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United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-27628
SUPERGEN, INC.
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(exact name of registrant as specified in its charter)
CALIFORNIA 94-3132190
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(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
6450 HOLLIS STREET,EMERYVILLE,CALIFORNIA 94608
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(Address of principal executive offices) (Zip Code)
(510) 655 - 1075
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(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 No X
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APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of the registrant's Common Stock $.001 par value,
outstanding as of May 13, 1996 was 16,803,529.
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SUPERGEN, INC
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE NO.
Item 1 - Financial Statements
Condensed Balance Sheets as of March 31, 1996 3
and December 31, 1995
Condensed Statements of Operations for the three 4
months ended March 31, 1996 and 1995 and for
the period from inception to March 31, 1996
Condensed Statements of Cash Flows for the three 5
months ended March 31, 1996 and 1995 and for
the period from inception to March 31, 1996
Notes to Condensed Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Securities
Holders 16
Item 6 - Exhibits and Reports on Form 8-K 17
2
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SUPERGEN, INC.
(a development stage company)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1996 1995
(unaudited) (Note)
----------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $19,587,815 $1,815,420
Prepaid expenses and other current assets 327,193 134,452
---------------------------
Total current assets 19,915,008 1,949,872
Property and equipment, at cost:
Research and development equipment 83,546 81,894
Office furniture and fixtures 149,486 148,932
Leasehold improvements 47,208 47,208
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280,240 278,034
Less accumulated depreciation and amortization 141,701 127,713
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138,539 150,321
Other assets 26,390 61,390
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Total assets $20,079,937 $2,161,583
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $617,812 $298,328
Accrued compensation and related expenses 191,620 212,266
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Total current liabilities 809,432 510,594
Shareholders' equity:
Preferred stock, $.001 par value; 2,000,000
shares authorized; none outstanding
Common stock, $.001 par value; 40,000,000
shares authorized; 16,279,227 and
12,752,427 shares issued and outstanding
at March 31, 1996 and December 31, 1995 35,991,543 17,213,067
Deficit accumulated during the development
stage (16,721,038) (15,562,078)
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Total shareholders' equity 19,270,505 1,650,989
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Total liabilities and shareholders' equity $20,079,937 $2,161,583
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---------------------------
</TABLE>
See accompanying notes to condensed 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
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SUPERGEN, INC.
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
March 1, 1991
(inception)
Three months ended through
March 31, March 31,
1996 1995 1996
------------------------------------------
<S> <C> <C> <C>
Total revenues $10,047 $73,499 $191,249
------------------------------------------
Operating expenses:
Research and development 900,593 969,606 9,558,635
Sales and marketing 70,534 53,744 624,205
General and administrative 245,337 220,742 2,124,199
Non-cash charges for
acquisition of in-process
research and development 4,867,645
------------------------------------------
Total operating expenses 1,216,464 1,244,092 17,174,684
------------------------------------------
Loss from operations (1,206,417) (1,170,593) (16,983,435)
Interest income, net 47,457 32,558 262,397
------------------------------------------
Net loss ($1,158,960) ($1,138,035) ($16,721,038)
------------------------------------------
------------------------------------------
Net loss per share ($0.09) ($0.09)
-------------------------
-------------------------
Weighted average shares used
in computing per share
amounts 13,268,330 12,229,559
-------------------------
-------------------------
</TABLE>
See accompanying notes to condensed financial statements
4
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SUPERGEN, INC.
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
March 1, 1991
(inception)
Three months ended through
March 31, March 31,
1996 1995 1996
----------------------------------------
<S> <C> <C> <C>
Operating activities:
Net loss ($1,158,960) ($1,138,035) ($16,721,038)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization 13,988 19,123 143,864
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 (192,741) 94,949 (327,193)
Other assets 35,000 25,000 (26,390)
Accounts payable and accrued
liabilities 298,838 (14,044) 809,432
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Net cash used in operating activities (1,003,875) (1,013,007) (11,253,680)
----------------------------------------
Investing activities:
Purchase of property and
equipment, net (2,206) (25,718) (282,403)
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Financing activities:
Issuances of common stock 18,778,476 29,037,153
Contract research funding from
affiliated partnerships 2,086,745
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Net cash provided by financing
activities 18,778,476 0 31,123,898
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Net increase (decrease) in cash 17,772,395 (1,038,725) 19,587,815
Cash at beginning of period 1,815,420 3,053,031 0
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Cash at end of period $19,587,815 $2,014,306 $19,587,815
----------------------------------------
----------------------------------------
</TABLE>
See accompanying notes to condensed financial statements.
