FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1997
________________________________________________
Commission File Number 0-19529
____________________________________________
Alteon Inc.
__________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 13-3304550
__________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
170 Williams Drive, Ramsey, New Jersey 07446
__________________________________________________________________
(Address of principal executive offices) (Zip Code)
(201) 934-5000
__________________________________________________________________
(Registrant's telephone number, including area code)
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: * NO:
On October 31, 1997, 16,974,507 shares of Registrant's Common Stock
were outstanding.
1
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Alteon Inc.
Index
PART I. FINANCIAL INFORMATION Page
______________________________ _____
Item 1. - Financial Statements:
Balance sheets as of December 31, 1996
and September 30, 1997 3
Statements of operations for the three and nine
months ended September 30, 1996 and 1997 4
Statements of cash flows for the nine months ended
September 30, 1996 and 1997 5
Notes to financial statements 6
Item 2. - Management's Discussion and
Analysis of Financial Condition and
Results of Operations 8
PART II. OTHER INFORMATION
___________________________
Item 6. - Exhibits and Reports on Form 8-K 11
SIGNATURES 13
__________
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Part I
Item 1. Financial Statements.
Alteon Inc.
BALANCE SHEETS
(Unaudited)
December 31, September 30,
1996 1997
____________ ____________
ASSETS
Current Assets:
Cash and cash equivalents $31,497,633 $16,843,976
Short-term investments 3,001,890 3,482,712
Other current assets 649,169 621,227
___________ ___________
Total current assets 35,148,692 20,947,915
Property and equipment, net 3,999,530 3,335,816
Deposits and other assets 266,971 280,339
Restricted cash 723,800 723,800
___________ ___________
Total assets $40,138,993 $25,287,870
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 1,853,400 $ 1,253,917
Accrued expenses 6,447,521 7,017,620
Obligations under capital leases 305,321 240,099
_____________ _____________
Total current liabilities 8,606,242 8,511,636
_____________ _____________
Obligations under capital leases 161,577 --
_____________ _____________
Stockholders' Equity:
Preferred stock, $.01 par value; 1,998,329
shares authorized, and 0 and 2,060 shares
issued and outstanding, as of December 31,
1996 and September 30, 1997, respectively,
(liquidation preference $2,114,185) -- 21
Common stock, $.01 par value; 30,000,000
shares authorized and 15,702,825 and
16,515,970 shares issued and outstanding
as of December 31, 1996 and September 30,
1997, respectively 157,028 165,160
Additional paid-in capital 84,018,146 90,023,357
Accumulated deficit (52,800,283) (73,412,020)
Unrealized losses on short-term
investments (3,717) (284)
____________ ____________
Total stockholders' equity 31,371,174 16,776,234
____________ ____________
Total liabilities and
stockholders' equity $40,138,993 $25,287,870
============ ============
See accompanying notes to financial statements
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<TABLE>
Alteon Inc.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
__________________________ _________________________
1996 1997 1996 1997
___________ ___________ ___________ ___________
<S> <C> <C> <C> <C>
Revenues:
Investment income $587,989 $353,854 $1,773,318 $1,206,651
Expenses:
Research and development 4,999,154 6,914,923 9,554,197 18,028,585
General and administrative 923,492 885,205 2,662,107 2,745,805
Interest 11,190 5,554 37,573 20,983
___________ ___________ ___________ ___________
Total expenses 5,933,836 7,805,682 12,253,877 20,795,373
___________ ___________ ___________ ___________
Net loss before
preferred stock
dividends (5,345,847) (7,451,828) (10,480,559) (19,588,722)
___________ ___________ ___________ ___________
Preferred stock
dividends and discount
amortization -- 662,664 -- 1,023,015
___________ ___________ ___________ ____________
Net loss $(5,345,847) $(8,114,492) $(10,480,559) $(20,611,737)
============ ============= ============= =============
Net loss per share to
common stockholders $(0.34) $(0.51) $(0.67) $(1.31)
============ ============= ============= =============
Weighted average common
shares 15,679,313 15,933,422 15,620,842 15,784,691
=========== ============ ============= =============
</TABLE>
See accompanying notes to financial statements
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Alteon Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
September 30,
______________________________
1996 1997
______ _____
Cash Flows from Operating Activities:
Net loss $(10,480,559) $(20,611,737)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 592,745 544,997
Amortization of deferred compensation -- 149,827
