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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
( ) Annual Report Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934 (Fee Required)
For the Fiscal Year Ended January 31, 1998
Or
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 (No Fee Required)
For the transition period from _____ to _____
Commission File No. 0-19122
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APHTON CORPORATION
444 Brickell Avenue, Suite 51-507
Miami, Florida 33131-2492
(305) 374-7338
Incorporated in I.R.S. Employer
Delaware Identification
No. 95-3640931
Securities Registered pursuant to Section 12(g) of
the Act:
Common Stock ($.001 par value)
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Title of Each Class
Number of shares of Common Stock ($.001 par value)
Outstanding as of February 28, 1998: 14,191,217
Aggregate market value of Common Stock ($.001 par
value) held by non-affiliates on February
28, 1998
based on the last sale price on February 27, 1998: $144,177,612
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein
and will not be contained to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. ( )
Documents Incorporated by Reference
Document Part of Form 10-K
Proxy Statement for the Annual Part III
Meeting of Stockholders
<PAGE>
PART I
Item 1. Business
The Company
Aphton Corporation is a biopharmaceutical company developing products using its
innovative vaccine-like technology for neutralizing hormones that participate in
gastrointestinal system and reproductive system cancer and non-cancer diseases;
and the prevention of pregnancy. Aphton has strategic alliances with Pasteur
Merieux Connaught (Rhone-Poulenc Group), Schering Plough Animal Health and the
World Health Organization (WHO). Aphton's Web page, describing the company, its
technology, products, strategic alliances, news releases and reports of
independent research analysts, can be visited at: www.aphton.com.
Basis of Approach
Aphton's approach to the treatment of major diseases is to employ (anti)
"hormone therapy." Aphton's hormone therapy involves neutralizing, or blocking,
hormones which play a critical role in diseases of the gastrointestinal and
reproduction systems. Aphton has selected the strategy of hormone therapy
because it has proved, over many years, to be efficacious in the treatment of
major diseases, both malignant and non-malignant; in short, because this
risk-averse strategy has been proven to be effective in humans. Well-documented
examples of such efficacy in humans are: blocking gastrin (Proglumide) and
histamine (Zantac, Tagamet), which in turn is stimulated by gastrin, in order to
reduce stomach acid to treat ulcerations of the esophagus and to heal or prevent
peptic ulcers; blocking estrogen (Tamoxifen) for breast cancer therapy and
blocking testosterone for prostate cancer therapy.
Results and Status
Safety / Dose Ranging
Aphton successfully completed both the safety and dose-ranging phases of its
Phase I/II clinical trial with its immunotherapeutic product Gastrimmune(TM)
with terminal cancer patients. Aphton demonstrated, during the dose-ranging
phase, that Gastrimmune(TM) is very potent, inducing large antibody responses in
terminally ill patients whose colon cancer had not only metastasized to the
liver, but were considered "end-Stage".
Survival
In January of 1998, Aphton announced increased survival results, which were
statistically significant, from a comparative analysis of its Phase I/II
clinical trials in which Aphton's anti-gastrin therapeutic vaccine
Gastrimmune(TM) was administered to patients with end-stage colorectal cancer
("advanced" Dukes D). The study was carried out at the Queens Medical Center,
University of Nottingham, UK. The group treated with Gastrimmune(TM) (the
treatment group) had 40 evaluable patients. The comparative placebo group was
from a parallel study at the same medical center, with the same principal
investigator as the Aphton study, carried out under the auspices of the Cancer
Research Campaign (CRC), a leading cancer research organization in the UK. The
placebo group from the CRC study had 77 evaluable patients, also with end-stage
colorectal cancer.
The treatment group and the placebo group had similar inclusion and exclusion
criteria. The treatment group had a higher proportion of patients with liver
metastases (87.5% treatment group vs. 65.0% placebo group) and a similar
incidence of lung metastases (22.5% treatment group vs. 26.0% placebo group). A
larger proportion of patients in the placebo group had received adjuvant
chemotherapy (16.9% placebo group vs. 7.5% treatment group) or chemotherapy for
advanced disease (27.2% placebo group vs. 17.5% treatment group), prior to entry
into the trial. Both the lower rate of liver metastases and the higher
proportion of antecedent chemotherapy in the placebo group, tended to confer on
the placebo group an expected, or theoretical, "survival advantage" over the
treatment group.
Results: The patients immunized with Gastrimmune(TM) had a median survival of
338 days vs. 184 days for the placebo group. The increased survival in the
Gastrimmune(TM) group was statistically significant both by univariate analysis,
with p=0.046 and by multivariate analysis, with p=0.026.
Aphton's Chief Medical Officer spoke for the Company when he said: "These
statistically significant survival results with Gastrimmune(TM), in such
terminally ill patients, are very encouraging".
Aphton's Phase III trial program encompasses the above gastrointestinal system
cancers. Since all of these are stimulated by gastrin, Aphton could and did
select stomach cancer as the first indication for which regulatory approval will
be sought, because: (a) survival time, the "end point," is short relative to
colon cancer (the patients selected in Phase I/II); (b) trial costs are
relatively low; (c) there is no current effective therapy; (d) the number of
patients, worldwide, is in the millions.
In 1997 Aphton signed an agreement with Pasteur Merieux Connaught ("PMC")
(Rhone-Poulenc Group), for a strategic alliance for all human cancer
applications of Gastrimmune(TM), including stomach, colorectal, liver,
esophageal and pancreatic cancers. Under the terms of the twenty-year agreement,
Aphton is responsible for product development, clinical trials and regulatory
agency approvals, and PMC is responsible for and will fund the promotion,
advertising, marketing, distribution and sales of Gastrimmune(TM) in North
America, Mexico and Europe. In addition, Aphton and PMC have entered and will
enter into further agreements providing for the supply of certain components of
Gastrimmune(TM) (as well as other Aphton products) from PMC to Aphton.
Discussions are continuing between PMC and Aphton for marketing rights to
Gastrimmune(TM) in Japan and elsewhere in Asia.
During the past year Aphton, together with its collaborating teams of leading
scientific researchers from universities in the UK, Canada and the US, presented
and published papers in international, peer-reviewed journals. Perhaps most
important to note in the context of Aphton's current clinical trial programs,
some of these papers demonstrated the central role that gastrin plays in: (a)
both gastrointestinal system cancers and in the genesis and progression of such
cancers; and (b) the ability of Aphton's product Gastrimmune(TM) to elicit
antibodies in the patient which block gastrin, inhibit tumor growth and increase
survival.
In August, 1997, Aphton announced that it formed an exclusive worldwide
strategic alliance with Schering-Plough Animal Health for the development,
clinical testing, manufacturing and marketing of Aphton's proprietary
anti-gastrin 17 immunogen, a veterinary product, that reduces stomach acid.
Equine ulcers was selected as the first indication to be pursued. Under the
terms of the agreement, Schering-Plough Animal Health will work closely with
Aphton's scientists and management to bring the anti-gastrin 17 immunogen to
market. Schering-Plough is responsible for all capital costs and financial
requirements, product development, clinical trials and marketing for each animal
health indication. Schering-Plough Animal Health and Aphton will share in all
product profits.
In November, 1997, Aphton Corporation announced that it was issued a US Patent
relating to Aphton's anti-Gonadotropin Releasing Hormone (GnRH) product
Gonadimmune(TM), for the therapeutic treatment of prostate cancer, breast
cancer, endometrial cancer and endometriosis. Gonadimmune(TM) induces antibodies
in the patient which neutralize (or block) GnRH. This, in turn, shuts down the
production of estrogen and testosterone in the gonads (a biological blocking
which is reversible in males and females). Estrogen fuels the growth of breast
cancer and testosterone fuels prostate cancer, both primary and metastatic
(spread) in each cancer. It has been known for decades that biological blockage,
like physical castration, is efficacious in the treatment of prostate and breast
cancers. Gonadimmune(TM), induces such biological blockage.
Gonadimmune(TM) has successfully completed the toxicology testing (safety)
required for human use, having previously completed extensive and successful
preclinical animal testing (safety and efficacy). These efficacy tests, which
compared Gonadimmune(TM) to therapeutic drugs currently used in humans, were
reported upon in the scientific literature and met or exceeded all of Aphton's
expectations. Aphton plans to initiate Phase I/II clinical trials with patients
with breast cancer, prostate cancer and also patients with other diseases, as
well. The timing will depend upon the results of the negotiations now underway
with major drug companies for a strategic alliance for Gonadimmune(TM). These
negotiations rely significantly on the patent which issued to Aphton in
November, 1997, in addition to the product development at Aphton which preceded
it.
It is also known that biological blockage of GnRH renders males and females
infertile. Aphton's product for companion pets and food animals is the subject
of a possible strategic alliance with a major drug company. Aphton has exclusive
manufacturing, distribution and sales rights for an immunocontraceptive product
which also utilizes vaccine-like technology. Aphton is collaborating with the
World Health Organization (WHO) on the clinical development of the product. This
product will be sold, when approved, worldwide in both the developed and the
developing countries and will confer protective immunity and prevent pregnancy.