5
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SUPERGEN, INC.
(a development stage company)
Notes to Condensed Financial Statements
March 31, 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 five generic products
and four 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 financial statements at March 31, 1996 and
1995 and for the periods then ended, including the inception to date
period, have been prepared in accordance with generally accepted accounting
principles on a basis consistent with the audited financial statements for
the nine month period ended December 31, 1995.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 month periods ended March 31, 1996 and 1995,
because the effect of their inclusion is anti-dilutive. In accordance with
Securities and Exchange Commission Staff Accounting Bulletins (SAB's),
common and 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).
4. In March, 1996, the Company completed its initial public offering of
3.5 million units ("Units"), each Unit consisting of one share of the
Company's common stock and one warrant to purchase one share of the
Company's common stock ("Warrants"). The Company received net proceeds of
approximately $18.6 million after deducting underwriting discounts and
offering expenses.
On April 11,1996 the underwriter exercised its option to purchase
524,302 additional Units to cover over-allotments. The exercise of the
option resulted in net proceeds to the Company of approximately $ 2.9
million after deducting underwriting discounts and offering expenses.
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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
March 31, 1996 the Company incurred a cumulative net loss of approximately
$16.7 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 MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995.
Total revenue decreased approximately $63,000 or 86% to approximately
$10,000 in the three months ended March 31, 1996 from approximately $73,500 for
the same period in 1995. Revenues in the period ended March 31, 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 March 31, 1996
decreased approximately $69,000 or 7% from the comparable period ended March 31,
1995. The decrease is the result of the payment of a one time licensing fee of
$100,000 for the rights to technology in the 1995 period partially offset by
increased salaries and consulting costs in the period ended March 31, 1996. 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 $17,000 or 31% in
the three months ended March 31, 1996 compared to the same period in 1995 due
to increased salary and travel expenses. The Company expects sales and
marketing expenses to increase in support of the introduction of the
Company's initial generic products.
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General and Administrative expenses increased approximately $25,000 or 11%
in the three months ended March 31, 1996 compared to the same period in 1995 due
primarily to increased salaries, consulting fees, and other operating expenses.
The increase was partially offset by a $50,000 charge to operations in the
period ended March 31, 1995 relating to an unexercised expired option for the
acquisition of a site for future operations. 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 $15,000 in the three months ended
March 31, 1996 as compared to 1995 due primarily to higher invested cash
balances resulting from the approximately $18.6 million of net proceeds received
from the Company's initial public offering.
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. 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 underwriter's overallotment option.
The Company believes that its current cash and cash equivalents, together
with the additional proceeds received in April 1996 from the exercise of the
underwriter's option to purchase 524,302 units to cover over-allotments, will
satisfy its budgeted cash requirements for approximately the next eighteen
months, based on the Company's current operating plan. The Company's current
operating plan shows that at the end of such eighteen month period the
Company will require substantial additional capital. In addition, pursuant to
an existing agreement with Israel Chemicals, Ltd. ("ICL") the Company may
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 eighteen 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 -- Additional Financing Requirements."
8
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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.
Factors Affecting Future Operating Results
THE FOLLOWING FACTORS AFFECTING FUTURE OPERATING RESULTS SHOULD BE CAREFULLY
REVIEWED IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS QUARTERLY REPORT
ON FORM 10-Q.
HISTORY OF OPERATING LOSSES: FUTURE PROFITABILITY UNCERTAIN. Since its inception
in 1991 the Company has incurred losses in every fiscal period. The Company has
not generated any revenues from product sales to date, and there can be no
assurance that revenues from product sales will be achieved. Moreover, even if
the Company does achieve revenues from product sales, the Company nevertheless
expects to incur significant operating losses over the next several years. The
Company's ability to achieve a profitable level of operations in the future will
depend in large part on its completing product development of its supergeneric,
proprietary blood cell disorder and/or its obesity products, obtaining
regulatory approvals for such products and bringing several of these to market.
There can be no assurance that the Company will ever achieve significant
revenues or profitable operations.
