<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 0-27628
SUPERGEN, INC.
--------------
(exact name of registrant as specified in its charter)
CALIFORNIA 94-3132190
---------- ----------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
6450 HOLLIS STREET, EMERYVILLE, CALIFORNIA 94608
- ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(510) 655 - 1075
----------------
(Registrant's telephone number, including area code)
_________________________________Not applicable_________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of the registrant's Common Stock, $.001 par value,
outstanding as of August 7, 1996 was 16,823,529.
<PAGE>
SUPERGEN, INC
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE NO.
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1996 3
and December 31, 1995
Condensed Consolidated Statements of Operations for the three 4
and six months ended June 30, 1996 and 1995 and for the
period from inception to June 30, 1996
Condensed Consolidated Statements of Cash Flows for the six 5
months ended June 30, 1996 and 1995 and for the period
from inception to June 30, 1996
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 6 - Exhibits and Reports on Form 8-K 12
2
<PAGE>
SUPERGEN, INC.
(a development stage company)
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-----------------------------
(unaudited) (Note)
<S> <C> <C>
Current assets:
Cash and cash equivalents $20,759,813 $1,815,420
Prepaid expenses and other current assets 489,376 134,452
-----------------------------
Total current assets 21,249,189 1,949,872
Property and equipment, at cost:
Research and development equipment 83,546 81,894
Office furniture and fixtures 298,968 148,932
Leasehold improvements 53,579 47,208
-----------------------------
436,093 278,034
Less accumulated depreciation and amortization 157,871 127,713
-----------------------------
278,222 150,321
Other assets 41,630 61,390
-----------------------------
Total assets $21,569,041 $2,161,583
-----------------------------
-----------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $550,557 $298,328
Accrued compensation and related expenses 76,348 212,266
-----------------------------
Total current liabilities 626,905 510,594
Shareholders' equity:
Preferred stock, $.001 par value; 2,000,000 shares
authorized; none outstanding
Common stock, $.001 par value; 40,000,000 shares
authorized; 16,823,529 and 12,752,427 shares
issued and outstanding at June 30, 1996 and
December 31, 1995, respectively 39,057,826 17,213,067
Deficit accumulated during the development stage (18,115,690) (15,562,078)
-----------------------------
Total shareholders' equity 20,942,136 1,650,989
-----------------------------
Total liabilities and shareholders' equity $21,569,041 $2,161,583
-----------------------------
-----------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements
Note: The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
3
<PAGE>
SUPERGEN, INC.
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
March 1, 1991
(inception)
Three months ended Six months ended through
June 30, June 30, June 30,
1996 1995 1996 1995 1996
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $16,473 $9,779 $26,520 $83,278 $207,722
-------------------------------------------------------------------------
Operating expenses:
Research and development 1,135,330 740,266 2,035,923 1,709,872 10,693,965
Sales and marketing 85,411 46,083 155,945 99,827 709,616
General and administrative 449,439 159,022 694,776 379,764 2,573,638
Non-cash charges for
acquisition of in-process
research and development 4,867,645
-------------------------------------------------------------------------
Total operating expenses 1,670,180 945,371 2,886,644 2,189,463 18,844,864
-------------------------------------------------------------------------
Loss from operations (1,653,707) (935,592) (2,860,124) (2,106,185) (18,637,142)
Interest income, net 259,055 27,690 306,512 60,248 521,452
-------------------------------------------------------------------------
Net loss ($1,394,652) ($907,902) ($2,553,612) ($2,045,937) ($18,115,690)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net loss per share ($0.08) ($0.07) ($0.17) ($0.17)
----------------------------------------------------------
----------------------------------------------------------
Weighted average shares used
in computing per share
amounts 16,754,705 12,394,394 15,030,895 12,312,432
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
SUPERGEN, INC.
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
March 1, 1991
(inception)
Six months ended through
June 30, June 30,
1996 1995 1996
---------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net loss ($2,553,612) ($2,045,937) ($18,115,690)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 30,158 32,030 160,033
Non-cash charges for
acquisition of in-process
research and development 4,867,645
Changes in operating assets and
liabilities:
Prepaid expenses and other
current assets (354,924) 174,560 (489,376)
Other assets 19,760 26,409 (41,630)
Accounts payable and accrued
liabilities 116,311 (75,640) 626,905
---------------------------------------------
Net cash used in operating activities (2,742,307) (1,888,578) (12,992,113)
Investing activities:
Purchase of property and
equipment (158,059) (22,806) (438,255)
Financing activities:
Issuances of common stock 21,844,759 1,500,000 32,103,436
Contract research funding from
affiliated partnerships 2,086,745
---------------------------------------------
Net cash provided by financing
activities 21,844,759 1,500,000 34,190,181
---------------------------------------------
Net increase (decrease) in cash 18,944,393 (411,384) 20,759,813
Cash at beginning of period 1,815,420 3,053,031 0
---------------------------------------------
Cash at end of period $20,759,813 $2,641,647 $20,759,813
---------------------------------------------
---------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
SUPERGEN, INC.
