<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-19910
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CREATIVE BIOMOLECULES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2786743
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
45 SOUTH STREET, HOPKINTON, MA 01748
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 782-1100
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
As of May 2, 2000, the registrant had 38,238,502 shares of Common Stock
outstanding.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page Number
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 2000
(unaudited) and December 31, 1999 3
Unaudited Consolidated Statements of Operations
for the three months ended March 31, 2000 and
1999 4
Unaudited Consolidated Statements of
Comprehensive Loss for the three months ended
March 31, 2000 and 1999 4
Unaudited Consolidated Statements of Cash Flows
for the three months ended March 31, 2000 and
1999 5
Notes to Unaudited Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES
2
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CREATIVE BIOMOLECULES, INC. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,555,450 $ 2,751,069
Marketable securities 9,381,888 18,619,516
Accounts receivable 199,187 60,296
Prepaid expenses and other 322,266 146,764
Deferred merger costs 1,482,026 --
------------- -------------
Total current assets 21,940,817 21,577,645
------------- -------------
PLANT AND EQUIPMENT - net 1,947,414 2,130,158
------------- -------------
OTHER ASSETS:
Patents and licensed technology - net 938,461 951,198
Deferred patent application costs - net 4,434,796 4,124,716
Deposits and other 108,574 108,574
Total other assets 5,481,831 5,184,488
------------- -------------
TOTAL $ 29,370,062 $ 28,892,291
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Lease obligations - current portion $ 359,895 $ 347,323
Accounts payable 421,805 612,811
Accrued liabilities 2,396,591 1,895,634
Accrued compensation 455,732 944,270
Deferred revenue -- 661,279
------------- -------------
Total current liabilities 3,634,023 4,461,317
------------- -------------
LEASE OBLIGATIONS 915,939 1,009,388
------------- -------------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 10,000,000 shares authorized
Common Stock, $.01 par value, 50,000,000 shares authorized,
38,238,502 shares and 36,665,115 shares issued and outstanding at
March 31, 2000 and December 31, 1999, respectively 382,385 366,651
Additional paid-in capital 153,039,725 144,680,760
Officer notes receivable (1,131,380) --
Accumulated other comprehensive income (34,058) (30,801)
Accumulated deficit (127,436,572) (121,595,024)
------------- -------------
Total stockholders' equity 24,820,100 23,421,586
------------- -------------
TOTAL $ 29,370,062 $ 28,892,291
============= =============
</TABLE>
See notes to unaudited consolidated financial statements
3
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CREATIVE BIOMOLECULES, INC. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
REVENUES:
Research and development contracts $ 670,387 $ 824,645
------------ ------------
Total revenues 670,387 824,645
------------ ------------
COSTS AND EXPENSES:
Research and development 2,073,338 2,728,917
General and administrative 4,732,249 1,529,638
1999 reorganization expense adjustment (38,391) --
------------ ------------
Total costs and expenses 6,767,196 4,258,555
------------ ------------
NET OPERATING LOSS (6,096,809) (3,433,910)
------------ ------------
OTHER INCOME/(EXPENSES)
Interest and other 298,896 755,733
Interest expense (43,635) (32,661)
------------ ------------
Total other income/(expenses) 255,261 723,072
------------ ------------
NET LOSS (5,841,548) (2,710,838)
ACCRETION ON SERIES 1998/A PREFERRED STOCK -- (389,168)
------------ ------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (5,841,548) $ (3,100,006)
============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE $ (.16) $ (.09)
COMMON SHARES FOR BASIC AND DILUTED
LOSS COMPUTATION 37,556,903 34,666,296
============ ============
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
NET LOSS $ (5,841,548) $ (2,710,838)
UNREALIZED LOSS ON MARKETABLE SECURITIES (3,257) (110,359)
------------ ------------
COMPREHENSIVE LOSS $ (5,844,805) $ (2,821,197)
============ ============
</TABLE>
See notes to unaudited consolidated financial statements
4
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CREATIVE BIOMOLECULES, INC. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,841,548) $ (2,710,838)
------------ ------------
Adjustments to reconcile net loss to net cash used:
Depreciation and amortization 240,966 217,563
Compensation expense 3,139,478 64,000
Reorganization expense adjustment 38,391 --
Deferred patent and application costs -- 45,653
Increase (decrease) in cash from:
Accounts receivable (138,891) 216,398
Inventory and prepaid expenses (175,502) 46,552
Deferred merger costs (1,482,026) --
Accounts payable and accrued liabilities (216,978) (1,993,197)
Deferred contract revenue (661,279) (750,000)
------------ ------------
Total adjustments 744,159 (2,153,031)
------------ ------------
Net cash used for operating activities (5,097,389) (4,863,869)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities -- (6,409,882)
Sale of marketable securities 9,234,371 4,601,703
Expenditures for property, plant and equipment (16,463) (74,940)
Expenditures for patents (339,102) (149,145)
------------ ------------
Net cash provided by (used for) investing activities 8,878,806 (2,032,264)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of equity:
Common Stock - other 4,103,841 47,313
Repayments of obligations under capital leases (80,877) (42,927)
------------ ------------
Net cash provided by financing activities 4,022,964 4,386
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,804,381 (6,891,747)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,751,069 17,738,044
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10,555,450 $ 10,846,297
============ ============
SUPPLEMENTAL DISCLOSURE OF NON CASH
INVESTING AND FINANCING ACTIVITIES:
Property and equipment purchased under capital lease obligations $ -- $ 73,758
============ ============
Conversion of Series 1998/A Preferred Stock $ -- $ 788,305
============ ============
Officer notes payable for exercise of stock options $ 1,131,380 $ --
============ ============
</TABLE>
See notes to unaudited consolidated financial statements
5
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CREATIVE BIOMOLECULES, INC. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
================================================================================
1. Opinion of Management - The accompanying consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles applicable to interim periods. These statements are condensed
and do not include all disclosures as required by generally accepted
accounting principles. In the opinion of management, the unaudited
financial statements contain all adjustments (all of which were considered
normal and recurring) necessary to present fairly the Company's financial
position at March 31, 2000 and the results of operations and cash flows
for the three months ended March 31, 2000 and 1999. The financial
statements should be read in conjunction with the Company's audited
consolidated financial statements and notes thereto for the year ended
December 31, 1999.
