<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
* QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 1996
--------------------
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________.
COMMISSION FILE NUMBER 0-17951
CORTEX PHARMACEUTICALS, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
Delaware 33-0303583
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
15241 Barranca Parkway, Irvine, California, 92718
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(714) 727-3157
(ISSUERS'S TELEPHONE NUMBER)
NOT APPLICABLE
----------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST YEAR)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
----- -----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
7,415,197 shares of Common Stock as of May 10, 1996
Page 1 of 12
<PAGE>
CORTEX PHARMACEUTICALS, INC.
INDEX
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets -- March 31, 1996 and June 30, 1995.................3
Statements of Operations -- Three months ended
March 31, 1996 and 1995; nine months ended March 31,
1996 and 1995; and period from inception (February 10,
1987) through March 31, 1996.......................................4
Statements of Cash Flows -- Three months ended
March 31, 1996 and 1995; nine months ended March 31,
1996 and 1995; and period from inception (February 10,
1987) through March 31, 1996.......................................5
Notes to Financial Statements......................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations; Plan of Operation.............8
PART II. OTHER INFORMATION
Item 3. Defaults upon Senior Securities...................................11
Item 6. Exhibits and Reports on Form 8-K..................................11
SIGNATURES....................................................................12
Page 2 of 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CORTEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (NOTE)
March 31, 1996 June 30, 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,706,334 $ 149,880
U.S. government securities -- available for sale 1,986,060 3,689,356
Other current assets 127,359 92,212
----------- -----------
Total current assets 4,819,753 3,931,448
Furniture, equipment and leasehold improvements, net 784,001 931,794
Other 23,659 23,130
----------- -----------
$ 5,627,413 $ 4,886,372
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 161,867 $ 377,589
Accrued dividends 59,400 183,150
Accrued wages, salaries and related expenses 37,292 35,223
Current obligations under capital leases 8,297 7,698
----------- -----------
Total current liabilities 266,856 603,660
Obligations under capital leases 3,702 10,016
Note payable issuable to Alkermes, Inc. 1,025,746 1,000,000
Stockholders' equity:
9% cumulative convertible preferred stock, $0.001
par value; $1.00 per share liquidation preference;
shares authorized: 1,250,000; shares issued and
outstanding: 110,000 (March 31, 1996) and
370,000 (June 30, 1995) 110,000 370,000
Series B convertible preferred stock, $0.001 par value;
$0.6667 per share liquidation preference; shares
authorized: 3,200,000; shares issued and
outstanding: 150,000 (March 31, 1996) and
525,000 (June 30, 1995) 86,810 303,837
Series C convertible preferred stock, $0.001 par value;
$25,000 per share liquidation preference; shares
authorized: 160; shares issued and outstanding: 67
(March 31, 1996) 1,354,457 --
Common stock, $0.001 par value; shares authorized:
20,000,000; shares issued and outstanding:
7,158,509 (March 31, 1996) and 6,085,201
(June 30, 1995) 7,159 6,085
Additional paid-in capital 27,104,765 23,957,790
Deferred compensation -- (145,359)
Unrealized gain (loss) on available for
sale U.S. government securities 132 (18,606)
Deficit accumulated during the development stage (24,332,214) (21,201,051)
----------- -----------
Total stockholders' equity 4,331,109 3,272,696
----------- -----------
$ 5,627,413 $ 4,886,372
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES.
NOTE: THE BALANCE SHEET AS OF JUNE 30, 1995 HAS BEEN DERIVED FROM THE AUDITED
FINANCIAL STATEMENTS AT THAT DATE.
