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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 0-27628
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SUPERGEN, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 91-1841574
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
TWO ANNABEL LANE, SUITE 220, SAN RAMON, 94583
CALIFORNIA (Zip Code)
(Address of principal executive
offices)
</TABLE>
(925) 327 - 0200
(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 November 7, 2000, was 33,233,071.
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TABLE OF CONTENTS
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PAGE
NO.
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PART I FINANCIAL INFORMATION
Item 1--Financial Statements (Unaudited)
Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999......................................... 3
Consolidated Statements of Operations for the three and nine
month periods ended September 30, 2000 and 1999........... 4
Consolidated Statements of Cash Flows for the nine month
periods ended September 30, 2000 and 1999................. 5
Notes to Consolidated Financial Statements.................. 6
Item 2--Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 11
Item 3--Quantitative and Qualitative Disclosures of Market Risk......... 19
PART II OTHER INFORMATION
Item 2--Changes in Securities and Use of Proceeds....................... 20
Item 6--Exhibits and Reports on Form 8-K................................ 21
SIGNATURES.......................................................................... 22
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2
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SUPERGEN, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
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<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED) (NOTE 1)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 86,190 $ 22,546
Marketable securities..................................... 20,300 5,008
Accounts receivable, net.................................. 542 1,754
Other receivables......................................... 93 5,000
Inventories............................................... 1,435 1,368
Prepaid expenses and other current assets................. 3,551 2,879
--------- --------
Total current assets.................................... 112,111 38,555
Property, plant and equipment, net.......................... 3,396 2,923
Developed technology at cost, net........................... 1,298 1,707
Goodwill and other intangibles, net......................... 1,696 2,036
Investment in stock of related parties...................... 21,638 5,938
Due from related party...................................... -- 450
Marketable securities--non-current.......................... 32,752 1,812
Restricted cash............................................. 3,164 --
Other assets................................................ 71 57
--------- --------
Total assets............................................ $ 176,126 $ 53,478
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 3,133 $ 2,694
Deferred revenue.......................................... 1,000 894
Accrued employee benefits................................. 1,568 955
--------- --------
Total current liabilities............................... 5,701 4,543
Deferred revenue--non-current............................. 3,417 4,167
--------- --------
Total liabilities....................................... 9,118 8,710
--------- --------
Stockholders' equity:
Preferred stock, $.001 par value; 2,000,000 shares
authorized; none outstanding............................ -- --
Common stock, $.001 par value; 150,000,000 shares
authorized; 33,307,393 and 25,477,770 shares issued and
outstanding at September 30, 2000 and December 31, 1999,
respectively............................................ 33 25
Additional paid in capital................................ 287,154 138,461
Deferred compensation..................................... (662) (835)
Accumulated other comprehensive loss...................... (1,299) (5)
Accumulated deficit....................................... (118,218) (92,878)
--------- --------
Total stockholders' equity.............................. 167,008 44,768
--------- --------
Total liabilities and stockholders' equity.................. $ 176,126 $ 53,478
========= ========
</TABLE>
See accompanying notes to consolidated financial statements
3
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SUPERGEN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Net sales revenue.................................. $ 450 $ 736 $ 4,006 $ 3,076
Other revenue...................................... 343 -- 737 --
-------- -------- -------- --------
Total revenue.................................... 793 736 4,743 3,076
Operating expenses:
Cost of sales...................................... 163 131 938 1,324
Research and development........................... 7,955 3,934 22,601 10,730
Selling, general, and administrative............... 3,511 2,972 10,928 7,077
Acquisition of in-process research & development... 1,585 10,850 1,585 10,850
-------- -------- -------- --------
Total operating expenses......................... 13,214 17,887 36,052 29,981
-------- -------- -------- --------
Loss from operations................................. (12,421) (17,151) (31,309) (26,905)
Interest income...................................... 2,528 241 5,969 525
Amortization of loan commitment fee.................. -- (1,304) -- (2,000)
-------- -------- -------- --------
Net loss............................................. $ (9,893) $(18,214) $(25,340) $(28,380)
======== ======== ======== ========
Basic net loss per share............................. $ (0.30) $ (0.78) $ (0.81) $ (1.29)
======== ======== ======== ========
Weighted average shares used in basic net loss per
share calculation.................................. 33,150 23,307 31,187 21,993
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
4
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SUPERGEN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
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NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
2000 1999
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Operating activities:
Net loss.................................................. $(25,340) $(28,380)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 1,428 578
Amortization of loan commitment fee..................... -- 2,000
Expense related to stock options and warrants granted to
non-employees......................................... 653 1,244
Non-cash charges related to acquisition of in-process
research and development.............................. 1,585 10,850
Amortization of deferred revenue........................ (644) --
Changes in operating assets and liabilities:
Accounts receivable................................... 1,212 (221)
Inventories........................................... (67) (386)
Prepaid expenses and other assets..................... (686) (1,625)
Other receivables..................................... 4,907 --
Restricted cash....................................... (3,164) --
Accounts payable and other liabilities................ 927 (42)
-------- --------
Net cash used in operating activities....................... (19,189) (15,982)
-------- --------
Investing activities:
Purchases of marketable securities........................ (51,944) (1,033)
Sales or maturities of marketable securities.............. 5,892 2,240
Purchase of equity investment in related party............ (5,000) --
Purchase of property and equipment........................ (529) (206)
Acquisition of cash due to purchase of Sparta
Pharmaceuticals......................................... -- 510
-------- --------
Net cash provided by (used in) investing activities:........ (51,581) 1,511
-------- --------
Financing activities:
Issuance of common stock, net of issuance costs........... 134,414 37,701
-------- --------
Net cash provided by financing activities................... 134,414 37,701
-------- --------
Net increase in cash and cash equivalents................... 63,644 23,230
Cash and cash equivalents at beginning of period............ 22,546 8,614
-------- --------
Cash and cash equivalents at end of period.................. $ 86,190 $ 31,844
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
5
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SUPERGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
SuperGen, Inc. ("we," "SuperGen" or "the Company") 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
year ended December 31, 1999 and in accordance with the instructions to
Form 10-Q. The consolidated financial statements include the accounts of Sparta
Pharmaceuticals, Inc. and two other wholly owned subsidiaries, which are
immaterial. The statements include all adjustments (consisting of normal
recurring accruals) which in our opinion are necessary for a fair presentation
of the results for the periods presented. The interim results are not
necessarily indicative of results that may be expected for the full year.
