SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended January 31, Commission File Number 0-19122
1997
APHTON CORPORATION
(Exact name of registrant as specified in its charter)
California 95-3640931
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
PO BOX 1049, Woodland, CA. 95776
(address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code
(916)666-5226
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 14 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 No __
The number of shares of Common Stock outstanding as of the close
of
business on January 31, 1997:
Class Number of
Shares outstanding
Common Stock, no par value 12,913,149
APHTON CORPORATION
Index
Page
Part I - Financial Information----------------------------------3
Item 1. Financial Statements:
Balance Sheets - January 31, 1997 and April 30, 1996---------3
Statements of Operations - Three and Nine months ended
January 31, 1997 and 1996----------------------------------4
Statements of Stockholders' Equity - Three and Nine months
ended January 31, 1997 and the year ended April 30,1996----4
Statements of Cash Flows - Nine months ended January 31,
1997 and 1996----------------------------------------------5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations-------------------6
Part II - Other Information
Item 1. Legal Proceedings-------------------------------------8
Item 2. Changes in Securities---------------------------------8
Item 3. Defaults Upon Senior Securities-----------------------8
Item 4. Submission of Matters to a Vote of Security Holders---8
Item 5. Other Information-------------------------------------8
Item 6. Exhibits and Reports on Form 8-K-----------------------8
Signature Page--------------------------------------------------8
APHTON CORPORATION
Part I - Financial Information
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the financial statements
include all adjustments necessary to present fairly the financial position of
the Company as of January 31, 1997 and April 30, 1996 and the results of its
operations and its cash flows for the three and nine months ended January 31,
1997 and 1996. It is suggested that these financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's latest annual report on Form 10-K.
APHTON CORPORATION
Balance Sheets - January 31, 1997 and April 30, 1996
January 31, April 30,
1997 1996
Assets
Cash and short-term cash investments $4,385,789 $8,169,368
Other assets 278,256 184,837
--------- ---------
Total assets $4,664,043 $8,354,205
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and other $1,810,378 $1,312,784
--------- ---------
Total liabilities 1,810,378 1,312,784
Stockholders' Equity:
Common stock, no par value -
Authorized: 20,000,000 shares
Issued and outstanding:
12,913,149 shares at January 31,1997
and 12,911,149 at April 30, 1996 26,665,091 26,664,591
Purchase warrants 147,004 147,004
Accumulated deficit (23,958,430) (19,770,174)
---------- ----------
Total stockholders' equity 2,853,665 7,041,421
Total liabilities and stockholders'equity $4,664,043 $8,354,205
========= =========
APHTON CORPORATION
Statements of operations
for the three and nine months ended January 31, 1997 and 1996
Three Months Ended Nine Months Ended
January 31, January 31,
1997 1996 1997 1996
Revenue:
Dividend, interest and
other income $54,269 $122,473 $207,369 $336,328
------ ------- ------- -------
Total 54,269 122,473 207,369 336,328
Costs and Expenses:
General and
administrative 191,356 156,998 552,482 440,876
Research and
development 1,277,791 1,300,831 3,843,143 3,382,607
--------- --------- --------- ---------
Total costs and
expenses 1,469,147 1,457,829 4,395,625 3,823,483
Net loss $(1,414,878) $(1,335,356) $(4,188,256) $(3,487,155)
========= ========= ========= =========
Net loss per
common share $(0.11) $(0.10) $(0.32) $(0.28)
==== ==== ==== ====
Weighted average
number of common shares
outstanding 12,913,149 12,889,716 12,912,927 12,660,382
========== ========== ========== ==========
Statements of stockholders' equity
for the nine months ended January 31, 1997
and for the year ended April 30, 1996
Common Stock Purchase
