<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 SEPTEMBER 30, 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 October 25,
1996:
Common Stock, par value $.01 16,346,120 shares outstanding
<PAGE>
AUTOIMMUNE INC.
QUARTER ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page Number
<S> <C>
Item 1 - Financial Statements
Balance Sheet
December 31, 1995 and September 30, 1996.......................... 2
Statement of Operations
for the three months ended September 30, 1995 and 1996, the nine
months ended September 30, 1995 and 1996 and for the period from
inception (September 9, 1988) through September 30, 1996.......... 3
Statement of Cash Flows
for the nine months ended September 30, 1995 and 1996
and for the period from inception (September 9, 1988)
through September 30, 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, September 30,
1995 1996
---------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 29,087,000 $ 12,019,000
Marketable securities 41,366,000 43,882,000
Interest receivable 160,000 287,000
Prepaid expenses and other current assets 172,000 536,000
---------------- -----------------
Total current assets 70,785,000 56,724,000
Fixed assets, net 2,166,000 2,429,000
Other assets 30,000 30,000
---------------- -----------------
$ 72,981,000 $ 59,183,000
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 944,000 $ 3,340,000
Accrued expenses 588,000 662,000
Current portion of obligations under capital leases 462,000 686,000
---------------- -----------------
Total current liabilities 1,994,000 4,688,000
---------------- -----------------
Obligations under capital leases 569,000 638,000
---------------- -----------------
Commitments and contingencies
---------------- -----------------
Stockholders' equity:
Common stock, $.01 par value; 25,000,000 shares
authorized; 16,282,067 and 16,317,070 shares issued and
outstanding at December 31, 1995 and September 30, 1996,
respectively 163,000 163,000
Additional paid-in capital 116,797,000 117,059,000
Deficit accumulated during the development stage (46,611,000) (63,374,000)
Valuation allowance for marketable securities 69,000 9,000
---------------- -----------------
70,418,000 53,857,000
---------------- -----------------
$ 72,981,000 $ 59,183,000
================ =================
</TABLE>
2
<PAGE>
AUTOIMMUNE INC.
(A development stage company)
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Period from
inception
Three months ended Nine months ended (September 9, 1988)
September 30, September 30, September 30, September 30, through
1995 1996 1995 1996 September 30, 1996
------------- ------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Option fees $ 1,500,000 - $ 1,500,000 - $ 2,200,000
Research and development
revenue under collaborative
agreements - - - - 955,000
--------------- ------------- --------------- ------------ ---------------
Total revenue 1,500,000 - 1,500,000 - 3,155,000
--------------- ------------- --------------- ------------ ---------------
Costs and expenses:
Research and development:
Related party 573,000 543,000 1,713,000 1,613,000 14,423,000
Other 2,741,000 6,871,000 9,532,000 15,779,000 49,934,000
General and administrative 704,000 598,000 1,738,000 1,783,000 8,682,000
--------------- ------------- --------------- ------------ ---------------
Total costs and expenses 4,018,000 8,012,000 12,983,000 19,175,000 73,039,000
--------------- ------------- --------------- ------------ ---------------
Interest income 516,000 793,000 1,010,000 2,462,000 6,716,000
Interest expense (13,000) (17,000) (42,000) (50,000) (202,000)
--------------- ------------- --------------- ------------ ---------------
503,000 776,000 968,000 2,412,000 6,514,000
--------------- ------------- --------------- ------------ ---------------
Net loss $ (2,015,000) $ (7,236,000) $ (10,515,000) $ (16,763,000) $ (63,370,000)
=============== ============= =============== ============ ================
Net loss per share $ (0.15) $ (0.44) $ (0.84) $ (1.03)
=============== ============= =============== ============
Weighted average common
shares outstanding 13,806,993 16,295,718 12,592,296 16,287,723
=============== ============= =============== ============
</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)
Nine months ended through
September 30, 1995 September 30, 1996 September 30, 1996
------------------ ------------------ -----------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss $ (10,515,000) $ (16,763,000) $ (63,370,000)
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 508,000 670,000 2,335,000
Decrease in capitalized patent costs - - 563,000
Increase in interest receivable (76,000) (127,000) (287,000)
(Increase) decrease in prepaid expenses 62,000 (364,000) (536,000)
Increase (decrease) in accounts payable (356,000) 2,396,000 3,340,000
Increase in accrued expenses 182,000 74,000 662,000
-------------------- --------------------- --------------------
Net cash used by operating activities (10,195,000) (14,114,000) (57,242,000)
-------------------- --------------------- --------------------
Cash flows from investing activities:
Purchase of available-for-sale marketable securities (5,062,000) (30,774,000) (189,145,000)
Proceeds from sale/maturity of available-for-sale
marketable securities - 28,197,000 134,260,000
Proceeds from maturity of held-to-maturity
marketable securities 5,956,000 - 11,011,000
Purchase of fixed assets (123,000) (933,000) (4,639,000)
Increase in patent costs - - (563,000)
Increase in other assets - - (155,000)
-------------------- --------------------- --------------------
Net cash provided (used) by investing
activities 771,000 (3,510,000) (49,231,000)
-------------------- --------------------- --------------------
Cash flows from financing activities:
Proceeds from sale-leaseback of fixed assets - 821,000 2,654,000
Payments on obligations under capital leases (332,000) (528,000) (1,330,000)
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 68,575,000 262,000 104,656,000
Proceeds from issuance of convertible notes payable - - 2,200,000
-------------------- -------------------- -------------------
Net cash provided by financing activities 68,243,000 555,000 118,491,000
-------------------- --------------------- -------------------
Net increase (decrease) in cash and cash
equivalents 58,819,000 (17,069,000) 12,018,000
Cash and cash equivalents, beginning of period 3,368,000 29,087,000 -
-------------------- -------------------- --------------------
Cash and cash equivalents, end of period $ 62,187,000 $ 12,018,000 $ 12,018,000
==================== ===================== ====================
</TABLE>
4
<PAGE>
AUTOIMMUNE INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL DATA
The interim financial data as of September 30, 1996 and for the three month
periods ended September 30, 1995 and 1996, the nine month periods ended
September 30, 1995 and 1996, and for the period from inception (September
9, 1988) through September 30, 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 September 30, 1996:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
--------------- --------------
<S> <C> <C>
Money market $12,736,000 $ 1,528,000
U.S. Government debt securities 16,292,000 9,932,000
--------------- --------------
$29,028,000 $11,460,000
--------------- --------------
The following is a summary of available-for-sale marketable securities held by the Company at
December 31, 1995 and September 30, 1996 which are carried out at fair market value :
</TABLE>
<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
------------ -------- ---------- -----------
<CAPTION>
Maturity Fair Unrealized Unrealized
term value gains losses Amortized cost
----------------- ----------- ------------ ----------- -----------------
<S> <C> <C> <C> <C> <C>
SEPTEMBER 30, 1996
U.S. Government
debt securities within 1 year $10,017,000 $ 9,000 $(14,000) $10,022,000
U.S. Government
debt securities between 1-5 years 33,865,000 16,000 (2,000) 33,851,000
------------ -------- ---------- -----------
$43,882,000 $25,000 $(16,000) $43,873,000
------------ -------- ---------- -----------
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.
