<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
-------
For the Quarter Ended: March 31, 1996 Commission File Number 0-27352
Hybridon, Inc.
--------------
(Exact name of registrant as specified in its charter)
Delaware 04-3072298
- - - ---------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
organization or incorporation)
One Innovation Drive
Worcester, Massachusetts 01605
------------------------------
(Address of principal executive offices, including zip code)
(508) 752-7000
-------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
------ -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.001 per share 24,475,442
- - - --------------------------------------- --------------------------------
Class Outstanding as of April 30, 1996
<PAGE> 2
HYBRIDON, INC.
Form 10Q
INDEX
PART I - FINANCIAL INFORMATION
- - - ------------------------------
Item 1 - Financial Statements
Consolidated Condensed Balance Sheets
March 31, 1996 And December 31, 1995
Consolidated Condensed Statement of Operations for
the Three Months ended March 31, 1996 and 1995,
and Cumulative from MAY 25, 1989 to March 31, 1996
Consolidated Condensed Statements of Cash Flows for
the Three Months ended March 31, 1996 and 1995,
and Cumulative from May 25, 1989 to March 31, 1996
Notes to Consolidated Condensed Financial Statements
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
- - - ---------------------------
Item 6 - Exhibits and Reports on Form 8-K
Signatures
<PAGE> 3
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
ASSETS
MARCH 31, DECEMBER 31,
1996 1995
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 34,609,609 $ 5,284,262
Short-term investments 9,914,429 --
Prepaid expenses and other current assets 2,469,241 1,389,518
------------- -------------
Total current assets 46,993,279 6,673,780
------------- -------------
PROPERTY AND EQUIPMENT, AT COST:
Laboratory equipment 5,525,613 5,153,550
Leasehold improvements 1,965,825 1,965,754
Equipment under capital leases 1,507,535 1,507,535
Office equipment 1,181,299 1,149,141
Furniture and fixtures 434,926 321,763
Construction-in-progress 4,586,026 3,236,330
------------- -------------
15,201,224 13,334,073
Less--Accumulated depreciation and amortization 4,702,473 4,202,543
------------- -------------
10,498,751 9,131,530
------------- -------------
OTHER ASSETS:
Restricted cash 973,850 1,025,856
Notes receivable from officers 310,649 308,133
Deferred financing costs and other assets 213,626 684,514
Deposits 4,705,202 1,793,746
------------- -------------
6,203,327 3,812,249
------------- -------------
$ 63,695,357 $ 19,617,559
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations $ 409,291 $ 418,713
Accounts payable 1,762,086 2,053,438
Accrued expenses 3,070,394 3,454,625
Deferred revenue 86,250 86,250
Amounts payable to related parties 85,500 12,500
------------- -------------
Total current liabilities 5,413,521 6,025,526
------------- -------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, NET OF CURRENT 1,046,754 1,145,480
------------- -------------
PORTION
MINORITY INTEREST 1,800,599 --
------------- -------------
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.01 par value-
Authorized--23,026,323 shares at December 31, 1995 and
none at March 31, 1996
Issued and outstanding--15,982,179 shares at December 31,
1995 and none at March 31, 1996 -- 159,822
Preferred stock, $.01 par value-
Authorized--5,000,000 shares at March 31, 1996
Issued and outstanding--None -- --
Common stock, $.001 par value-
Authorized--100,000,000 shares
Issued and outstanding--1,843,666 shares at December 31, 1995
and 24,468,941 shares at March 31,1996 24,469 1,844
Additional paid-in capital 167,038,253 114,626,062
Deficit accumulated during the development stage (111,628,239) (102,341,175)
------------- -------------
Total stockholders' equity 55,434,483 12,446,553
------------- -------------
$ 63,695,357 $ 19,617,559
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE> 4
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
CUMULATIVE
FROM
MAY 25, 1989
THREE MONTHS ENDED MARCH 31, (INCEPTION) TO
1996 1995 MARCH 31, 1996
<S> <C> <C> <C>
REVENUES:
Research and development $ 259,350 $ 258,750 $ 3,394,224
Interest income 294,873 54,268 989,728
----------- ----------- -------------
554,223 313,018 4,383,952
----------- ----------- -------------
OPERATING EXPENSES:
Research and development 7,383,297 6,668,151 86,624,672
General and administrative 2,418,386 1,538,240 27,861,584
Interest 39,604 52,535 1,525,935
----------- ----------- -------------
9,841,287 8,258,926 116,012,191
----------- ----------- -------------
Net loss $(9,287,064) $(7,945,908) $(111,628,239)
=========== =========== =============
PRO FORMA NET LOSS PER COMMON SHARE (Note 2) $ (.41) $ (.56)
=========== ===========
SHARES USED IN COMPUTING PRO FORMA NET LOSS PER
COMMON SHARE (Note 2) 22,708,394 14,221,899
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE> 5
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
CUMULATIVE
FROM
MAY 25, 1989
THREE MONTHS ENDED MARCH 31, (INCEPTION) TO
1996 1995 MARCH 31, 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (9,287,064) $(7,945,908) $(111,628,239)
Adjustments to reconcile net loss to net cash used
in operating activities-
Depreciation and amortization 499,930 354,020 4,803,914
Compensation on grant of stock options,
warrants and restricted stock -- 231,000 7,044,541
Amortization of discount on convertible
promissory -- -- 690,157
notes payable
Amortization of deferred financing costs -- -- 216,732
Noncash interest on convertible promissory -- -- 260,799
notes payable
Changes in assets and liabilities-
Prepaid and other current assets (1,079,723) (198,122) (2,469,241)
Notes receivable from officers (2,516) 1,088 (310,649)
Amounts payable to related parties 73,000 -- (114,500)
Accounts payable and accrued expenses (675,583) (1,464,611) 4,832,480
Deferred revenue -- -- 86,250
------------ ----------- -------------
Net cash used in operating activities (10,471,956) (9,022,533) (96,587,756)
------------ ----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in short-term investments (9,914,429) -- (9,914,429)
Purchases of property and equipment (1,867,151) (433,775) (14,766,872)
(Increase) decrease in restricted cash and other (3,827) 39,853 (1,536,710)
assets
Increase in deposits (2,911,456) -- (4,705,202)
Proceeds from sale/leaseback -- -- 1,073,183
------------ ----------- -------------
Net cash used in investing activities (14,696,863) (393,922) (29,850,030)
------------ ----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible preferred -- 12,263,402 96,584,154
stock
Proceeds from issuance of common stock related
to stock options and restricted stock grants 43,750 -- 128,676
Proceeds from sale of common stock 52,231,244 -- 52,355,324
Repurchase of common stock -- -- (263)
Proceeds from notes payable -- -- 1,950,000