The balance sheet at December 31, 1999 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.
For further information, refer to the consolidated financial statements and
footnotes included in the Company's annual report on Form 10-K for the year
ended December 31, 1999.
We have reclassified certain prior year amounts to conform to the current
year's presentation.
NOTE 2. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES
Cash and cash equivalents include bank demand deposits, certificates of
deposit, investments in debt securities with maturities of three months or less
when purchased, and an interest in money market funds which invest primarily in
U.S. government obligations and commercial paper. These instruments are highly
liquid and are subject to insignificant risk.
Investments in marketable securities consist of corporate or government debt
securities that have a readily ascertainable market value and are readily
marketable. We report these investments at fair value. We designate all debt
securities as available-for-sale, with unrealized gains and losses included in
equity.
The following is a summary of available-for-sale securities as of
September 30, 2000 (in thousands):
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GROSS
AMORTIZED UNREALIZED ESTIMATED
COST GAINS (LOSSES) FAIR VALUE
--------- -------------- ----------
<S> <C> <C> <C>
U.S. corporate debt securities............................. $130,441 $ 37 $130,478
U.S. government debt securities............................ 3,118 (2) 3,116
Marketable equity securities............................... 22,666 (1,334) 21,332
-------- ------- --------
Total.................................................. $156,225 $(1,299) $154,926
======== ======= ========
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6
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SUPERGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 2. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (CONTINUED)
Balance sheet classification as of September 30, 2000 (in thousands):
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<CAPTION>
GROSS
AMORTIZED UNREALIZED ESTIMATED
COST GAINS (LOSSES) FAIR VALUE
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<S> <C> <C> <C>
Cash and cash equivalents.................................. $ 80,754 $ (18) $ 80,736
Marketable securities, current............................. 20,375 (75) 20,300
Marketable securities, non-current 32,597 155 32,752
Investment in stock of related party....................... 22,499 (1,361) 21,138
-------- ------- --------
Total.................................................. $156,225 $(1,299) $154,926
======== ======= ========
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Available-for-sale securities by contractual maturity (in thousands):
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<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
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Debt securities:
Due in one year or less..................................... $101,035 $22,846
Due after one year through three years...................... 32,559 1,753
-------- -------
133,594 24,599
Marketable equity securities................................ 21,332 5,497
-------- -------
Total................................................... $154,926 $30,096
======== =======
</TABLE>
There were no realized gains and losses for the three and nine months
periods ended September 30, 2000 and 1999.
NOTE 3. INVENTORIES
Inventories consist of the following (in thousands):
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SEPTEMBER 30, DECEMBER 31,
2000 1999
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Raw material................................................ $ 183 $ 183
Work in process............................................. 212 935
Finished goods.............................................. 1,040 250
------ ------
$1,435 $1,368
====== ======
</TABLE>
7
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SUPERGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 4. STOCKHOLDERS' EQUITY
FOLLOW-ON OFFERING OF COMMON STOCK
In March 2000, we concluded a public follow-on offering of our common stock.
We issued 1,465,000 shares of registered stock, resulting in net proceeds to the
Company of approximately $61,000,000.
PUBLIC WARRANTS
In September 1999, we issued a notice that we would redeem our 1996 publicly
traded $9.00 warrants ("SUPGW" warrants) outstanding at April 16, 2000 at $0.25
per warrant. Over 99.9% of the outstanding SUPGW warrants were exercised by the
redemption date.
NOTE 5. AGREEMENTS WITH ABBOTT LABORATORIES
In December 1999, we entered into agreements with Abbott Laboratories
("Abbott") under which Abbott will undertake to market and distribute our
products, and invest in shares of our common stock. In January 2000, Abbott made
a $26.5 million equity investment in the Company as part of the agreement
covering the development, marketing, and distribution of rubitecan.
Under the terms of the Nipent distribution agreement, beginning March 1,
2000, Abbott became the exclusive U.S. distributor of Nipent for a period of
five years. We retain U.S. marketing rights for Nipent. In accordance with this
agreement, in January 2000, Abbott made a $5 million cash payment to the
Company. This amount is being recognized as "Other revenue" ratably over the
term of the agreement and the unamortized balances are included in current and
non-current deferred revenue at September 30, 2000.
NOTE 6. RELATED PARTY TRANSACTIONS--AVI BIOPHARMA, INC.
In December 1999, we entered into an agreement with AVI BioPharma, Inc.
("AVI"). The president of AVI is a member of our Board of Directors. The
president and chief executive officer of SuperGen is a member of the Board of
Directors of AVI. Under the terms of the agreement, we acquired one million
shares of AVI common stock, which amounted to approximately seven and one half
percent (7.5%) of AVI's outstanding common stock, for $2.5 million cash and
100,000 shares of our common stock at $28.25 per share. We also acquired
exclusive negotiating rights for the United States market for Avicine-TM-, AVI's
proprietary cancer vaccine currently in late-stage clinical testing against a
variety of solid tumors.
In July 2000, we finalized an agreement with AVI to obtain the U.S.
marketing rights for Avicine. We issued 347,826 shares of our common stock along
with $5 million in cash to AVI as payment for our investment, in exchange for
1,684,211 shares of AVI common stock. As part of this agreement, we obtained the
right of first discussion to all of AVI's oncology compounds and an option to
acquire an additional 10% of AVI's common stock for $35.625 per share. This
option is exercisable for a three-year period commencing on the earlier of the
date the Food and Drug Administration ("FDA") accepts the New Drug Application
("NDA") submitted for Avicine or the date on which the closing
8
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SUPERGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 6. RELATED PARTY TRANSACTIONS--AVI BIOPHARMA, INC. (CONTINUED)
price of AVI's common stock exceeds the option exercise price. We have accounted
for the investment in AVI under the cost method as our ownership is less than
20% of AVI's outstanding shares.
