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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 JUNE 30, 1999
Commission File Number 0-19529
ALTEON INC.
(Exact name of registrant as specified in its charter)
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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)
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(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 August 3, 1999, 19,009,860 shares of Registrant's Common Stock were
outstanding.
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ALTEON INC.
INDEX
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PART I. FINANCIAL INFORMATION Page
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Item 1. - Financial Statements:
Balance sheets as of December 31, 1998
and June 30, 1999 ................................................ 3
Statements of operations for the three months and six months ended
June 30, 1998 and 1999 ........................................... 4
Statements of cash flows for the six months ended
June 30, 1998 and 1999 ........................................... 5
Notes to financial statements .................................... 6
Item 2. - Management's Discussion and
Analysis of Financial Condition and
Results of Operations .................................................. 7
Item 3. - Quantitative and Qualitative Disclosures About Market Risk ... 19
PART II. OTHER INFORMATION
- ---------------------------
Item 4. - Submission of Matters to a Vote of Security-Holders ........... 19
Item 5. - Other Information ............................................. 20
Item 6. - Exhibits and Reports on Form 8-K .............................. 21
SIGNATURES ...................................................................... 23
- ----------
INDEX TO EXHIBITS ............................................................... 24
- -----------------
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PART I
ITEM 1. FINANCIAL STATEMENTS.
ALTEON INC.
BALANCE SHEETS
(Unaudited)
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DECEMBER 31, JUNE 30,
1998 1999
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ASSETS
CURRENT ASSETS:
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Cash and cash equivalents ...................................................... $ 10,839,586 $ 11,996,236
Short-term investments ......................................................... 13,292,666 2,826,714
Other current assets ........................................................... 274,145 496,213
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Total current assets ........................................................ 24,406,397 15,319,163
Property and equipment, net .................................................... 2,985,156 2,656,890
Deposits and other assets ...................................................... 260,080 270,126
------------- -------------
Total assets ................................................................... $ 27,651,633 $ 18,246,179
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................................................... $ 1,035,417 $ 1,061,522
Accrued expenses ............................................................... 3,277,858 3,019,090
------------- -------------
Total current liabilities ................................................... 4,313,275 4,080,612
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STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,993,329 shares authorized,
and 771 and 804 of Series G, and 2,315 and 2,414 of Series
H shares issued and outstanding, as of December 31, 1998,
and June 30, 1999, respectively .............................................. 31 32
Common stock, $.01 par value; 30,000,000 shares authorized and
18,814,740 and 19,009,860 shares issued and outstanding, as of
December 31, 1998, and June 30, 1999, respectively ........................... 188,147 190,099
Additional paid-in capital ..................................................... 131,005,033 132,507,884
Accumulated deficit ............................................................ (107,856,621) (118,528,888)
Unrealized other comprehensive income/(loss) ................................... 1,768 (3,560)
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Total stockholders' equity .................................................. 23,338,358 14,165,567
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Total liabilities and stockholders' equity ..................................... $ 27,651,633 $ 18,246,179
============= =============
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See accompanying notes to financial statements
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ALTEON INC.
STATEMENTS OF OPERATIONS
(Unaudited)
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<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ------------------------
1998 1999 1998 1999
---- ---- ---- ----
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Revenues:
Investment income ................................ $ 287,567 $ 226,901 $ 673,020 $ 505,211
Expenses:
Research and development ......................... 5,524,504 3,167,641 11,281,432 7,697,334
Elimination of previously accrued loss contingency (1,770,975) -- (1,770,975) --
General and administrative ....................... 989,951 1,072,259 2,141,804 2,165,694
Interest ......................................... 1,038 -- 3,610 --
------------ ------------ ------------ ------------
Total expenses ................................ 4,744,518 4,239,901 11,655,871 9,863,028
------------ ------------ ------------ ------------
Net loss ...................................... $ (4,456,951) $ (4,013,000) $(10,982,851) $ (9,357,817)
------------ ------------ ------------ ------------
Preferred stock dividends ........................ 202,349 667,671 401,083 1,314,450
------------ ------------ ------------ ------------
Net loss applicable to common stockholders .... $ (4,659,300) $ (4,680,671) $(11,383,934) $(10,672,267)
============ ============ ============ ============
Basic loss per share to common stockholders ........ $ (0.26) $ (0.25) $ (0.63) $ (0.56)
============ ============ ============ ============
Diluted loss per share to common stockholders ...... $ (0.26) $ (0.25) $ (0.63) $ (0.56)
============ ============ ============ ============
Weighted average common shares used in computing
basic and diluted loss per share ................. 17,975,137 18,971,236 17,965,105 18,920,374
============ ============ ============ ============
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See accompanying notes to financial statements
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ALTEON INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
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<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
-----------------------------------
1998 1999
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Cash Flows from Operating Activities:
Net loss ........................................................................... $(10,982,851) $ (9,357,817)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ................................................ 325,911 346,055
Amortization of deferred compensation ........................................ 323,189 131,818
Changes in operating assets and liabilities:
Other current assets ...................................................... (391,063) (222,068)
Other assets .............................................................. (12,533) (10,046)
Accounts payable and accrued expenses ..................................... (2,285,382) (232,670)
------------ ------------
Net cash used in operating activities ..................................... (13,022,729) (9,344,728)
------------ ------------
Cash Flows from Investing Activities:
Capital expenditures ............................................................... (363,157) (17,782)
Purchases of marketable securities ................................................. (58,806,907) (26,173,328)
Sales and maturities of marketable securities ...................................... 54,296,880 36,633,952
Restricted cash .................................................................... 620,400 --
------------ ------------
Net cash used in investing activities ..................................... (4,252,784) 10,442,842
------------ ------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock ............................................. 187,899 58,536
Principal payments under capital lease obligations ................................. (161,581) --
------------ ------------
Net cash provided by financing activities ................................. 26,318 58,536
------------ ------------
Net decrease in cash and cash equivalents ............................................ (17,249,195) 1,156,650
Cash and cash equivalents, beginning of period ....................................... 20,423,675 10,839,586
------------ ------------
Cash and cash equivalents, end of period ............................................. $ 3,174,480 $ 11,996,236
============ ============
Supplemental disclosures of cash flow information:
Cash paid for interest .................................................... $ 3,610 $ --
============ ============
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See accompanying notes to financial statements
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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 six months ended June 30, 1999,
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. 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, 1998.
2. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - Cash and cash equivalents
include highly liquid investments which have a maturity of less than three
months at the time of purchase. Short-term investments are recorded at fair
market value. As of June 30, 1999, short-term investments were invested in debt
instruments of the U.S. Government, government agencies, financial institutions
and corporations with strong credit ratings.
At June 30, 1999, $2,826,714 of the Company's short term investments
are classified as available for sale. A net unrealized loss of $3,560 relating
to the available for sale securities has been recorded as a separate component
of stockholders' equity at June 30, 1999.
3. NET 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 - The following sets forth comprehensive income as
required by SFAS 130 for the periods ended June 30, 1998 and 1999 (dollars in
thousands):
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1998 1999
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Net Loss ....................................... $(10,983) $ (9,358)
Net Unrealized Loss on Marketable Securities ... (5) (4)
-------- --------
Comprehensive Loss ............................. $(10,988) $ (9,362)
======== ========
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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.-formation inhibitors.
Pursuant to this arrangement, Genentech purchased Common Stock, Series G
Preferred Stock and Series H Preferred Stock in an aggregate amount of
$37,544,000, and received a license to use and sell pimagedine in certain
geographical areas.
Pursuant to a letter agreement dated February 11, 1999 between Alteon
and Genentech the development collaboration and license agreement terminated
effective June 30, 1999. As a result,
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Genentech's license to use and sell pimagedine is no longer in effect and
Genentech has no obligation to provide funding to the Company for the period
after June 30, 1999.
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. In December 1997, Genentech purchased Common Stock and Series G Preferred
Stock for an aggregate purchase price of $15,000,000. On July 27, 1998, and
October 1, 1998, Genentech purchased $8,000,000 (800 shares) and $14,544,000
(1,454.37 shares), respectively of Series H Preferred Stock. As of June 30,
1999, approximately $3,522,000 of Preferred Stockholder Dividends and
amortization of Preferred Stock conversion discount was recorded. Series G
Preferred Stock and Series H Preferred Stock Dividends are payable quarterly in
shares at a rate of 8.5%. Each share of Series G Preferred Stock and Series H
Preferred Stock is convertible at any time 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.
7. OTHER RELATED PARTY TRANSACTIONS - In July 1993, a former 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 home
purchased by the former officer. In February 1999, the terms of the loan were
amended to require payment of the principal amount and interest in full in the
event such home is sold; otherwise, interest will stop accruing as of July 1999
and the principal and interest shall be paid in equal installments in January
2000, July 2000 and July 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 June 30, 1999, $267,311, including accrued interest, remained outstanding.
In 1997 and 1998 interest payments of $25,000 were made.
8. SUBSEQUENT EVENT - In July 1999, the Company completed a downsizing
eliminating 20% of its associates. The Company undertook the downsizing to
reduce operating expenses in order to preserve its existing capital resources
for research and development programs.
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 an accumulated deficit of $118,528,888 as of June 30, 1999,
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. 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.
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Although the Company anticipates increased expenditures in research and
development expenses as it develops products and conducts 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 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. None of the Company's collaborative partners is currently
funding any of the Company's programs.
The Company is reviewing with its corporate partners their arrangements
in light of the Company's current development plans and priorities.
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 JUNE 30, 1999 AND 1998
Total revenues for the three months ended June 30, 1999, and the three
months ended June 30, 1998, were $227,000 and $288,000, respectively. Revenues
were derived from interest earned on cash and cash equivalents and short-term
investments. The 21.2% decrease in investment income was attributed to the
decrease in cash, cash equivalents and short-term investment balances.
The Company's total expenses decreased to $4,240,000 for the three
months ended June 30, 1999, from $4,745,000 for the three months ended June 30,
1998, and consisted primarily of research and development expenses. This
decrease was primarily due to decreased research and development expenditures
related to the clinical trials offset by the elimination of a previously accrued
loss contingency recorded in the second quarter of 1998. Research and
development expenses were $3,168,000 for the three months ended June 30, 1999,
and $5,525,000 for the three months ended June 30, 1998, a 42.7% decrease. This
decrease was primarily due to decreased expenses related to the clinical trial
costs.
General and administrative expenses increased to $1,072,000 for the
three months ended June 30, 1999 from $990,000 for the three months ended June
30, 1998, a 8.3% increase. This increase was primarily due to increased
consulting expenses.
