<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934.
For the quarterly period ended June 30, 1997
--------------------------------
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 #0-14732
ADVANCED MAGNETICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2742593
(State or other jurisdiction (IRS Employer Incorporation
of organization) or Identification No.)
725 Concord Avenue
Cambridge, MA 02138
(Address of principal executive offices)
Registrant's telephone number, including area code: (617) 354-3929
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
--- ---
At August 7, 1997, 6,739,937 shares of registrant's common stock (par value,
$.01) were outstanding.
Page 1 of 15
<PAGE> 2
ADVANCED MAGNETICS, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 1997
PART I. FINANCIAL INFORMATION
Item 1 -- Financial Statements
Page 2 of 15
<PAGE> 3
ADVANCED MAGNETICS, INC.
BALANCE SHEETS
JUNE 30, 1997 AND SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS June 30, September 30,
------ -------- -------------
1997 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents ...................................................... $ 1,025,879 $10,805,842
Marketable securities (Note B) ................................................. 37,049,980 23,271,169
Accounts receivable ............................................................ 470,855 149,235
Inventories .................................................................... 25,087 182,166
Prepaid expenses ............................................................... 238,806 131,234
----------- -----------
Total current assets ......................................................... 38,810,607 34,539,646
----------- -----------
Property, plant and equipment:
Land ........................................................................... 360,000 360,000
Building ....................................................................... 4,326,236 4,320,766
Laboratory equipment ........................................................... 7,515,261 7,316,534
Furniture and fixtures ......................................................... 584,580 553,149
----------- -----------
12,786,077 12,550,449
Less--accumulated depreciation and amortization ................................ (7,033,674) (6,219,579)
----------- -----------
Net property, plant and equipment .............................................. 5,752,403 6,330,870
----------- -----------
Other assets ................................................................... 248,902 195,857
----------- -----------
Total assets ................................................................. $44,811,912 $41,066,373
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable ............................................................... $ 187,421 $ 383,335
Accrued expenses ............................................................... 637,133 500,365
Income taxes payable ........................................................... 50,128 50,128
----------- -----------
Total current liabilities .................................................... 874,682 933,828
----------- -----------
Stockholders' equity:
Preferred stock, par value $.01 per share, authorized
2,000,000 shares; none issued ............................................... -- --
Common stock, par value $.01 per share, authorized 15,000,000 shares; issued and
outstanding 6,726,816 shares at June 30, 1997
and 6,761,612 shares at September 30, 1996 .................................. 67,268 67,616
Additional paid-in capital ..................................................... 44,166,693 44,926,502
Retained earnings (deficit) .................................................... (4,062,629) (6,678,476)
Unrealized gains on market value of securities (Note B) ........................ 3,765,898 1,816,903
----------- -----------
Total stockholders' equity ................................................... 43,937,230 40,132,545
----------- -----------
Total liabilities and stockholders' equity ..................................... $44,811,912 $41,066,373
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 3 of 15
<PAGE> 4
ADVANCED MAGNETICS, INC.
STATEMENT OF OPERATIONS
FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED
JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three-Month Period Ended June 30, Nine-Month Period Ended June 30,
--------------------------------- --------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
License fees ...................... $ -- $ -- $5,500,000 $ --
Royalties ......................... 85,000 (25,000) 305,904 125,000
Product sales ..................... 394,656 -- 1,270,911 12,762
Interest, dividends and net gains
and losses on sales of securities 705,324 470,373 2,510,665 1,310,539
---------- ----------- ---------- -----------
Total revenues ............... 1,184,980 445,373 9,587,480 1,448,301
---------- ----------- ---------- -----------
Costs and expenses:
Cost of product sales ............. 83,436 -- 259,771 2,550
Research And development expenses . 2,040,380 2,559,241 6,293,656 7,236,546
Selling, general and administrative
expenses ........................ 271,818 749,235 1,062,028 1,435,206
Other(income) expenses .............. (264,800) -- (264,800) --
---------- ----------- ---------- -----------
Total costs and expenses ..... 2,130,834 3,308,476 7,350,655 8,674,302
---------- ----------- ---------- -----------
Income (loss) before provision for
