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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 MARCH 31, 1998
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 April 30, 1998, 17,974,125 shares of Registrant's Common Stock were
outstanding.
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ALTEON INC.
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. - Financial Statements:
Balance sheets as of December 31, 1997
and March 31, 1998...........................................3
Statements of operations for the three months ended
March 31, 1997 and 1998......................................4
Statements of cash flows for the three months ended
March 31, 1997 and 1998......................................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....................................................................14
2
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ALTEON INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................... $ 20,423,675 $ 3,819,375
Short-term investments ...................................... 8,550,063 18,889,272
Other current assets ........................................ 468,680 614,765
------------- -------------
Total current assets ..................................... 29,442,418 23,323,412
Property and equipment, net ................................... 3,183,362 3,040,463
Deposits and other assets ..................................... 261,358 268,226
Restricted cash ............................................... 620,400 620,400
------------- -------------
Total assets ................................................ $ 33,507,538 $ 27,252,501
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................................ $ 921,637 $ 870,651
Accrued expenses ............................................ 5,969,384 5,996,346
Obligations under capital leases ............................ 161,581 81,558
------------- -------------
Total current liabilities ................................ 7,052,602 6,948,555
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STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,993,329 shares authorized,
and 942 and 961 shares issued and outstanding, as of
December 31, 1997 and March 31, 1998, respectively ........ 9 10
Common stock, $.01 par value; 30,000,000 shares
authorized and 17,922,319 and 17,974,125 shares issued
and outstanding, as of December 31, 1997 and March 31,
1998, respectively ........................................ 179,223 179,741
Additional paid-in capital .................................. 105,585,019 106,167,039
Accumulated deficit ......................................... (79,303,374) (86,028,009)
Unrealized losses on short-term investments ................. (5,941) (14,835)
------------- -------------
Total stockholders' equity ............................... 26,454,936 20,303,946
------------- -------------
Total liabilities and stockholders' equity .................. $ 33,507,538 $ 27,252,501
============= =============
</TABLE>
See accompanying notes to financial statements
3
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ALTEON INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------------
1997 1998
------------ ------------
<S> <C> <C>
Revenues:
Investment income ............................ $ 443,969 $ 385,452
Expenses:
Research and development ..................... 5,298,807 5,803,596
General and administrative ................... 914,315 1,105,183
Interest ..................................... 8,425 2,572
------------ ------------
Total expenses ............................ 6,221,547 6,911,351
------------ ------------
Net loss ....................................... $ (5,777,578) $ (6,525,899)
------------ ------------
Preferred stock dividends ...................... -- 198,735
------------ ------------
Net loss applicable to common shareholders ..... $ (5,777,578) $ (6,724,634)
============ ============
Basic loss per share to common shareholders .... $ (0.37) $ (0.37)
============ ============
Diluted loss per share to common shareholders .. $ (0.37) $ (0.37)
============ ============
Weighted average common shares used in computing
basic and diluted loss per share ............. 15,708,936 17,954,962
============ ============
</TABLE>
See accompanying notes to financial statements
4
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ALTEON INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------------
1997 1998
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss .................................................................. $ (5,777,578) $ (6,525,899)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ....................................... 195,362 162,529
Amortization of deferred compensation ............................... 4,794 200,154
Changes in operating assets and liabilities:
Other current assets ............................................. 242,450 (146,085)
Other assets ..................................................... (1,772) (6,868)
Accounts payable and accrued expenses ............................ (1,552,421) (24,024)
------------ ------------
Net cash used in operating activities ............................ (6,889,165) (6,340,193)
------------ ------------
Cash Flows from Investing Activities:
Capital expenditures ...................................................... -- (19,630)
Purchases of marketable securities ........................................ (37,412,000) (48,664,422)
Sales and maturities of marketable securities ............................. 38,465,983 38,316,319
------------ ------------
Net cash provided by (used in) investing activities .............. 1,053,983 (10,367,733)
------------ ------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock .................................... 6,925 183,649
Principal payments under capital lease obligations ........................ (74,169) (80,023)
------------ ------------
Net cash (used in) provided by financing activities .............. (67,244) 103,626
------------ ------------
Net (decrease)/increase in cash and cash equivalents ........................ (5,902,426) (16,604,300)
Cash and cash equivalents, beginning of period .............................. 31,497,633 20,423,675
------------ ------------
Cash and cash equivalents, end of period .................................... $ 25,595,207 $ 3,819,375
============ ============
Supplemental disclosures of cash flow information:
Cash paid for interest ........................................... $ 8,425 $ 2,572
============ ============
</TABLE>
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 three months ended March 31, 1998,
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. 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, 1997.
2. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - Cash and cash equivalents
include highly liquid investments which have a maturity of less than ninety days
at the time of purchase. Short-term investments are recorded at fair market
value. As of March 31, 1998, 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 March 31, 1998, $18,889,272 of the Company's short term investments
are classified as available for sale. A net unrealized loss of $14,835 relating
to the available for sale securities has been recorded as a separate component
of stockholders' equity at March 31, 1998.
3. NET LOSS PER SHARE - Effective for the year ended December 31, 1997, the
Company adopted statement of Financial Accounting Standards Board No. 128,
Earnings Per Share ("SFAS 128"). SFAS 128 requires the presentation of basic
earnings (loss) per share and diluted earnings (loss) per share. Basic loss per
share is based on the average numbers of shares outstanding during the year.
Diluted loss per share is the same as basic loss per share, as the inclusion of
common stock equivalents would be antidilutive.
4. COMPREHENSIVE INCOME - Effective January 1, 1998, the Company adopted the
provisions of Financial Accounting Standards Board No. 130, Reporting
Comprehensive Income ("SFAS 130"), which establishes standards for reporting and
displaying comprehensive income and its components. The adoption of this
statement has no effect on the Company's financial position or operating
results.
The following sets forth comprehensive income as required by SFAS 130
for the periods ended March 31, :
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Net Loss ....................................... $(5,778) $(6,526)
Net unrealized Loss on Marketable Securities ... (6) (15)
------- -------
Comprehensive Loss ............................. $(5,784) $(6,541)
======= =======
</TABLE>
5. EVENTS CONCERNING COLLABORATIVE PARTNERS - In December 1997, Alteon and
Genentech, Inc. ("Genentech") entered into a stock purchase agreement and a
development collaboration and license agreement providing for the development
and marketing of pimagedine and second-generation A.G.E.-
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5. EVENTS CONCERNING COLLABORATIVE PARTNERS (CONTINUED)
formation inhibitors. These agreements were amended in April 1998 to impose
certain restrictions on Genentech's purchase and conversion of the preferred
stock to be purchased by it to comply with requirements of the National
Association of Securities Dealers, Inc. In December 1997, Genentech purchased
Common Stock and Series G Preferred Stock for an aggregate purchase price of
$15,000,000. The use of these funds is unrestricted to the Company. Genentech
has agreed to fund the continued development of pimagedine and support possible
additional clinical trials for expanded indications of the drug through the
periodic purchase of up to $48,000,000 in Series H Preferred Stock. The first
such purchase, in the amount of $8,000,000, will occur after Alteon's 1998
Annual Meeting of Stockholders, which is scheduled for late July. In addition,
Genentech will fund the agreed-upon development costs for second-generation
A.G.E. formation inhibitors.
Pursuant to the development collaboration and license agreement, Alteon
has granted Genentech an exclusive license to use and sell pimagedine in all
areas of the world except for Japan, China, South Korea and Taiwan, territories
covered under Alteon's agreement with Yamanouchi Pharmaceutical Co., Ltd.
("Yamanouchi") , and Israel, Jordan, Bulgaria, Cyprus and South Africa,
territories covered under Alteon's agreement with Gamida (the "Genentech
Territory"). Alteon has also granted Genentech an exclusive license to use and
sell second-generation A.G.E.-formation inhibitor products (and any future
Alteon compounds in this class), to be selected by Genentech after review of
Alteon's A.G.E.-formation inhibitor portfolio, in the Genentech Territory. In
consideration of the license, Alteon will receive $50,000,000 in payments from
Genentech upon meeting milestones relating to U.S. and European regulatory
filings and approvals for pimagedine product and an additional $50,000,000 upon
meeting milestones relating to U.S. and European regulatory filings and
approvals for a second-generation A.G.E.-formation inhibitor product. Following
commercialization, Alteon will receive royalties on net sales of pimagedine and
second-generation A.G.E.-formation products within the Genentech Territory.
