<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 1996
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 Number 0-20954
COCENSYS, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0538836
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
213 Technology Drive, Irvine, CA 92718
(Address of principal executive offices including zip code)
(714) 753-6100
(Registrant's telephone number, including area code)
---------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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.
Common Stock $.001 par value 21,917,004
- --------------------------------------------------------------------------------
(Class) (Outstanding at May 1, 1996)
<PAGE>
COCENSYS, INC.
TABLE OF CONTENTS
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Condensed Consolidated Balance Sheets as of March 31, 1996
and December 31, 1995 3
Condensed Consolidated Statements of Operations for the
three-month periods ended March 31, 1996 and 1995
and the period from inception (February 15, 1989) through
March 31, 1996 4
Condensed Consolidated Statements of Cash Flows for the
three-month periods ended March 31, 1996 and 1995
and the period from inception (February 15, 1989) through
March 31, 1996 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. 10
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 14
SIGNATURES 15
2
<PAGE>
COCENSYS, INC.
(A development stage company)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,650 $ 6,895
Short-term investments 16,809 6,554
Other current assets 783 455
----------- -----------
TOTAL CURRENT ASSETS 24,242 13,904
Property and equipment, net 2,858 2,777
Notes receivable from officers 270 264
Deferred patent costs, net 295 394
Deferred sales organization costs, net 488 650
Other assets, net 168 212
----------- -----------
$ 28,321 $ 18,201
----------- -----------
----------- -----------
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 830 $ 880
Other accrued liabilities 1,838 2,418
Advances from corporate partners 4,691 3,144
Capital lease obligation - current portion 741 709
----------- -----------
TOTAL CURRENT LIABILITIES 8,100 7,151
Capital lease obligation, less current portion 308 357
Other liabilities 47 49
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value - -
Authorized shares -- 5,000,000
Issued and outstanding shares -- none
Common stock, $.001 par value
Authorized shares -- 30,000,000
Issued and outstanding shares -- 21,842,586 at March 31, 1996
and 19,395,341 at December 31, 1995 22 19
Additional paid-in capital 90,871 76,277
Deficit accumulated during the development stage (70,287) (64,674)
Deferred compensation (676) (956)
Unrealized loss on investments (64) (22)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 19,866 10,644
----------- -----------
$ 28,321 $ 18,201
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
3
<PAGE>
COCENSYS, INC.
(A development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
THREE MONTHS ENDED (FEBRUARY 15,
MARCH 31, 1989) TO
----------------------------- MARCH 31,
1996 1995 1996
--------- --------- ----------
<S> <C> <C> <C>
REVENUES
Co-promotion revenues from corporate partners $ 798 $ 234 $ 18,614
Co-development revenues from corporate partners 833 - 2,803
--------- --------- ----------
Total revenues 1,631 234 21,417
--------- --------- ----------
OPERATING EXPENSES
Research and development 4,354 3,010 47,806
General and administrative 1,277 783 12,816
Sales and marketing 1,855 2,096 17,855
Acquired research and development and advances to Acea - - 14,879
--------- --------- ----------
Total operating expenses 7,486 5,889 93,356
--------- --------- ----------
OPERATING LOSS (5,855) (5,655) (71,939)
Interest income 272 84 2,523
Interest expense (30) (56) (871)
--------- --------- ----------
NET LOSS $ (5,613) $ (5,627) $ (70,287)
--------- --------- ----------
--------- --------- ----------
Net loss per share $ (0.26) $ (0.39)
--------- ---------
--------- ---------
Shares used in computing net loss per share 21,193,228 14,532,196
---------- ----------
---------- ----------
</TABLE>
See accompanying notes.
4
<PAGE>
COCENSYS, INC.
