<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1998 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
COMMISSION FILE NUMBER: 0-19454
ANERGEN, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0183594
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 PENOBSCOT DRIVE, 94063
REDWOOD CITY, CALIFORNIA (Zip Code)
(Address of principal executive offices)
Telephone number: (650) 361-8901
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 [ ]
At August 6, 1998, Registrant had outstanding 18,892,000 shares of Common Stock.
<PAGE> 2
ANERGEN, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page No.
--------
<S> <C> <C>
ITEM 1. Financial Statements
Condensed balance sheets - June 30, 1998
and December 31, 1997 ............................................... 3
Condensed statements of operations - three month and six months
ended June 30, 1998 and 1997 ........................................ 4
Condensed statements of cash flows - six months
ended June 30, 1998 and 1997 ........................................ 5
Notes to condensed financial statements ............................... 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ....................... 7
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K ...................................... 17
Signatures ............................................................ 18
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ANERGEN, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 540 $ 1,412
Short-term investments......................................... 4,603 6,991
Contract receivables........................................... -- 836
Prepaid expenses............................................... 73 78
-------- --------
Total current assets............................. 5,216 9.317
Property and equipment, net......................................... 1,314 1,703
Other assets........................................................ 36 36
-------- --------
$ 6,566 $ 11,056
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities....................... $ 912 $ 1,281
Deferred revenue............................................... 250 502
Current portion of capital lease obligations and debt.......... 484 616
-------- --------
Total current liabilities........................ 1,646 2,399
Long-term portion of capital lease obligations and debt............. 653 870
Commitments
Shareholders' equity:
Preferred stock, no par value; 10,000,000 shares
authorized; none issued and outstanding................. -- --
Common stock, no par value; 40,000,000 shares
authorized; 18,892,000 shares issued and
outstanding (18,846,264 at December 31, 1997)........... 57,705 57,670
Additional paid-in-capital..................................... 659 659
Accumulated other comprehensive income......................... (4) (6)
Accumulated deficit............................................ (54,093) (50,536)
-------- --------
Total shareholders' equity....................... 4,267 7,787
-------- --------
$ 6,566 $ 11,056
======== ========
</TABLE>
Note: The balance sheet at June 30, 1998 is derived from unaudited financial
statements. The December 31, 1997 information is derived from audited
financial statements.
See accompanying notes.
3
<PAGE> 4
ANERGEN, INC.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Contract revenues, primarily from related parties... $ 1,548 $ 1,354 $ 2,715 $ 3,162
Interest income 81 117 196 299
-------- -------- -------- --------
1,629 1,471 2,911 3,461
Expenses:
Research and development............................ 2,212 2,822 4,838 5,709
General and administrative.......................... 861 709 1,553 1,593
Interest expense.................................... 36 61 77 104
-------- -------- -------- --------
3,109 3,592 6,468 7,406
-------- -------- -------- --------
Net loss................................................. $ (1,480) $ (2,121) $ (3,557) $ (3,945)
======== ======== ======== ========
Basic net loss per share................................. $ (0.08) $ (0.11) $ (0.19) $ (0.21)
======== ======== ======== ========
Shares used in calculating per share data................ 18,891 18,819 18,871 18,819
======== ======== ======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 5
ANERGEN, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net loss.......................................................... $ (3,557) $ (3,945)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................................... 449 409
Deferred compensation amortization.............................. -- --
Changes in operating assets and liabilities:
Contract receivables - related party............................ 835 (1,582)
Prepaid expenses................................................ 5 110
Other assets.................................................... -- --
Accounts payable and accrued liabilities........................ (369) 488
Deferred Revenue................................................ (252) --
-------- --------
Net cash used in operating activities (2,889) (4,520)
Cash flows provided by (used in) investing activities:
Purchase of investments available-for-sale........................ (3,728) (15,899)
Sale of investments available-for-sale............................ 6,116 22,876
Unrealized loss................................................... 2 --
Purchase of property and equipment................................ (58) (795)
-------- --------
Net cash provided by investing activities............................ 2,332 6,182
-------- --------
Cash flows provided by (used in) financing activities:
Proceeds from facility and equipment debt financing.............. 0 545
Repayments of capital lease obligations and debt.................. (350) (299)
Issuance of common stock, net..................................... 35 99
-------- --------
Net cash provided by (used in) financing activities.................. (315) 345
Net increase (decrease) in cash...................................... (872) 2007
Cash and cash equivalents at beginning of period.................... 1,412 3,963
-------- --------
Cash and cash equivalents at end of period.......................... 540 5,970
Short-term investments at end of period 4,603 5,463
-------- --------
Cash, cash equivalents and short-term investments at end of period... $ 5,143 $ 11,433
======== ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
ANERGEN, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
1. NATURE OF BUSINESS
Anergen, Inc. ( the "Company") was incorporated on April 26, 1988 for the
purpose of developing therapies using biopharmaceutical compounds for the
treatment of autoimmune diseases. The Company devotes its efforts to
research and development on its own behalf and also on behalf of its
corporate partners.
2. BASIS OF PRESENTATION
The interim financial statements included herein have been prepared by the
Company and have not been audited, pursuant to the rules and regulations
promulgated by the Securities and Exchange Commission (the "Commission").
Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted
accounting principles, have been omitted pursuant to Commission rules and
regulations; nevertheless, the Company believes that the disclosures are
adequate to make the information presented not misleading. These condensed
financial statements should be read in conjunction with the audited
financial statements and notes thereto contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997. In the opinion of
management, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position of the
Company (subject to year-end adjustments) with respect to the interim
financial statements, and of the results of its operations and cash flows
for the interim periods then ended, have been included. The results of
operations for the interim periods are not necessarily indicative of the
results for the full year.
Net Loss Per Share
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128
requires the presentation of basic earnings (loss) per share and diluted
earnings (loss) per share, if more diluted.
Basic net loss per share is computed using the weighted average number of
shares of common stock outstanding during the period.
Diluted net loss per share has not been presented as stock options and
other common stock equivalents are antidilutive.
