<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934
For Quarter Ended June 30, 1997
Commission File Number 0-23252
IGEN International, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2852543
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
16020 INDUSTRIAL DRIVE, GAITHERSBURG, MD 20877
(Address of principal executive offices) (Zip Code)
301-984-8000
(Registrant's telephone number, including area code)
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 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 / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT JULY 31, 1997
- ------------------------------------ ---------------------------------
Common Stock, $0.001 par value 15,034,517
<PAGE>
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
PART I FINANCIAL INFORMATION
Item 1: FINANCIAL STATEMENTS
Balance Sheets--June 30, 1997 and March 31, 1997 3
Statements of Operations--For the three months ended
June 30, 1997 and 1996 4
Statements of Cash Flows--For the three months ended
June 30, 1997 and 1996 5
Notes to Financial Statements 6
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
PART II OTHER INFORMATION
Item 6: EXHIBITS AND REPORTS ON FORM 8-K 10
Signatures 11
2
<PAGE>
IGEN INTERNATIONAL, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
ASSETS 1997 1997
- ----------------------------------------------------------------------------------------- ------------- -----------
<S> <C> <C>
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents................................................................ $ 4,414 $ 790
Short term investments................................................................... 1,059 8,254
Accounts receivable...................................................................... 2,152 1,783
Notes receivable......................................................................... 212 417
Inventory................................................................................ 1,706 2,075
Prepaid expenses......................................................................... 599 648
Other assets............................................................................. 179 218
------------- -----------
Total current assets............................................................... 10,321 14,185
------------- -----------
EQUIPMENT, FURNITURE, AND IMPROVEMENTS................................................... 7,101 6,950
Accumulated depreciation and amortization................................................ (3,998) (3,781)
------------- -----------
Equipment, furniture, and improvements, net............................................ 3,103 3,169
------------- -----------
OTHER ASSETS............................................................................. 433 440
------------- -----------
TOTAL.................................................................................... $ 13,857 $ 17,794
------------- -----------
------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses.................................................... $ 4,245 $ 4,266
Deferred revenue......................................................................... 4,257 5,393
Obligations under capital leases......................................................... 90 95
------------- -----------
Total current liabilities.......................................................... 8,592 9,754
------------- -----------
OBLIGATIONS UNDER CAPITAL LEASES -....................................................... 103 158
NONCURRENT
STOCKHOLDERS' EQUITY:
Common stock: $.001 par value, 50,000,000 shares authorized: 15,025,680 and 14,987,416
issued and outstanding................................................................. 15 15
Additional paid-in capital............................................................... 65,012 64,876
Accumulated deficit...................................................................... (59,571) (56,700)
Notes receivable from sale of common stock............................................... (294) (309)
------------- -----------
Total stockholders' equity......................................................... 5,162 7,882
------------- -----------
TOTAL.................................................................................... $ 13,857 $ 17,794
------------- -----------
------------- -----------
</TABLE>
See notes to financial statements.
3
<PAGE>
IGEN INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
(UNAUDITED)
REVENUES:
Product sales.............................................................................. $ 1,764 $ 1,883
Royalty Income............................................................................. 1,264 21
License and contract revenue............................................................... 395 3,077
--------- ---------
Total.................................................................................. 3,423 4,981
--------- ---------
OPERATING COSTS AND EXPENSES:
Product costs.............................................................................. 643 624
Research and development................................................................... 2,901 3,555
Marketing, general and administrative...................................................... 2,711 2,560
--------- ---------
Total.................................................................................. 6,255 6,739
--------- ---------
LOSS FROM OPERATIONS......................................................................... (2,832) (1,758)
INTEREST (EXPENSE) INCOME--net............................................................... (39) 234
--------- ---------
NET LOSS..................................................................................... $ (2,871) $ (1,524)
--------- ---------
--------- ---------
NET LOSS PER SHARE........................................................................... $ (.19) $ (.10)
--------- ---------
--------- ---------
SHARES USED IN COMPUTING NET LOSS PER SHARE.................................................. 15,013 14,924
--------- ---------
--------- ---------
</TABLE>
See notes to financial statements.
