<PAGE>
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 MARCH 31, 2000
Commission File Number 0-15313
BIO-TECHNOLOGY GENERAL CORP.
(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
(Address of principal executive offices)
(732) 632-8800
(Registrant's telephone number, including area code)
Former address: Not Applicable
- --------------------------------------------------------------------------------
(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 May 5, 2000:
54,412,340
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INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets at
March 31, 2000 and December 31, 1999.............................................3
Consolidated Statements of Operations
for the three months ended
March 31, 2000 and 1999..........................................................4
Consolidated Statement of Changes in
Stockholders' Equity for the three
months ended March 31, 2000......................................................5
Consolidated Statements of Cash Flows
for the three months ended
March 31, 2000 and 1999..........................................................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 5. Other Information.................................................................15
Item 6. Exhibits and Reports on Form 8-K..................................................15
</TABLE>
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PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
(Unaudited)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 32,537 $ 18,703
Short-term investments 68,473 68,547
Accounts receivable 27,959 37,504
Inventories 9,336 8,624
Deferred income taxes 4,289 4,286
Prepaid expenses and other current assets 1,776 220
-------- --------
Total current assets 144,370 137,884
Account receivable 2,443 2,443
Severance pay funded 2,460 2,369
Property and equipment, net 20,000 18,938
Other assets 3,060 3,011
-------- --------
Total assets $172,333 $164,645
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term bank loans $ 433 $ 20
Accounts payable 4,723 7,257
Other current liabilities 12,900 11,151
-------- --------
Total current liabilities 18,056 18,428
-------- --------
Long-term liabilities 4,635 4,333
-------- --------
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: 54,301,000 (53,280,000 at
December 31, 1999) 543 533
Capital in excess of par value 175,035 168,743
Deficit (21,049) (22,534)
Less - treasury stock at cost, 83,000 shares (340) (340)
Accumulated other comprehensive income (4,547) (4,518)
-------- --------
Total stockholders' equity 149,642 141,884
-------- --------
Total liabilities and stockholders' equity $172,333 $164,645
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
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CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- ----------------------------------------------------------------------------------------------------
2000 1999
-------- --------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Product sales $ 12,507 $ 15,867
Contract fees 2,475 2,906
Royalties 635 36
Other revenues 432 461
Interest income 1,351 958
-------- --------
17,400 20,228
-------- --------
Expenses:
Research and development 5,397 4,618
Cost of product sales 2,336 2,254
General and administrative 3,446 2,664
Marketing and sales 3,256 4,559
Commissions and royalties 654 321
Interest and finance 30 3
-------- --------
15,119 14,419
-------- --------
Income before income taxes 2,281 5,809
Income taxes 796 1,803
-------- --------
Net income $ 1,485 $ 4,006
======== ========
Earnings per common share:
Basic $0.03 $0.08
======== ========
Diluted $0.03 $0.08
======== ========
Weighted average number of common and common equivalent shares:
Basic 53,748 51,940
======== ========
Diluted 57,373 52,652
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
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CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Common Stock Accumulated
-------------- Capital in Other Total
Par Excess of Treasury Comprehensive Stockholders'
Shares Value Par Value Deficit Stock Income Equity
(Loss)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 53,280 $533 $168,743 $(22,534) $(340) $(4,518) $141,884
Comprehensive income:
Net income for three months
ended March 31, 2000 1,485 1,485
Unrealized loss on marketable
securities, net (29) (29)
--------
Total comprehensive income: 1,456
--------
Issuance of common stock 70 1 380 381
Exercise of stock options 951 9 5,912 5,921
------ ---- -------- -------- ----- ------- --------
Balance, March 31, 2000 54,301 $543 $175,035 $(21,049) $(340) $(4,547) $149,642
====== ==== ======== ======== ===== ======= ========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
5
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-------------------------
2000 1999
---- ----
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,485 $ 4,006
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 728 825
Provision for severance pay 302 144
Loss on sales of short-term investments 260 16
Gain on sales of fixed assets (12) (7)
Deferred income taxes 733 1,455
Common stock as payment for services 15 15
Changes in: receivables 9,545 19,636
inventories (712) (1,150)
prepaid expenses and other current assets (1,559) (116)
accounts payable (3,267) (380)
other assets (251) 20
other current liabilities 2,162 148
------- ---------
Net cash provided by operating activities 9,429 24,612
------- ---------
Cash flows from investing activities:
Short-term investments (6,662) (31,386)
Capital expenditures (1,616) (588)
Severance pay funded (91) (53)
Proceeds from sales of fixed assets 40 30
Proceeds from sales of short-
term investments 6,447 5,026
------- ---------
Net cash used in investing activities (1,882) (26,971)
------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise
of options 6,287 669
------- ---------
Net increase (decrease) in cash and cash equivalents 13,834 (1,690)
Cash and cash equivalents at beginning of year 18,703 9,431
------- ---------
Cash and cash equivalents at end of period $32,537 $ 7,741
======= =========
SUPPLEMENTARY INFORMATION
Other information:
Income tax paid $ -- $ 344
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
6
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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, 1999. 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,
1999.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three months ended March 31, 2000
compared with three months ended March 31, 1999
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, 1999.
