<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 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 Number 0-28290
AKSYS, LTD.
(Exact name of registrant as specified in its charter)
Delaware 36-3890205
(State of incorporation) (I. R. S. Employer
Identification No.)
Two Marriott Drive, Lincolnshire, Illinois 60069
(address of principal executive offices) (Zip Code)
Registrant's telephone number 847-229-2020
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 twelve months, and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
The number of shares of Common Stock, $.01 Par Value, outstanding as of July 31,
1998 was 14,701,786.
<PAGE>
AKSYS, LTD.
FORM 10-Q
For the Quarterly Period Ended June 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
============================================================================================
PART 1 - FINANCIAL INFORMATION Page
Item 1. Consolidated Financial Statements
<S> <C> <C>
Consolidated Balance Sheets as of June 30, 1998 (Unaudited)
and December 31, 1997.................................................... 3
Consolidated Statements of Operations for the Three- and Six-Month
Periods Ended June 30, 1998 and 1997 (Unaudited)......................... 4
Consolidated Statements of Cash Flows for the Six-Month Periods
Ended June 30, 1998 and 1997 (Unaudited)................................. 5
Notes to Consolidated Financial Statements............................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................... 7-10
PART II - OTHER INFORMATION
Item 2. Changes in Securities.................................................... 11
Item 6. Exhibits and Reports on Form 8-K......................................... 11
SIGNATURES........................................................................ 11
INDEX TO EXHIBITS................................................................. 12
</TABLE>
2
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
=========================================================================================
June 30, December 31,
Assets 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
(Unaudited)
Current assets:
Cash and cash equivalents $ 7,781,185 $ 8,150,612
Short-term investments 15,444,118 21,045,044
Interest receivable 308,421 398,561
Prepaid expenses 143,778 85,326
Other current assets 34,751 34,951
- -----------------------------------------------------------------------------------------
Total current assets 23,712,253 29,714,494
- -----------------------------------------------------------------------------------------
Long-term investments 6,290,425 2,808,349
Property and equipment, net 3,964,999 3,866,157
Other non-current assets 275,962 258,251
- -----------------------------------------------------------------------------------------
$ 34,243,639 $ 36,647,251
=========================================================================================
Liabilities and Stockholders' Equity
- -----------------------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 977,333 $ 930,880
Accrued liabilities 211,075 351,113
- -----------------------------------------------------------------------------------------
Total current liabilities 1,188,408 1,281,993
- -----------------------------------------------------------------------------------------
Other long-term liabilities 104,838 77,269
- -----------------------------------------------------------------------------------------
Total liabilities 1,293,246 1,359,262
- -----------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, par value $.01 per share, 1,000,000
shares authorized, 0 shares issued and outstanding -- --
Common stock, par value $.01 per share, 50,000,000
shares authorized, 14,698,036 and 14,002,663 shares
issued and outstanding in 1998 and 1997, respectively 146,980 140,027
Additional paid-in capital 69,817,443 64,673,596
Foreign currency translation adjustment 9,785 10,567
Deficit accumulated during development stage (37,023,815) (29,536,201)
- -----------------------------------------------------------------------------------------
Total stockholders' equity 32,950,393 35,287,989
- -----------------------------------------------------------------------------------------
$ 34,243,639 $ 36,647,251
=========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
Consolidated Statements of Operations
For the Three- and Six-Month Periods Ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from
Jan. 18, 1991
Three months ended June 30, Six months ended June 30, (inception)
--------------------------- ------------------------- through
1998 1997 1998 1997 June 30, 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating expenses:
Research and development $ 3,464,451 $ 3,131,253 $ 6,387,283 $ 5,905,320 $ 30,458,187
Business development 111,495 244,645 371,232 493,229 2,322,396
General and administrative 759,826 997,920 1,675,250 2,087,335 9,556,414
- ----------------------------------------------------------------------------------------------------------------------------
Operating Loss (4,335,772) (4,373,818) (8,433,765) (8,485,884) (42,336,997)
- ----------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest income 458,064 592,984 946,152 1,233,556 5,271,923
