<PAGE>
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, 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 August
9, 1999 was 14,870,260.
<PAGE>
AKSYS, LTD.
FORM 10-Q
For the Quarterly Period Ended June 30, 1999
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PART 1 - FINANCIAL INFORMATION Page
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 1999 (Unaudited)
and December 31, 1998............................................ 3
Consolidated Statements of Operations for the Three- and Six-Month
Periods Ended June 30, 1999 and 1998 (Unaudited)................. 4
Consolidated Statements of Cash Flows for the Six-Month Periods
Ended June 30, 1999 and 1998 (Unaudited)......................... 5
Notes to Consolidated Financial Statements....................... 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
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 1999 1998
- ------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,119,665 $ 8,671,576
Short-term investments 8,947,796 11,588,692
Interest receivable 180,301 81,358
Prepaid expenses 141,808 85,660
Other current assets 202,016 99,200
- ------------------------------------------------------------------------------------------------------
Total current assets 23,591,586 20,526,486
- ------------------------------------------------------------------------------------------------------
Long-term investments 2,296,080 780,000
Property and equipment, net 4,220,563 4,369,924
Other assets 252,863 265,425
- ------------------------------------------------------------------------------------------------------
$ 30,361,092 $ 25,941,835
======================================================================================================
Liabilities and Stockholders' Equity
- ------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 1,438,856 $ 2,109,409
Accrued liabilities 229,512 407,441
Deferred revenue 6,858,929 --
- ------------------------------------------------------------------------------------------------------
Total current liabilities 8,527,297 2,516,850
- ------------------------------------------------------------------------------------------------------
Other long-term liabilities 136,561 123,041
- ------------------------------------------------------------------------------------------------------
Total liabilities 8,663,858 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, 14,842,948 and 14,758,542 shares
issued and outstanding in 1999 and 1998, respectively 148,429 147,585
Additional paid-in capital 70,156,685 69,831,490
Accumulated other comprehensive income 12,317 13,797
Deficit accumulated during development stage (48,620,197) (46,690,928)
- ------------------------------------------------------------------------------------------------------
Total stockholders' equity 21,697,234 23,301,944
- ------------------------------------------------------------------------------------------------------
$ 30,361,092 $ 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 Six-Month Periods Ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
===============================================================================================================================
Cumulative
from
Jan. 18, 1991
Three months ended June 30, Six months ended June 30, (Inception)
---------------------------- ------------------------- through
1999 1998 1999 1998 June 30, 1999
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Joint development income $ 7,141,071 $ - $ 7,141,071 $ - $ 8,141,071
- -------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Research and development 3,061,992 3,464,451 6,510,859 6,387,283 45,924,296
Business development 770,137 111,495 1,123,905 371,232 4,260,323
General and administrative 911,662 759,826 1,868,037 1,675,250 13,053,948
- -------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 4,743,791 4,335,772 9,502,801 8,433,765 63,238,567
- -------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 2,397,280 (4,335,772) (2,361,730) (8,433,765) (55,097,496)
- -------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest income 187,881 458,064 432,461 946,152 6,436,039
Interest expense -- -- -- -- (23,591)
Other income -- -- -- -- 67,884
- -------------------------------------------------------------------------------------------------------------------------------
187,881 458,064 432,461 946,152 6,480,332
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 2,585,161 $(3,877,708) $(1,929,269) $(7,487,613) $ (48,617,164)
- -------------------------------------------------------------------------------------------------------------------------------
Basic income (loss) per share $ 0.17 $ (0.26) $ (0.13) $ (0.51)
- --------------------------------------------------------------------------------------------------------------
Basic weighted average shares outstanding 14,835,371 14,669,054 14,822,029 14,584,885
- --------------------------------------------------------------------------------------------------------------
Diluted income (loss) per share $ 0.17 $ (0.26) $ (0.13) $ (0.51)
- --------------------------------------------------------------------------------------------------------------
Diluted weighted average shares outstanding 15,345,501 14,669,054 14,822,029 14,584,885
- --------------------------------------------------------------------------------------------------------------
</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, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Cumulative
from
Jan. 18, 1991
(inception)
through
