<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, 1999
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
4, 1999 was 14,967,746.
<PAGE>
AKSYS, LTD.
FORM 10-Q
For the Quarterly Period Ended September 30, 1999
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- ----------------------------------------------------------------------------------------------------------------
PART 1 - FINANCIAL INFORMATION Page
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 1999 (Unaudited)
and December 31, 1998............................................................................ 3
Consolidated Statements of Operations for the Three- and Nine-Month
Periods Ended September 30, 1999 and 1998 (Unaudited)............................................ 4
Consolidated Statements of Cash Flows for the Nine-Month Periods
Ended September 30, 1999 and 1998 (Unaudited).................................................... 5
Notes to Consolidated Financial Statements (Unaudited)........................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................................. 7-10
Item 3. Quantitative and Qualitative Disclosures About Market Risk....................................... 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 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,757,816 $ 8,671,576
Short-term investments 13,519,714 11,588,692
Interest receivable 374,166 81,358
Prepaid expenses 114,488 85,660
Other current assets 187,656 99,200
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets 19,953,840 20,526,486
- ---------------------------------------------------------------------------------------------------------------------------
Long-term investments 780,000 780,000
Property and equipment, net 3,121,777 4,369,924
Other assets 250,957 265,425
- ---------------------------------------------------------------------------------------------------------------------------
$ 24,106,574 $ 25,941,835
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- ---------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 893,703 $ 2,109,409
Accrued liabilities 299,607 407,441
Deferred revenue 5,523,393 -
- ---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 6,716,703 2,516,850
- ---------------------------------------------------------------------------------------------------------------------------
Other long-term liabilities 142,386 123,041
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,859,089 2,639,891
- ---------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, par value $.01 per share, 1,000,000
shares authorized, 0 shares issued and outstanding
in 1999 and 1998 - -
Common stock, par value $.01 per share, 50,000,000
shares authorized, 14,933,079 and 14,758,542 shares
issued and outstanding in 1999 and 1998, respectively 149,331 147,585
Additional paid-in capital 70,268,483 69,831,490
Accumulated other comprehensive income 12,803 13,797
Deficit accumulated during development stage (53,183,132) (46,690,928)
- ---------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 17,247,485 23,301,944
- ---------------------------------------------------------------------------------------------------------------------------
$ 24,106,574 $ 25,941,835
- ---------------------------------------------------------------------------------------------------------------------------
</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, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Cumulative
from
Jan. 18, 1991
(inception)
Three months ended Sept. 30, Nine months ended Sept. 30, through
--------------------------------- --------------------------------
1999 1998 1999 1998 Sept. 30, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Joint development income $ 1,335,536 $ 1,000,000 $ 8,476,607 $ 1,000,000 $ 9,476,607
- -----------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Research and development 4,778,713 3,990,353 11,289,572 10,377,636 50,703,009
Business development 288,531 237,100 1,412,436 608,332 4,548,854
General and administrative 1,143,882 771,495 3,011,919 2,446,745 14,197,830
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 6,211,126 4,998,948 15,713,927 13,432,713 69,449,693
- -----------------------------------------------------------------------------------------------------------------------------------
Operating loss (4,875,590) (3,998,948) (7,237,320) (12,432,713) (59,973,086)
- -----------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest income 312,655 406,202 745,116 1,352,354 6,748,694
Interest expense - - - - (23,591)
Other income - - - - 67,884
- -----------------------------------------------------------------------------------------------------------------------------------
312,655 406,202 745,116 1,352,354 6,792,987
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss $ (4,562,935) $ (3,592,746) $ (6,492,204) $ (11,080,359) $ (53,180,099)
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss per share, basic and diluted $ (0.31) $ (0.24) $ (0.44) $ (0.76) $ (9.10)
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 14,886,412 14,709,205 14,843,754 14,626,780 5,841,958
