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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
Quarterly Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 for the Quarterly
Period ended June 30, 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
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of August 3, 1995 there were outstanding 13.5 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, Capital
Resources and Liquidity 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings 10
</TABLE>
2
<PAGE 3>
NEORX CORPORATION
(a development stage company)
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---------- ------------
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,725 $ 2,428
Short-term investments 16,005 14,723
Inventories 391 393
Prepaids and other 1,407 1,430
------- -------
Total current assets 19,528 18,974
------- -------
FACILITIES AND EQUIPMENT, at cost:
Equipment and furniture 3,317 3,298
Leasehold improvements 3,212 3,204
------- -------
6,529 6,502
Less: accumulated depreciation and amortization (5,723) (5,555)
------- -------
Facilities and equipment, net 806 947
------- -------
OTHER ASSETS 114 114
------- -------
$ 20,448 $ 20,035
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 553 $ 603
Accrued liabilities 1,993 2,115
Deferred revenue 250 250
Current portion of capital leases 12 14
------- -------
Total current liabilities 2,808 2,982
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NON-CURRENT LIABILITIES:
Convertible subordinated debentures, 9 3/4% 1,195 1,195
Capital leases, less current portion 11 17
------- -------
Total non-current liabilities 1,206 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, 208,000 and 298,000 shares
issued and outstanding, respectively 4 6
Common stock, $.02 par value, 60,000,000
shares authorized, 13,476,000 and
11,865,000 shares issued and
outstanding, respectively 270 237
Additional paid-in capital 123,027 115,614
Deferred compensation (186) (232)
Accumulated deficit since inception (106,681) (99,784)
------- -------
Total shareholders' equity 16,434 15,841
------- -------
$ 20,448 $ 20,035
======= =======
</TABLE>
See notes to financial statements.
3
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NEORX CORPORATION
(a development stage company)
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
February 13,
Three months Six months 1984
ended June 30, ended June 30, (inception) to
---------------- ---------------- June 30,
1995 1994 1995 1994 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
REVENUES:
Contract revenues and fees $ - $ 46 $ 57 $ 91 $ 37,390
------ ------ ------ ------ --------
OPERATING EXPENSES:
Research and development 1,786 1,713 3,985 3,470 87,326
General and administrative 1,191 1,474 2,313 2,915 52,311
------ ------ ------ ------ --------
Total operating expenses 2,977 3,187 6,298 6,385 139,637
------ ------ ------ ------ --------
Loss from operations (2,977) (3,141) (6,241) (6,294) (102,247)
Other income (expense):
Investment and interest
income, net 248 242 460 460 10,314
Interest expense, net (33) (33) (67) (66) (5,422)
Litigation expense, net - - - - (888)
Debt conversion expense - - - - (1,228)
------ ------ ------ ------ --------
Net loss $(2,762) $(2,932) $(5,848) $(5,900) $ (99,471)
====== ====== ====== ====== ========
Preferred stock dividends (162) (181) (344) (363) (5,650)
------ ------ ------ ------ --------
Net loss applicable to
common shares $(2,924) $(3,113) $(6,192) $(6,263) $(105,121)
====== ====== ====== ====== ========
Net loss per common share $ (.23) $ (.27) $ (.50) $ (.54) $ (21.29)
====== ====== ====== ====== ========
Weighted average common shares
outstanding 12,952 11,546 12,487 11,545 4,937
====== ====== ====== ====== ========
</TABLE>
See notes to financial statements.
4
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NEORX CORPORATION
(a development stage company)
STATEMENTS OF CASH FLOWS
(in thousands)(unaudited)
<TABLE>
<CAPTION>
February 13,
Three months Six months 1984
ended June 30, ended June 30, (inception)
---------------- ---------------- to June 30,
1995 1994 1995 1994 1995
------ ------ ------ ------ ------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net loss $(2,762) $(2,932) $(5,848) $(5,900) $(99,471)
------ ------ ------ ------ -------
Adjustments to reconcile net
loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 106 72 211 149 9,262
(Increase) decrease in
inventories (25) 33 2 75 (391)
(Increase) decrease in
prepaids and other assets 243 (26) 23 31 (1,414)
Increase (decrease) in
accounts payable and
accrued liabilities (268) (155) (152) (243) 2,504
Increase (decrease) in
deferred revenue - (46) - (91) 250
Return of common stock for
license - - - - (3,850)
Debt conversion expense - - - - 1,228
Compensation expense on
stock awards and options 23 23 46 46 986
Common stock issued for services - - 80 9 383
Total adjustments 79 (99) 210 (24) 8,958
------ ------ ------ ------ -------
Net cash used in operating
activities (2,683) (3,031) (5,638) (5,924) (90,513)
------ ------ ------ ------ -------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of short-term
investments (2,383) (2,282) (1,282) (1,863) (16,005)
Facilities and equipment purchases (29) (90) (70) (181) (8,861)
Other - - - - (17)
------ ------ ------ ------ -------
Net cash used in investing
activities (2,412) (2,372) (1,352) (2,044) (24,883)
------ ------ ------ ------ -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from sale of common stock
and warrants 6,451 - 6,451 - 97,422
Proceeds from sale of convertible
debentures - - - - 26,606
Proceeds from capital lease
obligations - - - - 2,322
Repayments of capital lease
obligations (3) (11) (8) (21) (3,537)
Proceeds from exercise of stock
options 13 5 48 7 998
Preferred stock issuance costs - - - - (792)
Preferred stock dividends (204) (363) (204) (363) (5,261)
Repurchase of preferred stock - - - - (305)
Repurchase of common stock - - - - (332)
------ ------ ------ ------ -------
Net cash provided by (used in)
financing activities 6,257 (369) 6,287 (377) 117,121
------ ------ ------ ------ -------
Net increase (decrease) in cash
and cash equivalents 1,162 (5,772) (703) (8,345) 1,725
Cash and cash equivalents:
Beginning of period 563 11,774 2,428 14,347 -
------ ------ ------ ------ -------
End of period $ 1,725 $ 6,002 $ 1,725 $ 6,002 $ 1,725
====== ====== ====== ====== =======
</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 June 30, 1995 and the
results of operations and cash flows for the three and six month periods
ended June 30, 1995 and 1994 and for the period from inception to June 30,
1995.
