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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the transition period from ______________ to _________________
Commission file number 0-26534
-----------------
VION PHARMACEUTICALS, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3671221
-------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4 Science Park, New Haven, CT 06511
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(203) 498-4210
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(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
------- -------
The number of shares outstanding of the issuer's sole class of common
equity, as of March 31, 2000 is: 22,982,620 shares of common stock, $.01 par
value.
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<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEET
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
<TABLE><CAPTION>
------------ ------------
March 31, December 31,
2000 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 18,244,560 $ 11,105,262
Due from transfer agent 832,215 --
Accounts receivable 589,465 1,592,583
Other current assets 68,251 108,404
------------ ------------
Total current assets 19,734,491 12,806,249
Property and equipment, net 685,694 659,823
Security deposits 48,736 49,851
Research contract prepayments 417,882 417,882
------------ ------------
Total assets $ 20,886,803 $ 13,933,805
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Obligation under capital leases - current $ 114,145 $ 160,328
Accounts payable and accrued expenses 1,105,631 2,734,745
------------ ------------
Total current liabilities 1,219,776 2,895,073
Obligation under capital leases - long term 4,293 6,181
------------ ------------
Total liabilities 1,224,069 2,901,254
Redeemable Preferred Stock:
5% convertible preferred stock Series 1998, $0.01 par value, authorized:
15,000 shares; issued and outstanding: 0 shares in 2000 and 5,000 -- 5,179,287
shares in 1999 (redemption value: none in 2000 and $5,125,000 in 1999)
Shareholders' equity
Preferred stock, $0.01 par value - 5,000,000 shares authorized consisting of:
Class A convertible preferred stock, $0.01 par value, authorized:
3,500,000 shares; issued and outstanding: 206,314 in 2000 and 498,194
in 1999 (liquidation preference $2,063,000 in 2000 and $4,982,000 in 1999) 2,063 4,982
Common stock, $0.01 par value, authorized: 35,000,000 shares;
issued and outstanding: 22,982,620 shares in 2000 and 18,242,119 shares
in 1999 229,826 182,421
Additional paid-in-capital 84,852,285 68,012,183
Deferred compensation -- (2,864)
Accumulated deficit (65,421,440) (62,343,458)
------------ ------------
19,662,734 5,853,264
------------ ------------
Total liabilities and shareholders' equity $ 20,886,803 $ 13,933,805
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
Page 2
<PAGE>
STATEMENT OF OPERATIONS
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
<TABLE><CAPTION>
For The Period
From May 1, 1994
Three Months Ended (Inception) through
March 31, March 31, March 31,
--------------------------------------------
2000 1999 2000
(Unaudited) (Unaudited)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Contract research grants $ 151,462 $ 61,946 $ 896,016
Research support -- 259,468 5,498,153
Technology license revenues 40,278 50,000 4,195,666
Laboratory support service revenues 6,463 -- 41,463
------------ ------------ ------------
Total revenues 198,203 371,414 10,631,298
Operating expenses:
Research and development 2,260,853 2,347,801 45,732,083
General and administrative 804,054 504,601 12,883,567
Nonrecurring collaboration restructuring fee -- -- 600,000
Interest Income (151,846) (60,366) (1,859,416)
Interest Expense 4,946 11,607 200,215
------------ ------------ ------------
Net Loss $ (2,719,804) $ (2,432,229) $(46,925,151)
============ ============ ============
Preferred stock dividends and accretion $ (358,178) $ (80,873) $(18,241,153)
------------ ------------ ------------
Loss applicable to common shareholders $ (3,077,982) $ (2,513,102) $(65,166,304)
============ ============ ============
Basic and diluted loss applicable to common
shareholders per share $ (0.16) $ (0.18)
------------ ------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
Page 3
<PAGE>
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Vion Pharmaceuticals, Inc.
