<PAGE>
SECURITIES AND EXCHANGE COMMISSION Conformed
Washington, D.C. 20549 Copy
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- -----------
Commission file number 0-14879
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CYTOGEN Corporation
--------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 22-2322400
- --------------- -------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
600 College Road East, CN 5308, Princeton, NJ 08540-5308
--------------------------------------------------------
(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code (609) 987-8200
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:
Class Outstanding at November 6, 1997
- ----------------- -------------------------------
Common Stock, $.01 par value 51,169,605
<PAGE>
PART I - FINANCIAL INFORMATION
- -------------------------------
Item I: Consolidated Financial Statements
CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS: 1997 1996
--------------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 4,873 $ 20,296
Short-term investments - 4,469
Restricted cash 11,145 9,916
Accounts receivable, net 3,099 439
Inventories 106 258
Other current assets 418 241
---------------- ---------------
Total current assets 19,641 35,619
---------------- ---------------
Property and Equipment:
Leasehold improvements 10,117 10,023
Equipment and furniture 7,700 7,248
---------------- ---------------
17,817 17,271
Less- Accumulated depreciation and amortization (13,600) (12,455)
---------------- ---------------
Net property and equipment 4,217 4,816
---------------- ---------------
Other Assets 1,562 1,509
---------------- ---------------
$ 25,420 $ 41,944
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable and accrued liabilities $ 6,042 $ 5,338
Current portion of long-term liabilities 2,050 1,824
---------------- ---------------
Total current liabilities 8,092 7,162
---------------- ---------------
Long-Term Liabilities 10,201 1,855
---------------- ---------------
Stockholders' Equity:
Preferred stock, $.01 par value, 5,400,000 shares
authorized - Series A Convertible Preferred Stock,
$.01 par value, 1,000 shares authorized, issued and
outstanding in 1997 and 1996 - -
Common stock, $.01 par value, 89,600,000 shares authorized,
51,160,000 and 51,079,000 shares issued and outstanding
in 1997 and 1996, respectively 511 511
Additional paid-in capital 284,814 284,527
Unrealized (loss) on short-term investments 0 (5)
Accumulated deficit (278,198) (252,106)
---------------- ---------------
Total stockholders' equity 7,127 32,927
---------------- ---------------
$ 25,420 $ 41,944
=============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
---------------------------- ---------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------ ----
<S> <C> <C> <C> <C>
REVENUES:
Product related $ 3,159 $ 393 $ 5,360 $ 1,135
License and contract 1,013 795 4,834 2,804
----------- ----------- ----------- -----------
Total Revenues 4,172 1,188 10,194 3,939
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Research and development 5,280 4,736 19,767 14,062
Acquisition of product right 7,500 - 7,500 -
Selling and marketing 1,180 945 3,678 2,797
General and administrative 2,155 1,276 5,896 4,468
----------- ----------- ----------- -----------
Total Operating Expenses 16,115 6,957 36,841 21,327
----------- ----------- ----------- -----------
Loss from Operations $ (11,943) $ (5,769) $ (26,647) $ (17,388)
----------- ----------- ----------- -----------
INTEREST INCOME 223 313 905 1,079
INTEREST EXPENSE (204) (116) (350) (342)
------------ ----------- ----------- -----------
NET LOSS $ (11,924) $ (5,572) $ (26,092) $ (16,651)
============ =========== =========== ===========
NET LOSS PER COMMON SHARE $ (0.23) $ (0.12) $ (0.51) $ (0.35)
============ =========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 51,152 48,358 51,124 47,703
============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (26,092) $ (16,651)
-------------- -------------
Adjustments to Reconcile Net Loss to Cash Used for
Operating Activities:
Depreciation and Amortization 1,145 1,135
Imputed Interest 195 310
Amortization of Deferred Charges - (17)
Stock Grants 42 -
Changes in Assets and Liabilities:
Accounts receivable, net (2,660) (243)
Inventories 152 86
Other assets (230) (89)
Accounts payable and accrued liabilities 718 (2,851)
Other current liabilities 31 (389)
--------------- -------------
Total adjustments (607) (2,058)
--------------- -------------
Net cash used for operating activities (26,699) (18,709)
--------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Redemption (Purchases) of Short Term Investments 4,474 (4,813)
(Increase) Decrease in Restricted Cash (1,229) (9,467)
