<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
FOR THE QUARTER ENDED MARCH 31, 1996 COMMISSION FILE NO. 0-20948
AUTOIMMUNE INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 13-348-9062
(State of Incorporation) (I.R.S. Employer Identification No.)
128 SPRING STREET, LEXINGTON, MA 02173
(Address of Principal Executive Offices)
(617) 860-0710
(Registrant's Telephone No., 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 X NO___________________
-------------
Number of shares outstanding of the registrant's Common Stock as of April 30,
1996:
Common Stock, par value $.01 16,284,442 shares outstanding
<PAGE>
AUTOIMMUNE INC.
QUARTER ENDED MARCH 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page Number
<S> <C>
Item 1 - Financial Statements
Balance Sheet
December 31, 1995 and March 31, 1996................................... 2
Statement of Operations
for the three months ended March 31, 1995 and 1996 and for the period
from inception (September 9, 1988) through March 31, 1996.............. 3
Statement of Cash Flows
for the three months ended March 31, 1995 and 1996
and for the period from inception (September 9, 1988)
through March 31, 1996................................................. 4
Notes to the Unaudited Financial Statements.................................. 5
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations................................ 7
PART II - OTHER INFORMATION
Item 6(b) - Reports on Form 8-K....................................................... 9
Signatures............................................................................ 10
</TABLE>
1
<PAGE>
AUTOIMMUNE INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
-------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 29,087,000 $ 10,873,000
Marketable securities 41,366,000 55,454,000
Interest receivable 160,000 301,000
Prepaid expenses and other current assets 172,000 303,000
--------------- ---------------
Total current 70,785,000 66,931,000
Fixed assets, net 2,166,000 2,090,000
Other assets 30,000 30,000
--------------- ---------------
$ 72,981,000 $ 69,051,000
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 944,000 $ 787,000
Accrued expenses 588,000 622,000
Current portion of obligations under
capital leases 462,000 627,000
--------------- ---------------
Total current liabilities 1,994,000 2,036,000
--------------- ---------------
Obligations under capital leases 569,000 757,000
--------------- ---------------
Commitments and contingencies
--------------- ---------------
Stockholders' equity:
Common stock, $.01 par value;
25,000,000 shares authorized;
16,282,067 and 16,283,942 shares
issued and outstanding at
December 31, 1995 and March 31,
1996, respectively 163,000 163,000
Additional paid-in capital 116,797,000 116,809,000
Deficit accumulated during the
development stage (46,611,000) (50,725,000)
Valuation allowance for marketable
securities 69,000 11,000
--------------- ---------------
70,418,000 66,258,000
--------------- ---------------
$ 72,981,000 $ 69,051,000
=============== ===============
</TABLE>
2
<PAGE>
AUTOIMMUNE INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
inception
Three months ended (September 9, 1988)
March 31, March 31, through
1995 1996 March 31, 1996
---------------- --------------- ---------------------
<S> <C> <C> <C>
Revenue:
Option fees $ - $ - $ 2,200,000
Research and development
revenue under collaborative
agreements - - 955,000
---------------- --------------- ---------------------
Total revenue - - 3,155,000
---------------- --------------- ---------------------
Cost and expenses:
Research and development:
Related party 547,000 534,000 13,344,000
Other 2,972,000 3,766,000 37,921,000
General and administrative 504,000 599,000 7,498,000
---------------- --------------- ---------------------
Total costs and expenses 4,023,000 4,899,000 58,763,000
---------------- --------------- ---------------------
Interest income 253,000 796,000 5,050,000
Interest expense (15,000) (11,000) (163,000)
---------------- --------------- ---------------------
238,000 785,000 4,887,000
---------------- --------------- ---------------------
Net loss $ (3,785,000) $ (4,114,000) $ (50,721,000)
================ =============== =====================
Net loss per share $ (0.32) $ (0.25)
================ ===============
Weighted average shares
outstanding 11,682,190 16,282,623
================ ===============
</TABLE>
3
<PAGE>
AUTOIMMUNE INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
inception
(September 9, 1988)
Three months ended through
March 31, 1995 March 31, 1996 March 31, 1996
-------------- ----------------- --------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,785,000) $ (4,114,000) $ (50,721,000)
Adjustment to reconcile net loss to net cash
used by operating activities:
Interest expense related to demand notes
converted into Series A mandatorily
redeemable covertible preferred stock - - 48,000
