<PAGE>
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1998
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-22769
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LEUKOSITE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3173859
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 FIRST STREET 02142
CAMBRIDGE, MASSACHUSETTS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (617) 621-9350
----------------------------
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.
Yes X No
---- ----
The number of shares outstanding of each of the registrant's classes of
common stock as of:
Date Class Outstanding Shares
August 10, 1998 Common stock, $.01 par value 11,889,051
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1
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LEUKOSITE, INC.
( A Development Stage Company)
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
December 31, 1997 and June 30, 1998 3
Condensed Consolidated Statements of Operations for the three
and six months ended June 30, 1997 and 1998, and for the
Period from Inception (May 1, 1992) to June 30, 1998 4
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 and 1998, and for the Period from
Inception (May 1, 1992) to June 30, 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 12
Item 4. Submission of Matters to a Vote of Security
12
Item 6. Exhibits and Reports on Form 8-K
13
Signatures 14
</TABLE>
2
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PART I FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LeukoSite, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1998
------------------ -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,587,873 $ 5,984,601
Marketable securities 14,569,100 13,516,349
Other current assets 408,811 688,669
-------------- --------------
Total current assets 25,565,784 20,189,619
-------------- --------------
Property and equipment, net of accumulated depreciation
and amortization 2,439,289 2,675,690
-------------- --------------
Other assets 27,090 27,090
---------- --------------
Total assets $ 28,032,163 $ 22,892,399
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,063,410 $ 2,278,610
Obligation to fund L&I Joint Venture (Note 4) 1,770,310 958,437
Deferred revenue 1,161,250 3,881,230
Deferred rent, current portion 243,171 243,171
Current portion of capital lease obligations 866,835 661,383
-------------- --------------
-------------- --------------
Total current liabilities 6,104,976 8,022,831
-------------- --------------
Deferred rent, net of current portion 222,907 101,322
-------------- --------------
Capital lease obligations, net of current portion 896,578 875,241
-------------- --------------
Stockholders' equity:
Preferred stock $.01 par value-
Authorized-5,000,000 shares
Issued and outstanding-no shares - -
Common stock, $.01 par value-
Authorized-25,000,000 shares
Issued and outstanding-9,875,741 shares at
December 31,1997 and 9,901,998 shares at June 30, 1998 98,758 99,021
Additional paid-in capital 53,294,367 53,360,510
Deficit accumulated during the development stage (32,585,423) (39,566,526)
-------------- --------------
Total stockholders' equity 20,807,702 13,893,005
-------------- --------------
Total liabilities and stockholders' equity $ 28,032,163 $ 22,892,399
-------------- --------------
-------------- --------------
</TABLE>
3
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LeukoSite, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Inception
Three Months Ended June 30, Six Months Ended June 30, (May 1, 1992)
------------------------------ ---------------------------- through
1997 1998 1997 1998 June 30,1998
---- ---- ---- ---- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Corporate collaborations $ 1,271,434 $ 2,060,465 $ 2,070,024 $ 4,277,666 $ 13,467,117
Government grants 98,250 274,500 205,422 415,344 1,075,573
---------- ---------- ----------- ---------- ------------
Total revenue 1,369,684 2,334,965 2,275,446 4,693,010 14,542,690
---------- ---------- ----------- ---------- ------------
OPERATING EXPENSES:
Research and development 2,669,931 4,834,187 5,451,437 8,940,001 43,110,121
General and administrative 356,450 684,433 735,562 1,316,693 6,628,775
---------- ---------- ----------- ---------- -----------
Total operating expenses 3,026,381 5,518,620 6,186,999 10,256,694 49,738,896
---------- ---------- ----------- ---------- -----------
LOSS FROM OPERATIONS (1,656,697) (3,183,655) (3,911,553) (5,563,684) (35,196,206)
OTHER INCOME (EXPENSE):
Equity in operations of joint
venture - (718,698) - (1,984,905) (5,342,821)
Interest income 191,994 308,493 294,794 646,994 2,317,003
Interest expense ( 40,562) (39,766) (83,357) (79,508) ( 734,502)
----------- ----------- ------------ ----------- -----------
NET LOSS $ (1,505,265) $ (3,633,626) $ (3,700,116) $ (6,981,103) $(38,956,526)
----------- ----------- ------------ ------------ -----------
----------- ----------- ------------ ------------ -----------
NET LOSS PER COMMON SHARE
