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Total Number of Pages: 4
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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) January 29, 1999
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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.
On January 29, 1999, Cygnus, Inc. issued a press release, the
text of which is attached hereto as Exhibit 99.1, announcing its earnings
for the quarter ended December 31, 1998. The Company also announced that
there will be no reverse stock split of the Company's common stock.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit Number
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99.1 Press Release by Cygnus, Inc. dated January 29, 1999
referred to in Item 5 above.
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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 hereunto duly authorized.
CYGNUS, INC.
DATE: February 1, 1999 By: /s/ Barbara G. McClung
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Name: Barbara G. McClung
Title: Vice President and General Counsel
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EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
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99.1 Press Release by Cygnus, Inc. dated January 29, 1999. Refer to Item
5 above.
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EXHIBIT 99.1
FOR ADDITIONAL INFORMATION:
Craig Carlson/CFO, Cygnus
(650) 369-4300 www.cygn.com
Burns McClellan (212) 213-0006
Jonathan M. Nugent - Investors
Justin Jackson - Media
FOR IMMEDIATE RELEASE
Cygnus Reports 1998 Financial Results
No Reverse Stock Split for Cygnus;
Nasdaq Continued Listing Requirements Achieved
REDWOOD CITY, CA - January 29, 1999 - Cygnus, Inc. (Nasdaq:CYGN) today
reported total revenue of $11.7 million for the year ended December 31,
1998, as compared to $29.5 million for the year ended December 31, 1997.
Cygnus posted a net loss of $39.4 million ($1.95/share) for 1998, as
compared to a net loss of $50.5 million ($2.67/share) for 1997. The
decrease in total revenue was primarily attributed to royalties received
in 1997, some of which were deferred from 1996, from Nicotrol (registered
trademark of Pharmacia AB, Stockholm, Sweden) transdermal systems
manufactured and shipped to support the over-the-counter launch of the
product. No such revenue was recognized in 1998. Additionally, product
revenue decreased as a result of the discontinuation of the shipments of
the FemPatch (registered trademark of Warner-Lambert Co., Morris Plains,
NJ) system as well as the Nicotrol system. The decrease in contract
revenue largely reflects one-time payments in 1997 from Pharmacia &
UpJohn's purchase of the manufacturing rights for the Nicotrol system in
the U.S. and payments from Warner-Lambert related to manufacturing the
FemPatch system.
Cygnus today also announced that there will be no reverse stock split of
the Company's common stock. Nasdaq notified the Company that it has been
found to be in compliance with the bid price requirement as well as all
other requirements necessary for continued listing on the Nasdaq National
Market. Cygnus received approval from shareholders, in December 1998, for
a three-for-one reverse stock split as a solution if there was no other
recourse in complying with the continued listing requirements for the
Nasdaq National Market.
"It has been management's strong desire to avoid a reverse stock split
and we are pleased this is no longer an issue we need to deal with at
this time," stated John C. Hodgman, President and Chief Executive
Officer of Cygnus, Inc. "As a result of restructuring the convertible
debt and now being in compliance with Nasdaq, we believe there is
improved stability and predictability in our capital structure. We can
focus all of our attention on achieving our regulatory milestones and
signing a marketing agreement for the GlucoWatch (Registered Trademark)
biographer," he added.
Net loss for 1997 included a $39.7 million non-recurring arbitration
settlement expense. Net loss for 1997, exclusive of this arbitration
expense, was $10.8 million. The increase in net loss in 1998 as compared
to 1997, exclusive of the arbitration expense mentioned above, is mainly
due to a decrease in total revenue, partially offset by a decrease in
cost of goods sold, an increase in operating expenses and a decrease in
net interest income. Operating expenses increased primarily due to the
Company's accelerated level of clinical and marketing activities
associated with the GlucoWatch biographer. The decrease in net interest
income principally relates to the amortization of debt issuance costs
associated with the Senior Subordinated Convertible Notes, interest
expense, and non-cash beneficial conversion costs associated with the
subsequent restructuring of the Senior Subordinated Convertible Notes.