(A development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
THREE MONTHS ENDED (FEBRUARY 15,
MARCH 31, 1989) TO
----------------------------- MARCH 31,
1996 1995 1996
--------- --------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (5,613) $ (5,627) $ (70,287)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 488 440 4,305
Amortization of deferred compensation 201 177 2,859
Issuance of stock and warrants for services - - 129
Loss on sale of fixed assets - - 26
Acquired research and development - - 12,279
Increase in other current assets (328) (840) (855)
Decrease in receivable from corporate partner - 535 -
Increase (decrease) in accounts payable and other accrued liabilities (632) (1,099) 2,440
--------- --------- ---------
NET CASH USED IN OPERATING ACTIVITIES (5,884) (6,414) (49,104)
--------- --------- ---------
INVESTING ACTIVITIES
Increase in short-term investments (10,297) (4,783) (16,876)
Purchase of property and equipment (264) (39) (5,077)
Decrease (increase) in other assets and notes receivable from officers (6) 4 (513)
Cash received on sale of fixed assets - - 19
Increase in deferred sales organization costs - - (1,571)
Increase in deferred patent costs - - (904)
Acquisition of Acea Pharmaceuticals, net of cash acquired - - (62)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (10,567) (4,818) (24,984)
--------- --------- ---------
FINANCING ACTIVITIES
Net cash proceeds from issuance of common stock 14,676 5,007 58,188
Net cash proceeds from issuance of preferred stock - - 16,381
Advances from corporate partners 1,547 2,866 4,691
Proceeds from sale/leaseback of fixed assets and notes payable 253 - 3,837
Payments on capital lease obligations and notes payable (270) (147) (2,359)
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 16,206 7,726 80,738
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (245) (3,506) 6,650
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,895 6,939 -
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,650 $ 3,433 $ 6,650
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 30 $ 34 $ 645
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
5
<PAGE>
COCENSYS, INC.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The interim financial information for the three-month periods ended March
31, 1996 and 1995 is unaudited but includes all adjustments (consisting
only of normal recurring entries) which the Company's management believes
to be necessary for the fair presentation of the financial position,
results of operations and cash flows for the periods presented. The
accompanying interim financial statements should be read in conjunction
with the financial statements and related notes included in the Company's
1995 Annual Report on Form 10-K for the year ended December 31, 1995.
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 the Securities and
Exchange Commission rules and regulations. Interim results of operations
for the three-month period ended March 31, 1996, are not necessarily
indicative of operating results to be expected for the full year.
REVENUE AND EXPENSE RECOGNITION
See Notes 2, 3 and 4 for revenue recognition policies related to the Ciba
Promotion and Ciba Research and Development Agreements, the Warner
Collaboration Agreement and the Parke-Davis Promotion Agreement, and the
Somerset Promotion Agreement, respectively. The initial costs incurred in
establishing the sales and marketing organization were deferred until
initiation of the Company's sales efforts on August 1, 1994. Such costs
are being amortized over the contract term of the Ciba Promotion Agreement
(through December 31, 1996).
NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of shares
of common stock outstanding during the periods.
2. MARKETING AND DEVELOPMENT COLLABORATION WITH CIBA-GEIGY LIMITED
In May 1994, the Company entered into a marketing and development
collaboration with Ciba-Geigy Limited (Ciba Basel) and its U.S. affiliate
Ciba-Geigy Corporation (Ciba U.S.) for the co-promotion by the Company of
certain Ciba U.S. products and the development and commercialization of
ACEA 1021, a compound being developed by the Company. This
6
<PAGE>
COCENSYS, INC.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. MARKETING AND DEVELOPMENT COLLABORATION WITH CIBA-GEIGY LIMITED (CONTINUED)
collaboration consists of the Ciba Promotion Agreement with Ciba U.S. and
the Ciba Research and Development Agreement with Ciba Basel.
Pursuant to the Ciba Promotion Agreement, CoCensys established a sales
force to co-promote and market certain Ciba U.S. products in the United
States initially to psychiatrists. The agreement provides for the advance
of funds to the Company to cover a portion of the expenses incurred by the
CoCensys sales force in promoting the Ciba U.S. products. CoCensys
realizes co-promotion revenues from its share of sales of the Ciba U.S.
products above certain baseline levels specified in the contract. In the
event sales levels are insufficient to cover the advanced expenses in a
given year, CoCensys will have an obligation for repayment. Any such
repayment obligations may be deferred for up to five years, with the first
two years at no interest. The Ciba Promotion Agreement, as amended, is
scheduled to terminate at the end of 1996.
Under the Ciba Research and Development Agreement, each party is obligated
to pay one-half of the U.S. development costs of ACEA 1021. The parties
will co-promote ACEA 1021 in the United States and share equally the
profits generated, if any. Ciba Basel will have the exclusive right to
develop and market the compound, at its own cost, for markets outside the
United States, subject to a specified royalty payment to the Company.
In connection with the Ciba Research and Development Agreement, Ciba Basel
purchased $7.0 million of CoCensys common stock. In addition, the Company
will receive nonrefundable milestone payments upon the occurrence of
certain events in the course of the development of ACEA 1021 for the United
States and Japanese markets. Under certain circumstances, Ciba Basel will
also make available to the Company a revolving line of credit. Repayment
of the line is to be made from income generated under the Ciba Promotion
Agreement, if any. The balance outstanding will bear interest and will be
due upon attainment of certain milestones for ACEA 1021, as defined in the
Agreement.
