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 March 31, 1998
Commission File No. 0-19131
MEDIMMUNE, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1555759
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
35 West Watkins Mill Road, Gaithersburg, MD 20878
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301)417-0770
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 [ ]
As of March 31, 1998, 26,509,269 shares of Common Stock, par value
$0.01 per share, were outstanding.
MEDIMMUNE, INC.
Index to Form 10-Q
Part I Financial Page
Item 1. Financial Statements
Balance Sheets 1
Statements of Operations 2
Condensed Statements of Cash Flows 3
Notes to Financial Statements 4-6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7-10
Part II Other Information 10-11
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
CytoGam and RespiGam are registered trademarks and Synagis is
a trademark of the Company.
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
MEDIMMUNE, INC.
BALANCE SHEETS
(in thousands, except share data)
<S> <C> <C>
March 31, December 31,
1998 1997
---------- ----------
ASSETS: (Unaudited)
Cash and cash equivalents $ 44,751 $ 29,984
Marketable securities 88,932 20,342
Trade receivables, net 20,471 15,236
Contract receivables, net 652 3,064
Inventory, net 23,476 28,857
Other current assets 3,510 2,740
---------- ----------
Total Current Assets 181,792 100,223
Property and equipment, net 66,286 65,254
Other assets 10,324 4,859
---------- ----------
Total Assets $258,402 $170,336
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable $ 5,501 $ 4,535
Accrued expenses 28,551 27,682
Product royalties payable 7,028 6,227
Accrued interest 1,542 2,583
Other current liabilities 2,823 2,633
---------- ----------
Total Current Liabilities 45,445 43,660
Long term debt 84,647 85,363
Other liabilities 793 777
---------- ----------
Total Liabilities 130,885 129,800
---------- ----------
Commitments and Contingencies
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized
5,524,525 shares; none issued or outstanding -- --
Common stock, $.01 par value; authorized
60,000,000 shares; issued and outstanding
26,509,269 at March 31, 1998 and
24,444,745 at December 31, 1997 265 244
Paid-in capital 250,319 176,564
Accumulated deficit (123,067) (136,272)
---------- ----------
Total Shareholders' Equity 127,517 40,536
---------- ----------
Total Liabilities and Shareholder's Equity $258,402 $170,336
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
(1)
<TABLE>
MEDIMMUNE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands except per share data)
For the
three months ended
March 31,
1998 1997
-------- --------
<S> <C> <C>
REVENUES:
Product sales $ 42,893 $ 10,131
Other 16,445 7
-------- --------
Total revenues 59,338 10,138
-------- --------
COSTS AND EXPENSES:
Cost of sales 22,275 5,215
Research and development 5,668 13,368
Selling, administrative and general 12,926 6,147
Other operating expenses 5,802 289
-------- --------
Total expenses 46,671 25,019
-------- --------
Operating Earnings (Loss) 12,667 (14,881)
Interest income 1,700 1,538
Interest expense (1,162) (979)
-------- --------
Net Earnings (Loss) $ 13,205 ($ 14,322)
======== ========
Basic earnings (loss) per share $0.51 ($0.65)
======== ========
Shares used in computing
basic earnings (loss) per share 25,944 21,874
======= =======
Diluted earnings (loss) per share $0.44 ($0.65)
======== ========
Shares used in computing
diluted earnings (loss) per share 31,577 21,874
======== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
(2)
<TABLE>
<CAPTION>
MEDIMMUNE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
For the
three months ended
March 31,
1998 1997
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $13,205 ($14,322)
Noncash items:
Depreciation and amortization 632 493
Amortization of (discount) premium on
marketable securities (413) 274
Other (445) (227)
Other changes in assets and liabilities (2,181) 2,058
-------- --------
Net cash provided by (used in)
operating activities 10,798 (11,724)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in marketable securities (68,177) 14,883
Capital expenditures (1,114) (12,616)
-------- --------
Net cash (used in) provided by (69,291) 2,267
investing activities
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common
stock and exercise of stock options 73,776 442
(Decrease) increase in long term debt (516) 2,375
-------- --------
Net cash provided by financing
activities 73,260 2,817
-------- --------
Net increase (decrease) in cash and cash
equivalents 14,767 (6,640)
Cash and cash equivalents at beginning
of period 29,984 12,629
-------- --------
Cash and cash equivalents at end of period $44,751 $5,989
======== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
(3)
MEDIMMUNE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
General
The financial information presented as of March 31, 1998, and for
the periods ended March 31, 1998 and 1997, is unaudited. In the
opinion of the Company's management, the financial information
contains all adjustments (which consist only of normal recurring
adjustments) necessary for a fair presentation of such financial
information.
