<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ 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: 0-15006
T CELL SCIENCES, INC.
(Exact name of registrant as specified in charter)
Delaware No. 13-3191702
(State of Incorporation) (I.R.S. Employer Identification No.)
115 Fourth Avenue, Needham, Massachusetts 02194-2725
(Address of principal executive offices) (Zip code)
(617) 433-0771
(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
--- ---
Class Outstanding as of
----- May 09, 1995
------------
Common Stock, par value $.001 17,054,972
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PART I. FINANCIAL INFORMATION
---------------------
<TABLE>
ITEM 1. FINANCIAL STATEMENTS
--------------------
T CELL SCIENCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1995 1994
====================================================================
<S> <C> <C>
OPERATING REVENUE:
Product Development and
Licensing Agreements $588,676 $1,349,363
Product Sales 608,080 917,024
--------------------------------------------------------------------
Total Operating Revenue 1,196,756 2,266,387
--------------------------------------------------------------------
OPERATING EXPENSE:
Cost of Product Sales 458,990 485,010
Research and Development 2,025,355 2,613,781
General and Administrative 1,059,372 1,128,836
Sales and Marketing 292,876 367,230
--------------------------------------------------------------------
Total Operating Expense 3,836,593 4,594,857
--------------------------------------------------------------------
Operating Loss (2,639,837) (2,328,470)
Interest Income 229,376 391,577
--------------------------------------------------------------------
NET LOSS ($2,410,461) ($1,936,893)
====================================================================
NET LOSS PER
COMMON SHARE ($0.14) ($0.11)
====================================================================
Weighted Average Common
Shares Outstanding 17,054,222 17,051,143
====================================================================
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
T CELL SCIENCES, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MARCH 31, December 31,
1995 1994
===========================================================================================
(Audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash, Cash Equivalents and
Short Term Investments $12,914,728 $16,184,319
Accounts Receivable, Net 1,209,658 551,316
Inventories 412,663 409,266
Prepaid Expenses and Other 548,681 534,653
-------------------------------------------------------------------------------------------
Total Current Assets 15,085,730 17,679,554
-------------------------------------------------------------------------------------------
Property and Equipment, Net 812,219 1,060,193
Noncurrent Assets 2,148,838 1,944,784
-------------------------------------------------------------------------------------------
Total Assets $18,046,787 $20,684,531
===========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable 827,123 786,344
Accrued Expenses 1,544,446 1,812,508
-------------------------------------------------------------------------------------------
Total Current Liabilities 2,371,569 2,598,852
-------------------------------------------------------------------------------------------
Collaborator Advance 500,000 500,000
Stockholders' Equity:
Class B Preferred Stock, $2 par Value; 1,163,102
Shares Authorized; None Outstanding - -
Class C Preferred Stock, $.01 Par Value; 3,000,000
Shares Authorized; None Outstanding - -
Common Stock, $.001 Par Value; 50,000,000
Shares Authorized; 17,054,222
Shares Issued and Outstanding 17,054 17,054
Additional Paid-in Capital 55,726,143 55,726,143
Less: 16,323 Common Treasury Shares at Cost (76,931) (76,931)
Accumulated Deficit (40,491,048) (38,080,587)
-------------------------------------------------------------------------------------------
Total Stockholders' Equity 15,175,218 17,585,679
-------------------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $18,046,787 $20,684,531
===========================================================================================
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
T CELL SCIENCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1995 1994
========================================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ($2,410,461) ($1,936,893)
Depreciation and Amortization 164,066 197,454
Net Change in Current Assests
and Liabilities (903,050) (227,805)
- ----------------------------------------------------------------------------------------
Net Cash Used by Operating Activities (3,149,445) (1,967,244)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Prop. & Equip. (1,625) (155,172)
Disposal of Equipment, net 134,353 -
Increase in Patents and Other Assets (252,874) (25,756)
Sale of Short Term Investments 8,589,391 1,071,200
Purchase of Short Term Investments (49,725) (336,105)
- ----------------------------------------------------------------------------------------
Net Cash Provided (Used) by Investing Activities 8,419,520 554,167
CASH FROM FINANCING ACTIVITIES:
Proceeds from Exercise of Stock Options 0 7,931
- ----------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 0 7,931
- ----------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 5,270,075 (1,405,146)
Cash and Cash Equivalents at Beginning of Period 7,644,653 5,151,419
- ----------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $12,914,728 $3,746,273
========================================================================================
CASH, CASH EQUIVALENTS AND SHORT TERM
INVESTMENTS AT END OF PERIOD $12,914,728 $25,492,234
========================================================================================
See accompanying notes to financial statements.
