<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 29, 2000
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 001-15167
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BIOPURE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2836871
(State of Incorporation) (IRS Employer Identification Number)
11 Hurley Street, Cambridge, Massachusetts 02141
(Address of principal executive offices) (Zip Code)
(617) 234-6500
(Registrant's telephone number)
-----------------------------------------
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 February 25, 2000 was:
Class A Common Stock, $.01 par value.................22,345,876
Class B Common Stock, $1.00 par value.....................117.7
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<PAGE> 2
BIOPURE CORPORATION
INDEX TO FORM 10-Q
Page
----
Part I - Financial Information:
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
at January 29, 2000 and October 31, 1999 1
Condensed Consolidated Statements of
Operations for the quarters ended
January 29, 2000 and January 30, 1999 2
Condensed Consolidated Statements of Cash
Flows for the three months ended
January 29, 2000 and January 30, 1999 3
Notes to Condensed Consolidated
Financial Statements 4-7
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations 8-9
Item 3 - Quantitative and Qualitative Disclosure of Market Risk 10
Part II - Other Information:
Item 1 - Legal Proceedings 11
Item 2 - Changes in Securities and Use of Proceeds 11
Item 6 - Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit Index
<PAGE> 3
FORM 10-Q
PART I
ITEM 1
PAGE 1
BIOPURE CORPORATION
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
January 29, 2000 October 31, 1999
---------------- ----------------
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 22,146 $ 30,778
Accounts receivable, net 336 321
Inventories, net 2,564 3,182
Current portion of restricted cash 3,508 3,508
Other current assets 459 488
----------- -----------
Total current assets 29,013 38,277
Property, plant and equipment, net 26,502 27,447
Investment in affiliate 101 101
Other assets 418 405
----------- -----------
Total assets $ 56,034 $ 66,230
=========== ===========
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable $ 446 $ 741
Accrued expenses 10,309 9,664
----------- -----------
Total current liabilities 10,755 10,405
Deferred compensation 1,805 1,788
Stockholders' equity:
Convertible preferred stock, $0.01 par value,
30,000,000 shares authorized, no shares outstanding - -
Common stock:
Class A, $0.01 par value, 100,000,000 shares
authorized, 22,288,706 shares
outstanding at January 29, 2000 and 22,280,867
at October 31, 1999 223 223
Class B, $1.00 par value, 179 shares
authorized, 117.7 shares outstanding - -
Capital in excess of par value 283,720 282,054
Contributed capital 24,574 24,574
Notes receivable (2,509) (2,463)
Accumulated deficit (262,534) (250,351)
------------ -----------
Total stockholders' equity 43,474 54,037
------------ -----------
Total liabilities and stockholders'
equity $ 56,034 $ 66,230
=========== ===========
</TABLE>
Note: The balance sheet at October 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
<PAGE> 4
FORM 10-Q
PART I
ITEM 1
PAGE 2
BIOPURE CORPORATION
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------
January 29, 2000 January 30, 1999
---------------- ----------------
<S> <C> <C>
Revenues:
Oxyglobin $ 595 $ 671
Other 3 62
-------- ---------
Total revenues 598 733
Cost of revenues 1,189 1,680
-------- ---------
Gross profit (loss) (591) (947)
Operating expenses:
Research and development 8,259 4,283
Sales and marketing 579 729
General and administrative 3,112 1,092
-------- ---------
Total operating expenses 11,950 6,104
-------- ---------
Loss from operations (12,541) (7,051)
Other income 358 207
-------- ---------
Net loss applicable to
common stockholders $(12,183) $(6,844)
========= =========
Historical:
Basic net loss
per common share $ (0.55) $ (0.55)
Weighted average shares used in
computing basic net loss
per common share 22,282 12,422
Pro forma:
Pro forma basic net loss
per common share $ (0.36)
Weighted average shares used in
computing pro forma basic net
loss per common share 18,948
</TABLE>
See accompanying notes.
<PAGE> 5
FORM 10-Q
PART I
ITEM 1
PAGE 3
BIOPURE CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------
January 29, 2000 January 30, 1999
---------------- ----------------
<S> <C> <C>
Operating activities:
Net loss $ (12,183) $ (6,844)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 998 984
Equity compensation 1,688 -
Deferred compensation 17 69
Accrued interest on stockholders' notes receivable (46) (46)
Accounts receivable (15) (16)
Inventories 618 (146)
Other current assets 29 (64)
Accounts payable (295) (707)
Accrued expenses 645 (237)
---------- ---------
Net cash used in operating activities (8,544) (7,007)
Investing activities:
Purchase of property, plant and equipment (53) (622)
Other assets (13) (16)
---------- ---------
Net cash used in investing activities (66) (638)
Financing activities:
Net proceeds from sale of common stock (30) -
Net proceeds from sale of preferred stock - 16,946
Payment of long-term debt - (500)
Proceeds from exercise of options 8 28
---------- ---------
Net cash provided by (used in) financing activities (22) 16,474
---------- ---------
Net increase (decrease) in cash and cash equivalents (8,632) 8,829
Cash and cash equivalents at beginning of period 30,778 6,063
---------- ---------
Cash and cash equivalents at end of period $ 22,146 $ 14,892
========== =========
</TABLE>
See accompanying notes.