Purchases of Property and Equipment (546) (614)
--------------- -------------
Net cash provided by (used for) investing activities 2,699 (14,894)
--------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock 231 17,370
Proceeds from Issuance of Series A Preferred Stock - 4,850
Proceeds from Note Payable 10,000 -
Payment of Long Term Debt (1,654) (1,690)
--------------- -------------
Net cash provided by financing activities 8,577 20,530
--------------- -------------
Net Decrease in Cash and Cash Equivalents (15,423) (13,073)
Cash and Cash Equivalents, Beginning of Period 20,296 27,551
--------------- -------------
Cash and Cash Equivalents, End of Period $ 4,873 $ 14,478
=============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company
CYTOGEN Corporation ("CYTOGEN" or the "Company") is a biopharmaceutical
company engaged in the development, manufacture and commercialization of
products for the targeted delivery of diagnostic and therapeutic substances
directly to disease sites. In March 1997, CYTOGEN received clearance from
the U.S. Food and Drug Administration ("FDA") to market the Quadramet,
CYTOGEN's product for the relief of pain due to cancer that has spread to the
bone. In October 1996, CYTOGEN received marketing approval from FDA for the
ProstaScint imaging agent, CYTOGEN's prostate cancer diagnostic imaging product.
In December 1992, FDA approved OncoScint CR/OV imaging agent, CYTOGEN's
colorectal and ovarian cancer specific diagnostic imaging product, for single
administration per patient. In November 1995, FDA approved an expanded
indication allowing for repeat administration of OncoScint CR/OV. All three
products are currently available in the market place.
Basis of Consolidation
The consolidated financial statements include the accounts of CYTOGEN and
its subsidiaries, AxCell Biosciences Corporation ("AxCell"), Cellcor Inc.
("Cellcor") and Targon Corporation ("Targon"). Intercompany balances and
transactions have been eliminated in consolidation. Unless the context
otherwise indicates, as used herein, the term "Company" refers to CYTOGEN and
its subsidiaries, taken as a whole.
Basis of Presentation
These consolidated financial statements of CYTOGEN Corporation are
unaudited and include all adjustments which, in the opinion of management, are
necessary to present fairly the financial condition and results of operations as
of and for the periods set forth in the Consolidated Balance Sheets,
Consolidated Statements of Operations and Consolidated Statements of Cash
Flows. All such accounting adjustments are of a normal, recurring nature.
The consolidated financial statements do not include all of the information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles and should be
read in conjunction with the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K, filed with the
Securities and Exchange Commission, which includes financial statements as of
and for the year ended December 31, 1996. The results of the Company's
operations for any interim period are not necessarily indicative of the
results of the Company's operations for any other interim period or for a
full year.
5
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks and all
highly-liquid investments with a maturity of three months or less at the time of
purchase.
Restricted Cash
In 1996, CYTOGEN and Elan Corporation, plc and affiliated corporations
(collectively, "Elan") created Targon, a U.S.-based cancer company. Targon was
initially funded by CYTOGEN with the proceeds of equity investments CYTOGEN
received from Elan which were contractually restricted in use for Targon. In
July 1997, Targon received $10.0 million from CYTOGEN in exchange for a three
year interest bearing note (see Note 3), of which $7.5 million was used to
purchase from Elan Morphelan, an oral once-daily, controlled-release
formulation of morphine sulfate which would be studied by Targon as an
analgesic therapy for moderate to severe pain. The remaining $2.5 million is
to be used by Targon as working capital for product development of Morphelan.
At September 30, 1997 and December 31, 1996, the aggregate amount of
restricted cash totaled $11.1 million and $9.9 million, respectively.
Earnings per Share (EPS)
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share", which the Company is required to adopt for both interim and annual
periods ending after December 15, 1997. SFAS No. 128 simplifies the EPS
calculation by replacing primary EPS with basic EPS. Basic EPS is computed
by dividing reported earnings available to common stockholders by the
weighted average shares outstanding. Early application of SFAS No. 128 is
prohibited, although footnote disclosure of pro forma EPS amounts is required.
