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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
( X ) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended December 31, 1998
OR
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ________________ to ________________ .
Commission File Number: 0-18976
CELTRIX PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 94-3121462
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
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2033 Gateway Place, Suite 600, San Jose, CA 95110
(Address of principal executive offices and zip code)
Registrant's Telephone Number: (408) 988-2500
Formerly at 3055 Patrick Henry Drive, Santa Clara, CA 95054
(Former name or former address, if changed since last report)
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.
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.
As of January 31, 1999, the Registrant had outstanding 25,061,053 shares of
Common Stock.
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CELTRIX PHARMACEUTICALS, INC.
INDEX
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Page No.
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PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of December 31, 1998 and
March 31, 1998........................................................... 3
Condensed Consolidated Statements of Operations for the three- and
nine-month periods ended December 31, 1998 and 1997...................... 4
Condensed Consolidated Statements of Cash Flows for the three- and
nine-month periods ended December 31, 1998 and 1997...................... 5
Notes to Condensed Consolidated Financial Statements....................... 6
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................... 8
PART II. OTHER INFORMATION
Item 2: Changes in Securities and Use of Proceeds..................................... 25
Item 6: Exhibits and Reports on Form 8-K.............................................. 27
SIGNATURES............................................................................ 28
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PART I. FINANCIAL INFORMATION
CELTRIX PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
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December 31, March 31,
1998 1998
--------- ---------
(Unaudited) (1)
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Assets
Current assets:
Cash and cash equivalents $ 1,780 $ 1,608
Short-term investments -- 6,305
Receivables and other current assets 148 219
--------- ---------
Total current assets 1,928 8,132
Property and equipment, net 836 7,062
Intangible and other assets, net 2,548 2,682
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$ 5,312 $ 17,876
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 821 $ 751
Other accrued liabilities 792 1,483
Accrued restructuring reserve 131 --
Current portion of capital lease obligations -- 8
--------- ---------
Total current liabilities 1,744 2,242
Deferred rent -- 890
Stockholders' equity:
Preferred stock -- --
Common stock 251 211
Additional paid-in capital 133,459 131,542
Accumulated deficit (130,142) (117,009)
--------- ---------
Total stockholders' equity 3,568 14,744
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$ 5,312 $ 17,876
========= =========
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(1) Derived from audited financial statements at that date but does not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
See accompanying notes.
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CELTRIX PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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Three Months Ended Nine Months Ended
December 31, December 31,
----------------------------- -----------------------------
1998 1997 1998 1997
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Revenues:
Product sales $ -- $ 16 $ 10 $ 49
Other revenues 21 20 69 66
-------- -------- -------- --------
21 36 79 115
Costs and expenses:
Cost of sales -- -- -- 1
Research and development 615 3,248 6,432 9,313
General and administrative 496 468 1,725 1,415
Restructuring costs -- -- 5,178 --
-------- -------- -------- --------
1,111 3,716 13,335 10,729
-------- -------- -------- --------
Operating loss (1,090) (3,680) (13,256) (10,614)
Interest income, net 14 148 121 564
Gain on sale of investment in
Prograft Medical, Inc. -- -- -- 737
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Net loss $ (1,076) $ (3,532) $(13,135) $ (9,313)
======== ======== ======== ========
Basic and diluted net loss per share $ (0.04) $ (0.17) $ (0.59) $ (0.44)
======== ======== ======== ========
Shares used in basic and diluted per
share computation 24,583 20,986 22,235 20,986
======== ======== ======== ========
</TABLE>
See accompanying notes.
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CELTRIX PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(In thousands)
(Unaudited)
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Nine Months Ended
December 31,
------------------------------
1998 1997
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Cash flows from operating activities:
Net loss $(13,135) $ (9,313)
Adjustments to reconcile net loss to net cash
used in operating activities:
Write off of leasehold improvements 5,311 --
Reduction in deferred rent liability (890) --
Depreciation and amortization 939 1,270
Gain on sale of investment in Prograft Medical, Inc. -- (737)
Other adjustments related to changes in operating
accounts (506) (133)
-------- --------
Net cash used in operating activities (8,281) (8,913)
Cash flows from investing activities:
Decrease (increase) in available-for-sale securities 6,307 (5,137)
Proceeds from sale of fixed assets 359 --
Capital expenditures (77) (154)
Increase in intangible and other assets (85) (259)
-------- --------
Net cash provided by (used in) investing activities 6,504 (5,550)
Cash flows from financing activities:
Proceeds from issuance of common stock, net 1,957 13,456
Principal payments under lease obligations (8) (278)
-------- --------
Net cash provided by financing activities 1,949 13,178
-------- --------
Net increase (decrease) in cash and cash equivalents 172 (1,285)
Cash and cash equivalents at beginning of period 1,608 2,734
-------- --------
Cash and cash equivalents at end of period $ 1,780 $ 1,449
======== ========
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See accompanying notes.
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CELTRIX PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Condensed Consolidated Interim Financial Statements
The condensed consolidated balance sheet as of December 31, 1998 and the
condensed consolidated statements of operations and cash flows for the three-
and nine-month periods ended December 31, 1998 and 1997, have been prepared by
the Company, without audit. In the opinion of management, the accompanying
unaudited interim condensed consolidated financial statements include all
adjustments, which include normal recurring adjustments, necessary to present
fairly the Company's financial position, results of its operations and its cash
flows. Interim results are not necessarily indicative of results to be expected
for a full fiscal year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with the audited financial
statements and notes thereto for the fiscal year ended March 31, 1998 in the
Company's 1998 Annual Report to Stockholders.
The accompanying financial statements have been prepared assuming that
the Company continues as a going concern. At December 31, 1998, the Company had
working capital of $0.2 million, an accumulated deficit of $130.1 million, and
incurred a net loss of $1.1 million for the quarter ended December 31, 1998. In
November 1998, the Company completed a private placement, resulting in net
proceeds to the Company of approximately $1.9 million. Current cash, cash
equivalents and short-term investments, including proceeds from this financing,
payment to be received pursuant to a settlement agreement expected to be signed
in February 1999 with a third-party licensee (see Note 5(a)), and the sale of
fixed assets as a result of discontinuing the Company's manufacturing operations
in connection with the September 1998 restructuring (see Note 3), will be
sufficient to fund ongoing operations into the third calendar quarter of 1999.