<PAGE> 6
FORM 10-Q
PART I
ITEM 1
PAGE 4
BIOPURE CORPORATION
Notes to Condensed Consolidated Financial Statements
January 29, 2000
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and pursuant to the rules
and regulations of the Securities and Exchange Commission (SEC).
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the three month period ended
January 29, 2000 are not necessarily indicative of the results that may
be expected for the year ended October 31, 2000.
For further information, refer to the consolidated financial statements
and footnotes thereto for the year ended October 31, 1999, included in
the Company's Annual Report on Form 10-K for the year ended October 31,
1999.
2. NET LOSS PER SHARE
Historical basic net loss per share is computed based on the
weighted-average number of common shares outstanding during the period.
Diluted net loss per share is computed based upon the weighted-average
number of common shares outstanding during the year, adjusted for the
dilutive effect of shares issuable upon the conversion of preferred
stock outstanding and the exercise of common stock options and warrants
determined based upon the average market price of common stock for the
period. Diluted net loss per share is not presented in the accompanying
condensed consolidated financial statements because the Company had
losses for all periods presented.
The pro forma basic net loss per common share is computed using the
weighted-average number of outstanding common shares assuming
conversion of all convertible preferred shares into common shares at
date of original issuance.
<PAGE> 7
FORM 10-Q
PART I
ITEM 1
PAGE 5
BIOPURE CORPORATION
Notes to Condensed Consolidated Financial Statements
January 29, 2000
(Unaudited)
(Continued)
The following table sets forth the computation of basic and pro forma
loss per share for the three months ended January 29, 2000 and January
30, 1999 (in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------
January 29, 2000 January 30, 1999
---------------- ----------------
<S> <C> <C>
Historical:
Net loss applicable
to common stockholders $(12,183) $ (6,844)
========= ==========
Weighted-average number of
common shares outstanding 22,282 12,422
========= ==========
Basic net loss
per common share $ (0.55) $ (0.55)
========= ==========
Pro forma:
Weighted-average number of
common shares:
Historical outstanding 12,422
Issued upon conversion
of preferred stock 6,526
---------
Total weighted-average number
of common shares used in
computing pro forma basic net
loss per common share 18,948
==========
Pro forma basic net loss
per common share $ (0.36)
==========
</TABLE>
<PAGE> 8
FORM 10-Q
PART I
ITEM 1
PAGE 6
BIOPURE CORPORATION
Notes to Condensed Consolidated Financial Statements
January 29, 2000
(Unaudited)
(Continued)
3. INVENTORIES
Inventories are valued at the lower of cost (determined using the
first-in, first-out method) or market. Inventories were as follows:
<TABLE>
<CAPTION>
January 29, 2000 October 31, 1999
---------------- ----------------
In thousands
<S> <C> <C>
Raw materials ..................................... $ 719 $ 690
Work-in-process ................................... 110 134
Finished goods .................................... 1,735 2,358
-------- --------
$ 2,564 $ 3,182
======== ========
</TABLE>
4. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
January 29, 2000 October 31, 1999
---------------- ----------------
In thousands
<S> <C> <C>
Settlement ...................................... $ 3,508 $ 3,508
Phase III clinical trial ........................ 4,655 2,925
Initial public offering ......................... - 619
Other ........................................... 2,146 2,612
-------- --------
$ 10,309 $ 9,664
======== ========
</TABLE>
5. STOCK OPTION COMPENSATION
In August 1999, Biopure granted 386,680 options to two directors
which, under the Interpretation of APB 25, are assumed to be for
services in addition to board activities and must be accounted for at
fair value. The Company records compensation expense based on the
service period which ranges from two to four years adjusted for the
fair value of the stock until the options have been earned as
discussed below. In November 1999, Biopure granted 25,000 warrants to
three consultants, which must be accounted for at fair value. With
respect to these 411,680 options and warrants, $1,700,000 was charged
to non-cash compensation expense for the quarter ended January 29,
2000.