Proceeds from issuance of convertible promissory
notes payable -- 9,191,744
Proceeds from long-term debt -- -- 662,107
Payments on long-term debt and capital leases (108,148) (214,915) (1,463,597)
Proceeds from sale of stock in subsidiary 1,800,599 -- 1,800,599
Decrease (increase) in deferred financing costs 526,721 -- (161,349)
------------ ----------- -------------
Net cash provided by financing 54,494,166 12,048,487 161,047,395
------------ ----------- -------------
activities
NET INCREASE IN CASH AND CASH EQUIVALENTS 29,325,347 2,632,032 34,609,609
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 5,284,262 3,395,783 --
------------ ----------- -------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 34,609,609 $ 6,027,815 $ 34,609,609
============ =========== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 39,604 $ 52,535 $ 486,278
============ =========== =============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE> 6
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) ORGANIZATION
Hybridon, Inc. (the Company) was incorporated in the State of Delaware on
May 25, 1989. The Company is engaged in the discovery and development of
novel genetic medicines based primarily on antisense technology.
The Company is in the development stage. Since inception, the Company has
devoted substantially all of its efforts toward product research and
development and raising capital. Management anticipates that substantially
all future revenues will be derived from products under development or
those developed in the future, as well as from contract research and
development revenues and fees and royalties derived from licensing of the
Company's technology. Accordingly, the Company is dependent on the proceeds
from possible future sales of equity securities, debt financings and
research and development collaborations in order to fund future operations.
The unaudited consolidated condensed financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission and include, in the
opinion of management, all adjustments, consisting of normal, recurring
adjustments, necessary for a fair presentation of interim period results.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes, however, that its disclosures are
adequate to make the information presented not misleading. The results
presented for the three-month period ended March 31, 1996 are not
necessarily indicative of results to be expected for the full fiscal year.
It is suggested that these financial statements be read in conjunction with
the audited consolidated financial statements and notes thereto included in
the Company's Form 10-K for the year ended December 31, 1995 as filed with
the Securities and Exchange Commission.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Pro Forma Net Loss per Common Share
Pro forma net loss per common share is computed using the weighted average
number of shares of common stock outstanding during the period. Pursuant to
the requirements of the Securities and Exchange Commission, common stock
issued by the Company during the 12 months immediately preceding its
initial public offering, plus shares of common stock that became issuable
during the same period pursuant to the grant of common stock options and
preferred and common stock warrants, has been included in the calculation
of pro forma weighted average number of shares outstanding for the three
months ended March 31, 1995 and for the period from January 1, 1996
through
<PAGE> 7
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Pro Forma Net Loss per Common Share (Continued)
February 2, 1996 (using the treasury-stock method and the initial public
offering price of $10 per share). In addition, the calculation of the pro
forma weighted average number of shares outstanding includes shares of
common stock as if all shares of preferred stock were converted into
common stock on the respective original dates of issuance.
(3) CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
<TABLE>
The Company applies SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities. Accordingly, the Company has classified its
cash equivalents and short-term investments as held-to-maturity, and has
recorded them at amortized costs, which approximates market value.
Short-term investments mature within one year of the balance sheet date.
Cash equivalents have original maturities of less than three months. Cash
and cash equivalents and short-term investments at March 31, 1996 and
December 31, 1995 consisted of the following:
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
<S> <C> <C>
Cash and Cash Equivalents-
Cash and money market funds $ 5,757,807 $5,284,262
U.S. government securities 28,851,802 -
----------- ----------
$34,609,609 $5,284,262
=========== ==========
Short-term Investments-
U.S. government securities $ 9,914,429 $ -
</TABLE>
=========== ==========
(4) INITIAL PUBLIC OFFERING
On February 2, 1996, the Company completed its initial public offering of
5,750,000 shares of common stock at $10.00 per share. The sale of common
stock resulted in net proceeds to the Company of approximately $52,231,000
after deducting expenses related to the offering. In addition, all
outstanding shares of preferred stock were converted into 16,856,649 shares
of common stock upon the consummation of the initial public offering.
<PAGE> 8
(5) INVESTMENT IN METHYLGENE, INC.
In January 1996, the Company and certain institutional Canadian investors
formed a Quebec company, MethylGene, Inc. (MethylGene), to develop and
market certain compounds to be agreed upon by the Company and MethylGene.
The Company acquired a 49% interest in MethylGene for approximately
$752,000, and the Canadian investors acquired a 51% interest in MethylGene
for a total of approximately $5,500,000. The Company and such investors
have contributed $2,105,000 to MethylGene through March 31, 1995 and are
required to contribute the remaining amounts by the end of May 1996. The
Company has recorded a liability as of March 31, 1996 for the net amount of
proceeds received from such investors and expects to maintain a liability
that reflects the option of the MethylGene investors to require the Company
to exchange the investors' MethylGene stock for Hybridon stock (see below).
The Canadian investors have the right to exchange all (but not less than
all) of their shares of stock in MethylGene for an aggregate of 500,000
shares of Hybridon common stock (subject to adjustment for stock splits,
stock dividends and the like). This option is exercisable only during a
90-day period commencing on the earlier of the date five years after the
closing of the institutional investors' investment in MethylGene or the
date on which MethylGene ceases operations. This option terminates sooner
if MethylGene raises certain additional amounts of equity or debt financing
or if MethylGene enters into a corporate collaboration that meets certain
requirements.
