FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended September 30, 2000
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: 0-11749
Scios Inc.
(Exact name of Registrant as specified in its charter)
Delaware 95-3701481
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Scios Inc.
820 W. Maude Ave.
Sunnyvale, CA 94086
(Address of principal executive offices) (Zip code)
(408) 616-8200
(Registrant's telephone number including area code)
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 registrant's
classes of common stock, as of the latest practicable date.
Title Outstanding
Common Stock, $.001 par value 38,468,652
<PAGE>
15
SCIOS INC.
AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
<TABLE>
<CAPTION>
SCIOS INC.
AND SUBSIDIARY
Consolidated Balance Sheets
(In thousands, except share data)
September 30, December 31,
ASSETS 2000 1999
------------------ -----------------
<S> <C> <C>
------------------ -----------------
(Unaudited)
Current assets:
Cash and cash equivalents $3,282 $11,582
Marketable securities 19,181 18,776
Accounts receivable 2,960 3,068
Prepaid expenses 345 899
------------------ -----------------
Total current assets 25,768 34,325
Marketable securities, non-current 50,668 70,354
Property and equipment, net 9,358 11,534
Other assets 1,045 2,059
------------------ -----------------
TOTAL ASSETS $86,839 $118,272
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,915 $1,572
Other accrued liabilities 8,293 11,157
Deferred contract revenue 16,954 17,890
Current portion of long term debt -- 2,000
------------------ -----------------
Total current liabilities 28,162 32,619
Long-term debt 38,225 42,866
------------------ -----------------
Total liabilities 66,387 75,485
------------------ -----------------
Stockholders' equity:
Series A preferred stock; $.001 par value; 20,000,000
shares authorized; none issued and outstanding -- --
Series B preferred stock; $.001 par value; 50,000
shares authorized; 4,991 shares issued and outstanding -- --
in 2000 and none in 1999
Common stock; $.001 par value; 150,000,000
shares authorized; issued and outstanding
38,468,652 and 38,468,652 shares in 2000 38 38
and 1999, respectively
Additional paid-in capital 422,315 416,600
Treasury stock; 346,968 and 735,036
shares, respectively (1,632) (3,458)
Notes receivable from stockholders (211) (108)
Deferred compensation, net (417) (340)
Accumulated other comprehensive loss (444) (1,060)
Accumulated deficit (399,197) (368,885)
------------------ -----------------
Total stockholders' equity 20,452 42,787
------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $86,839 $118,272
================== =================
</TABLE>
[FN]
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
<PAGE>
<TABLE>
<CAPTION>
SCIOS INC.
AND SUBSIDIARY
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share data)
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
----------------- ---------------- ---------------- ----------------
<S> <C> <C>
(Unaudited) (Unaudited)
Revenues:
Product sales $7,085 $10,633 $20,287 $27,927
Co-promotion commissions 1,875 2,025 5,950 6,639
Research & development contracts 1,192 2,067 4,567 7,129
----------------- ---------------- ---------------- ----------------
Net revenues 10,152 14,725 30,804 41,695
----------------- ---------------- ---------------- ----------------
Costs and expenses:
Cost of goods sold 4,232 5,638 11,935 14,836
Research and development 9,645 7,042 30,223 25,714
Marketing, general and administration 5,841 5,557 17,204 15,125
Profit distribution to third parties 808 1,718 2,329 4,363
Restructuring charges (credits) -- -- (993) 6,670
----------------- ---------------- ---------------- ----------------
Total costs and expenses 20,526 19,955 60,698 66,708
----------------- ---------------- ---------------- ----------------
Loss from operations (10,374) (5,230) (29,894) (25,013)
Other income and expenses:
Investment income 1,221 1,300 3,809 3,426
Interest expense (917) (713) (2,928) (2,053)
Realized gains (losses) on securities (3) (92) (187) 4,999
Other income (expense), net (411) -- (1,112) 272
----------------- ---------------- ---------------- ----------------
Total other income and expenses (110) 495 (418) 6,644
----------------- --------------------------------------------------------
Net loss (10,484) (4,735) (30,312) (18,369)
