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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
For the quarterly period ended September 30, 1997
Commission file number 000-23266
UroMed Corporation
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(Exact name of registrant as specified in its charter)
Massachusetts 04--3104185
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(State or other jurisdiction (I.R.S. Employer
of organization or incorporation Identification No.)
64 A Street, Needham, Massachusetts 02194
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(Address of principal executive offices)
(617) 433-0033
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(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 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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
26,660,225 shares of Common stock, no par value, outstanding at October 31, 1997
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UROMED CORPORATION
FORM 10-Q
For the quarterly period ended September 30, 1997
PAGE NO.
Part I--FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets at September 30, 1997 and
December 31, 1996.................................................... 3
Condensed Statements of Operations for the three and nine
months ended September 30, 1997 and 1996............................. 4
Condensed Statements of Cash Flows for the nine months
ended September 30, 1997 and 1996.................................... 5
Notes to Financial Statements.......................................... 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 8-13
Part II--OTHER INFORMATION
Item 6. Exhibits....................................................... 13
Signatures............................................................. 14
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
UROMED CORPORATION
CONDENSED BALANCE SHEETS
(In thousands, except share data)
(unaudited)
September 30, December 31,
1997 1996
------------- -----------
Assets
Current assets:
Cash and cash equivalents................... $ 39,342 $ 45,556
Short-term investments...................... 35,023 56,082
Inventories................................. 290 587
Prepaid expenses and other assets........... 1,433 1,324
-------- --------
Total current assets...................... 76,088 103,549
Fixed assets, net............................. 6,585 3,962
Other assets.................................. 3,656 2,977
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$ 86,329 $110,488
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--------- --------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable........................... $ 1,254 $ 713
Accrued expenses........................... 6,062 4,823
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Total current liabilities................ 7,316 5,536
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Convertible subordinated notes............... 69,000 69,000
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Stockholders' equity:
Common stock............................... 106,848 106,739
Other stockholders' equity................. (96,835) (70,787)
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Total stockholders' equity................... 10,013 35,952
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$ 86,329 $110,488
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The accompanying notes are an integral part of the financial statements.
3
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ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
UROMED CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ----------------------
1997 1996 1997 1996
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues......................................... $ 42 $ 800 $ 457 $ 2,119
--------- --------- ---------- ----------
Costs and expenses:
Cost of revenues............................... 1,212 1,204 3,148 3,891
Research and development....................... 3,474 2,039 9,202 35,734
Marketing and sales............................ 2,799 2,785 10,802 4,926
General and administrative..................... 1,226 822 3,981 1,948
--------- --------- ---------- ----------
Total costs and expenses...................... 8,711 6,850 27,133 46,499
--------- --------- ---------- ----------
Loss from operations............................. (8,669) (6,050) (26,676) (44,380)
Interest income.................................. 1,122 606 3,593 2,173
Interest expense................................. (1,035) -- (3,105) (1)
--------- --------- ---------- ----------
Net loss......................................... $ (8,582) $ (5,444) $ (26,188) $ (42,208)
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Net loss per share............................... $ (.32) $ (.21) $ (.99) $ (1.67)
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Weighted average common shares outstanding....... 26,613 26,429 26,549 25,244
--------- --------- ---------- ----------
--------- --------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
UROMED CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Net cash used in operating activities.......................... $ (21,907) $ (15,855)
---------- ----------
Cash flows from investing activities:
Sales of short-term investments, net......................... 21,102 8,217
Purchase of fixed assets..................................... (4,543) (1,660)
Investment in Medworks Corporation........................... (1,000) --
Increase in other assets..................................... 25 33
---------- ----------
Net cash provided by investing activities.................. 15,584 6,590
---------- ----------
Cash flows from financing activities:
Principal payments on capital lease obligations.............. -- (12)
Proceeds from issuance of common stock....................... 109 127
---------- ----------
Net cash provided by financing activities.................. 109 115
---------- ----------
Net decrease in cash and cash equivalents...................... (6,214) (9,150)
Cash and cash equivalents, beginning of period................. 45,556 18,165
---------- ----------
Cash and cash equivalents, end of period....................... $ 39,342 $ 9,015
---------- ----------
---------- ----------
Supplemental disclosure of cash flow information:
Interest paid.................................................. $ 2,070 $ 1
</TABLE>
The accompanying notes are an integral part of the financial statements.