The development collaboration and license agreement provides that all
development activities in the United States for pimagedine and second-generation
A.G.E.-formation inhibitors will be jointly managed by a steering committee with
representatives from Alteon and Genentech. Genentech will be responsible for
development outside the United States and for marketing and sales of the
licensed products in the Genentech Territory. Alteon has granted Genentech the
right to manufacture pimagedine for its pre-clinical, clinical and commercial
supplies of licensed products and has agreed to supply all pimagedine for
pre-clinical and clinical trials in the United States. The parties have agreed
to enter into a manufacturing and supply agreement covering supplies on terms to
be agreed upon.
The development collaboration and license agreement may be terminated
upon six months' notice by Genentech in its entirety or with respect to any
licensed product. If the Company's stockholders do not approve removal of the
restrictions imposed by the amendment to the Company's agreements with
Genentech, the Company would be required to assume the cost of the continuation
or wind-down of any then on-going clinical trials from the date of the
termination notice which would greatly increase the Company's working capital
requirements. If terminated after the Series H funds are received, certain of
the funds may be refundable to Genentech, as defined in the agreement. If
terminated prior to the receipt of Series H funds, Genentech would be required
to pay certain amounts, as defined in the agreement. Genentech's license expires
as to each product in each country in the Genentech Territory upon the later of
the expiration of the last patent applicable to the product in such country or
twelve and one-half years after the first commercial sale of the product in such
country.
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5. EVENTS CONCERNING COLLABORATIVE PARTNERS (CONTINUED)
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. 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. 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 Company.
HMRI has invoiced the Company $2,612,000 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 flow.
6. PREFERRED STOCK TRANSACTIONS - In December 1997, the Company and Genentech
entered into a stock purchase agreement pursuant to which Genentech agreed to
buy shares of Common Stock, Series G Preferred Stock and Series H Preferred
Stock (the "Securities"). On December 19, 1997, the Company sold to Genentech
837,314 shares of Common Stock and 939 shares of Series G Preferred Stock for
an aggregate purchase price of $15,000,000. The Securities were offered and
sold to a single accredited investor in compliance with the requirements of
Rule 506 under the Securities Act of 1933, and accordingly the transaction was
exempt from registration under such Act. Each share of Series G Preferred Stock
is convertible at any time upon seventy days' written notice into a number
of shares of Common Stock determined by dividing $10,000 by the average of the
closing sales price of the Common Stock, as reported on the Nasdaq National
Market, for the twenty business days immediately preceding the date of
conversion (the "Conversion Price"), provided that the Conversion Price may not
be less than $5.6875 unless the Company stockholders approve removal of the
limitation. The shares of Series H Preferred Stock will be convertible on the
same basis at any time after the earlier of (i) the granting of approval by the
U.S. Food and Drug Administration for the marketing and sale of any pimagedine
product specified in the development collaboration and license agreement
between the Company and Genentech, (ii) termination by Genentech of the
development collaboration and license agreement or (iii) December 1, 2002.
In October 1997, the Company agreed to issue warrants (the "Warrants")
to the persons and entities who purchased its 6% Cumulative Convertible
Preferred Stock (the "6% Preferred Stock") in April 1997, and their assignees in
consideration of their waiver of certain rights of first refusal to purchase the
Company's Common Stock. The Warrants were issued and delivered in January 1998.
The Warrants were issued exclusively to accredited investors in compliance with
the requirements of Rule 506 under the Securities Act of 1933, and accordingly
the transaction was exempt from registration under such Act. The holders of the
Warrants are entitled to purchase, in the aggregate, 10,000 shares of Common
Stock for $4.025 per share. The Warrants may be exercised at any time and from
time to time, in whole or in part, prior to October 9, 2004. The number of
shares and kind of securities issuable on exercise of the Warrants is subject to
adjustment in the event of certain subdivisions or combinations of the
securities issuable upon exercise of the Warrants, declarations of dividends or
distributions on the Common Stock, mergers or consolidations of the Company and
reorganizations or reclassifications of the securities issuable upon exercise of
the Warrants.
7. OTHER RELATED PARTY TRANSACTIONS - In July 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 the purpose of purchasing a home.
The loan is secured by a second mortgage on the premises purchased by the
officer. In February 1998, the terms of the loan were amended so that interest
will stop accruing as of July
8
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7. OTHER RELATED PARTY TRANSACTIONS (CONTINUED)
1999 and the principal and interest shall be paid in equal installments in July,
1999, 2000 and 2001. 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
March 31, 1998, $265,411, including accrued interest, remained outstanding. A
$25,000 payment was made on December 31, 1997.