Shares Amount Warrants Deficit Total
Balance, May 1,
1995 12,379,049 $21,656,566 $147,004 $(15,059,241) $6,744,329
Exercise of
purchase
warrants 32,100 8,025 -- -- 8,025
Sale of stock,
net 500,000 5,000,000 -- -- 5,000,000
Net loss -- -- -- (4,710,933) (4,710,933)
-------- --------- ------ --------- ---------
Balance, April
30, 1996 12,911,149 26,664,591 147,004 (19,770,174) 7,041,421
Exercise of
purchase
warrants 2,000 500 -- -- 500
Net loss -- -- -- (4,188,256) (4,188,256)
---------- --------- ------- ---------- ---------
Balance,
January 31,
1997 12,913,149 $26,665,091 $147,004 $(23,958,430) $2,853,665
========== ========== ======= ========== =========
APHTON CORPORATION
Statements of cash flows
for the nine months ended January 31, 1997 and 1996
Increase (decrease) in cash and short-term cash investments
Nine Months Ended
January, 31
1997 1996
Net cash used in operating
activities $(3,632,731) $(3,267,863)
Net cash provided from sale of stock 500 5,008,025
Net cash used in other non-operating
activities (151,350) (25,553)
--------- ---------
Net increase (decrease)
in cash and short-term cash investments (3,783,581) 1,714,609
Cash and short-term cash
investments:
Beginning of year 8,169,368 7,520,172
--------- ---------
End of period $4,385,787 $9,234,781
========= =========
Reconciliation of net loss to net cash
used in operating activities
Net loss $(4,188,256) $(3,487,155)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 42,736 34,553
Decrease (increase) in other assets 15,195 (21,139)
Increase (decrease) in
accounts payable 497,594 205,878
Net cash used in operating --------- ---------
activities $(3,632,731) $(3,267,863)
========= =========
Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
Aphton Corporation is a biopharmaceutical company developing products using its
innovative vaccine-like technology for neutralizing, or "blocking," hormones.
The precisely targeted hormones are those that participate in diseases, both
malignant and non-malignant, in (a) the gastrointestinal system and (b) the
reproductive system. These products, called immunogens, treat the following
diseases: (a) Gastroesophageal Reflux Disease (GERD, or severe heartburn),
ulcers and colorectal, stomach, liver and pancreatic cancers; (b) endometriosis
and prostate, breast, endometrial and ovarian cancers. Aphton has successfully
completed both the safety and dose-ranging phases of its Phase I/II clinical
trial with Gastrimmune with terminal cancer patients. Aphton demonstrated "Proof
of Concept and Technology in Humans," and "Reduction of Stomach Acid in Humans,"
by the desired 90% for GERD applications. Aphton has started its Phase III
clinical trial program to demonstrate the degree of efficacy of Gastrimmune in
the treatment of patients with cancers of the gastrointestinal tract. Aphton's
immunogen, Gonadimmune(TM), is applicable to breast and prostate cancer and has
successfully completed the toxicology testing (safety) required for human use.
Aphton plans to initiate a Phase I/II clinical trial for both breast cancer and
prostate cancer patients jointly with this immunogen. After recruitment of the
patients, this Phase I/II will be a relatively short trial, since much of the
dose-ranging data with Gastrimmune will be directly applicable to
Gonadimmune(TM). In addition, Aphton has exclusive manufacturing, distribution
and sales rights for an immunocontraceptive product, also utilizing vaccine-like
technology, which is now in a clinical trial funded by the World Health
Organization(WHO).
Operations
Aphton's activities during this quarter focused on: the Phase III clinical trial
program; manufacturing immunogens; preparing for the Phase I/II clinical trial
with breast and prostate cancer patients; further development of the
immunocontraceptive product now in Phase II clinical trial in Sweden; and
late-stage discussions with potential corporate partners for marketing one or
more products, in one or more countries, for both human and for animal
applications. Discussions with one or more such potential corporate partners are
now centered on the detailed commercial/financial terms and conditions (1).