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ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
UROMED CORPORATION
NOTES TO FINANCIAL STATEMENTS
(In thousands, except per share data)
1. NATURE OF BUSINESS
UroMed Corporation (the "Company"), a Massachusetts corporation, was
incorporated in October 1990 to develop male and female health care products.
The Company's initial areas of focus have been to develop, manufacture and
market products to manage urological and gynecological disorders, to potentially
enhance breast cancer detection, and to assist in prostate cancer surgery.
2. BASIS OF PRESENTATION
The condensed balance sheet at September 30, 1997, the condensed
statements of operations for the three and nine months ended September 30,
1997 and 1996 and the condensed statements of cash flows for the nine months
ended September 30, 1997 and 1996 are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of these
financial statements have been included. Such adjustments consisted only of
normal recurring items and, due to the underutilization of certain
Reliance-related manufacturing equipment, the Company recorded a provision in
the third quarter to reduce the carrying amount of this equipment to its
respective fair values. Interim results are not necessarily indicative of
results for a full year.
Certain prior year amounts have been reclassified to conform to the current
period financial statement presentation. These reclassifications had no impact
on net loss.
The financial statements should be read in conjunction with the Company's
audited financial statements and related footnotes for the year ended December
31, 1996 which may be found in the Company's 1996 Annual Report on Form 10-K.
3. INVENTORIES
Inventories are stated at the lower of cost or market, cost being determined
using the first-in, first-out method. At September 30, 1997, inventories
consisted of the following:
Raw materials.............................. $ 129
Work in process............................ 52
Finished goods............................. 109
---------
$ 290
---------
---------
4. INVESTMENT IN MEDWORKS CORPORATION
On August 7, 1997, the Company invested $1 million in the preferred stock of
Medworks Corporation of Louisville, KY as part of a license and supply agreement
between the Company and Medworks Corporation, enabling the Company to market,
sell and distribute Medworks' surgical technology to correct female urinary
stress incontinence. This investment is accounted for under the cost method and
is included in other assets in the condensed balance sheet.
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5. ACQUISITION OF TECHNOLOGY
On May 9, 1996, the Company acquired all of the incontinence technology of
the ASI Liquidating Trust, the successor to Advanced Surgical Intervention,
Inc., including the Miniguard-TM- Patch, an FDA-cleared prescription adhesive
patch placed externally against the urethral opening to help block leakage in
women with mild to moderate stress incontinence. The Company purchased the
Miniguard Patch and its related technology for $30.0 million, consisting of $7.0
million in cash and $23.0 million in common stock. The acquisition of this
incontinence technology was accounted for as purchased research and development
and, as a result, the purchase price and related expenses of $0.2 million were
charged to operations in the second quarter of 1996. During 1997, the Company
changed the name Miniguard-TM- Patch to Impress-TM- Softpatch.
6. NET LOSS PER SHARE
Net loss per share is determined by dividing net loss by the weighted
average number of common shares outstanding during the period. All common stock
equivalent shares from stock options have been excluded from the calculation of
weighted average number of common shares outstanding because their inclusion
would be antidilutive.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 , "Earnings Per Share". The provisions
of this statement are required to be adopted by the Company during the fourth
quarter of 1997. The adoption of this statement is not expected to have any
effect on earnings per share.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a developer of male and female health care products. The
Company's initial area of focus has been to develop, manufacture and market
products for the management of urological and gynecological disorders. The
Company's first five products, the Reliance-Registered Trademark- Insert,
the Impress-TM-Softpatch, the INTROL-Registered Trademark-Bladder Neck
Support Prosthesis, the PelvicFlex-TM-Personal Trainer video, and the
minimally invasive BEACON Technology System-TM-surgical line, are intended
for the management of certain types of female urinary incontinence ("UI"). In
addition to the continence care product line, the Company recently unveiled
two proposed new product lines: the first product offering, the
BreastCheck-TM-breast self examination device together with its
physician-use BreastExam-TM-counterpart device, may potentially enhance
early suspicious breast lump detection. The second product offering, the
CaverMap-TM-Surgical Aid, is designed to assist physicians in sparing vital
nerves typically damaged during prostate cancer surgery.