Aphton's strengths include its innovative technology and products which
specifically neutralize, or block, hormones in a novel manner, providing
significant benefits and advantages over conventional drugs (blockers), some of
which have severe disadvantages. Aphton's products, of course, must proceed
successfully through the clinical trials and regulatory process in the same
manner as many newly discovered drugs whose mode of action have not been
demonstrated previously to be clinically effective in humans. However, Aphton
believes that employing a strategy of therapeutic approach that has been proven
effective in humans significantly reduces risk and enhances the likelihood of:
clinical trials success; obtaining regulatory agency approval; achieving
commercial success in the market place; and, benefiting large number of patients
suffering from these serious diseases.
In view of the foregoing, Aphton believes that its crucial task, in addition to
proper planning and execution during clinical trials, is to demonstrate in human
trials that each product induces the patient's immune system to neutralize, or
block, its targeted hormone. Aphton believes that therapeutic efficacy should
then follow and be demonstrated in the pivotal Phase III trials, given the
history of success and efficacy for hormone therapy in humans, in which the
targeted hormone is blocked.
Technical Background
Aphton has developed an innovative technology to create immunogens, which are
vaccine-like products. They harness and direct the body's immune system to
generate antibodies which bind to specific peptide portions of the administered
immunogen. These antibodies cross-react (bind) with targeted "self" molecules,
such as hormones, when they encounter that portion of the hormone which is
similar to the peptide portion of the administered immunogen. Because diseases
involving hormones are not pathogen (microorganism) driven, they have not been
viewed traditionally as being susceptible to treatment using the body's immune
system. Instead, the traditional pharmaceutical industry approach to controlling
these diseases has been to treat them with synthetic drugs. Unfortunately, these
drugs typically must be administered in relatively large quantities and on a
daily or more frequent basis, giving rise to patient compliance problems, and
often have adverse side effects. In contrast, Aphton's immunogens create a
strong antibody response from the patient's own immune system (which effectively
becomes a "drug factory") and have a more potent and longer-lasting therapeutic
effect. Aphton's technology enables it to specifically target a small sequence
within the hormone to be neutralized, in order to achieve a specific desired
biological and physiological response. This approach directs all of the
immunogen-induced antibodies to the targeted hormone sequence, and at the same
time: minimizes the possibility of undesired physiological consequences through
cross-reactivity of the immunogen with any self molecule or portion thereof,
other than the specifically-targeted hormone sequence; and avoids the
possibility of autoimmune disease where the antibody production is not "turned
off." This is because the antibody production can only be "turned on and kept
on" in the presence of the "carrier" portion of the immunogen (see below).
Indeed, without a "booster shot" of the immunogen, the antibodies wane(diminish)
and are cleared by the body, over time. Aphton's products may be administered in
much smaller dosages and on a much less frequent basis than pharmaceutical
drugs; typically twice a year. This virtually eliminates the problem of patient
compliance, which is associated with pharmaceutical drugs.
Aphton's Gastrimmune(TM), for example, consists of:
(a) A synthetic peptide, which is similar to a portion of the
hormone G17 which is targeted to be neutralized (i.e., blocked
or prevented from reaching and binding to its receptor).
(b) A "carrier," Diphtheria Toxoid (DT), foreign to the body, to
which a number of the synthetic peptides in (a) are chemically
bound (conjugated). This makes them available to be both bound
to and, together with the DT, internalized by "B-cells." DT
contains the structures (epitopes) which, when internalized
and "presented" on B-cells and Macrophages, are bound to by
"T-cells." By binding to these foreign epitopes, these
T-cells, in turn, proliferate and signal the B-cells which
bind to the peptide (a) to proliferate and to "mass-produce"
the desired antibodies (all of which bind to the peptide (a)).
(c) A liquid slow-release suspender which contains (a) and (b).
Gastrimmune(TM), which is administered by injection, with booster shots at
six-month intervals, thus induces antibodies in the patient which bind with
peptide (a) and which also bind (cross-react) with and neutralize G17 (when they
encounter that portion on G17 which is similar to peptide (a)). G17 is known to
drive (or fuel) colorectal, stomach, liver and pancreatic cancer. Neutralizing
G17 inhibits both the growth and metastasis (spread) of these gastrointestinal
cancers. In addition, Gastrimmune(TM) uniquely neutralizes glycine-extended G17,
which has also been shown, recently, to fuel these gastrointestinal system
cancers.
G17 is also responsible for the production of the bulk of stomach acid
(approximately 90% in humans), the reduction of which is therapeutic for GERD
and for both peptic ulcers and NSAID (e.g., aspirin/Ibuprofen)-induced ulcers.
Aphton's Gonadimmune(TM) is very similarly constructed. In this case, the
synthetic peptide sequence in (a) represents the hormone GnRH, which is targeted
to be neutralized. Neutralizing GnRH inhibits the production of estrogen,
progesterone and testosterone. Inhibiting estrogen (and progesterone) is
therapeutic for women with breast cancer, endometrial cancer, ovarian cancer and
endometriosis. Inhibiting testosterone is therapeutic for men with prostate
cancer.
Aphton's Immunocontraceptive is also very similarly constructed. In this case,
the so-called "C-terminal" peptide portion of the hormone hCG (which is targeted
to be neutralized) is synthesized. (Not using a larger portion of the hCG
molecule avoids inducing unwanted antibodies against other hormones in the woman
(LH and FSH), which share domains with some portions of the hCG.) Pregnancy is
prevented by immunizing the woman; this induces antibodies which bind to and
neutralize hCG.
Strategic Alliances
During the previous year, discussions with potential strategic allies (corporate
partners) culminated in the above discussed agreement with Pasteur Merieux
Connaught (Rhone-Poulenc Group) for all human cancer applications of
Gastrimmune(TM).
Also, during the previous year, discussions with one or more drug companies for
animal healthcare applications for both Gonadimmune(TM) and Gastrimmune(TM)
cleared the scientific hurdles (due diligence).
During the past year, discussions on commercial terms and considerations
culminated in the above discussed agreement with Schering-Plough Animal Health
Division for all animal applications of Gastrimmune(TM).
During the past year, discussions with potential strategic allies (corporate
partners) proceeded beyond exploratory discussions and cleared the hurdle of
scientific due diligence considerations. Discussions are now in final stages
regarding the commercial terms and considerations of a possible agreement.
In January, 1995, Aphton announced a major relationship with the World Health
Organization(WHO), for the immunocontraceptive product, also discussed above.
Manufacturing and Marketing
Absent or together with a strategic alliance or corporate partnering
relationship (such as those with Pasteur Merieux Connaught and Schering-Plough)
which may impact on the following, 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 market, sell and distribute its products.
The contract manufacturing approach takes advantage of the large and available
manufacturing resources of pharmaceutical industry companies. Aphton has
contracted with drug manufacturing sources which have provided Aphton's
immunogens for toxicology studies and clinical trials. Aphton's contract
marketing, distribution and sales strategy, as exemplified by the Pasteur
Merieux Connaught and Schering-Plough Animal Health agreements, similarly takes
advantage of the large and effective sales forces of the major pharmaceutical
companies. Aphton's capital formation, personnel and plant and equipment
requirements, together with associated risks, are clearly greatly reduced by
such a commercialization strategy. This significantly enhances Aphton's ability
to achieve rapid market penetration and growth and to exploit the benefits of
the patent life of its products.
It should be noted that contract manufacturing and contract marketing differ
significantly from the normal "licensing" of products to third parties. In the
former, Aphton can retain a significantly larger degree of control, share of
profits and thus earnings. Under typical licensing (with royalty payments which
are generally a small percentage of sales), the opposite would be the case. By
avoiding the industry norm of "corporate partnering" with drug companies in its
earlier development stages, and by both undertaking and overcoming the
associated risks, Aphton has earned and retained its options and the ability to
optimally carry out its commercialization approach. This strategy was
successfully validated with Aphton's agreements with Pasteur Merieux Connaught
and Schering-Plough Animal Health.
Patents and Trade Secrets
Proprietary protection for Aphton's products is central to the Company's
business. Aphton's policy is to protect its technology by, among other things,
filing patent applications in worldwide markets of interest for products which
it considers important and intends to market. In that regard, Aphton has filed
patent applications and has continued to receive patents for its products, both
domestic and foreign. Additional patent applications are in preparation or being
filed or are pending in the U.S. and in other countries. Aphton intends to
continue filing additional patent applications relating to its products and,
when appropriate, improvements in its technology and other specific products
that it develops.