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The Company's net loss applicable to common stockholders increased to
$4,681,000 for the three months ended June 30, 1999, from $4,659,000 in the same
period in 1998, an increase of less than 1%. This was primarily a result of
increased preferred stock dividends and general and administrative expenses and
the elimination of a previously accrued loss contingency recorded in the second
quarter of 1998 and offset by decreased research and development expenditures
related to the clinical trials.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Total revenues for the six months ended June 30, 1999, and the six
months ended June 30, 1998, were $505,000 and $673,000, respectively. Revenues
were derived from interest earned on cash and cash equivalents and short-term
investments. The 25.0% decrease in investment income was attributed to the
decrease in cash and cash equivalents and short-term investment balances.
The Company's total expenses decreased to $9,863,000 for the six months
ended June 30, 1999, from $11,656,000 for the six months ended June 30, 1998,
and consisted primarily of research and development expenses. This decrease was
primarily due to decreased research and development expenditures related to the
clinical trials offset by the elimination of a previously accrued loss
contingency recorded in the second quarter of 1998. Research and development
expenses were $7,697,000 for the six months ended June 30, 1999, and $11,281,000
for the six months ended June 30, 1998, a 31.8% decrease. This decrease was
primarily due to decreased expenses related to the clinical trial costs.
General and administrative expenses increased to $2,166,000 for the six
months ended June 30, 1999, from $2,142,000 for the six months ended June 30,
1998, a 1.1% increase. This increase was primarily due to increased consulting
expenses offset by decreased personnel related expenses.
The Company's net loss applicable to common stockholders decreased to
$10,672,000 for the six months ended June 30, 1999, from $11,384,000 in the same
period in 1998, a decrease of 6.3%. This decrease was primarily due to decreased
research and development expenditures related to the clinical trials, offset by
the elimination of a previously accrued loss contingency recorded in the second
quarter of 1998 and increased preferred stock dividends.
LIQUIDITY AND CAPITAL RESOURCES
Alteon had cash, cash equivalents and short-term investments at June
30, 1999, of $14,823,000 compared to $24,132,000 at December 31, 1998. This is a
decrease in cash, cash equivalents and short-term investments for the six months
ended June 30, 1999, of $9,309,000. This consisted of $9,345,000 of cash used in
operations consisting primarily of research and development expenses, personnel
and related costs and facility expenses, $18,000 of capital expenditures and
$4,000 of additional unrealized losses. This was offset by $58,000 of financing
activities related to proceeds from stock option exercises. As of June 30, 1999,
Alteon had invested $7,874,000 in capital equipment and leasehold improvements.
The Company's research and development expenses, to date, have been
funded primarily by research and development collaborative arrangements and
sales of equity securities. 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
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collaborative partners. However, none of the Company's programs are currently
being funded by a collaborative partner.
In December 1997, Alteon and Genentech, Inc. 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. Pursuant to this arrangement, Genentech purchased
Common Stock, Series G Preferred Stock and Series H Preferred Stock in an
aggregate amount of $37,544,000, and received a license to use and sell
pimagedine in certain geographical areas.
Pursuant to a letter agreement dated February 11, 1999 between Alteon
and Genentech the development collaboration and license agreement terminated
effective June 30, 1999. As a result, Genentech's license to use and sell
pimagedine is no longer in effect and Genentech has no obligation to provide
funding to the Company for the period after June 30, 1999.
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 2000.
The amount of the Company's 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.
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. If
the Company obtains funds through arrangements with collaborative partners or
others it may be required to relinquish rights to certain of its technologies or
product candidates.
Alteon's corporate 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.
The Company's current priorities are the evaluation and possible
continued development of pimagedine and the development of ALT-711, its lead
A.G.E. crosslink breaker candidate. The Company is currently in discussion with
advisors to determine the best course of action for pimagedine, and expects to
seek one or more corporate partners to provide necessary funding. The Company is
actively seeking one or more corporate partners to help fund the development of
ALT-711. The Company believes that additional development of this compound and
other product candidates will require the Company to find sources of funding.
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The Company has received notification from the Nasdaq Stock Market,
Inc. ("Nasdaq") that the Company is not presently in compliance with the Nasdaq
maintenance standard which requires that the Company's Common Stock maintain a
closing bid price of greater than or equal to $1.00. The Company is scheduled to
meet with Nasdaq in August 1999 and at least until this meeting the Company's
Common Stock will continue to be listed. No assurance can be given that the
meeting with Nasdaq will prevent the Company's stock from being delisted.
Delisting could have a material adverse effect on the Company and its ability to
raise additional capital on favorable terms as well as on stockholder liquidity.
The Company is conducting a review of its computer systems to identify
any issues which may result from the year 2000 date recognition problem, which
is the result of computer programs being written using two digits rather than
four to define the applicable year. The Company believes that with minor
modifications to its systems, which it expects to complete before December 31,
1999, the year 2000 issue will not pose significant operation problems for its
internal computer systems as so modified. The year 2000 assessments and
modifications are generally being done in-house. Therefore, the primary costs
associated with this project are included in payroll expenditures.
The Company is assessing the possible effect on its operations of year
2000 problems faced by its third party vendors. The Company believes that the
primary area in which its operations could be materially affected by year 2000
problems of its vendors relates to its use of contract research organizations
("CROs") to provide services in connection with portions of its clinical trials.
