S E C U R I T I E S A N D E X C H A N G E C O M M I S S I O N
Washington, D. C. 20549
FORM 10Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter ended March 31, 1995 Commission file number 0-14887
T H E L I P O S O M E C O M P A N Y, I N C.
(Exact name of registrant as specified in its charter)
Delaware 22-2370691
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Research Way, Princeton Forrestal Center, Princeton, N.J. 08540
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 452-7060
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 each of the issuer's classes of Common
Stock as of the latest practicable date:
Class May 5, 1995
Common Stock, $.01 par value 27,145,311
THE LIPOSOME COMPANY, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE NO.
Part I. FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Consolidated Balance Sheets as of
March 31, 1995 and December 31, 1994 3
Consolidated Statements of Operations
for the Three Month Periods Ending
March 31, 1995 and 1994.......................... 4
Consolidated Statements of Cash Flows
for the Three Month Periods Ending
March 31, 1995 and 1994.......................... 5
Notes to Consolidated Financial Statements 6,7
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operation 8,9,10, 11
Part II. OTHER INFORMATION 12
ITEM 1 - Legal Proceedings N/A
ITEM 2 - Changes in Securities N/A
ITEM 3 - Defaults upon Senior Securities N/A
ITEM 4 - Submission of Matters to a Vote of
Security Holders 12
ITEM 5 - Other Information N/A
ITEM 6 - Exhibits and Reports on Form 8-K 12
Signatures 13
************************************************
Note concerning trademarks: Certain names
mentioned in this report are trademarks owned by
The Liposome Company, Inc. or its affiliates or
licensees. ABLC and AbelcetTM are trademarks of
The Liposome Company, Inc.
Page 2 of 13
THE LIPOSOME COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
(Unaudited)
March 31, December 31,
ASSETS 1995 1994
Current assets:
Cash and cash equivalents $ 110 $ 2,369
Short-term investments 48,872 55,487
Accounts receivable 1,797 1,618
Inventories 1,296 748
Prepaid expenses 732 419
Other current assets 196 31
Total current assets 53,003 60,672
Long-term investments 9,418 9,421
Plant and equipment, net 17,571 17,686
Restricted cash 4,880 4,880
Other assets, net 522 537
Total assets $ 85,394 $ 93,196
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,145 $ 1,112
Accrued expenses and other current liabilities 5,348 4,698
Current obligations under capital lease 1,484 1,476
Current obligations under note payable 303 303
Preferred Stock dividends payable 1,337 1,337
Unearned contract income and other fees 921 --
Total current liabilities 10,538 8,926
Long-term obligations under capital lease 3,751 4,126
Long-term obligations under note payable 1,715 1,791
Total liabilities 16,004 14,843
Stockholders' equity:
Capital stock:
Preferred stock, par value $.0l;
2,400,000 authorized; 276,000 shares of
Series A Cumulative Convertible Exchangeable
Preferred Stock outstanding (liquidation
preference of $69,000,000) 3 3
Common stock, par value $.0l;
60,000,000 shares authorized;
24,101,515 and 23,982,849 shares issued
and outstanding 241 240
Additional paid-in capital 191,273 192,003
Net unrealized investment loss (2,941) (5,033)
Foreign currency translation adjustment 6 (1)
Accumulated deficit (119,192) (108,859)
Total stockholders' equity 69,390 78,353
Total liabilities and stockholders' equity $ 85,394 $ 93,196
See accompanying notes.
Page 3 of 13
THE LIPOSOME COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share figures)
(Unaudited)
Three Months Ended March 31,
1995 1994
Collaborative research and
development revenues............... $ 1,428 $ 1,554
Licensing and other revenue.............. 72 26
Interest and investment income, net 353 1,456
Total revenues................. 1,853 3,036
Research and development expenses..... 9,216 7,577
General and administrative expenses... 2,886 2,222
Interest expense...................... 84 75
Total expenses................ 12,186 9,874
Net loss... (10,333) (6,838)
Preferred Stock dividends (1,337) (1,337)
Net loss applicable to Common Stock $(11,670) $(8,175)
Net loss per share applicable to
Common Stock........................ $ (.49) $ (.34)
Weighted average number of common
shares outstanding.................. 24,050 23,715
See accompanying notes.