Regulation
Government regulation in the U.S. and other countries is a significant factor in
the development and marketing of all of the Company's products and in the
Company's ongoing research and development activities. International regulations
governing human clinical studies can vary widely, depending on the specific
country. In particular, regulatory approvals in certain countries, including
countries in the European Union with a combined population larger than that of
the U.S., often result in more rapid product approvals than in the U.S. Aphton
will conduct trials with some of its products commencing in the UK (where much
of the data is expected to be readily acceptable in the U.S., given the high
standards of medicine and clinical trials monitoring in the UK), in addition to
conducting trials in the U.S. and elsewhere in the world, if, and as, required
or advantageous. Regulatory approval, of course, is required for marketing a
product in the U.S. and other countries.
Clinical trials of new drugs for non-"life-threatening" diseases are typically
conducted in three sequential phases. Phase I studies typically test the product
for safety tolerance. Phase II studies involve limited trials to determine the
optimal dose and frequency of administration and an indication of efficacy for
defined indications. When the product has been found safe and shows promise of
efficacy, further (pivotal) trials are undertaken in Phase III to fully evaluate
clinical efficacy and to test further for safety using a large number of
patients at geographically diverse medical centers.
Based on discussions with the regulatory authorities, Aphton believes that its
cancer immunogens will be placed on a significantly less expensive "fast track,"
because they treat "life-threatening" diseases. The "fast track" regimen
shortens the time for a clinical trial, thus offering Aphton the potential for a
more rapid approval process for these products.
Directors, Executive Officers and Employees
The directors and executive officers of the Company are set forth below:
Name: Position(s):
Philip C. Gevas Chairman of the Board of Directors,
Chief Executive Officer
and President
William A. Hasler Vice Chairman of the Board of
Directors and Chairman of
Audit Committee
Robert S. Basso Chairman of Compensation Committee
and Director
Nicholas John Stathis, Esq. Director
Dov Michaeli, M.D., Ph.D. Senior Vice President,
Director of Medical Science
and Chief Medical Officer
Paul Broome, MB., Ch.B., MFPM Vice President and Medical Director,
Clinical Trials and
Regulatory Affairs
Richard Ascione, Ph.D. Vice President, Director of
Laboratory of Molecular Medicine
Peter Blackburn Ph.D. Vice President, Program Development
Donald Henderson Regional Managing Director,
Finance and Administration
Frederick W. Jacobs Treasurer and Chief
Accounting Officer
Philip C. Gevas--Chairman of the Board of Directors, has served as Director,
President and Chief Executive Officer since co-founding Aphton in 1981.
Previously, Mr. Gevas had over ten years experience in executive management,
including finance, manufacturing and marketing, following ten years of
experience as a project scientist/engineer. Mr. Gevas conceived and directed the
development of Aphton's inventions for the treatment of colorectal, pancreatic,
liver, esophageal and stomach cancers, GERD and chronic peptic ulcers. He is a
co-inventor for Aphton's human contraceptive product (issued patent). Mr. Gevas
has the degrees of M.E., and M.S. Mathematics (Stevens Institute of Technology)
and M.S.E.E. (Ohio State University).
William A. Hasler-- In October, 1996 Mr. Hasler was elected Vice Chairman of the
Company. Mr. Hasler has been a Director of the Company since October, 1991.
Since 1991, Mr. Hasler has been the Dean of both the Graduate School and
Undergraduate School of Business at the University of California, Berkeley. Dean
Hasler was formerly Vice Chairman of KPMG Peat Marwick, responsible for
management consulting worldwide. Dean Hasler is also a director of The Gap,
Inc., Walker Interactive Systems, Tenera, Inc., TCSI Corporation and is Public
Governor of the Pacific Exchange.
Robert S. Basso--Director of the Company since February, 1988, has been a
Director of the Company or of its now dissolved subsidiary, Aphton Development
Corporation, since 1984. Mr. Basso has been President, Correspondent Services
Corporation (CSC) since 1990. Formerly, Mr. Basso was President, Broadcort
Capital Corporation and Managing Director, Merrill Lynch, Pierce, Fenner &
Smith.
Nicholas John Stathis, Esq.--Director of the Company since January, 1994. Mr.
Stathis is retired from the law firm of White & Case, where he was of counsel
from 1989 to 1993. Prior to that he was partner at Botein, Hays & Sklar, from
1984 to 1989. Previously, Mr. Stathis was a partner successively at Watson,
Leavenworth, Kelton & Taggart and Hopgood, Calimafde, Kalil, Blaustein &
Judlowe. Since 1954, Mr. Stathis has been engaged in the practice of all phases
of patent, trademark, copyright and unfair competition law, including conduct of
litigation and counseling of clients.
Dov Michaeli, M.D. (University of California, San Francisco), Ph.D. (University
of California, Berkeley)--Senior Vice President, Director of Medical Science and
Chief Medical Officer. Dr. Michaeli joined Aphton as a senior member of the
management team and was elected Vice President in 1989. Previously, Dr. Michaeli
was a Professor for twenty years at the University of California, San Francisco
(Departments of Biochemistry and Surgery). He has served as a member of Aphton's
Scientific Advisory Board since 1988. He has over thirty years of experience in
scientific research and in clinical medicine. This experience includes extensive
consulting on human clinical trials sponsored by drug companies. Dr. Michaeli
has five patents and over fifty published articles and book chapters.
Paul Broome, MB., Ch.B., MFPM (University of Sheffield Medical School, UK)--Vice
President and Medical Director for Clinical Trials and Regulatory Affairs. Dr.
Broome's more than twenty years of clinical experience includes, notably, the
responsibility at Glaxo for clinical trials which provided data for US (FDA) and
UK (MCA) registration of the indication for ranitidine (Zantac) as maintenance
therapy, which became the world's largest selling drug. Later, Dr. Broome was
Medical Director for BIOS, a leading company in the UK which provides services
ranging from consulting and R&D through clinical trials, regulatory affairs and
the registration of drugs for marketing approval from government regulatory
agencies.
Richard Ascione, Ph.D. (Princeton University), Vice President, is Aphton's
Director of the Laboratory of Molecular Medicine. Dr. Ascione directs R&D in the
area of Molecular Biology and works closely with Aphton's Laboratory of
Immunobiology in research and product development. Previously, Dr. Ascione was
Professor in the Department of Experimental Oncology and Associate Director of
the Center for Molecular and Structural Biology at the Hollings Cancer Center
and the Medical University of South Carolina, respectively, in Charleston, South
Carolina. Prior to that, Dr. Ascione was with the National Cancer Institute
(NCI) of the National Institutes of Health (NIH) for approximately twenty years,
the last ten of which he served as Deputy Chief of NCI's Laboratory of Molecular
Oncology. Dr. Ascione has published over sixty-five peer-reviewed papers,
several book chapters and articles related to the molecular biology of cancer,
human retroviruses and HIV/AIDS.
Peter Blackburn, Ph.D.-Vice President, Program Development of the Company since
September, 1997. Previously Dr. Blackburn was Executive Vice President, Applied
Microbiology, Inc., where he was employed for over ten years. His
responsibilities encompassed those of a chief operating officer, engaged in the
R&D and manufacture of antimicrobial peptides and pharmaceutical grade bulk
drug. Earlier, and for ten years, he was engaged in academic research at the
Rockefeller University, New York, in protein chemistry in the laboratory of two
recipients of the Nobel Prize for Chemistry. Dr. Blackburn has published
numerous papers in peer-reviewed journals and is the inventor on numerous U.S.
and foreign patents.
Donald Henderson-Regional Managing Director, Finance and Administration of the
Company since February, 1998. Mr. Henderson has held management positions with
Warner Lambert and Fisons, including postings to Australia and Japan, and was
most recently Director of Finance and Administration for Europe/Middle
East/Africa for the Australian based pharmaceuticals group Fauldings.
The Company's Bylaws authorize the Board of Directors to fix the number of
directors from time to time by vote.
All directors currently hold office until the next annual meeting of
shareholders and until their successors have been elected. Officers are elected
to serve, subject to the discretion of the Board of Directors, until their
successors are appointed. There are no family relationships among executive
officers or directors of the Company.
Directors do not receive any fees for service on the Board. Board members are
reimbursed for their expenses for each meeting attended.
The Company's Audit Committee is composed of Messrs. Hasler and Basso. The
Compensation Committee is composed of Messrs. Basso and Hasler.
Messrs. Basso, Hasler and Stathis are non-executive Board Members.
Scientific Advisory Board
The members of the Scientific Advisory Board, which functions primarily as a
review board for research projects and for product development programs, in
addition to Philip C. Gevas, Drs. Dov Michaeli, Paul Broome and Richard Ascione,
are:
Richard L. Littenberg, M.D. A co-founder of the Company, Dr. Littenberg is a
member of Aphton's Scientific Advisory and Program Review Board and is a
co-inventor of three Aphton patent filings. Dr. Littenberg is Board Certified in
both Internal Medicine and Nuclear Medicine and a Diplomate of the National
Board of Medical Examiners and is President and Chief Executive Officer of The
Honolulu Medical Group (HMG). Dr. Littenberg received his M.D. degree from the
State University of New York. He has practiced internal and nuclear medicine for
over seventeen years. He has participated in clinical trials for major
pharmaceutical companies and has engaged in both cancer and cardiovascular
research.
