<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1994 Commission File Number 0-14587
------------- -------
GENETICS INSTITUTE, INC.
- - --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2718435
--------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
87 CambridgePark Drive, Cambridge, MA 02140
- - --------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (617) 876-1170
-----------------
None
- - --------------------------------------------------------------------------
(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 ______
26,456,533 shares of Common Stock, par value $.01 (including 10,455,793 shares
represented by Depositary Shares) were outstanding on July 29, 1994.
<PAGE> 2
<TABLE>
GENETICS INSTITUTE, INC.
INDEX
-----
<CAPTION>
Page
PART I - FINANCIAL INFORMATION Number
- - ------------------------------ ------
<S> <C>
Item 1 - Financial Statements
Consolidated Condensed Balance Sheets -
June 30, 1994 and November 30, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations
for the Three and Six Months Ended June 30, 1994 and May 31, 1993 . . . . . . . . . . . . . 2
Consolidated Condensed Statements of Cash Flows
for the Six Months Ended June 30, 1994 and May 31, 1993 . . . . . . . . . . . . . . . . . . 3
Notes to Consolidated Condensed Financial Statements . . . . . . . . . . . . . . . . . . . . 4
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 8
PART II - OTHER INFORMATION
- - ---------------------------
Item 1 - Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 4 - Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . 11
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE> 3
<TABLE>
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF JUNE 30, 1994 AND NOVEMBER 30, 1993
(unaudited - in thousands except share data)
<CAPTION>
June 30, November 30,
1994 1993
-------- ------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 12,615 $ 5,859
Marketable securities 260,131 285,625
Accounts receivable 10,244 24,434
Inventories:
Materials and supplies 3,562 3,924
Work in progress 1,055 406
Finished goods 11,060 11,150
------------ ----------
15,677 15,480
Other current assets 5,151 5,426
------------ ----------
Total Current Assets 303,818 336,824
Property, plant and equipment 151,300 138,682
Less - accumulated depreciation
and amortization (49,028) (42,245)
------------ ----------
Net Property, Plant and Equipment 102,272 96,437
Other assets 6,976 7,476
------------ ----------
$ 413,066 $ 440,737
============ ==========
LIABILITIES:
Accounts payable $ 4,876 $ 7,309
Accrued expenses 21,045 19,733
------------ ----------
Total Current Liabilities 25,921 27,042
SHAREHOLDERS' EQUITY:
Common stock, par value $.01;
authorized 50,000,000 shares 264 262
Additional paid-in capital 591,473 585,636
Accumulated deficit (204,592) (172,203)
------------ ----------
Total Shareholders' Equity 387,145 413,695
------------ ----------
$ 413,066 $ 440,737
============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-1-
<PAGE> 4
<TABLE>
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1994 AND MAY 31, 1993
(unaudited - in thousands except per share data)
<CAPTION>
Three Months Ended Six Months Ended
------------------- -----------------
June 30, May 31, June 30, May 31,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE:
Product sales $ 10,784 $ 8,420 $ 23,736 $ 16,809
Royalties 10,467 6,478 19,339 12,499
Collaborative research and development 3,536 6,547 8,662 17,267
-------- ------- -------- --------
Total Revenue 24,787 21,445 51,737 46,575
OPERATING EXPENSES:
Cost of sales 6,791 5,360 14,391 8,145
Research and development 25,405 23,266 52,529 47,101
General and administrative 4,569 6,777 8,786 12,273
-------- ------- -------- --------
Total Operating Expenses 36,765 35,403 75,706 67,519
-------- ------- -------- --------
LOSS FROM OPERATIONS (11,978) (13,958) (23,969) (20,944)
OTHER INCOME (EXPENSE), NET:
Investment income 3,264 5,394 7,084 10,929
Other, net (829) (246) (2,709) (997)
-------- ------- -------- --------
Total Other Income, Net 2,435 5,148 4,375 9,932
-------- ------- -------- --------
NET LOSS $ (9,543) $(8,810) $(19,594) $(11,012)
======== ======= ======== ========
DIVIDENDS ON PREFERRED STOCK $ - $(1,146) $ - $ (2,292)
======== ======= ======== ========
NET LOSS APPLICABLE TO
COMMON SHARES $ (9,543) $(9,956) $(19,594) $(13,304)
======== ======= ======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 26,396 24,440 26,365 24,432
