<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 March 31, 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 May 10,
1999 was 14,832,948.
<PAGE>
AKSYS, LTD.
FORM 10-Q
For the Quarterly Period Ended March 31, 1999
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PART 1 - FINANCIAL INFORMATION Page
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of March 31, 1999 (Unaudited)
and December 31, 1998............................................ 3
Consolidated Statements of Operations for the Three-Month
Periods Ended March 31, 1999 and 1998 (Unaudited)................ 4
Consolidated Statements of Cash Flows for the Three-Month Periods
Ended March 31, 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.............................. 7-9
Item 3. Quantitative and Qualitative Disclosures About Market Risk....... 9
PART II - OTHER INFORMATION
Item 2. Changes in Securities .......................................... 10
Item 4. Submission of Matters to a Vote of Security Holders ............ 10
Item 6. Exhibits and Reports on Form 8-K................................ 10
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>
- --------------------------------------------------------------------------------
March 31, December 31,
Assets 1999 1998
- --------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,913,925 $ 8,671,576
Short-term investments 7,096,095 11,588,692
Interest receivable 135,262 81,358
Prepaid expenses 129,975 85,660
Other current assets 195,730 99,200
- --------------------------------------------------------------------------------
Total current assets 15,470,987 20,526,486
- --------------------------------------------------------------------------------
Long-term investments 780,000 780,000
Property and equipment, net 4,397,926 4,369,924
Other assets 262,178 265,425
- --------------------------------------------------------------------------------
$ 20,911,091 $ 25,941,835
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 1,602,095 $ 2,109,409
Accrued liabilities 117,787 407,441
- --------------------------------------------------------------------------------
Total current liabilities 1,719,882 2,516,850
- --------------------------------------------------------------------------------
Other long-term liabilities 129,801 123,041
- --------------------------------------------------------------------------------
Total liabilities 1,849,683 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, 14,827,585
and 14,758,542 shares issued and outstanding
in 1999 and 1998, respectively 148,276 147,585
Additional paid-in capital 70,105,946 69,831,490
Accumulated other comprehensive income 12,544 13,797
Deficit accumulated during development stage (51,205,358) (46,690,928)
- --------------------------------------------------------------------------------
Total stockholders' equity 19,061,408 23,301,944
- --------------------------------------------------------------------------------
$ 20,911,091 $ 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-Month Periods Ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Cumulative
from
Jan. 18, 1991
Three months ended March 31, (inception)
------------------------------------- through
1999 1998 March 31, 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Joint development income $ - $ - $ 1,000,000
- ----------------------------------------------------------------------------------------------------------------
Operating expenses:
Research and development 3,448,867 2,922,832 42,862,304
Business development 353,768 259,737 3,490,186
General and administrative 956,375 915,424 12,142,286
- ----------------------------------------------------------------------------------------------------------------
Total operating expenses 4,759,010 4,097,993 58,494,776
- ----------------------------------------------------------------------------------------------------------------
Operating loss (4,759,010) (4,097,993) (57,494,776)
- ----------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest income 244,580 488,088 6,248,158
Interest expense - - (23,591)
Other income - - 67,884
- ----------------------------------------------------------------------------------------------------------------
244,580 488,088 6,292,451
- ----------------------------------------------------------------------------------------------------------------
Net loss $(4,514,430) $(3,609,905) $(51,202,325)
- ----------------------------------------------------------------------------------------------------------------
Net loss per share, basic and diluted $ (0.30) $ (0.25)
- ----------------------------------------------------------------------------------------------
Weighted average shares outstanding 14,808,540 14,499,781
- ----------------------------------------------------------------------------------------------
</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 Three Months Ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Cumulative
from
Jan. 18, 1991
(inception)
through
1999 1998 March 31, 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(4,514,430) $ (3,609,905) $ (51,202,325)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 270,350 220,529 2,515,515
Stock option expense -- -- 3,240
Issuance of stock in exchange for services rendered -- -- 69,550
Changes in assets and liabilities:
Interest receivable (53,904) 103,807 (135,262)
Prepaid expenses (44,315) (62,225) (130,245)
Other current assets (96,530) 2,000 (195,730)
Accounts payable (507,314) 332,169 1,602,095
Accrued liabilities (289,654) (69,898) 251,395
Other (14,882) (19,627) (485,921)
- ----------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (5,250,679) (3,103,150) (47,707,688)
- ----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from maturities of investments 5,500,000 12,865,000 101,623,337
Purchases of investments (1,007,403) (10,381,466) (109,506,975)
Purchases of property and equipment (274,716) (264,249) (6,550,032)
Organizational costs incurred -- -- (19,595)
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 4,217,881 2,219,285 (14,453,265)
- ----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock,
net of issuance costs 275,147 5,144,162 57,842,303
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 275,147 5,144,162 70,074,878
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (757,651) 4,260,297 7,913,925
Cash and cash equivalents at beginning of period 8,671,576 8,150,612 --
- ----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 7,913,925 $ 12,410,909 $ 7,913,925
================================================================================================================
</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, 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-month period ended March 31, 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) 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. 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 March 31, 1999, the Company had a deficit accumulated during the
development stage of $51.2 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
Net loss for the quarter ended March 31, 1999 was $4.5 million ($0.30 per
share), compared to $3.6 million ($0.25 per share), for the quarter ended March
31, 1998. The increase in net loss during the quarter ended March 31, 1999
compared to the same period last year is due to an increase in operating
expenses coupled with a reduction in interest income for the quarter ended March
31, 1999. Interest income is comprised of interest earned on the investment of
the net proceeds raised by the Company in the initial public offering completed
during May 1996.