Eliezer Benjamini, Ph.D., University of California, Berkeley. A co-founder of
the Company, Dr. Benjamini is the Chairman of the Scientific Advisory Board. Dr.
Benjamini is a co-inventor of two of the Company's issued US patents. Dr.
Benjamini has been a professor in the Department of Medical Microbiology and
Immunology at the University of California, Davis, for over twenty years. He now
holds the title of Professor Emeritus. Dr. Benjamini is widely recognized in the
field of immunology. He has received awards from industry and academia,
including the Distinguished Scientists Award in Virology and Immunology (1984)
which was given for his pioneering work in the development of synthetic peptide
vaccines. Dr. Benjamini has over one hundred publications and is co-author, with
Dr. Sidney Leskowitz, of Immunology: A Short Course, a textbook for medical
students.
Robert J. Scibienski, Ph.D., University of California, Los Angeles. A co-founder
of the Company, Dr. Scibienski focuses on immunology-related basic technology at
the Company, currently addressing immune system regulation and antigen
presentation. Dr. Scibienski is a co-inventor of both issued US patents and a
number of patent applications of the Company. Dr. Scibienski is Associate
Professor, Department of Medical Microbiology and Immunology and Director of the
campus-wide Central Hybridoma Facility at the University of California, Davis.
Dr. Scibienski has over thirty publications.
Demosthenes Pappagianis, M.D. (Stanford School of Medicine), Ph.D. (University
of California, Berkeley). A co-founder of the Company, Dr. Pappagianis is its
principal resource on the mechanisms of infection of pathogens and of host
defenses. Professor and Chairman (1967-1985) in the Department of Medical
Microbiology and Immunology at the University of California, Davis, Dr.
Pappagianis is widely recognized in the field of infectious diseases. He is a
Diplomate of the National Board of Medical Examiners and Diplomate of the
American Board of Medical Microbiology. In addition, he is a Fellow of the
Infectious Diseases Society of America and an Associate Member of the Armed
Forces Epidemiological Board. Dr. Pappagianis has over one hundred publications.
Vernon C. Stevens, Ph.D. Professor of Reproductive Biology, Ohio State
University. Dr. Stevens is recognized worldwide as one of the pre-eminent
authorities on vaccines for contraception and synthetic peptide based immunogen
formulations. He pioneered the development of synthetic peptide immunogens for
human use, particularly for Aphton's immunocontraceptive vaccine under
development with the World Health Organization(WHO).
Other scientists (consultants) participate when their expertise is needed on a
specific project.
Scientific Staff
In addition to the founding scientists (Drs. Benjamini, Scibienski and
Pappagianis), the Company's full-time scientific staff includes the following:
Dov Michaeli, M.D., Ph.D. - see "Directors and Executive Officers."
Paul Broome, MB., Ch.B., MFPM, - see "Directors and Executive Officers."
Richard Ascione, Ph.D. - see "Directors and Executive Officers."
Stephen L. Karr, Jr., Ph.D., University of California, Davis. Dr. Karr joined
Aphton in 1983 and serves in a number of capacities, namely:. Divisional Vice
President and General Manager, Laboratory of Immunobiology. Responsible for:
daily operations; program planning, budgeting and control; and Project Manager,
in which capacity he is responsible for the experimental design and
implementation of special projects. Dr. Karr, who is also an
immunoparasitologist, is an inventor of two of the Company's issued patents and
three pending patent applications. Dr. Karr has sixteen publications and had
presented twenty papers prior to joining the Company.
Stephen Grimes, Ph.D., University of California, Davis. Dr. Grimes, Divisional
Vice President, Immunology, is responsible for research and development in
immunology and the experimental design and implementation of immunology-based
projects. He also serves as the principal scientific deputy to Dr. Michaeli and
Dr. Broome for Aphton's clinical trials projects. Dr. Grimes is a co-inventor of
issued U.S. patents of the Company and of additional patents in preparation and
pending. Dr. Grimes came directly to the Company in 1981 upon finishing his
doctoral dissertation under Dr. Scibienski at the University of California,
Davis.
Both Dr. Karr and Dr. Grimes support closely the office of Program Development
and Aphton's Product Development/Manufacturing Team in the UK, which includes
former SmithKline Beecham employees with many years of development /
manufacturing experience.
Intellectual Property
The Company's policy, in its early years, had been to protect and maximize the
value of its intellectual property assets by withholding papers and publications
from the scientific and medical literature until the subject matter is under
sufficient patent protection. This policy has proven to be successful, as
evidenced by the broad and growing range of patents and claims which have been
issued to Aphton in countries around the world and upon which Aphton's strategic
alliances rely. Aphton, together with its scientific collaborators at leading
Universities and Medical Centers in the UK, Canada and the US, has now published
numerous papers in peer-reviewed scientific journals and is preparing or
submitting for publication additional scientific papers, in a carefully
controlled manner designed to enhance the interests of the shareholders.
The Company employs approximately twenty-five individuals directly and has
numerous others under contracts with other supporting organizations.
Item 2. Properties
The Company has noncancelable facilities leases expiring at various dates
through fiscal 2003. The leases provide various options to renew. The minimum
rental commitments for the fiscal years 1999 through 2003, respectively, are,
$115,000, $101,000, $103,000, $80,000, $22,000 and none thereafter. Rental
expense for these leases for the nine months ended January 31, 1998 and for the
years ended April 30, 1997, 1996 and 1995, was approximately $80,000, $108,000,
$108,000 and $87,000.
Item 3. Legal Proceedings
The Company is not involved, and has never been involved, in any litigation,
administrative or governmental proceeding and none is believed by the Company's
management to be threatened.
Item 4. Submission of Matters to a Vote of Security Holders.
A special meeting of shareholders of was held November 5, 1997. The shareholders
approved the merger of Aphton California into Aphton Delaware and related
changes to the Company's Certificate of Incorporation and Bylaws. As part of the
reincorporation the Company's fiscal year was changed from April 30 to January
31.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Common Stock of Aphton has been trading on Nasdaq's National Market System
since June 2, 1994. Aphton had been traded in the Nasdaq Small-Cap Issues
(formerly over-the-counter) market since April 1, 1991, the date of Aphton's
initial public offering. The following table sets forth high and low price
information, provided by Nasdaq Historical Research Department, for each full
quarter beginning after April 30, 1996. The Company's Common Stock is traded
under the symbol "APHT."
Fiscal Year Ended April 30, 1997: High Low
1st Quarter $29 1/4 $ 15 1/2
2nd Quarter 20 1/2 13 1/2
3rd Quarter 22 1/2 16 1/2
4th Quarter 23 3/4 11 3/4
Fiscal Period Ended January 31, 1998:
1st Quarter $15 1/2 $ 11 1/2
2nd Quarter 16 1/2 10 1/4
3rd Quarter 12 3/4 9 3/8
Quarter ended April 30, 1998: 15 11 7/16
As of January 31, 1998, Aphton had approximately 300 shareholders of record and
approximately 4,000 beneficial holders of its Common Stock.
Item 6. Selected Financial Data
SELECTED FINANCIAL INFORMATION
The selected financial data set forth below with respect to the Company's
statements of operations and balance sheets for the nine months ended January
31, 1998 and each of the four years in the period ended April 30, 1997, are
derived from audited financial statements and should be read together with the
financial statements and related notes included in this Annual Report. All
selected financial data are not covered by the independent accountants' report.
The data presented below should be read together with the financial statements,
related notes, and other financial information included herein.
SUMMARY FINANCIAL INFORMATION
(In thousands except for per share data)
Nine Months Ended
January 31, Year Ended April 30,
Statement of Operations
Data: 1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
Revenue $ 534 $ 271 $ 438 $ 463 $ 62 $ 125
Net Loss (6,605) (5,629) (4,711) (3,930) (3,139) (2,094)
Research & Development
Expenditures 4,963 5,206 4,501 3,905 2,924 2,085
Net Loss per Share $(0.48) $(0.44) $(0.37) $(0.32) $(0.28) $(0.20)
Weighted Average Shares
Outstanding 13,733 12,913 12,723 12,378 11,268 10,593
January 31, Year Ended April 30,
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
Balance Sheet Data:
Cash and Short-Term
Cash Investments $14,226 $8,846 $8,169 $7,520 $11,157 $2,781
Total Assets 23,580 18,362 8,354 7,741 11,290 2,924
Total Liabilities 12,273 15,851 1,313 997 619 137
Accumulated Deficit (32,004) (25,399) (19,770) (15,059) (11,130) (7,991)
Total Stockholders' 11,307 2,511 7,041 6,744 10,671 2,787
Equity
Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Nine Months Ended January 31, 1998 and the Fiscal Years
Ended April 30, 1997, 1996 and 1995
During the nine months ended January 31, 1998, the Company reported a net loss
of $6,604,544, including non-cash interest expense of $1,566,971 relating to the
convertible debenture described below. During this period the Company had no
contract revenues. Investment earnings on cash increased $262,738 to $533,908
due to higher average cash balances. Research and development expenditures were
$4,963,481 which represented an increase in average quarterly research and
development expenditures from about $1.3 million per quarter in the year ended
April 30, 1997 to about $1.7 million per quarter for the nine months ended
January 31, 1998. This increase was budgeted for and related to the on-going and
planned additional (human) Clinical Trials.