(See also Note 5(b) and Management's Discussion and Analysis of Financial
Condition and Results of Operations.)
2. Recent Pronouncement
As of April 1, 1998, the Company adopted Financial Accounting Standards
Board Statement No. 130, "Reporting Comprehensive Income". Statement 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this Statement had no impact on the
Company's net loss or shareholders' equity. Statement 130 requires unrealized
gains or losses on the Company's available-for-sale securities and foreign
currency translation adjustments, which prior to adoption were reported
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separately in shareholders' equity, to be included in other comprehensive
income. Total comprehensive income approximates net income during the periods
ended December 31, 1998 and 1997.
3. Restructuring Charges
In September 1998, Celtrix announced that it would restructure the
Company to focus on the clinical development of SomatoKine, cease manufacturing
operations and reduce the cash burn rate. As a result, the Company recognized a
$5.2 million restructuring charge in the quarter ended September 30, 1998
consisting of a $5.3 million non-cash write-off of leasehold improvements partly
offset by $816,000 non-cash reduction of deferred rent liability, $358,000 in
severance expenses, $250,000 related to non-cancelable operating lease
obligations, and $75,000 in other restructuring-related charges. As part of the
restructuring, the Company reduced its workforce by approximately 90% by the end
of the calendar year. As of December 31, 1998, $131,000 in restructuring
liabilities remain to be paid.
4. Private Placement
In November 1998, pursuant to a Common Stock and Warrant Purchase
Agreement dated October 12, 1998, the Company completed a private placement of
4,000,000 shares of newly issued common stock at $0.50 per share, resulting in
net proceeds to the Company of approximately $1.9 million. For every share of
stock issued, the Company also issued one and one-half warrants to purchase
additional shares at $0.55 per share. The warrants are exercisable beginning in
January 1999 and will expire in November 2001. (See also Note 5(b).)
5. Subsequent Events
(a) The Company expects to sign a settlement agreement in February 1999
with a third-party licensee related to the termination of a license
agreement. Pursuant to the settlement agreement, the Company
expects to receive a $600,000 payment in the fiscal quarter ending
March 31, 1999.
(b) In February 1999, the Securities and Exchange Commission informed
the Company that it did not have a valid exemption for the sale of
its Common Stock and Warrants to purchasers in connection with the
November 1998 financing and, consequently, the Company has offered
the purchasers from the November 1998 financing an opportunity to
rescind their purchase of Common Stock and Warrants. The exercise
by any of the investors of such rescission right will reduce the
Company's available cash and cash equivalents, and could have a
material adverse effect on the Company's ability to conduct its
business in the future. The accompanying financial statements do
not reflect the impact of such potential rescission. However, as of
the date hereof, all purchasers from the November 1998 financing
have informed the Company that they do not intend to rescind their
purchases, and they have agreed to waive certain rights (including
certain financial penalties) in connection with the timing of the
Company's obligation to register the shares of Common Stock and
Warrants purchased in the November 1998 financing with the
Securities and Exchange Commission.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
condensed consolidated financial statements and notes thereto included in Part I
- -- Item 1 of this Quarterly Report and the financial statements and notes
thereto in the Company's 1998 Annual Report to Stockholders.
OVERVIEW
Celtrix Pharmaceuticals, Inc. is a biopharmaceutical company developing
novel therapeutics for the treatment of seriously debilitating, degenerative
conditions primarily associated with severe trauma, chronic diseases or aging.
The Company's focus is on regenerating lost tissue and metabolic processes
essential for the patient's health and quality of life. Ongoing product
development programs target severe osteoporosis (recovery from hip fracture
surgery), traumatic burns and diabetes. Other potential indications include
protein wasting diseases associated with cancer, AIDS, advanced kidney failure
and other life-threatening conditions.
The Company's development focus is on SomatoKine, a naturally occurring
complex comprised of the anabolic hormone insulin-like growth factor-I (IGF-I)
and its primary binding protein, BP3. IGF-I is known to play a major role in
diverse biological processes, including muscle and bone formation, tissue repair
and endocrine regulation. However, limitations associated with administering
free IGF-I therapeutically have proven significant because IGF-I does not
naturally exist in quantity free of its binding proteins. SomatoKine delivers
IGF-I complexed with BP3, which contains biological information important for
the body's natural regulation of IGF-I bioavailability and biodistribution, and
the resulting complex does not display the acute limitations seen in free IGF
administration.
Results from the Company's three earlier Phase I studies demonstrated
that the repeated or continuous administration of SomatoKine safely delivers
IGF-I at substantially higher dosage levels than have ever been achievable with
free IGF-I, increasing the peak blood concentration of IGF-I up to 35-fold its
normal level. Furthermore, the elevated levels substantially stimulated bone and
connective tissue metabolism.
In early 1997, the Company initiated a Phase II clinical feasibility
study using SomatoKine to treat severe osteoporosis patients recovering from hip
fracture surgery. Following the trauma of hip fracture, patients typically
suffer an accelerated loss of hip bone
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mineral density (BMD) which predisposes them to a high risk of refracture.
Final data from this Phase II clinical feasibility study reveal significant
treatment results in several key measurements including hip bone mass and tests
of functional ability. The results suggest that SomatoKine amplifies the body's
natural bone metabolism and that short-term treatment with SomatoKine appears to
have sustained effects. The findings suggest the potential usefulness of
SomatoKine for the treatment of osteoporosis. The Company intends to establish
corporate partnership(s) to continue the global development of SomatoKine for
severe osteoporosis.
In mid-1997, the Company began a Phase II clinical feasibility study in severely
burned patients. Severe burns patients typically have low IGF-I levels which may
be connected to the disruption of the biological processes that are essential
for efficient and successful healing and protection from complications. Interim
results provided evidence that SomatoKine improved the metabolic processes
involved in maintaining muscle protein. In addition, SomatoKine appeared to have
a positive effect on the heart function and immune system of these severely
burned patients. Latest clinical findings support interim results regarding
SomatoKine's effectiveness in reducing protein wasting. Clinical findings from
this study will be used to establish corporate partnership(s) for future
development of SomatoKine in severe burns.