Accrued preferred stock dividends -- 1,023,015
Changes in operating assets and
liabilities:
Receivables from corporate partner 519,151 --
Other current assets (326,966) 27,942
Other assets (14,026) (13,368)
Accounts payable and accrued expenses 3,170,971 (29,384)
_____________ _____________
Net cash used in operating activities (6,538,684) (18,908,708)
_____________ _____________
Cash Flows from Investing Activities:
Capital expenditures (188,877) (6,799)
Purchases of marketable securities (61,488,903) (77,070,394)
Sales and maturities of marketable
securities 94,112,594 76,593,005
Restricted cash -- --
_____________ _____________
Net cash provided by (used in)
investing activities 32,434,814 (484,188)
_____________ _____________
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 356,499 38,157
Proceeds from issuance of preferred stock -- 4,802,365
Principal payments under capital lease
obligations (210,214) (226,799)
Proceeds from sales-leaseback financing 254,975 125,516
_____________ _____________
Net cash provided by financing
activities 401,260 4,739,239
_____________ _____________
Net increase/(decrease) in cash
and cash equivalents 26,297,390 (14,653,657)
Cash and cash equivalents, beginning
of period 980,010 31,497,633
_____________ _____________
Cash and cash equivalents, end of period $27,277,400 $16,843,976
============= =============
Supplemental disclosures of cash flow
information:
Cash paid for interest $37,573 $20,983
============= =============
See accompanying notes to financial statements
5
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Alteon Inc.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation - The accompanying unaudited financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of Management, all
adjustments (consisting of only normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the nine
months ended September 30, 1997, are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997. For further
information refer to the financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.
2. Cash and Cash Equivalents and Short-term Investments - Cash and cash
equivalents include highly liquid investments which have a maturity of less than
ninety days. Short-term investments are recorded at fair market value. As of
September 30, 1997, short-term investments were invested in debt instruments of
the U.S. Government, government agencies and financial institutions and
corporations with strong credit ratings.
At September 30, 1997, $3,482,712 of the Company's short term investments are
classified as available for sale. A net unrealized loss of $284 relating to the
available for sale securities has been recorded as a separate component of
stockholders' equity at September 30, 1997.
3. Net Loss Per Share - Net loss per share is calculated using the weighted
average number of common shares and common stock equivalents, as applicable,
outstanding during the period. In 1996 and 1997 common stock equivalents are
excluded from the computation of loss per share since their inclusion would be
antidilutive.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128). This
Statement establishes standards for computing and presenting earnings per share
and applies to entities with publicly traded common stock or potential common
stock. SFAS 128 is effective for financial statements for both interim and
annual periods ending after December 15, 1997, and early adoption is not
permitted. When adopted, the statement will require restatement of prior years'
earnings per share. The Company will adopt this statement for its year ended
December 31, 1997. The adoption of this statement will not have a material
impact on reported earnings per share.
4. Events Concerning Collaborative Partners - In December 1990, the Company and
Marion Merrell Dow, Inc., which was subsequently acquired by an affiliate of
Hoechst AG and renamed Hoechst Marion Roussel, Inc. ("HMRI"), formed a strategic
alliance to develop and commercialize the Company's A.G.E. technology for
therapeutics in the areas of diabetic and aging complications. The arrangements
included a research and development collaboration to conduct clinical trials
jointly, including funding by HMRI of trials on pimagedine, an agreement for the
joint promotion and sale in the United States, Canada and Western Europe of
drugs developed pursuant to the collaboration, and a manufacturing and supply
agreement. In 1996, HMRI ended the collaboration as a result of HMRI's
continuing prioritization of its new product pipeline, and the Company regained
all rights granted to HMRI covering the Company's technology. As a result of the
termination of the strategic alliance with HMRI, the Company has assumed full
responsibility for the continuation of clinical trials which has been funded by
HMRI. The estimated costs of the clinical trials are $1.4 million per month.