CONTINENCE CARE
The Reliance Insert was cleared by the U.S. Food and Drug Administration
("FDA") for marketing in the United States in August 1996. The Reliance Insert
is a small, prescription, balloon-tipped, single-use plug designed to be
inserted in the urethra and inflated to block the flow of urine from the bladder
to the urethra. The Company has completed its manufacturing and marketing
scale-up and began the first phase of the commercial launch of the Reliance
Insert in the United States in November 1996. The Company is continuing its
commercialization of the Reliance Insert throughout 1997. The Reliance Insert is
also commercially available through the Company's European distributors in
Germany, the United Kingdom, Finland, Norway, Sweden, Denmark, France and The
Netherlands.
The Impress Softpatch was cleared by the FDA for marketing in the United
States in May 1996. The Impress Softpatch is a small, prescription,
disposable adhesive patch designed to be placed externally against the
urinary opening to block the leakage of urine in mild to moderate UI
patients. The Company is developing the commercial manufacturing process for
the Impress Softpatch and is also developing a marketing plan for the
commercial launch of the Impress Softpatch in the United States, which is
currently expected to occur in 1998. During the third quarter of 1997, the
Company began to conduct test marketing activities for the Impress Softpatch
in the United States. These activities will continue throughout the end of
1997.
On April 9, 1997, the Company acquired the product line, all associated
license rights and all other rights of Johnson & Johnson Medical, Inc. and
certain of its affiliates to the INTROL Bladder Neck Support Prosthesis. The
INTROL Bladder Neck Support Prosthesis, cleared for marketing in the U.S. by the
FDA in May of 1995, is a patented intravaginal device which is designed to
elevate the bladder neck to its normal anatomical position, simulating the
effect of bladder neck suspension surgery. The Company initially serviced the
small group of physicians who had been trained and were involved in the limited
post-FDA clearance marketing of INTROL. The Company initiated a broader United
States launch of INTROL to healthcare practitioners in July 1997. In the short
term, the Company expects a modest financial contribution by adding INTROL to
its product line.
On August 7, 1997, the Company entered into an exclusive license and supply
agreement with Medworks Corporation of Louisville, KY to market, sell and
distribute Medworks' surgical technology to correct female urinary stress
incontinence. The Company expects to commence full-scale marketing and sales
launches of a series of surgical kits utilizing its BEACON technology in early
1998. In connection with this agreement, the Company has entered into a letter
of intent with Innovasive Devices, Inc., a manufacturer of proprietary tissue
repair systems, for supply of its bone anchoring system to be used by the
Company in conjunction with its surgical technology. No assurances can be made
that the Company will be successful in negotiating a definitive agreement with
Innovasive Devices, Inc.
In its initial focus on continence care, the Company provides an integrated
system of care for health professionals, patients and payors. This system is
complemented by a direct customer support and distribution system. During the
second and third quarter of 1997, several major health plans approved patient
reimbursement for UroMed's line of continence care patient products, including
the Reliance Insert, the Impress Softpatch, the INTROL Bladder Neck Support
Prosthesis, and the PelvicFlex-TM- Personal Trainer video. The Company is
actively involved in marketing its system of continence care to a range of
payors in order to achieve broader reimbursement coverage.
8
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BREAST CANCER
The BreastCheck device is designed to assist women with their monthly
breast exams by potentially improving sensitivity for suspicious breast lumps
and providing a greater level of comfort to women. It is a simple-to-operate,
hand-held device that utilizes advanced electronics and miniature pressure
sensors that are glided over the breast, gently "palpating" the breast in a
manner similar to the way the human hand does. The BreastExam product
addresses physician challenges when performing clinical breast exams. The
BreastCheck technology requires a Pre-Market Approval ("PMA") application
regulatory process with the FDA. The PMA clinicals are slated to begin in
early 1998, and this technology may be available to women in the U.S. as
early as the first part of 1999 if, and only if, FDA approval is obtained
within that time frame. No assurances can be made that the Company will be
successful in obtaining FDA approval for this product, or as to the timing of
such approval.
PROSTATE CANCER
The CaverMap Surgical Aid is a device for physicians to help potentially
improve prostate cancer surgery outcomes by reducing complications. This
device provides the surgeon greater capability to locate and map the
cavernosal nerve filaments to enable the best possible decision on what
tissue to extract in order to best remove the cancer while sparing nerves
vital for potency and other functions. The Company's patented technology for
this system uses state-of-the-art electronics to stimulate and sense the
function, and therefore location, of the microscopic cavernosal nerves that
control erectile function. In October 1997, The CaverMap Surgical Aid was
cleared by the FDA for marketing in the United States for the use described
above. The Company is focusing on U.S. introduction efforts of this product
in 1998. There are risks associated with the manufacturing and marketing of
this product in addition to dependence on suppliers and obtaining
reimbursement for this product as described in the Forward Looking Statements
and Associated Risks section of this report.