- -----------------------------------------------------------------------------------------------------------------------------------
</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 Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Cumulative
from
Jan. 18, 1991
(inception)
through
1999 1998 Sept. 30, 1999
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (6,492,204) $ (11,080,359) $ (53,180,099)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 820,371 633,530 3,065,536
Adjustment of fixed asset carrying value 950,000 - 950,000
Issuance of stock in exchange for services rendered - - 69,550
Changes in assets and liabilities:
Interest receivable (292,808) 18,751 (374,166)
Prepaid expenses (28,828) (51,677) (114,758)
Other current assets (88,456) (28,200) (187,656)
Accounts payable (1,215,706) (264,669) 893,703
Deferred revenue 5,523,393 - 5,523,393
Accrued liabilities (107,834) (34,344) 433,215
Other (41,882) (34,251) (509,681)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (973,954) (10,841,209) (43,430,963)
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from maturities of investments 10,719,671 32,913,708 106,843,008
Purchases of investments (12,650,693) (28,793,117) (121,150,265)
Purchases of property and equipment (447,523) (1,064,476) (6,722,839)
Organizational costs incurred - - (19,595)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (2,378,545) 3,056,115 (21,049,691)
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock,
net of issuance costs 438,739 5,156,439 58,005,895
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 - - (103,521)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 438,739 5,156,439 70,238,470
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (2,913,760) (2,628,655) 5,757,816
Cash and cash equivalents at beginning of period 8,671,576 8,150,612 -
- -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,757,816 $ 5,521,957 $ 5,757,816
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
AKSYS, LTD. AND SUBSIDIARY
(a development stage enteprise)
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, 1998, 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, 1999 are not necessarily
indicative of results that ultimately may be achieved for the entire year
ending December 31, 1999. These financial statements should be read in
conjunction with the financial statements and notes thereto for the year
ended December 31, 1998, included in the Company's Annual Report on Form 10-
K filed with the Securities and Exchange Commission on March 31, 1999.
(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) Co-Development and License Agreement with Teijin Limited
On June 21, 1999, the Company entered into a co-development and license
agreement (the "Agreement") with Teijin Limited of Osaka, Japan. Under the
terms of the Agreement, Teijin paid $14 million to Aksys and committed to a
future royalty payment in exchange for rights to manufacture and sell the
PHD System in Japan. The Company has recognized $8.5 million of revenue
from the Agreement, with the balance of the $14 million received recorded as
deferred revenue at September 30, 1999. Over the next 12 months, the
Company will recognize revenue to the extent the Company incurs development
costs related to the joint development of the next generation PHD System to
be marketed in the US, Japan and worldwide.
(4) Comprehensive Income
Other comprehensive income is comprised of the following:
<TABLE>
<CAPTION>
Three months ended Nine months ended
Sept. 30, Sept. 30,
------------------------- --------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss $(4,562,935) $(3,592,746) $(6,492,204) $(11,080,359)
Foreign currency
translation adjustment 486 287 (994) (495)
----------- ----------- ----------- ------------
Comprehensive income $(4,562,449) $(3,592,459) $(6,493,198) $(11,080,854)
=========== =========== =========== ============
</TABLE>
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. The Company has developed the Aksys PHD Personal
Hemodialysis System (the "PHD System"), which is designed to enable patients to
perform daily hemodialysis at alternate sites, such as the patient's home. The
Company has never generated sales revenue and has incurred losses since its
inception. At September 30, 1999, the Company had a deficit accumulated during
the development stage of $53.2 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
For the quarter ended September 30, 1999, the Company reported a net loss of
$4.6 million ($0.31 per share), compared with a net loss of $3.6 million ($0.24
per share) for the quarter ended September 30, 1998. For the nine months ended
September 30, 1999 and 1998, net losses were $6.5 million ($0.44 per share) and
$11.1 million ($0.76 per share), respectively. The decrease in net losses for
the quarter and nine months ended September 30, 1999, compared with the same
periods last year, is primarily due to joint development income related to the
co-development and license agreement (the "Agreement") entered into with Teijin
Limited during the quarter ended June 30, 1999.
