UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the quarterly period ended September 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period from to
--------- ---------
Commission File No. 000-20139
Diacrin, Inc.
(Exact name of registrant as specified in its charter)
Delaware 22-3016912
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Building 96 13th Street, Charlestown Navy Yard,
Charlestown, MA 02129 (Address of principal
executive offices, including zip code)
(617) 242-9100
(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 X NO
------ -------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of October 31, 1998, 14,322,925 shares of the registrant's Common
Stock were outstanding.
<PAGE>
Diacrin, Inc.
Index
Page
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of
December 31, 1997 and September 30, 1998.......................3
Statements of Operations for the Three and Nine Month
Periods Ended September 30, 1997 and 1998......................4
Statements of Cash Flows for the Nine Month Periods
Ended September 30, 1997 and 1998..............................5
Notes to Financial Statements..................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................8
PART II.- OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds......................12
SIGNATURES................................................................13
- 2 -
<PAGE>
Diacrin, Inc.
Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,015,777 $ 5,082,577
Short-term investments 6,000,098 16,808,376
Interest receivable and other current assets 438,756 536,682
------------------ ------------------
Total current assets 11,454,631 22,427,635
---------------- ---------------
Property and equipment, at cost:
Laboratory and manufacturing equipment 839,856 872,774
Equipment under capital lease 675,262 675,262
Furniture and office equipment 277,109 288,711
Leasehold improvements 55,557 76,827
------------------- -------------------
1,847,784 1,913,574
Less- Accumulated depreciation and amortization 853,911 1,115,741
----------------- -----------------
993,873 797,833
----------------- ------------------
Long-term investments 10,331,289 5,418,129
Investment in joint venture - 79,212
------------ ------------------
10,331,289 5,497,341
--------------- ----------------
$ 22,779,793 $ 28,722,809
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 185,306 $ 174,072
Accrued expenses 994,166 1,234,690
Deferred revenue 387,056 242,617
Current portion of long-term debt 337,171 318,511
----------------- ------------------
Total current liabilities 1,903,699 1,969,890
----------------- -----------------
Long-term debt 672,426 441,030
----------------- ------------------
Stockholders' equity:
Preferred stock, $.01 par value, Authorized--
5,000,000 shares; none issued and outstanding - -
Common stock, $.01 par value; Authorized-- 30,000,000
shares; issued and outstanding-- 13,268,256 shares
and 14,322,925 shares at December 31, 1997
and September 30, 1998, respectively 132,683 143,229
Additional paid-in capital 54,730,773 64,189,539
Accumulated deficit (34,659,788) (38,020,879)
---------------- ----------------
Total stockholders' equity 20,203,668 26,311,889
---------------- ----------------
$ 22,779,793 $ 28,722,809
================ ===============
See Accompanying Notes to Financial Statements
</TABLE>
- 3 -
<PAGE>
Diacrin, Inc.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1997 1998 1997 1998
---------- --------- ------- ------
<S> <C> <C> <C> <C>
REVENUES:
Research and development $ 1,150,402 $ 790,867 $ 3,597,488 $ 2,840,585
Interest income 322,535 408,299 984,192 1,188,639
---------- ---------- --------- ---------
Total revenues 1,472,937 1,199,166 4,581,680 4,029,224
---------- ---------- --------- ---------
OPERATING EXPENSES:
Research and development 1,706,813 1,812,228 5,010,305 5,572,793
General and administrative 353,579 377,855 1,159,946 1,151,417
Interest expense 24,270 20,951 60,389 71,208
---------- ---------- --------- ----------
Total operating expenses 2,084,662 2,211,034 6,230,640 6,795,418
---------- ---------- --------- ----------
EQUITY IN OPERATIONS
OF JOINT VENTURE - (290,658) - (594,897)
---------- ---------- --------- ----------
NET LOSS $ (611,725) $ (1,302,526) $ (1,648,960) $ (3,361,091)
============== ============= ============= =============
BASIC AND DILUTED
NET LOSS PER COMMON SHARE $ (.05) $ (.09) $ (.12) $ (.24)
