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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Commission File Number 0-15313
BIO-TECHNOLOGY GENERAL CORP.
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(Exact name of registrant as specified in its charter)
Delaware 13-3033811
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
70 Wood Avenue South, Iselin, New Jersey 08830
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(Address of principal executive offices)
(732) 632-8800
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(Registrant's telephone number, including area code)
Former address: Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ----
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Common Stock, par value $.01 per share, outstanding as of August 9, 1999:
52,531,626
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<PAGE>
INDEX
Page
-------
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets at
June 30, 1999 and December 31, 1998 ................... 3
Consolidated Statements of Operations
for the three and six months ended
June 30, 1999 and 1998 ................................ 4
Consolidated Statement of Changes in
Stockholders' Equity for the
six months ended June 30, 1999 ........................ 5
Consolidated Statements of Cash Flows
for the six months ended
June 30, 1999 and 1998 ................................ 6
Notes to Consolidated Financial Statements................ 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations.......................................... 8
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders....... 15
Item 6. Exhibits and Reports on Form 8-K.......................... 15
2
<PAGE>
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, 1999
(Unaudited) December 31, 1998
------------- -----------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents ........................ $ 8,410 $ 9,431
Short-term investments ........................... 65,604 37,602
Accounts receivable - trade ...................... 45,525 52,429
- other ...................... 695 15,968
Inventories ...................................... 5,702 4,978
Deferred income taxes ............................ 2,637 5,407
Prepaid expenses and other current assets ........ 498 344
--------- ---------
Total current assets .......................... 129,071 126,159
Severance pay funded ................................ 2,266 2,233
Property and equipment, net ......................... 17,063 9,442
Intangibles, net .................................... 1,447 1,728
Patents, net ........................................ 377 404
Other assets ........................................ 2,507 2,629
--------- ---------
Total assets .................................. $ 152,731 $ 142,595
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term bank loans ............................ $ 550 $ 288
Accounts payable ................................. 5,166 5,359
Other current liabilities ........................ 10,572 10,153
--------- ---------
Total current liabilities ..................... 16,288 15,800
--------- ---------
Long-term liabilities ............................... 3,924 3,818
--------- ---------
Stockholders' equity:
Preferred stock - $.01 par value; 4,000,000
shares authorized; no shares issued ............ -- --
Common stock - $.01 par value; 150,000,000
shares authorized; issued: 52,218,000
(51,934,000 at December 31, 1998) ............... 522 519
Capital in excess of par value ................... 162,439 161,164
Deficit .......................................... (27,290) (36,396)
Less - treasury stock at cost, 83,000 shares ..... (340) (340)
Accumulated other comprehensive income ........... (2,812) (1,970)
--------- ---------
Total stockholders' equity .................... 132,519 122,977
--------- ---------
Total liabilities and stockholders' equity .... $ 152,731 $ 142,595
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
3
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands except per share data)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
-------------------- ----------------------
1999 1998 1999 1998
------ ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Product sales....................... $35,248 $32,659 $19,381 $16,923
Contract fees....................... 4,633 1,744 1,727 740
Other revenues...................... 1,216 275 719 125
Interest income..................... 2,011 1,408 1,053 858
------ ------ ------ ------
43,108 36,086 22,880 18,646
------ ------ ------ ------
Expenses:
Research and development............ 8,977 8,973 4,359 3,717
Cost of product sales............... 6,122 5,006 3,868 2,488
General and administrative.......... 5,895 4,381 3,231 2,329
Marketing and sales................. 8,324 5,950 3,765 3,303
Commissions and royalties........... 717 343 396 217
Interest and finance................ 60 40 57 19
------ ------ ------ ------
30,095 24,693 15,676 12,073
------ ------ ------ ------
Income before income taxes............. 13,013 11,393 7,204 6,573
Income taxes........................... 3,907 3,485 2,104 2,030
------ ------ ------ ------
Net income............................. $ 9,106 $ 7,908 $ 5,100 $ 4,543
====== ====== ====== ======
Earnings per common share:
Basic............................... $ 0.18 $ 0.17 $ 0.10 $ 0.09
===== ===== ===== =====
Diluted............................. $ 0.17 $ 0.16 $ 0.10 $ 0.09
===== ===== ===== =====
Weighted average number of common and
common equivalent shares:
Basic............................... 52,014 47,810 52,086 48,292
====== ====== ====== ======
Diluted............................. 53,217 50,893 53,358 50,514
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(in thousands)
<CAPTION>
Accumulated
Common Stock Other
-------------- Capital in Comprehensive Total
Par Excess of Treasury Income Stockholders'
Shares Value Par Value Deficit Stock (Loss) Equity
------ ----- ----------- ------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998......... 51,934 $519 $161,164 $(36,396) $(340) $(1,970) $122,977
Comprehensive income:
Net income for six months
ended June 30, 1999.......... 9,106 9,106
Unrealized loss on marketable
securities, net............... (842) (842)
--------
Total comprehensive income: 8,264
--------
Issuance of common stock. ......... 120 1 647 648
Exercise of stock options.......... 164 2 628 630
-------- ----- -------- --------- ------ -------- --------
Balance, June 30, 1999............. 52,218 $ 522 $162,439 $(27,290) $(340) $(2,812) $132,519
======== ===== ======== ========= ====== ======== ========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
----------------------
1999 1998
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................ $ 9,106 $ 7,908
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ....................... 1,692 1,440
Provision for severance pay ......................... 106 (142)
Gain (loss) on sales of short-term investments ...... 174 (220)
(Loss) on sales of fixed assets ..................... (5) --
Deferred income taxes ............................... 2,770 3,248
Common stock as payment for services ................ 30 29
Changes in: receivables ............................. 22,177 (4,897)
inventories .............................. (724) (500)
prepaid expenses and other current assets (154) (8)
accounts payable ......................... (193) 219
other assets ............................. (36) (4)
other current liabilities ................ 681 1,597
-------- --------
Net cash provided by operating activities ................ 35,624 8,670
-------- --------
Cash flows from investing activities:
Short-term investments ................................ (39,597) (16,178)
Capital expenditures .................................. (8,629) (1,224)
Changes in patents .................................... (108) --
Changes in intangibles ................................ (149) --
Severance pay used (funded) ........................... (33) 82
Proceeds from sales of fixed assets ................... 44 --
Proceeds from sales of short-term investments ......... 10,579 7,564
-------- --------
Net cash used in investing activities ................... (37,893) (9,756)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock ................ 1,248 5,574
-------- --------
Net (decrease) increase in cash and cash equivalents ..... (1,021) 4,488
Cash and cash equivalents at beginning of year ........... 9,431 9,329
-------- --------
Cash and cash equivalents at end of period ............... $ 8,410 $ 13,817
======== ========
Supplementary Information
- -------------------------
Other information:
Income tax paid ....................................... $ 789 $ 185
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Statement on Adjustments
In the opinion of management, the condensed consolidated financial statements
include all adjustments, consisting of only normal recurring accruals,
considered necessary for a fair presentation. Due to fluctuations in quarterly
revenues earned, operating results for interim periods are not necessarily
indicative of the results that may be expected for the full year. The accounting
policies continue unchanged from December 31, 1998. For further information,
refer to the Consolidated Financial Statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three and six months ended June 30, 1999
compared with three and six months ended June 30, 1998
Statements in this Quarterly Report on Form 10-Q concerning the Company's
business outlook or future economic performance; anticipated profitability,
revenues, expenses or other financial items; introductions and advancements in
development of products, and plans and objectives related thereto; and
statements concerning assumptions made or expectations as to any future events,
conditions, performance or other matters, are "forward-looking statements" as
that term is defined under the Federal Securities Laws. Forward-looking
statements are subject to risks, uncertainties and other factors which could
cause actual results to differ materially from those stated in such statements.