Joint development income. During the quarter ended September 30, 1999, the
- -------------------------
Company recognized $1.3 million of revenue from the Agreement. For the nine
months ended September 30, 1999, revenue recognition under the Agreement totaled
$8.5 million. At the time of signing, Aksys received $14 million. The balance
of the funds received is recorded as deferred revenue at September 30, 1999,
and will be recognized as revenue over the next 12 months to the extent the
Company incurs development costs related to the joint development of the next
generation PHD System to be marketed in the US, Japan and worldwide
Operating expenses. Operating expenses for the quarter and nine months ended
- -------------------
September 30, 1999 were $6.2 and $15.7 million, respectively, compared with $5.0
million and $13.4 million for the comparable periods in 1998. Research and
development expenses increased $0.8 million for the quarter and $0.9 million for
the nine months ended September 30, 1999. During the quarter ended September 30,
1999, the Company wrote the carrying value of the PHD Systems with alternative
commercial applications that will be used primarily for the clinical trial to
zero, and also reduced the carrying value of components to be used for future
commercial manufacturing. The total amount of these adjustments, which had no
impact on cash flows, was $950,000.
Business development expenses remained relatively constant during the quarter
ended September 30, 1999, as compared to the quarter ended September 30, 1998,
and increased $0.8 million to $1.4 million during the nine months ended
September 30, 1999. The primary factor in the increase in year-to-date business
development expenses is the cost related to execution of the Teijin agreement.
7
<PAGE>
General and administrative expenses increased $0.4 million to $1.1 million
during the quarter ended September 30, 1999, and increased $0.6 million to $3.0
million for the nine months ended September 30, 1999. The quarter and
year-to-date increases are primarily attributable to transition costs of hiring
a new President and CEO during the current quarter.
Interest income. Interest income for the quarter ended September 30, 1999 was
- ----------------
$0.3 million, compared with $0.4 million for the quarter ended September 30,
1998. For the nine months ended September 30, 1999, interest income decreased
$0.6 million to $0.7 million. The decrease is attributed to the corresponding
decrease in cash and investments, which were used to support the Company's
development efforts.
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, 1999, the Company
had received net offering proceeds from public and private sales of equity
securities of approximately $70.3 million. Since its inception in 1991 through
September 30, 1999, the Company made $6.7 million of capital expenditures and
used $43.4 million in cash to support its operations. At September 30, 1999,
the Company had cash, cash equivalents and short-term investments of $19.3
million, working capital of $13.2 million and long-term investments of $0.8
million.
The Company expects that the majority of cash expended on operations will be
used to (i) purchase PHD Systems to be used in clinical trials, (ii) fund
product testing and validation, and (iii) conduct clinical studies using the PHD
System. 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, 1999 are sufficient to finance the
Company's operations, except for working capital needs related to commercial
production of machines, through the date the Company expects to receive 510(k)
approval of the PHD System.
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 will 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 was successful in marketing its products
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.
8
<PAGE>
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, the extent and results of 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.
The Company has not generated taxable income to date. At September 30, 1999,
the net operating losses available to offset future taxable income were
approximately $56 million. Because the Company has experienced ownership
changes, future utilization of the carryforwards may be limited in any one
fiscal year pursuant to Internal Revenue Code regulations. The carryforwards
expire at various dates beginning in 2008. As a result of the annual
limitation, a portion of these carryforwards may expire before ultimately
becoming available to reduce federal income tax liabilities.
Note on Forward-Looking Information
Certain statements in this Form 10-Q and in 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) 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, (iii) changes
in GMP requirements, (iv) 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, (v) the uncertainty
regarding the effectiveness and ultimate market acceptance of the PHD System,
the Company's primary product in development, (vi) changing market conditions,
(vii) the need to further establish the clinical benefits of daily hemodialysis,
(viii) 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, (ix)
the potential adverse impact of
9
<PAGE>
possible changes to Medicare reimbursement policies and rates, (x) the Company's
dependence on key personnel and on patents and proprietary information, and (xi)
risks related to the regulatory approval process. Regulatory risks include the
timing, scope and results of the Company's clinical trials, and whether and when
the Company will obtain clearance from the FDA of a 510(k) pre-market
notification or PMA (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. 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the Company's market risk during the
nine-month period ended September 30, 1999. For additional information refer to
Item 7A in the Company's Annual Report on Form 10-K for the year ended December
31, 1998.