----------------- --------------------------------------------------------
Other comprehensive loss:
Changes in unrealized gains (losses)
on securities 387 (40) 616 (11,848)
----------------- ---------------- ---------------- ----------------
Comprehensive loss ($10,097) ($4,775) ($29,696) ($30,217)
----------------- ---------------- ---------------- ----------------
Loss per common share:
Basic and diluted ($0.28) ($0.13) ($0.80) ($0.49)
----------------- ---------------- ---------------- ----------------
Weighted average number of common shares outstanding used in
calculation of:
----------------- ---------------- ---------------- ----------------
Basic and diluted 37,881,422 37,708,060 37,813,858 37,726,253
----------------- ---------------- ---------------- ----------------
</TABLE>
[FN]
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
<PAGE>
<TABLE>
<CAPTION>
SCIOS INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(In thousands)
Nine months ended
September 30,
2000 1999
------------- ------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ($30,312) ($18,369)
Adjustments to reconcile net loss to net
Cash used in operating activities:
Depreciation and amortization 2,775 2,085
Loss on property and equipment retirement 254 --
(Gain) loss on sale of securities 187 (4,999)
Minority interest -- (20)
Deferred compensation 232 233
Change in assets and liabilities:
Accounts receivable 108 1,597
Accounts payable 1,342 (1,267)
Accrued long term interest payable 2,927 2,053
Other accrued liabilities (1,812) (2,103)
Other 1,568 (252)
Deferred contract revenue (936) 5,302
Restructuring charges (1,052) 3,263
------------- ------------
Net cash used in operating activities (24,719) (12,477)
------------- ------------
Cash flows from investing activities:
Purchases of property and equipment (853) (3,486)
Proceeds from the sale of assets -- 21,744
Sales/maturities of marketable securities 63,238 80,529
Purchases of marketable securities (43,528) (88,254)
------------- ------------
Net cash provided by investing activities 18,857 10,533
------------- ------------
Cash flows from financing activities:
Issuance of common stock and collection of notes
receivable from stockholders, net 2,123 1,124
Purchase of treasury stock -- (1,048)
Payment of notes payable (4,561) --
------------- ------------
Net cash provided by (used in) financing activities (2,438) 76
------------- ------------
Net decrease in cash and cash equivalents (8,300) (1,868)
Cash and cash equivalents at beginning of period 11,582 6,683
------------- ------------
Cash and cash equivalents at end of period $ 3,282 $ 4,815
============= ============
Supplemental cash flow data:
Cash paid during the period for interest $4,561 $--
Supplemental disclosure of non-cash investing
And financing:
Change in net unrealized gains (losses) on securities $ 616 $ 11,808
Conversion of note payable to preferred stock $ 5,006 $--
</TABLE>
[FN]
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
<PAGE>
SCIOS INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(unaudited)
1. Basis of Presentation and Accounting Policies
The unaudited consolidated financial statements of Scios Inc. ("Scios"
or the "Company") reflect, in the opinion of management, all adjustments,
consisting only of normal and recurring adjustments, necessary to present fairly
the Company's consolidated financial position at September 30, 2000, the
Company's consolidated results of operations for the three-month and nine-month
periods ended September 30, 2000 and 1999, and the consolidated cash flows for
the nine-month period ended September 30, 2000 and 1999. Interim-period results
are not necessarily indicative of results of operations or cash flows for a
full-year period. The year-end balance sheet data were derived from audited
financial statements, but do not include all disclosures required by generally
accepted accounting principles.
These financial statements and the notes accompanying them should be
read in conjunction with the Company's annual report on Form 10-K for the year
ended December 31, 1999. Investors are encouraged to review the Form 10-K for a
broader discussion of the Company's business and the opportunities and risks
inherent in the Company's business. Copies of the 10-K are available from the
Company on request and from the Securities and Exchange Commission's Edgar
database at web site www.sec.gov.