Comprehensive Income (Loss)
As of January 1, 1998, the Company adopted the provisions of SFAS No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes new
rules for the reporting and display of comprehensive income and its
components; however, the adoption of SFAS 130 had no impact on the
Company's net loss or shareholders' equity. SFAS 130 requires unrealized
gains or losses on the Company's available-for-sale securities, which prior
to adoption were reported separately in shareholders' equity, to be
included in other comprehensive income (loss).
For the six months ended June 30, 1998 and 1997, total comprehensive loss
amounted to $3,559,000 and $2,124,000 respectively.
Reclassification
Certain prior year amounts have been reclassified to conform to the current
periods presentation.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains certain forward-looking statements which involve risks and
uncertainties including but not limited to the adequacy of capital resources,
the nature of the Company's capital requirements, the availability and timing of
financing, the progress of the Company's clinical trials, and research and
development programs, the likelihood of development of potential products, if
any, from such research and the effect of year 2000 problems, if any. The
Company's actual results could differ materially from the results anticipated in
these forward-looking statements as a result of certain factors set forth
hereunder and in the Company's Annual Report as filed on Form 10-K filed with
the Securities and Exchange Commission for the year ended December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has financed its operations primarily through private
placements of its equity securities with venture capitalists (which raised
an aggregate of approximately $7.6 million in net proceeds), through the
sale of its Common Stock to Novo Nordisk A/S (which raised approximately $8
million in net proceeds), through the issuance of its Common Stock and
Warrants to purchase shares of Common Stock through a private placement in
exchange for $1.5 million in proceeds, and through public offerings of its
Common Stock which have raised an aggregate of $38.8 million in net
proceeds, including $9.4 million in net proceeds from the sale of 3.5
million shares of Common Stock to the public in August 1996 and
approximately $500,000 from the underwriters' exercise of the
over-allotment option in September 1996. The Company's cash, cash
equivalents and short-term investments at June 30, 1998 were approximately
$5.1 million. Accounts payable and accrued liabilities decreased to
$912,000 at June 30, 1998 from $1,281,000 at December 31, 1997. Long-term
debt decreased from $870,000 at December 31, 1997 to $653,000 at June 30,
1998 due to repayment of loans. The Company had shareholders' equity at
June 30, 1998 of approximately $4.3 million which decreased from $7.8
million at December 31, 1997 due to the net loss from operations.
The Company anticipates that its current cash, cash equivalents, short-term
investments and expected revenues under its collaborative agreements will
be sufficient to fund its operations through 1998. Thereafter, the Company
will require substantial additional funds to continue its operations. The
Company anticipates that its current resources will be primarily used to
fund clinical testing of AnervaX(TM) for Rheumatoid Arthritis ("RA"),
AnergiX(TM) for Multiple Sclerosis ("MS"), AnergiX for the treatment of RA,
and continued research and development of DiavaX(TM) for Type I Diabetes,
as well as key mechanism studies. The balance of such resources will be
used to fund continued limited research on other autoimmune diseases and
general and administrative activities, including those associated with
seeking collaborative arrangements to enable the Company to increase its
research and development activities in these and other autoimmune diseases.
These foregoing forward-looking statements regarding the Company's capital
requirements involve risks and uncertainties that could cause actual
results to differ materially. Although the Company believes that its
current resources will be sufficient to meet the Company's operating and
capital requirements through 1998, there can be no assurance that the
Company will not require additional financing within this time frame. In
particular, the Company's capital requirements will vary depending on
numerous factors many of which are outside the Company's control. These
factors include the progress of the Company's research and development
programs, manufacturing activities, the progress of the Company's clinical
programs, the size and complexity of these programs, the scope and results
of laboratory testing and clinical trials, the time and cost required to
seek regulatory approvals to commence clinical trials for the Company's
initial products, the need to obtain licenses to other proprietary rights,
any required adjustments to the Company's operating plan to respond to
competitive pressures or technological advances, developments with respect
to the Company's existing or future collaborative arrangements, and the
availability of various methods of financing. The Company expects to seek
to raise additional capital in 1998 through equity or debt financing,
research and development collaborations with other pharmaceutical companies
or through other sources. Any additional equity financing may be dilutive
to shareholders, and debt financing, if available, may involve restrictions
on stock dividends and other restrictions on the Company. Adequate funds
for the Company's operations, whether from equity or debt, collaborative or
other arrangements with corporate partners or from other sources, may not
be
7
<PAGE> 8
available when needed or on terms attractive to the Company. Insufficient
funds may require the Company to delay, scale back or eliminate some or all
of its research and product development programs or to license third
parties to commercialize products or technologies that the Company would
otherwise seek to develop itself. The Company's liquidity will be reduced
as amounts are expended for continuing research and development.
RESULTS OF OPERATIONS
The Company's net loss decreased by 31% to $1,480,000 in the fiscal quarter
ended June 30, 1998 compared to a $2,121,000 loss in the corresponding
period in the previous year. The decrease was due to revenues that
increased 11% to $1,629,000 in the fiscal quarter ended June 30, 1998
compared to $1,471,000 in the corresponding period in the previous year,
and by a decrease in expenses of 13% to $3,109,000 in the fiscal quarter
ended June 30, 1998 compared to $3,592,000 in the corresponding period in
the previous year. The increase in revenues was primarily due to a
$1,000,000 milestone payment received from the Company's collaboration
partner, N.V. Organon for filing an IND for AnergiX for RA. This payment
offset decreasing revenue from the Company's previous collaborative
agreement with Novo Nordisk as the Phase I clinical trial of AnergiX for
the treatment of MS nears completion. On February 26, 1998, Novo Nordisk
paid the Company $1,000,000, the estimated costs to complete the Phase I
study. As a result of the termination of the agreement with Novo Nordisk,
if the Company elects to continue with Phase II clinical trials of AnergiX,
the Company would no longer receive reimbursement of expenses from Novo
Nordisk. Research and development expenses decreased 22% to $2,212,000 for
the quarter ended June 30, 1998 from $2,822,000 in the corresponding period
in the previous year. A contributing factor relates to decreased clinical
trial activity with the completion of the AnervaX Phase IIa trial in 1997.
The Company expects total operating expenses to increase as it increases
research and development efforts.
General and administrative expenses increased 15% to $861,000 for the
quarter ended June 30, 1998 compared to $709,000 in the corresponding
period in the previous year.