RESULTS OF OPERATIONS
REVENUES
The Company's revenues decreased by 95% to $0.04 million from $0.8
million in the third quarter of 1997 compared to the third quarter of 1996,
and 78% to $0.5 million from $2.1 million for the first nine months of 1997
compared to the first nine months of 1996. These decreases are primarily due
to the facts that there were no stocking shipments of the Reliance Insert
product to the Company's European distributors during 1997 and that there
were decreases in recognition of deferred revenue from a portion of the
advance payments received upon the signing of European distributorship
agreements, partially offset by small amounts of U.S. sales of the Reliance
Insert and the INTROL Bladder Neck Support Prosthesis.
The Company had no additional shipments of the Reliance Insert to its
European distributors in the first nine months of 1997 due to their having
adequate initial stocking levels already in place. The Company expects that
international sales of the Reliance Insert will be minimal for the remainder
of 1997 due to distributors' expected sales volume in relation to their
inventory levels.
Sales of the Reliance Insert in the U.S. in the third quarter and for the
first nine months of 1997 were minimal due to a more modest than expected
ramp-up of prescriptions by U.S. urologists, the early stages of the
Company's U.S. gynecology launch phase and the difficulties faced by the
Company in persuading physicians and patients to accept an urethral insert
such as Reliance as a viable alternative to other competing treatments for
UI. As of September 30, 1997, the Company had more than 3,900 physicians
trained to prescribe the Reliance Insert. The Company believes that its
patient numbers will continue to increase, but will contribute to very modest
product revenue growth in the near term. The Company believes that results to
date, with respect to the Reliance Insert, illustrate the importance of
continuing with its plans for (1) training gynecologists, (2) reaching
consumers, (3) achieving reimbursement and (4) offering physicians, patients
and managed care providers a wider range of expanded treatment options. The
Company believes that each of these elements will be important to the success
of its continence care program, and it expects to see progress on these
fronts over the next 12 months. There can be no assurance that these plans
will continue to be the most effective strategy to attain product revenue
growth.
9
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COST OF REVENUES
Cost of revenues increased by 1% to $1.21 million in the third quarter of
1997 compared to the third quarter of 1996 and decreased 19% to $3.1 million
from $3.9 million for the first nine months of 1997 as compared to the first
nine months of 1996. The increase for the third quarter of 1997 as compared
to the third quarter of 1996 was primarily the result of additional reserve
provisions for the underutilization of Reliance inventories. The decrease in
the first nine months of 1997 is primarily due to significantly lower
variable product cost due to lower product sales during the third quarter and
first nine months of 1997, partially offset by the same level of
manufacturing-related overhead costs in 1997 as in these same periods in
1996. Cost of revenues significantly exceeded product revenue for the 1996
and 1997 periods due to the current level of variable product costs as well
as the Company's manufacturing-related overhead costs, relative to the low
start-up volume of production in these periods. The Company expects negative
or low gross margins for the near term and, accordingly, has considered this
in its valuation of inventory. There can be no assurance that the Company
will ever realize sufficient production volumes or otherwise reduce its
manufacturing costs in order to raise gross margins. The Company anticipates
increased expenditures in manufacturing in the next two quarters as a result
activities for the Impress Softpatch. In addition, the Company expects to
increase future facilities spending in order to accommodate changes in, as
well as increases to, its manufacturing space for the Impress Softpatch and
the INTROL Bladder Neck Support Prosthesis.
RESEARCH AND DEVELOPMENT
Research and development expenses increased by 70% to $3.5 million from
$2.0 million in the third quarter of 1997 as compared to the third quarter of
1996 and decreased 74% to $9.2 million from $35.7 million in the first nine
months of 1997 as compared to the first nine months of 1996. The decrease for
the first nine months of 1997 as compared to the first nine months of 1996 is
due to the acquisition of technology for the Impress Softpatch during the
second quarter of 1996. This was accounted for as purchased research and
development and, as a result, the purchase price of $30.0 million and related
expenses of $0.2 million were charged to operations in the second quarter of
1996. Without the Impress Softpatch acquisition charge, research and
development expenses increased by 66% to $9.2 million from $5.5 million for
the first nine months of 1997 as compared to the first nine months of 1996.