income taxes ................... (945,854) (2,863,103) 2,236,825 (7,226,001)
---------- ----------- ---------- -----------
Income tax provision (benefit) .... (379,022) -- (379,022) --
---------- ----------- ---------- -----------
Net income (loss) .................... $ (566,832) $(2,863,103 $2,615,847 $(7,226,001
========== =========== ========== ===========
Income (loss) per share .............. $ (0.08) $ (0.42) $ 0.38 $ (1.07)
---------- ----------- ---------- -----------
Weighted average number of common
and common equivalent shares .... 6,730,188 6,768,705 6,814,887 6,762,983
---------- ----------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 4 of 15
<PAGE> 5
ADVANCED MAGNETICS, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED
JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Nine-Month Periods Ended
June 30,
-----------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers ....................... $ 6,854,637 $ 1,300,212
Cash paid to suppliers and employees ............... (6,512,771) (8,253,418)
Dividends and interest received .................... 935,785 1,501,027
Income taxes paid .................................. -- (20,000)
Income tax refund .................................. 379,022 --
------------ -----------
Net cash provided by (used in) operating activities 1,656,673 (5,472,179)
------------ -----------
Cash flows from investing activities:
Proceeds from sales of securities .................. 7,579,147 8,747,672
Proceeds from U.S. Treasury Notes maturing ......... -- 9,796,348
Purchase of securities ............................. (17,966,953) (1,421,716)
Capital expenditures ............................... (235,628) (387,780)
(Increase) in other assets ......................... (53,045) (50,785)
------------ -----------
Net cash provided by (used in) investing activities (10,676,479) 16,683,739
------------ -----------
Cash flows from financing activities:
Proceeds from issuances of common stock ............ 37,146 273,754
Purchase of treasury stock ......................... (797,303) (184,868)
------------ -----------
Net cash provided by financing activities .......... (760,157) 88,886
------------ -----------
Net increase (decrease) in cash and cash equivalents (9,779,963) 11,300,446
------------ -----------
Cash and cash equivalents at beginning of the period 10,805,842 1,066,419
------------ -----------
Cash and cash equivalents at end of the period ..... $ 1,025,879 $12,366,865
------------ -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 5 of 15
<PAGE> 6
ADVANCED MAGNETICS, INC.
RECONCILIATION OF NET INCOME (LOSS)
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
FOR THE NINE-MONTH PERIODS ENDED
JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Nine-Month Periods
Ended June 30,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Net income (loss) .......................................................... $ 2,615,847 $(7,226,001)
----------- -----------
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization .............................................. 814,095 789,064
Accretion of U.S. Treasury Notes Discount .................................. (26,632) (23,321)
(Increase) decrease in accounts receivable ................................. (321,620) 1,344,263
(Increase) decrease in prepaid expenses .................................... (107,572) (37,286)
(Decrease) increase in accounts payable and accrued expenses ............... (59,146) (283,229)
(Decrease) in income taxes payable ......................................... -- (20,000)
Decrease (increase) in inventories ......................................... 157,079 (47,665)
Net realized (gains) losses on sales of marketable securities .............. (1,415,378) 31,996
----------- -----------
Total adjustments .......................................................... (959,174) 1,753,822
----------- -----------
Net cash provided by (used in) operating activities ........................ $ 1,656,673 $(5,472,179)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 6 of 15
<PAGE> 7
ADVANCED MAGNETICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
A. SUMMARY OF ACCOUNTING POLICIES.
BUSINESS
--------
Founded in November 1981, Advanced Magnetics, Inc., a Delaware Corporation
(the "Company"), is a biopharmaceutical company engaged in the development and
manufacture of compounds utilizing the Company's core proprietary colloidal
superparamagnetic particle technology and core polysaccharide technology for
magnetic resonance imaging ("MRI") and for polysaccharide-directed,
receptor-mediated drug delivery systems. The initial products developed by the
Company are diagnostic imaging agents for use in conjunction with MRI to aid in
the diagnosis of cancer and other diseases. In therapeutics, the Company is
developing targeted drug delivery platforms for the treatment of organ specific
diseases.
The accompanying financial statements are unaudited and in the opinion of
management, all adjustments necessary for a fair presentation of such financial
statements have been recorded. Such adjustments consisted of normal recurring
items.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The year-end balance sheet data was derived from audited financial statements,
but does not include disclosures required by generally accepted accounting
principles. It is suggested that these interim financial statements be read in
conjunction with the Company's most recent Form 10-K and Annual Report as of
September 30, 1996.