Interest expense - - - - (23,591)
Other income - - - - 67,884
- ----------------------------------------------------------------------------------------------------------------------------
458,064 592,984 946,152 1,233,556 5,316,216
- ----------------------------------------------------------------------------------------------------------------------------
Net loss $ (3,877,708) $ (3,780,834) $ (7,487,613) $ (7,252,328) $ (37,020,781)
- ----------------------------------------------------------------------------------------------------------------------------
Net loss per share $ (0.26) $ (0.27) $ (0.51) $ (0.53)
- ---------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 14,669,054 13,767,396 14,584,885 13,756,750
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from
Jan. 18, 1991
(inception)
through
1998 1997 June 30, 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (7,487,613) $ (7,252,328) $ (37,020,781)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 427,341 298,969 1,711,657
Stock option expense - - 3,240
Issuance of stock in exchange for services rendered - - 69,550
Changes in assets and liabilities:
Interest receivable 90,140 274,052 (308,421)
Prepaid expenses (58,452) (27,153) (144,048)
Other current assets 200 (95,117) (34,751)
Accounts payable 46,453 5,783 977,333
Accrued liabilities (140,038) 39,165 298,911
Other (31,392) (80,679) (409,964)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (7,153,361) (6,837,308) (34,857,274)
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of investments 20,590,000 18,788,298 81,773,337
Purchases of investments (18,471,150) (11,412,540) (103,518,653)
Purchases of property and equipment (485,716) (1,356,092) (5,381,709)
Organizational costs incurred - - (19,595)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 1,633,134 6,019,666 (27,146,620)
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock,
net of issuance costs 5,150,800 36,010 57,552,504
Proceeds from issuance of preferred stock - - 12,336,096
Proceeds from issuance of note payable - - 41,792
Repayment of notes payable - - (41,792)
Repayment of lease obligation - (20,071) (103,521)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 5,150,800 15,939 69,785,079
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (369,427) (801,703) 7,781,185
Cash and cash equivalents at beginning of period 8,150,612 10,900,059 -
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 7,781,185 $ 10,098,356 $ 7,781,185
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
Notes to Consolidated Financial Statements--Unaudited
(1) Basis for Presentation
The consolidated financial statements of Aksys, Ltd. and Subsidiary (the
"Company") presented herein are unaudited, other than the consolidated
balance sheet at December 31, 1997, which is derived from audited financial
statements. The interim financial statements and notes thereto have been
prepared pursuant to the rules of the Securities and Exchange Commission
for quarterly reports on Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. In the opinion of management, the interim financial statements
reflect all adjustments consisting of normal, recurring adjustments
necessary for a fair statement of the results for interim periods. The
operations for the three- and six-month periods ended June 30, 1998 are not
necessarily indicative of results that ultimately may be achieved for the
entire year ending December 31, 1998. These financial statements should be
read in conjunction with the financial statements and notes thereto for the
year ended December 31, 1997, included in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 30,
1998.
(2) Principles of Consolidation
On April 18, 1996 the Company established a subsidiary in Tokyo, Japan. The
consolidated financial statements include the accounts of the Company and
the wholly-owned subsidiary. All material intercompany transactions and
balances have been eliminated in consolidation.
(3) Computation of Net Loss per Share
Net loss per share is based on the weighted average number of shares
outstanding and excludes unexercised stock options using the treasury stock
method because the effect is anti-dilutive.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Since its inception in January 1991, the Company has been engaged in the
development of hemodialysis products and services for patients suffering from
end stage renal disease, commonly known as chronic kidney failure. The Company
has developed the Aksys Personal Hemodialysis System (the "PHD(tm) system"),
which is designed to enable patients to perform daily hemodialysis at alternate
sites, such as the patient's home. By greatly reducing the complexity and
inconvenience of dialysis, the PHD system allows users to gain the significant,
clinically demonstrated benefits of dialyzing on a more frequent basis than the
traditional standard of three times per week. The Company believes that its
products and services will provide a superior alternative to currently available
kidney dialysis treatment modalities by providing better clinical outcomes,
lower overall costs and improved quality of life for dialysis patients.
