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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, 1997
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)
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.
$.001 PAR VALUE 22,517,321
(CLASS OF COMMON STOCK) (OUTSTANDING AT MAY 9, 1997)
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COCENSYS, INC.
TABLE OF CONTENTS
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Condensed Balance Sheets as of March 31, 1997
and December 31, 1996 3
Condensed Statements of Operations for the
three-month periods ended March 31, 1997 and 1996
and the period from inception (February 15, 1989)
through March 31, 1997 4
Condensed Statements of Cash Flows for the
three-month periods ended March 31, 1997 and 1996
and the period from inception (February 15, 1989)
through March 31, 1997 5
Notes to Condensed 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
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COCENSYS, INC.
(A development stage company)
CONDENSED BALANCE SHEETS
(In thousands, except share and par value amounts)
MARCH 31, DECEMBER 31,
1997 1996
------------ -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,195 $ 1,050
Short-term investments 11,079 16,949
Receivables from corporate partners 632 659
Other current assets 442 556
------------ -------------
TOTAL CURRENT ASSETS 14,348 19,214
Property and equipment, net 2,656 2,685
Notes receivable from officers 203 126
Other assets, net 26 26
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$ 17,233 $ 22,051
------------ -------------
------------ -------------
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,354 $ 1,437
Other accrued liabilities 1,974 2,556
Advances from corporate partners 99 446
Capital lease obligation - current portion 477 341
------------ -------------
TOTAL CURRENT LIABILITIES 3,904 4,780
Capital lease obligation, less current portion 275 284
Other liabilities 39 40
Commitments and contingencies
Stockholders' equity:
Preferred stock - $.001 par value,
5,000,000 shares authorized; 100,000 shares
Series B convertible issued and outstanding 7,000 7,000
Common stock - $.001 par value,
75,000,000 shares authorized; 22,495,769 shares
issued and outstanding at March 31, 1997 and
22,083,346 at December 31, 1996 95,909 93,986
Deficit accumulated during the development stage (89,243) (83,162)
Deferred compensation (639) (905)
Unrealized gain (loss) on investments (12) 28
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TOTAL STOCKHOLDERS' EQUITY 13,015 16,947
------------ -------------
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$ 17,233 $ 22,051
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See accompanying notes
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COCENSYS, INC.
(A development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
THREE MONTHS ENDED (FEBRUARY 15,
MARCH 31, 1989) TO
-------------------------- MARCH 31,
1997 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Co-promotion revenues from corporate partners $ 1,123 $ 798 $ 28,024
Co-development revenues from corporate partners 702 833 8,745
----------- ----------- -----------
Total revenues 1,825 1,631 36,769
----------- ----------- -----------
OPERATING EXPENSES
Research and development 5,432 4,823 73,604
Marketing, general and administrative 2,679 2,663 40,309
Acquired research and development and advances to Acea - - 14,879
----------- ----------- -----------
Total operating expenses 8,111 7,486 128,792
----------- ----------- -----------
----------- ----------- -----------
OPERATING LOSS (6,286) (5,855) (92,023)
Interest income 219 272 3,774
Interest expense (14) (30) (994)
----------- ----------- -----------
NET LOSS $ (6,081) $ (5,613) $ (89,243)
----------- ----------- -----------
----------- ----------- -----------
Net loss per share $ (0.27) $ (0.26)
----------- -----------
----------- -----------
Shares used in computing net loss per share 22,251 21,193
----------- -----------
----------- -----------
</TABLE>
See accompanying notes
4
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COCENSYS, INC.
(A development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
THREE MONTHS ENDED (FEBRUARY 15,
MARCH 31, 1989) TO
------------------------- MARCH 31,
1997 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (6,081) $ (5,613) $ (89,243)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 267 488 6,156
Amortization of deferred compensation 74 201 3,412
Issuance of stock and warrants for services - - 1,917
Loss on sale of fixed assets - - 26
Acquired research and development - - 12,279
Decrease (increase) in other current assets 114 (328) (514)
Decrease (increase) in receivable from corporate partner 27 - (632)
Increase (decrease) in advances from corporate partners (347) 1,547 99
Increase (decrease) in accounts payable and other accrued liabilities (665) (632) 3,092
---------- ---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (6,611) (4,337) (63,408)
---------- ---------- ----------
INVESTING ACTIVITIES
Decrease (increase) in short-term investments 5,830 (10,297) (11,092)
Purchase of property and equipment (238) (264) (5,863)
Increase in other assets and notes receivable from officers (77) (6) (385)
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 PROVIDED BY (USED IN) INVESTING ACTIVITIES 5,515 (10,567) (19,858)
---------- ---------- ----------
FINANCING ACTIVITIES
Net cash proceeds from issuance of common stock 2,115 14,676 60,900
Net cash proceeds from issuance of preferred stock - - 23,381
Proceeds from sale/leaseback of fixed assets and notes payable 334 253 4,567
Payments on capital lease obligations and notes payable (208) (270) (3,387)
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,241 14,659 85,461
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,145 (245) 2,195
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,050 6,895 -
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,195 $ 6,650 $ 2,195
---------- ---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 14 $ 30 $ 768
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</TABLE>
See accompanying notes
5
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COCENSYS, INC.