======== ======= ======== ========
NET LOSS PER COMMON
SHARE $ (.36) $ (.41) $ (.74) $ (.54)
======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE> 5
<TABLE>
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND MAY 31, 1993
(unaudited - in thousands)
<CAPTION>
June 30, May 31,
1994 1993
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (19,594) $ (11,012)
Adjustments to reconcile net loss to net
cash used in operating activities -
Depreciation and amortization 6,034 5,621
Equity in net loss of affiliates 1,419 587
Compensation related to incentive plans 347 661
Changes in assets and liabilities 4,972 (8,083)
--------- ---------
Net cash used in operating activities (6,822) (12,226)
--------- ---------
INVESTING ACTIVITIES:
Purchase of marketable securities (120,508) (183,303)
Proceeds from sale/maturity of
marketable securities 135,403 167,088
Additions to property, plant and
equipment (17,669) (14,414)
Other investing activities (2,841) 272
--------- ---------
Net cash used in investing activities (5,615) (30,357)
--------- ---------
FINANCING ACTIVITIES:
Stock issuances 4,183 1,453
Preferred stock dividends - (2,292)
--------- ---------
Net cash provided by (used in) financing
activities 4,183 (839)
--------- ---------
Net decrease in cash and cash equivalents (8,254) (43,422)
--------- ---------
Cash and cash equivalents, beginning of the
period 20,869 64,623
--------- ---------
Cash and cash equivalents, end of the period $ 12,615 $ 21,201
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 6
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. Significant Accounting Policies
BASIS OF PRESENTATION. The accompanying consolidated condensed financial
statements are unaudited. In the opinion of management, all adjustments
necessary for a fair presentation of these financial statements have been
included. Such adjustments consisted only of normal recurring items.
Interim results are not necessarily indicative of results for a full year.
Certain amounts in the prior period financial statements have been
reclassified to conform to the current period presentation. The
consolidated condensed financial statements should be read in conjunction
with the Company's audited consolidated financial statements and related
footnotes for the year ended November 30, 1993.
CHANGE IN FISCAL YEAR. The Company changed its fiscal year end from
November 30 to December 31 effective January 1, 1994. Financial
information for the preceding fiscal year has not been restated because the
information is reasonably comparable with the current year periods.
MARKETABLE SECURITIES. The Company adopted Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in Debt
and Equity Securities" (SFAS No. 115) effective January 1, 1994.
Accordingly, at January 1, 1994, the Company's cash equivalents were
classified as held-to-maturity (recorded at amortized cost) and its
marketable securities were classified as available-for-sale (recorded at
fair value). The cumulative effect of implementing SFAS No. 115 was to
record a net unrealized gain of $2.6 million on available-for-sale
securities. Under SFAS No. 115, such net unrealized holding gains or
losses are recorded in shareholders' equity. For periods prior to fiscal
1994, marketable securities are recorded at cost which approximates market.
In computing realized gain or loss, the cost of securities sold is based on
average cost. The estimated fair value of marketable securities is based
primarily on market quotations.
2. Transactions with American Home Products Corporation
On September 19, 1991, the Company and American Home Products Corporation
("AHP") entered into an Agreement and Plan of Merger (the "AHP
Transaction") that was consummated on January 16, 1992. In connection with
the AHP Transaction, the Company issued 9,466,709 new shares of Common
Stock to AHP for an aggregate purchase price of approximately $300.0
million and, for shares of common stock owned, the Company's shareholders
received a combination of cash and Depositary Shares subject to a call
option. Under the terms of the call option, AHP has the right but not the
obligation, to purchase the outstanding Depositary Shares that it does not
own, in whole but not in part, at any time until December 31, 1996, at call
prices beginning at $68.42 per share for the period July 1, 1994 to
September 30, 1994 and increasing by approximately $1.84 on a quarterly
basis to $85.00 per share for the quarter ending December 31, 1996.