The Company has never generated sales revenue and has incurred losses since its
inception. At June 30, 1998, the Company had a deficit accumulated during the
development stage of $37.0 million. The Company expects to incur additional
losses in the foreseeable future at least until such time, if ever, that it
obtains necessary regulatory clearances or approvals from the FDA to market the
PHD system in the United States or it is able to secure equivalent regulatory
approvals to market the PHD system in countries other than the United States.
Comparison of Results of Operations
Net losses for the quarter and six months ended June 30, 1998 were $3.9 million
($0.26 per share) and $7.5 million ($0.51 per share), respectively, compared to
$3.8 million ($0.27 per share) and $7.3 million ($0.53 per share), respectively,
for the same periods in 1997. The slight increase in net loss during the quarter
and six months ended June 30, 1998 compared to the same periods last year is due
to relatively constant operating expenses and a reduction in net interest
income. The Company's use of cash to fund operations resulted in a reduction of
interest bearing investments and a related decrease in interest income during
the quarter and six months ended June 30, 1998.
On a per share basis, losses were lower for the quarter and six months ended
June 30, 1998, compared to the quarter and six months ended June 30, 1997, due
to an increase in weighted average shares outstanding. The increase in weighted
average shares outstanding in 1998 is primarily attributable to an equity
investment in Aksys by Teijin Limited on January 16, 1998.
7
<PAGE>
Operating expenses. Operating expenses for the quarter and six months ended
June 30, 1998 were $4.3 million and $8.4 million, respectively, compared to $4.4
million and $8.5 million, respectively, for the quarter and six months ended
June 30, 1997. In comparing the operating expenses for the quarter and six
months ended June 30, 1998 to the same periods in 1997, increases in research
and development spending were offset by reductions in general and administrative
and business development expenses.
Other income (expense). Net interest income for the quarter and six months
ended June 30, 1998 was $0.5 million and $0.9 million, respectively, compared to
$0.6 million and $1.2 million, respectively, for the same periods last year. The
Company's use of cash to fund operations resulted in a reduction of interest
bearing investments and a related decrease in interest income during the quarter
and six months ended June 30, 1998.
Liquidity and Capital Resources
The Company has financed its operations to date primarily through public and
private sales of its equity securities. Through June 30, 1998, the Company had
received net offering proceeds from public and private sales of equity
securities of approximately $69.9 million. Since its inception in 1991 through
June 30, 1998, the Company made $5.4 million of capital expenditures and used
$34.9 million in cash to support its product development efforts and working
capital needs. At June 30, 1998, the Company had cash, cash equivalents and
short-term investments of $23.2 million, working capital of $22.5 million and
long-term investments of $6.3 million.
The Company estimates that during 1998 it will spend approximately $16 to $18
million for operations, manufacturing scale-up and commercialization of the PHD
system. The Company expects that substantially all of this amount will be used
to (i) purchase molds, tooling and other assets to be used by independent
contractors to produce the PHD system and pay for other preproduction costs of
such contractors payable by the Company, (ii) fund product testing and
validation including the purchase of PHD systems for use in clinical trials from
such independent contractors, (iii) conduct clinical studies using the PHD
system, (iv) establish and train a sales and marketing staff and (v) establish
and train a customer service and technical support staff. The Company expects to
continue to incur substantial expenses related to manufacturing scale-up and
commercialization of the PHD system and the protection of patent and other
proprietary rights. The Company believes that cash and investments as of June
30, 1998, together with future milestone payments to be received from Teijin
Limited under the terms of the joint development agreement, are sufficient to
finance the Company's operations, except for working capital needs related to
production of machines, through December 31, 1999.