The increases in research and development costs for both the third
quarter of 1997 and the first nine months of 1997 as compared to the 1996
periods, without this Impress Softpatch acquisition charge, were primarily
due to increased expenditures on the Impress Softpatch scale-up activities,
specific charges in relation to product-line acquisition activity, provisions
for Reliance manufacturing capacity underutilization and the focusing of
additional efforts and resources on accelerating internal development
activities outside of the continence care area and in-licensing activities
both within and outside of the continence care area, including the
BreastCheck breast self examination device, the physician-use BreastExam
device, and the CaverMap Surgical Aid.
The Company anticipates a comparable spending level in research and
development expenditures in the fourth quarter of 1997 and the first quarter
of 1998 as a result of clinical and regulatory efforts with respect to
internal development activities outside of the continence care area including
the BreastCheck breast self examination device, the physician-use BreastExam
device, and the CaverMap Surgical Aid. In 1998, the Company anticipates total
research and development spending to become relatively evenly allocated among
its product development efforts in the areas of continence care, breast
cancer and prostate cancer.
MARKETING AND SALES
Marketing and sales expenses increased by 1% to $2.8 million in the third
quarter of 1997 as compared to the third quarter of 1996, and increased 119%
to $10.8 million from $4.9 million for the first nine months of 1997 as
compared to the first nine months of 1996. This increase was the result of
expenditures incurred in connection with both the ramp-up and commencement of
the U.S. launch of the Reliance Insert, which began in November 1996 and
continued into the third quarter of 1997, and involved gynecologist education
and a public relations campaign to patients and physicians. Increases were
also a result of the commencement of test marketing activities for the
Impress Softpatch in preparation for its broader-based United States launch
in 1998. Increases relate specifically to hiring marketing and sales
personnel, costs to design an advertising and public relations campaign,
sales training and market research. All increases were partially offset by
operating reductions as a result of the Company's reallocation of resources
and elimination of certain Reliance-related positions during the second
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quarter of 1997. The Company anticipates increased sales and marketing
expenditures in the fourth quarter of 1997 and the first quarter of 1998 due
to increased costs in connection with conducting the Impress Softpatch test
market and preparation for the U.S. launch of the Impress Softpatch in early
1998, increased costs in connection with marketing and sales efforts of the
BEACON Technology surgical line, and as a result of internal development
activities including the BreastCheck breast self examination device, the
physician-use BreastExam device, and the CaverMap Surgical Aid.
During the second quarter of 1997, the Company reallocated its resources
and eliminated certain Reliance-related positions to better align costs with
Reliance sales levels. In line with this initiative, the Company is focusing
additional efforts on accelerating internal development activities outside of
the continence care area and in-licensing activities both within and outside
of the continence care area. This action resulted in a reduction of
approximately $0.6 million in operating expenses from the second quarter of
1997 to the third quarter of 1997.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased by 49% to $1.2 million in
the third quarter of 1997 as compared to $0.8 million in the third quarter of
1996, and increased 104% to $4.0 million from $1.9 million for the first nine
months of 1997 as compared to the first nine months of 1996. These increases
are primarily due to costs to support the U.S. launch of the Reliance Insert
and increased systems and consulting expenses. The Company anticipates an
increase in general and administrative expenses in the fourth quarter of 1997
and the first quarter of 1998 as a result of increased support costs in
connection with internal development activites, including the BreastCheck
breast self examination device, the physician-use BreastExam device, and the
CaverMap Surgical Aid, conducting the Impress Softpatch test market, and
preparation for the U.S. launch of the Impress Softpatch in 1998.
INTEREST INCOME AND INTEREST EXPENSE
Interest income increased by 85% to $1.1 million from $0.6 million in the
third quarter of 1997, as compared to the third quarter of 1996, and
increased by 65% to $3.6 million from $2.2 million for the first nine months
of 1997 as compared to the first nine months of 1996. The increases were
attributable to the significant increase in the Company's interest-bearing
cash equivalents and short-term investments as a result of the issuance of
the Company's 6% Convertible Subordinated Notes due October 15, 2003 (the
"Convertible Notes") in the fourth quarter of 1996, partially offset by lower
interest rates on invested cash balances in 1997.