Interest income decreased to $81,000 for the quarter ended June 30, 1998 as
compared to $117,000 in the corresponding period in the previous year due
to lower average cash balances in 1998. Interest income is expected to
decline gradually over future periods as invested capital is used for
operating activities. Interest expense decreased to $36,000 for the quarter
ended June 30, 1998 as compared to $61,000 in the corresponding period in
the previous year due to lower debt balances.
The Company expects to incur substantial and increasing operating losses
for at least the next several years. The Company's losses on a
quarter-by-quarter basis may vary depending upon a variety of factors, any
of which may fluctuate, including the level of research activities, the
timing of hiring of additional scientific and management personnel, the
retention of consultants, the purchase or leasing of laboratory equipment,
the licensing of any required technology and other factors. Accordingly,
the Company believes that quarter-by-quarter losses will not be a useful
indicator of the performance of the Company.
IMPACT OF YEAR 2000
The Company is in the process of performing its assessment of the impact of
year 2000 on its operations. Management is in the process of formalizing
its assessment procedures and developing a plan to address identified
issues. The Company has evaluated its financial and accounting systems and
concluded that they are not materially affected by the year 2000. It is
unknown the extent, if any, of the impact of the year 2000 on other systems
and equipment. There can be no assurance that all third parties the company
interacts with will address the year 2000 issue in a timely fashion if at
all. The Company is in the process of inquiring of its vendors and business
partners about their progress in identifying and addressing problems
related to the year 2000. Any year 2000 compliance problems 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.
8
<PAGE> 9
RISK FACTORS THAT MAY AFFECT FUTURE OPERATING PERFORMANCE
EARLY STAGE OF PRODUCT DEVELOPMENT; LACK OF COMMERCIAL PRODUCTS; NO ASSURANCE OF
SUCCESSFUL PRODUCT DEVELOPMENT
The Company was founded in 1988 to discover and develop biopharmaceutical
compounds for the treatment of autoimmune diseases. To achieve profitable
operations, the Company, alone or with others, must successfully develop,
obtain regulatory approval for, manufacture and market products. The
Company does not have any products available for sale nor does it expect to
have any products commercially available for at least several years, if at
all. The Company's potential products are at the early stages of research
and development, with only limited human testing of certain of the
Company's products undertaken to date. The products currently under
development by the Company will require significant additional research,
laboratory testing and clinical trials and investment of capital prior to
their commercialization. There can be no assurance that any potential
products will be successfully developed, prove to be safe and efficacious
in clinical trials, meet applicable regulatory standards, be capable of
being produced in commercial quantities at acceptable costs or be
successfully marketed.
LIMITED OPERATING HISTORY; HISTORY OF LOSSES
The Company has experienced significant net losses every year since its
inception in 1988. Net losses for the quarters ended June 30, 1998 and 1997
were approximately $1.5 million and $2.1 million, respectively, and the
Company had an accumulated deficit of approximately $54.1 million as of
June 30, 1998. The Company expects to incur substantial and increasing
operating losses for at least the next several years. The amount of net
losses and the time required by the Company to reach profitability are
highly uncertain. There can be no assurance that the Company will ever be
able to generate product revenue or achieve profitability on a substantial
basis or at all. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
FUTURE REQUIREMENT FOR SIGNIFICANT ADDITIONAL CAPITAL
The Company anticipates that its current cash, cash equivalents, short-term
investments and expected revenues under its collaborative agreements will
be sufficient to fund its operations through 1998. Thereafter, the Company
will require substantial additional funds to continue its operations. The
Company anticipates that its current resources will be primarily used to
fund clinical testing of AnervaX for RA, AnergiX for MS, AnergiX for RA and
continued research and development and preparation for clinical testing of
DiavaX for the treatment of Type I diabetes. The balance of such resources
will be used to fund continued limited research on these and other
autoimmune diseases and general and administrative activities, including
those associated with seeking collaborative arrangements to enable the
Company to increase its research and development activities in other
autoimmune diseases. These foregoing forward-looking statements regarding
the Company's capital requirements involve risks and uncertainties that
could cause actual results to differ materially. Although the Company
believes that its current resources will be sufficient to meet the
Company's operating and capital requirements through 1998, there can be no
assurance that the Company will not require additional financing within the
same time frame. The Company's working capital requirements may vary
depending upon numerous factors, including the progress of the Company's
research and development programs, manufacturing activities, the progress
of the Company's clinical programs, the size and complexity of these
programs, the scope and results of laboratory testing and clinical trials,
the time and cost required to seek regulatory approvals to commence
clinical trials for the Company's initial products, the need to obtain
licenses to other proprietary rights, any required adjustments to the
Company's operating plan to respond to competitive pressures or
technological advances, developments with respect to existing or future
collaborative arrangements and the availability of various methods of
financing. The Company expects to seek to raise additional capital through
equity or debt financing, research and development collaborations with
corporate partners or through other sources. Any additional equity
financing may be dilutive to shareholders, and debt financing, if
available, may involve restrictions on stock dividends and other
restrictions on the Company. Adequate funds for the Company's operations,
whether from equity or debt financings, collaborative or other arrangements
with corporate partners or from other sources, may not be available when
needed or on terms attractive to the Company. Insufficient funds may
require the Company to delay, scale back or eliminate some or all of its
research and product development programs or to license third parties to
commercialize products or technologies that the Company would otherwise
seek to develop itself. The Company's liquidity will be reduced as amounts
are expended for
9
<PAGE> 10
continuing research and development. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
UNCERTAINTIES RELATED TO PRECLINICAL AND 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 any 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. The failure to adequately demonstrate the safety and efficacy of a
therapeutic product under development could delay or prevent regulatory
approval of the product and could have a material adverse effect on the
Company.
The rate of completion of the Company's clinical trials is dependent upon,
among other factors, the Food and Drug Administration's willingness to
allow Anergen to proceed; the results of Anergen's continued research and
development, including test results and success in producing the epitopes
and HLA molecules for each AnergiX compound; the number of skilled
scientists, clinicians, and consultants the Company is able to employ in
its efforts and the general interest in the medical community in a
therapeutic using the Company's approach for treatment of the diseases
targeted by the Company. Currently, the Company does not anticipate
establishing its own clinical trials facility. The rate of completion of
clinical trials is also dependent on patient enrollment, which is a
function of many factors, including the size of the patient population, the
proximity of patients to clinical sites and the existence of competitive
trials. If the Company is unable to successfully complete its clinical
trials, its business, financial condition and results of operations could
be materially and adversely affected.