Generally, the Company expects U.S. customers to purchase PHD systems and enter
into contracts whereby the Company will provide all products and services
related to the PHD systems for a single monthly price, which would include all
consumables, service and product support. As an alternative, U.S. customers may
enter into lease agreements for the PHD systems, under which the single monthly
price would also include a lease payment. The Company's present
commercialization plan for markets outside of the United States is to develop a
partnership in those markets to distribute the PHD system and related
consumables and service. Financing production of the PHD system in quantities
necessary for commercialization will require a significant investment in working
capital. This need for working capital is likely to increase to the extent that
demand for the PHD system increases. The Company would, therefore, have to rely
on sources of capital beyond cash generated from operations to finance
production of the PHD system even if the Company is successful in marketing its
products
8
<PAGE>
and services. The Company currently intends to finance the working capital
requirements associated with these arrangements through equipment and receivable
financing with a commercial lender. If the Company is unable to obtain such
equipment financing, it would need to seek other forms of financing, through the
sale of equity securities or otherwise, to achieve its business objectives. The
Company has not yet obtained a commitment for such equipment financing, and
there can be no assurance that the Company will be able to obtain equipment
financing or alternative financing on acceptable terms or at all.
The Company's funding needs will depend on many factors, including the timing
and costs associated with obtaining FDA clearance or approval, continued
progress in research and development, clinical studies, manufacturing scale-up,
the cost involved in filing and enforcing patent claims and the status of
competitive products. In the event that the Company's plans change, its
assumptions change or prove inaccurate or it is unable to obtain production
financing on commercially reasonable terms, the Company could be required to
seek additional financing sooner than currently anticipated. In addition, in the
future the Company will require substantial additional financing to fund full-
scale production and marketing of the PHD system and related services. The
Company has no current arrangements with respect to sources of additional
financing. There can be no assurance that FDA clearance or approval will be
obtained in a timely manner or at all or that additional financing will be
available to the Company when needed, on commercially reasonable terms, or at
all.
Year 2000 Program
The Company will continue to conduct a comprehensive review of its computer
systems to identify the systems that could be affected by the Year 2000 issue
and is developing an implementation plan to resolve any issues that may arise.
Any computer systems that the Company implements in the future will be
thoroughly analyzed to ensure that those systems are Year 2000 compliant. The
Company is not presently aware of any Year 2000 computer system issues that will
pose significant operational problems for the Company's computer systems.
However, if in the future the Company determines that modifications or
conversions of its computer systems are required, and if those modifications and
conversions of computer systems are not completed in a timely manner, the Year
2000 problem could have a material impact on the operations of the Company.
Note on Forward-Looking Information
Certain statements in this Form 10-Q and in the future filings made by the
Company with the Securities and Exchange Commission and in the Company's written
and oral statements made by or with the approval of an officer of the Company
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
and the Company intends that such forward-looking statements be subject to the
safe harbors created thereby. The words "believes," "expects," "estimates,"
"anticipates," and "will be," and similar words or expressions, identify
forward-looking statements made by or on behalf of the Company. These forward-
looking statements reflect the Company's views as of the date they are made with
respect to future events and financial performance, but are subject to many
uncertainties and factors which may cause the actual results of the Company to
be materially different from any future results expressed or implied by such
forward-looking statements. Examples of such uncertainties and factors include,
but are not limited to, (i) risks related to the failure to meet development and
manufacturing milestones on a timely basis, (ii) whether and when the Company
will obtain clearance from the FDA of a 510(k)
9
<PAGE>
premarket notification, and equivalent regulatory clearances for Europe and
Japan, and what additional clinical and other data the Company might have to
obtain in connection with seeking such clearances; (iii) the Company's need to
achieve manufacturing scale-up in a timely manner and its need to provide for
the efficient manufacturing of sufficient quantities of its products, (iv)
changes in GMP requirements, (v) the Company's need to develop the marketing,
distribution, customer service and technical support and other functions
critical to the success of the Company's business plan, (vi) the uncertainty
regarding the effectiveness and ultimate market acceptance of the PHD system,
the Company's primary product in development, (vii) changing market conditions,
(viii) the need to further establish the clinical benefits of daily
hemodialysis, (ix) the capital requirements necessary to fund the development
and commercialization of the Company's products and services and effectively
compete with its competitors, many of whom have substantially greater resources,
(x) the potential adverse impact of possible changes to Medicare reimbursement
policies and rates and (xi) the Company's dependence on key personnel and on
patents and proprietary information. The Company does not undertake any
obligation to update or revise any forward-looking statement made by it or on
its behalf, whether as a result of new information, future events, or otherwise.