Page 4 of 13
THE LIPOSOME COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
1995 1994
Cash flows from operating activities:
Net loss $(10,333) $(6,838)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 813 765
Other 70 28
Changes in assets and liabilities
Accounts receivable (179) 375
Inventory (548) (103)
Prepaid expenses (313) 23
Other current assets (165) (16)
Accounts payable (32) (2,626)
Accrued expenses and other current liabilities 650 616
Unearned contract income and other fees 921 955
Net cash (used)/provided by operating activitie (9,116) (6,821)
Cash flows from investing activities:
Purchases of short and long-term investments (7,359) (29,864)
Sales of short and long-term investments... 16,069 36,968
Purchases of property, plant and equipment (618) (150)
Net cash provided/(used) by investing activities 8,092 6,954
Cash flows from financing activities:
Proceeds from the exercise of stock options 538 32
Principal payments under note payable (76) (76)
Principal payments under capital lease obligations (367) (358)
Dividend payments (1,337) (1,337)
Net cash (used)/provided by financing activities (1,242) (1,739)
Effects of exchange rate changes on cash 7 1
Net (decrease)/increase in cash and cash equivalents (2,259) (1,605)
Cash and cash equivalents at beginning of the period 2,369 4,670
Cash and cash equivalents at end of the period $ 110 $ 3,065
See accompanying notes.
Page 5 of 13
THE LIPOSOME COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.Basis of Presentation
The information presented at March 31, 1995 and 1994, and for the
three month periods then ended is unaudited, but includes all
adjustments (consisting only of normal recurring accruals) which
the Company's management believes to be necessary for the fair
presentation of results for the periods presented. The December
31, 1994 balance sheet was derived from audited financial
statements. These financial statements should be read in
conjunction with the Company's audited financial statements for the
year ended December 31, 1994, which were included as part of the
Company's Report on Form 10-K. Certain reclassifications have been
made to the prior year financial statement amounts to conform with
the presentation in the current year financial statements.
2.Common Stock Outstanding and Per Share Information
Per share data is based on the weighted average of shares of Common
Stock outstanding during each of the periods. Stock options
(common stock equivalents) and the conversion of the preferred
stock to Common Stock are not included in the calculation since
their inclusion would be anti-dilutive. The net loss per common
share includes a charge for dividends paid on the outstanding
shares of Preferred Stock of $.06 per common share for the three
months ended March 31, 1995 and 1994.
3.Inventories
The Company values inventory on a lower of cost or market basis and
relieves it on the first-in first-out (FIFO) method. The components of
inventories are as follows:
March 31, December 31,
1995 1994
Finished Goods $ 366,000 $ -
Raw materials 701,000 611,000
Supplies 229,000 137,000
$1,296,000 $ 748,000
4.Stockholders' Equity
Dividend Payable:
On May 11, 1995, the Board of Directors of the Company declared a
quarterly cash dividend on the Series A Cumulative Convertible
Exchangeable Preferred Stock at a prorated dividend rate of
$.484375 per Depositary Share. Each Depositary Share represents
one-tenth of a share of Preferred Stock. The dividend, totaling
approximately $1,337,000, is payable on July 17, 1995 to
stockholders of record on July 3, 1995.
Page 6 of 13
THE LIPOSOME COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
5.Supplemental Disclosure of Cash Flow Information
Three Months Ended March 31,
1995 1994
Cash paid during the year for interest $77,000 $77,000
6. Subsequent Events
Common Stock:
On April 27, 1995 the Company's Registration Statement on Form S-3 with
respect to 3,000,000 shares of its Common Stock was declared effective
by the Securities and Exchange Commission. The closing occurred on May
5, 1995. Proceeds received were $25,440,000 net of underwriters' fees.
