UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 June 30, 1996
[ ] 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 0-19612
IMCLONE SYSTEMS INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 04-2834797
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
180 VARICK STREET, NEW YORK, NY 10014
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 645-1405
- --------------------------------------------------------------------------------
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 12 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 registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of August 13,1996
- ----------------------------- --------------------------------
Common Stock, par value $.001 19,927,821 Shares
<PAGE>
IMCLONE SYSTEMS INCORPORATED
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1996
and December 31, 1995 1
Statements of Operations - Three and six
months ended June 30, 1996 and 1995 2
Statements of Cash Flows - Six months
ended June 30, 1996 and 1995 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
IMCLONE SYSTEMS INCORPORATED
Balance Sheets
(in thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- --------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ................................. $ 388 $ 10,207
Securities available for sale ............................. 18,466 --
Prepaid expenses .......................................... 260 115
Amount due from officer and stockholder ................... 119 132
Other current assets ...................................... 311 26
--------- --------
Total current assets ........................... 19,544 10,480
--------- --------
Property and equipment:
Land ...................................................... 340 340
Building and building improvements ........................ 8,969 8,969
Leasehold improvements .................................... 4,832 4,832
Machinery and equipment ................................... 4,976 4,796
Furniture and fixtures .................................... 536 526
Construction in progress .................................. 104 --
--------- --------
Total cost ..................................... 19,757 19,463
Less accumulated depreciation and amortization .......... (8,849) (7,984)
--------- --------
Property and equipment, net .................... 10,908 11,479
--------- --------
Patent costs, net ............................................ 711 707
Deferred financing costs, net ................................ 69 74
Other assets ................................................. 63 63
--------- --------
$ 31,295 $ 22,803
========= ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ........................................... $ 917 $ 992
Accrued expenses and other ................................. 1,375 1,626
Interest payable ........................................... 293 343
Current portion of long-term liabilities ................... 695 3,784
--------- --------
Total current liabilities ...................... 3,280 6,745
--------- --------
Long-term debt ............................................... 4,313 2,200
Long-term notes payable, net ................................. -- 1,928
Other long-term liabilities, less current portion ............ 1,082 107
--------- --------
Total liabilities .............................. 8,675 10,980
--------- --------
Stockholders' equity :
Preferred stock, $1.00 par value; authorized
4,000,000 shares; none issued and outstanding .......... -- --
Common stock, $.001 par value; authorized
30,000,000 shares; issued 19,835,949 and 16,819,622
at June 30, 1996 and December 31, 1995, respectively;
outstanding 19,821,526 and 16,806,919 at June 30, 1996
and December 31, 1995, respectively ...................... 20 17
Additional paid-in capital ................................. 116,564 97,914
Accumulated deficit ........................................ (93,673) (85,958)
Treasury stock, at cost; 14,423 shares ..................... (169) (150)
Unrealized loss on securities available for sale ........... (122) --
--------- --------
Total stockholders' equity ..................... 22,620 11,823
--------- --------
$ 31,295 $ 22,803
========= ========
</TABLE>
See accompanying notes to financial statements.