<PAGE> 9
FORM 10-Q
PART I
ITEM 1
PAGE 7
BIOPURE CORPORATION
Notes to Condensed Consolidated Financial Statements
January 29, 2000
(Unaudited)
(Continued)
Because the options and warrants are assumed to be earned over the
vesting period, the final value of the options and warrants (i.e. the
compensation expense), will not be determined until the vesting is
complete. Therefore, at each time interval (i.e. quarterly), the
options and warrants must be marked to fair value (based on a
valuation model such as the Black Scholes option pricing model).
Compensation expense based on fair value will continue to be
amortized to general and administrative expense on a straight-line
basis over the vesting period. However, the amount charged to expense
will be increased or decreased at each point in time based on the
then current fair value of the Company's stock.
Therefore, during each time interval the Company will be required to
record two amounts, the first relating to the current period
compensation charge and the second would be a cumulative catch-up
adjustment for the period based on the fair value of the options at
the end of that period.
6. LITIGATION
The Company is a party to litigation initially filed in 1990 arising
from certain joint venture agreements for development and
distribution of product in Central and South America. Summary
judgments were entered against the two plaintiffs in 1994. The
plaintiffs each appealed the judgments; one of the appeals was
voluntarily dismissed. The other appeal was denied in part and
remanded to the trial court for further findings based on lack of
jurisdiction. On February 23, 2000, the United States District Court
for the District of Massachusetts reaffirmed entry of final judgment
in favor of Biopure and found on the jurisdiction issue that there is
no reason to delay the appeal. In connection with the summary
judgments, the Company agreed to a settlement with a third-party
intervenor with claims against one of the plaintiffs. Final payment
of the settlement is subject to the outcome of the pending appeal;
however, the Company has provided for such settlement in the
accompanying financial statements. At January 29, 2000, the Company
had $3,508,000 in escrow in connection with this settlement and
included this amount in current portion of restricted cash. The
settlement amount has been recorded as a current obligation.
<PAGE> 10
FORM 10-Q
PART I
ITEM 2
PAGE 8
BIOPURE CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
January 29, 2000
Except for historical information contained herein, some matters discussed in
this report constitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Actual results could differ materially from
those projected in the forward-looking statements as a result of the risk
factors set forth in this report and in the Company's Registration Statement as
amended (Form S-1, Registration No. 333-30382). In light of the substantial
risks and uncertainties inherent in all future projections, the inclusion of
forward-looking statements in this report should not be regarded as
representations by the Company that the objectives or plans of the Company will
be achieved. Many factors could cause the Company's actual results, performance
or achievements to differ materially from those in the forward-looking
statements. Reference is made in particular to the discussions set forth below
in this Report under "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and set forth in the Registration
Statement as amended (Form S-1, Registration No. 333-30382) under the captions
"Risk Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
RESULTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 29, 2000 COMPARED TO THREE MONTHS ENDED JANUARY 30,
1999
Total revenues decreased 18.4% to $598,000 in the first quarter of fiscal 2000
from $733,000 in the first quarter of fiscal 1999. The first quarter of fiscal
1999 was the national launch period for Oxyglobin. Revenues in the first quarter
of fiscal 2000 consisted primarily of Oxyglobin (veterinary product) sales.
Cost of revenues decreased 29.2% to $1,189,000 in the first quarter of fiscal
2000 from $1,680,000 in the first quarter of fiscal 1999. This decline is due to
a 20% reduction in unit sales volume and a reduction in manufacturing spending.
Research and development expenses increased 92.8% to $8,259,000 in the first
quarter of fiscal 2000 from $4,283,000 in the first quarter of fiscal 1999. This
increase was primarily due to the expenses associated with the pivotal Phase III
clinical trial activities for Hemopure.
Sales and marketing expenses decreased 20.6% to $579,000 in the first quarter of
fiscal 2000 from $729,000 in the first quarter of fiscal 1999. This decrease was
primarily attributable to expenses of normal operations in the first quarter of
fiscal 2000 compared to the national launch expenses for the same period last
year. Selling, marketing and distribution expenses and headcount have also been
reduced versus the same period last year.
General & administrative expenses increased 185.0% to $3,112,000 in the first
quarter of fiscal 2000 from $1,092,000 in the first quarter of fiscal 1999. The
increase is primarily due to non-cash compensation expense for stock options and
warrants issued to certain consultants and directors in August and November
1999. We are required to account for the fair market value of these options and
warrants, per FAS 123, amortized over the vesting period, and revalued each
quarter based on the closing stock price. For the first quarter of fiscal 2000,
we charged $1,700,000 to compensation expense versus no compensation expense for
the same period last year.
Total other income was $358,000 in the first quarter of fiscal 2000 compared to
$207,000 in the first quarter of fiscal 1999. This favorable change of $151,000
was primarily associated with a $201,000 increase in interest income.