(a development stage company)
Notes to Condensed Consolidated Financial Statements
June 30, 1996
1. SuperGen, Inc. is a development stage pharmaceutical company dedicated to
the development and commercialization of products intended to treat life-
threatening diseases, particularly cancer and blood cell (hematological)
disorders, and other serious conditions such as obesity. SuperGen is
developing its anticancer portfolio of nine generic products and five
enhanced or "supergeneric" products. The Company is also developing a group
of proprietary blood cell disorder products for the treatment of anemia
associated with chemotherapy, radiotherapy, renal failure and aplastic
anemia. SuperGen's proprietary obesity pill, which has shown promise in
early preclinical and animal studies for chronic genetic obesity, general
obesity and type II diabetes, has been cleared by the U.S. Food and Drug
Administration (the "FDA") for the commencement of new Phase II human
clinical studies.
2. The accompanying unaudited condensed consolidated financial statements at
June 30, 1996 and 1995 and for the periods then ended, including the period
from inception to date, have been prepared in accordance with generally
accepted accounting principles for interim financial information on a basis
consistent with the audited financial statements for the nine month period
ended December 31, 1995. The condensed consolidated financial statements
for the three and six months ended June 30, 1996 include the accounts of its
wholly-owned Israeli subsidiary, Rubicon Pharmaceuticals, Ltd. formed in
June, 1996. The results of operations to date have been immaterial and all
intercompany transactions and balances have been eliminated. The statements
include all adjustments (consisting of normal recurring accruals) which in
the opinion of the Company's management are necessary for a fair
presentation of the results for the interim and inception to date periods
presented. The interim results are not necessarily indicative of results
that may be expected for the full year. The accompanying condensed
financial statements should be read in conjunction with the Company's
audited financial statements for the nine month period ended December 31,
1995 which are included in the prospectus dated March 13, 1996.
3. Net loss per share information is computed using the weighted average
number of shares of common stock outstanding during each period. Common
equivalent shares issuable upon the exercise of outstanding options and
warrants to purchase shares of the Company's common stock (using the
treasury stock method) are not included in the calculation of the net loss
per share for the three and six month periods ended June 30, 1996 and 1995,
because the effect of their inclusion is anti-dilutive. In accordance with
Securities and
6
<PAGE>
Exchange Commission Staff Accounting Bulletins (SABs), common
equivalent shares issued by the Company at prices below the public offering
price of $6.00 per share during the period beginning one year prior to the
initial filing of the registration statement for the Company's initial
public offering have been included in the calculation as if they were
outstanding for all periods through December 31, 1995 (using the treasury
stock method and the initial public offering price of $6.00 per share).
7
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Preliminary Note Regarding Forward-looking Statements
This Quarterly Report on Form 10-Q contains 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. The Company's actual results may differ
materially from the results projected in the forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those
discussed under "Factors Affecting Future Operating Results."
Results of Operations
INCEPTION TO DATE.
From the inception of the Company in 1991 through June 30, 1996 the Company
incurred a cumulative net loss of approximately $18.1 million, including a non-
cash charge of $4.9 million for the acquisition of in-process research and
development from two affiliated limited partnerships. The Company expects its
operating expenses to increase over the next several years as it expands its
research and development and commercialization activities and operations. The
Company expects to incur significant additional operating losses for at least
the next several years.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995.
Total revenues increased approximately $6,700 or 68% to approximately $16,500 in
the three months ended June 30, 1996 from approximately $9,800 for the same
period in 1995. Revenues in the period ended June 30, 1996 are related to
grants activity, while revenues in the period ended June 30, 1995 are primarily
related to research and development work performed for Israel Chemicals, Ltd.
(ICL), a related party. The work for ICL was completed during calendar year
1995. The Company does not anticipate earning any future revenues from ICL.
Research and development expenses for the three months ended June 30, 1996
increased approximately $395,000 or 53% from the same period ended June 30,
1995. The increase is the result of increased expenditures for preclinical and
clinical trials, the payment of a bonus to employees, and increased research and
development personnel. The Company expects its research and development expenses
to increase as it expands its product development and clinical trials
activities.