NOTE 7. ACQUISITION OF ASSETS FROM AMUR PHARMACEUTICALS, INC.
In September 2000, we acquired all of the intellectual property of AMUR
Pharmaceuticals, Inc. ("Amur") in exchange for 37,795 shares of our common stock
and two-year warrants to purchase 200,000 shares of our common stock at $40.00
per share. Amur's proprietary technology is based on a new water-soluble class
of hormones. Investigation of these hormones determined that a specific portion,
phosphocholine, confers water solubility to the hormones. Amur's previously
conducted research and development has shown that phosphocholine may be attached
to other compatible molecules representing a novel patented drug delivery
technology. In the quarter ended September 30, 2000, we recorded a non-recurring
charge of $1,585,000 to acquired in-process research and development associated
with this technology acquisition.
NOTE 8. LEASE FOR NEW CORPORATE HEADQUARTERS
In June 2000, we entered into an operating lease for approximately 50,000
square feet of office space in Dublin, California. This lease has an initial
non-cancelable term of 10 years with an expected commencement date in
November 2000. We intend to consolidate all of our non-laboratory functions in
the new office space and expect the space to be sufficient to satisfy our office
space needs for the foreseeable future. We have an option to extend the lease
term for an additional five-year period. Based on a November 2000 commencement,
the future minimum rental payments under this lease are as follows (in
thousands):
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YEAR ENDING
DECEMBER 31,
------------
<S> <C>
2001........................................................ $ 1,700
2002........................................................ 1,700
2003........................................................ 1,800
2004........................................................ 1,900
2005 and thereafter......................................... 12,700
-------
$19,800
=======
</TABLE>
The terms of the lease require us to establish and maintain two irrevocable
and unconditional letters of credit to secure our obligations under the lease.
The financial institution issuing the letters of credit requires us to
collateralize our potential obligations under the lease by assigning to the
institution approximately $3.2 million in certificates of deposit. The
certificates of deposit are included in the balance sheet under "Restricted
cash." Upon achievement of certain milestones and the passage of time, the
amounts of the letters of credit are subject to reduction or elimination.
9
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SUPERGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 9. COMPREHENSIVE LOSS
For the three months ended September 30, 2000 and 1999, total comprehensive
losses amounted to $15,731,000 and $18,221,000, respectively. For the nine
months ended September 30, 2000 and 1999, total comprehensive losses amounted to
$26,634,000 and $28,358,000, respectively. Comprehensive losses consisted
primarily of the net losses and unrealized gains or losses on investments.
NOTE 10. BASIC NET LOSS PER SHARE
Basic and diluted net loss per common share is computed by dividing net loss
by the weighted average number of shares outstanding during the quarter.
As we have reported operating losses each period since our inception, the
effect of assuming the exercise of options and warrants would be anti-dilutive
and, therefore, basic and diluted loss per share are the same.
10
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION TOGETHER WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS REPORT. THE
RESULTS DISCUSSED BELOW ARE NOT NECESSARILY INDICATIVE OF THE RESULTS TO BE
EXPECTED IN ANY FUTURE PERIODS. TO THE EXTENT THAT THE INFORMATION PRESENTED IN
THIS DISCUSSION ADDRESSES FINANCIAL PROJECTIONS, INFORMATION OR EXPECTATIONS
ABOUT OUR CLINICAL TRIALS, PRODUCTS, OR MARKETS OR OTHERWISE MAKES STATEMENTS
ABOUT FUTURE EVENTS, SUCH STATEMENTS ARE FORWARD-LOOKING AND ARE SUBJECT TO A
NUMBER OF RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE STATEMENTS MADE.
OVERVIEW
Since our incorporation in 1991 we have devoted substantially all of our
resources to our product development efforts. Our product revenues to date have
been limited and have been principally from sales of Nipent, which we are
marketing in the United States for the treatment of hairy cell leukemia. As a
result of our substantial research and development expenditures and minimal
product revenues, we have incurred cumulative losses of $118.2 million for the
period from inception through September 30, 2000. These losses included non-cash
charges of $20.0 million for the acquisition of in-process research and
development.
During the first nine months of 2000, we significantly increased our cash,
cash equivalents, and marketable securities to approximately $140 million at
September 30, 2000. We raised approximately $61 million through a public
offering of our common stock, received over $31 million in connection with our
corporate partnering transactions with Abbott Laboratories, and received
approximately $38 million through the exercise of our publicly traded warrants
issued at the time of our initial public offering ("SUPGW" warrants) and the
related underwriters unit purchase warrants.
The level of expenditures related to ongoing clinical trials has increased
significantly throughout the period as we expand the number of clinical trials
and increase the patient accrual into these trials. We expect to file a new drug
application with the Food and Drug Administration ("FDA") for rubitecan in
pancreatic cancer in mid-2001. We plan to initiate additional clinical trials
during the balance of 2000 with rubitecan, Nipent and decitabine. To support
these additional trials, we expect to increase our clinical development staff
which, when combined with the increased clinical trial activity, will result in
increased costs over the level expended in the third quarter. During the quarter
ended September 2000 we added four veteran medical and pharmaceutical executives
to our clinical research team: Karl L. Mettinger, M.D., Ph. D., as Senior Vice
President, Clinical Research and Medical Affairs; Lawrence A. Romel as Vice
President, Clinical Operations; Jorge F. DiMartino, M.D., Ph.D., as Associate
Director, Clinical Research; and Charlene P. Holt, M.D. as Medical Director of
Commercial Operations.
Our partner, AVI BioPharma, Inc. ("AVI") has informed us that they intend to
initiate a Phase III clinical trial with Avicine-TM-, their therapeutic vaccine
for colorectal cancer. We will share U.S. developmental and regulatory approval
costs for Avicine and upon commercialization in the U.S. we will split all U.S.
profits. AVI and SuperGen will jointly determine the optimum development
strategy for the international marketplace and will share all profits received.