</TABLE>
5
<PAGE>
AUTOIMMUNE INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
3. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
Estimated
useful life December 31, September 30,
(years) 1995 1996
------------- -------------- --------------
<S> <C> <C> <C>
Laboratory equipment 4 - 5 $2,638,000 $3,002,000
Office and computer equipment 4 - 5 417,000 495,000
Leasehold improvements 5 - 7 592,000 1,055,000
----------- -----------
3,647,000 4,552,000
Less-accumulated depreciation and
amortization 1,481,000 2,123,000
----------- -----------
$2,166,000 $2,429,000
=========== ===========
</TABLE>
In March and September 1996, the Company sold assets which had a net book
value of $432,000 and $320,000, respectively, for $480,000 and $341,000,
respectively, 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, September 30,
1995 1996
------------- -------------
<S> <C> <C>
Accrued employee costs $372,000 $484,000
Accrued professional fees 216,000 178,000
------------ -----------
$588,000 $662,000
============ ===========
</TABLE>
6
<PAGE>
AUTOIMMUNE INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
Since its inception through September 30, 1996, the Company has incurred ongoing
losses from operations and has cumulative losses as of September 30, 1996
totaling $63,370,000. To date, the Company has not recorded any revenues from
the sale of products. Revenues recorded through September 30, 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 AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1996
Revenue of $1,500,000 in 1995 represents fees paid by a Japanese pharmaceutical
company for a short-term exclusive right among Japanese companies to review the
results of the Phase II dosing study of Colloral/R/. There was no revenue during
the nine months ended September 30, 1996.
Research and development expenses were $3,314,000 and $7,414,000 for the three
month periods ended September 30, 1995 and 1996, respectively. Research and
development expenses were $11,245,000 and $17,392,000 for the nine month periods
ended September 30, 1995 and 1996, respectively. The increase is due to the
advancement of clinical trial activity.
General and administrative expenses were $704,000 and $598,000 for the three
month periods ended September 30, 1995 and 1996, respectively. General and
administrative expenses were $1,738,000 and $1,783,000 for the nine month
periods ended September 30, 1995 and 1996, respectively. The change in general
and administrative expense is due primarily to personnel costs and the timing of
corporate activity.
Net interest income was $503,000 and $776,000 for the three month periods ended
September 30, 1995 and 1996, respectively. Net interest income was $968,000 and
$2,412,000 for the nine month periods ended September 30, 1995 and 1996,
respectively. The increase is due to a higher balance of cash available for
investment.
The net loss was $2,015,000 and $7,236,000 for the three month periods ended
September 30, 1995 and 1996, respectively. The net loss was $10,515,000 and
$16,763,000 for the nine month periods ended September 30, 1995 and 1996,
respectively. The net loss per share increased from $0.15 for the three months
ended September 30, 1995 to $0.44 for the three months ended September 30, 1996.
The net loss per share increased from $0.84 for the nine months ended September
30, 1995 to $1.03 for the nine months ended September 30, 1996. The changes
reflect the continued increase in research and development activity levels
offset by 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.
7
<PAGE>
AUTOIMMUNE INC.
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 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 the filing of
the Company's Product License Application for its lead product. 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 September 30, 1996, the Company's cash and cash
equivalents and marketable securities totaled $70,453,000 and $55,901,000,
respectively. Current liabilities at December 31, 1995, and September 30, 1996
were $1,994,000 and $4,688,000, 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: November 6, 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-31-1995
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 12,019,000
<SECURITIES> 43,882,000
<RECEIVABLES> 287,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 56,724,000
<PP&E> 4,552,000
<DEPRECIATION> (2,123,000)
<TOTAL-ASSETS> 59,183,000
<CURRENT-LIABILITIES> 4,688,000
<BONDS> 0
0
0
<COMMON> 117,222,000
<OTHER-SE> (63,365,000)
<TOTAL-LIABILITY-AND-EQUITY> 59,183,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 8,012,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,236,000)
<EPS-PRIMARY> (0.44)
<EPS-DILUTED> 0
</TABLE>
