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SECURITIES AND EXCHANGE COMMISSION
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 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 0-12900
ALLIANCE PHARMACEUTICAL CORP.
(Exact name of Registrant as specified in its charter)
New York 14-1644018
- --------------------------------- ------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
3040 Science Park Road
San Diego, California 92121
- --------------------------------- ------------------------------
(Address of principal Zip Code
executive offices)
Registrant's telephone number,
including area code: 619-558-4300
------------------------------
Indicate by a check 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
filing requirements for the past 90 days.
Yes X No
------------ -------------
As of October 31, 1997, Registrant had 31,473,974 shares of its Common Stock,
$.01 par value, outstanding.
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
INDEX
- ----- Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
2
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PART I FINANCIAL INFORMATION:
Item 1. Financial Statements
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
----------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------------------------------
SEPTEMBER 30, JUNE 30,
1997 1997
ASSETS (UNAUDITED) (NOTE)
------ ------------- -------------
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CURRENT ASSETS:
Cash and cash equivalents $ 24,668,000 $ 14,590,000
Short-term investments 53,340,000 57,041,000
Research revenue receivable 2,250,000 7,250,000
Other current assets 1,121,000 1,147,000
------------- -------------
Total current assets 81,379,000 80,028,000
PROPERTY, PLANT AND EQUIPMENT - NET 16,785,000 16,574,000
PURCHASED TECHNOLOGY - NET 14,020,000 14,400,000
OTHER ASSETS - NET 1,002,000 1,011,000
------------- -------------
$ 113,186,000 $ 112,013,000
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,702,000 $ 2,807,000
Accrued expenses 2,542,000 3,439,000
Deferred revenue 2,346,000 2,500,000
Payable for acquired in-process technology 5,057,000 7,557,000
Current portion of long-term debt 1,656,000 1,508,000
------------- -------------
Total current liabilities 13,303,000 17,811,000
LONG-TERM DEBT 2,340,000 2,742,000
OTHER 106,000 129,000
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par value; 5,000,000 shares authorized;
500,000 and 0 shares of Series D issued and outstanding at
September 30, 1997 and June 30, 1997, respectively 5,000 -
Common stock - $.01 par value; 50,000,000 shares authorized;
31,465,564 and 31,164,935 shares issued and outstanding at
September 30, 1997 and June 30, 1997, respectively 315,000 311,000
Additional paid-in capital 334,715,000 322,268,000
Accumulated deficit (237,598,000) (231,248,000)
------------- -------------
Total stockholders' equity 97,437,000 91,331,000
------------- -------------
$ 113,186,000 $ 112,013,000
------------- -------------
------------- -------------
Note: The balance sheet at June 30, 1997 has been derived from the audited financial statements at that date but does not
include all of the information and footnotes required by generally accepted accounting principles for complete financial
statements.