3. MARKETING AND DEVELOPMENT COLLABORATION WITH WARNER-LAMBERT COMPANY
In October 1995, the Company entered into a collaboration with Warner-
Lambert Company and its Parke-Davis division to develop and market
therapeutic drugs for the treatment of certain CNS disorders. This
arrangement consists of the Research, Development and Marketing
Collaboration Agreement (the Warner Collaboration Agreement), for the
development and commercialization of a new class of neurological and
psychiatric drugs, termed subtype selective NMDA receptor antagonists
("SSNRAs"), and the Parke-Davis Promotion Agreement, pursuant to which the
Company co-promotes Parke-Davis' CNS drug, Cognex-Registered Trademark-, to
U.S. neurologists for the treatment of Alzheimer's disease.
7
<PAGE>
COCENSYS, INC.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. MARKETING AND DEVELOPMENT COLLABORATION WITH WARNER-LAMBERT COMPANY
(CONTINUED)
Under the Parke-Davis Promotion Agreement, the Company realizes co-
promotion revenues from its share of sales of Cognex above certain baseline
levels specified in the contract. The agreement provides that funds will
be advanced to the Company each quarter to cover training and operating
expenses incurred by the CoCensys sales force to promote Cognex. In the
event sales are insufficient to cover the advances, the Company is
obligated to repay the advances. During the first year, one-half of the
repayment obligation may be deferred for one year. After the first year,
repayment obligations may not be deferred.
Under the Warner Collaboration Agreement, both companies will share
technology and resources to develop SSNRA candidates. The parties are
obligated to make specified contributions to development costs with respect
to any development candidates. Promotion costs of, and profits from, any
products developed under the agreement will be shared equally in the United
States and Japan. Warner-Lambert will have the exclusive right to develop
and market any product, at its own cost, for markets outside the United
States and Japan, subject to a specified royalty payment to the Company.
Pursuant to the Warner Collaboration Agreement, Warner-Lambert purchased
$2.0 million of CoCensys common stock in October 1995. Warner-Lambert is
obligated to purchase an additional $2.0 million of CoCensys common stock
during the first quarter of 1997. Upon achievement of certain clinical
development and regulatory milestones, Warner-Lambert is obligated to make
certain milestone payments for each development compound, as well as pay
its specified portion of development costs.
4. PROMOTION AGREEMENT WITH SOMERSET PHARMACEUTICALS, INC.
In January 1996, the Company and Somerset Pharmaceuticals, Inc. (Somerset)
entered into the Somerset Promotion Agreement, pursuant to which the
Company promotes Somerset's drug Eldepryl-Registered Trademark- to
neurologists in the United States for the treatment of Parkinson's disease.
The initial term of the Somerset Promotion Agreement expires December 31,
1997, subject to certain provisions for early termination and renewal.
Somerset currently has market exclusivity for Eldepryl pursuant to the
Orphan Drug Act, but such exclusivity will expire in June 1996. Under the
Somerset Promotion Agreement, CoCensys has the exclusive right (except,
during the first three months of 1996, as to one other party) to detail
Eldepryl to neurologists in the United States. During the term of the
Somerset Promotion Agreement, CoCensys realizes co-promotion revenues based
upon the number of details undertaken for Eldepryl, new prescriptions
written and sales. Compensation to CoCensys is subject to adjustment in
the event of generic competition. In addition, such compensation is
subject to review in the event of certain governmental or third-party
actions.
8
<PAGE>
COCENSYS, INC.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. PROMOTION AGREEMENT WITH SOMERSET PHARMACEUTICALS, INC. (CONTINUED)
To finance a portion of its sales force to promote Eldepryl, CoCensys
receives quarterly advances from Somerset, which are repayable in full at
the end of each quarter.
5. EQUITY FINANCING
In January 1996, the Company completed a public offering of common stock,
obtaining net proceeds of $14.6 million through the sale of 2.4 million
shares at $6.50 per share.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE
NOT LIMITED TO, THOSE DISCUSSED BELOW AND IN THE COMPANY'S 1995 ANNUAL
REPORT ON FORM 10-K.
OVERVIEW
Since its inception in February 1989, the Company has devoted substantially
all of its resources to the discovery and development of
neuropharmaceutical products for the treatment of disorders affecting the
central nervous system. The Company has incurred losses since inception
and expects losses to continue for the foreseeable future, primarily due to
the expansion of programs for research and development. Operating results
are expected to fluctuate as a result of uncertainty in the timing and
amount of revenues to be earned from product sales and from achievement of
research and development milestones, and uncertainty in the timing and
amount of expenses for product development, including clinical trials. As
of March 31, 1996, the Company's accumulated deficit was approximately
$70.3 million.