B. MARKETABLE SECURITIES.
The cost and market value of the Company's marketable securities portfolio
are as follows:
<TABLE>
<CAPTION>
June 30, 1997 September 30,1996
--------------------------- ---------------------------
Cost Fair Value Cost Fair Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. government securities:
Due in one year or less ........ $ 7,502,622 $ 7,500,000 $ 7,510,203 $ 7,481,250
Due after one through five years 17,234,856 17,213,820 7,392,785 7,312,500
Preferred stock ................... 6,296,615 8,639,085 3,062,404 3,145,029
Common stock ...................... 2,249,989 3,697,075 3,488,874 5,332,390
----------- ----------- ----------- -----------
$33,284,082 $37,049,980 $21,454,266 $23,271,169
=========== =========== =========== ===========
</TABLE>
Page 7 of 15
<PAGE> 8
C. INCOME TAX
The income tax benefit for the three-month and nine-month periods ended
June 30, 1997 resulted from payments received from the Internal Revenue Service
for contingent refunds of federal income taxes. The refunds were $305,842 for
the fiscal year ended September 30, 1995 and $73,180 for the fiscal year ended
September 30, 1996. The Company does not expect to record an income tax
provision for the fiscal year ended September 30, 1997 as a result of net
operating loss carry-forwards.
D. LEGAL PROCEEDINGS
The Company and certain of its officers were sued in an action in the
United States District Court for the District of Massachusetts on September 3,
1992. The plaintiff, a former consultant to the Company, claims that he was
incorrectly omitted as an inventor or joint inventor on certain of the Company's
patents and on pending applications, and seeks injunctive relief and unspecified
monetary damages. The plaintiff filed a related case in the Superior Court of
the Commonwealth of Massachusetts. The Superior Court has dismissed most of the
claims on summary judgment. While the final outcome of these actions cannot be
determined, the Company believes that the plaintiff's claims are without merit
and intends to defend the actions vigorously.
E. EARNINGS PER SHARE
Effective September 30, 1998, the Company will adopt Statement of Financial
Accounting Standards No. 128 (SFAS 128) "Earnings per Share" which will require
the disclosure of Basic Earnings per Common Share and Diluted Basic Earnings per
Common Share for all periods presented. The Company believes SFAS 128 will not
have a material impact for any periods presented.
The FASB has recently issued Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income". This Statement requires
that changes in comprehensive income be shown in a financial statement that is
displayed with the same prominence as other financial statements. While not
mandating a specific financial statement format, SFAS 130 requires that an
amount representing total comprehensive income be reported. SFAS 130 will become
effective for fiscal years beginning after December 15, 1997. Reclassification
of financial statements for earlier periods is required for comparative
purposes. The Company has not yet assessed the impact of SFAS 130 on the
results of operations.
Page 8 of 15
<PAGE> 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Since its inception in November 1981, the Company has focused its efforts
on developing its core superparamagnetic iron oxide particle technology. In
recent years, the Company's efforts have been focused primarily on the
development of MRI contrast agents and, to a lesser extent, on the development
of a drug delivery platform that targets therapeutics to the liver. The Company
has funded its operations with cash from license fees, royalties, sales of its
products, the proceeds of financings, income earned on invested cash and fees
from contract research performed for third parties. The Company's long-term
viability and growth will depend on the successful commercialization of products
resulting from its research activities. Among other things, successful
commercialization of the Company's products will require obtaining necessary
governmental approvals in a timely manner, attracting and retaining key
employees, responding to technological changes in the marketplace, and
successful marketing of approved products by the Company's licensees and
marketing partners.
The Company's operating results may continue to vary significantly from
quarter to quarter or from year to year depending on a number of factors,
including: (i) the timing of payments from corporate partners; (ii) the
introduction of new products; (iii) the timing and size of orders from
customers; (iv) the general level of acceptance of the Company's products; and
(v) increases or decreases in, and timing of research and development, clinical
trials and other expenses. Revenue or profits in any period will not necessarily
be indicative of results in subsequent periods and there can be no assurance
that the Company will achieve consistent profitability or that revenue growth
will occur in the future.
A substantial portion of the Company's expenses are research and
development expenses. The Company expects its research and development expenses
to increase as it funds additional clinical trials and associated toxicology and
pharmacology studies and devotes resources to developing additional contrast
agents and targeted drug delivery platforms for the treatment of organ-specific
diseases.