Interim results are not necessarily indicative of results for a full year
and such results are subject to year end adjustments and independent
audit.
2. Reorganization - In October 1999, the Company was reorganized and the
Board approved a plan to focus our operations and financial resources on
the development of morphogenic protein-based clinical candidates for the
treatment of stroke and renal disease. The reorganization charge included
$511,000 related primarily to termination benefits in the reduction of
employees, of which $95,503 remained to be paid as of December 31, 1999.
During the quarter ended March 31, 2000, the Company determined that
health insurance claims were less than originally estimated. This resulted
in a reduction in the reorganization charges and the related accrual of
approximately $38,000. As of March 31, 2000, there was approximately
$6,000 of accrued costs, principally representing future cash outlays for
employee outplacement costs. The Company expects to pay these accrued
costs by June 2000.
3. Merger - On February 15, 2000, the Company announced that it will merge
with Ontogeny, Inc., and Reprogenesis, Inc., to form a public company
named Curis, Inc. Under the terms of the merger, which is subject to
shareholder approval, Creative's stockholders will receive three Curis
shares for every ten shares of Creative Common Stock. Following the
completion of the transaction, Creative's stockholders will hold
approximately 43%, Ontogeny's stockholders will hold approximately 38% and
Reprogenesis' stockholders will hold approximately 19% of Curis. The
merger will be accounted for under the purchase method of accounting for
business combinations, with the Company being the acquiring company for
accounting purposes. The merger is expected to close in June 2000. As of
March 31, 2000, the Company has incurred and deferred approximately
$1,482,000 of costs directly attributable to the merger. Such costs will
be included in determining the final purchase price or will be expensed in
the event the merger is not consummated.
4. Stock Option Amendment - On February 8, 2000, the Board of Directors
approved the immediate acceleration of vesting of unvested stock options
held by the Company's executive officers and outside directors and the
extension of the exercise period for one year. Vesting for approximately
1,264,000 options was accelerated and the exercise period for
approximately 2,361,000 vested options was extended, resulting in a
non-cash compensation charge of $3,139,000 recorded in the quarter ending
March 31, 2000.
5. Lease Obligations - In March 2000, the Company entered into a sublease for
its Boston, Massachusetts facility lease commencing on the later of July
1, 2000 or the date that the Company vacates the facility. The sublease
terminates on July 31, 2002, also the termination date of the Company's
original lease on this facility. In April 2000, the Company agreed to
terminate one of its Hopkinton, Massachusetts facility leases on July 31,
2000.
6
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Future minimum operating lease obligations at March 31, 2000 were as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, Operating Sublease Net Obligation
------------------------ ----------- ----------- --------------
<S> <C> <C> <C>
2000 $ 502,200 $ (241,086) $ 261,114
2001 528,825 (482,172) 46,653
2002 274,558 (281,267) (6,709)
2003 8,483 -- 8,483
Thereafter -- -- --
----------- ----------- -----------
Total minimum lease payments $ 1,314,066 $(1,004,525) $ 309,541
=========== =========== ===========
</TABLE>
6. Net Loss Per Share - Basic and Diluted Loss Per Common Share--Basic loss
per common share is computed after giving effect to accretion and
repurchase costs on Series 1998/A Preferred Stock using the weighted
average number of common shares outstanding during each year. Diluted
loss per common share reflects the effect of the Company's outstanding
options and warrants, except where such items would be anti-dilutive. In
2000 and 1999, the effect of stock options and warrants was anti-dilutive
and, therefore, not included in the computation of diluted loss per share.
SFAS No. 128, "Earnings Per Share," provides that if there is a loss from
continuing operations, a company should not include potential common
shares in the denominator of a dilutive per share computation, even if
including those potential common shares in other dilutive per share
computations may be dilutive to their comparable basic per share amounts.
Therefore, loss per share excludes the dilutive effect of options,
warrants and preferred stock of 2,393,342 and 3,942,045 for the three
months ended March 31, 2000 and 1999, respectively.
7. New Accounting Standards - In June 1998, the Financial Accounting
Standards Board, or FASB, released Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which the Company will be required to adopt effective January
1, 2001. SFAS No. 133 establishes standards for reporting and accounting
for derivative instruments, and conforms the requirements for treatment of
hedging activities across the different types of exposures hedged. The
Company has not yet completed its evaluation of SFAS No. 133, and is,
therefore unable to disclose the impact adoption will have on its
consolidated financial position or results of operations.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
================================================================================
GENERAL
To date, we have derived most of our revenues from research and development
payments and license fees under agreements with collaborative partners. We
anticipate that over the next several years we will derive most of our revenues
from agreements with collaborative partners, including possible royalty revenues
from Stryker Corporation, or Stryker. We have never been profitable and expect
to incur additional operating losses in the remainder of 2000. Results beyond
2000 will depend largely on the timing and magnitude of royalty payments from
Stryker if the OP-1 Device, currently under regulatory review with the Food and
Drug Administration, or FDA, and certain international regulatory agencies, is
approved for commercial sale and is sold. We may not receive substantial
royalties from Stryker, and, if we do, we cannot be sure when those royalties
will be received. We may incur continued losses in future years.