The Company has granted to MethylGene exclusive worldwide licenses and
sublicenses in respect of certain technology relating to the MethylGene
fields. In addition, the Company and MethylGene have entered into a supply
agreement pursuant to which MethylGene is obligated to purchase from the
Company all required formulated bulk oligonucleotides at specified transfer
prices.
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company is engaged in the discovery and development of genetic medicines
based primarily on antisense technology. The Company commenced operations in
February 1990 and since that time has been engaged primarily in research and
development efforts, development of its manufacturing capabilities and
organizational efforts, including recruitment of scientific and management
personnel and raising capital. To date, the Company has not received revenue
from the sale of products. In order to commercialize products, the Company will
need to address a number of technological challenges and comply with
comprehensive regulatory requirements. Accordingly, it is not possible to
predict the amount of funds that will be required or the length of time that
will pass before the Company receives revenues from sales of any of its
products. All revenues received by the Company to date have been from
collaborative agreements and interest on invested funds.
The Company has incurred losses since its inception and expects to incur
significant operating losses in the future. The Company expects that its
research and development expenses will increase significantly during 1996 and
future years as it moves its principal research and development programs to more
advanced preclinical studies, into clinical trials and to later phase clinical
trials. In addition, the Company expects that its personnel and patent costs
will significantly increase in the future. Costs associated with the Company's
patent applications are expected to increase as the Company continues to file
and prosecute such applications. Patent costs also would significantly increase
if the Company became involved in litigation or administrative proceedings
involving its patents or those of third parties. The Company has incurred
cumulative losses since inception through March 31, 1996 of approximately
$111,628,000.
This Quarterly Report on Form 10-Q contains forward-looking statements that
involve a number of risks and uncertainties. Among the important factors that
could cause actual results to differ materially from those indicated by such
forward-looking statements are the factors set forth in the Company's Annual
Report on Form 10-K under the caption Management's Discussion and Analysis of
Financial Condition and Results of Operation -- Certain Factors That May
Affect Future Results, which are incorporated by reference herein.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
The Company had revenues of $554,000 and $313,000 in the three months ended
March 31, 1996 and 1995, respectively. Revenues in the three months ended March
31, 1996 and 1995 consisted of $259,000 received by the Company in each period,
under a collaborative agreement with F. Hoffman-La Roche Ltd. (Roche) and
$295,000 and $54,000, respectively, of interest income. The increase in
interest income was the result of substantially higher cash balances available
for investment as a result of the Company's initial public offering completed
on February 2, 1996.
The Company had research and development expenses of $7,383,000 and $6,668,000
in the three months ended March 31, 1996 and 1995, respectively. The increase in
research and development expenses in the three months ended March 31, 1996
reflects additional expenses associated with salaries and related costs,
facilities equipment costs related to additional laboratories and expenses
related to the product of GEM-91
<PAGE> 10
and additional preclinical compounds. Research and development staffing and
related costs increased significantly in 1996 as the number of employees engaged
in research and development activities increased by approximately 20%. The
Company expects to invest significant resources in the remainder of 1996 in
connection with the ongoing clinical trials of GEM 91 and the performance of
preclinical studies and the preparation of IND applications with respect to
additional antisense compounds.
The Company had general and administrative expenses of $2,418,000 and $1,538,000
in the three months ended March 31, 1996 and 1995, respectively. The increase
was attributable primarily to increases in salaries and bonuses, consulting
expenses for business development and financial advisory services and
travel-related expenses.
The Company had interest expenses of $40,000 and $53,000 in the three months
ended March 31, 1996 and 1995, respectively. Interest expenses in the three
months ended March 31, 1996 and 1995 primarily consisted of interest incurred
on borrowings to finance the purchase of property and equipment, and leasehold
improvements. The decrease in the three months ended March 31, 1996 reflect a
decrease in the long-term debt outstanding during 1996.
As a result of the above factors, the Company incurred net losses of $9,287,000
and $7,946,000 for the three months ended March 31, 1996 and 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1996, the Company used $10,472,000 for
operating activities, principally in connection with the Company's ongoing
research and development programs. The Company also increased its investment
in property and equipment by approximately $1,867,000, consisting primarily of
costs associated with the buildout of the Milford manufacturing facility, and
made additional advances to the landlord of the Cambridge facility of
approximately $2,911,000 during the three months ended March 31, 1996. In
addition, during the three months ended March 31, 1996, the Company increased
its short-term investments by approximately $9,914,000. On February 2, 1996,
the Company completed its initial public offering of common stock, which
resulted in net proceeds to the Company of approximately $52,231,000. As a
result of the closing of the Comapany's initial public offering, all of the
Comapany's previously outstanding series of convertible preferred stock were
automatically converted into common stock.
The Company also has signed a lease for a facility in Cambridge, Massachusetts,
and expects to move its primary operations to such facility in the fourth
quarter of 1996 or the first quarter of 1997. The Company expects to incur
significant costs in equipping and building out this facility, and the Company's
leasing costs will significantly increase as and when it takes occupancy of the
Cambridge facility. The Company has entered into an amendment to the lease for
the Cambridge facility pursuant to which, among other things, the Company
intends to purchase a partnership interest in the landlord of the facility for
approximately $5,450,000, which capital contribution will be used to fund a
portion of the costs (primarily relating to tenant improvements) of the
construction of the leased premises (of which $4,593,000 had been advanced to
the landlord and recorded as a deposit as of March 31, 1996).