Page 1 of 14
<PAGE>
IMCLONE SYSTEMS INCORPORATED
Statements of Operations
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
License fees from third parties ................... $ -- $ -- $ -- $ --
Research and development funding from third parties 75 75 150 150
-------- -------- -------- --------
Total revenues ...................... 75 75 150 150
-------- -------- -------- --------
Operating expenses:
Research and development .......................... 2,593 1,941 4,918 4,028
General and administrative ........................ 845 804 1,587 1,587
-------- -------- -------- --------
Total operating expenses ............. 3,438 2,745 6,505 5,615
-------- -------- -------- --------
Operating loss ....................................... (3,363) (2,670) (6,355) (5,465)
-------- -------- -------- --------
Other (income) expense:
Interest and other income ......................... (261) (3,007) (454) (3,020)
Interest and other expense ........................ 200 170 547 402
-------- -------- -------- --------
Net interest and other (income) expense (61) (2,837) 93 (2,618)
-------- -------- -------- --------
Net income (loss) before extraordinary item .......... (3,302) 167 (6,448) (2,847)
Extraordinary loss on extinguishment of debt, net
of income taxes .................................... 1,267 -- 1,267 --
-------- -------- -------- --------
Net income (loss) .................................... $ (4,569) $ 167 $ (7,715) $ (2,847)
======== ======== ======== ========
Net income (loss) per common share:
Income (loss) before extraordinary loss on
extinguishment of debt ....................... $ (0.17) $ 0.01 $ (0.34) $ (0.23)
Extraordinary loss on extinguishment of debt ..... (0.06) -- (0.07) --
-------- -------- -------- --------
Net income (loss) per common share ............... $ (0.23) $ 0.01 $ (0.41) $ (0.23)
======== ======== ======== ========
Weighted average shares outstanding .................. 19,595 12,596 18,730 12,587
======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
Page 2 of 14
<PAGE>
IMCLONE SYSTEMS INCORPORATED
Statements of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1996 1995
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................... $ (7,715) $(2,847)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization ........................... 910 920
Write-off of fixed assets ............................... -- 2
Unrealized loss from securities available for sale ...... (122) --
Extraordinary loss on early extinguishment of debt ...... 1,267 --
Discounted interest amortization ........................ 156 --
Changes in:
Prepaid expenses ..................................... (145) (75)
Other current assets ................................. (285) 6
Due from officer ..................................... 13 8
Other assets ......................................... -- 2
Interest payable ..................................... (111) 146
Accounts payable ..................................... (75) (611)
Accrued expenses and other ........................... (251) 42
-------- -------
Net cash used in operating activities ............. (6,358) (2,407)
-------- -------
Cash flows from investing activities:
Acquisitions of property and equipment .................. (294) (16)
Sales/ (purchases) of securities available for sale ..... (18,466) --
Additions to patents .................................... (44) (142)
-------- -------
Net cash used in investing activities ............. (18,804) (158)
-------- -------
Cash flows from financing activities:
Issuance of common stock ................................ 13,560 35
Proceeds from exercise of stock options and warrants .... 1,831 8
Purchase of treasury stock .............................. (19) --
Repayment of notes payable .............................. -- (320)
Proceeds from notes payable ............................. -- 100
Payments of other liabilities ........................... (29) (25)
-------- -------
Net cash provided by (used in) financing activities 15,343 (202)
-------- -------
Net decrease in cash and cash equivalents ................... (9,819) (2,767)
Cash and cash equivalents at beginning of period ............ 10,207 3,032
-------- -------
Cash and cash equivalents at end of period .................. $ 388 $ 265
======== =======
</TABLE>
See accompanying notes to financial statements.
Page 3 of 14
<PAGE>
IMCLONE SYSTEMS INCORPORATED
NOTES TO INTERIM FINANCIAL STATEMENTS
(unaudited)
(1) Basis of Presentation
The financial statements as of June 30, 1996 and for the six months ended
June 30, 1996 and 1995 are unaudited. In the opinion of management, these
unaudited financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, as filed with the Securities and Exchange Commission.
Results for the interim periods are not necessarily indicative of results
for the full years.
(2) Subsequent Events
In August 1995, a group of investors including Oracle Partners, L.P. ("the
Oracle Group") purchased 1,000,000 shares of Common Stock for a purchase price
of $1,500,000 and made a two-year loan to the Company in the amount of
$2,500,000 at an annual interest rate of 8%. Part or all of the loan was subject
to mandatory prepayment at the request of the investors, upon the occurrence of
certain events, including the raising of certain additional funds. The
obligations of the Company in connection with the loan were secured by a lien on
the Company's Branchburg, New Jersey manufacturing facility. The Oracle Group
also received warrants exercisable at anytime until August 10, 2000 entitling
the holders thereof to purchase an aggregate of 500,000 shares of Common Stock
at a price of $1.50 per share and 500,000 shares of Common Stock at a price of
$3.00 per share. The Company filed a Registration Statement under the Securities
Act of 1933 ("the 1933 Act") registering for public sale the shares purchased in
this financing and the shares that would be obtained through the exercise of the
warrants. The Company recorded a non-cash debt discount of approximately
$1,062,500 in connection with this financing. In May 1996 the Company and the
Oracle Group exchanged the notes evidencing the loan for 333,333 shares of
Common Stock based on a stock price of $7.50. The market price of the Company's
stock on April 15, 1996 was $9.13 and the Company paid the accrued and unpaid
interest through April 15, 1996, the date of the agreement in principle, on the
notes in the amount of $143,000 in cash. The Company recorded an extraordinary
loss of $1,228,000 on the extinguishment of debt, of which $542,000 related to
the difference in stock price, while $686,000 related to write off of
unamortized debt discount. In July 1996, the Company registered such shares of
Common Stock for resale by the Oracle Group under the 1933 Act. See also Note 3.
