SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996
Commission file number 0-16177
ONCOR, Inc.
(Exact name of registrant as specified in its charter)
Maryland 52-1310084
(State of Incorporation) (I.R.S Employer Identification No.)
209 Perry Parkway
Gaithersburg, Maryland 20877
(Address of principal executive offices)
(Zip code)
(301) 963-3500
(Registrant's telephone number, including area code)
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 April 30, 1996, there were 23,190,906 shares of Common Stock
outstanding. <PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited consolidated balance sheet as of March 31,
1996, the audited consolidated balance sheet as of December 31,
1995, and the unaudited consolidated statements of operations and
of cash flows for the three month periods ended March 31, 1996
and 1995, set forth below, have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission
(the "Commission"). Certain information and note disclosures
normally included in the annual financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted pursuant to those rules and
regulations. Oncor, Inc. (the "Company") believes that the
disclosures made are adequate to make the information presented
not misleading.
In the opinion of management of the Company, the
accompanying financial statements reflect all adjustments
(consisting only of normal recurring adjustments) that are
necessary for a fair presentation of results for the periods
presented. It is suggested that this financial information be
read in conjunction with the Form 10-K, including "Item 1.
Business - Additional Risk Factors," filed with the Commission
for the year ended December 31, 1995.
The results for the first quarter ended March 31, 1996,
presented in the accompanying financial statements, are not
necessarily indicative of the results for the entire year.<PAGE>
<TABLE>
ONCOR, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
As of
-----------------------------
Mar. 31, 1996 Dec. 31, 1995
Unaudited
-----------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $6,981,127 $14,249,925
Short-term investments, at market 3,609,014 1,580,127
Accounts receivable, net of allowance
for doubtful accounts of approxi-
mately $306,000 and $341,000 3,075,160 3,946,147
Inventories 6,050,298 6,356,041
Other current assets 1,459,905 1,714,030
Total current assets 21,175,504 27,846,270
------------- -------------
NON-CURRENT ASSETS:
Property and equipment, net 7,416,548 7,445,214
Deposits and other non-current assets 567,285 718,183
Investment in and advances to affiliate 4,372,621 832,809
Intangible assets, net 8,740,606 9,278,376
Total non-current assets 21,097,060 18,274,582
------------- -------------
Total assets $42,272,564 $46,120,852
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $3,236,883 $3,679,034
Accrued expenses and other current
liabilities 1,043,160 1,596,203
Short-term borrowings 12,270 227,839
Current portion of long-term debt 1,847,408 2,302,156
Total current liabilities 6,139,721 7,805,232
------------- ------------
NON-CURRENT LIABILITIES:
Long-term debt 7,111,450 9,301,408
Deferred rent - 18,223
Total non-current liabilities 7,111,450 9,319,631
------------- ------------
Total liabilities 13,251,171 17,124,863
------------- ------------
COMMITMENTS AND CONTINGENCY
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY 3,003,591 3,008,637
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000,000
shares authorized, no shares issued - -
Common stock, $.01 par value,
50,000,000 shares authorized,
22,430,807 and 21,822,477 issued;
22,351,398 and 21,743,068 outstanding 223,514 217,431
Additional paid-in capital 104,610,195 98,233,612
Unrealized (loss) gain on investments (41,427) 556
Cumulative translation adjustment 192,891 412,787
Accumulated deficit (78,746,859) (72,656,522)
Less - 79,409 shares of common
stock held in treasury, at cost (220,512) (220,512)
Total stockholders' equity 26,017,802 25,987,352
------------ ------------
Total liabilities and
stockholders' equity $42,272,564 $46,120,852
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
ONCOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Three Months Ended
March 31,
------------------------------
1996 1995
------------------------------
<S> <C> <C>
GROSS REVENUES:
Product sales $3,923,372 $3,675,789
Grants and contracts 297,330 279,589
------------ ------------
Gross revenues 4,220,702 3,955,378
OPERATING EXPENSES:
Direct cost of sales 2,413,115 1,935,143
Amortization of
intangibles 344,379 320,190
Selling, general and
administrative 3,668,829 2,963,619