<PAGE> 11
During the first quarter of 1996, the Company and three institutional Canadian
investors formed a new Canadian biotechnology company, MethylGene, Inc., to
develop and market certain compounds to be agreed upon by the Company and
MethylGene. It is expected that MethylGene will incur substantial losses in the
development of this technology. The Canadian investors have committed a total
of $5,500,000 to MethylGene and own a 51% interest. Hybridon acquired a
49% monthly interest in MethylGene for a commitment of $752,000. A March 31,
1996, Hybridon and the Canadian investors had contributed $268,000 and
$1,837,000, respectively, and are required to contribute the additional
$484,000 and $3,663,000, respectively, by the end of May 1996. The Canadian
investors have an option to convert their shares in MethylGene into an
aggregate of 500,000 shares of Hybridon common stock under certain
circumstances over a five-year period. Accordingly, the Company has recorded a
liability equal to the amount invested by the Canadian investors as of March
31, 1996 (approximately $1,801,000 net of issuance costs) for this conversion
option. MethylGene is a consolidated subsidiary of the Company, and the results
of operations of MethylGene will be reflected in Hybridon's consolidated
financial statements in future periods. For the first quarter of 1996,
MethylGene has not incurred any expenses or generated revenue.
The Company expects that its capital requirements will increase in the future
depending on numerous factors, including but not limited to the progress of the
Company's research and development activities; the results and costs of
preclinical studies and clinical trials; the timing and costs involved in
obtaining regulatory approvals; the costs involved with filing, prosecuting,
enforcing and defending patent claims; the costs associated with potential
commercialization of products under development, including the development of
manufacturing, marketing and sales capabilities; the ability of the Company to
enter into additional collaborative arrangements; and the ability of the Company
to obtain third-party financing for leasehold improvements and other capital
expenditures. The Company expects that capital expenditures for the nine months
ending December 31, 1996 will total approximately $9,800,000, primarily in
connection with the build-out and equipping of the Company's manufacturing
facility in Milford, Massachusetts, and the build-out of the Company's Cambridge
facility.
The Company anticipates that its existing capital resources will be adequate to
satisfy its capital requirements for at least 12 months. Substantial additional
funds will be required from external sources to support the Company's operations
beyond that time. The Company intends to seek additional equity, debt and lease
financing to fund future operations, depending on the terms on which such
sources of funding may be available from time to time. In particular, the
Company contemplates seeking bank or lease financing for the build-out and
equipping of the Milford facility. The Company also intends to seek additional
collaborative development and commercialization relationships with potential
corporate partners in order to fund certain of
<PAGE> 12
its programs. Except for research and development funding from Roche and Searle
under Hybridon's collaboration agreements with such companies (which are subject
to early termination in certain circumstances), Hybridon has no committed
external sources of capital, and, as discussed above, expects no product
revenues for a number of years. If the Company is unable to obtain necessary
additional funds, it would be required to scale back or eliminate certain of its
research and development programs or commercialization efforts or license to
third parties certain technologies which the Company would otherwise pursue on
its own.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The following important factors, among others, could cause actual results to
differ materially from those contained in forward-looking statements made in
this Quarterly Report on Form 10-Q and presented elsewhere by management from
time to time.
Early Stage of Development: Technological Uncertainty
Hybridon's potential products are at an early stage of development. All of the
Company's potential products are in research or development. There are a number
of technological challenges that the Company must successfully address to
complete any of its development efforts. To date, most of the Company's
resources have been dedicated to applying oligonucleotide chemistry and cell
biology to the research and development of potential pharmaceutical products
based on antisense technology. As in most drug discovery programs, the results
of in vitro, tissue culture and preclinical studies by the Company may be
inconclusive and may not be indicative of results that will be obtained in human
clinical trials. In addition, results attained in early human clinical trials by
the Company may not be indicative of results that will be obtained in later
clinical trials. Neither the Company nor, to its knowledge, any other company
has successfully completed human clinical trials of a product based on antisense
technology, and there can be no assurance that any of the Company's products
will be successfully developed.
Uncertainty Associated with Clinical Trials
Before obtaining regulatory approvals for the commercial sale of any of its
products under development, the Company must undertake extensive and costly
preclinical studies and clinical trials to demonstrate that such products are
safe and efficacious. The results from preclinical studies and early clinical
trials are not necessarily predictive of results that will be obtained in later
stages of testing or development, and there can be no assurance that the
Company's clinical trials will demonstrate the safety and efficacy of any
products or will result in products capable of being produced in commercial
quantities at reasonable costs or in a marketable form.
Although the Company is developing several oligonucleotide compounds on which it
plans to file IND applications with the FDA and equivalent filings outside of
the U.S., there can be no assurance that necessary preclinical studies on these
compounds will be completed satisfactorily or that the Company otherwise will be
able to make its intended filings. Further, there can be no assurance that the
Company will be permitted to undertake and complete human clinical trials of any
of the Company's potential products, either in the U.S. or elsewhere, or, if
permitted, that such products will not have undesirable side effects or other
characteristics that may prevent or limit their commercial use.
<PAGE> 13
Future Capital Needs: Uncertainty of Additional Funding
The Company's future capital requirements will depend on many factors, including
continued scientific progress in its research, drug discovery and development
programs, the magnitude of these programs, progress with preclinical and
clinical trials, the time and costs involved in obtaining regulator approvals,
the costs involved in filing, prosecuting and enforcing patent claims, competing
technological and market developments, the ability of the Company to establish
and maintain collaborative academic and commercial research, development and
marketing relationships, and the costs of manufacturing scale-up and
commercialization activities and arrangements.
Based on its current operating plan, the Company anticipates that its existing
capital resources will be adequate to satisfy its capital requirements for at
least 12 months. The Company anticipates that it will be required to raise
substantial additional funds, including through collaborative relationships and
public or private financings. No assurance can be given that additional
financing will be available, or, if available, that it will be available on
acceptable terms. If adequate funds are not available, the Company may be
required to significantly curtail one or more of its research, drug discovery or
development programs, or obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain
of is technologies, product candidates or products which the Company would
otherwise pursue on its own.
History of Operating Losses and Accumulated Deficit
Hybridon has incurred net losses since its inception. At March 31, 1996, the
Company's accumulated deficit was approximately $111,628,000. Such losses have
resulted principally from costs incurred in the Company's research and
development programs and from general and administrative costs associated with
the Company's development. No revenues have been generated from product sales,
and no product sales revenues are anticipated for a number of years, if ever.