4
<PAGE>
IGEN International, Inc.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................................... $ (2,871) $ (1,524)
Adjustments to reconcile net income to net cash used in operating activities:
Interest on notes receivable from sale of common stock................................... (2)
Amortization of deferred compensation.................................................... -- 27
Depreciation and amortization............................................................ 217 344
Deferred revenue......................................................................... (1,136) (2,767)
Add (deduct) items not affecting cash:
Increase in accounts receivable.......................................................... (369) (14)
Decrease in notes receivable............................................................. 205 --
Decrease (increase) in inventory......................................................... 369 (122)
Decrease in prepaid expenses............................................................. 49 273
Decrease (increase) in other current assets.............................................. 39 (1,004)
(Decrease) increase in accounts payable and accrued expenses............................. (21) 62
Decrease in other non-current assets..................................................... 7 8
--------- ---------
Net cash used in continuing operating activities....................................... (3,511) (4,719)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for equipment, furniture and improvements..................................... (151) (118)
Sale of short-term investments............................................................. 7,195 2,475
--------- ---------
Net cash provided by investing activities.............................................. 7,044 2,357
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes receivable from sale of common stock, net............................... 15 10
Issuance of common stock--net.............................................................. 136 107
Principal payments under capital lease obligations......................................... (60) (119)
--------- ---------
Net cash provided by (used in) financing activities.................................... 91 (2)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................................... 3,624 (2,364)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............................................. 790 4,001
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................................... $ 4,414 $ 1,637
--------- ---------
--------- ---------
</TABLE>
See notes to financial statements.
5
<PAGE>
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The financial statements of IGEN International, Inc. (the "Company")
reflect, in the opinion of management, all adjustments, consisting only of
normal and recurring adjustments, necessary to present fairly the Company's
financial position at June 30, 1997 and the Company's results of operations for
the three month periods ended June 30, 1997 and 1996. Interim period results are
unaudited and are not necessarily indicative of results of operations or cash
flows for a full year period. The balance sheet at March 31, 1997 was derived
from audited financial statements at such date.
Pursuant to accounting requirements of the Securities and Exchange
Commission applicable to quarterly reports on Form 10-Q, the accompanying
financial statements and these notes do not include all disclosures required by
generally accepted accounting principles for complete financial statements.
Accordingly, these statements should be read in conjunction with the Company's
most recent annual financial statements included in the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents and Short-Term Investments--Cash equivalents include cash
in banks, and money market funds, securities of the U.S. Treasury and
certificates of deposit with original maturities of three months or less.
Concentration of Credit Risks--The Company has invested its excess cash
generally in securities of the U.S. Treasury, money market funds, certificates
of deposit and corporate bonds. The Company invests its excess cash in
accordance with a policy objective that seeks to ensure both liquidity and
safety of principal. The policy limits investments to certain types of
instruments issued by institutions with strong investments grade credit ratings
and places restrictions on their terms and concentrations by type and issuer.
Inventory is recorded at the lower of cost or market using the first-in,
first-out method and consists of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1997 MARCH 31, 1997
------------- ---------------
<S> <C> <C>
Finished goods................................................. $ 1,002 $ 1,095
Work in process................................................ 578 150
Raw materials.................................................. 126 830
------ ------
Total.......................................................... $ 1,706 $ 2,075
------ ------
------ ------
</TABLE>
6
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IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Equipment, Furniture, and Improvements are carried at cost. Depreciation is
computed over the estimated useful lives of the assets, generally five years,
using accelerated methods.
Revenue Recognition--Nonrefundable license fees, option fees, and milestone
payments in connection with research and development contracts or
commercialization agreements with corporate partners are recognized when they
are earned in accordance with the applicable performance requirements and
contractual terms. Amounts received in advance of performance under contracts or
commercialization agreements are recorded as deferred revenue until earned.
Product sales revenue is recorded as products are shipped.
