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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 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 0-16614
NeoRx Corporation
(Exact Name of Registrant as Specified in its Charter)
WASHINGTON 91-1261311
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
410 West Harrison Street, Seattle, Washington 98119
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (206) 281-7001
Indicate by check mark whether the Registrant (1) has filed all reports re-
quired to be filed by Section 13 or 15(d) of the Securities Exchange Act of
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:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practibable date.
As of April 27, 1995 there were outstanding 13.2 million shares of the Com-
pany's Common Stock, $.02 par value.
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TABLE OF CONTENTS
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Page
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings 10
</TABLE>
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NEORX CORPORATION
(a development stage company)
<TABLE>
<CAPTION>
BALANCE SHEETS
(in thousands)
March 31, December 31,
1995 1994
---------- ------------
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 563 $ 2,428
Short-term investments 13,622 14,723
Inventories 366 393
Prepaids and other 1,496 1,430
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Total current assets 16,047 18,974
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FACILITIES AND EQUIPMENT, at cost:
Equipment and furniture 3,331 3,298
Leasehold improvements 3,212 3,204
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6,543 6,502
Less: accumulated depreciation and amortization (5,660) (5,555)
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Facilities and equipment, net 883 947
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OTHER ASSETS 268 114
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$ 17,198 $ 20,035
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 727 $ 603
Accrued liabilities 2,289 2,115
Deferred revenue 250 250
Current portion of capital leases 12 14
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Total current liabilities 3,278 2,982
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NON-CURRENT LIABILITIES:
Convertible subordinated debentures, 9 3/4% 1,195 1,195
Capital leases, less current portion 14 17
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Total non-current liabilities 1,209 1,212
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Convertible exchangeable preferred stock,
Series 1, $.02 par value, 3,000,000 shares
authorized, 298,000 shares issued
and outstanding 6 6
Common stock, $.02 par value, 60,000,000
shares authorized, 11,893,000 and
11,865,000 shares issued and
outstanding 237 237
Additional paid-in capital 115,729 115,614
Deferred compensation (209) (232)
Accumulated deficit since inception (103,052) ( 99,784)
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Total shareholders' equity 12,711 15,841
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$ 17,198 $ 20,035
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</TABLE>
See notes to financial statements.
3
<PAGE>4
NEORX CORPORATION
(a development stage company)
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three months ended February 13, 1984
March 31, (inception) to
--------------------- March 31,
1995 1994 1995
------ ------ ------
<S> <C> <C> <C>
REVENUES:
Contract revenues and fees $ 57 $ 45 $ 37,390
------ ------ --------
OPERATING EXPENSES:
Research and development 2,199 1,757 85,540
General and administrative 1,122 1,441 51,120
------ ------ --------
Total operating expenses 3,321 3,198 136,660
------ ------ --------
Loss from operations (3,264) (3,153) (99,270)
Other income (expense):
Investment and interest income, net 212 218 10,066
Interest expense (34) (33) (5,389)
Litigation expense, net - - (888)
Debt conversion expense - - (1,228)
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Net loss $(3,086) $(2,968) $ (96,709)
Preferred stock dividends (182) (182) (5,488)
------ ------ --------
Net loss applicable to common shares $(3,268) $(3,150) $(102,197)
====== ====== =========
Net loss per common share $ (.28) $ (.27) $ (21.53)
====== ====== =========
Weighted average common
shares outstanding 11,873 11,543 4,747
====== ====== ========
</TABLE>
See notes to financial statements.