Since the Company has incurred losses in the three and nine month periods
ended September 30, 1997 and 1996, there is no difference between pro forma
basic EPS and net loss per share as reported.
Reclassifications
Certain reclassifications have been reflected in the 1996 financial
statements to conform with the 1997 presentation.
2. QUADRAMET RELATED REVENUES/EXPENSES:
In March 1997, the Company received marketing clearance from FDA for
Quadramet. As a result of the clearance CYTOGEN recorded a milestone payment of
6
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
$2.0 million from The DuPont Merck Pharmaceutical Company ("DuPont Merck"), for
manufacturing and marketing rights to Quadramet, and also recorded a $4.0
million milestone payment to The Dow Chemical Company ("Dow") for the
exclusive license to Quadramet. Since the product launch in the second
quarter of 1997 CYTOGEN has earned royalty revenues on Quadramet from DuPont
Merck. Royalties are based on a percentage of sales of Quadramet or guaranteed
contractual minimum royalty payments, whichever is greater.
3. ACQUISITION OF PRODUCT RIGHTS:
In July 1997, Targon entered into an agreement with Elan pursuant to which
Targon acquired an exclusive worldwide license for Morphelan, for an up-front
license fee of $7.5 million. CYTOGEN received from Elan $10.0 million in
exchange for a three-year interest bearing note with principal due in full at
the end of year three. CYTOGEN, in turn, loaned $10.0 million to Targon in
exchange for a three year interest bearing note with principal due in full at
the end of year three. The funds were used by Targon for the purchase of the
Morphelan license ($7.5 million) with the balance to provide working capital
for development of this product. Additional payments may be due Elan by
Targon if certain milestones are met. As a result of the license agreement,
the Company recorded a charge of $7.5 million in acquisition of product
rights to its Statement of Operations during the third quarter of 1997.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
From time to time, as used herein, the term "Company" may include CYTOGEN
and its subsidiaries AxCell, Cellcor and Targon, taken as a whole, where
appropriate.
Background. Currently, the Company's commercial products and priority
developmental technology are: (i) Quadramet, a cancer therapy agent for the
treatment of bone pain associated with bone metastases, (ii) ProstaScint, a
monoclonal antibody-based diagnostic imaging product for prostate cancer, (iii)
OncoScint CR/OV, a monoclonal antibody-based diagnostic imaging agent for
colorectal and ovarian cancer, which received FDA licensure to market for both
single and repeat administration; (iv) autolymphocyte therapy developed by
Cellcor for the treatment of advanced metastatic renal cell carcinoma, which
has completed Phase III development; and (v) the Genetic Diversity Library
technology involving peptides that have potentially significant commercial
applications in high throughput screening of drug candidates, in accelerated,
functional drug discovery programs, as peptide-based therapeutics, and in the
discovery of synthetic genes.
In June 1997, DuPont Merck launched into the market place CYTOGEN's third
7
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont'd)
FDA-approved product, Quadramet, a treatment for the pain associated with bone
metastases, a condition that occurs when cancer spreads to the bone. DuPont
Merck manufactures, markets and distributes Quadramet through its
radiopharmaceuticals operations in the U.S. CYTOGEN records royalty
revenues on Quadramet from DuPont Merck, as they are earned. Royalties are
based on a percentage of sales of Quadramet or guaranteed contractual minimum
royalty payments, whichever is greater.
In February 1997, CYTOGEN launched its second FDA-approved product,
ProstaScint, a monoclonal antibody-based imaging agent developed to detect the
presence and extent of metastatic prostate cancer. In connection with the
launch, CYTOGEN has developed its PIE (Partners in Excellence)
accreditation program by establishing a network of qualified nuclear medicine
sites and physicians. Each site is trained and certified in acquiring,
processing and interpreting the antibody-derived images. As of October 31,
1997 there are 168 PIE sites in operation. ProstaScint is available only at
such qualified sites, thus providing quality control and support. C.R. Bard,
Inc. ("Bard") is currently marketing ProstaScint to urologists while CYTOGEN
markets ProstaScint to the medical imaging community through its PIE Program.