</TABLE>
4
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T CELL SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
--------------
(1) Nature of Business
------------------
T Cell Sciences, Inc. (the "Company"), was incorporated in the State of
Delaware on December 9, 1983, and is utilizing proprietary complement
inhibitor and T cell receptor technology to develop pharmaceutical products to
treat diseases of inflammation and autoimmunity. T Cell Diagnostics, Inc.
("TCD"), a wholly-owned subsidiary of the Company, develops, manufactures and
markets innovative preclinical reagents and immune monitoring products.
The consolidated financial statements include the accounts of the
Company and T Cell Diagnostics.
(2) Interim Financial Statements
----------------------------
The accompanying financial statements for the three month periods ended
March 31, 1995 and 1994 include the consolidated accounts of the Company, and
have been prepared in accordance with generally accepted accounting principles
for interim reporting information and with the instructions to Form 10-Q and
article 10 of Regulation S-X. In the opinion of management, all adjustments,
consisting of only normal recurring accruals, necessary to present fairly the
financial positions as of March 31, 1995 and December 31, 1994, the results of
operations for the three months ended March 31, 1995 and 1994, and the cash
flows for the three months ended March 31, 1995 and 1994. The results of
operations for the interim period ended March 31, 1995 are not necessarily
indicative of results for any future interim period or for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted, although the Company believes that the
disclosures included are adequate to make the information presented not
misleading. The consolidated financial statements and the notes included
herein should be read in conjunction with footnotes contained in the Company's
Annual Report(Form 10-K) for the fiscal year ended December 31, 1994.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
The Company reported a consolidated net loss of $2,410,461 ($.14 per
share) for the three month period ended March 31, 1995, compared with
5
<PAGE> 6
$1,936,8893 ($.11 per share) for the first quarter of 1994. The increased
loss is the result of lower product development revenue, and a decline in
product sales, offset by reduced expenses resulting from cost containment
programs implemented during the latter part of 1994, limiting discretionary
spending in all functional areas. In February 1995, the Company and SmithKline
Beecham agreed to a mutual termination of their agreement, for sCR1. The
Company now has all worldwide development, manufacturing and marketing rights
for sCR1 the Company's lead therapeutic product candidate, subject to a
continuing agreement covering Japan between the Company, SmithKline Beecham and
Yamanouchi Pharmaceutical Co., Ltd. During the first quarter of 1995, the
Company continued its phase I clinical trial for sCR1 in patients at risk of
developing adult respiratory distress syndrome ("ARDS") which was started in
September 1994. In March 1995, the Company initiated a second phase I clinical
trial for sCR1 for reperfusion injury following heart attacks.
Collaborative product development revenue of $588,676 decreased
approximately 56% from product development revenue reported in the same
quarter of 1994. The decrease is mainly the result of lower revenue from the
Company's collaborative partner Astra AB, ("Astra") as a result of Astra
assuming more responsibility for the development of T cell receptor monoclonal
antibody candidates in accordance with the amended and restated agreement of
December 1993. In addition, first quarter 1994 revenue included an execution
fee associated with the distribution agreement with INCSTAR Corporation.
During the first quarter of 1995, both parties mutually agreed to terminate
that agreement without any future financial obligations.
