to obtain a license to any proprietary rights that may be necessary to
commercialize OPTISON(TM), either on acceptable terms or at all. If the Company
were required to obtain a license necessary to commercialize OPTISON(TM), the
Company's failure or inability to do so would have a material adverse effect on
the Company's business, financial condition and results of operations.
Liquidity and Capital Resources
At September 30, 1997, the Company had net working capital of $32.2
million compared to $43.8 million at March 31, 1997. Cash, cash equivalents,
marketable securities and certificates of deposit pledged were $32.7 million at
September 30, 1997 compared to $44.4 million at March 31, 1997. In June 1997,
the Company entered into an equipment leasing agreement with Mellon US Leasing
("Mellon") for a lease line of $1.6 million with a term of 48 months. The
Company has not yet drawn down on this lease line.
For the next several years, the Company expects to incur substantial
additional expenditures associated with product development. The Company
anticipates that its existing resources, including the proceeds of the public
offering in May 1996 and interest thereon, plus payments under its collaborative
agreement with Mallinckrodt, will enable the Company to fund its operations for
at least the next twelve months. The Company continually reviews its product
development activities in an effort to allocate its resources to those products
that the Company believes have the greatest commercial potential. Factors
considered by the Company in determining the products to pursue may include, but
are not limited to, the projected markets, potential for regulatory approval,
technical feasibility and estimated costs to bring the product to the market.
Based upon these factors, the Company may from time to time reallocate its
resources among its product development activities.
The Company may pursue a number of options to raise additional funds,
including borrowings; lease arrangements; collaborative research and development
arrangements with pharmaceutical companies; the licensing of product rights to
third parties; or additional public and private financing, as capital
requirements change as a result of strategic, competitive, technological and
regulatory factors. There can be no assurance that funds from these sources will
be available on favorable terms, or at all.
Results of Operations
Revenues Under Collaborative Agreements. Revenues under collaborative
agreements were $1.3 million for the three-month period ended September 30, 1997
compared to $1.2 million for the same period in the prior year. These revenues
in both years consist of quarterly payments to support clinical trials,
regulatory submissions and product development received from Mallinckrodt under
the Company's amended agreement with Mallinckrodt which the Company entered into
in September 1995.
Product and Royalty Revenues. Revenues from product sales and royalties
were $81,000 for the three-month period ended September 30, 1997, compared to
$32,000 for the same period in the prior year. Product revenues come from the
Company's sales of ALBUNEX(R) to Mallinckrodt which are recognized upon shipment
of the product. The transfer price for the Company's sales is determined under
the Company's agreement with Mallinckrodt and is equal to 40% of Mallinckrodt's
net sales price to its end users of the product. Royalty revenues were received
under a licensing agreement between the Company and Abbott Laboratories.
Costs of Products Sold. Cost of products sold totaled $970,000 for the
three-month period ended September 30, 1997, resulting in a negative gross
profit margin. This negative gross profit margin was due to the fact that the
current low levels of production are insufficient to cover the Company's fixed
manufacturing overhead expenses. For the same period in the prior year, cost of
products sold totaled $1.3 million. The Company anticipates an increase in its
gross profit margins if and when ALBUNEX(R) sales volume increases and if and
when OPTISON(TM) receives regulatory approval and obtains market acceptance. The
increase in sales volume would permit the fixed costs included in manufacturing
overhead to be allocated over a larger number of vials produced. Manufacturing
fixed costs are currently running at an annual rate of approximately $5 million.
The amount of any increase in the Company's margins and the time required by the
Company to achieve higher margins are highly dependent on market acceptance of
ALBUNEX(R) and OPTISON(TM) and are therefore uncertain.
Research and Development Costs. For the three-month period ended
September 30, 1997, the Company's research and development costs totaled $2.7
million, as compared to $2.3 million for the same period in 1996. This increase
is due to the fact that the Company has initiated clinical trials for additional
indications for OPTISON(TM).
Selling, General and Administrative Expenses. For the three-month
period ended September 30, 1997, the Company's selling, general and
administrative expenses totaled $2.8 million, compared to $1.8 million for the
same period in 1996. This increase in the current year is primarily attributable
to legal expenses related to the recent FDA lawsuit and pending patent
litigation. See the discussion under "Recent Events".
Interest Expense and Interest Income. Interest expense for the
three-month period ended September 30, 1997 amounted to $186,000, and consisted
of mortgage interest on the Company's manufacturing building and interest on a
note payable which is secured by the tangible assets of the Company. The
interest rate on the mortgage was 8.0% in September 1997. The note payable, in
the amount of $6.0 million, bears interest at prime plus 1% and is payable in
monthly installments of principal plus interest over five years. The interest
rate on the note was 9.5% in September 1997.
The increase in interest income in the current year is due primarily to
higher average cash and marketable securities balances.
The Company's cash is invested primarily in short-term, fixed principal
investments, such as U.S. Government agency issues, corporate bonds,
certificates of deposit and commercial paper.
<PAGE>
Prospective Information
The Company is involved in several legal and administrative proceedings
which could result in a substantial cost to the Company. Given the complexity of
the legal and factual issues and the uncertainty of litigation, there can be no
assurance of a favorable outcome. An unfavorable outcome could have a material
adverse effect on the Company's business, financial condition and results of
operations. For a detailed discussion of these matters, see "Recent Events".
PART II - OTHER INFORMATION
Item 1 - LEGAL PROCEEDINGS
See "Recent Events" in Part I, Item 2, which is incorporated by
reference in this response.
Item 2-5 - The Company has nothing to report with respect to these items for the
quarter ended September 30, 1997.
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) No reports on Form 8-K were filed by the Company during the quarter ended
September 30, 1997.
<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.
MOLECULAR BIOSYSTEMS, INC.
/s/ Gerard Wills
Gerard A. Wills
Vice President Finance and
Chief Financial Officer
11/12/97
Date
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the consolidated financial statements of Molecular
Biosystems, Inc. dated September 30, 1997 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 103
<SECURITIES> 29,644
<RECEIVABLES> 898
<ALLOWANCES> 0
<INVENTORY> 943
<CURRENT-ASSETS> 40,165
<PP&E> 20,130
<DEPRECIATION> 6,926
<TOTAL-ASSETS> 58,843
<CURRENT-LIABILITIES> 7,951
<BONDS> 0
0
0
<COMMON> 178
<OTHER-SE> 42,496
<TOTAL-LIABILITY-AND-EQUITY> 58,843
<SALES> 305
<TOTAL-REVENUES> 2,900
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