Page 3 of 12
<PAGE>
CORTEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
inception
Three months ended Nine months ended (February 10,
March 31, March 31, 1987) through
----------------------------- ----------------------------- March 31,
1996 1995 1996 1995 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Research and license revenue
under an agreement with
Alkermes, Inc. $ -- $ -- $ -- $ -- $ 3,600,000
Grant revenue -- -- -- -- 94,717
------------ ------------ ------------ ------------ ------------
Total revenues -- -- -- -- 3,694,717
Operating expenses:
Research and development 760,890 856,293 2,033,806 3,145,339 18,325,341
General and administrative 441,276 384,259 1,252,451 1,278,279 9,659,278
Settlement with Alkermes, Inc. -- -- -- -- 1,227,977
------------ ------------ ------------ ------------ ------------
Total operating expenses 1,202,166 1,240,552 3,286,257 4,423,618 29,212,596
------------ ------------ ------------ ------------ ------------
Loss from operations (1,202,166) (1,240,552) (3,286,257) (4,423,618) (25,517,879)
Interest income, net 56,882 45,857 116,716 156,819 1,286,961
------------ ------------ ------------ ------------ ------------
Net loss $ (1,145,284) $ (1,194,695) $ (3,169,541) $ (4,266,799) $(24,230,918)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Weighted average common
shares outstanding 6,536,803 6,075,429 6,260,152 6,074,756
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net loss per share $ (0.18) $ (0.20) $ (0.51) $ (0.70)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES.
Page 4 of 12
<PAGE>
CORTEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
inception
Nine months ended (February 10,
March 31, 1987) through
----------------------------- March 31,
1996 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
NET LOSS $ (3,169,541) $ (4,266,799) $(24,230,918)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 173,055 151,215 1,051,853
Settlement with Alkermes, Inc. -- -- 1,227,977
Changes in operating assets/liabilities:
Accounts payable and accrued expenses (175,276) (376,809) 237,536
Accrued interest on U.S. government securities (64,012) 25,258 (81,973)
Other current assets (35,147) (5,150) (127,359)
Interest receivable from former officer -- -- (19,274)
Realized loss on sale of U.S. government securities 969 48,358 54,016
Stock option compensation expense 42,109 42,108 555,809
Stock issued for services -- -- 28,750
Reduction in note receivable from former
officer--compensation expense -- -- 22,600
Changes in other assets and other long term liabilities 25,747 -- 33,736
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (3,202,096) (4,381,819) (21,247,247)
------------ ------------ ------------
Cash flows from investing activities:
U.S. government securities--available-for-sale--
Purchases (13,102,660) (3,368,838) (29,950,330)
Proceeds from sales 14,887,736 8,082,208 27,992,359
Purchase of fixed assets (28,038) (400,431) (1,806,578)
Sale of fixed assets 2,777 -- 10,236
Decrease (increase) in--
Other assets (529) 1,092 (40,399)
Note receivable from former officer -- -- (100,000)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,759,286 4,314,031 (3,894,712)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock 428,436 2,295 21,332,045
Proceeds from issuance of Series C
convertible preferred stock 3,576,543 -- 3,576,543
Proceeds from issuance of Series B
convertible preferred stock -- -- 1,841,108
Proceeds from issuance of 9% preferred stock -- -- 1,076,588
Proceeds from subordinated convertible note -- -- 208,333
Payment of 9% preferred stock dividends -- -- (110,250)
Redemption of 9% preferred stock -- (63,750) (63,750)
Redemption of common stock -- -- (350)
Principal payments on capitalized leases (5,715) (4,445) (11,974)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 3,999,264 (65,900) 27,848,293
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents 2,556,454 (133,688) 2,706,334
Cash and cash equivalents, beginning of period 149,880 160,956 --
------------ ------------ ------------
Cash and cash equivalents, end of period $ 2,706,334 $ 27,268 $ 2,706,334
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES.
(CONTINUED ...)
Page 5 of 12
<PAGE>
CORTEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(UNAUDITED, CONTINUED)
<TABLE>
<CAPTION>
Period from
inception
Nine months ended (February 10,
March 31, 1987) through
----------------------------- March 31,
1996 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental schedule of non-cash investing
and financing activities:
Accretion of 9% preferred stock $ -- $ -- $ 139,674
Conversion of 9% preferred stock to common stock 388,700 -- 1,311,686
Conversion of Series B preferred stock
to common stock 217,027 -- 1,754,273
Conversion of Series C preferred stock
to common stock 2,085,433 -- 2,085,433
Capital lease obligation incurred to lease equipment -- 23,973 23,973
</TABLE>
SEE ACCOMPANYING NOTES.