Research and development 2,810,606 1,864,932
Clinical and regulatory 492,279 356,154
------------ ------------
Total operating expenses 9,729,208 7,440,038
LOSS FROM OPERATIONS (5,508,506) (3,484,660)
OTHER INCOME (EXPENSE):
Investment income 182,597 317,512
Other expense, net (151,695) (94,035)
Foreign exchange loss (21,165) (27,596)
Equity in net loss of
affiliate (591,568) (517,301)
------------ ------------
(581,831) (321,420)
Net loss ($6,090,337) ($3,806,080)
NET LOSS PER SHARE ($0.28) ($0.18)
WEIGHTED-AVERAGE COMMON
SHARES OUTSTANDING 21,815,426 20,763,691
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
<TABLE>
ONCOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the three months ended March 31,
------------------------------------
1996 1995
------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($6,090,337) ($3,806,080)
Adjustments to reconcile net loss to
net cash used in operating activities:
Issuance of common stock for interest
payment of convertible note 60,842 -
Issuance of common stock in
connection with research and
development agreements 192,505 -
Depreciation and amortization 823,874 683,625
Unrealized loss on investments - (10,501)
Equity in net loss of affiliate 591,571 523,616
Changes in operating assets
and liabilities:
Accounts receivable 803,411 600,598
Inventories 268,213 (716,096)
Other current assets 35,813 (525,186)
Deposits and other non-current assets 12,787 -
Accounts payable (374,410) (509,835)
Customer deposits - (105,679)
Accrued expenses and other
current liabilities (536,325) (335,249)
Deferred rent (18,223) (18,214)
Net cash used in operating activities (4,230,279) (4,219,001)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (374,194) (591,837)
Purchase of minority interest in subsidiary - (82,315)
Purchases of investments (2,070,870) (1,935,630)
Redemptions of investments - 2,204,058
Net cash used in investing
activities (2,445,064) (405,724)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock
of subsidiary - 55,000
Exercise of stock options and warrants 199,950 319,520
Offering costs of private placement (54,100) -
Payment on notes for acquisitions (603,444) (841,848)
Payment on bank loan (328,601) -
Long-term borrowings 207,410 347,935
Net cash used in financing
activities (578,785) (119,393)
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (14,670) (51,700)
------------ ------------
Net decrease in cash and cash
equivalents (7,268,798) (4,795,818)
CASH AND CASH EQUIVALENTS, beginning of
the period 14,249,925 9,749,911
------------ ------------
CASH AND CASH EQUIVALENTS, end of the
period $6,981,127 $4,954,093
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $95,081 $109,198
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In March 1996, the Company issued 498,081 shares of its common stock
valued at $2,100,000 in connection with conversion of convertible debt.
In February 1995, the Company entered into a $1,235,504 capital lease of
a building.
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
<PAGE>
ONCOR, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 1996
(Unaudited)
1. Cash Equivalents and Investments
Cash equivalents and investments consist primarily of funds
invested in money market instruments, commercial paper and U.S.
government treasury bills. Investments with maturities between
three months and one year are classified as short-term
investments. Investments in securities with original maturities
of three months or less are considered cash equivalents. Cash of
$2.3 million is pledged on a reducing basis over approximately
one year as security to a bank which guaranteed the principal and
interest of a note issued in an acquisition.
Investments that are classified as available-for-sale
securities are carried at fair market value. Unrealized holding
gains and losses are excluded from earnings and reported as a net
amount in a separate component of shareholder's equity until
realized.
2. Intangible Assets
The intangible assets comprise software and technology
acquired, the estimated value of contractual positions, and the
excess of the purchase price of acquisitions over the fair market
value of the tangible assets acquired. The intangible assets are
being amortized on a straight line method over periods of two to
10 years, with a weighted average amortization period of eight
years.
3. Net Loss Per Share
Net loss per share is determined using the weighted-average
number of shares of Common Stock outstanding during the periods
presented. The effects of options and warrants have not been
considered since the effects would be antidilutive.