During the fiscal year ended April 30, 1997, the Company reported a net loss of
$5,628,966. During this period the Company had no contract revenues. Investment
earnings on cash decreased to $271,170 due to lower average cash balances.
Research and development expenditures increased to $5,205,854. This increase was
budgeted for and related to the on-going and planned additional (human) Clinical
Trials.
During the fiscal year ended April 30, 1996, the Company reported a net loss of
$4,710,933. During this period the Company had no contract revenues. Investment
earnings on cash decreased $24,681 to $438,812. Research and development
expenditures increased $596,310 to $4,500,877. This increase was budgeted for
and related to the on-going and planned additional (human) Clinical Trials.
During the fiscal year ended April 30, 1995, the Company reported a net loss of
$3,929,709. During this period the Company had no contract revenues. Investment
earnings on cash increased $401,162 to $463,493 due to higher average cash
balances. Research and development expenditures increased $980,342 to
$3,904,567. This increase was budgeted for and related to the on-going and
planned additional (human) Clinical Trials.
The Financial Accounting Standards Board (FASB) issued several new
pronouncements in 1997, including SFAS No. 130, "Reporting Comprehensive
Income"; and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." SFAS No. 130 states that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. SFAS No. 131 requires disclosures regarding segments
of an enterprise and related information that reflects the different types of
business activities in which the enterprise engages and the different economic
environments in which it operates. The adoption of these standards during the
Company's fiscal year ended January 31, 1999 is not expected to have a material
effect on the Company's financial statements. In January 1998, the FASB also
issued SFAS No. 132, "Employers' Disclosure About Pensions and Other
Postretirement Benefits" which is not applicable to the Company since the
Company does not provide such benefits.
The Company is aware of the issues associated with the programming code in
existing digital computer systems as the year 2000 approaches. The "year 2000"
problem is pervasive and complex, extending beyond purely computational
considerations, to control systems, as well. Virtually every computer, or
computer-chip driven operation will be affected in some way by the rollover of
the two digit year value to 00. The issue is whether computer systems will
properly recognize date sensitive information when the year changes to 2000.
Systems that do not properly recognize such information could generate erroneous
data or cause a system to fail. Management plans to implement any necessary
vendor upgrades and modifications to assure continued functionality with respect
to the widely discussed software problems associated with the year 2000. At
present, management does not expect that material incremental costs will be
incurred in the aggregate or in any single future year.
Inflation and changing prices have not had a significant effect on continuing
operations and are not expected to have any material effect in the foreseeable
future. Dividend, interest and other income were primarily derived from
money-market accounts.
Liquidity and Capital Resources
The Company had financed its operations since inception through the sale of its
equity securities and, to a lesser extent, operating revenues from R&D limited
partnerships to conduct research and development. These funds provided the
Company with the resources to acquire staff, construct its research and
development facility, acquire capital equipment and to finance technology and
product development, manufacturing and clinical trials. In April 1997, the
Company issued a $5,000,000 7% senior redeemable convertible debenture. During
the nine months ended January 31, 1998 the debenture and related interest was
converted into 559,068 shares of the Company's common stock. Non-cash interest
on such debt amounted to approximately $1,567,000 in the nine months ended
January 31, 1998 and $15,000 in fiscal 1997. The recorded cost of the debenture,
at April, 30, 1997, approximates market value.
On February 14, 1997 Aphton signed an agreement with Pasteur Merieux Connaught
("PMC") (Rhone-Poulenc Group), a leader in medical science and research and the
world's largest vaccine manufacturer and marketer, for a strategic alliance for
all human cancer applications of the Company's product Gastrimmune(TM) including
stomach, colorectal, liver and pancreatic cancers. Under the terms of the
twenty-year license and co-promotion agreement, Aphton will be responsible for
product development, clinical trials and regulatory agency approvals, and PMC
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 PMC will enter into
agreements providing for: (a) the supply of Gastrimmune(TM) from Aphton to PMC;
and (b) the supply of certain components of Gastrimmune(TM) (as well as other
Aphton products) from PMC to Aphton. PMC will fund the costs associated with
product introduction, promotion, advertising and marketing throughout the
territory covered by the agreement. Under the terms of the agreement, in
addition to upfront consideration aggregating $10 million including $1 million
cash and the supply commitment (of material suitable for human use) of $9
million, Aphton will receive the majority of the profits from sales of
Gastrimmune(TM) with the balance of profits to be retained by PMC.
The supply commitment of materials suitable for human use consists of Diphtheria
Toxoid and/or Tetanus Toxoid. Aphton may use some or all of the unconditional
supply commitment in the Product under development with PMC or Aphton may use
some or all of the supply commitment on other current product lines or on
Research and Development. The supply commitment of material suitable for human
use is not readily obtained on the open market in such large quantities. By
comparison to lower quality material available in smaller quantities management
estimates that the market value of the supplies is substantially greater than
the carrying value of $9 million, if they could be obtained. The carrying value
of $9 million is based on the negotiated License Fee. The amount of material to
be received for the $9 million is based on negotiated per unit costs, which are
well below the per unit costs of lower quality materials available in smaller
quantities.
The $10 million upfront consideration has been classified as a license payment
and has been deferred and will be recognized for financial statement
(accounting) purposes as revenue within the twenty-year period of the agreement.
The revenue recognition will begin once regulatory agency approval to market the
product has been received and will be recognized ratably over the remaining
period of the contract, which ends February 13, 2017. The Company does not
speculate on the timing of regulatory approvals. However, they are not likely to
occur in less than two years and quite possibly may occur in more than two
years. Under the agreement, PMC shall have the right to terminate upon one
hundred eighty (180) days prior notice to Aphton, in the event that it
determines, following completion of Phase III clinical trials of the Product
(and receipt by PMC of the results and supporting data obtained in such trials),
that for safety and efficacy reasons it does not wish to co-promote, market or
sell the Product. In addition, either party may terminate the agreement by (a)
mutual agreement, (b) for uncured material breach and (c) due to liquidation,
insolvency, etc. Further, under the agreement, none of the aggregate $10 million
consideration, either the cash or the Company's rights to the full $9 million in
unconditional supply commitment, is refundable to PMC under any conditions.
There is no provision under the agreement for the unconditional supply
commitment to be satisfied by PMC with a cash payment. (The $10 million license
payment was recognized for tax purposes in the year ended April 30, 1997.)
Discussions are continuing between PMC and Aphton for marketing rights to
Gastrimmune(TM) in Japan and other Asian markets.
On June 17, 1997, the Company announced that it had received proceeds of
$10,000,000 from the closing of a private financing of Common Stock with one of
the largest investment banking/stock brokerage firms in the United States. The
Company issued 715,000 shares of common stock with a 7-year warrant for 225,000
shares exercisable at $17.50 per share.
The Company anticipates that its existing capital resources which are composed
primarily of cash and short-term cash investments, including the proceeds of its
private placements and interest thereon, would enable it to maintain its
currently planned operations into the year 2000. The Company's working capital
and capital requirements will depend upon numerous factors, including the
following: the progress of the Company's research and development program,
preclinical testing and clinical trials; the timing and cost of obtaining
regulatory approvals; the levels of resources that the Company devotes to
product development, manufacturing and marketing capabilities; technological
advances; competition; and collaborative arrangements or strategic alliances
with other drug companies, including the further development, manufacturing and
marketing of certain of the Company's products and the ability of the Company to
obtain funds from such strategic alliances or from other sources.
Item 8. Financial Statements and Supplementary Data.
Financial Statements are set forth in this report beginning at page F-1.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required for this item is incorporated by reference to the
section captioned "Election of Directors" in the Company's Proxy Statement for
the Annual Meeting of Stockholders.
Item 11. Executive Compensation
The information required for this item is incorporated by reference to the
section captioned "Executive Compensation" in the Company's Proxy Statement for
the Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required for this item is incorporated by reference to the
section captioned "Election of Directors" of the Company's Proxy Statement for
the Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions.
Not applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents filed as part of this Form 10-K
(i) Financial Statements:
Report of Independent Accountants
Balance sheets as of January 31, 1998 and April 30, 1997 and 1996
Statements of Operations for the nine months ended January 31, 1998
and the years ended April 30, 1997, 1996 and 1995 Statements of
Stockholders' Equity for the nine months ended January 31, 1998 and
for the years ended April 30, 1997, 1996 and 1995 Statements of
Cash Flows for the nine months ended January 31, 1998 and for the
years ended April 30, 1997, 1996 and 1995 Notes to Financial
Statements
(ii) Financial Statements Schedules:
Financial Statement Schedules are omitted because they are either
not required, not applicable, or the information is included in the
Financial Statements or Notes thereto.
