<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED SEPTEMBER 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 0-15246
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ORGANOGENESIS INC.
------------------
(Exact name of registrant as specified in its charter)
DELAWARE 04-2871690
- - - - - - ------------------------------- -----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
150 DAN ROAD, CANTON, MA 02021
------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 575-0775
------------------------
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 ( )
The number of shares outstanding of registrant's Common Stock, par value $.01
per share, at November 3, 1995 was 13,638,962 shares.
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<TABLE>
ORGANOGENESIS INC.
INDEX
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<CAPTION>
Page
PART I - FINANCIAL INFORMATION Number
- - - - - - ------------------------------ ------
<S> <C>
Item 1 - Financial Statements
Consolidated Balance Sheets
at September 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations
for the three-month and nine-month periods ended September 30, 1995 and 1994 . . . . . . . 2
Consolidated Statements of Cash Flows
for the nine months ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . 3
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PART II - OTHER INFORMATION
- - - - - - ---------------------------
Item 5 - Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
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<TABLE>
ORGANOGENESIS INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 897,171 $ 3,187,286
Investments 14,428,403 5,684,127
Other current assets 735,661 541,252
------------ ------------
16,061,235 9,412,665
Property and equipment, net 5,110,153 5,634,627
Other assets 81,475 79,475
------------ ------------
$21,252,863 $15,126,767
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 570,563 $ 445,125
Accrued expenses 428,351 547,189
Deferred revenue - 13,051
------------ ------------
998,914 1,005,365
Deferred rent payable 124,960 157,091
Other liabilities - 15,000
Stockholders' equity:
Preferred Stock, par value $1.00; authorized
1,000,000 shares; issued and outstanding
250,000 Series A Convertible Preferred
shares (liquidation preference -
$2,000,000) 250,000 250,000
Common Stock, par value $.01; authorized
20,000,000 shares; issued and outstanding
13,271,576 and 9,366,198 shares as of
September 30, 1995 and December 31, 1994,
respectively 132,716 93,662
Additional paid-in capital 76,105,250 60,548,924
Accumulated deficit (56,358,977) (46,943,275)
------------ ------------
20,128,989 13,949,311
------------ ------------
$21,252,863 $15,126,767
============ ============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
1
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<TABLE>
ORGANOGENESIS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
For the For the
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------- ---------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Contract revenue $ - $ 60,961 $ 18,037 $ 184,126
Interest income 156,431 156,016 392,321 511,008
----------- ----------- ----------- -----------
156,431 216,977 410,358 695,134
Costs and Expenses:
Research and development 2,502,012 2,198,060 7,228,819 6,312,712
General and administrative 931,539 794,120 2,597,241 2,236,230
----------- ----------- ----------- -----------
Net loss $(3,277,120) $(2,775,203) $(9,415,702) $(7,853,808)
=========== =========== =========== ===========
Net loss per common share $(.25) $(.24) $(.72) $(.69)
=========== =========== =========== ===========
Weighted average number of
common shares outstanding 13,027,974 11,477,200 13,022,814 11,436,326
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
2
<PAGE> 5
<TABLE>
ORGANOGENESIS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
For the
Nine Months
Ended September 30,
-------------------------------------
1995 1994
-------------- -------------
<S> <C> <C>
Cash used in operating activities:
Net loss $ (9,415,702) $ (7,853,808)
Adjustment to reconcile net loss to
cash used in operating activities:
Depreciation and amortization 751,005 711,087
Changes in assets and liabilities:
Other current assets (194,409) 199,722
Other assets (2,000) -
Accounts payable 125,438 (29,389)
Accrued expenses (118,838) 18,668
Deferred revenue (13,051) 113,213
Deferred rent payable (32,131) (2,793)
Other liabilities (15,000) -
-------------- -------------
Cash used in operating activities (8,914,688) (6,843,300)
Cash flows from investing activities:
Capital expenditures (226,531) (296,259)
Purchases of investments (12,500,000) (98,000)
Sales/maturities of investments 3,755,724 6,052,087
-------------- -------------
Cash provided by (used in) investing activities (8,970,807) 5,657,828
Cash flows from financing activities:
Sale of common stock 15,595,380 1,283,821
Increase (decrease) in cash and cash equivalents (2,290,115) 98,349
Cash and cash equivalents, beginning of period 3,187,286 3,496,477
-------------- -------------
Cash and cash equivalents, end of period $ 897,171 $ 3,594,826
============== =============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
3
<PAGE> 6
ORGANOGENESIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation:
----------------------
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management the
accompanying financial statements include all adjustments, consisting
of normal recurring adjustments, necessary for a fair presentation of
the financial position, results of operations and changes in cash flows
for the periods presented.