Our research agreements with collaborative partners have typically obligated
such collaborative partners to provide for the partial or complete funding of
research and development for specified projects and pay royalties to us in
exchange for licenses to market the resulting products. We have been a party to
research collaborations with Stryker to develop products for orthopaedic
reconstruction and dental therapeutics and with Biogen Inc., or Biogen, to
develop products for the treatment of renal disorders. Each of these research
collaborations was restructured in 1998.
Under the research portion of our collaboration with Stryker, prior to its
restructuring in November 1998, we supplied OP-1 products to Stryker for
clinical trials and other uses, provided manufacturing regulatory support and
performed research work pursuant to work plans we both established periodically.
In November 1998, we sold certain of our OP-1 manufacturing rights and
facilities to Stryker. In fiscal 1999 and 2000, we have focused internal
research efforts on developing new tissue regeneration therapies in non-bone
applications and do not anticipate significant revenue from Stryker in the
remainder of 2000.
We are developing an OP-1 based therapy for chronic renal failure, a condition
characterized by the slow progressive loss of kidney function ultimately
resulting in the need for kidney transplantation or dialysis. Chronic renal
failure represents a substantial unmet medical need. Preclinical studies
indicate that OP-1 administration improves kidney function in animal models of
both acute and chronic renal failure. In 1998, we modified our partnership in
renal therapy with Biogen. Biogen provided funding to us through December 1999
pursuant to an option to resume responsibility for development of OP-1 as a
therapy for chronic renal failure. As of December 31, 1999, Biogen did not
exercise its option, and we have assumed all rights to OP-1 renal therapies.
In October 1999, we reorganized and the Board approved a plan to focus our
operations and financial resources on the development of morphogenic
protein-based clinical candidates for the treatment of stroke and renal disease.
In connection with this reorganization, we reduced our headcount from 70 to 43
employees. In the year ending December 31, 1999, we recorded approximately
$511,000 in operating expenses for salary termination costs.
On February 15, 2000, we announced that we will merge with Ontogeny, Inc., and
Reprogenesis, Inc., to form a public company named Curis, Inc. Under the terms
of the merger, which is subject to stockholder approval, our stockholders will
receive three Curis shares for every ten shares of our Common Stock. Following
completion of the transaction, our stockholders will hold approximately 43%,
Ontogeny's stockholders will hold approximately 38% and Reprogenesis'
stockholders will hold approximately 19% of Curis. The merger will be accounted
for under the purchase method of accounting for business combinations, with the
Company being the acquiring company for accounting purposes. The merger is
expected to close in June 2000.
Although we are seeking to enter into collaborative arrangements with respect to
certain other projects, there can be no assurance that we will be able to obtain
such agreements on acceptable terms or that the costs
8
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required to complete the projects will not exceed the funding available for such
projects from the collaborative partners. Upon consummation of our proposed
merger with Ontogeny and Reprogenesis, Curis, the successor entity intends to
review the research and development pipeline of the combined companies and
allocate resources among the various research and development projects based on
their strategic fit and the availability of internal resources.
We earn and recognize revenue based upon work performed, upon the sale or
licensing of product rights, upon shipment of product for use in preclinical and
clinical testing or upon attainment of benchmarks specified in collaborative
agreements. Our results of operations vary significantly from year to year and
quarter to quarter and depend on, among other factors, the timing of payments
made by collaborative partners. The timing of our contract revenues may not
match the timing of our associated product development expenses. As a result,
research and development expenses may exceed contract revenues in any particular
period. Furthermore, aggregate research and development contract revenues for
any product may not offset all of our development expenses for such product.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999. Our total revenues for the three
month periods ended March 31, 2000 and 1999 consisted entirely of research and
development revenues. Research and development contract revenues decreased 19%
from $825,000 for the three month period ended March 31, 1999 to $670,000 for
the three month period ended March 31, 2000. The decrease in research and
development contract revenues from 1999 to 2000 primarily is a result of the
termination of the Biogen research contract which provided research funding
during 1999. This decrease was offset in part by the recognition of deferred
contract revenue from Stryker.
Our total costs and expenses increased 59% from $4,259,000 for the three month
period ended March 31, 1999, to $6,767,000 for the three month period ended
March 31, 2000. Research and development expenses decreased 24% from $2,729,000
for the three month period ended March 31, 1999 to $2,073,000 for the three
month period ended March 31, 2000. The decrease in research and development
expenses is primarily due to the October 1999 company-wide reorganization, which
resulted in a reduction in our employee headcount. As a result of the decrease
in employee headcount, payroll related expenses and lab supplies were
substantially lower in the period ended March 31, 2000 as compared to the same
period in 1999. This decrease was partially offset by slightly higher costs for
external scientific consultants and collaborations. We anticipate that research
and development expenses in the remaining quarters of 2000 will be substantially
less than in the comparable periods of 1999.
General and administrative expenses increased 209% from $1,530,000 for the three
month period ended March 31, 1999 to $4,732,000 for the three month period ended
March 31, 2000. The increase primarily is due to a one-time non-cash charge of
$3,139,000 for compensation expense related to the February 8, 2000 acceleration
of certain stock options and the extension of the exercise period for options
held by the Company's executive officers and outside directors. Payroll expenses
decreased due to reduced employee headcount following the October 1999
company-wide reorganization. This decrease was partially offset by increases in
legal and other consulting costs. We anticipate that general and administrative
expenses for the remaining quarters of 2000 will be at amounts lower than the
comparable periods in 1999.