Operating expenses. Operating expenses for the quarters ended March 31, 1999 and
1998 were $4.8 and $4.1 million, respectively. Research and development expenses
increased $0.5 million to $3.5 million in the quarter ended March 31, 1999, as
the Company incurred costs supporting the filing 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
$0.1 million to $0.4 million during the quarter ended March 31, 1999, mainly in
support of the Company's business development activities in Japan and Europe.
General and administrative expenses remained relatively constant between the two
periods.
Interest income. Interest income for the quarter ended March 31, 1999 was $0.2
million, compared to $0.5 million for the quarter ended March 31, 1998. 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 March 31, 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
March 31, 1999, the Company made $6.6 million of capital expenditures and used
$47.7 million in cash
7
<PAGE>
to support its operations. At March 31, 1999, the Company had cash, cash
equivalents and short-term investments of $15.0 million, working capital of
$13.8 million and long-term investments of $0.8 million.
The Company estimates that during 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 final development, product testing and validation including
the purchase of PHD Systems for use in clinical trials from such independent
contractors, 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 March 31, 1999, together with future milestone
payments to be received from Teijin under the terms of the joint development
agreement, are sufficient to finance the Company's operations, except for
working capital needs related to production of machines, through the date the
Company files for 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 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.
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 is evaluating and is in discussions
with potential sources of additional funding, although no definitive
arrangements are in place. 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 March 31, 1999, the net
operating losses available to offset future taxable income were approximately
$54 million. Because the Company has experienced ownership changes, future
utilization of the carryforwards may be limited in any one fiscal
8
<PAGE>
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 whether and when the Company will obtain an
approved 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 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
three-month period ended March 31, 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.
9
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities
none
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on April 22, 1999. The
stockholders elected two directors to serve for terms ending in 2002 and until
their successors are elected. The stockholders present in person or by proxy
cast the following numbers of votes in connection with the election of
directors, resulting in the election of all of the nominees of the Company:
<TABLE>
<CAPTION>
Votes For Votes Against Abstain/Non-Vote
---------- ------------- ----------------
<S> <C> <C> <C>
Peter H. McNerney 12,907,941 65,075 0
Bernard R. Tresnowski 12,906,616 66,400 0
</TABLE>
The names of the remaining directors who did not stand for election at the
Annual Meeting and whose terms of office as directors continue after such
meeting are Lawrence H.N. Kinet, Richard B. Egen, Rodney S. Kenley, K. Shan
Padda and W. Dekle Rountree, Jr.