In July 1998, Celtrix initiated a Phase II feasibility study in Type I
diabetes. This 12-patient study will investigate SomatoKine's potential to
reduce the need for exogenous (injected) insulin and improve blood glucose
control. A number of parameters are being measured including the amount of
insulin required for optimal glycemic control. Clinical findings from this
study, expected in first calendar quarter 1999, will be used to establish
corporate partnership(s) for future development of SomatoKine in diabetes.
The Company has a product development, license and marketing agreement
with Genzyme Corporation ("Genzyme") for TGF-beta-2, a potential pharmaceutical
based on a naturally occurring compound which appears to play an important role
in regulating healthy cell functions. Under amended terms in December 1997, the
Company granted Genzyme expanded territory rights to TGF-beta-2 to include
Japan, China, Korea and Taiwan. Additionally, under a separate license
agreement, Genzyme was granted a worldwide royalty-bearing license to TGF-beta
antibodies and receptor technology. The Company is not currently pursuing an
in-house TGF-beta-2 program.
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Celtrix has not earned substantial revenues from product sales and at
December 31, 1998 has an accumulated deficit of $130.1 million. The Company
expects to incur additional operating losses, which may fluctuate from quarter
to quarter, for at least the next several years as the Company continues its
clinical development of SomatoKine.
Development of the Company's product beyond the current Phase II
feasibility studies will require the commitment of substantial funding to
conduct further clinical studies. Such additional funding will need to be raised
through collaborative arrangements or through public or private financings,
including equity financing. There can be no assurance that any such financing
will be available to the Company or on terms attractive to the Company, or that
the Company can enter into a collaborative relationship with a corporate partner
for the continuation of the clinical trials in any of its current indications.
Consequently, there can be no assurance that Celtrix will ever achieve either
significant revenues from product sales or profitable operations. To achieve
profitable operations, the Company, alone or with others, must successfully
develop, obtain regulatory approval for and market its potential products. No
assurance can be given that the Company's product development efforts will be
successfully completed, that required regulatory approvals will be obtained, or
that any products, if developed and introduced, will be successfully marketed or
achieve market acceptance.
RESULTS OF OPERATIONS
Celtrix incurred a net loss of $1.1 million and $13.1 million for the
three- and nine-month periods ended December 31, 1998, compared to $3.5 million
and $9.3 million for the same periods in 1997. Net loss per share decreased to
$0.04 per share for the three-months ended December 31, 1998, compared to $0.17
per share for the same period in 1997. The decrease is due to the reduction of
expenses since the September 1998 restructuring of the Company, and an increase
in the number of shares outstanding resulting from the November 1998 private
placement. Net loss per share increased to $0.59 per share for the nine-months
ended December 31, 1998, compared to $0.44 per share for the same period in
1997, due primarily to the one-time restructuring charge made by the Company in
September 1998 in its effort to reduce its cash burn rate.
Revenues decreased to $21,000 and $79,000 for the three- and nine-month
periods ended December 31, 1998 from $36,000 and $115,000 for the same periods
in 1997 due primarily to a reduction in sale of material for research purposes.
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Operating expenses decreased to $1.1 million for the three-month period
ended December 31, 1998 from $3.7 million for the same period in 1997. The
decrease is a result of the restructuring plan implemented by the Company in the
second quarter, which involved the discontinuation of manufacturing and a
reduction of workforce. Operating expenses increased to $13.3 million for the
nine-month period ended December 31, 1998, compared to $10.7 million for the
same period in 1997. The increase is due primarily to a one-time $5.2 million
restructuring charge recorded in September 1998.
Net interest income of $14,000 and $121,000 for the three- and
nine-month periods ended December 31, 1998 decreased from $148,000 and $564,000
for the same periods in 1997 due primarily to the decrease in average cash, cash
equivalent and short-term investment balances.
In September 1998, Celtrix announced a restructuring of the Company to
focus on the clinical development of SomatoKine, and to significantly reduce its
cash burn rate. Since sufficient clinical grade SomatoKine has been manufactured
for the conduct of clinical trials over the next two years, the Company
discontinued its manufacturing operations. As part of the restructuring, the
Company reduced its work force by 59 employees, or approximately 80%, in
September 1998. The Company further reduced its work force by the end of the
calendar year, for a total reduction of approximately 90%. The reduction in work
force affected all levels of staff in manufacturing and other functions. Also,
as a result of discontinuing its manufacturing operations, the Company is
currently in the process of selling its equipment and other assets. The Company
terminated its 69,000 square foot facility lease effective November 30, 1998,
and relocated to offices in San Jose, California to support ongoing clinical and
business development activities.
As a result of the restructuring, the Company recognized a $5.2 million
one-time charge in the quarter ended September 30, 1998, which included a net
$4.5 million non-cash charge for the write-off of leasehold improvements,
$358,000 for severance and benefit expenses, $250,000 related to certain
non-cancelable operating lease obligations and $75,000 in other
restructuring-related charges. As of December 31, 1998, the Company has $131,000
reserved for future payments related to the restructuring, which include $86,000
under non-cancelable operating leases, $15,000 for severance and benefit
payments, and $30,000 in other anticipated payments. (See also Note 3.)
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The $737,000 gain on investment reported in the quarter ended June 30,
1997 was the result of the sale of 43,750 shares of Prograft Medical, Inc.
("Prograft") preferred stock, held by the Company since 1993.
LIQUIDITY AND CAPITAL RESOURCES
Celtrix has funded its activities with proceeds from public and private
offerings, advances from Collagen, research and development revenues from
collaborative arrangements, lease and debt financing arrangements, proceeds from
liquidating its equity investments and, to a lesser extent, other revenues and
product sales.
At December 31, 1998, Celtrix's cash, cash equivalents and short-term
investments were $1.8 million compared to $7.9 million at March 31, 1998. The
net decrease of $6.1 million was due primarily to cash outlays consisting of
$8.3 million in net cash and investments used in operating activities and
$170,000 used in investing and financing activities, partly offset by net
financing proceeds of $2.0 million received from the issuance of common stock,
and $359,000 in proceeds from the sale of assets.
In November 1998, the Company completed a private placement of 4,000,000
shares of newly issued common stock at $0.50 per share, resulting in net
proceeds to the Company of approximately $1.9 million. In addition, for every
share of stock issued, the Company also issued one and one-half warrants to
purchase additional shares at $0.55 per share pursuant to a Common Stock and
Warrant Purchase Agreement dated October 12, 1998. (See also Note 4 and
Note 5(b).)