Patent costs paid with junior convertible
preferred and common stock - - 3,000
Depreciation and amortization 163,000 207,000 1,872,000
Decrease in capitalized patent costs - - 563,000
(Increase) decrease in interest receivable 92,000 (141,000) (301,000)
Increase in prepaid expenses (24,000) (131,000) (303,000)
Increase (decrease) in accounts payable (88,000) (157,000) 787,000
Increase in accrued expenses 90,000 34,000 623,000
-------------- ------------------- --------------------
Net cash used by operating activities (3,552,000) (4,302,000) (47,429,000)
-------------- ------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available-for-sale marketable
securities - (14,146,000) (172,518,000)
Proceeds from sale/maturity of available-
for-sale marketable securities - - 106,063,000
Proceeds from maturity of held-to-maturity
marketable securities 5,957,000 - 11,011,000
Purchase of fixed assets (117,000) (131,000) (3,837,000)
Increase in patent costs - - (563,000)
Increase in other assets - - (155,000)
-------------- ------------------- --------------------
Net cash provided (used) by investing
activities 5,840,000 (14,277,000) (59,999,000)
-------------- ------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale-leaseback of fixed assets - 480,000 2,313,000
Payments on obligations under capital leases (110,000) (127,000) (929,000)
Net proceeds from issuance of mandatorily
redeemable convertible preferred stock - - 10,011,000
Proceeds from bridge notes - - 300,000
Proceeds from issuance of common stock 9,136,000 12,000 104,406,000
Proceeds from issuance of convertible notes
payable - - 2,200,000
-------------- ------------------- --------------------
Net cash provided by financing
activities 9,026,000 365,000 118,301,000
-------------- ------------------- --------------------
Net increase (decrease) in cash and cash
equivalents 11,314,000 (18,214,000) 10,873,000
Cash and cash equivalents, beginning of period 3,368,000 29,087,000 -
-------------- ------------------- --------------------
Cash and cash equivalents, end of period $ 14,682,000 $ 10,873,000 $ 10,873,000
============== =================== ====================
</TABLE>
4
<PAGE>
AUTOIMMUNE INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL DATA
The interim financial data for the three month periods ended March 31, 1995
and 1996 and for the period from inception (September 9, 1988) through
March 31, 1996 are unaudited; however, in the opinion of the Company, these
interim data include all adjustments, consisting only of normal recurring
adjustments necessary for a fair presentation of the results for these
interim periods. These financial statements should be read in conjunction
with the financial statements and the notes thereto for the period ended
December 31, 1995 included in the Company's Form 10-K. Results for interim
periods are not necessarily indicative of results for the entire year.
2. CASH EQUIVALENTS AND MARKETABLE SECURITIES
The following is a summary of cash equivalents held by the Company. Cash
equivalents are carried at fair market value, which approximated amortized
cost at December 31, 1995 and March 31, 1996:
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
--------------- ------------
<S> <C> <C>
Money Market $12,736,000 $ 1,838,000
U.S. Government debt securities 16,292,000 8,597,000
--------------- ------------
$29,028,000 $10,435,000
=============== ============
</TABLE>
The following is a summary of available-for-sale marketable securities held
by the Company at December 31, 1995 and March 31, 1996 which are carried
out at fair market value:
<TABLE>
<CAPTION>
Maturity Fair Unrealized Unrealized
term value gains losses Amortized cost
-------------------- ------------- ------------ ------------- ----------------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1995
U.S. Government
debt Securities within 1 year $32,252,000 $23,000 $ - $32,229,000
U.S. Government
debt Securities between 1-5 years 9,114,000 46,000 - 9,068,000
------------- ------------ ------------- ----------------
$41,366,000 $69,000 $ - $41,297,000
============= ============ ============= ================
Maturity Fair Unrealized Unrealized
term value gains losses Amortized cost
-------------------- ------------- ------------ ------------- ----------------
<S> <C> <C> <C> <C> <C>
MARCH 31, 1996
U.S. Government
debt Securities within 1 year $45,392,000 $ 4,000 $(12,000) $45,400,000
U.S. Government
debt Securities between 1-5 years 10,062,000 19,000 - 10,043,000
------------- ------------ ------------- ----------------
$55,454,000 $23,000 $(12,000) $55,443,000
============= ============ ============= ================
</TABLE>
Marketable securities which were purchased and sold in periods prior to
adoption of FAS 115 on January 1, 1994 other than held-to-maturity
marketable securities, are included in the category available-for-sale
marketable securities in the "period from inception" column of the
statement of cash flows.