2. Restructuring Charges and Expenses
On March 1, 1999, the Company announced a restructuring plan that
included reduction of the Company's full-time workforce by approximately 30% and
the consolidation of its headquarters, development and research staff into
currently leased facilities in Sunnyvale, California. The Company recorded a
one-time restructuring charge of approximately $6.7 million for the disposal of
certain unused assets and severance costs. All restructuring activities were
complete by the end of the second quarter of 2000, leaving a remaining balance
of $1.0 million in the reserve. The unused reserve was due to changes in the
estimates of the cost of workforce reductions and the gain on the sale of excess
capital assets that were unanticipated. The reserve was credited to restructure
expense in the second quarter of 2000.
<PAGE>
3. Computation of Loss Per Share
The following table sets forth the computation of the Company's basic
and diluted loss per share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Numerator
Basic
Net loss ($ 10,484) ($ 4,735) ($ 30,312) ($ 18,369)
Diluted
Net loss ($ 10,484) ($ 4,735) ($ 30,312) ($ 18,369)
Denominator
Basic
Weighted average shares 37,881 37,708 37,814 37,726
Basic loss per share ($ 0.28) ($ 0.13) ($ 0.80) ($ 0.49)
Diluted loss per share ($ 0.28) ($ 0.13) ($ 0.80) ($ 0.49)
</TABLE>
The potentially dilutive effect of preferred stock and outstanding
options to purchase common stock would have been anti-dilutive in both 2000 and
1999, and were therefore excluded from the diluted earnings calculation for both
periods. Although potentially dilutive, the payoff of the Genentech loan through
the issuance of stock would have been anti-dilutive for both the nine-month
periods ended 2000 and 1999 and was therefore excluded from the calculations.
At September 30, 2000, the Company had 5,238,021 outstanding stock
options at prices ranging from $3.6875 to $21.125 per share. Options to purchase
common stock were excluded from earnings calculations because they were
anti-dilutive.
<PAGE>
4. Industry and Geographic Segment Information
Management uses one measurement of profitability for its business. The
Company receives revenue from product sales and from licensing and development
of products. The Company markets its products in the U.S. and receives licensing
and other revenue from partners in the U.S., Canada, Europe and Asia Pacific and
operates in one business segment.
All long-lived assets are located in the United States and all revenues
were earned in the United States in the nine-month periods ended September 30,
2000 and 1999.
5. Recent Accounting Pronouncements
In June 1999, the FASB issued Statement of Financial Accounting
Standards No. 133, ("SFAS 133"), "Accounting for Derivative Instruments and
Hedging Activities." SFAS 133 establishes new standards of accounting and
reporting for derivative instruments and hedging activities. SFAS 133 will be
effective for fiscal 2001. The Company does not currently hold derivative
instruments or engage in hedging activities.
In December 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in
Financial Statements." SAB 101 requires that license and other up front fees
received from research collaborators be recognized over the term of the
agreement unless the fee is in exchange for products delivered or services
performed that represent the culmination of a separate earnings process. The
Company has not yet determined the impact of its implementation on the reporting
of the Company's contract revenue.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation - an interpretation of APB No. 25," ("FIN 44"). The Interpretation
clarifies the definition of employee for purposes of applying APB No. 25, the
criteria for determining whether a plan qualifies as a non-compensatory plan,
the accounting consequence of various modifications to the terms of a previously
fixed stock option or award and the accounting for an exchange of stock
compensation awards in a business combination. This Interpretation was effective
July 1, 2000, and did not have a material effect on the financial position or
results of operations of the Company.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
In accordance with Federal laws, the Company reminds readers that the
following discussion contains forward-looking statements about plans,
objectives, future results and intentions of the Company. These forward-looking
statements are based on the current expectations of the Company, and the Company
assumes no obligation to update this information. Realization of these plans and
results involves risks and uncertainties, and the Company's actual results could
differ materially from the historical results or future plans discussed here.
Factors that could cause or contribute to such differences include, but are not
limited to, those items discussed below, as well as the considerations discussed
in the Company's Annual Report on Form 10-K for the year ended December 31,
1999.