The discussion in this Item 2 contains some forward looking statements
which involve certain risks and uncertainties, including statements related to
expenditures on research and development, liquidity and capital resources and
capital expenditures. The Company's actual results may differ significantly from
those stated in any forward-looking statements. Factors that may cause such
differences include, but are not limited to, those relating to the timing and
results of U. S. Food and Drug Administration ("FDA") action, delays in
arrangements with clinical investigators, uncertainties relating to results of
clinical trials and product development and other risks identified in the
Company's Form 10-K for the year ended September 30, 1996 and in the Company's
other filings with the Securities and Exchange Commission.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1997 AS COMPARED TO THE
QUARTER ENDED JUNE 30, 1996.
REVENUES
Total revenues for the third fiscal quarter ended June 30, 1997 were
$1,184,980 compared to $445,373 for the third fiscal quarter ended June 30,
1996. The Company's revenues historically consist primarily of license fees,
royalties on products sold by licensees, direct sales of products and investment
income. The increase in revenues in the third quarter ended June 30, 1997
compared to the third fiscal quarter ended June 30, 1996 resulted from an
increase in product sales, royalties and gains on sales of securities.
Page 9 of 15
<PAGE> 10
The Company accounts for royalty revenue based on estimated product sales
by licensees for the applicable time period. Royalties for the third fiscal
quarter ended June 30, 1997 were $85,000. There were no royalties for the third
fiscal quarter ended June 30, 1996, since there were no product sales by
licensees for this quarter. In addition, the company adjusted royalty revenue
for that period by $25,000 to reflect an overestimate of product sales in
previous periods.
Product sales were $394,656 for the third fiscal quarter ended June 30,
1997. This reflects the initial product launch in the United States of the
Company's liver contrast agent Feridex I.V.(R). There were no product sales for
the third fiscal quarter ended June 30, 1996.
Interest, dividends and gains and losses on sales of securities resulted in
revenues of $705,324 for the third fiscal quarter ended June 30, 1997 compared
to $470,373 for the third fiscal quarter ended June 30, 1996. Interest income of
$260,384 for the third fiscal quarter ended June 30, 1997 was $117,483 less than
interest income of $377,867 for the third fiscal quarter ended June 30, 1996,
primarily due to fewer interest bearing types of investments. Dividend income
was $48,437 for the third fiscal quarter ended June 30, 1997 compared with
$82,530 for the third fiscal quarter ended June 30, 1996. The lower dividend
income was also a result of fewer investments in dividend paying preferred
stock. There was a net gain on sales of securities of $396,503 for the third
fiscal quarter ended June 30, 1997 compared with a net gain on sales of
securities of $9,976 for the third fiscal quarter ended June 30, 1996.
COSTS AND EXPENSES
Research and development expenses for the third fiscal quarter ended June
30, 1997 were $2,040,380 compared to $2,559,241 for the third fiscal quarter
ended June 30, 1996. The reduced expenses are related to general cost reductions
at the Company. Selling, general and administrative expenses were $271,818 for
the third fiscal quarter ended June 30, 1997 compared to $749,235 for the third
fiscal quarter ended June 30, 1996. The decrease of $477,417 was primarily
related to the expensing in the quarter ended June 30,1996 of $237,729
associated with a proposed, but later terminated, public offering of the
Company's common stock. The balance of the reduction is due to lower legal fees
and the overall reduction in expenses during the quarter ended June 30, 1997.
Other income of $264,800 was recognized during the third fiscal quarter ended
June 30, 1997 due to an insurance settlement for damages resulting from a
rain-caused flood in the research and development laboratory in October 1996.
The Company incurred costs of product sold of $83,436 for for the third
fiscal quarter ended June 30, 1997 compared to no cost of products sold for the
third fiscal quarter ended June 30, 1996.
INCOME TAXES
Payments from the Internal Revenue Service for contingent refunds were
received and recognized as income tax benefits on the Statement of Operations
during the third fiscal quarter ended June 30, 1997. The refunds were $305,842
for the fiscal year ended September 30, 1995 and $73,180 for the fiscal year
ended September 30, 1996.
EARNINGS
For the reasons stated above, there was a net loss of ($566,832) or ($0.08)
per share for the third fiscal quarter ended June 30, 1997 compared to a net
loss of ($2,863,103) or ($0.42) per share for the third fiscal quarter ended
June 30, 1996. The Company has not yet assessed the impact of SFAS 130 on the
results of operations.
Page 10 of 15
<PAGE> 11
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 1997 AS COMPARED TO THE
NINE MONTHS ENDED JUNE 30, 1996
REVENUES
Total revenues for the nine-month period ended June 30, 1997 were
$9,587,480 compared to $1,448,301 for the nine-month period ended June 30, 1996.