Inventory
Inventory is comprised of the following (in thousands):
March 31, 1998 December 31, 1997
-------------- -----------------
Raw Materials $18,349 $14,503
Work in Process 10,722 12,990
Finished Goods 2,377 3,810
------ ------
31,448 31,303
Less noncurrent (7,972) (2,446)
------ ------
$23,476 $28,857
====== ======
In December 1997, the Company filed a Biologics License
Application ("BLA") for its second generation anti-RSV drug,
Synagis. In anticipation of marketing clearance by the FDA, the
Company and its third party contractors have begun to produce
commercial quantities of Synagis and the Company has capitalized
approximately $4.6 million of work-in-process inventory at March
31, 1998. Additionally, the Company has begun to purchase raw
plasma for use in production in the Company's manufacturing
facility, which will also be subject to FDA licensure and
approval. Due to the uncertainty surrounding the likelihood and
timing of FDA approval, these amounts have been classified as
noncurrent and included in other assets in the accompanying
balance sheet.
The Company expects to continue to build Synagis inventories in
future quarters in anticipation of a potential launch of the
product.
Finished goods at March 31, 1998 and December 31, 1997 include
approximately $2.1 million and $0.8 million, respectively, of by-
products that result from the production of the Company's
(4)
principal products at one of its contract manufacturers and are
held for resale. As of March 31, 1998, no sales of these by-
products have occurred.
Property and Equipment
Property and equipment, stated at cost, is comprised of the
following (in thousands):
March 31, December 31,
1998 1997
---------- -----------
Land $1,521 $1,521
Leasehold improvements 11,126 11,042
Laboratory equipment 10,028 9,355
Office furniture, computers,
and equipment 4,718 4,377
Construction in progress 49,606 49,040
-------- --------
76,999 75,335
Less accumulated depreciation and (10,713) (10,081)
amortization
-------- --------
$66,286 $65,254
======== ========
Property and equipment at March 31, 1998 and December 31, 1997
includes $3.0 million and $2.4 million, respectively, of
capitalized interest related to the design and construction of
the Company's manufacturing facility in Frederick, Maryland.
Construction of the manufacturing facility is substantially
complete and validation activities are ongoing.
Earnings per Share
The Company computes earnings (loss) per share in accordance with
Statement of Financial Accounting Standards("SFAS") No. 128,
Earnings Per Share. Basic earnings (loss) per share is computed
based on the weighted average number of common shares outstanding
during the period. Diluted earnings (loss) per share is computed
based on the weighted average shares outstanding and the dilutive
common stock equivalents outstanding during the period. The
dilutive effect of convertible debt is measured using the "if
converted" method. The dilutive effect of stock options is
measured using the treasury stock method. Common stock
equivalents are not included in periods where there is a loss as
they are anti-dilutive.
These financial statements have been prepared and presented
based on the new standard.
The following is a reconciliation of the numerators and
(5)
denominators of the basic and diluted earnings (loss) per share
computations for the periods ended March 31, 1998 and 1997 (in
thousands).
1998 1997
----- -----
Net earnings (loss) - basic $ 13,205 ($ 14,322)
Interest expense on convertible debt 578 --
--------- ---------
Net earnings (loss) - diluted $ 13,783 ($ 14,322)
========= =========
Wtd avg shares outstanding - basic 25,944 21,874
Convertible debt 3,049 --
Stock options 2,584 --
--------- ---------
Wtd avg shares outstanding - diluted 31,577 21,874
========= =========
Restatements
Certain 1997 amounts have been restated to conform with the
current presentation.
Comprehensive Income
In 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income. SFAS No. 130 requires additional reporting with respect
to certain changes in assets and liabilities that previously were
included in shareholders' equity. The Company has no
comprehensive income items to report for the current
presentation.
Income Taxes
No provision for income taxes was recorded for the three months
ended March 31, 1998 because of the existence of net operating
loss carryforwards of $159 million, as well as uncertainty
surrounding achievement of profitability for the entire year.
The Company's deferred tax asset has been reduced by a full
valuation allowance. Reversal of the allowance will occur when it
is determined to be more likely than not that the Company will be
able to fully realize all or a portion of the tax benefits of its
carryforwards.
Segment Reporting
SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," requires financial and descriptive
information with respect to operating segments of an entity based
on the way management disaggregates the entity for making
internal operating decisions. The Company will begin making the
required disclosures with financial statements for the period
ending December 31, 1998.
(6)
ITEM 2.
MEDIMMUNE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Total revenues for the three months ended March 31, 1998
increased 485% to $59.3 million from $10.1 million in the 1997
period. Product sales grew to $42.9 million in first quarter 1998
from $10.1 million in first quarter 1997, an increase of 323%.