The Company expects to incur additional operating losses over the next several
years and expects cumulative losses to significantly increase as the Company's
research and development and clinical trial efforts expand.
Patents and Proprietary Rights
The Company's success will depend in part on its ability to develop patentable
products and obtain and enforce patent protection for its products both in the
U.S. and in other countries. The Company has filed and intends to file
applications as appropriate for patents covering both its products and
processes. However, the patent positions of pharmaceutical and biotechnology
firms, including Hybridon, are generally uncertain and involve complex legal and
factual questions. No assurance can be given that patents will issue from any
pending or future patent applications owned by or licensed to Hybridon or that
the claims allowed under any issued patents will be sufficiently broad to
protect the Company's technology.
The commercial success of the Company will also depend in part on the Company
neither infringing patents issued to competitors or others nor breaching the
technology licenses upon which the Company's products might be based. The
Company's licenses of patents and patent applications impose various
commercialization, sublicensing, insurance and other obligations on the Company.
Failure of the Company to comply with these requirements could result in
termination of the license. The Company is aware of patents and patent
applications belonging to competitors, and it is uncertain whether these patents
and patent applications will require the Company to alter its products or
processes, pay licensing fees or cease certain activities.
<PAGE> 14
Need to Establish Collaborative Commercial Relationships: Dependence on Partners
Hybridon's business strategy includes entering into strategic alliances or
licensing arrangements with corporate partners, primarily pharmaceutical and
biotechnology companies, relating to the development and commercialization of
certain of its potential products. Although the Company is a party to corporate
collaborations with Roche, Medtronic, Pharmacia and Searle, there can be no
assurance that these collaborations will be scientifically or commercially
successful, that the Company will be able to renegotiate additional
collaborations, that such collaborations will be available to the Company on
acceptable terms or that any such relationships, if established, will be
scientifically or commercially successful.
No Assurance of Regulatory Approval: Government Regulation
The Company's preclinical studies and clinical trials, as well as the
manufacturing and marketing of its potential products, are subject to extensive
regulation by numerous federal, state and local governmental authorities in the
U.S. Similar regulatory requirements exist in other countries where the Company
intends to test and market its drug candidates. Failure to comply with
applicable regulatory requirements can, among other things, result in fines,
suspension of regulatory approvals, product recalls, seizure of products,
operating restrictions and criminal prosecutions. FDA policy may change and
additional government regulations may be established that could prevent or delay
regulatory approval of the Company's potential products. In addition, a marketed
drug and its manufacturer are subject to continual review, and subsequent
discovery of previously unknown problems with a product or manufacturer may
result in restrictions on such product or manufacturer, including withdrawal of
the product from the market and withdrawal of the right to manufacture the
product. All of the foregoing regulatory matters also will be applicable to
development, manufacturing and market undertaken by any strategic partners or
licenses of the Company.
Competition
There are many companies, both private and publicly traded, that are conducting
research and development activities on technologies and products similar to or
competitive with the Company's antisense technologies and proposed products. For
example, many other companies are actively seeking to develop products,
including antisense oligonucleotides, with disease targets similar to those
being pursued by the Company. Some of these competitive products are in clinical
trials. The Company believes that the industrywide interest in investigating the
potential of gene expression modulation technologies will continue and will
accelerate as the techniques that permit the design and development of drugs
based on such technologies become more widely understood. There can be no
assurance that the Company's competitors will not succeed in developing products
based on oligonucleotide or other technologies, existing or new, that are more
effective than any that are being developed by the Company or that would render
Hybridon's antisense technologies obsolete and noncompetitive. Moreover, there
currently are commercially available products for the treatment of certain of
the disease targets being pursued by the Company.
Competitors of the Company engaged in all areas of biotechnology and drug
discovery in the U.S. and other countries are numerous and include, among
others, pharmaceutical and chemical companies, biotechnology firms, universities
and other research institutions. Many of the Company's competitors have
substantially greater financial, technical and human resources than the Company
has. In addition, many of these competitors have significantly greater
experience than the Company has in undertaking preclinical studies
<PAGE> 15
and human clinical trials of new pharmaceutical products and obtaining FDA and
other regulatory approvals of products for use in health care. Furthermore, if
the Company is permitted to commence commercial sales of products, it will also
be competing with respect to manufacturing efficiency and marketing
capabilities, areas in which it has limited or no experience. Accordingly, the
Company's competitors may succeed in obtaining FDA or other regulatory approvals
for products or in commercializing such products more rapidly than the Company.
Limited Manufacturing Capability
While the Company believes that its existing production capacity and inventories
of GEM 91 will be sufficient to enable it to satisfy its current research needs
and its needs for clinical trials for this product candidate through 1996, and
that its existing production capacity is sufficient to support the Company's
other preclinical and clinical requirements for oligonucleotide compounds during
such period, the Company will need to expand its manufacturing capacity in order
to satisfy its future requirements for commercial production of GEM 91 and the
Company's other product candidates. In addition, in order to successfully
commercialize its product candidates, the Company may be required to further
reduce the cost of production of its oligonucleotide compounds, and there can be
no assurance that the Company will be able to do so.
The manufacture of the Company's products will be subject to GMP requirements
prescribed by the FDA or other standards prescribed by the appropriate
regulatory agency in the country of use. To the Company's knowledge, therapeutic
products based on chemically modified oligonucleotides have never been
manufactured on a commercial scale. There can be no assurance that the Company
will be able to manufacture or obtain products in a timely fashion and at
acceptable quality and price levels, that it or its suppliers can manufacture in
compliance with GMP or other regulatory requirements, or that it or its
suppliers will be able to manufacture an adequate supply of product.