The results of operations for the three and six month periods ended June 30,
1995 are not necessarily indicative of the expected operating results for the
full year.
2. Shareholders' Equity
Changes in shareholders' equity from December 31, 1994 to June 30, 1995
were as follows:
<TABLE>
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<S> <C>
Balance December 31, 1994 $15,841
Common stock issued 6,739
Preferred stock dividends (344)
Net loss (5,848)
Amortization of deferred compensation 46
------
Balance June 30, 1995 $16,434
======
</TABLE>
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NEORX CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
3. Company Financing
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 unit and the exercise price of the
warrant were priced at $5.3125, the closing price of the common stock on
April 17, 1995.
7
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NEORX CORPORATION
(a development stage company)
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition, Capital Resources and Liquidity.
QUARTER AND SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO QUARTER AND SIX
MONTHS ENDED JUNE 30, 1994
There were no contract revenues or fees in the quarter ended June 30, 1995
compared to $46,000 earned in the comparable quarter of 1994. For the six
months ended June 30, 1995, contract revenues and fees were $57,000 compared
to $91,000 in last year's comparable period.
Total operating expenses decreased $210,000, or 7%, to $2,977,000 from
$3,187,000 for the quarters ended June 30, 1995 and 1994, respectively, and
for the six month periods decreased 1% to $6,298,000 from $6,385,000. Research
and development expenses increased 4% to $1,786,000 from $1,713,000 for the
quarters ended June 30, 1995 and 1994, respectively, and for the six month
periods increased 15% to $3,985,000 from $3,470,000, primarily due to increased
clinical and research activities and personnel. General and administrative
expenses decreased 19% to $1,191,000 from $1,474,000 for the quarters ended June
30, 1995 and 1994, respectively, and for the six month periods decreased 21% to
$2,313,000 from $2,915,000, primarily due to settlement of litigation in the
second half of 1994.
Investment and interest income and interest expense remained essentially
unchanged for the quarters and six month periods ended June 30, 1995 and 1994.
Net loss decreased 6% to $2,762,000 from $2,932,000 for the quarters ended June
30, 1995 and 1994, respectively, and for the six month periods decreased 1% to
$5,848,000 from $5,900,000, primarily due to settlement of litigation in the
second half of 1994.
CAPITAL RESOURCES AND LIQUIDITY
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 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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NEORX CORPORATION
(a development stage company)
Item 2. Capital Resources and Liquidity (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
and capital requirements will depend upon numerous factors, including results
of research and development activities, clinical trials and 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 agree-
ments. 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 resources. 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 and
consolidated class action complaint filed in the United States District Court
for the Southern District of New York on March 27, 1995. The pending complaint
names David Blech, D. Blech & Co. and a number of other individuals, as well
as eleven publicly traded biotechnology companies as defendants. 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 June 30, 1995 includes a receivable of $925,000 representing
expected insurance company 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 amendment to be signed
on its behalf by the undersigned thereunto duly authorized.
NeoRx Corporation
(Registrant)
<TABLE>
<S> <C>
Date: August XX, 1995 By: Robert M. Littauer
---------------------------
Robert M. Littauer
Authorized Officer and
Senior Vice President,
Chief Financial Officer and
Treasurer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS OF NEORX CORPORATION AS OF 6/31/95 AND 12/31/94, AND THE RELATED STATE-
MENTS OF OPERATIONS FOR EACH OF THE 3 MONTHS AND 6 MONTHS ENDED 6/30/95 AND
6/30/94 AND FOR THE PERIOD FROM 12/31/84 (INCEPTION) TO 6/30/95 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q REPORT FOR THE PERIOD ENDED 6/30/95.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,725
<SECURITIES> 16,005
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 391
<CURRENT-ASSETS> 19,528
<PP&E> 6,529
<DEPRECIATION> 5,723
<TOTAL-ASSETS> 20,448
<CURRENT-LIABILITIES> 2,808
<BONDS> 1,206
<COMMON> 270
0
4
<OTHER-SE> 16,160
<TOTAL-LIABILITY-AND-EQUITY> 20,448
<SALES> 0
<TOTAL-REVENUES> 57
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67
<INCOME-PRETAX> (5,848)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,848)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,848)
<EPS-PRIMARY> (.50)
<EPS-DILUTED> (.50)
</TABLE>