Product sales revenue of $608,080 decreased approximately 34% from
$917,024 in the prior year. The significant decrease in product sales is the
result of increased competition, particularly in the international market.
The Company is improving strategic focus, evaluating existing distribution
channels and implementing aggressive advertising and promotion programs along
with introducing new products and quality enhancements to existing products,
with the goal of increasing sales in future quarters. Gross margin for the
first quarter 1995 was 25% versus 47% for the comparable 1994 period. The
decrease is the result of the inefficiencies of producing at lower volumes.
Interest income amounted to $229,376 for the three month period ended
March 31, 1995, compared with $391,577 for the comparative prior, representing
a decrease of approximately 41%. The decrease is the result of lower cash
balances during 1995.
Research and development expense decreased approximately 23% to
$2,025,355 for the three months ended March 31, 1995, from $2,613,781 for the
comparable period in 1994. In addition to discretionary spending controls in
place during 1995, the decrease reflects costs incurred during the first
quarter of 1994 associated with the supplemental clinical trials conducted
with TRAx [registered trademark] CD4.
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<PAGE> 7
General and administrative expense decreased $69,464 or approximately 6%
from the first quarter of 1994, and sales and marketing expense decreased 20%
from $367,230. Reorganization of responsibilities and discretionary cost
containment programs implemented during 1994 have contributed to the decrease
in expense in these administrative areas.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company had cash and cash equivalents of approximately $12.9 million
as of March 31, 1995. During 1994, the Company entered into a lease agreement
to lease up to $2 million of equipment over a five year period. As of March
31, 1995, $890,840 had been drawn against the lease and the Company intends to
draw against this lease during 1995 to meet its capital requirements. The
Company believes its current cash and cash equivalents combined with
anticipated net cash provided by operations, should be sufficient to meet the
Company's cash requirements for operations through 1996. The Company will
consider additional sources of funding and capital when available and
appropriate.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
------------------
There have been no significant developments or changes from the
litigation reported in the Company's 1994 Annual Report on Form 10K.
ITEM 2. THROUGH ITEM 5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K:
--------------------------------
The Company filed a Form 8-K, dated April 7, 1995, reporting the
termination agreement dated April 7, 1995, between the Company and SmithKline
Beecham. Under the termination agreement, the Company regained all patent and
technology rights previously granted to SmithKline Beecham for sCR1 in all
countries of the world except Japan and received an exclusive license to
SmithKline Beecham's patent and technology rights for sCR1. In addition, the
Company will receive a supply of finished sCR1. Thereafter, the Company and
SmithKline Beecham will have no further obligations, financial or otherwise,
to each other, related to this agreement.
7
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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.
T CELL SCIENCES, INC.
Dated: May 15, 1995 BY: /s/Alan W. Tuck
-----------------
President & Chief
Executive Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000744218
<NAME> T CELL SCIENCES, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 7,644,653
<SECURITIES> 8,539,666
<RECEIVABLES> 561,316
<ALLOWANCES> (10,000)
<INVENTORY> 409,266
<CURRENT-ASSETS> 17,679,554
<PP&E> 4,057,413
<DEPRECIATION> (2,997,220)
<TOTAL-ASSETS> 20,684,531
<CURRENT-LIABILITIES> 2,598,852
<BONDS> 500,000
<COMMON> 55,743,197
0
0
<OTHER-SE> (38,157,518)
<TOTAL-LIABILITY-AND-EQUITY> 20,684,531
<SALES> 3,230,815
<TOTAL-REVENUES> 6,967,958
<CGS> 2,008,279
<TOTAL-COSTS> 16,053,175
<OTHER-EXPENSES> 490,055
<LOSS-PROVISION> 10,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (11,583,551)
<INCOME-TAX> 0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,583,551)
<EPS-PRIMARY> (.68)
<EPS-DILUTED> (.68)
</TABLE>