Sales and marketing expenses increased approximately $39,000 or 85% in the three
months ended June 30, 1996 compared to the same period in 1995 due to the
payment of a bonus, increased salaries and travel expenses. The Company expects
sales and marketing expenses to continue to increase as the Company
introduces its
8
<PAGE>
initial generic products and as the Company continues its efforts to acquire
generic products or marketing rights to such products.
General and Administrative expenses increased approximately $290,000 or 183% in
the three months ended June 30, 1996 compared to the same period in 1995 due
primarily to the addition of personnel, payment of a bonus, travel, consulting
fees, and other operating expenses associated with the increased administrative
requirements of a public company. The Company expects general and administrative
expenses to increase in future periods in support of the expected increases in
both research and development as well as sales and marketing activities and as
the Company incurs expenses associated with being a public company.
Net interest income rose approximately $231,000 in the three months ended June
30, 1996 as compared to the same period in 1995 due primarily to higher invested
cash balances resulting principally from the approximately $21.5 million of net
proceeds received from, the Company's initial public offering and the exercise
of the underwriters' option.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995.
Total revenues decreased approximately $57,000 or 68% to approximately
$26,000 in the six months ended June 30, 1996 from approximately $83,000 in
the same period in 1995. Revenues in the period ended June 30, 1995 are
primarily related to research and development work performed for ICL.
Research and development expenses for the six months ended June 30, 1996
increased approximately $326,000 or 19% over the same period in 1995. The
majority of the increase occurred in the three months ended June 30, 1996 as
described above. There was a one time licensing fee of $100,000 for technology
rights acquired in the period ended June 30, 1995.
Sales and Marketing expenses increased approximately $56,000 or 56% in the six
months ended June 30, 1996 compared to the same period in 1995. The majority of
the increase occurred in the three months ended June 30, 1996 as described
above.
General and Administrative expenses increased approximately $315,000 or 83% for
the six months ended June 30, 1996 over the same period in 1995. Approximately
$290,000 of the increase occurred in the three months ended June 30, 1996 as
described above.
Net Interest income increased approximately $246,000 or 409% for the six months
ended June 30, 1996 compared to the same period in 1995. The increase is due
primarily to the higher invested cash balances resulting principally from the
proceeds of the public offering and the exercise of the underwriters' option.
9
<PAGE>
Liquidity and Capital Resources
From inception through February, 1996 the Company financed its operations
primarily through private equity sales and contract research funding
agreements with affiliated limited partnerships. In March, 1996 the Company
completed its initial public offering of 3.5 million Units, consisting of one
share of Common Stock and one redeemable warrant to acquire one share of
Common Stock at $9.00 per share. The Company received net proceeds of
approximately $18.6 million after deducting underwriting discounts and
offering expenses. Additional net proceeds of approximately $2.9 million were
received in April, 1996 from the exercise of the underwriters' overallotment
option.
The Company believes that its current cash and cash equivalents will satisfy
its budgeted cash requirements for approximately the next fifteen months,
based on the Company's current operating plan. The Company's current
operating plan shows that at the end of such fifteen month period the Company
will require substantial additional capital. In addition, pursuant to an
existing agreement with Israel Chemicals, Ltd. the Company intends to fund up
to $1 million ($500,000 on or prior to December 31, 1996 and provided that
the Company has adequate financial capability as reasonably determined by the
Company's Board of Directors, an additional $500,000 on or prior to December
31, 1997) in projects in Israel conditioned upon such funding serving the
best interest of the Company and the financial viability of the proposed
projects as determined by the Company's Board of Directors. Moreover, if the
Company experiences unanticipated cash requirements during the fifteen month
period, the Company could require additional capital to fund operations,
continue research and development programs and pre-clinical and clinical
testing of its potential generic, supergeneric and proprietary products and
commercialize any products that may be developed. See "Factors Affecting
Future Operating Results."
The Company's future expenditures and capital requirements will depend on
numerous factors, including without limitation, the progress of its research and
development programs, the progress of its clinical trials and the time and cost
involved in obtaining regulatory approvals, the cost of filing, prosecuting,
defending and enforcing any patent claims and other intellectual property
rights, competing technological and market developments, the ability of the
Company to establish collaborative arrangements and the terms of any such
arrangements and the development of commercialization activities and
arrangements. The Company's cash requirements are expected to continue to
increase significantly each year as it expands its development and
commercialization activities and operations.
