<PAGE> 1
WASHINGTON, D.C. 20549
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 March 31, 1995
--------------
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 0-15190
------------------------------------------------------
ONCOGENE SCIENCE, INC.
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3159796
- - -----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
106 Charles Lindbergh Blvd., Uniondale, New York 11553
- - -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
516-222-0023
- - -----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- - -----------------------------------------------------------------------------
(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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
At April 29, 1995 the registrant had outstanding 17,253,142 shares of common
stock .$01 par value.
Total Pages: 11
<PAGE> 2
ONCOGENE SCIENCE, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I - FINANCIAL INFORMATION - UNAUDITED
Consolidated Balance Sheets - March 31, 1995
and September 30, 1994 3
Consolidated Statements of Operations
- Three months ended March 31, 1995 and 1994 4
Consolidated Statements of Operations
- Six months ended March 31,1995 and 1994 5
Consolidated Statements of Cash Flows
- Six months ended March 31, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II - OTHER INFORMATION 10
SIGNATURES 11
</TABLE>
* * * *
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
ONCOGENE SCIENCE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, September 30,
Assets 1995 1994
- - ------ ------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,614,090 $ 322,308
Short-term investments 15,145,729 17,835,583
Accounts receivable, including
trade receivables of $904,301 and
$956,747 at March 31, 1995 and
September 30, 1994, respectively 3,010,860 3,032,839
Inventory 1,591,761 1,744,663
Accrued interest receivable 130,552 147,222
Grants receivable 498,935 659,621
Prepaid expenses 323,300 445,464
------------ ------------
Total current assets 22,315,227 24,187,700
Property, equipment and leasehold
improvements - net 6,131,157 6,554,237
Other receivable 257,060 425,520
Loans to officers and employees 75,116 85,516
Other assets 115,334 118,068
Intangible assets - net 9,797,019 10,669,859
------------ ------------
$ 38,690,913 $ 42,040,900
============ ============
Liabilities and Stockholders' Equity
- - ------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 1,523,346 $ 2,522,171
Current portion of unearned revenue 882,725 457,384
------------ ------------
Total current liabilities 2,406,071 2,979,555
------------ ------------
Other Liabilities:
Long-term portion of unearned revenue 189,181 216,588
Post-retirement benefits other
than pension 257,820 188,443
------------ ------------
Total liabilities 2,853,072 3,384,586
------------ ------------
Stockholders' equity:
Common stock, $.01 par value;
50,000,000 shares authorized,
16,565,970 and 16,564,715 shares
issued at March 31, 1995 and
September 30, 1994, respectively 165,659 165,647
Additional paid-in capital 61,203,280 61,199,670
Accumulated deficit (24,730,426) (21,870,671)
Cumulative foreign currency
translation adjustment (99,113) (41,773)
Unrealized holding loss on
short-term investments (559,000) (654,000)
------------ ------------
35,980,400 38,798,873
Less: Treasury stock, at cost
222,521 shares at March 31, 1995
and September 30, 1994 (142,559) (142,559)
------------ ------------
Total stockholders' equity 35,837,841 38,656,314
------------ ------------
Commitments and contingencies $ 38,690,913 $ 42,040,900
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
ONCOGENE SCIENCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
Revenues: 1995 1994
----------- -----------
<S> <C> <C>
Collaborative program revenues,
principally from related parties $ 2,461,403 $ 2,285,605
Sales 1,283,899 1,275,051
Other research revenue 523,780 570,505
----------- -----------
4,269,082 4,131,161
----------- -----------
Expenses:
Research and development 3,348,571 2,830,657
Production 393,974 270,865
Selling, general and administrative 1,826,436 1,873,237
Amortization of intangibles 436,507 436,291
----------- -----------
6,005,488 5,411,050
----------- -----------
Loss from operations (1,736,406) (1,279,889)
Other income (expense):
Interest income 221,219 203,582
Other income (expense) 46,419 (27,143)
----------- -----------
Net loss (1,468,768) (1,103,450)