1999 1998 June 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,929,269) $ (7,487,613) $ (48,617,164)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 542,469 427,341 2,787,634
Stock option expense -- -- 3,240
Issuance of stock in exchange for services rendered -- -- 69,550
Changes in assets and liabilities:
Interest receivable (98,943) 90,140 (180,301)
Prepaid expenses (56,148) (58,452) (142,078)
Other current assets (102,816) 200 (202,016)
Accounts payable (670,553) 46,453 1,438,856
Deferred revenue 6,858,929 -- 6,858,929
Accrued liabilities (177,929) (140,038) 363,120
Other (24,112) (31,392) (495,151)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 4,341,628 (7,153,361) (38,115,381)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from maturities of investments 10,662,202 20,590,000 98,764,233
Purchases of investments (9,537,386) (18,471,150) (110,015,652)
Purchases of property and equipment (344,394) (485,716) (6,619,710)
Organizational costs incurred -- -- (19,595)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 780,422 1,633,134 (17,890,724)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock,
net of issuance costs 326,039 5,150,800 57,893,195
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 326,039 5,150,800 70,125,770
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 5,448,089 (369,427) 14,119,665
Cash and cash equivalents at beginning of period 8,671,576 8,150,612 --
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 14,119,665 $ 7,781,185 $ 14,119,665
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
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, 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 six-month periods ended June 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 $7.0 million to AKSYS for the right to
manufacture and sell the PHD System in Japan. AKSYS is also entitled to
future royalty payments from future product sales in Japan. The $7.0
million has been recognized as revenue in the current period. Teijin also
paid AKSYS a $7.0 million co-development fee relating to the PHD System.
Use of the proceeds from the co-development fee is restricted to
development costs incurred on the PHD System and may not be used for other
general corporate purposes. Amounts paid under the co-development
arrangement are recognized as revenue as development costs on the PHD
System are incurred.
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/TM/ 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 June 30, 1999, the Company had a deficit accumulated during the
development stage of $48.6 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
For the quarter ended June 30, 1999, the Company reported net income of $2.6
million ($0.17 per share), compared with a net loss of $3.9 million ($0.26 per
share) for the quarter ended June 30, 1998. For the six months ended June 30,
1999 and 1998, net losses were $1.9 million ($0.13 per share) and $7.5 million
($0.51 per share), respectively. The net income for the current year quarter,
and the decrease in net loss for the six months ended June 30, 1999 compared
with the same period last year, is due to revenue recognition of $7.1 million
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 June 30, 1999, the Company
recognized $7.1 million of revenue from the Agreement. Under the terms of the
Agreement, Teijin paid $7.0 million to Aksys for the right to manufacture and
sell the PHD System in Japan. The $7.0 million has been recognized as revenue in
the current period. Teijin also paid Aksys a $7.0 million co-development fee
relating the PHD System. Amounts paid under the co-development arrangement are
recognized as revenue as development costs on the PHD System are incurred ($0.1
million during the quarter ended June 30, 1999).
Operating expenses. Operating expenses for the quarter and six months ended
June 30, 1999 were $4.7 and $9.5 million, respectively, compared with $4.3
million and $8.4 million for the comparable periods in 1998. The increases in
research and development expenses of $0.4 million for the quarter and $1.1
million for the six months ended June 30, 1999, were in support of the filing
and subsequent approval of an Investigational Device Exemption ("IDE") with the
U.S. Food and Drug Administration on March 31, 1999. The Company also completed
the manufacture of machines to be used in the clinical evaluation of the PHD
System.
Business development expenses increased $0.7 million to $0.8 million during the
quarter ended June 30, 1999, and increased $0.8 million to $1.1 million for the
six months then ended, as a result of costs related to the execution of the
Agreement.
7
<PAGE>
General and administrative expenses increased $0.1 million to $0.9 million for
the current year quarter, and increased $0.2 million to $1.9 million for the six
months ended June 30, 1999, in support of the Company's research and business
development activities.
Interest income. Interest income for the quarter ended June 30, 1999 was $0.2
million, compared with $0.4 million for the quarter ended June 30, 1998. For the
six months ended June 30, 1999, interest income decreased $0.5 million to $0.4
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 June 30, 1999, the Company had
received net offering proceeds from public and private sales of equity
securities of approximately $70.2 million. Since its inception in 1991 through
June 30, 1999, the Company made $6.6 million of capital expenditures and used
$38.1 million in cash to support its operations. At June 30, 1999, the Company
had cash, cash equivalents and short-term investments of $23.1 million, working
capital of $15.1 million and long-term investments of $2.3 million.