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 seven 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 and fermentation 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
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<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
2000 1999
---- ----
<S> <C> <C>
Revenues:
Product sales 71.9% 78.4%
Contract fees 14.2 14.4
Royalties 3.6 0.2
Other revenues 2.5 2.3
Interest income 7.8 4.7
----- -----
Total 100.0% 100.0%
===== =====
Expenses:
Research and development 31.0 22.8
Cost of product sales 13.4 11.1
General and administrative 19.8 13.2
Marketing and sales 18.7 22.6
Commissions and royalties 3.8 1.6
Interest and finance 0.2 0.0
----- -----
Total 86.9 71.3
----- -----
Income before income taxes 13.1 28.7
Income taxes 4.6 8.9
----- -----
Net income 8.5% 19.8%
===== =====
</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
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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>
THREE MONTHS ENDED
MARCH 31,
------------------------
2000 1999
---- ----
<S> <C> <C>
Oxandrin 40.1% 42.4%
Bio-Tropin 31.7 31.7
BioLon 14.7 14.6
Delatestryl 12.7 9.9
Other 0.8 1.4
----- -----
Total 100.0% 100.0%
===== =====
</TABLE>
The Company believes that its product mix will change significantly 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, in April 1999 Gentiva Health
Services, Inc. ("Gentiva"), BTG's distributor for Oxandrin, began to reduce its
purchases of Oxandrin in order to reduce the amount of Oxandrin inventory it
carried as a result of a slowing in the rate of increase of Oxandrin
prescriptions. The Company expects during 2000 to introduce Oxandrin to address
involuntary weight loss in patients with pressure ulcers and wounds. 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:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
2000 1999
---- ----
<S> <C> <C>
United States 53.2% 51.9%
International 46.8 48.1
----- -----
Total 100.0% 100.0%
===== =====
</TABLE>
10
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COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999
REVENUES. Total revenues decreased 14% in the first quarter of
2000 to $17,400,000 from $20,228,000 in the first quarter of 1999. Product sales
decreased by $3,360,000, or 21%, in the first quarter of 2000 from the
comparable prior period. Oxandrin sales to Gentiva Health Services Inc.
("Gentiva"), the Company's wholesale and retail distributor of Oxandrin in the
United States, decreased $1,721,000, or 26%, in the first quarter of 2000
compared to the first quarter of 1999 despite the fact that end user sales were
approximately $9.6 million in the three months ended March 31, 2000 as compared
to approximately $8.2 million in the comparable period in 1999. The decrease in
sales to Gentiva was primarily due to Gentiva's change in policy in April 1999
to reduce the amount of Oxandrin inventory it carries. Product sales of hGH and
BioLon decreased $1,072,000, and $480,000, or 21% and 21%, respectively. The
decrease in sales of hGH was primarily the result of the timing of purchases by
BTG's distribution partners.
Contract fees are primarily generated from licensing and
distribution arrangements. Contract fees represented approximately 14.2% of
total revenues in the first quarter of 2000 compared to 14.4% in the first
quarter of 1999. Of the contract fees earned in the first quarter of 2000,
$1,475,000, $450,000 and $250,000, or 60%, 18% and 10% of total contract fees,
respectively, was earned in respect of the Company's Hepatitis-B- Vaccine,
Oxandrin and BioLon products, respectively. Of the contract fees earned in the
first quarter of 1999, $2,596,000, or 89% of total contract fees, was earned in
respect of Insulin and $175,000, or 6% of total contract fees, was earned in
respect of the Company's Vitamin D Silkis product.