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
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ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
----------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------
THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
----------- -----------
(UNAUDITED)
REVENUES:
License and research revenue $ 6,539,000 $ 5,750,000
OPERATING EXPENSES:
Research and development 12,046,000 9,250,000
General and administrative 1,812,000 1,947,000
----------- -----------
13,858,000 11,197,000
----------- -----------
LOSS FROM OPERATIONS (7,319,000) (5,447,000)
INVESTMENT INCOME AND OTHER - NET 969,000 1,034,000
----------- -----------
NET LOSS $(6,350,000) $(4,413,000)
----------- -----------
----------- -----------
NET LOSS PER COMMON SHARE $ (0.20) $ (0.15)
----------- -----------
----------- -----------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 31,316,000 30,026,000
----------- -----------
----------- -----------
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
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ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
----------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- ---------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
------------ ------------
(UNAUDITED)
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OPERATING ACTIVITIES:
Net loss $ (6,350,000) $ (4,413,000)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization 1,213,000 818,000
Changes in operating assets and liabilities:
Research revenue receivable 5,000,000 -
Deferred revenue (154,000) -
Other assets 35,000 (566,000)
Accounts payable and accrued expenses and other (2,025,000) (1,955,000)
------------ -------------
Net cash used in operating activities (2,281,000) (6,116,000)
------------ -------------
INVESTING ACTIVITIES:
Short-term investments 3,613,000 17,703,000
Property, plant and equipment (1,044,000) (558,000)
------------ -------------
Net cash provided by investing activities 2,569,000 17,145,000
------------ -------------
FINANCING ACTIVITIES:
Issuance of common stock 294,000 409,000
Issuance of convertible preferred stock 9,750,000 -
Principal payments on long-term debt (254,000) (173,000)
------------ -------------
Net cash provided by financing activities 9,790,000 236,000
------------ -------------
INCREASE IN CASH AND CASH EQUIVALENTS 10,078,000 11,265,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 14,590,000 9,480,000
------------ -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 24,668,000 $ 20,745,000
------------ -------------
------------ -------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Issuance of common stock in connection with
acquired in-process technology $ 2,500,000
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Alliance Pharmaceutical Corp. and its subsidiaries (collectively, the
"Company" or "Alliance") are engaged in identifying, designing, and
developing novel medical products.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Alliance
Pharmaceutical Corp., its wholly owned subsidiary Astral, Inc., its wholly
owned subsidiary MDV Technologies, Inc. ("MDV") from the acquisition date of
November 1996, and its majority-owned subsidiaries, Talco Pharmaceutical,
Inc. and Applications et Transferts de Technologies Avancees ("ATTA"). ATTA
was dissolved in 1997. All significant intercompany accounts and
transactions have been eliminated. Certain amounts in 1997 have been
reclassified to conform to the current year's presentation.
INTERIM CONDENSED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of September 30, 1997, the
condensed consolidated statements of operations for the three months ended
September 30, 1997 and 1996, and the condensed consolidated statements of
cash flows for the three months ended September 30, 1997 and 1996 are
unaudited. In the opinion of management, such unaudited financial statements
include all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation of the results for the periods presented.
Interim results are not necessarily indicative of the results to be expected
for the full year. The financial statements should be read in conjunction
with the Company's consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended June
30, 1997.
PURCHASED TECHNOLOGY
The purchased technology was primarily acquired as a result of the
merger of Fluoromed Pharmaceutical, Inc. into a subsidiary of the Company in
1989. The technology acquired is the Company's core perfluorochemical
("PFC") technology and was valued based on an analysis of the present value
of future earnings anticipated from this technology at that time. The
Company identified alternative future uses for the PFC technology, including
the OXYGENT-TM- (temporary blood substitute) and LIQUIVENT-Registered
Trademark- (intrapulmonary oxygen carrier) products. Purchased technology
also includes $2 million for technology capitalized as a result of the
acquisition of BioPulmonics, Inc. ("BioPulmonics") in December 1991. Since
the acquisition, an alternative future use of the acquired technology has
been pursued by the Company. An intrapulmonary drug delivery system using
the PFC-based liquid as a carrier (or dispersing agent) is being developed by
Alliance from the liquid ventilation technology.
The PFC technology is the basis for the Company's main drug development
programs and is being amortized over a 20-year life. Accumulated amortization
for this PFC technology was $10 million and $8.8 million at September 30,
1997 and 1996, respectively. The technology
6
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acquired from BioPulmonics is being amortized over five to seven years and
accumulated amortization was $1.3 million and $929,000 at September 30, 1997
and 1996, respectively.
The carrying value of purchased technology is reviewed periodically
based on the projected cash flows to be received from license fees, milestone
payments, royalties and other product revenues. If such cash flows are less
than the carrying value of the purchased technology, the difference will be
charged to expense.