(3) Related Party Transactions
In July 1995, a director loaned the Company $180,000 in exchange for a
long-term note due two years from issuance at on annual interest rate of 8%. As
part of the transaction, the director was granted 36,000 warrants to purchase
Company Common Stock at $1.50 per share and an additional 36,000 warrants to
purchase Company Common Stock at $3.00 per share. In May 1996, the Company and
the director exchanged the note for 24,000 shares of Common Stock and the
Company paid the accrued and unpaid interest through April 15, 1996, the date of
the agreement in principle, on the note in the amount of $10,000 in cash. The
Company recorded an extraordinary loss of $39,000 on the extinguishment of the
debt. In July 1996, the Company registered such shares of Common Stock under the
1933 Act.
During the year ended December 31, 1995, the Company made miscellaneous
non-interest-bearing cash advances to the President and CEO totaling $7,000. In
addition, the officer repaid $31,000 of a demand promissory note during the year
ended December 31, 1995. This brought the outstanding balance of total
miscellaneous noninterest-bearing cash advances to the officer to $132,000 at
December 31, 1995. The balance due from the officer at July 31, 1996 was
$117,000. The officer has provided the Company with a demand promissory note
pursuant to which the officer is obligated to repay the debt over a twenty four
month period ending April 30, 1997.
Page 4 of 14
<PAGE>
(4) Long-term Debt
In June 1996, the Company and the New York Industrial Development Agency
extended the maturity of the Company's $2,113,000 repayment obligation to the
NYIDA for the 1986 Industrial Revenue Bond, which was due on June 18, 1996, to
December 15, 1997.
Page 5 of 14
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis by management is provided to identify
certain significant factors which affected the Company's financial position and
operating results during the periods included in the accompanying financial
statements.
Results of Operations
Six Months Ended June 30, 1996 and 1995
Revenues for the six-month periods ended June 30, 1996 and 1995 were each
$150,000 and represented research and development support fees from its
corporate partnership with American Cyanamid Company in infectious disease
vaccines.
Total operating expenses for the six-month periods ended June 30, 1996 and
June 30, 1995 were $6,505,000 and $5,615,000, respectively. Research and
development expenses for the six-month periods ended June 30, 1996 and June 30,
1995 were $4,918,000 and $4,028,000, respectively. Such amounts for the
six-month periods ended June 30, 1996 and June 30, 1995 represented 76% and 72%,
respectively, of total operating expenses. The increase in research and
development expenses is primarily attributable to the costs incurred to
manufacture C225, the Company's lead product candidate.
General and administrative expenses include administrative personnel costs,
costs incurred in connection with pursuing arrangements with corporate partners
and expenses associated with applying for patent protection for the Company's
technology and products. Such expenses for the six-month periods ended June 30,
1996 and June 30, 1995 were each $1,587,000.
Interest and other income was $454,000 for the six-month period ended June
30, 1996 compared to $3,020,000 for the six-month period ended June 30, 1995.
The decrease was primarily attributable to the April 1995 sale of the Company's
preferred and common stock holdings in Cadus Pharmaceutical Corporation to an
unrelated party for $3,000,000. Such decrease was mitigated by increased
interest income earned from higher cash balances in the Company's investment
portfolio resulting from the proceeds received from public stock offerings which
were completed in November 1995 and February 1996, respectively. Interest and
other expense was $547,000 and $402,000 for the six-month periods ended June
30, 1996 and June 30, 1995, respectively. Interest and other expense for both
periods primarily includes interest on two outstanding Industrial Development
Revenue Bonds with an aggregate principal amount of $4,313,000, interest
recorded on the liability to Pharmacia and UpJohn, Inc. for the reacquisition of
the worldwide rights to IL-6m and the contract manufacture of clinical material
for the Company's trials of IL-6m, and interest accrued and the amortization of
the non-cash debt discount recorded in connection with the Company's August 1995
financing with the Oracle Group. See Note 2.