Such risks, uncertainties and factors include, but are not limited to, changes
and delays in product development plans and schedules, changes and delays in
product approval and introduction, customer acceptance of new products, changes
in pricing or other actions by competitors, patents owned by the Company and its
competitors, changes in healthcare reimbursement, risk of operations in Israel,
risk of product liability, governmental regulation, dependence on third parties
to manufacture products and commercialize products, general economic conditions,
as well as other risks detailed in the Company's filings with the Securities and
Exchange Commission, including the Company's Annual Report on Form 10-K for the
year ended December 31, 1998.
OVERVIEW
The Company is engaged in the research, development, manufacture and
marketing of biopharmaceutical products. Through a combination of internal
research and development, acquisitions, collaborative relationships and
licensing arrangements, BTG has developed a portfolio of therapeutic products,
including six products that have received regulatory approval for sale, of which
five are currently being marketed. The Company seeks both broad markets for its
products as well as specialized markets where it can seek Orphan Drug status and
potential marketing exclusivity.
The Company was founded in 1980 to develop, manufacture and market
novel therapeutic products. The Company's overall administration, licensing,
human clinical studies, marketing activities, quality assurance and regulatory
affairs are primarily coordinated at the Company's headquarters in Iselin, New
Jersey. Pre-clinical studies, research and development activities and
manufacturing of the Company's genetically engineered products are primarily
carried out through its wholly owned subsidiary in Rehovot, Israel.
RESULTS OF OPERATIONS
The following tables set forth for the fiscal periods indicated the
percentage of revenues represented by certain items reflected on the Company's
statement of operations.
8
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Product sales........................... 81.8% 90.5% 84.7% 90.7%
Contract fees........................... 10.7 4.8 7.6 4.0
Other revenues.......................... 2.8 0.8 3.1 0.7
Interest income......................... 4.7 3.9 4.6 4.6
------ ------ ------ ------
Total.............................. 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ======
Expenses:
Research and development................ 20.8% 24.9% 19.1% 19.9%
Cost of product sales................... 14.2 13.9 16.9 13.3
General and administrative.............. 13.7 12.1 14.1 12.5
Marketing and sales..................... 19.3 16.5 16.5 17.7
Commissions and royalties............... 1.7 0.9 1.7 1.2
Interest and finance.................... 0.1 0.1 0.2 0.1
------ ------ ------ ------
Total............................... 69.8 68.4 68.5 64.7
------ ------ ------ ------
Income before taxes....................... 30.2 31.6 31.5 35.3
Income taxes.............................. 9.1 9.7 9.2 10.9
------ ------ ------ ------
Net income................................ 21.1% 21.9% 22.3% 29.4%
====== ====== ====== ======
</TABLE>
The Company has historically derived its revenues from product sales as
well as from collaborative arrangements with third parties, under which the
Company may earn up-front contract fees, may receive funding for additional
research (including funding from the Chief Scientist of the State of Israel), is
reimbursed for producing certain experimental materials, may be entitled to
certain milestone payments, may sell product at specified prices, and may
receive royalties on sales of product. The Company anticipates that product
sales will constitute the majority of its revenues in the future. Revenues have
in the past displayed and will in the immediate future continue to display
significant variations due to changes in demand for its products, new product
introductions by the Company and its competitors, the obtaining of new research
and development contracts and licensing arrangements, the completion or
termination of such contracts and arrangements, the timing and amounts of
milestone payments, and the timing of regulatory approvals of products.
The following table summarizes the Company's sales of its commercialized
products as a percentage of total product sales for the periods indicated:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------ -------------------
1999 1998 1999 1998
----- ----- ------ -----
<S> <C> <C> <C> <C>
Oxandrin.................................. 38.5% 60.7% 35.3% 62.1%
Bio-Tropin................................ 37.7 27.0 42.6 26.6
BioLon.................................... 11.5 9.3 9.1 9.2
Delatestryl............................... 11.0 1.3 12.0 1.3
Other..................................... 1.3 1.7 1.0 0.8
------ ------ ------ ------
Total............................... 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ======
</TABLE>
9
<PAGE>
The Company believes that its product mix will fluctuate from quarter to quarter
as it continues to focus on: (i) increasing market penetration of its existing
products; (ii) expanding into new markets; and (iii) commercializing additional
products.
As previously announced, as a result of a slowing in the rate of
increase of Oxandrin prescriptions, Olsten Health Services, Inc., BTG's
distributor for Oxandrin, has decided to adjust future purchases to effect an
adjustment in inventory. The timing and magnitude of the adjustment are the
subject of ongoing discussions between Olsten and BTG, and will depend in large
part on end-user demand for Oxandrin. As a result, purchases of Oxandrin by
Olsten are expected to be lower than in 1998. The Company expects during 1999 to
introduce Oxandrin to promote weight gain in patients with involuntary weight
loss and pressure ulcers. Successful penetration of this new market could lead
to a more rapid rate of Oxandrin prescription growth.