Interest expense increased to $1.0 million in the third quarter of 1997
as compared to in the third quarter in 1996, and increased to $3.1 million
for the first nine months of 1997 as compared to in the first nine months of
1996 as a result of the issuance in October 1996 of the Convertible Notes.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had cash, cash equivalents and
short-term investments totaling $74.4 million, a decrease of $27.2 million,
or 26.8%, from $101.6 million at December 31, 1996. At September 30, 1997,
the Company's funds were invested in U.S. government obligations, corporate
debt obligations and money market funds.
Net cash used in operating activities of $21.9 million during the nine
months ended September 30, 1997 was primarily a result of the net loss for
the period, which was partially offset by non-cash expenses and increases in
accounts payable and related accrued expenses which were primarily the result
of interest accrued on the Convertible Notes, accruals for conducting
clinical studies and expenses incurred but not yet paid for the
commercialization, marketing and manufacturing scale-up activities for the
Impress Softpatch.
11
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Net cash provided by investing activities was $15.6 million during the
nine months ended September 30, 1997. Short-term investments decreased by
$21.1 million due to a shift into cash and cash equivalents. In addition, the
Company invested $1.0 million in the preferred stock of Medworks Corporation
in connecton with a license and supply agreement. Fixed assets increased by
$4.5 million as a result of purchases of additional automated assembly and
packaging equipment, production molds and purchases of other machinery and
equipment. At September 30, 1997, the Company has outstanding commitments of
approximately $5.7 million for the purchase of automated assembly and
packaging equipment for the Impress Softpatch and other machinery and
equipment, against which advance and milestone payments of $3.3 million have
already been made.
Net cash provided by financing activities was $0.1 million during the nine
months ended September 30, 1997 primarily as the result of proceeds received
from the exercise of stock options and from purchases under the employee stock
purchase plan.
The Company believes that available cash, cash equivalents and short term
investments will be sufficient to meet the Company's operating expenses and
capital requirements for the foreseeable future. The Company's future
liquidity and capital requirements depend on numerous factors, including, but
not limited to, development of the Company's marketing capability, market
acceptance of the Reliance Insert, the Impress Softpatch, the INTROL Bladder
Neck Support Prosthesis and the BEACON Technology system surgical line, the
uncertainty of widespread medical reimbursement, development of the Company's
manufacturing capability and achieving acceptable cost of production, the
uncertain protection afforded the Company by its intellectual property rights
and/or patents relating to the Reliance Insert, the Impress Softpatch and the
INTROL Bladder Neck Support Prosthesis, the development status of other
potential products, including but not limited to the BreastCheck device, the
BreastExam device and the CaverMap surgical aid, potential acquisitions and
other potential strategic product opportunities. There can be no assurance
that the Company will not require additional financing or that, if required,
such financing will be available on terms acceptable to the Company.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
Certain statements contained in this Quarterly Report may be considered
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, including
statements regarding (i) the planned progression of the Company's
commercialization strategies for the Reliance Insert, the Impress Softpatch, the
INTROL Bladder Neck Support Prosthesis and the BEACON Technology System surgical
line, including the timing and extent of initial or other sales in the United
States and abroad, (ii) the planned increases in manufacturing capacity for the
Reliance Insert and the Impress Softpatch , including the timing and extent of
expenditures needed for capital equipment and inventory production, (iii)
consumer acceptance of the use of the Reliance Insert, the Impress Softpatch and
the INTROL Bladder Neck Support Prosthesis as strategies for the self-care of UI
and the size and accessibility of the Company's target markets, (iv) the
Company's expectations regarding its research and development and in-licensing
activities, including but not limited to the BreastCheck, Breast Exam and the
CaverMap Surgical Aid, (v) the timing related to the commencement of marketing
activities for the commerical launches of BreastCheck, BreastExam, Impress
Softpatch, BEACON Technology System, and the CaverMap Surgical Aid, (vi) the
timing related to regulatory clearance for the BreastCheck and BreastExam, (vii)
the Company's planned uses for its cash and other liquid resources and (viii)
the extent of future revenues, expenses and results of operations and the
sufficiency of the Company's financial resources to meet planned operational
costs and other expenditure needs. These forward-looking statements are based
largely on the Company's expectations and are subject to a number of risks and
uncertainties, many of which are beyond the Company's control. Actual results
could differ materially from these forward-looking statements as a result of
certain factors, including those described below:
- The uncertainty that the Reliance Insert, the Impress Softpatch, the
INTROL Bladder Neck Support Prosthesis and the BEACON Technology system will
gain market acceptance either among physicians or UI sufferers in the United
States or in Europe and the risk that the adverse effects experienced by some
of the parties enrolled in clinical trials of the Company's Reliance Insert,
the Impress Softpatch and the INTROL Bladder Neck Support Prosthesis will be
more prevalent in widespread consumer use of such products and that such
effects will affect the market acceptance of these products.