Independent of its right to call the Depositary Shares, AHP is permitted by
the terms of the agreements with the Company to acquire additional
Depositary Shares through open market purchases or privately negotiated
purchases, provided that its aggregate holdings do not exceed 75% of the
Company's outstanding equity, subject to certain exceptions. As of June
30, 1994, AHP had purchased 947,000 additional Depositary Shares through
such purchases. In addition, in connection
-4-
<PAGE> 7
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
with the call for redemption of the Company's Convertible Exchangeable
Preferred Stock (the "Preferred Stock") on July 15, 1993, holders of
Preferred Stock elected to convert 1,136,815 shares, or approximately 99%
of the outstanding shares of such stock, into 1,624,021 shares of Genetics
Institute Common Stock which, pursuant to the AHP Transaction, were
exchanged for the same combination of cash and Depositary Shares received
by holders of Genetics Institute Common Stock in the AHP Transaction.
Pursuant to agreements with AHP, the Company issued to AHP 14,864 shares of
Common Stock, the proceeds of which funded the cash required for the
redemption of the 8,490 shares of Preferred Stock not converted. As of
June 30, 1994, such transactions have brought AHP's total ownership
position in the Company to approximately 64%.
Collaborative research and development revenue includes $1.5 million for
each of the three month periods ended June 30, 1994 and May 31, 1993 and
$2.9 million and $4.9 million, respectively, for the six months ended June
30, 1994 and May 31, 1993, relating to a collaboration with Wyeth-Ayerst
Laboratories, the pharmaceutical division of AHP, in the area of cellular
adhesion proteins. Effective July 8, 1994, the Company and Wyeth-Ayerst
Laboratories entered into an agreement to jointly develop recombinant human
interleukin-twelve (rhIL-12), an immune system modulatory protein,
worldwide (except Japan). In connection with this agreement, the Company
will recognize in the third quarter of fiscal 1994 collaborative research
and development revenue of $20.0 million representing initial milestone and
signature payments.
3. Investments in Debt Securities
The Company's portfolio of debt securities consists of cash equivalents
classified as held-to-maturity and marketable securities classified as
available-for-sale. Aggregate fair values, amortized cost and average
maturity for marketable securities held at June 30, 1994 are presented
below. The average maturities presented below include estimates of the
effective life for certain securities whose actual maturities will differ
from contractual maturities because the borrowers have the right to call or
prepay the obligations without call or prepayment penalties.
<TABLE>
<CAPTION>
Fair Gross Unrealized Amortized
Value Holding Gains and (Losses) Cost
----- -------------------------- ----
(in thousands)
<S> <C> <C> <C> <C>
U.S. Government and Agency
securities (average maturity
of 3.3 years) $140,229 $162 $(4,855) $144,922
Corporate and other debt securities
(average maturity of 2.8 years) 119,902 187 (3,917) 123,632
-------- ---- -------- --------
$260,131 $349 $(8,772) $268,554
======== ==== ======== ========
</TABLE>
The fair value of cash equivalents approximated the amortized cost of $11.8
million at June 30, 1994. Realized gains and losses on sales of marketable
securities for the six months ended June 30, 1994 were not material.
-5-
<PAGE> 8
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
4. Contingencies
The Company has been engaged in legal proceedings relating to the amount of
damages payable by the Company as a result of the holding of the U.S. Court
of Appeals for the Federal Circuit that the Company infringed a U.S. patent
of Amgen, Inc. ("Amgen") relating to recombinant human erythropoietin
("rhEPO"). On May 11, 1993, the Company and Amgen announced that they had
agreed to settle all outstanding claims of Amgen against the Company in the
United States relating to rhEPO.
In August 1991, Ortho Pharmaceutical Corporation ("Ortho"), a licensee of
Kirin-Amgen, Inc.'s rhEPO patents, initiated infringement proceedings
against the Company in the U.S. District Court for the District of
Massachusetts. Ortho moved to consolidate the case with the infringement
suit brought by Amgen. Upon motion by the Company and Amgen, Ortho's
claims were dismissed and Ortho has appealed the District Court's decision.