The following table summarizes the Company's U.S. and international
product sales as a percentage of total product sales for the period indicated:
Six Months Ended Three Months Ended
June 30, June 30,
------------------ ----------------------
1999 1998 1999 1998
------ ------ ------ -------
United States ............ 45.3% 62.0% 37.2% 63.0%
International ............ 54.7 38.0 62.8 37.0
----- ----- ----- -----
Total .............. 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Comparison of Six Months Ended June 30, 1999 and June 30, 1998
Revenues. Total revenues increased 19% in the first half of 1999 to
$43,108,000 from $36,086,000 in the first half of 1998. Product sales increased
by $2,589,000, or 8%, in the first half of 1999 from the comparable prior
period, as increased sales of human growth hormone ("hGH"), BioLon and
Delatestryl to BTG's distributors were partially offset by decreased sales of
Oxandrin. Oxandrin sales to Olsten Corporation ("Olsten"), the Company's
wholesale and retail distributor of Oxandrin in the United States, decreased
$8,265,000, or 42%, in the first half of 1999 compared to the first half of
1998. The decrease in sales to Olsten was due to Olsten's change in policy to
reduce the amount of Oxandrin inventory it carries; however, end-user sales of
Oxandrin by Olsten increased in the first half of 1999 compared to the first
half of 1998. The decrease in sales to Olsten was partially offset by $2,153,000
of sales of Oxandirin to a third party for distribution overseas. Product sales
of hGH, BioLon and Delatestryl increased $4,470,000, $1,015,000 and $3,457,000
or 51%, 33% and 810%, respectively. The increase in sales of hGH were primarily
due to increased sales in Japan resulting from Sumitomo Pharmaceutical Co., Ltd.
commencing distribution of the Company's hGH in Japan in January 1999. The
increase in sales of Delatestryl, which is also distributed on behalf of the
Company by Olsten, is primarily the result of the U.S. Food and Drug
Administration stopping production of a competing injectable testosterone
product currently used to treat men with hypogonadism (testosterone deficiency).
Contract fees and other revenues are primarily generated from licensing
and distribution arrangements and partial research and development funding by
the Chief Scientist of the State of Israel. Contract fees represented 10.7% of
total revenues in the first half of 1999 compared to 4.8% in the first half of
1998. Of the contract fees earned in the first half of 1999, $4,197,000, or 91%
of total contract fees, was earned in respect of the license of distribution
rights for Insulin on a substantially worldwide basis. Of the contract fees
earned in the first half of 1998, $500,000, or 29% of total contract fees, were
earned in respect of the license of distribution rights for BioLon in the United
States, and $425,000, $400,000 and $353,000, or 24%, 23% and 20% of total
contract fees, respectively, were earned in respect of the Company's oral
contraceptive regimen, hepatitis-B vaccine and insulin, respectively. Interest
income increased $603,000, or 43%, over the comparable prior period primarily as
a result of increased cash balances (including short-term investments) resulting
mainly from exercise of warrants (which expired December 31, 1998) and options
and cash flow from operations subsequent to June 30, 1998.
Research and Development Expense. Research and development expense was
essentially the same in the first half of 1999 and 1998. In the first half of
1998, the Company was conducting a Phase III clinical trial for its superoxide
dismutase product. This clinical trial, which was terminated in the second
quarter of 1998, is now being conducted as a Phase II trial. The decrease in
research and development expenses resulting from termination of the Phase III
trial was offset by increased salaries due to increased research and development
and other clinical activities.
10
<PAGE>
Cost of Product Sales. Cost of product sales increased $1,116,000, or
22%, in the first half of 1999 to $6,122,000 from $5,006,000 in the first half
of 1998. Cost of product sales as a percentage of product sales increased to
17.4% as compared to 15.3% in the comparable period last year. Cost of product
sales increased, both in absolute terms and as a percentage of revenues,
primarily as a result of increased sales of Delatestryl. Oxandrin and human
growth hormone have a relatively low cost of manufacture as a percentage of
product sales, while Delatestryl and BioLon have the highest cost to manufacture
as a percentage of product sales. Cost of product sales as a percentage of
product sales varies from year to year and quarter to quarter depending on the
quantity and mix of products sold.
General and Administrative Expense. General and administrative expense
increased 35% in the first half of 1999 to $5,895,000 versus $4,381,000 in the
comparable prior period. As a percentage of revenues, general and administrative
expense increased to 13.7% of revenues in the first half of 1999 versus 12.1% of
revenues in the comparable prior year period. The increase derived mainly from
legal fees resulting from the reactivation in the fourth quarter of 1998 of the
Company's declaratory judgment action against Genentech in respect of the
Company's hGH in the United States.
Marketing and Sales Expense. Marketing and sales expense increased 40%
in the first half of 1999 to $8,324,000 from $5,950,000 for the prior year
period. As a percentage of revenues, marketing and sales expense increased to
19.3% from 16.5% for the first half of 1998. These expenses primarily related to
the sales and marketing force in the United States that the Company established
to promote distribution of Oxandrin in the United States. The increase was
primarily due to additional marketing and sales expenses, primarily resulting
from increased personnel and increased advertising, promotional and market
research activities.
Commissions and Royalties. Commissions and royalties were $717,000 in
the first half of 1999, as compared to $343,000 in the first half of 1998. These
expenses consist primarily of royalties to entities from which the Company
licensed certain of its products and to the Chief Scientist.
Income Taxes. Provision for income taxes for the six months ended June
30, 1999 was $3,907,000, representing 30.0% of income before income taxes as
compared to $3,485,000, or 30.6% of income before income taxes, in the six
months ended June 30, 1998. The Company's consolidated tax rate differs from the
statutory rate because of Israeli tax benefits, research and experimental tax
credits and similar items which reduce the tax rate.
Earnings per Common Share. The Company had approximately 4.2 million
and 2.3 million additional basic and diluted weighted average shares
outstanding, respectively, for the six month period ended June 30, 1999, as
compared to the same period in 1998. The increased number of basic shares was
primarily the result of the issuance, subsequent to June 30, 1998, of
approximately 3,146,000 shares upon the exercise of warrants that expired on
December 31, 1998. The increase in the number of diluted shares was the result
of the increased number of shares outstanding, partially offset by fewer
outstanding options being considered common equivalent shares because their
exercise price was above the average fair market value of the Common Stock for
the first half of 1999, which average fair market value was lower than in the
first half of 1998.
Comparison of Three Months Ended June 30, 1999 and June 30, 1998
Revenues. Total revenues increased 23% in the second quarter of 1999 to
$22,880,000 from $18,646,000 in the second quarter of 1998. Product sales
increased by $2,458,000, or 15%, in the second quarter of 1999 from the
comparable prior period, as increased sales of human growth hormone, BioLon and
Delatestryl to BTG's distributors were partially offset by decreased sales of
Oxandrin. Oxandrin sales to Olsten Corporation, the Company's wholesale and
retail distributor of Oxandrin in the United States, decreased $5,663,000, or
54%, in the three months ended June 30, 1999 compared to the same period in
1998. The decrease in sales to Olsten was due to Olsten's change in policy to
reduce the amount of Oxandrin inventory it carries; however, end-user sales of
Oxandrin by Olsten increased in the second quarter of 1999 compared to the
second quarter of 1998 and the first quarter of 1999. The decrease in sales to
Olsten was partially offset by $2,083,000 of sales of Oxandrin to a third party
for distribution overseas. Product sales of hGH, BioLon and Delatestryl
increased $3,758,000, $203,000 and $2,102,000 or 83%, 13% and 877%,
respectively. The increase in sales of hGH were primarily due to increased sales
in Japan resulting from Sumitomo Pharmaceutical Co., Ltd. commencing
distribution of the Company's hGH in Japan in January 1999. The increase in
sales of Delatestryl, which is also distributed on behalf of the Company by
Olsten, is primarily the result of the U.S. Food and Drug Administration
stopping production of a competing injectable testosterone product currently
used to treat men with hypogonadism (testosterone deficiency).