In addition to an up front equity investment, we are obligated to make
additional payments to AVI based on successful achievement of developmental,
regulatory approval, and commercialization milestones over the next several
years. As part of this agreement, we obtained the right of first discussion to
all of AVI's oncology compounds and an option to acquire an additional 10% of
AVI's common stock. Avicine will require significant additional expenditures to
complete the clinical development necessary to gain marketing approval from the
FDA and equivalent foreign regulatory agencies.
11
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We also acquired all of the intellectual property of AMUR
Pharmaceuticals, Inc. ("Amur") during the third quarter in exchange for a
combination of common stock and warrants to purchase common stock. Amur's
proprietary technology is based on a new water-soluble class of hormones.
Investigation of these hormones determined that a specific portion,
phosphocholine, confers water solubility to the hormones. Amur's previously
conducted research and development has shown that phosphocholine may be attached
to other compatible molecules representing a novel patented drug delivery
technology. We have recorded a $1,585,000 charge associated with this technology
acquisition in the quarter ended September 30, 2000.
Sales of Nipent during the first nine months of 2000 were significantly
higher than 1999 levels despite the absence of European sales in 2000. U.S.
sales of Nipent in the first nine months of 2000 totaled $3,644,000 and compare
most favorably to the $2,026,000 in U.S. sales recorded in the comparable period
in 1999. Sales in the third quarter of 2000 were affected by a higher than
normal order level during the latter part of the second quarter of 2000 in
advance of a scheduled price increase effected in July 2000. This event, coupled
with the recurring seasonal downturn in the sale of chemotherapeutic drugs over
the summer months, resulted in a sales level for the third quarter less than
that experienced during the third quarter of 1999. We expect Nipent revenue in
the fourth quarter to increase significantly over the third quarter levels as
inventory levels are restocked in the U.S. marketplace.
In addition to the activities described above, we are pursuing the clinical
and regulatory development of our other product candidates internally and expect
to continue to incur operating losses at least through 2001. This is due
primarily to projected increases in our spending for the development of our
product candidates. Our ability to become profitable will depend upon a variety
of factors, including regulatory approvals of our products, the timing of the
introduction and market acceptance of our products and competing products,
increases in sales and marketing expenses related to the launch of rubitecan,
and our ability to control our costs.
As part of our strategy, we intend either to market our products ourselves
or co-promote these products with partners. In 1999, we entered into an alliance
with Abbott Laboratories ("Abbott") under which Abbott will undertake to market
and distribute rubitecan. We will co-promote rubitecan with Abbott in the United
States and Abbott has exclusive rights to market rubitecan outside of the United
States. In the U.S. market, we will share profits from product sales equally
with Abbott. Outside the U.S. market, Abbott will pay us royalties and transfer
fees based on product sales. We will remain responsible for pursuing and funding
the clinical development of rubitecan and obtaining regulatory approval for the
product in the United States, Canada and the member states of the European
Union.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999.
Revenues were $793,000 in the third quarter of 2000 compared to $736,000 in
the third quarter of 1999. Third quarter revenues in 2000 included $275,000 in
sales of Nipent in the U.S. marketplace compared to $589,000 for the comparable
period in 1999. Revenues in the third quarter of 2000 were significantly
influenced by the price increase for Nipent effected in July 2000. We received
several large orders for Nipent in the latter part of the second quarter of 2000
from a number of our more active distributors based on their desire to increase
their inventory levels in advance of the price increase. This action on the part
of our distributors reduced the U.S. sales of Nipent in the third quarter of
2000. Unlike our Nipent sales efforts in the U.S. market where we call on
clinicians directly, our role in Europe is currently limited to that of a
supplier. As such, we do not have a direct influence on Nipent sales at the
clinical level, making their timing and magnitude difficult to predict and
dependent on the efforts of our European distributor. Based on this existing
relationship, it is our expectation that current inventory levels at our
distributor in Europe will likely result in lower order requirements over
12
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the next several quarters. The third quarter of 2000 also included recognition
of $250,000 in revenues related to the Nipent distribution arrangement with
Abbott Laboratories, and the recognition of $93,000 in grant revenues from the
National Institutes of Health/National Cancer Institute relating to the
development of IPdR.
Cost of sales as a percentage of net sales revenues was 36% in the third
quarter of 2000 compared to 18% during the same period in 1999. The increased
cost of sales percentage is due primarily to a variation in the mix of higher
margin Nipent sales with lower margin generic mitomycin sales, due to the lower
volume of Nipent sales in the third quarter of 2000. Current margins may not be
indicative of future margins due to possible variations in average selling
prices and manufacturing costs.
Research and development expenses were $7,955,000 in the third quarter of
2000 compared to $3,934,000 in 1999. The increased expense was due primarily to
a broader clinical development program along with its associated costs,
expansion of the research and development staff, a significant increase in the
accrual rates of patients into our ongoing clinical trials, and increased
research and development expenditures.
Selling, general and administrative expenses were $3,511,000 in the third
quarter of 2000 compared to $2,972,000 in 1999. This increase was due primarily
to costs associated with the expansion of the sales, professional services,
information technology and general and administrative staffs together with
increased costs associated with trade shows, speakers programs and symposiums.
Acquisition of in-process research & development totaled $1,585,000 in the
third quarter of 2000 and was the result of the acquisition of the intellectual
property of AMUR Pharmaceuticals, Inc. In the third quarter of 1999 acquisition
of in-process research & development totaled $10,850,000, which was comprised of
$7,450,000 relating to the acquisition of the drug candidates of Sparta
Pharmaceuticals, Inc. and $3,400,000 relating to the license of decitabine from
Pharmachemie.
Interest income was $2,528,000 in the third quarter of 2000 compared to
$241,000 in the third quarter of 1999. This was due to the greater cash balances
available for investment as a result of our Abbott corporate partnership, the
follow-on offering of our common stock, and the exercise of our SUPGW warrants
and related underwriters' unit purchase warrants.