4. Investments in Debt Securities at March 31, 1996
The aggregate fair value of investments in debt securities
as of March 31, 1996 is as follows:
Government securities
$U.S. denominated $4,021,110
Commercial paper 1,416,678
----------
Total $5,437,788
==========
5. OncorPharm Private Placement
On April 2, 1996, OncorPharm, Inc. ("OncorPharm"), a
53%-owned subsidiary, completed a private placement
of 670,000 of its preferred shares of stock at $3.00 per share.
The effect of this transaction was to reduce the Company's
ownership interest in OncorPharm to approximately 46%. As the
Company's voting interest is now less than 50%, the Company will
account for its investment in OncorPharm using the equity method
of accounting beginning in the second quarter. The financial
statements of the Company for the three months ended March 31,
1996 will be retroactively adjusted to record the results of
OncorPharm pursuant to the equity method of accounting from
January 1, 1996. The Company will only reflect in its financial
statements its proportionate share of the earnings or losses of
OncorPharm. The restatement will have no impact on the Company's
net loss or net loss per share. OncorPharm realized net cash
proceeds of approximately $2.0 million from sale of the shares.
<PAGE>
The following unaudited pro forma consolidated financial
information assumes the OncorPharm private placement had occurred
on March 31, 1996.
CONDENSED PRO FORMA BALANCE SHEET
As of March 31, 1996
(In thousands)
As Reported Pro Forma
------------ ---------
Assets:
Investment in OncorPharm $ 0 $ 1,667
All other assets 42,273 40,500
--------- ---------
Total Assets $ 42,273 $ 42,167
========= =========
Liabilities and Stockholders'
Equity:
Liabilities and Minority Interest 16,255 13,128
Stockholders' Equity
Common Stock 224 224
Additional Paid-In Capital 104,610 107,631
Accumulated Deficit (78,747) (78,747)
Treasury Stock (221) (221)
Unrealized Loss (41) (41)
Cumulative translation adjustment 193 193
--------- ---------
Total Stockholders' Equity 26,018 29,039
Total Liabilities and
Stockholders' Equity $ 42,273 $ 42,167
========= =========
<PAGE>
CONDENSED PRO FORMA STATEMENT OF RESULTS OF OPERATIONS
Three Months Ended March 31, 1996
(In thousands)
As Reported Pro Forma
----------- ---------
Gross Revenues $ 4,221 $ 4,196
Operating Expenses 9,729 8,695
---------- ----------
Loss from Operations (5,508) (4,499)
Non-Operating Expenses, Net (582) (1,591)
---------- ----------
Net Loss $ 6,090 $ (6,090)
========== ==========
6. Subsequent Event
In April 1996, the Company issued 834,894 shares of its
Common Stock valued at $3,950,000 in connection with conversion
of convertible debt.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion and analysis provides information
which management believes is relevant to an assessment and
understanding of the Company's results of operations and
financial condition. The discussion should be read in
conjunction with the audited consolidated financial statements of
the Company and notes thereto, which were included in the
Company's Annual Report on Form 10-K for fiscal year ended
December 31, 1995. This Form 10-Q contains certain statements of
a forward-looking nature relating to future events or the future
financial performance of the Company. Investors are cautioned
that such statements are only predictions and that actual events
or results may differ materially. In evaluating such statements,
investors should specifically consider the various factors
identified in this Report which could cause actual results to
differ materially from those indicated by such forward-looking
statements, including the matters set forth in "Risk Factors."
Results of Operations
Revenues increased 7% to $4.2 million for the three months
ended March 31, 1996, as compared to $4.0 million for the
corresponding period of 1995, due to improved sales by the
Company's European operations.
Grants and contracts of $0.3 million did not change in the
first quarter of 1996 compared to the corresponding period in the
prior year. A significant portion of the grants will expire over
the next year. Application for renewal has been made, but there
can be no assurance that such application will be successful.
Gross profit as a percentage of product revenues decreased
to 38% in the first quarter of 1996 from 47% in the corresponding
period of 1995. The decrease was due to measures taken to reduce
inventory levels and, to a lesser extent, product mix differences
and increased competitive pressures in Europe.