( A Development Stage Company)
<TABLE><CAPTION>
CLASS A CLASS B
CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK
---------------------------- ---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 757,632 $ 7,576 4,592 $ 46 9,833,934 $ 98,339
------------ ------------ ------------ ------------ ------------ ------------
Accretion of dividend payable on
Class B convertible preferred stock
Conversion of Class B convertible
preferred stock (4,592) (46) 1,205,178 12,052
Premium on Conversion dividend on
class B convertible preferred stock 585,898 5,859
Conversion of Class A convertible
preferred stock (174,981) (1,749) 486,062 4,860
Class A convertible preferred stock
dividend 34,005 340
Discount on Series 1998 convertible
preferred stock
Series 1998 convertible preferred
stock accretion
Common stock issued in exchange for
cancellation 1,792,952 17,929
of outstanding warrants
Exercise of stock options 32,750 328
Exercise of warrants 16,272 163
Compensation associated with stock
option grants
Amortization of deferred compensation
Net loss
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1998 616,656 $ 6,167 0 $ 0 13,953,046 $ 139,530
------------ ------------ ------------ ------------ ------------ ------------
Conversion of Class A convertible
preferred stock (144,612) (1,446) 401,707 4,018
Class A convertible preferred stock
dividend 26,150 261
Series 1998 convertible preferred
stock accretion
Common stock issued in exchange for
cancellation of outstanding warrants 102 1
Exercise of stock options 470,886 4,709
Retirement of Treasury Stock (35,659) (357)
Exercise of warrants 26,296 263
Issuance of common stock 3,425,741 34,257
Amortization of deferred compensation
Net loss
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1999 498,194 $ 4,982 0 $ 0 18,242,119 $ 182,421
------------ ------------ ------------ ------------ ------------ ------------
Conversion of Class A convertible
preferred stock (291,880) (2,919) 810,781 8,108
Series 1998 convertible preferred
stock accretion
Conversion of Series 1998 convertible
preferred stock 1,507,024 15,070
Exercise of stock options 333,919 3,339
Exercise of warrants 2,088,777 20,888
Amortization of deferred compensation
Net loss
------------ ------------ ------------ ------------ ------------ ------------
Balance at March 31, 2000 (unaudited) 206,314 $ 2,063 0 $ 0 22,982,620 $ 229,826
------------ ------------ ------------ ------------ ------------ ------------
ADDITIONAL TOTAL
PAID-IN TREASURY DEFERRED ACCUMULATED SHAREHOLDERS'
CAPITAL STOCK COMPENSATION DEFICIT EQUITY
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 47,661,639 $ 0 ($72,128) ($35,736,922) $ 11,958,550
------------ ------------ ------------ ------------ ------------
Accretion of dividend payable on
Class B convertible preferred stock 286,776 (286,776) 0
Conversion of Class B convertible
preferred stock (12,006) 0
Premium on Conversion dividend on
class B convertible preferred stock 2,043,532 (2,049,391) 0
Conversion of Class A convertible
preferred stock (3,111) 0
Class A convertible preferred stock
dividend 329,206 (329,546) 0
Discount on Series 1998 convertible
preferred stock 1,597,218 (1,597,218) 0
Series 1998 convertible preferred
stock accretion 0 (151,119) (151,119)
Common stock issued in exchange for
cancellation 8,441,442
of outstanding warrants (8,502,064) (42,693)
Exercise of stock options 119,854 120,182
Exercise of warrants 10,910 11,073
Compensation associated with stock
option grants 51,252 51,252
Amortization of deferred compensation 34,632 34,632
Net loss (10,477,669) (10,477,669)
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1998 $ 52,024,648 $ 0 ($37,496) ($50,628,641) $ 1,504,208
------------ ------------ ------------ ------------ ------------
Conversion of Class A convertible
preferred stock (2,572) 0
Class A convertible preferred stock
dividend 384,738 (384,999) 0
Series 1998 convertible preferred
stock accretion (324,782) (324,782)
Common stock issued in exchange for
cancellation of outstanding warrants 473 474
Exercise of stock options 650,028 (196,159) (40,310) 418,268
Retirement of Treasury Stock $ 196,159 (195,802) 0
Exercise of warrants (263) 0
Issuance of common stock 14,955,131 14,989,388
Amortization of deferred compensation 34,632 34,632
Net loss (10,768,924) (10,768,924)
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1999 $ 68,012,183 $ 0 ($2,864) ($62,343,458) $ 5,853,264
------------ ------------ ------------ ------------ ------------
Conversion of Class A convertible
preferred stock (5,189) 0
Series 1998 convertible preferred
stock accretion (358,178) (358,178)
Conversion of Series 1998 convertible
preferred stock 5,522,395 5,537,465
Exercise of stock options 1,403,451 1,406,790