The Company and HMRI are negotiating various open issues arising from the
termination of their collaboration. This includes the rights of the parties
under certain patents and amounts which may be payable by the Company to HMRI
and by HMRI to the
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NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
Company. HMRI has invoiced the Company $2,611,975 which in the Company's
opinion is without merit. The Company believes the ultimate resolution of this
matter will not have a material adverse effect on the Company's financial
position, results of operations or cash flows.
5. 1997 Preferred Stock Transaction - On April 24, 1997, the Company raised $4.8
million net of offering costs, through the issuance of 5,000 shares of its $0.01
par value, 6% Cumulative Convertible Preferred Stock ("Preferred Stock"). In
connection with this issuance, the Company issued to the purchasers, warrants to
purchase 50,000 shares of its Common Stock at an exercise price of $4.025 per
share. The Preferred Stock has a liquidation preference of $1,000 per share
plus accrued and unpaid dividends and certain default payments as defined. Each
share of Preferred Stock is convertible at any time into shares of the Company's
Common Stock determined by the liquidation preference divided by the conversion
price, which price is based on a discount to the average low trading price of
the Common Stock, as defined, which goes up to 14.5% of the average low trading
price after 180 days of issuance. Through September 30, 1997, 2,940 shares of
Preferred Stock have been converted into Common Stock. In addition, there have
been 1,810 shares of Preferred Stock converted into Common Stock from October 1,
1997 through October 31, 1997. In the event of a change in control, as defined,
the Preferred Stock will be convertible into the Company's Common Stock using a
conversion price which is 83% of the lowest of the daily low trading price of
the Common Stock during the ten days immediately preceding the date of
conversion.
Holders of the Preferred Stock have no voting rights; however, certain
significant issues, as defined, require the majority vote of the outstanding
Preferred Stock holders. Also, under certain conditions, the Company may
require conversion of the Preferred Stock. Simultaneous with the issuance of
the Preferred Stock, the Company entered into a registration rights agreement
which imposes penalties on the Company for failure to keep the underlying shares
registered for resale by the holders. Non-compliance will require Company to
redeem the Preferred Stock (or Common Stock issued upon conversion) at a price
equal to 130% of the liquidation preference or the average low trading price in
the case of Common Stock. It also provides that if the Company's Common Stock
is delisted from the Nasdaq National Market and the Company does not redeem the
then outstanding Preferred Stock, the holders may exercise warrants (delisting
warrants) to purchase an aggregate of one million shares of Common Stock (200
shares for each share of Preferred Stock held) at an exercise price of $0.10 per
share. In addition, a 3% monthly default payment would be required. As of
September 30, 1997, the number of shares covered by the delisting warrants had
been reduced to 412,000 reflecting the conversion of 2,940 shares of Preferred
Stock.
The discount, as discussed above, associated with the most beneficial
conversion rate to the holders, 14.5%, is approximately $848,000, which amount
is being amortized over the 180 day initial conversion period. For the period
ended September 30, 1997, the Company has recorded Preferred Stockholder
Dividends of $1,023,015 representing the amortization of the conversion discount
and the 6% preferred dividends.