Contract fees and other revenues are primarily generated from licensing
and distribution arrangements and partial research and development funding by
the Chief Scientist of the State of Israel. Contract fees represented 7.6% of
total
11
<PAGE>
revenues in the second quarter of 1999 compared to 4.0% in the second quarter of
1998. Of the contract fees earned in the second quarter of 1999, $1,600,000, or
93% of total contract fees, was earned in respect of the license of distribution
rights for Insulin on a substantially worldwide basis. Of the contract fees
earned in the second quarter of 1998, $425,000 and $282,000, or 57% and 38% of
total contract fees, respectively, were earned in respect of the Company's oral
contraceptive regimen and insulin, respectively. Interest income increased
$195,000, or 23% over the comparable prior period primarily as a result of
increased cash balances (including short-term investments) resulting mainly from
exercise of warrants (which expired December 31, 1998) and options and cash flow
from operations subsequent to June 30, 1998.
Research and Development Expense. Research and development expense
increased 17% in the second quarter of 1999 to $4,359,000 from $3,717,000 in the
second quarter of 1998. The increase in research and development expenditures in
the three month ended June 30, 1999 is mainly attributable to increased salaries
due to increased research and development and other clinical activities.
Cost of Product Sales. Cost of product sales increased $1,380,000, or
55%, in the second quarter of 1999 to $3,868,000 from $2,488,000 in the second
quarter of 1998. Cost of product sales as a percentage of product sales
increased to 20.0% as compared to 14.7% in the comparable period last year. Cost
of product sales decreased, both in absolute terms and as a percentage of
revenues, primarily as a result of increased sales of Delatestryl. Oxandrin and
human growth hormone have a relatively low cost of manufacture as a percentage
of product sales, while Delatestryl and BioLon have the highest cost to
manufacture as a percentage of product sales. Cost of product sales as a
percentage of product sales varies from year to year and quarter to quarter
depending on the quantity and mix of products sold.
General and Administrative Expense. General and administrative expense
increased 39% in the second quarter of 1999 to $3,231,000 versus $2,329,000 in
the comparable prior period. As a percentage of revenues, general and
administrative expense increased to 14.1% of revenues in the second quarter of
1999 versus 12.5% of revenues in the comparable prior year period. The increase
derived mainly from legal fees resulting from the reactivation in the fourth
quarter of 1998 of the Company's declaratory judgment action against Genentech
in respect of the Company's hGH in the United States.
Marketing and Sales Expense. Marketing and sales expense increased 14%
in the second quarter of 1999 to $3,765,000 from $3,303,000 for the prior year
period. These expenses primarily related to the sales and marketing force in the
United States that the Company established to promote distribution of Oxandrin
in the United States. The increase was primarily due to additional marketing and
sales expenses, primarily resulting from increased personnel and increased
advertising, promotional and market research activities. As a percentage of
revenues, marketing and sales expense decreased to 16.5% from 17.7% for the
second quarter of 1998 due to the fact that revenues increased at a faster rate
than marketing and sales expense.
Commissions and Royalties. Commissions and royalties were $396,000 in
the second quarter of 1999, as compared to $217,000 in the second quarter of
1998. These expenses consist primarily of royalties to entities from which the
Company licensed certain of its products and to the Chief Scientist.
Income Taxes. Provision for income taxes for the three months ended
June 30, 1999 was $2,104,000, representing 29.2% of income before income taxes
as compared to $2,030,000, or 30.9% of income before income taxes, in the second
quarter of 1998. The Company's consolidated tax rate differs from the statutory
rate because of Israeli tax benefits, research and experimental tax credits and
similar items which reduce the tax rate.
Earnings per Common Share. The Company had approximately 3.8 million
and 2.8 million additional basic and diluted weighted average shares
outstanding, respectively, for the three month period ended June 30, 1999, as
compared to the same period in 1998. The increased number of basic shares was
primarily the result of the issuance, subsequent to June 30, 1998, of
approximately 3,146,000 shares upon the exercise of warrants that expired on
December 31, 1998. The increase in the number of diluted shares was the result
of the increased number of shares outstanding, partially offset by fewer
outstanding options being considered common equivalent shares because their
exercise price was above the average fair market value of the Common Stock for
the second quarter of 1999, which average fair market value was lower than in
the second quarter of 1998.
12
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LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at June 30, 1999 was $112,783,000 as
compared to $110,359,000 at December 31, 1998.
The cash flows of the Company have fluctuated significantly due to the
impact of net income and losses, capital spending, working capital requirements,
the issuance of Common Stock and other financing activities. The Company expects
that cash flow in the near future will be primarily determined by the levels of
net income and financings, if any, undertaken by the Company. Net cash
(decreased) increased by $(1,021,000) and $4,488,000 in the six months ended
June 30, 1999 and 1998, respectively. Short-term investments increased
$28,002,000 and $8,387,000, respectively, in these periods.
Net cash provided by operating activities was $35,624,000 and
$8,670,000 in the six months ended June 30, 1999 and 1998, respectively. Net
income was $9,106,000 and $7,908,000 in the same periods, respectively. In the
six months ended June 30, 1999 net cash provided by operating activities was
greater than net income primarily because of a decrease in receivables of
$22,177,000, deferred income taxes at $2,770,000 and depreciation and
amortization at $1,692,000. In the six months ended June 30, 1998, net cash
provided by operating activities was greater than net income primarily because
of a decease in deferred income taxes of $3,248,000, an increase in other
current liabilities of $1,597,000 and depreciation and amortization of
$1,440,000 partially offset by an increase in receivables and inventories of
$4,897,000 and $500,000, respectively.
Net cash used in investing activities was $37,893,000 and $9,756,000 in
the six months ended June 30, 1999 and 1998, respectively. Net cash used in
investing activities included capital expenditures of $8,629,000 and $1,224,000
in these periods, respectively, consisting in 1999 of approximately $6,250,000
to purchase a new manufacturing facility, with the remainder in both periods
primarily for laboratory and manufacturing equipment. The remainder of the net
cash used in investing activities was primarily for purchases and sales of
short-term investments.
Net cash provided by financing activities was $1,248,000 and $5,574,000
in the six months ended June 30, 1999 and 1998, respectively, which are net
proceeds from issuances of Common Stock, primarily as a result of exercise of
stock options.