Basic and diluted $(1.60) $(.37) $(3.83) $(.71)
--------- --------- ----------- ----------
--------- --------- ----------- ----------
Pro forma $ (.26) $ (.63)
--------- -----------
--------- -----------
SHARES USED IN COMPUTING NET LOSS
PER COMMON SHARE
Basic and diluted 1,094,740 9,897,766 1,093,108 9,889,575
--------- --------- ----------- ----------
--------- --------- ----------- ----------
Pro forma 6,630,361 6,628,627
--------- -----------
--------- -----------
</TABLE>
4
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LeukoSite, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Inception
June 30, (May 1, 1992)
------------------------ through
1997 1998 June 30, 1998
---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,700,116) $ (6,981,103) $ (38,956,526)
Adjustments to reconcile net loss to net
cash used in operating activities:
Stock compensation expense - - 89,339
Depreciation and amortization 539,999 542,203 3,513,519
Equity in operations of joint venture - 1,984,905 5,342,821
Change in operating assets and liabilities:
Other current assets (168,023) (279,858) (688,669)
Accounts payable and accrued expenses 922,522 215,200 2,845,312
Deferred revenue 2,163,750 2,719,980 3,881,230
Deferred rent (4,891) (121,585) 344,493
------------ ------------ -------------
Net cash used in operating activities (246,759) (1,920,258) (23,628,481)
------------ ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in marketable securities (4,953,064) (7,863,717) (45,927,798)
Proceeds from maturities of marketable securities 4,878,592 8,916,468 32,403,004
Investment in joint venture - (2,796,778) (4,384,384)
Purchases of property and equipment (405,981) (431,833) (2,266,621)
Decrease in other assets (524,246) - (27,090)
------------ ------------ -------------
Net cash used in investing activities (1,004,699) (2,175,860) (20,202,889)
------------ ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital leases (388,556) (573,560) (2,853,721)
Net proceeds from notes payable - - 2,086,312
Proceeds from redeemable convertible preferred stock,
net of issuance costs 3,819,506 - 23,256,599
Proceeds from initial public offering, net of issuance - - 15,297,020
costs
Issuance of common stock - 45,368 4,015,368
Exercise of stock options 10,172 21,038 102,518
Issuance of convertible preferred stock,
net of issuance costs - - 7,911,875
------------ ------------ -------------
Net cash provided (used) by financing activities 3,441,122 (507,154) 49,815,971
------------ ------------ -------------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS 2,189,664 (4,603,272) 5,984,601
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 4,430,507 10,587,873 -
------------ ------------ -------------
CASH AND EQUIVALENTS, END OF PERIOD $ 6,620,171 $ 5,984,601 $ 5,984,601
------------ ------------ -------------
------------ ------------ -------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest $ 83,357 $ 79,508 $ 948,115
------------ ------------ -------------
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Property and equipment purchased under capital lease
obligations $ 87,491 $ 346,771 $ 4,164,145
------------ ------------ -------------
</TABLE>
5
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Operations and Basis of Presentation
LeukoSite, Inc. (the "Company") was incorporated on May 1, 1992. The
Company is engaged in the development of immunomodulatory therapeutics
with potential applications in inflammatory, autoimmune, and viral
diseases and cancer.
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission and include, in the opinion of
management, all adjustments, consisting of normal, recurring adjustments,
necessary for a fair presentation of interim period results. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes, however, that its disclosures are
adequate to make the information presented not misleading. The results for
the interim periods presented are not necessarily indicative of results to
be expected for the full fiscal year. These condensed financial statements
should be read in conjunction with the audited consolidated financial
statements and notes related thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997 filed with the Securities
and Exchange Commission.
2. Summary of Significant Accounting Policies
(a) Cash Equivalents and Marketable Securities
Cash equivalents are highly liquid investments with original maturities of
less than three months. Marketable securities consist of securities with
original maturities of greater than three months. The Company accounts for
cash equivalents and marketable securities in accordance with Statement of
Financial Accounting Standards (SFAS) No. 115 "Accounting for Certain
Investments in Debt and Equity Securities." In accordance with SFAS No. 115,
the Company has classified its investments as held-to-maturity. The
investments that the Company has the positive intent and ability to hold to
maturity are reported at amortized cost, which approximates fair market
value.