The Company's financial statements are prepared and presented on a basis
assuming it continues as a going concern. At December 31, 1998, the Company had
working capital of $0.2 million and an accumulated deficit of $130.1 million,
and incurred a net loss of $1.1 million for the quarter ended December 31, 1998.
The Company expects current cash, cash equivalents and short-term investments,
including proceeds from the November 1998 financing, payment to be received
pursuant to a settlement agreement expected to be signed in February 1999 with a
third-party licensee and the sale of fixed assets as a result of discontinuing
the manufacturing operations in connection with the September 1998
restructuring, will be sufficient to fund operations into the third calendar
quarter of 1999. The Company will be required to seek additional funds to
finance operations beyond that period. In February 1999, the Securities and
Exchange Commission informed the Company that it did not have a valid exemption
for the sale of its Common Stock and Warrants to purchasers in connection with
the November 1998 financing and, consequently, the Company has offered the
purchasers from the November 1998 financing an opportunity to rescind their
purchase of Common Stock and Warrants. The exercise by any of the investors of
such rescission right will reduce the Company's available cash and cash
equivalents, and could have a material adverse effect on the Company's ability
to conduct its business in the future. The accompanying financial statements do
not reflect the impact of such potential rescission. However, as of the date
hereof, all purchasers from the November 1998 financing have informed the
Company that they do not intend to rescind their purchases, and they have agreed
to waive certain rights (including certain financial penalties) in connection
with the timing of the Company's obligation to register the shares of Common
Stock and Warrants purchased in the November 1998 financing with the Securities
and Exchange Commission. To minimize future dilution from additional equity
financing, the Company plans to concentrate on establishing corporate partner
arrangements and other opportunities that will enable the continued development
of SomatoKine. Merger opportunities that are consistent with the Company's
clinical development of SomatoKine will also be considered. There can be no
assurance that the Company will be able to raise any additional funds or enter
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into any collaborative arrangement on terms favorable to the Company, or at all.
If the Company is unable to obtain the necessary capital, it may be required to
liquidate its assets or to cease operations.
The Company anticipates that it will be necessary to expend significant
capital resources to support further clinical development. Capital resources may
also be required for the acquisition of complementary businesses, products or
technologies. The Company's future capital requirements will depend on many
factors, including progress with its clinical trials, the time and costs
involved in obtaining regulatory approvals, the time and costs involved in
filing, prosecuting, enforcing and defending patent claims, competition in
technological and market developments, the establishment of and changes in
collaborative relationships and the cost of commercialization activities and
arrangements. The Company anticipates that it will be required to raise
substantial additional capital over a period of several years in order to
continue its clinical development programs and to prepare for commercialization.
Raising additional funds may result in further dilution to then-existing
shareholders. No assurance can be given that such additional funds will be
available on reasonable terms, or at all. The unavailability of such financing
could delay or prevent the development and marketing of the Company's potential
products.
RISK FACTORS
Early Stage of Development; No Developed or Approved Products
The Company's potential products are in research and development and no
material revenues have been generated to date from product sales. To achieve
profitable operations, the Company, alone or with others, must successfully
develop, obtain regulatory approval for, manufacture and market its potential
products. Much of the clinical development work for the Company's potential
products remains to be completed. No assurance can be given that the Company's
product development effort will be successfully completed, that required
regulatory approval will be obtained or that any products, if developed and
introduced will be successfully marketed or achieve market acceptance.
History of Operating Losses; Accumulated Deficit
The Company has incurred net operating losses in every year of operation
since its inception. As of December 31, 1998, the Company had an accumulated
deficit of approximately $130.1 million. Losses have resulted principally from
costs incurred in connection with the
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Company's research and development activities and from general and
administrative costs associated with the Company's operations. The Company
expects to incur substantial and increasing operating losses for at least the
next several years. The Company's ability to achieve profitability will depend
in part on completing the research and development of, and obtaining regulatory
approvals for, its products and successfully commencing product
commercialization.
Possible Volatility of Stock Price; Dividend Policy
The market prices for securities of biopharmaceutical and biotechnology
companies have historically been highly volatile, and the market has from time
to time experienced significant price and volume fluctuations that are unrelated
to the operating performance of particular companies. Since the Company's common
stock became listed for public trading, its market price has fluctuated over a
wide range and the Company expects that it will continue to fluctuate. In
addition, announcements concerning the Company or its competitors, the results
of clinical trials, technological innovations or new commercial products,
government regulations, developments concerning proprietary rights, litigation
or public concern as to safety of the Company's potential products as well as
changes in general market conditions may have a significant effect on the market
price of Celtrix's common stock.
The Company has never paid dividends on its capital stock and the Company
does not anticipate paying any cash dividends in the foreseeable future.
Future Capital Requirements and Uncertainty of Additional Funding
After the completion of the November 1998 financing and the sale of fixed
assets as a result of discontinuing its manufacturing operations, the Company
anticipates that sufficient funds will be available to fund the Company's
operations into the third calendar quarter of 1999, not including further
clinical trials beyond completion of the Phase II feasibility trial in diabetes.
Accordingly, further development of the Company's products will require the
commitment of substantial resources to conduct the time-consuming research and
development, clinical studies and regulatory activities necessary to bring any
potential therapeutic products to market and to establish production, marketing
and sales capabilities. Such additional funding will need to be raised through
collaborative arrangements or through public or private financings, including
equity financing. Any additional equity financing may be dilutive to
stockholders, and any debt financing, if available, may involve restrictions on
the Company's ability to pay future dividends on its capital stock or the manner
in which the Company conducts its business.
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There can be no assurance that any such financing will be available to the
Company or on terms attractive to the Company, or that the Company can enter
into a collaborative relationship with a corporate partner for the continuation
of the clinical trials in any of its current indications. In February 1999, the
Securities and Exchange Commission informed the Company that it did not have a
valid exemption for the sale of its Common Stock and Warrants to purchasers in
connection with the November 1998 financing and, consequently, the Company has
offered the purchasers from the November 1998 financing an opportunity to
rescind their purchase of Common Stock and Warrants. The exercise by any of the
investors of such rescission right will reduce the Company's available cash and
cash equivalents, and could have a material adverse effect on the Company's
ability to conduct its business in the future. However, as of the date hereof,
all purchasers from the November 1998 financing have informed the Company that
they do not intend to rescind their purchases. The inability to obtain funds, or
to enter into additional corporate collaborations, may require the Company,
ultimately, to liquidate its assets or to cease operations.