Manufacturing and Marketing
Coupled with one or morestrategic alliances, Aphton plans to commercialize its
products by executing long-term contracts with third parties, including major
pharmaceutical companies, to manufacture its products and by contracting with
similar drug companies to promote, market, sell and distribute its products,
worldwide. The contract manufacturing approach utilizes the large and available
manufacturing resources of pharmaceutical companies. Aphton already contracted
with drug manufacturing sources to produce Aphton's immunogens for its
toxicology studies and clinical trials. Aphton's marketing, distribution and
sales approach similarly utilizes the large and effective sales forces and
resources of the major pharmaceutical companies. This maximizes Aphton's return
on revenues and minimizes its requirements and risks for capital formation,
personnel and plant and equipment.
Liquidity and Capital Resources
The Company has financed its operations principally through the sale of its
equity securities, both private and public, and, initially, R&D Limited
Partnerships. These funds provided the Company with the necessary resources to
equip and staff its research and development facilities, and acquire capital
equipment, finance product and technology development, complete preclinical
trials and the milestone Phase I/II clinical trials with patients with cancers
of the gastrointestinal tract; and begin its Phase III clinical trial program to
demonstrate the degree of efficacy of Gastrimmune in the treatment of such
cancers. Aphton anticipates that its existing capital resources, which are
composed primarily of cash and cash equivalents, will enable it to maintain its
current and planned operations through 1997, exclusive of the possibility of
obtaining additional funds through other means or sources, at an appropriate or
opportune time (2).
(1),(2) See Aphton's News Release dated
February 18, 1997, incorporated herewith.
N E W S R E L E A S E
APHTON CORPORATION
AND PASTEUR MERIEUX CONNAUGHT
FORM STRATEGIC ALLIANCE
Woodland, California, February 18, 1997
Aphton Corporation (NASDAQ NMS: APHT)
Aphton Corporation is pleased to announce the signing of an agreement with
Pasteur Merieux Connaught (Rhone-Poulenc Group), a leader in medical science and
research and the world's largest vaccine manufacturer, for a strategic alliance
for Aphton's immunotherapeutic product, Gastrimmune(TM), for all human cancer
applications, including colorectal, stomach, liver and pancreatic cancers. Under
the terms of the twenty-year agreement, Aphton will be responsible for product
development, clinical trials and regulatory agency approvals, and Pasteur
Merieux Connaught will be responsible for promotion, advertising, marketing,
distribution and sales of Gastrimmune(TM) in the United States, Canada, Europe
(including the C.I.S. countries) and Mexico. In addition, Aphton and Pasteur
Merieux Connaught will enter into agreements providing for the supply of
Gastrimmune(TM) to Pasteur Merieux Connaught and the supply of certain
components of Gastrimmune(TM) and other Aphton products to Aphton.
In consideration of the exclusive rights granted to Pasteur Merieux Connaught
under the agreement, Pasteur Merieux Connaught will provide upfront
consideration totaling $10 million to Aphton. In addition, Pasteur Merieux
Connaught will fund the costs associated with product introduction, promotion,
advertising and marketing throughout the territory covered by the agreement,
which are expected to be substantial. Finally, under the auspices of the
agreement Pasteur Merieux Connaught will provide Aphton with assistance in
connection with the development and registration of Gastrimmune(TM). Once sales
of Gastrimmune(TM) commence, under the terms of the agreement Aphton will
receive the majority of the profits from sales of Gastrimmune(TM), with the
balance of profits to be retained by Pasteur Merieux Connaught.
Discussions are continuing between Pasteur Merieux Connaught and Aphton for
marketing rights to Gastrimmune(TM) for Japan and other Asian markets. In
addition, Aphton will also continue discussions with Pasteur Merieux Connaught
and other drug companies to address the non-cancer, human applications of
Gastrimmune(TM) (e.g., GERD and ulcers) and Aphton's product Gonadimmune(TM) for
breast and prostate cancers.