As of June 30, 1998 there were no material unrealized gains or losses on any
investments. Cash and cash equivalents and marketable securities consisted
of the following:
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1998
<S> <C> <C>
Cash and cash equivalents:
Cash $ 1,373,786 $ 231,596
Money market funds 6,609,783 4,249,382
Taxable auction securities 2,604,304 1,503,623
------------ -----------
$ 10,587,873 $ 5,984,601
------------ -----------
------------ -----------
Marketable securities:
U.S. government agency obligations
(average maturity of 5 months) $ 6,094,401 $ 2,119,502
Corporate bonds and notes (average
maturity of 5 months) 8,474,699 11,396,847
------------ -----------
$ 14,569,100 $13,516,349
------------ -----------
------------ -----------
</TABLE>
6
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(b) Net Loss per Common Share
In March 1997 the Financial Accounting Standards Board issued SFAS No. 128,
Earnings per Share. The Company adopted SFAS No. 128 effective December 15,
1997. Basic net loss per common share is based on the weighted average
number of common shares outstanding. Diluted net loss per common share is
the same as basic net loss per common share as the inclusion of stock
options and warrants would be antidilutive. Pro forma net loss per common
share assumes the automatic conversion of all outstanding shares of
redeemable convertible preferred stock and convertible preferred stock into
common stock using the as-converted method, which occurred upon the closing
of the Company's initial public offering on August 15, 1997. In addition,
the net loss available to common stockholders for the three months and the
six months ended June 30, 1997 has been adjusted to include $244,000 and
$488,000, respectively, of dividends attributable to redeemable convertible
preferred stock.
3. Subsequent Event
In July 1998, the Company completed a private placement of 1,967,169 shares
of its common stock at $6 per share, for total net proceeds of $11.7
million after expenses of the offering.
4. Ilex Agreement
In May 1997 the Company and Ilex Oncology, Inc. (Ilex) entered into a joint
venture agreement that established a limited partnership for the purpose of
developing LDP-03. Under the terms of the partnership, the Company is
required to fund 50% of the partnership's working capital requirements. The
joint venture expires in 2017, but provides for either partner under certain
circumstances to purchase the other partner's ownership position of the
joint venture after October 2000. Should either party fail to fulfill its
funding obligations, control of the joint venture may change.
The Company accounts for its investment in the joint venture under the
equity method of accounting and records its share of the income or loss in
other income (expense). The Company is reimbursed by the joint venture for
certain costs incurred on behalf of the joint venture. For the six months
ended June 30, 1998 the Company's share of the joint venture's recorded loss
was $1,984,905 and the Company had a funding liability of $958,437 to the
joint venture as of June 30, 1998. The Company charged the joint venture
$415,344 for costs incurred by the Company on behalf of the joint venture.
The joint venture has entered into an agreement with a third party to
manufacture LDP-03. In connection with this agreement, the Company and Ilex
have guaranteed the payment of the obligations of the joint venture due
under the manufacturing agreement. As of June 30, 1998 the remaining
obligation was approximately $2.8 million.
7
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations and this Quarterly Report on Form 10-Q contains certain
forward-looking statements within the meaning of Section 27A of the securities
Act of 1933 and Section 21E of the Securities and Exchange Act of 1934,
including but not limited, (i) statements about the adequacy of the Company's
capital resources, interest income and revenues from its collaboration
agreements to fund its operating expenses and capital requirements into
2000, (ii) statements about the amount of capital expenditures that the Company
expects to incur in 1998 and (iii) certain statements identified or qualified by
words such as "anticipate," "plan," "believe," "estimate," "expect" and similar
expressions. Investors are cautioned that forward-looking statements are
inherently uncertain and that the Company's actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. Factors that could cause or contribute to
such differences include those discussed under the caption "Risk Factors" in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997.
OVERVIEW
The Company is a leader in the discovery and development of therapeutics
based upon the biology of leukocytes. Therapeutics developed using the
Company's technology may be used to treat inflammatory, autoimmune, and viral
diseases and cancer. The Company has been funded to date primarily through
proceeds from the sale of equity securities and funding from collaboration
agreements. To date, the Company has not received any revenue from the sale
of products and does not expect to generate material product revenues for the
next several years. The Company has experienced operating losses since its
inception and expects that the activities required to develop and
commercialize its products will result in further operating losses for the
next several years. As of June 30, 1998 the Company had an accumulated
deficit of approximately $39.6 million.