The CROs have advised the Company that they are addressing the year 2000
compliance issue and are in the process of assessing their systems which may be
vulnerable to the year 2000 issue. The Company continues to monitor their
readiness. However, if year 2000 problems prevent the CROs from performing their
work for the Company, the Company will not be able to develop internal systems
to replace the CROs and will have to find other CROs which are able to perform.
As a result, the Company could incur substantial delays in its data analysis and
any then ongoing clinical trials. In addition, power failures caused by year
2000 problems faced by utilities could compromise animal studies in progress at
the Company's facilities. This could cause material delays in the Company's
research and development programs.
The Company's operations and financial conditions could be adversely
and materially affected by other year 2000 problems including, without
limitation, (i) unexpected failures by third party vendors, (ii) failures by
governmental agencies causing delays in approval of new products, (iii) failures
in global banking systems and capital markets, and (iv) failures to identify
year 2000 problems in critical systems within the Company.
In July 1999, the Company completed a downsizing eliminating 20% of its
associates. The Company undertook the downsizing to reduce operating expenses in
order to preserve its existing capital resources for research and development
programs.
Statements in this Form 10-Q that are not statements or descriptions of
historical facts are "forward-looking" statements under Section 21E of the
Securities Exchange Act of 1934, as amended, and the Private Securities
Litigation Reform Act of 1995 and are subject to numerous risks and
uncertainties. These forward-looking statements and other forward-looking
statements made by the Company or its representatives are based on a number of
assumptions. The words "believes," "expects," "anticipates," "intends,"
"estimates" or other expressions which are predictions of or indicate future
events and trends and which do not relate to historical matters identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements as they involve
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risks and uncertainties, and actual results could differ materially from those
currently anticipated due to a number of factors, including those set forth in
this section and elsewhere in, or incorporated by reference into, this Form
10-Q. These factors include, but are not limited to, the risks set forth below.
The forward-looking statements represent the Company's judgment and expectations
as of the date of this Report. The Company assumes no obligation to update any
such forward-looking statements.
Need for Future Funding; Uncertainty of Access to Capital
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 2000. Alteon
will require substantial new funding in order to continue the research, product
development, preclinical testing and clinical trials of its product candidates,
including pimagedine if the Company decides to continue its development and
ALT-711, the Company's lead A.G.E. crosslink breaker candidate. The Company will
also require additional funding for operating expenses, the pursuit of
regulatory approvals for its product candidates and the establishment of
marketing and sales capabilities. The Company's future capital requirements will
depend on many factors, including continued scientific progress in its research
and development programs, the size and complexity of these programs, progress
with preclinical testing and clinical trials, the time and costs involved in
obtaining regulatory approvals, the costs involved in filing, prosecuting and
enforcing patent claims, competing technological and market developments, the
establishment of additional collaborative arrangements, the cost of
manufacturing arrangements, commercialization activities, and the cost of
product in-licensing and strategic acquisitions, if any. There can be no
assurance that the Company's cash reserves and other liquid assets, including
funding that may be received from the Company's corporate partners and equity
sales and interest income earned thereon, will be adequate to satisfy its
capital and operating requirements.
Alteon intends to seek funding initially through arrangements with
corporate collaborators. It may in the future seek funding through public or
private sales of the Company's securities, including equity securities, when and
if conditions permit. In addition, the Company may pursue opportunities to
obtain debt financing, including capital leases, in the future. There can be no
assurance, however, that additional funding will be available on reasonable
terms, if at all. Any additional equity financing would be dilutive to the
Company's stockholders. If adequate funds are not available, Alteon may be
required to curtail significantly or eliminate one or more of its research and
development programs. If Alteon obtains funds through arrangements with
collaborative partners or others, it may be required to relinquish rights to
certain of its technologies or product candidates.
Uncertainties Related to the Early Stage of Development; Technological
Uncertainties
All of the Company's product candidates are in the research or
development stage, and all revenues to date have been generated from
collaborative research agreements and financing activities, or interest income
earned on these funds. No revenues have been generated from product sales. There
can be no assurance that product revenues can be realized on a timely basis, if
at all.
Alteon has not yet requested or received regulatory approval for any
product from the FDA or any other regulatory body. Before obtaining regulatory
approvals for the commercial sale of any of its products under development, the
Company must demonstrate through preclinical studies and clinical
12
<PAGE> 13
trials that the product is safe and effective 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 any clinical trials undertaken by the Company will
demonstrate sufficient safety and efficacy to obtain the requisite regulatory
approvals or will result in marketable products.
There can be no assurance that Alteon will succeed in the development
and marketing of any therapeutic or diagnostic product. To achieve profitable
operations, the Company must, alone or with others, successfully identify,
develop, introduce and market proprietary products. Such products will require
significant additional investment, development and preclinical and clinical
testing prior to potential regulatory approval and commercialization.
The development of new pharmaceutical products is highly uncertain and
subject to a number of significant risks. Potential products that appear to be
promising at early stages of development may not reach the market for a number
of reasons. Potential products may be found ineffective or cause harmful side
effects during preclinical testing or clinical trials, fail to receive necessary
regulatory approvals, be difficult to manufacture on a large scale, be
uneconomical, fail to achieve market acceptance or be precluded from
commercialization by proprietary rights of third parties. There can be no
assurance that the Company will undertake additional clinical trials or that the
Company's product development efforts will be successfully completed, that
required regulatory approvals can be obtained or that any products, if
introduced, will be successfully marketed or achieve customer acceptance.