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 August 30, 1999
(99.2) Press Release of the Company, Issued October 21, 1999
(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 12, 1999 By: /s/ William C. Dow
----------------- -------------------
William C. Dow
President, Chief Executive Officer
and Director
Date: November 12, 1999 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 August 30, 1999
99.2 Press Release of the Company, Issued October 21, 1999
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 Sept. 30, Nine months ended Sept. 30,
----------------------------------- -------------------------------------
1999 1998 1999 1998
--------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Net loss $ (4,562,935) $ (3,592,746) $ (6,492,204) $ (11,080,359)
- --------------------------------------------------------------------------------------------------------------------------
Weighted average common
shares outstanding 14,886,412 14,709,205 14,843,754 14,626,780
- --------------------------------------------------------------------------------------------------------------------------
Net loss per share, basic and diluted $ (0.31) $ (0.24) $ (0.44) $ (0.76)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Exhibit 99.1
Contact:
Richard B. Egen
Chairman
(847) 229-2020
AKSYS APPOINTS WILLIAM DOW PRESIDENT
AND CHIEF EXECUTIVE OFFICER
Lincolnshire, IL -- August 30, 1999 -- Aksys, Ltd. (NASDAQ: AKSY), a pioneer
in innovative dialysis systems, today announced the appointment of William C.
Dow as its President and Chief Executive Officer, succeeding Lawrence H.N.
Kinet.
William Dow brings to Aksys a proven track record of successful leadership in
early-stage companies during 25 years in the medical device and service
industries. He has had extensive experience in guiding the development and
market introduction of complex medical devices, employing both hardware and
disposables in a combination similar to that used in the kidney dialysis field.
Most recently, he has been President and Chief Executive Officer of PLC Medical
Systems, Inc., a pioneer in the development of products used to perform
transmyocardial revascularization (TMR), a new medical treatment for patients
suffering from coronary artery disease. Working with leading researchers and
premier heart surgery centers around the world, PLC developed the world's first
FDA-approved TMR laser device, a sophisticated system known as The Heart Laser.
(TM)
Prior to joining PLC, Mr. Dow had been the President and Chief Executive Officer
of Deknatel Snowden Pencer Worldwide, Inc., a $100 million medical device
manufacturer of surgical products used primarily in the cardiovascular area,
which is now part of Genzyme Corporation. During his four year tenure, he
achieved sales growth of over 20% and doubled operating profits. Previous
career assignments included positions of increasing responsibility in marketing
and sales with a series of medium and large size U.S. and internationally based,
global health care companies, including Griffith Micro Science, Kendall, Terumo
and American Hospital Supply.
Mr. Dow stated, "I am delighted to be joining Aksys at such a pivotal time in
the development of its breakthrough PHD kidney dialysis technology. It is not
often that one has the opportunity to work with a product that we believe not
only will be beneficial to the patient, but will also be economically
advantageous to payors. With the PHD System's therapeutic benefits, and the
promise it holds to reduce the overall cost of treating dialysis patients, its
potential is tremendously exciting."
Lawrence H.N. Kinet's resignation as President and Chief Executive Officer, and
as a member of the Board of Directors is effective September 1, 1999. Mr.
Kinet, however, will continue to serve as a consultant to the Company.
Mr. Kinet said, "Through the first half of 1999, Aksys has made great progress.
We expanded our strategic alliance with Teijin and received a $14 million cash
payment. This important development along with the recent IDE approval by the
FDA has generated increased momentum
<PAGE>
for the PHD System and allowed me to accelerate my own personal timetable.
Accordingly, the Board and I agreed that it was extremely important to identify
new leadership as expeditiously as possible to shepherd the PHD System through
the clinical trial process and for filing of the 510K. I am confident that a
smooth transition will take place which will help assure continued progress on
the timeline already established for completion of these next critical
milestones, and for the successful introduction of the PHD System to the
market."
Aksys, Ltd. is developing hemodialysis products and services for patients
suffering from kidney failure. The Company's lead product in development, the
PHD 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, and risks related to the regulatory
approval process. Regulatory risks include the timing, scope and results of the
Company's clinical trials, and 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.