Selling, general and administrative expenses increased by
$0.7 million or 24% to $3.7 million for the first quarter of 1996
from $3.0 million in the corresponding period of 1995. The
increase is due to expenses associated with the Company's
financing efforts, expansion of its OncorPharm subsidiary,
executive recruitment and relocation and the realignment of
certain distributor relationships.
Research and development expenses increased by $0.9 million
or 51% to $2.8 million in the first quarter of 1996 from $1.9
million in the corresponding period of 1995. Approximately $0.5
million of the increase is due to (i) initial payments, made
largely in Common Stock of the Company, at the inception of two
research collaboration agreements with The Johns Hopkins
University and (ii) substantial increased activity in the
development of diagnostic products. Approximately $0.4 million
of the increase is due to a significant increase in research
activities by OncorPharm. As noted in Note 5 to the accompanying
financial statements, operating expenses related to OncorPharm
will hereafter no longer be included in the consolidated
operating expenses of the Company.
Clinical and regulatory expenses increased by $0.1 million
or 38% to $0.5 million in the first quarter of 1996 from $0.4
million in the corresponding period of the previous year. This
increase is due to professional fees incurred to support the
Company's applications for diagnostic products with the U.S. Food
and Drug Administration.
Other net non-operating expenses increased by $0.3 million
or 81% to $0.6 million in the first quarter of 1996 from $0.3
million in the corresponding period of 1995. The increase is due
to a decrease in interest income which is included as an offset
to other non-operating expenses in this category. Hereafter, the
Company's proportionate share of net losses attributable to
OncorPharm will be reported as other non-operating expense. Such
amount for the first quarter of 1996 was $1.0 million and was
included in the consolidated operating expenses of the Company.
Net losses increased to $6.1 million, $0.28 per share, in
the first quarter of 1996 from $3.8 million, $0.18 per share, in
the first quarter of 1995, primarily as result of the
aforementioned.
Liquidity and Capital Resources
The following table sets forth the cash and liquid
investments position of the Company and the most significant
sources and uses of cash in the first quarter of 1996 (in
millions):
Cash and liquid investments at December 31, 1995 $15.8
Net cash loss, exclusive of OncorPharm (3.5)
Net loss of OncorPharm (1.0)
Cash generated from the decline in working capital 0.2
Purchases of equipment (0.4)
Principal portion of debt service (0.6)
Proceeds from exercise of options,
long-term borrowings and other 0.1
------
Cash and liquid investments at March 31, 1996 $10.6
======
Net cash loss from operations and losses from OncorPharm are
discussed under Results of Operations found elsewhere in this
Management's Discussion and Analysis. The decline in working
capital represents a decrease in inventory and accounts
receivable of $1.1 million, largely offset by a decline in
current liabilities of $0.9 million. Purchases of equipment are
for the on-going replacement of laboratory equipment. The
Company expects property and equipment purchases to continue at
this rate. Principal portion of debt service is expected to
continue at this rate through the first three quarters of 1996,
at which time the debt issued in connection with the acquisition
of Appligene S.A. (together with its consolidated subsidiaries,
"Appligene") will be repaid and debt service requirements are
expected to decline substantially.
Expenditures of $1.2 million related to the activities of
OncorPharm contributed to the net decrease in cash and liquid
securities. This subsidiary completed the first tranche of a
private placement of preferred stock in April 1996, securing
additional funding of approximately $2.0 million. OncorPharm
intends to secure additional amounts in a second tranche of the
offering in the second quarter of 1996 in which the Company has
subscribed for $0.3 million of the issue. It is not certain that
this private placement will be sufficient to sustain OncorPharm's
activities at their current level throughout 1996. OncorPharm
intends to seek additional financing later in the year from
either public or private sources. There can be no assurance that
such financing will be available.
In April 1996, certain holders of convertible debt
securities elected to convert $4.0 million principal amount into
approximately 840,000 shares of Common Stock of the Company.
Other than as noted above with respect to OncorPharm, the
Company believes that it has sufficient cash and liquid
securities investments to sustain operations throughout the
remainder of 1996.