Both companies work together to market ProstaScint to managed care
organizations.
Results of Operations
Revenues. Total revenues for the three and nine months ended September 30,
1997 were $4.2 million and $10.2 million, respectively, compared to $1.2 million
and $3.9 million recorded in the same periods of 1996. The increase from the
prior year periods is principally attributable to increased product related
revenues from royalties earned on Quadramet and sales of the ProstaScint
product. The 1997 year-to-date revenues were further increased by a $2.0
million milestone payment recorded in the first quarter of 1997 from DuPont
Merck upon FDA clearance of Quadramet.
For the three and nine months ended September 30, 1997, product related
revenues were $3.2 million and $5.4 million, respectively, compared to $393,000
and $1.1 million recorded for the same periods of 1996. The increase from the
prior year periods is attributable primarily to royalties earned on
Quadramet and sales of the ProstaScint product, both launched earlier in 1997.
License and contract revenues for the three and nine months ended September
30, 1997 were $1.0 million and $4.8 million, respectively, compared to $795,000
and $2.8 million recorded in the same periods of 1996. The third quarter
increase from the prior year period is primarily attributable to higher
revenues realized from the sale of manufacturing services. The year-to-date
increase from the prior year period is primarily attributable to the $2.0
million milestone payment from DuPont Merck.
Operating Expenses. The current year operating expenses reflect the
Company's efforts in acquiring, developing and marketing of new products. For
the three and nine months ended September 30, 1997 operating expenses were
$16.1 million and $36.8 million, respectively, compared to $7.0 million and
$21.3 million recorded in the same periods of 1996. The increase from the prior
year periods is due to the one-time license fee of $7.5 million for the
8
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont'd)
acquisition of Morphelan, product development efforts by Targon and AxCell,
higher administrative costs and increased selling and marketing efforts to
promote ProstaScint and establish PIE sites. The 1997 year-to-date operating
expenses are further increased by a one-time $4.0 million milestone payment to
Dow recorded in the first quarter of 1997.
Research and development expenses for the three and nine months ended
September 30, 1997 were $5.3 million and $19.8 million, respectively, compared
to $4.7 million and $14.1 million recorded in the same periods of 1996. These
expenses principally reflect product development efforts and support of clinical
trials. The increase over the prior year periods is due to expenses associated
with the Targon and AxCell subsidiaries. The 1997 year-to-date research and
development expenses were further increased by the aforementioned $4.0 million
milestone payment to Dow.
Acquisition of product rights expense of $7.5 million was recorded in the
third quarter of 1997. This expense represents the one-time license fee for the
exclusive worldwide rights to Morphelan purchased by Targon from Elan. The
license fee payment was funded by a $10 million loan from Elan (evidenced by
notes from CYTOGEN to Elan and, in turn, from Targon to CYTOGEN), with the
balance of the proceeds of such loan planned to be used by Targon for the
development of Morphelan.
Selling and marketing expenses for the three and nine months ended
September 30, 1997 were $1.2 million and $3.7 million, respectively, compared to
$945,000 and $2.8 million recorded in the same periods of 1996. The increase
from the prior year periods is primarily attributable to expenses associated
with the launch of ProstaScint, including expenses to establish the PIE Program.
General and administrative expenses for the three and nine months ended
September 30, 1997 were $2.2 million and $5.9 million, respectively, compared to
$1.3 million and $4.5 million recorded in the comparable periods of 1996. The
increase from the prior year periods is primarily due to higher employment
related costs, including accruals for year-end merit awards which will
normalize by year-end to prior year levels, and professional services.
Interest Income/Expense. Interest income for the three and nine months
ended September 30, 1997 was $223,000 and $905,000, respectively, compared to
$313,000 and $1.1 million realized in the same periods of the prior year. The
decrease from the prior year periods is due to lower cash and short term
investment balances for the periods.
Interest expense for the three and nine months ended September 30, 1997 was
$204,000 and $350,000, respectively, compared to $116,000 and $342,000 recorded
in the same periods of 1996. The increase from the prior year periods is due to
the interest expense associated with the $10.0 million note due to Elan.