=========== ===========
Weighted average number of shares
of common stock outstanding 16,343,241 16,332,437
=========== ===========
Net loss per weighted share of
common stock outstanding $ (.09) $ (.07)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
ONCOGENE SCIENCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
-------------------------------
Revenues: 1995 1994
----------- -----------
<S> <C> <C>
Collaborative program revenues,
principally from related parties $ 4,779,777 $ 4,418,508
Sales 2,597,588 2,411,956
Other research revenue 1,099,698 1,081,333
----------- -----------
8,477,063 7,911,797
----------- -----------
Expenses:
Research and development 6,425,536 5,388,329
Production 799,252 671,549
Selling, general and administrative 3,700,865 3,545,903
Amortization of intangibles 872,841 872,582
----------- -----------
11,798,494 10,478,363
----------- -----------
Loss from operations (3,321,431) (2,566,566)
Other income (expense):
Interest income 441,891 393,021
Other income (expense) 19,785 (67,854)
----------- -----------
Net loss $(2,859,755) $(2,241,399)
=========== ===========
Weighted average number of shares
of common stock outstanding 16,342,919 16,331,716
=========== ===========
Net loss per weighted share of
common stock outstanding $ (.18) $ (.14)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
ONCOGENE SCIENCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
------------------------------
1995 1994
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received for goods and services $ 9,226,128 $ 9,138,527
Cash paid for goods and services (10,628,408) (9,642,964)
Interest received 301,170 440,493
------------ -----------
Net cash used by operating activities (1,101,110) (63,944)
------------ -----------
Cash flows from investing activities:
Additions to short-term investments (499,688) (5,517,880)
Maturities and sales of short-term investments 3,441,932 5,805,242
Additions to property, equipment
and leasehold improvements (539,668) (630,552)
Additional employee loans - (60,258)
Repayment of employee loans - 20,000
Foreign currency translation (13,306) 11,646
------------ -----------
Net cash provided (used) by
investing activities 2,389,270 (371,802)
------------ -----------
Cash flows from financing activities:
Proceeds from exercise of stock options
and employee stock purchases 3,622 14,350
------------ -----------
Net cash provided by financing activities 3,622 14,350
------------ -----------
Net increase (decrease) in cash and cash
equivalents 1,291,782 (421,396)
Cash and cash equivalents at
beginning of period 322,308 822,033
------------ -----------
Cash and cash equivalents at end of period $ 1,614,090 $ 400,637
============ ===========
Reconciliation of net loss to net cash
used by operating activities:
Net loss $ (2,859,755) $(2,241,399)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 650,187 555,384
Amortization of intangibles 872,841 872,582
Foreign exchange(gain) loss (44,034) 11,807
Decrease in loans to officers and employees 10,400 25,000
Decrease in accounts receivable 21,980 1,350,287
Decrease (increase) in interest receivable (140,721) 47,472
Decrease in grant receivable 160,686 196,695
Decrease (increase) in other receivable 168,460 (431,957)
Decrease (increase) in inventory 152,902 (73,665)
Decrease (increase) in other assets (3,430) 2,115
Decrease in prepaid expenses 122,164 20,316
Decrease in accounts payable (680,103) (579,657)
Increase in post-retirement benefits liability 69,378 69,375
Increase in unearned revenue 397,935 111,701
------------ -----------
Cash used by operating activities $ (1,101,110) $ (63,944)
============ ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE> 7
ONCOGENE SCIENCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Opinion of Management
In the opinion of Management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the Company's financial position as of
March 31, 1995 and September 30, 1994, its results of operations for the three
and six months ended March 31, 1995 and 1994 and its cash flows for the six
months ended March 31, 1995 and 1994. Certain reclassifications have been
made to the prior financial statements to conform them to the current
presentation.
It is recommended that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto in the
Company's 1994 Annual Report on Form 10-K.
Results for interim periods are not necessarily indicative of results for the
entire year.