There were license fee revenues of $5,500,000 for the nine-month period
ended June 30, 1997 compared to no license fee revenues for the nine-month
period ended June 30, 1996. The Company received a non-refundable $5,000,000
license fee on October 15, 1996, from Berlex Laboratories, Inc. ("Berlex") as a
result of Berlex's market launch of the Company's Feridex I.V.(R)MRI contrast
agent in the United States. The Company also received a milestone payment of
$500,000 as a license fee from its marketing partner Mallinckrodt Medical, Inc.
due to product approval received from the U.S. Food and Drug Administration on
December 6,1996.
Royalties for the nine-month period ended June 30, 1997 were $305,904.
Royalties for the nine-month period ended June 30, 1996 were $125,000. The
increase is due to increased sales of the Company's products in the United
States and Europe.
Product sales for the nine-month period ended June 30, 1997 were $1,270,911
compared to $12,762 for the nine-month period ended June 30, 1996. The increase
is also due to increased sales of the Company's products in the United States
and Europe.
Interest, dividends and gains and losses on sales of securities resulted in
revenues of $2,510,665 for the nine-month period ended June 30, 1997 compared to
$1,310,539 for the nine-month period ended June 30, 1996. Interest income for
the nine-month period ended June 30, 1997 was $905,755 compared to $1,062,572
for the nine-month period ended June 30, 1996. The decrease in interest revenue
was due primarily to the decrease in interest bearing cash equivalent
investments in fiscal 1997. Dividend income for the nine-month period ended June
30, 1997 was $90,431 less than the nine-month period ended June 30, 1996
primarily due to a reduction in funds invested in dividend paying preferred
stocks and an increase in investments in non-interest bearing securities. There
was a net gain on sales of securities of $1,415,378 for the nine-month period
ended June 30, 1997 compared to a net loss of ($31,996) for the nine-month
period ended June 30, 1996.
COSTS AND EXPENSES
The cost of product sales for the nine-month period ended June 30, 1997
was $259,771 compared to $2,550 for the nine-month period ended June 30, 1996.
The cost of product sales for both nine-month periods was approximately 20% of
product sales. Research and development expenses for the nine-month period
ended June 30, 1997 decreased approximately 13% to $6,293,656 from $7,236,546
for the nine-month period ended June 30, 1996. The decrease was primarily a
result of lower costs associated with clinical trials. Selling, general and
administrative expenses decreased approximately 26% to $1,062,028 for the
nine-month period ended June 30, 1997 from $1,435,206 for the nine-month period
ended June 30, 1996. The decrease was primarily due to expenses associated with
a proposed but later terminated public offering of the Company's common stock
in the nine-month period ended June 30, 1996. Other income of $264,800 was
recognized during the third fiscal quarter ended June 30, 1997 due to an
insurance settlement for damages resulting from a rain-caused flood in the
research and development laboratory in October 1996.
Page 11 of 15
<PAGE> 12
INCOME TAXES
There were no income tax provisions for the nine-month periods ended June
30, 1997 and June 30,1996 due to operating losses in each period. Payments from
the Internal Revenue Service were received and recognized as an income tax
benefit during the nine month period ended June 30, 1997 for contingent refunds
of federal income taxes. The refunds were $305,842 for the fiscal year ended
September 30, 1995 and $73,180 for the fiscal year ended September 30, 1996. The
Company does not expect to record an income tax provision for the fiscal year
1997 as a result of net operating loss carry forwards.
EARNINGS
For the reasons stated above, there was net income for the nine-month
period ended June 30, 1997 of $2,615,847 or $0.38 per share compared to a net
loss of ($7,226,001) or ($1.07) per share for the nine-month period ended June
30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company's cash and cash equivalents totaled
$1,025,879, representing a decrease of $9,779,963 from cash and cash equivalents
at September 30, 1996. In addition, the Company had marketable securities of
$37,049,980 at June 30, 1997 as compared to $23,271,169 on September 30, 1996.
