<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 September 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
_________________________________________________________
Commission File 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 November
5, 1998 was 14,722,599.
<PAGE>
AKSYS, LTD.
FORM 10-Q
For the Quarterly Period Ended September 30, 1998
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------------
PART 1 -- FINANCIAL INFORMATION Page
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 1998 (Unaudited)
and December 31, 1997................................................. 3
Consolidated Statements of Operations for the Three- and Nine-Month
Periods Ended September 30, 1998 and 1997 (Unaudited).................. 4
Consolidated Statements of Cash Flows for the Nine-Month Periods
Ended September 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>
- -----------------------------------------------------------------------------------------
September 30, December 31,
Assets 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
(Unaudited)
Current assets:
Cash and cash equivalents $ 5,521,957 $ 8,150,612
Short-term investments 15,444,118 21,045,044
Interest receivable 379,810 398,561
Prepaid expenses 137,004 85,326
Other current assets 63,151 34,951
- -----------------------------------------------------------------------------------------
Total current assets 21,546,040 29,714,494
- -----------------------------------------------------------------------------------------
Long-term investments 4,288,684 2,808,349
Property and equipment, net 4,359,433 3,866,157
Other non-current assets 268,688 258,251
- -----------------------------------------------------------------------------------------
$ 30,462,845 $ 36,647,251
- -----------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- -----------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 666,211 $ 930,880
Accrued liabilities 316,779 351,113
- -----------------------------------------------------------------------------------------
Total current liabilities 982,990 1,281,993
- -----------------------------------------------------------------------------------------
Other long-term liabilities 116,281 77,269
- -----------------------------------------------------------------------------------------
Total liabilities 1,099,271 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, 14,722,599 and 14,002,663 shares
issued and outstanding in 1998 and 1997, respectively 147,226 140,027
Additional paid-in capital 69,822,836 64,673,596
Foreign currency translation adjustment 10,072 10,567
Deficit accumulated during development stage (40,616,560) (29,536,201)
- -----------------------------------------------------------------------------------------
Total stockholders' equity 29,363,574 35,287,989
- -----------------------------------------------------------------------------------------
$ 30,462,845 $ 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 Nine-Month Periods Ended September 30, 1998 and 1997
(Unaudited)
[CAPTION]
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
Cumulative
from
Jan. 18, 1991
(inception)
Three months ended Sept 30, Nine months ended Sept. 30 through
--------------------------- --------------------------
1998 1997 1998 1997 Sept. 30, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Joint development income $ 1,000,000 $ -- $ 1,000,000 $ -- $ 1,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Research and development 3,990,353 2,500,695 10,377,636 8,406,015 34,448,540
Business development 237,100 248,202 608,332 741,431 2,559,496
General and administrative 771,495 848,994 2,446,745 2,936,328 10,327,909
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 4,998,948 3,597,891 13,432,713 12,083,774 47,335,945
- -----------------------------------------------------------------------------------------------------------------------------------
Operating loss (3,998,948) (3,597,891) (12,432,713) (12,083,774) (46,335,945)
- -----------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest income 406,202 535,557 1,352,354 1,769,113 5,678,125
Interest expense -- -- -- -- (23,591)
Other income -- -- -- -- 67,884
- -----------------------------------------------------------------------------------------------------------------------------------
406,202 535,557 1,352,354 1,769,113 5,722,418
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss $(3,592,746) $(3,062,334) $(11,080,359) $(10,314,661) $(40,613,527)
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss per share, basic and diluted $ (0.24) $ (0.22) $ (0.76) $ (0.75)
- -------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 14,709,205 13,787,108 14,626,780 13,766,980
- -------------------------------------------------------------------------------------------------------------------
</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 Nine-Month Periods Ended September 30, 1998 and 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative
from
Jan. 18, 1991
(inception)
through
1998 1997 Sept. 30, 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(11,080,359) $(10,314,661) $ (40,613,527)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 633,530 491,522 1,917,846