6. Other Related Party Transactions - In 1993, a Company officer received a loan
which bore interest at a rate equal to the prime rate as published in the Wall
Street Journal, adjusted quarterly, for purpose of purchasing a home. The loan
is secured by a second mortgage on the premises purchased by the officer. In
July 1996, the terms of the loan were amended so that interest will stop
accruing as of July 1998 and the principal and interest shall be paid in equal
installments in July, 1998, 1999 and 2000. In the event an installment is not
paid when due, interest shall accrue at a rate of one percent per month until
payment is made. As of September 30, 1997, the entire loan amount of $281,000
including accrued interest, remained outstanding.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Overview
Since its inception in October 1986, Alteon has devoted substantially all of
its resources to its research, drug discovery and development programs. To
date, Alteon has not generated any revenues from the sale of products and does
not expect to generate any such revenues for several years, if at all. Alteon
has incurred a cumulative net loss of $73,412,020 as of September 30, 1997, and
expects to incur operating losses, potentially greater than losses in prior
years, for a number of years.
Alteon has financed its operations through proceeds from an initial public
offering of Common Stock in 1991, a follow-on offering of Common Stock completed
in 1995, private placements of preferred equity securities (including the sale
of its 6% Cumulative Convertible Preferred Stock in April 1997), revenue from
its collaborations with Hoechst Marion Roussel, Inc. ("HMRI") and Yamanouchi
Pharmaceutical Co., Ltd. ("Yamanouchi"), reimbursement of certain of Alteon's
research and development expenses by its collaborative partners, and investment
income earned on cash balances and short-term investments.
Effective August 10, 1996, HMRI and Alteon ended their collaboration, and
Alteon regained all rights granted to HMRI covering the Company's core
technology and assumed full responsibility for the continuation of clinical
trials which had been funded by HMRI. HMRI's decision to withdraw from the
collaboration was a result of its continuing prioritization of its new product
pipeline. The Company is seeking one or more collaborative partners to replace
HMRI. There is no assurance that the Company will be able to enter into such an
agreement or that if such an agreement is reached, it will provide the level of
funding which had been provided by HMRI.
Although the Company anticipates increased expenditures in research and
development expenses as it develops products and extends its clinical trials, a
portion of such development expenses is expected to be reimbursed by Alteon's
collaborative partners. Yamanouchi has agreed to fund preclinical studies,
including most toxicology studies, on pimagedine and any other products that the
parties jointly agree to develop including a second generation A.G.E.-
formation inhibitor and a macrophage stimulator. Gamida for Life ("Gamida")
conducted, at its own expense, a Phase II clinical trial in Israel to evaluate
pimagedine in patients with diabetes and elevated serum cholesterol levels,
which was completed in April 1997. Yamanouchi and Gamida do not fund Alteon's
research or early product development expenses.
The Company's business is subject to significant risks including, but not
limited to, (i) its ability to obtain funding, (ii) the risks inherent in its
research and development efforts, including clinical trials, (iii) uncertainties
associated both with obtaining and enforcing its patents and with the patent
rights of others, (iv) the lengthy, expensive and uncertain process of seeking
regulatory approvals, (v) uncertainties regarding government reforms and of
product pricing and reimbursement levels, (vi) technological change and
competition, (vii) manufacturing uncertainties, and (viii) dependence on third
parties. Even if the Company's product candidates appear promising at an early
stage of development, they may not reach the market for numerous reasons. Such
reasons include the possibilities that the products will be ineffective or
unsafe during clinical trials, will fail to receive necessary regulatory
approvals, will be difficult to manufacture on a large scale, will be
uneconomical to market or will be precluded from commercialization by
proprietary rights of third parties.
8
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Results of Operations
Three Months Ended September 30, 1997 and 1996
Total revenues for the three months ended September 30, 1997, and the three
months ended September 30, 1996, were $354,000 and $588,000, respectively.
Revenues were derived from interest earned on cash and cash equivalents and
short-term investments. The 39.8% decrease in investment income was attributed
to the decrease in cash and cash equivalents and short-term investment balances.
The Company's total expenses increased to $7,806,000 for the three months
ended September 30, 1997, from $5,934,000 for the three months ended September
30, 1996, and consisted primarily of research and development expenses.