UNCERTAINTY OF MARKET ACCEPTANCE
Even if the requisite regulatory approvals are obtained for the Company's
potential products or for products developed in collaboration with the
Company, uncertainty exists as to whether such products will be accepted by
the market. A number of factors also may limit the market acceptance of a
product which may be developed by, or discovered through collaboration
with, the Company, including the rate of adoption by health care
practitioners, the indications for which the product is approved, the rate
of the product's acceptance by the target population, the timing of market
entry relative to competitive products, the availability of alternative
therapies, the price of the Company's product relative to alternative
therapies, the availability of third-party reimbursement and the extent of
marketing efforts by the Company and third-party distributors or agents
retained by the Company. Side effects or unfavorable publicity concerning a
Company product or any similar product could have an adverse effect on the
Company's ability to obtain physician, patient or third-party payor
acceptance and on efforts to sell that product. There can be no assurance
of the Company's ability, or the length of time required, to achieve
commercialization of the Company's products or that physicians, patients or
third party payors will accept any of the Company's products as readily as
alternative therapies, or at all.
GOVERNMENT REGULATION; NO ASSURANCE OF OBTAINING PRODUCT APPROVALS
The Company's research and development activities are subject to regulation
by numerous governmental authorities in the United States and other
countries. Further, the future production and marketing of any products
developed by the Company would also be regulated, particularly as to safety
and efficacy. In the United States, vaccines, drugs and biologics are
subject to rigorous FDA review. The Federal Food, Drug, and Cosmetic Act,
the Public Health Service Act and other federal statutes and regulations
govern or influence the testing, manufacture, safety, labeling, storage,
record keeping, approval, advertising and promotion of such products.
Noncompliance with applicable requirements can result in fines, recall or
seizure of products, clinical study holds, total or partial suspension of
production, refusal of the government to approve NDAs, PLAs, ELAs or allow
the Company to enter into supply contracts and criminal prosecution. The
FDA also has the authority to revoke PLAs and ELAs previously granted.
In order to obtain FDA approval of a new biological product, the Company
must submit proof of safety, purity,
10
<PAGE> 11
potency and efficacy. In most cases such proof entails extensive
pre-clinical, laboratory, and clinical tests. The testing, preparation of
necessary marketing applications and processing of those applications by
the FDA is expensive and time consuming, can vary based on the type of
product, and may take several years to complete. There is no assurance that
the FDA will act favorably or quickly in making such reviews, and
significant difficulties or costs may be encountered by the Company in its
efforts to obtain FDA approvals that could delay or preclude the Company
from marketing any products it may develop or furnish an advantage to
competitors. The FDA may also require post-marketing testing and
surveillance to monitor the effects of approved products or place
conditions on any approvals that could restrict the commercial applications
of such products. Product approvals may be withdrawn if compliance with
regulatory standards is not maintained or if problems occur following
initial marketing. In addition, delays imposed by the governmental approval
process may materially reduce the period during which the Company may have
the exclusive right to exploit patented products or technologies.
The FDA approval process for a new biological drug involves completion of
pre-clinical studies which include laboratory tests and animal studies to
assess safety and effectiveness of the drug. Among other things, the
results of these studies as well as how the product will be manufactured,
are submitted to the FDA in an IND and, unless the FDA objects, the IND
becomes effective 30 days following receipt by the FDA. FDA cleared human
clinical trials may then be conducted. The results of the clinical trials
are submitted to the FDA as part of a PLA. In addition to obtaining FDA
approval for each AnergiX indication, an ELA must be filed and the FDA must
approve the manufacturing facilities for the product. Product sales may
commence only if the PLA and ELA are approved. Regulatory requirements for
obtaining such FDA approvals are rigorous and there can be no assurance
that such approvals will be obtained on a timely basis or at all.
Sales of pharmaceutical products outside the United States are subject to
foreign regulatory requirements that vary widely from country to country.
The time required to obtain approvals required by foreign countries may be
longer or shorter than that required for FDA approval, and requirements for
licensing may differ from FDA requirements.
If approval is obtained, the Company will be subject to continuing FDA
obligations. When manufacturing biologics, the Company will be required to
adhere to regulations setting forth current Good Manufacturing Practices
("GMP"), which require that the Company manufacture its products and
maintain its records in a prescribed manner with respect to manufacturing,
testing and quality control activities. Further, the Company must pass a
preapproval inspection of its manufacturing facilities by the FDA before
obtaining approval.
Satisfaction of these FDA requirements, or similar requirements by foreign
regulatory agencies, typically takes several years and the time needed to
satisfy them may vary substantially, based upon the type, complexity and
novelty of the pharmaceutical product. The effect of government regulation
may be to delay or to prevent marketing of potential products for a
considerable period of time and to impose costly procedures upon the
Company's activities. There can be no assurance that the FDA or any other
regulatory agency will grant approval for any products or indications being
developed by the Company on a timely basis, or at all. Success in
preclinical or early stage clinical trials does not assure success in later
stage clinical trials. Data obtained from preclinical and clinical
activities are susceptible to varying interpretations which could delay,
limit or prevent regulatory approval. If regulatory approval of a product
is granted, such approval may impose limitations on the indicated uses for
which a product may be marketed. Further, even if regulatory approval is
obtained, later discovery of previously unknown problems with a product may
result in restrictions on the product, including withdrawal of the product
from the market. Delay in obtaining or failure to obtain regulatory
approvals would have a material adverse effect on the Company's business,
financial condition and results of operations.