Exercise of warrants 9,919,445 9,940,333
Amortization of deferred compensation 2,864 2,864
Net loss (2,719,804) (2,719,804)
------------ ------------ ------------ ------------ ------------
Balance at March 31, 2000 (unaudited) $ 84,852,285 $ 0 $ 0 ($65,421,440) $ 19,662,734
------------ ------------ ------------ ------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
Page 4
<PAGE>
STATEMENT OF CASH FLOWS
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
<TABLE><CAPTION>
For the period
from May 1, 1994
For The Three Months (inception) through
Ended March 31, March 31,
--------------------------------------------
2000 1999 2000
(Unaudited) (Unaudited)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from operating activities:
Net loss $ (2,719,804) $ (2,432,229) $(46,925,151)
Adjustments to reconcile net loss to
cash flows used in operating activities
Purchased research and development -- -- 4,481,405
Amortization of financing costs -- -- 345,439
Depreciation and amortization 101,187 124,138 1,548,539
Decrease in current assets 1,043,271 739,698 (656,730)
Decrease in other assets 1,115 -- (464,903)
(Decrease) in accounts payable and
accrued expenses (1,629,114) (1,105,343) 1,071,099
Extension/reissuance of placement agent warrants -- -- 168,249
Stock issued for services -- -- 600,417
Stock options issued for compensation 2,864 8,658 837,302
------------ ------------ ------------
Net cash (used in) operating activities (3,200,481) (2,665,078) (38,994,334)
------------ ------------ ------------
Cash flows used for investing activities:
Purchase of marketable securities -- -- (24,707,588)
Maturities of marketable securities -- 2,594,497 24,707,588
Acquisition of fixed assets (127,058) (21,094) (1,289,800)
------------ ------------ ------------
Net cash provided by (used in) investing activities (127,058) 2,573,403 (1,289,800)
------------ ------------ ------------
Cash flows provided by financing activities:
Initial public offering -- -- 9,696,210
Net proceeds from issuance of common stock / exercise of options 1,406,790 -- 20,098,486
Net proceeds from issuance of preferred stock -- -- 20,716,288
Exercise of Class A warrants 5,243,926 2,973 5,254,996
Exercise of Class B warrants 3,763,050 -- 3,763,050
Exercise of placement agent warrants 101,142 -- 101,142
Other financing activites, net -- -- (292,140)
Repayment of equipment capital lease (48,071) (76,173) (809,338)
------------ ------------ ------------
Net cash provided by (used in) financing activities 10,466,837 (73,200) 58,528,694
------------ ------------ ------------
Net increase (decrease) in cash 7,139,298 (164,875) 18,244,560
Cash and cash equivalents at beginning of period 11,105,262 3,821,234 --
------------ ------------ ------------
Cash and cash equivalents at end of period $ 18,244,560 $ 3,656,359 $ 18,244,560
============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
Page 5
<PAGE>
VION PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Note A) - The Company:
-----------
Vion Pharmaceuticals, Inc. (the "Company") is a development stage
biopharmaceutical company engaged in the research, development and
commercialization of cancer treatment technologies. The Company, formerly
OncoRx, Inc., was incorporated in May 1993 and began operations on May 1, 1994.
(Note B) - Basis of Presentation:
---------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three-month period ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000. For further
information, refer to the financial statements and footnotes thereto included in
the Company's Annual Report for the fiscal year ended December 31, 1999 on Form
10-KSB (File No. 0-26534).
(Note C) - Shareholders' Equity
--------------------
Private Placement of Common Stock - April 1999
- ----------------------------------------------
In April 1999, the Company consummated a private placement of the
Company's common stock. Pursuant to the private placement, the Company issued
893,915 shares of common stock at a price of approximately $4.47 per share (the
"Purchase Price"), for aggregate proceeds of approximately $4,000,000.
Public Offering of Common Stock - October 1999
- ----------------------------------------------
In October and November 1999, the Company completed the sale of 2,530,000 newly
issued shares of common stock (including shares sold to the underwriter upon the
exercise of its over-allotment option) at a purchase price of $5.00 per share,
in an underwritten public offering. The net proceeds from this offering were
approximately $11.05 million.
Redemption of Class A Warrants
- ------------------------------
On February 11, 2000, the Company notified registered holders of its outstanding
Class A Warrants of its intention to redeem their warrants on March 13, 2000.