- The uncertainty that physicians will prescribe the Reliance
Insert, the Impress Softpatch and the INTROL Bladder Neck Support Prostheses in
significant numbers.
- The uncertainty that patients using the Reliance Insert
will develop into long term users of the product.
- The dependence by the
Company on the success of five products, the Reliance Insert, the Impress
Softpatch ,
12
<PAGE>
the BEACON Technology system and INTROL Bladder Neck Support
Prosthesis.
- The uncertainty that the Company will be able to develop the
ability to produce commercial quantities of its products and produce such
quantities at an acceptable cost.
- The uncertainty that the Company will be able to develop an effective
sales force and implement a successful marketing plan for the Reliance
Insert, the Impress Softpatch, the INTROL Bladder Neck Support Prosthesis,
the BEACON Technology system and the CaverMap Surgical Aid in the United States.
- The Company's dependence on others for raw materials and certain
components of its products, including certain materials available only from
single sources.
- The effect of competing products and surgical and non-surgical
alternative treatments for incontinence.
- The uncertainty that the Company will be able to develop an effective
distribution network and implement a successful distribution strategy for the
Company's products in the United States, Europe and elsewhere.
- The uncertain protection afforded the Company by its patents and/or
other intellectual property rights relating to the Reliance Insert, the
Impress Softpatch, the INTROL Bladder Neck Support Prosthesis and other
products.
- The uncertainty whether the Company will be able to achieve widespread
medical reimbursement for the Reliance Insert, the Impress Softpatch,
INTROL Bladder Neck Support Prosthesis or the CaverMap Surgical Aid in the
United States or in the European markets targeted for the Company's products.
- The uncertainty whether the Company will be able to manufacture,
market and sell its products at prices that permit it to achieve satisfactory
margins in the production andmarketing of its products.
- Risks relating to FDA or other governmental oversight of the Company's
operations, including the possibility that the FDA could impose costly
additional labeling requirements on, or restrict the marketing of, the
Company's products, or suspend operations at one or more of the Company's
facilities.
- The uncertainty of the size of the potential markets based on such
technology and the coordination of products based on such technology with
UroMed's other products of the BreastCheck, BreastExam and the CaverMap
Surgical Aid.
- The uncertainty of receiving regulatory clearance for the Company's
BreastCheck and BreastExam devices.
Other relevant risks are described in the Company's Annual Report on Form
10-K for the year ended December 31, 1996 under the headings "Forward-Looking
Statements and Associated Risks" and "Risk Factors" are incorporated herein by
reference.
Part II. OTHER INFORMATION
ITEM 6. EXHIBITS
27 Financial Data Schedule
13
<PAGE>
SIGNATURES
Pursuant to 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.
UROMED CORPORATION
Date: November 12, 1997 /s/ John G. Simon John G.
----------------- ------------------------------------------
Simon, President and Chief Executive Officer
Date: November 12, 1997 /s/ Paul J. Murphy
----------------- ------------------------------------------
Paul J. Murphy, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE BALANCE SHEET AND
THE STATEMENT OF OPERATIONS FILED AS PART OF THE QUARTERLY REPORT ON FORM 10Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM
10Q.
</LEGEND>
<CIK> 0000917821
<NAME> UROMED-CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 39,342
<SECURITIES> 35,023
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 290
<CURRENT-ASSETS> 76,088
<PP&E> 9,908
<DEPRECIATION> 3,323
<TOTAL-ASSETS> 86,329
<CURRENT-LIABILITIES> 7,316
<BONDS> 69,000
0
0
<COMMON> 106,848
<OTHER-SE> (96,835)
<TOTAL-LIABILITY-AND-EQUITY> 86,329
<SALES> 42
<TOTAL-REVENUES> 42
<CGS> 1,212
<TOTAL-COSTS> 8,711
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,035)
<INCOME-PRETAX> (8,582)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,582)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,582)
<EPS-PRIMARY> (0.32)
<EPS-DILUTED> (0.32)
</TABLE>