5
<PAGE>
3. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
Estimated
useful life December 31, March 31,
(years) 1995 1996
------------ ------------- -------------
<S> <C> <C> <C>
Laboratory equipment 4 - 5 $2,638,000 $2,673,000
Office and computer equipment 4 - 5 417,000 434,000
Leasehold improvements 5 - 7 592,000 631,000
------------- -------------
3,647,000 3,738,000
Less-accumulated depreciation and
amortization 1,481,000 1,648,000
------------- -------------
$2,166,000 $2,090,000
============= =============
</TABLE>
In March 1996, the Company sold assets which had a net book value of $432,000
for $480,000 which were immediately leased back to the Company under a capital
lease agreement. The gain resulting from these sales has been deferred and is
being amortized to operations in proportion to the amortization of the related
leased assets.
4. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
-------------- -------------
<S> <C> <C>
Accrued employee costs $ 372,000 $ 421,000
Accrued professional fees 216,000 201,000
-------------- -------------
$ 588,000 $ 622,000
============== =============
</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
Since its inception through March 31, 1996, the Company has incurred ongoing
losses from operations and has cumulative losses as of March 31, 1996 totaling
$50,721,000. To date, the Company has not recorded any revenues from the sale
of products. Revenues recorded through March 31, 1996 were earned in connection
with contract research and the granting of certain short-term rights.
The Company expects that research and development and sales and marketing
expenses will increase in connection with new product development and the
creation of the Company's sales and marketing organization. Accordingly, the
Company expects to continue to incur substantial losses for the foreseeable
future.
THREE MONTH PERIODS ENDED MARCH 31, 1995 AND 1996
Research and development expenses were $3,519,000 and $4,300,000 for the three
month periods ended March 31, 1995 and 1996, respectively. The increase is due
to the advancement of clinical trial activity.
General and administrative expenses were $504,000 and $599,000 for the three
month periods ended March 31, 1995 and 1996, respectively. The increase in
general and administrative expense is due primarily to increased personnel costs
and corporate activity.
Net interest income was $238,000 and $785,000 for the three month periods ended
March 31, 1995 and 1996, respectively. The increase is due to a higher balance
of cash available for investment.
The net loss was $3,785,000 and $4,114,000 for the three month periods ended
March 31, 1995 and 1996, respectively. The change reflects the continued
increase in research and development activity levels. The net loss per share
decreased from $0.32 for the three months ended March 31, 1995 to $0.25 for the
three months ended March 31, 1996. The change reflects a higher number of
weighted average shares outstanding.
LIQUIDITY AND CAPITAL RESOURCES
The Company's needs for funds have increased from period to period as it has
increased the scope of its research and development activities. Since
inception, the Company has funded these needs almost entirely through sales of
its equity securities.
The Company's working capital and capital requirements will depend on numerous
factors, including the progress of the Company's research and development
activities, the level of resources that the Company devotes to the development,
clinical, regulatory and marketing aspects of its products, the extent to which
it proceeds, if at all, by means of collaborative relationships with
pharmaceutical companies and its competitive environment. Based upon its
current plans, the Company believes that
7
<PAGE>
current cash and marketable securities and the interest earned from the
investment thereof, will be sufficient to meet the Company's operating expenses
and capital requirements through at least mid-1998. Thereafter, the Company
will need to raise substantial additional capital to fund its operations. The
Company intends to seek such additional funding through public or private equity
or debt financings, collaborative arrangements with pharmaceutical companies or
from other sources. If adequate funds are not available, the Company will have
to reduce certain areas of research, product development, manufacturing or
marketing activity, or otherwise modify its business strategy, and its business
will be materially adversely affected.
In order to preserve principal and maintain liquidity, the Company's funds are
invested in U.S. Treasury obligations and other short-term instruments. As of
December 31, 1995, and March 31, 1996, the Company's cash and cash equivalents
and marketable securities totaled $70,453,000 and $66,327,000, respectively.
Current liabilities at December 31, 1995, and March 31, 1996 were $1,994,000 and
$2,036,000, respectively.
8
<PAGE>
AUTOIMMUNE INC.
PART II - OTHER INFORMATION
Item 6(b) - REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
9
<PAGE>
AUTOIMMUNE INC.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
AUTOIMMUNE INC.
Date: May 8, 1996 /s/ Robert C. Bishop
-------------------------------------
Robert C. Bishop
President and Chief Executive Officer
/s/ Michael W. Rogers
-----------------------------------------------
Michael W. Rogers
Vice President, Chief Financial Officer and Treasurer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 10,873,000
<SECURITIES> 55,454,000
<RECEIVABLES> 301,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 66,931,000
<PP&E> 3,738,000
<DEPRECIATION> (1,648,000)
<TOTAL-ASSETS> 69,051,000
<CURRENT-LIABILITIES> 2,036,000
<BONDS> 0
0
0
<COMMON> 116,972,000
<OTHER-SE> (50,714,000)
<TOTAL-LIABILITY-AND-EQUITY> 69,051,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 4,899,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,114,000)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> 0
</TABLE>