Net loss per share of common stock outstanding is based on the weighted average
number of shares outstanding. Common share equivalents (stock options) are not
included in the computation for the three months and six months ended March 31,
1995 and 1994 since their inclusion would be anti-dilutive.
(2) Subsequent Event
On April 19, 1995, the Company entered into an agreement with CIBA-GEIGY
Limited which expands the scope of the companies' collaborative efforts with
respect to recombinant Human Transforming Growth Factor Beta 3 ("TGF-B3") to
include development of TGF- B3 products for the treatment of oral mucositis and
certain other indications. Pursuant to the agreement, CIBA purchased 909,091
shares of the Company's common stock at $5.50 per share for an aggregate
purchase price of $5,000,000.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Three and Six Months Ended March 31, 1995, Compared to the Three and Six Months
Ended March 31, 1994.
Revenues for the quarter and six months ended March 31, 1995 increased by
approximately $138,000 and $565,000 or 3% and 7% respectively, as compared to
the same periods in the previous fiscal year. Collaborative program revenues
increased by approximately $176,000 and $361,000 or 8% for both the quarter and
six month period due to the commencement of the research program with
Hoechst-Roussel Pharmaceuticals in April 1994 and due to the expansion and
extension of the collaborative research agreement with Wyeth-Ayerst in March
1994. These increases were offset by decreased funding from Pfizer associated
with Pfizer's decreased participation in the TGF-B3 oral mucositis program in
order to focus exclusively on its collaborative programs with the Company
related to the research and development of anti-cancer drugs. Previously,
Pfizer had funded the Company's TGF-B3 oral mucositis program as a supplement
to its anti-cancer collaborative program. Under a Collaborative Agreement with
CIBA-GEIGY entered into on April 19, 1995, the Company will fund the
development of TGF-B3 for oral mucositis through the end of Phase I clinical
trials and CIBA-GEIGY will fund its subsequent clinical development. Sales for
the quarter and six months ended March 31, 1995 increased approximately $9,000
and $186,000, or 1% and 7% respectively, as compared to the same periods in the
previous fiscal year. The six month increase is due to an increase in the
number of units sold including private labeling products sold to Becton
Dickinson primarily in the first quarter. Other research revenues decreased
approximately $47,000 or 8% for the quarter ended March 31, 1995 as a result of
decreased funding related to the National Cooperative Drug Discovery Group
grant partially offset by increased revenue under other grant awards.
The Company's operation expenses increased by approximately $594,000 and
$1,320,000 or 11% and 13%, for the quarter and six months ended March 31, 1995,
compared to the same periods in the previous fiscal year. Research and
development costs increased approximately $518,000 and $1,037,000 or 18% and
19% respectively, due principally to the start of the research program with
Hoechst-Roussel and the increase in activities related to the Company's
proprietary programs in the area of medicinal and natural products chemistry
and clinical development of TGF-Beta 3 for oral mucositis. Production expenses
increased by approximately $123,000 and $128,000 or 46% and 19%, for the
quarter and six months ended March 31, 1995 compared to the same periods in the
previous fiscal year due principally to reduced inventory levels, higher sales
and changes in product mix. Selling, general and administrative expenses
increased $155,000 or 4% for the six months ended March 31, 1995, compared to
the six-month period of the prior year, as a result of expenses related to the
restructuring of the Company's European subsidiary and employee severance
costs. The savings from the restructuring took effect at the beginning of the
second quarter, and selling, general and administrative expenses decreased
approximately $47,000 or 3% during the three months ended March 31, 1995 as
compared to the comparable earlier quarter.
Since 1991, the cancer diagnostics collaborative program with Becton Dickinson
has focused on both serum-based and histochemical immunoassays. During the
second quarter Becton Dickinson decided to focus exclusively on histochemical
immunoassays. The Company is continuing the development of serum-based cancer
diagnostic products and is seeking a new collaborative partner in this area.