============== =============== ============= =============
SHARES USED IN COMPUTING
BASIC AND DILUTED NET LOSS
PER COMMON SHARE 13,253,465 14,322,066 13,226,621 14,099,970
========== ========== ========== ==========
See Accompanying Notes to Financial Statements
</TABLE>
- 4 -
<PAGE>
Diacrin, Inc.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
1997 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,648,960) $ (3,361,091)
Adjustments to reconcile net loss to net
cash used in operating activities-
Depreciation and amortization 186,101 261,830
Equity in operations of joint venture - 594,897
Changes in assets and liabilities-
Interest receivable and other current assets (84,824) (97,926)
Accounts payable 65,065 (11,234)
Accrued expenses 1,038,579 119,033
Deferred revenue (185,916) (144,439)
----------- -----------
Net cash used in operating activities (629,955) (2,638,930)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in short-term investments (1,762,097) (10,808,278)
Purchases of property and equipment, net (786,177) (65,790)
Decrease in long-term investments 532,245 4,913,160
Investment in joint venture - (1,204,572)
Return of capital for services provided on behalf of joint venture - 651,954
----------- -----------
Net cash used in investing activities (2,016,029) (6,513,526)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock 90,239 9,469,312
Principal payments on long-term debt (132,145) (250,056)
----------- -----------
Net cash (used in) provided by financing activities (41,906) 9,219,256
----------- -----------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (2,687,890) 66,800
CASH AND CASH EQUIVALENTS, beginning of period 7,308,710 5,015,777
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 4,620,820 $ 5,082,577
============ =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period $ 51,764 $ 71,208
============= ==============
See Accompanying Notes to Financial Statements
</TABLE>
- 5 -
<PAGE>
Diacrin, Inc.
Notes to Financial Statements
(Unaudited)
1. Operations and Basis of Presentation
Diacrin, Inc. (the Company) was incorporated on October 10, 1989 and is
developing transplantable cells for the treatment of human diseases which are
characterized by cell dysfunction or cell death and for which current therapies
are either inadequate or nonexistent.
The unaudited financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission and include, in the opinion of management,
all adjustments, consisting of normal, recurring adjustments, necessary for a
fair presentation of interim period results. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The Company believes, however, that its
disclosures are adequate to make the information presented not misleading. The
results for the interim periods presented are not necessarily indicative of
results to be expected for the full fiscal year. These financial statements
should be read in conjunction with the audited consolidated financial statements
and notes thereto included in the Company's latest Annual Report on Form 10-K
filed with the Securities and Exchange Commission.
2. Summary of Significant Accounting Policies
(a) Research and Development
In September 1996, the Company and Genzyme Corporation ("Genzyme")
formed a joint venture (the "Joint Venture") to develop and commercialize
NeuroCell(TM)-PD for Parkinson's disease and NeuroCell(TM)-HD for Huntington's
disease (the "Joint Venture Products"). The Joint Venture is funded by Genzyme
and the Company in accordance with the terms of the joint venture agreement.
Collaborative revenue under the joint venture agreement with Genzyme is
recognized as revenue to the extent that the Company's research and development
costs are funded by Genzyme through the Joint Venture. The Company receives
non-refundable monthly advances from the Joint Venture. Deferred revenue
represents amounts received prior to recognition of revenue. Research and
development costs are expensed as incurred.
(b) Net Loss per Common Share
In 1997, the Company adopted SFAS No. 128, "Earnings Per Share." Basic
net loss per common share is based on the weighted average number of common
shares outstanding. Diluted net loss per common share is the same as basic net
loss per common share as the inclusion of other shares of stock issuable
pursuant to stock options and warrants would be antidilutive.
- 6 -
<PAGE>
Diacrin, Inc.