Commercial availability of any Alteon products, including pimagedine, is not
expected for a number of years, if at all.
Uncertainty of Future Profitability
At June 30, 1999, the Company had an accumulated deficit of
$118,528,888. The Company anticipates that it will incur substantial,
potentially greater losses in the future. There can be no assurance that the
Company's products under development will be successfully developed or that its
products, if successfully developed, will generate revenues sufficient to enable
the Company to earn a profit. Alteon expects to incur substantial additional
operating expenses over the next several years as its research, development and
clinical trial activities increase. Alteon does not expect to generate revenues
from the sale of products, if any, for a number of years. The Company's ability
to achieve profitability depends in part on its ability to enter into agreements
for product development, obtain regulatory approval for its products and develop
the capacity, or enter into agreements, for the manufacture, marketing and sale
of any products. There can be no assurance that Alteon will obtain required
regulatory approvals, or successfully develop, manufacture, commercialize and
market product candidates or that the Company will ever achieve product revenues
or profitability.
Dependence on Collaborative Relationships
The Company's strategy for development and commercialization of certain
of its products is dependent upon entering into various arrangements with
research collaborators, corporate partners and others and upon the subsequent
success of these third-parties in performing their obligations.
Alteon has established collaborative arrangements with Yamanouchi,
Gamida, Roche Diagnostics, GmbH, formerly Corange International Ltd., acting
through Boehringer Mannheim Diagnostics and IDEXX Laboratories, Inc. with
respect to the development of drug therapies and
13
<PAGE> 14
diagnostics utilizing the Company's scientific platforms. The Company is
reviewing with its corporate partners their arrangements in light of the
Company's current development plans and priorities. Alteon is seeking to
establish new collaborative relationships to provide the funding necessary for
continuation of its product development but there can be no assurance that such
effort will be successful. The Company will, in some cases, be dependent upon
these outside partners to conduct preclinical testing and clinical trials and to
provide adequate funding for the Company's development programs. Under certain
of these arrangements, the Company's corporate partners may have all or a
significant portion of the development and regulatory approval responsibilities.
Failure of the corporate partners to develop marketable products or to gain the
appropriate regulatory approvals on a timely basis, if at all, would have a
material adverse effect on the Company's business, financial condition and
results of operations.
In most cases, the Company cannot control the amount and timing of
resources which its corporate partners devote to the Company's programs or
potential products. If any of the Company's corporate partners breach or
terminate their agreements with the Company or otherwise fail 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. The termination of collaborative arrangements would have a material
adverse effect on the Company's business, financial condition and results of
operations. There 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 or
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.
Alteon's corporate 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.
Uncertainties Related to Patents and Proprietary Technology
The Company's success will depend on its ability to obtain patent
protection for its products, preserve its trade secrets, prevent third-parties
from infringing upon its proprietary rights and operate without infringing upon
the proprietary rights of others, both in the United States and abroad.
The degree of patent protection afforded to pharmaceutical inventions
is uncertain and the Company's potential products are subject to this
uncertainty. Pimagedine is not a novel compound and is not covered by a
composition-of-matter patent. The patents covering pimagedine are use patents
containing claims covering therapeutic indications and the use of specific
compounds and classes of compounds to inhibit A.G.E. formation. Competitors may
develop and commercialize pimagedine or pimagedine-like products for indications
outside of the protection provided by the claims of the Company's use patents.
Physicians, pharmacies and wholesalers could then substitute for the Company's
pimagedine products. Substitution for the Company's pimagedine products would
have a material adverse effect on the Company's business, financial condition
and results of operations. Use patents may
14
<PAGE> 15
afford a lesser degree of protection in certain foreign countries due to their
patent laws. In addition, although the Company has several patent applications
pending to protect proprietary technology and potential products, there can be
no assurance that these patents will be issued, that the claims of any patents
which do issue will provide any significant protection of the Company's
technology or products, or that the Company will enjoy any patent protection
beyond the expiration dates of its currently issued patents.
There can be no assurance that competitors will not develop competitive
products outside the protection that may be afforded by the claims of the
Company's patents. The Company is aware that other parties have been issued
patents and have filed patent applications in the United States and foreign
countries with respect to other agents which impact A.G.E. or A.G.E. crosslink
formation.
The Company also relies upon unpatented trade secrets and improvements,
unpatented know-how and continuing technological innovation to maintain, develop
and expand its competitive position, which it seeks to protect, in part, by
confidentiality agreements with its corporate partners, collaborators, employees
and consultants. The Company also has invention or patent assignment agreements
with its employees and certain, but not all, corporate partners and consultants.
There can be no assurance that relevant inventions will not be developed by a
person not bound by an invention assignment agreement. There can be no assurance
that binding agreements will not be breached, that the Company would have
adequate remedies for such breach, or that the Company's trade secrets will not
otherwise become known to or be independently discovered by competitors.
Uncertainties Related to Government Regulation; No Assurance of Regulatory
Approval
Alteon's research, preclinical testing and clinical trials of its
product candidates are, and the manufacturing and marketing of its products will
be, subject to extensive and rigorous regulation by numerous governmental
authorities in the United States and in other countries where the Company
intends to test and market its product candidates.