Interest income increased approximately $18,000 or 9% and $49,000 or 12% for
the quarter and six months ended March 31, 1995. This increase is due to a
change in the investment portfolio to higher yielding funds off-set by
decreased funds invested.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (CONT'D)
Liquidity and Capital Resources
At March 31, 1995, working capital (representing primarily cash, cash
equivalents and short-term investments) aggregated approximately $19,909,000.
The Company has been, and will continue to be, dependent upon collaborative
research revenues, government research grants, sales of research products,
interest income and cash balances until other products developed from its
technology are commercially marketed. Pursuant to its collaborative agreement
with the Company entered into on April 19, 1995, CIBA-GEIGY purchased 909,091
shares of the Company's common stock for an aggregate purchase price of
$5,000,000.
Management believes that with the funding from its collaborative programs,
research products sales, government research grants, interest income, and cash
balances, the Company's financial resources are adequate for its current needs.
However, the Company's capital requirements may vary as a result of a number of
factors, including results of the research products business, competitive and
technological developments, and the time and expense required to obtain
governmental approval of products, some of which factors are beyond the
Company's control. There can be no assurance that scheduled payments will be
made by third parties, that current agreements will not be cancelled, that
government research grants will continue to be received at current levels or
that unanticipated events requiring the expenditure of funds will not occur.
Further, there can be no assurance that the Company will be able to obtain any
additional required funds, or, if such funds are available, that such funds
will be available on favorable terms.
9
<PAGE> 10
PART II. OTHER INFORMATION
Items 1-3. Not applicable.
Item 4. Submission of matters to a vote of security holders.
The Company's annual meeting of stockholders was held March 22,
1995. The following ten directors were elected:
<TABLE>
<CAPTION>
Name For Withholding Authority
---- --- ---------------------
<S> <C> <C>
Edwin A. Gee 14,273,786 494,713 Shares
Gary E. Frashier 14,293,886 474,613 Shares
Steven M. Peltzman 14,299,286 469,213 Shares
J. Gordon Foulkes 14,293,880 474,619 Shares
G. Morgan Browne 14,299,586 468,913 Shares
John French, II 14,296,186 472,313 Shares
Walter M. Lovenberg 14,299,386 469,113 Shares
Walter M. Miller 14,296,836 471,663 Shares
Gary Takata 14,278,586 489,913 Shares
John P. White 14,283,834 484,665 Shares
</TABLE>
In addition, the appointment of KPMG Peat Marwick LLP as
auditors for fiscal year ended September 30, 1995 was ratified
with 14,587,209 shares voted in favor, 79,635 shares against
and 101,655 shares abstained.
10
<PAGE> 11
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.
ONCOGENE SCIENCE, INC.
(Registrant)
Date 5/12/95 /s/ Gary E. Frashier
-------------------------- -------------------------------
Gary E. Frashier
President and
Chief Executive Officer
Date 5/12/95 /s/ Robert L. Van Nostrand
-------------------------- -------------------------------
Robert L. Van Nostrand
Vice President
Finance & Administration
<PAGE> 12
EXHIBIT INDEX
-------------
Exhibit 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,614,090
<SECURITIES> 15,145,729
<RECEIVABLES> 3,010,860
<ALLOWANCES> (41,050)
<INVENTORY> 1,591,761
<CURRENT-ASSETS> 952,787
<PP&E> 12,533,422
<DEPRECIATION> (6,402,265)
<TOTAL-ASSETS> 38,690,913
<CURRENT-LIABILITIES> 2,406,071
<BONDS> 0
<COMMON> 165,659
0
0
<OTHER-SE> 35,672,182
<TOTAL-LIABILITY-AND-EQUITY> 38,690,913
<SALES> 1,283,899
<TOTAL-REVENUES> 4,269,082
<CGS> 393,974
<TOTAL-COSTS> 6,005,488
<OTHER-EXPENSES> 46,419
<LOSS-PROVISION> 12,000
<INTEREST-EXPENSE> 221,219
<INCOME-PRETAX> (1,468,768)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,468,768)
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