Additional stock issuance costs including professional, registration,
filing and printing fees of approximately $417,500 are expected in
connection with this offering.
Dividend Payable:
On May 11, 1995, the Board of Directors of the Company declared a
quarterly cash dividend on the Series A Cumulative Convertible
Exchangeable Preferred Stock at a prorated dividend rate of $.484375
per Depositary Share. Each Depositary Share represents one-tenth of
a share of Preferred Stock. The dividend, totaling approximately
$1,337,000, is payable on July 17, 1995 to stockholders of record on
July 3, 1995.
Page 7 of 13
THE LIPOSOME COMPANY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The Company is a leading biotechnology company engaged in the discovery,
development and, recently, the commercialization of proprietary lipid and
liposome-based pharmaceuticals for the treatment, prevention and diagnosis of
inadequately treated, life-threatening illnesses. The Company is currently
launching its first product, amphotericin B lipid complex (ABLC or, in
Europe, AbelcetTM), which has been approved for marketing for certain
indications in the United Kingdom and is the subject of marketing application
filings in seventeen other countries. The Company expects to file an NDA for
ABLC in the United States during 1995. In addition to ABLC/AbelcetTM, the
Company's other lead products are TLC D-99 and TLC C-53. TLC D-99, liposomal
doxorubicin, is being developed in conjunction with Pfizer Inc ("Pfizer")
primarily as a first line treatment of metastatic breast cancer, and is
undergoing Phase III clinical testing in the United States. The Company has
completed a Phase II clinical trial for TLC C-53, liposomal prostaglandin E1,
for Acute Respiratory Distress Syndrome ("ARDS"). In January, 1995, the
Company commenced a Phase II clinical trial of TLC C-53 for the treatment of
Acute Myocardial Infarction ("AMI"), or heart attack. The Company also has a
continuing discovery research program that concentrates primarily on the
treatment of cancer and inflammatory conditions.
Results of Operations
Revenues
Total revenues of the Company for the quarter ended March 31, 1995 were
$1,853,000 compared to $3,036,000 for the same quarter during 1994. This
change in revenues represents a decrease of $1,183,000 or 39%. Revenues are
derived mainly from collaborative research and development activity, interest
and investment income, and licensing and other fees. These components can
increase or decrease significantly based on the number and amount of research
collaborations, including the achievement of developmental milestones, the
initiation of new licensing agreements and, in the case of interest and
investment income, the level of cash balances available for investment and
the rate of interest earned and gains and losses, if any, realized on the
sale of such investments. The Company has recently launched its lead product
ABLC/AbelcetTM in the United Kingdom, and has established a "Named Patient"
sales program to honor physician requests for product in selected other
countries.
Collaborative research and development revenues were $1,428,000 for the
first quarter of 1995, $126,000 or 8.1% lower than the first quarter of 1994,
primarily due to lower amounts received from Schering AG of Berlin ("Schering
AG"). The Company earned all of its research and development revenues from
two corporate sponsors during the first quarter 1995 and 1994: Pfizer and
Schering AG. Of these revenues, approximately 92% were received from Pfizer,
with which the Company has been developing its liposomal doxorubicin product
TLC D-99. The Company received notice of termination of its Agreement with
Schering AG on March 29, 1995.
Page 8 of 13
THE LIPOSOME COMPANY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations (Continued)
Interest and investment income for the quarters ended March 31, 1995 and
1994 was $353,000 and $1,456,000 respectively. This change represents a
decrease of $1,103,000 or 75.8% from 1994. Interest income declined due both
to the reduction in the level of cash balances available for investment and
realized losses on the sale of certain investments. Recently the Company
raised capital through the sale of equity securities resulting in proceeds of
approximately $25,000,000 net of all fees and expenses.