Prior to marketing, any product developed by the Company must undergo
an extensive regulatory approval process. This regulatory process, which
includes preclinical testing and clinical trials, and may include post-marketing
surveillance, of each compound to establish its safety and efficacy, can take
many years and can require the expenditure of substantial resources. Data
obtained from preclinical and clinical activities are susceptible to varying
interpretations which could delay, limit or prevent regulatory approval. In
addition, delays or rejections may be encountered based upon changes in FDA
policy for drug approval during the period of product development and FDA
regulatory review of each submitted New Drug Application ("NDA"). Similar delays
may also be encountered in foreign countries. There can be no assurance that
regulatory approval will be obtained for any drugs developed by the Company.
Moreover, regulatory approval may entail limitations on the indicated uses of
the drug. Further, even if regulatory approval is obtained, a marketed drug and
its manufacturer are subject to continuing review and discovery of previously
unknown problems with a product or manufacturer which may have adverse effects
on the Company's business, financial condition and results of operations,
including withdrawal of the product from the market. Violations of regulatory
requirements at any stage, including preclinical testing and clinical trials,
the approval process or post-approval, may result in various adverse
consequences including the FDA's delay in approving, or its refusal to approve,
a product withdrawal of an approved product from the market and the imposition
of criminal penalties against the manufacturer and NDA holder. Except for
pimagedine, which has been allowed to proceed
15
<PAGE> 16
into human clinical trials for diabetic patients with nephropathy, end-stage
renal disease, dyslipidemia and dermatological conditions and an Investigational
New Drug ("IND") for treatment of stroke (intravenous), the Company has not
submitted any other IND application for any product candidate in the United
States, and no products have been approved for commercialization in the United
States or elsewhere. No assurance can be given that the Company will be able to
obtain FDA approval for any products. Failure to obtain requisite governmental
approvals or failure to obtain approvals of the scope requested will delay or
preclude the Company or its licensees or marketing partners from marketing the
Company's products or limit the commercial use of such products and will have a
material adverse effect on the Company's business, financial condition and
results of operations.
Intense Competition and Risk of Technological Obsolescence; Alternate Cures or
Therapies for Diabetes
The Company is engaged in pharmaceutical fields characterized by
extensive research efforts and rapid technological progress. Many established
pharmaceutical and biotechnology companies with resources greater than those of
the Company are attempting to develop products that would be competitive with
the Company's products. Other companies may succeed in developing products that
are safer, more efficacious or less costly than any that may be developed by
Alteon and may also be more successful than Alteon in production and marketing.
Rapid technological development by others may result in the Company's products
becoming obsolete before the Company recovers a significant portion of the
research, development or commercialization expenses incurred with respect to
those products.
Certain technologies under development by other pharmaceutical
companies could result in a cure for diabetes or the reduction of the incidence
of diabetes and its complications. For example, a number of companies are
investigating islet cell transplantation as a possible cure for Type I diabetes.
Results of a study conducted by the National Institutes of Health, known as the
DCCT, published in 1993, showed that tight glucose control reduced the incidence
of diabetic complications. Numerous companies are pursuing methods to control
glucose levels. In addition, several large companies have initiated or expanded
research, development and licensing efforts to build a diabetic pharmaceutical
franchise focusing on diabetic nephropathy, neuropathy, retinopathy and related
conditions. An example of this is research seeking anti-angiogenesis drugs for
the potential treatment of diabetic retinopathy. Furthermore, the Company is
aware of several pharmaceutical companies which are developing thiazolidinedione
derivatives ("glitazones") for the treatment of Type II diabetes. In January
1997, Warner-Lambert Company was given approval and clearance by the FDA for the
marketing of Rezulin(TM) (troglitazone), an anti-diabetic drug designed to
target insulin resistance in Type II diabetes. It is possible that one or more
of these initiatives may reduce or eliminate the market for the Company's
products.
In addition, captopril, a product marketed by Bristol-Myers Squibb
Company, has been approved for Type I diabetics with overt nephropathy. The
patent covering captopril expired in February 1996. Other pharmaceutical
companies have chosen to market and sell this drug, resulting in a substantial
decrease in price. This decline in price for captopril may significantly reduce
or eliminate the market for any product developed by the Company for this
indication.
16
<PAGE> 17
Uncertainties Related to Pharmaceutical Pricing and Reimbursement
The Company's business, financial condition and results of operations
may be materially adversely affected by the continuing efforts of government and
third-party payors to contain or reduce the costs of health care through various
means. For example, in certain foreign markets, pricing and/or profitability of
prescription pharmaceuticals are subject to government control. In the United
States, the Company expects that there will continue to be federal and state
initiatives to control and/or reduce pharmaceutical expenditures. In addition,
increasing emphasis on managed care in the United States will continue to put
pressure on pharmaceutical pricing. Cost control initiatives could decrease the
price that the Company receives for any products it may develop and sell in the
future and have a material adverse effect on the Company's business, financial
condition and results of operations. Further, to the extent that cost control
initiatives have a material adverse effect on the Company's corporate partners,
the Company's ability to commercialize its products may be adversely affected.