Page 6 of 12
<PAGE>
CORTEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Period from Inception (February 10, 1987) through March 31, 1996
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-QSB and Item 310(b) of Regulation
S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting only of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month and nine-month periods
ended March 31, 1996 are not necessarily indicative of the results that may be
expected for the year ending June 30, 1996. For further information, refer to
the financial statements and notes thereto included in the Company's 1995 Annual
Report on Form 10-KSB. Certain previously reported amounts have been
reclassified to conform with the June 30, 1995 and March 31, 1996 presentation.
NOTE 2 -- DEVELOPMENT STAGE ENTERPRISE
From inception (February 10, 1987) through March 31, 1996, the Company has
generated only modest operating revenues and has incurred losses aggregating
$24,230,918. As of March 31, 1996, the Company had working capital of
$4,552,897, which under current spending plans will sustain its operations into
early calendar 1997. Successful completion of the Company's development program
and its transition, ultimately, to attaining profitable operations is dependent
upon obtaining additional financing adequate to fulfill its research and
development activities, and achieving a level of revenues adequate to support
the Company's cost structure.
NOTE 3 -- REVERSE STOCK SPLIT
On January 11, 1995, the Company effected a one-for-five reverse stock split of
its common stock and revised the authorized number of shares of common stock to
20,000,000 shares, with no change in the par value of $0.001 per share. The
accompanying financial statements have been adjusted retroactively to give
effect to the reverse stock split.
Page 7 of 12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS; PLAN OF OPERATION
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS REPORT.
INTRODUCTORY NOTE
This Quarterly Report on Form 10-QSB contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934 and the Company
intends that such forward looking statements be subject to the safe harbors
created thereby. These forward-looking statements relate to (i) future
research plans and expenditures, (ii) potential collaborative arrangements,
and (iii) the need for, and availability of, additional financing.
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements are based on assumptions regarding the Company's
business and technology, which involve judgments with respect to, among other
things, future scientific, economic and competitive conditions, and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although
the Company believes that the assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the results contemplated in
forward-looking statements will be realized. In light of the significant
uncertainties inherent in the forward-looking information included herein,
the inclusion of such information should not be regarded as a representation
by the Company or any other person that the objectives or plans of the
Company will be achieved.
RESULTS OF OPERATIONS
From inception (February 10, 1987) through March 31, 1996, the Company's revenue
has consisted of (i) $3,600,000 of license fees and research and development
funding from January 1992 through June 1993 under an earlier agreement with
Alkermes, Inc. (ii) net interest income aggregating $1,287,000, and (iii)
$95,000 of grant revenue. The Company sustained losses aggregating $21,061,377
for the period from inception (February 10, 1987) through June 30, 1995 and a
loss of $3,169,541 for the nine-month period ended March 31, 1996, for a
cumulative loss from inception (February 10, 1987) through March 31, 1996 of
$24,230,918. The loss for the three-month period ended March 31, 1996 of
$1,145,284 compares with a net loss of $1,194,695 for the corresponding prior
year period. The loss for the nine-month period ended March 31, 1996 was
$3,169,541, compared to a loss of $4,266,799 for the corresponding prior year
period.
Research and development expenses decreased from $856,293 to $760,890, or by
$95,403 (11%), during the three-month period ended March 31, 1996 compared to
the corresponding prior year period. The same expenses decreased from $3,145,339
to $2,033,806, or by $1,111,533 (35%), during the nine-month period ended March
31, 1996. The decreases were primarily due to costs incurred during the three-
and nine-month periods ended March 31, 1995 in connection with the October 1994
commencement of human clinical testing of AMPALEX-TM-, which is being developed
for the potential treatment of deficits of memory and cognition from Alzheimer's
disease. A reduction in scientific personnel as of June 30, 1995, a concomitant
decrease in laboratory supplies, lower outlays for scientific consulting and
decreased funding of external research programs were partially offset by an
increase in spending for patent filings to produce most of the remaining
decreases.