(A development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The interim financial information for the three-month periods ended March
31, 1997 and 1996 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
1996 Annual Report on Form 10-K for the year ended December 31, 1996.
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
Securities and Exchange Commission rules and regulations. Interim
results of operations for the three-month period ended March 31, 1997,
are not necessarily indicative of operating results to be expected for
the full year.
REVENUE AND EXPENSE RECOGNITION
See Notes 2, 3, 4 and 5 for revenue recognition policies related to
co-promotion and co-development revenues from corporate partners.
NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of
shares of common stock outstanding during the periods. Common stock
equivalents from stock options and warrants are excluded from the
calculation as their effect would be antidilutive.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 financial statements
to conform to the 1997 presentation.
2. 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
worldwide development and
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COCENSYS, INC.
(A development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
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, to United States neurologists
for the treatment of Alzheimer's disease.
The original Parke-Davis Promotion Agreement, entered into in October
1995, was terminated on December 31, 1996, when a revised promotion
agreement took effect. Under the original Parke-Davis Promotion
Agreement, the Company realized co-promotion revenues from its share of
sales of Cognex above certain baseline levels specified in the contract.
The agreement provided for funds to be prepaid to the Company each
quarter to cover training and operating expenses incurred by the CoCensys
sales force to promote Cognex. Under the revised Parke-Davis Promotion
Agreement, the Company realizes co-promotion revenues based upon the
number of prescriptions for Cognex written by certain targeted
neurologists and other doctors during each quarter, with a specified
minimum payment. The agreement provides that funds equal to the
specified minimum payment will be prepaid to the Company each quarter to
cover training and operating expenses to be incurred by the CoCensys
sales force to promote Cognex. The agreement is scheduled to terminate
December 31, 1997. Either party has the right to terminate the Promotion
Agreement earlier, without cause.
Under the Warner Collaboration Agreement, both companies are sharing
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. Warner-Lambert is obligated to pay its specified
portion of the development costs and to make certain milestone payments,
upon achievement of certain clinical development and regulatory
milestones, for each development compound. Payments received under the
Warner Collaboration Agreement will be recognized as co-development
revenues by the Company.
Pursuant to the Warner Collaboration Agreement, Warner-Lambert purchased
$2.0 million of CoCensys common stock in October 1995 and an additional
$2.0 million of CoCensys common stock in March 1997.
3. 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 to neurologists in
the United States for the treatment of Parkinson's disease. Effective
January 1, 1997, the initial agreement was superceded by the 1997
Somerset Promotion Agreement which is subject to certain provisions for
early termination and renewal. Under the 1997 Somerset Promotion
Agreement, CoCensys has the exclusive right to detail Eldepryl to certain
neurologists and other physicians in the United States. Under the 1997
Somerset Promotion Agreement, CoCensys is compensated based upon the
number of details undertaken and gross sales of Eldepryl.
7
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COCENSYS, INC.
(A development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Compensation paid to CoCensys is subject to adjustment in the event of
governmental or other third-party actions that may materially affect it.
To finance a portion of its sales force to promote Eldepryl, CoCensys
receives quarterly advances from Somerset, which are subject to repayment
on a pro rata basis if specified numbers of details are not undertaken by
the Company on behalf of Somerset.
4. DEVELOPMENT AND COMMERCIALIZATION AGREEMENT WITH G.D. SEARLE & CO.
In May 1996, the Company entered into an agreement with G.D. Searle & Co.
("Searle") to co-develop and co-promote the Company's lead compound for
the treatment of insomnia along with its back-up compounds. Pursuant to
the agreement, Searle paid a $3.0 million license fee and purchased
100,000 shares of the Company's Series B Convertible Preferred Stock for
$7.0 million. The license fee was recognized as co-development revenue in
1996. The preferred stock is convertible to common stock on May 17, 1998,
or earlier at the Company's discretion. The number of shares issuable
upon conversion shall be equal to $7.0 million divided by the then
current common stock price (subject to certain minimum and maximum
limits).
