<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-22890
SANGSTAT MEDICAL CORPORATION
----------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-3076-069
- - ------------------------ ---------------------------------
(State of incorporation) (IRS Employer Identification No.)
1505 Adams Drive
Menlo Park, CA 94025
-------------------------------------------------
(Address of principal executive office, Zip Code)
Registrant's telephone number, including area code: 415-328-0300
None
---------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
- - --------------------------------------------------------------------------------
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 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
/x/ Yes / / No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of March 31, 1996.
CLASS NUMBER OF SHARES
----- ----------------
Common Stock 13,056,383
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SANGSTAT MEDICAL CORPORATION
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS PAGE
----
<S> <C>
CONDENSED CONSOLIDATED BALANCE SHEETS.......................... 3
March 31, 1996 and December 31, 1995
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS................ 4
Three Months Ended March 31, 1996 and 1995
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS................ 5
Three Months Ended March 31, 1996 and 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS........... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................. 7-9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................... 9
SIGNATURES.............................................................. 9
</TABLE>
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SANGSTAT MEDICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 40,784,067 $ 4,609,186
Short-term Investments 10,171,936 4,612,565
Accounts Receivable 372,617 406,153
Other Receivables 287,702 170,118
Inventories 874,688 766,124
Prepaid Expenses 310,758 73,531
------------ ------------
Total Current Assets 52,801,768 10,637,677
PROPERTY AND EQUIPMENT -- NET 518,996 528,962
OTHER ASSETS 370,650 393,238
------------ ------------
TOTAL $ 53,691,414 $ 11,559,877
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 1,132,356 $ 1,041,389
Accrued Liabilities 663,955 652,742
Capital Lease Obligations -- Current 201,045 238,651
Notes Payable -- Current 296,312 254,249
------------ ------------
Total Current Liabilities 2,293,668 2,187,031
------------ ------------
CAPITAL LEASE OBLIGATIONS 306,913 286,558
------------ ------------
NOTES PAYABLE 779,155 804,811
------------ ------------
Common Stock 81,346,500 36,275,765
Accumulated Deficit (31,094,976) (28,051,991)
Accumulated Translation Adjustment 34,556 46,811
Unrealized Gain on Investment 25,598 10,892
------------ ------------
Total Stockholders' Equity 50,311,678 8,281,477
------------ ------------
TOTAL $ 53,691,414 $ 11,559,877
============ ============
</TABLE>
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SANGSTAT MEDICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------
1996 1995
------------ -----------
<S> <C> <C>
Revenues:
Net Product Sales $ 711,345 $ 701,904
Collaborative Agreement -- 750,000
------------ -----------
Total Revenues 711,345 1,451,904
------------ -----------
Costs and Operating Expenses
Cost of Sales and Manufacturing 695,138 676,979
Research and Development 2,229,436 1,334,288
Selling, General & Administrative 1,002,703 770,726
------------ -----------
Total Costs and Operating Expenses 3,927,277 2,781,993
------------ -----------
Loss from Operations (3,215,932) (1,330,089)
Other Income (Expense)
Interest Income 203,300 211,204
Interest & Other Expense (30,353) (30,323)
------------ -----------
Other Income, net 172,947 180,881
------------ -----------
Net Loss ($ 3,042,985) ($1,149,208)
============ ===========
Net Loss per Common and Equivalent Share ($ 0.29) ($ 0.13)
============ ===========
Common and Equivalent Shares used in
Computing per Share Amounts 10,326,182 8,885,982
============ ===========
</TABLE>
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<PAGE> 5
SANGSTAT MEDICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,042,985) $ (1,149,208)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 84,590 95,045
Changes in assets and liabilities:
Accounts receivable 34,474 (143,722)
Other receivables (118,907) (498,541)
Inventories (107,855) (395,734)
Prepaid expenses (237,258) (201,419)
Accounts payable 96,429 300,184
Accrued liabilites 15,317 (292,581)
------------ ------------
Net cash used in operating activities (3,276,195) (2,285,976)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 45,070,735 5,191,803
Note payable borrowings 127,980 221,250
Note payable repayments (101,912) (147,425)
Repayment of capital lease obligations (76,138) (69,628)
------------ ------------
Net cash provided by financing activities 45,020,665 5,196,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (16,615) (10,902)
Maturities of short-term investments 3,956,293 499,905
Purchase of short-term investments (9,467,862) (1,769,484)
Other assets 9,982 17,325
------------ ------------
Net cash used in investing activities (5,518,202) (1,263,156)
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (51,387) 62,518
------------ ------------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 36,174,881 1,709,386
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,609,186 9,828,928
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 40,784,067 $ 11,538,314
============ ============
NONCASH INVESTING AND FINANCING ACTIVITIES
Unrealized gain on investments $ 14,706 $ 33,799
============ ============
</TABLE>
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<PAGE> 6
SANGSTAT MEDICAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The consolidated financial statements include the accounts of SangStat Medical
Corporation and its wholly owned subsidiaries. Intercompany accounts and
transactions have been eliminated.