General and administrative expenses increased from $384,259 to $441,276, or by
$57,017 (15%) during the three-month period ended March 31, 1996 compared to the
corresponding prior year period. The increase was due to recruiting expenses
related to the search for a new Chief Executive Officer, partially offset by
lower spending for consulting services. General and administrative expenses
decreased from $1,278,279 to $1,252,451, or by $25,828 (2%), during the nine-
month period ended March 31, 1996 due to lower spending for consulting
activities, partially offset by recruiting fees.
The Company believes that inflation and changing prices have not had a material
impact on its ongoing operations to date.
PLAN OF OPERATION; LIQUIDITY AND CAPITAL RESOURCES
Cortex has funded its organizational and research and development activities
primarily from the issuance of equity securities, with net proceeds from such
issuances from inception (February 10, 1987) through March 31, 1996 aggregating
$28 million. An additional $3.6 million in research and
Page 8 of 12
<PAGE>
license payments was received from Alkermes, Inc. between January 1992 and June
1993 in connection with an earlier development and license agreement with that
firm. Interest income from inception through March 31, 1996, which approximates
funds received, was $1.3 million.
As of March 31, 1996, the Company had cash, cash equivalents and short-term
investments totaling $4.7 million and working capital of $4.6 million. Cortex
anticipates that its existing cash, cash equivalents and short-term investments,
combined with a modest amount of anticipated interest income, will be sufficient
to satisfy its capital requirements into early calendar 1997 under current
spending plans.
The Company leases approximately 30,000 square feet of research laboratory,
office and expansion space under an operating lease that expires on May 31,
1999, with an additional five-year option at 95% of the then fair market rental
rate. The commitments under the lease agreement for the years ending June 30,
1996, 1997, 1998 and 1999 are $192,000, $198,000, $203,000 and $192,000,
respectively. Minimum obligations have not been reduced by minimum sublease
rentals of $60,500 receivable during the year ending June 30, 1996 under a
noncancelable sublease.
As of March 31, 1996, Cortex had outstanding 110,000 shares of 9% cumulative
convertible preferred stock, which accrue cumulative dividends semi-annually at
an annual rate of $0.09 per share. To conserve capital for operations, the
Company has elected not to distribute the dividends that have accrued from June
15, 1990. Accrued and unpaid dividends as of March 31, 1996 were $59,400.
The settlement in October 1995 of a license dispute with Alkermes, Inc. involved
the issuance by the Company of a $1,000,000 three-year promissory note accruing
interest semi-annually at the current federal funds rate, in exchange for
reacquisition from Alkermes of commercial rights to calpain inhibitor products.
The Company also agreed to pay Alkermes, Inc. a graduated royalty on calpain
inhibitor development proceeds, as defined and subject to certain limitations.
Over the next twelve months, the Company plans to conduct additional preclinical
and Phase I clinical studies on its AMPAKINE-TM- compounds. This planned
research involves a twelve-month expenditure of approximately $4 million. This
amount includes approximately $750,000 of funding for sponsored research in
academic laboratories, to which the Company is or will be committed under
various license agreements and sponsored research agreements. Significant
investments in plant or equipment or substantial changes to staffing levels are
not contemplated under current spending plans for the next twelve months. As of
March 31, 1996, Cortex had 15 full-time employees and one part-time employee,
and has since recruited two additional full-time employees.