Absence of Sales and Marketing Experience
The Company expects to market and sell certain of its products directly and
through co-marketing or other licensing arrangements with third parties. There
can be no assurance that the Company will be able to build such a marketing
staff or sales force, that the cost of establishing such a marketing staff or
sales force will be justifiable in light of any product revenues or that the
Company's direct sales and marketing efforts will be successful. To the extent
the Company enters into co-marketing or other licensing arrangements, any
revenues received by the Company will be dependent in part on the efforts of
third parties, and there can be no assurance that such efforts will be
successful.
Product Liability Exposure and Insurance
The use of any of the Company's potential products in clinical trials and the
commercial sale of any products may expose the Company to liability claims.
These claims might be made directly by consumers, health care providers or by
pharmaceutical and biotechnology companies or others selling such products.
Hybridon has limited product liability insurance coverage, and such coverage is
subject to various deductibles. Such coverage is becoming increasingly
expensive, and no assurance can be given that the Company will be able to
maintain or obtain such insurance at reasonable cost or in sufficient amounts to
protect the Company against losses due to liability claims that could have a
material adverse effect on the Company.
<PAGE> 16
Uncertainty of Health Care Reform Measures
Federal, state and local officials and legislators (and certain foreign
government officials and legislators) have proposed or are reportedly
considering proposing a variety of reforms to the health care system in the U.S.
and abroad. The Company cannot predict what health care reform legislation, if
any, will be enacted in the U.S. or elsewhere. Significant changes in the health
care system in the U.S. or elsewhere are likely to have a substantial impact
over time on the manner in which the Company conducts its business. Such changes
could have a material adverse effect on the Company. The existence of pending
health care reform proposals could have a material adverse effect on the
Company's ability to raise capital.
Attraction and Retention of Key Employees and Scientific Collaborators
The Company's success is dependent on the retention of principal members of its
management and scientific staff and on the recruitment of additional qualified
scientific personnel who can provide additional expertise to the Company. The
Company's success also depends in part on its continued ability to develop and
maintain collaborative relationships with independent researchers and leading
academic and research institutions. However, given the intense competition for
experienced scientific personnel and for such collaborator relationships, there
can be no assurance that the Company will be able to attract and retain
scientific personnel or to develop and maintain collaborative agreements.
<PAGE> 17
HYBRIDON, INC.
PART II
OTHER INFORMATION
-------
Item 1-5 None
- - - --------
Item 6. Exhibits and Reports on Form 8-K
- - - ------- --------------------------------
(a) Exhibit
11 Computation of Earnings Per Share.
27 Financial Data Schedule (EDGAR).
99 Pages 36-39 of the Company's Annual Report on Form 10-K
for the period ended December 31, 1995 (which is not
deemed to be filed except to the extent that portions
thereof are expressly incorporated by reference
herein).
(b) No reports were filed on Form 8-K during the three months ended
March 31, 1996.
<PAGE> 18
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.
HYBRIDON, INC.
May 13, 1996 /s/ E. Andrews Grinstead, III
- - - -------------------- --------------------------------
Date E. Andrews Grinstead, III
Chairman, President and Chief
Executive Officer
May 13, 1996 /s/ Anthony J. Payne
- - - -------------------- ---------------------------------
Date Anthony J. Payne
Senior Vice President of Finance and
Administration and Chief Financial
Officer (Principal Financial and
Accounting Officer)
<PAGE> 19
HYBRIDON, INC.
EXHIBIT INDEX
-------
11 Computation of Earnings Per Share
27 Financial Data Schedule (EDGAR)
99 Pages 36-39 of the Company's Annual Report on Form 10-K for the period
ended December 31, 1995 (which is not deemed to be filed except to the
extent that portions thereof are expressly incorporated by reference
herein).
<PAGE> 1
EXHIBIT 11
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
COMPUTATION OF PRO FORMA NET LOSS PER COMMON SHARE(1)
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1996 1995
<S> <C> <C>
NET LOSS $(9,287,064) $(7,945,908)
=========== ===========
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common stock outstanding during the period 16,976,729 1,814,266
Conversion of preferred stock 5,557,137 11,884,049
Dilutive effect of common equivalent shares issued subsequent to
October 31, 1994 (2) 174,528 523,584
----------- -----------
$22,708,394 $14,221,899
=========== ===========
PRO FORMA NET LOSS PER COMMON SHARE $(.41) $(.56)
===== =====
<FN>
(1) Primary and fully diluted net loss per share has not been separately presented, as the amounts would not be
meaningful.
(2) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83, stock options issued at
prices below the initial public offering price per share (cheap stock) during the 12-month period immediately
preceding the initial filing date of the Company's Registration Statement of its initial public offering have been
included as outstanding for all periods presented. The dilutive effect of the common and common stock
equivalents was computed in accordance with the treasury stock method.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 34,609,609
<SECURITIES> 9,914,429
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 46,993,279
<PP&E> 15,201,224
<DEPRECIATION> 4,702,473
<TOTAL-ASSETS> 63,695,357
<CURRENT-LIABILITIES> 5,413,521
<BONDS> 1,046,754
<COMMON> 24,469
0
0
<OTHER-SE> 63,670,888
<TOTAL-LIABILITY-AND-EQUITY> 63,695,357
<SALES> 0
<TOTAL-REVENUES> 554,223
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,801,683
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,604
<INCOME-PRETAX> (9,287,064)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,287,064)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,287,064)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> (.41)
</TABLE>
<PAGE> 1
EXHIBIT 99
----------
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The following important factors, among others, could cause actual results
to differ materially from those contained in forward-looking statements made in
this Annual Report on Form 10-K and presented elsewhere by management from time
to time.
Early Stage of Development; Technological Uncertainty
Hybridon's potential products are at an early stage of development. All of
the Company's potential products are in research or development. There are a
number of technological challenges that the Company must successfully address to
complete any of its development efforts. To date, most of the Company's
resources have been dedicated to applying oligonucleotide chemistry and cell
biology to the research and development of potential pharmaceutical products
based upon antisense technology. As in most drug discovery programs, the results
of in vitro, tissue culture and preclinical studies by the Company may be
inconclusive and may not be indicative of results that will be obtained in human
clinical trials. In addition, results attained in early human clinical trials by
the Company may not be indicative of results that will be obtained in later
clinical trials. Neither the Company, nor to its knowledge, any other company
has successfully completed human clinical trials of a product based on antisense
technology, and there can be no assurance that any of the Company's products
will be successfully developed.