Licensing and other revenues for the quarters ended March 31, 1995 and
1994 were $72,000 and $26,000, respectively. The change in this category of
$46,000 or 177% is primarily due to the receipt of payments for shipments of
ABLC/AbelcetTM on a Named Patient basis, offset by the absence of licensing
fees from the Wyeth-Ayerst Laboratories, a divison of American Home Products
Corporation . The Company had a licensing arrangement with Wyeth-Ayerst for
TLC A-60 to be used in Wyeth-Ayerst's influenza vaccine. TLC A-60 is a
liposomal vaccine adjuvant. The Company has recently been advised that Wyeth-
Ayerst is no longer pursuing development of the influenza vaccine using TLC A-
60.
Expenses
Total expenses for the Company increased to $12,186,000 for the first
quarter of 1995 compared to $9,874,000 for the same period a year ago. This
increase of $2,312,000 or 23.4% is due to the Company's expanded research and
development activities to support the progression of its lead proprietary
products through late stage development.
Research and development expenditures were $9,216,000 and $7,577,000 for
the quarters ended March 31, 1995 and 1994, respectively. The increase of
$1,639,000 or 21.6% over prior year is due to higher costs related to
ABLC/AbelcetTM, including costs associated with the shift from product
development to the commencement of product manufacturing and
commercialization. Other components of this increase are expenditures
related to TLC C-53 and TLC D-99 as these products progress to late stages of
development; increased staffing levels in connection with increased activity
in the manufacturing facility in Princeton; and the expansion of the
Company's Medical, Regulatory, and Biostatistical departments to develop and
conduct increased clinical trial activity. As in prior years, costs
associated with the development of TLC D-99 are reimbursed by Pfizer.
General and administrative expenses for the first quarter were
$2,886,000 an increase of $664,000 or 29.9% over the same period a year ago.
The primary components of the increase were costs associated with the
continued development of the international sales and marketing operations and
additions of certain personnel in preparation of the launch of AbelcetTM
(amphotericin B lipid complex) in the United Kingdom.
Page 9 of 13
THE LIPOSOME COMPANY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
The Company expects that expenditures in all areas will increase
throughout 1995 as the company continues to receive marketing approvals in
Europe, progresses further in clinical development, and prepares to file a
new drug application in the United States for ABLC (amphotericin B lipid
complex).
Interest expense for the first quarter of 1995 was $84,000 as compared
to $75,000 for the same quarter in 1994. Such interest expense is related to
a mortgage on the Company's manufacturing facility located in Indianapolis
and for certain capital lease arrangements made by the Company.
Preferred Stock Dividends
In January 1993, the Company completed the issuance of 2,760,000
Depositary Shares representing 276,000 shares of Series A Cumulative
Convertible Exchangeable Preferred Stock with a cumulative dividend of 7.75%.
The Company has declared and paid dividends quarterly on the preferred stock
since issuance of the Depositary Shares. These dividends are included as
part of the Company's net loss applicable to Common Stock and net loss per
share of Common Stock.
Net Loss, Net Loss Applicable to Common Stock and Net Loss Per Share of
Common Stock
The net loss of $10,333,000 for the quarter ended March 31, 1995
increased $3,495,000 or 51.1% as compared to 1994. This increase in net loss
was due to the increase in total expenses of $2,312,000, in conjunction with
a decrease in total revenues of $1,183,00. The net loss applicable to Common
Stock was $11,670,000 in the first quarter of 1995 and $8,175,000 for the
same quarter a year ago as a result of the operational factors discussed
above and the declaration of preferred stock dividends in each year. The net
loss per common share was $.49 and $.34 for March 31, 1995 and 1994
respectively.