Operating Results
Three Months Ended September 30, 2000 and 1999
Revenues
The Company had total revenues of $10.2 million and $14.7 million for the
quarters ended September 30, 2000 and 1999, respectively. Net revenues
include revenues from product sales, co-promotion commissions, and contracts
(including research and development collaborations).
Product sales of psychiatric products under licenses from SmithKline
Beecham Corporation ("SB Products") accounted for 69.8 % of the revenues in the
third quarter of 2000 and 72.2 % in the third quarter of 1999. However, during
this period sales of the SB Products declined $3.5 million from $10.6 million in
the third quarter of 1999 to $7.1 million in the current quarter. The decrease
was largely the result of reduced distributor inventories caused by
manufacturing and product shelf life issues of Eskalith CR (one of five products
developed and manufactured by SB that are now sold by the Company), coupled with
the erosion of sales as a result of new market entrants and generic drugs.
Co-promotion commissions were $1.9 million for the third quarter of
2000 and $2.0 million for the same quarter in 1999. Co-promotion commissions
declined as a result of lower incentive payments received from co-promotion of
Risperdal (risperidone). Contract revenues were $1.2 million for the quarter
ended September 30, 2000 and $2.1 million for the comparable quarter in 1999.
The decline in the current quarter reflects the Company's receipt in 1999 of a
one-time milestone payment of $0.3 million for BNP diagnostics, and contract
revenues of $0.4 million from Bayer AG ("Bayer"), and $0.2 million in other
contract revenues that were not repeated in 2000.
<PAGE>
Cost of Goods Sold
Cost of goods sold was $4.2 million, or 59.7% of net product sales, for
the quarter ended September 30, 2000, and $5.6 million, or 53.0% of net product
sales, for the quarter ended September 30, 1999. Net product sales includes
allowances for rebates and product returns. The increase in the percentage
relationship between cost of goods sold and product sales was largely due to
higher rebates, and product returns due to the manufacturing issues of Eskalith
CR.
Operating Expenses
For the third quarter ended September 30,2000, research and development
(R&D) expenses were $9.6 million, up from $7.0 million for the same quarter
in 1999. Major development projects in 2000 include Natrecor(R)(nesiritide)
clinical trial expenses for the potential treatment of patients with acute
decompensated congestive heart failure, and the Company's p38 kinase inhibitor
program for rheumatoid arthritis and other inflammatory disorders.
Marketing, general and administrative, and profit distribution to third
parties for the three months ended September 30, 2000, were $6.6 million,
compared with $7.3 million for the same quarter of 1999. The year over year
decline in third quarter expenses was largely attributable to lower profit
distributions of $0.9 million primarily due to lower SB Product sales.
Other Income and Expenses
The Company reported other income and expense of $0.1 million expense
for the third quarter of 2000 compared to $0.5 million of income in the
comparable quarter in 1999. The $0.6 million change was comprised of a $0.2
million increase in interest expense, a $0.2 million write-down of the
investment in a privately held company, and a $0.2 million write-down of
property and equipment.
The net loss for the three months ended was $10.5 million or $0.28 per
share. This compares to a net loss of $4.8 million, or $0.13 per share for the
corresponding 1999 quarter.
Nine Months Ended September 30, 2000 and 1999
Revenues
Revenues for the nine-month period ended September 30, 2000 were $30.8
million in 2000 compared to $41.7 million for the same period in 1999. Revenues
in 2000 include revenues from product sales of $20.3 million, co-promotion
commissions of $5.9 million, and contracts of $4.6 million (including research
and development collaborations).
<PAGE>
For the nine months ended September 30, 2000 product sales were $20.3
million, a decline of $7.6 million or a 27.4 % decrease over the same period in
1999. As previously mentioned, the decline in product sales was largely
attributable to inventory issues with SB and erosion of sales due to increased
competition and generic entrants.