Interest and other income consisted primarily of interest revenues and decreased
60% from $756,000 for the three month period ended March 31, 1999 to $299,000
for the three month period ended March 31, 2000. This decrease was primarily
attributed to lower average balances of cash and marketable securities during
the three months ended March 31, 2000 as compared to the same period of 1999 due
principally to our repurchase of all of the outstanding Series 1998/A Preferred
Stock for approximately $22,470,000 in May 1999.
Interest expense increased 34% from $33,000 for the three month period ended
March 31, 1999 to $44,000 for the three month period ended March 31, 2000. The
increase in interest expense is due to an increase in our obligations under
capital leases as compared to the same period a year ago.
9
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As a result of the foregoing, we incurred a net loss of $5,842,000 for the three
month period ended March 31, 2000, compared to a net loss of $2,711,000 for the
three month period ended March 31, 1999.
Accretion on Series 1998/A Preferred Stock for the three month period ended
March 31, 1999, includes $283,000 calculated at the rate of 5% per annum of the
stated value of the outstanding Series 1998/A Preferred Stock and $106,000 of
accretion of issuance costs related to the sale of Series 1998/A Preferred
Stock. In May 1999, we repurchased all of the then outstanding Series 1998/A
Preferred Stock. As a result of this transaction, the Series 1998/A Preferred
Stock has been retired and there will be no subsequent conversions into Common
Stock.
In computing the net loss applicable to common stockholders for the three months
ended March 31, 1999, accretion of the Series 1998/A Preferred Stock mentioned
above is included.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, our principal sources of liquidity consisted of cash, cash
equivalents and marketable securities of $19,937,000. We have financed our
operations primarily through placements of equity securities, revenues received
under agreements with collaborative partners, and more recently, manufacturing
contracts and the sale of our OP-1 manufacturing rights and facilities to
Stryker.
Cash used for operating activities of $5,097,000 in the first quarter of 2000
compared to $4,864,000 in the first quarter of 1999. In November 1998, we sold
certain of our OP-1 manufacturing rights and facilities to Stryker for cash
proceeds of $19,530,000 and increased royalties on Stryker products, if approved
for commercial sale, in lieu of the manufacturing revenues anticipated under the
prior agreement. In prior years, we had received significant revenue from
Stryker for research support and the supply of OP-1.
In December 1998, we amended our 1996 Licensing and Development Agreement with
Biogen, Inc. Under the amended agreement, Biogen paid $3,000,000 to fund our
research in 1999 for development of OP-1 as a therapy for chronic renal failure.
Biogen retained an option through December 1999 to resume responsibility for
development of OP-1 as a therapy for chronic renal failure. Biogen did not
exercise its option by December 31, 1999 and has no further obligation to
provide funds to us. We have assumed all rights and responsibilities,
independent of Biogen, for the development of renal failure therapies.
Cash provided by investing activities of $8,879,000 in the first quarter of 2000
compared to $2,032,000 of cash used for investing activities in the first
quarter of 1999. We increased our investment in property, plant and equipment to
$8,642,000 at March 31, 2000 from $8,625,000 at December 31, 1999. We have
budgeted to spend approximately $240,000 during the remaining quarters of 2000
on equipment purchases to upgrade our research and development capabilities. In
the past, we have entered into lease agreements to provide for the lease
financing of laboratory and office equipment. We may enter into similar
agreements in the future.
Financing activities in the first quarter of 2000 provided $4,023,000 of cash as
compared with $4,000 provided in the first quarter of 1999. On May 27, 1998, we
completed a private placement with three institutional investors for the sale of
25,000 shares of Series 1998/A Preferred Stock, with a stated value of $1,000
per share resulting in net proceeds of approximately $23,618,000 after expenses.
On May 7, 1999, subsequent to the end of the first fiscal quarter of 1999, we
repurchased 20,486 shares, which represented all of the outstanding Series
1998/A Preferred Stock following final conversions, for approximately
$22,470,000 in cash. As a result of this transaction, the Series 1998/A
Preferred Stock has been retired and there will be no subsequent conversions
into Common Stock.
We anticipate that our existing capital resources should enable us to maintain
our current and planned operations through at least approximately March 2001. We
expect to incur substantial additional research and development and other costs,
including costs related to preclinical studies and clinical trials. Our ability
to continue funding planned operations is dependent upon our ability to generate
sufficient cash flow from royalties on Stryker products, if approved for
commercial sale, from collaborative arrangements and from
10
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additional funds through equity or debt financings, or from other sources of
financing, as may be required. We are seeking additional collaborative
arrangements and also expect to raise funds through one or more financing
transactions, if conditions permit. Over the longer term, because of our
significant long-term capital requirements, we intend to raise funds when
conditions are favorable, even if we do not have an immediate need for
additional capital at such time. If Stryker products are not approved for
commercial sale and we do not receive royalties from Stryker and/or if
substantial additional funding is not available, our business will be materially
and adversely affected.
NEW ACCOUNTING STANDARDS
In June, 1998, the Financial Accounting Standards Board, or FASB, released
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which the Company will be required to adopt
effective January 1, 2001. SFAS No. 133 establishes standards for reporting and
accounting for derivative instruments, and conforms the requirements for
treatment of hedging activities across the different types of exposures hedged.
The Company has not yet completed its evaluation of SFAS No. 133, and is
therefore unable to disclose the impact adoption will have on its consolidated
financial position or results of operations.
YEAR 2000 COMPLIANCE
We did not experience any difficulties related to the Year 2000 problem on
December 31, 1999 and are not aware of any such difficulties since that date.
Our operations have not, to date, been adversely affected by any difficulties
experienced by any of our suppliers or customers in connections with the Year
2000 problem. The Company's Year 2000 Compliance Plan also addressed issues
related to the date February 29, 2000 and management will continue to monitor
our systems for potential difficulties for the remainder of calendar year 2000.