In 1994, 1995 and 1996 the Company signed agreements with Warner-Lambert
Company for the discovery and development of drugs that are intended to
antagonize the MCP-1, IL-8, CCR5 and CXCR4 receptors found on certain
classes of leukocytes. In January 1998 Warner-Lambert Company made a $1
million payment related to the achievement of certain milestones. In July
1996 the Company signed an agreement with Roche Bioscience for the discovery
and development of therapeutics that are intended to antagonize the CCR3
receptor found on a certain class of leukocytes. In April 1997 the Company
signed an agreement with Kyowa Hakko Kogyo for the discovery and development
of therapeutics that are intended to antagonize the CXCR3 and CCR1 receptors
found on certain classes of leukocytes. In May 1997 the Company entered into
a joint venture with Ilex Oncology for the development of LDP-03 (CAMPATH-1H)
for the treatment of chronic lymphocytic leukemia. In October 1997 the
Company, Warner-Lambert and Kyowa agreed to jointly pursue research and
development of antagonists that target MCP-1, IL-8, CCR1 and CXCR3. In
December 1997 the Company entered into a collaboration agreement with
Genentech, Inc. for the development of a monoclonal antibody therapeutic
intended to be used in the treatment of inflammatory bowel disease.
8
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RESULTS OF OPERATIONS
Revenues for the three and six month periods ended June 30, 1998 and 1997.
For the three months ended June 30, 1998 revenues were $2,335,000 compared
to $1,370,000 for the comparable period in 1997. The increase of $965,000 was
the result of greater research funding from corporate collaborations with Kyowa
and Warner-Lambert, the achievement of a milestone with Warner-Lambert and from
Small Business Innovation Research ("SBIR") grants.
For the six months ended June 30, 1998 revenues were $4,693,000 compared to
$2,275,000 for the comparable period in 1997. The increase of $2,418,000 was the
result of greater research funding from corporate collaborations with Kyowa,
Warner-Lambert and Roche Bioscience, the achievement of a milestone with
Warner-Lambert, and SBIR grants.
Research and development expenses for the three and sixth month periods ended
June 30, 1998 and 1997.
For the three months ended June 30, 1998 research and development expenses
were $4,834,000 compared to $2,670,000 for the comparable period in 1997. The
increase of $2,164,000 was primarily due to the manufacturing of clinical trial
material and ongoing clinical trials for the Company's LDP-01 and LDP-02
programs and chemical library purchases. To a lesser extent, the increase was
the result of increased staffing and consumption of supplies associated with the
Company's drug discovery programs. The Company expects that research and
development expenses will increase over the next several years as the Company
further expands its discovery and development programs.
For the six months ended June 30, 1998 research and development expenses
were $8,940,000 compared to $5,451,000 for the comparable period in 1997. The
increase of $3,489,000 was primarily due to the manufacturing of clinical trial
material and ongoing clinical trials for the Company's LDP-01 and LDP-02
programs. To a lesser extent, the increase was the result of increased staffing
and consumption of supplies associated with the Company's drug discovery
programs. The Company expects that research and development expenses will
increase over the next several years as the Company further expands its
discovery and development programs.
General and administrative expenses for the three and six month periods ended
June 30, 1998 and 1997.
For the three months ended June 30, 1998 general and administrative expenses
were $684,000 compared to $356,000 for the comparable period in 1997. The
increase of $328,000 was primarily due to an increase in expenses associated
with operating as a public company. General and administrative expenses will
likely increase in future periods to support the projected growth of the
Company.
For the six months ended June 30, 1998 general and administrative expenses
were $1,317,000 compared to $736,000 for the comparable period in 1997. The
increase of $581,000 was primarily due to an increase in expenses associated
with operating as a public company. General and administrative expenses will
likely increase in future periods to support the projected growth of the
Company.
Equity in Operations of Joint Venture for the three and six month periods ended
June 30, 1998 and 1997.
For the three months ended June 30, 1998 equity in operations of joint
venture was a loss of $719,000. No loss was recorded for the comparable period
in 1997. Joint venture expenses were primarily related to data analysis,
regulatory submissions and activities related to an ongoing pivotal clinical
trial of LDP-03.
For the six months ended June 30, 1998 equity in operations of joint venture
was a loss of $1,985,000. No loss was recorded for the comparable period in
1997. Joint venture expenses were primarily related to the manufacture of LDP-03
by a third party for use in clinical trials and to a lesser extent activities
related to data analysis, regulatory submissions and activities related to an
ongoing pivotal clinical trial of LDP-03.
9
<PAGE>
Interest income (expenses), net for the three and six month periods ended June
30, 1998 and 1997.
For the three months ended June 30, 1998 net interest income was $269,000
compared to $151,000 for the comparable period in 1997. This increase of
approximately $118,000 was primarily due to an increase in interest income
resulting from higher average cash balances due to proceeds received from
LeukoSite's initial public offering completed in August 1997 and proceeds from
the sale of common stock to Genentech completed in December 1997.