The Company's ability to commercialize pharmaceutical products may
depend in part on the extent to which reimbursement for the products will be
available from government health administration authorities, private health
insurers and other third-party payors. Significant uncertainty exists as to the
reimbursement status of newly approved health care products, and third-party
payors, including Medicare, are increasingly challenging the prices charged for
medical products and services. There can be no assurance that any third-party
insurance coverage will be available to patients for any products developed by
the Company. Government and other third-party payors are increasingly attempting
to contain health care costs by limiting both coverage and the level of
reimbursement for new therapeutic products and by refusing in some cases to
provide coverage for uses of approved products for disease indications for which
the FDA has not granted labeling approval. If adequate coverage and
reimbursement levels are not provided by government and other third-party payors
for the Company's products, the market acceptance of these products would be
adversely affected.
Uncertainties Related to Marketing and Sales
For certain of its products, the Company has licensed exclusive
marketing rights to its corporate partners or formed collaborative marketing
arrangements within specified territories in return for royalties to be received
on sales, a share of profits or beneficial transfer pricing. These agreements
are terminable at the discretion of the Company's partners upon as little as 90
days' prior written notice. If the licensee or marketing partner terminates an
agreement or fails to market a product successfully, the Company's business,
financial condition and results of operations may be adversely affected.
Alteon currently has no experience in marketing or selling
pharmaceutical products. In order to achieve commercial success for any approved
product, Alteon must either develop a marketing and sales force or, where
appropriate or permissible, enter into arrangements with third parties to market
and sell its products. There can be no assurance that Alteon will develop
successfully marketing and sales experience or that it will be able to enter
into marketing and sales agreements with others on acceptable terms, if at all,
or that any such arrangements, if entered into, will not be terminated. If the
Company develops its own marketing and sales capability, it will compete with
other companies that currently have experienced, well funded and larger
marketing and sales operations. To the extent that the Company enters into
co-promotion or other sales and marketing arrangements with other companies, any
revenues to be received by Alteon will be dependent on the efforts of others,
and there can be no assurance that their efforts will be successful.
17
<PAGE> 18
No Manufacturing Experience; Reliance on Third-Party Manufacturing
The Company has no experience in manufacturing products for commercial
purposes and does not have manufacturing facilities. Consequently, the Company
is dependent on contract manufacturers for the production of products for
development and commercial purposes. The manufacture of the Company's products
for clinical trials and for commercial purposes is subject to cGMP regulations
promulgated by the FDA. The Company has contracted or will be contracting with
third parties for the manufacture and distribution of pimagedine if it pursues
this product candidate. However, in the event that the Company is unable to
obtain or retain third-party manufacturing for its products, it will not be able
to commercialize such products as planned. There can be no assurance that the
Company will be able to enter into agreements for the manufacture of future
products with manufacturers whose facilities and procedures comply with cGMP and
other regulatory requirements. The Company's current dependence upon others for
the manufacture of its products may adversely affect its profit margin, if any,
on the sale of future products and the Company's ability to develop and deliver
such products on a timely and competitive basis.
Potential Product Liability; Uncertainties Related to Insurance
The use of any of the Company's potential products in clinical trials
and the sale of any approved products, including the testing and
commercialization of pimagedine, may expose the Company to liability claims
resulting from the use of products or product candidates. These claims might be
made directly by consumers, pharmaceutical companies or others. The Company
maintains product liability insurance coverage for claims arising from the use
of its products in clinical trials. However, coverage is becoming increasingly
expensive, and no assurance can be given that the Company will be able to
maintain insurance or, if maintained, that insurance can be acquired at a
reasonable cost or in sufficient amounts to protect the Company against losses
due to liability that could have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that the Company will be able to obtain commercially reasonable
product liability insurance for any product approved for marketing in the future
or that insurance coverage and the resources of the Company would be sufficient
to satisfy any liability resulting from product liability claims. A successful
product liability claim or series of claims brought against the Company could
have a material adverse effect on its business, financial condition and results
of operations.
Attraction and Retention of Key Employees and Consultants
The Company is highly dependent on the principal members of its
management and scientific staff. The loss of services of any of these personnel
could impede the achievement of the Company's development objectives.
Furthermore, recruiting and retaining qualified scientific personnel to perform
research and development work in the future will also be critical to the
Company's success. There can be no assurance that the Company will be able to
attract and retain personnel on acceptable terms given the competition between
pharmaceutical and health care companies, universities and non-profit research
institutions for experienced scientists. In addition, the Company relies on
consultants and members of its Scientific Advisory Board to assist the Company
in formulating its research and development strategy. All of Alteon's
consultants and the members of the Scientific Advisory Board are employed
outside the Company and may have commitments to or consulting or advisory
contracts with other entities that may limit their availability to the Company.
18
<PAGE> 19
Hazardous Materials
The Company's research and development activities involve the
controlled use of hazardous materials, chemicals and various radioactive
compounds. Although the Company believes that its safety procedures for handling
and disposing of hazardous materials comply with the standards prescribed by
state and federal regulations, the risk of accidental contamination or injury
from these materials cannot be completely eliminated. In the event of an
accident, the Company could be held liable for any damages or fines that result.
Such liability could have a material adverse effect on the Company's business,
financial condition and results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's investment in marketable securities. The
Company does not use derivative financial instruments in its investments. The
Company's investments consist primarily of debt instruments of the U.S.
government, government agencies, financial institutions and corporations with
strong credit ratings. The Company prepared a detailed market risk disclosure of
these investments in the Company's 1998 annual report on Form 10-K. There have
been no material changes in the Company's market risk position since December
31, 1998.
