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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): November 10, 1998
MOLECULAR BIOSYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-10546 36-30878632
(State or other juris- (Commission file (IRS employer diction of incorporation)
number) identification number)
10030 Barnes Canyon Road, San Diego, California 92121
(Address of principal executive offices)
Registrant's telephone number, including area code: (619) 812-7200
<PAGE>
Item 5. Other Events.
Cost Reduction Measures
In the Company's second quarter 10-Q, the Company announced that revenues
from sales of OPTISON(r) to Mallinckrodt Inc. ("Mallinckrodt") would be reduced
in the near term. Although Mallinckrodt's sales of OPTISON to end users continue
to grow, with December being the strongest month to date, the Company continues
to expect that its revenues from sales of OPTISON for the quarters ended
December 31, 1998 and March 31, 1999 will be lower than revenues from sales of
OPTISON for the quarters ended June 30, 1998 and September 30, 1998 as
Mallinckrodt manages its current inventory of the product. Mallinckrodt expects
its efforts in medical education and reimbursement to continue to increase end
user sales.
As a result of the slower than planned ramp up of OPTISON sales, the
Company actively evaluated cost reduction measures and, on November 10, 1998,
announced the initiation of a multi-phase program to reduce expenses and
preserve capital.
The Company anticipates that the initial phase, which affected
approximately 40 employees of the Company's 140-person workforce, will reduce
the Company's payroll and related cash expenditures by approximately
$5.0 million annually. Subsequent phases will include further reductions of
the Company's headcount as a result of the planned out-sourcing of the Company's
manufacturing operations.
The impact of the cost reduction measures on the Company's financial
results will include a one-time charge of $7.2 million for the quarter ended
December 31, 1998. This charge will include $6.1 million in nonrecurring charges
and $1.1 million in cost of sales. The $6.1 million nonrecurring charge includes
$3.1 million for the write off of fixed assets, capitalized license fees and
capitalized patent costs that will no longer be used by the Company as a result
of the planned out-sourcing of manufacturing operations and the discontinuation
of certain projects, $2.3 million of severance costs, and approximately $700,000
of technology transfer costs and other costs related to the Company's plan to
out-source manufacturing. Of this $6.1 million nonrecurring charge, $3.0 million
will require cash outflows.
As indicated above, cost of sales for the fiscal third quarter will also
include a one-time charge associated with these cost reduction measures.
Approximately $1.1 million in inventories, including materials required for the
technology transfer, will be expensed through cost of sales in the third quarter
as a result of the planned out-source of manufacturing. Of this $1.1 million,
$500,000 will require cash outflows.
In addition to these charges in the quarter ended December 31, 1998, the
Company also expects to write off another $2.8 million in fixed assets through
accelerated depreciation over the next 12-15 months as the manufacturing process
is out-sourced.
Changes in Management
The Company also announced on December 3, 1998 key changes in management.
Elizabeth L. Hougen was named to the position of Chief Financial Officer,
effective January 1, 1999. The move was in response to the planned departure
of Gerard A. Wills, vice president of finance and Chief Financial Officer. The
Company also announced on December 3, 1998 the appointment of
Howard Dittrich, M.D., vice president of medical and regulatory affairs, to the
newly created office of executive vice president. In addition, the Company
reports that Thomas Jurgensen, vice president - legal and general counsel, and
William Ramage, vice president of marketing, are no longer with the Company
effective November 24, 1998.
Patent Issues
On December 15, 1998, the Company announced that it had received
correspondence from the U.S. Patent & Trademark Office (PTO) with respect to a
patent held by Sonus Pharmaceuticals, Inc ("Sonus") subject to a reexamination
proceeding initiated by the Company. On the basis of amendments after final
rejection in reexamination proceedings, the PTO has indicated that certain
claims in Sonus' U.S. Patent No. 5,558,094 ('094) are allowable by the agency,
subject to the issuance of a reexamination certificate. According to the PTO
correspondence, none of the original '094 patent claims which Sonus had asserted
against MBI will be allowed by the PTO without amendment. In June 1998, the PTO
rejected the Sonus patent in its original form, based on prior art not cited by
Sonus.
Subsequent to the December 15, 1998 announcement, the Company received
correspondence from the PTO with respect to another patent held by Sonus subject
to a reexamination proceeding initiated by the Company. The PTO has indicated
that certain claims of U.S. Patent 5,573,751 ('751) are also allowable by the
agency, subject to the issuance of a reexamination certificate. According to
the PTO correspondence, certain of the '751 patent claims which Sonus has
asserted against the Company will be allowed in their original form.