RESULTS OF OPERATIONS
In connection with the Ciba, Parke-Davis and Somerset Promotion Agreements,
the Company recognized $798,000 in co-promotion revenues for the three-
month period ended March 31, 1996, compared to $234,000 during the same
period in 1995. The increase in 1996 was due to the addition of new
promotion agreements. Sales operations began in October 1995 and January
1996 under the Parke-Davis and Somerset Promotion Agreements, respectively.
Due to the nature of its co-promotion agreements, the Company reports a
disproportionately large share of its co-promotion revenues during the
fourth quarter. The decrease in revenues for the first quarter of 1996
from $6.9 million in the fourth quarter of 1995 is attributable
principally to this factor. Although there can be no assurances regarding
trends, the Company believes this pattern will continue for the near
future.
In connection with the Ciba Research and Development Agreement, the Company
recognized $833,000 in co-development revenues for the three-month period
ended March 31, 1996. Since development activities subject to the
agreement began in June 1995, no co-development revenues were recognized
for the three-month period ended March 31, 1995.
Research and development ("R&D") expenses increased to $4.4 million for the
three-month period ended March 31, 1996, from $3.0 million during the same
period in 1995. The increase resulted from development costs associated
with Phase I clinical studies for ACEA 1021 and from increased staffing
levels to support the ACEA 1021 Phase I clinical program and the CCD 1042
Phase II clinical program.
10
<PAGE>
General and administrative expenses increased to $1.3 million for the
three-month period ended March 31, 1996, from $0.8 million during the same
period in 1995. Such increase was primarily due to additional staffing and
related expenses to support increased R&D activities, as well as higher
legal, accounting and other expenses in support of expanded levels of
business development.
Sales and marketing expenses decreased to $1.9 million for the three-month
period ended March 31, 1996, from $2.1 million during the same period in
1995. The decrease relates to changes in the co-promotion agreements,
whereby the Company no longer undertakes certain promotional activities.
Interest income increased to $272,000 for the three-month period ended
March 31, 1996, from $84,000 for the same period in 1995. The increase was
due to higher cash and short-term investment balances in 1996 than for the
same period in 1995.
Interest expense decreased to $30,000 for the three-month period ended
March 31, 1996, from $56,000 for the same period in 1995. The decrease in
1996 resulted from reduced capital lease obligations used to finance
equipment.
LIQUIDITY AND CAPITAL RESOURCES
From its inception in February 1989 through March 31, 1996, the Company has
financed its operations primarily through private and public offerings of
its equity securities, raising net proceeds of approximately $75.2 million
through sales of these securities. In January 1996, the Company completed
a registered direct public offering, obtaining net proceeds of $14.6
million through the sale of 2.4 million shares of common stock at $6.50 per
share. As of March 31, 1996, the Company's balance of cash, cash
equivalents and short-term investments totaled $23.5 million, compared to
$13.4 million at December 31, 1995.
As of March 31, 1996, the Company had invested $5.1 million in leasehold
improvements, laboratory and computer equipment and office furnishings and
equipment. The Company has financed $2.5 million of these capital
additions through capital lease lines. In addition, the Company leases its
laboratory and office facilities under operating leases. Additional
equipment will be needed as the Company increases its research and
development activities. The Company has no material commitments for the
acquisition of property and equipment.
Pursuant to the Ciba Promotion Agreement, the Company co-promotes and
markets the Ciba Products in the United States. Under the agreement, funds
are advanced to the Company to cover a portion of sales expenses incurred
to co-promote the Ciba Products. The Company is obligated to reimburse
Ciba U.S. for these advances. CoCensys realizes co-promotion revenues from
its share of sales of the Ciba Products above certain baseline levels
specified in the contract. Sales of the Ciba Products are the primary
source of cash the Company intends to use to meet its reimbursement
obligation to Ciba U.S. Although product sales were sufficient to cover
the Company's
11
<PAGE>
reimbursement obligation in 1995 and 1994, there can be no assurance that
they will continue to provide the necessary funds to enable the Company to
meet this obligation in the future.
Pursuant to the Ciba Research and Development Agreement, Ciba Basel is
obligated to pay one-half of the development costs of ACEA 1021 for the
United States market and all incremental development costs for the rest of
the world, along with additional payments upon the achievement of certain
milestones. The agreement also provides that Ciba Basel will make
available to CoCensys, under certain circumstances, a revolving line of
credit of up to $7 million to fund the Company's share of the development
costs for ACEA 1021. Repayment of amounts advanced will be secured by
future milestone payments. No amounts are currently outstanding.