Amortization of loan commitment fees totaled $1,304,000 in the third quarter
of 1999. This charge was related to a credit arrangement that existed during
1999. We had no such credit arrangement in 2000 and consequently incurred no
such charges during the period.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999.
Revenues were $4,743,000 in the first nine months of 2000 compared to
$3,076,000 in the first nine months of 1999. Year-to-date revenues in 2000
included $3,644,000 in sales of Nipent exclusively in the U.S. marketplace.
Revenues in the first nine months of 2000 were somewhat influenced by a pending
price increase for Nipent effected in July 2000. We received significant orders
in the latter part of the second quarter from a number of our more active
distributors based on their desire to increase their inventory levels in advance
of the price increase. Worldwide Nipent revenues of $2,713,000 in the first nine
months of 1999 included approximately $687,000 in sales to the European
distributor for Nipent. We have recorded no European sales in 2000. Unlike our
Nipent sales efforts in the U.S. market where we call on clinicians directly,
our role in Europe is currently limited to that of a supplier. As such, we do
not have a direct influence on Nipent sales at the clinical level, making their
timing and magnitude difficult to predict and dependent on the efforts of our
European distributor. Based on this existing relationship, it is our expectation
that current inventory levels at our distributor in Europe will likely result in
lower order requirements over the next several quarters. The first nine months
of 2000 also included recognition of $583,000 in revenues related to the Nipent
distribution arrangement with Abbott Laboratories, recognition of $50,000 in
revenue associated with the completion of a clinical trial
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<PAGE>
for busulfan in Europe, and recognition of $93,000 in grant revenues from the
National Institutes of Health/National Cancer Institute relating to the
development of IPdR.
Cost of sales as a percentage of net sales revenues was 23% in the first
nine months of 2000 compared to 43% in the same period in 1999. The improvement
in cost of sales percentage was due primarily to the absence in 2000 of sales to
the European distributor for Nipent, as such sales were made at a lower unit
selling price under a supply agreement for sale outside North America. Current
margins may not be indicative of future margins due to possible variations in
average selling prices and manufacturing costs.
Research and development expenses were $22,601,000 in the first nine months
of 2000 compared to $10,730,000 in 1999. The increased expense was due primarily
to a broader clinical development program along with its associated costs,
expansion of the research and development staff, a significant increase in the
accrual rates of patients into our ongoing clinical trials, and increased
research and development expenditures.
Selling, general and administrative expenses were $10,928,000 in the first
nine months of 2000 compared to $7,077,000 in 1999. This increase was due
primarily to costs associated with the expansion of the sales, professional
services, information technology and general and administrative staffs together
with increased costs associated with trade shows, speakers programs and
symposiums, investor relations, business development consulting and legal fees.
Acquisition of in-process research & development totaled $1,585,000 in the
first nine months of 2000 and resulted from the acquisition of the intellectual
property of AMUR Pharmaceuticals, Inc. In the comparable period of 1999
acquisition of in-process research & development totaled $10,850,000, which
included $7,450,000 relating to the acquisition of the drug candidates of Sparta
Pharmaceuticals, Inc. and $3,400,000 relating to the license of decitabine from
Pharmachemie.
Interest income was $5,969,000 in the first nine months of 2000 compared to
$525,000 in the first nine months of 1999. This was due to the greater cash
balances available for investment as a result of our Abbott corporate
partnership, the follow-on offering of our common stock, and the exercise of our
SUPGW warrants and related underwriters' unit purchase warrants.
Amortization of loan commitment fees totaled $2,000,000 in the first nine
months of 1999. This charge was related to a credit arrangement that existed
during 1999. We had no such credit arrangement in 2000 and consequently incurred
no such charges during the period.
LIQUIDITY AND CAPITAL RESOURCES
Our cash, cash equivalents and both short and long term marketable
securities totaled approximately $140 million at September 30, 2000, compared to
approximately $29 million at December 31, 1999. In January 2000, we received a
$26.5 million equity investment and a $5 million cash payment from Abbott.
During the first nine months of 2000, we raised approximately $61 million
through a follow-on offering of our common stock and we received approximately
$38 million through the exercise of our SUPGW warrants and related underwriters'
unit purchase warrants.
The net cash used in operating activities of $19.2 million in the first nine
months of 2000 primarily reflected the net loss for the period of $25.3 million
and the restriction of $3.2 million as collateral for our building lease letter
of credit, offset by the receipt of $5.0 million from Abbott Laboratories
relating to the Nipent distribution agreement and non-cash charges related to
the acquisition of in-process research and development of $1.6 million.
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<PAGE>
We believe that our current cash, cash equivalents and marketable securities
will satisfy our cash requirements at least through December 31, 2002. Our
primary planned uses of cash during that period are:
- for research and development activities, including expansion of clinical
trials;
- to enhance sales and marketing efforts in advance of the potential launch
of rubitecan;
- to lease and improve new facilities and potentially enhance manufacturing
capabilities; and
- to finance possible acquisitions of complimentary products, technologies
and businesses.
We believe that our need for additional funding will increase in the future
and that our continued ability to raise additional funds from external sources
will be critical to our success. We continue to actively consider future
contractual arrangements that would require significant financial commitments.
If we experience currently unanticipated cash requirements, we could require
additional capital much sooner than presently anticipated. We may seek such
additional funding through public or private financings or collaborative or
other arrangements with third parties. We may not be able to obtain additional
funds on acceptable terms, if at all.
FACTORS AFFECTING FUTURE OPERATING RESULTS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN
INVESTMENT DECISION. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE
ONLY ONES FACING OUR COMPANY. OUR BUSINESS OPERATIONS MAY BE IMPAIRED BY
ADDITIONAL RISKS AND UNCERTAINTIES THAT WE DO NOT KNOW OF OR THAT WE CURRENTLY
CONSIDER IMMATERIAL.