Please refer to the audited consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1994.
2. Stockholders' Equity:
---------------------
On July 17, 1995, the Company completed a Public Offering of 230,000
Units, at a Unit Price of $66.25, resulting in proceeds of
approximately $15,000,000, net of expenses. Each Unit in the Offering
consisted of five shares of Common Stock and one Unit Warrant to
purchase one share of Common Stock at an exercise price of $19.875 per
share. The Unit Warrants are exercisable from October 14, 1996
through October 14, 2001 when the Unit Warrants expire.
The Offering contained adjustment provisions affecting the number of
Warrants exercisable into Common Stock. The adjustment provisions
were based on the trading price of the Company's Common Stock for a
period of time after the completion of the Offering (the "Adjustment
Period"). The Adjustment Period expired on August 8, 1995 and no
additional warrants were required to be issued.
On August 24, 1995, the Board of Directors declared a 25% stock
dividend for stockholders of record on September 1, 1995. The stock
dividend was payable on September 8, 1995 and resulted in the issuance
of 2,653,847 additional shares of Common Stock. All related data in
the consolidated financial statements reflect the stock dividend for
all periods presented.
4
<PAGE> 7
ORGANOGENESIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Stockholder Rights Plan:
------------------------
On August 24, 1995, the Board of Directors adopted a Stockholder
Rights Plan and declared a dividend of one Right for each outstanding
share of Common Stock to stockholders of record on September 1, 1995.
Each right only becomes exercisable and transferable apart from the
Common Stock, at the earlier of, (i) 10 days after a person or group
acquires beneficial ownership of 15% or more of the company's
outstanding Common Stock (the "Stock Acquisition Date"), or (ii) 10
business days following an announcement of a tender or exchange offer
for 30% or more of the company's outstanding common stock.
Initially, each right, upon becoming exercisable, would entitle the
holder to purchase one-thousandth of a share of Series B Junior
Participating Preferred Stock at an exercise price of $85, subject to
adjustment. If a person or group acquires beneficial ownership of 15%
or more of the outstanding shares of Common Stock, then each holder of
a Right (other than Rights held by the acquiring person or group)
would have the right to receive that number of shares of Common Stock
which equals the exercise price of the Right divided by one-half of
the current market price of the Common Stock.
The Rights may be redeemed by the company for $0.01 per Right at any
time until the tenth day following the stock acquisition date. The
rights will expire on September 1, 2005.
5
<PAGE> 8
ORGANOGENESIS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources:
--------------------------------
From inception, the Company has financed its operations
through private and public placements of equity securities,
receipt of contract revenues, sale of products and interest
income from investments. At September 30, 1995 and December
31, 1994 respectively, the Company had cash, cash equivalents
and investments in the aggregate of $15,326,000 and
$8,871,000. The Company will continue to utilize working
capital in 1995 related to ongoing research and development
activities, conducting preclinical and clinical trials,
enhancement of proprietary manufacturing technologies and
expansion of business development, general and administrative
resources. These activities will require substantial
additional financial resources before the Company can expect
to realize revenue from product sales.
In July 1995, the Company completed a public offering (the
"Offering") of 230,000 Units, each consisting of five shares
of Common Stock and one Unit Warrant. The Offering generated
approximately $15,000,000, net of expenses. The Company
expects to use the net proceeds of this Offering for
preclinical and clinical programs, product research and
development, working capital and general corporate purposes.
Based upon its current plans, the Company believes that the
net proceeds of the Offering, together with existing capital,
will be sufficient to fund its operations at least through the
third quarter of 1996. However, the Company's requirements
may vary depending on numerous factors.
In February 1995, the Company announced it signed a letter of
intent to collaboratively develop and commercialize collagen
coated endovascular stents with SCIMED Life Systems, Inc.
("SCIMED"). Under the proposed agreement, as outlined in the
letter of intent, SCIMED would pay the Company up front and
milestone payments totaling approximately $11,000,000. The
milestone payments would be made upon meeting certain
conditions in the proposed agreement. In addition, SCIMED
would fund the related research and development activities.
As a result of the merger between SCIMED and Boston Scientific
Corporation ("BSC"), BSC management is analyzing the
collaborative program with the Company, and there can be no
assurance that the Company and BSC will enter into definitive
agreements.