Pursuant to the Parke-Davis Promotion Agreement, the Company promotes
Parke-Davis' CNS drug, Cognex-Registered Trademark-, to neurologists in the
United States. Funds are advanced to the Company quarterly to cover the
training and operating expenses incurred by the Company's sales force in
promoting Cognex. The Company is obligated to reimburse Parke-Davis for
these advances.
Pursuant to the Warner Collaboration Agreement, Warner-Lambert is also
obligated to make certain milestone payments for each compound selected for
development, as well as pay for its share of development costs. Warner is
obligated to purchase $2.0 million of CoCensys Common Stock in the first
quarter of 1997.
Pursuant to the Somerset Promotion Agreement, the Company promotes
Somerset's drug Eldepryl-Registered Trademark- to neurologists in the
United States. Funds are advanced to the Company quarterly to cover a
portion of the training and operating expenses incurred by the Company's
sales force in promoting Eldepryl. The Company is obligated to reimburse
Somerset for these advances.
CoCensys' operations to date have consumed substantial amounts of cash.
The negative cash flow from operations is expected to continue and will
likely increase over the foreseeable future, subject to the Company's
ability to mitigate such negative cash flows by revenues, if any, derived
from the sale of products from current and potential future marketing
collaborations. The Company anticipates that its existing capital
resources, including funding expected to be available through current
partner collaborations (including milestone payments and co-promotion
revenues), will be adequate to satisfy its capital needs through at least
1996. There can be no assurance that milestone-based payments or co-
promotion revenues will be sufficient to meet the Company's capital
requirements. The Company will need to obtain substantial additional funds
to conduct the costly and time-consuming research, preclinical development
and clinical trials necessary to bring its products to market. The Company
intends to seek additional funding through additional research and
development collaborations with suitable corporate partners, through
additional marketing collaborations to increase revenues generated from
sales of products and/or through public or private financing. There can
be no assurance that additional financings or suitable collaborations will
be available on favorable terms, if at all. Insufficient funds may
require the Company to delay, scale back or eliminate some or all of its
research and product development programs or to license third parties
to commercialize products or technologies that the Company would otherwise
seek to develop itself.
12
<PAGE>
The Company's future capital requirements will depend on many factors,
including the progress of the Company's research and development programs,
the level of co-promotion revenues, the scope and results of preclinical
testing and clinical trials, the time and costs involved in obtaining
regulatory approvals, the rate of technological advances, determinations as
to the commercial potential of the Company's products under development,
the status of competitive products, the expansion of sales and marketing
capabilities, the establishment of third-party manufacturing arrangements
and the establishment of additional collaborative relationships.
ADDITIONAL RISKS
The Company's products are in an early stage of development and face a high
degree of technological, regulatory and competitive risks. Drug discovery
and development are capital-intensive activities, and there can be no
assurance the Company will be able to raise the additional capital
necessary to develop and commercialize products. Human clinical trials
require considerable time and funding, and results from any stage of
testing may not predict results of later stages. In addition, if results
of any clinical trial fail to meet the Company's requirements, the study
plan for such compound may be adjusted or another compound may be
substituted, either of which may result in delays in future clinical
studies. Unfavorable clinical trials results could result in cancellation
of future clinical studies.
The Company has established relationships to manufacture the limited
quantities of its products required for human clinical trials. However,
the Company will need to finance and construct manufacturing facilities or
find other means of securing adequate production capacity before any
product approved for marketing may be launched. No assurance can be given
that the Company can successfully develop any of its products for marketing
or that it can successfully manufacture commercial quantities of any
products that are approved for marketing. Inherent in the fact that
CoCensys is an early stage biopharmaceutical company are a range of
additional risks, including the Company's history of losses, the risk of
technological and commercial competition, uncertainties associated with
obtaining and enforcing patents and protecting proprietary technology and
the risk of regulatory change, among others.
13
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COCENSYS, INC.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 1996.
14
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COCENSYS, INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
CoCensys, Inc.
Date: May 14, 1996 By: /s/ DANIEL L. KORPOLINSKI
---------------- -------------------------------------
Daniel L. Korpolinski
President and Chief Executive Officer
(Acting Principal Financial Officer)
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10Q FOR THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,650
<SECURITIES> 16,809
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,242
<PP&E> 5,252
<DEPRECIATION> 2,394
<TOTAL-ASSETS> 28,321
<CURRENT-LIABILITIES> 8,100
<BONDS> 308
0
0
<COMMON> 22
<OTHER-SE> 19,844
<TOTAL-LIABILITY-AND-EQUITY> 28,321
<SALES> 0
<TOTAL-REVENUES> 1,631
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30
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