Stringent Government Regulation; Need for Product Approvals
The preclinical testing and clinical trials of any compounds developed by
the Company or its collaborative partners and the manufacturing and marketing of
any drugs resulting therefrom are subject to regulation by numerous federal,
state and local governmental authorities in the United States, the principal one
of which is the United States Food and Drug Administration (the "FDA"), and by
similar agencies in other countries in which drugs developed by the Company or
its collaborative partners may be tested and marketed (each of such federal,
state, local and other authorities and agencies, a "Regulatory Agency"). Any
compound developed by the Company or its collaborative partners must receive
Regulatory Agency approval before it may be marketed as a drug in a particular
country. The regulatory process, which includes preclinical testing and clinical
trials of each compound in order to establish its safety and efficacy, can take
many years and requires the expenditure of substantial resources. Data obtained
from preclinical and clinical activities are susceptible to varying
interpretations which could delay, limit or prevent Regulatory Agency approval.
In addition, delays or rejections may be encountered based upon changes in
Regulatory Agency policy during the period of drug development and/or the period
of review of any application for Regulatory Agency approval for a compound.
Delays in obtaining Regulatory Agency approvals could adversely affect the
marketing of any drugs developed by the Company or its collaborative partners,
impose costly procedures upon the Company's and its collaborative partners'
activities, diminish any competitive advantages that the Company or its
collaborative partners may attain and adversely affect the Company's ability to
receive royalties, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations.
There can be no assurance that, even after such time and expenditures,
Regulatory Agency approvals will be obtained for any compounds developed by or
in collaboration with the Company. Moreover, if Regulatory Agency approval for a
drug is granted, such approval may entail limitations on the indicated uses for
which it may be marketed that could limit the
15
<PAGE> 16
potential market for any such drug. Furthermore, if and when such approval is
obtained, the marketing and manufacture of the Company's products would remain
subject to extensive regulatory requirements, and discovery of previously
unknown problems with a drug or its manufacturer may result in restrictions on
such drug or manufacturer, including withdrawal of the drug from the market.
Failure to comply with regulatory requirements could, among other things, result
in fines, suspension of regulatory approvals, operating restrictions and
criminal prosecution. In addition, Regulatory Agency approval of prices is
required in many countries and may be required for the marketing of any drug
developed by the Company or its collaborative partners in such countries.
Uncertainties Related to Clinical Trials
Before obtaining regulatory approvals for the commercial sale of any of
its products under development, the Company must demonstrate through preclinical
studies and clinical trials that the product is safe and efficacious for use in
each target indication. The results from preclinical studies and early clinical
trials may not be predictive of results that will be obtained in large-scale
testing, 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 marketable
products. A number of companies in the biotechnology industry have suffered
significant setbacks in advanced clinical trials, even after promising results
in earlier trials. For example, in fiscal year 1995, Celtrix discontinued its
in-house TGF-beta-2 program for the treatment of ophthalmic conditions as a
result of disappointing clinical study results.
The rate of completion of the Company's clinical trials is dependent upon,
among other factors, the rate of patient enrollment. Patient enrollment is a
function of many factors, including the size of the patient population, the
nature of the protocol, the proximity of patients to clinical sites and the
eligibility criteria for the study. Delays in planned patient enrollment may
result in increased costs and delays, which could have a material adverse effect
on the Company's business, financial condition and results of operations.
No Assurance of Market Acceptance
There can be no assurance that any products successfully developed by the
Company, if approved for marketing, will achieve market acceptance. The products
and therapies which the Company is attempting to develop will compete with a
number of well-established traditional drugs and therapies manufactured and
marketed by major pharmaceutical companies. The degree of market acceptance of
any products developed by the Company will depend on a
16
<PAGE> 17
number of factors, including the establishment and demonstration in the medical
community of the clinical efficacy and safety of the Company's product
candidates, their potential advantage over existing treatment methods, and
reimbursement policies of government and third-party payors. Competitors may
also develop new technologies or products which are more effective or less
costly than SomatoKine or perceived to be more cost-effective. There is no
assurance that physicians, patients or the medical community in general will
accept and utilize any products that may be developed by the Company. The
Company's business, financial condition and results of operations may be
materially adversely affected if SomatoKine does not receive market acceptance
for any reason.
Substantial Competition
In each of the Company's potential product areas, competition from large
pharmaceutical companies, biotechnology companies and other companies,
universities and research institutions is substantial. At least three large
biotechnology and pharmaceutical companies with substantial financial and legal
resources have patent applications on file in the United States and abroad
directed at the production of recombinant IGF-I by various methods. Relative to
the Company, most of these entities have substantially greater capital
resources, research and development staffs, facilities and experience in
conducting clinical trials and obtaining regulatory approvals, as well as in
manufacturing and marketing pharmaceutical products. Furthermore, the Company
believes that competitors have used, and may continue to use, litigation to gain
competitive advantage. In addition, these and other entities may have or develop
new technologies or use existing technologies that are, or may in the future be,
the basis for competitive products.
Any potential products that the Company succeeds in developing and for
which it gains regulatory approval will have to compete for market acceptance
and market share. For certain of the Company's potential products, an important
factor in such competition may be the timing of market introduction of
competitive products. Accordingly, the relative speed with which the Company can
develop products, complete the clinical testing and regulatory approval
processes and supply commercial quantities of the product to the market are
expected to be important competitive factors. The Company expects that
competition will be based, among other things, on product efficacy, safety,
reliability, availability, timing and scope of regulatory approval and price.
There can be no assurance that the Company's competitors will not succeed in
developing technologies and products that are more effective than any that are
being developed by the Company or that would render the Company's technology and
products obsolete or noncompetitive. In addition, many of the Company's
competitors may achieve product
17
<PAGE> 18
commercialization or patent protection earlier than the Company. The failure of
the Company to compete effectively would have a material adverse effect on the
Company's business, financial condition and results of operations.