For the six months ended June 30, 1998 net interest income was $567,000
compared to $211,000 for the comparable period in 1997. This increase of
approximately $356,000 was primarily due to an increase in interest income
resulting from higher average cash balances due to proceeds received from
LeukoSite's initial public offering completed in August 1997 and proceeds from
the sale of common stock to Genentech completed in December 1997.
Net Loss for the three and six month periods ended June 30, 1998 and 1997.
For the three months ended June 30, 1998 net loss was $3,634,000 compared to
$1,505,000 for the comparable period in 1997. The net loss increased $2,129,000
and was primarily due to LDP-03 development costs recorded by the joint venture
and the preparation of clinical trial material and clinical research related to
the Company's LDP-01 and LDP-02 programs which were offset in part by increased
revenues generated from research collaborations.
For the six months ended June 30, 1998 net loss was $6,981,000 compared to
$3,700,000 for the comparable period in 1997. The net loss increased $3,281,000
and was primarily due to LDP-03 development costs recorded by the joint venture
and the preparation of clinical trial material and clinical research related to
the Company's LDP-01 and LDP-02 programs which were offset in part by increased
revenues generated from research collaborations.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company's operations have been funded primarily through
proceeds from the sale of equity securities, which have raised approximately
$52.6 million, and to a lesser extent license fees and sponsored research, which
have generated approximately $15.9 million, and capital lease obligations, which
have generated approximately $4.2 million. The Company has used cash to fund
operating losses of approximately $39 million, the investment of approximately
$2.3 million in equipment and leasehold improvements and the repayment of
approximately $2.9 million of capital lease obligations. The Company had no
significant commitments as of June 30, 1998 for capital expenditures. At June
30, 1998 the Company had on hand cash, cash equivalents and marketable
securities of approximately $19.5 million. In July 1998, the Company completed a
private placement of 1,967,169 shares of its common stock at $6 per share, for
total net proceeds of $11.7 million after expenses of the offering.
In May 1997 the Company and Ilex entered into a joint venture whereby the
parties formed a limited partnership to develop and commercialize LDP-03 for the
treatment of chronic lymphocytic leukemia and other diseases. The Company and
Ilex are required to make contributions each time the joint venture requires
working capital. LeukoSite and Ilex will generally share equally in profits from
the sales of LDP-03 and in research, development, and clinical expenses. The
capital requirements of the joint venture consist of clinical development
expenses. LeukoSite and Ilex estimate that research, development, and clinical
expenses for the joint venture will be approximately $5.0 million for 1998. For
the six months ended June 30, 1998 the Company provided the joint venture with
approximately $2.4 million in funding and the Company had a funding liability of
approximately $958,000 as of June 30, 1998. The Company charged the joint
venture approximately $415,000 for expenses incurred on its behalf.
10
<PAGE>
The Company has entered into sponsored research and consulting agreements with
certain hospitals, academic institutions and consultants, requiring periodic
payments by the Company. As of June 30, 1998 aggregate minimum funding
obligations under these agreements, which include certain cancellation
provisions, total approximately $1,443,000, of which approximately $1,276,000
will be paid in 1998. The Company also has a remaining total commitment of
$750,000 to the Therapeutic Antibody Centre at the University of Oxford in
England to provide funding in semi-annual installments through the year 1999.
The Company believes that its existing capital resources, interest income and
revenue from the collaboration agreements will be sufficient to fund its planned
operating expenses and capital requirements into 2000. However, there can be no
assurance that such funds will be sufficient to meet the Company's operating
expenses and capital requirements during such period. The Company's actual cash
requirements may vary materially from those now planned and will depend upon
numerous factors, including the results of the Company's research and
development and collaboration programs, the timing and results of preclinical
and clinical trials, the timing and costs of obtaining regulatory approvals, the
progress of the milestone and royalty producing activities of the Company's
collaborative partners, the level of resources that the Company commits to the
development of manufacturing, marketing, and sales capabilities, the cost of
filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights, the ability of the Company to maintain existing
and establish new collaboration agreements with other companies, the
technological advances and activities of competitors and other factors.
The Company expects to incur substantial additional expenses, including expenses
related to ongoing research and development activities, expenditures for
preclinical and clinical trials and the expansion of its laboratory and
administrative activities. Therefore, the Company will need to raise substantial
additional capital. The Company intends to seek such additional funding through
public or private financing or collaboration or other arrangements with
collaborative partners. There can be no assurance, however, that additional
financing will be available from any sources or, if available, will be available
on acceptable terms.