EARLY STAGE OF DEVELOPMENT OF PROPRIETARY PRODUCTS; UNCERTAINTY OF FINAL PRODUCT
DEVELOPMENT. While the Company's proposed proprietary nongeneric products are in
the development rather than the research stage, significant development remains
prior to the time any of these proposed products may be brought to market. All
of the potential proprietary products currently under development by the Company
will require extensive clinical testing prior to submission of any regulatory
application for commercial use. Such proposed proprietary products as well as
the Company's proposed generic and supergeneric products are subject to the
risks of failure inherent
9
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in the development of pharmaceutical products, including the possibilities that
some of the Company's potential products will be found to be unsafe or
ineffective or otherwise fail to receive necessary regulatory clearances, that
the products, if safe and effective, will be difficult to manufacture on a large
scale or uneconomical to market, that the proprietary rights of third parties
will preclude the Company from marketing such products, or that third parties
will market superior or equivalent products. As a result, there can be no
assurance that any of the Company's products will be successfully developed,
receive required governmental regulatory approvals, become commercially viable
or achieve market acceptance.
GENERIC AND SUPERGENERIC PHARMACEUTICAL DEVELOPMENT. The Company's success is
dependent upon the successful commercialization of its potential generic and
supergeneric products. In this regard, SuperGen expects to receive
governmental approval for its first generic product, Mitomycin, in late 1996,
and intends to file for governmental approval of several of its other generic
and supergeneric products in 1996 and 1997. However, there can be no
assurance that such approval will ever be obtained or, if obtained, that the
Company will ever successfully commercialize its generic or supergeneric
products. While the Company has obtained bulk source approval from the FDA
for certain of its generic and supergeneric products, it has yet to receive
marketing approval for any products, and there can be no assurance that any
such marketing approval will ever be obtained. In addition, while the Company
believes its estimates as to when the Company will receive marketing approval
for Mitomycin, as well as its planned schedule for submitting additional
applications to the FDA, including for approvals for bulk source, IND's and
market approvals, are reasonable as of this time, there can be no assurance
that such time schedules will be met by either the Company or the FDA. As a
result, there can be no assurance that any of the Company's potential generic
or supergeneric products will ever be brought to market. In the event any of
the Company's generic and supergeneric products are brought to market, such
products will face intense competition and the potential for significant
price and gross margin erosion.
LACK OF OPERATING EXPERIENCE. To date, the Company has engaged exclusively in
the acquisition and development of pharmaceutical technology and products and
preliminary marketing activities. Although members of the Company's management
have substantial experience in pharmaceutical company operations, the Company
has no experience in manufacturing or procuring products in commercial
quantities or selling pharmaceutical products and has only limited experience in
negotiating, setting up and maintaining strategic relationships, conducting
clinical trials and other late stage phases of the regulatory approval process.
There can be no assurance that the Company will successfully engage in any of
these activities.
ADDITIONAL FINANCING REQUIREMENTS. The Company will require substantial funds
for further development of its potential pharmaceutical products and to
commercialize any pharmaceutical products that may be developed. The Company's
capital requirements
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depend on numerous factors, including the progress of its research and
development programs, the progress of preclinical and clinical testing, the
time and cost involved in obtaining regulatory approvals, the cost of filing,
prosecuting, defending and enforcing patent claims and other intellectual
property rights, competing technological and market developments, the ability
of the Company to establish collaborative arrangements, the development of
commercialization activities and arrangements and the purchase of capital
equipment. The Company has no current sources of funding beyond its existing
cash and cash equivalents. The Company's current operating plan shows that at
the end of the eighteen month period following March 31, 1996 the Company
will require substantial additional capital. Moreover, if the Company
experiences unanticipated cash requirements during that eighteen month period
the Company could require additional capital to fund its operations, continue
research and development programs and preclinical and clinical testing of its
potential generic, supergeneric and proprietary products and commercialize
any products that may be developed. The Company may seek such additional
funding through public or private financings or collaborative or other
arrangements with third parties. There can be no assurance that additional
funds will be available on acceptable terms, if at all. The Company may
receive additional funds upon the exercise from time to time of the Warrants
and other outstanding warrants and stock options, but there can be no
assurance that any such warrants or stock options will be exercised. If
additional funds are raised by issuing equity securities,further substantial
dilution to existing shareholders may result. If adequate funds are not
available, the Company may be required to delay, scale back or eliminate one
or more of its development programs, or to obtain funds by entering into
arrangements with collaborative partners or others that may require the
Company to relinquish rights to certain of its products or technologies that
the Company would not otherwise relinquish.