The Class A Warrants entitled the holder to purchase one share of common stock
and one Class B Warrant for an exercise price of $4.63. There were approximately
1.08 million Class A Warrants outstanding at December 31, 1999. During January
and February 2000, approximately 140,000 additional Class A Warrants were issued
in connection with the exercise of Unit Purchase Options. When the right of
Class A Warrant holders to exercise their warrants
Page 6
<PAGE>
to purchase shares of the Company's common stock and Class B Warrants terminated
on March 10, 2000, the Company had received net proceeds of $5.3 million from
the exercise of 1.2 million Class A Warrants which includes exercises of
approximately 56,000 of outstanding Class A Warrants prior to the redemption
period. The Company also received approximately $650,000 from the exercise of
Unit Purchase Options originally granted to underwriters in connection with the
Company's initial public offering in 1995.
Redemption of Class B Warrants
- ------------------------------
From January 1 through March 13, 2000, the day the Company redeemed the Class A
Warrants, the Company received net proceeds of approximately $3.7 million from
the voluntary exercise of approximately 598,000 of the Class B Warrants. On
March 27, 2000, the Company notified registered holders of its outstanding Class
B Warrants of its intention to redeem their warrants on April 27, 2000. The
Class B Warrants entitle the holder to purchase, at an exercise price of $6.23,
one share of common stock. In addition to the 598,000 Class B Warrants
previously discussed, 140,322 Class B Warrants were exercised between March 14
and March 31, 2000, totaling approximately $832,000.
Mandatory Conversion of 5% Redeemable Convertible Preferred Stock Series 1998
- -----------------------------------------------------------------------------
The Company's common stock traded above $7.20 for a period of 20 consecutive
trading days ending on February 7, 2000, and in accordance with the terms of the
5% Redeemable Convertible Preferred Stock Series 1998 issued on June 30, 1998,
all of the outstanding preferred shares having a redemption value of $5,425,286
were automatically converted into 1,507,024 shares of common stock at the $3.60
conversion price, effective February 22, 2000.
(Note D) - Per Share Data
--------------
The following table sets forth the computation of basic and diluted
earnings per share:
Three Months Three Months
Ended Ended
March 31, March 31,
2000 1999
========== ==========
Numerator:
Net loss ($2,719,804) ($2,432,229)
---------- ----------
Preferred stock dividends and
accretion (358,178) (80,873)
---------- ----------
Numerator for basic and diluted
loss per share applicable to
common stockholders ($3,077,982) ($2,513,102)
---------- ----------
Denominator:
Denominator for basic and
diluted loss per share
applicable to common
stockholders 19,739,294 14,034,943
---------- ----------
Basic and diluted loss per share
applicable to common stockholders ($0.16) ($0.18)
========== ==========
The warrants, Class A, B and Series 1998 Convertible Preferred Stock and stock
options were not included in diluted loss per share applicable to common
shareholders as the effects would be antidilutive.
Page 7
<PAGE>
(Note E) - Small Business Innovation Research Grants
- ----------------------------------------------------
On February 27, 1998 and April 22, 1998, the Company was awarded a Small
Business Innovation Research ("SBIR") grant from the National Cancer Institute
for the Reduced Toxicity of Tumor-Targeted Salmonella and the Inhibitors of
Ribonucleotide Reductase ("IRR") programs, respectively. The awards were for
reimbursable direct costs of up to $100,000 and $373,565, respectively, and
expired on August 31, 1998 and April 30, 1999. An automatic extension was
granted on the IRR grant to utilize the amount remaining on the IRR grant. A
twelve-month IRR grant was approved on April 7, 1999 for $374,764. For the year
ended December 31, 1999 the Company recorded revenues of $228,486 for this
grant. In the first three months of 2000 an additional $64,035 has been recorded
as revenues from this grant.
In January 2000, the Company received an additional two-year, Small Business
Innovation and Research grant from the National Institutes of Health/National
Cancer Institute for $750,000. This grant will be used to enhance the Company's
TAPET research. In the first three months of 2000, $87,427 has been recognized
as revenues from this grant.
(Note F) - Subsequent Events
-----------------
SBIR Research Grant
- -------------------
In April 2000, the Company received a one-year, Small Business Innovation and
Research grant from the National Institutes of Health/National Cancer Institute
for $100,000. This grant will be used in addition to an existing grant to
enhance the Company's TAPET research.
Call for Redemption of Class B Warrants
- ---------------------------------------
On March 27, 2000, the Company notified registered holders of its outstanding
Class B Warrants of its intention to redeem their warrants on April 27, 2000.