Uncertainty Associated with Clinical Trials
Before obtaining regulatory approvals for the commercial sale of any of its
products under development, the Company must undertake extensive and costly
preclinical studies and clinical trials to demonstrate that such products are
safe and efficacious. The results from preclinical studies and early clinical
trials are not necessarily predictive of results that will be obtained in later
stages of testing or development, and there can be no assurance that the
Company's clinical trials will demonstrate the safety and efficacy of any
products or will result in products capable of being produced in commercial
quantities at reasonable cost or in a marketable form.
Although the Company is developing several oligonucleotide compounds on
which it plans to file IND applications with the FDA and equivalent filings
outside of the U.S., there can be no assurance that necessary preclinical
studies on these compounds will be completed satisfactorily or that the Company
otherwise will be able to make its intended filings. Further, there can be no
assurance that the Company will be permitted to undertake and complete human
clinical trials of any of the Company's potential products, either in the U.S.
or elsewhere, or, if permitted, that such products will not have undesirable
side effects or other characteristics that may prevent or limit their commercial
use.
Future Capital Needs; Uncertainty of Additional Funding
The Company's future capital requirements will depend on many factors,
including continued scientific progress in its research, drug discovery and
development programs, the magnitude of these programs, progress with preclinical
and clinical trials, the time and costs involved in obtaining regulatory
approvals, the costs involved in filing, prosecuting and enforcing patent
claims, competing technological and market developments, the ability of the
Company to establish and maintain collaborative academic and commercial
research, development and marketing relationships, and the costs of
manufacturing scale-up and commercialization activities and arrangements.
Based upon its current operating plan, the Company anticipates that its
existing capital resources will be adequate to satisfy its capital requirements
for at least 12 months. The Company anticipates that it will be required to
raise substantial additional funds, including through collaborative
relationships and public or private financings. No assurance can be given that
additional financing will be available, or, if available, that it will be
available on acceptable terms. If adequate funds are not available, the Company
may be required to curtail significantly one or more of its research, drug
discovery or development
-36-
<PAGE> 2
programs, or obtain funds through arrangements with collaborative partners or
others that may require the Company to relinquish rights to certain of its
technologies, product candidates or products which the Company would otherwise
pursue on its own. See "Item 1. Business -- Hybridon Drug Development and
Discovery Programs" and "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
History of Operating Losses and Accumulated Deficit
Hybridon has incurred net losses since its inception. At December 31, 1995,
the Company's accumulated deficit was approximately $102,341,000. Such losses
have resulted principally from costs incurred in the Company's research and
development programs and from general and administrative costs associated with
the Company's development. No revenues have been generated from product sales,
and no product sales revenues are anticipated for a number of years, if ever.
The Company expects to incur additional operating losses over the next several
years and expects cumulative losses to increase significantly as the Company's
research and development and clinical trial efforts expand. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Patents and Proprietary Rights
The Company's success will depend in part on its ability to develop
patentable products and obtain and enforce patent protection for its products
both in the U.S. and in other countries. The Company has filed and intends to
file applications as appropriate for patents covering both its products and
processes. However, the patent positions of pharmaceutical and biotechnology
firms, including Hybridon, are generally uncertain and involve complex legal and
factual questions. No assurance can be given that patents will issue from any
pending or future patent applications owned by or licensed to Hybridon or that
the claims allowed under any issued patents will be sufficiently broad to
protect the Company's technology.
The commercial success of the Company will also depend in part on its
neither infringing patents issued to competitors or others nor breaching the
technology licenses upon which the Company's products might be based. The
Company's licenses of patents and patent applications impose various
commercialization, sublicensing, insurance and other obligations on the Company.
Failure of the Company to comply with these requirements could result in
termination of the license. The Company is aware of patents and patent
applications belonging to competitors, and it is uncertain whether these patents
and patent applications will require the Company to alter its products or
processes, pay licensing fees or cease certain activities. See "Item 1. Business
- - - -- Patents, Trade Secrets and Licenses."
Need to Establish Collaborative Commercial Relationships; Dependence on Partners
Hybridon's business strategy includes entering into strategic alliances or
licensing arrangements with corporate partners, primarily pharmaceutical and
biotechnology companies, relating to the development and commercialization of
certain of its potential products. Although the Company is a party to corporate
collaborations with Roche, Medtronic, Pharmacia and Searle, there can be no
assurance that these collaborations will be scientifically or commercially
successful, that the Company will be able to negotiate additional
collaborations, that such collaborations will be available to the Company on
acceptable terms or that any such relationships, if established, will be
scientifically or commercially successful. See "Item 1. Business -- Hybridon
Drug Development and Discovery Programs" and "-- Corporate Collaborations."
No Assurance of Regulatory Approval; Government Regulation
The Company's preclinical studies and clinical trials, as well as the
manufacturing and marketing of its potential products, are subject to extensive
regulation by numerous federal, state and local governmental authorities in the
U.S. Similar regulatory requirements exist in other countries where the Company
intends to test and market its drug candidates. Failure to comply with
applicable regulatory requirements can, among other things, result in fines,
suspension of regulatory approvals, product recalls, seizure of products,
operating restrictions and criminal prosecutions. FDA policy may change and
additional government regulations may be established that could prevent or delay
regulatory approval of the Company's potential products. In addition, a marketed
drug and its manufacturer are subject to continual review, and subsequent
discovery of previously unknown problems with a product or manufacturer may
result in restrictions on such product or manufacturer, including withdrawal of
the product
-37-
<PAGE> 3
from the market and withdrawal of the right to manufacture the product. All of
the foregoing regulatory matters also will be applicable to development,
manufacturing and marketing undertaken by any strategic partners or licensees of
the Company. See "Item 1. Business -- Government Regulation."