Liquidity and Capital Resources
The Company had $63,280,000 in cash and marketable securities reserves
as of March 31, 1995. Included in these reserves were cash and cash
equivalents of $110,000, short term investments of $48,872,000, long term
investments of $9,418,000 and restricted cash of $4,880,000. The cash
reserves decreased by $8,877,000 or 12.3% since December 31, 1994 due to the
use of funds for operations, capital acquisitions and Preferred Stock
dividends partially offset by a net unrealized investment adjustment recovery
of approximately $1,600,000 in accordance with the Statement of Financial
Accounting Standards ("SFAS") No. 115, Accounting for Certain Investments in
Debt and Equity Securities. In connection with certain financing
arrangements, the Company is required to maintain minimum cash balances, of
which the largest requirement is $20,000,000. The Company invests its excess
cash in a diversified portfolio of high grade marketable and United States
Government backed securities.
Page 10 of 13
THE LIPOSOME COMPANY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources (Continued)
During the first quarter of 1995 cash used by operations increased by
$2,295,000 as compared to the first quarter of 1994. This is primarily due
to the increase in net loss between periods and increases in inventories,
prepaids, accounts receivable, and other current assets. The cash use was
partially offset by increases in depreciation and amortization and accrued
expenses. Funding required for operating activities was derived from
existing cash balances, the sales of investments, revenue from corporate
sponsors, interest income, and exercises of stock options. Purchases of
capital assets increased by $468,000 over the first quarter of 1994 due
mainly to the refitting of the manufacturing facility located in
Indianapolis, Indiana. The Company expects to spend between $11,000,000 and
$13,000,000 for this project, with completion expected in mid to late 1996.
The Company expects to finance its operations from, among other things,
the proceeds received from payments under research and development
agreements, interest earned on investments, the maturity, sale and/or use of
certain investments and product sales. Funds may also be provided to the
Company by leasing arrangements for capital expenditures and from the
licensing of its products. The Company believes that its available cash and
marketable securities, revenues from research and development contracts and
interest income will be sufficient to meet its expected operating and capital
cash flow requirements for the intermediate term.
On April 27, 1995 the Company's Registration Statement on Form S-3 with
respect to 3,000,000 shares of its Common Stock was declared effective by
the Securities and Exchange Commission. The closing occurred on May 5,
1995. Proceeds received were $25,440,000 net of underwriters, fees.
Additional stock issuance costs including professional, registration, filing
and printing fees of approximately $417,500 are expected in connection with
this offering.
Page 11 of 13
THE LIPOSOME COMPANY, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders.
ITEM 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K. During the quarter for which this
report on Form 10-Q is filed, no reports on Form 8-K have been
filed.
Page 12 of 13
THE LIPOSOME COMPANY, INC. AND SUBSIDIARIES
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.
DATE: May ___, 1995
THE LIPOSOME COMPANY, INC.
By:
Charles A. Baker
Chairman of the Board and
Chief Executive Officer
By:
Brooks Boveroux
Vice President, Finance and
Chief Financial Officer
Page 13 of 13
THE LIPOSOME COMPANY, INC. AND SUBSIDIARIES
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.
DATE: May ___, 1995
THE LIPOSOME COMPANY, INC.
By: /s/ Charles A. Baker
Charles A. Baker
Chairman of the Board and
Chief Executive Officer
By: /s/ Brooks Boveroux
Brooks Boveroux
Vice President, Finance and
Chief Financial Officer
Page 13 of 13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 4,990
<SECURITIES> 48,872
<RECEIVABLES> 1,797
<ALLOWANCES> 0
<INVENTORY> 1,296
<CURRENT-ASSETS> 53,003
<PP&E> 28,903
<DEPRECIATION> 11,331
<TOTAL-ASSETS> 85,394
<CURRENT-LIABILITIES> 10,538
<BONDS> 5,466
<COMMON> 241
0
3
<OTHER-SE> 69,146
<TOTAL-LIABILITY-AND-EQUITY> 85,394
<SALES> 0
<TOTAL-REVENUES> 1,853
<CGS> 0
<TOTAL-COSTS> 12,186
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84
<INCOME-PRETAX> (10,333)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,333)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,333)
<EPS-PRIMARY> (.49)
<EPS-DILUTED> 0<F1>
<FN>
<F1>EPS-diluted not calculated because the effects would be anti-dilutive.
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