The '094 and '751 patents are involved in a lawsuit pending in the
U.S. District Court in Seattle. In the litigation, the Company continues to
challenge the validity of these patents and their applicability to the Company's
products.
Copies of the press releases that the Company issued on November 10, 1998,
December 3, 1998, and December 15, 1998 are attached to this Report as Exhibits
10.1, 10.2 and 10.3, respectively.
Statements in this current report on Form 8-K, including statements
regarding anticipated increases in end user sales of OPTISON, may constitute
forward looking statements and are subject to numerous risks and uncertainties,
including the expense and uncertain outcome of the patent litigation to which
the company is a party, including the possibility of injunctive relief
prohibiting the company from selling OPTISON; decisions by the Patent and
Trademark Office favoring competitors' patents; delays or inability to continue
marketing OPTISON in Europe as a result of regulatory delays or patent
litigation; the failure of OPTISON to achieve broad market acceptance;
difficulties and delays with respect to marketing and sales activities,
including the failure of physicians and third party payors to adopt OPTISON as a
standard of care; the Company's future capital needs; the failure to
successfully complete pivotal clinical trials; the development of competitive
products by others; delays by regulatory authorities in approving additional
indications for OPTISON, including the evaluation of myocardial perfusion;
manufacturing problems; general uncertainties accompanying the development and
introduction of new products; and other risks detailed from time to time in the
company's filings with the Securities and Exchange Commission. The actual
results may differ materially from those projected in this current report on
Form 8-K. The Company disclaims any obligation to update the statements in this
current report on Form 8-K.
<PAGE>
Signature
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 hereunto duly authorized.
Date: January 11, 1999.
Molecular Biosystems, Inc.
By /s/ Elizabeth L. Hougen
Elizabeth L. Hougen
Executive Director, Finance and Chief Financial Officer
<PAGE>
Exhibit Index
Sequentially
Exhibit Description Numbered Page
10.1 Press release (November 10, 1998) 6
10.2 Press release (December 3, 1998) 8
10.3 Press release (December 15, 1998) 9
Exhibit 10.1
FOR IMMEDIATE RELEASE
Contacts:
Robert P. Giargiari, Investor Relations (619) 812-7179
Patricia Sullivan, Corporate Communications (619) 812-7146
E-Mail: [email protected]
Molecular Biosystems Initiates Cost Reduction Measures,
Including Plans To Outsource Manufacturing
San Diego, California, November 10, 1998 -- Molecular Biosystems, Inc.
(NYSE: MB) Tuesday announced that it has initiated the first phase of a
multi-phase program to reduce expenses and preserve capital. The company
anticipates that the initial phase, which affects approximately 40 employees of
MBI's 140-person workforce, will reduce the company's payroll and related cash
expenditures by approximately $5 million annually. Subsequent phases likely
will include further reductions of MBI's headcount as a result of the planned
out-sourcing of the company's manufacturing operations. The company currently
is evaluating the final impact that this cost reduction program will have on its
future earnings and cash flows.
The company does not intend to eliminate positions critical to the launch
of its flagship product OPTISON(r), expansion of the OPTISON label, or
development of MBI's proprietary CT liver imaging agent.
"We remain confident in the market opportunity for OPTISON, yet we must exercise
caution with respect to our spending levels to better position the company to
take advantage of that opportunity," said Bobba Venkatadri, president and CEO of
MBI. "We believe that outsourcing the manufacturing of OPTISON will free up
resources and enable us to focus on the continued development of our most
promising new products."
Molecular Biosystems (NYSE: MB), based in San Diego, California, is a world
leader in the development and commercialization of ultrasound contrast agents
for diagnostic imaging. The company's innovative products, including OPTISON
and ORALEX(r), enable improved diagnoses of common disease through clearer
ultrasound images. Information about MBI may be obtained via fax by calling
888/329-4007 (toll-free) or via the internet by pointing your browser to
(http://www.mobi.com).
Statements in this press release may constitute forward looking statements and
are subject to numerous risks and uncertainties, including the expense and
uncertain outcome of the patent litigation to which the company is a party,
including the possibility of injunctive relief prohibiting the company from
selling OPTISON; decisions by the Patent and Trademark Office favoring
competitors' patents; delays or inability to continue marketing OPTISON in
Europe as a result of regulatory delays or patent litigation; the failure of
OPTISON to achieve broad market acceptance; the company's future capital needs;
the failure to successfully complete pivotal clinical trials; the development of
competitive products by others; delays by regulatory authorities in approving
additional indications for OPTISON, including the evaluation of myocardial
perfusion; manufacturing problems; difficulties and delays with respect to
marketing and sales activities; general uncertainties accompanying the
development and introduction of new products; and other risks detailed from time
to time in the company's filings with the Securities and Exchange Commission.