DEPENDENCE UPON COLLABORATIVE PARTNERS
The Company's strategy for the development, clinical trials, manufacturing
and commercialization of its products includes maintaining and entering
into various collaborations with corporate partners, licensors, licensees
and others. The Company has entered into collaborative arrangements with
Novo Nordisk with respect to the Company's AnergiX compounds for the
treatment of MS, MG and IDDM, and with Organon with respect to an AnergiX
compound for the treatment of RA. In February, the Company announced that
it and Novo Nordisk had agreed to terminate the collaboration in AnergiX
for MS, MG and IDDM effective February 9, 1998 with all rights returning to
the Company. There can be no assurance that the interests and motivations
of the Company's collaborators are, or will remain, aligned with those of
the Company or that such collaborators will successfully
11
<PAGE> 12
perform their development, regulatory compliance, manufacturing or
marketing functions or that such collaborations in whole or in part will
continue. There can also be no assurance that the Company will be able to
negotiate additional collaborative arrangements in the future on acceptable
terms, if at all, or that any such collaborative arrangements will be
successful. To the extent that the Company is not able to maintain or
establish such arrangements, the Company would be required to undertake
such activities at its own expense, which would significantly increase the
Company's capital requirements and limit the programs the Company is able
to pursue. In addition, the Company may encounter significant delays in
introducing its products into certain markets or find that the development,
manufacture or sale of its products in such markets is adversely affected
by the absence of such collaborative agreements.
The Company cannot control the amount and timing of resources which its
collaborative partners devote to the Company's program or potential
products, which can vary because of factors unrelated to the potential
product. Collaborator participation will depend not only on the achievement
of research objectives by the Company and its collaborators, which cannot
be assured, but also on each collaborator's own financial, competitive,
marketing and strategic considerations, which are outside the Company's
control. Such strategic considerations may include the relative advantages
of alternative products being marketed or developed by others, including
relevant patent and proprietary positions. The Company's collaborative
partners may develop, either alone or with others, products that compete
with the development and marketing of the Company's products. Competing
products, either developed by the collaborative partners or to which the
collaborative partners have rights, may result in their withdrawal of
support with respect to all or a portion of the Company's technology, which
would have a material adverse effect on the Company's business, financial
condition and results of operations. If Organon or any future collaborative
partner breaches or terminates their agreements with the Company or
otherwise fails to conduct their collaborative activities in a timely
manner, the preclinical or clinical development or commercialization of
product candidates or research programs will be delayed, and the Company
will be required to devote additional resources to product development and
commercialization or terminate certain development programs. There also can
be no assurance that disputes will not arise in the future with respect to
the ownership of rights to any technology developed with third parties.
These and other possible disagreements between collaborators and the
Company could lead to delays in the collaborative research, development and
commercialization of certain product candidates or could require or result
in litigation or arbitration, which would be time consuming and expensive,
and would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity
and Capital Resources".
UNCERTAINTY RELATING TO PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in significant part on its ability to
maintain patent protection for its therapeutic approach and for any
developed products, to preserve its trade secrets and to operate without
infringing the proprietary rights of third parties. Although the Company
has obtained patents covering certain aspects of its technology, no
assurance can be given that additional patents will be issued or, if
issued, that the scope of any patent protection will be significant, or
that the patents will be held valid if subsequently challenged. Moreover,
the Company cannot ascertain with certainty that no patent conflict will
exist with other products or processes which could compete with the
Company's approaches.
Because of the length of time and expense associated with bringing new
products through development and to the marketplace, and the length of time
required for the governmental approval process, the pharmaceutical industry
has traditionally placed considerable importance on obtaining and
maintaining patent and trade secret protection for significant new
technologies, products and processes. The Company and other biotechnology
and pharmaceutical firms have applied, and are applying, for patents for
their products and certain aspects of their technologies. The
enforceability of patents issued to biotechnology and pharmaceutical firms
is highly uncertain. Federal court decisions indicating legal
considerations surrounding the validity of patents in the field are in
transition, and there can be no assurance that the historical legal
standards surrounding questions of validity will continue to be applied or
that current defenses as to issued patents in the field will offer
protection in the future. In addition, there can be no assurance as to the
degree and range of protection any patents will afford, whether patents
will issue or the extent to which the Company will be successful in not
infringing patents granted to others.
While the Company pursues patent protection for products and processes
where appropriate, it also relies on trade secrets, know-how and continuing
technological advancement to develop and maintain its competitive
12
<PAGE> 13
position. The Company's policy is to have each employee enter into an
agreement that contains provisions prohibiting the disclosure of
confidential information to anyone outside the Company. Research and
development contracts and relationships between the Company and its
scientific consultants provide access to aspects of the Company's know-how
that is protected generally under confidentiality agreements with the
parties involved. There can be no assurance, however, that these
confidentiality agreements will be honored or that the Company can
effectively protect its rights to its unpatented trade secrets. Moreover,
there can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or
otherwise gain access to the Company's trade secrets.
The Company may be required to obtain licenses to patents or other
proprietary rights from third parties. There can be no assurance that any
licenses required under any patents or proprietary rights will be made
available on terms acceptable to the Company, if at all. If the Company
does not obtain required licenses, it could encounter delays in product
development while it attempts to redesign products or methods or it could
find that the development, manufacture or sale of products requiring such
licenses could be foreclosed.
The Company is aware of a European patent and corresponding U.S. and
Australian patents which contain claims that relate to certain of the
Company's proposed products and their uses. In accordance with European
Patent Office ("EPO") procedures, third parties can oppose an EPO patent
grant by presenting information which they believe justifies narrowing or
revoking the grant of the patent. The Company is opposing the
aforementioned grant in the EPO. There can, however, be no assurance that
the granted EPO claims will be revoked or significantly narrowed in scope
as a result of the opposition proceeding. If valid claims in these patents
are found to be infringed by the Company's products, the Company's ability
to make, use, offer to sell, or sell, such products could be materially and
adversely affected.
In addition, the Company could incur substantial costs in defending any
patent litigation brought against it or in asserting the Company's patent
rights, including those licensed to the Company by others, in a suit
against another party. The United States Patent and Trademark Office (the
"USPTO") could institute interference proceedings in connection with one or
more of the Company's patents or patent applications which proceedings
could result in an adverse decision as to priority of an invention. The
USPTO also could institute reexamination proceedings in connection with one
or more of the Company's patents or patent applications, which could result
in an adverse decision as to the patents' validity or scope.
