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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 September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-19117
IMMULOGIC PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3397957
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12 Alfred Street, Suite 300, Woburn, MA 01801
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 933-1772
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 October
27, 2000 - 20,550,773
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IMMULOGIC PHARMACEUTICAL CORPORATION
INDEX TO FORM 10-Q
PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Unaudited, Condensed Consolidated Financial Statements
and Notes
Unaudited, Condensed Consolidated Statements of Net Assets
in Liquidation As of September 30, 2000 and
December 31, 1999 3
Unaudited, Condensed Consolidated Statements of Changes
in Net Assets in Liquidation for the Three Months Ended
September 30, 1999 and for the Three and Nine Months
Ended September 30, 2000 4
Unaudited, Condensed Consolidated Statement of Operations
(Going Concern Basis) for the Three and Six Months Ended
June 30, 1999 5
Unaudited, Condensed Consolidated Statement of Cash Flows
(Going Concern Basis) for the Six Months Ended June 30, 1999 6
Notes to Unaudited, Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosure About Market Risk 12
PART II. OTHER INFORMATION
Item 6. Exhibits 13
Reports on Form 8-K 13
SIGNATURES 14
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
IMMULOGIC PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
(UNAUDITED)
(in thousands)
SEPTEMBER 30, DECEMBER 31,
2000 1999
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ASSETS
Cash and cash equivalents $1,770 $ 2,168
Cantab stock 1,091 12,000
Milestones and royalties 3,000 3,000
Landlord receivable 965 1,400
Other assets 20 53
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Total assets $6,846 $18,621
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LIABILITIES
Estimated costs to be incurred during
liquidation period $ 711 $ 1,215
Accounts payable and accrued expenses 193 505
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Total liabilities 904 1,720
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NET ASSETS IN LIQUIDATION $5,942 $16,901
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The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
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IMMULOGIC PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN NET ASSETS IN LIQUIDATION
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000
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<S> <C> <C> <C>
Net assets in liquidation,
beginning of period $18,586 $ 49,557 $16,901
Cash distribution to shareholders (9,659) (39,868) (9,659)
Other net changes in cash and cash equivalents 977 -- 9,261
Cash received from landlord (109) -- (435)
Net cash received from the sale of Cantab stock (928) -- (9,273)
Net change in other assets (54) -- (113)
Payment of estimated costs to be
incurred and accrued expenses 180 -- 626
Changes in liquidation basis accounting estimates:
(Decrease) increase in estimated net realizable
value of Cantab stock (3,051) -- (1,636)
Increase (Decrease) in estimated costs to be
incurred during the liquidation period -- -- 190
Increase in investment income receivable -- -- 80
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Net assets in liquidation September 30, 2000 $ 5,942 $ 9,689 $ 5,942
======= ======== =======
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
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IMMULOGIC PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED - GOING CONCERN BASIS)
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1999
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<S> <C> <C>
Revenues:
Sponsored research revenues $ 348 $ 1,088
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Total revenues 348 1,088
Operating expenses:
Research and development 348 1,088
General and administrative 632 2,178
Loss on leasehold improvements, net 966 966
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Total operating expenses 1,946 4,232
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Operating loss (1,598) (3,144)
Interest income 526 1,085
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Net loss $ (1,072) $ (2,059)
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Basic and diluted net loss per
common share $ (0.05) $ (0.10)
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Weighted average number of
common shares outstanding 20,377 20,376
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Comprehensive loss:
Net loss $ (1,072) $ (2,059)
Other comprehensive loss: (699) (872)
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Comprehensive loss: $ (1,771) $ (2,931)
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</TABLE>
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
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IMMULOGIC PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - GOING CONCERN BASIS)
(in thousands)
SIX MONTHS
ENDED JUNE 30,
1999
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Cash flows for operating activities:
Net loss $ (2,059)
Adjustments used to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 72
Write-down of leasehold improvements 1,446
Gain on sale of equipment (14)
Reduction of MIT liability (275)
Shares issued for 401(k) employer match 12
Change in assets and liabilities:
Prepaid and other current assets 170
Other assets 49
Accounts payable 462
Sublease deposit --
Reduction in lease obligation (616)
Accrued expenses and other current liabilities (182)
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Total adjustments 1,124
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Net cash used in operating activities (935)