CytoGam sales increased 116% to $10.8 million from $5.0 million
in first quarter 1997 reflecting a 104% increase in units sold as
well as two price increases since July 1997. In addition to
growth in the core business for CytoGam, the increase in CytoGam
sales includes product substitution occurring as a result of the
current worldwide shortage of standard intravenous immune
globulin ("IVIG") products. The duration of this shortage and
continued impact, if any, on CytoGam sales of this shortage, if
any, cannot be determined at this time. Sales of RespiGam
increased 523% to $32.1 million in first quarter 1998 from $5.2
million in first quarter 1997 reflecting increased demand.
Supply constraints limited sales in the 1997 period. Other
revenues in the 1998 first quarter of $16.4 million primarily
reflect funding from SmithKline Beecham related to the agreement
signed in December 1997 for development of a human papillomavirus
vaccine.
Cost of sales in first quarter 1998 increased to $22.3 million
from $5.2 million in first quarter 1997, an increase of 327%.
This increase was primarily attributable to a 292% increase in
unit volume for CytoGam and RespiGam, and an increase in the per-
unit costs of both CytoGam and RespiGam due to higher production
costs. CytoGam per-unit costs in 1998 were also impacted by
finished product inventory purchased from a third party at a
higher cost to meet demand.
Research, development and clinical spending decreased 58% to $5.7
million in this year's quarter from $13.4 million in last year's
quarter. Expenses in 1997 include costs of conducting the
Company's 1,502 patient Phase 3 Synagis (RSV monoclonal antibody,
formerly MEDI-493) clinical trial. Selling, administrative and
general expenses increased to $12.9 million in this year's
quarter versus $6.1 million in the 1997 quarter, an increase of
110%. Expenses in 1998 include $5.1 million due to American Home
Products ("AHP") for itstheir share of RespiGam product line
profit as computed under the terms of the Company's alliance with
AHP. Expenses in the 1997 period include $0.9 million of
reimbursement due fromto AHP under the terms of the alliance.
The remaining $0.8 million of increase in general and
administrative expenses was
(7)
dueincurred primarily due to increased wage and related expenses.
Other operating expenses of $5.8 million in the 1998 period
increased from $0.3 million in the 1997 period, reflecting costs
incurred for start-up at the Company's manufacturing facility in
Frederick, Maryland, and scale-up of production of Synagis at a
third-party manufacturer and at the Company's Gaithersburg
Manufacturing and Development Facility. The Company expects to
continue to incur significant start-up and scale-up costs in 1998
and 1999.
Interest income of $1.7 million was earned in the 1998 first
quarter, compared to $1.5 million in the first quarter of 1997
reflecting higher cash balances available for investment,
partially offset by a decrease in interest rates which lowered
the overall portfolio yield. Interest expense of $1.2 million
and $1.0 million was incurred in the 1998 and 1997 quarters,
respectively, reflecting primarily interest due on the Company's
convertible debt, net of capitalized interest. Interest expense
in the 1998 period also includes interest on equipment financing.
No provision for income taxes was recorded in the 1998 period
because of the existence of net operating loss carryforwards of
$159 million, as well as uncertainty surrounding achievement of
profitability for the entire year. The Company's deferred tax
asset has been reduced by a full valuation allowance, and
reversal of this allowance will occur only when it is determined
to be more likely than not that the Company will be able to fully
realize all or a portion of the tax benefits of its
carryforwards.
Net earnings in the 1998 first quarter were $13.2 million, or
$0.51 basic earnings per share and $0.44 diluted earnings per
share. Sharesd used in computing basic and diluted earnings per
share were 25.9 million and 31.6 million, respectively. The net
loss for the first quarter of 1997 was $14.3 million, or $0.65
basic and diluted loss per share, on 21.9 million shares.
These results were consistent with the Company's objectives for
the quarter and with the continued development of its products.
Quarterly financial results may vary significantly due to
seasonality of RespiGam product sales, fluctuation in sales of
CytoGam, research funding and expenditures for research,
development and marketing programs. RespiGam sales are expected
to occur primarily during, and in proximity to, the RSV season,
which typically occurs between November and April in the United
States. No assurances can be given that adequate product supply
will be available to meet demand., nor can the Company predict
the duration or extent of the IVIG shortage and what impact, if
any, this may have on CytoGam sales.