Notes to Financial Statements
(Unaudited)
3. Cash Equivalents and Investments
The Company's cash equivalents and investments are classified as
held-to-maturity and are carried at amortized cost, which approximates market
value. Cash equivalents, short-term investments and long-term investments have
maturities of less than three months, less than one year and greater than one
year, respectively. Cash and cash equivalents, short-term investments and
long-term investments at December 31, 1997 and September 30, 1998 consisted of
the following:
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
------------ -----------
<S> <C> <C>
Cash and cash equivalents-
Cash $ 381 $ 576
Money market mutual fund 2,513,759 4,081,862
Commercial paper 2,501,637 -
Corporate note (remaining mat. of 1 month) 1,000,139
----------- -----------
$ 5,015,777 $ 5,082,577
============== ==============
Short-term investments-
Corporate notes (rem. avg. mat. of 7 and 6 mos., respectively) $ 3,000,429 $ 16,808,376
Certificate of deposit 999,669 -
U.S. government agency obligation 2,000,000 -
----------- -----------
$ 6,000,098 $ 16,808,376
============== =============
Long-term investments-
Corporate notes (rem. avg. mat. of 15 and 13 mos., respectively) $ 10,331,289 $ 5,418,129
============= ==============
</TABLE>
4. Private Placement of Common Stock
In February 1998, the Company completed a private placement of 1,027,027
shares of its common stock for $9.25 per share, for net proceeds of
approximately $9.45 million.
- 7 -
<PAGE>
Diacrin, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview
Since its inception, the Company has principally focused its
efforts and resources on research and development of cell transplantation
products to treat neurodegenerative and other human diseases. The Company's
primary source of working capital to fund such activities has been proceeds from
the sale of equity and debt securities. In addition, commencing October 1, 1996,
the Company has received funding from the Joint Venture with Genzyme in support
of the NeuroCell(TM)-PD and NeuroCell(TM)-HD product development programs. The
Company has not received any revenues from the sale of products to date and does
not expect to generate product revenues for at least the next several years. The
Company has experienced fluctuating operating losses since its inception and
expects that the additional activities required to develop and commercialize the
Company's products will result in increasing operating losses for at least the
next several years. At September 30, 1998, the Company had an accumulated
deficit of $38.0 million.
In September 1996, the Company and Genzyme formed the Joint
Venture to develop and commercialize NeuroCell(TM)-PD and NeuroCell(TM)-HD. In
connection with the formation of the Joint Venture, the Company granted an
exclusive right and license to the patent rights and technology relating to the
Joint Venture Products. This right and license was considered to be the
Company's initial capital contribution to the Joint Venture. The Company has a
50% ownership interest in the Joint Venture. Under the terms, and subject to
certain conditions, of the joint venture agreement, which was effective October
1, 1996, Genzyme has agreed to provide 100% of the first $10 million in funding
and 75% of the following $40 million in funding for the development and
commercialization of the Joint Venture Products. The Company agreed to provide
the remaining 25% of the following $40 million in funding. All costs incurred in
excess of $50 million are to be shared equally between Genzyme and the Company
in accordance with the terms of the agreement. The Joint Venture plans that
Diacrin and Genzyme will perform, on behalf of the Joint Venture, the
development activities in connection with the Joint Venture Products and that
Genzyme will market and sell the Joint Venture Products on a cost reimbursement
basis on behalf of the Joint Venture.