9
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont'd)
Net Loss. Net loss for the three months ended September 30, 1997 was $11.9
million compared to a net loss of $5.6 million incurred in the same period of
1996. The loss per common share was $0.23 on 51.2 million average shares
outstanding compared to $0.12 on 48.4 million average shares outstanding for
the same period in 1996. The third quarter 1997 net loss per common share
included $0.15 per share attributable to the Morphelan product acquisition.
For the nine months ended September 30, 1997, the net loss was $26.1 million
compared to a $16.7 million loss recorded in the comparable period of the prior
year. The loss per common share was $0.51 (including the $0.15 impact of the
Morphelan transaction) on 51.1 million average shares outstanding compared to
$0.35 on 47.7 million average shares outstanding in 1996.
Liquidity and Capital Resources
The Company's cash, restricted cash and short term investments were $16.0
million as of September 30, 1997, compared to $34.7 million as of December 31,
1996 (see Note 1). The Company's primary sources of cash have been proceeds
from the issuance and sale of its stock through public offerings and private
placements, product related revenues, the sale of research and manufacturing
services, fees paid under its license agreements and interest earned on its
cash and short term investments.
ProstaScint. Beginning in 1997, product related revenues included sales
of ProstaScint. CYTOGEN is co-promoting ProstaScint with Bard. During the term
of the co-promotion agreement, Bard will receive performance-based compensation
for its services.
Quadramet. Upon the FDA clearance of Quadramet, the product was launched
by DuPont Merck in June 1997. In April 1997, pursuant to the terms of an
agreement between CYTOGEN and DuPont Merck, CYTOGEN received a $2.0 million
milestone payment from DuPont Merck in connection with FDA clearance of
Quadramet. The agreement also provides for future payments towards additional
clinical programs, additional payments upon achievement of certain other
milestones and royalty payments based on sales, including guaranteed minimum
payments. CYTOGEN records royalty revenues on Quadramet from DuPont Merck, as
they are earned.
OncoScint CR/OV. In 1994, the Company reacquired all U.S marketing rights
to OncoScint from Knoll Pharmaceuticals Company ("Knoll") and is required to pay
to Knoll as follows: $1.6 million in 1997 which was paid on July 1, 1997 and
$1.7 million in 1998. In that same year, the Company reacquired the exclusive
marketing and distribution rights in Europe from Chiron B.V. ("Chiron") and is
required to pay to Chiron in 1997 the $377,000 outstanding balance from the
resulting liability.
During the third quarter of 1997, Targon entered into an agreement with
Elan to purchase Morphelan. After the up-front license fee payment to Elan, the
agreement provides Targon with $2.5 million for product development. The
three-year $10.0 million interest bearing note between CYTOGEN and Elan will be
10
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont'd)
due in full at the end of year three while interest payments on the note are due
quarterly. Similar terms apply to the $10.0 million note between Targon and
CYTOGEN. Additional payments may be due Elan by Targon if certain milestones
are met. See Note 3 to the Consolidated Financial Statements.
CYTOGEN acquired an exclusive license in the U.S., Canada and Latin America
from Dow for Quadramet. In April 1997, the Company paid to Dow $4.0 million in
connection with FDA clearance of Quadramet. The agreement provides for
additional payments by the Company upon achievement of certain milestones and
royalties on net sales of the product once commercialized, including
guaranteed minimum payments.
The Company's capital and operating requirements may change depending upon
several factors, including: (i) the success of the Company and its strategic
partners in manufacturing, marketing and commercialization of its products; (ii)
the amount of resources which the Company devotes to clinical evaluations and
the establishment of marketing and sales capabilities; (iii) results of
preclinical testing, clinical trials and research and development activities;
and (iv) competitive and technological developments.