Research and development expenses were $6,915,000 for the three months ended
September 30, 1997, and $4,999,000 for the three months ended September 30,
1996, a 38.3% increase. This increase was primarily due to the Company's
assumption of the ACTION trial costs as a result of the termination of the
Company's collaborative agreements with HMRI on August 10, 1996.
General and administrative expenses decreased to $885,000 for the three \
months ended September 30, 1997, from $923,000 for the three months ended
September 30, 1996, a 4.1% decrease. This decrease is due primarily to a
decrease in legal, depreciation, investor relations and postage/delivery
expenses offset by an increase in facility allocated expenses.
The Company's net loss increased to $8,114,000 for the three months ended
September 30, 1997, from $5,346,000 in the same period in 1996, an increase of
51.8%, as a result of increased research and development expenses, preferred
stock dividend and expenses related to the sale of its 6% Cumulative Convertible
Preferred Stock in April 1997 and decreased investment income.
Nine months Ended September 30, 1997 and 1996
Total revenues for the nine months ended September 30, 1997, and the nine
months ended September 30, 1996, were $ 1,207,000 and $1,773,000, respectively.
Revenues were derived from interest earned on cash and cash equivalents and
short-term investments. The 32.0% decrease in investment income was attributed
to the decrease in cash and cash equivalents and short-term investment balances.
The Company's total expenses increased to $20,795,000 for the nine months
ended September 30, 1997, from $12,254,000 for the nine months ended September
30, 1996, and consisted primarily of research and development expenses.
Research and development expenses were $18,029,000 for the nine months ended
September 30, 1997, and $9,554,000 for the nine months ended September 30, 1996,
a 88.7% increase. This increase was primarily due to the Company's assumption
of the ACTION trial costs as a result of the termination of the Company's
collaborative agreements with HMRI on August 10, 1996.
General and administrative expenses increased to $2,746,000 for the nine
months ended September 30, 1997, from $2,662,000 for the nine months ended
September 30, 1996, a 3.2% increase. This increase is due primarily to an
increase in facility allocated expenses, lease expenses related to additional
sales-leaseback transactions, patent, and insurance expenses which were offset
by decreased investor relations, legal and postage/delivery expenses.
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Results of Operations (continued)
The Company's net loss increased to $20,612,000 for the nine months ended
September 30, 1997, from $10,481,000 in the same period in 1996, an increase of
96.7%, as a result of increased research and development expenses, general
administrative expenses, and preferred dividends and expenses related to the
sale of its 6% Cumulative Convertible Preferred Stock in April 1997 and
decreased investment income.
Liquidity and Capital Resources
Alteon had cash and cash equivalents and short-term investments at September
30, 1997, of $20,327,000 compared to $34,500,000 at December 31, 1996. This is
a decrease in cash and cash equivalents and short-term investments for the nine
months ended September 30, 1997, of $14,173,000. This consisted of $18,908,000
of cash used in operations consisting primarily of research and development
expenses, personnel and related costs and facility expenses and $7,000 in
capital expenditures, offset by $4,739,000 of financing activities primarily
related to the sale of its 6% Cumulative Convertible Preferred Stock and
$3,000 of unrealized gains. As of September 30, 1997, Alteon had invested
$7,339,000 in capital equipment and leasehold improvements, of which a
cumulative $1,347,000 had been funded through capital leases.
The Company's research and development expenses, to date, have been funded
primarily by research and development collaborative arrangements and sales of
equity securities. In programs that are subject to joint development
agreements, the Company expects to incur substantial additional research and
development costs, including costs related to drug discovery, preclinical
research and clinical trials. The Company anticipates that it will be able to
offset a portion of its research and development expenses and its clinical
development expenses with funding from its collaborative partners.
However, as described above, the Company and one of its collaborative
partners, HMRI, have terminated their collaboration. In addition to the
reimbursement of certain of the Company's research and development expenses,
HMRI had also incurred the significant portion of the expenses of the Company's
clinical trials. The estimated costs of the clinical trials, which is now the
responsibility of the Company, is estimated to be $1.4 million per month.