For 1996 and 1997, the Company expensed all research and
development costs related to the Joint Venture Products incurred by it on behalf
of the Joint Venture and recognized an equal amount of research and development
revenue due to the fact that costs incurred were funded by the Joint Venture
exclusively out of contributions made to it by Genzyme. Through December 31,
1997, Genzyme made 100% of the total cash contributions to the Joint Venture on
a monthly basis, in advance. During the first quarter of 1998, the Joint
Venture's cumulative funding requirements since its inception exceeded $10
million. As such, the Company, as required by the joint venture agreement, began
making cash contributions to the Joint Venture equal to 25% of the Joint
Venture's monthly funding requirements. The Joint Venture's funding requirements
are determined on a monthly basis by the Company and Genzyme and are met by
monthly contributions from both parties in percentages prescribed by the terms
of the joint venture agreement. To the extent the Company's contributed funds
are used to fund expenses incurred by Genzyme on behalf of the Joint Venture,
the Company recognizes an expense in its statement of operations captioned
"equity in operations of the Joint Venture." Furthermore, to the extent the
Company's contributed funds are used to fund expenses incurred by the Company on
behalf of the Joint Venture, the Company reduces the research and development
revenue recognized by it from the Joint Venture by an amount equal to the
Company-funded portion of such expenses.
Any profits of the Joint Venture are to be shared equally by Genzyme
and the Company. Losses of the Joint Venture are allocated to each party in
proportion to the funding provided by each party.
- 8 -
<PAGE>
Results of Operations
Three Months Ended September 30, 1998 Versus Three Months Ended
September 30, 1997
Research and development revenues were $791,000 for the three months
ended September 30, 1998 versus $1.2 million for the three months ended
September 30, 1997 and were derived exclusively from the Joint Venture. The
current period research and development revenues were reduced by approximately
$264,000 representing funding received by the Company from the Joint Venture out
of Company-funded contributions to the Joint Venture.
Interest income was $408,000 and $323,000 for the three month periods
ended September 30, 1998 and 1997, respectively. The 27% increase in interest
income was due to higher cash balances available for investment in the 1998
period as a result of the Company's private placement of common stock in
February 1998.
Research and development expenses were $1.8 million for the three
months ended September 30, 1998 versus $1.7 million for the three months ended
September 30, 1997. The 6% increase was primarily due to increased costs related
to the operation of clinical production facilities.
General and administrative expenses of $378,000 and $354,000 for the
three months ended September 30, 1998 and 1997, respectively, were relatively
unchanged between periods.
Interest expense of $21,000 and $24,000 for the three months ended
September 30, 1998 and 1997, respectively, was relatively unchanged between
periods.
For the three months ended September 30, 1998, the Company recorded
$291,000 related to its equity in operations of the joint venture. This expense
is due to funds contributed by the Company to the Joint Venture that were used
to fund expenses incurred by Genzyme on behalf of the Joint Venture. This
expense did not occur in the prior year as the Company was not required to make
contributions to the Joint Venture until the quarter ended March 31, 1998.
The Company incurred a net loss of approximately $1.3 million for the
three months ended September 30, 1998 versus approximately $612,000 for the
three months ended September 30, 1997.
Nine Months Ended September 30, 1998 Versus Nine Months Ended September 30, 1997
Research and development revenues were approximately $2.8 million for
the nine months ended September 30, 1998 versus $3.6 million for the nine months
ended September 30, 1997 and were derived exclusively from the Joint Venture.
The current period research and development revenues were reduced by
approximately $652,000 representing funding received by the Company from the
Joint Venture out of Company-funded contributions to the Joint Venture.
- 9 -
<PAGE>
Interest income was $1.2 million and $984,000 for the nine month
periods ended September 30, 1998 and 1997, respectively. The 21% increase in
interest income was due to higher cash balances available for investment in the
1998 period as a result of the Company's private placement of common stock in
February 1998.
Research and development expenses were $5.6 million for the nine months
ended September 30, 1998 versus $5.0 million for the nine months ended September
30, 1997. The 11% increase was primarily due to the production costs of clinical
grade antibody produced during the current year period for use in certain of the
Joint Venture's planned phase 2/3 clinical trials of NeuroCell(TM)-PD. The
increase was, to a lessor extent, due to increased costs related to the
operation of clinical production facilities completed in the second half of
1997.
General and administrative expenses of $1.2 million for each of the
nine month periods ended September 30, 1998 and 1997 were relatively unchanged.