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 $86,028,009 as of March 31, 1998,
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 common and preferred equity securities,
revenue from its collaborations with Hoechst Marion Roussel, Inc. ("HMRI") and
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.
In December 1997, Alteon and Genentech entered into a stock purchase
agreement and a development collaboration and license agreement providing for
the development and marketing of pimagedine and second-generation
A.G.E.-formation inhibitors. The agreements were amended in April 1998. In
December 1997, Genentech purchased Common Stock and Series G Preferred Stock for
an aggregate purchase price of $15,000,000. The use of these funds is
unrestricted to the Company. Genentech has agreed to fund continued development
of pimagedine and support possible additional clinical trials for expanded
indications of the drug through the periodic purchase of up to $48,000,000 in
Series H Preferred Stock. The first such purchase, in the amount of $8,000,000,
will occur after Alteon's 1998 Annual Meeting of Stockholders, which is
scheduled for late July. Genentech will also fund agreed-upon development costs
for second-generation A.G.E.-formation inhibitors. Genentech may terminate the
license agreement upon six months' notice to the Company. Under certain
circumstances, the Company would be required to assume the cost of the
continuation or wind-down of any then on-going clinical trials from the date of
the termination notice, which would greatly increase the Company's working
capital requirements.
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 pre-clinical 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.
9
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OVERVIEW (CONTINUED)
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 product pricing and reimbursement levels, (vi) technological change and
competition, (vii) manufacturing uncertainties, and (viii) dependence on
collaborative partners and other 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 prove 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.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Total revenues for the three months ended March 31, 1998, and the three
months ended March 31, 1997, were $385,000 and $444,000, respectively. Revenues
were derived from interest earned on cash and cash equivalents and short-term
investments. The 13.3% decrease in investment income was attributed to the
decrease in cash, cash equivalents and short-term investment balances.
The Company's total expenses increased to $6,911,000 for the three
months ended March 31, 1998, from $6,222,000 for the three months ended March
31, 1997, and consisted primarily of research and development expenses. Research
and development expenses were $5,804,000 for the three months ended March 31,
1998, and $5,299,000 for the three months ended March 31, 1997, a 9.5% increase.
This increase was primarily due to increased expenses related to the clinical
trial costs.
General and administrative expenses increased to $1,105,000 the three
months ended March 31, 1998 from $914,000 for the three months ended March 31,
1997, a 20.9% increase. This increase is due primarily to increased
personnel-related expenses and investor relations expenses.
The Company's net loss applicable to common shareholders increased to
$6,725,000 for the three months ended March 31, 1998, from $5,778,000 in the
same period in 1997, an increase of 16.4%, as a result of increased research and
development expenses, general and administrative expenses, preferred stock
dividends and decreased investment income.
LIQUIDITY AND CAPITAL RESOURCES
Alteon had cash, cash equivalents and short-term investments at March
31, 1998, of $22,709,000 compared to $28,974,000 at December 31, 1997. This is a
decrease in cash, cash equivalents and short-term investments for the three
months ended March 31, 1998, of $6,265,000. This consisted of $6,340,000 of cash
used in operations consisting primarily of research and development expenses,
personnel and related costs and facility expenses, $20,000 of capital
expenditures and $9,000 of additional unrealized losses. This was offset by
$104,000 of financing activities primarily related to proceeds from stock option
exercises
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LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
offset by capital lease obligations. As of March 31, 1998, Alteon had invested
$7,378,000 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, pre-clinical
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.