The Company estimates that during the full fiscal year 1999 it will spend
approximately $13 to $15 million for operations, clinical evaluation and
preparation for commercialization of the PHD System. The Company expects that
substantially all of this amount 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 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, 1999 are sufficient to
finance its operations through the time it receives 510(k) approval for the PHD
System. However, the Company will need to obtain additional financing for its
working capital needs related to production of PHD machines, as described below.
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 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. 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.
8
<PAGE>
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 June 30, 1999, the net
operating losses available to offset future taxable income were approximately
$52 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 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) the Company's need to achieve
manufacturing scale-up in a timely manner with its primary manufacturing
contractor, SeaMED Corporation, 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 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
9
<PAGE>
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 six-
month period ended June 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 Income (Loss) Per Share
(27) Financial Data Schedule
(99.1) Press Release of the Company, Issued May 25, 1999
(99.2) Press Release of the Company, Issued June 22, 1999
(99.3) Press Release of the Company, Issued July 15, 1999
(99.4) Press Release of the Company, Issued July 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: August 13, 1999 By: /s/ Lawrence H. N. Kinet
---------------- -------------------------------------
Lawrence H. N. Kinet
President and Chief Executive Officer
and Director
Date: August 13, 1999 By: /s/ Steven A. Bourne
---------------- -------------------------------------
Steven A. Bourne
Acting CFO
11
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- -------------------------------------------------------------------------------
11 Statement Regarding Computation of Net Income (Loss) Per Share
27 Financial Data Schedule
99.1 Press Release of the Company, Issued May 25, 1999
99.2 Press Release of the Company, Issued June 22, 1999
99.3 Press Release of the Company, Issued July 15, 1999
99.4 Press Release of the Company, Issued July 21, 1999
12
<PAGE>
AKSYS, LTD. AND SUBSIDIARY Exhibit 11
(a development stage enterprise)
Statement Regarding Computation of Net Income (Loss) Per Share
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
-------------------------------- -------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net income (loss) $ 2,585,161 $(3,877,708) $(1,929,269) $(7,487,613)
- -----------------------------------------------------------------------------------------------------------------------------------
Basic weighted average common
shares outstanding 14,835,371 14,669,054 14,822,029 14,584,885
- -----------------------------------------------------------------------------------------------------------------------------------
Basic income (loss) per share $ 0.17 $ (0.26) $ (0.13) $ (0.51)
- -----------------------------------------------------------------------------------------------------------------------------------
Dilutive effect of options outstanding under
treasury-stock method 510,130 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Diluted weighted average common shares outstanding 15,345,501 14,669,054 14,822,029 14,584,885
- -----------------------------------------------------------------------------------------------------------------------------------
Diluted income (loss) per share $ 0.17 $ (0.26) $ (0.13) $ (0.51)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
consolidated balance sheet as of June 30, 1999 and the consolidated statement of
operations for the six months ended June 30, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 14,120
<SECURITIES> 11,244
<RECEIVABLES> 180
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,592
<PP&E> 6,694
<DEPRECIATION> 2,473
<TOTAL-ASSETS> 30,361
<CURRENT-LIABILITIES> 8,527
<BONDS> 0
0
0
<COMMON> 148
<OTHER-SE> 21,549
<TOTAL-LIABILITY-AND-EQUITY> 30,361
<SALES> 0
<TOTAL-REVENUES> 7,141
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,503
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,929)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,929)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,929)
<EPS-BASIC> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
<PAGE>
Exhibit 99.1
Contact:
Lawrence H. N. Kinet
President and CEO
(847) 229-2222
AKSYS DIRECTOR RESIGNS, REMAINS A CONSULTANT
Lincolnshire, IL, May 25, 1999 -- Aksys, Ltd. (NASDAQ: AKSY), a pioneer in
innovative dialysis systems, today announced that Rod Kenley, the Company's
founder, has resigned as a Director of the Company but will continue to work
with Aksys as a consultant.