Risk Factors
Risk Associated with the Her-2/neu Gene-Based Test System
In November 1995, an FDA advisory panel (the "Panel") made a
recommendation against final approval of the Company's Pre-Market
Approval ("PMA") application for the use of its Her-2/neu
gene-based test system for diagnostic purposes. No assurance can
be given that the Panel will reconsider its position or that the
FDA will overturn the recommendation of the Panel or that the
Company will obtain FDA approval for its Her-2/neu gene-based
test system. The failure to obtain FDA approval for its
Her-2/neu gene-based test system on a timely basis, or at all,
would have a material and adverse effect on the Company's
business, financial condition and results of operations. In the
event that the Company receives FDA approval for its Her-2/neu
gene-based test system, there can be no assurance that the
Company will be capable of manufacturing the test system in
commercial quantities at reasonable costs or marketing the
product successfully, that the test system will be accepted by
the medical diagnostic community, or that the market demand for
the test system will be sufficient to allow profitable sales.
No Assurance of Regulatory Approvals; Government Regulation
The Company is currently pursuing FDA approval of certain
existing products and expects to pursue FDA approval of certain
additional products under development. There can be no assurance
that the Company will receive regulatory approval for any of its
products or, even if it does receive regulatory approval for a
particular product, that the Company will ever recover its costs
in connection with obtaining such approval. The timing of
regulatory approvals is not within the control of the Company.
The failure of the Company to receive requisite approval, or
significant delays in obtaining such approval, could have a
material and adverse effect on the business, financial condition
and results of operations of the Company.
Approval by the FDA requires lengthy, detailed and costly
laboratory procedures, clinical testing procedures and
application preparation and defense efforts to demonstrate a
product's efficacy and safety before a product can be sold for
diagnostic use. Even if such regulatory approval is obtained for
a product, its manufacturer and its manufacturing facilities are
subject to continual review and periodic inspections by the FDA
and other regulatory agencies. The regulatory standards for
manufacturing are applied stringently by the FDA. Discovery of
previously unknown problems with a product, manufacturer or
facility may result in restrictions on such product or
manufacturer, including costly recalls or even withdrawal of the
product from the market. Furthermore, approval may entail
ongoing requirements for postmarketing studies. Failure to
maintain requisite manufacturing standards or discovery of
previously unknown problems could have a material and adverse
effect on the Company's business, financial condition or results
of operations.
Patents and Proprietary Rights
The Company's success will depend in large part on its, or
its licensors, ability to obtain patents, defend its patents,
maintain trade secrets and operate without infringing upon the
proprietary rights of others, both in the United States and in
foreign countries. The patent position of firms relying upon
biotechnology is highly uncertain in general and involves complex
legal and factual questions. To date there has emerged no
consistent policy regarding the breadth of claims allowed in
biotechnology patents or the degree of protection afforded under
such patents. The Company relies on certain patents and pending
United States and foreign patent applications relating to various
aspects of its products. These patents and patent applications
are either owned by the Company or rights under them are licensed
to the Company. There can be no assurance that patents will
issue as a result of any such pending applications or that, if
issued, such patents will be sufficiently broad to afford
protection against competitors with similar technology. In
addition, there can be no assurance that any patents issued to
the Company, or for which the Company has license rights, will
not be challenged, invalidated or circumvented, or that the
rights granted thereunder will provide competitive advantages to
the Company. The commercial success of the Company will also
depend upon avoiding the infringement of patents issued to
competitors and upon maintaining the technology licenses upon
which certain of the Company's current products are, or any
future products under development might be, based. Litigation,
which could result in substantial cost to the Company, may be
necessary to enforce the Company's patent and license rights or
to determine the scope and validity of others' proprietary
rights. If competitors of the Company prepare and file patent
applications in the United States that claim technology also
claimed by the Company, the Company may have to participate in
interference proceedings declared by the United States Patent and
Trademark Office ("PTO") to determine the priority of invention,
which could result in substantial cost to the Company, even if
the outcome is favorable to the Company. An adverse outcome
could subject the Company to significant liabilities to third
parties and require the Company to license disputed rights from
third parties or cease using the technology. A United States
patent application is maintained under conditions of
confidentiality while the application is pending in the PTO, so
that the Company cannot determine the inventions being claimed in
pending patent applications filed by its competitors in the PTO.