The stockholders also approved the proposal to increase the shares of Aksys,
Ltd. Common Stock authorized for issuance under the Aksys, Ltd. 1996 Stock
Awards Plan to 1,775,000 from 900,000. The stockholders present in person or by
proxy cast the following numbers of votes in connection with the proposal:
<TABLE>
<CAPTION>
Votes For Votes Against Abstain/Non-Vote
---------- ------------- ----------------
<S> <C> <C>
8,980,793 272,162 3,720,061
</TABLE>
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 January 28, 1999
(99.2) Press Release of the Company, Issued March 31, 1999
(99.3) Press Release of the Company, Issued April 21, 1999
(99.4) Press Release of the Company, Issued May 5, 1999
(b) Reports on Form 8-K
none
10
<PAGE>
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: May 13, 1999 By: /s/ Lawrence H. N. Kinet
------------- -------------------------
Lawrence H.N. Kinet
President and Chief Executive Officer
and Director
Date: May 13, 1999 By: /s/ Steven A. Bourne
------------- ---------------------
Steven A. Bourne
Acting CFO and 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 January 28, 1999
99.2 Press Release of the Company, Issued March 31, 1999
99.3 Press Release of the Company, Issued April 21, 1999
99.4 Press Release of the Company, Issued May 5, 1999
</TABLE>
12
<PAGE>
Exhibit 11
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
Statement Regarding Computation of Net Loss Per Share
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Three months ended
---------------------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Net loss $(4,514,430) $(3,609,905)
- -------------------------------------------------------------------------------
Weighted average common
shares outstanding 14,808,540 14,499,781
- -------------------------------------------------------------------------------
Net loss per share, basic and diluted $ (0.30) $ (0.25)
- -------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the consolidated balance sheet as of March 31, 1999 and the consolidated
statement of operations for the three months ended March 31, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 7,914
<SECURITIES> 7,876
<RECEIVABLES> 135
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,471
<PP&E> 6,625
<DEPRECIATION> 2,227
<TOTAL-ASSETS> 20,911
<CURRENT-LIABILITIES> 1,720
<BONDS> 0
0
0
<COMMON> 148
<OTHER-SE> 18,913
<TOTAL-LIABILITY-AND-EQUITY> 20,911
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,759
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,514)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,514)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,514)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
<PAGE>
Exhibit 99.1
Contact:
Lawrence H. N. Kinet
Chairman and CEO
Aksys, Ltd.
(847) 229-2222
AKSYS REPORTS FOURTH QUARTER
AND FISCAL 1998 RESULTS
Lincolnshire, IL, January 28, 1999 - Aksys, Ltd. (NASDAQ: AKSY), a pioneer in
innovative dialysis systems, today reported results for the fourth quarter and
year ended December 31, 1998.
For the fourth quarter, the Company reported a net loss of $6.1 million, or
($0.41) per share, compared with a net loss of $3.2 million, or ($0.23) per
share, for the fourth quarter a year ago. Included in the net loss for the
fourth quarter is a one-time operating charge of $1.6 million, or $0.11 per
share. The charge is primarily due to the delivery of many of the PHD Systems to
be used during the clinical evaluation in 1999, and represents actual cost in
excess of the estimated market value of the machines. The charge also included
costs of outside contractors used to complete sections of the IDE, which is
expected to be filed by the end of the first quarter of 1999. Without the one-
time operating charge, the net loss for the fourth quarter would have been $4.5
million, or ($0.30) per share. At December 31, 1998, the Company remained in a
solid cash position with a total of $21.0 million in cash and long-term
investments.
For the year ended December 31, 1998, the Company reported a net loss of $17.2
million or ($1.17) per share, compared with a net loss of $13.5 million, or
($0.98) per share, for the year ended December 31, 1997. Excluding the one-time
operating charge incurred in the fourth quarter, the 1998 net loss would have
been $15.6 million, or ($1.06) per share. This net loss exceeded the 1997 net
loss because reduced administrative expenses were more than offset by increased
research and development spending on the Company's PHD(TM) System.
Recently, Aksys received notice of six new patent awards, three each from the
U.S. Patent and Trademark Office and equivalent foreign patent offices related
to its PHD(TM) Personal Hemodialysis System. These patent awards are in addition
to 24 U.S. and 11 foreign patents which Aksys now owns, and 4 U.S. patents to
which the Company has exclusive rights, bringing to 45 the total number of
patents held by Aksys.
-more-
<PAGE>
AKSYS REPORTS FOURTH QUARTER AND FISCAL 1998 RESULTS
Page 2
Lawrence H.N. Kinet, Chairman and Chief Executive Officer, said, "The Company
continues to make steady progress toward filing the IDE by the end of this
year's first quarter while maintaining our focus on conserving resources. We are
pleased that these systems have been manufactured and are available for the
clinical trial, pending IDE approval. We believe it is more conservative to
expense the excess costs of the machines at the time of delivery as opposed to
writing them off over the term of the clinical trial. The charge related to the
development cost of these systems does not impact our projected cash
requirements. Once in commercial production, the costs to manufacture the PHD
Systems will be significantly lower and overhead will be spread across a higher
volume."