CAUTIONARY FACTORS WITH RESPECT TO FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements which are based on
management's current expectations and which involve risks and uncertainties. Our
actual results may differ significantly from the results discussed in the
forward-looking statements. We caution investors that there is no guarantee that
the actual results or business conditions will not differ materially from those
projected or suggested in such forward-looking statements as a result of various
factors, including, but not limited to the following:
o Our reliance on current and prospective collaborative partners to supply
funds for research and development and to commercialize our products;
o Uncertainty as to timing of and our ability to commercialize our products;
o Our reliance on our lead product candidate;
o Our lack of control over the clinical or regulatory progress of several
applications for our products, which are controlled by our collaborative
partners;
o Our reliance on programs in various stages of preclinical development and
early stage research;
o Our reliance on key management personnel;
o Intense competition related to the research and development of morphogenic
and other proteins for various applications and therapies and the
possibility that others may discover or develop, and we may not be able to
gain rights with respect to, the technology necessary to commercialize our
products;
o Our lack of development, commercial manufacturing, marketing and sales
experience and the risk that any products that we develop may not be able
to be marketed at acceptable prices or receive commercial acceptance in
the markets that we expect to target;
o Our lack of control over government approvals on our lead product;
o Uncertainty related to market conditions affecting the biotechnology
industry;
o Uncertainty as to the extent of future government regulation of our
business;
o Uncertainty as to whether there will exist adequate reimbursement for our
products from governments, private health insurers and other
organizations; and
11
<PAGE>
o Uncertainty as to whether the merger will be approved by our shareholders
and regulatory authorities, and if approved, whether the benefits of
integration will be achieved.
As a result, our future development and commercialization efforts involve a high
degree of risk.
12
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
================================================================================
The Company's market risk disclosures set forth in the 1999 Form 10-K have not
changed significantly through the quarter ended March 31, 2000.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not Applicable.
ITEM 2. CHANGES IN SECURITIES.
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
(d) Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 5. OTHER INFORMATION.
On February 8, 2000, the Company loaned to two executive officers an
aggregate of $1,131,380, which was equal to the aggregate exercise
price of incentive stock options exercised by them on the same date.
The officers immediately used these funds to pay the Company the
exercise price of these incentive stock options. These full recourse
loans each bear interest at an annual rate of 7.0% and the principal
is due and payable on the earlier of May 8, 2002 or 30 days following
the sale of the stock purchased with these funds.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit
Number Description
------ -----------
10.1 Sublease dated March 15, 2000 by BP 111 Huntington
Avenue LLC to the Company.
10.2 Form of Promissory Note dated February 8, 2000 by
certain executive officers to the Company.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
On February 15, 2000, the Company filed a Current Report on Form 8-K,
dated February 15, 2000, to report the merger with Ontogeny, Inc. and
Reprogenesis, Inc. to form a new public company named Curis, Inc.
On February 18, 2000, the Company filed a Current Report on Form 8-K,
dated February 14, 2000, to file the Agreement and Plan of Merger among
us, Ontogeny, Inc. and Reprogenesis, Inc.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in Hopkinton, Massachusetts, on May 4,
2000.
CREATIVE BIOMOLECULES, INC.
By: /s/ Steven L. Basta
-----------------------------
Vice President, Finance and
Business Development
By: /s/ Susan M. Letterie
-----------------------------
Director of Accounting
15
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.1 Sublease dated March 15, 2000 by BP 111 Huntington Avenue LLC to the
Company
10.2 Form of Promissory Note dated February 8, 2000 by certain executive
officers to the Company
27 Financial Data Schedule
16
<PAGE>
EXHIBIT 10.1
------------
101 Huntington Avenue
Boston, Massachusetts 02199
(the "Building")
SUBLEASE
--------
March 15, 2000
Reference is made to a certain Lease dated June 16, 1997, as amended by a
First Amendment dated August 10, 1998 (collectively, the "Lease") by and between
BP Prucenter Acquisition LLC, successor in interest to The Prudential Insurance
Company of America, as landlord ("Prime Landlord") and Creative BioMolecules,
Inc., as tenant ("Landlord"), with respect to premises ("Premises") containing
10,482 rentable square feet located on the twenty-fourth (24th) floor of the
Building.
WHEREAS, Landlord desires to sublease the Premises ("Sublet Premises") to
Tenant;
WHEREAS, Tenant desires to sublease the Sublet Premises on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the rents to be paid by Tenant to
Landlord and the full and complete performance of all terms, covenants, and
conditions herein contained to be performed by Landlord and Tenant, the parties
hereto hereby agree as follows:
I. SUBLEASE OF SUBLET PREMISES FROM LANDLORD TO TENANT
---------------------------------------------------
Landlord hereby demises and subleases the Sublet Premises to Tenant,
and Tenant hereby hires and takes the Sublet Premises from Landlord. This
Sublease shall be upon all of the same terms and conditions of the Lease (with
Landlord under this Sublease as the Landlord under the Lease, and Tenant under
this sublease as the Tenant under the Lease), except to the extent inconsistent
with the provisions of this Sublease (in which event the provisions of this
Sublease shall control).
II. DEFINITIONS
-----------
All of the terms used in this Sublease shall have the same definitions as
set forth in the Lease, except as herein set forth:
-1-
<PAGE>
LANDLORD: Creative BioMolecules, Inc.
TENANT: BP 111 Huntington Ave LLC
PRIME LANDLORD: BP Prucenter Acquisition LLC
COMMENCEMENT DATE: The later of (x) July 1, 2000 or (y) the date that
Landlord vacates the Sublet Premises.