NEED TO DEVELOP MANUFACTURING CAPABILITIES
The Company has no volume manufacturing capacity or experience in volume
manufacturing of pharmaceutical or other biological products. Establishing
its own volume manufacturing capabilities would require significant
scale-up expenses and additions to facilities and personnel. In addition,
the Company must successfully develop the process required for volume
manufacturing. The pharmaceutical products under development by the Company
have never been manufactured on a commercial scale and there can be no
assurance that such products can be manufactured at a cost or in quantities
to make them commercially viable. The Company will be required to establish
arrangements with contract manufacturers to supply a portion of its
compounds for subsequent clinical trials as well as the manufacture,
packaging, labeling and distribution of finished products. If the Company
is unable to contract for sufficient supply of a portion of its compounds
on acceptable terms, and it is unable to develop the capability to produce
the epitopes internally, the Company's human clinical testing schedule
would be delayed, resulting in the delay of submission of products for
regulatory approval and initiation of new development programs, which would
have a material adverse effect on the Company. If the Company should
encounter delays or difficulties in establishing relationships with
manufacturers to produce, package and distribute its finished products,
market introduction and subsequent sales of such products would be
adversely affected. Moreover, contract manufacturers that the Company may
use must adhere to current GMP regulations enforced by the FDA through its
facilities inspection program. If these facilities cannot pass a
pre-approval plant inspection, the FDA pre-market approval of the products
will be adversely affected.
LACK OF MARKETING EXPERIENCE; DEPENDENCE ON THIRD PARTIES
The Company currently has no sales, marketing or distribution capability.
The Company intends to rely on relationships with one or more
pharmaceutical companies with established distribution systems and direct
sales forces to market its products. In the event that the Company is
unable to reach agreement with one or more pharmaceutical companies to
market its products, it may be required to market its products directly and
to
13
<PAGE> 14
develop a marketing and sales force with technical expertise and supporting
distribution capability. There can be no assurance that the Company will be
able to establish in-house sales and distribution capabilities or
relationships with third parties, or that it will be successful in gaining
market acceptance for its products. To the extent that the Company decides
to utilize existing or future co-promotion or other licensing arrangements,
the Company must develop its own sales, marketing or distribution
capability, and there can be no assurance that such efforts will be
successful.
COMPETITION AND TECHNOLOGICAL CHANGE
The biotechnology and pharmaceutical industries are characterized by
rapidly evolving technology and intense competition. The Company's
competitors include major pharmaceutical, chemical and specialized
biotechnology companies, most of which have financial, technical, research
and development, manufacturing, clinical and marketing resources
significantly greater than those of the Company. The Company believes that
these other entities recognize the need for effective therapies for the
autoimmune diseases targeted by the Company and are highly motivated to
develop such therapies. In addition, many specialized biotechnology
companies have formed collaborations with large, established companies to
support research, development and commercialization of products that may be
competitive with those of the Company. Academic institutions, governmental
agencies and other public and private research organizations are also
conducting research activities and seeking patent protection and may
commercialize products on their own or through joint ventures. The Company
is aware of certain products in development by competitors that are
intended to be used for the prevention or treatment of certain diseases the
Company has targeted for product development.
The existence of these products, or other products or treatments of which
the Company is not aware, or products or treatments that may be developed
in the future which may be more effective, may adversely affect the
commercialization or marketability of products which may be developed by
the Company or potentially render the Company's technology obsolete or
non-competitive.
The Company's competitive position will depend on its ability to attract
and retain qualified scientific and other personnel, develop effective
proprietary products, implement production and marketing plans, obtain
patent protection and secure adequate capital resources. In addition, the
first pharmaceutical product to reach the market in a therapeutic or
preventive area is often at a significant competitive advantage relative to
later entrants to the market. The Company expects its products, if approved
for sale, to compete primarily on the basis of product efficacy, safety,
patent position, reliability, price and patient convenience.
UNCERTAINTY RELATED TO PHARMACEUTICAL PRICING AND REIMBURSEMENT
Political, economic and regulatory influences are subjecting the health
care industry in the United States to fundamental change. Initiatives to
reduce the federal deficit and to reform health care delivery are
increasing these cost containment efforts. The Company anticipates that
Congress, state legislatures and the private sector will continue to review
and assess alternative benefits, controls on health care spending through
limitations on the growth of private health insurance premiums and Medicare
and Medicaid spending, the creation of large insurance purchasing groups,
price controls on pharmaceuticals and other fundamental changes to the
health care delivery system. Any such proposed or actual changes could
cause existing and potential partners of the Company to limit or eliminate
spending on collaborative development projects. Legislative debate is
expected to continue in the future, market forces are expected to demand
reduced costs and Anergen cannot predict what impact the adoption of any
federal or state health care reform measures or future private sector
reforms may have on its business.
In both domestic and foreign markets, sales of the Company's proposed
products will depend in part upon the availability of reimbursement from
third-party payors, such as government health administration authorities,
private health insurers and other organizations. In addition, other
third-party payors are increasingly challenging the price and cost
effectiveness of medical products and services. Significant uncertainty
exists as to the reimbursement status of newly approved health care
products. There can be no assurance that the Company's potential products
or products discovered in collaboration with the Company will be considered
cost-effective or that adequate third-party reimbursement will be available
to enable Anergen to maintain price levels sufficient to realize an
appropriate return on its significant investment in product research and
development. Legislation and regulations affecting the pricing of
pharmaceuticals may change before the Company's proposed products are
approved for marketing. Adoption of such legislation could further limit
reimbursement for medical products. If
14
<PAGE> 15
adequate coverage and reimbursement levels are not provided by the
government and third-party payors for the Company's products, the market
acceptance of these products would be adversely affected, which would have
a material adverse effect on the Company's business, financial condition
and results of operations.
DEPENDENCE ON AND NEED FOR ADDITIONAL KEY PERSONNEL; RELIANCE ON ACADEMIC
COLLABORATORS
The success of the Company and of its business strategy is dependent in
large part on the ability of the Company to attract and retain key
management and operating personnel. Such persons are in high demand and are
often subject to competing offers. The Company will need to develop
expertise and add skilled employees or retain consultants in such areas as
research and development, clinical testing, government approvals, marketing
and manufacturing in the future. There can be no assurance that the Company
will be able to attract and retain the qualified personnel or develop the
expertise needed for its business. The loss of the services of one or more
of the Company's officers or other members of the research or management
group or the inability to hire additional personnel and develop expertise
as needed would have a material adverse effect on the Company.