Under the agreement, both companies are obligated to pay a portion of the
development costs of the compound and its back-up compounds. In
addition, the Company will receive nonrefundable milestone payments upon
the occurrence of certain events in the development of the compound. The
parties will co-promote any products derived from the collaboration in
the United States, while Searle will have the right to develop, register
and market the products in the rest of the world, subject to specified
royalty payments.
5. MARKETING AND DEVELOPMENT COLLABORATION WITH NOVARTIS PHARMA, A.G.
In May 1994, the Company entered into a marketing and development
collaboration with Novartis Pharma, A.G. (formerly Ciba-Geigy Limited)
for the co-promotion by the Company of certain Novartis products and the
development and commercialization of ACEA 1021, a compound being
developed by the Company. This collaboration consisted of the Novartis
Promotion Agreement and the Novartis Research and Development Agreement.
Pursuant to the Novartis Promotion Agreement, CoCensys established a
sales force to co-promote and market certain Novartis products in the
United States initially to psychiatrists. The agreement provided for the
advance of funds to the Company to cover a portion of the expenses
incurred by the CoCensys sales force in promoting the Novartis products.
CoCensys realized co-promotion revenues from its share of sales of
Novartis products above certain baseline levels specified in the
contract. The Novartis Promotion Agreement terminated at the end of
1996.
In connection with the Novartis Research and Development Agreement,
Novartis purchased $7.0 million of CoCensys common stock and agreed to
make certain nonrefundable milestone payments in
8
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COCENSYS, INC.
(A development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
connection with specified events in the course of the development of ACEA
1021. Novartis has advised the Company that it will not continue the
development of ACEA 1021. The agreement will terminate in October 1997.
There can be no assurance that the Company will be able to secure another
partner to continue the development of ACEA 1021.
6. SUBSEQUENT EVENT
On May 12, 1997, the Company entered into a development and
commercialization agreement for Co 2-6749, its lead anxiolytic compound,
with Wyeth-Ayerst Laboratories, the pharmaceutical division of American
Home Products Corporation. Under the terms of the agreement, Wyeth-Ayerst
will pay CoCensys upfront payments of $5 million in licensing fees and $5
million to purchase convertible preferred stock. Additionally, CoCensys
will receive specified milestone payments dependent upon the achievement
of key development events and $3 million per year for up to three years
to identify back-up compounds. Wyeth-Ayerst will be responsible for the
development of Co 2-6749. The Company and Wyeth-Ayerst will co-promote
any resulting product in certain market segments in the United States,
while Wyeth-Ayerst will have rights to develop, register and market any
drugs derived from the collaboration in the rest of the world, subject to
royalty payments. The preferred stock will be convertible into common
stock after May 12, 1999, into a number of shares of common stock equal
to $5 million divided by the conversion price, which will be determined
at the time of conversion (subject to certain minimum and maximum limits).
9
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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 1996
ANNUAL REPORT ON FORM 10-K.
OVERVIEW
CoCensys, Inc. is a biopharmaceutical company dedicated to the discovery,
development, marketing and sales of small molecule drugs to treat
neurological and psychiatric disorders. The Company's product discovery
and development programs are focused on the exploration of novel
receptors and enzymes and their ligands and inhibitors through three
technology platforms: GABA receptor enhancers or Epalons; glutamate
antagonists; and ICE-like protease inhibitors.
The Company's lead Epalon compound, CCD 1042 (ganaxolone), an
anticonvulsant and anti-migraine compound, is in separate Phase II
clinical trials for pediatric epilepsy, adult epilepsy and migraine. The
Company anticipates that CCD 3693, its lead compound for the treatment of
insomnia, will enter Phase I trials in the second quarter of 1997.
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 co-promotion
activities 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, 1997, the
Company's accumulated deficit was approximately $89.2 million.
RESULTS OF OPERATIONS
The Company recognized $1,123,000 in co-promotion revenues for the
three-month period ended March 31, 1997, compared to $798,000 during the
same period in 1996. This increase is due primarily to higher revenues
under the Parke-Davis Promotion Agreement. Due to the nature of its
co-promotion agreements, the Company has historically reported a
disproportionately large share of its co-promotion revenues during the
fourth quarter. The decrease in revenue for the first quarter of 1997 of
$3.1 million as compared to the fourth quarter of 1996 is attributable
principally to this factor.
The Company recognized $702,000 in co-development revenues for the
three-month period ended March 31, 1997 compared to $833,000 for the
same period of 1996, principally as a result of lower co-development
revenue from to the ACEA 1021 program, partially offset by increased
funding from Searle related to the development of CCD 3693.