For the first nine months of 2000, co-promotion commissions were $6.0
million compared with $6.6 million in 1999 as a result of lower incentive
payments received from co-promotion of Risperdal. In this same period, contract
revenues totaled $4.6 million in 2000 and $7.1 in 1999. The nine months decrease
in contract revenues was mainly the result of a $1.6 million decline in revenues
from Bayer, the Company's former Natrecor partner, and from a $0.9 million
reduction in milestone and other contract revenues.
Cost of Goods Sold
For the nine month period cost of goods sold was $11.9 million in 2000,
and $14.8 million in 1999. Cost of goods as a percent of product sales was 58.8%
and 53.1%, respectively, for the nine months ended September 30, 2000 and 1999.
The increase in cost of goods sold as a percentage of product sales was
principally due to higher rebates and product returns due to the manufacturing
issues of Eskalith CR.
Operating Expenses
In the nine-month periods ended September 30, R&D expenses were $30.2
million in 2000 and $25.7 million in 1999. Major development projects in 2000
include Natrecor clinical trial expenses and p38 kinase programs, which were
partially offset by the declines in headcount expenses that resulted from the
restructure in March 1999. The Company expects R&D costs to increase in 2001,
primarily reflecting higher expenses related to the development of Natrecor for
other indications, and p38 human trials.
For the nine months ended September 30, 2000, marketing, general and
administrative, profit distribution to third parties, and restructuring charge
credits totaled $18.5 million compared with $26.2 million for the same period in
1999. The major factors that resulted in the decline in expenses of $7.7 million
were the absence of restructuring charges of $6.7 million included in 1999, and
lower profit distributions of $2.0 million, partially offset by higher marketing
and general and administrative expenses of $2.0 million. The increase in
marketing, general and administrative was principally the result of Natrecor
marketing activities and other consulting expenses during the period. The
Company expects its marketing costs to significantly rise in 2001, to support
the sales force build-up and product promotion activities in preparation for the
launch of Natrecor. The Company anticipates that Natrecor will obtain Food and
Drug Administration ("FDA") approval in mid 2001.
<PAGE>
Other Income and Expenses
Other income and expense decreased $7.0 million from the nine-month
period in 1999 to the comparable period in 2000. The decline in other income was
principally due to the $5.2 million decrease in realized gains on sale of
securities. In the first quarter of 1999, the Company sold its remaining 1.3
million shares of Guilford Pharmaceuticals, Inc. stock for a gain of $4.8
million. Investment income increased by $0.4 million for the nine-month period
in 2000 from the comparable period in 1999. The increase was primarily due to
the increases in interest rates from period to period. Interest expense increase
from $2.1million in 1999 to $2.9 million in 2000 was a result of increased
average notes payable balances and higher interest rates from period to period.
For the nine-month periods ended September 30, 2000 and 1999, net
losses were $30.3 million or $0.80 per share and $18.4 million or $0.49 per
share, respectively.
In 1999, the Company determined with the FDA the nature of the
additional clinical trial (referred to by the Company as the "VMAC Trial") that
the agency requires before it will consider approval of Natrecor for marketing.
The Company has continued regular interactions with the FDA about the filing of
an amended NDA containing the results of the VMAC Trial. The Company initiated
enrollment in the VMAC Trial in October 1999 and on July 31, 2000 announced the
completion of the 480 patient study. The results of the trial will be presented
at the American Heart Association's Clinical Trial Results Plenary Session on
November 15, 2000.
The ability of the Company to achieve profitability depends principally
on the Company's success in developing and commercializing its own products and
on its ability to complete agreements with third parties that result in
additional revenue. Among the factors that will determine the Company's success
in commercializing its products are: the demonstrated safety and efficacy of
products in development; the cost of and the time taken to complete clinical
trials and regulatory submissions; the timing and scope of regulatory approvals,
particularly with respect to the Company's lead product Natrecor; the Company's
ability to maintain a cost-effective drug supply; the Company's success in
developing and implementing cost effective sales and marketing strategies either
on its own behalf or in partnership with other companies; and the level of
market acceptance if products are approved, both at product launch and over
time. The Company's ability to raise additional revenue through third parties
will be dependent on the factors described above, as well as other factors such
as: its success in marketing and selling the third-party products which it may
acquire the right to co-promote; the disposition of various patent proceedings
related to the protection of the Company's potential products; the perceived
value of the Company's current product portfolio and research programs to
outside parties; and the success of third parties, such as Kaken Pharmaceutical
Co., Ltd. and Chiron Corporation on Fiblast and Novo Nordisk A/S on GLP-1, in
developing and commercializing the Company's products.