The Company had net losses of $7,715,000 or $0.41 per share, and $2,847,000
or $0.23 per share, for the six-month periods ended June 30, 1996 and June 30,
1995, respectively. The net loss for the six-month period ended June 30, 1996
included a $1,267,000 or $0.07 per share extraordinary loss on early
extinguishment of debt. This extraordinary loss resulted from the issuance
during the second quarter of Company Common Stock in lieu of cash repayment of a
$2,500,000 million loan due the Oracle Group and a $180,000 long-term note owed
to a Company Director. See "Liquidity and Capital Resources" for further
discussion of these transactions. The increased loss per share in the 1996
period is directly attributable to the extraordinary loss and the Cadus stock
sale noted above.
Page 6 of 14
<PAGE>
Three Months Ended June 30, 1996 and 1995
Revenues for the three-month periods ended June 30, 1996 and 1995 were each
$75,000 and reflected contract research fees from the Company's corporate
partnership with American Cyanamid Company in infectious disease vaccines.
Total operating expenses for the three-month periods ended June 30, 1996
and June 30, 1995 were $3,438,000 and $2,745,000, respectively. Research and
development expenses for the three-month periods ended June 30, 1996 and June
30, 1995 were $2,593,000 and $1,941,000, respectively. Such amounts for the
three-month periods ended June 30, 1996 and June 30, 1995 represented 77% and
71%, respectively, of total operating expenses. The increase in research and
development expenses is primarily attributable to the costs incurred to
manufacture C225, the Company's lead product candidate.
General and administrative expenses include administrative personnel costs,
costs incurred in connection with pursuing arrangements with corporate partners
and expenses associated with applying for patent protection for the Company's
technology and products. Such expenses for the three-month periods ended June
30, 1996 and June 30, 1995 were $845,000 and $804,000, respectively.
Interest and other income was $261,000 for the three-month period ended
June 30, 1996 compared to $3,007,000 for the three-month period ended June 30,
1995. The decrease was primarily attributable to the April 1995 sale of the
Company's remaining 50% of Cadus stock to an unrelated party for total
consideration of $3,000,000. Such decrease was mitigated by increased interest
income earned from higher cash balances in the Company's investment portfolio
resulting from the proceeds received from public stock offerings which were
completed in November 1995 and February 1996. Interest and other expense was
$200,000 and $170,000 for the three-month periods ended June 30, 1996 and June
30, 1995, respectively. Interest and other expense for both periods primarily
includes interest on two outstanding Industrial Development Revenue Bonds with
an aggregate principal amount of $4,313,000, interest recorded on the liability
to Pharmacia and UpJohn, Inc. for the reacquisition of the worldwide rights to
IL-6m and the contract manufacture of clinical material for the Company's trials
of IL-6m and interest accrued and the amortization of the non-cash debt discount
recorded in connection with the Company's August 1995 financing with the Oracle
Group. See Note 2.
The Company had a net loss of $4,569,000 or $0.23 per share for the
three-month period ended June 30, 1996 compared with net income of $167,000 or
$0.01 per share for the three month period ended June 30, 1995. The net loss for
the three-month period ended June 30, 1996 included a $1,267,000 or $0.06 per
share extraordinary loss on early extinguishment of debt. This extraordinary
loss resulted from the issuance during the second quarter of Company Common
Stock in lieu of cash repayment of a $2,500,000 million loan due the Oracle
Group and a $180,000 long-term note owed to a Company Director. See "Liquidity
and Capital Resources" for further discussion of these transactions. The
increased loss per share in the 1996 period is directly attributable to the
extraordinary loss and the Cadus stock sale noted above.
Page 7 of 14
<PAGE>
Liquidity and Capital Resources
The Company's cash and cash equivalents and securities available for sale
totaled $17,227,000 at August 9, 1996; on June 30, 1996 such balances totaled
$18,854,000.