A significant portion of the Company's research and development and
clinical trials is conducted under sponsored research programs with several
universities. The Company depends on the availability of the principal
investigator for each such program, and the Company cannot assure that
these individuals or their research staffs will be available to conduct
research and development or clinical trials. The Company's academic
collaborators are not employees of the Company. As a result, the Company
has limited control over their activities and can expect that only limited
amounts of their time will be dedicated to Company activities. In addition,
the Company's academic collaborators are employed by major institutions
which have collaborative relationships with other parties, some of which
may be competitors of the Company. Accordingly, there can be no assurance
that research and development, preclinical and clinical testing performed
by these collaborators will be completed in a timely manner, if at all, and
any inability to do so could have a material adverse effect on the Company.
POTENTIAL PRODUCT LIABILITY
The testing, marketing and sale of human health care products entail an
inherent risk of exposure to product liability claims in the event that the
use of the Company's technology or prospective products is alleged to have
resulted in adverse effects. While the Company has taken, and will continue
to take, what it believes are appropriate precautions to minimize exposure
to product liability, there can be no assurance that it will avoid
significant liability. The Company possesses limited general liability and
product liability insurance related to its clinical trials of AnervaX for
RA and intends to seek such insurance related to its clinical trials of
AnergiX for MS and certain other types of insurance customarily obtained by
business organizations. There can be no assurance that the existing
insurance coverage is adequate or that it will avoid liability. The Company
intends to seek insurance against product liability risks associated with
the testing, manufacturing or marketing of its products. However, there can
be no assurance that it will be able to obtain such insurance in the
future, or that if obtained, such insurance will be sufficient in amount.
Consequently, a product liability claim or other claims with respect to
uninsured liabilities or in excess of insured liabilities could have a
material adverse effect on the business or financial condition of the
Company.
HAZARDOUS MATERIALS; ENVIRONMENTAL MATTERS
The Company is subject to regulation by the Occupational Safety and Health
Administration ("OSHA") and the Environmental Protection Agency ("EPA") and
to regulation under the Toxic Substances Control Act, the Resource
Conservation and Recovery Act and other regulatory statutes, and may in the
future be subject to other federal, state or local regulations. Although
the Company believes that it has complied with these laws, regulations and
policies in all material respects and has not been required to take any
significant action to correct any material noncompliance, there can be no
assurance that the Company will not be required to incur significant costs
to comply with environmental and health and safety regulations in the
future. The Company's research and development involves the controlled use
of hazardous materials, including but not limited to certain hazardous
chemicals and radioactive materials. Although the Company believes that its
safety procedures for handling and disposing of such materials comply with
the standards prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be
eliminated. In the event of such an accident, the Company could be held
liable for any damages that result and any such liability could exceed the
resources of the Company. In addition, regulations may be promulgated
governing biotechnology that may affect the
15
<PAGE> 16
Company's research and development programs. The Company is unable to
predict whether any agency will adopt any regulation which would have a
material adverse effect on the Company's business, financial condition and
results of operations.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock, similar to the securities
of other biotechnology companies, has been and is likely to continue to be
highly volatile. Announcements regarding the results of regulatory approval
filings, clinical trials or other testing, technological innovations or new
commercial products by the Company or its competitors, patents and
intellectual property rights by the Company or its competitors,
developments as to current or future collaborations by the Company or its
competitors, government regulations, the status of health care reform
initiatives, fluctuations in operating results, changes in recommendations
by financial analysts, and general market conditions for biotechnology
stocks could have a significant impact on the future price of the Common
Stock. Trading volume of the Company's Common Stock has been relatively
limited and sales of substantial amounts of Common Stock could have an
adverse effect on the price of the Common Stock.
CONTROL BY EXISTING STOCKHOLDERS
The Company's officers, directors and principal shareholders, namely
Warburg, Pincus Ventures, L.P. ("Warburg"), International Biotechnology
Trust PLC ("IBT"), and Novo Nordisk, collectively beneficially own
approximately 48% of the Company's outstanding Common Stock. Under a March
1995 common stock purchase agreement with Warburg and IBT ("Warburg/IBT
Purchase Agreement"), the Company is currently obligated to include in the
slate of nominees recommended by the Company's Board of Directors and
management, at each election of directors, two candidates selected by
Warburg, one candidate selected by IBT and one candidate mutually agreed to
by IBT and Warburg. Additionally, while not obligated to do so, since 1993,
the Company has included a representative of Novo Nordisk in its slate of
nominees for the Board of Directors. The ownership of the Company's Common
Stock, and the ability to designate candidates for the Company's
recommended slate of nominees for the Board of Directors, of Warburg, IBT
and Novo Nordisk will enable such shareholders to have significant
influence over major corporate transactions as well as the election of
directors of the Company and control over board decisions and could have
the effect of delaying, deterring or preventing a change in control of the
Company.
ANTI-TAKEOVER PROVISIONS; POSSIBLE ISSUANCE OF PREFERRED STOCK OR ACCELERATION
OF OPTION VESTING
The Board of Directors has authority, without further action by
shareholders, to issue up to 10,000,000 shares of Preferred Stock with
rights, preferences and privileges designated by the Board of Directors.
This Preferred Stock could be issued quickly with terms calculated to delay
or prevent a change in control of the Company or to make removal of
management more difficult. In certain circumstances, such issuance could
have the effect of decreasing the market price of the Common Stock or of
delaying, deterring or preventing a change in control of the Company. The
Company has no present plan to issue any shares of Preferred Stock.
Further, pursuant to the Company's option plans, in the event of certain
mergers of the Company with other entities, transfers of voting control of
the Company's capital stock or sale of all or substantially all of the
Company's assets, the Company's Board of Directors has the right under
certain circumstances to cause all outstanding options to become fully
vested prior to the event causing such acceleration and all unexercised
options will terminate upon completion of such event.
16
<PAGE> 17
ANERGEN, INC.
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
(a) Annual Meeting of Shareholders on April 29, 1998.