Lawrence H.N. Kinet, President and Chief Executive Officer, said "We are very
grateful to Rod for the important role he has played as founder and Director of
Aksys over the past six years and we look forward to an ongoing relationship
with him. We continue to make good progress toward completing final system
software validation and we expect our clinical evaluation process to begin by
the end of the third quarter."
Rod Kenley said, "Although I am no longer directly involved with this effort, I
believe that the PHD(TM) System will fulfill most of the requirements and
objectives on which the Company was founded. It is my expectation that the
system as currently designed will prove both safe and effective. We were all
very gratified with the conditional approval by the FDA of our IDE given the
enormous effort that went into it."
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, and risks related to the regulatory
approval process. Regulatory risks include whether and when the Company will
obtain final approval of an Investigational Device Exemption (IDE), 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.
###
15
<PAGE>
Exhibit 99.2
Contact:
Lawrence H. N. Kinet
President and CEO
(848) 229-2222
AKSYS EXPANDS PARTNERSHIP WITH TEIJIN IN JAPAN
Lincolnshire, IL, June 22, 1999 -- Aksys, Ltd. (NASDAQ: AKSY), a pioneer in
innovative dialysis systems, today announced an expanded relationship with its
strategic partner, Teijin Limited of Osaka, Japan. Under the terms of a new
agreement, Teijin has paid $14 million to Aksys, and committed to a royalty
payment, in order to obtain the license to manufacture and sell the PHD(TM)
System in Japan. The proceeds from this transaction will help assure that Aksys
has sufficient capital to guide the PHD System through the regulatory processes
in both the U.S. and Europe, and to complete development of a system which meets
the requirements of the Japanese market.
This agreement follows by 17 months the initial agreement between Aksys and
Teijin under which Teijin purchased approximately 500,000 shares of Aksys stock
and agreed to share development costs related to product registration and
regulatory approval of the PHD System in Japan.
Lawrence H.N. Kinet, President and Chief Executive Officer, said "Since
finalizing our initial agreement in early 1998, we have found Teijin's support
to be invaluable -- not only their expertise on issues related to the Japanese
marketplace, but also their engineering capabilities. We are delighted with
Teijin's interest in expanding our relationship to include a licensing agreement
for the development, manufacture and sale of the PHD System in Japan."
Mr. Kinet added, "We will work closely with Teijin and its engineering staff to
develop a PHD System suited for Japan as well as other major global dialysis
markets. Improvements made in this system will also allow us to improve the
reliability, performance and cost of the PHD System we plan to market in the
U.S. and Europe."
Mr. Toshimitsu Ishikawa, Managing Director, General Manager, Medical and
Pharmaceutical Group of Teijin Limited, said, "Since establishing our
partnership 17 months ago, we have been impressed with the technology
incorporated in the PHD System and Aksys' engineering staff. We look forward to
a PHD System, developed by both Teijin and Aksys engineers, which will make
daily home hemodialysis a reality in Japan."
16
<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, and risks related to the regulatory
approval process. Regulatory risks include whether and when the Company will
obtain final approval of an Investigational Device Exemption (IDE), 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.
###
17
<PAGE>
Exhibit 99.3
Contact:
Lawrence H. N. Kinet
President and CEO
(849) 229-2222
AKSYS' PHD(TM) SYSTEM RECEIVES IDE APPROVAL
Lincolnshire, IL, July 15, 1999 -- Aksys, Ltd. (NASDAQ: AKSY), a pioneer in
innovative dialysis systems, today reported that the U. S. Food and Drug
Administration (FDA) has granted final approval of the Company's filing for an
Investigational Device Exemption (IDE) related to its PHD Personal Hemodialysis
System. FDA approval of the IDE filing was necessary before Aksys could begin
the clinical evaluation process with its PHD System.
Aksys had filed the IDE during late March this year, and announced conditional
FDA approval, pending system software validation, on May 5. The Company is now
preparing the required number of systems to begin the clinical trial process
before the end of the third quarter. After completing the clinical evaluation,
Aksys will submit the patient data to the FDA with its 510(k) pre-market
notification, anticipated before the end of the second quarter of 2000.