While the quarterly financial information in this filing is unaudited, the
financial statements presented reflect all adjustments (consisting only of
normal recurring adjustments) which the Company considers necessary for a fair
presentation of the results of operations for the interim periods covered and of
the financial condition of the Company at the dates of the interim balance
sheets. These results for interim periods are not necessarily indicative of the
results for the entire year. The information included in this report should be
read in conjunction with the Company's audited financial statements and notes
thereto included in the Company's 1995 Annual Report to Shareholders.
Per Share Information
Net loss per common and equivalent share is computed using the weighted average
number of common shares outstanding during the period. Options granted by the
Company have been excluded in the calculation of common and common equivalent
shares outstanding since they would serve to reduce the net loss per share.
Inventories
Inventories, valued at the lower of cost (first-in, first-out) or market consist
of:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Raw materials $415,865 $432,549
Work-in-progress 251,703 213,863
Finished goods 207,120 119,712
-------- --------
Total $874,688 $766,124
======== ========
</TABLE>
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<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Net product revenue was $711,000 in the first quarter of 1996 as compared with
$702,000 in the first quarter of 1995. This reflects an increase of over 50% in
combined product revenue from distribution of SangStat's first therapeutic
product, THYMOGLOBULIN(R) in Canada (under the Canadian Emergency Drug Release
program) and PRA-STAT(R), the Company's first pre-transplant monitoring product.
These sales were offset in part by declines in other revenues specific to 1995
for clinical development studies for monitoring products and contract
manufacturing. The Company began distribution of THYMOGLOBULIN(R) in Canada in
January 1995 under that country's Emergency Drug Release program. The Company
obtained an exclusive license in October 1993 for distribution and sale of
THYMOGLOBULIN in North America from Pasteur Merieux Serums et Vaccins, a
subsidiary of Rhone Poulenc Rorer. PRA-STAT is distributed through Baxter
Healthcare Corporation's affiliate, NexTran.
As expected under the Company's collaborative agreement with Baxter, no revenue
was received in the first quarter of 1996 as compared with $750,000 in the same
period in 1995. The revenue earned under the collaborative agreement in 1995
resulted from completion of the second and third milestones for the Company's
second pre-transplant monitoring product, CROSS-STAT(R). The fourth and final
milestone for CROSS-STAT was completed in the second quarter of 1995. To date,
$10.0 million has been received by the Company under its collaborative agreement
with Baxter, consisting of $6.75 million in collaborative revenues and $3.25
million in equity.
Cost of sales and manufacturing expenses increased to $695,000 for the quarter
ended March 31, 1996 from $677,000 in the corresponding quarter of 1995. This
reflects the result of increased product sales offset by lower cost of sales for
both therapeutic and monitoring products. The Company's monitoring products
business does not currently generate a profit, because certain sales are made on
a cost recovery basis and the Company has not yet achieved a scale of production
which allows it to cover fixed manufacturing costs. Sales of these monitoring
products however, partially offset fixed costs and serve as a prototype for
manufacturing further products as well as to further the Company's reputation
and presence in the industry. Notwithstanding these losses, the Company's
strategy is to obtain regulatory approval for certain of these and other
monitoring products and to produce and sell these products on a commercially
profitable basis. The Company accordingly obtained FDA 510(k) market clearances
for its PRA-STAT product in September 1994 and for its CROSS-STAT product in May
1995.
Research and development expenses increased to $2,229,000 in the first quarter
of 1996 from $1,334,000 in the same period in 1995. This reflects increases in
later stage expenses for the Company's continuing pivotal Phase III clinical
trial for THYMOGLOBULIN, bio-equivalence clinical trials for generic drug
product candidates CYCLOSPORINE and AZATHIOPRINE, a second Phase II
pharmacokinetic and safety study for ALLOTRAP(R) and on-going research and
development expenses for both therapeutic and monitoring products.
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<PAGE> 8
Selling, general and administrative expenses increased to $1,003,000 in the
first quarter of 1996 from $771,000 from the same quarter of the previous year.