The Company is seeking collaborative or other arrangements with larger
pharmaceutical companies, under which it is intended that such companies would
provide additional capital to the Company in exchange for exclusive or non-
exclusive license or other rights to certain of the technologies and products
the Company is developing. However, competition for such arrangements is
intense, with a large number of biopharmaceutical companies attempting to secure
strategic alliances with more established pharmaceutical companies. Although the
Company is presently engaged in discussions with a number of candidate
companies, there can be no assurance that an agreement or agreements will arise
from these discussions in a timely manner, or at all. Accordingly, the Company
presently intends to raise additional capital through the sale of additional
debt or equity securities. If the
Page 9 of 12
<PAGE>
Company proceeds with a debt or equity financing, there can be no assurance that
the funds will be available on favorable terms, or at all. If additional funds
are raised by issuing equity securities, dilution to existing stockholders is
likely to result.
Over the longer term, Cortex will require substantial additional capital, which
it intends to raise through a combination of corporate partnering and financing
activities, to complete its development phase and, assuming that its proposed
products can be successfully developed and marketed, to make the transition to
profitable operations. There can be no assurance that the Company will be able
to enter into corporate partnering arrangements on favorable terms, or at all,
or that any such arrangements will reduce the Company's future funding
requirements. There can also be no assurance that any such arrangements that may
be entered into will continue. Additional equity or debt financings will be
required, and any equity financings are likely to cause dilution to then-
existing shareholders.
The products that Cortex is developing are in the preclinical or early clinical
stage of development and will require significant further research, development,
clinical testing and regulatory clearances. They are subject to the risks of
failure inherent in the development of products based on innovative
technologies. These risks include the possibilities that any or all of the
proposed products will be found to be ineffective or toxic, or otherwise fail to
receive necessary regulatory clearances, that the proposed products, although
effective, will be uneconomical to market, that third parties may now or in the
future hold proprietary rights that preclude the Company from marketing them, or
that third parties will market a superior or equivalent product. Accordingly,
the Company is unable to predict whether its research and development activities
will result in any commercially viable products or applications. Further, due to
the extended testing and regulatory review process required before marketing
clearance can be obtained, the Company does not expect to be able to
commercialize any therapeutic drug for at least five years, either directly or
through its corporate partners or licensees. There can be no assurance that the
Company's proposed products will prove to be safe or effective or receive the
regulatory approvals that are required for commercial sale.
Page 10 of 12
<PAGE>
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Board of Directors of the Company elected not to distribute the semi-annual
dividends that have accrued from June 15, 1990 on the Company's 9% cumulative
convertible preferred stock, in order to conserve capital for operations. As of
March 31, 1996, accrued and unpaid dividends on the 9% cumulative convertible
preferred stock were $59,400.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
----------------------------------------------------------------------
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended March
31, 1996.
Page 11 of 12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CORTEX PHARMACEUTICALS, INC.
May 13, 1996 By: /s/ D. Scott Hagen
----------------------------------------
D. Scott Hagen
Acting President and Chief Operating Officer;
Vice President and Chief Financial Officer;
Corporate Secretary
(Principal Executive Officer; Principal
Financial and Accounting Officer)
Page 12 of 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 1996, AND THE RELATED STATEMENTS OF OPERATIONS,
STOCKHOLDER'S EQUITY AND CASH FLOWS FOR THE NINE MONTHS THEN ENDED, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 2,706,334
<SECURITIES> 1,986,060
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,819,753
<PP&E> 1,812,271
<DEPRECIATION> 1,028,270
<TOTAL-ASSETS> 5,627,413
<CURRENT-LIABILITIES> 266,856
<BONDS> 1,025,746<F1>
0
1,551,267
<COMMON> 7,159
<OTHER-SE> 2,772,683
<TOTAL-LIABILITY-AND-EQUITY> 5,627,413
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,286,257
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,859
<INCOME-PRETAX> (3,169,541)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,169,541)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,169,541)
<EPS-PRIMARY> (0.51)
<EPS-DILUTED> (0.51)
<FN>
<F1>PROMISSORY NOTE PAYABLE TO ALKERMES, INC.
</FN>
</TABLE>