Dependence on Proprietary Technology; Uncertainty of Patent Protection
The Company's success will depend in part on its ability to obtain
patents, maintain trade secrets and operate without infringing on the
proprietary rights of others, both in the United States and in other countries.
The patent positions of pharmaceutical, biopharmaceutical and biotechnology
companies, including the Company, are highly uncertain and involve complex legal
and factual questions. Patent law relating to the scope of claims in the
technology fields in which the Company operates is still evolving. The degree of
future protection for the Company's proprietary rights is therefore uncertain.
No consistent policy has emerged regarding the permissible breadth of coverage
of claims in biotechnology patents. Therefore, no assurance can be given that
any of the Company's or its licensors' patent applications will issue as patents
or that any such issued patents will provide competitive advantages for the
Company's products or will not be successfully challenged or circumvented by its
competitors. In addition, there can be no assurance that others will not
independently develop substantially equivalent proprietary technology that is
not covered by the Company's patents or that others will not be issued patents
that may prevent the sale of the Company's proposed products or require
licensing and the payment of significant fees or royalties by the Company.
At least three large biotechnology and pharmaceutical companies with
substantial financial and legal resources have issued patents and/or patent
applications on file in the United States and abroad directed at the production
and/or use of recombinant IGF-I by various methods. The earliest date of filing
of these patent applications is April 25, 1983. Unless and until all of these
applications issue, it is not possible to determine the breadth of these claims
regarding a process for IGF-I production or for the use of IGF-I for any
particular indication. Furthermore, a large biotechnology and pharmaceutical
company with substantial financial and legal resources has a patent issued in
the United States directed towards certain DNA molecules encoding BP3 and the
corresponding BP3 protein. This same patent was previously granted in Europe and
was successfully opposed by Celtrix. However, this large biotechnology and
pharmaceutical company has recently appealed the decision and there can be no
assurance that the appeal will not be successful, and it is not possible to
determine what, if any, claims will be reinstated or the breadth of such claims.
In addition, this large biotechnology company has been issued a patent directed
toward the subcutaneous bolus administration of IGF-BP3 for certain
18
<PAGE> 19
limited areas of use. Each of the referenced companies can be expected to defend
its patent position vigorously.
Celtrix has developed a new process for the production of IGF and BP3
which it does not believe will infringe on other patents relating to recombinant
protein production in general or on other patents relating to the production of
IGF and BP3 in particular, although there can be no assurance that a contrary
position will not be asserted. A large number of other companies have pending
patent applications and/or issued patents which claim certain methods of use of
IGF. There can be no assurance that third parties will not claim the Company's
technology, current or future products or manufacturing processes infringe the
proprietary rights of others. If other companies were to successfully bring
legal actions against the Company claiming patent or other intellectual property
infringements, in addition to any potential liability for damages, then the
Company could be required to obtain a license in order to continue to use the
affected process or to manufacture or use the affected products or cease using
such products or process if enjoined by a court. Any such claim, with or without
merit, could result in costly litigation or might require the Company to enter
into royalty or licensing agreements, all of which could delay or otherwise
adversely impact the Company's potential products for commercial use. If any
licenses are required, there can be no assurance that the Company will be able
to obtain any such license on commercially favorable terms, if at all, and if
these licenses are not obtained, the Company might be prevented from pursuing
the development of certain of its potential products. The Company's breach of an
existing license or failure to obtain or delay in obtaining a license to any
technology that it may require to commercialize its products may have a material
adverse impact on the Company.
Litigation, which could result in substantial costs to the Company, may
also be necessary to enforce any patents issued or licensed to the Company or to
determine the scope and validity of another party's proprietary rights. There
can be no assurance that the Company's issued or licensed patents would be held
valid by a court of competent jurisdiction. An adverse outcome in litigation or
an interference or other proceeding in a court or patent office could subject
the Company to significant liabilities to other parties, require disputed rights
to be licensed from other parties or require the Company to cease using such
technology, any of which could have a material adverse effect on the Company.
Celtrix also relies on trade secrets to protect technology, especially
where patent protection is not believed to be appropriate or obtainable. Celtrix
attempts to protect its proprietary technology and processes in part by
confidentiality agreements with its employees, consultants and certain
contractors. There can be no assurance that these agreements will not
19
<PAGE> 20
be breached, that the Company would have adequate remedies for any breach, or
that the Company's trade secrets will not otherwise become known or be
independently discovered by competitors in such a manner that the Company has no
practical recourse. To the extent that the Company or its consultants or
research collaborators use intellectual property owned by others in their work
for the Company, disputes may also arise as to the rights in related or
resulting know-how and inventions.
Limited Manufacturing Experience and Capacity
The Company's products must be manufactured in compliance with regulatory
requirements and at acceptable costs. In September 1998, the Company implemented
a restructuring plan to focus its operation on the clinical development of its
lead drug compound, SomatoKine, and to reduce its cash burn rate. With
sufficient clinical grade SomatoKine to support the conduct of clinical trials
over the next two years, the Company discontinued its in-house manufacturing
operations. In the future, the Company will need to contract its manufacturing
operations or enter into corporate partnering arrangements that will support
manufacturing of drug material to support additional clinical drug needs and
eventual commercial scale manufacturing. There can be no assurance that the
Company will be able to successfully identify and contract a third party
manufacturer to manufacture any of its current or future products on a
commercial scale, nor that such products can be manufactured at a cost or in
quantities to make commercially viable products. Failure to obtain sufficient
commercial quantities of SomatoKine at acceptable terms will have an adverse
impact on the Company's attempts to seek approval for this product, or to
commercialize this product.
Limited Sales and Marketing Experience
If the Company is permitted to commence commercial sales of products, it
will face commercial competition with respect to sales, marketing and
distribution, areas in which it has no experience. To market any of its products
directly, the Company must develop a marketing and sales force with technical
expertise and with supporting distribution capability. Alternatively, the
Company may obtain the assistance of a pharmaceutical company with a large
distribution system and a large direct sales force. There can be no assurance
that the Company will be able to establish sales and distribution capabilities
or be successful in gaining market acceptance for its proprietary products. To
the extent the Company enters into co-promotion or other licensing arrangements,
any revenues received by the Company will be dependent on the efforts of third
parties and there can be no assurance that such efforts will be successful.