ACQUIRED IN-PROCESS TECHNOLOGY
In November 1996, the Company acquired MDV by a merger (the "MDV
Merger") of a wholly owned subsidiary of the Company into MDV. MDV is engaged
in the development of a thermo-reversible gel, FLOGEL-Registered Trademark-,
intended for use as an anti-adhesion treatment for persons undergoing
abdominal or pelvic surgeries. FLOGEL is applied in a cold, liquid form and
becomes a gel at body temperature. MDV has obtained preliminary human safety
data with the product's current formulation, and has performed preclinical
studies on additional formulations.
The consideration payable in the MDV Merger consists of $15.5 million,
payable in common stock or cash, of which $8 million was paid during fiscal
1997, $2.5 million was paid on August 13, 1997, and $5 million will be paid
on November 13, 1997. The $8 million payments made in fiscal 1997 and the
$2.5 million payment made in August of 1997 were made through the delivery of
703,093 and 248,879 shares of the Company's common stock, respectively.
Additionally, the Company will pay up to $20 million if advanced clinical
development or licensing milestones are achieved in connection with MDV's
technology. The Company will also make certain royalty payments on the sales
of products, if any, developed from such technology. The Company may buy out
its royalty obligation for $10 million at any time prior to the first
anniversary of the approval by U.S. regulatory authorities of any products
based upon the MDV technology (the amount increasing thereafter over time).
All of such payments to the former MDV shareholders may be made in cash or,
at the Company's option, shares of the Company's common stock, except for the
royalty obligations which will be payable only in cash. The Company has not
determined whether subsequent payments (other than royalties) will be made in
cash or in common stock or, if made in cash, the source of such payments.
There can be no assurance that any of the contingent payments will be made,
because they are dependent on future developments which are inherently
uncertain.
NEW ACCOUNTING STANDARDS.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS No. 128"). SFAS No. 128 requires the presentation of basic and
diluted earnings per share amounts. Basic earnings per share is calculated
based upon the weighted average number of common shares outstanding during
the period while diluted earnings per share also gives effect to all
potential dilutive common shares outstanding during the period such as
options, warrants, convertible securities, and contingently issuable shares.
SFAS No. 128 is effective for periods ending after December 15, 1997. The
Company does not expect SFAS No. 128 to have a material impact on its
calculations of earnings per share.
7
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2. LICENSE AGREEMENT
In September 1997, the Company entered into a license agreement (the
"Schering License Agreement") with Schering AG, Germany ("Schering"), which
provides Schering with worldwide exclusive marketing and manufacturing rights
to Alliance's drug compounds, drug compositions and medical devices and
systems related to perfluorocarbon ultrasound imaging products, including
IMAGENT-Registered Trademark-US. The product will be developed jointly by
Alliance and Schering. Under the Schering License Agreement, Schering paid
to Alliance an initial license fee of $4 million and agreed to pay further
milestone payments and royalties on product sales. Schering also agreed to
provide funding to Alliance for some of its development expenses. In
conjunction with the Schering License Agreement, Schering Berlin Venture
Corp., an affiliate of Schering, purchased 500,000 shares of the Company's
convertible Series D Preferred Stock for $10 million.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(References to years are to the Company's fiscal years ended June 30.)
Alliance has devoted substantial resources to research and development
related to its medical products. The Company has been unprofitable since
inception and expects to continue to spend substantial amounts on research
and development, preclinical testing and clinical trials, regulatory
activities, and commercial manufacturing start-up. The Company has entered
into collaborative research and development agreements with companies for
OXYGENTTM, LIQUIVENT-Registered Trademark-, IMAGENT US, and RODA TM. The
arrangements with its existing partners for OXYGENT, LIQUIVENT, and IMAGENT
US require them to reimburse the Company for certain approved development
expenses incurred for the respective products. All three partners for such
products will make milestone payments to the Company upon the achievement of
certain product development events, followed by royalties on sales at
commercialization. With respect to RODA, the Company has agreed to reimburse
VIA Medical Corporation for substantially all of its development expenses and
to share revenues on the sale of products. If some of the development events
under its existing agreements are achieved and the relevant payments made by
partners, the Company could become profitable on a periodic basis over the
next two years, prior to the commercialization of products. However, the
timing and amounts of such payments, if any, cannot be predicted with
certainty and may not occur if product development events are not achieved.