The Company purchased a manufacturing facility in Israel for
approximately $6,250,000. The Company will initially locate its production
activities for Bio-Hep-B and Fibrimage at this new facility, and will thereafter
move the remainder of its production activities to this facility. The Company
expects the initial production facility will be ready by the end of 2000. The
Company expects it will cost approximately $30 million to complete the
production facility (excluding the cost of purchasing the facility).
The Company maintains its funds in money market funds, commercial paper
and other liquid debt instruments.
The Company manages its Israeli operations with the objective of
protecting against any material net financial loss in U.S. dollars from the
impact of Israeli inflation and currency devaluations on its non-U.S. dollar
assets and liabilities. The cost of the Company's operations in Israel, as
expressed in dollars, is influenced by the extent to which any increase in the
rate of inflation in Israel is not offset (or is offset on a lagging basis) by a
devaluation of the Israeli Shekel in relation to the U.S. dollar. The rate of
inflation (as measured by the consumer price index) was approximately 7% in 1997
and 9% in 1998, while the Shekel was devalued by approximately 9% and 18%,
respectively. In the six months ended June 30, 1999 the consumer price index
decreased at the rate of approximately 1% while the Shekel's value in relation
to the U.S. dollar decreased by approximately 2%. As a result, for those
expenses linked to the Israeli Shekel, such as salaries and rent, this resulted
in corresponding decreases in these costs in U.S. dollars. To the extent that
expenses in Shekels exceed BTG's revenues in Shekels (which to date have
consisted primarily of research funding from the Chief Scientist and product
sales in Israel), the devaluations of Israeli currency have been and will
continue to be a benefit to BTG's financial condition. However, should BTG's
revenues in Shekels exceed its expenses in Shekels in any material respect, the
devaluation of the Shekel will adversely affect BTG's financial condition.
Further, to the extent the devaluation of the Shekel with respect to the U.S.
dollar does not substantially offset the increase in the costs of local goods
and services in Israel, BTG's financial results will be adversely affected as
local expenses measured in U.S. dollars will increase.
At June 30, 1999, intangibles, net consist of (i) $1,083,000 (net of
amortization) relating to the repurchase of all rights to hGH previously
licensed to The DuPont Merck Pharmaceutical Company, together with all rights to
all data generated in pharmacological, toxicological and clinical studies and
encompassed in the Investigational New Drug Application and New Drug Application
files then pending with the U.S. Food and Drug Administration for the treatment
of human growth hormone-
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deficient children and (ii) $214,000 (net of amortization) relating to the
reacquisition of all rights to human growth hormone licensed to Smithkline
Beecham.
The Company is party to several proceedings relating to patents owned
by it or others. The Company cannot predict the costs of such proceedings, and
there can be no assurance that such costs will not be significant. Should the
Company be unsuccessful in any of these proceedings, it may be unable to
commercialize the products which are the subject of such proceedings in certain
countries, and may be unable to produce the products in Israel, which could have
a material adverse effect on the Company's revenues and results of operations.
The Company believes that its remaining cash resources as of June 30,
1999, together with anticipated product sales, scheduled payments to be made to
BTG under its current agreements with pharmaceutical partners, the proceeds from
sales of equity and continued funding from the Chief Scientist at current
levels, will be sufficient to fund the Company's current operations for the
foreseeable future. There can, however, be no assurance that product sales will
occur as anticipated, that scheduled payments will be made by third parties,
that current agreements will not be canceled, that the Chief Scientist will
continue to provide funding at current levels, or that unanticipated events
requiring the expenditure of funds will not occur. The satisfaction of the
Company's future cash requirements will depend in large part on the status of
commercialization of the Company's products, the Company's ability to enter into
additional research and development and licensing arrangements, and the
Company's ability to obtain additional equity investments, if necessary. There
can be no assurance that the Company will be able to obtain additional funds or,
if such funds are available, that such funding will be on favorable terms.
YEAR 2000
The Company uses and relies on a variety of information technologies,
computer systems and scientific and manufacturing equipment containing
computer-related components (such as programmable logic controllers and other
embedded systems). Certain of the Company's computer systems and equipment use
two digit fields rather than four digit fields to define the applicable year. As
a result, such systems may not be able to distinguish between dates in the 20th
century and the 21st century. This could cause system or equipment shutdowns,
failures or miscalculations resulting in inaccuracies in computer output or
disruptions of operations, including inaccurate processing of financial
information and/or temporary inabilities to process transactions, manufacture
products or engage in normal business activities.
The Company has conducted an evaluation of the actions necessary to
ensure that its business critical computer systems and equipment will be able to
function without disruption with respect to the application of dating systems in
the Year 2000. This evaluation was completed by the end of 1998, following which
the Company upgraded, replaced and tested its computer systems and equipment so
as to be able to operate without disruption due to Year 2000 issues. The Company
expects to complete all its remediation efforts before the end of 1999. However,
there can be no assurance that any required remedial actions will be able to be
completed on a timely basis. If the Company is unable to complete its remedial
actions in the necessary time frame, contingency plans will be developed to
address those business critical systems which may not be Year 2000 compliant.
In addition to risks associated with the Company's own computer systems
and equipment, the Company has relationships with, and is to varying degrees
dependent upon, a number of third parties that provide goods, services and
information to the Company. These include contract manufacturers, suppliers,
licensees, vendors, research partners and financial institutions. If any of
these third parties experience failures in their computer systems or equipment
due to Year 2000 non-compliance, which systems and equipment are outside the
control of the Company, it could affect the Company's ability to manufacture
products or engage in normal business activities. The Company has made contact
with all of its significant customers, suppliers, vendors and partners to
determine the extent to which the Company is vulnerable to their failures and to
ascertain their Year 2000 compliance and risk. Based on these responses, the
Company believes that its significant customers, suppliers, vendors and partners
will be Year 2000 compliant.
The total cost of the Year 2000 systems evaluation and remediation is
being funded through operating cash flows and the Company is expensing these
costs. While the total cost to obtain Year 2000 compliance is not known at this
time, the Company currently expects the cost to be less than $100,000, of which
approximately $50,000 has been expended through June 30, 1999. The actual cost,
however, could exceed this estimate. The Company believes that such cost will
not have a material effect on the Company's financial position, results of
operations or cash flows.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The Annual Meeting of Stockholders of Bio-Technology General
Corp. was held on June 9, 1999.
(c) The following persons, comprising the entire Board of
Directors, were elected at the Annual Meeting pursuant to the
following vote tabulation:
Name Votes For Votes Withheld
---- --------- --------------
Herbert J. Conrad 46,415,277 571,874
Sim Fass 46,415,577 571,574
Carl Kaplan 46,415,777 571,374
Allan Rosenfield 46,415,777 571,374
David Tendler 46,415,777 571,374
Virgil Thompson 46,415,277 571,874
Dan Tolkowsky 46,410,017 577,134
Faye Wattleton 46,411,677 575,474
Herbert Weissbach 46,415,777 571,374
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
---------
10.1 Employment Agreement, dated as of July 23, 1999, between
Bio-Technology General Corp. and Robert M. Shaw
27. Financial Data Schedule
(b) Reports on Form 8-K:
--------------------
None
15
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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.