Cash flows from investing activities:
Purchase of Cantab stock (6,000)
Leasehold improvement sublease payments 463
Proceeds from sale of equipment 133
Purchase of short term investments --
Redemption of short term investments 8,219
Redemption of long term investments 4,142
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Net cash provided by investing activities 6,957
Net increase in cash and cash equivalents 6,022
Cash and cash equivalents, beginning of period 18,856
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Cash and cash equivalents, end of period $ 24,878
========
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
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IMMULOGIC PHARMACEUTICAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(unaudited)
NOTE A -- ORGANIZATION AND ACCOUNTING POLICIES
On March 23 1999, the Board of Directors of ImmuLogic Pharmaceutical Corporation
(the "Company") approved a plan to liquidate and dissolve the Company (the
"Plan"). The Plan was approved by the stockholders of the Company on August 25,
1999. The key features of the Plan are (1) the conclusion of all business
activities, other than those in execution of the Plan; (2) the sale or
disposition of all of the Company's assets; (3) the satisfaction of all
outstanding liabilities; (4) the payment of liquidating distributions to
stockholders in complete redemption of the Common Stock; and (5) the
authorization of the filing of Certificate of Dissolution with the State of
Delaware. As a result of the adoption of the Plan and the imminent nature of the
liquidation, the Company adopted the liquidation basis of accounting effective
July 1, 1999, whereby assets are valued at their estimated net realizable values
and liabilities are valued at their estimated settlement amounts. The valuation
of assets and liabilities requires many estimates and assumptions by management
and there are substantial uncertainties in carrying out the provisions of the
Plan. The amount and timing of future liquidating distributions will depend upon
a variety of factors including, but not limited to, the actual proceeds from the
sale of any of the Company's assets, the ultimate settlement amounts of the
Company's liabilities and obligations, actual costs incurred in connection with
carrying out the Plan, including management fees and administrative costs during
the remaining liquidation period, and the timing of the liquidation and
dissolution.
The accompanying financial statements, notes and discussions should be read in
conjunction with the consolidated financial statements, related notes and
discussions contained in the Company's annual report on Form 10-K for the year
ended December 31, 1999.
The interim financial information contained herein is unaudited; however, in the
opinion of management, all adjustments necessary for the fair presentation of
such financial information have been included.
The results for the interim period are not necessarily indicative of the results
to be expected for the year ending December 31, 2000.
NOTE B -- LIQUIDATION BASIS OF ACCOUNTING
CANTAB STOCK
In December 1998, the Company signed an agreement with Cantab for the sale of
the Company's assets and the transfer of control over the programs related to
its drugs of addiction vaccine programs for the treatment of nicotine and
cocaine addiction (the "Nicotine and Cocaine Programs"). The assets sold
consisted primarily of patents and other intellectual property, as well as
certain equipment and materials used in these programs. In connection with this
sale, the Company remitted $6,000,000 in cash to Cantab in 1999 and received
2,566,845 Cantab ordinary shares in the form of 855,615 American Depository
Shares ("ADSs"). One ADS is equal to approximately three ordinary shares. Under
the terms of the Company's agreement with Cantab,
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the Company could not sell any of the ADSs or Cantab ordinary shares represented
by the ADSs prior to August 2, 1999. Thereafter, the Company could immediately
sell up to 25% of the ADSs, and then may sell an additional 25% every 90 days
thereafter. In addition, the Company was obligated to sell such shares through a
broker or brokers designated by Cantab and approved by the Company, and in a
manner to be agreed upon by the Company and Cantab that is mutually advantageous
to the Company and Cantab, considering the desire for the Company to sell and
the desire of Cantab to avoid undue disruption of the market for such
securities.
On June 16, 2000, the Company converted 785,615 of its total 855,615 ADSs of
Cantab Pharmaceuticals Plc ("Cantab") into 2,356,845 Ordinary Shares of Cantab
and sold 1,300,000 of such Ordinary Shares on the London Stock Exchange for
aggregate gross proceeds of approximately $7,215,000. In addition, ImmuLogic
sold the remaining 70,000 ADSs to a private buyer in the United States for
aggregate gross proceeds of approximately $1,165,000.
On July 7, 2000 and September 29, 2000, the Company sold a total of 200,000
Ordinary Shares of Cantab on the London Stock Exchange for aggregate net
proceeds of approximately $928,000. The Company's holdings of Cantab consisted
of 856,845 Ordinary Shares as of September 30, 2000.
In October and November of 2000, the Company sold the remaining 856,845 Ordinary
Shares of Cantab on the London Stock Exchange for aggregate net proceeds
totaling $1,091,000. The Company has no remaining holdings of Cantab as of
November 6, 2000.
NOTE C -- DISTRIBUTION TO SHAREHOLDERS
On September 1, 1999 and September 1, 2000, the Company returned to its
stockholders $39.9 million (or $1.94 per share) and $9.7 million (or $.47 per
share), respectively, based on 20,550,773 shares of Common Stock outstanding to
stockholders of record as of August 25, 1999 and August 25, 2000, respectively.