The Class B Warrants entitle the holder to purchase, at an exercise price of
$6.23, one share of common stock. 2,031,902 Class B Warrants were exercised
during this period, generating proceeds of $ $12,074,361 net of commissions,
substantially all of which was received in the second quarter. Following the
redemption of the Class B Warrants on April 27, 2000, the Company's cash and
cash equivalents totaled approximately $28.8 million.
Conversions of Class A Preferred Stock
- --------------------------------------
The Company announced that approximately 86% of the 206,314 shares of the Class
A preferred stock outstanding on March 31, 2000 were converted into common stock
in April 2000, leaving 29,143 Class A preferred shares outstanding, convertible
into 80,953 common shares.
Cooperative Research and Development Agreement
- ----------------------------------------------
On April 1, 2000 the Company reached a Cooperative Research and Development
Agreement ("CRADA") with the National Institutes of Health, National Cancer
Institute, Division of clinical Sciences, Surgery Branch for "Development of
TAPET(R)-Based Immunotherapies Targeted Against Cancer". Under the terms of the
CRADA, the Surgery Branch will provide materials and supplies to research and
development projects using CRADA funds, personnel and "in kind" resources
supplied by the Company. The Company will contribute $350,000 per year, for a
period of five years, payable quarterly to be used for material support as well
as for work to be performed by National Cancer Institute staff.
Page 8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD-LOOKING STATEMENTS - CAUTIONARY FACTORS
Statements included in this Form 10-Q which are not historical in
nature are forward-looking statements made pursuant to the safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements regarding our future business prospects, plans,
objectives, expectations and intentions are subject to certain risks,
uncertainties and other factors that could cause actual results to differ
materially from those projected or suggested in the forward-looking statements,
including, but not limited to: the inability to raise additional capital, the
possibility that any or all of the our products or procedures are found to be
ineffective or unsafe, the possibility that third parties hold proprietary
rights that preclude us from marketing our products, and the possibility that
third parties will market a product equivalent or superior to our product
candidates.
OVERVIEW
We are a development stage biopharmaceutical company. Our activities to
date have consisted primarily of research and product development, obtaining
regulatory approval for clinical trials, conducting clinical trials, negotiating
and obtaining collaborative agreements, and obtaining financing in support of
these activities. Our revenues consist of research grants, technology license
fees and reimbursements for research expenses. We have generated minimal
licensing revenues from product sales and have incurred substantial operating
losses from our activities.
Our plan of operations for the next 18 months includes the following
elements:
o Continue to conduct internal research and development with respect to our
core technologies and other product candidates that we may identify;
o Conduct Phase I clinical studies of Triapine in the United States for
safety and dosage;
o File investigational new drug application(s) with the FDA for "armed" TAPET
vectors and conduct Phase I clinical studies in the United States and
Europe for the safety and selective tumor accumulation of several "armed"
and "unarmed" bacterial constructs using our TAPET delivery system.
o Continue to support research and development being performed at Yale
University and by other collaborators; and
o Continue to seek collaborative partnerships, joint ventures, co-promotional
agreements or other arrangements with third parties.
o Conduct preclinical toxicology studies on a Sulfonyl Hydrazine agent and
evaluate its suitability to proceed to clinical trials.
Page 9
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THREE MONTHS ENDED
MARCH 31, 1999
Revenues. Revenues decreased approximately 47% from $371,414 for the
three months ended March 31, 1999 to $198,203 for the three months ended March
31, 2000. This change was primarily due to the elimination of revenues from
reimbursed development costs under the terms of our collaboration agreement with
BI which was revised in December 1999. These research support revenues totaled
$259,468 for the three months ended March 31, 1999. Revenue from contract
research grants increased approximately 145% to $151,462 for the most recent
quarter, related to a Small Business Innovation and Research grant for TAPET
received in January 2000, compared to $61,946 for the quarter ended March 31,
1999. Technology license revenues decreased 19% from $50,000 for the three
months ended March 31, 1999 to $40,278 for the three months ended March 31,
2000. Technology license revenues in 2000 reflect adjustments related to San Mar
Laboratories royalties paid against contractual minimums.