Interest expense was $71,000 and $60,000 for the nine month periods
ended September 30, 1998 and 1997, respectively. The increase in interest
expense is due to the $650,000 term loan obtained by the Company in November
1997 to finance the purchase of production equipment.
For the nine months ended September 30, 1998, the Company recorded
$595,000 related to its equity in operations of the joint venture. This expense
is due to funds contributed by the Company to the Joint Venture that were used
to fund expenses incurred by Genzyme on behalf of the Joint Venture. This
expense did not occur in the prior year as the Company was not required to make
contributions to the Joint Venture until the quarter ended March 31, 1998.
The Company incurred a net loss of approximately $3.4 million for the
nine months ended September 30, 1998 versus a net loss of approximately $1.6
million for the nine months ended September 30, 1997.
Liquidity and Capital Resources
The Company has financed its activities primarily with the net proceeds
from its pre-1998 equity offerings aggregating $53.6 million; with the net
proceeds of approximately $9.45 million from the Company's private placement of
common stock completed in February 1998; and with interest earned thereon. In
addition, the Company has recorded approximately $8.6 million in revenue from
the Joint Venture since it commenced October 1, 1996. At September 30, 1998, the
Company had cash and cash equivalents, short-term investments and long-term
investments aggregating approximately $27.3 million.
In November 1997, the Company borrowed $650,000 at the Prime Rate + .5%
under an unsecured five-year term loan with a bank to finance production
equipment acquired during 1997. As of September 30, 1998, the Company had an
aggregate of approximately $760,000 outstanding under the term loan with the
bank and under a master lease agreement for capital equipment. The Company had
no material commitments for capital expenditures as of September 30, 1998.
Under the joint venture agreement with Genzyme, the Company's two lead
product development programs, NeuroCell(TM)-PD for the treatment of Parkinson's
disease and NeuroCell(TM)-HD for the treatment of Huntington's disease, are
being developed by the Joint Venture. Both Genzyme and Diacrin are responsible
for funding the Joint Venture in accordance with the terms, and subject to the
conditions, of the joint venture agreement. Genzyme agreed to fund 100% of the
first $10 million of development and commercialization costs incurred after
October 1, 1996, 75% of the next $40 million and 50% of all remaining
development and commercialization costs in excess of $50 million. After Genzyme
funds the first $10 million, the Company is responsible for funding 25% of the
next $40 million and 50% of all development and commercialization costs in
excess of $50 million. As of September 30, 1998, approximately $13.6 million and
$1.2 million has been contributed to the Joint Venture by Genzyme and Diacrin,
respectively. The Company's obligation to fund 25% of the program costs
commenced in the first quarter of 1998. The Company expects that the Joint
Venture's product development plans together with the Company's commencement of
funding of the Joint Venture will significantly increase the Company's net loss
and cash and investments used in the fourth quarter of 1998 and in the year
ended December 31, 1999 as compared to the same prior year periods.
- 10 -
<PAGE>
The Company believes that its existing funds, together with expected
future funding under the joint venture agreement with Genzyme, will be
sufficient to fund its operating expenses and capital requirements as currently
planned through at least mid-2000. However, the Company's cash requirements may
vary materially from those now planned because of results of research and
development, the scope and results of preclinical and clinical testing, any
termination of the Joint Venture, relationships with strategic partners, changes
in the focus and direction of the Company's research and development programs,
competitive and technological advances, the FDA's regulatory process, the market
acceptance of any approved Company products and other factors. For a more
detailed discussion of these and other factors that may affect the Company's
future operating results, see the Company's Annual Report on Form 10-K for the
year ended December 31, 1997, as amended, as filed with the Securities and
Exchange Commission.
The Company expects to incur substantial additional costs, including
costs related to ongoing research and development activities, preclinical
studies, clinical trials, establishing pig production capabilities and the
expansion of its laboratory and administrative activities. Therefore, in order
to achieve commercialization of its potential products, the Company will need
substantial additional funds. There can be no assurance that the Company will be
able to obtain the additional funding that it will require on acceptable terms,
if at all.