TERMINATION DATE: July 31, 2002
ANNUAL RENT: $482,172.00 (i.e. a monthly payment of $40,181.00)
III. TERM
-----
The term of this Sublease shall commence as of the Commencement Date, and
shall, subject to the provisions of this Sublease and the Consent to Sublease,
terminate as of the Termination Date. Notwithstanding anything to the contrary
herein or in the Lease contained, if Landlord holds over in the Sublet Premises
beyond July 1, 2000, then Tenant shall be entitled to one and one-half (1 1/2)
days of free rent for each day of holdover by Landlord from and after July 1,
2000.
IV. CONDITION OF THE SUBLET PREMISES
--------------------------------
Tenant shall take the Sublet Premises "as-is", in the condition in
which the Sublet Premises are in as of the Commencement Date, without any
obligation on the part of Landlord to prepare or construct the Sublet Premises
for Tenant's occupancy, Tenant hereby acknowledging that Landlord has made no
representation or warranty to Tenant as to the condition of the Sublet Premises.
V. PAYMENT OF RENT
---------------
A. All rent payable under this Sublease shall be paid by Tenant to
Landlord at the address set forth in Article XI of this Sublease, or such other
place as Landlord may designate in writing to Tenant
B. Commencing as of the Commencement Date, and continuing thereafter
throughout the term of this Sublease, the Annual Rent shall be payable on the
first day of each month in advance. If the termination of the term of this
Sublease occurs on other than the last day of a calendar month, the Annual Rent
for such month shall be pro-rated.
-2-
<PAGE>
VI. ADDITIONAL RENT
---------------
A. Commencing as of the Commencement Date, and continuing thereafter
throughout the term of this Sublease, Tenant shall pay Tenant's Share of
Increased Operating Expenses and Tenant's Share of increased Real Estate Taxes
in respect of the Sublet Premises in accordance with Sections 3.2 and 3.4 of the
Lease and in accordance with Paragraphs 1(C) and (D) of the First Amendment.
B. Tenant shall pay directly to Boston Edison the cost of electricity
used for and in the Sublet Premises pursuant to Section 3.3 of the Lease.
VII. END OF TERM; HOLDING OVER
-------------------------
Tenant covenants and agrees to vacate and surrender the Sublet Premises to
Landlord, in broom clean condition, free of personal property, furniture and
fixtures, on or before expiration or the earlier termination of the term of this
Sublease, as the case may be. Any holdover by Tenant shall, at Landlord's
option, be treated as a daily tenancy at sufferance at a daily rate based upon
twice the rental rate payable by Landlord to Prime Landlord in respect of such
hold over period, and shall otherwise be on the terms and conditions of this
Sublease so far as the same may be applicable. In addition, Tenant shall
indemnify, defend, and hold Landlord harmless from and against any loss, cost or
damage arising from Tenant's breach of its obligation to deliver the Sublet
Premises to Landlord on a timely basis in accordance with this Paragraph VIII
(including, without limitation, any charges which Landlord may owe to Prime
Landlord as the result of such hold-over).
VIII. TENANT ALTERATIONS; SIGNS
-------------------------
A. Tenant shall not make any alteration, installation, removal,
addition or improvement ("Installations") to the Sublet Premises and Tenant
shall have no right to install any signage in the Sublet Premises or the
Building without obtaining Landlord's prior written consent. Without limiting
the foregoing, Tenant's right to make any such Installations shall be subject to
all of the restrictions and conditions set forth in the Lease.
B. Tenant hereby agrees that, at Landlord's election, Tenant shall, at
its sole cost and expense, remove any Installations made by Tenant in the Sublet
Premises and shall repair any damage to the Sublet Premises or the Building
caused by the installation or removal of such Installations.
IX. INDEMNITY, SUBROGATION, AND LIABILITY INSURANCE
-----------------------------------------------
1. Tenant's indemnity, as set forth in Section 11.1 of the Lease shall
run in favor of both Landlord and Prime Landlord.
-3-
<PAGE>
2. Tenant's liability insurance, which Tenant is required to carry
pursuant to Article 11 of the Lease shall insure both Landlord and Prime
Landlord as additional insured parties.
3. Tenant hereby waives any claim which it has against either Landlord or
Prime Landlord based upon damage to property caused by a peril which could have
been insured against under a fire and extended coverage insurance policy, with
so-called "All-Risk" rider, whether or not Tenant actually maintains such
insurance and whether or not such damage is caused by the negligence of Tenant
or Prime Landlord, or their respective agents, employees, or contractors.
X. SUBLEASE SUBJECT TO LEASE
-------------------------
Tenant acknowledges that this Sublease is subject and subordinate in all
respects to the Lease (including, without limitation, Prime Landlord's rights of
access to the Sublet Premises and its right to terminate the Lease in the event
of certain takings and casualties). Therefore:
1. Tenant agrees that it will not take any action which would constitute
a default under the Lease, as applicable to this Sublease, and Tenant agrees to
indemnify, defend, and hold Landlord harmless from and against any and all
liability, loss, cost, damage or expense, including reasonable attorneys fees,
arising out of or in connection with any act or failure on the part of Tenant
which constitutes a default under this Sublease or under the Lease.
2. Wherever Landlord's consent is required under this Lease, the consent
of Prime Landlord shall also be required. It is understood and agreed that
Landlord shall not be deemed to be unreasonable in withholding its consent if
Prime Landlord has not granted its consent.
3. Tenant acknowledges and agrees that Landlord shall have no obligation
to provide any services to the Sublet Premises, to perform any maintenance of or
repairs to the Sublet Premises or the Building, or to perform any obligation
which is required to be performed by Prime Landlord under the Lease.