The Company's financial objectives are to meet its capital and operating
requirements through revenues from existing products, subcontract manufacturing,
license and research contracts, and control of spending. To achieve its
strategic objectives, the Company may enter into research and development
partnerships and acquire, in-license and develop other technologies, products or
services. Certain of these strategies may require payments by the Company in
either cash or stock in addition to the costs associated with developing and
marketing a product or technology. However, the Company believes that, if
successful, such strategies may increase long term revenues. There can be no
assurance as to the success of such strategies or that resulting funds will be
sufficient to meet cash requirements until product related revenues are
sufficient to cover operating expenses. To fund these strategic and operating
activities, the Company may sell equity and debt securities as market conditions
permit or enter into credit facilities. The Company is currently evaluating
financing options. If necessary, the Company believes that it has the
ability to reduce the operating expenses so that it will have adequate cash flow
to carry it through the first quarter of 1998.
==========================
Cautionary Statement
The foregoing discussion contains historical information as well as forward
looking statements that involve a number of risks and uncertainties. In
addition to the risks discussed above, among other factors that could cause
actual results to differ materially from expected results are the following:
(i) the timing and results of clinical studies; (ii) market acceptance of the
Company's products, including programs designed to facilitate use of the
products, such as the PIE Program; (iii) the acceptance by the majority of
11
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont'd)
public and private insurance carriers to reimburse patients for the Company's
products; (iv) the profitability of its products; (v) the ability to attract,
and the ultimate success of strategic partnering arrangements, collaborations,
and acquisition candidates; (vi) the ability to attract additional contract
manufacturing customers; (vii) the ability of the Company and its partners to
identify new products as a result of those collaborations that are capable of
achieving FDA approval, that are cost-effective alternatives to existing
products and that are ultimately accepted by the key users of the product;
(viii) the success of the Company's distributors in obtaining marketing
approvals in Canada and in additional European countries, in achieving
milestones and achieving sales of products resulting in royalties; and (ix) the
Company's ability to access the capital markets in the near term and in the
future for continued funding of existing projects and for the pursuit of new
projects.
12
<PAGE>
PART II - OTHER INFORMATION
- ------- -----------------
Item 5 - Other Information
- ------
On October 29, 1997 and November 13, 1997, the Company issued the
attached press releases.
Item 6 - Exhibits and Reports on Form 8-K
- ------
(a) Exhibits:
27 - Financial Data Schedule (Submitted to SEC only in
electronic format).
99.1 - Press release issued by CYTOGEN Corporation on October 29,
1997.
99.2 - Press release issued by CYTOGEN Corporation on November
13, 1997.
(b) Reports on Form 8-K:
On July 8, 1997, the Company filed a report on Form 8-K
reporting on "Item 5. Other Events" regarding the amendment of
its request for confidential treatment for information
contained in certain exhibits filed with its Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996.
13
<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.
CYTOGEN CORPORATION
Date November 14, 1997 By /s/ Jane M. Maida
----------------- ------------------
Jane M. Maida
Chief Accounting Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1997 AND THE CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 16,018,000
<SECURITIES> 0
<RECEIVABLES> 3,645,000
<ALLOWANCES> (546,000)
<INVENTORY> 106,000
<CURRENT-ASSETS> 418,000
<PP&E> 17,817,000
<DEPRECIATION> (13,600,000)
<TOTAL-ASSETS> 25,420,000
<CURRENT-LIABILITIES> 8,092,000
<BONDS> 0
0
0
<COMMON> 511,000
<OTHER-SE> 6,616,000
<TOTAL-LIABILITY-AND-EQUITY> 25,420,000
<SALES> 5,360,000
<TOTAL-REVENUES> 10,194,000
<CGS> 0
<TOTAL-COSTS> 4,527,000
<OTHER-EXPENSES> 32,314,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 350,000
<INCOME-PRETAX> (26,092,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (26,092,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,092,000)
<EPS-PRIMARY> (0.51)
<EPS-DILUTED> 0
</TABLE>
CYTOGEN ANNOUNCES APPOINTMENT OF JOHN E. BAGALAY, JR.
AS INTERIM CHIEF FINANCIAL OFFICER
PRINCETON, N.J., October 29, 1997 -- CYTOGEN Corporation
(NASDAQ:CYTO) today announced the appointment of John E. Bagalay,
Jr. as interim Chief Financial Officer of the Company. Dr.