20
<PAGE> 21
Reliance on Qualified and Key Personnel
The Company is highly dependent on the principal members of its scientific
and management staff, the loss of whose services might significantly delay or
prevent the achievement of research, development, or business objectives.
Although the Company believes it has retained sufficient employees to achieve
its near-term business objectives after its reduction in force in September
1998, there can be no assurance that the loss of service of such employees would
not impede the Company's objectives. Furthermore, there can be no assurance that
the reduction in force will not adversely affect the Company's ability to retain
its remaining employees. The loss of key management or scientific personnel
could adversely affect the Company's continued business.
The Company's potential expansion into areas and activities requiring
additional expertise, such as clinical trials, governmental approvals, contract
manufacturing and marketing, are expected to place a significant strain on the
Company's management, operational and financial resources. These demands are
expected to require a substantial increase in management and scientific
personnel and the development of additional expertise by existing management
personnel. The failure to attract and retain such personnel or to develop such
expertise could materially adversely affect prospects for the Company's success.
Product Liability; Availability of Insurance
The Company currently has in force general liability insurance, with
coverage limits of $2.0 million per incident and $4.0 million in the aggregate
annually, and product liability insurance with coverage limits of $1.0 million
per incident and $3.0 million in the aggregate annually. The Company's insurance
policies provide coverage for product liability on a claims made basis and
general liability on occurrence basis. These policies are subject to annual
renewal. Such insurance may not be available in the future on acceptable terms
or at all. There can be no assurance that the Company's insurance coverage will
be adequate or that a product liability claim or recall would not materially
adversely affect the business or financial condition of the Company.
The use of the Company's potential products or technology in clinical
trials and the sale of such products may expose the Company to liability claims.
Such risks exist even with respect to those potential products, if any, that
receive regulatory approval for commercial sale. Although Celtrix has taken and
will continue to take what it believes are appropriate
21
<PAGE> 22
precautions, there can be no assurance that it will avoid significant product
liability exposure. There also can be no assurance that the Company's insurance
coverage will be adequate or that a product liability claim or recall would not
materially adversely affect the business or financial condition of the Company.
Concentration of Stock Ownership
As of December 31, 1998 the Company's directors and officers and their
affiliates beneficially owned approximately 25% of the outstanding common stock.
As a result, these stockholders have been able to exercise significant influence
over all matters requiring stockholder approval, including the election of
directors and approval of significant corporate transactions. Such concentration
of ownership may have the effect of delaying or preventing a change in control
of the Company.
Impact of Year 2000
Many computer systems experience problems handling dates beyond the year
1999. Therefore, some computer hardware and software will need to be upgraded or
modified prior to the Year 2000 in order to remain functional. The Company is
currently assessing the impact of Year 2000 on its existing software and
systems. The Company expects to implement successfully the systems and software
changes necessary to address the Year 2000 issues, and does not believe that the
costs of such actions will have a material effect on the Company's results of
operations or financial condition. However, it is unknown the extent, if any, of
the impact of the Year 2000 on other systems and equipment of third parties with
which the Company does business. There can be no assurance that third parties
will address the Year 2000 issue in a timely fashion, or at all. Any Year 2000
compliance problem or delay of either the Company, its suppliers, its clinical
research organizations, or its collaborative partners could have a material
adverse effect on the Company's business, operating results and financial
conditions.
22
<PAGE> 23
Nasdaq Issues
In November 1998, the Company received notice from the Nasdaq Stock Market
that it failed to comply with two Nasdaq continued listing requirements - the
minimum net tangible assets requirement and the minimum bid price requirement.
In January 1999, Nasdaq officials confirmed that the Company had regained
compliance with the minimum bid price requirement, but that it would be subject
to delisting if it failed to comply with the minimum net tangible assets
requirement. In response, the Company requested an oral hearing before a Nasdaq
Listing Qualifications Panel to present its plan to regain compliance with the
minimum net tangible assets requirement. The oral hearing has been scheduled for
April 1, 1999. Although the Company is working to comply with all continued
listing requirements of Nasdaq, there can be no assurance that it will be able
to satisfy such requirements prior to the oral hearing, and delisting by Nasdaq
may have a material adverse effect on the price of the Company's Common Stock
and the levels of liquidity currently available to its stockholders.
Restructuring
In efforts to reduce the Company's cash burn rate and preserve value in
the Company's core assets and technologies, in the second quarter of 1998, the
Company restructured its operations to eliminate manufacturing and announced a
reduction in work force of up to 90%. Such actions were designed to permit the
Company to continue its clinical development of SomatoKine. There can be no
assurance that the restructuring efforts the Company has engaged in to date will
be successful or that the Company will be able to sustain its clinical
development activities going forward. In addition, there can be no assurance
that the Company's management will not deem it appropriate to undertake other
restructuring efforts in the future or to what degree any such efforts will
result in improved performance or a reduction in the Company's cash burn rate.
Dilutive and Potential Dilutive Effect to Stockholders
In November 1998, pursuant to the terms of a Common Stock and Warrant
Purchase Agreement dated October 12, 1998, the Company completed a private
placement of 4,000,000 shares of the Company's Common Stock (the "Private
Placement"), resulting in net proceeds to the Company, after deducting estimated
transaction costs, of approximately $1.9 million. Also in connection with the
Private Placement for every share of stock issued, the Company issued
23
<PAGE> 24
one and one-half warrants to purchase additional shares at $0.55 per share. The
foregoing Private Placement issuance of shares of the Company's common stock and
warrants exercisable for common stock dilutes the beneficial ownership of
existing Company stockholders.
In February 1999, the Securities and Exchange Commission informed the
Company that it did not have a valid exemption for the sale of its Common Stock
and Warrants to purchasers in connection with the November 1998 financing and,
consequently, the Company has offered the purchasers from the November 1998
financing an opportunity to rescind their purchase of Common Stock and
Warrants. The exercise by any of the investors of such rescission right will
reduce the Company's available cash and cash equivalents, and could have a
material adverse effect on the Company's ability to conduct its business in the
future. However, as of the date hereof, all purchasers from the November 1998
financing have informed the Company that they do not intend to rescind their
purchases.
FORWARD-LOOKING STATEMENTS
The Company notes that certain of the foregoing statements are forward
looking within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. Actual results may differ materially from the statements made
due to a variety of factors including, but not limited to, the ability to obtain
financing for the Company's working capital, clinical study results, the ability
to secure corporate partnership arrangements, and other risk factors which are
described in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1998.