Kinet continued, "With our accelerated research and development efforts in the
fourth quarter, we have finalized data supporting critical segments of our IDE
application. Having completed these requirements, we remain confident that our
existing cash resources provide us with sufficient liquidity to see us through
the commercial launch of our PHD(TM) System."
Aksys, Ltd. is developing hemodialysis products and services for patients
suffering from kidney failure. The Company's lead product in development, the
PHD(TM) System, is a next generation hemodialysis system designed to improve
clinical outcomes of patients and reduce mortality, morbidity and the associated
high cost of patient care. Further information is available on Aksys' website:
www.aksys.com.
This press release contains forward-looking statements that involve a number of
risks and uncertainties. The Company's actual results could differ materially
from the results identified or implied in any forward-looking statement and
these statements are based on the Company's views as of the date they are made
with respect to future events. Factors that could cause such a difference
include, but are not limited to, risks related to the failure to meet
development and manufacturing milestones on a timely basis, changes in GMP
requirements, changing market conditions, risks related to the regulatory
approval process, whether and when the Company will obtain clearance from the
FDA of a 510(K) pre-market notification and what additional clinical and other
data the Company might have to obtain in connection with seeking such clearance,
and risks associated with the timing and scope related to the commencement of
clinical trials based on an approved Investigational Device Exemption (IDE), a
prerequisite for the commencement of such trials.
- financial table to follow -
<PAGE>
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter ended December 31, Year ended December 31,
-------------------------- ----------------------------
1998 1997 1998 1997
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Joint development income $ - $ - $ 1,000,000 $ -
----------- ----------- ------------ ------------
Operating expenses:
Research and development 4,965,000 2,481,000 15,343,000 10,887,000
Business development 577,000 302,000 1,185,000 1,044,000
General and administrative 858,000 913,000 3,305,000 3,849,000
----------- ----------- ------------ ------------
Total operating expenses 6,400,000 3,696,000 19,833,000 15,780,000
----------- ----------- ------------ ------------
Operating loss (6,400,000) (3,696,000) (18,833,000) (15,780,000)
Net interest income 326,000 504,000 1,678,000 2,273,000
----------- ----------- ------------ ------------
Net loss $(6,074,000) $(3,192,000) $(17,155,000) $(13,507,000)
=========== =========== ============ ============
Net loss per share - basic and diluted $ (0.41) $ (0.23) $ (1.17) $ (0.98)
=========== =========== ============ ============
Weighted average shares outstanding 14,735,000 13,863,000 14,654,000 13,791,000
=========== =========== ============ ============
</TABLE>
SELECTED BALANCE SHEET DATA
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Cash and short-term investments $20,260,000 $29,196,000
Working capital 18,010,000 28,433,000
Long-term investments 780,000 2,808,000
Total assets 25,942,000 36,647,000
Total liabilities 2,640,000 1,359,000
Stockholders' equity 23,302,000 35,288,000
</TABLE>
<PAGE>
Exhibit 99.2
Contact:
Lawrence H. N. Kinet
Chairman and CEO
Aksys, Ltd.
(847) 229-2222
AKSYS FILES IDE WITH FDA
Lincolnshire, IL, March 31, 1999 - Aksys, Ltd. (NASDAQ: AKSY), a pioneer in
innovative dialysis systems, today reported that it has filed a request for an
Investigational Device Exemption (IDE) for the Aksys PHD Personal Hemodialysis
System. The Company must obtain IDE approval from the U.S. Food and Drug
Administration (FDA) prior to using the PHD System during clinical trials.
Including a baseline evaluation using existing hemodialysis equipment, the
clinical evaluation is expected to take approximately six months. After
gathering patient data from the evaluation, the Company intends to submit the
clinical results to the FDA as part of a 510(k) pre-market notification.
Lawrence H.N. Kinet, Chairman and Chief Executive Officer, stated, "Our filing
of the IDE reflects the continued, steady progress we are making in the
development of our PHD System. Having finalized the clinical protocol with the
FDA, we will be completing preparations for the clinical evaluation process
while the FDA reviews our IDE submission."
