<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 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 0-15246
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 August 9, 1995 was 10,581,313 shares.
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ORGANOGENESIS INC.
INDEX
<TABLE>
<CAPTION>
Page
PART I - FINANCIAL INFORMATION Number
------
<S> <C>
Item 1 - Financial Statements
Consolidated Balance Sheets
at June 30, 1995 and December 31, 1994..........................................................1
Consolidated Statements of Operations
for the three-month and six-month periods ended June 30, 1995 and 1994..........................2
Consolidated Statements of Cash Flows
for the six months ended June 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...........................................................5
PART II - OTHER INFORMATION
Item 4 -Submission of Matters to a Vote of Security Holders.......................................................7
Item 6 - Exhibits and Reports on Form 8-K.........................................................................7
Signatures........................................................................................................8
</TABLE>
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ORGANOGENESIS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1995 December 31,
(unaudited) 1994
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 571,685 $ 3,187,286
Investments 2,434,668 5,684,127
Other current assets 953,787 541,252
------------- -------------
3,960,140 9,412,665
Property and equipment, net 5,287,569 5,634,627
Other assets 81,475 79,475
------------- -------------
$ 9,329,184 $ 15,126,767
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 690,703 $ 445,125
Accrued expenses 590,393 547,189
Deferred revenue -- 13,051
------------- -------------
1,281,096 1,005,365
Deferred rent payable 134,607 157,091
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 9,379,578 and 9,366,198 shares as of June 30, 1995 and
December 31, 1994,
respectively 93,796 93,662
Additional paid-in capital 60,651,542 60,548,924
Accumulated deficit (53,081,857) (46,943,275)
------------- -------------
7,913,481 13,949,311
------------- -------------
$ 9,329,184 $ 15,126,767
============= =============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
1
<PAGE> 4
ORGANOGENESIS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the For the
Three Months Six Months
Ended June 30 Ended June 30
------------------ -------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Contract revenue $ - $ 56,875 $ 16,871 $ 123,165
Interest income 97,721 179,169 237,056 354,992
----------- ----------- ------------ -----------
97,721 236,044 253,927 478,157
Costs and Expenses:
Research and development 2,422,512 2,192,168 4,726,807 4,114,652
General and administrative 868,107 756,548 1,665,702 1,442,109
----------- ---------- ------------ -----------
Net loss $(3,192,898) $(2,712,672 $ (6,138,582) $(5,078.604)
=========== =========== ============ ===========
Net loss per common share $(.34) $(.30) $(.65) $(.56)
===== ===== ===== ====
Weighted average number of
common shares outstanding 9,378,003 9,136,854 9,375,450 9,132,448
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
2
<PAGE> 5
ORGANOGENESIS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended
-------------------------------
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
Cash used in operating activities:
Net loss $(6,138,582) $ (5,078,604)
Adjustment to reconcile net loss to
cash used in operating activities:
Depreciation and amortization 501,597 469,514
Changes in assets and liabilities:
Other current assets (412,535) 78,589
Other assets (2,000) --
Accounts payable 245,578 (7,855)
Accrued expenses 43,204 2,784
Deferred revenue (13,051) 104,211
Deferred rent payable (22,484) (1,863)
Other liabilities (15,000) --
----------- ------------
Cash used in operating activities (5,813,273) (4,433,224)
Cash flows from investing activities:
Capital expenditures (154,539) (215,049)
Purchases of investments -- (98,000)
Sales/maturities of investments 3,249,459 4,883,047
----------- ------------
Cash provided by investing activities 3,094,920 4,569,998
Cash flows from financing activities:
Exercise of stock options 102,752 91,020
----------- ------------
Increase (decrease) in cash and cash equivalents (2,615,601) 227,794
Cash and cash equivalents, beginning of period 3,187,286 3,496,477
----------- ------------
Cash and cash equivalents, end of period $ 571,685 $ 3,724,271
=========== ============
</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. Subsequent Events:
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.
4
<PAGE> 7
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 June 30, 1995 and December 31,
1994 respectively, the Company had cash, cash equivalents and
investments in the aggregate of $3,006,000 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 this 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, SCIMED would pay the
Company upfront 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.
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
5
<PAGE> 8
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 $16,900 for the three and six
month periods ended June 30, 1995, respectively, as compared
to $57,000 and $123,000 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 intends to negotiate and enter into a supply
arrangement to provide dense fibrillar collagen. Interest
income was $98,000 and $237,000 for the three and six month
periods ended June 30, 1995, respectively, as compared to
$179,000 and $355,000 for the comparable periods in 1994. The
decrease in interest income is attributable to less cash being
available for investment.
Research and development expenses were $2,423,000 and
$4,727,000 for the three and six month periods ended June 30,
1995, respectively, compared to $2,192,000 and $4,115,000
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. General and administrative
expenses were $868,000 and $1,666,000 for the three and six
month periods ended June 30, 1995, respectively, as compared
to $757,000 and $1,442,000 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 $3,193,000, or $.34 per share and
$6,139,000, or $.65 per share, for the three and six month
periods ended June 30, 1995, respectively, as compared with a
net loss of $2,713,000, or $.30 per share, and $5,079,000, or
$.56 per share, for the comparable 1994 periods.
6
<PAGE> 9
ORGANOGENESIS INC.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting to Stockholders on May 18,
1995. At the meeting, Messrs. Richard S. Cresse, William J.
Hopke, Anton E. Schrafl, Herbert M. Stein, David T. Rovee, and
Bjorn R. Olsen were re-elected as Directors. The vote with
respect to each nominee is set forth below:
<TABLE>
<CAPTION>
Total Vote for Total Vote Withheld
Each Director from each Director
-------------- -------------------
<S> <C> <C>
Mr. Cresse 8,482,796 471,529
Mr. Hopke 8,482,796 473,129
Dr. Schrafl 8,482,796 470,240
Mr. Stein 8,482,796 469,701
Dr. Rovee 8,482,796 470,701
Dr. Olsen 8,482,796 469,501
</TABLE>
The stockholders also authorized the issuance of up to
1,200,000 shares of common stock by approving the Company's
1995 Stock Option Plan by a vote of 4,696,131 shares for
981,473 shares against and 89,039 shares abstaining and
3,608,285 shares non-voting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -- None.
(b) No current reports on Form 8-K were filed during the
quarter ended June 30, 1995.
7
<PAGE> 10
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: August 11, 1995 /S/ Herbert M. Stein
------------------------- -----------------------------------------
Herbert M. Stein, Chairman
and Chief Executive Officer
(Principal Executive Officer)
Date: August 11, 1995 /S/ Albert K. Federico
------------------------- -----------------------------------------
Albert K. Federico, Chief Accounting
Officer, Treasurer and Assistant Secretary
(Principal Financial Officer and Principal
Accounting Officer)
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) BALANCE
SHEET, INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
(B) JUNE 30, 1995 10-Q.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 571,685
<SECURITIES> 2,434,668
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,960,140
<PP&E> 9,935,556
<DEPRECIATION> (4,647,987)
<TOTAL-ASSETS> 9,329,184
<CURRENT-LIABILITIES> 1,281,096
<BONDS> 0
<COMMON> 93,796
0
250,000
<OTHER-SE> 60,651,542
<TOTAL-LIABILITY-AND-EQUITY> 9,329,184
<SALES> 0
<TOTAL-REVENUES> 97,721
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,290,619
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,192,898)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,192,898)
<EPS-PRIMARY> (.34)
<EPS-DILUTED> (.34)
</TABLE>