A decision on the Ortho appeal is pending. The Company and Amgen also
jointly moved to dismiss similar claims brought by Ortho against the
Company in the U.S. District Court for the Central District of California
in 1989, and the court granted the motion in March 1994.
In June 1994, the Company sued Ortho in the U.S. District Court of
Delaware. The Company's suit claims that Ortho's manufacture, use and sale
of rhEPO in the U.S. infringes a patent covering pharmaceutical
compositions containing homogeneous erythropoietin that was issued to the
Company by the U.S. Patent and Trademark Office on June 21, 1994. The
Company can provide no assurances as to the outcome of these disputes with
Ortho.
The Company and its licensees are engaged in various patent litigation
proceedings in Europe related to rhEPO. Beginning in 1991, Ortho and
certain Ortho affiliates initiated patent infringement litigation in Europe
against Boehringer Mannheim, the Company's European rhEPO licensee, based
on a European rhEPO patent issued to Kirin-Amgen, Inc. ("Kirin-Amgen"),
its licensor. The suits have included requests for damages and/or
injunctive relief. Boehringer Mannheim filed suits against Ortho and/or
its affiliates in Europe for infringement of the Company's European
purified and rhEPO patents. This litigation has expanded into many of the
European Community countries in Boehringer Mannheim's territory. In some
countries, where the patentee is a legally necessary party to a suit to
enforce a patent, the Company has joined as a plaintiff. The Company is
also a defendant to a suit in the United Kingdom brought by an Ortho
affiliate seeking to invalidate and revoke the Company's rhEPO patents in
the United Kingdom, and similar proceedings have been brought in Germany
and Italy seeking to revoke the Company's rhEPO patents granted in the
former East Germany and Italy, respectively. The revocation suit in
Germany was dismissed in May 1994, however, it is subject to further
appeal. In June 1994, the Company's European patent covering homogeneous
erythropoietin compositions (the '539 patent) was upheld in a hearing
before the Opposition Division of the European Patent Office. This
decision of the Opposition Division is appealable.
-6 -
<PAGE> 9
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
If the courts ultimately rule in Ortho's favor in these proceedings,
including issuing an injunction against the future manufacture or sale of
rhEPO by Boehringer Mannheim, or if this litigation is otherwise concluded
in a manner adverse to Boehringer Mannheim or the Company, future royalty
income from rhEPO in Europe, which totaled approximately $7.5 million in
fiscal 1993, could be reduced or eliminated.
The Company is engaged in a patent interference proceeding among the
Company, Genentech, Inc. and Chiron Corporation concerning the Factor VIII
patent rights which are cross-licensed between Baxter (the Company's
licensee) and Genentech, Inc. While the Company believes it or Genentech
should prevail in the interference, no assurance can be given as to the
outcome of this interference. Any disposition of this proceeding in a
manner unfavorable to the Company or its licensee could have a material
adverse effect on the Company's future consolidated results of operations.
-7-
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Genetics Institute, Inc. is principally engaged in discovering, developing and
commercializing protein-based therapeutic products using recombinant DNA and
related technologies. Significant volatility has been associated with the
business and operations of biopharmaceutical companies. Developments by the
Company or its competitors concerning technological innovations, new commercial
products, results of clinical trials, patents, proprietary rights and related
infringement disputes, results of litigation and the expense and time
associated with obtaining requisite government approvals may have a significant
impact on the Company's business.
The Company's consolidated results of operations have fluctuated from period to
period and may continue to fluctuate in the near-term as a result of the timing
of production and shipment of bulk protein products, changes in the timing and
composition of funding under its collaborative research and development
agreements, the ability to consummate new collaborative agreements, royalty
income (and the impact of infringement litigation on royalty income), interest
income and the amount of expenditures committed to self-funded research and
development programs.
The Company and American Home Products Corporation ("AHP") entered into a
transaction (the "AHP Transaction") through which AHP acquired a majority
interest in the Company effective January 16, 1992 (see Note 2 of Notes to
Consolidated Condensed Financial Statements).
The Company changed its fiscal year to a calendar year effective January 1,
1994. Financial information for the preceding fiscal year has not been
restated because the information is reasonably comparable with the current year
periods.
