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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) OCTOBER 22, 1998
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CYGNUS, INC.
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(Exact name of registrant as specified in charter)
DELAWARE 0-18962 94-2978092
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
400 PENOBSCOT DRIVE, REDWOOD CITY, CALIFORNIA 94063-4719
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (650) 369-4300
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NOT APPLICABLE
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(Former name or former address, if changed since last report.)
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Item 5. OTHER EVENTS.
In a press release disseminated on October 22, 1998, the Registrant
publicly announced its earnings for the quarter ended September 30, 1998. A
copy of the press release is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
Item 7. EXHIBITS.
A copy of the Registrant's press release announcing its earnings
for the quarter ended September 30, 1998 is attached hereto as Exhibit 99.1.
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SIGNATURE
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.
CYGNUS, INC.
DATE: October 26, 1998 By: /s/ John C. Hodgman
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Name: John C. Hodgman
Title: President, Chief Executive
Officer and Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
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<S> <C>
99.1 Press Release dated October 22, 1998, issued by Cygnus, Inc. ,
announcing its earnings for the quarter ended September 30, 1998.
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EXHIBIT 99.1
FOR ADDITIONAL INFORMATION:
Craig Carlson/Senior Vice President
(650) 369-4300 www.cygn.com
FOR IMMEDIATE RELEASE
CYGNUS REPORTS THIRD QUARTER FINANCIAL RESULTS
Redwood City, CA - October 22, 1998 - Cygnus, Inc. (NASDAQ: CYGN) reported
total revenue of $2.8 million for the quarter ended September 30, 1998,
compared to $5.4 million for the quarter ended September 30, 1997. Cygnus
posted a net loss of $9.6 million ($0.48/share) for the quarter ended
September 30, 1998 compared to a net loss of $44.6 million ($2.36/share) for
the third quarter of 1997. The reduction in total revenue in the third
quarter of 1998 is primarily attributed to the lack of product revenue
associated with the FemPatch-Registered Trademark- system (Warner-Lambert
Co., Morris Plains, NJ) compared to the third quarter of 1997.
The Company had total costs and expenses of $12.2 million for the third
quarter of 1998 compared to $50.3 million for the third quarter of 1997.
Total costs and expenses decreased due to the recognition of $39.6 million
from an arbitration settlement obligation at the end of the third quarter of
1997. Cost of products sold for the third quarter of 1998 totaled
$0.7 million compared to $3.1 million for the third quarter of 1997 due to the
decrease in shipments of the FemPatch system. The Company does not anticipate
manufacturing revenue for the FemPatch system for the remainder of 1998.
Research and development costs for the third quarter of 1998 totaled
$7.9 million compared to $5.4 million for the third quarter of 1997, resulting
from increased costs of development clinical studies for the
GlucoWatch-Registered Trademark- system and increased costs associated with
production scale-up activities for one of the Company's transdermal products.
Cash and short-term investments totaled $55.2 million as of September 30,
1998.
"Our focus over the past quarter has been to assure a smooth transition from
the change in management, to re-establish our strategy for seeking a
marketing alliance for the GlucoWatch monitor and to begin our final set of
development clinical studies for the GlucoWatch monitor," stated John C.
Hodgman, President and Chief Executive Officer of Cygnus.
The Company's results of operations vary significantly from period to period
and depend on, among other factors, the signing of new product development
agreements and the timing of recognizing payment amounts specified
thereunder, the timing of recognizing license fees and cost reimbursement
payments made by pharmaceutical company licensees, the demand for its
Nicotrol-Registered Trademark- patch (Pharmacia AB, Stockholm, Sweden), and
the demand for and costs associated with the manufacture of the FemPatch
system. The Company's contract revenues are generally earned and recognized
based on the percentage of actual efforts expended compared to total expected
efforts during the development period for each contract. However, contract
revenues are not always aligned with the timing of related expenses. To
date, research and development expenses generally have exceeded contract
revenues in any particular period, and the Company expects the same situation
to continue for the next several years. In addition, the level of revenues
in any given period is not necessarily indicative of expected revenues in
future periods.
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Cygnus is engaged in the development and manufacture of diagnostic and drug
delivery systems utilizing its proprietary technologies to satisfy unmet
medical needs cost effectively. Cygnus' current efforts are primarily
focused on two core areas: an automatic and continuous glucose monitoring
device (the GlucoWatch monitor) and transdermal drug delivery systems. The
Company currently has two marketed products and a number of other products in
different stages of development.
The forward looking statements regarding future events and the future
performance of the Company contained in this press release involve risks and
uncertainties that may cause the Company's actual results to differ
materially. Such factors include the timely development, government
approvals, establishment of a marketing alliance, commercial introduction and
market acceptance of the GlucoWatch monitor and the Company's other products
in development. The Company refers you to the documents the Company files
from time to time with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, which contain descriptions of certain factors
that could cause the Company's actual results to differ from the Company's
current expectations and any forward-looking statements contained in this
news release.
END
FINANCIAL TABLE TO FOLLOW
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CYGNUS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT 30, SEPT 30,
1998 1997 1998 1997
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<S> <C> <C>
PRODUCT REVENUES $ 0 $ 1,770 $ 587 $ 3,470
CONTRACT REVENUES 2,463 3,528 7,822 10,984
ROYALTY & OTHER REVENUES 319 139 714 8,516
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TOTAL REVENUES 2,782 5,437 9,123 22,970
COSTS AND EXPENSES:
COSTS OF PRODUCTS SOLD 741 3,062 2,701 7,071
RESEARCH AND DEVELOPMENT 7,859 5,381 22,665 16,353
MARKETING, GENERAL AND ADMINISTRATIVE 3,634 2,240 8,350 6,103
ARBITRATION SETTLEMENT 0 39,633 0 39,633
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TOTAL COSTS AND EXPENSES 12,234 50,316 33,716 69,160
INCOME/(LOSS) FROM OPERATIONS (9,452) (44,879) (24,593) (46,190)
INTEREST INCOME & EXPENSE, AND OTHER (NET) (171) 272 (227) 910
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NET LOSS $ (9,623) $ (44,607) $ (24,820) $ (45,280)
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NET LOSS PER SHARE $ (0.48) $ (2.36) $ (1.23) $ (2.41)
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SHARES USED IN COMPUTATION OF NET LOSS PER SHARE 20,241 18,879 20,107 18,818
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CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
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<CAPTION>
SEPT. 30,
1998
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<S> <C>
Current assets $ 58,379
Equipment and improvements, net 6,148
Deferred compensation and other assets 7,440
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TOTAL ASSETS $ 71,967
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Current liabilities 14,662
Long-term liabilities 81,685
Shareholders' equity (24,380)
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 71,967
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