6
<PAGE> 9
The ultimate success of the Company is dependent upon its
ability to raise capital through equity placement, receipt of
contract revenue, sale of product, research and development
funding under licensing agreements, royalty and manufacturing
payments and interest income on invested capital. However,
the Company's capital requirements may change depending upon
numerous factors, including progress of the Company's research
and development programs; time required to obtain regulatory
approvals; resources the Company devotes to self-funded
projects, proprietary manufacturing methods and advanced
technologies; ability to obtain and retain continued funding
from third parties under collaborative agreements; ability to
obtain licensing arrangements; and the demand for the
Company's products if, and when, approved.
While management believes that additional financing composed
of equity investments and funding provided under collaborative
agreements will be available to fund future operations, there
can be no assurances that additional funds will be available
when required on terms acceptable to the Company.
Results of Operations:
----------------------
Contract revenue was $ -0- and $18,000 for the three and nine
month periods ended September 30, 1995, respectively, as
compared to $61,000 and $184,000 for the comparable periods in
1994. The contract revenue was realized under an agreement
with Biomet, Inc. ("Biomet") for the development of orthopedic
implants using the Company's proprietary dense fibrillar
collagen. The Company has completed the development agreement
with Biomet and has entered into a supply arrangement to
provide collagen. Interest income was $156,000 and $392,000
for the three and nine month periods ended September 30, 1995,
respectively, as compared to $156,000 and $511,000 for the
comparable periods in 1994. The decrease in interest income
for the nine month period is attributable to less cash being
available for investment.
Research and development expenses were $2,502,000 and
$7,229,000 for the three and nine month periods ended
September 30, 1995, respectively, compared to $2,198,000 and
$6,313,000 during the comparable 1994 periods. The increase
was primarily due to the Company's preparation for the
regulatory filing and commercialization of GRAFTSKIN and
related increases in resources in clinical research,
cryobiology, quality assurance, and process scale-up. The
increase was also due in part to the Company establishing
research collaborations with leading academic institutions,
including Harvard Medical School, to further enhance its
product portfolio. General and administrative expenses were
$932,000 and $2,597,000 for the three and nine month periods
ended September 30, 1995, respectively, as compared to
$794,000 and $2,236,000 for the comparable 1994 periods. The
increase was primarily due to higher professional fees and
services.
As a result of the net effect described above, the Company
incurred a net loss of $3,277,000, or $.25 per share and
$9,416,000, or $.72 per share, for the three and nine month
periods ended September 30, 1995, respectively, as compared
with a net loss of $2,775,000, or $.24 per share, and
$7,854,000, or $.69 per share, for the comparable 1994
periods.
7
<PAGE> 10
ORGANOGENESIS INC.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
During the third quarter of 1995, the Company completed
preparation of the regulatory application for marketing
GRAFTSKIN in the U.S.; the submission of this 60-volume
document to the Food and Drug Administration was announced
October 2, 1995. The FDA has granted expedited review status
to this PMA, which means it will receive priority review over
other pending PMAs and 510(k)s at the FDA.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -- None.
(b) Reports on Form 8-K
(i) A current report on Form 8-K dated July 17, 1995 was
filed by the Registrant reporting that the company had
completed a public offering of 1,150,000 shares of Common
Stock, raising over $15 million, net of expenses.
(ii) A current report on Form 8-K dated August 29, 1995 was
filed by the Registrant reporting the adoption of a
Stockholder Rights Plan and the declaration of a 25% Common
Stock dividend.
8
<PAGE> 11
ORGANOGENESIS INC.
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.
ORGANOGENESIS INC.
-------------------
(Registrant)
Date: November 13, 1995 /S/ Herbert M. Stein
----------------- ------------------------------------------
Herbert M. Stein, Chairman
and Chief Executive Officer
(Principal Executive Officer)
Date: November 13, 1995 /S/ Albert K. Federico
----------------- ------------------------------------------
Albert K. Federico, Chief Accounting
Officer, Treasurer and Assistant Secretary
(Principal Accounting Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT OF ORGANOGENESIS, INC. FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1995 IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 897,171
<SECURITIES> 14,428,403
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,061,235
<PP&E> 10,007,548
<DEPRECIATION> (4,897,395)
<TOTAL-ASSETS> 21,252,863
<CURRENT-LIABILITIES> 998,914
<BONDS> 0
<COMMON> 132,716
0
250,000
<OTHER-SE> 76,105,250
<TOTAL-LIABILITY-AND-EQUITY> 21,252,863
<SALES> 0
<TOTAL-REVENUES> 156,431
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,433,551
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,277,120)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,277,120)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