Competition
There are many companies, both private and publicly traded, that are
conducting research and development activities on technologies and products
similar to or competitive with the Company's antisense technologies and proposed
products. For example, many other companies are actively seeking to develop
products, including antisense oligonucleotides, with disease targets similar to
those being pursued by the Company. Some of these competitive products are in
clinical trials. The Company believes that the industry-wide interest in
investigating the potential of gene expression modulation technologies will
continue and will accelerate as the techniques which permit the design and
development of drugs based on such technologies become more widely understood.
There can be no assurance that the Company's competitors will not succeed in
developing products based on oligonucleotide or other technologies, existing or
new, which are more effective than any that are being developed by the Company,
or which would render Hybridon's antisense technologies obsolete and
noncompetitive. Moreover, there currently are commercially available products
for the treatment of certain of the disease targets being pursued by the
Company.
Competitors of the Company engaged in all areas of biotechnology and drug
discovery in the U.S. and other countries are numerous and include, among
others, pharmaceutical and chemical companies, biotechnology firms, universities
and other research institutions. Many of the Company's competitors have
substantially greater financial, technical and human resources than the Company.
In addition, many of these competitors have significantly greater experience
than the Company in undertaking preclinical studies and human clinical trials of
new pharmaceutical products and obtaining FDA and other regulatory approvals of
products for use in health care. Furthermore, if the Company is permitted to
commence commercial sales of products, it will also be competing with respect to
manufacturing efficiency and marketing capabilities, areas in which it has
limited or no experience. Accordingly, the Company's competitors may succeed in
obtaining FDA or other regulatory approvals for products or in commercializing
such products more rapidly than the Company. See "Item 1. Business
- - - --Competition."
Limited Manufacturing Capability
While the Company believes that its existing production capacity and
inventories of GEM 91 will be sufficient to enable it to satisfy its current
research needs and its needs for clinical trials for this product candidate
through 1996, and that its existing production capacity is sufficient to support
the Company's other preclinical and clinical requirements for oligonucleotide
compounds during such period, the Company will need to expand its manufacturing
capacity in order to satisfy its future requirements for commercial production
of GEM 91 and the Company's other product candidates. In addition, in order to
successfully commercialize its product candidates, the Company may be required
to reduce further the cost of production of its oligonucleotide compounds, and
there can be no assurance that the Company will be able to do so.
The manufacture of the Company's products will be subject to GMP
requirements prescribed by the FDA or other standards prescribed by the
appropriate regulatory agency in the country of use. To the Company's knowledge,
therapeutic products based on chemically-modified oligonucleotides have never
been manufactured on a commercial scale. There can be no assurance that the
Company will be able to manufacture or obtain products in a timely fashion and
at acceptable quality and price levels, that it or its suppliers can manufacture
in compliance with GMP or other regulatory requirements or that it or its
suppliers will be able to manufacture an adequate supply of product. See "Item
1. Business --Manufacturing."
Absence of Sales and Marketing Experience
The Company expects to market and sell certain of its products directly and
through co-marketing or other licensing arrangements with third parties. There
can be no assurance that the Company will be able to build such a marketing
staff or sales force, that the cost of establishing such a marketing staff or
sales force will be justifiable in light of any product revenues or that the
Company's direct sales and marketing efforts will be successful. To the extent
the Company enters into co-marketing or other licensing arrangements, any
revenues received by the Company will be dependent in part on the efforts of
third parties and there can be no assurance that such efforts will be
successful. See "Item 1. Business -- Marketing Strategy."
-38-
<PAGE> 4
Product Liability Exposure and Insurance
The use of any of the Company's potential products in clinical trials and
the commercial sale of any products may expose the Company to liability claims.
These claims might be made directly by consumers, health care providers or by
pharmaceutical and biotechnology companies or others selling such products.
Hybridon has limited product liability insurance coverage, and such coverage is
subject to various deductibles. Such coverage is becoming increasingly
expensive, and no assurance can be given that the Company will be able to
maintain or obtain such insurance at reasonable cost or in sufficient amounts to
protect the Company against losses due to liability claims that could have a
material adverse effect on the Company.
Uncertainty of Health Care Reform Measures
Federal, state and local officials and legislators (and certain foreign
government officials and legislators) have proposed or are reportedly
considering proposing a variety of reforms to the health care systems in the
U.S. and abroad. The Company cannot predict what health care reform legislation,
if any, will be enacted in the U.S. or elsewhere. Significant changes in the
health care system in the U.S. or elsewhere are likely to have a substantial
impact over time on the manner in which the Company conducts its business. Such
changes could have a material adverse effect on the Company. The existence of
pending health care reform proposals could have a material adverse effect on the
Company's ability to raise capital.
Attraction and Retention of Key Employees and Scientific Collaborators
The Company's success is dependent on the retention of principal members of
its management and scientific staff and on the recruitment of additional
qualified scientific personnel who can provide additional expertise to the
Company. The Company's success also depends in part on its continued ability to
develop and maintain collaborative relationships with independent researchers
and leading academic and research institutions. However, given the intense
competition for experienced scientific personnel and for such collaborator
relationships, there can be no assurance that the Company will be able to
attract and retain scientific personnel or to develop and maintain collaborative
agreements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------------------------------------------
All financial statements required to be filed hereunder are filed as
APPENDIX A hereto, are listed under Item 14(a), and are incorporated herein by
this reference.
-39-
<PAGE> 5
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.
HYBRIDON, INC.
May 13, 1996 /s/ E. Andrews Grinstead, III
- - - -------------------- --------------------------------
Date E. Andrews Grinstead, III
Chairman, President and Chief
Executive Officer
May 13, 1996 /s/ Anthony J. Payne
- - - -------------------- ---------------------------------
Date Anthony J. Payne
Senior Vice President of Finance and
Administration and Chief Financial
Officer (Principal Financial and
Accounting Officer)