MILESTONES & ROYALTIES
The Company could receive up to a maximum of $11 million in milestone payments
contingent upon Cantab's successful development to the end of Phase II clinical
trials of the Nicotine and Cocaine Programs sold to Cantab. These payments may
be made in cash or in additional ADSs or a combination thereof at Cantab's
discretion. The Company would receive the following for successful completion of
the Phases (as defined in the agreement) as follows:
Cocaine...........................Phase II $2 million
Nicotine..........................Phase I $3 million
Nicotine..........................Phase II $6 million
Upon receipt of the Phase II Cocaine or Phase I Nicotine milestones in the form
of Cantab stock or ADSs, the Company may sell up to 25% of such shares in each
of the four quarters following the expiration of an initial six-month period.
Any shares paid in respect of any additional milestones would not be subject to
these lock-up provisions.
The Company could potentially also receive a share of the net royalties Cantab
may receive from vaccine sales proportionate to the level of worldwide product
sales achieved. While the Company will attempt to monetize these potential
royalty streams, the Company does not anticipate receiving significant value for
them and thus has not recorded any net realizable value for the royalty stream.
The Company estimates that the range of value to be received from these
milestones and royalties to be $0 to $11 million based on the contract terms.
The Company recorded $3.0 million at December 31, 1999 as the estimated net
realizable value for the purpose of liquidation basis accounting, which assumes
the realization of one of these milestones. The estimate recorded for the
milestones has not changed since December 31, 1999
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because no factors have indicated a change in their net realizable value.
LANDLORD RECEIVABLE
In February 1998, the Company entered into a phased sublease agreement with
Anadys Pharmaceuticals, Inc. (formerly Scriptgen Pharmaceuticals, Inc.) for the
Company's 85,000 square foot headquarters and research and development facility
located in Waltham, Massachusetts. The entire facility was subleased to Anadys
effective August 1, 1999. Under the terms of the sublease, Anadys has assumed
the Company's obligations under the lease in addition to reimbursing the Company
for a portion of the Company's leasehold improvements. The Company negotiated an
arrangement with the landlord and Anadys eliminating the Company's liability for
the lease in the event that Anadys were to default on its sublease obligations.
In consideration for this arrangement, the Company expects to receive $55,000
per month from Anadys through August 2002, or an aggregate of approximately
$1.76 million. If Anadys were to default on its lease agreement or if the
Company sold its interest in the lease, the Company would receive less than the
$1.76 million. As of September 30, 2000, the Company has recorded $965,000
(estimated total payments of $1.4 million as of December 31, 1999, less $435,000
in payments actually received during the first nine months of 2000) as the
remaining estimated net realizable value for the purpose of liquidation basis
accounting.
LIABILITIES
At September 30, 2000, the Company estimates that there are $711,000 of costs to
be incurred during the remaining liquidation period through August 27, 2002 as
compared to $1.2 million of costs remaining as of December 31, 1999. The
decrease of $489,000 resulted from payments made during the first nine months of
2000 totaling $299,000 and a decrease in the estimate of costs to be incurred
during the liquidation period in the amount of $190,000.
Accounts payable and accrued expenses consist primarily of costs incurred
through June 30, 1999, including severance costs and other operating costs
incurred prior to the liquidation of the Company. At September 30, 2000, the
Company estimates there are $193,000 of severance costs for a former employee
which will be paid over the next six months ending in the first quarter of 2001.
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Since inception, the Company had focused on the research and clinical
development of products to treat allergies, autoimmune diseases, and vaccines
for the management of drugs of abuse.
On February 5, 1999, the Company announced that its Board of Directors had
decided to conclude the business activities of the Company as soon as
practicable. On March 23 1999, the Board of Directors approved a plan to
liquidate and dissolve the Company (the "Plan"). The Plan was approved by the
stockholders of the Company on August 25, 1999. The key features of the Plan are
(1) the conclusion of all business activities, other than those in execution of
the Plan; (2) the sale or disposition of all of the Company's assets; (3) the
satisfaction of all outstanding liabilities; (4) the payment of liquidating
distributions to stockholders in complete redemption of the Common Stock; and
(5) the authorization of the filing of Certificate of Dissolution with the State
of Delaware. As a result of the adoption of the Plan and the imminent nature of
the liquidation, the Company adopted the liquidation basis of accounting
effective July 1, 1999, whereby assets are valued at their estimated net
realizable values and liabilities are valued at their estimated settlement
amounts. The valuation of assets and liabilities requires many estimates and
assumptions by management and there are substantial uncertainties in carrying
out the provisions of the Plan. The amount and timing of future liquidating
distributions will depend upon a variety of factors including, but not limited
to, the actual proceeds from the sale of any of the Company's assets, the
ultimate settlement amounts of the Company's liabilities and obligations, actual
costs incurred in connection with carrying out the Plan, including management
fees and administrative costs during the liquidation period, and the timing of
the liquidation and dissolution.