Year 2000 Issues
The Company has assessed the impact of the year 2000 as it relates to the
Company's computer and operating systems and does not believe that the year
2000 will have a significant impact on the Company's information and
operating systems and computer technology or on its business, results of
operations or financial condition.
11
<PAGE>
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company's Registration Statement on Form S-1 (Reg. No.
333-30213) in connection with the Company's initial public
offering of Common Stock was declared effective by the
Securities and Exchange Commission (the "SEC") on August 14,
1997. Such Registration Statement (the "IPO Registration
Statement") provided for the registration under the
Securities Act of 1933, as amended (the "Securities Act"),
of 2,875,000 shares of the Company's Common Stock.
The aggregate initial public offering price for all
2,875,000 shares of Common Stock registered under the
Securities Act pursuant to the IPO Registration Statement
was $17,250,000. The net proceeds to the Company from such
issuance and distribution, after deducting the aggregate
amount of expenses (including underwriting discounts and
commissions) paid by the Company in connection therewith,
were $15,297,000.
Of such net proceeds, an aggregate of $6,870,000 has been
spent through June 30, 1998 for the following uses and in
the following amounts per use: $4,384,000 for the clinical
development of CAMPATH-1H through the Company's joint
venture with Ilex Oncology; $2,486,000 for working capital.
All amounts spent by the Company for such uses, other than
payment of salaries to directors and officers of the
Company, consisted of direct payments to persons or
entities, none of which was a director or officer of the
Company, holder of 10 percent or more of any class of
equity securities of the Company or other affiliate of
the Company. The remaining cash balance of such net
proceeds, consisting of $8,427,000, are held in cash,
cash equivalents, and marketable securities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on May 4, 1998 the
following proposals were adopted by the margins indicated:
1. To elect eight directors of the Company to serve until the
1999 Annual Meeting.
<TABLE>
<CAPTION>
Number of Shares
For Withheld
<S> <C> <C>
Christopher K. Mirabelli, Ph.D. 7,685,526 3,621
Kate Bingham 7,685,647 3,500
Yasunori Kaneko, M.D. 7,685,647 3,500
John W. Littlechild 7,685,647 3,500
Martin Peretz, Ph.D. 7,685,647 3,500
Mark Skaletsky 7,685,647 3,500
Timothy A. Springer, Ph.D. 7,685,647 3,500
Christopher T.Walsh, Ph.D. 7,685,647 3,500
</TABLE>
2. To consider and vote upon a proposal to ratify the adoption
and approval by the Board of Directors of an amendment to the
Company's Amended and Restated 1993 Stock Option Plan (the
"1993 Plan") to provide for an increase in the number of
shares of Common Stock authorized for issuance under the 1993
Plan from 1,500,000 to 2,125,000.
<TABLE>
<CAPTION>
<S> <C>
For 6,826,990
Against 44,970
Abstain 17,621
</TABLE>
3. To consider and vote upon a proposal to approve the
potential issuance of 20% or more of the Company's outstanding
Common Stock at a price less than the market value of the
Common Stock (upon the conversion of loans made to the Company
by Genentech, Inc.) in accordance with the rules of The NASDAQ
Stock Market.
<TABLE>
<CAPTION>
<S> <C>
For 6,850,798
Against 38,853
Abstain 3,100
</TABLE>
12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company
during the quarter for which this report is filed.
13
<PAGE>
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.
LeukoSite, Inc.
(Registrant)
Dated: August 13, 1998 /s/ Augustine Lawlor
--------------------------
Augustine Lawlor
Vice President, Corporate
Development and Chief Financial Officer
(principal finance and accounting officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 5,985
<SECURITIES> 13,516
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,190
<PP&E> 6,191
<DEPRECIATION> (3,515)
<TOTAL-ASSETS> 22,892
<CURRENT-LIABILITIES> 8,023
<BONDS> 0
0
0
<COMMON> 99
<OTHER-SE> 13,794
<TOTAL-LIABILITY-AND-EQUITY> 22,894
<SALES> 0
<TOTAL-REVENUES> 4,693
<CGS> 0
<TOTAL-COSTS> 10,257
<OTHER-EXPENSES> 1,417
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80
<INCOME-PRETAX> (6,981)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,981)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,981)
<EPS-PRIMARY> (.71)
<EPS-DILUTED> (.71)
</TABLE>