Research and Development. Research and development expenses decreased
slightly from $2,347,801 for the three months ended March 31, 1999 to $2,260,853
for the three months ended March 31, 2000 reflecting fewer expenses related to
the Promycin head and neck Phase III trial. We expect research and development
expenses to continue to increase in the future related to TAPET and Triapine
Phase I clinical trials and preclinical development of our Sulfonyl Hydrazine
agent.
General and Administrative. General and administrative expenses
increased 59% from $504,601 for the three months ended March 31, 1999 to
$804,054 for the three months ended March 31, 2000. This increase was due to the
timing of discretionary management bonuses paid in the first quarter of 2000
compared to 1999, when they were paid in the second quarter.
Interest Income and Expense. Interest income on invested funds
increased 152% from $60,366 for the three months ended March 31, 1999 to
$151,846 for the three months ended March 31, 2000. This increase reflects a
higher level of invested funds. Interest expense decreased from $11,607 for the
three months ended March 31, 1999 to $4,946 for the three months ended March 31,
2000.
Preferred Dividends and Accretion. Preferred stock dividends and
accretion increased from $80,873 for the three months ended March 31, 1999 to
$358,178 for the three months ended March 31, 2000. The difference primarily
represents our recording of non-cash dividends related to our Series 1998
Convertible Redeemable Preferred Stock valued at market prices higher than their
conversion price. All outstanding shares of the Series 1998 Convertible
Redeemable Preferred Stock were converted to common stock on February 22, 2000.
Loss applicable to common shareholders increased from $2,513,102 to $3,002,982
as a result of the net loss and the effects of the preferred dividends and
accretion.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, we had working capital of $18,514,715.
On February 11, 2000, we notified registered holders of our outstanding
Class A Warrants of our intention to redeem the warrants on March 13, 2000. Our
Class A Warrants entitled the holder to purchase one share of Common Stock and
one Class B Warrant for an exercise price of $4.63. Of the 1.19 million
outstanding Class A Warrants at that time, approximately 98% were exchanged for
1.17 million shares of common stock and 1.17 million Class B Warrants, and
Page 10
<PAGE>
the exercise of the Class A Warrants resulted in net proceeds to the company of
approximately $5.3 million. During the period from February 11, 2000 to March
26, 2000, holders of the Class B warrants voluntarily exercised approximately
598,000 Class B warrants for an equal amount of common stock, paying us
approximately $3.7 million. On March 27, 2000 we notified registered holders of
our outstanding Class B Warrants of our intention to redeem the warrants on
April 27, 2000. The Class B Warrants entitle the holder to purchase one share of
Common Stock for an exercise price of $6.23. 2,031,902 Class B Warrants were
exercised during this period, generating proceeds of $12,074,361 net of
commissions, substantially all of which was received in the second quarter.
We currently estimate that our existing cash and cash equivalents of
approximately $28,800,000 will be sufficient to fund our planned operations
through 2001. As of March 31, 2000 we estimate that the amount required to fund
all operations for the next twelve months is approximately $15.0 million.
However, our cash requirements may vary materially from those now planned
because of the results of research and development, results of product testing,
relationships with strategic partners, changes in focus and direction of our
research and development programs, competitive and technological advances, the
regulatory process in the United States and abroad and other factors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
Page 11
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
--------
27. Financial Data Schedule
(b) Reports on Form 8-K.
-------------------
On February 14, 2000, the Company filed a Current Report on Form
8-K with the Commission regarding the call for redemption on
March 13, 2000 of its outstanding Class A warrants
On March 28, 2000, the Company filed a Current Report on Form 8-K
with the Commission regarding the call for redemption on April
27, 2000 of its outstanding Class B warrants.
All other items of this report are inapplicable.
Page 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VION PHARMACEUTICALS, INC.
(Registrant)
By: /s/ Thomas E. Klein
---------------------------
Thomas E. Klein
Vice President - Finance
(Duly authorized signatory and
Chief Financial Officer)
Date: May 11, 2000
Page 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 18,244,560
<SECURITIES> 0
<RECEIVABLES> 1,421,680
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,734,491
<PP&E> 685,694
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,886,803
<CURRENT-LIABILITIES> 1,219,776
<BONDS> 0
0
2,063
<COMMON> 229,826
<OTHER-SE> 19,430,845
<TOTAL-LIABILITY-AND-EQUITY> 20,886,803
<SALES> 0
<TOTAL-REVENUES> 198,203
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,064,907
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,946
<INCOME-PRETAX> (2,719,804)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,719,804)
<EPS-BASIC> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