OUR BUSINESS, RESULTS OF OPERATIONS OR CASH FLOWS MAY BE ADVERSELY AFFECTED
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR. IN SUCH CASE, THE TRADING PRICE OF
OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
THIS REPORT ALSO CONTAINS AND INCORPORATES BY REFERENCE FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT
OF CERTAIN FACTORS, INCLUDING THE RISKS DESCRIBED BELOW AND ELSEWHERE IN THIS
REPORT.
IF THE RESULTS OF FURTHER CLINICAL TESTING INDICATE THAT OUR PROPOSED
PRODUCTS ARE NOT SAFE AND EFFECTIVE FOR HUMAN USE, OUR BUSINESS WILL SUFFER.
Most of our products are in the development stage and prior to their sale will
require the commitment of substantial resources. All of the potential
proprietary products that we are currently developing will require extensive
pre-clinical and clinical testing before we can submit any application for
regulatory approval. Before obtaining regulatory approvals for the commercial
sale of any of our products, we must demonstrate through pre-clinical testing
and clinical trials that our product candidates are safe and effective in
humans. Conducting clinical trials is a lengthy, expensive and uncertain
process. Completion of clinical trials may take several years or more. The
length of time generally varies substantially according to the type, complexity,
novelty and intended use of the product candidate. Our clinical trials may be
suspended at any time if we or the FDA believe the patients participating in our
studies are exposed to unacceptable health risks. We may encounter problems in
our studies which will cause us or the FDA to delay or suspend the studies. Our
commencement and rate of completion of clinical trials may be delayed by many
factors, including:
- ineffectiveness of the study compound, or perceptions by physicians that
the compound is not effective for a particular indication;
- inability to manufacture sufficient quantities of compounds for use in
clinical trials;
- failure of the FDA to approve our clinical trial protocols;
- slower than expected rate of patient recruitment;
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- inability to adequately follow patients after treatment;
- unforeseen safety issues;
- lack of efficacy during the clinical trials; or
- government or regulatory delays.
The clinical results we have obtained to date do not necessarily predict
that the results of further testing, including later-stage controlled human
clinical testing, will be successful. If our trials are not successful, or are
perceived as not successful by the FDA or physicians, our business, financial
condition and results of operations will be harmed.
IF WE FAIL TO OBTAIN REGULATORY MARKETING APPROVALS IN A TIMELY MANNER, OUR
BUSINESS WILL SUFFER. Even if we believe our trials are successful, the FDA may
require additional clinical testing and, therefore we would have to commit
additional unanticipated resources. The FDA has substantial discretion in the
drug approval process. We cannot assure you that we will obtain the necessary
regulatory approvals to market our products. The FDA and comparable agencies in
foreign countries impose substantial requirements for the introduction of both
new pharmaceutical products and generic products through lengthy and detailed
clinical testing procedures, sampling activities and other costly and
time-consuming compliance procedures. We have not yet received marketing
approval for any of our internally developed proprietary products. Our
proprietary drugs and products will require lengthy clinical trials along with
FDA and comparable foreign agency review as new drugs. Our generic drugs will
also require regulatory review and approval.
We cannot predict with certainty if or when we might submit for regulatory
review those products currently under development. Once we submit our potential
products for review, we cannot assure you that the FDA or other regulatory
agencies will grant approvals for any of our pharmaceutical products on a timely
basis or at all. Sales of our products outside the United States will be subject
to regulatory requirements governing clinical trials and marketing approval.
These requirements vary widely from country to country and could delay the
introduction of our products in those countries.
IF OUR RELATIONSHIP WITH ABBOTT IS NOT SUCCESSFUL, OUR BUSINESS COULD BE
HARMED. Our strategic relationship with Abbott is important to our success.
However, that relationship may not be successful. We cannot assure you that we
will receive any additional payments from Abbott or that the relationship will
be commercially successful. The transactions contemplated by our agreements with
Abbott, including the equity purchases and cash payments, are subject to
numerous risks and conditions. For example:
- we may fail to achieve clinical and sales milestones;
- rubitecan may fail to achieve regulatory approval domestically and
internationally;
- rubitecan may not be commercially successful;
- Abbott may fail to perform its obligations under our agreements, such as
failing to devote sufficient resources to marketing rubitecan; and
- our agreements with Abbott may be terminated in their entirety or on a
territory-by-territory basis against our will.
The occurrence of any of these events could severely harm our business.
WE HAVE GRANTED CERTAIN RIGHTS TO ABBOTT THAT COULD NEGATIVELY AFFECT YOUR
INVESTMENT. We have granted Abbott an option to purchase shares of our common
stock so that upon its exercise Abbott will own up
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to 49% of our outstanding common stock. Our ability to satisfy this contractual
obligation is subject to a number of conditions outside of our control,
including:
- stockholder approval of a potential change in control under the rules of
the Nasdaq National Market; and
- clearance of the purchase by federal antitrust regulators.
If we do not satisfy any of these conditions, Abbott could terminate our
relationship. If we obtain all necessary approvals and Abbott exercises its
option, the stock ownership of our other stockholders will be diluted and Abbott
will have significant influence over us. Abbott's right to exercise this option,
and Abbott's share ownership after exercise, may discourage other parties from
acquiring us.
Abbott has a right of first discussion with respect to our product portfolio
and a right of first refusal to acquire us. These rights may discourage third
parties from bidding on any assets that we wish to sell or license and may
discourage acquisition bids. These provisions may limit the price that investors
might be willing to pay in the future for shares of our common stock.
WE HAVE A HISTORY OF OPERATING LOSSES AND AN ACCUMULATED DEFICIT, WE MAY NOT
ACHIEVE OR MAINTAIN PROFITABILITY IN THE FUTURE, AND WE MAY NEED TO OBTAIN
ADDITIONAL FUNDING. We incurred cumulative losses of $118.2 million for the
period from inception through September 30, 2000. Currently we are not
profitable and we expect to continue to incur substantial operating losses at
least through 2001. Our ability to achieve profitability will depend primarily
on our ability to obtain regulatory approval for and successfully commercialize
rubitecan. Our success will also depend, to a lesser extent, on our ability to
develop and obtain regulatory approval of Nipent for indications other than
hairy cell leukemia and to bring our proprietary products to market. Our ability
to become profitable will also depend upon a variety of other factors, including
the following:
- increases in the level of our research and development, including the
timing and costs to complete or expand our clinical trials;
- regulatory approvals of competing products, or expanded labeling approvals
of existing products;
- increases in sales and marketing expenses related to the commercial launch
of rubitecan;
- delays in or inadequate commercial sales of rubitecan, once regulatory
approvals have been received; and
- expenditures associated with acquiring products, technologies or companies
and further developing these assets.