4
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NEORX CORPORATION
(a development stage company)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended February 13, 1984
March 31, (inception) to March 31,
---------------------- March 31,
1995 1994 1995
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<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,086) $(2,968) $(96,709)
----- ----- -------
Adjustments to reconcile net
loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 105 77 9,156
(Increase) decrease in inventories 27 42 (366)
(Increase) decrease in prepaids
and other assets (220) 57 (1,657)
Increase (decrease) in accounts
payable and accrued liabilities 116 (88) 2,772
Increase (decrease) in deferred
revenue - (45) 250
Compensation expense on stock
awards and options 23 23 963
Return of common stock for license - - (3,850)
Debt conversion expense - - 1,228
Common stock issued for services 80 9 383
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Total adjustments 131 75 8,879
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Net cash (used in) operating
activities (2,955) (2,893) (87,830)
----- ----- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from (purchases of) short-
term investments, net 1,101 419 (13,622)
Facilities and equipment purchases (41) (91) (8,832)
Other - - (17)
------ ------ -------
Net cash provided by (used in)
investing activities 1,060 328 (22,471)
------ ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock
and warrants - - 90,971
Proceeds from sale of convertible
debentures - - 26,606
Proceeds from capital lease obligations - - 2,322
Repayments of capital lease obligations (5) (10) (3,534)
Proceeds from stock options exercised 35 2 985
Preferred stock issuance costs - - (792)
Preferred stock dividends - - (5,057)
Repurchase of preferred stock - - (305)
Repurchase of common stock - - (332)
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Net cash provided by (used in)
financing activities 30 (8) 110,864
------ ------ -------
Net increase (decrease) in cash
and cash equivalents (1,865) (2,573) 563
Cash and cash equivalents:
Beginning of period 2,428 14,347 -
------ ------ -------
End of period $ 563 $11,774 $ 563
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</TABLE>
See notes to financial statements.
5
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NEORX CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The interim financial statements contained herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and note disclosures normally included
in annual financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to those rules and regulations, although the Company believes that the
disclosures made are adequate to make the information presented not
misleading. These financial statements should be read in conjunction
with the Company's Annual Report to Shareholders for the year ended
December 31, 1994.
In the opinion of management, the interim financial statements reflect
all adjustments, consisting only of normal recurring accruals necessary
to present fairly the Company's financial position as of March 31, 1995
and the results of operations and cash flows for the three month periods
ended March 31, 1995 and 1994 and for the period from inception to March
March 31, 1995.
The results of operations for the three month period ended March 31,
1995 are not necessarily indicative of the expected operating results
for the full year.
6
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NEORX CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
2. Shareholders' Equity
Changes in shareholders' equity from December 31, 1994 to March 31, 1995
were as follows:
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Balance December 31, 1994 $15,841
Common stock issued 115
Preferred stock dividends (182)
Net loss (3,086)
Amortization of deferred compensation 23
------
Balance March 31, 1995 $12,711
======
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3. Subsequent Events
In April 1995, the Company sold to certain accredited investors
1,323,471 unregistered units consisting of one share of common
stock and one 3-year warrant to purchase one-quarter of one share
of common stock. Gross proceeds amounted to $7.0 million. The
The unit and the exercise price of the warrant were priced at
$5.3125, the closing price of the common stock on April 17, 1995.
The Company has agreed to file a registration statement with the
Securities and Exchange Commission to register the resale of the
shares and warrants included in the units and the shares issuable
upon exercise of the warrants by such investors.
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NEORX CORPORATION
(a development stage company)
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition
QUARTER ENDED MARCH 31, 1995 COMPARED TO QUARTER ENDED MARCH 31, 1994.
Revenues for the three months ended March 31, 1995 increased to $57,000
from $45,000 recorded for the three months ended March 31, 1994.
Total operating expenses for the quarter ended March 31, 1995 increased
4% to $3,321,000 from $3,198,000 recorded in the quarter ended March 31,
1994. Research and development expenses for the quarter ended March 31,
1995 increased 25% to $2,199,000 from $1,757,000 recorded in the quarter
ended March 31, 1994, primarily due to the Company's increased clinical
trial activities. General and administrative expenses decreased 22% to
$1,122,000 from $1,441,000 for the quarters ended March 31, 1995 and 1994,
respectively, primarily due to the settlement of litigation in 1994.