RESULTS OF OPERATIONS
Three and Six months Ended June 30, 1994 and May 31, 1993. The Company
reported a net loss of $9.5 million for the second quarter ended June 30, 1994
compared with a net loss of $8.8 million for the second quarter of fiscal 1993.
For the six month periods ended June 30, 1994 and May 31, 1993, the Company
reported a net loss of $19.6 million and $11.0 million, respectively. The
increases in the net loss for both the three month and six month periods are
due primarily to the timing of recognition of certain collaborative research
and development revenue and significant expansion of the Company's product
development activities and discovery research programs. With four products
presently in clinical trials and one other anticipated to enter clinical trials
within the next twelve months, the Company expects to incur an operating loss
for this fiscal year.
The Company's revenues include product revenue from the supply of recombinant
antihemophilic factor concentrate ("rhAHF"), royalties resulting from the sale
of products by marketing partners and collaborative research and development
revenue for activities conducted under the Company's agreements with its
various collaborative partners. Revenues increased 16%, or $3.3 million, from
the second quarter of fiscal 1993 to the second quarter of fiscal 1994 and 11%,
or $5.2 million, from the first six months of fiscal 1993 to the first six
months of fiscal 1994. These increases were due to increases in product sales
and royalties, partly offset by decreases in collaborative research and
development revenue.
In December 1992, the Food and Drug Administration approved the Company's rhAHF
product and Baxter Healthcare Corporation's ("Baxter") finished rhAHF product.
Product revenue represents commercial sales of rhAHF to Baxter and, in
accordance with the Company's supply contract with Baxter, included $3.9
million of manufacturing profit recorded in the first quarter of fiscal 1993
relating to shipments of rhAHF to Baxter made prior to the December 1992
commercial approval date. Pre-commercial shipments of rhAHF were originally
billed to Baxter at cost. The increases in product revenue, excluding the
manufacturing profit recognized upon commercial product approval of rhAHF in
December 1992, were due to increases in the volume of rhAHF shipped to Baxter.
-8-
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The increase in royalty revenue is principally due to increases in the volume
of collaborative partners' sales of finished drug products. The net decrease
in collaborative research and development revenue is principally due to a lower
level of benchmark revenues and a lower level of expenditures reimbursable
from the Company's collaborative partner in the rhM-CSF program. In the first
quarter of fiscal 1993, benchmark fees received from Baxter for commercial
approval of rhAHF and from Boehringer Mannheim in connection with its own
manufacture of rhEPO totaled $3.0 million.
Operating expenses increased 4%, or $1.4 million, from the second quarter of
fiscal 1993 to the second quarter of fiscal 1994 and 12%, or $8.2 million, from
the six month period ended May 31, 1993 to the six month period ended June 30,
1994. The increases were primarily attributable to higher staffing levels in
the discovery research and product development areas of the Company and higher
cost of sales relating to increased commercial shipments of rhAHF to Baxter,
partly offset by lower litigation costs in fiscal 1994. Cost of sales includes
royalties payable to third parties upon the receipt of certain royalty revenues
from collaborative partners. Such third party royalties totaled $1.0 million
and $0.9 million for the three month periods ended June 30, 1994 and May 31,
1993, respectively, and $2.3 million and $1.0 million for the fiscal 1994 and
fiscal 1993 six month periods, respectively. Cost of product sales (excluding
third party royalties), as a percentage of product sales (excluding the $3.9
million of one-time manufacturing profit recognized in the first quarter of
fiscal 1993 discussed above), was 53% for each of the three month periods ended
June 30, 1994 and May 31, 1993, and 51% and 55% for the six months ended June
30, 1994 and May 31, 1993, respectively. The decrease in such costs from
fiscal 1993 was due to lower unit manufacturing costs. Research and
development expenses for the quarter ended June 30, 1994 included a charge of
$1.5 million for acquiring certain supply and product option rights. General
and administrative expenses for the quarter ended May 31, 1993 included a
charge of $1.0 million to fully provide for a litigation settlement.