Alteon anticipates that its existing available cash and cash equivalents and
short-term investments, will be adequate to satisfy its working capital
requirements for its current and planned operations into the first quarter of
1998. The Company completed the sale of its 6% Cumulative Convertible Preferred
Stock in April 1997 and is in discussion with potential private purchasers of
its debt or equity securities to provide additional financing. There can be no
assurance that such additional financing can be obtained.
Future capital requirements will depend on numerous factors, including the
progress of the Company's research and development programs, the conduct of
preclinical tests and clinical trials, the development of regulatory
submissions, the costs associated with protecting patents and other proprietary
rights, the development of marketing and sales capabilities and the availability
of third-party funding.
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Liquidity and Capital Resources (continued)
Because of the Company's long-term capital requirements, it may seek access
to the public or private equity markets whenever conditions are favorable. The
Company may also seek additional funding through corporate collaborations and
other financing vehicles, potentially including off-balance sheet financing
through limited partnerships or corporations. There can be no assurance that
such funding will be available at all or on terms acceptable to the Company. If
adequate funds are not available, the Company may be required to curtail
significantly one or more of its research or development programs or obtain
funds through arrangements with collaborative partners or others. This may
require the Company to relinquish rights to certain of its technologies or
product candidates.
Alteon's commercial 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 commercial partners or
to which the commercial 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.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
Exhibit
No. Description of Exhibit
_______ ______________________
3.1 Restated Certificate of Incorporation. (Incorporated
by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 File Number 33-
42574) which became effective on November 1, 1991).
3.2 Certificate of the Voting Powers, Designations,
Preference and Relative Participating, Optional and
Other Special Rights and Qualifications, Limitations or
Restrictions of Series F Preferred Stock of the
Company. (Incorporated by reference to Exhibit 4.2 to
the Company's Current Report on Form 8-K filed on
August 4, 1995).
3.3 By-laws, as amended. (Incorporated by reference to
Exhibit 3.1 to the Company's Current Report on Form 8-K
filed on April 22, 1996).
3.4 Certificate of Designations of 6% Cumulative
Convertible Preferred Stock for Alteon Inc.
(Incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K filed on May 9,
1997).
4.1 Stockholders' Rights Agreement dated as of July 27,
1995 between Alteon Inc. and Registrar and Transfer
Company, as Rights Agent. (Incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K
filed on August 4, 1995).
4.2 Registration Rights Agreement dated as of April 24,
1997 between Alteon Inc. and the investors named on the
signature page thereof. Incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K
filed on May 9, 1997).
11
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Exhibits and Reports on Form 8-K. (continued)
4.3 Form of Common Stock Purchase Warrant. (Incorporated
by reference to Exhibit 4.2 to the Company's Current
Report on Form 8-K filed on May 9, 1997).
4.4 Form of Common Stock Purchase Delisting Warrant.
(Incorporated by reference to Exhibit 4.3 to the
Company's Current Report on Form 8-K filed on May 9,
1997).
4.5 Amendment to Stockholders' Rights Agreement between
Alteon Inc. and Registrar and Transfer Company, as
Rights Agent. (Incorporated by reference to Exhibit
4.4 to the Company's Current Report on Form 8-K filed
on May 9, 1997).
10.1* Supply Agreement dated September 12, 1997 between Ganes
Chemicals Inc. and Alteon Inc. (Incorporated by
reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed on October 3, 1997).
10.2 Letter Agreement dated October 21, 1997 between the
Company and Elizabeth A. O'Dell amending Employment
Agreement dated October 21, 1995.
27 Financial Data Schedule
* Confidential treatment has been granted for a portion of
this document
a) The following reports on Form 8-K were filed during the quarter
ended September 30, 1997:
On August 8, 1997 the Company filed a Current Report on Form
8-K which reported the expansion of its End-Stage Renal Disease
clinical trial in response to positive trends in mortality data.