Royalties were $635,000 in the first quarter of 2000, as
compared to $36,000 in the same quarter last year. These revenues consist of
royalties from the licensee of the Company's Mircette product.
Other revenues are primarily generated from partial research
and development funding by the Chief Scientist of the State of Israel.
Interest income increased $393,000, or 41%, over the
comparable prior period, primarily as a result of increased cash balances
(including short-term investments) resulting mainly from cash flow from
operations and exercise of options subsequent to March 31, 1999.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development
expense increased 17% in the first quarter of 2000 to $5,397,000 from $4,618,000
in the first quarter of 1999. The increase in research and development expenses
resulted mainly from the increase in research and development personnel and
other expenses associated with these additional personnel.
COST OF PRODUCT SALES. Cost of product sales increased
$82,000, or 4%, in the first quarter of 2000 to $2,336,000 from $2,254,000 in
the first quarter of 1999. Cost of product sales as a percentage of product
sales increased to 18.7% as compared to 14.2% 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 the unfavorable mix of product
and higher manufacturing costs of BioLon. Oxandrin and human growth hormone have
a relatively low cost of manufacture as a percentage of product sales, while
BioLon has the highest cost to manufacture as a percentage of product sales.
Cost of product sales as a percentage of product sales also increased as a
result of fixed production costs, primarily overhead, being spread over a
smaller amount 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 29% in the first quarter of 2000 to $3,446,000 versus
$2,664,000 in the comparable prior period. As a percentage of revenues, general
and administrative expense increased to approximately 19.8% of revenues in the
first quarter of 2000 versus 13.2% of revenues in the comparable prior year
period. The increase in general and
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administrative expense 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
and additional personnel as a result of the Company's growth.
MARKETING AND SALES EXPENSE. Marketing and sales expense
decreased 29% in the first quarter of 2000 to $3,256,000 from $4,559,000 for the
prior year period. As a percentage of revenues, marketing and sales expense
decreased to approximately 18.7% from 22.6% for the first quarter of 1999. 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 decrease was primarily due to the timing of marketing, advertising,
promotional and market research activities.
COMMISSIONS AND ROYALTIES. Commissions and royalties were
$654,000 in the first quarter of 2000, as compared to $321,000 in the first
quarter of 1999. 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 March 31, 2000 was $796,000, representing approximately 34.9% of income
before income taxes as compared to $1,803,000, or 31.0% of income before income
taxes, in the first quarter of 1999. The increase in the effective tax rate in
the first quarter of 2000 compared to the first quarter of 1999 was primarily
due to the substantial reduction of certain tax credits available in prior
years. The Company's consolidated tax rate differs from the statutory rate
because of Israeli tax benefits, tax credits and similar items which reduce the
tax rate.
EARNINGS PER COMMON SHARE. The Company had approximately 1.8
million and 4.7 million additional basic and diluted weighted average shares
outstanding, respectively, for the three month period ended March 31, 2000, as
compared to the same period in 1999. The increased number of basic shares was
primarily the result of the issuance, subsequent to March 31, 1999, of shares
upon the exercise of options. The increase in the number of diluted shares was
the result of the increased number of shares outstanding, as well as more
outstanding options being considered common equivalent shares because their
exercise price was below the average fair market value of the Common Stock for
the first quarter of 2000, which average fair market value was higher than in
the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at March 31, 2000 was
$126,314,000 as compared to $119,456,000 at December 31, 1999.
The cash flows of the Company have fluctuated significantly
due to the impact of net income, 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 increased
(decreased) by $13,834,000 and ($1,690,000) in the three months ended March 31,
2000 and 1999, respectively.
Net cash provided by operating activities was $9,429,000 and
$24,612,000 in the three months ended March 31, 2000 and 1999, respectively. Net
income was $1,485,000 and $4,006,000 in the same periods, respectively. In the
three months ended March 31, 2000 net cash provided by operating activities was
greater than net income mainly due to changes in receivables of $9,545,000,
primarily as a result of the payment by Teva Pharmaceutical Industries Ltd. of a
$10 million contract fee accrued in September 1999, an increase in other current
liabilities of $2,162,000, depreciation and amortization of $728,000 and
deferred income taxes of $733,000, partially offset by a decrease in accounts
payable and an increase in prepaid expenses and other current assets and
inventory in the amounts of $3,267,000, $1,559,000 and $712,000, respectively.