The actual results may differ materially from those projected in this press
release. The company disclaims any obligation to update the statements in this
press release.
Exhibit 10.2
FOR IMMEDIATE RELEASE
Contacts:
Robert P. Giargiari, Investor Relations (619) 812-7179
Patricia Sullivan, Corporate Communications (619) 812-7146
E-Mail: [email protected]
Molecular Biosystems Appoints Executive Vice President and CFO
San Diego, California, December 3, 1998 -- Molecular Biosystems, Inc. (NYSE:MB)
(MBI) Thursday announced the appointment of Howard Dittrich, M.D.,
vice president of medical and regulatory affairs, to the newly created office of
executive vice president. Dr. Dittrich, who has been instrumental in the
development and regulatory approval of the company's flagship product
OPTISON(r), will assume expanded management responsibilities.
Dr. Dittrich, an echocardiographer and Clinical Professor of Medicine at the
University of California, San Diego, has been employed at MBI since 1996.
Additionally, MBI named Elizabeth L. Hougen, company controller, to the position
of chief financial officer, effective January 1, 1999. Ms. Hougen has more than
15 years of experience in finance and accounting in the biomedical, high
technology and professional services industries. She has been employed at MBI
since 1992. Ms. Hougen is a certified management accountant and holds an MBA in
finance from University of San Diego.
The move is in response to the planned departure of Gerard A. Wills,
vice president of finance and CFO. Mr. Wills' resignation is effective
December 31, 1998.
Molecular Biosystems (NYSE: MB), based in San Diego, California, is a world
leader in the development and commercialization of ultrasound contrast agents
for diagnostic imaging. The company's innovative products, including OPTISON
and ORALEX(r), enable improved diagnoses of common disease through clearer
ultrasound images. Information about MBI may be obtained via fax by calling
888-329-4007 (toll-free) or via the internet by pointing your browser to
(http://www.mobi.com).
Exhibit 10.3
FOR IMMEDIATE RELEASE
Contacts:
Robert P. Giargiari, Investor Relations (619) 812-7179
Patricia Sullivan, Corporate Communications (619) 812-7146
E-Mail: [email protected]
MBI Announces Patent Office Action in Sonus Reexamination
San Diego, California, December 15, 1998 -- Molecular Biosystems, Inc.
(NYSE: MB) today announced that it has received correspondence from the
U.S. Patent & Trademark Office (PTO) with respect to a patent held by Sonus
Pharmaceuticals, Inc.
On the basis of amendments after final rejection in reexamination proceedings,
the PTO has indicated that certain claims in Sonus' U.S. Patent No. 5,558,094
('094) are allowable by the agency, subject to the issuance of a reexamination
certificate. According to the PTO correspondence, none of the original '094
patent claims which Sonus had asserted against MBI will be allowed by the PTO
without amendment. In June 1998, the PTO rejected the Sonus patent in its
original form, based on prior art not cited by Sonus.
The '094 patent, along with Sonus' U.S. Patent 5,573,751, are involved in a
lawsuit pending in the U.S. District Court in Seattle. In the litigation, MBI
continues to challenge the validity of these patents and their applicability to
MBI's products and processes.
MBI holds more than 60 valid patents worldwide protecting its proprietary
microsphere technology, which has enabled the development of OPTISON(r),
the only FDA-approved advanced generation ultrasound contrast agent.
Molecular Biosystems (NYSE: MB), based in San Diego, California, is a world
leader in the development and commercialization of ultrasound contrast agents
for diagnostic imaging. The company's innovative products, including OPTISON
and ORALEX(r), enable improved diagnoses of common disease through clearer
ultrasound images. Information about MBI may be obtained via fax by calling
888/329-4007 (toll-free) or via the internet by pointing your browser to
(http://www.mobi.com).
Statements in this press release may constitute forward looking statements and
are subject to numerous risks and uncertainties, including the expense and
uncertain outcome of the patent litigation to which the company is a party,
including the possibility of injunctive relief prohibiting the company from
selling OPTISON; decisions by the Patent and Trademark Office favoring
competitors' patents; delays or inability to continue marketing OPTISON in
Europe as a result of regulatory delays or patent litigation; and other risks
detailed from time to time in the company's filings with the Securities and
Exchange Commission. The actual results may differ materially from those
projected in this press release. The company disclaims any obligation to update
the statements in this press release.
