<PAGE> 1
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 period ended March 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 0-19117
IMMULOGIC PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3397957
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
610 Lincoln Street, Waltham, MA 02154
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 466-6000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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 requirement for the past 90 days.
Yes X No
Number of shares of $.01 par value common stock outstanding as of May 8,
1998 20,358,780
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Page 1 of 11
Exhibit Index is on Page 9
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IMMULOGIC PHARMACEUTICAL CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Condensed Consolidated Financial Statements and Notes
Condensed Consolidated Balance Sheets 3
March 31, 1998 and December 31, 1997
Condensed Consolidated Statements of Operations 4
Three Months Ended March 31, 1998 and 1997
Condensed Consolidated Statements of Cash Flows 5
Three Months Ended March 31, 1998 and 1997
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits 9
Reports on Form 8-K 9
SIGNATURES 10
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
IMMULOGIC PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,145 $ 8,437
Short-term investments 9,555 19,068
Prepaid expenses and other current assets 515 561
--------- ---------
Total current assets 26,215 28,066
Property and equipment, net 6,401 6,685
Long-term investments 24,692 24,788
Other assets 49 49
--------- ---------
Total assets $ 57,357 $ 59,588
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 631 539
Deferred rent 893 1,016
Payroll and payroll taxes 683 1,796
Security deposit on sublease 500 --
Accrued expenses and other current liabilities 1,393 1,893
--------- ---------
Total current liabilities 4,100 5,244
Other long-term liabilities 325 325
--------- ---------
Total liabilities 4,425 5,569
Stockholders' equity:
Preferred stock - $.01 par value;
1,000,000 shares authorized; no shares issued
or outstanding -- --
Common stock - $.01 par value; 40,000,000 shares
authorized; 20,358,780 and 20,340,727 shares
issued and outstanding at March 31, 1998 and
December 31, 1997, respectively 204 203
Additional paid-in capital 185,283 185,250
Accumulated deficit (132,555) (131,434)
--------- ---------
Total stockholders' equity 52,932 54,019
--------- ---------
Total liabilities and stockholders' equity $ 57,357 $ 59,588
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE> 4
IMMULOGIC PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1997
------- -------
<S> <C> <C>
Revenues:
Sponsored research revenues $ 530 $ 552
------- -------
Total revenues 530 552
Operating expenses:
Research and development 1,487 4,891
General and administrative 867 2,888
------- -------
Total operating expenses 2,354 7,779
------- -------
Operating loss (1,824) (7,227)
Interest income 703 891
------- -------
Net loss $(1,121) $(6,336)
======= =======
Basic and diluted net loss per common share $ (0.06) $ (0.31)
======= =======
Weighted average number of
common shares outstanding 20,356 20,234
======= =======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE> 5
IMMULOGIC PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1998 1997
-------- --------
<S> <C> <C>
Cash flows for operating activities:
Net loss $ (1,121) $ (6,336)
Adjustments used to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 284 659
Non-cash benefits 34 85
Change in assets and liabilities:
Prepaid and other current assets 46 (127)
Accounts payable 92 (83)
Sublease deposit 500 --
Accrued expenses (1,736) (703)
-------- --------
Total adjustments (780) (169)
-------- --------
Net cash used in operating activities (1,901) (6,505)
Cash flows from investing activities:
Purchase of equipment and leasehold improvements -- (563)
Purchase of short-term investments (2,793) (18,269)
Redemption of short-term investments 12,306 14,892
Purchase of long-term investments -- (4,002)
Redemption of long-term investments 96 4,976
-------- --------
Net cash provided by (used in) investing activities 9,609 (2,966)
Cash flows from financing activities:
Proceeds from exercise of stock options -- 5
-------- --------
Net cash provided by financing activities -- 5
-------- --------
Net increase (decrease) in cash and cash equivalents 7,708 (9,466)
Cash and cash equivalents, beginning of period 8,437 23,742
-------- --------
Cash and cash equivalents, end of period $ 16,145 $ 14,276
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE> 6
IMMULOGIC PHARMACEUTICAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements reflect
all adjustments which are necessary, in the opinion of management, for a fair
presentation of results of the interim periods presented. The statements do not
include all information and footnote disclosures required by generally accepted
accounting principles and therefore should be read in conjunction with the
consolidated financial statements and footnotes included in the Company's 1997
Form 10-K. The results of operations for the interim periods presented are not
necessarily indicative of the results of operations for the full fiscal year.
NOTE B - NEW ACCOUNTING PRONOUNCEMENTS
In February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 132 (SFAS 132) "Employers' Disclosures About
Pensions and Other Post Retirement Benefits". SFAS 132 is effective for fiscal
years beginning after December 31, 1997. The Company does not believe that the
adoption of SFAS will have any impact on its financial statement disclosures.
The Company adopted SFAS No. 130 (SFAS 130) "Reporting Comprehensive Income"
for the period ended March 31, 1998. The adoption of this statement had no
impact on the Company's financial statements for the periods presented.
NOTE C - SUBLEASE SECURITY DEPOSIT
During the first quarter of 1998, the Company received a security deposit in the
amount of $500,000 in accordance with the sublease agreement for its Waltham, MA
facility.
6
<PAGE> 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES
Revenues for the first quarter of 1998 were $530,000 compared to $552,000 for
the first quarter of 1997. In both periods, revenues consisted primarily of
research funding from Schering AG, Germany (Schering) related to a joint
development and collaboration agreement for the Company's multiple sclerosis
program and sponsored research revenues from the National Institute of Health
(NIH) for a grant related to the research and development of the Company's
cocaine vaccine.