(b) Exhibits
Exhibit Number Description
3.1 Certificate of Incorporation (Incorporated by reference
to Exhibit B of the Registrant's Definitive Proxy
Statement filed October 8, 1997)
3.3 By-Laws (Incorporated by reference to Exhibit C
of the Registrant's Definitive Proxy Statement
filed October 8, 1997)
23.1 Written Consent of Coopers & Lybrand L.L.P.
(attached as an exhibit)
27.1 Financial Data Schedules. (attached as an exhibit)
(c) Reports on Form 8-K
During the three-month period ending January 31, 1998, the Company did
not file any reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: April 30, 1998 APHTON CORPORATION
By: PHILIP C. GEVAS
Chairman of the Board, Chief Executive Officer,
and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signatures Title Date
Chairman of the Board, Chief Executive
PHILIP C. GEVAS Officer and President April 30, 1998
WILLIAM A. HASLER Vice Chairman of the Board and Director April 30, 1998
ROBERT S. BASSO Director April 30, 1998
NICHOLAS JOHN STATHIS Director April 30, 1998
FREDERICK W. JACOBS Treasurer and Chief Accounting Officer April 30, 1998
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Report of Independent Accountants..............................F-1
Balance Sheets - January 31, 1998, April 30, 1997 and 1996.....F-2
Statements of Operations - for the nine months ended January 31, 1998
and for the years ended April 30, 1997, 1996 and 1995.....F-3
Statements of Stockholders' Equity - for the nine months ended January 31, 1998
and for the years ended April 30, 1997, 1996 and 1995.....F-4
Statements of Cash Flows - for the nine months ended January 31, 1998
and for the years ended April 30, 1997, 1996 and 1995.....F-5
Notes to the Financial Statements..............................F-6
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders
Aphton Corporation
We have audited the accompanying balance sheets of Aphton Corporation as of
January 31, 1998 and April 30, 1997 and 1996, and the related statements of
operations, stockholders' equity, and cash flows for the nine months ended
January 31, 1998 and each of the three fiscal years ending April 30, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aphton Corporation as of
January 31, 1998 and April 30, 1997 and 1996, and the results of its operations
and its cash flows for the nine months ended January 31, 1998 and each of the
three years ended April 30, 1997 in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Honolulu, Hawaii
March 23, 1998
APHTON CORPORATION
Balance Sheets - January 31, 1998 and April 30, 1997 and 1996
1998 1997 1996
Assets
Current Assets:
Cash and short-term cash investments $14,226,000 $8,845,739 $8,169,368
Other assets (including current portion of
unconditional supply commitment) 205,454 308,920 52,534
---------- ---------- ----------
Total current assets 14,431,454 9,154,659 8,221,902
Equipment and improvements, at cost, net of
accumulated depreciation and amortization 197,736 216,123 132,303
Unconditional supply commitment 8,951,000 8,991,000 -
---------- --------- ---------
Total assets $23,580,190 $18,361,782 $8,354,205
=========== =========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities:
Accounts payable and other $2,273,072 $1,948,827 $1,312,784
---------- ---------- ----------
Total current liabilities 2,273,072 1,948,827 1,312,784
Convertible debenture - 3,902,440 -
Deferred revenue 10,000,000 10,000,000 -
---------- ---------- ---------
Total liabilities 12,273,072 15,851,267 1,312,784
---------- ---------- ---------
Commitment
Stockholders' Equity:
Common stock, $0.001 par value -
Authorized: 30,000,000 shares
Issued and outstanding: 14,191,217
shares at January 31, 1998 and
12,913,149 shares at April 30, 1997 and
12,911,149 shares at April 30, 1996 14,191 26,665,091 26,664,591
Additional paid in capital 42,955,207 1,097,560 -
Purchase warrants 341,404 147,004 147,004
Accumulated deficit (32,003,684) (25,399,140) (19,770,174)
------------ ------------ ------------
Total stockholders' equity 11,307,118 2,510,515 7,041,421
------------ ------------ ------------
Total liabilities and
stockholders' equity $23,580,190 $18,361,782 $8,354,205
=========== =========== ==========
The accompanying notes are an integral part of the
financial statements.
APHTON CORPORATION
Statements of Operations
for the nine months ended January 31, 1998 and
for the years ended April 30, 1997, 1996 and 1995
1998 1997 1996 1995
Revenue:
Dividend, interest
and other income $533,908 $271,170 $438,812 $463,493
-------- -------- -------- --------
Total revenue 533,908 271,170 438,812 463,493
-------- -------- -------- --------
Costs and Expenses:
General and administrative 608,000 543,939 648,868 488,635
Research and development 4,963,481 5,205,854 4,500,877 3,904,567
Non-cash interest expense 1,566,971 15,342 - -
--------- --------- --------- ---------
Total costs and expenses 7,138,452 5,765,136 5,149,745 4,393,202
--------- --------- --------- ---------
Loss before
income tax expense (6,604,544) (5,493,966) (4,710,933) (3,929,709)
Income tax expense 135,000
Net loss $(6,604,544) $(5,628,966) $(4,710,933) $(3,929,709)
============ ============ ============ ============
Per share data
Basic loss per common share $(0.48) $(0.44) $(0.37) $(0.32)
======= ======= ======= =======
Diluted loss per common share $(0.48) $(0.44) $(0.37) $(0.32)
======= ======= ======= =======
Weighted average number
of common shares
outstanding 13,733,478 12,912,982 12,723,082 12,377,541
========== ========== ========== ==========
The accompanying notes are an integral part of the
financial statements.
APHTON CORPORATION
Statements of Stockholders' Equity
for the nine months ended January 31, 1998
and for the years ended April 30, 1997, 1996 and 1995
Common Stock Additional
Paid in Purchase Accumulated
Shares Amount Capital Warrants Deficit Total
Balance,
May 1, 1994 12,367,949 $21,653,791 $ - $147,004 $(11,129,532) $10,671,263
Exercise of
purchase
warrants 11,100 2,775 - - - 2,775
Net loss - - - - (3,929,709) (3,929,709)
Balance,
April 30,1995 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
Conversion
feature of
convertible debt - - 1,097,560 - - 1,097,560
Net loss - - - - (5,628,966) (5,628,966)
Balance,
April 30,
1997 12,913,149 26,665,091 1,097,560 147,004 (25,399,140) 2,510,515
---------- ---------- --------- ------- ------------ ---------
Sale of
stock, net 715,000 10,000,000 - - - 10,000,000
Issuance of
purchase
warrants
for services - - 198,900 - - 198,900
Exercise of
purchase
warrants 1,000 4,000 (5,500) - - (4,500)
Transfer between
equity accounts
resulting from a
change in the par
value of the stock - (41,857,647)41,857,647 - - -
Conversion of
convertible
debt 559,068 5,201,247 - - - 5,201,247
Net loss - - - - (6,604,544) (6,604,544)
Balance,
January 31,
1998 14,191,217 $14,191 $42,955,207 $341,404 $(32,003,684)$11,307,118
========== ======= =========== ======== ============ ===========
The accompanying notes are an integral part of the
financial statements.
APHTON CORPORATION
Statements of Cash Flows
for the nine months ended January 31, 1998
and for the years ended April 30, 1997, 1996 and 1995
Increase (decrease) in cash and short-term cash investments
1998 1997 1996 1995
Cash flows from
operating activities:
Cash paid to suppliers
and employees $(5,115,606) $(4,156,450) $(4,756,612) $(4,011,652)
Interest and
dividends received 533,908 271,170 438,812 463,493
----------- ---------- ---------- -----------
Net cash used in
operating activities (4,581,698) (3,885,280) (4,317,800) (3,548,159)
----------- ---------- ---------- -----------
Cash flows from investing activities:
Capital expenditures (39,041) (151,349) (41,029) (91,428)
------- -------- ------- -------
Cash used in
investing activities (39,041) (151,349) (41,029) (91,428)
------- -------- ------- -------
Cash flows from financing activities:
Issuance of
convertible debenture - 5,000,000 - -
Debenture issue costs - (287,500) - -
Sales of stock 10,001,000 500 5,008,025 2,775
---------- --------- --------- -------
Cash received from
financing activities 10,001,000 4,713,000 5,008,025 2,775
Net increase (decrease)
in cash and short-term
cash investments 5,380,261 676,371 649,196 (3,636,812)
Cash and short-term
cash investments:
Beginning of period 8,845,739 8,169,368 7,520,172 11,156,984
--------- --------- --------- ----------
End of period $14,226,000 $8,845,739 $8,169,368 $7,520,172
=========== ========== ========== ==========
Reconciliation of net
loss to net cash used
in operating activities
Net loss $(6,604,544) $(5,628,966) $(4,710,933) $(3,929,709)
Adjustments to reconcile
net loss to net cash
used in operating activities:
Depreciation and
amortization 57,428 67,529 52,780 47,073
Warrants issued for
services received 198,900 - - -
Stock issued for
non-cash debenture
interest, debenture
discount and issuance
costs 1,566,971 - - -
Changes in -
Other assets (124,698) 40,114 24,098 (43,119)
Cash receipt treated
as deferred revenue - 1,000,000 - -
Accounts payable and other 324,245 636,043 316,255 377,596
-------- --------- ------- -------
Net cash used in
operating activities: $(4,581,698) $(3,885,280) $(4,317,800) $(3,548,159)
=========== =========== =========== ===========
Non-cash investing and financing activities:
For information about non-cash investing and financing
activities, please see Notes 3 and 6
The accompanying notes are an integral part of the financial statements.