These costs were offset by a net arbitration settlement with Pharmacia &
Upjohn from which Cygnus received $2.7 million.
Cygnus reported revenue of $2.5 million in the fourth quarter of 1998, as
compared to $6.5 million in the fourth quarter of 1997. The reduction in
revenue is primarily attributed to a decrease in billings related to the
Nicotrol system and the discontinuation of shipments of the FemPatch
system. Net loss for the fourth quarter 1998 was $14.6 million
($0.71/share) as compared to $5.2 million ($0.27/share) in the fourth
quarter of 1997. Net loss increased primarily due to an increase in
operating expenses related to the GlucoWatch biographer clinical and
marketing activities and a decrease in interest income due to interest on
Senior Subordinated Convertible Notes, amortization of debt issuance
costs, and the non-cash beneficial conversion costs related to the
restructuring of the Senior Subordinated Convertible Notes.
Cygnus ended 1998 with cash, cash equivalents and short-term investments
of $28.8 million.
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, and the
demand for its Nicotrol system. The Company's contract revenue is
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 revenue is not always aligned with
the timing of related expenses. To date, research and development
expenses generally have exceeded contract revenue in any particular
period and the Company expects the same situation for the next several
years. In addition, the level of revenue in any given period is not
necessarily indicative of expected revenue in future periods.
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 automatic glucose biographer) and
transdermal drug delivery systems.
This news release contains forward-looking statements regarding future
events and the future performance of the Company that involve risks and
uncertainties that may cause the Company's actual results to differ
materially. Such factors include the timely development, regulatory
submission, government approvals, commercial introduction and market
acceptance of the GlucoWatch biographer. There can be no assurances that
the results achieved in the clinical studies would result in the FDA
clearing this device for market approval. Additionally, there can be no
assurances that Cygnus will not be deficient in the future with Nasdaq
listing requirements, nor can there be assurances that Cygnus would not
implement a reverse stock split in the future if there is a deficiency
with Nasdaq listing requirements that could only be cured through a
reverse stock split. There can also be no assurances that Cygnus will be
successful in signing a marketing and distribution agreement for the
GlucoWatch biographer. 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
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
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1998 1997 1998 1997
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Product revenues..................... $ -- $742 $587 $4,212
Contract revenues.................... 2,356 3,122 10,178 14,106
Royalty and other revenues........... 176 2,668 890 11,184
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Total revenues............. 2,532 6,532 11,655 29,502
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Costs and expenses:
Costs of products sold............ 777 3,342 3,478 10,413
Research and development.......... 9,484 5,975 32,149 22,328
Marketing, general and
administrative.................. 3,380 2,592 11,730 8,695
Arbitration settlement............ -- 33 -- 39,666
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Total costs and expenses... 13,641 11,942 47,357 81,102
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Loss from operations................. (11,109) (5,410) (35,702) (51,600)
Interest income & (expense)
and other, net..................... (3,499) 230 (3,726) 1,140
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NET LOSS............................. $(14,608) $(5,180) $(39,428) $(50,460)
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Basic and diluted net loss per share. $(0.71) $(0.27) $(1.95) $(2.67)
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Shares used in computation of basic
and diluted net loss per share..... 20,583 19,240 20,226 18,928
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Summary Consolidated Balance Sheet Data
(In thousands)
December 31,
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1998 1997
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Current assets................................ $31,165 $39,784
Equipment and improvements, net............... 6,464 4,596
Deferred compensation and other assets........ 5,825 4,897
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Total assets............................. $43,454 $49,277
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Current liabilities........................... $16,001 $29,843
Long-term obligations......................... 60,220 33,234
Shareholders' equity (net capital deficiency). (32,767) (13,800)
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Total liabilities & stockholders'
equity (net capital deficiency).......... $43,454 $49,277
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