10
<PAGE>
PART II -- OTHER INFORMATION
Item 2. Changes in Securities
none
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement Regarding Computation of Net Loss Per Share
(27) Financial Data Schedule
(99.1) Press Release of the Company, Issued July 21, 1998
(b) Reports on Form 8-K
none
Signatures
Pursuant to 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.
Aksys, Ltd.
Date: August 12, 1998 By: /s/ Lawrence H. N. Kinet
--------------- -------------------------------------
Lawrence H.N. Kinet
Chairman and Chief Executive Officer
and Director
Date: August 12, 1998 By: /s/ Steven A. Bourne
--------------- -------------------------------------
Steven A. Bourne
Controller
11
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
-----------------------------------------------------------------------------
11 Statement Regarding Computation of Net Loss Per Share
27 Financial Data Schedule
99.1 Press Release of the Company, Issued July 21, 1998
12
<PAGE>
AKSYS, LTD. AND SUBSIDIARY Exhibit 11
(a development stage enterprise) ----------
Statement Regarding Computation of Net Loss Per Share
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Three months ended Six months ended
----------------------------- -----------------------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net loss $ (3,877,708) $ (3,780,834) $ (7,487,613) $ (7,252,328)
- -------------------------------------------------------------------------------------------------
Weighted average common
shares outstanding 14,669,054 13,767,396 14,584,885 13,756,750
- -------------------------------------------------------------------------------------------------
Net loss per share $ (0.26) $ (0.27) $ (0.51) $ (0.53)
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
consolidated balance sheet as of June 30, 1998 and the consolidated statement of
operations for the six months ended June 30, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 7,781
<SECURITIES> 21,735
<RECEIVABLES> 308
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,712
<PP&E> 5,457
<DEPRECIATION> 1,492
<TOTAL-ASSETS> 34,244
<CURRENT-LIABILITIES> 1,188
<BONDS> 0
0
0
<COMMON> 147
<OTHER-SE> 32,803
<TOTAL-LIABILITY-AND-EQUITY> 34,244
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,434
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,488)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,488)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,488)
<EPS-PRIMARY> (0.51)
<EPS-DILUTED> (0.51)
</TABLE>
<PAGE>
Exhibit 99.1
Contact:
Lawrence H. N. Kinet
Chairman and CEO
Aksys, Ltd.
(847) 229-2222
For Immediate Release
- ---------------------
AKSYS REPORTS SECOND QUARTER RESULTS
Lincolnshire, IL, July 21, 1998 - Aksys, Ltd. (NASDAQ: AKSY), a pioneer in
innovative dialysis systems, today reported results for the second quarter and
six months ended June 30, 1998.
For the second quarter ended June 30, 1998, the Company reported a net loss of
$3,877,000, or ($0.26) per share, compared with a net loss of $3,781,000, or
($0.27) per share, for the second quarter a year ago. The decrease in the loss
per share resulted from an increase in weighted average common shares
outstanding for the quarter and year to date periods, primarily due to an equity
investment in Aksys by Teijin Limited. Overall, operating expenses remained
relatively constant year to year, as the increase in research and development
expenditures was more than offset by a reduction in business development and
general and administrative expenses. The Company's use of cash to fund
operations resulted in a reduction of interest bearing investments and hence a
decrease in net interest income from $593,000 during the second quarter a year
ago to $458,000 for the second quarter ended June 30, 1998. At quarter end, the
Company had total cash and short-term investments of $23.2 million and long-term
investments of $6.3 million.
For the six months ended June 30, 1998, the Company reported a net loss of
$7,488,000, or ($0.51) per share, versus a net loss of $7,252,000, or ($0.53)
per share, for the first six months of 1997. With operating expenses relatively
unchanged year to year, the slightly higher net loss is primarily a result of a
decrease in net interest income from $1,234,000 during the first six months last
year to $946,000 for the six-month period ended June 30, 1998.