OPERATING EXPENSES
For the quarter ended March 31, 1998, the Company's research and development
expenses decreased $3,404,000 or 69.6% to $1,487,000 from $4,891,000 for the
same period in 1997. The decrease in research and development expenses is due
primarily to the Company's restructuring which occurred during 1997.
Specifically, reduced headcount and related savings and reduced expenditures for
the Company's discontinued ALLERVAX(R) CAT and RAGWEED programs contributed to
the savings.
General and administrative expenses were $867,000 and $2,888,000 for the
quarters ended March 31, 1998 and 1997, respectively, representing a decrease of
$2,021,000 or 70.0%. The decrease was primarily due to headcount and related
cost savings resulting from the Company's restructuring which occurred during
1997 and to severance totaling approximately $1,054,000 incurred and paid during
the first quarter of 1997 to the former Chairman of the Board of the Company.
INTEREST INCOME
Interest income for the first quarter of 1998 was $703,000 compared to $891,000
for the first quarter of 1997, a decrease of $188,000 or 21.1%. The decrease in
interest income for the quarter resulted primarily from a lower available
investment balance as compared to the prior year.
NET LOSS
The Company reported a net loss of $1,121,000 ($(0.06) per share) for the first
quarter of 1998 compared to a net loss of $6,336,000 ($(0.31) per share) for the
first quarter of 1997, a decrease of $5,215,000 or 82.3%. The decrease in net
loss for the period resulted primarily due to the Company's restructuring which
occurred during 1997 and to severance totaling approximately $1,054,000 incurred
and paid to the former Chairman of the Board of the Company during the first
quarter of 1997, offset in part by lower interest income for the quarter as
compared to prior year.
In addition, the Company entered into a staged sublease agreement effective
February 28, 1998 for its Waltham, Massachusetts facility with the entire
facility being sub-leased effective October 1, 1998. This sublease agreement
will further reduce operating costs and related cash expenditures in future
quarters. The Company is planning for the sale of the majority of the equipment
located in its facility and is in the process of obtaining new space to
accommodate its operations.
7
<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and investments were $50,392,000 at March 31, 1998
compared to $52,293,000 at December 31, 1997. Net cash used in operations for
the three months ended March 31, 1998 was $1,901,000 as compared to $6,505,000
in the comparable 1997 period. The decrease of $4,604,000 was due primarily to
the Company's restructuring which occurred during 1997 and to severance totaling
approximately $1,054,000 paid to the former Chairman of the Board of the Company
during the first quarter of 1997. In addition, the Company received a security
deposit in the amount of $500,000 in accordance with the sublease agreement for
its Waltham, MA facility. Offsetting these savings was a decrease in accounts
payable and accrued expenses of $1,644,000 due to the payment of expenses
accrued as of December 31, 1997 and reduced interest income for the first
quarter of 1998 as compared to prior year.
The Company has funded its operations to date primarily through the sale of
equity securities, sponsored research revenues, license payments, and earnings
on invested capital. The Company has expended substantial funds for the
research and development of its product candidates, and may in the future
expend substantial funds for further research and development of its product
candidates. The Company may seek to obtain additional funds for these purposes
through equity or debt financings, collaborative arrangements with corporate
partners, or from other sources. No assurance can be given that such additional
funds will be available to the Company for such purposes on acceptable terms,
if at all. Insufficient funds could require the Company to delay, scale back,
or eliminate certain of its research and development programs or to license
third parties to develop products or technologies that the Company would
otherwise develop itself. The Company anticipates that its existing capital
resources will enable it to maintain its current and planned operations through
at least December 31, 2000.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 132 (SFAS 132) "Employers' Disclosures About
Pensions and Other Post Retirement Benefits". SFAS 132 is effective for fiscal
years beginning after December 31, 1997. The Company does not believe that the
adoption of SFAS will have any impact on its financial statement disclosures.
The Company adopted Statement of Financial Accounting Standards No. 130 (SFAS
130) "Reporting Comprehensive Income" for the period ended March 31, 1998. The
adoption of this statement had no impact on the Company's financial statements
for the periods presented.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans," expects," intends" and
similar expressions are intended to identify forward-looking statements. There
are a number of important factors that could affect the future operating results
of the Company, including, without limitation, the factors set forth in the
preceding paragraph with respect to availability of funds and those set forth
under the heading "Factors Which May Affect Future Operating Results" and
elsewhere in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, as filed with the Securities and Exchange Commission, and the
information contained in this Quarterly Report on Form 10-Q should be read in
light of such factors.
8
<PAGE> 9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit:
Exhibit
Number Exhibit Page No.
------ ------- --------
27 Financial Data Schedule 11
(b) Reports on Form 8-K: No Current Reports on Form 8-K
were filed during the quarter
ended March 31, 1998.
9
<PAGE> 10
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.
IMMULOGIC PHARMACEUTICAL CORPORATION
(Registrant)
Date: 5/12/98 /s/ J. Joseph Marr
------------ --------------------------------------
J. Joseph Marr, M.D.
Chief Operating Officer
Date: 5/12/98 /s/ J. Richard Crowley
------------ --------------------------------------
J. Richard Crowley
Chief Financial Officer
(Principal Financial and Accounting
Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1998 AND STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDING MARCH 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q DATED MARCH 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 16,145
<SECURITIES> 34,247<F1>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,215
<PP&E> 19,898
<DEPRECIATION> 13,497
<TOTAL-ASSETS> 57,357
<CURRENT-LIABILITIES> 4,100
<BONDS> 0
0
0
<COMMON> 204
<OTHER-SE> 52,728
<TOTAL-LIABILITY-AND-EQUITY> 57,357
<SALES> 0
<TOTAL-REVENUES> 530
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,354
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,121)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,121)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
<FN>
<F1>Marketable securities includes $24,692,000 in long-term investments.
</FN>
</TABLE>