On October 3, 1997 the Company filed a Current Report on Form
8-K which reported the execution of a Supply Agreement by the
Company and Ganes Chemicals Inc.
12
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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.
Date: November 11, 1997
Alteon Inc.
/s/ James J. Mauzey
BY: James J. Mauzey
Chairman of the Board,
Chief Executive Officer and
Director (principal
executive officer)
/s/ Kenneth I. Moch
By: Kenneth I. Moch
Senior Vice President,
Finance and Business
Development and Chief
Financial Officer
(principal financial
officer)
13
[ALTEON LETTERHEAD]
October 21, 1997
Ms. Elizabeth A. O'Dell
100 Inwood Avenue
Upper Montclair, NJ 07043
Dear Liz:
This letter will confirm certain matters related to your employment
by Alteon Inc. (the "Company") and shall constitute an amendment to
your employment agreement with the Company dated October 21, 1995
(the "Employment Agreement"), and as amended by letter dated
January 29, 1997.
Your Term of Employment, as defined in Paragraph 1 of your
Employment Agreement, shall begin on the date hereof and terminate
3 years from such date.
Your salary for the calendar year 1997 will be $120,852 and it
shall be subject to further adjustment, as may be determined by the
Company, for periods thereafter. In addition, you will be eligible
to receive a bonus, to be awarded at the sole discretion of the
Board of Directors of the Company, in an amount of up to $5,000 and
up to 10,000 stock options for the calendar year ending December
31, 1997. You will also be eligible to receive bonuses for 1998
and 1999 in such amounts as may be determined by the Company. The
vesting schedule and exercise price for bonus options will be
determined by the Company.
Subject to your acceptance of this letter, the Company shall award
you options to purchase 50,000 shares of the Company's common stock
at an exercise price of $5.625 (the fair market value of Alteon
stock on January 31, 1997, when the Compensation Committee of the
Board approved this award). The options will be subject to the
terms and conditions of the Company's amended 1995 Stock Option
Plan and the Company's standard Incentive/Non-Qualified Stock
Option Grant Agreement to be executed after action of the
Compensation Committee ("Grant Agreement"). The fifty thousand
(50,000) options will vest a rate of 1,388 per month during the
Term of Employment.
<PAGE>
Ms. Elizabeth A. O'Dell
October 21, 1997
Page 2
Paragraph 20 of your Employment Agreement ("General") is amended to
include the Grant Agreement and this letter as part of the "entire
agreement," with respect to the subject matter of your employment
by the Company under these agreements. Except as modified by this
letter, the terms of your Employment Agreement, as previously
amended, shall remain in full force and effect.
If the foregoing is acceptable to you, please indicate your
agreement by signing and returning the enclosed copy of this
letter.
Sincerely,
/s/ James J. Mauzey
James J. Mauzey
Chairman and
Chief Executive Officer
Accepted and Agreed:
/s/ Elizabeth A. O'Dell
Elizabeth A. O'Dell
[ALTEON PAGE 2 LETTERHEAD]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEETS, STATEMENTS OF OPERATIONS AND STATEMENTS
OF CASH FLOW FILED AS PART OF ALTEON'S QUARTERLY REPORT ON FORM
10-Q FOR THE QUERTER ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 16,843,976
<SECURITIES> 3,482,712
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,947,915
<PP&E> 3,335,816
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,287,870
<CURRENT-LIABILITIES> 8,511,636
<BONDS> 0
0
21
<COMMON> 165,160
<OTHER-SE> 16,611,053
<TOTAL-LIABILITY-AND-EQUITY> 25,287,870
<SALES> 0
<TOTAL-REVENUES> 1,206,651
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 21,797,405
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,983
<INCOME-PRETAX> (20,611,737)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20,611,737)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,611,737)
<EPS-PRIMARY> (1.31)
<EPS-DILUTED> (1.31)
</TABLE>