10
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Research and development ("R&D") expenses increased to $5.4 million for
the three-month period ended March 31, 1997, from $4.8 million in the
first quarter of the prior year. This increase resulted primarily from
higher product development costs and additional staffing required to
support Phase II clinical trials of CCD 1042 in migraine and epilepsy and
pre-clinical development of CCD 3693. These increases were partially
offset by lower product development costs associated with the ACEA 1021
program. Clinical development of ACEA 1021 was suspended in April 1997
following the decision of the Company's development partner, Novartis
Pharma A.G. ("Novartis"), not to continue participation in the
development of ACEA 1021. The Company does not intend to resume clinical
development of ACEA 1021 until it secures another partner.
Marketing, general and administrative expense was $2.7 million for the
first quarter in each of 1997 and 1996.
Interest income was $219,000 for the three-month period ended March 31,
1997 compared to $272,000 for the same quarter in 1996. The decrease was
due to lower cash and short-term investment balances in the first quarter
of the current year when compared to the same quarter a year earlier.
LIQUIDITY AND CAPITAL RESOURCES
From its inception in February 1989 through March 31, 1997, the Company
has financed its operations primarily through private and public
offerings of its equity securities, raising net proceeds of approximately
$84.3 million through sales of these securities. As of March 31, 1997,
the Company's balance of cash, cash equivalents and short-term
investments totaled $13.3 million, compared to $18.0 million at December
31, 1996. In March 1997, Warner Lambert purchased $2.0 million of
the Company's common stock. Subsequent to the end of the first quarter,
the Company received $10.7 million from Wyeth-Ayerst and American Home
Products, its parent, related to the Co 2-6749 development and
commercialization agreement signed on May 12, 1997.
As of March 31, 1997, the Company had invested $5.9 million in leasehold
improvements, laboratory and computer equipment and office furnishings
and equipment. The Company has financed $3.0 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 Parke-Davis Promotion Agreement, the Company promotes
Parke-Davis' CNS drug, Cognex-Registered Trademark-, to neurologists in
the United States. Funds are prepaid to the Company quarterly to cover
the training and operating expenses incurred by the Company's sales force
in promoting Cognex. The Company will recognize co-promotion revenues
from its share of sales of Cognex above certain base levels specified in
the contract.
Pursuant to the Warner Collaboration Agreement, Warner-Lambert is
obligated to make certain milestone payments for each compound selected
for development, as well as pay for its share of
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development costs. Also pursuant to this contract, Warner-Lambert
purchased $2.0 million of CoCensys common stock in October 1995 and an
additional $2.0 million of CoCensys common stock in March 1997.
Pursuant to the 1997 Somerset Promotion Agreement, the Company promotes
Somerset's drug Eldepryl-Registered Trademark- to certain neurologists
and other physicians 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.
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 with 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 for
at least the next 12 months. 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.
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
In addition to those discussed above, the Company is subject to the
following risks:
The Company's product candidates 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. The
Company's strategy for the development, clinical testing and
commercialization of its products includes entering into various
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collaborations with corporate partners, licensors, licensees and others.
There can be no assurance that the Company will be able to negotiate
further collaborative arrangements on acceptable terms, if at all, or
that its current collaborative efforts will be successful. 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 could result in
cancellation of future clinical studies. Inherent in the fact that
CoCensys is an early stage biopharmaceutical company are a range of
additional risks, including those associated with obtaining and enforcing
patents and protecting proprietary technology and the risk of regulatory
change, among others.
The securities markets have from time to time experienced significant
price and volume fluctuations that may be unrelated to the operating
performance of particular companies. In addition, the market prices of
the common stock of many publicly traded biopharmaceutical companies have
in the past been, and can in the future be expected to be, especially
volatile. Announcements of technological innovations or new products by
the Company or its competitors, developments or disputes concerning
patents or proprietary rights, publicity regarding actual or potential
medical results relating to products under development by the Company or
its competitors, regulatory developments in both the United States and
foreign countries, public concern as to the safety of biotechnology
products and economic and other external factors, as well as
period-to-period fluctuations in the Company's financial results, may
have a significant impact on the market price of the Company's common
stock. 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 results of clinical trials results
could cause result in cancellation of future clinical studies.
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, 1997.
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: 5-13-97 By: /s/ F. Richard Nichol, Ph.D.
- ------------- -------------------------------
F. Richard Nichol, Ph.D.
President and Chief Executive Officer
(PRINCIPAL EXECUTIVE OFFICER)
Date: 5-13-97 By: /s/ Peter E. Jansen
- ------------- -------------------------------
Peter E. Jansen
Chief Financial Officer
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
15
<TABLE> <S> <C>
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