Bagalay's appointment to this position will be in addition to his
existing role as Director.
In his capacity as Chief Financial Officer, Dr. Bagalay will
oversee the financial and investment functions of the Company.
Since September, 1989, Dr. Bagalay has served as Managing
Director of Community Technology Fund, the venture capital
affiliate of Boston University. Dr. Bagalay has been a member of
the CYTOGEN Board of Directors since October 1995, and currently
serves on the boards of directors of Seragen, Inc., Wave Systems
Corporation and several privately-held companies in the
biotechnology industry. Dr. Bagalay holds a B.A. in Politics,
Philosophy and Economics, a Ph.D. in Political Philosophy from
Yale University, and a J.D. from the University of Texas.
Thomas J. McKearn, President, Chief Executive Officer and
Chairman of CYTOGEN stated, "Dr. Bagalay's appointment as Chief
Financial Officer follows the departure of T.J. Madison from this
position. Mr. Madison has left CYTOGEN and its subsidiaries
because of differences over the business strategies of the
Company and will return to pursuing interests in venture capital
and investment banking."
CYTOGEN is a biopharmaceutical company engaged in the development,
manufacture, and commercialization of products for the targeted delivery
of diagnostic and therapeutic substances directly to disease sites.
CYTOGEN has demonstrated its ability to develop new technology from early
discovery through clinical development, regulatory approval and
commercial-scale biologic manufacturing.
CYTOGEN ANNOUNCES SUCCESSION PLAN
AS PART OF LONG TERM CORPORATE STRATEGY
PRINCETON, NJ, November 13, 1997 -- CYTOGEN Corporation
(NASDAQ:CYTO)today announced, consistent with its long term
corporate strategy,plans for management succession. Chairman,
President and Chief Executive Officer Thomas J. McKearn, M.D.,
Ph. D., has advised the Board of Directors that he desires to
step down from those positions and return to a scientific role in
the Company, a position similar to that which he held for many
years prior to assuming the responsibility for CYTOGEN's overall
leadership. The Company plans to recruit new chief executive
leadership.
Dr. McKearn will remain in his current role pending completion of
the Board's search for a new Chief Executive Officer. The
Company also indicated that no time frame could be given for the
change, which would depend on identification of the right
candidate. The Board has accepted Dr. McKearn's request and
believes there is considerable merit in a newly defined
scientific role, but indicated that any final decision could only
be determined at the time a new Chief Executive Officer is
appointed.
"In recent years, CYTOGEN has matured from being principally a
research and development company to a commercial concern with
three marketed products and other products in late stages of
clinical development," said Dr. McKearn. "Thus, the time and
circumstances are appropriate to recruit a chief executive with
more substantial industry experience on business and financial
matters who can guide CYTOGEN through its next phase of growth."
"The clinical and regulatory functions will continue to occupy
critical and increasingly important roles in bringing new
products to the market," said Dr. McKearn. "In addition, the
need exists to bring even more focus and resources to CYTOGEN's
Genetic Diversity Library technology, whose broad commercial
potential has given birth to several of the Company's strategic
business units and offers still more opportunities for the
future. I believe that my most significant contribution to
CYTOGEN can be made by concentrating my efforts on these
technical and scientific activities. I look forward to being
able to define with a new Chief Executive Officer how I can best
serve the needs of the Company."
Dr. McKearn originally joined CYTOGEN in 1981 at the Company's
founding, and became its Chief Executive Officer in 1995 and
Chairman in 1996.
CYTOGEN is a biopharmaceutical company engaged in the
development, manufacture and commercialization of products for
targeted delivery of diagnostic and therapeutic substances
directly to disease sites. CYTOGEN has demonstrated its ability
to develop new technology from early discovery through clinical
development, regulatory approval and commercial-scale biologic
manufacturing.
Information in this press release which is not historical is
forward looking, and subject to risks and uncertainties. Actual
results or events may differ materially for various reasons,
including lack of commercial acceptance of the Company's
products, the uncertainties inherent in locating a qualified
successor or in determining the future management structure of
the Company, and other risks described in the Company's filings
with the Securities and Exchange Commission.
###