Net cash provided by operating activities was $1,656,673 in the nine-month
period ended June 30, 1997 compared to net cash used in operating activities of
$5,472,179 in the nine-month period ended June 30, 1996. Cash used in investing
activities was $10,676,479 for the nine-month period ended June 30, 1997,
compared to $16,715,739 provided by investing activities in the nine-month
period ended June 30, 1996. The cash used in investing activities was due to the
purchase of $9,810,771 in U.S. Treasury Bills and purchases of other securities
of $8,156,182, offset by sales of $7,579,147 in equities in the nine month
period ended June 30, 1997. The cash provided by investing activities in the
nine-month period ended June 30, 1996 included the proceeds of $8,747,672 from
the sale of marketable securities and the proceeds of $9,796,348 from maturing
United States Treasury Notes. Offsetting these proceeds was the purchase of
marketable securities of $1,421,716 in the nine-month period ended June 30,
1996. Cash used in financing activities in the nine-month period ended June 30,
1997 was $760,157 compared to $88,886 provided by financing activities for the
nine-month period ended June 30, 1996. Cash provided by financing activities in
the fiscal nine-month period ended June 30, 1997 and 1996 included $37,146 and
$273,754, respectively, from the issuance of common stock. In May 1996, the
Board of Directors authorized the purchase of up to 250,000 shares of the
Company's common stock on the open market at prevailing market prices. The
Company purchased 55,000 shares for $797,303 during the nine months ended June
30,1997 and 10,000 shares for $184,868 during the nine months ended June 30,
1996.
Capital expenditures in the nine-month period ended June 30, 1997 were
$235,628 compared to $387,780 in the nine-month period ended June 30, 1996.
These expenditures reflect continued upgrades to existing plant and equipment.
The Company has no current commitment for any significant expenditures on
property, plant and equipment. The Company expects that expenditures for
research and development for the remainder of fiscal 1997 will increase due to
additional human clinical trials for the Company's products in development.
Administrative costs will also rise slightly due to product introduction costs.
Management believes that funds for future needs can be generated from
existing cash balances, cash generated from investing activities and cash
generated from operations. In addition, the Company will consider from time to
time various financing alternatives and may seek to raise additional capital
through equity or debt financing or to enter into corporate partnering
arrangements. There can be no assurance, however, that such funding will be
available on terms acceptable to the Company, if at all.
Page 12 of 15
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 11 Statement re: Computation of per share earnings
Exhibit 27.1 Financial Data Schedule (EDGAR filing only)
The Company did not file any current reports on Form 8-K during the
quarter ended June 30, 1997.
Page 13 of 15
<PAGE> 14
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.
ADVANCED MAGNETICS, INC.
Date By
----------- --------------------------------------------------------
Jerome Goldstein, Chairman of the Board of Directors and
Treasurer
Date By
----------- --------------------------------------------------------
James A. Matheson, Vice President
and Principal Accounting Officer
Page 14 of 15
<PAGE> 1
ADVANCED MAGNETICS, INC.
Exhibit 11 - Statement Re Computation of Per Share Earnings
Attached to and made part of Part II of Form 10-Q for the
Three-Month and Nine-Month Periods Ended June 30, 1997 and 1996 (unaudited)
<TABLE>
<CAPTION>
Three-Month Periods Nine-Month Periods
Ended June 30, Ended June 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number of shares
issued and outstanding .................................. 6,730,188 6,768,705 6,746,482 6,762,983
Assumed exercise of options, reduced by the number of shares
which could have been purchased
with the proceeds of those options ......................... -- -- 68,405 --
As adjusted ................................................ 6,730,188 6,768,705 6,814,887 6,762,983
========= ========= ========= =========
</TABLE>
Note: calculations for the assumed exercise of options, reduced by the number of
shares which could have been purchased with the proceeds of those options, are
not used during periods in which there are losses, since their use would be
anti-dilutive.
Page 15 of 15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1997 3RD
QUARTER 10-Q REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,025,879
<SECURITIES> 37,049,980
<RECEIVABLES> 470,855
<ALLOWANCES> 0
<INVENTORY> 25,087
<CURRENT-ASSETS> 38,810,607
<PP&E> 12,786,077
<DEPRECIATION> (7,033,674)
<TOTAL-ASSETS> 44,811,912
<CURRENT-LIABILITIES> 874,682
<BONDS> 0
0
0
<COMMON> 67,268
<OTHER-SE> 43,905,962
<TOTAL-LIABILITY-AND-EQUITY> 44,811,912
<SALES> 394,656
<TOTAL-REVENUES> 1,184,980
<CGS> 83,436
<TOTAL-COSTS> 2,130,834
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (945,854)
<INCOME-TAX> (379,022)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (556,832)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