Other income, net decreased 53% or $2.7 million from the second quarter of
fiscal 1993 to the second quarter of fiscal 1994 and 56% or $5.6 million from
the fiscal 1993 to the fiscal 1994 six month periods. The decreases reflect
(i) lower investment income due to lower investments in cash equivalents and
marketable securities and (ii) an increase in the Company's equity in the net
losses of its Japanese joint venture, GI-Yamanouchi, Inc., due to expansion of
rhBMP-2 and rhIL-11 development activities in Japan. The Company expects the
level of investment income to continue to decrease as cash is used to fund
capital expenditures and working capital requirements.
LEGAL PROCEEDINGS
The Company is engaged in a number of legal proceedings. See Note 4 of Notes
to Consolidated Condensed Financial Statements which is incorporated by
reference herein.
LIQUIDITY AND CAPITAL RESOURCES
Cash and marketable securities totaled $272.7 million at June 30, 1994, a
decrease of $18.7 million from November 30, 1993. This decrease includes a
non-cash unrealized loss on marketable securities of $8.4 million and a net use
of cash of $10.3 million. The net use of cash primarily reflects capital
expenditures of $8.9 million for the three months ended June 30, 1994 and $17.7
million for the six months ended June 30, 1994, partly offset by $9.9 million
of cash received in December 1993 from the sale-leaseback of certain equipment.
Approximately $36.5 million has been expended for facilities expansion and
improvement projects in progress as of June 30, 1994, which are expected to
cost approximately $55.0 million in the aggregate through fiscal 1994.
-9-
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company expects that its available cash and marketable securities, together
with investment income, operating revenues and lease and debt financing
arrangements, will be sufficient to finance its working capital and capital
requirements for the foreseeable future. Over the next several years, the
Company's cash requirements will be subject to change depending upon numerous
factors including the level of capital expenditures, the amount of expenditures
committed to self-funded research and development programs, the results of
research and development activities, competitive and technological
developments, the levels of resources which the Company devotes to the
expansion of its clinical testing, manufacturing and marketing capabilities and
the timing and cost of obtaining required regulatory approvals for new
products.
-10-
<PAGE> 13
Part II - Other Information
---------------------------
Item 1. Legal Proceedings
- - ------- -----------------
See Note 4 of Notes to the Consolidated Condensed Financial Statements
provided in Part I of this Quarterly Report on Form 10-Q, which Note is
hereby incorporated by reference.
<TABLE>
Item 4. Submission of Matters to a Vote of Security Holders
- - ------- ---------------------------------------------------
At the Company's Annual Meeting of Shareholders held on April 9, 1994,
the following proposals were adopted by the vote specified below:
<CAPTION>
Withheld
Proposal For Authority
-------- --- ---------
<S> <C> <C> <C> <C>
1. Election of Class I Directors:
James G. Andress 23,572,842 122,849
Benno C. Schmidt 23,539,249 156,442
Broker
For Against Abstain Non-votes1
--- ------- ------- ---------
2. Amendment to 1991 Employee
Stock Purchase Plan increasing
the aggregate number of
Depositary Shares covered by
such plan from 180,000 to
480,000 23,395,630 137,548 41,090 121,423
3. Ratification of Arthur Andersen
& Co. as the Company's
independent accountants for the
current fiscal year 23,654,281 12,568 28,842
</TABLE>
In addition, Dr. Robert I. Levy, Anthony B. Evnin and Dr. Thomas P.
Maniatis will continue to serve as Class II directors until the
Company's 1995 Annual Meeting and Fred Hassan and Gabriel Schmergel will
continue to serve as Class III directors until the Company's 1996 Annual
Meeting.
-11-
_______________________
1Votes counted for quorum purposes, as to which the broker or other
nominee holder was not authorized by the beneficial owner to cast a vote on this
particular proposal but was authorized to cast (and did cast) a vote on at least
one other proposal.
<PAGE> 14
Item 6. Exhibits and Reports on Form 8-K
------- --------------------------------
(a) No exhibits are filed herewith.
(b) No reports were filed on Form 8-K during the quarter ended June
30, 1994.
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.
GENETICS INSTITUTE, INC.
------------------------
(Registrant)
Date: August 4, 1994 By:/s/ Garen G. Bohlin
-------------- ----------------------------------------------------
Garen G. Bohlin,
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
-12-