NEED TO COMPLY WITH GOVERNMENTAL REGULATION AND TO OBTAIN PRODUCT APPROVALS. The
research, testing, manufacture, labeling, distribution, marketing, and
advertising of products such as the Company's proposed products and its ongoing
research and development activities are subject to extensive regulation by
governmental regulatory authorities in the U.S. and other countries. The FDA and
comparable agencies in foreign countries impose substantial requirements on the
introduction of new pharmaceutical products through lengthy and detailed
clinical testing procedures, sampling activities and other costly and time
consuming compliance procedures. A delay in obtaining or failure to obtain
regulatory approvals for the marketing and distribution of the Company's
proposed products in the U.S. and other countries would have a material adverse
effect on the Company's business and results of operations. Failure to comply
with regulatory requirements in the U.S. or other countries could subject the
Company to regulatory or judicial enforcement actions, including, but not
limited to, product recalls or seizures, injunctions, civil penalties, criminal
prosecution, refusals to approve new products and withdrawal of existing
approvals, as well as potentially enhanced product liability exposure.
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PATENTS AND PROPRIETARY TECHNOLOGY. The Company actively pursues a policy of
seeking patent protection for its proprietary products and technologies. The
Company has licenses to or assignments of numerous issued U.S. patents. However,
there can be no assurance that the Company's patent position will provide it
with significant protection against competitors. Litigation could be necessary
to protect the Company's patent position, and there can be no assurance that the
Company will have the required resources to pursue such litigation or otherwise
to protect its patent rights. In addition, the Company also relies on trade
secret protection for its unpatented proprietary technology. However, there can
be no assurance that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
the Company's trade secrets, that such trade secrets will not be disclosed or
that the Company can effectively protect its rights to unpatented trade secrets.
The Company pursues a policy of having its employees and consultants execute
proprietary information agreements upon commencement of employment or consulting
relationships with the Company, which agreements provide that all confidential
information developed or made known to the individual during the course of the
relationship shall be kept confidential except in specified circumstances. There
can be no assurance, however, that these agreements will provide meaningful
protection for the Company's trade secrets or other proprietary information in
the event of unauthorized use or disclosure of such information.
The Company's rights to its potential supergeneric, blood cell disorder and
obesity products are dependent upon compliance with certain licenses and
agreements which require, among other things, certain royalty and other
payments, the Company reasonably exploiting the underlying technology of the
applicable patents, as well as compliance with certain regulatory filings.
Failure to comply with such licenses and agreements could result in loss of the
Company's underlying rights to one or more of these potential products which
would have a material adverse effect on the Company's business and results of
operations.
There can be no assurance that claims against the Company will not be raised in
the future based on patents held by others or that, if raised, such claims will
not be successful. If any such actions are successful, in addition to any
potential liability for damages, the Company could be required to obtain a
license in order to continue to manufacture or market the affected product.
There can be no assurance that the Company would prevail in any such action or
that any license required under any such patent would be made available on
acceptable terms, if at all.
A significant number of products currently in development by the Company consist
of generic products for which patent protection has expired. Both the price at
which the Company can expect to sell such products and the volume of any such
sales are expected to depend to a significant degree on the number of
competitors at any given point in time. There can be no assurances that the
prices or volumes achieved by the Company for any such products will meet the
Company's expectations that formed
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the basis for its decision to proceed with development or will justify
production of such products.
COMPETITION. Competition in the area of pharmaceutical products is intense.
There are many companies both public and private, including well known
pharmaceutical companies, that are engaged in the development of products for
certain of the applications being pursued by the Company. Most of these
companies have substantially greater financial, research and development,
manufacturing and marketing experience and resources than the Company does and
represent substantial long-term competition for the Company. Such companies may
succeed in developing pharmaceutical products that are more effective or less
costly than any that may be developed by the Company.
Factors affecting competition in the pharmaceutical industry vary depending on
the extent to which the competitor is able to achieve a competitive advantage
based on proprietary technology, and can include effectiveness, price,
recognition and reputation. For example, the Company believes that the total
estimated U.S. sales for certain of the Company's proposed generic products
have decreased in recent years due to increased competition and that sales for
these and other proposed generic products may continue to decrease in the future
as a result of competitive factors, including the introduction of additional
generics as well as other cancer drugs, new formulations for these drugs and the
use of different therapies. There can be no assurance that the Company will
compete successfully in the future.
The industry in which the Company competes is characterized by extensive
research and development efforts and rapid technological progress. The Company's
competitive position also depends on its ability to attract and retain qualified
scientific and other personnel, develop effective proprietary products,
implement development and marketing plans, obtain patent protection and secure
adequate capital resources.