The Company owned 28% of the common and preferred stock of Cadus until
December 1994 when it completed the sale of 50% of its holdings in Cadus to High
River Limited Partnership ("High River") for $3,000,000. In April, 1995, the
Company completed the sale of the remaining one-half of its shares of capital
stock of Cadus for $3,000,000 to the same party. The Company has a right to
repurchase all 3,238,184 shares of Cadus any time prior to October 27, 1996 for
$1.75 per share, subject to adjustment under certain circumstances. In exchange
for such right, the Company granted to High River two options to purchase shares
of Common Stock. One option is to purchase 150,000 shares at an exercise price
of $2.00 per share, subject to adjustment under certain circumstances, and the
other option is to purchase 300,000 shares at an exercise price per share of
$0.69 per share, subject to adjustment under certain circumstances. Both options
will expire on April 26, 2000.
In August, 1995, the Oracle Group purchased 1,000,000 shares of Common
Stock for a purchase price of $1,500,000 and made a loan to the Company in the
aggregate amount of $2,500,000 with a two-year maturity, but subject to
mandatory prepayment, in whole or in part, upon the occurrence of certain
events, including the raising of certain additional funds. The Company has
recorded a non-cash debt discount of approximately $1,062,500 in connection with
this financing. The Oracle Group includes Oracle Partners, L.P., Quasar
International Partners C.V., Oracle Institutional Partners L.P., Sam Oracle
Fund, Inc. and Warren B. Kanders. The Oracle Group also received warrants
exercisable at any time until August 10, 2000 entitling the holders thereof to
purchase an aggregate of 500,000 shares of Common Stock at a price of $1.50 per
share and 500,000 shares of Common Stock at a price of $3.00 per share. As a
result of the Company's offerings of shares of its Common Stock in November 1995
and February 1996, the Oracle Group was entitled to require the Company to apply
20 percent of the gross proceeds of the sale of the shares of Common Stock from
the offerings to repay the loan.
In May 1996, the Company and the Oracle Group completed the exchange of the
notes in the aggregate outstanding principal amount of $2,500,000 million for
333,333 shares of Common Stock and the Company paid the accrued and unpaid
interest through April 15, 1996, the date of the agreement in principle, on the
notes in the amount of $143,000 in cash. The Company recorded an extraordinary
loss of $1,228,000 on the extinguishment of the debt. See Note 2. See "Results
of Operations". In July 1996 the Company registered such shares of Common Stock
with the Commission under a registration statement in accordance with the
provisions of the 1933 Act for resale by the Oracle Group.
In July 1995, a director loaned the Company $180,000 in exchange for a
long-term note due two years from issuance at on annual interest rate of 8%. As
part of the transaction, the director was granted 36,000 warrants to purchase
Company common stock at $1.50 per share and an additional 36,000 warrants to
purchase Company common stock at $3.00 per share. In May 1996, the Company and
the director exchanged the note for 24,000 shares of Common Stock and the
Company paid the accrued and unpaid interest through April 15, 1996, the date of
the agreement in principle, on the note in the amount of $10,000 in cash. The
Company recorded an extraordinary loss of $39,000 on the extinguishment of the
debt. See "Related Party Transactions" "Results of Operations". In July 1996 the
Company registered such shares of Common Stock with the Commission under a
registration statement in accordance with the provisions of the 1933 Act.
In February 1996, the Company completed a public sale of 2,200,000 shares
of Common Stock at a per share price to the public of $6.63. Net proceeds to the
Company from this sale totaled approximately $13,600,000 after deducting
expenses payable by the Company in connection with the offering and the
commission paid by the Company.
Page 8 of 14
<PAGE>
In May 1996, the Company extended its collaboration with Merck for the
development of a therapeutic cancer vaccine, BEC-2, for use in small-cell
carcinoma and in malignant melanoma. The collaboration continues a research and
license agreement between the two companies signed in December of 1990. Under
the terms of the modified agreement, the Company could receive up to $11,700,000
in license fees, research and development support and milestone payments in
addition to monies previously received in the original agreement. In return,
Merck has marketing rights to BEC-2 for all therapeutic indications outside
North America. Formerly the rights of Merck were confined to Europe, Australia
and New Zealand. Merck will also share in the development costs for the United
States and Europe and will pay all development costs in other territories. The
Company will be entitled to royalties based upon product sales outside of North
America.