On July 2, 1998, the Company signed the First Strategy Written Consent with its
Japanese partner, Teijin Limited. This represents the first development
milestone under the terms of the Joint Development Agreement between Aksys and
Teijin. The First Strategy identifies the time frame during which the
finalization of PHD System specifications, future clinical evaluation and market
launch are to take place in Japan. Under the terms of the Joint Development
Agreement, the signing of the First Strategy resulted in a $1,000,000 payment to
Aksys by Teijin.
Earlier this month, the Company completed the first "live" test of the PHD
System, having used it to successfully conduct a number of animal dialysis
treatments. While the PHD System has historically performed well in a
laboratory environment, this recent test represented the first "live"
application during which the PHD System consistently met performance
specifications.
-more-
<PAGE>
AKSYS REPORTS SECOND QUARTER RESULTS
Page 2
Lawrence H.N. Kinet, Chairman and Chief Executive Officer, said, "The
consummation of the First Strategy Written Consent with Teijin is a noteworthy
event for Aksys and signifies meaningful progress toward the successful
introduction of our PHD System in Japan. We are also pleased with the results
from the animal evaluation of the PHD System, the data from which will be useful
to our development efforts as we prepare for IDE submission and first human
use."
Kinet continued, "Over the last year we have made a number of additions to our
management team. The R&D team, in particular, has been strengthened over the
past year and was responsible for redefining our internal development process
and line of accountability. During that time, we have met or beaten every
milestone and are very much on track as we prepare to file for IDE approval by
the end of the third quarter or shortly thereafter, followed by a clinical
evaluation of the PHD System."
Aksys, Ltd. is developing hemodialysis products and services for patients
suffering from kidney failure. The Company's lead product in development, the
PHD(tm) System, is a next generation hemodialysis system designed to improve
clinical outcomes of patients and reduce mortality, morbidity and the associated
high cost of patient care. Further information is available on Aksys' website:
www.aksys.com.
This press release contains forward-looking statements that involve a number of
risks and uncertainties. The Company's actual results could differ materially
from the results identified or implied in any forward-looking statement and
these statements are based on the Company's views as of the date they are made
with respect to future events. Factors that could cause such a difference
include, but are not limited to, risks related to the failure to meet
development and manufacturing milestones on a timely basis, changes in GMP
requirements, changing market conditions, risks related to the regulatory
approval process, whether and when the Company will obtain clearance from the
FDA of a 510(K) pre-market notification and what additional clinical and other
data the Company might have to obtain in connection with seeking such clearance,
and risks associated with the timing and scope related to the commencement of
clinical trials based on an approved Investigational Device Exemption (IDE), a
prerequisite for the commencement of such trials.
- financial table to follow -
<PAGE>
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter ended June 30, Six months ended June 30,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues: $ 0 $ 0 $ 0 $ 0
----------- ----------- ----------- -----------
Operating expenses:
Research and development 3,464,000 3,131,000 6,388,000 5,905,000
Business development 111,000 245,000 371,000 493,000
General and administrative 760,000 998,000 1,675,000 2,088,000
----------- ----------- ----------- -----------
Total operating expenses 4,335,000 4,374,000 8,434,000 8,486,000
----------- ----------- ----------- -----------
Operating loss (4,335,000) (4,374,000) (8,434,000) (8,486,000)
Net interest income 458,000 593,000 946,000 1,234,000
----------- ----------- ----------- -----------
Net loss $(3,877,000) $(3,781,000) $(7,488,000) $(7,252,000)
=========== =========== =========== ===========
Net loss per share - basic and diluted $ (0.26) $ (0.27) $ (0.51) $ (0.53)
=========== =========== =========== ===========
Weighted average shares outstanding 14,669,000 13,767,000 14,585,000 13,757,000
=========== =========== =========== ===========
</TABLE>
SELECTED BALANCE SHEET DATA
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
Cash and short-term investments $23,225,000 $29,196,000
Working capital 22,524,000 28,433,000
Long-term investments 6,290,000 2,808,000
Total assets 34,244,000 36,647,000
Total liabilities 1,293,000 1,359,000
Stockholders' equity 32,951,000 35,288,000
</TABLE>
###