Further, United States patents do not provide any remedies for
infringement that occurred before the patent is granted.
The University of California and its licensee, Vysis, Inc.
("Vysis"), filed suit against Oncor on September 5, 1995 for
infringement of U.S. Patent No. 5,447,841 entitled Methods and
Compositions for Chromosome Specific Staining which issued on
that same date. The patent relates to a method of performing in
situ hybridization using a blocking nucleic acid that is
complementary to repetitive sequences. A failure to successfully
defend against or settle this suit may result in damages being
assessed against the Company and an injunction against the sale
of some of the Company's probes. The University of California
and Vysis have offered to grant the Company a non-exclusive
license.
The Company has licensed rights to inventions disclosed in
United States and foreign patent applications relating to methods
and probes for detecting the presence of the Fragile X syndrome.
The Company believes that its licensors are original inventors
and are entitled to patent protection in the United States, but
the Company is aware that certain third parties also have filed
patent applications in the United States and abroad and claim to
be entitled to patents related to this technology. The Company
has initiated an interference proceeding with these third parties
in the PTO to resolve which party is entitled to a United States
patent, if any. The application licensed by the Company is
senior in the interference. An unfavorable decision in such a
proceeding could have an adverse effect on the Company.
The Company currently has certain licenses from third
parties and in the future may require additional licenses from
other parties to develop, manufacture and market commercially
viable products effectively. There can be no assurance that such
licenses will be obtainable on commercially reasonable terms, if
at all, that the patents underlying such licenses will be valid
and enforceable or that the proprietary nature of the patented
technology underlying such licenses will remain proprietary.
The Company relies substantially on certain technologies
that are not patentable or proprietary and are therefore
available to the Company's competitors. The Company also relies
on certain proprietary trade secrets and know-how that are not
patentable. Although the Company has taken steps to protect its
unpatented trade secrets and know-how, in part through the use of
confidentiality agreements with its employees, consultants and
certain of its contractors, there can be no assurance that these
agreements will not be breached, that the Company would have
adequate remedies for any breach, or that the Company's trade
secrets will not otherwise become known or be independently
developed or discovered by competitors.
Uncertainties Relating to Product Development
Most of the Company's products have not been approved by the
FDA and may be sold only for research purposes. The Company has
undertaken to seek FDA approval for certain of these products,
and may in the future undertake to seek such approval for other
products, and substantial additional investment, laboratory
development, clinical testing and FDA approval will be required
prior to the commercialization of such products for diagnostic
purposes. There can be no assurance that the Company will be
successful in developing such existing or future products, that
such products will prove to be efficacious in clinical trials,
that required regulatory approvals can be obtained for such
products, that such products, if developed and approved, will be
capable of being manufactured in commercial quantities at
reasonable costs, will be marketed successfully or will be
accepted by the medical diagnostic community, or that market
demand for such products will be sufficient to allow profitable
operations.
International Sales and Foreign Exchange Risk
The Company derived approximately $9.0 million or 56% of its
total product revenues, from customers outside of the United
States for the year ended December 31, 1995. The Company
anticipates that a significant amount of its sales will take
place in European countries and likely will be denominated in
currencies other than the U.S. dollar. These sales may be
adversely affected by changing economic conditions in foreign
countries and by fluctuations in currency exchange rates. Any
significant decline in the applicable rates of exchange could
have a material adverse effect on the Company's business,
financial condition and results of operations. Additional risks
inherent in the Company's international business activities
generally include unexpected changes in regulatory requirements,
tariffs and other trade barriers, lack of acceptance of products
in foreign markets, longer accounts receivable payment cycles,
difficulties in managing international operations, potentially
adverse tax consequences, restrictions on repatriation of
earnings and the burdens of complying with a wide variety of
foreign laws. There can be no assurance that such factors will
not have a material adverse effect on the Company's future
international revenues and, consequently, on the Company's
business, financial condition and results of operations.