There can be no assurance that the Company will be able to achieve
profitability at all or on a sustained basis.
LIQUIDITY AND CAPITAL RESOURCES
Through September 1997, the Company financed its activities primarily
from public and private sales of equity and funding from collaborations with
corporate partners. To date, the Company's revenue from the sale of products
has not been significant.
In January 1997, the Company entered into a loan and security agreement
with a bank under which the Company received $3.5 million. Amounts borrowed
under the agreement are secured by certain fixed assets and, pursuant to two
promissory notes, are to be repaid over three and four years, respectively.
If certain financial covenants are not satisfied, the outstanding balance may
become due and payable. On September 30, 1997, the balance outstanding on
these loans was $3.2 million. The Company has another loan from a financing
company with an outstanding balance of $752,000 on September 30, 1997. The
Company has financed
8
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substantially all of its office and research facilities and related leasehold
improvements under operating lease arrangements and loan and security
agreements.
In September 1997, the Company entered into the Schering License
Agreement with Schering AG, Germany. See Note 2 to the Condensed
Consolidated Financial Statements for information related to the license
agreement.
See Note 1 to the Condensed Consolidated Financial Statements for
information related to the November 1996 acquisition of MDV by the Company.
In February 1996, the Company entered into a license agreement (the
"HMRI License Agreement") with Hoechst Marion Roussel, Inc. ("HMRI"), which
provides HMRI with worldwide marketing and manufacturing rights to the
intratracheal administration of liquids, including LIQUIVENT, which perform
bronchoalveolar lavage or liquid ventilation. The product is being developed
jointly by Alliance and HMRI, with HMRI responsible for most of the costs of
development and marketing. HMRI has agreed to pay milestone payments and
royalties on product sales. On June 30, 1997, HMRI paid the Company a $2.5
million milestone payment and $2.5 million for the purchase of clinical trial
supplies. The Company also announced in June 1997 that the parties have
agreed in principle to modify the HMRI License Agreement to (i) adjust
certain milestone payments and (ii) temporarily revise the method for
reimbursing the expenses for portions of the development work, in conjunction
with the temporary interruption of the LIQUIVENT clinical development program
in April 1997. The modification is being formalized by an amendment which is
expected to be executed in the near future. Prior to the modification, the
HMRI License Agreement required HMRI to reimburse Alliance for approved
worldwide development expenses incurred by Alliance on a quarterly basis.
Under the modified agreement, from July 1997 Alliance will conduct and be
responsible for funding development activities in North America through
December 1997. HMRI will reimburse Alliance for approved expenses for such
activities in the form of payments which will be made upon the occurrence of
specified events subsequent to December 1997. HMRI will continue to be
responsible for conducting and funding any activities outside of North
America. Beginning in January 1998, HMRI will resume funding for
substantially all LIQUIVENT development expenses worldwide. The agreement in
principle provides for the establishment of a mechanism for HMRI to recoup
from Alliance certain reimbursed development expenses if HMRI terminates the
HMRI License Agreement prior to January 1998.
In August 1994, the Company executed a license agreement (the "Ortho
License Agreement") with Ortho Biotech Inc. and The R.W. Johnson
Pharmaceutical Research Institute, a division of Ortho Pharmaceutical
Corporation (collectively referred to as "Ortho"), which provides Ortho with
worldwide marketing and, at its election, manufacturing rights to the
Company's injectable perfluorochemical emulsions capable of transporting
oxygen for therapeutic use, including OXYGENT. Ortho has agreed to pay
milestone payments and royalties on product sales. Ortho is responsible for
substantially all of the costs of developing and marketing the products. In
December 1996, Ortho paid the Company a $15 million milestone payment under
the Ortho License Agreement.