4. Tenant acknowledges and agrees that Landlord shall have no liability
or obligation to Tenant based upon any act or omission of Prime Landlord or the
agents, employees, or contractors of Prime Landlord. Without limiting the
foregoing, Landlord shall have no liability to Tenant, and Tenant's obligation
to pay rent due under this Sublease shall not be reduced or abated, in the event
that Prime Landlord fails to provide any service, to perform any maintenance or
repairs, or to perform any other obligation which Prime Landlord is required to
provide or to perform pursuant to the Lease. Landlord, upon the written request
of Tenant, from time to time, shall use reasonable efforts to require Prime
Landlord to perform its obligations under the Lease.
-4-
<PAGE>
XI. NOTICES
-------
Any notices required or permitted to be sent under this Sublease shall be
sent to the following addresses, or such other addresses as either party may
advise the other:
To Landlord: Creative BioMolecules, Inc.
____________________________
____________________________
To Tenant: BP 111 Huntington Ave LLC
c/o Boston Properties Limited Partnership
800 Boylston Street
Boston, MA 02199
XII. BROKER
------
Landlord and Tenant warrant and represent to each other that each has dealt
with no broker or agent in connection with this Sublease. Tenant agrees to
indemnify, defend, and hold Landlord harmless of and from all claims (including
reasonable attorneys fees and expenses) which may be made by any person against
Landlord for breach of Tenant's warranty. Landlord agrees to indemnify, defend
and hold harmless Tenant from all claims (including reasonable attorneys fees
and expenses) which may be made by any person against Tenant for breach of
Landlord's warranty.
XIII. TIME PERIODS
------------
Recognizing that the relationship between Landlord and Tenant is a sublease
and that, in the event of an action required or failed to be taken by Tenant
hereunder may place Landlord in default of its obligations under the Lease, the
parties hereby agree that Tenant shall have a shorter period of time to cure its
defaults and to exercise its rights under the Sublease than Landlord has under
the Lease. Therefore, and without limiting the foregoing, the following time
periods shall be applicable under this Sublease.
1. Monetary Default: Replace the seven (7) day period in Section 8.1(a)
----------------
with a three (3) day period.
2. Non-Monetary Default: Replace the thirty (30) day period in Section
--------------------
8.1(f) with a fifteen (15) day period.
XIV. ADDITIONAL INAPPLICABLE LEASE PROVISIONS
----------------------------------------
In addition to the inapplicable provisions of the Lease set forth above,
the following provisions of the Lease shall have no applicability to this
Sublease:
-5-
<PAGE>
Lease Cover Sheet
Section 1.4
Section 1.5
Section 2
Section 12.9
Exhibit B to the Lease
Paragraph 2, 3 and 4 of the First Amendment
XV. FURNITURE
---------
Reference is made to certain furniture to be purchased by Tenant from
Landlord, which Landlord shall leave in the Sublet Premises, a list of which
furniture is attached hereto as Exhibit B ("Purchased Furniture"). Tenant
shall, within ten (10) days after Landlord has vacated the Sublet Premises, pay
to Landlord Three Hundred Fifty Thousand and 00/100 ($350,000.00) Dollars as
payment in full for the Purchased Furniture.
XVI. CONSIDERATION FEE
-----------------
In consideration of Landlord's agreement to sublease the Sublet Premises to
Tenant, Tenant shall, within ten (10) days after Landlord has vacated the Sublet
Premises, pay to Landlord a fee ("Consideration Fee") of One Hundred Twenty-Five
Thousand and 00/100 ($125,000.00) Dollars.
XVII. ASSIGNMENT AND SUBLEASING
-------------------------
A. Notwithstanding anything to the contrary herein or in the Lease
contained, Tenant shall have the right, without the consent of Landlord, but
upon written notice to Landlord, to assign Tenant's interest in the Sublease to
Boston Properties Limited Partnership. In such event, Boston Properties Limited
Partnership shall assume all of Tenant's obligations under the Sublease arising
from and after the effective date of the assignment and Tenant shall be released
from all obligations of Tenant under the Sublease arising from and after the
effective date of the assignment.
B. Notwithstanding anything to the contrary herein or in the Lease
contained, Tenant shall have the right, without the consent of Landlord, but
upon written notice to Landlord, to sublet all or any portion of the Sublet
Premises to prospective tenants with whom Tenant, or an affiliate of Tenant, is
negotiating for space in the Building, in 101 Huntington Avenue, or in the
building being constructed at 111 Huntington Avenue.
XVIII. CONSENT OF PRIME LANDLORD
-------------------------
The parties hereby acknowledge and agree that this Sublease shall not be
effective unless and until the parties have obtained the consent of the Prime
Landlord.
-6-
<PAGE>
EXECUTED UNDER SEAL as of the date first above-written.
LANDLORD:
CREATIVE BIOMOLECULES, INC.
By:__________________________________
(Name) (Title)
TENANT:
BP 111 HUNTINGTON AVE LLC
By: Boston Properties Limited Partnership,
a Delaware limited partnership,
Its: Member
By: Boston Properties, Inc.,
a Delaware corporation
Its: General Partner
By:___________________
Name:_________________
Its:____________________
Hereunto Duly Authorized
-7-
<PAGE>
EXHIBIT A
PLAN OF SUBLET PREMISES
-8-
<PAGE>
EXHIBIT B
LIST OF FURNITURE
-9-
<PAGE>
EXHIBIT 10.2
------------
PROMISSORY NOTE
---------------
$__________
February 8 , 2000
FOR VALUE RECEIVED, ________, an individual residing at __________,
_________ (the "Borrower") hereby promises to pay to Creative BioMolecules, Inc.
(the "Lender"), or its successor or assigns, at 101 Huntington Avenue, Suite
2400, Boston, MA, or at such other place as the Lender may from time to time
designate, the principal amount of ____________ ($_______) in lawful money of
the United States of America, in full or in parts, as applicable, on the
Maturity Date(s) (as hereinafter defined). Interest shall accrue on the
outstanding principal balance hereof commencing on the date hereof until
maturity (whether as stated, by acceleration or otherwise) at a rate equal to 7%
per annum and shall be payable upon maturity and as set forth herein. In no
event shall the rate of interest hereunder exceed the maximum interest rate
permitted by applicable law.