Stock option expense -- -- 3,240
Issuance of stock in exchange for services rendered -- -- 69,550
Changes in assets and liabilities:
Interest receivable 18,751 260,205 (379,810)
Prepaid expenses (51,677) (10,840) (137,273)
Other current assets (28,200) 21,662 (63,151)
Accounts payable (264,669) (688,806) 666,211
Accrued liabilities (34,334) (111,727) 404,615
Other (34,251) (110,742) (412,823)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (10,841,209) (10,463,387) (38,545,122)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of investments 32,913,708 29,788,298 94,097,045
Purchases of investments (28,793,117) (15,658,277) (113,840,620)
Purchases of property and equipment (1,064,476) (1,994,556) (5,960,469)
Organizational costs incurred -- -- (19,595)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 3,056,115 12,135,465 (25,723,639)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock,
net of issuance costs 5,156,439 40,231 57,558,143
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 -- (30,107) (103,521)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 5,156,439 10,124 69,790,718
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (2,628,655) 1,682,202 5,521,957
Cash and cash equivalents at beginning of period 8,150,612 10,900,059 --
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,521,957 $ 12,582,261 $ 5,521,957
==================================================================================================================================
</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 nine-month periods ended September 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, other than income from a joint
development agreement, and has incurred losses since its inception. At
September 30, 1998, the Company had a deficit accumulated during the development
stage of $40.6 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 nine months ended September 30, 1998 were $3.6
million ($0.24 per share) and $11.1 million ($0.76 per share), respectively,
compared to $3.1 million ($0.22 per share) and $10.3 million ($0.75 per share),
respectively, for the same periods in 1997. The increase in net loss during the
quarter and nine months ended September 30, 1998 compared to the same periods
last year is due to increased operating expenses, offset by income from the
Company's joint development agreement with Teijin Limited of Osaka, Japan. 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 nine months ended September 30, 1998.
Joint development income. During the quarter ended September 30, 1998, the
Company received a milestone payment of $1.0 million under the terms of a joint
development agreement entered into during January 1998. The milestone payment
signifies the completion of a written strategy for Aksys and Teijin to develop
the PHD System for use in Japan.
7
<PAGE>
Operating expenses. Operating expenses for the quarter and nine months ended
September 30, 1998 were $5.0 million and $13.4 million, respectively, compared
to $3.6 million and $12.1 million, respectively, for the quarter and nine months
ended September 30, 1997. In comparing the operating expenses for the quarter
and nine months ended September 30, 1998 to the same periods in 1997, increases
in research and development spending were partially offset by reductions in
general and administrative and business development expenses.
Other income (expense). Net interest income for the quarter and nine months
ended September 30, 1998 was $0.4 million and $1.4 million, respectively,
compared to $0.5 million and $1.8 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 nine months ended September 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 September 30, 1998, the Company
had received net offering proceeds from public and private sales of equity
securities of approximately $70.0 million. Since its inception in 1991 through
September 30, 1998, the Company made $6.0 million of capital expenditures and
used $38.5 million in cash to support its product development efforts and
working capital needs. At September 30, 1998, the Company had cash, cash
equivalents and short-term investments of $21.0 million, working capital of
$20.6 million and long-term investments of $4.3 million.
The Company estimates that during 1998 it will spend approximately $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 and (ii) fund product testing and validation
including the purchase of PHD Systems for use in clinical trials from such
independent contractors. 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 September 30, 1998, together with
potential future milestone payments expected to be received from Teijin Limited
under the terms of the joint development agreement, are sufficient to finance
the Company's operations through commercialization of the PHD System. The
Company will require additional working capital to produce and sell the PHD
System in commercial quantities. There are no assurances that the Company will
be able to obtain such working capital at terms acceptable to the Company.