###
<PAGE>
Exhibit 99.2
Contact:
William C. Dow
President and CEO
(847) 229-2222
AKSYS REPORTS THIRD QUARTER RESULTS
Lincolnshire, IL -- October 21, 1999 -- Aksys, Ltd. (NASDAQ: AKSY), a pioneer
in innovative dialysis systems, today reported results for the third quarter and
nine months ended September 30, 1999.
For the third quarter, the Company reported a net loss of $4.6 million, or $0.31
per share, compared with a net loss of $3.6 million, or $0.24 per share, for the
third quarter a year ago. Operating expenses increased by approximately $1.2
million to $6.2 million, due primarily to costs incurred in preparation for the
clinical evaluation of the PHD System. Expenses were partially offset by the
recognition of $1.3 million of fee income related to the co-development and
licensing agreement with Teijin Limited of Osaka, Japan. Interest income
decreased from $406,000 to $313,000 due to cash and investments being expended
to support the Company's development efforts. At September 30, 1999, the
Company had total cash and investments of $20.1 million.
For the nine months ended September 30, 1999, the Company reported a net loss of
$6.5 million, or $0.44 per share, compared with a net loss of $11.1 million, or
$0.76 per share, for the same period last year. The current year's net loss
resulted from joint development and licensing income of $8.5 million, being more
than offset by total operating expenses of $15.7 million. Expenses supported
the Company's efforts to complete the final phases of engineering for its PHD
System, and the necessary clinical trials and documentation to advance progress
through the FDA approval process. Interest income for the period was $745,000
versus $1,352,000 for the first nine months of fiscal 1998.
William Dow, President and Chief Executive Officer, said, "Having received IDE
approval for the PHD System early in the third quarter, the Aksys management
team has turned its attention to human clinical trials which began in early
September. Building on our current momentum, we anticipate the successful
completion of these clinical trials toward the middle of next year. We will
also work in parallel on preparing documentation for the 510(k) filing with the
U.S. Food and Drug Administration."
<PAGE>
Aksys, Ltd. is developing hemodialysis products and services for patients
suffering from kidney failure. The Company's lead product in development, the
PHD 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, and risks related to the regulatory
approval process. Regulatory risks include the timing, scope and results of the
Company's clinical trials, and 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.
-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,
----------------------------------- -----------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Joint development and licensing income $ 1,335,000 $ 1,000,000 $ 8,477,000 $ 1,000,000
-------------- -------------- -------------- --------------
Operating expenses:
Research and development 4,779,000 3,990,000 11,290,000 10,378,000
Business development 288,000 237,000 1,412,000 608,000
General and administrative 1,144,000 772,000 3,012,000 2,447,000
-------------- -------------- -------------- --------------
Total operating expenses 6,211,000 4,999,000 15,714,000 13,433,000
-------------- -------------- -------------- --------------
Operating loss (4,876,000) (3,999,000) (7,237,000) (12,433,000)
Interest income 313,000 406,000 745,000 1,352,000
-------------- -------------- -------------- --------------
Net loss $ (4,563,000) $ (3,593,000) $ (6,492,000) $ (11,081,000)
============== ============== ============== ==============
Net loss per share, basic and diluted $ (0.31) $ (0.24) $ (0.44) $ (0.76)
============== ============== ============== ==============
Weighted average shares outstanding 14,886,000 14,709,000 14,844,000 14,627,000
============== ============== ============== ==============
</TABLE>
SELECTED BALANCE SHEET DATA
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------- --------------
<S> <C> <C>
Cash and short-term investments $ 19,278,000 $ 20,260,000
Working capital 13,237,000 18,010,000
Long-term investments 780,000 780,000
Total assets 24,107,000 25,942,000
Total liabilities 6,859,000 2,640,000
Stockholders' equity 17,248,000 23,302,000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 5,758
<SECURITIES> 14,300
<RECEIVABLES> 374
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,954
<PP&E> 5,848
<DEPRECIATION> 2,726
<TOTAL-ASSETS> 24,107
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<BONDS> 0
0
0
<COMMON> 149
<OTHER-SE> 17,098
<TOTAL-LIABILITY-AND-EQUITY> 24,107
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<TOTAL-REVENUES> 8,477
<CGS> 0
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<INCOME-CONTINUING> (6,492)
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</TABLE>