The Borrower hereby agrees to use the funds borrowed pursuant to this
promissory note, to purchase _______ shares of common stock, par value $.01 per
share, of the Lender (the "Underlying Stock") pursuant to the incentive stock
option grant described on Exhibit A hereto. It is expressly contemplated that
if the Borrower sells all or a portion of the Underlying Stock during the term
of this promissory note, Borrower shall first apply the proceeds from such
sale(s) to pay the outstanding balance of principal and interest hereof until
the outstanding balance of principal and interest hereof is paid in full.
This Note shall, at the option of the Lender, become immediately due and
payable upon notice or demand upon the occurrence of any of the following events
(each, an "Event of Default"):
(a) Borrower shall fail to make any payment when due which failure
continues for five (5) days after receipt of written notice from the
Lender; or
(b) The occurrence of any of the following with respect to the Borrower:
the admission in writing of his inability, or the general inability,
to pay his debts as they become due, appointment of a receiver for any
part of the property of, legal or equitable assignment, conveyance or
transfer of property for the benefit of creditors by, or the
commencement of any proceedings under any bankruptcy or insolvency
laws by or against, the Borrower, provided that it shall not be an
Event of Default hereunder if a proceeding under any bankruptcy or
insolvency laws commenced against the Borrower is dismissed within
ninety (90) days.
The "Maturity Date" shall mean the earlier of i) May 8, 2002 or (ii) 30
days following the sale by the Borrower of the Underlying Stock.
Nothwithstanding the foregoing, sales of shares of Underlying Stock by the
Borrower which together do not aggregate the total number of shares represented
by the Underlying Stock shall not accelerate the Maturity Date with respect to
the outstanding balance of principal and interest not discharged from the
proceeds of such sale of Underlying Stock.
<PAGE>
The Borrower hereby waives diligence, demand, presentment, protest and
notice of any kind, and assents to extensions of the time of payment, release,
surrender or substitution of security, or forbearance or other indulgence,
without notice.
No act, omission or delay by the Lender or course of dealing between the
Lender and the Borrower shall constitute a waiver of the rights and remedies of
the Lender hereunder. No single or partial waiver by the Lender of any default
or right or remedy which it may have shall operate as a waiver of any other
default, right or remedy or of the same default, right or remedy on a future
occasion.
This Note shall be governed by and construed in accordance with the laws of
The State of Delaware (without giving effect to the conflict of laws principles
thereof). Any legal action or proceeding with respect to this Note may be
brought in the courts of The State of Delaware or of the United States of
America for the District of Massachusetts, and, by execution and delivery of
this Note, the Borrower hereby accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. The Borrower hereby knowingly, voluntarily, intentionally and
irrevocably waives, in connection with any such action or proceeding: (i) any
objection, including, without limitation, any objection to the laying of venue
or based on the grounds of forum non conveniens, which it may now or hereafter
have to the bringing of any such action or proceeding in such respective
jurisdictions, (ii) the right to interpose any setoff, non-compulsory
counterclaim or cross-claim and (iii) to the maximum extent not prohibited by
law, any right it may have to a trial by jury in respect of any litigation
directly or indirectly arising out of, under or in connection with this Note.
The Borrower irrevocably consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to the Borrower at its
address set forth above. Nothing herein shall affect the right of the Lender to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Borrower in any other jurisdiction.
No provision hereof shall be modified, altered or limited except by a
written instrument expressly referring to this Note and to such provision, and
executed by the Borrower and the Lender.
This Note and all obligations evidenced hereby shall be binding upon the
heirs, executors, administrators, successors and assigns of the Borrower and
shall, together with the rights and remedies of the Lender hereunder, inure to
the benefit of the Lender, its successors, endorsees and assigns.
In the event the Lender or any holder hereof shall refer this Note to an
attorney for collection, the Borrower agrees to pay, in addition to unpaid
principal and interest, all the costs and expenses incurred in attempting or
effecting collection hereunder, including reasonable attorney's fees, whether or
not suit is instituted.
-2-
<PAGE>
This Note shall take effect as an instrument under seal in The State of
Delaware.
_____________________________ ___________________________________
Witness
-3-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS AS OF MARCH 31, 2000 AND FOR THE 3 MONTH PERIOD
ENDED MARCH 31, 2000.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 10,555,450
<SECURITIES> 9,381,888
<RECEIVABLES> 199,187
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,940,817
<PP&E> 8,641,726
<DEPRECIATION> (6,694,312)
<TOTAL-ASSETS> 29,370,062
<CURRENT-LIABILITIES> 3,634,023
<BONDS> 0
0
0
<COMMON> 382,385
<OTHER-SE> 153,039,725
<TOTAL-LIABILITY-AND-EQUITY> 29,370,062
<SALES> 0
<TOTAL-REVENUES> 670,387
<CGS> 0
<TOTAL-COSTS> 6,767,196
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,635
<INCOME-PRETAX> (5,841,548)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,841,548)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,841,548)
<EPS-BASIC> (.16)
<EPS-DILUTED> (.16)
</TABLE>