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 and services. The Company currently intends to finance the working
capital requirements associated
8
<PAGE>
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) premarket notification, and
equivalent regulatory clearances for Europe and Japan, and what additional
9
<PAGE>
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 October 12, 1998
(99.2) Press Release of the Company, Issued October 26, 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: November 11, 1998 By: /s/ Lawrence H. N. Kinet
----------------- ------------------------
Lawrence H.N. Kinet
Chairman and Chief Executive Officer
and Director
Date: November 11, 1998 By: /s/ Steven A. Bourne
----------------- --------------------
Steven A. Bourne
Controller
11
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- --------------------------------------------------------------------------------
<S> <C>
11 Statement Regarding Computation of Net Loss Per Share
27 Financial Data Schedule
99.1 Press Release of the Company, Issued October 12, 1998
99.2 Press Release of the Company, Issued October 26, 1998
</TABLE>
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 Nine months ended
-------------------------------- --------------------------------
Sept. 30, 1998 Sept. 30, 1997 Sept. 30, 1998 Sept. 30, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net loss $(3,592,746) $(3,062,334) $(11,080,359) $(10,314,661)
- ----------------------------------------------------------------------------------------------------------
Weighted average common
shares outstanding 14,709,205 13,787,108 14,626,780 13,766,980
- ----------------------------------------------------------------------------------------------------------
Net loss per share, basic and diluted $ (0.24) $ (0.22) $ (0.76) $ (0.75)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the consolidated balance sheet as of September 30, 1998 and the consolidated
statement of operations for the nine months ended September 30, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,522
<SECURITIES> 19,733
<RECEIVABLES> 380
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,546
<PP&E> 6,036
<DEPRECIATION> 1,677
<TOTAL-ASSETS> 30,463
<CURRENT-LIABILITIES> 983
<BONDS> 0
0
0
<COMMON> 147
<OTHER-SE> 29,217
<TOTAL-LIABILITY-AND-EQUITY> 30,463
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 13,433
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (11,080)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,080)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,080)
<EPS-PRIMARY> (0.76)
<EPS-DILUTED> (0.76)
</TABLE>
<PAGE>
Exhibit 99.1
Contacts:
Lawrence H.N. Kinet
Chairman and CEO
Aksys, Ltd.
(847) 229-2222
For Immediate Release
- ---------------------
AKSYS NAMES BRUCE DOBSCH SENIOR VICE PRESIDENT
OF RESEARCH AND DEVELOPMENT
Lincolnshire, IL, October 12, 1998 - Aksys, Ltd. (NASDAQ: AKSY) today announced
the appointment of Bruce Dobsch, an experienced executive from DuPont and Dade
Behring, as Senior Vice President of Research and Development.
During his 28 years with DuPont and Dade Behring, Mr. Dobsch held positions of
increasing responsibility within the company's R&D organization. Most recently
as Vice President, Research and Development of Dade Behring's Chemistry and
Engineering Skill Center, Mr. Dobsch led a staff of several hundred people and
had responsibility for all North American engineering and worldwide chemistry
development activities. He directed the effort to bring the company's Dimension
chemistry analyzer from concept to a major revenue producer for Dade Behring.
Previously, while Director of Research and Development, Mr. Dobsch streamlined
the R&D function as he increased productivity and was a member of the business
leadership committee for DuPont Diagnostics.
Lawrence H.N. Kinet, Chairman and CEO, stated "Bruce Dobsch has successfully
taken complex medical diagnostic equipment from concept to full
commercialization. He led the development of sophisticated diagnostic Systems
with on-board software and related disposable products through the 510(k)
approval process at the Food and Drug Administration. His experience with
DuPont and Dade Behring has direct application to our product development
efforts at Aksys. His proven technical skills and multi-disciplinary leadership
experience will be helpful to us as we prepare for the clinical evaluation and
worldwide commercialization of the Aksys PHD(TM) Personal Hemodialysis System."
Kinet concluded, "Bruce's experience will be invaluable in managing the final
system integration phases of the PHD System, one of the remaining development
tasks to be completed prior to our filing with the FDA. We are on track for the
IDE submission, which we currently expect to occur mid- fourth quarter of this
year."
<PAGE>
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.
# # #
<PAGE>
Exhibit 99.2
Contact:
Lawrence H. N. Kinet
Chairman and CEO
Aksys, Ltd.