BIO-TECHNOLOGY GENERAL CORP.
----------------------------
(Registrant)
By: /s/ SIM FASS
----------------------------
Sim Fass
Chairman and
Chief Executive Officer,
Principal Executive Officer
/s/ YEHUDA STERNLICHT
----------------------------
Yehuda Sternlicht
Vice President-Finance and
Chief Financial Officer,
Principal Financial and Accounting Officer
Dated: August 11, 1999
16
EMPLOYMENT AGREEMENT
AGREEMENT made as of July 23, 1999, between BIO-TECHNOLOGY GENERAL
CORP., a Delaware corporation with an office at 70 Wood Avenue South, Iselin,
New Jersey 08830 (the "Company"), and Robert M. Shaw, having a residence at 17
Governors Lane, Princeton, New Jersey 08540 (the "Executive").
W I T N E S S E T H :
---------------------
WHEREAS, the Company desires that Executive be employed to serve in a
senior executive capacity with the Company, and Executive desires to be so
employed by the Company, upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations and covenants herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT.
The Company hereby employs Executive and Executive hereby accepts such
employment, subject to the terms and conditions herein set forth. Executive
shall hold the office of Senior Vice President and General Counsel, reporting to
the Chief Executive Officer of the Company.
2. TERM.
The initial term of employment under this Agreement shall begin on the
date hereof (the "Employment Date") and shall continue for a period of two (2)
years from that date, subject to prior termination in accordance with the terms
hereof. Thereafter, this Agreement shall automatically be renewed for successive
two year terms unless either party shall give the other ninety (90) days prior
written notice of its intent not to renew this Agreement.
3. COMPENSATION.
(a) As compensation for the employment services to be rendered by
Executive hereunder, including all services as an officer or director of the
Company and any of its subsidiaries, the Company agrees to pay, or cause to be
paid, to Executive, and Executive agrees to accept, payable in equal
installments in accordance with Company practice, an initial annual salary of
$210,000. Executive's annual salary hereunder for the remaining years of
employment shall be determined by the Board of Directors in its sole discretion;
provided, however, that Executive's
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annual salary shall not be reduced during the term of this Agreement below the
highest annual salary paid to Executive at any time during such term.
(b) Executive shall be entitled to bonuses from time to time in such
amounts as may be determined by the Board of Directors in its sole discretion.
4. EXPENSES.
The Company shall pay or reimburse Executive, upon presentment of
suitable vouchers, for all reasonable business and travel expenses that may be
incurred or paid by Executive in connection with his employment hereunder.
Executive shall comply with such restrictions and shall keep such records as the
Company may deem necessary to meet the requirements of the Internal Revenue Code
of 1986, as amended from time to time, and regulations promulgated thereunder.
5. OTHER BENEFITS.
Executive shall be entitled to a vacation allowance of not less than
four (4) weeks per annum and to participate in and receive any other benefits
customarily provided by the Company to its senior management personnel
(including any profit sharing, pension, short and long-term disability
insurance, hospital, major medical insurance, dental insurance and group life
insurance plans in accordance with the terms of such plans) and including stock
option and/or stock purchase plans, all as determined from time to time by the
Board of Directors of the Company. Unused annual vacation may not be carried
over to other years except that with the consent of the Chief Executive Officer
the Executive may carry over unused vacation in those instances in which
Executive has been unable to utilize fully his annual vacation entitlement due
to exigencies of Company business matters and needs.
6. DUTIES.
(a) Executive shall perform such duties and functions as the Chief
Executive Officer of the Company shall from time to time determine in accordance
with what it is normal and customary for an individual holding Executive's
position to perform, and Executive shall comply in the performance of such
duties and functions with the policies of the Board of Directors.
(b) Executive agrees to devote his entire working time, attention and
energies to the performance of the business of the Company and of any of its
subsidiaries by which he may be employed; and Executive shall not without the
approval of the Board of Directors, directly or indirectly, alone or as a member
of any partnership or other business organization, or as an officer, director or
employee of any other corporation, partnership or other business organization,
be actively engaged in or concerned with any other duties or pursuits of a
business nature which interfere with the performance of his duties hereunder, or
which, even if non-interfering, may be, in the reasonable determination of the
Board of Directors of the Company in its sole discretion, inimical, or contrary,
to the best interests of the Company.
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<PAGE>
(c) All fees, compensation or commissions received by Executive during
the term of this Agreement for personal services (including, but not limited to,
commissions and compensation received as a fiduciary or a director, and fees for
lecturing and teaching) rendered at the request of the Company shall be paid to
the Company when received by Executive, except those fees that the Board of
Directors determines may be kept by Executive.
(d) Nothing in this Section 6 or elsewhere in this Agreement shall be
construed to prevent Executive from investing or trading in non-conflicting
investments as he sees fit for his own account, including real estate, stocks,
bonds, securities, commodities or other forms of investments.
(e) The principal location at which the Executive shall perform his
duties hereunder shall be at the Company's offices in Iselin, New Jersey or at
such other location as may be designated from time to time by the Board of
Directors of the Company, provided that if the principal location of Executive's
duties is transferred from Iselin, New Jersey, the new principal location of
Executive's duties shall not be transferred beyond a 50-mile radius of Iselin,
New Jersey without Executive's consent. Notwithstanding the foregoing, Executive
shall perform such services at such other locations as may be required for the
proper performance of his duties hereunder, and Executive recognizes that such
duties may involve significant travel.
7. TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION.
(a) Executive's employment hereunder may be terminated at any time
upon written notice from the Company to Executive:
(i) upon the determination by the Board of
Directors, after Executive has received
notice that his performance is not
satisfactory for any reason which would not
constitute justifiable cause (as defined in
7(d)) and which notice specifies with
reasonable particularity how such
performance is not satisfactory, that
Executive has failed to remedy such
performance to the reasonable satisfaction
of the Board of Directors within thirty (30)
days of such notice; or
(ii) upon the determination by the Board of
Directors that there is justifiable cause
(as defined in 7(d)) for such termination
and upon ten (10) days' prior written notice
of same to Executive.
(b) Executive's employment shall terminate upon:
(i) the death of Executive; or
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(ii) the "disability" of Executive (as defined in 7(c))
pursuant to 7(f) hereof.
(c) For the purposes of this Agreement, the term "disability" shall
mean the inability of Executive, due to illness, accident or any other physical
or mental incapacity, substantially to perform his duties for a period of three
(3) consecutive months or for a total of six (6) months (whether or not
consecutive) in any twelve (12) month period during the term of this Agreement,
as reasonably determined by the Board of Directors of the Company in its sole
discretion after examination of Executive by an independent physician reasonably
acceptable to Executive.