<PAGE>
Liquidity and Capital Resources
Combined cash, cash equivalents and marketable securities (both current
and non-current) totaled $73.1 million at September 30, 2000, a decrease of
$27.6 million from December 31, 1999. The decrease was primarily attributable to
cash used to fund operations and to the repayment of $4.6 million on the debt to
Genentech Inc.
The Company's resources of $73.1 million in cash, cash equivalents and
marketable securities (both current and non-current) at September 30, 2000,
together with revenues from product sales, collaborative agreements, interest
income and any funding from existing or future debt or equity arrangements, will
be used to support current and new clinical trials for proprietary products
under development, to support development and commercialization efforts for
prospective products and for other general purposes. The Company has terminated
its equipment lease line-of credit after drawing down approximately $0.6 million
in the third quarter of 1999. Key factors that will affect future cash use and
the timing of the Company's need to seek additional financing include the
Company's decisions concerning the degree to which it will incur expenses to
launch its products in the United States market following the necessary
regulatory approvals, the results of the Company's partnering efforts, the
timing and amounts realized from licensing and partnering activities, the rate
of spending required to develop the Company's products and respond to changing
business conditions, and the net contribution produced by the Company's ability
to co-promote and market products for third parties.
Over the long-term, the Company may need to arrange additional
financing for the future operation of its business, including the
commercialization of products currently under development, and it will consider
collaborative arrangements and additional public or private financing, including
additional equity financing. Factors influencing the availability of additional
funding include, but are not limited to, the Company's progress in product
development, investor perception of the Company's prospects and the general
conditions of the financial markets.
The information above contains forward-looking statements including,
without limitation, statements relating to the Company's plans, strategies,
objectives, expectations, intentions, and the adequacy of its resources that are
made pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. Readers are cautioned that actual results may be
materially different than those expected and that forward-looking statements
should be read in conjunction with the Company's disclosures in its most recent
Annual Report on Form 10-K as filed with the Securities and Exchange Commission.
Recent Accounting Pronouncements
In June 1999, the FASB issued Statement of Financial Accounting
Standards No. 133, ("SFAS133" ), "Accounting for Derivative Instruments and
Hedging Activities." SFAS 133 establishes new standards of accounting and
reporting for derivative instruments and hedging activities. SFAS 133 will be
effective for fiscal 2001. The Company does not currently hold derivative
instruments or engage in hedging activities.
<PAGE>
In December 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in
Financial Statements." SAB 101 requires that license and other up front fees
received from research collaborators be recognized over the term of the
agreement unless the fee is in exchange for products delivered or services
performed that represent the culmination of a separate earnings process. The
Company has not yet determined the impact of its implementation on the reporting
of the Company's contract revenue.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation - an interpretation of APB No. 25," ("FIN 44"). The Interpretation
clarifies the definition of employee for purposes of applying APB No. 25, the
criteria for determining whether a plan qualifies as a non-compensatory plan,
the accounting consequence of various modifications to the terms of a previously
fixed stock option or award and the accounting for an exchange of stock
compensation awards in a business combination. This Interpretation was effective
July 1, 2000, and did not have a material effect on the financial position or
results of operations of the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
No significant change in market risk has occurred since the filing by
the Company on form 10-K for the year ended December 31, 1999. Reference is made
to Part II, item 7, Financial Risk Management, in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999.
<PAGE>
Part II. Other Information
Item 2. Changes in Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
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.
SCIOS INC.
November 10, 2000 By: S/S Richard B. Brewer
----------------------------------------
Richard B. Brewer, President and CEO
November 10, 2000 By: S/S David W. Gryska
---------------------------------------
David W. Gryska, Vice President and CFO