In the three months ended March 31, 1999, net cash provided by operating
activities was greater than net income primarily because of changes in
receivables of $19,636,000, deferred income taxes
12
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of $1,455,000 and depreciation and amortization of $825,000 partially offset by
changes in prepaid expenses and other current assets of $1,150,000. The decrease
in 1999 in accounts receivable is primarily attributable to the decrease in
accounts receivable-other consisting of proceeds due from the exercise of
warrants that expired on December 31, 1998, which proceeds were received in
January 1999.
Net cash used in investing activities was $1,882,000 and
$26,971,000 in the three months ended March 31, 2000 and 1999, respectively. Net
cash used in investing activities included capital expenditures of $1,616,000
and $588,000 in these periods, respectively, primarily for the new manufacturing
facility in Israel in 2000 and primarily for laboratory and manufacturing
equipment in 1999. 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 $6,287,000 and
$699,000 in the three months ended March 31, 2000 and 1999, respectively, which
are net proceeds from issuances of Common Stock as a result of exercise of stock
options.
In April 1999, 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 early 2001. The
Company expects it will cost approximately $38,000,000 to complete the
production facility (excluding the cost of purchasing the facility), of which
approximately $11,000,000 had been expended through March 31, 2000.
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 9% in 1998
and 1% in 1999, while the Shekel was devalued by approximately 18% and 0%,
respectively. In the three months ended March 31, 2000 the consumer price index
decreased at the rate of approximately 1% while the Shekel's value in relation
to the U.S. dollar increased by approximately 3%. 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 in 1998, but an
increase in these costs in U.S. dollar terms in 1999 and in the first quarter of
2000. 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 March 31, 2000, intangibles, net consist of $758,000 (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-deficient children.
The Company believes that its remaining cash resources as of
March 31, 2000, together with anticipated product sales, scheduled payments to
be made to BTG under its current agreements with
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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.
14
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PART II. OTHER INFORMATION
Item 5. OTHER INFORMATION
In May 2000, the Company entered into an agreement with the
Ross Products Division of Abbott Laboratories pursuant to which Ross will
co-market Oxandrin in the United States.
On May 8, 2000, the United States Court of Appeals for the
Federal Circuit denied Genentech, Inc.'s motion for an injunction pending the
outcome of its appeal of a district court decision earlier this year in which a
Genentech patent relating to a method for producing recombinant human growth
hormone was found to be invalid. In addition, the Appellate Court denied
Genentech's motion to expedite the appeal proceedings. U.S. rights to BTG's
human growth hormone are licensed to Teva Pharmaceutical Industries Ltd., a
leading pharmaceutical company with a commitment to provide competitively priced
pharmaceuticals in markets worldwide. Teva has indicated that it will be ready
to launch the product in the United States during the second half of 2000. The
launch timing could, however, be subject to the resolution of a dispute between
BTG and Serono Laboratories, Inc. ("Serono") relating to a 1998 co-promotion
agreement with respect to Serono's recombinant human growth hormone product,
Saizen(R). Serono is contesting BTG's termination of that agreement in 1999 and
asserting that a non-compete provision, which BTG maintains will expire in
mid-2000 if it is applicable at all, should continue until April 30, 2002. In
March 2000, BTG filed a lawsuit in New Jersey to confirm BTG's position on these
issues. Serono has filed a motion to dismiss BTG's lawsuit.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
27 Financial Data Schedule.
(b) REPORTS ON FORM 8-K:
None
15
<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.
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: May 11, 2000
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATION
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 32,537
<SECURITIES> 68,473
<RECEIVABLES> 27,959
<ALLOWANCES> 0
<INVENTORY> 9,336
<CURRENT-ASSETS> 144,370
<PP&E> 40,493
<DEPRECIATION> 20,493
<TOTAL-ASSETS> 172,333
<CURRENT-LIABILITIES> 18,056
<BONDS> 0
0
0
<COMMON> 543
<OTHER-SE> 149,099
<TOTAL-LIABILITY-AND-EQUITY> 172,333
<SALES> 12,507
<TOTAL-REVENUES> 17,400
<CGS> 2,336
<TOTAL-COSTS> 15,089
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> 2,281
<INCOME-TAX> 796
<INCOME-CONTINUING> 1,485
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,485
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