APHTON CORPORATION
Notes to the Financial Statements
1. Organization and Operations
Aphton Corporation is a biopharmaceutical company developing products using its
innovative vaccine-like technology for neutralizing hormones that participate in
gastrointestinal system and reproductive system cancer and non-cancer diseases;
and the prevention of pregnancy. Aphton has strategic alliances with Pasteur
Merieux Connaught (PMC) (Rhone-Poulenc Group), Schering Plough Animal Health and
the World Health Organization (WHO).
Aphton changed its state of incorporation from California to Delaware effective
January 29, 1998. As part of the reincorporation, the company's fiscal year end
was changed from April 30 to January 31.
2. Summary of Significant Accounting Policies
Use of Estimates in the Preparation of Financial Statements -
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
disclosures 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, however management believes such differences are unlikely to be
significant.
Research and Development Expenses -
Research and development costs are expensed as incurred.
General and Administrative Expenses -
Amounts shown represent expenses not clearly related to research and
development expense. A significant portion of these expenses relate to
intellectual property/patent legal costs and salaries.
Equipment and Improvements -
Equipment and furniture are depreciated using accelerated methods over the
estimated economic lives (5-7 years) of the assets. Improvements are
amortized over the term of the lease using the straight-line method.
Betterments that substantially extend the useful life of equipment and
furniture are capitalized and depreciated over the period of expected
benefit.
Income Taxes -
The Company accounts for income taxes pursuant to Statement of Financial
Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes," which
requires an asset and liability approach in accounting for income taxes.
Under this method, the amount of deferred tax asset or liability is
calculated by applying the provisions of enacted tax laws to the differences
in the bases of assets and liabilities for financial and income tax
purposes. Income tax expense is the tax payable for the period and the
change during the period in deferred tax assets and liabilities. Investment
tax credits and research and experimentation credits are accounted for using
the flow-through method.
Per Share Data -
The Company has adopted SFAS No. 128, "Earnings per Share," which specifies
the computation, presentation and disclosure requirements for earnings per
share. The Company's basic loss per common share was calculated by dividing
net loss by the weighted average number of common shares outstanding. The
Company's common stock equivalents are anti-dilutive, and accordingly, basic
and diluted loss per share are the same. Such common stock equivalents
consist of purchase warrants (See Note 7) and could potentially dilute basic
earnings per share in the future.
Cash Equivalents -
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments, including short-term cash investments,
purchased with an original maturity of three months or less to be cash
equivalents.
Concentrations Of Credit Risk -
The Company's short-term cash investments are held in several financial
institutions and consist principally of insured money market accounts and
cash management accounts that are collateralized by or invested in U.S.
Government and U.S. Government agency securities.
Impairment of the unconditional supply commitment -
As discussed in Note 3, the Company has the unconditional right to receive
supplies aggregating $9 million from PMC. The Company's policy is to review
the current market prices of available supplies, if any, to assure that they
remain above the stated PMC contract price of the materials and that the
right to receive the supplies remains unimpaired. PMC is one of the largest
pharmaceutical vaccine manufacturers in the world. The Company monitors the
financial performance of PMC to assure that they will continue to be able to
perform under the contract, wherein the special order supplies are to be
provided from supplies manufactured by PMC in large quantities and sold to
many customers, including the U.S. Government, as part of PMC's basic
franchise (business). The contract allows for inflation based increases in
the per unit costs of the supplies which the Company and PMC believes are
sufficient to assure that there will be no future financial hardship
incurred by PMC in the execution of the agreement.
New Accounting Pronouncements-
The Financial Accounting Standards Board (FASB) issued several new
pronouncements in 1997, including SFAS No. 130, "Reporting Comprehensive
Income"; and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." SFAS No. 130 states that all items that are required
to be recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. SFAS No. 131 requires disclosures
regarding segments of an enterprise and related information that reflects
the different types of business activities in which the enterprise engages
and the different economic environments in which it operates. The adoption
of these standards during the Company's fiscal year ended January 31, 1999
is not expected to have a material effect on the Company's financial
statements. In January 1998, the FASB also issued SFAS No. 132, "Employers'
Disclosure About Pensions and Other Postretirement Benefits" which is not
applicable to the Company since the Company does not provide such benefits.
3. License and Co-Promotion Agreement
On February 14, 1997 Aphton signed an agreement with Pasteur Merieux Connaught
("PMC") (Rhone-Poulenc Group), a leader in medical science and research and the
world's largest vaccine manufacturer and marketer, for a strategic alliance for
all human cancer applications of the Company's product Gastrimmune(TM) including
stomach, colorectal, liver and pancreatic cancers. Under the terms of the
twenty-year license and co-promotion agreement, Aphton will be responsible for
product development, clinical trials and regulatory agency approvals, and PMC
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 PMC will enter into
agreements providing for: (a) the supply of Gastrimmune(TM) from Aphton to PMC;
and (b) the supply of certain components of Gastrimmune(TM) (as well as other
Aphton products) from PMC to Aphton. PMC will fund the costs associated with
product introduction, promotion, advertising and marketing throughout the
territory covered by the agreement. Under the terms of the agreement, in
addition to upfront consideration aggregating $10 million including $1 million
cash and the supply commitment (of material suitable for human use) of $9
million, Aphton will receive the majority of the profits from sales of
Gastrimmune(TM) with the balance of profits to be retained by PMC.
The supply commitment of materials suitable for human use consists of Diphtheria
Toxoid and/or Tetanus Toxoid. Aphton may use some or all of the unconditional
supply commitment in the Product under development with PMC or Aphton may use
some or all of the supply commitment on other current product lines or on
Research and Development. The supply commitment of material suitable for human
use is not readily obtained on the open market in such large quantities. By
comparison to lower quality material available in smaller quantities management
estimates that the market value of the supplies is substantially greater than
the carrying value of $9 million, if they could be obtained. The carrying value
of $9 million is based on the negotiated License Fee. The amount of material to
be received for the $9 million is based on negotiated per unit costs, which are
well below the per unit costs of lower quality materials available in smaller
quantities.
The $10 million upfront consideration has been classified as a license payment
and has been deferred and will be recognized for financial statement
(accounting) purposes as revenue within the twenty-year period of the agreement.
The revenue recognition will begin once regulatory agency approval to market the
product has been received and will be recognized ratably over the remaining
period of the contract, which ends February 13, 2017. The Company does not
speculate on the timing of regulatory approvals. However, they are not likely to
occur in less than two years and quite possibly may occur in more than two
years.
Under the agreement, PMC shall have the right to terminate upon one hundred
eighty (180) days prior notice to Aphton, in the event that it determines,
following completion of Phase III clinical trials of the Product (and receipt by
PMC of the results and supporting data obtained in such trials), that for safety
and efficacy reasons it does not wish to co-promote, market or sell the Product.
In addition, either party may terminate the agreement by (a) mutual agreement,
(b) for uncured material breach and (c) due to liquidation, insolvency, etc.
Further, under the agreement, none of the aggregate $10 million consideration,
either the cash or the Company's rights to the full $9 million in unconditional
supply commitment, is refundable to PMC under any conditions. There is no
provision under the agreement for the unconditional supply commitment to be
satisfied by PMC with a cash payment. (The $10 million license payment was
recognized for tax purposes in the year ended April 30, 1997.) Discussions are
continuing between PMC and Aphton for marketing rights to Gastrimmune(TM) in
Japan and other Asian markets.
4. Equipment And Improvements
At January 31, 1998, April 30, 1997 and 1996,
equipment and improvements consisted of the following:
January 31, April 30, April 30,
1998 1997 1996
Laboratory equipment $ 430,782 $ 414,408 $ 342,328
Leasehold improvements 266,123 243,456 190,333
Office and laboratory
furniture and fixtures 192,300 192,300 166,154
------- ------- -------
889,205 850,164 698,815
Less accumulated depreciation
and amortization (691,469) (634,041) (566,512)
-------- -------- -------
$ 197,736 $ 216,123 $ 132,303
========= ========= =========
5. Accounts Payable and Other
At January 31, 1998, April 30, 1997 and 1996, accounts payable and other was
composed of approximately $1,167,000, $934,000 and $479,000 payable on trade
accounts and approximately $1,106,000, $1,015,000 and $834,000 accrued for
employee wages and benefits, respectively.