The Company is a Delaware corporation and Delaware law requires that the Company
stay in existence as a non-operating entity for three years from August 27,
1999, the date the Company filed a certificate of dissolution in Delaware.
During the dissolution period, the Company will attempt to convert its remaining
net assets to cash as expeditiously as possible.
On September 1, 1999 and September 1, 2000, the Company returned to its
stockholders $39.9 million (or $1.94 per share) and $9.7 million (or $.47 per
share), respectively, based on 20,550,773 shares of Common Stock outstanding to
stockholders of record as of August 25, 1999 and August 25, 2000, respectively.
Future distributions to stockholders would be made by the Board of Directors of
the Company as the Company's net assets are converted to cash. The actual amount
and timing of future distributions cannot be predicted at this time. The Company
intends to distribute pro rata to its stockholders, in cash or in-kind, or sell
or otherwise dispose of, all of its property and net assets. The liquidation
should be concluded prior to August 27, 2002 by a final liquidating distribution
either directly to the stockholders or to one or more liquidating trusts.
Details regarding the plan to liquidate and dissolve the Company can be found in
the Company's 1999 Proxy Statement filed with the Securities and Exchange
Commission and mailed to stockholders on July 15, 1999.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's primary objectives are to liquidate its net assets in an efficient
manner that optimizes the values for such assets and to reduce operating costs.
The period of time to liquidate the assets and distribute the proceeds of the
Company's assets is subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's control.
On July 7, 2000 and September 29, 2000, the Company sold a total of 200,000
Ordinary Shares of Cantab on the London Stock Exchange for aggregate net
proceeds of approximately $928,000. The Company's holdings of Cantab consisted
of 856,845 Ordinary Shares as of September 30, 2000.
In October and November of 2000, the Company sold the remaining 856,845 Ordinary
Shares of Cantab on the London Stock Exchange for aggregate net proceeds
totaling $1,091,000. The Company has no remaining holdings of Cantab as of
November 6, 2000.
On September 1, 1999 and September 1, 2000, the Company returned to its
stockholders $39.9 million (or $1.94 per share) and $9.7 million (or $.47 per
share), respectively, based on 20,550,773 shares of Common Stock outstanding to
stockholders of record as of August 25, 1999 and August 25, 2000, respectively.
As of September 30, 2000, the Company had cash and cash equivalents of
$1,770,000 invested primarily in high-grade commercial paper and money market
funds.
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",
"estimates", and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could affect the future
activities of the Company, including, without limitation, the factors set forth
below and those set forth under the heading "Future Results" and elsewhere in
the Company's Annual Report on Form 10-K for the year ended December 31, 1999,
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.
The Company no longer satisfies the requirements for continued listing of its
common stock on the Nasdaq National Market ("NASDAQ"). The Company received a
notice from NASDAQ on October 19, 1999, indicating that the company would be
delisted as of January 22, 2000. The delisting of the company's common stock in
fact occurred on that date. Because NASDAQ has delisted the Company's common
stock, the ability of stockholders to buy and sell shares may be materially
impaired. The Company's common stock is now traded on the NASDAQ
over-the-counter bulletin board.
Any future payments the Company may receive under its agreement with Cantab,
and, therefore, any future value which may be returned to the Company's
stockholders with respect to that agreement, is dependent upon the successful
development and commercialization of the products licensed or sold to such
companies, as the case may be. The ability of Cantab to develop and
commercialize its products is subject to all of the risks and uncertainties
inherent in the biotechnology industry, including those associated with the
early stage of development of such products, government regulation, competition,
patents and proprietary rights, manufacturing and marketing, additional
financing requirements and access to capital, product liability and third-party
reimbursement. There can be no assurance that any of these products will be
successfully developed or commercialized or that the Company will receive any
value with respect to them during the liquidation period.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's investment policy specifies credit quality standards for the
Company's investments and limits the amount of credit exposure to any single
issue, issuer or type of investment. The Company does not believe that it has
any material exposure to market risk with respect to derivative or other
financial instruments requiring disclosure under this item.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit:
Exhibit
Number Exhibit
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27 Financial Data Schedule
(b) Reports on Form 8-K: None.
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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: 11/14/00 /s/ J. Richard Crowley
-------------------------------------
J. Richard Crowley
President, Secretary and Treasurer
(Principal Financial and Accounting Officer)
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