We cannot predict the outcome of these factors and we cannot assure you that
we will ever become profitable.
Even if we do become profitable, we may need substantial additional funding.
We expect that our rate of spending will accelerate as a result of increased
clinical trial costs and expenses associated with regulatory approval and
commercialization of our products now in development. We anticipate that our
capital resources will be adequate to fund operations and capital expenditures
at least through 2002. However, if we experience unanticipated cash requirements
during this period, we could require additional funds much sooner. Our business,
results of operations and cash flows will be adversely affected if we fail to
obtain adequate funding in a timely manner, or at all. We may receive funds from
the sale of equity securities, or the exercise of outstanding warrants and stock
options. Additionally, we may receive funds upon the achievement of certain
developmental and sales milestones pursuant to our agreement with Abbott.
However, we cannot assure you that any of those fundings will occur, or if they
occur, that they will be on terms favorable to us. Also, the dilutive effect of
those fundings could adversely affect our results per share.
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WE DEPEND ON THIRD PARTIES FOR MANUFACTURING AND STORAGE OF OUR PRODUCTS AND
OUR BUSINESS MAY BE HARMED IF THE MANUFACTURE OF OUR PRODUCTS IS INTERRUPTED OR
DISCONTINUED. We have no manufacturing facilities and we currently rely on third
parties for manufacturing activities related to all of our products. As we
develop new products and increase sales of our existing products, we must
establish and maintain relationships with manufacturers to produce and package
sufficient supplies of our finished pharmaceutical products, including
rubitecan.
Our manufacturing strategy presents the following risks:
- delays in scale-up to quantities needed for multiple clinical trials could
delay clinical trials, regulatory submissions and commercialization of our
products in development;
- our current and future manufacturers are subject to ongoing periodic
unannounced inspection by the FDA and corresponding state agencies for
compliance with strictly enforced GMP regulations and similar foreign
standards, and we do not have control over our third-party manufacturers'
compliance with these regulations and standards;
- if we need to change to other commercial manufacturing contractors, the
FDA and comparable foreign regulators must approve these contractors prior
to our use. This would require new testing and compliance inspections. The
new manufacturers would have to be educated in, or themselves develop
substantially equivalent processes necessary for, the production of our
products. In addition, the FDA and comparable foreign regulators would
need to approve the new manufacturers;
- if market demand for our products increases suddenly, our current
manufacturers might not be able to fulfill our commercial needs, which
would require us to seek new manufacturing arrangements and may result in
substantial delays in meeting market demand; and
- we may not have intellectual property rights, or may have to share
intellectual rights, to any improvements in the manufacturing processes or
new manufacturing processes for our products.
Any of these factors could delay clinical trials or commercialization of our
products under development, interfere with current sales, entail higher costs
and result in our being unable to effectively sell our products.
In addition, we store the majority of the unpurified, bulk form of Nipent at
a single location. Improper storage, fire, natural disaster, theft or other
conditions at this location that may lead to the loss or destruction of the bulk
concentrate could adversely affect our business, results of operations and cash
flows.
We do not currently intend to manufacture any pharmaceutical products,
although we may choose to do so in the future. If we decide to manufacture
products, we would be subject to the regulatory risks and requirements described
above. We will also be subject to similar risks regarding delays or difficulties
encountered in manufacturing these pharmaceutical products and we will require
additional facilities and substantial additional capital. In addition, we have
only limited experience in manufacturing pharmaceutical products. We cannot
assure you that we would be able to manufacture any of these products
successfully in accordance with regulatory requirements and in a cost-effective
manner.
ASSERTING, DEFENDING AND MAINTAINING INTELLECTUAL PROPERTY RIGHTS COULD BE
DIFFICULT AND COSTLY AND FAILURE TO DO SO WILL HARM OUR ABILITY TO COMPETE AND
THE RESULTS OF OUR OPERATIONS. If competitors develop substantially equivalent
proprietary information and techniques or otherwise gain access to our trade
secrets, if our trade secrets are disclosed or if we cannot effectively protect
our rights to unpatented trade secrets, our business will be harmed.
The pharmaceutical fields are characterized by a large number of patent
filings. A substantial number of patents have already been issued to other
pharmaceutical companies, research or academic
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institutions or others. Competitors may have filed applications for or have been
issued patents and may obtain additional patents and proprietary rights related
to products or processes that compete with or are similar to ours. We may not be
aware of all of the patents potentially adverse to our interests that may have
been issued to others.
We actively seek patent protection for our proprietary products and
technologies. We have a number of United States patents and also have licenses
to, or assignments of, numerous patents issued both in the United States and
elsewhere. We may also license our patents outside the United States.
Limitations on patent protection outside the United States, and differences in
what constitutes patentable subject matter in countries outside the United
States, may limit the protection we have on patents or licenses of patents
outside the United States.
Litigation may be necessary to protect our patent position, and we cannot be
certain that we will have the required resources to pursue the necessary
litigation or otherwise to protect our patent rights. Our efforts to protect our
patents may fail. In addition to pursuing patent protection in appropriate
cases, we also rely on trade secret protection for unpatented proprietary
technology. However, trade secrets are difficult to protect. Our trade secrets
or those of our collaborators may become known or may be independently
discovered by others.
Our proprietary products are dependent upon compliance with numerous
licenses and agreements. These licenses and agreements require us to make
royalty and other payments, reasonably exploit the underlying technology of the
applicable patents, and comply with regulatory filings. If we fail to comply
with these licenses and agreements, we could lose the underlying rights to one
or more of these potential products, which would adversely affect our business,
results of operations and cash flows.