<PAGE> 11
FORM 10-Q
PART I
ITEM 2
PAGE 9
BIOPURE CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
January 29, 2000
(Continued)
Basic net loss per common share for the current quarter was $0.55, compared with
a basic net loss per common share of $0.55 and a pro forma basic net loss per
common share of $0.36 for the same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
At January 29, 2000, we had current assets of $29,013,000, which consisted
primarily of $22,146,000 in cash and cash equivalents and $2,564,000 in net
inventory. At January 29, 2000, current liabilities were $10,755,000.
We have financed operations from inception primarily through sales of equity
securities, development and license agreement payments, interest income and
debt.
We have not been profitable since inception and had an accumulated deficit of
$262,534,000 as of January 29, 2000. We will continue to generate losses from
operations for the foreseeable future. We will explore opportunities to raise
capital through sales of equity and debt securities, potential partnerships,
bank borrowings or leasing arrangements.
We believe our current cash, cash equivalents and short-term investments should
be more than sufficient to meet our projected requirements through June 2000,
including the anticipated completion of our pivotal Phase III trial. On March
13, 2000, Biopure entered into a firm commitment underwriting agreement to sell
2,500,000 shares of class A common stock at $35.00 per share for estimated net
proceeds of $81,630,000. Our cash requirements may vary significantly from
current projections.
As of October 31, 1999, we had net operating loss carryforwards of approximately
$161,000,000 to offset future federal and state taxable income through 2019. Due
to the degree of uncertainty related to the ultimate realization of such prior
losses, no benefit has been recognized in our financial statements as of October
31, 1999. Utilization of such losses in future years may be limited under the
change of stock ownership rules of the Internal Revenue Service.
YEAR 2000 COMPUTER SYSTEMS COMPLIANCE
All of our computer hardware and software has been upgraded for Year 2000
compliance. All of our key vendors have provided assurance that they are Year
2000 compliant. While there were no Year 2000 related problems at the transition
in the Year 2000, we are maintaining our contingency plans in the event any
problems arise in the future.
<PAGE> 12
FORM 10-Q
PART I
ITEM 3
PAGE 10
BIOPURE CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
January 29, 2000
(Continued)
QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
The Company currently does not have any foreign currency exchange risks with the
exception of negligible exchange fluctuations associated with expenses for
clinical trial and regulatory activities outside of the United States. The
Company invests its cash and cash equivalents in high-grade commercial paper and
money market funds.
<PAGE> 13
FORM 10-Q
PART II
ITEM 1-6
PAGE 11
BIOPURE CORPORATION
Part II - Other Information
January 29, 2000
ITEM 1 - LEGAL PROCEEDINGS
Reference is made to Item 103 in the Corporation's Annual Report on Form 10-K.
On February 23, 2000, the Court reaffirmed entry of final judgment in favor of
Biopure and found that there is no reason to delay the plaintiff's appeal.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
Warrants and employee stock options to purchase 7,839 shares of Class A Common
Stock were exercised in the first quarter of fiscal 2000 for aggregate proceeds
to the Corporation of $7,492.50. The Corporation relied on the SEC Rule 701 and
Section 4(2) of the Securities Act of 1933.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits are listed in the accompanying Exhibit Index.
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
<PAGE> 14
FORM 10-Q
PART II
PAGE 12
SIGNATURES
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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.
BIOPURE CORPORATION
Date: March 14, 2000 By: /s/ Carl W. Rausch
-------------------
Carl W. Rausch
--------------
Chairman of the Board
Chief Executive Officer
Date: March 14, 2000 By: /s/ Francis H. Murphy
----------------------
Francis H. Murphy
-----------------
Chief Financial Officer
<PAGE> 15
EXHIBIT INDEX
Number Description
- ------ -----------
27 Financial Data Schedule for three
months ended January 29, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-29-2000
<EXCHANGE-RATE> 1
<CASH> 22,146
<SECURITIES> 0
<RECEIVABLES> 373
<ALLOWANCES> 37
<INVENTORY> 2,564
<CURRENT-ASSETS> 29,013
<PP&E> 44,398
<DEPRECIATION> 17,896
<TOTAL-ASSETS> 56,034
<CURRENT-LIABILITIES> 10,755
<BONDS> 0
0
0
<COMMON> 223
<OTHER-SE> 43,251
<TOTAL-LIABILITY-AND-EQUITY> 56,034
<SALES> 595
<TOTAL-REVENUES> 598
<CGS> 1,189
<TOTAL-COSTS> 1,189
<OTHER-EXPENSES> 8,259<F1>
<LOSS-PROVISION> (12)
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> (12,183)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,183)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,183)
<EPS-BASIC> (0.55)
<EPS-DILUTED> 0
<FN>
<F1>OTHER EXPENSES ARE FOR R&D INCURRED IN DEVELOPING PRODUCT FOR MARKET
</FN>
</TABLE>