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 an approved 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.
###
<PAGE>
Exhibit 99.3
Contact:
Lawrence H. N. Kinet
Chairman and CEO
(847) 229-2222
AKSYS REPORTS FIRST QUARTER RESULTS
Lincolnshire, IL, April 21, 1999 - Aksys, Ltd. (NASDAQ: AKSY), a pioneer in
innovative dialysis systems, today reported results for the first quarter ended
March 31, 1999.
For the first quarter, the Company reported a net loss of $4.5 million, or
($0.30) per share, compared with a net loss of $3.6 million, or ($0.25) per
share, for the first quarter a year ago. The increase in net loss is primarily
attributable to increased spending for research and development, as the Company
completed final phases of engineering and filed an IDE for its PHD(TM) System.
At March 31, 1999, the Company had total cash and investments of $15.8 million.
Lawrence H.N. Kinet, Chairman and Chief Executive Officer, said, "We continue to
make steady progress toward clinical evaluation and commercialization of the
PHD(TM) System. While the FDA reviews the IDE that we filed at the end of the
first quarter, we continue with preparations for clinical trials. With our
accelerated research and development efforts in the quarter, we have completed
manufacturing all PHD(TM) Systems for the clinical study."
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 an approved 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.
- financial table to follow -
<PAGE>
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter ended March 31,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenues: $ - $ -
------------ ------------
Operating expenses:
Research and development 3,449,000 2,923,000
Business development 354,000 260,000
General and administrative 956,000 915,000
------------ ------------
Total operating expenses 4,759,000 4,098,000
------------ ------------
Operating loss (4,759,000) (4,098,000)
Interest income 245,000 488,000
------------ ------------
Net loss $ (4,514,000) $ (3,610,000)
============ ============
Net loss per share - basic and diluted $ (0.30) $ (0.25)
============ ============
Weighted average shares outstanding 14,809,000 14,500,000
============ ============
</TABLE>
SELECTED BALANCE SHEET DATA
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Cash and short-term investments $ 15,010,000 $ 20,260,000
Working capital 13,751,000 18,010,000
Long-term investments 780,000 780,000
Total assets 20,911,000 25,942,000
Total liabilities 1,850,000 2,640,000
Stockholders' equity 19,061,000 23,302,000
</TABLE>
<PAGE>
Exhibit 99.4
Contact:
Lawrence H. N. Kinet
President and CEO
(848) 229-2222
AKSYS RECEIVES IDE CONDITIONAL APPROVAL
Lincolnshire, IL, May 5, 1999 - Aksys, Ltd. (NASDAQ: AKSY), a pioneer in
innovative dialysis systems, today announced that the U.S. Food and Drug
Administration (FDA) granted conditional approval of the Company's filing for
Investigational Device Exemption (IDE). Prior to final approval by the FDA, the
Company must submit system software validation. An approved IDE is necessary
prior to patient connection on the PHD(TM) System.
Lawrence H.N. Kinet, President and Chief Executive Officer, said, "We are
pleased that the FDA has reviewed the protective systems, automated hot water
disinfection system and operating characteristics of the PHD System and
determined that the machine can be used by patients in a clinical trial, subject
to submitting system software validation data. Conditional approval is an
important step in our continued progress of clinical evaluation and
commercialization of the PHD System. We can now focus our efforts on completing
final system validation, preparing the machines for clinical use and finalizing
study center and patient recruitment activities. We expect that our clinical
evaluation process should begin by the end of the third quarter of this year."
The Company also announced that Rod Kenley has resigned as Vice President of the
Company. Kinet stated "Aksys was founded on Rod's conviction that frequent, home
hemodialysis should be the therapy of choice and his involvement has been
instrumental in the Company's progress to this point. With the conditional
approval of the IDE, Rod felt that the time was right to pursue other business
interests. We thank him for his many contributions to the Company."
The Company further announced that Richard B. Egen will assume the position of
Chairman of the Board, effective immediately. Mr. Egen, a Board member since
November 1997, will become more involved in the strategic direction of the
Company in his role as Chairman. He currently serves as President and CEO of
NephRx Corporation, a biotechnology company that is developing technology for
kidney growth factors. Prior to NephRx, Mr. Egen was a Senior Vice President at
Baxter International Inc., and President and CEO of Clintec International, a
joint venture between Baxter and Nestle S.A.
<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 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.
###