This increase reflects generally increased expenses for sales and marketing,
administration, patents and additions of personnel. Important additions to staff
from the first quarter of 1995 to the first quarter of 1996 included David
Winter, M.D., President and Chief Operating Officer, a Vice President of
Investor Relations, a Vice President, Pharmacy and a Sales Manager.
Interest income was $203,000 in the first quarter of 1996 as compared to
$211,000 in the same quarter of the previous year. Interest earned in the first
quarter of 1995 was primarily the result of investment of the cash proceeds from
the Company's self-managed private placement in December 1994 and self-managed
public offering in February 1995. The investment base for interest earned in the
first quarter of 1996 was augmented by cash proceeds from the Company's
follow-on public offering concluded in March 1996. Interest and other expense
for capital lease obligations and long term notes remained essentially unchanged
at $30,000 for the first quarter of both 1995 and 1996.
The Company's net loss was $3,043,000 or $0.29 per share in the first quarter of
1996, compared with a net loss of $1,149,000 or $0.13 per share in the first
quarter of 1995.
FINANCIAL CONDITION
Total assets as of March 31, 1996 increased by $42,132,000 from December 31,
1995. This increase is due to an increase of cash and investments of
$41,734,000, an increase in other receivables of $118,000 due primarily to
increased interest receivable, an increase in inventories of $109,000 primarily
due to additional purchases of THYMOGLOBULIN and an increase of $237,000 in
prepaid expenses primarily due to the timing of payments for certain insurance
coverage. Total liabilities remained essentially unchanged. Stockholders' equity
increased by $42,030,000 from year end 1995. This increase consisted primarily
of $45,071,000 in net proceeds from the Company's public offering and exercise
of the underwriters' over-allotment option in March 1996, offset partially by
the net loss of $3,043,000 for the quarter ended March 31, 1996.
LIQUIDITY
The Company has cash, cash equivalents and investments of $50,956,000 at March
31, 1996. The Company expects to incur significant costs related to continued
research and development programs, preclinical and clinical testing and
regulatory approval activities in the years ahead. In addition, in the event the
Company receives regulatory approval for any of its therapeutic products, the
Company may then need to raise additional funds through additional financings,
including private or public equity offerings and collaborative research and
development arrangements with corporate partners. There can be no assurance that
funds will be raised on favorable terms, if at all, or that discussions with
potential collaborative partners will result in any agreements. The Company
believes that its existing capital resources, together with product sales and
interest income will be sufficient to meet the Company's operating and capital
requirements through at least 1997. The Company's future capital requirements
will depend on many factors, including: continued scientific progress in its
research and development programs; progress in clinical trials; the time and
costs involved in obtaining regulatory approvals; the costs involved in
obtaining and enforcing patents; the ability of the Company to establish
development and commercialization relationships; and the costs of manufacturing
scale-up.
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<PAGE> 9
This document contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. For a discussion of factors
that might result in different outcomes, see the Company's Registration
Statement on Form S-3 filed on February 9, in particular "Risk Factors" set
forth therein, and the Company's 10-K and annual report filed with the
Securities and Exchange Commission.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no exhibits required to be filed pursuant to this report on
Form 10-Q.
(b) No reports on Form 8-K were filed by the Company during the quarter
ended March 31, 1996.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF 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.
SANGSTAT MEDICAL CORPORATION
----------------------------
(REGISTRANT)
DATE: May 13, 1995 BY:
--------------------------------------------
PHILIPPE POULETTY, M.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
DATE: May 13, 1995 BY:
--------------------------------------------
HENRY N. EDMUNDS, PH.D.
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONDENSED CONSOLIDATED BALANCE SHEETS OF MARCH 31, 1996/95 (UNAUDITED) AND (B)
THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF MARCH 31, 1996/1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 40,784,067
<SECURITIES> 10,171,936
<RECEIVABLES> 660,319
<ALLOWANCES> 16,228
<INVENTORY> 874,688
<CURRENT-ASSETS> 52,801,768
<PP&E> 1,856,449
<DEPRECIATION> 1,337,503
<TOTAL-ASSETS> 518,996
<CURRENT-LIABILITIES> 2,293,667
<BONDS> 0
0
0
<COMMON> 81,346,500
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 53,691,414
<SALES> 711,345
<TOTAL-REVENUES> 711,345
<CGS> 695,138
<TOTAL-COSTS> 3,927,277
<OTHER-EXPENSES> 90
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,263
<INCOME-PRETAX> (3,042,985)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,042,985)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,042,985)
<EPS-PRIMARY> (0.29)
<EPS-DILUTED> (0.27)
</TABLE>