Loss Per Share has been computed based on the weighted average number of
common shares and common equivalent shares outstanding during each period
including common equivalent shares calculated for the stock options and
warrants under the treasury stock method for all periods presented. Statement
of Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share,"
("EPS") was recently issued by the Financial Accounting Standards Board. SFAS
No. 128 is effective for periods ending after December 15, 1997 and early
adoption is not permitted. SFAS No. 128 requires the company to compute and
present a basic and diluted earnings per share. Had the Company computed
earnings per share in accordance with SFAS No. 128, the resulting Loss Per
Share would not be different than that which has been reported for the
periods ended June 30, 1997 and 1996.
7
<PAGE>
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company devotes substantially all of its resources to the research
and development of its proprietary technologies, primarily the
ORIGEN-Registered Trademark- technology for clinical diagnostic and life
science research products. In addition to product sales and royalties, the
Company's sources of revenue have consisted primarily of license or research
payments pursuant to licensing or collaborative research agreements. The
Company has entered into collaborative arrangements with corporate
collaborators that provide for the development and marketing of certain
ORIGEN systems. These agreements provide fees and royalties payable to the
Company in exchange for licenses to produce and sell the resulting products.
In the near term, the Company may selectively pursue additional strategic
alliances although, over time, it expects an increasing amount of its
revenues to be derived from sales of its products and royalties from
corporate collaborations.
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section.
RESULTS OF OPERATIONS
THE QUARTER IN REVIEW
The Company reported a net loss of $2.9 million ($ .19 per share) on
revenues of $3.4 million for its first quarter ended June 30, 1997. This
compares with a net loss of $1.5 million ($ .10 per share) on revenues of $5
million for the same period last year. Revenue during the first quarter in 1997
reflects a change in the revenue mix as compared to the first quarter in 1996.
During the year ended March 31, 1997, a significant portion of the Company's
license and contract revenue converted to royalty income based on product sales
by corporate partners. Accordingly, during the quarter ended June 30, 1997, fees
from licenses and for contract research declined $2.7 million, while revenue
from royalty income increased by $1.2 million. The increase in royalty income is
directly attributable to royalties generated through the Company's License
Agreement with Boehringer Mannheim GmbH. Boehringer Mannheim recently launched
its Elecsys series of immunodiagnostic products which are based on the Company's
ORIGEN-Registered Trademark- technology.
The Company and Boehringer Mannheim are currently in dispute concerning
the amount of royalties earned by the Company with respect to Boehringer
Mannheim's sales of Elecsys products. Based on information provided by
Boehringer Mannheim, the Company believes higher royalties are due than
Boehringer Mannheim has proposed. The Company has therefore invoked
contractual dispute resolution procedures according to the terms of the
License Agreement. The parties are currently engaged in discussions to
resolve these issues and the parties are discussing the possibility of
Boehringer Mannheim buying out its obligation to pay future royalties due
under the Agreement. The timing and likely outcome of these discussions
cannot be determined at this time.
8
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IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Product cost as a percentage of sales remained relatively constant at 36% in
the current quarter compared to 33% in the same prior year quarter. Research and
development expenditures decreased to $2.9 million during the first quarter in
1997 compared to $3.6 million during the same quarter in 1996. This decrease was
due to external technical collaborations which were completed during the second
half of the fiscal year ended March 31, 1997. Sales, marketing and
administrative expenses remained relatively constant at $2.7 million in the
current quarter when compared to $2.6 million in the comparable quarter a year
ago.
Income (loss) from operations over the next several years is likely to
fluctuate substantially from quarter to quarter as a result of differences in
the timing of revenues earned under license and product development agreements,
and associated product development expenses.
As of March 31, 1997, the Company had federal net operating loss and general
business credit tax carry forwards of approximately $41.9 million and $2.4
million, respectively. The Company's ability to utilize its net operating loss
and general business credit tax carry forwards may be subject to an annual
limitation in future periods pursuant to the "change in ownership rules" under
Section 382 of the Internal Revenue Service Code of 1986, as amended.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations through the sale of Preferred and
Common Stock, aggregating approximately $60 million through June 30, 1997,
collaborative research and licensing agreements, royalty payments and sales of
its ORIGEN line of products. As of June 30, 1997, the Company had $5.5 million
in cash, cash equivalents and short term investments. Working capital excluding
current deferred revenue which is classified as a current liability was $6
million at June 30, 1997. Including current deferred revenue, working capital
was $1.7 million.