Impact of the Year 2000 Issue
The Company is in the process of completing its assessment of Year 2000
issues and their potential impact on its information systems and business.
Generally, the Company has potential Year 2000 exposure in four areas: (i)
financial and management operating computer systems used to manage the Company's
business, (ii) operating computer systems used in the Company's research and
product development laboratories, (iii) microprocessors and other electronic
equipment used by the Company ("embedded chips") and (iv) computer systems used
by third parties, in particular financial institutions and suppliers of the
Company.
At September 30, 1998, the Company had completed its assessment of its
financial and management operating computer systems and has identified software
that is not Year 2000 compliant. The Company estimates the cost to update this
software through the purchase of an off-the-shelf software package, together
with hardware and network server software will be approximately $15,000. At
September 30, 1998, the Company had already spent approximately $2,000 in this
effort. The Company expects to substantially complete the update of the systems
that are not Year 2000 compliant by January 1, 1999.
At September 30, 1998, the Company had also completed its assessment of
its Year 2000 exposure to operating computer systems used in the Company's
research and development laboratories and embedded chips in its facilities or
equipment used in its facilities. The Company has not identified any
non-compliant systems that play a significant role in the Company's research,
product development or facilities management.
The Company continues to interview financial institutions and vendors
to determine their exposure to Year 2000 issues, their anticipated risks and
responses to those risks. To date, the Company has not obtained information
suggesting any critical vendors or financial institutions will not be able to
fully service or supply the Company on or after January 1, 2000.
If the Company is unsuccessful in completing remediation of
non-compliant systems, additional costs may be incurred to develop alternative
methods of managing the effected aspects of its business. The Company has not
yet established any contingency plans and does not expect to do so until 1999.
Year 2000 issues are not expected to have a significant impact on the Company's
ongoing results of operations.
- 11 -
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(c) The Company did not sell any equity securities during the quarter
ended September 30, 1998 that were not registered under the Securities Act.
(d) The following information updates and supplements the information
regarding use of proceeds originally filed by Diacrin on Form SR for the period
ended May 12, 1996, as amended to date and relates to securities sold by the
Company pursuant to the Registration Statement on Form S-2 (Registration No:
33-80773) which was declared effective on February 12, 1996: Through September
30, 1998, the Company has used approximately $6,643,000 of the total net
proceeds from its initial public offering of $20,911,755. Of the $6,643,000
used, approximately $255,000 was used for the purchase of machinery and
equipment; approximately $495,000 was used for repayment of indebtedness; and
approximately $5,893,000 was used for working capital. The unused proceeds of
approximately $14,269,000 are in temporary investments consisting of corporate
notes and a money market mutual fund. All proceeds used or invested were direct
or indirect payments to others.
- 12 -
<PAGE>
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.
Diacrin, Inc.
<TABLE>
<S> <C>
November 13, 1998 /s/ Thomas H. Fraser
--------------------------
Thomas H. Fraser
President and Chief
Executive Officer
/s/ Mark J. Fitzpatrick
---------------------------
Mark J. Fitzpatrick
Vice President of Finance and
Administration; CFO & Treasurer
- 13 -
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 5,082,577
<SECURITIES> 16,808,376
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 22,427,635
<PP&E> 1,913,574
<DEPRECIATION> 1,115,741
<TOTAL-ASSETS> 28,722,809
<CURRENT-LIABILITIES> 1,969,890
<BONDS> 441,030
<COMMON> 143,229
0
0
<OTHER-SE> 26,168,660
<TOTAL-LIABILITY-AND-EQUITY> 28,722,809
<SALES> 0
<TOTAL-REVENUES> 2,840,585
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,572,793
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71,208
<INCOME-PRETAX> (3,361,091)
<INCOME-TAX> 0
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<CHANGES> 0
<NET-INCOME> (3,361,091)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