In May 1996, the Company entered into a two-year employment agreement with
Carl S. Goldfischer, pursuant to which Mr. Goldfischer will serve as the
Company's Vice President for Finance and Strategic Planning, and Chief Financial
Officer. The agreement includes provisions relating to termination of employment
with and without cause, certain payments to Mr. Goldfischer in case of
termination, and compensation and stock options to be awarded to Mr. Goldfischer
during the term of the agreement.
During the current and next several years, the Company expects to incur
substantial additional research and development costs, including costs related
to pre-clinical and clinical trials, increased administrative expenses to
support its research and development operations and increased capital
expenditures for manufacturing capacity and various equipment needs. In June
1996, the Company and the New York Industrial Development Agency extended the
maturity of the Company's $2,113,000 repayment obligation to the NYIDA for the
1986 Industrial Revenue Bond, which was due on June 18, 1996, to December 15,
1997. In addition, the $2,200,000 Industrial Development Revenue Bond issued on
behalf of the Company in 1990 becomes due in 2004.
In July 1993, the Company entered into an agreement to acquire the
worldwide rights to IL-6m, a blood cell growth factor, from Erbamont, now a
subsidiary of Pharmacia and UpJohn, Inc. ("Pharmacia"), which had been licensed
to Pharmacia pursuant to a development and licensing agreement. In consideration
of the return of rights and the transfer of certain material and information,
the Company has paid $900,000 and has further obligations to Pharmacia. Such
obligations, including those to pay for IL-6m material manufactured and supplied
by Pharmacia, totaled $2,400,000 at the end of 1994. The total amount currently
due Pharmacia is $2,400,000. In addition, the Company is required to pay
Pharmacia $2,700,000 in royalties on eventual sales of IL-6m, if any. In March
1996, the Company entered into a Repayment Agreement with Pharmacia by which it
has agreed to pay the $2,400,000 over 24 months commencing in March 1996, with
interest only payable during the first six months. In connection with the
Repayment Agreement, the Company has signed a Confession of Judgment, which can
be filed in the case of default. Pursuant to a Security Agreement entered into
with Pharmacia, the Company has pledged its interests in patents related to its
IL-6m and to heparanase to secure its obligations under the Repayment Agreement.
Page 9 of 14
<PAGE>
The Company's future working capital and capital requirements will depend
upon numerous factors, including the progress of the Company's research and
development programs, pre-clinical testing and clinical trials, the Company's
corporate partners fulfilling their obligations to the Company, the timing and
cost of seeking regulatory approvals, the level of resources that the Company
devotes to the development of manufacturing, marketing and sales capabilities,
technological advances, the status of competitors and the ability of the Company
to maintain existing and establish new collaborative arrangements with other
companies to provide funding to the Company to support these activities.
The Company's budgeted cash expenditures for the full year ending December
31, 1996 total approximately $16,000,000, which includes $676,000 of the
$2,400,000 obligation to Pharmacia. The Company expects that its existing
capital resources will be sufficient to fund its capital needs through mid-1997
(assuming no exercise of the Company's option to repurchase the shares of
Cadus). In order to fund its capital needs after that time, the Company will
require significant levels of additional capital and intends to raise the
necessary capital through additional equity or debt financings, arrangements
with corporate partners or from other sources.
The Company has entered into preliminary discussions with several major
pharmaceutical companies concerning the funding of research and development for
certain of its products in research. No assurance can be given that the Company
will be successful in pursuing any such alternatives. In addition, the Company
may seek to enter into a significant strategic partnership with a pharmaceutical
company for the development of its lead product candidate, C225. Such a
strategic alliance could include an up-front equity investment and license fees
plus milestone fees and revenue sharing. There can be no assurance that the
Company will be successful in achieving such an alliance, nor can the Company
predict the amount of funds which might be available to it if it entered into
such an alliance or the time at which such funds would be made available.