Aphton Corporation is a biopharmaceutical company developing products using its
innovative vaccine-like technology for neutralizing hormones that participate in
gastrointestinal cancers and other diseases, as well. These other diseases
include: Gastroesophageal Reflux Disease (GERD); ulcers (both peptic and
pain-killer induced); endometriosis; and prostate, breast and endometrial
cancers. In addition, Aphton has exclusive worldwide manufacturing, distribution
and sales rights for an immunocontraceptive product, also utilizing vaccine-like
technology. This product is in a clinical trial funded by the World Health
Organization (WHO).
Pasteur Merieux Connaught (Rhone-Poulenc Group) is the new trade name of Pasteur
Merieux Serums and Vaccins SA (headquarters: Lyon, France) and all its
subsidiaries worldwide, including Connaught Laboratories which operates in North
America. As the world leader in vaccines, Pasteur Merieux Connaught contributes
to the protection and maintenance of human health by creating superior
immunological products for the prevention and treatment of infectious diseases
and cancers.
PART II - Other information
Item 1. Legal Proceedings. Not applicable.
Item 2. Changes in Securities. Not applicable.
Item 3. Defaults Upon Senior Securities. Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders. Not applicable.
Item 5. Other Information. Not applicable.
Item 6. Exhibits and Report on Form 8-K.
a. Exhibit Numbers
11.l Computation of net income per common and common
stock equivalent for the three and nine months ended
January 31, 1997 and 1996.
27 Financial Data Schedules
b. There were no reports on Form 8-K filed during the
quarter for which this report is filed.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
Aphton Corporation
Date: March 3, 1997 By: /s/ Philip C. Gevas
--------------------
Philip C. Gevas
Chairman, President and
Chief Executive Officer
APHTON CORPORATION
Reconciliation of shares outstanding for earnings per share calculations
Three Months Ended Nine Months Ended
January 31st January 31st
1997 1996 1997 1996
Primary Earnings
Per Share
Balance at
beginning of the
period. 12,913,149 12,879,049 12,911,149 12,379,049
Weighted average of
shares issued
during the period - 10,667 1,778 281,344
---------- ---------- ---------- ----------
Weighted average
shares-
primary earnings
per share 12,913,149 12,889,716 12,912,927 12,660,393
========== ========== ========== ==========
Net loss for the
period. $(1,414,878) $(1,335,356) $(4,188,256) $(3,487,155)
========= ========= ========= =========
Net loss per share
for the period $(0.11) $(0.10) $(0.32) $(0.28)
==== ==== ==== ====
Fully Diluted
Earnings Per
Share
Balance at
beginning of the
period. 12,913,149 12,879,049 12,911,149 12,379,049
Weighted average of
shares issued
during the period - 10,667 1,778 281,344
Incremental common
stock equivalents
from the treasury
stock method (720,665) (424,152) (720,665) (424,152)
Weighted average
shares-
fully diluted
shares (1) 12,192,484 12,465,564 12,192,262 12,236,241
========== ========== ========== ==========
Net loss for the
period. $(1,414,878) $(1,335,356) $(4,188,256) $(3,487,155)
========= ========= ========= =========
Net loss per fully
diluted share $(0.12) $(0.11) $(0.34) $(0.28)
==== ==== ==== ====
Notes:
Fully diluted earnings per share includes certain common stock equivalents that
are anti-dilutive and are therefore not reflected in primary earnings per share.
This calculation is provided as required by SEC regulations, even though the
fully diluted earnings per share amounts are not required to be disclosed in the
financial statements.
Exhibit 11.1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED APRIL 30, 1996 AND THE QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTER AND NINE MONTHS ENDED JANUARY 31, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000840319
<NAME> APHTON CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-1-1996
<PERIOD-END> JAN-31-1997
<CASH> 4,386
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,664
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 26,665
<OTHER-SE> 147
<TOTAL-LIABILITY-AND-EQUITY> 4,664
<SALES> 0
<TOTAL-REVENUES> 207
<CGS> 0
<TOTAL-COSTS> 4,396
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,188)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.34)
<FN>
<F1>
REGISTRANT HAS AN UNCLASSIFIED BALANCE SHEET
</FN>
</TABLE>