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 at least into the
second half of 1999. 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. In connection with this issuance, the
Company issued to the purchasers, warrants to purchase 60,000 shares of its
Common Stock at an exercise price of $4.025 per share. As of December 31, 1997,
all of the Preferred Stock has been converted. In December 1997, Alteon and
Genentech entered into a stock purchase agreement and a development
collaboration and license agreement providing for the development and marketing
of pimagedine and second-generation A.G.E.-formation inhibitors. These
agreements were amended in April 1998 to impose certain restrictions on
Genentech's purchase and conversion of the preferred stock to be purchased by it
to comply with requirements of the National Association or Securities Dealers,
Inc. In December 1997, Genentech purchased Common Stock and Series G Preferred
Stock for an aggregate purchase price of $15,000,000. The use of these funds is
unrestricted to the Company. Genentech has agreed to fund the continued
development of pimagedine and support possible additional clinical trials for
expanded indications of the drug through the periodic purchase of up to
$48,000,000 in Series H Preferred Stock. The first such purchase, in the amount
of $8,000,000, will occur after Alteon's 1998 Annual Meeting of Stockholders,
which is scheduled for late July. In addition, Genentech will fund agreed-upon
development costs for second-generation A.G.E.-formation inhibitors. However,
Genentech may terminate the license agreement on six months' notice. If the
Company' stockholders do not approve removal of the restrictions imposed by the
amendment to the Company's agreements with Genentech, the Company would be
required to assume the cost of the continuation or wind-down of any then
on-going clinical trials from the date of the termination notice which would
greatly increase the Company's working capital requirements. If this occurs, the
Company's cash and cash equivalents and short term investments would then be
adequate to satisfy its working capital requirement for its current and planned
operations into early 1999.
Future capital requirements will depend on numerous factors, including
the progress of the Company's research and development programs, the conduct of
pre-clinical 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.
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
11
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LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
available, the Company may be required to curtail significantly one or more it
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 corporate partners or to
which the corporate 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.
PART II
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 Certificate of Retirement of 6% Cumulative Convertible
Preferred Stock of Alteon Inc.
3.4 Certificate of Designations of Series G Preferred Stock of
Alteon Inc. (Incorporated by reference to Exhibit 3.4 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
3.5 Certificate of Designations of Series H Preferred Stock of
Alteon Inc. (Incorporated by reference to Exhibit 3.5 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
3.6 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).
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).
12
<PAGE> 13
EXHIBITS AND REPORTS ON FORM 8-K. (CONTINUED)
4.2 Amendment to Stockholders' Rights Agreement dated as of April
24, 1997 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).
4.3 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).
4.4 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).
4.5 Amendment to Stockholders' Rights Agreement dated as of
December 1, 1997 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 December 10, 1997).
10.1 Letter Agreement dated September 15, 1997 between the Company
and Kenneth I. Moch amending Employment Agreement dated
February 27, 1995. (Incorporated by reference to Exhibit 10.35
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.2 Letter Agreement dated February 24, 1998 between the Company
and Jere E. Goyan amending Employment Agreement dated July 13,
1993, as amended. (Incorporated by reference to Exhibit 10.39
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
27 Financial Data Schedule.
b) The following report on Form 8-K was filed during the quarter ended
March 31, 1998:
On March 23, 1998 the Company filed a Current Report on Form 8-K which
reported the External Safety Monitoring Committee's and the U.S. Food and Drug
Administration's recommendations to complete the Company's ACTION I clinical
trial of pimagedine and to discontinue the Company's ACTION II trial.
13
<PAGE> 14
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:
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)
14
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE
OF
RETIREMENT OF STOCK
OF
ALTEON INC.
Pursuant to Section 243 of the Delaware General Corporation Law, Alteon
Inc., a corporation organized and existing under the laws of the State of
Delaware (the "Corporation"), DOES HEREBY CERTIFY THAT:
1. The Certificate of Designations of 6% Cumulative Convertible
Preferred Stock of the Corporation provides that shares of the Corporation's 6%
Cumulative Convertible Preferred Stock (the "6% Preferred Stock") acquired by
the Corporation by reason of redemption, purchase, conversion or otherwise shall
not be reissued.
2. All 5,000 shares of the 6% Preferred Stock issued by the Corporation
were acquired by the Corporation by December 4, 1997 by reason of conversion and
were retired on such date.
3. Effective December 4, 1997, as a result of such retirement of the 6%
Preferred Stock, the total number of shares of Preferred Stock which the
Corporation is authorized to issue is 1,993,329 shares.
IN WITNESS WHEREOF, this Certificate of Retirement of Stock is made
this 10th day of February, 1998.
ALTEON INC.
By: /s/ James J. Mauzey
--------------------------
James J. Mauzey
Chairman and
Chief Executive Officer
ATTEST:
By: /s/ Elizabeth A. O'Dell
------------------------------
Elizabeth A. O'Dell
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIS
SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS, STATEMENT OF OPERATIONS AND STATEMENTS OF CASH FLOW FILED AS PART OF
ALTEON'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
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<NAME> ALTEON INC.
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