MANUFACTURING LIMITATIONS. The Company currently relies on foreign manufacturers
for the production of its bulk generics and supergenerics and on domestic
manufacturers to supply sufficient quantities of compounds to conduct clinical
trials on its proprietary products. If the Company is unable to contract for or
obtain a sufficient supply of its potential pharmaceutical products on
acceptable terms, or such supplies are delayed or contaminated, there could be
significant delays in bringing the Company's proposed generic and supergeneric
products to market, as well as delays in the Company's preclinical and human
clinical testing schedule, and delays in submission of products for regulatory
approval and initiation of new development programs, any of which could have a
material adverse effect on the Company's business and results of operations. If
the Company is unable to obtain or retain third party manufacturing on
commercially acceptable terms, it may not be able to commercialize
pharmaceutical products as planned. The Company's dependence upon third parties
for the manufacture of pharmaceutical products may adversely affect the
Company's profit
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margins and its ability to develop and deliver pharmaceutical products on a
timely and competitive basis.
LIMITED MARKETING AND SALES RESOURCES. While the Company has established a core
nucleus for its marketing and sales organization, its marketing and sales
resources are limited. If the Company successfully develops any commercially
marketable pharmaceutical products and receives the appropriate governmental
approvals, the Company intends to expand its marketing and sales organization to
commercialize such products or enter into joint ventures or other marketing
arrangements. There can be no assurance that the Company will be able to
successfully establish an internal marketing and sales capability that will be
able to enter into any such marketing arrangements with third parties or that it
will successfully commercialize any of its products. Failure to market its
products successfully would have a material adverse effect on the Company's
business and results of operations.
DEPENDENCE ON KEY PERSONNEL. The Company's success is dependent on certain key
management and scientific personnel the loss of whose services could
significantly delay the achievement of the Company's planned development
objectives. Achievement of the Company's business objectives will require
substantial additional expertise in such areas as finance, manufacturing and
marketing among others. The Company is actively seeking a Chief Financial
Officer. Competition for qualified personnel among pharmaceutical companies is
intense, and the loss of key personnel, or the inability to attract and retain
the additional, highly skilled personnel required for the expansion of the
Company's activities, could have a material adverse effect on the Company's
business and results of operations.
MANAGEMENT OF GROWTH. The Company's ability to manage its growth, if any, will
require it to continue to improve and expand its management, operational and
financial systems and controls. If the Company's management is unable to manage
growth effectively, the Company's business and results of operations will be
adversely affected. In the normal course of business, the Company evaluates
potential acquisitions of patents, products, technologies and businesses that
could complement or expand the Company's business. In the event the Company were
to identify an appropriate acquisition candidate, there is no assurance that the
Company would be able to successfully negotiate, finance or integrate such
acquired patents, products, technologies or businesses. Furthermore, such an
acquisition could cause a diversion of management time and resources. There can
be no assurances that a given acquisition, when consummated, would not
materially adversely affect the Company's business and results of operations.
HEALTH CARE REFORM AND POTENTIAL LIMITATIONS ON THIRD-PARTY REIMBURSEMENT
RELATED MATTERS. The levels of revenues and profitability of pharmaceutical
companies may be affected by the continuing efforts of government and third-
party payers to contain or reduce costs of health care through various means.
The Company cannot predict the
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<PAGE>
effect health care reforms may have on its business and there can be no
assurance that any such reforms will not have a material adverse effect on the
Company. In addition, in both the U.S. and elsewhere, sales of prescription
pharmaceuticals are dependent in part on the availability of reimbursement to
the consumer from third-party payers, such as government and private insurance
plans. Third -party payers are increasingly challenging the prices charged for
medical products and services. If the Company succeeds in bringing one or more
products to the market, there can be no assurance that these products will be
considered cost effective and that reimbursement to the consumer will be
available or will be sufficient to allow the Company to sell its products on a
competitive basis.
RISK OF PRODUCT LIABILITY. Clinical trials or marketing of any of the Company's
potential pharmaceutical products may expose the Company to liability claims
from the use of such pharmaceutical products. The Company currently carries
product liability insurance; however, there can be no assurance that the Company
will be able to obtain or maintain insurance on acceptable terms for its
clinical and commercial activities or that such insurance would be sufficient to
cover any potential product liability claim or recall. Failure to have
sufficient coverage could have a material adverse effect on the Company's
business and results of operations.