The Company had net working capital of $68.1 million at September 30,
1997, compared to $62.2 million at June 30, 1997. The Company's cash, cash
equivalents, and short-term investments increased to $78 million at September
30, 1997 from $71.6 million at June 30, 1997.
9
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The increase resulted primarily from proceeds from the sale of
convertible preferred stock of $10 million in conjunction with the Schering
License Agreement, offset by cash used in operations of $2.3 million and
property, plant and equipment additions of $1 million. The Company's
operations to date have consumed substantial amounts of cash, and are
expected to continue to do so for the foreseeable future.
The Company continually reviews its product development activities in an
effort to allocate its resources to those product candidates that the Company
believes have the greatest commercial potential. Factors considered by the
Company in determining the products to pursue include projected markets and
need, potential for regulatory approval and reimbursement under the existing
healthcare system, status of its proprietary rights, technical feasibility,
expected and known product attributes, and estimated costs to bring the
product to market. Based on these and other factors, the Company may from
time to time reallocate its resources among its product development
activities. Additions to products under development or changes in products
being pursued can substantially and rapidly change the Company's funding
requirements.
The Company expects to incur substantial additional expenditures
associated with product development. The Company will seek additional
collaborative research and development relationships with suitable corporate
partners for its non-licensed products. There can be no assurance that such
relationships, if any, will successfully reduce the Company's funding
requirements. Additional equity or debt financing may be required, and there
can be no assurance that funds from these sources will be available on
reasonable terms, if at all. If adequate funds are not available, the Company
may be required to delay, scale back, or eliminate one or more of its product
development programs, or obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to
certain of its technologies, product candidates, or products that the Company
would not otherwise relinquish.
Alliance believes that its current capital resources, expected revenues
from the Ortho License Agreement, HMRI License Agreement, and Schering
License Agreement, and investments will be adequate to satisfy its capital
requirements for at least the next 24 months. The Company's future capital
requirements will depend on many factors, including, but not limited to,
continued scientific progress in its research and development programs,
progress with preclinical testing and clinical trials, the time and cost
involved in obtaining regulatory approvals, patent costs, competing
technological and market developments, changes in existing collaborative
relationships, the ability of the Company to establish additional
collaborative relationships, and the cost of manufacturing scale-up.
The Company anticipates that capital expenditures for facilities will
increase significantly over the next twelve to eighteen months, some or all
of which will be financed by third parties. While the Company believes that
it can produce materials for clinical trials and the initial market launch
for its emulsion products at its existing San Diego facility and for
LIQUIVENT at its Otisville, New York facility, it may need to expand its
commercial manufacturing capabilities for its products in the future. The
Company's existing San Diego facility currently produces material for
clinical trials for IMAGENT US. The Company is in the process of leasing an
additional facility and will expand its market launch production capacity in
San Diego for IMAGENT US. Any expansion for any of its products may occur in
stages, each of which would require regulatory approval, and product demand
could at times exceed supply capacity. The Company has not selected a site
or obtained any regulatory approvals for construction of a commercial
production
10
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facility for its products, nor can there be any assurance that it
will be able to do so. The Company cannot predict the amount that it will
expend for the construction of such a production facility, and there can be
no assurance as to when or whether the U.S. Food and Drug Administration will
determine that such facility complies with Good Manufacturing Practices. The
projected location and construction of a facility will depend on regulatory
approvals, product development, and capital resources, among other things.
The Ortho License Agreement provides an option for Ortho to elect to
manufacture the emulsion products referred to therein, or to require the
Company to manufacture such products at a negotiated price. The HMRI License
Agreement requires the Company to manufacture LIQUIVENT at its Otisville
facility for a period of time after market launch and to sell the product to
HMRI at a negotiated price. HMRI will be responsible for establishing
production capacity beyond the maximum capacity of the Otisville facility.
The Schering License Agreement requires the Company to manufacture products
at its San Diego facility for a period of time after market launch at a
negotiated price. Schering will be responsible for establishing production
capacity beyond the maximum capacity of the San Diego facility.