From time to time we receive correspondence inviting us to license patents
from third parties. Although we know of no pending patent infringement suits,
discussions regarding possible patent infringements or threats of patent
infringement litigation either related to patents held by us or our licensors or
our products or proposed products, there has been, and we believe that there
will continue to be, significant litigation in the pharmaceutical industry
regarding patent and other intellectual property rights. Claims may be brought
against us in the future based on patents held by others. These persons could
bring legal actions against us claiming damages and seeking to enjoin clinical
testing, manufacturing and marketing of the affected product. If we become
involved in any litigation, it could consume a substantial portion of our
resources, regardless of the outcome of the litigation. If any of these actions
are successful, in addition to any potential liability for damages, we could be
required to obtain a license to continue to manufacture or market the affected
product. We cannot assure you whether we would prevail in any of these actions
or that we could obtain any licenses required under any of these patents on
acceptable terms, if at all.
IF WE LOSE KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL,
HIGHLY SKILLED PERSONNEL REQUIRED FOR THE EXPANSION OF OUR ACTIVITIES, OUR
BUSINESS WILL SUFFER. Our success is dependent on key personnel, including
Dr. Rubinfeld, our President and Chief Executive Officer, and members of our
senior management and scientific staff. To successfully expand our operations,
we will need to attract and retain additional, highly skilled individuals,
particularly in the areas of sales, marketing, clinical administration,
manufacturing and finance. We compete with other companies for the services of
existing and potential employees. We believe our compensation and benefits
packages are competitive for our geographical region and our industry group.
However, we may be at a disadvantage to the extent that potential employees may
favor larger, more established employers.
ITEM 3--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Due to the short-term nature of our interest bearing assets, we believe that
our exposure to interest rate market risk is not significant.
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SUPERGEN, INC.
PART II--OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
RECENT SALES OF UNREGISTERED SECURITIES
During the quarter ended September 30, 2000, we issued the following
securities:
- 347,826 shares of common stock in July 2000 to AVI BioPharma, Inc. in
connection with the acquisition of 1,684,211 shares of AVI
BioPharma, Inc. common stock and an agreement to acquire the U.S.
marketing rights for AVI's proprietary cancer vaccine Avicine.
- 37,795 shares of common stock in September 2000 to AMUR
Pharmaceuticals, Inc. in connection with the acquisition of the
intellectual property of AMUR. Also issued to AMUR in this transaction
were two-year warrants to purchase 200,000 shares of our common stock at
$40.00 per share.
The issuances of shares described above were in reliance on Section 4(2) of
the Securities Act of 1933, as amended.
We made no public solicitation in connection with the issuance of the above
mentioned securities nor were there any other offerees. We relied on
representation from the recipients of the securities that they purchased the
securities for investment for their own account and not with a view to, or for
resale in connection with, any distribution thereof and that they were aware of
our business affairs and financial condition and had sufficient information to
reach an informed and knowledgeable decision regarding their acquisition of the
securities.
USE OF PROCEEDS
On March 13, 1996, we commenced our initial public offering (the "IPO") of
4,025,000 units, which included the underwriter's over-allotment option of
525,000 units at a public offering price of $6.00 per unit. A unit consisted of
one share of our common stock $0.001 par value per share, and a warrant to
purchase one share of our common stock at $9.00. We commenced the IPO pursuant
to a registration statement on Form S-B (file no. 333-476 LA) filed with the
Securities and Exchange Commission. Of the units registered, 4,024,302 were
sold. Paulson Investment Company was the managing underwriter of the IPO.
Aggregate gross proceeds from the IPO (prior to deduction of underwriting
discounts and commissions and expenses of the offering and any exercises of the
warrants) were $24,146,000. All of the shares registered for the exercise of the
warrants have not yet been sold. There were no selling stockholders in the IPO.
We paid total expenses of $2,615,000 in connection with the IPO, consisting
of underwriting discounts, commissions and expenses of $1,992,000 and other
expenses of approximately $623,000. The net proceeds from the IPO through
September 30, 2000, including subsequent exercises of warrants to purchase
common stock, were $63,316,000.
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From March 13, 1996, the effective date of the registration statement, to
September 30, 2000, (our fiscal 2000 second quarter end), the approximate amount
of net proceeds used or available were:
<TABLE>
<S> <C>
Construction of plant, building and facilities.............. $1,246,000
Purchase and installation of machinery and equipment........ 295,000
Purchase of real estate..................................... 744,000
Working capital used in or available for operations......... 56,754,000
Repurchase of common stock.................................. 3,557,000
Purchase of equity investment............................... 500,000
Acquisition of developed technology......................... 220,000
</TABLE>
None of such payments consisted of direct or indirect payments to directors,
officers, owners of more than 10% of the outstanding stock of the Company or
affiliates of the Company, with the exception of:
- The payment to repurchase common stock, which was made to a stockholder
that, immediately prior to the repurchase, owned more than 10% of our then
outstanding common stock; and
- Payments to directors and officers as compensation for services provided.
On September 20, 1999, we issued a notice that we would redeem our 1996
publicly traded $9.00 warrants ("SUPGW" warrants) outstanding at April 16, 2000
at $0.25 per warrant. Through September 30, 2000, over 99.9% of the outstanding
SUPGW warrants had been exercised.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No.
<TABLE>
<S> <C>
27.1 Financial Data Schedule--electronic filing only.
</TABLE>
(b) The following reports were filed on Form 8-K during the quarter for which
this report is filed.
- Form 8-K dated August 15, 2000, filed on August 17, 2000 regarding changes
in personnel in our Clinical Research department.
- Form 8-K dated September 28, 2000, filed on October 2, 2000 regarding our
common stock repurchase program.
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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.
<TABLE>
<S> <C> <C> <C>
SUPERGEN, INC.
Date: November 10, 2000 By: /s/ RONALD H. SPAIR
-------------------------------------- --------------------------------------
Ronald H. Spair
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER (PRINCIPAL FINANCIAL
AND ACCOUNTING OFFICER)
</TABLE>
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