HAZARDOUS MATERIALS; ENVIRONMENTAL MATTERS. The Company is subject to federal,
state and local laws and regulations governing the use, manufacture, storage,
handling and disposal of hazardous materials and certain waste products. The
Company currently maintains a supply of several hazardous materials at the
Company's facilities. While the Company currently outsources its research and
development programs involving the controlled use of biohazardous materials, if
in the future the Company conducts such programs itself, there can be no
assurance that the Company would not be required to incur significant cost to
comply with environmental laws and regulations. In the event of an accident, the
Company could be held liable for any damages that result, and such liability
could exceed the resources of the Company.
15
<PAGE>
SUPERGEN, INC.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Pursuant to a Shareholders Written Consent Dated February 12, 1996, the
following matters were submitted to shareholder vote:
(a) The amendment and restatement of the Company's Articles of
Incorporation to (i) increase the number of shares of Common Stock authorized
from 20,000,000 to 40,000,000; (ii) change the par value of the Common Stock
from no par value to $.001 par value per share; (iii) authorize 2,000,000 shares
of undesignated Preferred Stock, par value $.001 per share; and (iv) eliminate
shareholder action by written consent following the effectiveness of a firm
commitment underwritten public offering.
Votes For: 9,589,413
Votes Against: 0
Votes Abstaining: 0
(b) The amendment and restatement of the Company's Bylaws to provide,
among other things, that: (i) the Company's authorized number of directors range
from six to ten, with the current number of directors set at six; (ii)
cumulative voting by shareholders be eliminated upon qualification by the
Company as a "listed corporation," as defined in Section 301.5 of the California
Corporation Code; and (iii) following the effectiveness of a firm commitment
underwritten public offering, the shareholders of the Company may act pursuant
to a meeting (whether annual or special), but not by written consent.
Votes For: 9,589,413
Votes Against: 0
Votes Abstaining: 0
(c) The amendment and restatement of the 1993 Stock Option Plan (the "1993
Stock Plan") be amended and restated to, among other things; (i) include certain
changes related to Section 16(b) of the Securities Exchange Act of 1934, as
amended and Section 162(m) of the Internal Revenue code of 1986, as amended;
(ii) increase the number of shares authorized for issuance under the 1993 Stock
Plan to 2,000,000 shares of Common Stock; and (iii) provide for restricted stock
purchase rights.
Votes For: 9,589,413
Votes Against: 0
Votes Abstaining: 0
16
<PAGE>
(d) The adoption of the Directors Stock Option Plan, under which 250,000
shares of Common Stock are reserved for issuance to non-employee directors of
the corporation, and form of Directors Option Agreement.
Votes For: 9,589,413
Votes Against: 0
Votes Abstaining: 0
(e) That the officers of the Company are authorized to enter into
Indemnification Agreements, on behalf of the Company with each of the directors,
executive officers and key employees of the Company as determined by the Board
of Directors.
Votes For: 9,589,413
Votes Against: 0
Votes Abstaining: 0
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.
17
<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 May 9, 1996 By /s/ Joseph Rubinfeld
------------------------------
Joseph Rubinfeld, Ph.D.
Chief Executive Officer, President,
Chief Scientific Officer and Director
(Principal Executive Officer)
Date May 9, 1996 By /s/ David M. Fineman
------------------------------
David M. Fineman
Director, Acting Chief Financial Officer
and Secretary (Principal Financial
Officer)
18
<PAGE>
INDEX OF EXHIBITS
The following exhibits are included herein:
11.1 Statement re: computation of per share loss
27 Financial Data Schedule -- electronic filing only
19
<PAGE>
SUPERGEN, INC.
EXHIBIT 11.1
Statement re: computation of per share loss
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
-------------------------
<S> <C> <C>
Net Loss ($1,158,960) ($1,138,035)
-------------------------
-------------------------
Weighted average number
of shares of Common Stock
outstanding 13,268,330 12,074,627
Shares related to SAB
Nos. 64 and 83 154,932
Total weighted average
number of shares of
-------------------------
Common Stock outstanding 13,268,330 12,229,559
-------------------------
-------------------------
Net Loss per Share ($0.09) ($0.09)
-------------------------
-------------------------
</TABLE>
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SUPERGEN,
INC. MARCH 31, 1996 CONDENSED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 19,587,815
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,915,008
<PP&E> 280,240
<DEPRECIATION> 141,701
<TOTAL-ASSETS> 20,079,937
<CURRENT-LIABILITIES> 809,432
<BONDS> 0
0
0
<COMMON> 35,991,543
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 20,079,937
<SALES> 0
<TOTAL-REVENUES> 10,047
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,216,464
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,206,417)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,158,960)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> 0
</TABLE>