Interest income was $212,000 and $218,000 and interest expense was $34,000
and $33,000 for the three months ended March 31, 1995 and 1994, respectively.
LIQUIDITY AND CAPITAL RESOURCES.
In April 1995, the Company sold to certain accredited investors 1,323,471
unregistered units consisting of one share of common stock and one 3-year
warrant to purchase one-quarter of one share of common stock. Gross pro-
ceeds amounted to $7.0 million. The unit and the exercise price of the
warrant were priced at $5.3125, the closing price of the common stock on
April 17, 1995.
8
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Item 2. (continued)
The Company expects that its capital resources and interest income will be
sufficient to finance its currently anticipated working capital and capital
requirements into the second half of 1996. The Company's working capital
requirements will depend upon numerous factors, including results of
research and development activities, clinical trials, the levels of
resources that the Company devotes to establishing and expanding marketing
and manufacturing capabilities, competitive and technological developments
and the timing and cost of relationships with parties to collaborative
agreements. The Company will need to raise substantial additional funds
to conduct research and development activities, preclinical studies and
clinical trials necessary to bring its products to market, and to establish
marketing and limited manufacturing capabilities. The Company intends to
seek additional funding through public or private equity financings,
arrangements with corporate collaborators or other sources. Adequate
funds may not be available when needed or on terms acceptable to the Company.
9
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NEORX CORPORATION
(a development stage company)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
IN RE BLECH SECURITIES LITIGATION
The Company has been named as an additional codefendant in an amended
complaint filed in the United States District Court Southern District
of New York on March 27, 1995 in a pending purported class action suit
against David Blech, D. Blech & Co. and a number of other defendants,
including eleven publicly traded biotechnology companies. The complaint
seeks damages for alleged unlawful manipulation of the stock market prices
of the named biotechnology companies. The Company believes that the claims
against it have no factual or legal basis and are without merit. Although
the complaint alleges that D. Blech & Co. was the principal market maker for
NeoRx Corporation stock, to the Company's knowledge D. Blech & Co. was
never a significant market maker for the Company's stock. The Company
intends to defend this suit vigorously.
MELD V. NEORX CORPORATION
In February 1995, the Company settled a lawsuit filed against it and certain
Directors and officers in May 1994. Under the settlement, which is subject
to court approval, NeoRx will issue to the plaintiffs stock or a combination
of stock and cash worth $1,500,000. The Company's balance sheet at March 31,
1995 includes a receivable of $925,000 representing expected insurance com-
pany proceeds to be received in 1995.
10
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NEORX CORPORATION
(a development stage company)
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.
NeoRx Corporation
(Registrant)
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Date: May 11, 1995 By: Robert M. Littauer
--------------------------
Robert M. Littauer
Authorized Officer and
Senior Vice President,
Chief Financial Officer and
Treasurer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS OF NEORX CORPORATION AS OF 3/31/95 AND 12/31/94, AND THE RELATED STATE-
MENTS OF OPERATIONS FOR EACH OF THE 3 MONTHS ENDED 3/31/95 AND 3/31/94 AND FOR
THE PERIOD FROM 12/31/84 (INCEPTION) TO 3/31/95 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH 10-Q REPORT FOR THE PERIOD ENDED 3/31/95.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 563
<SECURITIES> 13,622
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 366
<CURRENT-ASSETS> 16,047
<PP&E> 6,543
<DEPRECIATION> 5,660
<TOTAL-ASSETS> 17,198
<CURRENT-LIABILITIES> 3,278
<BONDS> 1,209
<COMMON> 237
0
6
<OTHER-SE> 12,468
<TOTAL-LIABILITY-AND-EQUITY> 17,198
<SALES> 0
<TOTAL-REVENUES> 57
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34
<INCOME-PRETAX> (3,086)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,086)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,086)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> (.28)
</TABLE>