Except for historical information, the statements made herein and
elsewhere are forward-looking. The Company wishes to caution readers that
these statements are only predictions and that the Company's business is
subject to significant risks. The factors discussed herein and other
important factors in some cases have affected, and in the future could
affect, the Company's actual results and could cause the Company's actual
consolidated results for 1998, and beyond, to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company. These risks include the inability to enter into collaborative
relationships to further develop and commercialize the Company's products;
changes in any such relationships, or the inability of any collaborative
partner to adequately commercialize any of the Company's products; the
uncertainties associated with the lengthy regulatory approval process;
obtaining and enforcing patents important to the Company's business; and
possible competition from other products. Furthermore, even if the Company's
products appear promising at an early stage of development, they may not
reach the market for a number of important reasons. Such reasons include,
but are not limited to, the possibilities that the potential products will be
found ineffective during clinical trials; failure to receive necessary
regulatory approvals; difficulties in manufacturing on a large scale; failure
to obtain market acceptance; and the inability to commercialize because of
proprietary rights of third parties. The research, development, and market
introduction of new products will require the application of considerable
technical and financial resources, while revenues generated from such
products, assuming they are developed successfully, may not be realized for
several years. Other material and unpredictable factors which could affect
operating results include, without limitation, the uncertainty of the timing
of product approvals and introductions and of sales growth; the ability to
obtain necessary raw materials at cost effective prices or at all; the effect
of possible technology and/or other business acquisitions or transactions;
and the increasing emphasis on controlling healthcare costs and potential
legislation or regulation of healthcare pricing.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AS COMPARED WITH THREE MONTHS
ENDED SEPTEMBER 30, 1996
The Company's license and research revenue increased by approximately
14% to $6.5 million for the three months ended September 30, 1997, compared
to $5.8 million for the three
11
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months ended September 30, 1996. The increase is primarily a result of the
$4 million initial license fee received under the Schering License Agreement,
net of a reduction in research revenue from the license agreement with HMRI.
The Company expects research revenue to continue at comparable levels in 1998
compared to 1997, but expects milestone payments to diminish.
Research and development expenses increased by approximately 30% to $12
million for the three months ended September 30, 1997, compared to $9.3
million for the three months ended September 30, 1996. The net increase in
expenses was primarily due to an increase of $1.4 million in payments to
universities and outside consultants for preclinical and clinical trials and
other product development work and an increase of $833,000 in staffing costs.
General and administrative expenses decreased by approximately 7% to
$1.8 million for the three months ended September 30, 1997, compared to $1.9
million for the three months ended September 30, 1996.
Investment income and other was $969,000 for the three months ended
September 30, 1997, compared to $1 million for the three months ended
September 30, 1996.
Alliance expects to continue to incur substantial and increasing
expenses associated with its research and development programs. Operating
losses may fluctuate from quarter to quarter as a result of differences in
the timing of revenues earned and expenses incurred and such fluctuations may
be substantial. The Company's historical results are not necessarily
indicative of future results.
PART II OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K
(a) There were no exhibits.
(b) The Company filed a report on Form 8-K dated September 23, 1997, regarding
the Schering License Agreement, which information is
contained in Note 2 to the Condensed Consolidated Financial Statements
above.
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.
ALLIANCE PHARMACEUTICAL CORP.
(Registrant)
/s/ THEODORE D. ROTH
----------------
Theodore D. Roth
Executive Vice President
and Chief Financial Officer
Date: November 7, 1997
12
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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND THE CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 24,668,000
<SECURITIES> 53,340,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 81,379,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 113,186,000
<CURRENT-LIABILITIES> 13,303,000
<BONDS> 0
0
5,000
<COMMON> 315,000
<OTHER-SE> 97,117,000
<TOTAL-LIABILITY-AND-EQUITY> 113,186,000
<SALES> 0
<TOTAL-REVENUES> 6,539,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 13,858,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,350,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,350,000)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,350,000)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> 0
</TABLE>