On April 29, 1998 the Company held its Annual Meeting of
Shareholders to (i) elect seven directors to serve for one year and
until their successors are duly elected ("Proposal 1"), (ii) approve
an amendment to the Company's 1991 Employee Stock Purchase Plan
increasing the number of shares of Common Stock reserved fro issuance
by 500,000 shares ("Proposal 2"), (iii) approve an amendment to the
Company's 1996 Stock Plan increasing the number of shares of Common
Stock reserved for issuance by 1,000,000 shares ("Proposal 3"), (iv)
approve a change in the state of incorporation of the Company from the
State of California to the State of Delaware by means of a merger of
the Company with and into a wholly-owned Delaware subsidiary
("Proposal 4"), (v) approve the form of indemnification agreement to
be entered into between the Company and its directors and officers in
connection with the proposed reincorporation ("Proposal 5"), (vi)
approve an amendment to the Company's Amended and Restated Articles of
Incorporation to effect a reverse split of the Company's Common Stock
("Proposal 6"), (vii) approve an amendment to the Company's Amended
and Restated Articles of Incorporation increasing the authorized
number of shares of Common Stock of the Company from 40,000,000 shares
to 60,000,000 shares ("Proposal 7"), and (viii) confirm the
appointment of Ernst & Young LLP as independent auditors for the
fiscal year ending December 31, 1998 ("Proposal 8").
The names of the persons nominated for director and the voting
results are as follows:
<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD
------- --- --------
<S> <C> <C>
Bruce L.A. Carter 16,771,746 674,133
Nicholas J. Lowcock 16,761,146 684,733
Harden M. McConnell 16,759,576 686,303
Harry H. Penner, Jr. 16,770,446 675,433
Barry M. Sherman 16,760,646 685,233
James E. Thomas 16,803,246 642,633
Nicole Vitullo 16,790,146 655,733
</TABLE>
Proposal 2 sought shareholder approval to amend the Company's
1991 Employee Stock Purchase Plan Proposal 2 sought shareholder
approval of an amendment to the Company's 1991 Employee Stock Purchase
Plan increasing the number of shares of Common Stock reserved fro
issuance by 500,000 shares. The voting results for Proposal 2 were as
follows: 16,581,768 shares cast "for", 806,120 shares cast "against",
57,991 shares abstained, and no broker non-votes were cast. Proposal 3
sought shareholder approval for an amendment to the Company's 1996
Stock Plan increasing the number of shares of Common Stock reserved
for issuance by 1,000,000 shares. The voting results for Proposal 3
were as follows: 16,682,496 shares cast "for", 695,287 shares cast
"against", 68,096 shares abstained, and no broker non-votes were cast.
Proposal 4 sought shareholder approval for a change in the state of
incorporation of the Company from the State of California to the State
of Delaware by means of a merger of the Company with and into a
wholly-owned Delaware subsidiary. The voting
17
<PAGE> 18
results for Proposal 4 were as follows: 11,603,051 shares cast
"for", 1,440,652 shares cast "against", 73,258 shares abstained,
and 4,328,918 broker non-votes were cast. Proposal 5 sought
shareholder approval for the form of indemnification agreement to
be entered into between the Company and its directors and
officers in connection with the proposed reincorporation. The
voting results for Proposal 5 were as follows: 12,309,178 shares
cast "for", 701,090 shares cast "against", 106,693 shares
abstained, and 4,328,918 broker non-votes were cast. Proposal 6
sought shareholder approval for an amendment to the Company's
Amended and Restated Articles of Incorporation to effect a
reverse split of the Company's Common Stock. The voting results
for Proposal 6 were as follows: 16,175,698 shares cast "for",
1,207,763 shares cast "against", 62,418 shares abstained, and no
broker non-votes were cast. Proposal 7 sought shareholder
approval for an amendment to the Company's Amended and Restated
Article of Incorporation increasing the authorized number of
shares of Common Stock of the Company from 40,000,000 shares to
60,000,000 shares. The voting results for Proposal 7 were as
follows: 15,952,742 shares cast "for", 1,441,569 shares cast
"against", 51,568 shares abstained, and no broker non-votes were
cast. Proposal 8 sought shareholder approval to confirm the
appointment of Ernst & Young LLP as independent auditors for the
fiscal year ending December 31, 1998. The voting results for
Proposal 8 were as follows: 17,397,709 shares cast "for", 29,810
shares cast "against", 18,360 shares abstained, and no broker
non-votes were cast. For additional detail as to the matters
submitted for shareholder vote at the Annual Meeting, refer to
the definitive proxy materials relating to the 1998 Annual
Meeting of Shareholders which were sent to the Commission on
April 6, 1998.
Item 5. Other Information
None
Item 6. Exhibits and reports on Form 8-K
a) Exhibits
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
3.1(1) Certificate of Incorporation.
3.2(2) Bylaws, as amended.
4.1(2) Form of Common Stock Certificate.
27.1 Financial Data Schedule
</TABLE>
(1) Incorporated by reference to the exhibit filed with the Form 8-K
on July 27, 1998.
(2) Incorporated by reference to the exhibit filed with Registrant's
Registration Statement on Form S-1 (No. 33-42107), as amended.
b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the quarter ended June 30, 1998.
18
<PAGE> 19
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANERGEN, INC.
Date: August 12, 1998 By: /s/ DAVID V. SMITH
----------------------------------
David V. Smith
Vice President, Finance and Chief
Financial Officer on behalf of the
Company and as principal financial
and chief accounting officer
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
3.1(1) Certificate of Incorporation.
3.2(2) Bylaws, as amended.
4.1(2) Form of Common Stock Certificate.
27.1 Financial Data Schedule
</TABLE>
- ------------
(1) Incorporated by reference to the exhibit filed with the Form 8-K on July
27, 1998.
(2) Incorporated by reference to the exhibit filed with Registrant's
Registration Statement on Form S-1 (No. 33-42107), as amended.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 540
<SECURITIES> 4,603
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,216
<PP&E> 7,149
<DEPRECIATION> 5,835
<TOTAL-ASSETS> 6,566
<CURRENT-LIABILITIES> 1,646
<BONDS> 653
0
0
<COMMON> 57,705
<OTHER-SE> (53,438)
<TOTAL-LIABILITY-AND-EQUITY> 6,566
<SALES> 0
<TOTAL-REVENUES> 2,911
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,386
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 77
<INCOME-PRETAX> (3,557)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,557)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,557)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