6. Senior Redeemable Convertible Debenture
In April 1997, the Company issued a $5,000,000 7% senior redeemable convertible
debenture. For financial reporting purposes, $1,097,560 of the proceeds was
allocated to the conversion feature of the debt and recorded as additional paid
in capital. The value of the conversion feature was based on the Company's stock
market price at the date of issuance, less an 18% discount. As a result, the
convertible debt instrument of $5,000,000 was recorded net of discount equal to
the conversion feature which increases the effective interest rate of the debt.
Accordingly, beginning on the date of issuance, the discount was charged to
interest expense on a pro rata basis using the effective interest method as the
security became convertible. The effective interest rate on this debenture was
approximately 52%. Non-cash interest on such debt amounted to approximately
$15,000 in fiscal 1997. In the period ended January 31, 1998, the debenture and
related interest was converted to 559,068 shares of common stock. Non-cash
interest expense for the period then ended was approximately $1,567,000.
7. Common Stock and Purchase Warrants
Common Stock -
During fiscal 1998, in a private placement, the Company sold 715,000 shares
of common stock for $10,000,000 net of insignificant legal, accounting and
filing fee expenses and 4,000 shares through the exercise of outstanding
purchase warrants.
During fiscal 1997 the Company sold 2,000 shares of common stock through the
exercise of outstanding purchase warrants.
During fiscal 1996, in a private placement, the Company sold 500,000 shares
of common stock for $5,000,000 net of insignificant legal, accounting and
filing fee expenses. The Company also sold 32,100 shares of common stock
through the exercise of outstanding purchase warrants.
The Company sold 11,100 shares of common stock during fiscal 1995
through the exercise of outstanding purchase warrants.
Purchase Warrants -
Each warrant described below is exercisable for one share of common stock
and is subject to the restrictive holding requirements of SEC Rule 144. The
term of the warrants is from 8 to 23 years. All warrants exercised from
inception of the Company have been from warrants issued prior to April 30,
1991.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," in October, 1995. Under SFAS No. 123, companies can either
continue to account for stock compensation plans pursuant to existing
accounting standards or elect to expense the value derived from using an
option pricing model such as Black-Scholes. Aphton Corporation will continue
to apply existing accounting standards. However, SFAS No. 123 requires
disclosure of pro forma net income and earnings per share as if the Company
had adopted the expensing provisions of SFAS No. 123. Based on Black-Scholes
values, for the year ended April 30, 1997, the pro forma net loss would be
$6,011,431 and the pro forma loss per common share would be $.47. There were
no employee stock purchase warrants granted in 1998, 1996 or 1995.
In the nine months ended January 31, 1998 the Company issued 13,000 warrants
to individuals (non-employees) for services. The Company recorded an expense
of $198,900 for these warrants. The Company also issued 225,000 warrants to
an institutional investor in conjunction with the sale of 715,000 shares of
stock for $10,000,000.
The following assumptions were used in the Black-Scholes option pricing
model for the 25,000 purchase warrants granted in fiscal 1997 to a director.
The stock price and exercise price of $18.25 was set equal to the fair
market value of the Company's common stock on the date of grant. The
risk-free rate of return used was 7.01%. The expected dividend yield used
was 0%. The expected time to exercise used was 10 years. The expected
volatility used was 75%.
The following table summarizes
purchase warrant activity Weighted-Average
over the past three fiscal periods: Number of Shares Exercise Price
Outstanding and exercisable at May 1, 1994 1,699,400 $12.57
Granted -- --
Exercised (11,000) $.25
Canceled or expired (20,000) $12.00
----------
Outstanding and exercisable at April 30, 1995 1,668,400 $12.66
Granted 125,000 $12.50
Exercised (32,100) $.25
Canceled or expired -- --
---------
Outstanding and exercisable at April 30, 1996 1,761,300 $12.88
Granted (1) 25,000 $18.25
Exercised (2,000) $.25
Canceled or expired -- --
---------
Outstanding and exercisable at April 30, 1997 1,784,300 $13.26
Granted (1) 238,000 $17.35
Exercised (4,000) $.25
Canceled or expired -- --
---------
Outstanding and exercisable at January 31, 1998 2,018,300 $13.76
========= ======
For options outstanding and exercisable at January 31, 1998, the exercise price
ranges and average remaining lives were:
Options Outstanding and Exercisable
Range of Exercise Prices
Number Outstanding Average Period (2) Average Price (3)
------------------ ------------------ -----------------
$.25 to $14.00 771,300 15.5 $ 9.91
$14.01 to $24.00 1,247,000 15.7 $16.15
---------
2,018,300 13.7 $13.76
=========
(1) Weighted average grant date fair value is $15.30
(2) Weighted average remaining years
(3) Weighted average exercise price
8. Income Taxes
The provision for income taxes consists of the following:
Current 1998 1997 1996 1995
Federal $ - $100,000 $ - $ -
State - 35,000 - -
Deferred - - - -
----- -------- ------ -----
- $135,000 - -
===== ======== ====== =====
The 1997 current provision reflects alternative minimum tax for which a deferred
tax asset was not recognized.
Gross deferred tax assets result from net operating loss and income tax credit
carryforwards. Realization of these assets is dependent on the Company's ability
to generate sufficient future taxable income, prior to the expiration of the
carryforwards, which is dependent on the completion of research and development
activities and successful marketing of the Company's various products. Due to
the uncertainties related to the above and in accordance with guidance contained
in Statement No. 109, a valuation allowance has been provided for these deferred
tax assets. Accordingly, these assets do not appear in the Company's balance
sheet at January 31, 1998 and April 30, 1997 and 1996. The changes in the
valuation allowance in 1998, 1997, 1996 and 1995 were $2,578,000, $2,886,000,
$3,071,000 and $1,614,000 respectively.
January 31, April 30, April 30,
Deferred tax assets consisted of: 1998 1997 1996
-------- --------- --------
Federal net operating loss carryforward $5,956,000 $4,010,000 $5,760,000
State net operating loss carryforward 972,000 446,000 740,000
---------- ---------- ----------
Total operating loss carryforward 6,928,000 4,456,000 6,500,000
Deferred license payment revenues 4,330,000 4,330,000 -
Expenses deductible in future periods 479,000 453,000 361,000
Federal tax credits 1,433,000 1,413,000 1,031,000
State tax credits 501,000 557,000 451,000
--------- --------- ---------
Total tax credits 1,934,000 1,970,000 1,482,000
--------- --------- ---------
Total deferred tax assets 13,671,000 11,209,000 8,343,000
Valuation allowance (13,671,000) (11,209,000) (8,343,000)
----------- ----------- ----------
Net deferred tax assets $ - $ - $ -
=========== =========== ==========
At January 31, 1998, for Federal income tax purposes, the Company had net
operating loss carryforwards of approximately $17,518,000 and various income tax
credit carryforwards, primarily research and experimentation, aggregating
$1,433,000, which expire at various dates through 2013.
At January 31, 1998, for California income tax purposes, the Company had net
operating loss carryforwards of approximately $10,449,000, which expire at
various dates through 2003; and various income tax credit carryforwards,
primarily research and experimentation, aggregating $501,000, which expire at
various dates through 2013.
9. Commitments and Contingencies
The Company has noncancelable facilities leases expiring at various dates
through fiscal 2003. The leases provide various options to renew. The minimum
rental commitments for the fiscal years 1999 through 2003, respectively, are,
$115,000, $101,000, $103,000, $80,000, $22,000 and none thereafter. Rental
expense for these leases for the nine months ended January 31, 1998 and for the
years ended April 30, 1997, 1996 and 1995, was approximately $80,000, $108,000,
$108,000 and $87,000.
10. Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Values of Financial Instruments," requires that the Company disclose estimated
fair values for its financial instruments. The carrying amounts of cash and
short-term cash investments and the recorded cost (at April 30, 1997) of the
senior redeemable convertible debenture approximate fair value.
11. Transition Period Comparative Data:
The following table presents certain financial information for the nine months
ended January 31, 1998 and 1997, respectively.
1998 1997
(unaudited)
Revenues $533,908 $207,369
======== ========
Net loss $(6,604,544) $(4,188,256)
============ ============
Basic loss per common share $(0.48) $(0.32)
====== ======
Weighted average common
shares outstanding 13,733,478 13,912,927
========== ==========
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Aphton Corporation on Forms S-3 (File Nos. 33-77286 and 333-31217) of our report
dated March 23, 1998, on our audits of the financial statements of Aphton
Corporation as of January 31, 1998 and April 30, 1997 and 1996 and for the nine
months ended January 31, 1998 and the years ended April 30, 1997, 1996 and 1995,
which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Honolulu, Hawaii
May 1, 1998
Exhibit 23.1
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This schedule contains summary financial information extracted from the Annual
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in its entirety by reference to such financial statements.
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<NAME> Aphton Corporation
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