24
<PAGE> 25
PART II. OTHER INFORMATION
CELTRIX PHARMACEUTICALS, INC.
Item 2. Changes in Securities and Use of Proceeds.
(a) Securities Sold
(I) On November 20, 1998, the Company issued and sold to purchasers
in a private placement pursuant to a Common Stock and Warrant
Purchase Agreement dated October 12, 1998 (the "1998 Private
Placement") 4,000,000 shares of the Company's Common Stock (the
"Shares") and warrants exercisable for 6,000,000 shares of the
Company's Common Stock (the "Warrants"). The Shares and Warrants
were sold in the form of "Units" which consisted of one Share of
Common Stock and a Warrant exercisable for one and one half
shares of Common Stock. (See also Note 5(b).)
(II) On April 1, 1997, the Company issued and sold to purchasers in a
private placement (the "1997 Private Placement") 5,721,876
shares of the Company's Common Stock (the "Shares") and warrants
exercisable for 2,860,934 shares of the Company's Common Stock
(the "Warrants"). The Shares and Warrants were sold in the form
of "Units" which consisted of two Shares of Common Stock and a
Warrant exercisable for one share of Common Stock.
(III) On December 15, 1995, the Company issued and sold to Genzyme
Corporation pursuant to a 1994 Product Development, License and
Marketing Agreement, 1,472,829 shares (the "Genzyme Shares") of
the Company's Common Stock.
(b) Underwriters and Other Purchasers
There were no underwriters for the foregoing transactions mentioned in
(a)(I), (a)(II) and (a)(III). A finders fee of $520,000 was paid to
BioAsia LLC in connection with the private placement described in
(a)(II) above. The Shares and Warrants in (a)(I) and (a)(II) were
offered only to a group of accredited investors. The Genzyme Shares
were offered only to Genzyme Corporation, an accredited investor.
(c) Consideration
(I) The Shares and Warrants from the 1998 Private Placement were
sold for an aggregate offering price of $2,000,000.00.
(II) The Shares and Warrants from the 1997 Private Placement were
sold for an aggregate offering price of $13,949,955.60.
(III) The shares issued to Genzyme Corporation were sold for an
aggregate price of $4,418,487.00.
(d) Exemption from Registration Claimed
(I) In February 1999, the Securities and Exchange Commission
informed the Company that it did not have a valid exemption for
the sale of its Common Stock and Warrants to purchasers in the
foregoing transaction under (a)(I) and, consequently, the
Company has offered the purchasers from the 1998 Private
Placement an opportunity to rescind their purchase of Common
Stock and Warrants.
(II) The foregoing transaction under (a)(II) was exempt from
registration under the Securities Act of 1933, as amended (the
"Act") pursuant to Rule 506 of Regulation D, which provides an
exemption for sales without regard to the dollar amount of the
offering, provided that there are no more than 35 purchasers,
and the sale satisfies all terms and conditions of Rules 501 and
502 under the Act.
25
<PAGE> 26
(III) The foregoing transaction under (a)(III) was exempt from
registration under the Act pursuant to Rule 505 of Regulation D,
which provides an exemption for sales of securities not
exceeding $5 million, provided that there are no more than 35
purchasers, and the sale satisfies all terms and conditions of
Rules 501 and 502 under the Act.
(e) Terms of Conversion or Exercise
(I) In connection with the 1998 Private Placement, the Warrants are
exercisable at a price of $0.55 per share and expire on November
20, 2001.
(II) In connection with the 1997 Private Placement, the Warrants are
exercisable at a price of $2.6818 per share and expire on April
1, 2000. If the holder of a Unit sold any Shares between April
1, 1997 and April 1, 1998, the number of shares issuable upon
exercise of that holder's Warrant would have been reduced by an
amount equal to 0.5 multiplied by the number of Shares sold or
otherwise disposed of during such period. Also, in the event
that the average of the daily high and low bid price per share
of the Company's Common Stock as reported on the Nasdaq National
Market (or such other equivalent market or exchange) exceeds
$4.876 for a period of thirty (30) consecutive trading days (a
"Callable Event"), then the Company may, on or before the tenth
(10th) trading day after such Callable Event has occurred, send
a written notice to the Warrant holder that a Callable Event has
occurred and that the Warrant shall terminate on the thirtieth
(30th) day after the date the notice became effective.
26
<PAGE> 27
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27.1 Financial Data Schedule
(b) The Company filed the following reports on Form 8-K during the
quarter ended December 31, 1998:
Report Date: November 19, 1998
Item 5. Other Events
The Registrant announced that SomatoKine(R) improves cardiac function in
victims of burn trauma.
- ------------
Report Date: November 19, 1998
Item 5. Other Events
The Registrant announced its second quarter financial results and
completion of a private financing.
- ------------
Report Date: December 2, 1998
Item 5. Other Events
The Registrant announced that SomatoKine(R) demonstrates positive
effects in patients recovering from hip fractures caused by severe
osteoporosis.
- ------------
Report Date: December 10, 1998
Item 5. Other Events
The Registrant announced that SomatoKine(R) demonstrates significant
effects in the treatment of trauma-induced protein wasting.
27
<PAGE> 28
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.
CELTRIX PHARMACEUTICALS, INC. (Registrant)
Date: February 22, 1999 By: /s/ DONALD D. HUFFMAN
-----------------------------------------------
Donald D. Huffman
Vice President, Finance and Administration and
Chief Financial Officer (Duly authorized
principal financial and accounting officer)
28
<PAGE> 29
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS INCLUDED IN ITS FORM 10-Q FOR THE FISCAL QUARTER
ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,780
<SECURITIES> 0
<RECEIVABLES> 2
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,928
<PP&E> 6,002
<DEPRECIATION> 4,955
<TOTAL-ASSETS> 5,312
<CURRENT-LIABILITIES> 1,744
<BONDS> 0
0
0
<COMMON> 251
<OTHER-SE> 3,317
<TOTAL-LIABILITY-AND-EQUITY> 5,312
<SALES> 10
<TOTAL-REVENUES> 79
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,432
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,135)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,135)
<EPS-PRIMARY> (0.59)
<EPS-DILUTED> (0.59)
</TABLE>