In connection with the acquisition of Appligene, the
Company issued or acquired approximately $6 million in
indebtedness denominated in French francs. Accordingly, any
significant decline in the value of the U.S. dollar as compared
to the French franc would materially increase the dollar amount
required to repay such indebtedness. Although the Company
intends to continue to mitigate such risk through hedging
transactions, such transactions may not be available to the
Company at a reasonable cost, or at all.
Competition and Technological Change
The diagnostic and biotechnology industries are subject to
intense competition and rapid and significant technological
change. Competitors of the Company in the United States and in
foreign countries are numerous and include, among others,
diagnostic, health care, pharmaceutical, biotechnology and
chemical companies, academic institutions, government agencies
and other public and private research organizations. Many of
these competitors have substantially greater financial and
technical resources and production and marketing capabilities
than the Company. There can be no assurance that these
competitors will not succeed in developing technologies and
products that are more effective, easier to use or less expensive
than those that have been or are being developed by the Company
or that would render the Company's technology and products
obsolete and noncompetitive. The Company also competes with
various companies in acquiring technology from academic
institutions, government agencies and research organizations. In
addition, many of the Company's competitors have significantly
greater experience than the Company in conducting clinical trials
of new diagnostic products and in obtaining FDA and other
regulatory approvals of products for use in health care.
Accordingly, the Company's competitors may succeed in obtaining
regulatory approval for products more rapidly than the Company.
Investment in OncorMed and OncorPharm
The Company owns approximately 29% of the common stock of
its publicly-traded affiliate, OncorMed, and 53% of the voting
securities of its consolidated subsidiary, OncorPharm. The
shares of common stock of both OncorMed and OncorPharm held by
the Company are not currently freely tradeable and no public
market exists for the Common Stock of OncorPharm. Therefore,
there can be no assurance that the Company will be able to
realize the economic benefit of its investment or predict the
timing of such realization. The value of the Company's
investment in OncorMed represents a significant portion of the
total assets of the Company and such value fluctuates with the
market price of OncorMed's common stock. Therefore, any event
that has a material and adverse effect on the market price of the
common stock of OncorMed will have a material and adverse effect
on the value of the Company's investment in OncorMed. Although
Stephen Turner, the Company's Chief Executive Officer, is a
Director of OncorMed and the Company is a significant stockholder
in OncorMed, the Company does not control the day-to-day
operations and management of OncorMed and, therefore, has little
direct control over its operations and financial results.
OncorPharm will require additional financing in the future. The
Company does not currently intend to provide a significant
portion of such financing although the Company may provide
additional financing in the future. The failure of OncorPharm to
obtain any required financing on acceptable terms could have a
material and adverse effect on the value of the Company's
investment in OncorPharm.
Other Factors
Other factors that may affect the Company's
business, financial condition and results of operations, include
the Company's limited manufacturing, marketing and distribution
experience, the level and availability of government funding, the
Company's ability to attract and retain key personnel, potential
health care reform measures and the availability of third-party
reimbursement, potential product liability claims, and
environmental risks.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
a. The following exhibits are filed as part of this report on
Form 10-Q.
27. Financial Data Schedule.
b. Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
ONCOR, INC.
(Registrant)
Date: May 14, 1996
Stephen Turner, Chairman and Chief
Executive Officer
Date: May 14, 1996
Cecil Kost, President and Chief
Operating Officer
Date: May 14, 1996
John L. Coker, Vice President
of Finance and Administration,
Chief Financial Officer
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
ONCOR, INC.
(Registrant)
Date: May 14, 1996 /s/ Stephen Turner
Stephen Turner, Chairman and Chief
Executive Officer
Date: May 14, 1996 /s/ Cecil Kost
Cecil Kost, President and Chief
Operating Officer
Date: May 14, 1996 /s/ John L. Coker
John L. Coker, Vice President
of Finance and Administration,
Chief Financial Officer
<PAGE>
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