(d) For the purposes hereof, the term "justifiable cause" shall mean
and be limited to:
(i) Executive's conviction (which, through lapse of time or
otherwise, is not subject to appeal) of any crime or offense
involving the Company's or its subsidiaries' money or other
property or which constitutes a felony in the jurisdiction
involved;
(ii) Executive's performance of any act or his failure to act, for
which it is determined by independent counsel retained by the
Board of Directors (which counsel shall not be an individual or
firm which at any time within the prior three (3) years has
represented the Company, any executive employed by Company, the
Board of Directors or any individual Director), after due
inquiry in which Executive is given the opportunity to be heard
and represented by counsel, that if Executive were prosecuted, a
crime or offense involving money or property of the Company or
its subsidiaries, or which would constitute a felony in the
jurisdiction involved, would have occurred and Executive would,
in all reasonable probability, be convicted; provided, however,
that if such independent counsel does not make such
determination, then the Company shall pay Executive's reasonable
counsel fees and expenses incurred in defending Executive during
such inquiry;
(iii) any disclosure which has not been authorized or subsequently
ratified by the Company or which is not required to be made
pursuant to any judicial proceeding or by statute or regulation,
by Executive to any person, firm or corporation other than the
Company, its subsidiaries and its and their directors, officers
and employees, of any confidential information or trade secret
of the Company or any of its subsidiaries;
(iv) any attempt by Executive to secure any improper personal profit
in connection with the business of the Company or any of its
subsidiaries; or
4
<PAGE>
(v) Executive's repeated and willful failure to comply with his
duties under 6(a) or 6(b) (other than failure to comply with
instructions or policies which are illegal or improper) where
such conduct shall not have ceased or been cured within thirty
(30) days following receipt by Executive of written warning from
the Board of Directors.
Upon termination of Executive's employment for justifiable cause, this Agreement
shall terminate immediately and Executive shall not be entitled to any amounts
or benefits hereunder other than such portion of Executive's annual salary as
has been accrued through the date of his termination of employment and
reimbursement of expenses pursuant to Section 4 hereof.
(e) If Executive shall die during the term of his employment
hereunder, this Agreement shall terminate immediately. In such event, the estate
of Executive shall thereupon be entitled to receive such portion of Executive's
annual salary as has been accrued through the date of his death and such bonus,
if any, as the Board of Directors in its sole discretion may determine to award
taking into account Executive's contributions to the Company prior to his death.
If Executive's death shall occur while he is on Company business, the estate of
Executive shall be entitled to receive, in addition to the other amounts set
forth in this subsection (e), an amount equal to one-half his then annual
salary.
(f) Upon Executive's "disability", the Company shall have the right to
terminate Executive's employment. Notwithstanding any inability to perform his
duties, Executive shall be entitled to receive his compensation (including
bonus, if any) as provided herein until he begins to receive long-term
disability insurance benefits under the policy provided by the Company pursuant
to Section 5 hereof (the period during which Executive continues to receive his
compensation hereunder being the "Transition Period"). During the Transition
Period, the Company shall (i) allow Executive to participate in the Company's
401k plan to the extent permitted by such plan and (ii) at Company's expense and
to the same extent that Executive had participated prior to termination of his
employment in the Company's health insurance, dental insurance, life insurance
and disability insurance programs, continue Executive's participation in such
programs. Any termination pursuant to this subsection (f) shall be effective on
the date thirty (30) days after which Executive shall have received written
notice of the Company's election to terminate.
(g) Notwithstanding any provision to the contrary contained herein, in
the event that Executive's employment is terminated by the Company at any time
for any reason other than justifiable cause, disability or death, or in the
event the Company shall fail to renew this Agreement:
(i) the Company shall pay to Executive, in full satisfaction and in
lieu of any and all other payments due and owing to Executive
under the terms of this Agreement (other than any payments
constituting reimbursement of expenses pursuant to Section 4
hereof), a severance payment in an amount equal to his then
annual salary plus the amount
5
<PAGE>
of the last bonus awarded to Executive (less all amounts, if any,
required to be withheld), payable bi-weekly in equal
installments,
(ii) Executive shall have a right to exercise any options which are
exercisable as of the date of termination at any time during a
period of six (6) months following the effective date of
termination;
(iii) the Company shall continue to allow Executive to participate in
the Company's 401k plan to the extent permitted by such plan for
twelve (12) months following the effective date of termination;
and
(iv) the Company shall continue to allow Executive to participate, at
the Company's expense and to the same extent that Executive had
participated prior to termination of his employment, in the
Company's health insurance, dental insurance, life insurance and
disability insurance programs, to the extent permitted under such
programs, until the earlier of twelve (12) months from the
effective date of termination or until such time as Executive
becomes eligible to participate in another employer's group
health, dental and disability insurance plans; provided, however,
that Executive shall notify the Company of his acceptance of a
position with a new employer, together with the specific date on
which Executive shall become eligible for coverage in such new
employer's health, dental, life and disability insurance
programs, such notice to be given within fifteen (15) days
following commencement of such employment.
(h) Executive may terminate his employment at any time upon thirty (30)
days' prior written notice to the Company. Upon Executive's termination of his
employment hereunder, this Agreement (other than Sections 4, 7, 10, 11, 12 and
13, which shall survive) shall terminate immediately. In such event, Executive
shall be entitled to receive such portion of Executive's annual salary as has
been accrued to date. Executive shall be entitled to reimbursement of expenses
pursuant to Section 4 hereof and to participate in the Company's benefit plans
to the extent participation by former employees is required by law or permitted
by such plans, with the expense of such participation to be as specified in such
plans for former employees.
8. REPRESENTATIONS AND AGREEMENTS OF EXECUTIVE.
(a) Executive represents and warrants that he is free to enter into this
Agreement and to perform the duties required hereunder, and that there are no
employment contracts or under standings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder or requiring him to perform employment, consulting, business related
or similar duties for any other person.
6
<PAGE>
(b) Executive agrees to submit to a medical examination and to cooperate
and supply such other information and documents as may be required by any
insurance company in connection with the Company's obtaining life insurance on
the life of Executive, and any other type of insurance or fringe benefit as the
Company shall determine from time to time to obtain.
9. REPRESENTATIONS OF COMPANY.
The Company represents and warrants that the Board of Directors has
consented to the Company entering into this Agreement with Executive on the
terms set forth herein and that all written consents, resolutions and approvals
required to give full force and effect to this Agreement and to the Company's
obligations hereunder have been obtained.
10. NON-INTERFERENCE.
Executive agrees that for a period of one year following the termination of
Executive's employment hereunder, Executive shall not, directly or indirectly,
request or cause any collaborative partners, universities, governmental
agencies, contracting parties, suppliers or customers with whom the Company or
any of its subsidiaries has a business relationship to cancel or terminate any
such business relationship with the Company or any of its subsidiaries or
solicit, interfere with or entice from the Company any employee (or former
employee) of the Company.