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
The Annual Meeting of Stockholders of Alteon (the "Meeting") was held
on June 2, 1999. The following matters were voted upon at the Meeting: (i) the
election of one director, (ii) a proposal to ratify the amendment of the Alteon
Inc. Amended 1995 Stock Option Plan to increase the number of shares of Common
Stock reserved for issuance upon the exercise of options granted under the plan
from 2,000,000 shares to 4,000,000 shares, (iii) the ratification of the
appointment of Arthur Andersen, LLP as independent public accountants for the
fiscal year ending December 31, 1999.
(i) The following table sets forth the name of the nominee who was
elected to serve as director and the number of votes cast for or withheld from
the election of such nominee:
<TABLE>
<CAPTION>
Number of Number of
Name Votes For Votes Withheld
---- --------- --------------
<S> <C> <C>
Kenneth I. Moch 14,781,240 2,064,669
</TABLE>
(ii) The votes cast for, against, abstaining or non-votes regarding the
proposal to ratify the amendment to the Alteon Inc. Amended 1995 Stock Option
Plan to increase the number of shares of Common Stock reserved for issuance upon
the exercise of options granted under the plan from 2,000,000 shares to
4,000,000 shares were as follows:
19
<PAGE> 20
<TABLE>
<CAPTION>
Broker
Votes For Votes Against Abstentions Non-Votes
--------- ------------- ----------- ---------
<S> <C> <C> <C>
4,168,438 3,121,997 42,883 9,512,591
</TABLE>
(iii) The votes cast for, against or abstaining from the ratification
of the appointment of Arthur Andersen LLP as independent public accountants for
the fiscal year ending December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions
--------- ------------- -----------
<S> <C> <C>
15,473,821 1,319,837 52,251
</TABLE>
ITEM 5. OTHER INFORMATION.
On August 2, 1999, Kenneth Cartwright, MB ChB, MFCM, MRCPsych., the
Company's Senior Vice President, Development and Regulatory Affairs, announced
his retirement effective August 31, 1999.
20
<PAGE> 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
------- ----------------------
<S> <C>
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 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.)
3.4 Certificate of Amendment of Certificate of Designations of
Series G Preferred Stock of Alteon Inc. (Incorporated by
reference to Exhibit 3.4 to the Company's Report on Form 10-Q
filed on August 14, 1998.)
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 Amended Certificate of Designations of Series H Preferred
Stock of Alteon Inc. (Incorporated by reference to Exhibit 3.6
to the Company's Report on Form 10-Q filed on August 14,
1998.)
3.7 By-laws, as amended. (Incorporated by reference to Exhibit 3.7
to the Company's Report on Form 10-Q filed on May 12, 1999.)
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 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 Amendment to Stockholders' Rights Agreement dated as of
December 1, 1997 between Alteon Inc. and Registrar and
Transfer Company, as Rights Agent. (Incorporated by
</TABLE>
21
<PAGE> 22
<TABLE>
<CAPTION>
<S> <C>
reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K filed on December 10, 1997.)
27 Financial Data Schedule.
</TABLE>
b) The following reports on Form 8-K were filed during the quarter ended June
30, 1999:
On April 16, 1999, the Company filed a Current Report on Form
8-K, dated April 8, 1999, which reported updates to the Company's pimagedine
development program.
On April 23, 1999, the Company filed a Current Report on Form
8-K, dated April 19, 1999, which reported the departure of Anthony Cerami,
Ph.D., from the Company's Board of Directors.
On June 1, 1999, the Company filed a Current Report on Form
8-K, dated May 24, 1999, which reported the Company's intent to seek a new
partner for continued development of pimagedine.
One June 4, 1999, the Company filed a Current Report on Form
8-K, dated June 2, 1999, which reported Phase I human trial results of potential
treatment for aging-related diseases.
22
<PAGE> 23
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: August 3, 1999
ALTEON INC.
By:/s/ Kenneth I. Moch
------------------------------------------
Kenneth I. Moch
President and Chief Executive Officer
(principal executive officer)
By:/s/ Elizabeth A. O'Dell
------------------------------------------
Elizabeth A. O'Dell
Vice President Finance and Administration,
Secretary and Treasurer
(principal finance and accounting officer)
23
<PAGE> 24
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
------- ----------------------
<S> <C>
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 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.)
3.4 Certificate of Amendment of Certificate of Designations of
Series G Preferred Stock of Alteon Inc. (Incorporated by
reference to Exhibit 3.4 to the Company's Report on Form 10-Q
filed on August 14, 1998.)
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 Amended Certificate of Designations of Series H Preferred
Stock of Alteon Inc. (Incorporated by reference to Exhibit 3.6
to the Company's Report on Form 10-Q filed on August 14,
1998.)
3.7 By-laws, as amended. (Incorporated by reference to Exhibit 3.7
to the Company's Report on Form 10-Q filed on May 12, 1999.)
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 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 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.)
27 Financial Data Schedule.
</TABLE>
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS, STATEMENT OF OPERATIONS, AND STATEMENT OF CASH FLOW, FILED AS PART OF
ALTEON'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<CIK> 0000878903
<NAME> ALTEON INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 11,996,236
<SECURITIES> 2,826,714
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,319,163
<PP&E> 2,656,890
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,246,179
<CURRENT-LIABILITIES> 4,080,612
<BONDS> 0
0
32
<COMMON> 190,099
<OTHER-SE> 13,975,436
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<EPS-BASIC> (0.56)
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</TABLE>