The Company has granted a security interest in a substantial portion of the
facility equipment located in its New York City facility to secure the
obligations of the Company relating to the 1986 Industrial Development Bond and
another Industrial Revenue Bond, which were issued to finance a portion of the
cost of the New York facility.
In June 1992, the Company acquired land and a building in New Jersey at a
cost of approximately $4,665,000, including costs of acquisition. The Company
has outfitted and purchased equipment for the existing structure located on the
property to create a clinical-scale production facility that complies with
current Good Manufacturing Practices regulations at a total approximate cost of
$5,400,000. The facility was placed in service in late 1993. If clinical trials
of its products continue to be successful, the Company also intends to use the
facility for manufacturing clinical material for late-stage trials and, if
products are approved for marketing, for commercial material. The timing and
costs of further adapting the facility for commercial manufacturing will depend
on several factors, including the progress of products through clinical trials,
and are not yet determinable.
Total capital expenditures made during the six months ended June 30, 1996
were $294,000. $236,000 related to the refurbishment and equipping of the
Company's manufacturing facility in New Jersey while $58,000 reflected equipment
purchases for the research and development laboratories at the Company's New
York facility.
Page 10 of 14
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on June 3, 1996
(a) The persons elected as directors of the Company and the voting for
such persons was as follows:
Name Votes For Votes Against Abstain Delivered Non-Votes
- ---- --------- ------------- ------- -------------------
Jean Carvais 16,638,582 0 585,289 85,206
Vincent T. DeVita, Jr. 16,638,582 0 585,289 85,206
Robert F. Goldhammer 16,638,582 0 585,289 85,206
Harlan W. Waksal 16,638,582 0 585,289 85,206
Paul B. Kopperl 16,638,582 0 585,289 85,206
Samuel D. Waksal 16,638,582 0 585,289 85,206
(b) The 1996 Incentive Stock Option Plan was approved:
Votes For Votes Against Abstain Delivered Non-Votes
--------- ------------- ------- -------------------
6,795,161 2,841,220 34,252 7,638,444
(c) The 1996 Non-Qualified Stock Option Plan was approved:
Votes For Votes Against Abstain Delivered Non-Votes
--------- ------------- ------- -------------------
5,765,203 3,866,578 37,852 7,639,444
(d) The grant of warrants to the CEO was approved:
Votes For Votes Against Abstain Delivered Non-Votes
--------- ------------- ------- -------------------
6,639,687 2,987,744 42,202 7,639,444
(e) The appointment of KPMG Peat Marwick as the Company's accountants was
ratified:
Votes For Votes Against Abstain Delivered Non-Votes
--------- ------------- ------- -------------------
17,133,794 67,240 22,837 85,206
Page 11 of 14
<PAGE>
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
1. Employment Agreement, dated as of May 17, 1996, between the
Company and Carl S. Goldfischer.
(b) Reports on Form 8-K:
Date Filed Items Reported
--------------------------- ------------------------------
February 5, 1996 Item 5
February 14, 1996 Item 5
Page 12 of 14
<PAGE>
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.
IMCLONE SYSTEMS INCORPORATED
(Registrant)
Date: August 13, 1996 By /s/ Samuel D. Waksal
----------------------------------------
Samuel D. Waksal
President and Chief Executive Officer
Date: August 13, 1996 By /s/ Carl Goldfischer
----------------------------------------
Carl Goldfischer
Vice President of Financial and Strategic
Planning and Chief Financial Officer
Page 13 of 14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Information taken from the June 30, 1996 Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 388
<SECURITIES> 18,466
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,544
<PP&E> 19,757
<DEPRECIATION> (8,849)
<TOTAL-ASSETS> 31,295
<CURRENT-LIABILITIES> 3,280
<BONDS> 4,113
0
0
<COMMON> 20
<OTHER-SE> 22,600
<TOTAL-LIABILITY-AND-EQUITY> 31,295
<SALES> 0
<TOTAL-REVENUES> 75
<CGS> 0
<TOTAL-COSTS> 3,438
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 200
<INCOME-PRETAX> (3,302)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (1,267)
<CHANGES> 0
<NET-INCOME> (4,569)
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> 0
</TABLE>