Should the Company receive marketing clearance for Synagis, the
Company's second generation anti-RSV product, the Company may
record a reserve against RespiGam inventory. The magnitude of
this reserve, if any, would be determined by factors including,
but not limited to, the timing of Synagis marketing clearance,
(8)
the extent of RespiGam inventory on hand at the time, the assesed
market potential of Synagis and the assessed market potential of
RespiGam. In addition, should the Company receive marketing
clearance for Synagis, RespiGam vials previously purchased by
wholesalers may be returned to the Company for refund or
exchanged for Synagis, resulting in a possible reduction of
previously recorded revenues. Currently such rights of product
return do not exist. The magnitude of such reduction charge
cannot be determined at this time and would be impacted by
factors, including but not limited to, the timing of marketing
clearance of Synagis, if granted by the FDA, and market
acceptance of Synagis.
LIQUIDITY AND CAPITAL RESOURCES
Cash and marketable securities at March 31, 1998 were $133.7
million compared to $50.3 million at 1997 year end. Net cash
provided by operating activities in the three months ended March
31, 1998 was $10.8 million, reflecting primarily the net earnings
for the period and an increase in accounts payable, offset by an
increase in accounts receivable. Capital expenditures of $1.1
million for the three months were primarily for lab equipment.
The Company expects inventory to grow significantly during 1998,
as it purchases Synagis inventory from its third party
manufacturer in anticipation of a potential launch of Synagis.
In January 1998, the Company completed a private placement of
stock to three institutional investors for net proceeds of $66.3
million. The Company also sold 83,410 shares of stock to
SmithKline Beecham in first quarter 1998 for proceeds of $5.0
million. The Company's existing funds at March 31, 1998,
together with funds expected to be generated from product sales
and investment income are expected to provide sufficient
liquidity to meet the anticipated needs of the business for at
least the next 24 months, absent the occurrence of any unforeseen
events.
____________________
THE STATEMENTS IN THIS QUARTERLY REPORT THAT ARE NOT DESCRIPTIONS
OF HISTORICAL FACTS MAY BE FORWARD-LOOKING STATEMENTS. SUCH
STATEMENTS REFLECT MANAGEMENT'S CURRENT VIEWS, ARE BASED ON
CERTAIN ASSUMPTIONS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES,
INCLUDING BUT NOT LIMITED TO, REGULATORY APPROVAL TIMING, PRODUCT
DEMAND AND MARKET ACCEPTANCE RISKS, PATENT AND INTELLECTUAL
PROPERTY RISKS, THE EARLY STAGE OF PRODUCT DEVELOPMENT AND
RELIANCE ON THIRD-PARTY MANUFACTURERS INCLUDING, BUT NOT LIMITED
TO, CAPACITY AND SUPPLY CONSTRAINTS, PRODUCTION YIELDS,
REGULATORY APPROVAL TIMING AND FOREIGN EXCHANGE RISKS, AS WELL AS
OTHER RISKS DETAILED IN THE COMPANY'S FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION. ACTUAL RESULTS COULD DIFFER MATERIALLY
(9)
FROM THOSE CURRENTLY ANTICIPATED AS A RESULT OF THE FOREGOING OR
OTHER FACTORS.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders -
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
Report Date Event reported
1/5/98 Letter to Shareholders for 3rd Quarter
1997
1/14/98 MedImmune Announces $66.3 Million
Private Placement
1/20/98 MedImmune Finalizes Vaccine Agreement
With SmithKline Beecham
1/22/98 MedImmune Closes $66.3 Million Private
Placement
2/6/98 MedImmune Reports Profit On Record
Revenues in Fourth Quarter 1997
2/11/98 MedImmune Expands International
Commercialization of CytoGam
2/12/98 MedImmune Licenses Antibiotic
Technology to SIGA Pharmaceuticals
(10)
4/1/98 BioTransplant and MedImmune Announce
Issuance of U.S. Patent Covering MEDI-
507 and BTI-322 Antibodies
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.
MEDIMMUNE, INC.
(Registrant)
Date: May 14, 1998 /s/David M. Mott
President and
Chief Operating Officer
(Principal accounting and
financial officer)
(11)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MEDIMMUNE,
INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FILING.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 44,751
<SECURITIES> 88,932
<RECEIVABLES> 21,123
<ALLOWANCES> 0
<INVENTORY> 23,476
<CURRENT-ASSETS> 181,792
<PP&E> 66,286
<DEPRECIATION> 0
<TOTAL-ASSETS> 258,402
<CURRENT-LIABILITIES> 45,445
<BONDS> 84,647
0
0
<COMMON> 265
<OTHER-SE> 127,252
<TOTAL-LIABILITY-AND-EQUITY> 258,402
<SALES> 42,893
<TOTAL-REVENUES> 59,338
<CGS> 22,275
<TOTAL-COSTS> 46,671
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,162
<INCOME-PRETAX> 13,205
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,205
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,205
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.44
</TABLE>