Net cash used in operating activities was $3.5 million for the three months
ended June 30, 1997, as compared to $4.7 million for the corresponding prior
year period. This decrease in net cash used was due primarily to changes in
deferred revenue recognized in the current quarter. Until the Company earns and
recognizes royalty revenue from Boehringer Mannheim which exceeds the $6 million
royalty advance made by Boehringer Mannheim in January 1997, the Company will
not be entitled to receive any additional cash royalty payments from Boehringer
Mannheim.
The Company used $151,000 and $118,000 of net cash for investing activities,
substantially related to the acquisition of laboratory equipment, furniture and
leasehold improvements, during the three months ended June 30, 1997 and 1996,
respectively.
Subsequent to June 30, 1997, the Company announced that its corporate
partner, Eisai Co., Ltd. had commenced distribution in Japan of the Picolumi
immunodiagnostic system which utilizes the proprietary ORIGEN technology
developed by IGEN. Eisai is obligated to make its final license fee payment
of $2 million to IGEN and has agreed to pay IGEN a non-refundable royalty
advance of $2.75 million. Both amounts are scheduled for payment in August,
1997.
9
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IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The Company expects to incur substantial research and development expenses,
manufacturing costs and marketing and distribution expenses in the future. It is
the Company's intention to selectively seek additional collaborative or license
agreements with suitable corporate collaborators although there can be no
assurance the Company will be able to enter into such agreements or that amounts
received under such agreements will reduce substantially the Company's funding
requirements. Additional equity or debt financing may be required, and there can
be no assurance that these funds may be available on favorable terms, if at all.
The Company's future capital requirements depend on many factors, including
continued scientific progress in its diagnostics programs, the magnitude of
these programs, the time and costs involved in obtaining regulatory approvals,
the costs involved in filing, prosecuting and enforcing patent claims, competing
technological and market developments, changes in its existing license and other
agreements, the ability of the Company to establish development arrangements,
the cost of manufacturing scale-up and effective commercialization activities
and arrangements.
PART II OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<S> <C>
11.1 Statements regarding computation of per share earnings for the three months ended June
30, 1997 and 1996.
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None
10
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IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
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.
IGEN INTERNATIONAL, INC.
DATE: AUGUST 12, 1997 /s/ George V. Migausky
- ------------------------------ ---------------------------------------
GEORGE V. MIGAUSKY
VICE PRESIDENT OF FINANCE AND
CHIEF FINANCIAL OFFICER
(ON BEHALF OF THE REGISTRANT
AND AS PRINCIPAL FINANCIAL OFFICER)
11
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IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE
- ---------------- ----------------------------------------- -----
11.1 Computation of per share data 13
12
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IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
JUNE 30,
--------------------
1997 1996
--------- ---------
Primary and Fully Diluted :...................... 15,013 14,924
--------- ---------
Net Loss......................................... $ (2,871) $ (1,524)
--------- ---------
--------- ---------
Loss per share................................... $ (.19) $ (.10)
--------- ---------
--------- ---------
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,414
<SECURITIES> 1,059
<RECEIVABLES> 2,364
<ALLOWANCES> 0
<INVENTORY> 1,706
<CURRENT-ASSETS> 10,321
<PP&E> 7,101
<DEPRECIATION> 3,998
<TOTAL-ASSETS> 13,857
<CURRENT-LIABILITIES> 8,592
<BONDS> 0
0
0
<COMMON> 15
<OTHER-SE> 5,147
<TOTAL-LIABILITY-AND-EQUITY> 13,857
<SALES> 1,764
<TOTAL-REVENUES> 3,423
<CGS> 643
<TOTAL-COSTS> 6,255
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (39)<F1>
<INCOME-PRETAX> (2,871)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,871)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,871)
<EPS-PRIMARY> $(0.19)
<EPS-DILUTED> $(0.19)
<FN>
<F1>Net of interest income $ 61,000
</FN>
</TABLE>