11. INVENTIONS AND DISCOVERIES.
(a) Insofar as is related to the principal business activities and products
of the Company and any of its subsidiaries or joint ventures, Executive shall
promptly and fully disclose to the Company, and with all necessary detail for a
complete understanding of the same, all developments, know-how, discoveries,
inventions, improvements, concepts, ideas, writings, formulae, processes and
methods of a financial or other nature (whether copyrightable, patentable or
otherwise) made, received, conceived, acquired or written during working hours,
or otherwise, by Executive (whether or not at the request or upon the suggestion
of the Company) during the period of his employment with, or rendering of
advisory or consulting services to, the Company or any of its subsidiaries,
solely or jointly with others (collectively the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his rights, title and interest in and to the
Subject Matter, and Executive further agrees to deliver to the Company any and
all drawings, notes, specifications and data relating to the Subject Matter, and
to execute, acknowledge and deliver all such further papers, including
applications for copyrights or patents, as may be necessary to obtain copyrights
and patents for any thereof in any and all countries and to vest title thereto
to the Company. Executive shall assist the Company in obtaining such copyrights
or patents during the term of this Agreement, and any time thereafter on
reasonable notice and at mutually convenient times, and Executive agrees to
testify in any prosecution or litigation involving any of the Subject Matter;
provided, however, that Executive shall be compensated in a timely manner at the
rate of $250.00 per hour (with a minimum of $1500 per
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<PAGE>
day), plus out-of-pocket expenses incurred in rendering such assistance or
giving or preparing to give such testimony if it is required after termination
of his employment hereunder.
12. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Executive shall not, during the term of this Agreement, or at any time
following termination of this Agreement, directly or indirectly, disclose or
make accessible (other than as is required in the regular course of his duties,
including, without limitation, disclosures to the Company's advisors and
consultants,) or as may be required by law or regulation or pursuant to a
judicial proceeding (in which case Executive shall give the Company prior
written notice of such required disclosure) or with the prior written consent of
the Board of Directors of the Company), to any person, firm or corporation, any
confidential information acquired by him during the course of, or as an incident
to, his employment or the rendering of his advisory or consulting services
hereunder, relating to the Company or any of its subsidiaries, the directors of
the Company or its subsidiaries, any client of the Company or any of its
subsidiaries, or any corporation, partnership or other entity owned or
controlled, directly or indirectly, by any of the foregoing, or in which any of
the foregoing has a beneficial interest, including, but not limited to, the
business affairs of each of the foregoing. Such confidential information shall
include, but shall not be limited to, proprietary technology, trade secrets,
patented processes, research and development data, know-how, market studies and
forecasts, competitive analyses, pricing policies, employee lists, personnel
policies, the substance of agreements with customers and others, marketing or
dealership arrangements, servicing and training programs and arrangements,
customer lists and any other documents embodying such confidential information.
This confidentiality obligation shall not apply to any confidential information
which thereafter becomes publicly available other than pursuant to a breach of
this Section 12(a) by Executive.
(b) All information and documents relating to the Company and its
affiliates as hereinabove described shall be the exclusive property of the
Company, and Executive shall use commercially reasonable best efforts to prevent
any publication or disclosure thereof. Upon termination of Executive's
employment with the Company, all such documents, records, reports, writings and
other similar documents containing confidential information, including copies
thereof, then in Executive's possession or control shall be returned and left
with the Company.
13. SPECIFIC PERFORMANCE.
Executive agrees that if he breaches, or threatens to commit a breach of,
any of the provisions of Sections 10, 11 or 12 (the "Restrictive Covenants"),
the Company shall have, in addition to, and not in lieu of, any other rights and
remedies available to the Company under law and in equity, the right to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and that
money damages would not provide an adequate remedy to the Company.
Notwithstanding the foregoing, nothing herein shall constitute a waiver by
Executive of his right to contest whether a breach or threatened breach of any
Restrictive
8
<PAGE>
Covenant has occurred.
14. AMENDMENT OR ALTERATION.
No amendment or alteration of the terms of this Agreement shall be valid
unless made in writing and signed by both of the parties hereto.
15. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New Jersey
applicable to agreements made and to be performed therein.
16. SEVERABILITY.
The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
17. NOTICES.
Any notices required or permitted to be given hereunder shall be sufficient
if in writing, and if delivered by hand, or sent by certified mail, return
receipt requested, to the addresses set forth above or such other address as
either party may from time to time designate in writing to the other, and shall
be deemed given as of the date of the delivery or date of receipt.
18. WAIVER OR BREACH.
It is agreed that a waiver by either party of a breach of any provision of
this Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
19. ENTIRE AGREEMENT AND BINDING EFFECT.
This Agreement contains the entire agreement of the parties with respect to
the subject matter hereof and shall be binding upon and inure to the benefit of
the parties hereto and their respective legal representatives, heirs,
distributors, successors and assigns. Notwithstanding the foregoing, all prior
agreements between Executive and the Company relating to the confidentiality of
information, trade secrets, patents, indemnification, and stock options shall
not be affected by this Agreement.
20. SURVIVAL.
The termination of Executive's employment hereunder or the expiration of
this
9
<PAGE>
Agreement shall not affect the enforceability of Sections 4, 7, 9, 10, 11, 12
and 13 hereof.
21. FURTHER ASSURANCES.
The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
22. HEADINGS.
The Section headings appearing in this Agreement are for the purposes of
easy reference and shall not be considered a part of this Agreement or in any
way modify, demand or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
BIO-TECHNOLOGY GENERAL CORP.
By: /s/ SIM FASS
---------------------------------
Date:
-------------------------------
/s/ ROBERT M. SHAW
-------------------------------------
Robert M. Shaw
Date:_______________________________
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS 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> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 8,410
<SECURITIES> 65,604
<RECEIVABLES> 46,220
<ALLOWANCES> 0
<INVENTORY> 5,702
<CURRENT-ASSETS> 129,071
<PP&E> 36,242
<DEPRECIATION> 19,179
<TOTAL-ASSETS> 152,731
<CURRENT-LIABILITIES> 16,288
<BONDS> 0
0
0
<COMMON> 522
<OTHER-SE> 131,997
<TOTAL-LIABILITY-AND-EQUITY> 152,731
<SALES> 19,381
<TOTAL-REVENUES> 22,880
<CGS> 3,868
<TOTAL-COSTS> 15,619
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57
<INCOME-PRETAX> 7,204
<INCOME-TAX> 2,104
<INCOME-CONTINUING> 5,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,100
<EPS-BASIC> 0.10
<EPS-DILUTED> 0.10
</TABLE>