Pending use of its cash and cash equivalents, the Company invests in short-term,
interest bearing investment grade securities.
10
<PAGE>
FACTORS AFFECTING OPERATING RESULTS
The future operating results of the Company are highly uncertain, and the
following factors should be carefully reviewed in addition to the other
information contained in this quarterly report on Form 10-Q.
The Company has incurred losses in every fiscal period and expects to
continue to incur significant operating losses for the next several years.
The Company has never generated revenues from product sales and there is no
assurance that revenue from product sales will ever be achieved. In addition,
there is no assurance that any of the Company's proprietary products will
ever be successfully developed, receive and maintain required governmental
regulatory approvals, become commercially viable or achieve market
acceptance. In July 1996, the Company acquired certain non-exclusive
marketing rights to enable it to commence sales of three products, but there
is no assurance any such sales will occur in 1996, if at all, or that they
will exceed the related product and selling expenses due to the intense
competition and potential for significant selling price and gross margin
erosion.
The Company has no experience in manufacturing, procuring products in
commercial quantities, or marketing and only limited experience in
negotiating, setting up or maintaining strategic relationships and conducting
clinical trials and other late stage phases of the regulatory approval
process and there is no assurance that the Company will successfully engage
in any of these activities.
The Company's need for additional funding is expected to be substantial and
will be determined by the progress and cost of the development and
commercialization of its products and other activities. Based on the
Company's current operating plan, additional funds will be needed in
approximately fifteen months. Moreover, if the Company experiences
unanticipated cash requirements during the interim period, the Company could
require additional funds much sooner. The source, availability, and terms of
such funding have not been determined. Although funds may be received from
the sale of equity securities or the exercise of outstanding warrants and
options to acquire common stock of the Company, there is no assurance any
such funding will occur.
The Company faces numerous other risks in the operation of its business,
including, but not limited to, protecting its proprietary technology and
trade secrets and not infringing those of others; attaining a competitive
advantage; entering into agreements with others to source, manufacture,
market and sell its products; attracting and retaining key personnel in
research and development, manufacturing, marketing, sales and other
operational areas; managing growth, if any; and avoiding potential claims by
others in such areas as product liability and environmental matters.
The above factors are not intended to be inclusive and there may be numerous
other areas subjecting the Company's operating results to risk. Failure to
satisfactorily achieve any of the Company's objectives or avoid any of the
above or other risks would likely have a material adverse effect on the
Company's business and results of operations.
11
<PAGE>
SUPERGEN, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
No.
-------
11.1 Statement re: computation of per share loss
27 Financial Data Schedule - electronic filing only
(b) No reports were filed on Form 8-K during the quarter for which this
report is filed.
12
<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.
SuperGen, Inc.
Date 8/13/96 By /s/ Joseph Rubinfeld
----------------------------
Joseph Rubinfeld, Ph.D.
Chief Executive Officer,
President, Chief Scientific
Officer and Director
(Principal Executive Officer)
Date 8/13/96 By /s/ Henry C. Settle, Jr.
----------------------------
Henry C. Settle, Jr.
Chief Financial Officer
(Principal Financial Officer)
13
<PAGE>
INDEX TO EXHIBITS
The following exhibits are included herein:
11.1 Statement re: computation of per share loss
27 Financial Data Schedule - electronic filing only
14
<PAGE>
SUPERGEN, INC.
Exhibit 11.1
Statement re: computation of per share loss
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Net Loss ($1,394,652) ($907,902) ($2,553,612) ($2,045,937)
---------------------------------------------------
---------------------------------------------------
Weighted average number
of shares of Common Stock
outstanding 16,754,705 12,250,451 15,030,895 12,157,500
Shares related to SAB
Nos. 64 and 83 165,466 165,466
---------------------------------------------------
Total weighted average
number of shares of
Common Stock outstanding 16,754,705 12,415,917 15,030,895 12,322,966
---------------------------------------------------
---------------------------------------------------
Net Loss per Share ($0.08) ($0.07) ($0.17) ($0.17)
---------------------------------------------------
---------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SUPERGEN,
INC. JUNE 30, 1996 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 20,759,813
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,249,189
<PP&E> 436,093
<DEPRECIATION> 157,871
<TOTAL-ASSETS> 21,569,041
<CURRENT-LIABILITIES> 626,905
<BONDS> 0
0
0
<COMMON> 39,057,826
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 21,569,041
<SALES> 0
<TOTAL-REVENUES> 26,520
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,886,644
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,860,124)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,553,612)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> 0
</TABLE>