(847) 229-2222
AKSYS REPORTS THIRD QUARTER RESULTS
Lincolnshire, IL, October 26, 1998--Aksys, Ltd. (NASDAQ: AKSY), a pioneer in
innovative dialysis systems, today reported results for the third quarter and
nine months ended September 30, 1998.
For the third quarter ended September 30, 1998, the Company reported a net loss
of $3.6 million, or ($0.24) per share, compared with a net loss of $3.1 million,
or ($0.22) per share, for the third quarter a year ago. During the quarter,
Aksys received joint development income of $1.0 million representing the first
milestone payment from Teijin Limited under the terms of a joint development
agreement between the two companies. Offsetting the license income was a $1.5
million increase in research and development expenditures as Aksys gears up for
clinical evaluation of its PHD(TM) Personal Hemodialysis System. The Company's
use of cash to fund operations resulted in a reduction in interest bearing
investments, hence a decrease in net interest income from $536,000 during last
year's third quarter to $406,000 for the third quarter of 1998. At September
30, 1998, the Company had total cash and short-term securities of $21.0 million
and long term investments of $4.3 million.
For the nine months ended September 30, 1998, the Company reported a net loss of
$11.1 million or ($0.76) per share, compared to a net loss of $10.3 million, or
($0.75) per share, for last year's first nine months. The increase in net loss
is due to higher levels of research and development spending compared with a
year ago.
Aksys has received notice that the U.S. Patent and Trademark Office and
equivalent foreign patent offices have awarded the Company 7 and 9 new patents,
respectively, related to the Company's PHD(TM) Personal Hemodialysis System.
These patent awards are in addition to 17 U.S. and 2 foreign patents which Aksys
now owns, and 4 U.S. patents to which the Company has exclusive rights.
-more-
<PAGE>
AKSYS REPORTS THIRD Quarter Results
Page 2
Lawrence H.N. Kinet, Chairman and Chief Executive Officer, said, "I am quite
pleased with the progress we made during the third quarter toward the filing of
our IDE, which we currently expect to occur mid-fourth quarter of this year.
Having brought Bruce Dobsch on board during the quarter as our Senior Vice
President of R&D, Aksys' technical team is fully staffed and totally focused on
completing our filing. The $1.0 million milestone payment which we received
from Teijin during the third quarter and the Company's aggressive management of
our general and administrative spending enabled us to accelerate R&D
expenditures related to the IDE filing and subsequent clinical evaluation."
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 September 30, Nine months ended September 30,
----------------------------- --------------------------------
1998 1997 1998 1997
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
Joint development income $ 1,000,000 $ - $ 1,000,000 $ -
----------- ------------ ------------ -------------
Operating expenses:
Research and development 3,990,000 2,501,000 10,377,000 8,406,000
Business development 237,000 248,000 608,000 742,000
General and administrative 772,000 849,000 2,447,000 2,936,000
----------- ------------ ------------ -------------
Total operating expenses 4,999,000 3,598,000 13,432,000 12,084,000
----------- ------------ ------------ -------------
Operating loss (3,999,000) (3,598,000) (12,432,000) (12,084,000)
Net interest income 406,000 536,000 1,352,000 1,769,000
----------- ------------ ------------ -------------
Net loss $(3,593,000) $ (3,062,000) $(11,080,000) $(10,315,000)
=========== ============ ============ ==============
Net loss per share - basic and diluted $ (0.24) $ (0.22) $ (0.76) $ (0.75)
=========== ============ ============ =============
Weighted average shares outstanding 14,709,000 13,787,000 14,627,000 13,767,000
=========== ============ ============ =============
</TABLE>
SELECTED BALANCE SHEET DATA
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Cash and short-term investments $ 20,966,000 $ 29,196,000
Working capital 20,563,000 28,433,000
Long-term investments 4,289,000 2,808,000
Total assets 30,463,000 36,647,000
Total liabilities 1,099,000 1,359,000
Stockholders' equity 29,364,000 35,288,000
</TABLE>
19