Lawrence H.N. Kinet, President and Chief Executive Officer, stated, "We are
delighted with receiving final IDE approval of our PHD(TM) System. We are
looking forward to beginning the clinical trials, and making home hemodialysis a
reality for dialysis patients worldwide."
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, 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.
###
18
<PAGE>
Exhibit 99.4
Contact:
Lawrence H. N. Kinet
President and CEO
(850) 229-2222
AKSYS REPORTS SECOND QUARTER RESULTS
Lincolnshire, IL, July 21, 1999 -- Aksys, Ltd. (NASDAQ: AKSY), a pioneer in
innovative dialysis systems, today reported results for the second quarter and
six months ended June 30, 1999.
For the second quarter, the Company reported net income of $2.6 million, or
$0.17 per share, compared with a net loss of $3.9 million, or ($0.26) per share,
for the second quarter a year ago. The Company's operating expenses for the
quarter of $4.7 million were more than offset by the one-time recognition of
$7.1 million of fee income related to the co-development and licensing agreement
with Teijin Limited of Osaka, Japan. Comparing 1999's second quarter performance
with prior year's results, operating expenses increased by approximately
$400,000, due primarily to business development costs related to the Teijin
agreement. Interest income decreased from $458,000 to $188,000 due to cash and
investments being expended to support the Company's development efforts. At June
30, 1999, the Company had total cash and investments of $25.4 million.
Lawrence H.N. Kinet, President and Chief Executive Officer, said, "We continue
to make steady progress toward our goal of commercializing the PHD(TM) System
for dialysis patients. Several key events took place during the past three
months. Most recently, the FDA granted final IDE approval for the PHD System,
enabling us to move forward with the clinical evaluation process by the end of
the third quarter. We also expanded our alliance with Teijin, a leader in the
Japanese market for home health care and dialysis products, receiving $14
million in exchange for Teijin's right to manufacture and sell the PHD System in
Japan."
For the six months ended June 30, 1999, the Company reported a net loss of $1.9
million, or ($0.13) per share, compared with a net loss of $7.5 million, or
($0.51) per share, for the same period last year. The current year's net loss
resulted from joint development and licensing income of $7.1 million, being more
than offset by total operating expenses of $9.5 million. For the six months
ended June 30, 1999, operating expenses increased approximately $1.1 million
from the comparable period a year ago as the Company completed the final phases
of engineering for its PHD System and incurred costs to execute the Teijin
agreement. Interest income for the period was $433,000 versus $946,000 for the
first six months of fiscal 1998.
19
<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 -
20
<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,
------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Joint development and licensing income $ 7,141,000 $ - $ 7,141,000 $ -
----------- ----------- ----------- -----------
Operating expenses:
Research and development 3,062,000 3,464,000 6,511,000 6,388,000
Business development 770,000 112,000 1,124,000 371,000
General and administrative 912,000 760,000 1,868,000 1,675,000
----------- ----------- ----------- -----------
Total operating expenses 4,744,000 4,336,000 9,503,000 8,434,000
----------- ----------- ----------- -----------
Operating income (loss) 2,397,000 (4,336,000) (2,362,000) (8,434,000)
Interest income 188,000 458,000 433,000 946,000
----------- ----------- ----------- -----------
Net income (loss) $ 2,585,000 $(3,878,000) $(1,929,000) $(7,488,000)
=========== =========== =========== ===========
Basic income (loss) per share $ 0.17 $ (0.26) $ (0.13) $ (0.51)
=========== =========== =========== ===========
Basic weighted average shares outstanding 14,835,000 14,669,000 14,822,000 14,585,000
=========== =========== =========== ===========
Diluted income (loss) per share $ 0.17 $ (0.26) $ (0.13) $ (0.51)
=========== =========== =========== ===========
Diluted weighted average shares outstanding 15,346,000 14,669,000 14,822,000 14,585,000
=========== =========== =========== ===========
SELECTED BALANCE SHEET DATA
June 30, December 31,
1999 1998
----------- -----------
Cash and short-term investments $23,067,000 $20,260,000
Working capital 15,064,000 18,010,000
Long-term investments 2,296,000 780,000
Total assets 30,361,000 25,942,000
Total liabilities 8,664,000 2,640,000
Stockholders' equity 21,697,000 23,302,000
</TABLE>
